Exhibit 99.1

 

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Investor Relations

212-479-3195

NEWCASTLE ANNOUNCES SECOND QUARTER 2015 RESULTS

2Q CORE EARNINGS PER SHARE OF $0.17

 

 

NEW YORK—(BUSINESS WIRE)—August 5, 2015—Newcastle Investment Corp. (NYSE: NCT; “Newcastle”, the “Company”) today reported the following information for the quarter ended June 30, 2015.

SECOND QUARTER FINANCIAL HIGHLIGHTS

 

    Core Earnings of $12 million, or $0.17 per WA basic share

 

    Adjusted Funds from Operations (“AFFO”) of $27 million, or $0.40 per WA basic share

 

    GAAP Income of $17 million, or $0.26 per WA basic share

 

    Depreciation and amortization of $10 million, or $0.14 per WA basic share*

SECOND QUARTER & SUBSEQUENT HIGHLIGHTS

 

    Real Estate Debt Portfolio As of June 30, 2015, the Real Estate Debt Portfolio consisted of $373 million of non-agency assets and $202 million of agency securities. During the quarter, the Company:

 

    Sold $203 million of non-agency assets at an average price of 96% of par and $7 million of real estate properties, and received $32 million of pay downs, which generated $73 million of proceeds to NCT and $30 million of gain on sale

 

    Collapsed CDOs VIII and IX: Fully repaid $159 million of third party debt and retained $245 million of assets

 

    Generated $12 million of net investment income, or a 15% annualized return

 

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

 

    On August 4, 2015, the Company agreed to repurchase its $157 million of third party golf debt at a price of 90.0% of par, or $141 million. The purchase is expected to close in the third quarter and be funded with cash and new debt financing

 

    The golf business added 314 private club members to the same store portfolio year-over-year and increased public golf rounds played by approximately 55,000 during the first six months of 2015 compared to prior year

 

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

 

     2Q 2015      1Q 2015  
Summary Operating Results:      

GAAP Income/(Loss)

     $17 million      ($2) million

GAAP Income/(Loss) per WA Basic Share

     $0.26         ($0.03
Non-GAAP Results:      

Core Earnings**

     $12 million         $8 million   

Core Earnings per WA Basic Share**

     $0.17         $0.12   

Adjusted Funds From Operations (AFFO)**

     $27 million         $7 million   

AFFO per WA Basic Share**

     $0.40         $0.11   

WA: Weighted Average

 

* 2Q 2015 GAAP Income/(Loss) includes $7 million of total depreciation and amortization charges, $1 million of amortization of favorable or unfavorable leasehold intangibles and $2 million of accretion on golf membership deposit liability. 1Q 2015 GAAP Income/(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. 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.

 

1


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 Wednesday, August 5, 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 1-866-393-1506 (from within the U.S.) or 1-706-634-0623 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Newcastle Second 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 Wednesday, August 19, 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 “4388519.”

 

2


Investment Portfolio

The following table summarizes Newcastle’s consolidated investment portfolio at June 30, 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

   $ 83       $ 27         3.8   $ 45         17       B-      1.3   

Mezzanine Loans

     41         23         3.2     23         3       85%      0.6   

CDO Securities (4)

     15         —           —       10         2       C      6.5   

Other Investments (5)

     20         20         2.8     20         1            —     
  

 

 

    

 

 

    

 

 

   

 

 

          

 

 

 

Total Commercial Assets

     159         70         9.8     98               1.7   
  

 

 

    

 

 

    

 

 

   

 

 

          

 

 

 

Residential Assets

                   

Residential Loans

     4         4         0.6     4         6       725      1.8   

Non-Agency RMBS

     17         3         0.4     10         9       CC      12.1   

Real Estate ABS

     8         —           —       —           1       C      —     
  

 

 

    

 

 

    

 

 

   

 

 

          

 

 

 
     29         7         1.0     14               7.4   

FNMA/FHLMC

     202         208         29.1     208         4       AAA      8.8   
  

 

 

    

 

 

    

 

 

   

 

 

          

 

 

 

Total Residential Assets

     231         215         30.1     222               8.6   
  

 

 

    

 

 

    

 

 

   

 

 

          

 

 

 

Corporate Assets

                   

Corporate Bank Loans

     185         119         16.6     119         4       D      1.3   
  

 

 

    

 

 

    

 

 

   

 

 

          

 

 

 

