Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)

v3.2.0.727
SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)
6 Months Ended
Jun. 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
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

Impairment (reversal)
12,206

 
1,878

 

 

 

 

 
14,084

Operating revenues

 

 
143,629

 

 

 

 
143,629

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

Repairs and maintenance expenses - golf

 

 
4,387

 

 

 

 
4,387

Cost of sales - golf

 

 
15,161

 

 

 

 
15,161

General and administrative expense

 

 
1,041

 
3,821

 

 

 
4,862

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, net of tax

 

 

 

 
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 noncontrolling interests

 

 
230

 

 

 

 
230

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

 
$
3,432

 
$
(14,440
)
 
$
(13,844
)
 
$
639

 
$

 
$
14,927


 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt (B)
 
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

Impairment (reversal)
11,869

 
1,810

 

 

 

 

 
13,679

Operating revenues

 

 
82,803

 

 

 

 
82,803

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

Repairs and maintenance expenses - golf

 

 
2,421

 

 

 

 
2,421

Cost of sales - golf

 

 
9,108

 

 

 

 
9,108

General and administrative expense

 

 
793

 
2,392

 

 

 
3,185

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, net of tax

 

 

 

 
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 noncontrolling interests

 

 
49

 

 

 

 
49

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

 
$
521

 
$
(3,798
)
 
$
(7,410
)
 
$
524

 
$

 
$
17,019



 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Operations
 
Total
June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
Investments, net (E)
$
52,139

 
$
790,828

 
$
310,970

 
$

 
$

 
$
1,153,937

Cash and restricted cash
163

 
200

 
9,320

 
108,040

 

 
117,723

Other assets
98

 
397,812

 
33,434

 
669

 

 
432,013

Assets of discontinued operations

 

 

 

 
53

 
53

Total assets
52,400

 
1,188,840

 
353,724

 
108,709

 
53

 
1,703,726

Debt, net (E)
102,564

 
779,853

 
165,006

 
51,228

 

 
1,098,651

Other liabilities
31

 
211,748

 
151,944

 
13,608

 

 
377,331

Liabilities of discontinued operations

 

 

 

 

 

Total liabilities
102,595

 
991,601

 
316,950

 
64,836

 

 
1,475,982

Preferred stock

 

 

 
61,583

 

 
61,583

Noncontrolling interests

 

 
(194
)
 

 

 
(194
)
Equity attributable to common stockholders
$
(50,195
)
 
$
197,239

 
$
36,968

 
$
(17,710
)
 
$
53

 
$
166,355

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

 
$

 
$
3,863

 
$

 
$

 
$
3,863

 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
51,319

 
$
29,353

 
$
74

 
$
35

 
$

 
$
(4,436
)
 
$
76,345

Interest expense
(12,109
)
 
(23,001
)
 
(9,916
)
 
(1,908
)
 

 
4,436

 
(42,498
)
Inter-segment elimination
(4,436
)
 
1,635

 
2,801

 

 

 

 

Net interest income (expense)
34,774

 
7,987

 
(7,041
)
 
(1,873
)
 

 

 
33,847

Impairment (reversal)
1,958

 
814

 

 

 

 

 
2,772

Operating revenues

 

 
145,369

 

 

 

 
145,369

Other income (loss), net
32,895

 
24,630

 
(10
)
 

 

 

 
57,515

Loan and security servicing expense
310

 
955

 

 

 

 

 
1,265

Operating expenses - golf (C)

 

 
121,527

 

 

 

 
121,527

Repairs and maintenance expenses - golf

 

 
4,602

 

 

 

 
4,602

Cost of sales - golf

 

 
14,763

 

 

 

 
14,763

General and administrative expense

 
1,869

 
459

 
3,725

 

 

 
6,053

Acquisition and transaction expenses (D)

 

 
1,503

 
775

 

 

 
2,278

Management fee to affiliate

 

 

 
11,189

 

 

 
11,189

Depreciation and amortization

 

 
12,106

 
74

 

 

 
12,180

Income tax expense

 

 
144

 

 

 

 
144

Income (loss) from continuing operations
65,401

 
28,979

 
(16,786
)
 
(17,636
)
 

 

 
59,958

Income (loss) from
discontinued operations

 

 

 

 
(23,803
)
 

 
(23,803
)
Net income (loss)
65,401

 
28,979

 
(16,786
)
 
(17,636
)
 
(23,803
)
 

 
36,155

Preferred dividends

 

 

 
(2,790
)
 

 

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

 

 
168

 
 

 
522

 

 
690

Income (loss) applicable to common stockholders
$
65,401

 
$
28,979

 
$
(16,618
)
 
$
(20,426
)
 
$
(23,281
)
 
$

 
$
34,055


 
Debt Investments (A)
 
 
 
 
 
