Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING

v3.5.0.2
SEGMENT REPORTING
 6 Months Ended
Jun. 30, 2016
Segment Reporting [Abstract]  
SEGMENT REPORTING
SEGMENT REPORTING
 
Newcastle conducts its business through the following segments: (i) debt investments financed with collateralized debt obligations (“CDOs”), (ii) other debt investments (“Other Debt”), (iii) investment in golf properties and facilities (“Golf”) and (iv) corporate, which consists primarily of interest income on short-term investments, general and administrative expenses, interest expense on the junior subordinated notes payable and management fees pursuant to the Management Agreement.
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)
 
 
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Total
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
Interest income
$
1,097

 
$
40,278

 
$
77

 
$
8

 
$
41,460

Interest expense
(491
)
 
(18,586
)
 
(5,363
)
 
(1,511
)
 
(25,951
)
Net interest income (expense)
606

 
21,692

 
(5,286
)
 
(1,503
)
 
15,509

Total impairment
110

 
2,843

 
—

 
—

 
2,953

Total operating revenues
—

 
—

 
146,642

 
—

 
146,642

Total other income (loss), net
82,130

 
(2,343
)
 
(292
)
 
—

 
79,495

Loan and security servicing expense
30

 
8

 
—

 
—

 
38

Operating expenses - golf (C)
—

 
—

 
117,818

 
—

 
117,818

Operating expenses - golf, repairs and maintenance expenses
—

 
—

 
4,286

 
—

 
4,286

Cost of sales - golf
—

 
—

 
15,428

 
—

 
15,428

General and administrative expense
—

 
—

 
1,546

 
3,666

 
5,212

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

 
—

 
1,239

 
171

 
1,410

Management fee to affiliate
—

 
—

 
—

 
5,351

 
5,351

Depreciation and amortization
—

 
—

 
12,515

 
—

 
12,515

Income tax expense
—

 
—

 
182

 
—

 
182

Income (loss) from continuing operations
82,596

 
16,498

 
(11,950
)
 
(10,691
)
 
76,453

Net income (loss)
82,596

 
16,498

 
(11,950
)
 
(10,691
)
 
76,453

Preferred dividends
—

 
—

 
—

 
(2,790
)
 
(2,790
)
Net loss attributable to noncontrolling interests
—

 
—

 
12

 
—

 
12

Income (loss) applicable to common stockholders
$
82,596

 
$
16,498

 
$
(11,938
)
 
$
(13,481
)
 
$
73,675










Summary segment financial data (continued).
 
Debt Investments (A)
 
 
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Total
Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
Interest income
$
—

 
$
20,382

 
$
36

 
$
3

 
$
20,421

Interest expense
—

 
(9,153
)
 
(2,698
)
 
(566
)
 
(12,417
)
Net interest income (expense)
—

 
11,229

 
(2,662
)
 
(563
)
 
8,004

Total impairment
—

 
645

 
—

 
—

 
645

Total operating revenues
—

 
—

 
84,484

 
—

 
84,484

Total other income (loss), net
—

 
(940
)
 
(8
)
 
—

 
(948
)
Loan and security servicing expense
—

 
1

 
—

 
—

 
1

Operating expenses - golf (C)
—

 
—

 
63,105

 
—

 
63,105

Operating expenses - golf, repairs and maintenance expenses
—

 
—

 
2,394

 
—

 
2,394

Cost of sales - golf
—

 
—

 
9,217

 
—

 
9,217

General and administrative expense
—

 
—

 
706

 
1,782

 
2,488

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

 
—

 
1,100

 
134

 
1,234

Management fee to affiliate
—

 
—

 
—

 
2,676

 
2,676

Depreciation and amortization
—

 
—

 
6,484

 
—

 
6,484

Income tax expense
—

 
—

 
138

 
—

 
138

Income (loss) from continuing operations
—

 
9,643

 
(1,330
)
 
(5,155
)
 
3,158

Net income (loss)
—

 
9,643

 
(1,330
)
 
(5,155
)
 
3,158

Preferred dividends
—

 
—

 
—

 
(1,395
)
 
(1,395
)
Net income attributable to noncontrolling interests
—

 
—

 
(112
)
 
—

 
(112
)
Income (loss) applicable to common stockholders
$
—

 
$
9,643

 
$
(1,442
)
 
$
(6,550
)
 
$
1,651










Summary segment financial data (continued).
 
