|By Business Wire||
|May 2, 2014 07:02 AM EDT||
Newcastle Investment Corp. (NYSE:NCT; “Newcastle”, the “Company”) today reported the following information for the quarter ended March 31, 2014.
FIRST QUARTER FINANCIAL HIGHLIGHTS
- GAAP Income of $4 million, or $0.01 per basic share
- Core Earnings of $34 million, or $0.10 per basic share
- Completed the spin-off of New Media Investment Group (NYSE:NEWM) on February 13, 2014 – stock up 16% from its fair market value of $12.30 at the time of distribution
|1Q 2014||4Q 2013|
|Summary Operating Results:|
|GAAP Income||$4 million*||$29 million|
|GAAP Income per Basic Share||$0.01*||$0.09|
|Core Earnings**||$34 million||$27 million|
|Core Earnings per Basic Share**||$0.10||$0.08|
|GAAP Book Value:||$2.12***||$3.14|
*1Q 2014 GAAP Income includes total depreciation and amortization of $34 million, or $0.10 per basic share, including $4 million, or $0.01 per share from New Media, which is recorded in discontinued operations.
**For a reconciliation of GAAP Income to Core Earnings, please refer to the Reconciliation of Core Earnings below.
***Book Value decline is largely a result of the spin-off of New Media.
Highlights for the quarter ended March 31, 2014
- Senior Housing – In January, Newcastle invested $9 million of equity to acquire 2 managed senior housing properties for a total purchase price of $26 million, including transaction costs and working capital. Newcastle is also in contract to acquire 15 properties for a total purchase price of $319 million, which the Company expects will require an equity investment of $230 million. There can be no assurance that the Company will complete investments under contract, which are subject to the completion of diligence and other closing conditions.
CDOs & Other
- Intrawest Resort Holdings Third-Lien Pay Down – In February, Newcastle received $83 million of proceeds from Intrawest Resort Holdings as a partial prepayment of a third-lien loan held in CDO VIII & CDO IX. As a result of Newcastle’s direct holdings in CDO VIII, the Company received approximately $22 million of principal recovery.
- Sold 100% of Agency RMBS Portfolio – In January, Newcastle sold $503 million face amount of Agency RMBS at an average price of 105.8%, or $532 million. After paying off the related financing, the Company received $28 million of principal recovery, which represented a $2 million gain on sale.
- New Media Investment Group – In February, Newcastle completed the spin-off of the Company’s 85% ownership interest in New Media Investment Group. Holders of Newcastle common stock as of the record date, February 6, 2014, were issued approximately 0.07219 common shares of New Media Investment Group per common share of Newcastle.
- Dividend – In December, Newcastle declared a first quarter dividend of $0.10 per common share.
For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of Newcastle’s website, www.newcastleinv.com. For consolidated investment portfolio information, please refer to the Company’s Quarterly Report on Form 10-Q, which will be available on the Company’s website, www.newcastleinv.com.
EARNINGS CONFERENCE CALL
Newcastle’s management will host a conference call on Friday, May 2, 2014 at 10:00 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Newcastle’s website, www.newcastleinv.com.
All interested parties are welcome to participate on the live call. The conference call may be accessed by dialing 1-888-243-2046 (from within the U.S.) or 1-706-679-1533 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Newcastle First Quarter 2014 Earnings Call.”
A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newcastleinv.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.
