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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): November 12, 2019 (November 11, 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 November 11, 2019, Drive Shack Inc. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter ended September 30, 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 November 11, 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/ Nicholas M. Foley
 
   
Secretary
 
 
Date:  November 12, 2019
 


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Section 2: EX-99.1 (EXHIBIT 99.1)


Exhibit 99.1


November 11, 2019

Success of New Venues Showcased in Drive Shack Inc.’s Third Quarter 2019 Results

The Company announces successful opening of 3 new Drive Shack venues, results significantly outperform expectations
Achieves goal of selling 24 owned golf courses for total proceeds of ~$170 million

NEW YORK, November 11, 2019 (BUSINESS WIRE) -- Drive Shack Inc. (NYSE: DS), a leading owner and operator of golf entertainment and leisure venues, today announced financial results for its third quarter ended September 30, 2019.

The Company announced the successful openings of three Generation 2.0 Drive Shack venues: Raleigh, NC opened August 23rd; Richmond, VA opened September 20th; West Palm Beach, FL opened October 18th. As of November 8th, the three new venues generated combined revenue of $6.5 million, exceeding the Company’s plan by 21%. The new venues are expected to continue to ramp up faster than anticipated and achieve average EBITDA of $4 million to $6 million and development yields of 10 to 15% in 2020. Additionally, the Company announced the retirement of Ken May, who served as Chief Executive Officer. Hana Khouri, the Company’s current President, will be assuming the role of CEO and President.
 
“It has been a tremendous quarter, and we are thrilled to announce the success of our Generation 2.0 venues,” says Hana Khouri. “To open not one, but three new venues in a span of three months, and to see results of this caliber out of the gate, illustrates the strong trajectory of the company, as well as the talented and experienced leadership we have in place.”
 
“These results provide a real platform for valuation, stability, and growth of Drive Shack moving forward,” says Chairman of the Board of Directors, Wes Edens.  “Hana and her team have done a phenomenal job and set a precedent for the level of success we expect moving forward as we grow the company on a national scale.”
 
Additionally, the Company announced substantial progress in the development of its newest innovation, the “Urban Box.” The indoor format will provide a social, technology-enhanced mini golf experience designed for dense, urban locations. The focus on putting reduces venue dimension requirements compared to the core Drive Shack stores, and therefore provides more real estate opportunities, shorter development timelines and less capital risk. Three Urban Box stores are set to debut alongside Drive Shack’s New Orleans venue in 2020.
 
The Company also announced the completion of its goal to sell 24 of its 26 owned golf courses for total proceeds of approximately $170 million by year end 2019. The proceeds will be used to fund the development of the Company’s entertainment golf venues.
 
Financial Results

Three Months Ended September 30, 2019 compared to the Three Months Ended September 30, 2018 and Nine Months Ended September 30, 2019 compared to Nine Months Ended September 30, 2018 ($ in thousands, except for per share data):

   
Three Months Ended
September 30, 2019
   
Three Months Ended
September 30, 2018
   
Nine Months Ended
September 30, 2019
   
Nine Months Ended
September 30, 2018
 
Total revenues
 
$
74,682
   
$
87,419
   
$
200,249
   
$
245,083
 
Loss applicable to common stockholders
 
$
(13,414
)
 
$
(15,470
)
 
$
(43,763
)
 
$
(39,360
)
                                 
Basic
 
$
(0.20
)
 
$
(0.23
)
 
$
(0.65
)
 
$
(0.59
)
Diluted
 
$
(0.20
)
 
$
(0.23
)
 
$
(0.65
)
 
$
(0.59
)
 
For the three months ended September 30, 2019, the Company reported a loss of $13 million, or ($0.20) per share, compared to a loss of $15 million, or ($0.23) share, in the corresponding period of the prior year.  For the nine months ended September 30, 2019, the Company reported a loss of $44 million, or ($0.65) per share, compared to a loss of $39 million, or ($0.59) per share, in the corresponding period of the prior year.
 
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The Company paid dividends on October 31, 2019 to holders of record of preferred stock on October 1, 2019, for the period beginning August 1, 2019 and ending October 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.

The Board of Directors of the Company declared dividends on the Company’s preferred stock for the period beginning November 1, 2019 and ending January 31, 2020.  The dividends are payable on January 31, 2020, to holders of record of preferred stock on January 2, 2020, 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.

Conference Call Tuesday, November 12, 2019
Management will hold a conference call to discuss these results Tuesday, November 12th at 9:15 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 “9757719.”

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 Tuesday, November 26, 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 “9757719.”

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 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.

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. 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.

