Drive Shack Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING (Tables)

SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2017

Summary financial data on the Company’s segments is given below, together with a reconciliation to the same data for the Company as a whole:



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Nine Months Ended September 30, 2017
Revenues
Golf course operations	$	168,969		$	—		$	—		$	—		$	168,969
Sales of food and beverages	53,223			—			—			—			53,223
Total revenues	222,192			—			—			—			222,192
Operating costs
Operating expenses (A)	187,539			191			—			—			187,730
Cost of sales - food and beverages	15,762			—			—			—			15,762
General and administrative expense	2,152			203			10			3,899			6,264
General and administrative expense - acquisition and transaction expenses (B)	558			4,122			—			171			4,851
Management fee to affiliate	—			—			—			8,032			8,032
Depreciation and amortization	17,936			16			—			—			17,952
Impairment	—			—			60			—			60
Realized and unrealized loss on investments	317			—			6,044			—			6,361
Total operating costs	224,264			4,532			6,114			12,102			247,012
Operating loss	(2,072		)	(4,532		)	(6,114		)	(12,102		)	(24,820		)
Other income (expenses)
Interest and investment income	114			—			22,137			450			22,701
Interest expense, net (C)	(11,500		)	—			(2,532		)	(1,303		)	(15,335		)
Other (loss) income, net	(1,044		)	—			1,416			—			372
Total other income (expenses)	(12,430		)	—			21,021			(853		)	7,738
Income tax expense (D)	—			—			—			1,047			1,047
Net (loss) income	(14,502		)	(4,532		)	14,907			(14,002		)	(18,129		)
Preferred dividends	—			—			—			(4,185		)	(4,185		)
(Loss) income applicable to common stockholders	$	(14,502	)	$	(4,532	)	$	14,907		$	(18,187	)	$	(22,314	)

Summary segment financial data (continued).



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Three Months Ended September 30, 2017
Revenues
Golf course operations	$	62,034		$	—		$	—		$	—		$	62,034
Sales of food and beverages	19,657			—			—			—			19,657
Total revenues	81,691			—			—			—			81,691
Operating costs
Operating expenses (A)	67,244			141			—			—			67,385
Cost of sales - food and beverages	5,721			—			—			—			5,721
General and administrative expense	708			60			10			1,619			2,397
General and administrative expense - acquisition and transaction expenses (B)	72			1,804			—			55			1,931
Management fee to affiliate	—			—			—			2,678			2,678
Depreciation and amortization	6,171			16			—			—			6,187
Impairment	—			—			28			—			28
Realized and unrealized loss (gain) on investments	32			—			(347		)	—			(315		)
Total operating costs	79,948			2,021			(309		)	4,352			86,012
Operating income (loss)	1,743			(2,021		)	309			(4,352		)	(4,321		)
Other income (expenses)
Interest and investment income	42			—			8,085			291			8,418
Interest expense, net (C)	(3,830		)	—			(482		)	(458		)	(4,770		)
Other (loss) income, net	(211		)	—			413			—			202
Total other income (expenses)	(3,999		)	—			8,016			(167		)	3,850
Income tax benefit (D)	—			—			—			(2		)	(2		)
Net (loss) income	(2,256		)	(2,021		)	8,325			(4,517		)	(469		)
Preferred dividends	—			—			—			(1,395		)	(1,395		)
(Loss) Income applicable to common stockholders	$	(2,256	)	$	(2,021	)	$	8,325		$	(5,912	)	$	(1,864	)



	Traditional Golf		Entertainment Golf		Debt Investments (E)		Corporate		Total
September 30, 2017
Total assets	319,356		19,882		23,514		173,363		536,115
Total liabilities	278,352		5,384		170		55,901		339,807
Preferred stock	—		—		—		61,583		61,583
Equity attributable to common stockholders	$	41,004	$	14,498	$	23,344	$	55,879	$	134,725

Additions to property and equipment (including capital leases) during the nine months ended September 30, 2017	$	15,178	$	8,647	$	—	$	—	$	23,825

Summary segment financial data (continued).



