Drive Shack Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2020

Schedule of realized/unrealized (gain) loss on investments and other income (loss), net

Realized and Unrealized (Gain) Loss on Investments and Other Income (Loss), Net — These items are comprised of the following:


	Year Ended December 31,
	2020		2019		2018


Realized (gain) loss on settlement of non-hedge derivatives, net	—		—		(227)


Unrealized loss (gain) on non-hedge derivative instruments	—		—		96
Realized and unrealized loss (gain) on investments	$	—	$	—	$	(131)


Gain on sale of traditional golf properties, net (A)	$	16,447	$	19,338	$	8,704

Collateral management fee income, net	259		440		575
Equity in earnings, net of impairment from equity method investments (B)	(24,020)		1,381		1,471
Other loss	(297)		(283)		(7,870)
Other income (loss), net	$	(7,611)	$	20,876	$	2,880

(A)Gain on sale of traditional golf properties, net - During the year ended December 31, 2020, the Company sold one Traditional Golf property, resulting in net proceeds of $33.6 million. This property had a carrying value of $17.0 million and resulted in a gain of $16.6 million. During the year ended December 31, 2019, the Company sold eleven Traditional Golf properties, resulting in net proceeds of $74.3 million. These Traditional Golf properties had a carrying value of $54.7 million and resulted in a gain on sale of $19.4 million. During the year ended December 31, 2018, the Company sold thirteen Traditional Golf properties, resulting in net proceeds of $76.7 million. These Traditional Golf properties had a carrying value of $66.0 million and resulted in a gain on sale of $10.7 million. Net proceeds are inclusive of transactions costs.

(B)Equity in earnings, net of impairment from equity method investments - During the year ended December 31, 2020, the Company recorded an other-than-temporary impairment charge of $24.7 million on the Company's equity method investment.

Schedule of property and equipment

Depreciation is calculated using the straight-line method based on the lesser of the following estimated useful lives or the lease term:


Buildings and improvements			10-40 years
Finance leases - equipment			2-6 years
Furniture, fixtures, and equipment			2-7 years

The following table summarizes the Company's property and equipment:


	December 31, 2020						December 31, 2019
	Gross Carrying Amount		Accumulated Depreciation		Net Carrying Value		Gross Carrying Amount		Accumulated Depreciation		Net Carrying Value
Land	$	6,770	$	—	$	6,770	$	6,770	$	—	$	6,770
Buildings and improvements	142,635		(40,198)		102,437		147,146		(36,349)		110,797
Furniture, fixtures and equipment	51,622		(24,422)		27,200		52,327		(19,484)		32,843
Finance leases - equipment	34,339		(15,296)		19,043		36,166		(16,047)		20,119
Construction in progress	13,975		—		13,975		9,112		—		9,112
Total Property and Equipment	$	249,341	$	(79,916)	$	169,425	$	251,521	$	(71,880)	$	179,641

Below is a summary of the Traditional Golf properties sold during 2020 , 2019 and 2018 (in millions).


During the three months ended	Number of Golf Properties Sold	Sale Price	Net Proceeds (A)	Transaction Costs	Carrying Value	Gain (Loss) (B)	Management Agreements Executed Subsequent to Sale
September 30, 2018	1	3.5	3.2	—	3.3	(0.1)	—
December 31, 2018 (C)	12	86.2	73.5	1.2	62.7	10.8	8
March 31, 2019 (D)	3	28.7	25.5	0.5	20.3	5.2	1
June 30, 2019 (E)	4	19.7	17.9	0.8	18.3	(0.4)	1
September 30, 2019	1	12.5	12.3	0.2	5.2	7.0	1
December 31, 2019	3	19.1	18.6	0.4	10.9	7.7	2
December 31, 2020	1	34.5	33.6	0.9	17.0	16.6	1

(A)Net proceeds are inclusive of transaction costs.

(B)The gain (loss) on sale is recorded in pre-tax other income (loss), net on the Consolidated Statements of Operations.

(C)The difference between the sales price and the net proceeds was primarily due to prepaid membership dues that we are obligated to remit to the buyer. The Company received proceeds of $75.7 million as of December 31, 2018 and recorded $2.2 million of net payables related to the sales, which was settled in the first quarter of 2019.

