Park Hotels & Resorts Inc. 10-Q

Item 1. Financial Statements. PARK HOTELS & RESORTS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except share and per share data) March 31, 2021 December 31, 2020 (unaudited) ASSETS Property and equipment, net $ 9,125 9,193 Investments in affiliates 14 14 Intangibles, net 44 45 Cash and cash equivalents 868 951 Restricted cash 32 30 Accounts receivable, net of allowance for doubtful accounts of $ 2 and $ 3 38 26 Prepaid expenses 35 39 Other assets 53 60 Operating lease right-of-use assets 225 229 TOTAL ASSETS (variable interest entities - $ 228 and $ 229 ) $ 10,434 $ 10,587 LIABILITIES AND EQUITY Liabilities Debt $ 5,121 5,121 Accounts payable and accrued expenses 196 147 Due to hotel managers 80 88 Deferred income tax liabilities 10 10 Other liabilities 134 134 Operating lease liabilities 240 244 Total liabilities (variable interest entities - $ 215 and $ 213 ) 5,781 5,744 Commitments and contingencies - refer to Note 13 Stockholders' Equity Common stock, par value $ 0.01 per share, 6,000,000,000 shares authorized, 236,832,708 shares issued and 236,435,153 shares outstanding as of March 31, 2021 and 236,217,344 shares issued and 235,915,749 shares outstanding as of December 31, 2020 2 2 Additional paid-in capital 4,520 4,519 Retained earnings 185 376 Accumulated other comprehensive loss ( 3 ) ( 4 ) Total stockholders' equity 4,704 4,893 Noncontrolling interests ( 51 ) ( 50 ) Total equity 4,653 4,843 TOTAL LIABILITIES AND EQUITY $ 10,434 $ 10,587 Refer to the notes to the unaudited condensed consolidated financial statements. 2 PARK HOTELS & RESORTS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited, in millions, except per share data) Three Months Ended March 31, 2021 2020 Revenues Rooms $ 106 $ 362 Food and beverage 22 161 Ancillary hotel 29 57 Other 8 19 Total revenues 165 599 Operating expenses Rooms 35 112 Food and beverage 21 123 Other departmental and support 78 172 Other property-level 48 60 Management fees 7 25 Impairment loss and casualty gain, net — 694 Depreciation and amortization 74 75 Corporate general and administrative 18 16 Other 7 21 Total expenses 288 1,298 Gain on sales of assets, net — 62 Operating loss ( 123 ) ( 637 ) Interest income — 1 Interest expense ( 63 ) ( 40 ) Equity in losses from investments in affiliates ( 4 ) ( 1 ) Other loss, net — ( 2 ) Loss before income taxes ( 190 ) ( 679 ) Income tax expense ( 1 ) ( 10 ) Net loss ( 191 ) ( 689 ) Net loss attributable to noncontrolling interests 1 1 Net loss attributable to stockholders $ ( 190 ) $ ( 688 ) Other comprehensive loss, net of tax expense: Currency translation adjustment, net of tax expense of $ 0 — 4 Change in fair value of interest rate swap, net of tax expense of $ 0 1 ( 6 ) Total other comprehensive income (loss) 1 ( 2 ) Comprehensive loss ( 190 ) ( 691 ) Comprehensive loss attributable to noncontrolling interests 1 1 Comprehensive loss attributable to stockholders $ ( 189 ) $ ( 690 ) Loss per share: Loss per share - Basic $ ( 0.81 ) $ ( 2.89 ) Loss per share - Diluted $ ( 0.81 ) $ ( 2.89 ) Weighted average shares outstanding - Basic 235 238 Weighted average shares outstanding - Diluted 236 238 Refer to the notes to the unaudited condensed consolidated financial statements. 3 PARK HOTELS & RESORTS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in millions) Three Months Ended March 31, 2021 2020 Operating Activities: Net loss $ ( 191 ) $ ( 689 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 74 75 Gain on sales of assets, net — ( 62 ) Impairment loss and casualty gain, net — 694 Equity in losses from investments in affiliates 4 1 Other loss, net — 2 Share-based compensation expense 6 2 Amortization of deferred financing costs 2 1 Distributions from unconsolidated affiliates — 4 Changes in operating assets and liabilities 34 ( 41 ) Net cash used in operating activities ( 71 ) ( 13 ) Investing Activities: Capital expenditures for property and equipment ( 5 ) ( 26 ) Proceeds from asset dispositions, net — 205 Contributions to unconsolidated affiliates ( 2 ) — Insurance proceeds for property damage claims 4 1 Net cash (used in) provided by investing activities ( 3 ) 180 Financing Activities: Borrowings from credit facilities — 1,000 Repayments of mortgage