Drive Shack Inc. (NYSE:DS; the “Company”) today reported the
following information for the quarter ended March 31, 2017.
BUSINESS HIGHLIGHTS
- Drive Shack – The Company
continues to develop its first venue in Orlando, Florida, which is
targeted to open in 1Q 2018. It is also announcing the development
of its second venue in Richmond, Virginia. The Company is actively
working through a pipeline of locations across the U.S. and
abroad.
- American Golf – As of March 31,
2017, the Company owned, leased or managed 78 golf properties
across 13 states, over 75% of which were located in the top 20
Metropolitan Statistical Areas (MSAs).
- On a same store basis, excluding
managed courses, the traditional golf business ended the first
quarter with approximately 36,000 Players Club members for public
properties, an increase of approximately 9,000 members over the
first quarter of the prior year. On the private side of the
business, there were 8,539 full golf members at the end of the
first quarter, representing a decrease of 71 members from the first
quarter of the prior year. Average annual dues per full golf
private member increased 4% during the quarter, on a same store
basis, to $5,979 from $5,773 in 1Q 2016.
- Real Estate Debt Portfolio –
During the quarter, the Company monetized $13 million of recovery
proceeds, primarily from the sale of $290 million face amount of
agency securities.
FIRST QUARTER 2017 FINANCIAL
RESULTS
- GAAP (Loss) Income of $(14) million, or
$(0.21) per share, compared to $72 million, or $1.08 per share, in
1Q 2016.
- Year-over-year decrease is primarily
due to an $82 million one-time gain related to the sale and
deconsolidation of CDO VI, which occurred in 1Q 2016.
- Core Earnings of $(0.4) million, or
$(0.01) per share, compared to $3 million, or $0.05 per share, in
1Q 2016.
- Year-over-year decrease is primarily
due to lower interest income as a result of the Intrawest-related
loan that was partially repaid in 3Q 2016.
1Q 2017 1Q 2016 GAAP
(Loss) Income $(14) million $72 million GAAP (Loss) Income per WA
Basic Share $(0.21) $1.08
Non-GAAP Results: Core
Earnings* $(0.4) million $3 million Core Earnings per WA Basic
Share* $(0.01) $0.05
WA: Weighted Average
*For reconciliations of GAAP (Loss) Income to Core Earnings,
please refer to the Reconciliation of Core Earnings below.
SECOND QUARTER 2017
DIVIDENDS
Drive Shack Inc.’s Board of Directors declared dividends on the
Company's preferred stock for the period beginning May 1, 2017 and
ending July 31, 2017. The dividends are payable on July 31, 2017 to
stockholders of record on May 15, 2017. The Company will pay
dividends of $0.609375, $0.503125 and $0.523438 per share on the
9.750% Series B, 8.050% Series C and 8.375% Series D preferred
stock, respectively.
ADDITIONAL INFORMATION
For additional information that management believes to be useful
for investors, please refer to the presentation posted on the
Investor Relations section of the Company’s website,
www.driveshack.com. For consolidated investment portfolio
information, please refer to the Company’s most recent Annual
Report on Form 10-K, which is available on the Company’s
website, www.driveshack.com.
EARNINGS CONFERENCE CALL
The Company’s management will host a conference call on Friday,
May 5, 2017 at 9:00 A.M. Eastern Time. A copy of the earnings
release will be posted to the Investor Relations section of Drive
Shack Inc.’s website, www.driveshack.com.
All interested parties are welcome to participate on the live
call. The conference call may be accessed by dialing 1-866-393-1506
(from within the U.S.) or 1-706-634-0623 (from outside of the U.S.)
ten minutes prior to the scheduled start of the call; please
reference “Drive Shack First Quarter 2017 Earnings Call.”
A simultaneous webcast of the conference call will be available
to the public on a listen-only basis at www.driveshack.com. Please
allow extra time prior to the call to visit the website and
download any necessary software required to listen to the internet
broadcast.
A telephonic replay of the conference call will also be
available two hours following the call’s completion through 11:59
P.M. Eastern Time on Friday, May 19, 2017 by dialing 1-855-859-2056
(from within the U.S.) or 1-404-537-3406 (from outside of the
U.S.); please reference access code “16653920.”
