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Drive Shack Inc. Announces Second Quarter 2018 Results and Declares Third Quarter 2018 Preferred Stock Dividends

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Drive Shack Inc. (NYSE:DS, the "Company")) today reported the following
information for the second quarter ended June 30, 2018.

BUSINESS HIGHLIGHTS

  • Drive Shack The Company opened its first venue in
    Orlando, Florida, in April 2018.
    • The Company has announced five additional venues to date, which
      are in various stages of development, and are expected to open
      throughout 2019 and early 2020.
  • American Golf – As of June 30, 2018, the Company owned,
    leased or managed 74 golf properties across 12 states. These courses
    are located predominately in high-volume, top-tier cities across the
    U.S.
    • The Company is monetizing its 26 owned properties. As of the date
      of this release, 1 property was sold and 15 properties were under
      contract or had a letter of intent for purchase. The remaining
      properties are being actively marketed and the Company aims to
      achieve all sales by early 2019.
    • The Company entered the year aiming to terminate or restructure 14
      of its lease agreements. During the first six months of the year,
      2 properties have been terminated or converted to management
      agreements. The Company continues to pursue the remaining 12
      agreements.

SECOND QUARTER 2018 FINANCIAL RESULTS

  • GAAP Loss of $6 million, or $0.09 per share, for the three months
    ended June 30, 2018, compared to a loss of $6 million, or $0.09 per
    share, in the prior year corresponding period.
  • GAAP Loss of $24 million, or $0.36 per share, for the six months ended
    June 30, 2018, compared to a loss of $20 million, or $0.31 per share,
    in the prior year corresponding period.
    • Year-over-year decrease is primarily due to lower interest income
      because of the repayment of the resorts-related loan and sale of
      agency securities, partially offset by stronger year-over-year
      performance in the traditional golf business.
     
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
GAAP Loss $ (6) million $ (6) million $ (24) million $ (20) million
GAAP Loss per WA Basic Share $ (0.09) $ (0.09) $ (0.36) $ (0.31)
 
WA: Weighted Average
 

THIRD QUARTER 2018 PREFERRED STOCK DIVIDENDS

Drive Shack Inc.'s Board of Directors declared dividends on the
Company's preferred stock for the period beginning August 1, 2018 and
ending October 31, 2018. The dividends are payable on October 31, 2018
to holders of record of preferred stock on October 1, 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, 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.

EARNINGS CONFERENCE CALL

The Company's management will host a conference call on Friday, August
3, 2018 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, http://ir.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
"7369948."

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
Friday, August 17, 2018 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 "7369948."

 

Consolidated Statements of Operations (Unaudited)

($ in thousands, except share data)

    Three Months Ended
June 30,
  Six Months Ended
June 30,
2018   2017 2018   2017
Revenues
Golf operations $ 69,150 $ 60,639 $ 122,704 $ 106,935
Sales of food and beverages   21,854   20,721   34,960   33,566
Total revenues   91,004   81,360   157,664   140,501
Operating costs
Operating expenses 67,042 62,028 124,421 112,537
Cost of sales - food and beverages 6,193 6,009 10,233 10,041
General and administrative expense 10,268 7,058 19,462 14,545
Management fee to affiliate 2,677 5,354
Depreciation and amortization 4,315 5,972 9,863 11,765
Pre-opening costs 247 50 1,803 50
Impairment 32 1,473 32
Realized and unrealized (gain) loss on investments   (89)   3,287   (331)   6,676
Total operating costs   87,976   87,113   166,924   161,000
Operating income (loss) 3,028 (5,753) (9,260) (20,499)
Other income (expenses)
Interest and investment income 469 6,395 915 14,283
Interest expense, net (4,601) (5,131) (8,650) (10,565)
Other (loss) income, net   (3,699)   293   (4,105)   170
Total other income (expenses)   (7,831)   1,557   (11,840)   3,888
Loss before income tax (4,803) (4,196) (21,100) (16,611)
Income tax expense     510     1,049
Net Loss (4,803) (4,706) (21,100) (17,660)
Preferred dividends   (1,395)   (1,395)   (2,790)   (2,790)
Loss Applicable to Common Stockholders $ (6,198) $ (6,101) $ (23,890) $ (20,450)
 
Loss Applicable to Common Stock, per share
Basic $ (0.09) $ (0.09) $ (0.36) $ (0.31)
Diluted $ (0.09) $ (0.09) $ (0.36) $ (0.31)
Weighted Average Number of Shares of Common Stock Outstanding
Basic   66,977,104   66,874,155   66,977,104   66,858,155
Diluted   66,977,104   66,874,155   66,977,104   66,858,155
 
 

Consolidated Balance Sheets

($ in thousands, except share data)

    June 30, 2018  
(Unaudited) December 31, 2017
Assets
Current Assets
Cash and cash equivalents $ 125,659 $ 167,692
Restricted cash 3,859 5,178
Accounts receivable, net 9,877 8,780
Real estate assets, held-for-sale 165,261 2,000
Real estate securities, available-for-sale 2,425 2,294
Other current assets   25,171   21,568
Total Current Assets 332,252 207,512
Restricted cash, noncurrent 777 818
Property and equipment, net of accumulated depreciation 93,592 241,258
Intangibles, net of accumulated amortization 53,716 57,276
Other investments 21,901 21,135
Other assets   9,041   8,649
Total Assets $ 511,279 $ 536,648
 
Liabilities and Equity
Current Liabilities
Obligations under capital leases $ 5,158 $ 4,652
Membership deposit liabilities 8,972 8,733
Accounts payable and accrued expenses 44,506 36,797
Deferred revenue 10,614 31,207
Real estate liabilities, held-for-sale 9,651
Other current liabilities   15,145   22,596
Total Current Liabilities 94,046 103,985
Credit facilities and obligations under capital leases 112,268 112,105
Junior subordinated notes payable 51,204 51,208
Membership deposit liabilities, noncurrent 87,832 86,523
Deferred revenue, noncurrent 7,608 6,930
Other liabilities   5,480   4,846
Total Liabilities $ 358,438 $ 365,597
 
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, 2018
and December 31, 2017

$ 61,583 $ 61,583

Common stock, $0.01 par value, 1,000,000,000 shares authorized,
66,977,104 and
66,977,104 shares issued and outstanding at
June 30, 2018 and December 31, 2017,
respectively

670 670
Additional paid-in capital 3,174,089 3,173,281
Accumulated deficit (3,084,934) (3,065,853)
Accumulated other comprehensive income   1,433   1,370
Total Equity $ 152,841 $ 171,051
 
Total Liabilities and Equity $ 511,279 $ 536,648
 

ABOUT DRIVE SHACK INC.

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 statements regarding the timing and
frequency of opening new Drive Shack venues, the Company's ability to
consummate the sales of its owned golf courses and the Company's ability
to terminate or restructure its lease agreements. 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
Quarterly Report on Form 10-Q or 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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