debt ( 1 ) ( 2 ) Dividends paid — ( 136 ) Distributions to noncontrolling interests — ( 1 ) Tax withholdings on share-based compensation ( 6 ) ( 6 ) Repurchase of common stock — ( 66 ) Net cash (used in) provided by financing activities ( 7 ) 789 Net (decrease) increase in cash and cash equivalents and restricted cash ( 81 ) 956 Cash and cash equivalents and restricted cash, beginning of period 981 386 Cash and cash equivalents and restricted cash, end of period $ 900 $ 1,342 Supplemental Disclosures Non-cash financing activities: Dividends declared but unpaid $ — $ 106 Refer to the notes to the unaudited condensed consolidated financial statements. 4 PARK HOTELS & RESORTS INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited, in millions) Accumulated Additional Other Non- Common Stock Paid-in Retained Comprehensive controlling Shares Amount Capital Earnings Loss Interests Total Balance as of December 31, 2020 236 $ 2 $ 4,519 $ 376 $ ( 4 ) $ ( 50 ) $ 4,843 Share-based compensation, net — — 1 ( 1 ) — — — Net loss — — — ( 190 ) — ( 1 ) ( 191 ) Other comprehensive income — — — — 1 1 Balance as of March 31, 2021 236 $ 2 $ 4,520 $ 185 $ ( 3 ) $ ( 51 ) $ 4,653 Accumulated Additional Other Non- Common Stock Paid-in Retained Comprehensive controlling Shares Amount Capital Earnings Loss Interests Total Balance as of December 31, 2019 239 $ 2 $ 4,575 $ 1,922 $ ( 3 ) $ ( 45 ) $ 6,451 Share-based compensation, net — — ( 5 ) 1 — — ( 4 ) Net loss — — — ( 688 ) — ( 1 ) ( 689 ) Other comprehensive loss — — — — ( 2 ) ( 2 ) Dividends and dividend equivalents ( 1) — — — ( 106 ) — — ( 106 ) Distributions to noncontrolling interests — — — — — ( 1 ) ( 1 ) Repurchase of common stock ( 4 ) — ( 66 ) — — — ( 66 ) Balance as of March 31, 2020 235 $ 2 $ 4,504 $ 1,129 $ ( 5 ) $ ( 47 ) $ 5,583 (1) Dividends declared per common share were $ 0.45 for the three months ended March 31, 2020. Refer to the notes to the unaudited condensed consolidated financial statements. 5 PARK HOTELS & RESORTS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1: Organization and Recent Events Organization Park Hotels & Resorts Inc. (“we,” “us,” “our” or the “Company”) is a Delaware corporation that owns a portfolio of premium-branded hotels and resorts primarily located in prime city center and resort locations. On January 3, 2017, Hilton Worldwide Holdings Inc. (“Hilton”) completed the spin-off of a portfolio of hotels and resorts that established Park Hotels & Resorts Inc. as an independent, publicly traded company. On May 5, 2019, the Company, PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Domestic Sub LLC, a wholly-owned subsidiary of PK Domestic (“Merger Sub”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Chesapeake Lodging Trust (“Chesapeake”). On September 18, 2019, pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Chesapeake merged with and into Merger Sub (the “Merger”) and each of Chesapeake’s common shares of beneficial interest, $ 0.01 par value per share was converted into $ 11.00 in cash and 0.628 of a share of our common stock. No fractional shares of our common stock were issued in the Merger. The value of any fractional interests to which a Chesapeake shareholder would otherwise have been entitled was paid in cash. We are a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate, in a manner to qualify as a REIT. From the date of our spin-off from Hilton, Park Intermediate Holdings LLC (our “Operating Company”), directly or indirectly, has held all our assets and has conducted all of our operations. We own 100 % of the interests in our Operating Company. Recent Events The novel strain of coronavirus and the disease it causes (“COVID-19”) have had and continue to have a significant effect on the hospitality industry and our business. The effects of COVID-19, including government restrictions such as mandated closings of non-essential businesses and travel restrictions, have severely reduced overall lodging demand. Since the beginning of March 2020, we have experienced a significant decline in occupancy and Revenue per Available Room (“RevPAR”) associated with COVID-19 throughout our portfolio, which resulted in a decline in our operating cash flow. However, the distribution of COVID-19 vaccines that