NEWCASTLE INVESTMENT CORP.
Contact: FOR IMMEDIATE RELEASE
Lilly H. Donohue
Director of Investor Relations
212-798-6118
NEWCASTLE ANNOUNCES SECOND QUARTER RESULTS
Highlights
- FFO of $12.6 million, or $0.53 per diluted common share for the second
quarter 2003 as compared to $11.6 million or $0.49 per diluted common
share for the first quarter 2003, representing a 9% increase on a per
share basis.
- Income available for common stockholders of $11.9 million, or $0.50 per
diluted common share for the second quarter 2003, as compared to $10.9
million or $0.46 per diluted common share for the first quarter 2003,
representing a 9% increase on a per share basis.
- FFO return on average invested common equity was 17.6% for the three
months ended June 30, 2003.
- Increased quarterly dividend to $0.50 per share of common stock for the
second quarter 2003 from $0.45 per share of common stock for the first
quarter 2003.
- Issued 4.6 million shares of common stock at $20.35 per share in July
2003.
New York, NY. July 29, 2003 - Newcastle Investment Corp. (NYSE: NCT) reported
that for the quarter ended June 30, 2003, Funds from Operations ("FFO") were
$12.6 million, or $0.54 per basic common share and $0.53 per diluted common
share. We generated a FFO return on average invested common equity of 17.6%
for the second quarter 2003 and 16.8% for the six months ended June 30, 2003.
For the three months ended June 30, 2003, income available for common
stockholders was $11.9 million or $0.51 per basic common share and $0.50 per
diluted common share. For the quarter ended June 30, 2003, Newcastle declared
a dividend of $0.50 per share of common stock.
Our GAAP common equity book value was $310.8 million at June 30, 2003 and
increased from $287.4 million at March 31, 2003, primarily the result of a net
unrealized gain of $23.2 million. Total assets of $2.3 billion at June 30,
2003 increased from $2.1 billion at March 31, 2003.
For a reconciliation and discussion of GAAP net income to FFO and GAAP book
equity to invested common equity, please refer to the tables following the
presentation of GAAP results.
Selected Financial Data
(In Thousands)
Three Months Ended Six Months Ended
June 30, 2003 June 30, 2003
------------------ ----------------
Operating Data (Unaudited):
Funds from operations $ 12,649 $ 24,253
Income available for common stockholders $ 11,893 $ 22,793
As of
June 30, 2003 As of
(Unaudited) December 31, 2002
------------- -----------------
Balance Sheet Data:
Real estate securities $ 1,633,675 $ 1,069,892
Total assets $ 2,328,641 $ 1,572,567
CBO bond obligations $ 1,337,169 $ 868,497
Common stockholders' equity $ 310,755 $ 284,241
Preferred stock $62,500 -
Supplemental Real Estate Securities Data as of June 30, 2003 (Unaudited):
Weighted average asset yield 7.15%
Weighted average liability cost 5.04%
Weighted average net spread 2.11%
Weighted average credit rating BBB-
Weighted average asset credit spread 3.07%
Percentage investment grade 75%
Number of securities 216
CAPITAL MARKETS ACTIVITY
In May 2003, approximately 16.5 million shares of our common stock
(approximately 70% of our outstanding shares at the time of distribution) held
by Newcastle Investment Holdings Corp. ("Holdings"), the predecessor of
Newcastle, were distributed to the stockholders of Holdings. Upon
distribution, all of the shares, other than approximately 2.8 million shares
owned by affiliates of Fortress Investment Group LLC, our manager, were freely
tradable on the New York Stock Exchange.
Wesley R. Edens, Chairman and Chief Executive Officer, commented that "We are
pleased that the distribution went well. As a result of the greatly increased
number of shares that are freely tradable, the liquidity in our stock
increased markedly. In the past 11 weeks following the distribution, our
average daily trading volume increased 4.5 times. As the company continues to
grow, we expect that this will only increase."
In July 2003, Newcastle completed an underwritten public offering of 4.6
million shares of common stock raising net proceeds of approximately $89
million. Mr. Edens commented, "With the strength of our core business, we are
optimistic that we will be able to invest this new capital successfully."
Real Estate Securities Investment Activity
During the second quarter 2003, Newcastle purchased $165.9 million face amount
of real estate securities and accumulated $125.1 million through a warehouse
arrangement as part of our fourth real estate securities portfolio. We also
sold $48.2 million face amount of real estate securities for a net gain of
$3.6 million during the second quarter 2003. As of July 29, 2003, we have
accumulated $336.9 million face amount of real estate securities for our
fourth real estate securities portfolio which we expect to permanently finance
in the near term.