Debt Investments (A)
 
 
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Total
June 30, 2016
 
 
 
 
 
 
 
 
 
Investments
$
—

 
$
994,041

 
$
298,103

 
$
—

 
$
1,292,144

Cash and restricted cash
—

 
665

 
10,718

 
46,742

 
58,125

Other assets
—

 
379,119

 
38,184

 
82

 
417,385

Total assets
—

 
1,373,825

 
347,005

 
46,824

 
1,767,654

Debt, net
—

 
724,016

 
112,843

 
51,221

 
888,080

Other liabilities
—

 
456,694

 
164,100

 
3,141

 
623,935

Total liabilities
—

 
1,180,710

 
276,943

 
54,362

 
1,512,015

Preferred stock
—

 
—

 
—

 
61,583

 
61,583

Noncontrolling interests
—

 
—

 
(269
)
 
—

 
(269
)
Equity (deficit) attributable to common stockholders
$
—

 
$
193,115

 
$
70,331

 
$
(69,121
)
 
$
194,325

 
 
 
 
 
 
 
 
 
 
Additions to investments in real estate during the six months ended June 30, 2016
$
—

 
$
—

 
$
10,822

 
$
—

 
$
10,822


Summary segment financial data (continued).

 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Six Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
29,607

 
$
24,660

 
$
72

 
$
9

 
$
—

 
$
(3,005
)
 
$
51,343

Interest expense
(5,313
)
 
(19,173
)
 
(10,305
)
 
(1,891
)
 
—

 
3,005

 
(33,677
)
Inter-segment elimination
(3,005
)
 
—

 
3,005

 
—

 
—

 
—

 
—

Net interest income (expense)
21,289

 
5,487

 
(7,228
)
 
(1,882
)
 
—

 
—

 
17,666

Total impairment
12,206

 
1,878

 
—

 
—

 
—

 
—

 
14,084

Total operating revenues
—

 
—

 
143,629

 
—

 
—

 
—

 
143,629

Total other income (loss), net
30,271

 
(177
)
 
(228
)
 
8

 
—

 
—

 
29,874

Loan and security servicing expense
214

 
—

 
—

 
—

 
—

 
—

 
214

Operating expenses - golf (C)
—

 
—

 
115,988

 
—

 
—

 
—

 
115,988

Operating expenses - golf, repairs and maintenance expenses
—

 
—

 
4,387

 
—

 
—

 
—

 
4,387

Cost of sales - golf
—

 
—

 
15,161

 
—

 
—

 
—

 
15,161

General and administrative expense
—

 
—

 
1,041

 
3,821

 
—

 
—

 
4,862

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

 
—

 
321

 
17

 
—

 
—

 
338

Management fee to affiliate
—

 
—

 
—

 
5,342

 
—

 
—

 
5,342

Depreciation and amortization
—

 
—

 
13,872

 
—

 
—

 
—

 
13,872

Income tax expense
—

 
—

 
73

 
—

 
—

 
—

 
73

Income (loss) from continuing operations
39,140

 
3,432

 
(14,670
)
 
(11,054
)
 
—

 
—

 
16,848

Income from discontinued operations
—

 
—

 
—

 
—

 
639

 
—

 
639

Net income (loss)
39,140

 
3,432

 
(14,670
)
 
(11,054
)
 
639

 
—

 
17,487

Preferred dividends
—

 
—

 
—

 
(2,790
)
 
