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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 4, 2020 (August 4, 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 Sec.230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 Sec.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 August 4, 2020, Drive Shack Inc. (the “Company”) issued a press release announcing the Company’s results for the second quarter ended June 30, 2020.  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 August 4, 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:  August 5, 2020

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Section 2: EX-99.1 (EXHIBIT 99.1)


Exhibit 99.1

          
August 4, 2020

Drive Shack Announces Second Quarter 2020 Results
Provides Business & Financial Liquidity Update


NEW YORK, August 4, 2020 -- Drive Shack Inc. (the “Company”) (NYSE: DS) today reported its financial results for the second quarter ended June 30, 2020. The Company also provided an update on the impact of the COVID-19 pandemic on its business, together with measures the Company has taken to reduce cash expenditures.

“Despite the challenging environment, the Company experienced quite a bit of positive momentum in the second quarter. We reopened all of our golf courses and our Gen 2.0 Drive Shack venues in West Palm Beach, Richmond and Raleigh,” said Hana Khouri, Chief Executive Officer. “Our operators have done a remarkable job navigating the public health crisis. Due to COVID, we have implemented additional safety measures across all of our venues and courses to ensure that we are providing our guests with experiences that prioritize their health and safety.”

Khouri continued, “We have seen strong demand since reopening our traditional and entertainment golf businesses. Our courses and venues have proven to be the ideal setting for guests to socialize and make memories with friends while social distancing. The key differentiator is our outdoor, open-air format, with defined suite-style bays partitioned by protective dividers at our Drive Shack venues, and naturally limited on-course guest overlap at American Golf courses. We believe that these factors will ultimately set us up to emerge fr1om the COVID-19 environment as a leader in the leisure space.”

Business Update

The Company began the second quarter with operations suspended across all of its entertainment golf venues and substantially all of its owned, leased and managed traditional golf courses. By the end of June, all of its traditional golf courses, and all but one of its entertainment golf venues, resumed operations.  Across the traditional golf courses open for the full month of June, which excludes the courses located in New York and Texas, private course Membership Sales increased 32% and Member Rounds increased 20% compared to June 2019. During the same period, public course Green Fee & Cart Fee Revenue increased 10% compared to June 2019, despite available tee times decreasing 32% due to locally mandated restrictions. During the second quarter, our traditional golf business generated total revenue of $30 million. This comes to $22 million after adjusting for managed course expense reimbursements, of which $12 million was generated in June.

The Company’s entertainment golf business reopened its locations in West Palm Beach, Richmond and Raleigh on May 15, May 29, and June 26, respectively. Across 85 collective days of operations, the three entertainment golf venues generated total revenue of approximately $2 million and took less than 21 days on average to breakeven following their reopening.

The Company’s reopening strategy included a focus on safeguarding the health of its employees, guests and communities, with supplies and protocols intended to keep guests and employees safe and comfortable, including transparent bay partitioning, enhanced distancing, temperature checks, complimentary personal protective equipment, and complying with local safety mandates.

Financial Liquidity Update

As of July 31, 2020, the Company had approximately $12 million of unrestricted cash on hand compared to approximately $14 million as of April 30, 2020.   As the Company resumed its traditional and entertainment golf operations in the second quarter, it reopened its venues and courses with a re-positioned labor model designed to improve operational and financial performance. As resumed operations made headway, we were able to quickly generate sufficient cash flows to meet current venue and course level operating expenses, with cash flows from both businesses turning positive shortly thereafter.

