What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-01 · 121 added, 66 removed, 237 unchanged (44% of the section changed)

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We have a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value.

We currently have interests in 43 hotels, consisting of premium-branded hotels and resorts with over 26,000 rooms, of which over 86% are luxury and upper upscale (as defined by Smith Travel Research) and are located in prime U.S.

We currently have interests in 42 hotels, consisting of premium-branded hotels and resorts with approximately 26,000 rooms, of which over 86% are luxury and upper upscale (as defined by Smith Travel Research) and are located in prime U.S.

markets and its territories.

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in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information regarding our operating segments.

Economic disruptions, including as a result of supply chain disruptions, elevated interest rates and elevated rates of inflation may adversely affect our business.

Economic disruptions, including as a result of elevated interest rates and elevated rates of inflation may adversely affect our business.

Inflationary concerns can affect both consumer sentiment and demand for travel, as well as increase labor or other costs to maintain or operate hotels that cannot be reduced without adversely affecting business growth or hotel value.

However, we have relied on the performance of our hotels and active asset management to mitigate the effects of inflation, which is expected to continue to stabilize, and current macroeconomic uncertain ty.

During the first quarter of 2024, we continued to experience improvements in overall demand across our portfolio, although average daily rate ("ADR") growth has slowed as the industry recovery has stabilized and seasonal patterns have normalized.

During the second quarter of 2024, we continued to experience improvements in overall demand across our portfolio, although average daily rate ("ADR") growth has slowed as the industry recovery has stabilized and seasonal patterns have normalized.

While there can be no assurances that we will not experience further fluctuations in hotel revenues or earnings at our hotels due to inflation and other macroeconomic factors, local economic factors and demand, a potential economic slowdown or a recession and geopolitical conflicts , we expect the positive momentum to continue for the remainder of 2024 based on current demand trends, expected increases in city-wide events and as demand from international travel continues to improve.

Recent Events

In May 2024, Park Intermediate Holdings LLC (our "Operating Company"), PK Domestic Property LLC, an indirect subsidiary of the Company ("PK Domestic") and PK Finance Co-Issuer Inc.

("PK Finance") issued $550 million of 7.000% senior notes due in 2030 ("2030 Senior Notes") as well as amended our existing credit agreement to include a new $200 million term loan due May 2027 ("2024 Term Loan").

Net proceeds from the 2030 Senior Notes and the 2024 Term Loan were used to repurchase or redeem all of the $650 million of 7.500% senior notes due in 2025 ("2025 Senior Notes"), and the remainder was used for general corporate purposes.

Refer to Note 6:

"Debt" in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.

During the three months ended June 30, 2024, we repurchased approximately 1.7 million shares of our common stock for a total purchase price of $25 million.

Additionally in July 2024, the joint ventures that own and operate the Hilton La Jolla Torrey Pines sold the hotel for gross proceeds of approximately $165 million, and our pro-rata share of the gross proceeds was approximately $41 million, which was reduced by our portion of debt of approximately $17 million.

Key Business Metrics Used by Management

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We present comparable hotel results to help us and our investors evaluate the ongoing performance of our comparable hotels.

Our comparable hotels data includes results from hotels that were active and operating in our portfolio since January 1st of the previous year and excludes results from property dispositions that have occurred through March 31, 2024 and the Hilton San Francisco Hotels, which were placed into receivership at the end of October 2023.

Our comparable hotels data includes results from hotels that were active and operating in our portfolio since January 1st of the previous year and excludes results from property dispositions that have occurred through June 30, 2024 and the Hilton San Francisco Hotels, which were placed into receivership at the end of October 2023.

Non-GAAP Financial Measures

We also evaluate the performance of our business through certain other financial measures that are not recognized under U.S.

Each of these non-GAAP financial measures should be considered by investors as supplemental measures to GAAP performance measures such as total revenues, operating profit and net income.

Each of these non-GAAP financial measures should be considered by investors as supplemental measures to GAAP performance measures such as total revenues, operating profit and net income (loss).

EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA

EBITDA, presented herein, reflects net income excluding depreciation and amortization, interest income, interest expense, income taxes and also interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates.

