Quarterly report pursuant to Section 13 or 15(d)

EQUITY AND EARNINGS PER SHARE

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EQUITY AND EARNINGS PER SHARE
 9 Months Ended
Sep. 30, 2015
Stockholders' Equity Note [Abstract]  
EQUITY AND EARNINGS PER SHARE
EQUITY AND EARNINGS PER SHARE
 
A. Equity

The following is a summary of the changes in Newcastle's outstanding options for the nine months ended September 30, 2015:

 
Number of Options
 
Weighted Average Strike Price
 
Weighted Average Life Remaining (in years)
Outstanding at December 31, 2014
5,500,599

 
$
4.26

 
 
Granted
178,740

 
1.00

 
 
Exercised
13,201

 
1.00

 
 
Expired
55,332

 
14.92

 
 
Forfeited
—

 
—

 
 
Outstanding at September 30, 2015
5,610,806

 
$
2.79

 
7.03
 
 
 
 
 
 
Exercisable at September 30, 2015
4,732,305

 
$
2.64

 
6.68


On May 7, 2015, and pursuant to the anti-dilution provisions of the NCT Option Plans, Newcastle’s board of directors approved an equitable adjustment of all outstanding options in order to account for the impact of the 2014 return of capital distributions. The equitable adjustment entails a strike price adjustment and the issuance of additional options which were determined so as to compensate for the loss in value that would have otherwise occurred as a result of the 2014 return of capital distributions. As a result of this adjustment, a total of 178,740 options were issued on May 7, 2015 at a strike price of $1.00.

As of September 30, 2015, Newcastle’s outstanding options were summarized as follows:
 
Issued Prior to 2011
 
Issued in 2011 and thereafter
 
Total
Held by the Manager
115,239

 
5,010,243

 
5,125,482

Issued to the Manager and subsequently transferred to certain of the Manager's employees
29,422

 
455,902

 
485,324

Issued to the independent directors
—

 
—

 
—

Total
144,661

 
5,466,145

 
5,610,806

Weighted average strike price
$
13.18

 
$
2.52

 
$
2.79


 
On March 16, 2015, Newcastle declared a quarterly dividend of $0.12 per common share, and declared dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.750% Series B, 8.050% Series C and 8.375% Series D preferred stock, respectively, for the quarter ended March 31, 2015. Dividends totaling $9.4 million were paid in April 2015.

On June 22, 2015, Newcastle declared a quarterly dividend of $0.12 per common share, and declared dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.750% Series B, 8.050% Series C and 8.375% Series D preferred stock, respectively, for the quarter ended June 30, 2015. Dividends totaling $9.4 million were paid in July 2015.

On September 21, 2015, Newcastle declared a quarterly dividend of $0.12 per common share, and declared dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.750% Series B, 8.050% Series C and 8.375% Series D preferred stock, respectively, for the quarter ended September 30, 2015. Dividends totaling $9.4 million were paid in October 2015.

In June 2015, Newcastle issued a total of 51,777 shares of its common stock to its independent directors as a component of their annual compensation.


B. Option Exercise

On July 16, 2015, a former employee of the Manager exercised 13,201 options with a weighted average exercise price of $1.00. Upon exercise, 10,367 shares of Newcastle common stock were issued reflecting the $0.05 million intrinsic value of the exercisable options net of the exercise price.

C. Earnings Per Share

Newcastle is required to present both basic and diluted earnings per share (“EPS”). The following table shows the amounts used in computing basic and diluted EPS:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Numerator for basic and diluted earnings per share:
 
 
 
 
 
 
 
Income from continuing operations after preferred dividends and noncontrolling interests
$
6,492

 
$
12,560

 
$
20,780

 
$
70,418

Income (loss) from discontinued operations, net of tax
7

 
(8,624
)
 
646

 
(32,427
)
Income Applicable to Common Stockholders
$
6,499

 
$
3,936

 
$
21,426

 
$
37,991

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Denominator for basic earnings per share - weighted average shares
66,484,962

 
62,329,023

 
66,445,705

 
59,848,506

Effect of dilutive securities
 
 
 
 
 
 
 
Options
2,584,697

 
1,536,773

 
2,607,597

 
1,781,669

Denominator for diluted earnings per share - adjusted weighted average shares
69,069,659

 
63,865,796

 
69,053,302

 
61,630,175

 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interests
$
0.10

 
$
0.20

 
$
0.31

 
$
1.18

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

 
$
(0.14
)
 
$
0.01

 
$
(0.54
)
Income Applicable to Common Stock, per share
$
0.10

 
$
0.06

 
$
0.32

 
$
0.63

 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interests
$
0.09

 
$
0.20

 
$
0.30

 
$
1.14

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

 
$
(0.14
)
 
$
0.01

 
$
(0.54
)
Income Applicable to Common Stock, per share
$
0.09

 
$
0.06

 
$
0.31

 
$
0.62

 
 
 
 
 
 
 
 


Basic EPS is calculated by dividing net income available for common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted EPS is calculated by dividing net income available for common stockholders by the weighted average number of shares of common stock outstanding plus the additional dilutive effect of common stock equivalents during each period. Due to rounding, income per share from continuing operations and income per share from discontinued operations may not sum to the income per share of common stock. Newcastle’s common stock equivalents are its outstanding stock options. As of September 30, 2015 and 2014, Newcastle had 251,459 and 227,079 antidilutive options. During the three months ended September 30, 2015 and 2014, based on the treasury stock method, Newcastle had 2,584,697 and 1,536,773 dilutive common stock equivalents, respectively, resulting from its outstanding options. During the nine months ended September 30, 2015 and 2014, Newcastle had 2,607,597 and 1,781,669 dilutive common stock equivalents, respectively, resulting from its outstanding options. Net income available for common stockholders is equal to net income less preferred dividends and net income attributable to noncontrolling interests.