Exhibit 99.1
[GRAPHIC OMITTED] NEWCASTLE INVESTMENT CORP.
Contact: FOR IMMEDIATE RELEASE
Lilly H. Donohue
Director of Investor Relations
212-798-6118
Newcastle Announces Second Quarter 2004 Results
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Second Quarter Highlights
- Income available for common stockholders of $21.7 million, or $0.59
per diluted common share, up 18% from the second quarter 2003 on a
per diluted common share basis.
- Declared dividend of $0.60 per share of common stock.
- Issued 3.45 million shares of common stock in May 2004, raising net
proceeds of approximately $87.1 million.
New York, NY. July 28, 2004 - Newcastle Investment Corp. (NYSE: NCT) reported
that for the quarter ended June 30, 2004, Funds from Operations ("FFO") were
$18.7 million, or $0.51 per diluted common share, as compared to $12.6 million,
or $0.53 per diluted common share for the quarter ended June 30, 2003. FFO
excluding the effect of the sale of certain real estate properties held for
sale was $22.4 million, or $0.61 per diluted share. Approximately $3.5 million
or $0.09 per diluted share of the difference relates to the reversal of
accumulated depreciation from this sale. The Company generated a FFO return on
average invested common equity of 12.8% for the second quarter 2004 and 16.1%
excluding the sale of such real estate.
For the three months ended June 30, 2004, income available for common
stockholders was $21.7 million, or $0.59 per diluted common share compared with
$11.9 million, or $0.50 per diluted common share, in the second quarter 2003.
Second quarter 2004 results include a $0.01 per diluted share net loss from the
sale of certain real estate properties held for sale.
For the quarter ended June 30, 2004, Newcastle declared a dividend of $0.60 per
share of common stock.
Our common equity book value per share decreased to $16.71 at June 30, 2004
from $16.74 at March 31, 2004. GAAP common equity book value was $638.8 million
at June 30, 2004 compared with $581.0 million at March 31, 2004.
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 Three Months Ended
June 30, 2004 June 30, 2003
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Operating Data (Unaudited):
Funds from operations $ 18,699 $ 12,649
Income available for common stockholders $ 21,651 $ 11,893
As of
June 30, 2004 As of
(Unaudited) December 31, 2003
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Balance Sheet Data:
Total real estate and other securities $ 2,768,192 $ 2,330,830
Total assets $ 4,163,437 $ 3,533,081
CBO bond obligations $ 2,205,404 $ 1,793,533
Preferred stock $ 62,500 $ 62,500
Common stockholders' equity $ 638,758 $ 476,863
Supplemental Total Real Estate and Other
Securities Data as of June 30, 2004 (Unaudited):
Weighted average asset yield 6.35%
Weighted average liability cost 4.38%
Weighted average net spread 1.97%
Weighted average credit rating BBB-
Weighted average asset credit spread 3.01%
Percentage investment grade 71.3%
Number of securities 372
Capital Markets Activity
In May 2004, Newcastle issued 3.45 million shares of common stock for net
proceeds of approximately $87 million through an underwritten public offering.
The Company will use these proceeds to acquire real estate debt securities and
other real estate related investments. Wesley R. Edens, Chairman and Chief
Executive Officer, commented, "We are pleased with the second quarter results
and our continued ability to access the capital markets. In a rising interest
rate environment, we expect to be well positioned to opportunistically put
capital to work and currently anticipate being fully invested by the end of the
third quarter."
In July 2004, we refinanced $342.5 million of the AAA and AA bonds in our first
collateralized debt obligation which was issued in 1999, and will result in
approximately $1 million of interest cost savings for the next 12 months.
$322.5 million of AAA bonds were refinanced at LIBOR + 30 basis points from
LIBOR + 65 basis points and $20.0 million of AA bonds were refinanced at LIBOR
+ 50 basis points from LIBOR + 80 basis points.
Second Quarter Investment Activity
Kenneth Riis, Newcastle's President, noted that "We continue to find attractive
opportunities to invest our capital. Today, we believe low investment grade
real estate securities offer the best risk return profile. Credit spreads in
the quarter remained relatively tight despite a 100 basis point increase in
interest rates and strong CMBS issuance activity. BBB CMBS widened 10 basis
points while below investment grade securities tightened 25 basis points."