EBITDA, presented herein, reflects net income (loss) excluding depreciation and amortization, interest income, interest expense, income taxes and also interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates.

Adjusted EBITDA, presented herein, is calculated as EBITDA, further adjusted to exclude the following items that are not reflective of our ongoing operating performance or incurred in the normal course of business, and thus, excluded from management's analysis in making day-to-day operating decisions and evaluations of our operating performance against other companies within our industry:

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EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are not recognized terms under U.S.

GAAP and should not be considered as alternatives to net income or other measures of financial performance or liquidity derived in accordance with U.S.

GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S.

In addition, our definitions of EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

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and (ii) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.

EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income or other methods of analyzing our operating performance and results as reported under U.S.

EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss) or other methods of analyzing our operating performance and results as reported under U.S.

Some of these limitations are:

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• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect any cash requirements for such replacements.

The following table provides a reconciliation of Net income to Hotel Adjusted EBITDA:

Three Months Ended

The following table provides a reconciliation of Net income (loss) to Hotel Adjusted EBITDA:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

Net income $ 29 $ 33

Net income (loss) $ 67 $ (146) $ 96 $ (113)

Depreciation and amortization expense 64 64 129 128

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Interest expense associated with hotels in receivership (1)

Income tax expense 1 2

Income tax (benefit) expense (12) 3 (11) 5

Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 2 2 5 5

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Gain on derecognition of assets (1)

(15) — (29) —

Gain on sale of investments in affiliates (2)

Share-based compensation expense 5 5 9 9

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(1) For the three months ended March 31, 2024, represents accrued interest expense associated with the default of the SF Mortgage Loan, which was offset by a gain on derecognition for the corresponding increase of the contract asset on our condensed consolidated balance sheets, as we expect to be released from this obligation upon final resolution with the lender.

(1) For the three and six months ended June 30, 2024, represents accrued interest expense associated with the default of the SF Mortgage Loan, which was offset by a gain on derecognition for the corresponding increase of the contract asset on our condensed consolidated balance sheets, as we expect to be released from this obligation upon final resolution with the lender.

(2) Included in other (loss) gain, net.

(3) Includes other revenues and other expenses , non-income taxes on TRS leases included in other property expenses and corporate general and administrative expenses.

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We present Nareit FFO attributable to stockholders and Nareit FFO per diluted share (defined as set forth below) as non-GAAP measures of our performance.

We calculate funds from (used in) operations (“FFO”) attributable to stockholders for a given operating period in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), as net income attributable to stockholders (calculated in accordance with U.S.

We calculate funds from (used in) operations (“FFO”) attributable to stockholders for a given operating period in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), as net income (loss) attributable to stockholders (calculated in accordance with U.S.

GAAP), excluding depreciation and amortization, gains or losses on sales of assets, impairment, and the cumulative effect of changes in accounting principles, plus adjustments for unconsolidated joint ventures.

Adjustments for unconsolidated joint ventures are calculated to reflect our pro rata share of the FFO of those entities on the same basis.

As noted by Nareit in its

December 2018 “Nareit Funds from Operations White Paper – 2018 Restatement,” since real estate values historically have risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.

As noted by Nareit in its December 2018 “Nareit Funds from Operations White Paper – 2018 Restatement,” since real estate values historically have risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.

For these reasons, Nareit adopted the FFO metric in order to promote an industry-wide measure of REIT operating performance.

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• Other items that we believe are not representative of our current or future operating performance.

The following table provides a reconciliation of Net income attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders:

Three Months Ended

The following table provides a reconciliation of Net income (loss) attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(in millions, except per share amounts)

Net income attributable to stockholders $ 28 $ 33

Net income (loss) attributable to stockholders $ 64 $ (150) $ 92 $ (117)

Depreciation and amortization expense 64 64 129 128

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Gain on derecognition of assets (1)

(15) — (29) —

Gain on sale of investments in affiliates (2)

Impairment loss 7 202 12 202

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(2) Included in other (loss) gain, net.

(3) Per share amounts are calculated based on unrounded numbers.

Results of Operations

Property dispositions have had a significant effect on the year-over-year comparability of our operations as further illustrated in the table of Hotel Revenues and Operating Expenses below.