Total Corporate Assets

     185         119         16.6     119               1.3   
  

 

 

    

 

 

    

 

 

   

 

 

          

 

 

 

Total Debt Investments

     575         404         56.5     439               4.5   
                   

 

 

 

Other Investments

                   

Golf Investment (6)

     362         311         43.5     311            
  

 

 

    

 

 

    

 

 

   

 

 

          

Total Portfolio/Weighted Average

   $ 937       $ 715         100.0   $ 750            
  

 

 

    

 

 

    

 

 

   

 

 

          

WA- Weighted average

 

(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. 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 8 securities with zero value, which had an aggregate face amount of $115.0 million.
(5) Represents an equity investment in a real estate owned property.
(6) Face amount of the golf investment represents the gross carrying amount, including intangibles and excludes accumulated depreciation and amortization.

 

3


Unaudited Consolidated Statements of Income

($ in thousands, except per share data)

 

     Three Months Ended 
June 30,
    Six Months Ended 
June 30,
 
     2015     2014     2015     2014  

Interest income

   $ 24,265      $ 29,893      $ 51,343      $ 76,345   

Interest expense

     16,950        20,328        33,677        42,498   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     7,315        9,565        17,666        33,847   
  

 

 

   

 

 

   

 

 

   

 

 

 

Impairment/(Reversal)

        

Valuation allowance (reversal) on loans

     4,317        1,526        4,674        2,772   

Other-than-temporary impairment on securities

     9,128        —          9,472        —     

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)

     234        —          (62     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total impairment (reversal)

     13,679        1,526        14,084        2,772   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after impairment/reversal

     (6,364     8,039        3,582        31,075   

Operating Revenues

        

Golf course operations

     48,778        50,513        87,732        90,285   

Sales of food and beverages - golf

     20,944        19,923        33,956        33,462   

Other golf revenue

     13,081        12,301        21,941        21,622   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     82,803        82,737        143,629        145,369   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Loss)

        

Gain on settlement of investments, net

     26,776        40,435        27,791        42,769   

Gain (loss) on extinguishment of debt

     489        (3,410     489        (3,410

Other income (loss), net

     2,108        4,682        1,594        18,156   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

     29,373        41,707        29,874        57,515   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Loan and security servicing expense

     118        408        214        1,265   

Operating expenses - golf

     65,438        66,482        120,375        126,129   

Cost of sales - golf

     9,108        8,807        15,161        14,763   

General and administrative expense

     3,487        4,767        5,200        8,331   

Management fee to affiliate

     2,674        5,296        5,342        11,189   

Depreciation and amortization

     7,119        6,317        13,872        12,180   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     87,944        92,077        160,164        173,857   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income tax

     17,868        40,406        16,921        60,102   

Income tax expense

     27        4        73        144   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     17,841        40,402        16,848        59,958   

Income (loss) from discontinued operations, net of tax

     524        (8,504     639        (23,803
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

     18,365        31,898        17,487        36,155   

Preferred dividends

     (1,395     (1,395     (2,790     (2,790

Net loss attributable to noncontrolling interests

     49        29        230        690   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Applicable to Common Stockholders

   $ 17,019      $ 30,532      $ 14,927      $ 34,055   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Applicable to Common Stock, per share (1)

        

Basic

   $ 0.26      $ 0.52      $ 0.22      $ 0.58   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.25      $ 0.50      $ 0.22      $ 0.56   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

   $ 0.25      $ 0.67      $ 0.22      $ 0.99   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.24      $ 0.65      $ 0.21      $ 0.96   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

   $ 0.01      $ (0.15   $ 0.01      $ (0.41
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.01      $ (0.15   $ 0.01      $ (0.41
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

     66,426,980        58,599,666        66,425,751        58,587,691   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     69,204,717        60,477,084        69,055,495        60,493,844   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends Declared per Share of Common Stock (1)

   $ 0.12      $ 0.60      $ 0.24      $ 1.20   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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.