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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)
 
(Unaudited)
       
   
September 30, 2019
   
December 31, 2018
 
Assets
           
Current assets
           
Cash and cash equivalents
 
$
24,816
   
$
79,235
 
Restricted cash
   
3,163
     
3,326
 
Accounts receivable, net
   
5,243
     
7,518
 
Real estate assets, held-for-sale, net
   
27,833
     
75,862
 
Real estate securities, available-for-sale
   
2,914
     
2,953
 
Other current assets
   
18,615
     
20,505
 
Total current assets
   
82,584
     
189,399
 
Restricted cash, noncurrent
   
931
     
258
 
Property and equipment, net of accumulated depreciation
   
185,737
     
132,605
 
Operating lease right-of-use assets
   
220,197
     
 
Intangibles, net of accumulated amortization
   
18,208
     
48,388
 
Other investments
   
23,648
     
22,613
 
Other assets
   
4,601
     
8,684
 
Total assets
 
$
535,906
   
$
401,947
 
                 
Liabilities and Equity
               
Current liabilities
               
Obligations under finance leases
 
$
6,222
   
$
5,489
 
Membership deposit liabilities
   
10,766
     
8,861
 
Accounts payable and accrued expenses
   
38,032
     
45,284
 
Deferred revenue
   
7,627
     
18,793
 
Real estate liabilities, held-for-sale
   
21
     
2,947
 
Other current liabilities
   
28,697
     
22,285
 
Total current liabilities
   
91,365
     
103,659
 
Credit facilities and obligations under finance leases - noncurrent
   
14,397
     
10,489
 
Operating lease liabilities - noncurrent
   
191,442
     
 
Junior subordinated notes payable
   
51,194
     
51,200
 
Membership deposit liabilities, noncurrent
   
93,988
     
90,684
 
Deferred revenue, noncurrent
   
6,170
     
6,016
 
Other liabilities
   
3,694
     
5,232
 
Total liabilities
 
$
452,250
   
$
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 September 30, 2019 and December 31, 2018
   
61,583
     
61,583
 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,050,556 and 67,027,104 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
   
670
     
670
 
Additional paid-in capital
   
3,178,655
     
3,175,843
 
Accumulated deficit
   
(3,158,901
)
   
(3,105,307
)
Accumulated other comprehensive income
   
1,649
     
1,878
 
Total equity
 
$
83,656
   
$
134,667
 
                 
Total liabilities and equity
 
$
535,906
   
$
401,947
 

4

Consolidated Statements of Operations (unaudited)
(dollars in thousands, except share data)

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2019
   
2018
   
2019
   
2018
 
Revenues
                       
Golf operations
 
$
60,797
   
$
68,928
   
$
162,889
   
$
191,632
 
Sales of food and beverages
   
13,885
     
18,491
     
37,360
     
53,451
 
Total revenues
   
74,682
     
87,419
     
200,249
     
245,083
 
Operating costs
                               
Operating expenses
   
63,454
     
70,330
     
169,897
     
194,751
 
Cost of sales - food and beverages
   
3,856
     
5,180
     
10,458
     
15,413
 
General and administrative expense
   
12,755
     
10,149
     
37,981
     
29,611
 
Depreciation and amortization
   
5,723
     
4,495
     
15,769
     
14,358
 
Pre-opening costs
   
4,350
     
245
     
7,229
     
2,048
 
Impairment and other losses
   
1,872
     
4,172
     
6,077
     
5,645
 
Realized and unrealized (gain) loss on investments
   
     
48
     
     
(283
)
Total operating costs
   
92,010
     
94,619
     
247,411
     
261,543
 
Operating loss
   
(17,328
)
   
(7,200
)
   
(47,162
)
   
(16,460
)
                                 
Other income (expenses)
                               
Interest and investment income
   
191
     
467
     
799
     
1,382
 
Interest expense, net
   
(2,061
)
   
(4,290
)
   
(6,008
)
   
(12,940
)
Other income (loss), net
   
7,341
     
(3,052
)
   
12,955
     
(7,157
)
Total other income (expenses)
   
5,471
     
(6,875
)
   
7,746
     
(18,715
)
Loss before income tax
   
(11,857
)
   
(14,075
)
   
(39,416
)
   
(35,175
)
Income tax expense
   
162
     
     
162
     
 
Net Loss
   
(12,019
)
   
(14,075
)
   
(39,578
)
   
(35,175
)
Preferred dividends
   
(1,395
)
   
(1,395
)
   
(4,185
)
   
(4,185
)
Loss Applicable to Common Stockholders
 
$
(13,414
)
 
$
(15,470
)
 
$
(43,763
)
 
$
(39,360
)
                                 
Loss Applicable to Common Stock, per share
                               
Basic
 
$
(0.20
)
 
$
(0.23
)
 
$
(0.65
)
 
$
(0.59
)
Diluted
 
$
(0.20
)
 
$
(0.23
)
 
$
(0.65
)
 
$
(0.59
)
Weighted Average Number of Shares of Common Stock Outstanding
                               
Basic
   
67,040,692
     
66,992,322
     
67,032,519
     
66,982,233
 
Diluted
   
67,040,692
     
66,992,322
     
67,032,519
     
66,982,233
 

For Investor Relations Inquiries:

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


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