Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)

v3.3.0.814
SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)
9 Months Ended
Sep. 30, 2015
Segment Reporting [Abstract]  
Schedule of segment reporting
Summary financial data on Newcastle's segments is given below, together with reconciliation to the same data for Newcastle as a whole:
 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
30,983

 
$
46,246

 
$
110

 
$
19

 
$

 
$
(3,005
)
 
$
74,353

Interest expense
(5,993
)
 
(28,789
)
 
(13,779
)
 
(2,836
)
 

 
3,005

 
(48,392
)
Inter-segment elimination
(3,005
)
 

 
3,005

 

 

 

 

Net interest income (expense)
21,985

 
17,457

 
(10,664
)
 
(2,817
)
 

 

 
25,961

Total impairment (reversal)
12,569

 
4,975

 

 

 

 

 
17,544

Total operating revenues

 

 
226,493

 

 

 

 
226,493

Total other income (loss)
30,271

 
(3,070
)
 
14,606

 
54

 

 

 
41,861

Loan and security servicing expense
249

 
6

 

 

 

 

 
255

Operating expenses - golf (C)

 

 
181,506

 

 

 

 
181,506

Operating expenses - golf, repairs and maintenance expenses

 

 
6,853

 

 

 

 
6,853

Cost of sales - golf

 

 
24,003

 

 

 

 
24,003

General and administrative expense

 

 
1,960

 
5,767

 

 

 
7,727

General and administrative expense - acquisition and transaction expenses (D)

 
60

 
1,239

 
50

 

 

 
1,349

Management fee to affiliate

 

 

 
8,017

 

 

 
8,017

Depreciation and amortization

 

 
20,983

 

 

 

 
20,983

Income tax expense

 

 
1,330

 

 

 

 
1,330

Income (loss) from continuing operations
39,438

 
9,346

 
(7,439
)
 
(16,597
)
 

 

 
24,748

Income from discontinued operations, net of tax

 

 

 

 
646

 

 
646

Net income (loss)
39,438

 
9,346

 
(7,439
)
 
(16,597
)
 
646

 

 
25,394

Preferred dividends

 

 

 
(4,185
)
 

 

 
(4,185
)
Net loss attributable to noncontrolling interests

 

 
217

 

 

 

 
217

Income (loss) applicable to common stockholders
$
39,438

 
$
9,346

 
$
(7,222
)
 
$
(20,782
)
 
$
646

 
$

 
$
21,426










Summary segment financial data (continued).
 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
1,375

 
$
21,587

 
$
38

 
$
10

 
$

 
$

 
$
23,010

Interest expense
(680
)
 
(9,617
)
 
(3,473
)
 
(945
)
 

 

 
(14,715
)
Inter-segment elimination

 

 

 

 

 

 

Net interest income (expense)
695

 
11,970

 
(3,435
)
 
(935
)
 

 

 
8,295

Total impairment (reversal)
363

 
3,097

 

 

 

 

 
3,460

Total operating revenues

 

 
82,864

 

 

 

 
82,864

Total other income (loss)

 
(2,893
)
 
14,834

 
46

 

 

 
11,987

Loan and security servicing expense
35

 
6

 

 

 

 

 
41

Operating expenses - golf (C)

 

 
65,518

 

 

 

 
65,518

Operating expenses - golf, repairs and maintenance expenses

 

 
2,466

 

 

 

 
2,466

Cost of sales - golf

 

 
8,842

 

 

 

 
8,842

General and administrative expense

 

 
919

 
1,946

 

 

 
2,865

General and administrative expense - acquisition and transaction expenses (D)

 
60

 
918

 
33

 

 

 
1,011

Management fee to affiliate

 

 

 
2,675

 

 

 
2,675

Depreciation and amortization

 

 
7,111

 

 

 

 
7,111

Income tax expense

 

 
1,257

 

 

 

 
1,257

Income (loss) from continuing operations
297

 
5,914

 
7,232

 
(5,543
)
 

 

 
7,900

Income from discontinued operations, net of tax

 

 

 

 
7

 

 
7

Net income (loss)
297

 
5,914

 
7,232

 
(5,543
)
 
7

 

 
7,907

Preferred dividends

 

 

 
(1,395
)
 

 

 
(1,395
)
Net income attributable to noncontrolling interests

 

 
(13
)
 

 

 

 
(13
)
Income (loss) applicable to common stockholders
$
297

 
$
5,914

 
$
7,219

 
$
(6,938
)
 
$
7

 
$

 
$
6,499






Summary segment financial data (continued).
 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Operations
 
Total
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
Investments
$
49,397

 
$
938,424

 
$
307,933

 
$

 
$

 
$
1,295,754

Cash and restricted cash
110

 
2,528

 
6,156

 
28,458

 

 
37,252

Other assets
95

 
371,036

 
33,954

 
446

 

 
405,531

Assets of discontinued operations

 

 

 

 
53

 
53

Total assets
49,602

 
1,311,988

 
348,043

 
28,904

 
53

 
1,738,590

Debt, net
100,306

 
738,201

 
81,586

 
51,226

 