began in December 2020 and the reports of their effectiveness have resulted in an improvement in traveler and general consumer sentiment. We and our hotel managers have taken various actions to mitigate the effects of COVID-19, including temporarily suspending operations at certain of our hotels in March 2020, limiting capacity at our open hotels, deferring approximately $ 150 million of capital expenditures planned for 2020, reducing budgeted capital expenditures for maintenance projects to approximately $ 40 million for 2021, suspending our dividend after the first quarter of 2020, and, as a precautionary measure to increase liquidity and preserve financial flexibility, drawing on our revolving credit facility (“Revolver”) and completing two corporate bond offerings totaling $ 1.4 billion in 2020. We have since commenced a phased reopening of all except seven of our hotels as restrictions are removed and demand returns. The timing of fully reopening these hotels and beginning to reopen our hotels that remain suspended will depend primarily on government restrictions imposed or re-imposed, recommendations of health officials and market demand. We are committed to using our liquidity to support our hotels’ operations during the COVID-19 pandemic and subsequent recovery, while being focused on continuing to maintain and enhance our stockholders’ value. Note 2: Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation Principles of Consolidation The unaudited condensed consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP. In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. All significant intercompany transactions and balances within the financial statements have been eliminated. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021 6 Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Interim results are not necessarily indicative of full year performance. Reclassifications Certain line items on the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of cash flows for the three months ended March 31, 2020 have been reclassified to conform to the current period presentation. Summary of Significant Accounting Policies Our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021, contains a discussion of the significant accounting policies. There have been no significant changes to our significant accounting policies since December 31, 2020. Note 3: Dispositions During the three months ended March 31, 2020, we sold the Embassy Suites Washington DC Georgetown and our interests in the entity that owns the Hilton São Paulo Morumbi for total gross proceeds of $ 208 million and recognized a gain, net of selling costs, of $ 63 million on these hotels, which is included in gain on sales of assets, net in our condensed consolidated statements of comprehensive loss. Additionally, the net gain includes the reclassification of a currency translation adjustment of $ 7 million from accumulated other comprehensive loss into earnings concurrent with the sale of the Hilton São Paulo Morumbi . Note 4: Property and Equipment Property and equipment were: March 31, 2021 December 31, 2020 (in millions) Land $ 3,429 $ 3,429 Buildings and leasehold improvements 6,960 6,951 Furniture and equipment 1,046 1,042 Construction-in-progress 44 52 11,479 11,474 Accumulated depreciation and amortization ( 2,354 ) ( 2,281 ) $ 9,125 $ 9,193 Depreciation of property and equipment was $ 73 million and $ 74 million during the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2020, we recognized $ 88 million of impairment losses, primarily related to one of our hotels, and our inability to recover the carrying value of the asset because of COVID-19. 