Our non-comparable hotels consists of one hotel sold and one hotel returned to the lessor upon early termination of the ground lease during 2023.

The results of operations of these hotels are included in our consolidated results only during our period of ownership.

Additionally, our non-comparable hotels also consist of the two Hilton San Francisco Hotels, which are excluded from our consolidated results for the three months ended March 31, 2024, as a result of the hotels being placed into receivership in October 2023.

Changes in our operating revenues and expenses from these non-comparable hotels are shown below.

Additionally, our non-comparable hotels also consist of the two Hilton San Francisco Hotels, which are excluded from our consolidated results for the three and six months ended June 30, 2024, as a result of the hotels being placed into receivership in October 2023, which had a significant effect on the year-over-year comparability of our operations as further illustrated in the table of Hotel Revenues and Operating Expenses below.

Hotel Revenues and Operating Expenses

Three Months Ended March 31, Change from Non-Comparable Hotels

Three Months Ended June 30, Change from Non-Comparable Hotels

2024 2023 Change Change from Comparable Hotels (1)

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(1) Change from our comparable hotels primarily relates to the market-specific conditions discussed below.

Group, transient, contract and other rooms revenue for the three months ended March 31, 2024, as well as the change for each segment compared to the same period in 2023 are as follows:

Three Months Ended March 31, Change from

Six Months Ended June 30, Change from Non-Comparable Hotels

2024 2023 Change Change from Comparable Hotels (1)

Change from the Hilton San Francisco Hotels Change from Other Non-Comparable Hotels

(in millions)

Rooms revenue $ 790 $ 824 $ (34) $ 39 $ (67) $ (6)

Food and beverage revenue 364 359 5 27 (20) (2)

Ancillary hotel revenue 128 137 (9) (2) (7) —

Rooms expense 207 224 (17) 11 (27) (1)

Food and beverage expense 244 255 (11) 12 (21) (2)

Other departmental and support expense 300 323 (23) 8 (28) (3)

Other property expense 109 123 (14) (1) (12) (1)

Management fees expense 63 64 (1) 4 (4) (1)

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(1) Change from our comparable hotels primarily relates to the market-specific conditions discussed below.

Group, transient, contract and other rooms revenue for the three and six months ended June 30, 2024, as well as the change for each segment compared to the same period in 2023 are as follows:

Three Months Ended June 30, Change from

Non-Comparable Hotels

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(1) Change from our comparable hotels primarily relates to the market-specific conditions discussed below.

Six Months Ended June 30, Change from

Non-Comparable Hotels

2024 2023 Change Change from Comparable Hotels (1)

Change from the Hilton San Francisco Hotels Change from Other Non-Comparable Hotels

(in millions)

Group rooms revenue $ 251 $ 256 $ (5) $ 26 $ (30) $ (1)

Transient rooms revenue 478 507 (29) 2 (26) (5)

Contract rooms revenue 44 43 1 10 (9) —

Other rooms revenue 17 18 (1) 1 (2) —

Rooms revenue $ 790 $ 824 $ (34) $ 39 $ (67) $ (6)

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(1) Change from other factors primarily relates to the market-specific conditions discussed below.

Market-Specific Conditions

The increases in hotel revenues and operating expenses for our comparable hotels during the three months ended March 31, 2024, as compared to the same period in 2023, were primarily attributable to our hotels in Orlando, New York, Key West, Hawaii and New Orleans markets.

The Signia by Hilton Orlando Bonnet Creek benefited from an increase in group demand resulting in increases in occupancy and ADR of 5.4 percentage points and 8.3%, respectively, for the three

months ended March 31, 2024 compared to the same period in 2023.

The New York Hilton Midtown benefited from increases in both group and transient demand resulting in increases in occupancy and ADR of 5.7 percentage points and 2.8%, respectively, for the three months ended March 31, 2024 compared to the same period in 2023.

Combined occupancy and ADR at our Key West hotels increased 5.0 percentage points and 16.7%, respectively, for the three months ended March 31, 2024 compared to the same period in 2023 due to increases in group and transient demand primarily at the Casa Marina Key West, Curio Collection, which experienced increases in both occupancy and ADR of 6.1 percentage points and 24.4%, respectively, following a comprehensive renovation of the hotel that started in May 2023.

