Drive Shack Inc. (NYSE:DS; the “Company”) today reported the
following information for the quarter ended September 30, 2017.
BUSINESS HIGHLIGHTS
- Drive Shack – The Company
continues to develop its first venue in Orlando, Florida, which is
targeted to open in 1Q 2018.
- The Company has announced four other
venues to date, which are in various stages of development, and
continues to assess a national and global pipeline of
locations.
- American Golf – As of September
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 third
quarter with approximately 43,000 The Players Club members for
public properties, an increase of approximately 5,000 members over
the end of the third quarter of the prior year.
- On the private side of the business,
there were approximately 9,000 full golf members at the end of 3Q
2017 representing an increase of 310 members from the third quarter
of the prior year. Average annual dues per full golf private member
increased by $203 since 3Q 2016, on a same-store basis, to
$6,005.
- Real Estate Debt Portfolio –
During 3Q 2017, the Company received the final pay down on the
Intrawest-related loan in the amount of approximately $70 million,
and received approximately $12 million of net proceeds related to
sale and pay down of remaining agency securities.
THIRD QUARTER 2017 FINANCIAL
RESULTS
- GAAP (Loss) Income of $(2) million, or
$(0.03) per share, compared to $19 million, or $0.28 per share, in
3Q 2016.
- Year-over-year decrease is primarily
due to lower interest income on the Intrawest-related loan, related
to a $110 million pay down in 3Q 2016 and a $70 million pay down in
3Q 2017.
- Core Earnings of $9 million, or $0.13
per share, compared to $23 million, or $0.35 per share, in 3Q
2016.
3Q 2017 3Q 2016 GAAP (Loss) Income $(2)
million $19 million GAAP (Loss) Income per WA Basic Share $(0.03)
$0.28
Non-GAAP Results: Core Earnings* $9 million $23
million Core Earnings per WA Basic Share* $0.13 $0.35
WA: Weighted Average
*For reconciliations of GAAP (Loss) Income to Core Earnings,
please refer to the Reconciliation of Core Earnings below.
FOURTH QUARTER 2017 PREFERRED STOCK
DIVIDENDS
Drive Shack Inc.’s Board of Directors declared dividends on the
Company's preferred stock for the period beginning November 1, 2017
and ending January 31, 2018. The dividends are payable on January
31, 2018 to stockholders of record on January 2, 2018. The Company
will pay dividends of $0.609375, $0.503125 and $0.523438 per share
on the 9.750% Series B, 8.050% Series C and 8.375% Series D
preferred stock, respectively.
ADDITIONAL INFORMATION
For additional information that management believes to be useful
for investors, please refer to the presentation posted on the
Investor Relations section of the Company’s website,
www.driveshack.com. For consolidated investment portfolio
information, please refer to the Company’s most recent Annual
Report on Form 10-K and Quarterly Report on Form 10-Q, which are
available on the Company’s website, www.driveshack.com.
EARNINGS CONFERENCE CALL
The Company’s management will host a conference call on
Wednesday, November 1, 2017 at 9:00 A.M. Eastern Time. A copy of
the earnings release will be posted to the Investor Relations
section of Drive Shack Inc.’s website, www.driveshack.com.
All interested parties are welcome to participate on the live
call. The conference call may be accessed by dialing 1-866-913-6930
(from within the U.S.) or 1-409-983-9881 (from outside of the U.S.)
ten minutes prior to the scheduled start of the call; please
reference conference ID “8283737.”
A simultaneous webcast of the conference call will be available
to the public on a listen-only basis at www.driveshack.com. Please
allow extra time prior to the call to visit the website and
download any necessary software required to listen to the internet
broadcast.
A telephonic replay of the conference call will also be
available three hours following the call’s completion through 11:59
P.M. Eastern Time on Wednesday, November 15, 2017 by dialing
1-800-585-8367 (from within the U.S.) or 1-404-537-3406 (from
outside of the U.S.); please reference conference ID “8283737.”
