Exhibit 99.1

 

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Investor Relations

212-479-3195

NEWCASTLE ANNOUNCES FIRST QUARTER 2015 RESULTS

1Q CORE EARNINGS PER SHARE OF $0.12

 

 

NEW YORK—(BUSINESS WIRE)—May 8, 2015—Newcastle Investment Corp. (NYSE: NCT; “Newcastle”, the “Company”) today reported the following information for the quarter ended March 31, 2015.

FIRST QUARTER FINANCIAL HIGHLIGHTS

 

    Core Earnings of $8 million, or $0.12 per WA basic share

 

    Adjusted Funds from Operations (“AFFO”) of $7 million, or $0.11 per WA basic share

 

    GAAP Loss of $2 million, or $0.03 per WA basic share

 

    Depreciation and amortization of $9 million, or $0.14 per WA basic share*

FIRST QUARTER HIGHLIGHTS

 

    Real Estate Debt Portfolio Real estate debt portfolio asset face amount of $1.0 billion, which consisted of $0.6 billion of non-agency assets and $0.4 million of agency securities. During the quarter, the portfolio:

 

    Increased in value by $6 million to a price of 87% of par

 

    Received $43 million of non-agency asset pay downs and recovered $7 million of net proceeds to Newcastle

 

    Generated $15 million of net investment income, or a 16% annualized yield, over an average projected recovery value of $365 million

 

    Golf Business Owned and leased 88 golf properties across 14 states, of which 76% were located in the top 20 Metropolitan Statistical Areas (MSAs). The golf business:

 

    Added 270 private club members to the same store portfolio year-over-year and increased public golf rounds played by approximately 9,000

 

    Added a golf property in Southern California to the portfolio in the quarter: signed a favorable 21-year lease to operate a 27-hole municipal golf course that generated over $3 million of revenue in 2014

 

    Cash Dividends – In March, Newcastle declared a first quarter common cash dividend of $0.12 per share, or $8 million

 

     1Q 2015      4Q 2014  

Summary Operating Results:

     

GAAP Income/(Loss)

   ($ 2) million    ($ 10) million

GAAP Income/(Loss) per WA Basic Share

   ($ 0.03    ($ 0.16

Non-GAAP Results:

     

Core Earnings**

   $ 8 million       $ 8 million   

Core Earnings per WA Basic Share**

   $ 0.12       $ 0.12   

Adjusted Funds From Operations (AFFO)**

   $ 7 million       $ 11 million   

AFFO per WA Basic Share**

   $ 0.11       $ 0.17   

WA: Weighted Average

 

*

1Q 2015 GAAP Loss includes $7 million of total depreciation and amortization charges, $1 million of amortization of favorable or unfavorable leasehold intangibles, and $1 million of accretion on golf membership deposit liability. 4Q 2014 GAAP Loss includes $19 million (including $11 million from New Senior) of total depreciation and amortization charges, $1 million of amortization of favorable or unfavorable leasehold intangibles, and $1 million of accretion

 

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  on golf membership deposit liability. The depreciation and amortization from New Senior was recorded to income (loss) from discontinued operations. The accretion of membership deposit liability was recorded to interest expense and the amortization of favorable and unfavorable leasehold intangibles was recorded to operating expenses - golf.
** For a reconciliation of GAAP Income to Core Earnings and AFFO, please refer to the Reconciliation of Core Earnings and AFFO below.

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 and Annual Report on Form 10-K, which are available on the Company’s website, www.newcastleinv.com.

EARNINGS CONFERENCE CALL

Newcastle’s management will host a conference call on Friday, May 8, 2015 at 9:00 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 2015 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 22, 2015 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 “41078508.”

