| PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION |
16. PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information was derived from the application of pro forma adjustments to the consolidated financial statements of Newcastle. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the other information contained in these financial statements and related notes and with Newcastle’s historical consolidated financial statements.
The unaudited pro forma information set forth below reflects the historical information of Newcastle, as adjusted to give effect to the following transaction:
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|
●
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A spin-off in which Newcastle would separate certain of its investments from the rest of its assets by distributing shares of common stock of New Residential, which is currently a wholly-owned subsidiary of Newcastle.
|
The unaudited pro forma condensed consolidated statements of operations give effect to the spin-off of New Residential as if the spin-off had occurred on January 1, 2012 based on New Residential’s historical consolidated statement of operations. The unaudited pro forma condensed consolidated balance sheet assumes that the spin-off of New Residential occurred on March 31, 2013.
In the opinion of management, all adjustments necessary to reflect the effects of the potential transaction described above have been included and are based upon available information and assumptions that Newcastle believes are reasonable.
Further,
the historical financial information presented herein has been adjusted to give pro forma effect to events that Newcastle believes
are factually supportable and which are expected to have a continuing impact on Newcastle’s results. However, such adjustments
are estimates and may not prove to be accurate. Information regarding these adjustments is subject to risks and uncertainties
that could cause actual results to differ materially from those anticipated.
These unaudited pro forma condensed consolidated financial statements are provided for information purposes only. The unaudited pro forma condensed consolidated statements of operations and the unaudited pro forma condensed consolidated balance sheet do not purport to represent what Newcastle’s results of operations would have been had such transactions been consummated on the dates indicated, nor do they represent the financial position or results of operations of either Newcastle or New Residential for any future date or period.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
At March 31, 2013
| |
|
|
|
|
|
|
|
|
|
| |
|
Newcastle
|
|
|
Pro Forma
|
|
|
Newcastle
|
|
| |
|
Consolidated
|
|
|
Adjustments
|
|
|
Consolidated
|
|
| |
|
Historical (A)
|
|
|
New Residential
|
|
|
Pro Forma
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Real estate securities, available-for-sale
|
|
$ |
2,495,473 |
|
|
$ |
(1,598,868 |
) (B) |
|
$ |
896,605 |
|
|
Real estate related loans, held-for-sale, net
|
|
|
851,525 |
|
|
|
— |
|
|
|
851,525 |
|
|
Residential mortgage loans, held-for-investment, net
|
|
|
317,708 |
|
|
|
(35,484 |
) (C) |
|
|
282,224 |
|
|
Residential mortgage loans, held-for-sale, net
|
|
|
2,380 |
|
|
|
— |
|
|
|
2,380 |
|
|
Investments in excess mortgage servicing rights at fair value
|
|
|
236,555 |
|
|
|
(236,555 |
) (C) |
|
|
— |
|
|
Investments in equity method investees at fair value
|
|
|
102,588 |
|
|
|
(102,588 |
) (C) |
|
|
— |
|
|
Subprime mortgage loans subject to call option
|
|
|
406,115 |
|
|
|
— |
|
|
|
406,115 |
|
|
Investments in real estate, net of accumulated depreciation
|
|
|
168,515 |
|
|
|
— |
|
|
|
168,515 |
|