7 Note 5: Consolidated Variable Interest Entities ("VIEs") and Investments in Affiliates Consolidated VIEs We consolidate three VIEs that own hotels in the U.S. We are the primary beneficiary of these VIEs as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our VIEs are only available to settle the obligations of these entities. Our condensed consolidated balance sheets include the following assets and liabilities of these entities: March 31, 2021 December 31, 2020 (in millions) Property and equipment, net $ 214 $ 216 Cash and cash equivalents 9 8 Restricted cash 2 2 Accounts receivable, net 2 1 Prepaid expenses 1 1 Other assets — 1 Debt 207 207 Accounts payable and accrued expenses 6 5 Other liabilities 2 1 Unconsolidated Entities Investments in affiliates were: Ownership % March 31, 2021 December 31, 2020 (in millions) Hilton San Diego Bayfront 25 % $ 11 $ 11 All others (6 hotels) 20% - 50% 3 3 $ 14 $ 14 The affiliates in which we own investments accounted for under the equity method had total debt of approximately $ 943 million as of March 31, 2021 and December 31, 2020, respectively. Substantially all the debt is secured solely by the affiliates’ assets or is guaranteed by other partners without recourse to us. Note 6: Goodwill Due to the effects of COVID-19, we assessed goodwill for impairment during the first quarter of 2020 and determined that the carrying value of our consolidated and unconsolidated hotel reporting units exceeded their respective estimated fair value. As a result, we fully impaired our remaining goodwill balance, recognizing an impairment loss of $ 607 million in the first quarter of 2020. 8 Note 7: Debt Debt balances and associated interest rates as of March 31, 2021 were: Principal balance as of Interest Rate at March 31, 2021 Maturity Date March 31, 2021 December 31, 2020 (in millions) SF CMBS Loan (1) 4.11 % November 2023 $ 725 $ 725 HHV CMBS Loan (1) 4.20 % November 2026 1,275 1,275 Mortgage loans Average rate of 4.16% 2021 to 2026 (2)(3) 508 509 2019 Term Facility (4)(5) L + 2.65% August 2024 670 670 Revolver (5) L + 3.00% 2021 to 2023 (6) 601 601 2025 Senior Secured Notes (7) 7.50 % June 2025 650 650 2028 Senior Secured Notes (7) 5.88 % October 2028 725 725 Finance lease obligations 3.07 % 2021 to 2022 1 1 5,155 5,156 Add: unamortized premium 3 3 Less: unamortized deferred financing costs and discount ( 37 ) ( 38 ) $ 5,121 $ 5,121 (1) In October 2016, we entered into a $ 725 million CMBS loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco (“SF CMBS Loan”) and a $ 1.275 billion CMBS loan secured by the Hilton Hawaiian Village Waikiki Beach Resort (“HHV CMBS Loan”). (2) Assumes the exercise of all extensions that are exercisable solely at our option. The mortgage loan for Hilton Denver City Center matures in 2042 but is callable by the lender beginning August 2022 . ( 3 ) In December 2020, our joint venture executed a forbearance agreement for the $ 12 million loan secured by the Doubletree Spokane in which the lender agreed to forbear exercising its rights and remedies arising from the joint venture’s non-payment of the loan at maturity due to market conditions until October 6, 2021 . Beginning April 2021, the interest rate on the loan will be accrued at the default rate of 6.55 %. Additionally, in January 2021, we ceased making debt service payments for the $ 75 million mortgage loan secured by the W Chicago City Center. Failure to make debt service payments constitutes an event of default. While Park hopes to negotiate an amendment with the lender, there can be no assurances that an agreement will be reached. ( 4 ) In August 2019, the Company, our Operating Company and PK Domestic entered into a term loan facility (the “2019 Term Facility”). (5) In May 2020, we amended our credit and term loan facilities to add a LIBOR floor of 25 basis points . ( 6 ) In September 2020, we increased our aggregate commitments under the Revolver by $ 75 million to $ 1.075 billion and extended the maturity date with respect to $ 901 million of the aggregate commitments for two years to December 2023 , including all $ 75 million of the increased Revolver commitments. The maturity date for the remaining $ 174 million of commitments under the Revolver is December 2021 . ( 7 ) In May and September 2020, our Operating Company, PK Domestic and PK Finance Co-Issuer Inc. (“PK Finance”) issued an aggregate of $ 650 million of senior secured notes due 2025 (“2025 Senior Secured Notes”) and an aggregate of $ 725 million of senior secured notes due 2028 (“2028 Senior Secured Notes”), respectively. We are required to deposit with lenders certain cash reserves for restricted uses. As of March 31, 2021 and December 31, 2020, our condensed consolidated balance sheets included $ 12 million and $ 10 million of restricted cash, respectively, related to our CMBS and mortgage loans. 