 
971,319

Other liabilities
22

 
379,197

 
150,915

 
13,325

 

 
543,459

Liabilities of discontinued operations

 

 

 

 

 

Total liabilities
100,328

 
1,117,398

 
232,501

 
64,551

 

 
1,514,778

Preferred stock

 

 

 
61,583

 

 
61,583

Noncontrolling interests

 

 
(181
)
 

 

 
(181
)
Equity attributable to common stockholders
$
(50,726
)
 
$
194,590

 
$
115,723

 
$
(97,230
)
 
$
53

 
$
162,410

 
 
 
 
 
 
 
 
 
 
 
 
Additions to investments in real estate excluding intangibles and other liabilities, net of other assets acquired
$

 
$

 
$
9,028

 
$

 
$

 
$
9,028
















Summary segment financial data (continued).
 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
70,635

 
$
39,102

 
$
112

 
$
41

 
$

 
$
(6,001
)
 
$
103,889

Interest expense
(16,932
)
 
(32,344
)
 
(14,764
)
 
(2,870
)
 

 
6,001

 
(60,909
)
Inter-segment elimination
(6,001
)
 
1,748

 
4,253

 

 

 

 

Net interest income (expense)
47,702

 
8,506

 
(10,399
)
 
(2,829
)
 

 

 
42,980

Total impairment (reversal)
(2,185
)
 
942

 

 

 

 

 
(1,243
)
Total operating revenues

 

 
226,863

 

 

 

 
226,863

Total other income
34,717

 
32,698

 
2,718

 

 

 

 
70,133

Loan and security servicing expense
466

 
958

 

 

 

 

 
1,424

Operating expenses - golf (C)

 

 
187,681

 

 

 

 
187,681

Operating expenses - golf, repairs and maintenance expenses

 

 
7,194

 

 

 

 
7,194

Cost of sales - golf

 

 
23,183

 

 

 

 
23,183

General and administrative expense

 
2,921

 
986

 
5,963

 

 

 
9,870

General and administrative expense - acquisition and transaction expenses (D)

 

 
1,530

 
64

 

 

 
1,594

Management fee to affiliate

 

 

 
16,853

 

 

 
16,853

Depreciation and amortization

 

 
19,297

 
87

 

 

 
19,384

Income tax expense

 

 
144

 

 

 

 
144

Income (loss) from continuing operations
84,138

 
36,383

 
(20,833
)
 
(25,796
)
 

 

 
73,892

Loss from discontinued operations

 

 

 

 
(32,427
)
 

 
(32,427
)
Net income (loss)
84,138

 
36,383

 
(20,833
)
 
(25,796
)
 
(32,427
)
 

 
41,465

Preferred dividends

 

 

 
(4,185
)
 

 

 
(4,185
)
Net loss attributable to non-controlling interests

 

 
189

 

 
522

 

 
711

Income (loss) applicable to common stockholders
$
84,138

 
$
36,383

 
$
(20,644
)
 
$
(29,981
)
 
$
(31,905
)
 
$

 
$
37,991






Summary segment financial data (continued).
 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Three Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
19,316

 
$
9,749

 
$
37

 
$
6

 
$

 
$
(1,564
)
 
$
27,544

Interest expense
(4,823
)
 
(9,343
)
 
(4,847
)
 
(962
)
 

 
1,564

 
(18,411
)
Inter-segment elimination
(1,564
)
 
112

 
1,452

 

 

 

 

Net interest income (expense)
12,929

 
518

 
(3,358
)
 
(956
)
 

 

 
9,133

Total impairment (reversal)
(4,143
)
 
128

 

 

 

 

 
(4,015
)
Total operating revenues

 

 
81,494

 

 

 

 
81,494

Total other income
1,822

 
8,067

 
2,729

 

 

 

 
12,618

Loan and security servicing expense
157

 
2

 

 

 

 

 
159

Operating expenses - golf (C)

 

 
66,155

 

 

 

 
66,155

Operating expenses - golf, repairs and maintenance expenses

 

 
2,592

 

 

 

 
2,592

Cost of sales - golf

 

 
8,420

 

 

 

 
8,420

General and administrative expense

 
1,051

 
527

 
2,238

 

 

 
3,816

General and administrative expense - acquisition and transaction expenses (D)

 

 
27

 
(711
)
 

 

 
(684
)
Management fee to affiliate

 

 

 
5,664

 

 

 
5,664

Depreciation and amortization

 

 
7,191

 
13

 

 

 
7,204

Income tax expense

 

 

 

 





Income (loss) from continuing operations
18,737

 
7,404

 
(4,047
)
 
(8,160
)
 

 

 
13,934

Loss from discontinued operations

 

 

 

 
(8,624
)
 

 
(8,624
)
Net income (loss)
18,737

 
7,404

 
(4,047
)
 
(8,160
)
 
(8,624
)
 

 
5,310

Preferred dividends

 

 

 
(1,395
)
 

 

 
(1,395
)
Net loss attributable to non-controlling interests

 

 
21

 