 

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Investment Portfolio

The following table summarizes Newcastle’s consolidated investment portfolio at March 31, 2015 (dollars in millions):

 

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

Debt Investment

             

Commercial Assets

             

CMBS

   $ 209       $ 142         12.7   $ 179         30         B        2.4   

Mezzanine Loans

     93         66         5.9     66         6         101     1.2   

B-Notes

     22         19         1.7     19         1         92     3.4   

Whole Loans

     1         1         0.1     1         1         0     0.1   

CDO Securities (4)

     14         —           —       9         2         CCC-        11.1   

Other Investments (5)

     27         27         2.4     27         1         —          —     
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Total Commercial Assets

  366      255      22.8   301      2.5   
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Residential Assets

Residential Loans

  4      4      0.4   4      6      726      1.1   

Non-Agency RMBS

  65      26      2.3   44      28      CCC      7.7   

Real Estate ABS

  8      —        —     —        1      C      —     
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 
  77      30      2.7   48      6.6   

FNMA/FHLMC

  389      407      36.3   409      4      AAA      7.1   
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Total Residential Assets

  466      437      39.0   457      7.0   
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Corporate Assets

Corporate Bank Loans

  179      112      10.0   112      5      D      1.5   
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Total Corporate Assets

  179      112      10.0   112      1.5   
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Total Debt Investments (6)

  1,011      804      71.8   870      4.5   
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Other Investments

Golf Investment (7)

  359      316      28.2   316   
  

 

 

    

 

 

    

 

 

   

 

 

         

Total Portfolio/Weighted Average

$ 1,370    $ 1,120      100.0 $ 1,186   
  

 

 

    

 

 

    

 

 

   

 

 

         

WA-Weighted average

 

(1) Net of impairment.
(2) Credit represents the weighted average of minimum ratings 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.
(3) Weighted average life is based on the timing of expected principal reduction on the asset.
(4) Represents non-consolidated CDO securities, excluding eight securities with zero value, which had an aggregate face amount of $113.8 million.
(5) Represents an equity investment in a real estate owned property.
(6) Excludes operating real estate in discontinued operations of $7 million and loans subject to a call option with a face amount of $406 million.
(7) Face amount of the golf investment represents the gross carrying amount, including intangibles, and excludes accumulated depreciation and amortization. Basis amount of the golf investments represents carrying value including intangibles.

 

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Unaudited Consolidated Statements of Income

($ in thousands, except per share data)

 

     Three Months Ended
March 31,
 
     2015     2014  

Interest income

   $ 27,078      $ 46,452   

Interest expense

     16,727        22,170   
  

 

 

   

 

 

 

Net interest income

  10,351      24,282   
  

 

 

   

 

 

 

Impairment/(Reversal)

Valuation allowance (reversal) on loans

  357      1,246   

Other-than-temporary impairment on securities

  344      —     

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)

  (296   —     
  

 

 

   

 

 

 

Total impairment (reversal)

  405      1,246   
  

 

 

   

 

 

 

Net interest income after impairment/reversal

  9,946      23,036   

Operating Revenues

Golf course operations

  38,954      39,772   

Sales of food and beverages - golf

  13,012      13,539   

Other golf revenue

  8,860      9,321   
  

 

 

   

 

 

 

Total operating revenues

  60,826      62,632   
  

 

 

   

 

 

 

Other Income (Loss)

Gain on settlement of investments, net

  1,015      2,334   

Other income (loss), net

  (514   13,474   
  

 

 

   

 

 

 

Total other income

  501      15,808   
  

 

 

   

 

 

 

Expenses

Loan and security servicing expense

  96      857   

Operating expenses - golf

  54,937      59,647   

Cost of sales - golf

  6,053      5,956   

General and administrative expense

  1,713      3,564   

Management fee to affiliate

  2,668      5,893   

Depreciation and amortization

  6,753      5,863   
  

 

 

   

 

 

 

Total expenses

  72,220      81,780   
  

 

 

   

 

 

 

(Loss) income from continuing operations before income tax

  (947   19,696   

Income tax expense

  46      140   
  

 

 

   

 

 

 

(Loss) income from continuing operations

  (993   19,556   

Income (loss) from discontinued operations, net of tax

  115      (15,299
  

 

 

   

 

 

 

Net (Loss) Income

  (878   4,257   

Preferred dividends

  (1,395   (1,395

Net loss attributable to noncontrolling interests

  181      661   
  

 

 

   

 

 

 

(Loss) Income Applicable to Common Stockholders

$ (2,092 $ 3,523   
  

 