A telephonic replay of the conference call will also be available two hours following the call’s completion through 11:59 P.M. Eastern Time on Friday, May 16, 2014 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code “35067808.”
|Investment Portfolio as of March 31, 2014|
($ in millions, except where otherwise noted)
|CDO Securities (4)||72||56||2.00||%||60||2||BB+||3.2|
|Other Investments (5)||60||60||2.20||%||60||2||—||—|
|Total Commercial Assets||$||717||$||562||20.10||%||$||622||2.1|
|MH and Residential Loans||270||243||8.70||%||243||7,515||706||5.3|
|Real Estate ABS||8||—||0.00||%||—||1||C||—|
|Total Residential Assets||371||283||10.20||%||305||5.0|
|Corporate Bank Loans||175||97||3.50||%||97||5||C||2.3|
|Total Corporate Assets||204||126||4.50||%||128||2.2|
|Total Debt Investments||1,292||971||34.80||%||1,055||3.1|
|Senior Housing Investments (6)||1,521||1,466||52.60||%||1,466|
|Golf Investment (6)||360||352||12.60||%||352|
Total Portfolio/Weighted Average
Reconciliation to GAAP total assets:
|Other commercial real estate||7|
|Cash and restricted cash||126|
|GAAP total assets||$||3,521|
Net of impairment.
Credit represents the weighted average of minimum rating for rated assets, the loan-to-value ratio (based on the appraised value at the time of purchase or refinancing) for non-rated commercial assets, or the FICO score for non-rated residential assets. Ratings provided above were determined by third party rating agencies, represent the most recent credit ratings available as of the reporting date and may not be current.
Weighted average life is based on the timing of expected principal reduction on the asset.
Represents non-consolidated CDO securities, excluding nine securities with a zero value, which had an aggregate face amount of $115.3 million.
Represents $25.8 million of equity investment in a real estate owned property and $34.0 million relating to a linked transaction.
Face amount of senior housing and golf investments represents the gross carrying amount, including intangibles, and excludes accumulated depreciation and amortization.
Our subprime mortgage loans subject to call option are excluded from the presentation of our consolidated investment portfolio because they represent an option, not an obligation, to repurchase loans, and the option is a noneconomic interest until exercised, and is offset by a liability in an amount equal to the GAAP asset on the consolidated balance sheet.
|Unaudited Consolidated Statements of Income||
($ in thousands, except per share data)
|Three Months Ended March 31,|
|Net interest income||10,597||38,622|
Valuation allowance (reversal) on loans
|Other-than-temporary impairment on securities||—||422|
Portion of other-than-temporary impairment on securities recognized in other
comprehensive income (loss), net of the reversal of other comprehensive loss
|into net income (loss)||—||117|
|Total impairment (reversal)||1,246||2,773|
|Net interest income after impairment/reversal||9,351||35,849|
|Care and ancillary income||5,461||613|
|Golf course operations||40,389||—|
|Sales of food and beverages - golf||13,539||—|
|Other golf revenue||9,350||—|
|Total operating revenues||121,629||13,500|
|Gain (loss) on settlement of investments, net||2,332||(3||)|
|Gain on extinguishment of debt||—||1,206|
|Other income, net||13,474||4,567|
|Total other income||15,806||5,770|
|Loan and security servicing expense||857||1,034|
|Property operating expenses||23,804||8,670|
|Operating expenses - golf||58,338||—|
|Cost of sales - golf||5,956||—|
|General and administrative expense||9,212||3,906|
|Management fee to affiliate||8,037||9,565|
|Depreciation and amortization||30,359||4,079|
|Income from continuing operations before income tax||10,223||27,865|
|Income tax expense||295||—|
|Income from continuing operations||9,928||27,865|
|Income (loss) from discontinued operations, net of tax||(5,305||)||10,148|
Net loss attributable to noncontrolling interests
|Income Applicable to Common Stockholders||$||3,889||$||36,618|
|Income Per Share of Common Stock|
Income from continuing operations per share of common stock, after preferred
dividends and noncontrolling interests
|Income (loss) from discontinued operations per share of common stock|
|Weighted Average Number of Shares of Common Stock Outstanding|
|Dividends Declared per Share of Common Stock||$||0.10||$||0.22|
|Consolidated Balance Sheet|
($ in thousands)
|March 31, 2014||
December 31, 2013
|Real estate securities, available-for-sale||$||439,023||$||984,263|
|Real estate related and other loans, held-for-sale, net||313,250||437,530|
|Residential mortgage loans, held-for-investment, net||—||255,450|
|Residential mortgage loans, held-for-sale, net||248,299||2,185|
|Subprime mortgage loans subject to call option||406,217||406,217|
