Exhibit 99.1

 

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Investor Relations

212-479-3195

NEWCASTLE ANNOUNCES THIRD QUARTER 2013 RESULTS

 

NEW YORK—(BUSINESS WIRE)—November 1, 2013—Newcastle Investment Corp. (NYSE:NCT; the “Company”) today reported the following information for the quarter ended September 30, 2013:

 

    GAAP Income of $0.09 per diluted share

 

    Core Earnings of $0.08 per diluted share

 

    Declared common dividend of $0.10 per share, or $29 million

 

    GAAP book value of $2.74

The Company’s third quarter GAAP Income was $27.8 million, or $0.09 per diluted share, and Core Earnings was $23.9 million, or $0.08 per diluted share.

 

    

Q3 2013

 

Q2 2013

(Pro forma excluding 45 days of

New Residential earnings*)

Summary Operating Results:

    

GAAP Income

   $27.8 million   $27.8 million

GAAP Income per Diluted Share

   $0.09   $0.11

Non-GAAP Results:

    

Core Earnings**

   $23.9 million   $29.0 million

Core Earnings per Diluted Share**

   $0.08   $0.11

GAAP Book Value:

   $2.74   $2.73

For a reconciliation of GAAP Income to Core Earnings, please refer to the Reconciliation of Core Earnings and Pro forma Core Earnings table below.

 

* “Newcastle excluding 45 days of New Residential earnings” excludes the 45 days of earnings in the three months ended June 30, 2013 generated by New Residential prior to New Residential’s spin-off from Newcastle on May 15, 2013.
** The Company amended its definition of Core Earnings to exclude acquisition and spin-off related expenses in the third quarter of 2013. The calculation of Core Earnings has been retroactively adjusted for all periods presented.

Had Newcastle’s average uninvested cash balance of $120 million been invested at management’s expected returns since the beginning of the quarter, and if GateHouse debt had converted to equity and GateHouse obtained the anticipated debt facility, the full quarter earnings would have increased by $11 million, or $0.04 per share.

Highlights for the quarter ended September 30, 2013:

 

    Senior Housing – Invested $101 million of equity to acquire $301 million of senior housing assets. For each investment, Newcastle is targeting a stabilized year three return of over 20%

 

    Media Assets

 

    Local Media GroupInvested $54 million to purchase Local Media Group from News Corp for $87 million – financed with $33 million of non-recourse debt

 

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    GateHouse Debt – Invested $33 million to purchase $85 million face amount of debt – average price of 39% of par

 

    Spin Off of New Media – In September, announced intention to spin off all of our media assets to form a separate publicly traded company, New Media Investment Group Inc.

 

    CDO IX Repurchase – Invested $6 million to repurchase $25 million of NCT CDO IX Class A-2 at a price of 86% of par, or $21 million; financed using $15 million of repurchase agreements at L+1.65%

 

    Dividend – In September, declared a third quarter dividend of $0.10 per common share, or $29 million

Highlights subsequent to September 30, 2013:

 

    CDO VI Resecuritization Newcastle owns $110 million, or 100%, of CDO VI Class I-MM on balance sheet and in its managed CDOs. On October 31, Newcastle agreed to restructure the $110 million class into a $99 million senior tranche and an $11 million junior tranche. Newcastle agreed to issue the senior tranche to a third party for approximately $88 million of proceeds, will retain the $11 million junior tranche on balance sheet and will continue to manage the CDO. The issuance results in $47 million of unrestricted cash for Newcastle to reinvest and the remaining $41 million will be paid to CDO VIII and CDO IX. Following the issuance, total CDO VI cash flow received to date will be $238 million on a $170 million investment, with $12 million of future cash flows expected to come from the retained junior tranche

ADDITIONAL INFORMATION

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 is also available on the Company’s website, www.newcastleinv.com.

EARNINGS CONFERENCE CALL

Newcastle’s management will host a conference call on Friday, November 1, 2013 at 8:30 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 Third Quarter 2013 Earnings Call.”

A simultaneous webcast of the conference call will be available to the public 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 completion of the call through 11:59 P.M. Eastern Time on Friday, November 8, 2013 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 “75872614.”

 

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Investment Portfolio as of September 30, 2013

($ in millions, except where otherwise noted)

 

                % of Total                       Weighted  
    Outstanding     Amortized     Amortized     Carrying     Number of           Average Life  
    Face Amount     Cost Basis (1)     Cost Basis     Value     Investments     Credit (2)     (years) (3)  

Investment

             

Commercial Real Estate Debt & Other Assets

             

Commercial Assets

             

CMBS

  $ 344      $ 229        9.7   $ 286        51        BB-        3.0   

Mezzanine Loans

    338        269        11.3     269        12        84     1.8   

B-Notes

    110        95        4.0     95        4        76     0.7   

Whole Loans

    30        30        1.3     30        2        49     0.2   

CDO Securities (4)

    80        61        2.6     63        3        BB+        3.0   

Other Investments (5)

    68        68        2.9     68        3        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Total Commercial Assets

    970        752        31.8     811            2.2   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Residential Assets

