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Section 1: 8-K (8-K)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 8-K


CURRENT REPORT
 
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported): March 6, 2020 (March 6, 2020)


Drive Shack Inc.
(Exact name of registrant as specified in its charter)


Maryland
(State or other jurisdiction of incorporation)

001-31458
 
81-0559116
(Commission File Number)
 
(IRS Employer Identification No.)
   
218 W 18th St, 3rd Fl.
New York, New York
 
10011
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code (646) 585-5591

N/A
(Former name or former address, if changed since last report.)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 §240.12b-2).
 
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
DS
New York Stock Exchange (NYSE)
9.75% Series B Cumulative Redeemable Preferred Stock, $0.01 par value per share
DS-PB
New York Stock Exchange (NYSE)
8.05% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share
DS-PC
New York Stock Exchange (NYSE)
8.375% Series D Cumulative Redeemable Preferred Stock, $0.01 par value per share
DS-PD
New York Stock Exchange (NYSE)



Item 2.02.
Results of Operations and Financial Condition.

On March 6, 2020, Drive Shack Inc. (the “Company”) issued a press release announcing the Company’s results for the fourth quarter and year ended December 31, 2019. A copy of the Company’s press release is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

Item 2.02 of this Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

Item 9.01.
Financial Statements and Exhibits.

(d)
Exhibits
   
Press Release, dated March 6, 2020


SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

DRIVE SHACK INC.
 
(Registrant)
 
   
/s/ Nicholas M. Foley  
   
Secretary
 
   
Date:  March 6, 2020
 
 


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Section 2: EX-99.1 (EXHIBIT 99.1)


Exhibit 99.1
          
  March 5, 2020

Strength of New Venues Highlighted in Drive Shack Inc.’s Fourth Quarter 2019 Results

Generation 2.0 Drive Shack venues produce strong results, generated $15 million of revenue in second half of 2019
2 new Urban Box sites announced – Dallas, TX and Charlotte, NC
Expect to open 4 new venues in 2020

NEW YORK, March 5, 2020 (BUSINESS WIRE) -- Drive Shack Inc. (NYSE: DS), a leading owner and operator of golf-related leisure and “eatertainment” venues, today reported its financial results for the fourth quarter and full year ended December 31, 2019.

The Company announced that during the fourth quarter of 2019 it successfully opened its third Generation 2.0 Drive Shack venue in West Palm Beach, FL on October 14th. In the second half of 2019, the three new Generation 2.0 venues generated combined revenue of approximately $15 million. The new venues have ramped up faster than anticipated and are expected to achieve EBITDA margins of approximately 25% and development yields of 10 to 15% in 2020.

“For the second straight quarter we see our Generation 2.0 venues produce exceptional results,” says CEO, Hana Khouri. “Our fourth quarter results highlight the strength of these new venues, as the venues significantly outpace the anticipated timelines to ramp up to target economics. This is a direct result of the talented and experienced leadership team we have in place. They’ve done a phenomenal job executing the plan and will continue to be a key differentiator, and driver for us, as we execute our growth plan across the next 50 entertainment venues.”

Additionally, the Company announced substantial progress in the development of its newest innovation, the “Urban Box,” including the announcement of new sites in Dallas, TX and Charlotte, NC. Three Urban Box venues are set to debut alongside Drive Shack’s New Orleans venue in the second half of 2020. The Company outlined its plans for growth, which include doubling the number of operating entertainment golf venues by the end of 2020. By the end of 2023, the Company plans to operate a portfolio of nearly 60 entertainment venues, including 50 urban box venues and 8 core venues.

The Company also announced the departure of David Hammarley, who served as Chief Financial Officer. Lawrence A Goodfield Jr., the Company’s Chief Accounting Officer and Treasurer, will also assume the role of Interim Chief Financial Officer.

Financial Results

Three Months Ended December 31, 2019 compared to the Three Months Ended December 31, 2018 and the Year Ended December 31, 2019 compared to Year Ended December 31, 2018 ($ in thousands, except for per share data):

   
Three Months Ended
   
Year Ended
 
   
December 31, 2019
   
December 31, 2018
   
December 31, 2019
   
December 31, 2018
 
Total revenues
 
$
71,815
   
$
69,286
   
$
272,064
   
$
314,369
 
Loss applicable to common stockholders
 
$
(16,671
)
 
$
(4,905
)
 
$
(60,434
)
 
$
(44,263
)
Loss applicable to Common Stock, per share
                               
Basic
 
$
(0.25
)
 
$
(0.07
)
 
$
(0.90
)
 
$
(0.66
)
Diluted
 
$
(0.25
)
 
$
(0.07
)
 
$
(0.90
)
 
$
(0.66
)


1

For the three months ended December 31, 2019, the Company reported a loss of $17 million, or ($0.25) per share, compared to a loss of $5 million, or ($0.07) share, in the corresponding period of the prior year.  For the twelve months ended December 31, 2019, the Company reported a loss of $60 million, or ($0.90) per share, compared to a loss of $44 million, or ($0.66) per share, in the corresponding period of the prior year.