|
Intangibles, net of accumulated amortization
|
|
|
16,218 |
|
|
|
— |
|
|
|
16,218 |
|
|
Other investments
|
|
|
24,907 |
|
|
|
— |
|
|
|
24,907 |
|
|
Cash and cash equivalents
|
|
|
534,772 |
|
|
|
— |
|
|
|
534,772 |
(G) |
|
Restricted cash
|
|
|
11,494 |
|
|
|
— |
|
|
|
11,494 |
|
|
Derivative assets
|
|
|
176 |
|
|
|
— |
|
|
|
176 |
|
|
Receivables and other assets
|
|
|
27,577 |
|
|
|
(450 |
) (C) |
|
|
27,127 |
|
|
|
|
$ |
5,196,003 |
|
|
$ |
(1,973,945 |
) |
|
$ |
3,222,058 |
|
|
Liabilities and Stockholders' Equity
|
|
|
|
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|
|
|
|
|
|
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Liabilities
|
|
|
|
|
|
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|
|
|
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CDO bonds payable
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|
$ |
1,015,560 |
|
|
$ |
— |
|
|
$ |
1,015,560 |
|
|
Other bonds and notes payable
|
|
|
173,723 |
|
|
|
— |
|
|
|
173,723 |
|
|
Repurchase agreements
|
|
|
1,473,586 |
|
|
|
(1,182,212 |
) (D) |
|
|
291,374 |
|
|
Mortgage notes payable
|
|
|
120,525 |
|
|
|
— |
|
|
|
120,525 |
|
|
Financing of subprime mortgage loans subject to call option
|
|
|
406,115 |
|
|
|
— |
|
|
|
406,115 |
|
|
Junior subordinated notes payable
|
|
|
51,242 |
|
|
|
— |
|
|
|
51,242 |
|
|
Derivative liabilities
|
|
|
26,612 |
|
|
|
— |
|
|
|
26,612 |
|
|
Dividends payable
|
|
|
56,596 |
|
|
|
— |
|
|
|
56,596 |
|
|
Due to affiliates
|
|
|
4,611 |
|
|
|
(938 |
) (E) |
|
|
3,673 |
|
|
Purchase price payable on investments in excess mortgage servicing rights
|
|
|
59 |
|
|
|
(59 |
) (C) |
|
|
— |
|
|
Accrued expenses and other liabilities
|
|
|
17,875 |
|
|
|
(2,780 |
) (C) |
|
|
15,095 |
|
|
|
|
$ |
3,346,504 |
|
|
$ |
(1,185,989 |
) |
|
$ |
2,160,515 |
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
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|
Preferred stock
|
|
$ |
61,583 |
|
|
$ |
— |
|
|
$ |
61,583 |
|
|
Common stock
|
|
|
2,530 |
|
|
|
— |
|
|
|
2,530 |
|
|
Additional paid-in capital
|
|
|
2,472,931 |
|
|
|
— |
|
|
|
2,472,931 |
|
|
Accumulated deficit
|
|
|
(790,143 |
) |
|
|
(756,247 |
) (F) |
|
|
(1,546,390 |
) |
|
Accumulated other comprehensive income (loss)
|
|
|
102,598 |
|
|
|
(31,709 |
) (C) |
|
|
70,889 |
|
| |
|
$ |
1,849,499 |
|
|
$ |
(787,956 |
) |
|
$ |
1,061,543 |
|
|
|
|
$ |
5,196,003 |
|
|
$ |
(1,973,945 |
) |
|
$ |
3,222,058 |
|
|
(A)
|
Represents Newcastle’s historical consolidated balance sheet at March 31, 2013.
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|
(B)
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Represents the fair value of
New Residential’s real estate securities at March 31, 2013 adjusted to include securities owned by Newcastle at
March 31, 2013 and contributed by Newcastle to New Residential subsequent to March 31, 2013.
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(C)
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Represents New Residential’s assets, liabilities and accumulated other comprehensive income at March 31, 2013.
|
|
(D)
|
Represents New Residential’s repurchase agreements at March 31, 2013 adjusted for the additional repurchase agreements to finance the real estate securities described in (B) above.
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|
(E)
|
Represents a reduction of Newcastle’s due to affiliates for the allocation of one month of accrued and unpaid management fees from Newcastle to New Residential.
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|
(F)
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Represents the distribution of New Residential common stock to Newcastle shareholders.