(D)The Company received sales proceeds of $17.7 million during the three months ended March 31, 2019, consisting of $18.2 million for the golf properties sold during the three months ended March 31, 2019, and $2.2 million for golf properties that were sold during December 2018, less $2.7 million that was remitted to buyers for golf properties that were sold during December 2018. The Company previously received a $9.4 million cash deposit in 2018 related to a golf property that was sold in 2019. The difference between the sales

price and the net proceeds was primarily due to prepaid membership dues that we are obligated to remit to the buyer, including $2.1 million payable to the buyer of a golf property sold during the three months ended March 31, 2019.

(E)The Company received sale proceeds of $14.9 million during the three months ended June 30, 2019, consisting of $18.4 million for the golf properties sold during the three months ended June 30, 2019, less $3.5 million that was remitted to buyers for golf properties that were sold in 2018 and the first quarter of 2019.

Schedule of intangible assets

Amortization of all intangible assets is calculated using the straight-line method based on the following estimated useful lives:


Trade name			30 years
Management contracts			2 - 26 years
Internally-developed software			3 - 5 years
Membership base			7 years
Liquor licenses			Nonamortizable

The following table summarizes the Company's intangible assets:


	December 31, 2020						December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Trade name	$	700	$	(163)	$	537	$	700	$	(140)	$	560
Management contracts	31,043		(18,427)		12,616		32,331		(17,342)		14,989
Internally-developed software	314		(79)		235		252		(27)		225
Membership base	5,944		(5,236)		708		5,236		(4,488)		748
Nonamortizable liquor licenses	1,028		—		1,028		1,043		—		1,043
Total intangibles	$	39,029	$	(23,905)	$	15,124	$	39,562	$	(21,997)	$	17,565

Schedule of restricted cash from continuing operations

Restricted cash consisted of:


	December 31,
	2020		2019
CDO trustee accounts	$	114	$	114
Restricted cash for construction-in-progress	1,182		1,536
Restricted cash - Traditional Golf	1,566		1,656
Restricted cash - Entertainment Golf	185		235
Restricted cash, current and noncurrent	$	3,047	$	3,541

Schedule of other current assets

The following table summarizes the Company's other current assets:


	December 31,
	2020		2019
Managed property receivables	3,236		5,426
Prepaid expenses	3,158		3,608
Deposits	767		1,374
Inventory	1,950		2,762
Miscellaneous current assets, net	5,299		4,351
Other current assets	$	14,410	$	17,521

Schedule of other assets

The following table summarizes the Company's other assets:


	December 31,
	2020		2019
Prepaid expenses	$	2,154	$	317
Deposits	2,504		2,123
Miscellaneous assets, net	2,107		2,283
Other assets	$	6,765	$	4,723

Schedule of other current liabilities

The following table summarizes the Company's other current liabilities:


	December 31,
	2020		2019
Operating lease liabilities	19,894		16,922

Accrued rent	4,318		2,769
Dividends payable	—		930
Miscellaneous current liabilities	4,005		3,347
Other current liabilities	$	28,217	$	23,968

Schedule of other liabilities

The following table summarizes the Company's other liabilities:


	December 31,
	2020		2019
Service obligation intangible	$	—	$	1,776

Miscellaneous liabilities	3,447		1,502
Other liabilities	$	3,447	$	3,278

Schedule of amortization of discount and premium and other amortization

Amortization of Discount and Premium and Other Amortization — As reflected in the Consolidated Statements of Cash Flows, these items are comprised of the following:


	Year Ended December 31,
	2020		2019		2018
Accretion of net discount on securities, loans and other investments	$	(413)	$	(267)	$	(151)
Amortization of net discount on debt obligations and deferred financing costs	(10)		(8)		1,310
Amortization of discount and premium	$	(423)	$	(275)	$	1,159

Amortization of leasehold intangibles	$	—	$	—	$	4,093
Accretion of membership deposit liability	8,160		7,225		6,872
Other amortization	$	8,160	$	7,225	$	10,965