Discontinued
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Operations
 
Eliminations
 
Total
Three Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
20,596

 
$
12,401

 
$
34

 
$
25

 
$

 
$
(3,163
)
 
$
29,893

Interest expense
(5,983
)
 
(10,338
)
 
(6,217
)
 
(953
)
 

 
3,163

 
(20,328
)
Inter-segment elimination
(3,163
)
 
362

 
2,801

 

 

 

 

Net interest income (expense)
11,450

 
2,425

 
(3,382
)
 
(928
)
 

 

 
9,565

Impairment (reversal)
1,526

 

 

 

 

 

 
1,526

Operating revenues

 

 
82,737

 

 

 

 
82,737

Other income (loss), net
19,343

 
22,375

 
(11
)
 

 

 

 
41,707

Loan and security servicing expense
154

 
254

 

 

 

 

 
408

Operating expenses - golf (C)

 

 
64,398

 

 

 

 
64,398

Repairs and maintenance expenses - golf

 

 
2,084

 

 

 

 
2,084

Cost of sales - golf

 

 
8,807

 

 

 

 
8,807

General and administrative expense

 
1,870

 
152

 
1,629

 

 

 
3,651

Acquisition and transaction expenses (D)

 

 
728

 
388

 

 

 
1,116

Management fee to affiliate

 

 

 
5,296

 

 

 
5,296

Depreciation and amortization

 

 
6,280

 
37

 

 

 
6,317

Income tax expense

 
 
 
4

 

 




4

Income (loss) from continuing operations
29,113

 
22,676

 
(3,109
)
 
(8,278
)
 

 

 
40,402

Loss from discontinued operations

 

 

 

 
(8,504
)
 

 
(8,504
)
Net income (loss)
29,113

 
22,676

 
(3,109
)
 
(8,278
)
 
(8,504
)
 

 
31,898

Preferred dividends

 

 

 
(1,395
)
 

 

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

 

 
29

 
 

 

 

 
29

Income (loss) applicable to common stockholders
$
29,113

 
$
22,676

 
$
(3,080
)
 
$
(9,673
)
 
$
(8,504
)
 
$

 
$
30,532


(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, 2015
 
Investments
 
Debt
Non-Recourse
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
Subprime mortgage loans subject to call options
$
404,149

 
$
404,149

 
$
404,149

 
$
404,149

Other
 
 
 
 
 
 
 
Unlevered real estate securities (F)
48,211

 
13,360

 

 

Levered real estate securities
201,928

 
208,041

 
375,704

 
375,704

Real estate related and other loans
226,243

 
141,826

 

 

Other investments
N/A

 
19,925

 

 

Residential mortgage loans
4,206

 
3,527

 

 

 
$
884,737

 
$
790,828

 
$
779,853

 
$
779,853


(C)
Operating expenses-golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $1.2 million and $2.3 million for the three and six months ended June 30, 2015, respectively and $1.4 million and $2.7 million for the three and six months ended June 30, 2014.
(D)
Includes all transaction related and spin-off related expenses.
(E)
Net of $38.2 million of inter-segment eliminations.
(F)
Excludes 8 securities with zero value, which had an aggregate face amount of $115.0 million.
Schedule of other debt segment investments and debt
(B)
The following table summarizes the investments and debt in the other debt segment:
 
June 30, 2015
 
Investments
 
Debt
Non-Recourse
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
Subprime mortgage loans subject to call options
$
404,149

 
$
404,149

 
$
404,149

 
$
404,149

Other
 
 
 
 
 
 
 
Unlevered real estate securities (F)
48,211

 
13,360

 

 

Levered real estate securities
201,928

 
208,041

 
375,704

 
375,704

Real estate related and other loans
226,243

 
141,826

 

 

Other investments
N/A

 
19,925

 

 

Residential mortgage loans
4,206

 
3,527

 

 

 
$
884,737

 
$
790,828

 
$
779,853

 
$
779,853

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.

 
June 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
$
52,140

 
$
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
404,149

 
406,217

Other investments

 
20,308

Restricted cash
163

 
11,790

Receivables and other assets
98

 
1,927

Assets of discontinued operations

 
6,803

Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs
$
456,550

 
$
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.

 
June 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
$
92,693

 
$
227,673

Other bonds and notes payable
9,871

 
27,069

Financing of subprime mortgage loans subject to call option
404,149

 
406,217

Accounts payable, accrued expenses and other liabilities
30

 
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
$
506,743

 
$
663,797
Schedule of holdings in variable interests

Newcastle had variable interests in the following unconsolidated VIEs at June 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
 
$
95,475

 
$
122,368

 
$
10,187


(A)
Face amount.
(B)
Newcastle CDO V includes $42.9 million face amount of debt owned by Newcastle with a carrying value of $10.2 million at June 30, 2015.
(C)
This amount represents Newcastle’s maximum exposure to loss from this entity.