Kenneth Riis, Newcastle's President, stated, "The investment pipeline remained
strong with over $20 billion of CMBS new issuance in the second quarter 2003,
representing a significant increase over the first quarter 2003. Despite this
increased supply, CMBS credit spreads tightened approximately 30bps in the
quarter. We took advantage of this market dynamic by selling securities at a
gain and reinvesting the proceeds into securities with more attractive
risk-adjusted returns without a significant change to our net spread."
As of June 30, 2003, our aggregate $1.6 billion real estate securities
portfolio was well diversified with 216 securities of which 87% were fixed
rate securities with a weighted average life of 7.5 years and the remaining
13% represented floating rate securities with a weighted average life of 2.5
years. The portfolio consisted of 64% commercial mortgage backed securities,
29% senior unsecured REIT debt and 7% asset backed securities. As of June 30,
2003, the average credit quality of our aggregate real estate securities
portfolio was BBB- and 75% of the real estate securities were rated investment
grade. Our average investment size is $7.0 million and our largest investment
in a single security is $28 million. The weighted average credit spread was
3.07% as of June 30, 2003 versus 3.10% as of March 31, 2003. The weighted
average credit spread represents the yield premium on our securities over the
comparable US Treasury rate or LIBOR.
Real Estate Securities Business
Our core business strategy is to invest in a diverse portfolio of moderately
credit sensitive real estate debt securities. Our business model is to lock in
the difference between the yield on our assets and the cost of our liabilities
and optimize this difference, which we refer to as "net spread". We generally
target securities rated "A" through "BB". Newcastle seeks to match fund these
securities with respect to interest rates and maturities in order to minimize
the impact of interest rate fluctuations on earnings, and to reduce the risk
of refinancing our liabilities prior to the maturity of our assets. As of June
30, 2003, a 100 basis point change in short term interest rates would affect
our earnings by no more than $0.4 million per annum. In addition, these
financings are designed to give us the flexibility to manage our credit
exposure.
Our real estate securities portfolio is financed to maturity through long
term, match funded financings that are not callable as a result of changes in
value. Accordingly, unless there is a material impairment in value that would
result in a payment not being received on a security, changes in the book
value of our portfolio will not affect our recurring earnings and our ability
to pay a dividend, although they will result in changes to GAAP common equity
book value. As of June 30, 2003, none of our owned securities had defaulted,
and there have been no principal losses in our real estate securities
portfolio to date.
Other Investments
We supplement our core business strategy with investments in other real
estate-related assets, including operating real estate and mortgage loans.
During the second quarter 2003, Newcastle purchased non-conforming adjustable
rate residential mortgages with an aggregate unpaid principal balance of
approximately $146 million.
Conference Call
Management will conduct a conference call on July 30, 2003 to review the
Company's second quarter financial results for the period ended June 30, 2003.
The conference call is scheduled for 4:30 P.M. eastern time. All interested
parties are welcome to participate on the live call. You can access the
conference call by dialing (866) 233-3844 ten minutes prior to the scheduled
start of the call; please reference "Newcastle Second Quarter 2003 Earnings
Call." International callers should dial (612) 332-0107.
For those who are not available to listen to the live call, a replay will be
available until 6:00 P.M. eastern time on Friday, August 8, 2003 by dialing
(800) 475-6701; please reference access code "693460." International callers
should dial (320) 365-3844 to access the replay.
About Newcastle
Newcastle Investment Corp. invests in real estate securities and other real
estate-related assets. Newcastle is organized and conducts its operations to
qualify as a real estate investment trust (REIT) for federal income tax
purposes. For more information on Newcastle Investment Corp. and to be added
to our email distribution list, please visit www.newcastleinv.com.
Newcastle Investment Corp.
Consolidated Statement of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
Revenue: June 30, 2003 June 30, 2003
------------- -------------
Interest income $ 30,830 $ 55,862
Rental and escalation income 6,221 12,018
Gain on settlement of investments 3,628 6,119
-------- --------
Total revenue 40,679 73,999
Expenses:
Interest expense 19,915 34,778
Property operating expense 2,492 5,157
Loan servicing expense 521 923
General and administrative expense 811 1,761
Management fees to affiliate 1,449 2,754
Preferred incentive return to affiliate 1,626 2,956
Depreciation and amortization 775 1,486
-------- --------
Total expenses 27,589 49,815
-------- --------
Income from continuing operations 13,090 24,184
Income from discontinued operations 327 336
-------- --------
Net income 13,417 24,520
Preferred dividends (1,524) (1,727)
-------- --------
Income available for common stockholders $ 11,893 $ 22,793
========= ========
Net income per share of common stock, basic $ 0.51 $ 0.97
Net income per share of common stock, diluted $ 0.50 $ 0.96
Income from continuing operations per share of common stock, basic $ 0.50 $ 0.96
Income from continuing operations per share of common stock, diluted $ 0.49 $ 0.95
Income from discontinued operations per share of common stock, basic $ 0.01 $ 0.01
Income from discontinued operations per share of common stock, diluted $ 0.01 $ 0.01
Weighted average number shares of common stock outstanding, basic 23,488,652 23,488,585
Weighted average number shares of common stock outstanding, diluted 23,678,807 23,649,521
Newcastle Investment Corp.