—

 
—

 
(2,790
)
Net loss attributable to non-controlling interests
—

 
—

 
230

 
—

 
—

 
—

 
230

Income (loss) applicable to common stockholders
$
39,140

 
$
3,432

 
$
(14,440
)
 
$
(13,844
)
 
$
639

 
$
—

 
$
14,927






Summary segment financial data (continued).
 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Three Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
13,685

 
$
12,065

 
$
36

 
$
5

 
$
—

 
$
(1,526
)
 
$
24,265

Interest expense
(2,730
)
 
(9,594
)
 
(5,207
)
 
(945
)
 
—

 
1,526

 
(16,950
)
Inter-segment elimination
(1,526
)
 
—

 
1,526

 
—

 
—

 
—

 
—

Net interest income (expense)
9,429

 
2,471

 
(3,645
)
 
(940
)
 
—

 
—

 
7,315

Total impairment (reversal)
11,869

 
1,810

 
—

 
—

 
—

 
—

 
13,679

Total operating revenues
—

 
—

 
82,803

 
—

 
—

 
—

 
82,803

Total other income (loss), net
29,740

 
(140
)
 
(235
)
 
8

 
—

 
—

 
29,373

Loan and security servicing expense
118

 
—

 
—

 
—

 
—

 
—

 
118

Operating expenses - golf (C)
—

 
—

 
63,017

 
—

 
—

 
—

 
63,017

Operating expenses - golf, repairs and maintenance expenses
—

 
—

 
2,421

 
—

 
—

 
—

 
2,421

Cost of sales - golf
—

 
—

 
9,108

 
—

 
—

 
—

 
9,108

General and administrative expense
—

 
—

 
793

 
2,392

 
—

 
—

 
3,185

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

 
—

 
285

 
17

 
—

 
—

 
302

Management fee to affiliate
—

 
—

 
—

 
2,674

 
—

 
—

 
2,674

Depreciation and amortization
—

 
—

 
7,119

 
—

 
—

 
—

 
7,119

Income tax expense
—

 
—

 
27

 
—

 
—


—


27

Income (loss) from continuing operations
27,182

 
521

 
(3,847
)
 
(6,015
)
 
—

 
—

 
17,841

Income from discontinued operations
—

 
—

 
—

 
—

 
524

 
—

 
524

Net income (loss)
27,182

 
521

 
(3,847
)
 
(6,015
)
 
524

 
—

 
18,365

Preferred dividends
—

 
—

 
—

 
(1,395
)
 
—

 
—

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

 
—

 
49

 
—

 
—

 
—

 
49

Income (loss) applicable to common stockholders
$
27,182

 
$
521

 
$
(3,798
)
 
$
(7,410
)
 
$
524

 
$
—

 
$
17,019

(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:
 
June 30, 2016
 
Investments
 
Debt
Non-Recourse
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
Subprime mortgage loans subject to call options
$
362,931

 
$
362,931

 
$
362,931

 
$
362,931

Other
 
 
 
 
 
 
 
Unlevered real estate securities (E)
37,540

 
12,988

 
—

 
—

Levered real estate securities (F)
428,881

 
452,815

 
361,085

 
361,085

Real estate related and other loans
235,612

 
143,526

 
—

 
—

Other investments
N/A

 
21,339

 
—

 
—

Residential mortgage loans
777

 
442

 
—

 
—

 
$
1,065,741

 
$
994,041

 
$
724,016

 
$
724,016


(C)
Operating expenses - golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $1.0 million and $1.9 million for the three and six months ended June 30, 2016, respectively, and $1.2 million and $2.3 million for the three and six months ended June 30, 2015, respectively.
(D)
Includes all transaction related expenses.
(E)
Excludes 12 securities with zero value, which had an aggregate face amount of $183.5 million.
(F)
These investments represent purchases that were traded on June 30, 2016 but settled on July 14, 2016. These represent repurchase agreements collateralized by sold investments that were traded on June 30, 2016 and settled on July 14, 2016.