Conference Call Friday, March 6, 2020
Management will hold a conference call to discuss these results Friday, March 6th at 9:00 a.m. Eastern Time.  The conference call can be accessed over the phone by dialing 1-866-913-6930 (from within the U.S.) or 1-409-983-9881 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference conference ID “8985335.”

A copy of the earnings release will be posted to the Investor Relations section of Drive Shack Inc.’s website, http://ir.driveshack.com.

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at http://ir.driveshack.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available two hours following the call’s completion through 11:30 P.M. Eastern Time on Friday, March 20, 2020 by dialing 1-800-585-8367 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference conference ID “8985335.”

Additional Information
For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of the Company’s website, http://ir.driveshack.com. For consolidated information, please refer to the Company’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, which are available on the Company’s website, http://ir.driveshack.com.

About Drive Shack
Drive Shack Inc. is a leading owner and operator of golf-related leisure and “eatertainment” businesses.

Forward-Looking Statements: Certain items in this Press Release may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding Drive Shack Inc.’s (NYSE: DS; “DS Inc.” or the “Company” and “we,” “us” and “our,” as applicable) (a) statements relating to returns on our investments, (b) anticipated future sales of selected owned golf properties, including without limitation statements relating to the timing and amount of anticipated proceeds, (c) our plans and expectations to optimize the operation of, and grow, our existing leased and managed golf properties, (d) redeployment of cash from our generated liquidity, (e) targeted multiples, yields and returns, (f) our ability to terminate or restructure leases and (g) the Company’s current business plan and expectations relating to our Drive Shack venues, including (i) the number of venues that we may be able to develop, (ii) timing and frequency for opening venues, (iii) financial performance of these venues and capital expenditure costs, (iv) the growth of the golf, golf entertainment, and eatertainment industry and business, and (v) our ability to enhance technology.  These statements are based on management’s current expectations and beliefs and are subject to a number of risks, trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. We cannot give any assurances that management’s current expectations will be attained. For a discussion of some of the risks and important factors that could cause actual results to differ materially from such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s periodic reports filed with the Securities and Exchange Commission (“SEC”), which are available on the Company’s website (www.http://ir.driveshack.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible to predict or assess the impact of every factor that may cause actual results to differ from those contained in any forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements contained in this Press Release. Forward-looking statements speak only as of the date of this Press Release. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

Non-GAAP Financial Information: This Press Release includes information based on financial measures that are not recognized under generally accepted accounting principles (“GAAP”), including EBITDA, EBITDA margin, and Development Yield. You should use non-GAAP information in addition to, and not as an alternative to, financial information prepared in accordance with GAAP, which is included in the Company’s filings with the SEC. The Company has not reconciled its EBITDA expectations set forth in this press release to net income (loss), as items that impact such measures are out of the Company’s control and/or cannot be reasonably predicted. Accordingly, a reconciliation is not available without unreasonable effort. The company has not reconciled EBITDA to net income (loss) in this press release because doing so would require unreasonable effort.


2

Past Performance; No Offer; No Reliance: Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. This Press Release does not constitute an offer to sell, or a solicitation of an offer to buy, any security. Any such offer would only be made by means of formal offering documents, the terms of which would govern in all respects. You should not rely on this Press Release as the basis upon which to make any investment decision.

Cautionary Note regarding Estimated / Targeted Returns and Growth:  Targeted returns and growth represent management’s view and are estimated based on current and projected future operating performance of our current locations and other targeted locations, comparable companies in our industry and a variety of other assumptions, many of which are beyond our control, that could prove incorrect. As a result, actual results may vary materially with changes in our liquidity or ability to obtain financing, changes in market conditions and additional factors described in our reports filed with the SEC, which we encourage you to review. We undertake no obligation to update these estimates. See above for more information on forward-looking statements.


3

Consolidated Balance Sheets
(dollars in thousands, except share data)
 