Consolidated Statements of Operations
(Unaudited)
($ in thousands, except share data)
Three Months Ended March 31,
2017 2016
Revenues Golf course operations $ 46,296 $ 48,597 Sales of
food and beverages 12,845 13,561 Total
revenues 59,141 62,158
Operating
costs Operating expenses 54,431 58,219 Cost of sales - food and
beverages 4,032 4,597 General and administrative expense 3,565
2,937 Management fee to affiliate 2,677 2,675 Depreciation and
amortization 5,793 6,031 Impairment — 2,308 Realized/unrealized
loss on investments 3,389 2,007 Total
operating costs 73,887 78,774
Operating loss (14,746 ) (16,616 )
Other income
(expenses) Interest and investment income 7,888 21,039 Interest
expense (5,434 ) (13,534 ) Gain on deconsolidation — 82,130 Other
income (loss), net (123 ) 320 Total other
income (expenses) 2,331 89,955 (Loss)
Income before income tax (12,415 ) 73,339 Income tax expense
539 44 Net (Loss) Income (12,954 ) 73,295
Preferred dividends (1,395 ) (1,395 ) Net loss attributable to
noncontrolling interest — 124
(Loss) Income Applicable to Common Stockholders $ (14,349 ) $
72,024
(Loss) Income Applicable to Common Stock, per
share Basic $ (0.21 ) $ 1.08 Diluted $
(0.21 ) $ 1.05
Weighted Average Number of Shares
of Common Stock Outstanding Basic 66,841,977
66,654,598 Diluted 66,841,977
68,284,898 Dividends Declared per Share of Common
Stock $ — $ 0.12
Consolidated Balance Sheets
($ in thousands, except share data)
March 31, 2017 December 31, 2016 Assets
Real estate securities, available-for-sale $ 2,032 $ 1,950 Real
estate securities, available-for-sale, pledged as collateral
326,878 627,304 Real estate related and other loans, held-for-sale,
net 59,043 55,612 Investments in real estate, net of accumulated
depreciation 216,452 217,611 Intangibles, net of accumulated
amortization 63,366 65,112 Other investments 19,636 19,256 Cash and
cash equivalents 126,970 140,140 Restricted cash 7,213 6,404
Receivables from brokers, dealers and clearing organizations — 552
Receivables and other assets 38,165 38,017
Total Assets $ 859,755 $ 1,171,958
Liabilities and Equity Liabilities Repurchase
agreements 310,630 600,964 Credit facilities and obligations under
capital leases 114,851 115,284 Junior subordinated notes payable
51,214 51,217 Dividends payable 930 8,949 Membership deposit
liabilities 90,570 89,040 Accounts payable, accrued expenses and
other liabilities 87,720 88,437
Total Liabilities $ 655,915 $ 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 March 31, 2017 and December 31, 2016 $ 61,583 $
61,583 Common Stock, $0.01 par value, 1,000,000,000 shares
authorized, 66,842,378 and 66,824,304 shares issued and outstanding
at March 31, 2017 and December 31, 2016, respectively 668 668
Additional paid-in capital 3,172,795 3,172,720 Accumulated deficit
(3,032,421 ) (3,018,072 ) Accumulated other comprehensive income
1,215 1,168 Total Drive Shack
Stockholders’ Equity 203,840 218,067 Noncontrolling interest
— —
Total Equity $ 203,840 $
218,067
Total Liabilities and Equity $ 859,755
$ 1,171,958
Reconciliation of Core Earnings
($ in thousands)
Three Months Ended March 31, 2017 2016 (Loss)
Income applicable to common stockholders $ (14,349 ) $ 72,024 Add
(Deduct): Impairment —
2,308
Realized/unrealized (gain) loss on investments 3,389 2,007 Other
loss (income)(A) 502 (82,079 ) Depreciation and amortization(B)
8,407 8,665 Acquisition, transaction, restructuring and
spin-off related expenses(C) 1,662 491 Core earnings
$ (389 ) $ 3,416
(A) Other (loss) income
reconciliation:
Three Months Ended March 31, 2017 2016 Total
other income $ 2,331 $ 89,955 Add (deduct): Equity in earnings from
equity method investees (379 ) (371 ) Interest and investment
income (7,888 ) (21,039 ) Interest expense 5,434 13,534
Other (loss) income $ (502 ) $ 82,079
(B) Including accretion of membership deposit liabilities of
$1.6 million and $1.4 million and amortization of favorable and
unfavorable leasehold intangibles of $1.0 million and $1.2 million
in the three months ended March 31, 2017 and 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 $1.7 million and
$0.2 million and restructuring expenses of less than $0.1 million
and $0.3 million during the three months ended March 31, 2017 and
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.
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 site in Orlando, Florida 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. 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.
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Drive Shack Inc.Investor Relations212-479-3195
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