NEWCASTLE INVESTMENT CORP.
Contact: FOR IMMEDIATE RELEASE
Lilly H. Donohue
Director of Investor Relations
212-798-6118
Newcastle Announces Fourth Quarter and Year End 2003 Results
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Year End 2003 Highlights
- Total assets ended at $3.5 billion, a $1.9 billion increase from
December 31, 2002.
- Common equity book value totaled $476.9 million, or $15.20 per common
share, up 25.6% from December 31, 2002.
- FFO of $54.4 million, or $2.08 per diluted common share.
- Income available for common stockholders of $51.3 million, or $1.96
per diluted common share.
- FFO return on average invested common equity was 16.4%.
- Declared total dividends of $1.95 per share of common stock.
Fourth Quarter 2003 Highlights
- FFO of $16.2 million, or $0.55 per diluted common share, up 21% from
fourth quarter 2002.
- Income available for common stockholders of $15.4 million, or $0.52
per diluted common share, up 21% from fourth quarter 2002.
- FFO return on average invested common equity of 16.7%.
- Record investment activity in the fourth quarter of $873 million.
- Declared dividend of $0.50 per share of common stock.
- Issued approximately 3.28 million shares of common stock in December
2003, raising net proceeds of approximately $75 million.
New York, NY. February 11, 2004 - Newcastle Investment Corp. (NYSE: NCT)
reported that for the quarter ended December 31, 2003, Funds from Operations
("FFO") were $16.2 million, or $0.55 per diluted common share, up from $10.3
million, or $0.45 per diluted common share for the quarter ended December 31,
2002. FFO for the year ended December 31, 2003 was $54.4 million, or $2.08 per
diluted common share. The Company generated a FFO return on average invested
common equity of 16.7% for the fourth quarter 2003 and 16.4% for the year
ended December 31, 2003.
For the three months ended December 31, 2003, income available for common
stockholders was $15.4 million, or $0.52 per diluted common share, compared
with $9.7 million, or $0.43 per diluted common share, in the fourth quarter
2002. For the year ended December 31, 2003, income available for common
stockholders was $51.3 million or $1.96 per diluted common share. For the
quarter ended December 31, 2003, Newcastle declared a dividend of $0.50 per
share of common stock. Dividends declared in 2003 totaled $1.95 per common
share.
Our GAAP common equity book value was $476.9 million at December 31, 2003. For
the year ended December 31, 2003, the Company's assets increased over 100%,
with total assets at the end of the year of $3.5 billion, up from $1.6 billion
at December 31, 2002.
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 Year Ended
Operating Data (Unaudited): December 31, 2003 December 31, 2003
------------------ -----------------
Funds from operations $ 16,179 $ 54,380
Income available for common stockholders $ 15,369 $ 51,345
As of
December 31, 2003 As of
Balance Sheet Data: (Unaudited) December 31, 2002
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Total real estate and other securities $ 2,330,830 $ 1,118,878
Total assets $ 3,533,081 $ 1,572,567
CBO bond obligations $ 1,793,533 $ 868,497
Common stockholders' equity $ 476,863 $ 284,241
Preferred stock $ 62,500 -
Supplemental Total Real Estate and Other Securities Data as
of December 31, 2003 (Unaudited):
Weighted average asset yield 6.78%
Weighted average liability cost 4.53%
Weighted average net spread 2.25%
Weighted average credit rating BBB
Weighted average asset credit spread 3.23%
Percentage investment grade 79%
Number of securities 304
Wesley R. Edens, Chairman and Chief Executive Officer, commented, "We are
pleased with our results for the quarter and the year. Newcastle has achieved
consistent returns on equity despite having cash on our balance sheet
throughout 2003. Our assets have increased by $1.9 billion for the year with
significant investment activity in the fourth quarter. The Company's recent
transactions continue to reflect our core expertise and business strategy of
investing primarily in debt investments backed by real estate with an emphasis
on asset quality, diversification, match funded financing and rigorous credit
management."
Capital Markets Activity
Newcastle filed a Form S-3 shelf registration statement with the Securities
and Exchange Commission on October 9, 2003. The shelf registration was
declared effective on November 3, 2003 and allows the Company to issue various
types of securities, such as common stock, preferred stock, depositary shares,
debt securities and warrants, from time to time, up to an aggregate of $750
million.