             

MH and Residential Loans

    291        258        10.9     258        8,014        705        5.5   

Non-Agency RMBS

    101        41        1.7     58        34        CCC        5.0   

Real Estate ABS

    8        —          0.0     —          1        C        —     
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 
    400        299        12.6     316            5.3   

FNMA/FHLMC securities

    362        382        16.2     383        46        AAA        3.7   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Total Residential Assets

    762        681        28.8     699            4.5   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Corporate Assets

             

REIT Debt

    29        29        1.2     31        5        BB+        1.8   

Corporate Bank Loans

    875        402        17.0     402        7        CC        1.2   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Total Corporate Assets

    904        431        18.2     433            1.2   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Total Real Estate Debt & Other Assets

    2,636        1,864        78.8     1,943            2.6   

Equity Method Investment in Local Media
Group(6)

    57        57        2.4     57        —          —          —     

Senior Housing Investments (7)

    465        444        18.8     444        31        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Total Portfolio/Weighted Average

  $ 3,158      $ 2,365        100.0   $ 2,444            2.6   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

WA – Weighted average, in all tables

 

1) Net of impairment.
2) 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 and an implied AAA rating for FNMA/FHLMC securities. 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.
3) Weighted average life is based on the expected timing of expected principal reduction on the asset.
4) Represents non-consolidated CDO securities, excluding nine securities with a zero value, which had an aggregate face amount of $113.7 million.
5) Represents a $25 million equity investment in a real estate owned property and $43 million related to a linked transaction.
6) Face amount of the investment in Local Media Group represents the gross carrying value.
7) Face amount of Senior Housing Investments represents the gross carrying amount, including intangibles, which excludes accumulated depreciation and amortization.

 

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Unaudited Consolidated Statements of Income

($ in thousands, except per share data)

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  

Interest income

  $ 47,486      $ 72,947      $ 171,642      $ 223,765   

Interest expense

    20,555        28,411        65,263        88,038   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    26,931        44,536        106,379        135,727   
 

 

 

   

 

 

   

 

 

   

 

 

 

Impairment/(Reversal)

       

Valuation allowance (reversal) on loans

    (12,998     4,094        (11,473     (8,160

Other-than-temporary impairment on securities

    —          (236     4,405        16,506   

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)

    —          1,156        44        (1,913
 

 

 

   

 

 

   

 

 

   

 

 

 

Total impairment (reversal)

    (12,998     5,014        (7,024     6,433   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after impairment/reversal

    39,929        39,522        113,403        129,294   

Other Revenues

       

Rental income

    21,149        6,660        44,344        7,684   

Care and ancillary income

    3,763        1,411        8,081        1,411   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other revenues

    24,912        8,071        52,425        9,095   
 

 

 

   

 

 

   

 

 

   

 

 

 

Other Income

       

Gain on settlement of investments, net

    1,388        229,239        6,451        232,885   

Gain on extinguishment of debt

    3,359        2,345        4,565        23,127   

Equity in earnings of Local Media Group

    1,045        —          1,045        —     

Other income, net

    1,963        2,424        9,554        1,650   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

    7,755        234,008        21,615        257,662   
 

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

       

Loan and security servicing expense

    908        1,054        2,963        3,256   

Property operating expenses

    15,804        5,043        32,576        5,500   

General and administrative expense

    9,356        4,020        23,507        11,023   

Management fee to affiliate

    7,166        6,852        24,879        17,459   

Depreciation and amortization

    7,732        2,385        15,881        2,389   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    40,966        19,354        99,806        39,627   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

    31,630        262,247        87,637        356,424   

Income (loss) from discontinued operations

    (2,386     10,974        33,343        20,707   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

    29,244        273,221        120,980        377,131   

Preferred dividends

    (1,395     (1,395     (4,185     (4,185
 

 

 

   

 

 

   

 

 

   

 

 

 

Income Available for Common Stockholders

  $ 27,849      $ 271,826      $ 116,795      $ 372,946   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income Per Share of Common Stock

       

Basic

  $ 0.09      $ 1.65      $ 0.44      $ 2.77   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ 0.09      $ 1.63      $ 0.43      $ 2.74   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations per share of common stock, after preferred dividends

       

Basic

  $ 0.10      $ 1.59      $ 0.32      $ 2.62   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ 0.10      $ 1.57      $ 0.31      $ 2.59   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from discontinued operations per share of common stock

       

Basic

  $ (0.01   $ 0.06      $ 0.12      $ 0.15   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ (0.01   $ 0.06      $ 0.12      $ 0.15   
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Number of Shares of Common Stock Outstanding

       

Basic

    293,373,891        164,237,757        262,792,986        134,619,858   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

    301,027,917        166,429,120        269,057,682        135,869,332   
 

 

 

   

 

 

   

 

 

   

 

 

 

Dividends Declared per Share of Common Stock

  $ 0.10      $ 0.22      $ 0.49      $ 0.62   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

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Consolidated Balance Sheet

($ in thousands)

 

    September 30, 2013        
    (Unaudited)     December 31, 2012  

Assets

   