During the second quarter, we purchased or committed to purchase approximately
$416 million in face amount of real estate securities and mortgage loans.
Real estate securities. Purchased approximately $278 million of real estate
securities with an average credit rating of BBB-. Approximately $153 million
of these securities were commercial mortgage backed securities, $82 million
of REIT debt and $43 million of asset backed securities. In addition, we
sold approximately $49 million of real estate securities with an average
credit rating of A-.
Mortgage loans. Residential mortgage loans represent $138 million of total
purchases. These loans are adjustable rate LIBOR mortgage loans to high
quality borrowers with strong credit scores.
Operating real estate. We completed the sale of five real estate properties
located in Belgium, previously classified as held for sale, for $29 million.
Upon sale of real estate, accumulated depreciation is reversed for purposes
of calculating FFO. As a result of this sale, we recorded a net FFO loss of
$3.7 million, or $0.10 per diluted share, comprised of $0.09 per diluted
share ($3.5 million) relating to the reversal of accumulated depreciation
and a net realized loss of $0.01 per diluted share ($0.2 million).
The Company entered into an agreement with a major investment bank in May that
gives us the ability to purchase commercial mortgage backed securities, REIT
debt, real estate loans and asset backed securities for our sixth real estate
securities portfolio which is targeted to be $500 million. As of July 28, 2004,
we have accumulated approximately $300 million face amount of securities and we
expect to permanently finance this portfolio in the third quarter.
Real Estate Securities
As of June 30, 2004, our aggregate $2.8 billion real estate securities
portfolio was well diversified with 372 securities, of which 75% were fixed
rate securities with a weighted average maturity of 7.27 years and the
remaining 25% were floating rate securities with a weighted average maturity of
2.54 years. The portfolio consisted of 59% commercial mortgage backed
securities, 24% senior unsecured REIT debt and 17% asset backed securities. As
of June 30, 2004, the average credit quality of our aggregate real estate
securities portfolio was BBB- and 71% of the real estate securities were rated
investment grade. Our average investment size was $7 million and our largest
investment in a single security was $59 million. The weighted average credit
spread was 3.01% as of June 30, 2004. The weighted average credit spread
represents the yield premium on our securities over the comparable US Treasury
rate or LIBOR.
The Company's core 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. The weighted average maturity of our real estate
securities and their related liabilities was 6.07 years and 6.44 years. Mr.
Riis noted that "Our business is built on the foundation of generating stable
cash flows to support our dividends to stockholders. As of June 30, 2004, an
immediate 100 basis point increase in interest rates would affect our earnings
by less than a penny per share or $350,000 per annum."
Our real estate securities portfolio continues to perform as expected. As of
June 30, 2004, 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 July 29, 2004 to review the
Company's second quarter financial results for the period ended June 30, 2004.
The conference call is scheduled for 3:00 P.M. eastern time. All interested
parties are welcome to participate on the live call. You can access the
conference call by dialing (800) 230-1093 ten minutes prior to the scheduled
start of the call; please reference "Newcastle Second Quarter 2004 Earnings
Call." International callers should dial (612) 332-0228.