In December 2003, Newcastle issued approximately 3.28 million shares of common
stock through a direct placement to an institutional investor, raising net
proceeds of approximately $75 million. In addition, Newcastle issued 3.3
million shares of common stock for net proceeds of approximately $86 million
through an underwritten public offering in January 2004.
Mr. Edens commented, "Our shelf registration has allowed us to more
efficiently manage our balance sheet and raise capital at a lower cost. With
the completion of these offerings, Newcastle now has over $600 million of
equity capital supporting its assets. We expect to be fully invested by the
end of the first quarter."
Fourth Quarter Investment Activity
During the fourth quarter, we purchased or committed to purchase approximately
$873 million in face amount of real estate securities, real estate related
loans and residential mortgage loans. In addition, we sold approximately $50
million of securities with an average credit rating of A-.
Real estate securities. Approximately $558 million of total purchases
were real estate securities and have an average credit rating of BBB.
Approximately $226 million of these securities were asset backed
securities collateralized by loans on manufactured homes with an average
rating of BBB+ and weighted average principal credit support of 20.4%.
Real estate related loans. Approximately $144 million of total purchases
was real estate related loans, of which $100 million was a BB rated
participation in a $525 million term loan facility to an entity which
owns interests in a diverse portfolio of credit leased operating real
estate.
Residential mortgage loans. Residential mortgage loans represent $171
million of total purchases. These loans are adjustable rate LIBOR
mortgage loans to high quality borrowers with strong credit scores.
Real Estate Securities
As of December 31, 2003, our aggregate $2.3 billion real estate securities
portfolio was well diversified with 304 securities, of which 79% were fixed
rate securities with a weighted average life of 7.3 years and the remaining
21% were floating rate securities with a weighted average life of 2.4 years.
The portfolio consisted of 59% commercial mortgage backed securities, 24%
senior unsecured REIT debt and 17% asset backed securities. As of December 31,
2003, the average credit quality of our aggregate real estate securities
portfolio was BBB and 79% of the real estate securities were rated investment
grade. Our average investment size was $7.4 million and our largest investment
in a single security was $62 million. The weighted average credit spread was
3.23% as of December 31, 2003, up from 2.89% at September 30, 2003. The
weighted average credit spread represents the yield premium on our securities
over the comparable US Treasury rate or LIBOR.
To date, we have committed to purchase approximately $300 million of real
estate securities for our next real estate securities portfolio. Kenneth Riis,
Newcastle's President, noted that "We expect to term finance this portfolio to
lock in our net spread through the issuance of our fifth CDO. With credit
spreads at historic lows, we are focused on pricing our debt within the next
30 days."
The Company's business strategy is to invest in a diverse portfolio of
moderately credit sensitive real estate debt investments. 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." Newcastle seeks to match fund these investments 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 December 31, 2003, a
100 basis point change in short term interest rates would affect our earnings
by no more than $0.7 million per annum.
Our real estate securities portfolio continues to perform as expected. As of
December 31, 2003, none of our owned securities had defaulted, and there have
been no principal losses in our real estate securities portfolio to date. We
continue to seek investments that will generate superior risk adjusted returns
with a long-term objective of capital preservation and earnings stability in
varying interest rate and credit cycles.
Conference Call
Management will conduct a conference call on February 12, 2004 to review the
Company's fourth quarter financial results for the period ended December 31,
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 (800) 230-1092 ten minutes prior to the
scheduled start of the call; please reference "Newcastle Fourth Quarter 2003
Earnings Call." International callers should dial (612) 332-0226.
For those who are not available to listen to the live call, a replay will be
available until 11:59 P.M. eastern time on Thursday, February 19, 2004 by
dialing (800) 475-6701; please reference access code "720514." 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.
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 our ability to finance our portfolios of real
estate securities. 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, continued ability to source new investments which we deem
suitable for this portfolio and changes in the capital markets, including
changes in interest rates and/or credit spreads; 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.
Newcastle Investment Corp.
