Toggle SGML Header (+)


Section 1: 8-K (FORM 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): August 2, 2017
 


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


Maryland
(State or other jurisdiction of incorporation)
 
001-31458
81-0559116
(Commission
(IRS Employer
File Number)
Identification No.)
   
1345 Avenue of the Americas, 45th Floor
 
New York, New York
10105
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code (212) 798-6100
 
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 CFR §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.  



Item 2.02.     Results of Operations and Financial Condition.
 
On August 2, 2017, Drive Shack Inc. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter ended June 30, 2017. 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.
 
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
 
Exhibit
Number
  
Description
99.1
  
Press release, dated August 2, 2017, issued by Drive Shack Inc.
 

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/ Lawrence A. Goodfield, Jr.
 
Lawrence A. Goodfield, Jr.
 
Chief Financial Officer, Chief Accounting Officer & Treasurer
 
   
Date:  August 2, 2017

EXHIBIT INDEX

Exhibit
Number
  
Description
99.1
  
Press release, dated August 2, 2017, issued by Drive Shack Inc.



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)


Exhibit 99.1
 
 
Investor Relations
212-479-3195

DRIVE SHACK INC. ANNOUNCES SECOND QUARTER 2017 RESULTS AND DECLARES THIRD QUARTER 2017 PREFERRED STOCK DIVIDENDS

NEW YORK—(BUSINESS WIRE) — August 2, 2017 — Drive Shack Inc. (NYSE: DS; the “Company”) today reported the following information for the quarter ended June 30, 2017.

BUSINESS HIGHLIGHTS
 
§
Drive Shack The Company continues to develop its first two venues in Orlando, Florida and Richmond, Virginia, which are targeted to open in 1Q 2018 and 3Q 2018, respectively.
 
o
The Company is also developing its third venue in Raleigh, North Carolina, which is expected to open in the second half of 2018. The team has other sites in various stages of development and continues to assess a national and global pipeline of locations.
 
§
American Golf – As of June 30, 2017, the Company owned, leased or managed 77 golf properties across 13 states, over 75% of which are located in the top 20 Metropolitan Statistical Areas (MSAs).
 
o
On a same store basis, excluding managed courses, the traditional golf business ended the second quarter with approximately 42,000 The Players Club members for public properties, an increase of approximately 7,000 members over the end of the second quarter of the prior year.
 
o
On the private side of the business, there were 8,837 full golf members at the end of the second quarter, representing an increase of 183 members from the second quarter of the prior year. Average annual dues per full golf private member increased by $211 since 2Q 2016, on a same store basis, to $5,963.

§
Real Estate Debt Portfolio On August 1, 2017, the Company received the final pay down on the Intrawest-related loan in the amount of approximately $70 million.

SECOND QUARTER 2017 FINANCIAL RESULTS
 
§
GAAP (Loss) Income of $(6) million, or $(0.09) per share, compared to $2 million, or $0.02 per share, in 2Q 2016.
 
o
Year-over-year decrease is primarily due to lower interest income on the Intrawest-related loan vs. 2Q 2016, related to a $110 million pay down which occurred in 3Q 2016.
 
§
Core Earnings of $7 million, or $0.11 per share, compared to $14 million, or $0.21 per share, in 2Q 2016.

 
2Q 2017
 
2Q 2016
GAAP (Loss) Income
$(6) million
 
$2 million
GAAP (Loss) Income per WA Basic Share
$(0.09)
 
$0.02
       
Non-GAAP Results:
     
Core Earnings*
$7 million
 
$14 million
Core Earnings per WA Basic Share*
$0.11
 
$0.21

WA:  Weighted Average

*For reconciliations of GAAP (Loss) Income to Core Earnings, please refer to the Reconciliation of Core Earnings below.
1

THIRD QUARTER 2017 PREFERRED STOCK DIVIDENDS
 
Drive Shack Inc.’s Board of Directors declared dividends on the Company’s preferred stock for the period beginning August 1, 2017 and ending October 31, 2017. The dividends are payable on October 31, 2017 to stockholders of record on August 14, 2017. The Company will pay dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.750% Series B, 8.050% Series C and 8.375% Series D preferred stock, respectively.

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, www.driveshack.com. For consolidated investment portfolio information, please refer to the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are available on the Company’s website, www.driveshack.com.

EARNINGS CONFERENCE CALL
 
The Company’s management will host a conference call on Wednesday, August 2, 2017 at 10:00 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Drive Shack Inc.’s website, www.driveshack.com.
 
All interested parties are welcome to participate on the live call. The conference call may be accessed 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 “57004422.”
 