9 Debt Maturities The contractual maturities of our debt, assuming the exercise of all extensions that are exercisable solely at our option, as of March 31, 2021 were: Year (in millions) 2021 (1) $ 115 2022 99 2023 1,332 2024 677 2025 657 Thereafter (2) 2,275 $ 5,155 (1) Includes $ 96 million of the current outstanding balance under the Revolver; however, we have sufficient capacity with extended undrawn commitments under the Revolver to effectively extend for two years . (2) Assumes the exercise of all extensions that are exercisable solely at our option. Note 8: Fair Value Measurements We did not elect the fair value measurement option for our financial assets or liabilities. The fair values of our other financial instruments not included in the table below are estimated to be equal to their carrying amounts. The fair value of our debt and the hierarchy level we used to estimate fair values are shown below: March 31, 2021 December 31, 2020 Hierarchy Level Carrying Amount Fair Value Carrying Amount Fair Value (in millions) Liabilities: SF CMBS Loan 3 $ 725 $ 723 $ 725 $ 708 HHV CMBS Loan 3 1,275 1,238 1,275 1,195 2019 Term Facility 3 670 661 670 661 Revolver 3 601 596 601 596 2025 Senior Secured Notes 1 650 707 650 705 2028 Senior Secured Notes 1 725 774 725 774 Mortgage loans 3 508 491 509 480 Note 9: Income Taxes We are a REIT for U.S. federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate in a manner to qualify as a REIT. To qualify as a REIT, we must satisfy requirements related to, among other things, the real estate qualification of sources of our income, the real estate composition and values of our assets, the amounts we distribute to our stockholders annually and the diversity of ownership of our stock. To the extent we continue to remain qualified as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute annually to our stockholders. Accordingly, no provision for U.S. federal income taxes has been included in our accompanying condensed consolidated financial statements for the three months ended March 31, 2021 and 2020 related to our REIT activities, other than taxes related to our built-in gain property (representing property held by us with an excess of fair value over tax basis on January 4, 2017). We will be subject to U.S. federal income tax on taxable sales of built-in gain property through January 3, 2022. In addition, we are subject to non-U.S. income tax on foreign held REIT activities and certain sales of foreign investments. Further, our taxable REIT subsidiaries (“TRSs”) are generally subject to U.S. federal, state and local, and foreign income taxes (as applicable). 10 The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 and included several tax provisions that may impact us and our subsidiaries, including: • the ability for our TRSs to carry back net operating losses (“NOLs”) arising in 2020 to all post spin-off taxable years preceding the taxable year of the loss; • an increase of the business interest limitation under Internal Revenue Code (“Code”) section 163(j) from 30 percent to 50 percent of adjusted taxable income for taxable years beginning in 2019 and 2020 and the addition of an election by taxpayers to use their 2019 adjusted taxable income as their adjusted taxable income in 2020 for purposes of applying the limitation; and • a “technical correction” amending Code section 168(e)(3)(E) to add “qualified improvement property” to “15-year property” and assigning a class life of 20-years under section 168(g)(3)(B) to qualified improvement property under section 168(e)(3)(E)(vii). During the three months ended March 31, 2021, we recognized $ 1 million of income tax expense, which is comprised primarily of an adjustment to the benefit recognized in 2020 from utilizing the NOL carryback provisions of the CARES Act. During the three months ended March 31, 2020 , we recognized $ 10 million of income tax expense, which is comprised of $ 12 million of built-in gains tax expense from assets sold during the period and $ 14 million of non-U.S. income tax expense on the gain from the entity sold during the period, partially offset by a TRS income tax benefit of $ 17 million from utilizing the NOL carryback provisions of the CARES Act. Note 