Combined occupancy and ADR at our two Hawaii hotels increased 2.1 percentage points and 4.3%, respectively, for the three months ended March 31, 2024 compared to same period in 2023, driven by increases in group and transient demand primarily at the Hilton Hawaiian Village Waikiki Beach Resort, which experienced increases in both occupancy and ADR of 2.5 percentage points and 4.7%, respectively.

Additionally, our Hawaii hotels benefited from a state unemployment tax refund of approximately $4 million received during the three months ended March 31, 2024.

The Hilton New Orleans Riverside benefited from an increase in group demand resulting in an increase of occupancy of 9.4 percentage points compared to the same period in 2023.

Other revenue and Other operating expense

During the three months ended March 31, 2024, other revenue increased by $1 million and other operating expense increased by $1 million due to an increase in business and related costs that are allocated to the Hilton Grand Vacations pursuant to service arrangements with certain of our hotels.

The increases in hotel revenues and operating expenses for our comparable hotels during the three and six months ended June 30, 2024, as compared to the same periods in 2023, were primarily attributable to our hotels in the Key West, Orlando, New York and Boston markets.

Combined occupancy and ADR at our Key West hotels increased 34.2 percentage points and 7.5%, respectively, for the three months ended June 30, 2024 and 19.7 percentage points and 11.1%, respectively, for the six months ended June 30, 2024 compared to the same periods in 2023 due to increases in group and transient demand.

The increase in the Key West market was primarily driven by Casa Marina Key West, Curio Collection, which experienced increases in both occupancy and ADR of 48.2 percentage points and 13.9%, respectively, for the three months ended June 30, 2024 and 27.3 percentage points and 17.1%, respectively, for the six months ended June 30, 2024 following a comprehensive renovation of the hotel that started in May 2023 when the hotel suspended operations, with all rooms reopened by December 2023.

The Signia by Hilton Orlando Bonnet Creek benefited from increases in group demand resulting in increases in occupancy and ADR of 3.3 percentage points and 4.1%, respectively, for the three months ended June 30, 2024 and 4.3 percentage points and 6.6%, respectively, for the six months ended June 30, 2024 compared to the same periods in 2023, following completion of the ballroom expansion project in early 2024.

The New York Hilton Midtown benefited from an increase in group demand resulting in increases in occupancy and ADR of 1.9 percentage points and 1.9%, respectively, for the three months ended June 30, 2024 and 3.8 percentage points and 1.9%, respectively, for the six months ended June 30, 2024 compared to the same periods in 2023.

Combined occupancy and ADR at our Boston hotels increased 3.5 percentage points and 5.7%, respectively, for the three months ended June 30, 2024 and 3.6 percentage points and 4.4%, respectively, for the six months ended June 30, 2024 compared to the same periods in 2023 due to increases in group and transient demand.

These increases were partially offset by decreases in hotel revenues and operating expenses at our two Hawaii hotels where combined occupancy decreased 6.2 percentage points and 2.1 percentage points for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 due to decreases in transient demand, despite increases in group demand, primarily at the Hilton Hawaiian Village Waikiki Beach Resort.

Corporate general and administrative

Three Months Ended

2024 2023 Percent Change

(in millions)

June 30, Six Months Ended

2024 2023 Percent Change 2024 2023 Percent Change

(in millions) (in millions)

General and administrative expenses $ 11 $ 10 10.0 % $ 24 $ 21 14.3 %

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Impairment and casualty loss

During the three months ended March 31, 2024, we recognized an impairment loss of approximately $5 million related to one of our hotels and our inability to recover the carrying value of the asset.

During the three and six months ended June 30, 2024, we recognized impairment losses of approximately $7 million and $12 million, respectively, related to two of our hotels subject to ground leases and our inability to recover the carrying value of the assets over the remaining lease term.

Refer to Note 7:

"Fair Value Measurements" in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.

During the three and six months ended June 30, 2023, we recognized an impairment loss of approximately $202 million.

Refer to Note 7:

"Fair Value Measurements" in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.

Gain on sale of assets, net

During the three months ended March 31, 2023, we recognized a net gain of $15 million from the sale of one consolidated hotel.