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Nine Months Ended September 30, 2016
Revenues
Golf course operations	$	174,718		$	—		$	—		$	—		$	174,718
Sales of food and beverages	55,086			—			—			—			55,086
Total revenues	229,804			—			—			—			229,804
Operating costs
Operating expenses (A)	195,670			—			—			—			195,670
Cost of sales - food and beverages	17,139			—			—			—			17,139
General and administrative expense	2,207			5			70			5,602			7,884
General and administrative expense - acquisition and transaction expenses (B)	1,182			911			—			371			2,464
Management fee to affiliate	—			—			—			8,027			8,027
Depreciation and amortization	19,250			—			—			—			19,250
Impairment	—			—			3,564			—			3,564
Realized and unrealized loss (gain) on investments	35			—			(3,171		)	—			(3,136		)
Total operating costs	235,483			916			463			14,000			250,862
Operating loss	(5,679		)	(916		)	(463		)	(14,000		)	(21,058		)
Other income (expenses)
Interest and investment income	94			—			73,661			15			73,770
Interest expense, net (C)	(8,703		)	—			(28,482		)	(1,904		)	(39,089		)
Gain on deconsolidation	—			—			82,130			—			82,130
Other (loss) income, net	(272		)	—			1,611			—			1,339
Total other income (expenses)	(8,881		)	—			128,920			(1,889		)	118,150
Income tax expense	144			—			—			—			144
Net (loss) income	(14,704		)	(916		)	128,457			(15,889		)	96,948
Preferred dividends	—			—			—			(4,185		)	(4,185		)
Net income attributable to noncontrolling interest	(165		)	—			—			—			(165		)
(Loss) income applicable to common stockholders	$	(14,869	)	$	(916	)	$	128,457		$	(20,074	)	$	92,598

Summary segment financial data (continued).



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Three Months Ended September 30, 2016
Revenues
Golf course operations	$	63,249		$	—		$	—		$	—		$	63,249
Sales of food and beverages	19,913			—			—			—			19,913
Total revenues	83,162			—			—			—			83,162
Operating costs
Operating expenses (A)	69,251			—			—			—			69,251
Cost of sales - food and beverages	6,026			—			—			—			6,026
General and administrative expense	662			3			32			1,936			2,633
General and administrative expense - acquisition and transaction expenses (B)	173			682			—			200			1,055
Management fee to affiliate	—			—			—			2,676			2,676
Depreciation and amortization	6,735			—			—			—			6,735
Impairment	—			—			611			—			611
Realized and unrealized loss (gain) on investments	15			—			(6,620		)	—			(6,605		)
Total operating costs	82,862			685			(5,977		)	4,812			82,382
Operating income (loss)	300			(685		)	5,977			(4,812		)	780
Other income (expenses)
Interest and investment income	17			—			32,286			7			32,310
Interest expense, net (C)	(3,340		)	—			(9,405		)	(393		)	(13,138		)
Other income, net	—			—			505			—			505
Total other income (expenses)	(3,323		)	—			23,386			(386		)	19,677
Income tax benefit	(38		)	—			—			—			(38		)
Net (loss) income	(2,985		)	(685		)	29,363			(5,198		)	20,495
Preferred dividends	—			—			—			(1,395		)	(1,395		)
Net income attributable to noncontrolling interest	(177		)	—			—			—			(177		)
(Loss) income applicable to common stockholders	$	(3,162	)	$	(685	)	$	29,363		$	(6,593	)	$	18,923

(A)

Operating expenses includes rental expenses recorded under operating leases for carts and equipment in the amount of $0.7 million and $2.3 million for the three and nine months ended September 30, 2017, respectively, and $0.9 million and $2.9 million for the three and nine months ended September 30, 2016, respectively. Operating expenses also includes amortization of favorable and unfavorable lease intangibles in the amount of $1.0 million and $3.1 million for the three and nine months ended September 30, 2017, respectively, and $1.1 million and $3.4 million for the three and nine months ended September 30, 2016, respectively. In addition, straight-line rent associated with our Entertainment Golf venues is included in operating expenses.


(B)	Acquisition and transaction expenses include costs related to completed and potential acquisitions and transactions which may include advisory, legal, accounting, valuation and other professional or consulting fees. Transaction expenses also include personnel and other costs which do not qualify for capitalization associated with the development of new Entertainment Golf venues.

(C)

Interest expense, net includes the accretion of membership deposit liabilities in the amount of $1.6 million and $4.8 million for the three and nine months ended September 30, 2017, respectively, and $1.4 million and $4.3 million for the three and nine months ended September 30, 2016, respectively. Interest expense is net of $0.1 million related to capitalized interest for Entertainment Golf for both the three and nine months ended September 30, 2017.


(D)	Effective January 1, 2017, the Company revoked its election to be treated as a REIT. As a result, the Company is subject to U.S. federal corporate income tax and the provision for income taxes is recorded in the corporate segment.


(E)	Total assets in the Debt Investments segment includes an equity method investment in the amount of $20.6 million recorded in other investments on the Consolidated Balance Sheets. See Note 2 for additional information.