10: Share-Based Compensation We issue equity-based awards to our employees pursuant to the 2017 Omnibus Incentive Plan (“2017 Employee Plan”) and our non-employee directors pursuant to the 2017 Stock Plan for Non-Employee Directors (“2017 Director Plan”). The 2017 Employee Plan provides that a maximum of 8,000,000 shares of our common stock may be issued, and as of March 31, 2021, 2,910,578 shares of common stock remain available for future issuance. The 2017 Director Plan provides that a maximum of 450,000 shares of our common stock may be issued, and as of March 31, 2021, 67,094 shares of common stock remain available for future issuance. For the three months ended March 31, 2021 and 2020, we recognized $ 6 million and $ 2 million of share-based compensation expense, respectively. As of March 31, 2021, unrecognized compensation expense was $ 30 million, which is expected to be recognized over a weighted-average period of 2.1 years. The total fair value of shares vested (calculated as the number of shares multiplied by the vesting date share price) during the three months ended March 31, 2021 and 2020 was $ 14 million and $ 17 million, respectively. Restricted Stock Awards Restricted Stock Awards (“RSAs”) generally vest in annual installments between one and three years from each grant date. The following table provides a summary of RSAs for the three months ended March 31, 2021: Number of Shares Weighted-Average Grant Date Fair Value Unvested at January 1, 2021 834,258 $ 21.68 Granted 356,872 20.26 Vested ( 249,992 ) 26.07 Forfeited ( 1,547 ) 23.11 Unvested at March 31, 2021 939,591 $ 19.97 Performance Stock Units Performance Stock Units (“PSUs”) generally vest at the end of a three-year performance period and are subject to the achievement of a market condition based on a measure of our total shareholder return relative to the total shareholder return of the companies that comprise the FTSE Nareit Lodging Resorts Index (that have a market capitalization in excess of $ 1 billion as of the first day of the applicable performance period). The number of PSUs that may become vested ranges from zero to 200 % of the number of PSUs granted to an employee, based on the level of achievement of the foregoing performance measure. 11 Additionally, in November 2020, we granted special awards with vesting of these awards subject to the achievement of eight increasing levels of our average closing sales price per share, from $ 11.00 to $ 25.00 , over a consecutive 20 trading day period (“Share Price Target”). One-eighth of PSUs will vest at each date a Share Price Target is achieved and any PSUs remaining after a four-year performance period will be forfeited. As of March 31, 2021, six of the eight Share Price Targets were achieved and thus 75 % of the awards granted were vested. The following table provides a summary of PSUs for the three months ended March 31, 2021: Number of Shares Weighted-Average Grant Date Fair Value Unvested at January 1, 2021 1,078,555 $ 18.70 Granted 327,110 27.17 Vested ( 428,255 ) 16.33 Unvested at March 31, 2021 977,410 $ 22.57 The grant date fair values of the awards that are subject to the achievement of market conditions based on total shareholder return were determined using a Monte Carlo simulation valuation model with the following assumptions: Expected volatility ( 1) 60.0 % Dividend yield ( 2) — Risk-free rate 0.2 % Expected term 3 years (1) The weighted average expected volatility was 60.0 %. (2) Dividends are assumed to be reinvested in shares of our common stock and dividends will not be paid unless shares vest. Note 11: Earnings Per Share The following table presents the calculation of basic and diluted earnings per share (“EPS”): Three Months Ended March 31, 2021 2020 (in millions, except per share amounts) Numerator: Net loss attributable to stockholders $ ( 190 ) $ ( 688 ) Earnings attributable to participating securities — — Net loss attributable to stockholders, net of earnings allocated to participating securities $ ( 190 ) $ ( 688 ) Denominator: Weighted average shares outstanding – basic 235 238 Unvested restricted shares 1 — Weighted average shares outstanding – diluted 236 238 Loss per share - Basic ( 1) $ ( 0.81 ) $ ( 2.89 ) Loss per share - Diluted ( 1) $ ( 0.81 ) $ ( 2.89 ) (1) Per share amounts are calculated based on unrounded numbers. Certain of our outstanding equity awards were excluded from the above calculation of EPS for the three months ended March 31, 2021 and 2020 because their effect would have been anti-dilutive. 