 

4


Consolidated Balance Sheets

($ in thousands, except per share data)

 

     June 30, 2015
(Unaudited)
    December 31,
2014
 

Assets

    

Real estate securities, available-for-sale

   $ 65,499      $ 231,754   

Real estate securities, pledged as collateral

     208,041        407,689   

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

     141,826        230,200   

Residential mortgage loans, held-for-investment, net

     —          —     

Residential mortgage loans, held-for-sale, net

     3,527        3,854   

Subprime mortgage loans subject to call option

     404,149        406,217   

Investments in other real estate, net of accumulated depreciation

     231,268        239,283   

Intangibles, net of accumulated amortization

     79,702        84,686   

Other investments

     19,925        26,788   

Cash and cash equivalents

     114,338        73,727   

Restricted cash

     3,385        15,714   

Receivables from brokers, dealers and clearing organizations

     392,289        —     

Receivables and other assets

     39,724        35,191   

Assets of discontinued operations

     53        6,803   
  

 

 

   

 

 

 

Total Assets

   $ 1,703,726      $ 1,761,906   
  

 

 

   

 

 

 

Liabilities and Equity

    

Liabilities

    

CDO bonds payable

   $ 92,693      $ 227,673   

Other bonds and notes payable

     9,871        27,069   

Repurchase agreements

     375,704        441,176   

Credit facilities and obligations under capital leases

     165,006        161,474   

Financing of subprime mortgage loans subject to call option

     404,149        406,217   

Junior subordinated notes payable

     51,228        51,231   

Dividends payable

     8,907        8,901   

Payables to brokers, dealers and clearing organizations

     207,732        —     

Accounts payable, accrued expenses and other liabilities

     160,692        179,390   

Liabilities of discontinued operations

     —          447   
  

 

 

   

 

 

 

Total Liabilities

   $ 1,475,982      $ 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 June 30, 2015 and December 31, 2014

   $ 61,583      $ 61,583   

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 66,476,285 and 66,424,508 shares issued and outstanding, at June 30, 2015 and December 31, 2014, respectively

     665        664   

Additional paid-in capital

     3,172,297        3,172,060   

Accumulated deficit

     (3,042,901     (3,041,880

Accumulated other comprehensive income

     36,294        65,865   

Total Newcastle Stockholders’ Equity

     227,938        258,292   

Noncontrolling interests

     (194     36   
  

 

 

   

 

 

 

Total Equity

   $ 227,744      $ 258,328   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 1,703,726      $ 1,761,906   
  

 

 

   

 

 

 

 

5


Reconciliation of Core Earnings

($ in thousands)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  

Income available for common stockholders

   $ 17,019       $ 30,532       $ 14,927       $ 34,055   

Add (Deduct):

           

Impairment (reversal)

     13,679         1,526         14,084         2,772   

Other (income) loss(A)

     (29,044      (39,510      (29,231      (55,357

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

     (317      26,634         (306      60,758   

Depreciation and amortization(B)

     9,837         8,952         19,309         17,757   

Acquisition, restructuring and spin-off related expenses

     333         1,115         371         2,277   
  

 

 

    

 

 

    

 

 

    

 

 

 

Core earnings

   $ 11,507       $ 29,249       $ 19,154       $ 62,262   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(A) Net of $1.9 million of deal expenses relating to the sale of the manufactured housing portfolio which were recorded to general and administrative expense under GAAP during 2014.
(B) Including accretion of membership deposit liability of $1.5 million and $2.9 million and amortization of favorable and unfavorable leasehold intangibles of $1.2 million and $2.5 million in the three and six months ended June 30, 2015, respectively. Including accretion of membership deposit liability of $1.4 million and $3.1 million and amortization of favorable and unfavorable leasehold intangibles of $1.2 million and $2.5 million in the three and six months ended June 30, 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.

 

6


Reconciliation of Adjusted Funds from Operations (“AFFO”)

($ in thousands)

 

    Three Months Ended
June 30, 2015
    Three Months Ended
March 31, 2015
 

Income available for common stockholders

  $ 17,019      $ (2,092

Add:

   

Depreciation and amortization(A)

    9,837        9,482   
 

 

 

   

 

 

 

Adjusted Funds from Operations (“AFFO”)

  $ 26,856      $ 7,390   
 

 

 

   

 

 

 

 

(A) Depreciation and amortization charges for the three months ended June 30, 2015 includes $7.1 million of depreciation and amortization, $1.2 million of amortization of favorable or unfavorable leasehold intangibles and $1.5 million of accretion on the golf membership deposit liability. Depreciation and amortization charges for March 31, 2015 includes total depreciation and amortization of $6.8 million, $1.3 million of amortization of favorable or unfavorable leasehold intangibles and $1.4 million of accretion on golf membership deposit liability. 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.

 

7