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|
(G)
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Represents Newcastle’s cash and cash equivalents at March 31, 2013. Newcastle will contribute cash to New Residential in connection with the spin-off subsequent to March 31, 2013.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 2013
| |
|
Newcastle
|
|
|
Pro Forma
|
|
|
Newcastle
|
|
| |
|
Consolidated
|
|
|
Adjustments
|
|
|
Consolidated
|
|
| |
|
Historical (A)
|
|
|
New Residential (B)
|
|
|
Pro Forma
|
|
| |
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$ |
71,367 |
|
|
$ |
(16,191 |
) |
|
$ |
55,176 |
|
|
Interest expense
|
|
|
22,710 |
|
|
|
(899 |
) |
|
|
21,811 |
|
|
Net interest income
|
|
|
48,657 |
|
|
|
(15,292 |
) |
|
|
33,365 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment/(Reversal)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance (reversal) on loans
|
|
|
2,234 |
|
|
|
— |
|
|
|
2,234 |
|
|
Other-than-temporary impairment on securities
|
|
|
422 |
|
|
|
— |
|
|
|
422 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of the reversal of other comprehensive loss into net income (loss)
|
|
|
117 |
|
|
|
— |
|
|
|
117 |
|
| |
|
|
2,773 |
|
|
|
— |
|
|
|
2,773 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after impairment/reversal
|
|
|
45,884 |
|
|
|
(15,292 |
) |
|
|
30,592 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
12,887 |
|
|
|
— |
|
|
|
12,887 |
|
|
Care and ancillary income
|
|
|
613 |
|
|
|
— |
|
|
|
613 |
|
|
Total other revenues
|
|
|
13,500 |
|
|
|
— |
|
|
|
13,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on settlement of investments, net
|
|
|
(3 |
) |
|
|
— |
|
|
|
(3 |
) |
|
Gain on extinguishment of debt
|
|
|
1,206 |
|
|
|
— |
|
|
|
1,206 |
|
|
Change in fair value of investments in excess mortgage servicing rights
|
|
|
1,858 |
|
|
|
(1,858 |
) |
|
|
— |
|
|
Change in fair value of investments in equity method investees
|
|
|
969 |
|
|
|
(969 |
) |
|
|
— |
|
|
Other income (loss), net
|
|
|
4,567 |
|
|
|
— |
|
|
|
4,567 |
|
| |
|
|
8,597 |
|
|
|
(2,827 |
) |
|
|
5,770 |
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and security servicing expense
|
|
|
1,034 |
|
|
|
— |
|
|
|
1,034 |
|
|
Property operating expenses
|
|
|
8,363 |
|
|
|
— |
|
|
|
8,363 |
|
|
General and administrative expense
|
|
|
6,911 |
|
|
|
(2,719 |
) |
|
|
4,192 |
|
|
Management fee to affiliate
|
|
|
9,565 |
|
|
|
(2,325 |
) |
|
|
7,240 |
|
|
Depreciation and amortization
|
|
|
4,079 |
|
|
|
— |
|
|
|
4,079 |
|
| |
|
|
29,952 |
|
|
|
(5,044 |
) |
|
|
24,908 |
|
|
Income from continuing operations
|
|
|
38,029 |
|
|
|
(13,075 |
) |
|
|
24,954 |
|
|
Preferred dividends
|
|
|
(1,395 |
) |
|
|
— |
|
|
|
(1,395 |
) |
|
Income from continuing operations after preferred dividends
|
|
$ |
36,634 |
|
|
$ |
(13,075 |
) |
|
$ |
23,559 |
|
Income from continuing operations per share of common stock, after preferred dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.16 |
|
|
|
|
|
|
$ |
0.10 |
|
|
Diluted
|
|
$ |
0.15 |
|
|
|
|
|
|
$ |
0.10 |
(C) |
Weighted Average Number of Shares of Common Stock Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
235,136,756 |
|
|
|
|
|
|
|
235,136,756 |
|
|
Diluted
|
|
|
240,079,144 |
|
|
|
|
|
|
|
240,079,144 |
(C) |
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
12 Months Ended December 31, 2012
| |
|
Newcastle
|
|
|
Pro Forma
|
|
|
Newcastle
|
|
| |
|
Consolidated
|
|
|
Adjustments
|
|
|
Consolidated
|
|
| |
|
Historical (A)
|
|
|
New Residential (B)
|
|
|
Pro Forma
|
|
| |