 

   

 

 

 

(Loss) Income Applicable to Common Stock, per share (1)

Basic

$ (0.03 $ 0.06   
  

 

 

   

 

 

 

Diluted

$ (0.03 $ 0.06   
  

 

 

   

 

 

 

(Loss) Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interests (1)

Basic

$ (0.03 $ 0.32   
  

 

 

   

 

 

 

Diluted

$ (0.03 $ 0.31   
  

 

 

   

 

 

 

Income (Loss) from discontinued operations per share of common stock (1)

Basic

$ —      $ (0.26
  

 

 

   

 

 

 

Diluted

$ —      $ (0.26
  

 

 

   

 

 

 

Weighted Average Number of Shares of Common Stock Outstanding (1)

Basic

  66,424,508      58,575,582   
  

 

 

   

 

 

 

Diluted

  66,424,508      60,511,128   
  

 

 

   

 

 

 

Dividends Declared per Share of Common Stock (1)

$ 0.12    $ 0.60   
  

 

 

   

 

 

 

 

(1) All per share amounts and shares outstanding for all periods reflect the 1-for-3 reverse stock split, which was effective after the close of trading on August 18, 2014 and the 1-for-2 reverse stock split, which was effective after the close of trading on October 22, 2014.
(2) Three months ended March 31, 2014 consisted of 92 golf properties compared to three months ended March 31, 2015 which consisted of 88 golf properties.

 

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Consolidated Balance Sheets

($ in thousands, except per share data)

 

     March 31, 2015     December 31, 2014  
     (Unaudited)    

Assets

    

Real estate securities, available-for-sale

   $ 231,727      $ 231,754   

Real estate securities, pledged as collateral

     409,037        407,689   

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

     197,251        230,200   

Residential mortgage loans, held-for-sale, net

     3,735        3,854   

Subprime mortgage loans subject to call option

     406,217        406,217   

Investments in other real estate, net of accumulated depreciation

     234,049        239,283   

Intangibles, net of accumulated amortization

     82,000        84,686   

Other investments

     27,102        26,788   

Cash and cash equivalents

     56,002        73,727   

Restricted cash

     21,874        15,714   

Receivables and other assets

     37,448        35,191   

Assets of discontinued operations

     6,883        6,803   
  

 

 

   

 

 

 

Total Assets

$ 1,713,325    $ 1,761,906   
  

 

 

   

 

 

 

Liabilities and Equity

Liabilities

CDO bonds payable

$ 216,464    $ 227,673   

Other bonds and notes payable

  25,317      27,069   

Repurchase agreements

  421,803      441,176   

Credit facilities and obligations under capital leases

  162,806      161,474   

Financing of subprime mortgage loans subject to call option

  406,217      406,217   

Junior subordinated notes payable

  51,230      51,231   

Dividends payable

  8,901      8,901   

Accounts payable, accrued expenses and other liabilities

  173,489      179,390   

Liabilities of discontinued operations

  502      447   
  

 

 

   

 

 

 

Total Liabilities

$ 1,466,729    $ 1,503,578   
  

 

 

   

 

 

 

Commitments and contingencies

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 March 31, 2015 and December 31, 2014

$ 61,583    $ 61,583   

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 66,424,508 and 66,424,508 shares issued and outstanding, at March 31, 2015 and December 31, 2014, respectively

  664      664   

Additional paid-in capital

  3,172,060      3,172,060   

Accumulated deficit

  (3,051,943   (3,041,880

Accumulated other comprehensive income

  64,377      65,865   
  

 

 

   

 

 

 

Total Newcastle Stockholders’ Equity

  246,741      258,292   

Noncontrolling interests

  (145   36   
  

 

 

   

 

 

 

Total Equity

$ 246,596    $ 258,328   
  

 

 

   

 

 

 

Total Liabilities and Equity

$ 1,713,325    $ 1,761,906   
  

 

 

   

 

 

 

 

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Reconciliation of Core Earnings

($ in thousands)

 