Consolidated Statements of
Operations (Unaudited)
($ in thousands, except share data)
Three Months Ended September 30, Nine Months
Ended September 30, 2017 2016
2017 2016 Revenues Golf course operations $
62,034 $ 63,249 $ 168,969 $ 174,718 Sales of food and beverages
19,657 19,913 53,223
55,086 Total revenues 81,691
83,162 222,192 229,804 Operating
costs Operating expenses 67,385 69,251 187,730 195,670 Cost of
sales - food and beverages 5,721 6,026 15,762 17,139 General and
administrative expense 4,328 3,688 11,115 10,348 Management fee to
affiliate 2,678 2,676 8,032 8,027 Depreciation and amortization
6,187 6,735 17,952 19,250 Impairment 28 611 60 3,564 Realized and
unrealized (gain) loss on investments (315 ) (6,605 )
6,361 (3,136 ) Total operating costs
86,012 82,382 247,012
250,862 Operating (loss) income (4,321 ) 780 (24,820 )
(21,058 ) Other income (expenses) Interest and investment income
8,418 32,310 22,701 73,770 Interest expense, net (4,770 ) (13,138 )
(15,335 ) (39,089 ) Gain on deconsolidation — — — 82,130 Other
income, net 202 505 372
1,339 Total other income (expenses) 3,850
19,677 7,738 118,150
(Loss) Income before income tax (471 ) 20,457 (17,082 )
97,092 Income tax (benefit) expense (2 ) (38 )
1,047 144 Net (Loss) Income (469 ) 20,495
(18,129 ) 96,948 Preferred dividends (1,395 ) (1,395 ) (4,185 )
(4,185 ) Net income attributable to noncontrolling interest
— (177 ) — (165 ) (Loss) Income
Applicable to Common Stockholders $ (1,864 ) $ 18,923 $
(22,314 ) $ 92,598 (Loss) Income Applicable to Common Stock,
per share Basic $ (0.03 ) $ 0.28 $ (0.33 ) $ 1.39
Diluted $ (0.03 ) $ 0.27 $ (0.33 ) $ 1.35 Weighted
Average Number of Shares of Common Stock Outstanding Basic
66,932,744 66,730,583 66,883,291
66,688,962 Diluted 66,932,744
69,072,676 66,883,291 68,753,532
Dividends Declared per Share of Common Stock $ — $ 0.12
$
—
$ 0.24
Consolidated Balance Sheets
($ in thousands, except share data)
September 30, 2017
December 31, 2016
(Unaudited) Assets Current Assets Cash and
cash equivalents $ 182,371 $ 140,140 Restricted cash 4,629 4,992
Accounts receivable, net 8,540 8,047 Real estate securities,
available-for-sale 2,236 629,254 Other current assets 22,540
78,687 Total Current Assets 220,316 861,120
Restricted cash, noncurrent 1,407 1,412 Property and equipment, net
of accumulated depreciation 226,049 217,611 Intangibles, net of
accumulated amortization 59,309 65,112 Other investments 20,601
19,256 Other assets 8,433 7,447 Total
Assets $ 536,115 $ 1,171,958
Liabilities
and Equity Current Liabilities Obligations under capital leases
$ 4,484 $ 3,699 Membership deposit liabilities 8,830 8,491
Repurchase agreements — 600,964 Accounts payable and accrued
expenses 33,672 26,249 Deferred revenue 9,955 29,851 Other current
liabilities 21,753 28,968 Total Current
Liabilities 78,694 698,222 Credit facilities and obligations under
capital leases 112,383 111,585 Junior subordinated notes payable
51,210 51,217 Membership deposit liabilities, noncurrent 84,896
80,549 Deferred revenue, noncurrent 6,900 6,256 Other liabilities
5,724 6,062 Total Liabilities $ 339,807
$ 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 September
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 September 30, 2017 and December 31, 2016,
respectively
669 668 Additional paid-in capital 3,173,095 3,172,720 Accumulated
deficit (3,040,386 ) (3,018,072 ) Accumulated other comprehensive
income 1,347 1,168 Total Equity $
196,308 $ 218,067 Total Liabilities and Equity
$ 536,115 $ 1,171,958
Reconciliation of Core Earnings ($ in thousands)
Three Months Ended September
30,
2017 2016 (Loss) Income applicable to common
stockholders $ (1,864 ) $ 18,923 Add (Deduct): Impairment 28 611
Realized and unrealized gain on investments (315 ) (6,605 ) Other
loss (income)(A) 185 (121 ) Depreciation and amortization(B) 8,826
9,259 Acquisition, transaction, restructuring and spin-off related
expenses(C) 1,953 1,093 Core earnings $ 8,813
$ 23,160
(A) Other (loss) income reconciliation:
Three Months Ended September
30,
2017 2016 Total other income (loss) $ 3,850 $
19,677 Add (deduct):
Equity in earnings from equity method
investees
(387 ) (384 ) Interest and investment income (8,418 ) (32,310 )
Interest expense, net 4,770 13,138 Other (loss)
income $ (185 ) $ 121
(B) Including accretion of membership deposit
liabilities of $1.6 million and amortization of favorable and
unfavorable leasehold intangibles of $1.0 million in the three
months ended September 30, 2017. Including accretion of membership
deposit liabilities of $1.4 million and amortization of favorable
and unfavorable leasehold intangibles of $1.1 million in the three
months ended September 30, 2016. The accretion of membership
deposit liabilities was recorded to interest expense, net and the
amortization of favorable and unfavorable leasehold intangibles was
recorded to operating expenses. (C) Including acquisition
and transaction expenses of $1.9 million and restructuring expenses
of less than $0.1 million during the three months ended September
30, 2017. Including acquisition and transaction expenses of $1.1
million and restructuring expenses of zero during the three months
ended September 30, 2016. The acquisition and transaction costs
were recorded to general and administrative expense and
restructuring expenses were recorded to operating expenses.
Excludes costs associated with Hurricane Irma damage.
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 venue in Orlando, Florida, and other venues in the national
and global pipeline of locations. 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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Drive Shack Inc.Investor Relations212-479-3195
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