During the six months ended June 30, 2023, we recognized a net gain of $15 million from the sale of one consolidated hotel.

Gain on derecognition of assets

During the three months ended March 31, 2024, we recognized a gain of $14 million from the accrued interest expense associated with the default of the SF Mortgage Loan, which resulted in a corresponding increase of the contract asset in our condensed consolidated balance sheets, as we expect to be released from this obligation upon final resolution with the lender.

During the three and six months ended June 30, 2024, we recognized a gain of $15 million and $29 million, respectively, from the accrued interest expense associated with the default of the SF Mortgage Loan, which resulted in a corresponding increase of the contract asset in our condensed consolidated balance sheets, as we expect to be released from this obligation upon final resolution with the lender.

Non-operating Income and Expenses

Interest income

Interest income decreased $5 million during the three months ended March 31, 2024 compared to the same period in 2023 primarily as a result of a decrease in average cash balances.

Interest income decreased $5 million and $10 million during the three and six months ended June 30, 2024, respectively, compared to the same period in 2023 primarily as a result of a decrease in average cash balances.

Interest expense

Interest expense associated with our debt for the three months ended March 31, 2024 and 2023 were as follows:

Interest expense increased $2 million and $3 million, respectively during the three and six months ended June 30, 2024 compared to the same periods in 2023 due to the issuance of the 2030 Senior Notes and the 2024 Term Loan, partially offset by the repurchase and redemption of all the 2025 Senior Notes.

Interest expense associated with our debt for the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended

2024 2023 Percent Change

(in millions)

June 30, Six Months Ended

2024 2023 Percent Change 2024 2023 Percent Change

(in millions) (in millions)

HHV Mortgage Loan (1)

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Revolver — 1 (100.0) 1 2 (50.0)

2024 Term Loan 2 — 100.0 2 — 100.0

2025 Senior Notes (2)

7 12 (41.7) 19 24 (20.8)

2028 Senior Notes (2)

10 10 — 21 21 —

2029 Senior Notes (2)

9 9 — 18 18 —

2030 Senior Notes (2)

5 — 100.0 5 — 100.0

Other 3 1 200.0 5 2 150.0

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(1) In October 2016, we entered into a $1.275 billion CMBS loan secured by the Hilton Hawaiian Village Waikiki Beach Resort (“HHV Mortgage Loan”).

(2) In May and September 2020, Park Intermediate Holdings LLC (our “Operating Company”), PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Finance Co-Issuer Inc.

(“PK Finance”) issued an aggregate of $650 million of senior notes due 2025 (“2025 Senior Notes”) and an aggregate of $725 million of senior notes due 2028 (“2028 Senior Notes”), respectively.

Additionally, in May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $750 million of senior notes due 2029 ("2029 Senior Notes", collectively with the 2025 Senior Notes and 2028 Senior Notes, the "Senior Notes").

(2) In May 2020, our Operating Company, PK Domestic, and PK Finance issued an aggregate of $650 million of 2025 Senior Notes, all of which were repurchased or redeemed during the second quarter of 2024.

Our Operating Company, PK Domestic, and PK Finance also issued an aggregate of $725 million of senior notes due 2028 (“2028 Senior Notes”) in September 2020, an aggregate of $750 million of senior notes due 2029 ("2029 Senior Notes") in May 2021 and an aggregate of $550 million of 2030 Senior Notes in May 2024.

Interest expense associated with hotels in receivership

Interest expense on the SF Mortgage Loan increased $6 million due to accrued default interest beginning in June 2023 when we ceased making payments on the loan.

Interest expense on the SF Mortgage Loan increased $6 million and $12 million for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023 due to accrued default interest beginning in June 2023 when we ceased making payments on the loan.

The stated rate on the loan is 4.11%, however, beginning June 1, 2023, the default interest rate on the loan is 7.11%.

Additionally, beginning June 1, 2023, the loan accrues a monthly late payment administrative fee of 3% of the monthly amount due.

Other (loss) gain, net

During the three months ended June 30, 2024, we recognized a loss of approximately $3 million related to the write-off of the remaining unamortized deferred financing costs associated with the repurchase and redemption of all the 2025 Senior Notes.