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 Friday, August 6, 2004 by dialing
(800) 475-6701; please reference access code "739884." 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. or 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 invest existing cash balances,
our ability to finance our next portfolio of real estate securities and the
performance of our real estate securities portfolio. 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, our continued ability to source new investments, including
securities which we deem suitable for our securities portfolios; changes in the
capital markets, including changes in interest rates and/or credit spreads;
changes in particular sectors of the economy which might adversely affect the
credit quality of our securities portfolios and thereby their performance; 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 Statements of Income
(dollars in thousands, except share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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Revenues 2004 2003 2004 2003
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Interest income $ 56,142 $ 30,805 $ 105,172 $ 55,834
Rental and escalation income 3,727 5,312 9,524 10,225
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Gain on settlement of investments 4,446 3,628 9,582 6,119
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64,315 39,745 124,278 72,178
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Expenses
Interest expense 33,620 19,324 63,039 33,681
Property operating expense 1,806 2,203 4,197 4,555
Loan and security servicing expense 861 521 1,643 923
General and administrative expense 1,257 767 2,455 1,597
Management fee to affiliate 2,563 1,449 4,960 2,754
Incentive compensation to affiliate 1,236 1,626 3,610 2,956
Depreciation and amortization 519 496 1,072 952
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41,862 26,386 80,976 47,418
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Income before equity in earnings of unconsolidated subsidiaries 22,453 13,359 43,302 24,760
Equity in earnings of unconsolidated subsidiaries 2,218 - 3,441 -
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Income from continuing operations 24,671 13,359 46,743 24,760
Income (loss) from discontinued operations (1,496) 58 (1,717) (240)
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Net income 23,175 13,417 45,026 24,520
Preferred dividends (1,524) (1,524) (3,047) (1,727)
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Income Available For Common Stockholders $ 21,651 $ 11,893 $ 41,979 $ 22,793
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Net Income Per Share of Common Stock
Basic $ 0.60 $ 0.51 $ 1.19 $ 0.97
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Diluted $ 0.59 $ 0.50 $ 1.17 $ 0.96
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Income from continuing operations, after preferred dividends,
per share of common stock
Basic $ 0.64 $ 0.51 $ 1.24 $ 0.98
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Diluted $ 0.63 $ 0.50 $ 1.22 $ 0.97
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Income (loss) from discontinued operations per share of common
stock
Basic $ (0.04) $ 0.00 $ (0.05) $ (0.01)
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Diluted $ (0.04) $ 0.00 $ (0.05) $ (0.01)
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Weighted average number shares of common stock outstanding
Basic 36,160,778 23,488,652 35,281,696 23,488,585
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Diluted 36,670,603 23,678,807 35,828,575 23,649,521
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Dividends Declared per Common Share $ 0.60 $ 0.50 $ 1.20 $ 0.95
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Newcastle Investment Corp.
Consolidated Balance Sheets
(dollars in thousands, except share data)
As of
June 30, 2004 As of
Assets (Unaudited) December 31, 2003
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Real estate securities, available for sale $ 2,510,159 $ 2,089,712
Real estate securities portfolio deposit 18,741 19,541
Other securities, available for sale 239,292 221,577
Real estate related loans, net 378,377 341,193
Investments in unconsolidated subsidiaries 52,358 30,640
Operating real estate, net 88,008 102,995
Real estate held for sale 11,119 29,404
Residential mortgage loans, net 674,149 586,237
Cash and cash equivalents 131,435 60,403
Restricted cash 14,422 13,132
Deferred costs, net 7,751 10,304
Derivative assets 9,488 -
Receivables and other assets 28,138 27,943
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$ 4,163,437 $ 3,533,081
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Liabilities and Stockholders' Equity
Liabilities
CBO bonds payable $ 2,205,404 $ 1,793,533
Other bonds payable 248,339 260,674
Notes payable 162,660 154,562
Repurchase agreements 806,102 715,783
Derivative liabilities - 32,457
Dividends payable 23,956 16,703
Due to affiliates 4,550 2,445
Accrued expenses and other liabilities 11,168 17,561
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3,462,179 2,993,718
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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 62,500 62,500
Common stock, $0.01 par value, 500,000,000 shares
authorized, 38,234,481 and 31,374,833 shares issued
and outstanding at June 30, 2004 and December 31,
2003, respectively 382 314
Additional paid-in capital 626,112 451,806
Dividends in excess of earnings (16,458) (14,670)
Accumulated other comprehensive income 28,722 39,413
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701,258 539,363
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$ 4,163,437 $ 3,533,081
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Newcastle Investment Corp.
Reconciliation of GAAP Net Income to FFO
(In thousands)
(Unaudited)
Three Months Ended June Three Months Ended
30, 2004 June 30, 2003
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Net income available for common stockholders $ 21,651 $ 11,893
Operating real estate depreciation 517 756
Accumulated depreciation on operating real estate sold (3,469) -
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Funds from operations ("FFO") $ 18,699 $ 12,649
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Add back net FFO loss on sale of operating real estate 3,721
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FFO excluding the effect of the sale of certain real
estate properties held for sale $ 22,420
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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)
June 30, 2004
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Book equity $ 701,258
Preferred stock (62,500)
Accumulated depreciation on operating real estate 10,946
Accumulated other comprehensive income (28,722)
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Invested common equity $ 620,982
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