Consolidated Statement of Operations
(In thousands, except per share amounts)
Three Months Ended
December 31, 2003 Year Ended
Revenues (Unaudited) December 31, 2003
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Interest income $ 44,916 $ 134,669
Rental and escalation income 5,514 21,330
Gain on settlement of investments 4,132 13,179
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54,562 169,178
Expenses
Interest expense 27,661 81,561
Property operating expense 2,288 9,015
Loan and security servicing expense 566 2,154
General and administrative expense 1,761 4,030
Management fee to affiliate 1,931 6,468
Incentive compensation to affiliate 1,834 6,226
Depreciation and amortization 609 2,260
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36,650 111,714
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Income before equity in earnings of unconsolidated subsidiaries 17,912 57,464
Equity in earnings of unconsolidated subsidiaries 862 862
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Income from continuing operations 18,774 58,326
Income (loss) from discontinued operations (1,882) (2,208)
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Net income 16,892 56,118
Preferred dividends (1,523) (4,773)
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Income available for common stockholders $ 15,369 $ 51,345
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Net income per share of common stock
Basic $ 0.53 $ 1.98
Diluted $ 0.52 $ 1.96
Income from continuing operations, after preferred
dividends, per share of common stock
Basic $ 0.59 $ 2.07
Diluted $ 0.58 $ 2.05
Income (loss) from discontinued operations per
share of common stock
Basic $ (0.06) $ (0.09)
Diluted $ (0.06) $ (0.09)
Weighted average number shares of common stock outstanding
Basic 29,197,346 25,898,288
Diluted 29,562,752 26,140,777
Newcastle Investment Corp.
Consolidated Balance Sheet
(In thousands)
As of
December 31, 2003 As of
Assets (Unaudited) December 31, 2002
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Real estate securities, available for sale $ 2,089,712 $ 1,069,892
Real estate securities portfolio deposit 19,541 37,777
Other securities, available for sale 221,577 11,209
Real estate related loans, net 341,193 -
Investments in unconsolidated subsidiaries 30,640 -
Residential mortgage loans, net 586,237 258,198
Operating real estate, net 102,995 113,652
Real estate held for sale 29,404 3,471
Cash and cash equivalents 60,403 45,463
Restricted cash 13,132 10,380
Deferred costs, net 10,304 6,489
Receivables and other assets 27,943 16,036
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$ 3,533,081 $ 1,572,567
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Liabilities and Stockholders' Equity
CBO bonds payable $ 1,793,533 $ 868,497
Other bonds payable 260,674 37,389
Notes payable 154,562 62,952
Repurchase agreements 715,783 248,169
Derivative liabilities 32,457 54,095
Dividends payable 16,703 9,161
Due to affiliates 2,445 1,335
Accrued expenses and other liabilities 17,561 6,728
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2,993,718 1,288,326
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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 December 31, 2003 62,500 -
Common stock, $0.01 par value, 500,000,000 shares authorized,
31,374,833 and 23,488,517 shares issued and outstanding at December 31,
2003 and December 31, 2002, respectively 314 235
Additional paid-in capital 451,806 290,935
Dividends in excess of earnings (14,670) (13,966)
Accumulated other comprehensive income 39,413 7,037
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539,363 284,241
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$ 3,533,081 $ 1,572,567
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Newcastle Investment Corp.
Reconciliation of GAAP Net Income to FFO
(In thousands)
(Unaudited)
Three Months Ended Year Ended December 31,
December 31, 2003 2003
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Net income available for common stockholders $ 15,369 $ 51,345
Operating real estate depreciation 810 3,035
Funds from operations ("FFO") $ 16,179 $ 54,380
We believe FFO is one appropriate measure of the operating performance of real
estate companies because it provides investors with information regarding our
ability to 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. Furthermore, FFO is used to compute our incentive compensation to
our manager. FFO, for our purposes, represents net income available for common
stockholders (computed in accordance with GAAP), excluding extraordinary
items, plus real estate depreciation, 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. Our 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)
December 31, 2003
-----------------
Book equity $ 539,363
Preferred stock (62,500)
Accumulated depreciation on operating real estate 11,302
Accumulated other comprehensive income (39,413)
Invested common equity $ 448,752