December 31,
 
   
2019
   
2018
 
Assets
           
Current assets
           
Cash and cash equivalents
 
$
28,423
   
$
79,235
 
Restricted cash
   
3,103
     
3,326
 
Accounts receivable, net
   
5,249
     
7,518
 
Real estate assets, held-for-sale, net
   
16,948
     
75,862
 
Real estate securities, available-for-sale
   
3,052
     
2,953
 
Other current assets
   
17,521
     
20,505
 
Total current assets
   
74,296
     
189,399
 
Restricted cash, noncurrent
   
438
     
258
 
Property and equipment, net of accumulated depreciation
   
179,641
     
132,605
 
Operating lease right-of-use assets
   
215,308
     
 
Intangibles, net of accumulated amortization
   
17,565
     
48,388
 
Other investments
   
24,020
     
22,613
 
Other assets
   
4,723
     
8,684
 
Total assets
 
$
515,991
   
$
401,947
 
                 
Liabilities and Equity
               
Current liabilities
               
Obligations under finance leases
 
$
6,154
   
$
5,489
 
Membership deposit liabilities
   
10,791
     
8,861
 
Accounts payable and accrued expenses
   
25,877
     
45,284
 
Deferred revenue
   
26,268
     
18,793
 
Real estate liabilities, held-for-sale
   
4
     
2,947
 
Other current liabilities
   
23,964
     
22,285
 
Total current liabilities
   
93,058
     
103,659
 
Credit facilities and obligations under finance leases - noncurrent
   
13,125
     
10,489
 
Operating lease liabilities - noncurrent
   
187,675
     
 
Junior subordinated notes payable
   
51,192
     
51,200
 
Membership deposit liabilities, noncurrent
   
95,805
     
90,684
 
Deferred revenue, noncurrent
   
6,283
     
6,016
 
Other liabilities
   
3,278
     
5,232
 
Total liabilities
 
$
450,416
   
$
267,280
 
                 
Commitments and contingencies
               
                 
Equity
               
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 1,347,321 shares of 9.75% Series B Cumulative Redeemable Preferred Stock, 496,000 shares of 8.05% Series C Cumulative Redeemable Preferred Stock, and 620,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, issued and outstanding as of December 31, 2019 and 2018
   
61,583
     
61,583
 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,068,751 and 67,027,104 shares issued and outstanding at December 31, 2019 and 2018, respectively
   
671
     
670
 
Additional paid-in capital
   
3,177,183
     
3,175,843
 
Accumulated deficit
   
(3,175,572
)
   
(3,105,307
)
Accumulated other comprehensive income
   
1,710
     
1,878
 
Total equity
 
$
65,575
   
$
134,667
 
                 
Total liabilities and equity
 
$
515,991
   
$
401,947
 


4

Consolidated Statements of Operations (unaudited)
(dollars in thousands, except share data)
   
Three Months Ended December 31,
   
Year Ended December 31,
 
   
2019
   
2018
   
2019
   
2018
 
Revenues
                       
Golf operations
 
$
53,608
   
$
53,014
   
$
216,497
   
$
244,646
 
Sales of food and beverages
   
18,207
     
16,272
     
55,567
     
69,723
 
Total revenues
   
71,815
     
69,286
     
272,064
     
314,369
 
Operating costs
                               
Operating expenses
   
59,409
     
57,043
     
229,306
     
251,794
 
Cost of sales - food and beverages
   
4,759
     
4,740
     
15,217
     
20,153
 
General and administrative expense
   
9,994
     
8,951
     
47,976
     
38,560
 
Depreciation and amortization
   
6,627
     
5,346
     
22,396
     
19,704
 
Pre-opening costs
   
1,811
     
435
     
9,040
     
2,483
 
Impairment and other losses
   
9,336
     
2,595
     
15,413
     
8,240
 
Realized and unrealized (gain) loss on investments
   
     
152
     
     
(131
)
Total operating costs
   
91,936
     
79,262
     
339,348
     
340,803
 
Operating loss
   
(20,121
)
   
(9,976
)
   
(67,284
)
   
(26,434
)
                                 
Other income (expenses)
                               
Interest and investment income
   
156
     
412
     
955
     
1,794
 
Interest expense, net
   
(2,753
)
   
(3,699
)
   
(8,760
)
   
(16,639
)
Other income (loss), net
   
7,921
     
10,037
     
20,876
     
2,880
 
Total other income (expenses)
   
5,324
     
6,750
     
13,071
     
(11,965
)
Loss before income tax
   
(14,797
)
   
(3,226
)
   
(54,213
)
   
(38,399
)
Income tax expense
   
479
     
284
     
641
     
284
 
Net Loss
   
(15,276
)
   
(3,510
)
   
(54,854
)
   
(38,683
)
Preferred dividends
   
(1,395
)
   
(1,395
)
   
(5,580
)
   
(5,580
)
Loss Applicable to Common Stockholders
 
$
(16,671
)
 
$
(4,905
)
 
$
(60,434
)
 
$
(44,263
)
                                 
Loss Applicable to Common Stock, per share
                               
Basic
 
$
(0.25
)
 
$
(0.07
)
 
$
(0.90
)
 
$
(0.66
)
Diluted
 
$
(0.25
)
 
$
(0.07
)
 
$
(0.90
)
 
$
(0.66
)
Weighted Average Number of Shares of Common Stock Outstanding
                               
Basic
   
67,060,440
     
67,027,104
     
67,039,556
     
66,993,543
 
Diluted
   
67,060,440
     
67,027,104
     
67,039,556
     
66,993,543
 

For Investor Relations Inquiries:

Austin Pruitt
Head of Investor Relations
646-585-5591
[email protected]


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