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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): May 10, 2019 (May 7, 2019)


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 May 10, 2019, Drive Shack Inc. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter ended March 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 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

On May 7, 2019, Sarah L. Watterson resigned from the Board of the Company.  In connection with her resignation, the Board reduced the size of the Board to eight members effective immediately.

Item 9.01.
Financial Statements and Exhibits.

(d)
Exhibits

Press Release, dated May 10, 2019


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.
 
 
Chief Accounting Officer and Treasurer
 
Date:  May 10, 2019



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Section 2: EX-99.1 (EXHIBIT 99.1)


Exhibit 99.1


May 10, 2019

Drive Shack Announces First Quarter 2019 Results and Declares Second Quarter 2019 Preferred Stock Dividends

Company announces 1 new Drive Shack location and confirms three new venue openings in 2019
Has closed sales of 18 golf courses for $132 million to date

NEW YORK, May 10, 2019 (BUSINESS WIRE) -- Drive Shack Inc. (NYSE: DS), an owner and operator of golf entertainment and dining venues and traditional golf courses, today announced financial results for its first quarter ended March 31, 2019.

Business Highlights

Drive Shack

-
Entered into new partnership with Trackman, the leading provider of radar-based ball tracking

-
Announced Drive Shack location in Minneapolis, MN

-
Hired Head of Architecture to lead design of future Drive Shack venues

-
Drive Shack Orlando, which opened in April 2018, generated $1.7 million of revenue in Q1 2019, up 11% compared to Q4

-
Raleigh, Richmond and West Palm Beach locations on track to open in the second half of 2019
American Golf Corporation

-
Total golf proceeds of $132 million from the sale of 18 courses

-
American Golf Corporation Q1 2019 revenue generation of $52 million

-
Grew public course The Players Club Members by 14% and private course average membership Dues by 2%, on a same-store basis over prior year
Company adds 2 new members, Virgis Colbert and Ben Crane, to the Board of Directors

“We are pleased to see Drive Shack Orlando’s improved performance compared to the prior quarter. We are on track to open Raleigh, Richmond and West Palm Beach in second half of this year, and we are thrilled to announce a new Drive Shack location in Minneapolis, MN,” said Ken May, Chief Executive Officer. “We continue to refine our blueprint for site-level operations, using Orlando as the test kitchen for new ideas, ahead of the next three site openings. Guest experience is the priority. The implementation of Trackman ball tracking technology at all of our sites and the menu redesign rollout are just a couple ways we are enhancing the experience.”

“We continue to make strides optimizing our American Golf portfolio and expect the stabilized business to generate $175M in total revenue by 2020. In terms of course sales, we generated $132 million in gross proceeds from the sale of 18 owned golf courses and expect approximately $42 million additional gross proceeds across 5 courses in contract or LOI. We will use these proceeds to fund our entertainment golf business and expect to have 20 sites open by 2022,” said David Hammarley, Chief Financial Officer. “Overall, I’m confident that our world class operating team will execute on our business plan and hit the financial targets we’ve set. With our team and operating costs largely in place, we expect overall company G&A costs to scale down to 5-10% of total revenues over the next few years as the business scales up.”

Development
Since the last earnings release on March 14, 2019, the Company signed a new location in Minneapolis, MN. The Company plans to open 3 new Drive Shack sites in Raleigh, NC, Richmond, VA, and West Palm Beach, FL in the second half of 2019.

Board Members
The management team is excited to announce the addition of Virgis Colbert and Ben Crane to The Board of Directors to further drive the growth of the business.

Virgis Colbert, who will also serve on the Board’s Audit and Compensation Committees, has significant operational experience including Executive Vice President of Worldwide Operations at Miller Brewing Company. Mr. Colbert’s business acumen and proven track record earned him roles as the Director of the NASDAQ exchange and a Board seat on several Fortune 500 companies. He is a lifetime member of the National Association for the Advancement of Colored People and was named a national honorary member of the 100 Black Men of America. As an avid fan of golf, Virgis is a member of two of the most prestigious golf clubs in America.

Ben Crane, who will also serve on the Board’s Compensation Committee, is an American professional golfer, who has been a member of the PGA tour since December 2001 and captured five PGA tour wins. Mr. Crane is actively involved in several charities, which includes founding the Crane Foundation, whose mission is to help others reach new heights and levels of achievement and spirituality in their lives. His charity supports several other nonprofits including the College Golf Fellowship, Forward Edge International, H.O.P.E Farm Inc., Love146 Inc., the St. Bernard Project and Young Life.

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Sarah Watterson resigned from the Board on May 7, 2019 to focus on other professional pursuits. “We’re grateful for Sarah’s contributions in creating Drive Shack. I wish her all the best, and I am confident that her leadership will be greatly valued in future endeavors,” said Ken May.

Financial Outlook
Our FY 2019 expectations and stabilized targets are as follows:

Drive Shack Orlando site is targeted to break even from a cash flow perspective in 2019 and continue to ramp up its revenues and cash flow generation in 2020 onwards

Raleigh, Richmond, and West Palm Beach planned to open in the second half of 2019 and expect to generate revenues and EBITDA consistent with target unit economics starting in 2020

Plan to open 3 to 5 new sites in 2020 and 5 to 10 sites in 2021 and 2022

Targeting 20+ open sites in 2022

Stabilized target Drive Shack entertainment unit economics:

o
Cost to build between $20 to $35 million across the varying markets and relevant venue formats

o
Top-line revenues anticipated to be $15 to $25 million with targeted EBITDA margins of approximately 25%-30%

Stabilized traditional golf business to generate revenue of approximately $175 million and target annual course-level EBITDA margins of 15-20% in 2020 and beyond

Complete the remaining short-term course sales by end of 2019 with total gross proceeds of approximately $175 million from 24 of the 26 owned courses

o
Continue to explore the monetization of the remaining 2 owned courses in 2019

Target total Company G&A of 5-10% of total Revenue by 2022

Preferred Stock Dividends
The Company will pay dividends on July 31, 2019 to holders of record of preferred stock on July 1, 2019, for the period beginning May 1, 2019 and ending July 31, 2019, in an amount equal to $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.