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$ |
310,459 |
|
|
$ |
(33,759 |
) |
|
$ |
276,700 |
|
|
Interest expense
|
|
|
109,924 |
|
|
|
(704 |
) |
|
|
109,220 |
|
|
Net interest income
|
|
|
200,535 |
|
|
|
(33,055 |
) |
|
|
167,480 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment/(Reversal)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance (reversal) on loans
|
|
|
(24,587 |
) |
|
|
— |
|
|
|
(24,587 |
) |
|
Other-than-temporary impairment on securities
|
|
|
19,359 |
|
|
|
— |
|
|
|
19,359 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of the reversal of other comprehensive loss into net income (loss)
|
|
|
(436 |
) |
|
|
— |
|
|
|
(436 |
) |
| |
|
|
(5,664 |
) |
|
|
— |
|
|
|
(5,664 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after impairment/reversal
|
|
|
206,199 |
|
|
|
(33,055 |
) |
|
|
173,144 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
17,081 |
|
|
|
— |
|
|
|
17,081 |
|
|
Care and ancillary income
|
|
|
2,994 |
|
|
|
— |
|
|
|
2,994 |
|
|
Total other revenues
|
|
|
20,075 |
|
|
|
— |
|
|
|
20,075 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on settlement of investments, net
|
|
|
232,897 |
|
|
|
— |
|
|
|
232,897 |
|
|
Gain on extinguishment of debt
|
|
|
24,085 |
|
|
|
— |
|
|
|
24,085 |
|
|
Change in fair value of investments in excess mortgage servicing rights
|
|
|
9,023 |
|
|
|
(9,023 |
) |
|
|
— |
|
|
Other income (loss), net
|
|
|
13,712 |
|
|
|
(8,400 |
) |
|
|
5,312 |
|
| |
|
|
279,717 |
|
|
|
(17,423 |
) |
|
|
262,294 |
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and security servicing expense
|
|
|
4,260 |
|
|
|
— |
|
|
|
4,260 |
|
|
Property operating expenses
|
|
|
12,943 |
|
|
|
— |
|
|
|
12,943 |
|
|
General and administrative expense
|
|
|
22,942 |
|
|
|
(5,878 |
) |
|
|
17,064 |
|
|
Management fee to affiliate
|
|
|
24,693 |
|
|
|
(3,353 |
) |
|
|
21,340 |
|
|
Depreciation and amortization
|
|
|
6,975 |
|
|
|
— |
|
|
|
6,975 |
|
| |
|
|
71,813 |
|
|
|
(9,231 |
) |
|
|
62,582 |
|
|
Income from continuing operations
|
|
|
434,178 |
|
|
|
(41,247 |
) |
|
|
392,931 |
|
|
Preferred dividends
|
|
|
(5,580 |
) |
|
|
— |
|
|
|
(5,580 |
) |
|
Income from continuing operations after preferred dividends
|
|
$ |
428,598 |
|
|
$ |
(41,247 |
) |
|
$ |
387,351 |
|
Income from continuing operations per share of common stock, after preferred dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
2.97 |
|
|
|
|
|
|
$ |
2.69 |
|
|
Diluted
|
|
$ |
2.94 |
|
|
|
|
|
|
$ |
2.66 |
(C) |
Weighted Average Number of Shares of Common Stock Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
144,146,370 |
|
|
|
|
|
|
|
144,146,370 |
|
|
Diluted
|
|
|
145,766,413 |
|
|
|
|
|
|
|
145,766,413 |
(C) |
|
(A)
|
Represents Newcastle’s
historical consolidated statement of operations for the three months ended March 31, 2013 and the year ended December 31,
2012.
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(B)
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Represents New Residential’s historical consolidated statement of operations for the three months ended March 31, 2013 and the year ended December 31, 2012.
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(C)
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Does not include potential additional diluted shares as a result of changes to outstanding Newcastle options from the spin-off. The number of additional diluted shares will depend on various factors, including the share prices of Newcastle and New Residential subsequent to the spin-off.
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