     Three Months Ended
March 31, 2015
     Three Months Ended
December 31, 2014
 

Income available for common stockholders

   $ (2,092    $ (10,325

Add (Deduct):

     

Impairment (reversal)

     405         (1,176

Other (income) loss

     (187      (3,995

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

     11         12,238   

Depreciation and amortization(A)

     9,471         10,168   

Acquisition, restructuring and spin-off related expenses

     38         1,328   
  

 

 

    

 

 

 

Core earnings

$ 7,646    $ 8,238   
  

 

 

    

 

 

 

 

(A) Including accretion of membership deposit liability of $1.4 million and $1.3 million and amortization of favorable and unfavorable leasehold intangibles of $1.3 million and $1.3 million in the three months ended March 31, 2015 and December 31, 2014, respectively. The accretion of membership deposit liability was recorded to interest expense and the amortization of favorable and unfavorable leasehold intangibles was recorded to operating expenses - golf.

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, media 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. It also excludes depreciation and amortization charges, including the accretion of the membership deposit liability and the impact of the application of acquisition accounting, acquisition and spin-off related expenses and restructuring 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 our liquidity, and is not necessarily indicative of cash available to fund cash needs. For a further description of the differences between cash flows provided by operations and net income, see “– Liquidity and Capital Resources” in the Company’s Quarterly Report on Form 10-Q and Annual Report on Form 10-K, which are available on the Company’s website, www.newcastleinv.com . Our calculation of core earnings may be different from the calculation used by other companies and, therefore, comparability may be limited.

 

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Reconciliation of Adjusted Funds from Operations (“AFFO”)

($ in thousands)

 

     Three Months Ended
March 31, 2015
     Three Months Ended
December 31, 2014
 

Income available for common stockholders

   $ (2,092    $ (10,325

Add:

     

Depreciation and amortization(A)

     9,482         21,345   
  

 

 

    

 

 

 

Adjusted Funds from Operations (“AFFO”)

$ 7,390    $ 11,020   
  

 

 

    

 

 

 

 

(A) Depreciation and amortization charges for the three months ended March 31, 2015 includes $6.8 million of depreciation and amortization, $1.3 million of amortization of favorable or unfavorable leasehold intangibles, and $1.4 million of accretion on golf membership deposit liability. Depreciation and amortization charges for the three months ended December 31, 2014 includes $18.8 million (including $11.2 million from New Senior) of total depreciation and amortization, $1.3 million of amortization of favorable or unfavorable leasehold intangibles, and $1.3 million of accretion on golf membership deposit liability. The depreciation and amortization from New Senior were recorded to income (loss) from discontinued operations. The accretion of membership deposit liability was recorded to interest expense and the amortization of favorable and unfavorable leasehold intangibles was recorded to operating expenses - golf.

ADJUSTED FUNDS FROM OPERATIONS

The Company defines Adjusted Funds from Operations (“AFFO”) as net income available for common stockholders plus depreciation and amortization, including accretion of membership deposit liability and amortization of favorable and unfavorable leasehold intangibles. The Company believes AFFO provides useful information to investors regarding the performance of the Company, because it provides a measure of operating performance without regard to depreciation and amortization, which reduce the value of real estate assets over time even though actual real estate values may fluctuate with market conditions, accretion of membership deposit liability and amortization of favorable and unfavorable leasehold intangibles. AFFO does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income (loss) as an indicator of Newcastle’s operating performance or as an alternative to cash flow as a measure of Newcastle’s liquidity, and it is not necessarily indicative of cash available to fund cash needs. Newcastle’s calculation of AFFO may be different from the calculation used by other companies and, therefore, comparability may be limited. The Company’s definition of AFFO differs from the definition of FFO established by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income (or loss) (computed in accordance with GAAP) excluding losses or gains from sales of depreciable property, impairment of depreciable real estate, real estate-related depreciation and amortization and the portion of such items related to unconsolidated affiliates.

ABOUT NEWCASTLE

Newcastle focuses on investing in, and actively managing, real estate related assets. Newcastle conducts its operations to qualify as a REIT for federal income tax purposes. Newcastle 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. 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 Newcastle’s 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 Operations” 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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