 

 

 
21

Income (loss) applicable to common stockholders
$
18,737

 
$
7,404

 
$
(4,026
)
 
$
(9,555
)
 
$
(8,624
)
 
$

 
$
3,936

(A)
Assets held within non-recourse structures, including all of the assets in the CDO segment, are not available to satisfy obligations outside of such financings, except to the extent net cash flow distributions are received from such structures. Furthermore, creditors or beneficial interest holders of these structures generally have no recourse to the general credit of Newcastle. Therefore, the exposure to the economic losses from such structures generally is limited to invested equity in them and economically their book value cannot be less than zero. Therefore, impairment recorded in excess of Newcastle’s investment, which results in negative GAAP book value for a given non-recourse financing structure, cannot economically be incurred and will eventually be reversed through amortization, sales at gains, or as gains at the deconsolidation or termination of such non-recourse financing structure.
(B)
The following table summarizes the investments and debt in the other debt segment:
 
September 30, 2015
 
Investments
 
Debt
Non-Recourse
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
Subprime mortgage loans subject to call options
$
392,342

 
$
392,342

 
$
392,342

 
$
392,342

Other
 
 
 
 
 
 
 
Unlevered real estate securities (E)
37,347

 
12,111

 

 

Levered real estate securities
354,806

 
370,342

 
345,859

 
345,859

Real estate related and other loans
230,229

 
142,802

 

 

Other investments
N/A

 
20,258

 

 

Residential mortgage loans
925

 
569

 

 

 
$
1,015,649

 
$
938,424

 
$
738,201

 
$
738,201


(C)
Operating expenses-golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $1.1 million and $3.4 million for the three and nine months ended September 30, 2015, respectively and $1.2 million and $3.9 million for the three and nine months ended September 30, 2014.
(D)
Includes all transaction related and spin-off related expenses.
(E)
Excludes eight securities with zero value, which had an aggregate face amount of $115.5 million.

Schedule of other debt segment investments and debt
The following table summarizes the investments and debt in the other debt segment:
 
September 30, 2015
 
Investments
 
Debt
Non-Recourse
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
Subprime mortgage loans subject to call options
$
392,342

 
$
392,342

 
$
392,342

 
$
392,342

Other
 
 
 
 
 
 
 
Unlevered real estate securities (E)
37,347

 
12,111

 

 

Levered real estate securities
354,806

 
370,342

 
345,859

 
345,859

Real estate related and other loans
230,229

 
142,802

 

 

Other investments
N/A

 
20,258

 

 

Residential mortgage loans
925

 
569

 

 

 
$
1,015,649

 
$
938,424

 
$
738,201

 
$
738,201


(C)
Operating expenses-golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $1.1 million and $3.4 million for the three and nine months ended September 30, 2015, respectively and $1.2 million and $3.9 million for the three and nine months ended September 30, 2014.
(D)
Includes all transaction related and spin-off related expenses.
(E)
Excludes eight securities with zero value, which had an aggregate face amount of $115.5 million.
Schedule of certain assets and liabilities of Variable Interest Entities
The following table presents certain assets of VIEs, which are included in the Consolidated Balance Sheets. The assets in the table below include those assets that can only be used to settle obligations of consolidated VIEs, and are in excess of those obligations. Additionally, the assets in the table below exclude intercompany balances that eliminate in consolidation.

 
September 30, 2015
 
 
 
(Unaudited)
 
December 31, 2014
Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs
 
 
 
Real estate securities, available-for-sale
$
49,398

 
$
219,490

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

 
230,200

Residential mortgage loans, held-for-sale, net

 
3,211

Subprime mortgage loans subject to call option
392,342

 
406,217

Other investments

 
20,308

Restricted cash
110

 
11,790

Receivables and other assets
95

 
1,927

Assets of discontinued operations

 
6,803

Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs
$
441,945

 
$
899,946


The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above. The liabilities in the table below include liabilities of consolidated VIEs due to third parties only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Newcastle.

 
September 30, 2015
 
 
 
(Unaudited)
 
December 31, 2014
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Newcastle
 
 
 
CDO bonds payable
$
92,812

 
$
227,673

Other bonds and notes payable
7,494

 
27,069

Financing of subprime mortgage loans subject to call option
392,342

 
406,217

Accounts payable, accrued expenses and other liabilities
22

 
2,391

Liabilities of discontinued operations

 
447

Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Newcastle
$
492,670

 
$
663,797

Schedule of holdings in variable interests
Newcastle had variable interests in the following unconsolidated VIEs at September 30, 2015, in addition to the subprime securitizations which are described in Note 6:
Entity
 
Gross Assets (A)
 
Debt (A) (B)
 
Carrying Value of Newcastle's Investment (C)
Newcastle CDO V
 
$
80,426

 
$
107,438

 
$
9,183


(A)
Face amount.
(B)
Newcastle CDO V includes $43.5 million face amount of debt owned by Newcastle with a carrying value of $9.2 million at September 30, 2015.
(C)
This amount represents Newcastle’s maximum exposure to loss from this entity.