|Investments in senior housing real estate, net of accumulated depreciation||1,374,710||1,362,900|
|Investments in other real estate, net of accumulated depreciation||262,403||266,170|
|Intangibles, net of accumulated amortization||187,101||199,725|
|Cash and cash equivalents||122,053||74,133|
|Receivables and other assets||137,444||141,887|
|Assets of discontinued operations||—||690,746|
|Liabilities and Equity|
|CDO bonds payable||$||408,813||$||544,525|
|Other bonds and notes payable||221,305||230,279|
|Mortgage notes payable||1,091,823||1,076,828|
|Credit facilities, golf||152,961||152,498|
|Financing of subprime mortgage loans subject to call option||406,217||406,217|
|Junior subordinated notes payable||51,236||51,237|
|Accounts payable, accrued expenses and other liabilities||271,841||277,166|
|Liabilities of discontinued operations||—||295,267|
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 March 31, 2014 and December 31, 2013
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 351,453,495 shares issued and outstanding, at March 31, 2014 and December 31, 2013
|Additional paid-in capital||2,970,786||2,970,786|
|Accumulated other comprehensive income||79,860||76,874|
|Total Newcastle Stockholders' Equity||805,248||1,164,845|
|Total Liabilities and Equity||$||3,520,609||$||4,852,563|
|Reconciliation of Core Earnings|
($ in thousands)
|Three Months Ended March 31,||Year Ended|
|Income available for common stockholders||$||3,889||$||36,618||$||145,833|
|Other (income) loss||(15,847||)||(8,597||)||(35,401||)|
|Impairment (reversal), other (income) loss, depreciation and|
|amortization and other adjustments from discontinued operations||5,792||16||(6,429||)|
|Depreciation and amortization(A)||32,039||4,079||33,093|
|Acquisition and spin-off related expenses||6,602||2,546||23,576|
Including accretion of membership deposit liability of $1.7 million in the three months ended March 31, 2014.
Newcastle has the following primary variables that impact its operating performance: (i) the current yield earned on its 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 it earns from its non-recourse financing structures, (iii) the interest expense and dividends incurred under its recourse debt and preferred stock, (iv) the net operating income on its real estate and golf investments, (v) its operating expenses and (vi) its realized and unrealized gains or losses, including any impairment, on its investments, derivatives and debt obligations. Core Earnings is a non-GAAP measure of the operating performance of Newcastle excluding the sixth variable listed above and adjusting the consumer loans portfolio accounting to a level yield methodology. It also excludes depreciation and amortization charges, including accretion of membership deposit liability, and acquisition and spin-off related expenses.
Core Earnings is used by management to gauge the current performance of Newcastle without taking into account gains and losses, which, although they represent a part of our recurring operations, are subject to significant variability and are only a potential indicator of future economic performance. It is the judgment of management that depreciation and amortization charges are not indicative of operating performance and that acquisition and spin-off related expenses are not part of our core operations. Management believes that the exclusion from Core Earnings of the items specified above allows investors and analysts to readily identify 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 Newcastle’s current performance using the same measure that management uses to operate the business, which is among the factors considered when determining the amount of distributions to our shareholders.
Core Earnings does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of its liquidity and is not necessarily indicative of cash available to fund cash needs. The Company’s calculation of Core Earnings may be different from the calculation used by other companies and, therefore, comparability may be limited.
The Company focuses on investing in, and actively managing, real estate related assets and primarily invests in: (1) Senior Housing Assets (2) Real Estate Debt and (3) Golf & Other Investments. The Company conducts its operations to qualify as a real estate investment trust ("REIT") for federal income tax purposes. The Company is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm.
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 our 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 Operation” in the Company’s most recent Annual Report on Form 10-K and 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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