As part of its cash preservation strategy initiated at the onset of the closure periods, the Company has deferred or reduced a portion of its rent payments and entered into payment plans with a number of vendors.  In addition, the Company has continued to defer payment of the 2019 annual employee bonuses, suspend quarterly cash dividends on its preferred stock, and construction on its entertainment golf venues and traditional golf courses remains paused.
1

Second Quarter Results (unaudited)

Three Months and Six Months Ended June 30, 2020 compared to the Three Months and Six Months Ended June 30, 2019
($ in thousands, except for per share data):

   
Three Months Ended
   
Six Months Ended
 
   
June 30, 2020
   
June 30, 2019
   
June 30, 2020
   
June 30, 2019
 
Total revenues
 
$
32,100
   
$
71,615
   
$
93,235
   
$
125,567
 
Loss applicable to common stockholders
 
$
(40,921
)
 
$
(14,354
)
 
$
(59,678
)
 
$
(30,349
)
 
Loss applicable to common stock, per share
                               
Basic
 
$
(0.61
)
 
$
(0.21
)
 
$
(0.89
)
 
$
(0.45
)
Diluted
 
$
(0.61
)
 
$
(0.21
)
 
$
(0.89
)
 
$
(0.45
)

For the three months ended June 30, 2020, the Company reported a loss of $41 million, or ($0.61) per share, compared to a loss of $14 million, or ($0.21) per share, in the corresponding period of the prior year. 

For the six months ended June 30, 2020, the Company reported a loss of $60 million, or ($0.89) per share, compared to a loss of $30 million, or ($0.45) per share, in the corresponding period of the prior year.

Conference Call Wednesday, August 5, 2020
Management will hold a conference call to discuss these results Wednesday, August 5th 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 “6638268.”

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 Wednesday, August 19, 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 “6638268.”

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: The Company cautions that this release contains forward-looking statements, including, without limitation, statements relating to our expected results of operations and the impact on our business and operations of the COVID-19 pandemic. Forward-looking statements involve risks and uncertainties.   Accordingly, actual results may differ materially from the forward-looking statements, and the Company therefore cautions you against relying on such forward-looking statements.  Future factors that could cause actual results or other expectations or intentions to differ from those included in forward-looking statements include, without limitation, the uncertain and unprecedented impact of the COVID-19 pandemic on our business and operations and the related impact on our liquidity needs; our ability to continue as a going concern; our ability to access other funding sources; the potential imposition of government-mandated and voluntary shutdowns relating to the COVID-19 pandemic; the level of customer demand during the onset and continuance of the COVID-19 pandemic and thereafter; the economic impact of the COVID-19 pandemic and related disruptions on the communities we serve; our overall level of indebtedness and leverage; general business and economic conditions; the impact of competition; the seasonality of the Company’s business; adverse weather conditions; guest and employee complaints and litigation; labor costs and availability; changes in consumer and corporate spending; changes in demographic trends; changes in governmental regulations; unfavorable publicity, our ability to open new venues, and acts of God. The Company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more appropriate information becomes available, except as required by law.
2

Consolidated Balance Sheets

(dollars in thousands, except share data)
     