Financial Results
First Quarter 2019 compared to the First Quarter 2018 ($ in thousands, except for per share data):

   
Three Months Ended
March 31,
 
   
2019
   
2018
 
Total revenues
 
$
53,952
   
$
66,660
 
Loss applicable to common stockholders
 
$
(15,995
)
 
$
(17,690
)
                 
Basic
 
$
(0.24
)
 
$
(0.26
)
Diluted
 
$
(0.24
)
 
$
(0.26
)

Conference Call Today
Management will hold a conference call to discuss these results today 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 “8038894.”

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, May 24, 2019 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 “8038894.”

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.

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About Drive Shack
Drive Shack Inc. is a leading owner and operator of golf-related leisure and entertainment 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.

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.

The Company has not reconciled its EBITDA targets set forth in this press release to net income (loss) or cash from operations, 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.

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 location in Orlando 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.

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Consolidated Balance Sheets
   
(Unaudited)
March 31, 2019
   
December 31, 2018
 
Assets
           
Current assets
           
Cash and cash equivalents
 
$
49,599
   
$
79,235
 
Restricted cash
   
3,365
     
3,326
 
Accounts receivable, net
   
5,635
     
7,518
 
Real estate assets, held-for-sale, net
   
51,931
     
75,862
 
Real estate securities, available-for-sale
   
3,007
     
2,953
 
Other current assets
   
20,331
     
20,505
 
Total current assets
   
133,868
     
189,399
 
Restricted cash, noncurrent
   
258
     
258
 
Property and equipment, net of accumulated depreciation
   
157,636
     
132,605
 
Operating lease right-of-use assets
   
223,278
     
 
Intangibles, net of accumulated amortization
   
20,952
     
48,388
 
Other investments
   
22,956
     
22,613
 
Other assets
   
5,043
     
8,684
 
Total assets
 
$
563,991
   
$
401,947
 
                 
Liabilities and Equity
               
Current liabilities
               
Obligations under finance leases
 
$
6,790
   
$
5,489
 
Membership deposit liabilities
   
8,834
     
8,861
 
Accounts payable and accrued expenses
   
37,740
     
45,284
 
Deferred revenue
   
14,738
     
18,793
 
Real estate liabilities, held-for-sale
   
813
     
2,947
 
Other current liabilities
   
29,277
     
22,285
 
Total current liabilities
   
98,192
     
103,659
 
Credit facilities and obligations under finance leases - noncurrent
   
13,185
     
10,489
 
Operating lease liabilities - noncurrent
   
190,229
     
 
Junior subordinated notes payable
   
51,198
     
51,200
 
Membership deposit liabilities, noncurrent
   
92,603
     
90,684
 
Deferred revenue, noncurrent
   
5,445
     
6,016
 
Other liabilities
   
3,076
     
5,232
 
Total liabilities
 
$
453,928
   
$
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 March 31, 2019 and December 31, 2018
   
61,583
     
61,583
 
                 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,027,104 and 67,027,104 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
   
670
     
670
 
Additional paid-in capital
   
3,177,065
     
3,175,843
 
Accumulated deficit
   
(3,131,133
)
   
(3,105,307
)
Accumulated other comprehensive income
   
1,878
     
1,878
 
Total equity
 
$
110,063
   
$
134,667
 
                 
Total liabilities and equity
 
$
563,991
   
$
401,947
 

4

Consolidated Statements of Operations

   
Three Months Ended
March 31,
 
   
2019
   
2018
 
Revenues
           
Golf operations
 
$
44,706
   
$
53,554
 
Sales of food and beverages
   
9,246
     
13,106
 
Total revenues
   
53,952
     
66,660
 
Operating costs
               
Operating expenses
   
47,723
     
57,379
 
Cost of sales - food and beverages
   
2,698
     
4,040
 
General and administrative expense
   
11,619
     
9,192
 
Depreciation and amortization
   
4,924
     
5,548
 
Pre-opening costs
   
1,179
     
1,556
 
Impairment
   
4,088
     
1,473
 
Realized and unrealized (gain) on investments
   
     
(242
)
Total operating costs
   
72,231
     
78,946
 
Operating loss
   
(18,279
)
   
(12,286
)
                 
Other income (expenses)
               
Interest and investment income
   
344
     
446
 
Interest expense, net
   
(2,153
)
   
(4,049
)
Other income (loss), net
   
5,488
     
(406
)
Total other income (expenses)
   
3,679
     
(4,009
)
Loss before income tax
   
(14,600
)
   
(16,295
)
Income tax expense
   
     
 
Net Loss
   
(14,600
)
   
(16,295
)
Preferred dividends
   
(1,395
)
   
(1,395
)
Loss Applicable to Common Stockholders
 
$
(15,995
)
 
$
(17,690
)
                 
Loss Applicable to Common Stock, per share
               
Basic
 
$
(0.24
)
 
$
(0.26
)
Diluted
 
$
(0.24
)
 
$
(0.26
)
Weighted Average Number of Shares of Common Stock Outstanding
               
Basic
   
67,027,104
     
66,977,104
 
Diluted
   
67,027,104
     
66,977,104
 

For Investor Relations Inquiries:
Austin Pruitt
Drive Shack Inc.
646-585-5591
[email protected]


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