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.
- 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).
- 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.
- 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.
- 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.
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 $0.523438 per share
on the 9.750% Series B, 8.050% Series C and 8.375% Series D
preferred stock, respectively.
ADDITIONAL INFORMATION
For additional information that management believes to be useful
for investors, please refer to the presentation posted on the
Investor Relations section of the Company’s website,
www.driveshack.com. For consolidated investment portfolio
information, please refer to the Company’s most recent Annual
Report on Form 10-K and Quarterly Report on Form 10-Q, which are
available on the Company’s website, www.driveshack.com.
EARNINGS CONFERENCE CALL
The Company’s management will host a conference call on
Wednesday, August 2, 2017 at 10:00 A.M. Eastern Time. A copy of the
earnings release will be posted to the Investor Relations section
of Drive Shack Inc.’s website, www.driveshack.com.
All interested parties are welcome to participate on the live
call. The conference call may be accessed by dialing 1-866-913-6930
(from within the U.S.) or 1-409-983-9881 (from outside of the U.S.)
ten minutes prior to the scheduled start of the call; please
reference conference ID “57004422.”
A simultaneous webcast of the conference call will be available
to the public on a listen-only basis at www.driveshack.com. Please
allow extra time prior to the call to visit the website and
download any necessary software required to listen to the internet
broadcast.
A telephonic replay of the conference call will also be
available two hours following the call’s completion through 11:59
P.M. Eastern Time on Wednesday, August 16, 2017 by dialing
1-800-585-8367 (from within the U.S.) or 1-404-537-3406 (from
outside of the U.S.); please reference conference ID
“57004422.”
Consolidated Statements of Operations (Unaudited)
($ 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
Consolidated Balance Sheets
($ in thousands, except share data)
June 30, 2017
December 31, 2016 (Unaudited) 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
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 investees (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.
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.
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