Consolidated Balance Sheet
(In Thousands)
As of
June 30, 2003 As of
Assets (Unaudited) December 31, 2002
------------- -----------------
Real estate securities, available for sale $ 1,633,675 $1,069,892
Real estate securities portfolio deposit 12,518 37,777
Operating real estate, net 126,413 113,652
Real estate held for sale - 3,471
Mortgage loans, net 441,914 258,198
Other securities, available for sale 54,355 11,209
Cash and cash equivalents 21,148 45,463
Restricted cash 11,307 10,380
Deferred costs, net 6,961 6,489
Receivables and other assets 20,350 16,036
----------- ----------
$2,328,641 $1,572,567
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CBO bonds payable $1,337,169 $ 868,497
Other bonds payable 40,477 37,389
Notes payable 68,606 62,952
Repurchase agreements 421,563 248,169
Derivative liabilities 65,151 54,095
Dividends payable 12,761 9,161
Due to affiliates 1,817 1,335
Accrued expenses and other liabilities 7,842 6,728
----------- ----------
Total liabilities 1,955,386 1,288,326
----------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 100,000,000 shares
authorized, 2,500,000 shares of Series B Cumulative
Redeemable Preferred Stock, liquidation preference
$25.00 per share, issued and outstanding at June
30, 2003 62,500 -
Common stock, $0.01 par value, 500,000,000 shares authorized,
23,490,057 and 23,488,517 shares issued and outstanding at
June 30, 2003 and December 31, 2002, respectively
Additional paid-in capital 235 235
Dividends in excess of earnings 288,529 290,935
Accumulated other comprehensive income (13,487) (13,966)
35,478 7,037
----------- ----------
373,255 284,241
----------- ----------
Total liabilities and stockholders' equity $2,328,641 $1,572,567
=========== ==========
Newcastle Investment Corp.
Reconciliation of GAAP Net Income to FFO
(In Thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2003 June 30, 2003
------------------ ----------------
Net income available for common stockholders $ 11,893 $ 22,793
Operating real estate depreciation 756 1,460
-------- --------
Funds from operations ("FFO") $ 12,649 $ 24,253
======== ========
Newcastle believes FFO is one appropriate measure of the performance of real
estate companies because it provides investors with an understanding of our
ability to incur and service debt and make capital expenditures. We also
believe that FFO is an appropriate supplemental disclosure of operating
performance for a REIT due to its widespread acceptance and use within the
REIT and analyst communities. FFO, for our purposes, represents net income
available for common stockholders (computed in accordance with accounting
principles generally accepted in the United States (GAAP)), excluding
extraordinary items, plus real estate depreciation and amortization, and after
adjustments for unconsolidated subsidiaries, if any. We consider gains and
losses on resolution of our investments to be a normal part of our recurring
operations and, therefore, do not exclude such gains and losses when arriving
at FFO. Adjustments for unconsolidated subsidiaries, if any, are calculated to
reflect FFO on the same basis. FFO 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 liquidity and is
not necessarily indicative of cash available to fund cash needs. The Company's
calculation of FFO may be different from the calculation used by other
companies and, therefore, comparability may be limited.
Newcastle Investment Corp.
Reconciliation of GAAP Book Equity to Invested Common Equity
(In Thousands)
(Unaudited)
June 30, 2003
-------------
Book equity $ 373,255
Preferred stock (62,500)
Accumulated depreciation on operating real estate 12,224
Accumulated other comprehensive income (35,478)
---------
Invested common equity $ 287,501
=========
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 relating to earnings potential, capital markets
(including financing) activities, and future public offerings. 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; Newcastle can give no assurance that its expectations will be
attained. Factors that could cause actual results to differ materially from
Newcastle's expectations include, but are not limited to, changes in economic
conditions generally and the real estate and bond markets specifically;
adverse changes in the financings markets we access affecting our ability to
finance our real estate securities portfolio; changes in interest rate, credit
spreads, as well as the success of our hedging strategy in relation to such
changes; the number of suitable investments in the market and the rate at
which we can make said investments; impairments in the value of the collateral
underlying our real estate securities; changes in the markets; legislative/
regulatory changes; completion of pending investments; continued ability to
source new investments; the availability and cost of capital for future
investments; competition within the finance and real estate industries; and
other risks detailed from time to time in Newcastle's SEC reports. Such
forward-looking statements speak only as of the date of this press release.
Newcastle 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.