   
(Unaudited)
June 30, 2020
   
December 31, 2019
 
Assets
           
Current assets
       
   
Cash and cash equivalents
 
$
12,638
   
$
28,423
 
Restricted cash
   
2,974
     
3,103
 
Accounts receivable, net of allowance of $967 and $1,082, respectively
   
3,651
     
5,249
 
Real estate assets, held-for-sale, net
   
16,975
     
16,948
 
Real estate securities, available-for-sale
   
2,985
     
3,052
 
Other current assets
   
13,977
     
17,521
 
Total current assets
   
53,200
     
74,296
 
Restricted cash, noncurrent
   
267
     
438
 
Property and equipment, net of accumulated depreciation
   
178,732
     
179,641
 
Operating lease right-of-use assets
   
203,359
     
215,308
 
Intangibles, net of accumulated amortization
   
16,039
     
17,565
 
Other investments
   
     
24,020
 
Other assets
   
5,476
     
4,723
 
Total assets
 
$
457,073
   
$
515,991
 
                 
Liabilities and Equity
               
Current liabilities
               
Obligations under finance leases
 
$
5,860
   
$
6,154
 
Membership deposit liabilities
   
14,457
     
10,791
 
Accounts payable and accrued expenses
   
34,374
     
25,877
 
Deferred revenue
   
23,633
     
26,268
 
Real estate liabilities, held-for-sale
   
5
     
4
 
Other current liabilities
   
27,375
     
23,964
 
Total current liabilities
   
105,704
     
93,058
 
Credit facilities and obligations under finance leases - noncurrent
   
12,061
     
13,125
 
Operating lease liabilities - noncurrent
   
175,048
     
187,675
 
Junior subordinated notes payable
   
51,187
     
51,192
 
Membership deposit liabilities, noncurrent
   
95,913
     
95,805
 
Deferred revenue, noncurrent
   
6,783
     
6,283
 
Other liabilities
   
1,709
     
3,278
 
Total liabilities
 
$
448,405
   
$
450,416
 
                 
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, 2020 and December 31, 2019
   
61,583
     
61,583
 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,212,362 and 67,068,751 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
   
672
     
671
 
Additional paid-in capital
   
3,177,883
     
3,177,183
 
Accumulated deficit
   
(3,232,925
)
   
(3,175,572
)
Accumulated other comprehensive income
   
1,455
     
1,710
 
Total equity
 
$
8,668
   
$
65,575
 
                 
Total liabilities and equity
 
$
457,073
   
$
515,991
 
3

Consolidated Statements of Operations (unaudited)

(dollars in thousands, except share data)
 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Revenues
                       
Golf operations
 
$
29,675
   
$
57,386
   
$
78,300
   
$
102,092
 
Sales of food and beverages
   
2,425
     
14,229
     
14,935
     
23,475
 
Total revenues
   
32,100
     
71,615
     
93,235
     
125,567
 
Operating costs
                               
Operating expenses
   
33,224
     
58,720
     
87,591
     
106,443
 
Cost of sales - food and beverages
   
829
     
3,904
     
4,484
     
6,601
 
General and administrative expense
   
6,368
     
13,607
     
16,186
     
25,226
 
Depreciation and amortization
   
6,682
     
5,122
     
13,476
     
10,046
 
Pre-opening costs
   
270
     
1,700
     
822
     
2,879
 
(Gain) loss on lease terminations and impairment
   
(3,125
)
   
118
     
(2,333
)
   
4,206
 
Total operating costs
   
44,248
     
83,171
     
120,226
     
155,401
 
Operating loss
   
(12,148
)
   
(11,556
)
   
(26,991
)
   
(29,834
)
                                 
Other income (expenses)
                               
Interest and investment income
   
135
     
265
     
265
     
608
 
Interest expense, net
   
(2,591
)
   
(1,795
)
   
(5,336
)
   
(3,947
)
Other income (loss), net
   
(24,422
)
   
127
     
(24,055
)
   
5,614
 
Total other income (expenses)
   
(26,878
)
   
(1,403
)
   
(29,126
)
   
2,275
 
Loss before income tax
   
(39,026
)
   
(12,959
)
   
(56,117
)
   
(27,559
)
Income tax expense
   
500
     
     
771
     
 
Net Loss
   
(39,526
)
   
(12,959
)
   
(56,888
)
   
(27,559
)
Preferred dividends
   
(1,395
)
   
(1,395
)
   
(2,790
)
   
(2,790
)
Loss Applicable to Common Stockholders
 
$
(40,921
)
 
$
(14,354
)
 
$
(59,678
)
 
$
(30,349
)
                                 
Loss Applicable to Common Stock, per share
                               
Basic
 
$
(0.61
)
 
$
(0.21
)
 
$
(0.89
)
 
$
(0.45
)
Diluted
 
$
(0.61
)
 
$
(0.21
)
 
$
(0.89
)
 
$
(0.45
)
Weighted Average Number of Shares of Common Stock Outstanding
                               
Basic
   
67,111,843
     
67,029,610
     
67,090,805
     
67,028,364
 
Diluted
   
67,111,843
     
67,029,610
     
67,090,805
     
67,028,364
 





For Investor Relations Inquiries:

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

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