A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.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 11:59 P.M. Eastern Time on Wednesday, August 16, 2017 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 “57004422.”
2

Consolidated Statements of Operations (Unaudited)
($ in thousands, except share data)
 
 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
Revenues
                       
Golf course operations
 
$
60,639
   
$
62,872
   
$
106,935
   
$
111,469
 
Sales of food and beverages
   
20,721
     
21,612
     
33,566
     
35,173
 
Total revenues
   
81,360
     
84,484
     
140,501
     
146,642
 
                                 
Operating costs
                               
Operating expenses
   
65,914
     
68,200
     
120,345
     
126,419
 
Cost of sales - food and beverages
   
6,009
     
6,516
     
10,041
     
11,113
 
General and administrative expense
   
3,222
     
3,723
     
6,787
     
6,660
 
Management fee to affiliate
   
2,677
     
2,676
     
5,354
     
5,351
 
Depreciation and amortization
   
5,972
     
6,484
     
11,765
     
12,515
 
Impairment
   
32
     
645
     
32
     
2,953
 
Realized and unrealized loss on investments
   
3,287
     
1,462
     
6,676
     
3,469
 
Total operating costs
   
87,113
     
89,706
     
161,000
     
168,480
 
Operating loss
   
(5,753
)
   
(5,222
)
   
(20,499
)
   
(21,838
)
                                 
Other income (expenses)
                               
Interest and investment income
   
6,395
     
20,421
     
14,283
     
41,460
 
Interest expense
   
(5,131
)
   
(12,417
)
   
(10,565
)
   
(25,951
)
Gain on deconsolidation
   
     
     
     
82,130
 
Other income, net
   
293
     
514
     
170
     
834
 
Total other income (expenses)
   
1,557
     
8,518
     
3,888
     
98,473
 
(Loss) Income before income tax
   
(4,196
)
   
3,296
     
(16,611
)
   
76,635
 
Income tax expense
   
510
     
138
     
1,049
     
182
 
Net (Loss) Income
   
(4,706
)
   
3,158
     
(17,660
)
   
76,453
 
Preferred dividends
   
(1,395
)
   
(1,395
)
   
(2,790
)
   
(2,790
)
Net (income) loss attributable to noncontrolling interest
   
     
(112
)
   
     
12
 
(Loss) Income Applicable to Common Stockholders
 
$
(6,101
)
 
$
1,651
   
$
(20,450
)
 
$
73,675
 
                                 
(Loss) Income Applicable to Common Stock, per share
                               
Basic
 
$
(0.09
)
 
$
0.02
   
$
(0.31
)
 
$
1.11
 
Diluted
 
$
(0.09
)
 
$
0.02
   
$
(0.31
)
 
$
1.07
 
                                 
Weighted Average Number of Shares of Common Stock Outstanding
                               
Basic
   
66,874,155
     
66,681,248
     
66,858,155
     
66,667,923
 
Diluted
   
66,874,155
     
68,899,515
     
66,858,155
     
68,592,206
 
Dividends Declared per Share of Common Stock
 
$
   
$
   
$
   
$
0.12
 

3

Consolidated Balance Sheets
 
($ in thousands, except share data)
 
June 30, 2017
(Unaudited)
   
December 31, 2016
 
Assets
           
Real estate securities, available-for-sale
 
$
2,114
   
$
1,950
 
Real estate securities, available-for-sale - pledged as collateral
   
319,184
     
627,304
 
Real estate related and other loans, held-for-sale, net
   
62,708
     
55,612
 
Investments in real estate, net of accumulated depreciation
   
218,668
     
217,611
 
Intangibles, net of accumulated amortization
   
61,341
     
65,112
 
Other investments
   
20,019
     
19,256
 
Cash and cash equivalents
   
118,030
     
140,140
 
Restricted cash
   
5,338
     
6,404
 
Receivables from brokers, dealers and clearing organizations
   
     
552
 
Receivables and other assets
   
41,041
     
38,017
 
Total Assets
 
$
848,443
   
$
1,171,958
 
                 
                 
Liabilities and Equity
               
Liabilities
               
Repurchase agreements
   
307,689
     
600,964
 
Credit facilities and obligations under capital leases
   
116,131
     
115,284
 
Junior subordinated notes payable
   
51,212
     
51,217
 
Dividends payable
   
930
     
8,949
 
Membership deposit liabilities
   
92,129
     
89,040
 
Accounts payable, accrued expenses and other liabilities
   
81,092
     
88,437
 
Total Liabilities
 
$
649,183
   
$
953,891
 
                 
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 June 30, 2017 and December 31, 2016
 
$
61,583
   
$
61,583
 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 66,932,744 and 66,824,304 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
   
669
     
668
 
Additional paid-in capital
   
3,173,095
     
3,172,720
 
Accumulated deficit
   
(3,038,522
)
   
(3,018,072
)
Accumulated other comprehensive income
   
2,435
     
1,168
 
Total Equity
 
$
199,260
   
$
218,067
 
Total Liabilities and Equity
 
$
848,443
   
$
1,171,958
 
4

Reconciliation of Core Earnings
($ in thousands)
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2017
   