During the three months ended June 30, 2023, we recognized a gain of approximately $4 million for an early termination fee received from the lessor to terminate the lease for the Embassy Suites Phoenix Airport hotel.

Income tax benefit (expense)

During the three and six months ended June 30, 2024, we recognized an income tax benefit of $12 million and $11 million, respectively, which is primarily associated with the effective exit from the Hilton San Francisco Hotels and the reversal of $14 million of tax expense that is no longer expected to be incurred.

During the three and six months ended June 30, 2023, we recognized income tax expense of $3 million and $5 million, respectively, which was primarily related to taxable income from our TRSs.

Liquidity and Capital Resources

We seek to maintain sufficient amounts of liquidity with an appropriate balance of cash, debt and equity to provide financial flexibility.

As of March 31, 2024, we had total cash and cash equivalents of $378 million and $32 million of restricted cash.

As of June 30, 2024, we had total cash and cash equivalents of $449 million and $35 million of restricted cash.

Restricted cash primarily consists of cash restricted as to use by our debt agreements and reserves for capital expenditures in accordance with certain of our management agreements.

During the first quarter of 2024, we continued to experience improvements in overall demand across our portfolio and expect the improvement to continue through 2024 based on current demand trends, including an increase in city-wide events and from international travel.

During the second quarter of 2024, we continued to experience improvements in overall demand across our portfolio and expect the improvement to continue through 2024 based on current demand trends, including an increase in city-wide events and from international travel.

We continue to mitigate the effects of macroeconomic and inflationary pressures through active asset management.

With approximately $950 million available under our Revolver and $449 million in existing cash and cash equivalents, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next 12 months and beyond.

Excluding the SF Mortgage Loan for which we ceased to make debt service payments in June 2023 and is in default, we have no significant maturities until June 2025.

Excluding the SF Mortgage Loan for which we ceased to make debt service payments in June 2023 and is in default, and following the issuance of the 2030 Senior Notes and borrowings under the 2024 Term Loan, the proceeds from which collectively were used to repurchase or redeem all of the 2025 Senior Notes and for other general corporate purposes, we have no significant maturities until the fourth quarter of 2026.

Refer to Note 6:

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Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including reimbursements to our hotel manager for payroll and related benefits, costs associated with the operation of our hotels, interest and contractually due principal payments on our outstanding indebtedness, capital expenditures for in-progress renovations and maintenance at our hotels, corporate general and administrative expenses and dividends to our stockholders.

In February 2024, we declared a first quarter dividend of $0.25 per share that was paid on April 15, 2024 to stockholders of record as of March 29, 2024.

In addition, we declared a second quarter dividend of $0.25 per share in April 2024 to be paid on July 15, 2024 to stockholders of record as of June 28, 2024.

In April 2024, we declared a second quarter dividend of $0.25 per share that was paid on July 15, 2024 to stockholders of record as of June 28, 2024.

In addition, we declared a third quarter dividend of $0.25 per share in July 2024 to be paid on October 15, 2024 to stockholders of record as of September 30, 2024.

Many of the other expenses associated with our hotels are relatively fixed, including portions of rent expense, property taxes and insurance.

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Our commitments to fund capital expenditures for renovations and maintenance at our hotels will be funded by cash and cash equivalents, restricted cash to the extent permitted by our lending agreements and cash flow from operations.

We have construction contract commitments of approximately $91 million for capital expenditures at our properties.

We have construction contract commitments of approximately $111 million for capital expenditures at our properties, of which $34 million relates to guestroom renovations at the Hilton Hawaiian Village Waikiki Beach Resort, $22 million relates to guestroom renovations at the Hilton Waikoloa Village and $11 million relates to guestroom renovations at the Hilton New Orleans Riverside.

Our contracts contain clauses that allow us to cancel all or some portion of the work.

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In February 2023, our Board of Directors authorized and approved a stock repurchase program allowing us to repurchase up to $300 million of our common stock over a two-year period ending in February 2025, subject to any applicable limitations or restrictions set forth in our credit facility and indentures related to our Senior Notes.

Stock repurchases may be made through open market purchases, including through Rule 10b5-1 trading programs, in privately negotiated transactions, or in such other manner that would comply with applicable securities laws.

repurchases may be made through open market purchases, including through Rule 10b5-1 trading programs, in privately negotiated transactions, or in such other manner that would comply with applicable securities laws.

