Annual report pursuant to Section 13 and 15(d)

EQUITY AND EARNINGS PER SHARE (Tables)

v3.3.1.900
EQUITY AND EARNINGS PER SHARE (Tables)
12 Months Ended
Dec. 31, 2015
Stockholders' Equity Note [Abstract]  
Schedule of amounts used in computing basic and diluted EPS
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:
 
 
For Year Ended December 31,
 
 
2015
 
2014
 
2013
Numerator for basic and diluted earnings per share:
 
 
 
 
 
 
Income from continuing operations after preferred dividends and noncontrolling interest
 
$
15,621

 
$
62,855

 
$
134,286

Income (loss) from discontinued operations, net of tax
 
646

 
(35,189
)
 
11,547

Income Applicable to Common Stockholders
 
$
16,267

 
$
27,666

 
$
145,833

 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
Denominator for basic earnings per share - weighted average shares
 
66,479,321

 
61,500,913

 
46,146,882

Effect of dilutive securities
 
 
 
 
 
 
Options
 
2,168,594

 
1,630,314

 
1,071,392

Denominator for diluted earnings per share - adjusted weighted average shares
 
68,647,915

 
63,131,227

 
47,218,274

 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interest
 
$
0.23

 
$
1.02

 
$
2.91

Income (loss) from discontinued operations per share of common stock
 
$
0.01

 
$
(0.57
)
 
$
0.25

Income Applicable to Common Stock, per share
 
$
0.24

 
$
0.45

 
$
3.16

 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interest
 
$
0.23

 
$
1.00

 
$
2.84

Income (loss) from discontinued operations per share of common stock
 
$
0.01

 
$
(0.57
)
 
$
0.24

Income Applicable to Common Stock, per share
 
$
0.24

 
$
0.44

 
$
3.09

Schedule of shares of common stock issued in connection with public offerings
The following table presents shares of common stock issued by Newcastle in connection with public offerings since 2013:
 
 
 
 
Price per Share
 
 
 
Aggregate Shares purchased by
Principals of Fortress
 
Options Granted to Manager (A)
Date
 
Number
of Shares
Issued
 
To
Public
 
To Underwriters
 
Net
Proceeds
(millions)
 
Number
of Shares
 
Price
 
Number
of Shares
 
Grant Date Strike
Price
 
Grant Date
Value (millions)
January 2013
 
9,583,333
 
$
56.10

 
N/A

 
$
526.2

 
35,650

 
$
56.10

 
958,333
 
$
56.10

 
$
18.0

February 2013
 
3,833,333
 
N/A

 
$
62.04

 
$
237.4

 
31,833

 
$
62.88

 
383,333
 
$
62.88

 
$
8.4

June 2013
 
6,708,333
 
N/A

 
$
29.52

 
$
197.6

 
125,000

 
$
29.82

 
670,833
 
$
29.82

 
$
3.8

November 2013
 
9,658,492
 
N/A

 
$
31.26

 
$
301.4

 
75,159

 
$
31.50

 
965,849
 
$
31.50

 
$
6.0

August 2014
 
7,654,166
 
N/A

 
$
25.92

 
$
197.9

 
83,333

 
$
26.34

 
765,416
 
$
26.34

 
$
1.7


(A)
In connection with these offerings, Newcastle granted options to the Manager for the purpose of compensating the Manager for its role in raising capital for Newcastle.
(B)
This figure also includes shares purchased by officers of Newcastle.
Schedule of outstanding options
The following is a summary of the changes in Newcastle's outstanding options for the year ended December 31, 2015.
 
 
Number of Options
 
Weighted Average Strike Price
 
Weighted Average Life Remaining (in years)
Balance at December 31, 2014
 
5,500,599

 
$
4.26

 
 
Granted
 
178,740

 
1.00

 
 
Exercised
 
(202,446
)
 
1.00

 
 
Expired
 
(55,332
)
 
14.92

 
 
Forfeited
 

 

 
 
Balance at December 31, 2015
 
5,421,561

 
$
2.85

 
6.79 years
 
 
 
 
 
 
 
Exercisable at December 31, 2015
 
4,723,210

 
$
2.75

 
6.52 years
Schedule of outstanding options summary
Newcastle's outstanding options were summarized as follows:
 