2016
   
2017
   
2016
 
(Loss) Income applicable to common stockholders
 
$
(6,101
)
  $
1,651
   
$
(20,450
)
 
$
73,675
 
Add (Deduct):
                               
Impairment
   
32
     
645
     
32
     
2,953
 
Realized and unrealized loss on investments
   
3,287
     
1,462
     
6,676
     
3,469
 
Other loss (income)(A)
   
90
     
(140
)
   
592
     
(82,219
)
Depreciation and amortization(B)
   
8,607
     
9,029
     
17,014
     
17,694
 
Acquisition, transaction, restructuring and spin-off related expenses(C)
   
1,275
     
1,246
     
2,937
     
1,737
 
Core earnings
 
$
7,190
   
$
13,893
   
$
6,801
   
$
17,309
 

(A)
Other (loss) income reconciliation:
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2017
   
2016
   
2017
   
2016
 
Total other income (loss)
 
$
1,557
   
$
8,518
   
$
3,888
   
$
98,473
 
Add (deduct):
                               
Equity in earnings from equity method
   
(383
)
   
(374
)
   
(762
)
   
(745
)
Interest and investment income
   
(6,395
)
   
(20,421
)
   
(14,283
)
   
(41,460
)
Interest expense
   
5,131
     
12,417
     
10,565
     
25,951
 
Other (loss) income
 
$
(90
)
 
$
140
   
$
(592
)
 
$
82,219
 
 
(B)
Including accretion of membership deposit liabilities of $1.6 million and $3.2 million and amortization of favorable and unfavorable leasehold intangibles of $1.1 million and $2.1 million in the three and six months ended June 30, 2017, respectively. Including accretion of membership deposit liabilities of $1.4 million and $2.9 million and amortization of favorable and unfavorable leasehold intangibles of $1.1 million and $2.3 million in the three and six months ended June 30, 2016, respectively. The accretion of membership deposit liabilities was recorded to interest expense and the amortization of favorable and unfavorable leasehold intangibles was recorded to operating expenses.
 
(C)
Including acquisition and transaction expenses of $1.2 million and $2.9 million and restructuring expenses of less than $0.1 million and less than $0.1 million during the three and six months ended June 30, 2017, respectively.  Including acquisition and transaction expenses of $1.2 million and $1.4 million and restructuring expenses of zero and $0.3 million during the three and six months ended June 30, 2016, respectively. The acquisition and transaction costs were recorded to general and administrative expense and restructuring expenses were recorded to operating expenses.

CORE EARNINGS
 
The following primary variables impact our operating performance: (i) the current yield earned on our investments that are not included in non-recourse financing structures (i.e., unlevered investments, including investments in equity method investees and investments subject to recourse debt), (ii) the net yield we earn from our non-recourse financing structures, (iii) the interest expense and dividends incurred under our recourse debt and preferred stock, (iv) the net operating income on our real estate and golf investments, (v) our operating expenses and (vi) our realized and unrealized gains or losses, net of related provision for income taxes, including any impairment, on our investments, derivatives and debt obligations. Core earnings is a non-GAAP measure of our operating performance excluding the sixth variable listed above. Core earnings also excludes depreciation and amortization charges, including the accretion of membership deposit liabilities and the impact of the application of acquisition accounting, acquisition and spin-off related expenses and restructuring expenses. Core earnings is used by management to evaluate our  performance without taking into account gains and losses, net of related provision for income taxes, which, although they represent a part of our recurring operations, are subject to significant variability and are only a potential indicator of future performance. These adjustments to our (loss) income applicable to common stockholders are not indicative of the performance of the assets that form the core of our activity.
5

Management utilizes core earnings as a measure in its decision-making process relating to the underlying fundamental operations of our investments, as well as the allocation of resources between those investments, and management also relies on core earnings as an indicator of the results of such decisions.  As such, core earnings is not intended to reflect all of our activity and should be considered as only one of the factors in assessing our performance, along with GAAP net (loss) income, which is inclusive of all of our activities.  Management also believes that the exclusion from core earnings of the items specified above allows investors and analysts to readily identify and track the operating performance of the assets that form the core of our activity, assists in comparing the core operating results between periods, and enables investors to evaluate our current core performance using the same measure that management uses to operate the business.

Core earnings does not represent an alternative to net (loss) income as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our liquidity, and is not indicative of cash available to fund cash needs. Our calculation of core earnings may be different from the calculation used by other companies and, therefore, comparability may be limited.

ABOUT DRIVE SHACK INC.
 
Drive Shack Inc. is a leading owner and operator of golf-related leisure and entertainment businesses. Drive Shack Inc. is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm.

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 statements regarding the Company’s targets and expectations regarding Drive Shack’s sites in Orlando, Florida, Richmond, Virginia, Raleigh, North Carolina and other sites in the pipeline across the U.S. and abroad. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond Drive Shack’s control. The Company can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ 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 most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q.  Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
 
6
(Back To Top)