12 Note 12: Business Segment Information As of March 31, 2021, we have two operating segments, our consolidated hotels and unconsolidated hotels. Our unconsolidated hotels operating segment does not meet the definition of a reportable segment, thus our consolidated hotels is our only reportable segment. We evaluate our consolidated hotels primarily based on hotel adjusted earnings (loss) before interest expense, taxes and depreciation and amortization (“EBITDA”). Hotel Adjusted EBITDA is calculated as EBITDA from hotel operations, adjusted to exclude: • Gains or losses on sales of assets for both consolidated and unconsolidated investments; • Costs associated with hotel acquisitions or dispositions expensed during the period; • Severance expense; • Share-based compensation expense; • Impairment losses and casualty gains or losses; and • Other items that we believe are not representative of our current or future operating performance. The following table presents revenues for our consolidated hotels reconciled to our consolidated amounts and net loss to Hotel Adjusted EBITDA: Three Months Ended March 31, 2021 2020 (in millions) Revenues: Total consolidated hotel revenue $ 157 $ 580 Other revenues 8 19 Total revenues $ 165 $ 599 Net loss $ ( 191 ) $ ( 689 ) Other revenues ( 8 ) ( 19 ) Depreciation and amortization expense 74 75 Corporate general and administrative expense 18 14 Impairment loss and casualty gain, net — 694 Other operating expenses 7 21 Gain on sales of assets, net — ( 62 ) Interest income — ( 1 ) Interest expense 63 40 Equity in losses from investments in affiliates 4 1 Income tax expense 1 10 Severance expense ( 1) — 2 Other items ( 4 ) 5 Hotel Adjusted EBITDA $ ( 36 ) $ 91 (1) Severance expense is included in corporate general and administrative expense in our condensed consolidated statements of comprehensive loss. The following table presents total assets for our consolidated hotels, reconciled to total assets: March 31, 2021 December 31, 2020 (in millions) Consolidated hotels $ 10,415 $ 10,568 All other 19 19 Total assets $ 10,434 $ 10,587 13 Note 13: Commitments and Contingencies As of March 31, 2021, we had outstanding commitments under third-party contracts of approximately $ 52 million for capital expenditures at certain hotels. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract. We are involved in litigation arising from the normal course of business, some of which includes claims for substantial sums, and may make certain indemnifications or guarantees to select buyers of our hotels as part of a sale process. We are also involved in claims and litigation that is not in the ordinary course of business in connection with the spin-off from Hilton. The spin-off agreements indemnify us from certain of these claims as well as require us to indemnify Hilton for other claims. In addition, losses related to certain contingent liabilities could be apportioned to us under the spin-off agreements. In connection with our obligation to indemnify Hilton under the spin-off agreements, we have reserved approximately $ 8 million, as of March 31, 2021, related to litigation with respect to an audit by the Australian Tax Office (“ATO”) of Hilton related to the sale of the Hilton Sydney in June 2015. In February 2021, we were required to make a payment to Hilton of approximately $ 11 million representing our share of the deposit required by the ATO of Hilton to further defend against the claim and for certain out-of-pocket expenses incurred by Hilton. This amount could change as the litigation of the ATO’s claim progresses. Note 14: Subsequent Events In April 2021, we sold the 97-room W New Orleans – French Quarter for gross proceeds of approximately $ 24 million, or $ 249,000 per key. On April 30, 2021, our stockholders approved the amendment and restatement of our 2017 Director Plan to increase the maximum number of shares of our common stock available to issue under the plan from 450,000 to 950,000 . 14