Year Ended December 31, 2015
 
Year Ended December 31, 2014
 
Issued Prior
to 2011
 
Issued in 2011
and thereafter
 
Total
 

Issued Prior to 2011
 
Issued in 2011
and thereafter
 
Total
Held by the Manager
115,239

 
5,010,243

 
5,125,482

 
157,791

 
4,833,961

 
4,991,752

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

 
266,657

 
296,079

 
41,869

 
466,645

 
508,514

Issued to the independent directors

 

 

 
333

 

 
333

Total
144,661

 
5,276,900

 
5,421,561

 
199,993

 
5,300,606

 
5,500,599

Summary of Newcastle's outstanding options
The following table summarizes Newcastle’s outstanding options at December 31, 2015. Note that the last sales price on the New York Stock Exchange for Newcastle’s common stock in the year ended December 31, 2015 was $4.08 per share.
Recipient
 
Date of Grant/Exercise
 
Number of Options (A)
 
Options Exercisable at
December 31, 2015
 
Weighted Average
Strike Price (A)
 
Fair Value At Grant
Date (millions) (B)
 
Intrinsic Value at
December 31, 2015
(millions)
Directors
 
Various
 
3,333

 

 
$

 
Not Material
 

Manager (C)
 
2002 - 2007
 
587,277

 
144,661

 
$
13.18

 
$
6.4

 

Manager (C)
 
Mar-11
 
311,853

 
206,881

 
$
1.00

 
$
7.0

(I)
$
0.6

Manager (C)
 
Sep-11
 
524,212

 
376,268

 
$
1.00

 
$
5.6

(J)
$
1.2

Manager (C)
 
Apr-12
 
348,352

 
279,452

 
$
1.00

 
$
5.6

(K)
$
0.9

Manager (C)
 
May-12
 
396,316

 
316,871

 
$
1.00

 
$
7.6

(L)
$
1.0

Manager (C)
 
Jul-12
 
437,991

 
353,674

 
$
1.00

 
$
8.3

(M)
$
1.1

Manager (C)
 
Jan-13
 
958,331

 
872,528

 
$
2.32

 
$
18.0

(N)
$
1.5

Manager (C)
 
Feb-13
 
383,331

 
349,011

 
$
2.95

 
$
8.4

(O)
$
0.4

Manager (C)
 
Jun-13
 
670,829

 
610,770

 
$
3.23

 
$
3.8

(P)
0.5

Manager (C)
 
Nov-13
 
965,847

 
804,873

 
$
3.57

 
$
6.0

(Q)
0.4

Manager (C)
 
Aug-14
 
765,416

 
408,221

 
$
4.01

 
$
1.7

(R)
0.1

Exercised (D)
 
Prior to 2008
 
(173,853
)
 
N/A

 
$
14.09

 
N/A

 
N/A

Exercised (E)
 
Oct-12
 
(15,972
)
 
N/A

 
$
1.48

 
N/A

 
N/A

Exercised (F)
 
Sep-13
 
(51,306
)
 
N/A

 
$
1.67

 
N/A

 
N/A

Exercised (G)
 
2014
 
(216,186
)
 
N/A

 
$
1.46

 
N/A

 
N/A

Exercised (H)
 
2015
 
(202,446
)
 
N/A

 
1.00

 
N/A

 
N/A

Expired unexercised
 
2002-2005
 
(271,764
)
 
N/A

 
N/A

 
N/A

 
N/A

Outstanding
 
 
 
5,421,561

 
4,723,210

 
 
 
 
 
 

(A)
The strike prices are subject to adjustment in connection with return of capital dividends and spin-offs. A portion of Newcastle’s 2008 dividends was deemed return of capital dividends. The effect on the strike prices was not significant. In the first quarter of 2014, strike prices were adjusted by $0.32 reflecting the portion of Newcastle's 2013 dividends which was deemed return of capital. The strike prices were adjusted for the New Residential, New Media and New Senior spin-offs as described above. On May 7, 2015, and pursuant to the anti-dilution provisions of the 2014 Plan, 2012 Plan and Newcastle Option Plan, as applicable, 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, options relating to a total of 178,740 shares were issued on May 7, 2015 at a strike price of $1.00 per share as detailed below.
Grant Date
 