Real estate securities, available-for-sale

  $ 825,499      $ 1,691,575   

Real estate related and other loans, held-for-sale, net

    795,297        843,132   

Residential mortgage loans, held-for-investment, net

    260,463        292,461   

Residential mortgage loans, held-for-sale, net

    2,236        2,471   

Subprime mortgage loans subject to call option

    406,217        405,814   

Investments in real estate, net of accumulated depreciation

    409,041        169,473   

Intangibles, net of accumulated amortization

    41,371        19,086   

Equity method investment in Local Media Group

    57,384        —     

Other investments

    25,133        24,907   

Cash and cash equivalents

    92,134        231,898   

Restricted cash

    1,827        2,064   

Derivative assets

    43,172        165   

Receivables and other assets

    27,003        17,197   

Assets of discontinued operations

    —          245,069   
 

 

 

   

 

 

 

Total Assets

  $ 2,986,777      $ 3,945,312   
 

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

   

Liabilities

   

CDO bonds payable

  $ 718,473      $ 1,091,354   

Other bonds and notes payable

    153,798        183,390   

Repurchase agreements

    376,886        929,435   

Mortgage notes payable

    335,238        120,525   

Financing of subprime mortgage loans subject to call option

    406,217        405,814   

Junior subordinated notes payable

    51,239        51,243   

Derivative liabilities

    17,115        31,576   

Dividends Payable

    30,279        38,884   

Due to affiliates

    4,911        3,620   

Accrued expenses and other liabilities

    25,266        15,931   

Liabilities of discontinued operations

    2,380        480   
 

 

 

   

 

 

 

Total Liabilities

  $ 2,121,802      $ 2,872,252   
 

 

 

   

 

 

 

Commitments and contingencies

   

Stockholders’ Equity

   

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 September 30, 2013 and December 31, 2012

  $ 61,583      $ 61,583   

Common stock, $0.01 par value, 1,000,000,000 and 500,000,000 shares authorized, 293,488,981 and 172,525,645 shares issued and outstanding, at September 30, 2013 and December 31, 2012, respectively

    2,935        1,725   

Additional paid-in capital

    2,670,442        1,710,083   

Accumulated deficit

    (1,941,805     (771,095

Accumulated other comprehensive income

    71,820        70,764   
 

 

 

   

 

 

 

Total Stockholders’ Equity

  $ 864,975      $ 1,073,060   
 

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

  $ 2,986,777      $ 3,945,312   
 

 

 

   

 

 

 

 

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Reconciliation of Core Earnings and Pro forma Core Earnings*

($ in thousands)

 

     Three Months Ended     Three Months Ended  
     September 30,     June 30,  
     2013     2012     2013  

Income available for common stockholders

   $ 27,849      $ 271,826      $ 52,328   

Add (Deduct):

      

Impairment (reversal)

     (12,998     5,014        3,201   

Other (income) loss

     (7,168     (234,008     (8,090

Impairment (reversal), other (income) loss and other adjustments from discontinued operations

     2,386        (1,772     (8,534

Depreciation and amortization

     8,677        2,385        4,070   

Acquisition and spin-off related expenses

     5,168        1,697        6,192   
  

 

 

   

 

 

   

 

 

 

Core Earnings

   $ 23,914      $ 45,142      $ 49,167   
  

 

 

   

 

 

   

 

 

 

 

     Three Months Ended  
     June 30, 2013  

Pro forma income (loss) from continuing operations after preferred dividends

   $ 27,785   

Add (Deduct):

  

Impairment (reversal)

     (555

Other (income) loss

     (8,032

Depreciation and amortization

     4,070   

Acquisition and spin-off related expenses

     5,726   
  

 

 

 

Pro forma Core Earnings

   $ 28,994   
  

 

 

 

 

* Pro forma core earnings excludes the 45 days of earnings in the three months ended June 30, 2013 generated by New Residential prior to New Residential’s spin-off from Newcastle on May 15, 2013.

CORE EARNINGS

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 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 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.

 

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Newcastle changed its definition of Core Earnings to exclude acquisition and spin-off related expenses in the third quarter of 2013. The calculation of Core Earnings has been retroactively adjusted for all periods presented.

Management believes that this measure provides investors with useful information regarding Newcastle’s “core” current earnings, and it enables investors to evaluate Newcastle’s current performance using the same measure that management uses to operate the business. 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.

ABOUT NEWCASTLE

Newcastle focuses on investing in, and actively managing, real estate related assets and primarily invests in: (1) Senior Housing Assets and (2) Real Estate & Other Debt, in addition to other opportunistic 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.

FORWARD-LOOKING STATEMENTS

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to the planned spin-off of New Media Investment Group Inc. (“New Media”) and expected cash flows from the resecuritization of CDO VI. 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. For example, the spin-off of New Media is subject to certain conditions, such as GateHouse Media, Inc.’s emergence from bankruptcy, the declaration of New Media’s registration statement effective by the SEC, the filing and approval of an application to list New Media’s common stock on the NYSE and the formal declaration of the distribution by the Board of Directors. 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 or GateHouse 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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