Annual report pursuant to Section 13 and 15(d)

EQUITY AND EARNINGS PER SHARE (Tables)

v2.4.0.8
EQUITY AND EARNINGS PER SHARE (Tables)
12 Months Ended
Dec. 31, 2013
Equity And Earnings Per Share Tables  
Schedule of Stock Issued In Public Offerings

Common Stock Offerings

The following table presents shares of common stock issued by Newcastle in connection with public offerings since 2011:

                                                         
          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
  Strike
Price
  Grant Date
Value (millions)
 
March 2011     17,250,000   $ 6.00     N/A   $ 98.4     —     —     1,725,000   $ 6.00   $ 7.0  
September 2011     25,875,000   $ 4.55     N/A   $ 112.3     1,314,780  (B)   $ 4.55     2,587,500   $ 4.55   $ 5.6  
April 2012     18,975,000   $ 6.22     N/A   $ 115.2     —     —     1,897,500   $ 6.22   $ 5.6  
May 2012     23,000,000   $ 6.71     N/A   $ 152.0     —     —     2,300,000   $ 6.71   $ 7.6  
July 2012     25,300,000     N/A   $ 6.63   $ 167.4     450,000   $ 6.70     2,530,000   $ 6.70   $ 8.3  
January 2013     57,500,000   $ 9.35     N/A   $ 526.2     213,900   $ 9.35     5,750,000   $ 9.35   $ 18.0  
February 2013     23,000,000     N/A   $ 10.34   $ 237.4     191,000   $ 10.48     2,300,000   $ 10.48   $ 8.4  
June 2013     40,250,000     N/A   $ 4.92   $ 197.6     750,000   $ 4.97     4,025,000   $ 4.97   $ 3.8  
November 2013     57,950,952     N/A   $ 5.21   $ 301.4     450,952   $ 5.25     5,795,095   $ 5.25   $ 6.0  
   
(A) In connection with these offerings, Newcastle granted options to the Manager for the purpose of compensating the Manager for its successful efforts in raising capital for Newcastle.
(B) This figure also includes shares purchased by officers of Newcastle.
Schedule of Outstanding Options
Newcastle’s outstanding options were summarized as follows:
                                       
    Year Ended December 31, 2013   Year Ended December 31, 2012  
    Issued Prior
to 2011
  Issued in 2011
and thereafter
  Total   Issued Prior
to 2011
  Issued in 2011
and thereafter
  Total  
Held by the Manager     1,496,555     25,996,428     27,492,983     1,751,172     7,934,166     9,685,338  
Issued to the Manager and subsequently transferred to certain Manager’s employees     535,570     2,510,000     3,045,570     701,937     3,010,000     3,711,937  
Issued to the independent directors     2,000     2,000     4,000     10,000     2,000     12,000  
Total     2,034,125     28,508,428     30,542,553     2,463,109     10,946,166     13,409,275  

The following table summarizes Newcastle’s outstanding options at December 31, 2013. Note that the last sales price on the New York Stock Exchange for Newcastle’s common stock in the year ended December 31, 2013 was $5.74 per share.

                                       
                          Intrinsic Value at  
    Date of       Options Exercisable at   Weighted Average   Fair Value At Grant     December 31, 2013  
Recipient   Grant/Exercise   Number of Options   December 31, 2013   Strike Price (A)   Date (millions) (B)     (millions)  
Directors   Various     20,000     4,000   $ 8.06   Not Material       —  
Manager (C)   2002 - 2007     3,523,727     2,032,125   $ 12.66   $ 6.4       —  
Manager (C)   Mar-11     1,725,000     1,580,166   $ 2.72   $ 7.0 (G)   $ 4.8  
Manager (C)   Sep-11     2,587,500     2,165,361   $ 2.07   $ 5.6 (H)   $ 8.9  
Manager (C)   Apr-12     1,897,500     1,244,778   $ 2.82   $ 5.6 (I)   $ 5.5  
Manager (C)   May-12     2,300,000     1,421,667   $ 3.05   $ 7.6 (J)   $ 6.1  
Manager (C)   Jul-12     2,530,000     1,416,195   $ 3.04   $ 8.3 (K)   $ 6.7  
Manager (C)   Jan-13     5,750,000     2,108,333   $ 4.24   $ 18.0 (L)   $ 8.6  
Manager (C)   Feb-13     2,300,000     766,667   $ 4.75   $ 8.4 (M)   $ 2.3  
Manager (C)   Jun-13     4,025,000     805,000   $ 4.97   $ 3.8 (N)   $ 3.1  
Manager (C)   Nov-13     5,795,095     193,170   $ 5.25   $ 6.0 (O)   $ 2.8  
Exercised (D)   Prior to 2008     (1,043,118 )   N/A   $ 15.70     N/A       N/A  
Exercised (E)   Oct-12     (95,834 )   N/A   $ 5.28     N/A       N/A  
Exercised (F)   Sep-13     (307,833 )   N/A   $ 2.56     N/A       N/A  
Expired unexercised   2002-2003     (464,484 )   N/A     N/A     N/A       N/A  
Outstanding         30,542,553     13,737,462                      
     
  (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. The strike prices were adjusted for the New Residential spin-off as described above. As of December 31, 2013, the weighted average strike price of the outstanding options issued prior to 2011 was $12.66.
  (B) The fair value of the options was estimated using an option valuation model. Since the Newcastle Option Plan and 2012 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  
2004   $11.49-$14.05   226,125  
2005   $13.24   89,925  
2006   $13.16   48,450  
2007   $12.40-$14.01   171,070  
2011   $2.07-$2.72   1,210,000  
2012   $2.82-$3.05   1,300,000  
    Total   3,045,570  
     
  (D) 670,620 of the total options exercised were by the Manager. 368,498 of the total options exercised were by employees of Fortress subsequent to their assignment. 4,000 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) The assumptions used in valuing the options were: a 1.7% risk-free rate, 107.8% volatility and a 3.3 year expected term.
  (H) 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.
  (I) 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.
  (J) 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.
  (K) 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.
  (L) 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.
  (M) 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.
  (N) 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.
  (O) 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.