Number of Options Issued
Mar-11
 
24,354

Sep-11
 
92,963

Apr-12
 
32,105

May-12
 
12,987

Jul-12
 
16,331

Total options issued
 
178,740



As of December 31, 2015, the weighted average strike price of the outstanding options issued prior to 2011 was $13.18.
(B)
The fair value of the options was estimated using an option valuation model. Since the Newcastle Option Plan, 2012 Plan, 2014 Plan and 2015 Plan have characteristics significantly different from those of traded options, and since the assumptions used in such model, particularly the volatility assumption, are subject to significant judgment and variability, the actual value of the options could vary materially from management’s estimate. The volatility assumption for these options was estimated based primarily on the historical volatility of Newcastle’s common stock and management’s expectations regarding future volatility. The expected life assumption for options issued prior to 2011 was estimated based on the simplified term method. This simplified method was used because Newcastle did not have sufficient historical data to conclude on the appropriate expected life of its options and because historical data to date was consistent with the simplified term method. The expected life assumption for options issued in 2011 and thereafter was estimated based primarily on the historical expected life of applicable previously issued options.
(C)
The Manager assigned certain of its options to Fortress’s employees as follows:
Date of Grant
 
Range of Strike Prices
 
Total Unexercised Inception to Date
2006
 
$13.38
 
6,373

2007
 
$12.44 - $14.44
 
23,049

2011
 
$1.00
 

2012
 
$1.00
 

2013
 
$2.32 - $3.57
 
266,657

 
 
Total
 
296,079



(D)
111,770 of the total options exercised were by the Manager. 61,417 of the total options exercised were by employees of Fortress subsequent to their assignment. 666 of the total options exercised were by directors.
(E)
Exercised by employees of Fortress subsequent to their assignment. The options exercised had an intrinsic value of $0.2 million.
(F)
Exercised by employees of Fortress subsequent to their assignment. The options exercised had an intrinsic value of $0.9 million.
(G)
215,853 options were exercised by employees of Fortress subsequent to their assignment with an intrinsic value of $4.1 million. 333 options were exercised by directors with a minimal intrinsic value.
(H)
Exercised by employees of Fortress subsequent to their assignment. The options exercised had an intrinsic value of $0.8 million.
(I)
The assumptions used in valuing the options were: a 1.7% risk-free rate, 107.8% volatility and a 3.3 year expected term.
(J)
The assumptions used in valuing the options were: a 1.13% risk-free rate, 13.2% dividend yield, 151.1% volatility and a 4.6 year expected term.
(K)
The assumptions used in valuing the options were: a 1.3% risk-free rate, 12.9% dividend yield, 149.4% volatility and a 4.7 year expected term.
(L)
The assumptions used in valuing the options were: a 1.05% risk-free rate, 11.9% dividend yield, 148.4% volatility and a 4.8 year expected term.
(M)
The assumptions used in valuing the options were: a 0.75% risk-free rate, 11.9% dividend yield, 147.5% volatility and a 4.8 year expected term.rice
(N)
The assumptions used in valuing the options were: a 2.0% risk-free rate, 8.8% dividend yield, 56.2% volatility and a 10 year term.
(O)
The assumptions used in valuing the options were: a 2.1% risk-free rate, 7.8% dividend yield, 55.5% volatility and a 10 year term.
(P)
The assumptions used in valuing the options were: a 2.5% risk-free rate, 8.8% dividend yield, 36.9% volatility and a 10 year term.
(Q)
The assumptions used in valuing the options were: a 2.8% risk-free rate, 6.7% dividend yield, 32.0% volatility and a 10 year term.
(R)
The assumptions used in valuing the options were: a 2.7% risk-free rate, 8.6% dividend yield, 23.4% volatility and a 10 year term.
Schedule of options issued
As a result of this adjustment, options relating to a total of 178,740 shares were issued on May 7, 2015 at a strike price of $1.00 per share as detailed below.
Grant Date
 
Number of Options Issued
Mar-11
 
24,354

Sep-11
 
92,963

Apr-12
 
32,105

May-12
 
12,987

Jul-12
 
16,331

Total options issued
 
178,740

Schedule of assigned options to Fortress's employees
The Manager assigned certain of its options to Fortress’s employees as follows:
Date of Grant
 
Range of Strike Prices
 
Total Unexercised Inception to Date
2006
 
$13.38
 
6,373

2007
 
$12.44 - $14.44
 
23,049

2011
 
$1.00
 

2012
 
$1.00
 

2013
 
$2.32 - $3.57
 
266,657

 
 
Total
 
296,079