The timing of any future stock repurchases and the number of shares to be repurchased will depend upon prevailing market conditions and other factors, and we may suspend the repurchase program at any time.

As of March 31, 2024, $150 million remained available for stock repurchases.

During the three months ended June 30, 2024, we repurchased approximately 1.7 million shares of our common stock for a total purchase price of $25 million.

As of June 30, 2024, $125 million remained available for stock repurchases.

Sources and Uses of Our Cash and Cash Equivalents

The following tables summarize our net cash flows and key metrics related to our liquidity:

Three Months Ended March 31,

Six Months Ended June 30,

2024 2023 Percent Change

1 unchanged sentence

Net cash provided by operating activities $ 209 $ 250 (16.4) %

Net cash (used in) provided by investing activities (70) 49 242.9

Net cash used in investing activities (121) (20) 505.0

Net cash used in financing activities (354) (327) 8.3

Operating Activities

Cash flow used in operating activities are primarily generated from the operating income generated at our hotels.

The $12 million decrease in net cash provided by operating activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to a decrease in interest received of $4 million due to a decrease in average cash balances and timing of receipts from our customers and payments to our vendors and other third parties.

Cash flow from operating activities are primarily generated from the operating income generated at our hotels.

The $41 million decrease in net cash provided by operating activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to an increase of $10 million in cash paid for taxes, a decrease in interest received of $9 million due to a decrease in average cash balances and timing of receipts from our customers and payments to our vendors and other third parties.

Investing Activities

The $70 million in net cash used in investing activities for the three months ended March 31, 2024 was attributable to $70 million in capital expenditures.

The $49 million in net cash provided by investing activities for the three months ended March 31, 2023 was primarily attributable to $116 million of net proceeds from the sale of one of our hotels partially offset by $65 million in capital expenditures and land acquisitions.

The $121 million in net cash used in investing activities for the six months ended June 30, 2024 was attributable to capital expenditures.

The $20 million in net cash used in investing activities for the six months ended June 30, 2023 was primarily attributable to $135 million in capital expenditures and land acquisitions, partially offset by $116 million of net proceeds from the sale of one of our hotels.

Financing Activities

The $362 million in net cash used in financing activities for the three months ended March 31, 2024 was primarily attributable to $355 million of dividends paid.

The $217 million in net cash used in financing activities for the three months ended March 31, 2023 was primarily attributable to the repurchase of approximately 8.8 million shares of our common stock for approximately $105 million, $56 million of dividends paid and $52 million of debt repayments.

The $354 million in net cash used in financing activities for the six months ended June 30, 2024 was primarily attributable to the issuance of $550 million of 2030 Senior Notes and the $200 million 2024 Term Loan, offset by $654 million of debt repayments, the repurchase of approximately 1.7 million shares of our common stock for $25 million and $407 million of dividends paid.

The $327 million in net cash used in financing activities for the six months ended June 30, 2023 was primarily attributable to $130 million of debt repayments, the repurchase of approximately 8.8 million shares of our common stock for $105 million and $88 million of dividends paid.

As a REIT, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, to our stockholders on an annual basis.

6 unchanged sentences

June 28, 2024 July 15, 2024 $ 0.25

As of March 31, 2024, our total indebtedness was approximately $3.8 billion, including approximately $2.1 billion of our Senior Notes, and excluding both the $725 million SF Mortgage Loan on which we ceased making debt service payments in June 2023 and approximately $164 million of our share of debt from investments in affiliates.

September 30, 2024 October 15, 2024 $ 0.25

As of June 30, 2024, our total indebtedness was approximately $3.9 billion, including over $2 billion of our Senior Notes, and excluding both the $725 million SF Mortgage Loan (that we ceased making debt service payments in June 2023) and approximately $157 million of our share of debt from investments in affiliates (which excludes approximately $17 million of our share of debt that was repaid in connection with the sale of the Hilton La Jolla Torrey Pines in July 2024).

Substantially all the debt of such unconsolidated affiliates is secured solely by the affiliates’ assets or is guaranteed by other partners without recourse to us.

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis