Newcastle Announces Third Quarter 2013 Results Business Wire NEW YORK -- November 1, 2013 Newcastle Investment Corp. (NYSE:NCT) (the “Company”) today reported the following information for the quarter ended September 30, 2013: *GAAP Income of $0.09 per diluted share *Core Earnings of $0.08 per diluted share *Declared common dividend of $0.10 per share, or $29 million *GAAP book value of $2.74 The Company’s third quarter GAAP Income was $27.8 million, or $0.09 per diluted share, and Core Earnings was $23.9 million, or $0.08 per diluted share. Q2 2013 Q3 2013 (Pro forma excluding 45 days of New Residential earnings*) Summary Operating Results: GAAP Income $27.8 million $27.8 million GAAP Income per Diluted Share $0.09 $0.11 Non-GAAP Results: Core Earnings** $23.9 million $29.0 million Core Earnings per Diluted $0.08 $0.11 Share** GAAP Book Value: $2.74 $2.73 [For a reconciliation of GAAP Income to Core Earnings, please refer to the Reconciliation of Core Earnings and Pro forma Core Earnings table below. *“Newcastle excluding 45 days of New Residential earnings” excludes the 45 days of earnings in the three months ended June 30, 2013 generated by New Residential prior to New Residential’s spin-off from Newcastle on May 15, 2013. **The Company amended its definition of Core Earnings to exclude acquisition and spin-off related expenses in the third quarter of 2013. The calculation of Core Earnings has been retroactively adjusted for all periods presented.] Had Newcastle’s average uninvested cash balance of $120 million been invested at management’s expected returns since the beginning of the quarter, and if GateHouse debt had converted to equity and GateHouse obtained the anticipated debt facility, the full quarter earnings would have increased by $11 million, or $0.04 per share. Highlights for the quarter ended September 30, 2013: *Senior Housing – Invested $101 million of equity to acquire $301 million of senior housing assets. For each investment, Newcastle is targeting a stabilized year three return of over 20% *Media Assets *Local Media Group – Invested $54 million to purchase Local Media Group from News Corp for $87 million – financed with $33 million of non-recourse debt *GateHouse Debt – Invested $33 million to purchase $85 million face amount of debt – average price of 39% of par *Spin Off of New Media – In September, announced intention to spin off all of our media assets to form a separate publicly traded company, New Media Investment Group Inc. *CDO IX Repurchase – Invested $6 million to repurchase $25 million of NCT CDO IX Class A-2 at a price of 86% of par, or $21 million; financed using $15 million of repurchase agreements at L+1.65% *Dividend – In September, declared a third quarter dividend of $0.10 per common share, or $29 million Highlights subsequent to September 30, 2013: *CDO VI Resecuritization – Newcastle owns $110 million, or 100%, of CDO VI Class I-MM on balance sheet and in its managed CDOs. On October 31, Newcastle agreed to restructure the $110 million class into a $99 million senior tranche and an $11 million junior tranche. Newcastle agreed to issue the senior tranche to a third party for approximately $88 million of proceeds, will retain the $11 million junior tranche on balance sheet and will continue to manage the CDO. The issuance results in $47 million of unrestricted cash for Newcastle to reinvest and the remaining $41 million will be paid to CDO VIII and CDO IX. Following the issuance, total CDO VI cash flow received to date will be $238 million on a $170 million investment, with $12 million of future cash flows expected to come from the retained junior tranche ADDITIONAL INFORMATION For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of Newcastle’s website, www.newcastleinv.com. For consolidated investment portfolio information, please refer to the Company’s Quarterly Report on Form 10-Q, which is also available on the Company’s website, www.newcastleinv.com. EARNINGS CONFERENCE CALL Newcastle’s management will host a conference call on Friday, November 1, 2013 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Newcastle’s website, www.newcastleinv.com. All interested parties are welcome to participate on the live call. The conference call may be accessed by dialing 1-888-243-2046 (from within the U.S.) or 1-706-679-1533 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Newcastle Third Quarter 2013 Earnings Call.” A simultaneous webcast of the conference call will be available to the public at www.newcastleinv.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available two hours following the completion of the call through 11:59 P.M. Eastern Time on Friday, November 8, 2013 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code “75872614.” Investment Portfolio as of September 30, 2013 ($ in millions, except where otherwise noted) % of Weighted Outstanding Amortized Total Carrying Number of Average Face Amount Cost Amortized Value Investments Credit^(2) Life Basis^(1) Cost (years) Basis ^(3) Investment Commercial Real Estate Debt & Other Assets Commercial Assets CMBS $ 344 $ 229 9.7 % $ 286 51 BB- 3.0 Mezzanine Loans 338 269 11.3 % 269 12 84% 1.8 B-Notes 110 95 4.0 % 95 4 76% 0.7 Whole Loans 30 30 1.3 % 30 2 49% 0.2 CDO Securities 80 61 2.6 % 63 3 BB+ 3.0 ^(4) Other Investments 68 68 2.9 % 68 3 - - ^(5) Total Commercial 970 752 31.8 % 811 2.2 Assets Residential Assets MH and Residential 291 258 10.9 % 258 8,014 705 5.5 Loans Non-Agency RMBS 101 41 1.7 % 58 34 CCC 5.0 Real Estate ABS 8 - 0.0 % - 1 C - 400 299 12.6 % 316 5.3 FNMA/FHLMC 362 382 16.2 % 383 46 AAA 3.7 securities Total Residential 762 681 28.8 % 699 4.5 Assets Corporate Assets REIT Debt 29 29 1.2 % 31 5 BB+ 1.8 Corporate Bank 875 402 17.0 % 402 7 CC 1.2 Loans Total Corporate 904 431 18.2 % 433 1.2 Assets Total Real Estate Debt & Other 2,636 1,864 78.8 % 1,943 2.6 Assets Equity Method Investment in 57 57 2.4 % 57 - - - Local Media Group^(6) Senior Housing 465 444 18.8 % 444 31 - - Investments^(7) Total Portfolio/Weighted $ 3,158 $ 2,365 100.0 % $ 2,444 2.6 Average WA – Weighted average, in all tables 1) Net of impairment. Credit represents the weighted average of minimum rating for rated assets, the loan-to-value ratio (based on the appraised value at the time of purchase or refinancing) for non-rated commercial assets, or the FICO score 2) for non-rated residential assets and an implied AAA rating for FNMA/FHLMC securities. Ratings provided above were determined by third party rating agencies, represent the most recent credit ratings available as of the reporting date and may not be current. 3) Weighted average life is based on the expected timing of expected principal reduction on the asset. 4) Represents non-consolidated CDO securities, excluding nine securities with a zero value, which had an aggregate face amount of $113.7 million. 5) Represents a $25 million equity investment in a real estate owned property and $43 million related to a linked transaction. 6) Face amount of the investment in Local Media Group represents the gross carrying value. Face amount of Senior Housing Investments represents the gross carrying 7) amount, including intangibles, which excludes accumulated depreciation and amortization. Unaudited Consolidated Statements of Income ($ in thousands, except per share data) Three Months Ended Nine Months Ended September30, September30, 2013 2012 2013 2012 Interest income $ 47,486 $ 72,947 $ 171,642 $ 223,765 Interest expense 20,555 28,411 65,263 88,038 Net interest income 26,931 44,536 106,379 135,727 Impairment/(Reversal) Valuation allowance (12,998 ) 4,094 (11,473 ) (8,160 ) (reversal) on loans Other-than-temporary impairment on - (236 ) 4,405 16,506 securities Portion of other-than-temporary impairment on securities recognized in other comprehensive income - 1,156 44 (1,913 ) (loss), net of the reversal of other comprehensive loss into net income (loss) Total impairment (12,998 ) 5,014 (7,024 ) 6,433 (reversal) Net interest income after 39,929 39,522 113,403 129,294 impairment/reversal Other Revenues Rental income 21,149 6,660 44,344 7,684 Care and ancillary 3,763 1,411 8,081 1,411 income Total other revenues 24,912 8,071 52,425 9,095 Other Income Gain on settlement of 1,388 229,239 6,451 232,885 investments, net Gain on extinguishment of 3,359 2,345 4,565 23,127 debt Equity in earnings of 1,045 - 1,045 - Local Media Group Other income, net 1,963 2,424 9,554 1,650 Total other income 7,755 234,008 21,615 257,662 Expenses Loan and security 908 1,054 2,963 3,256 servicing expense Property operating 15,804 5,043 32,576 5,500 expenses General and administrative 9,356 4,020 23,507 11,023 expense Management fee to 7,166 6,852 24,879 17,459 affiliate Depreciation and 7,732 2,385 15,881 2,389 amortization Total expenses 40,966 19,354 99,806 39,627 Income from 31,630 262,247 87,637 356,424 continuing operations Income (loss) from discontinued (2,386 ) 10,974 33,343 20,707 operations Net Income 29,244 273,221 120,980 377,131 Preferred dividends (1,395 ) (1,395 ) (4,185 ) (4,185 ) Income Available for $ 27,849 $ 271,826 $ 116,795 $ 372,946 Common Stockholders Income Per Share of Common Stock Basic $ 0.09 $ 1.65 $ 0.44 $ 2.77 Diluted $ 0.09 $ 1.63 $ 0.43 $ 2.74 Income from continuing operations per share of common stock, after preferred dividends Basic $ 0.10 $ 1.59 $ 0.32 $ 2.62 Diluted $ 0.10 $ 1.57 $ 0.31 $ 2.59 Income (loss) from discontinued operations per share of common stock Basic $ (0.01 ) $ 0.06 $ 0.12 $ 0.15 Diluted $ (0.01 ) $ 0.06 $ 0.12 $ 0.15 Weighted Average Number of Shares of Common Stock Outstanding Basic 293,373,891 164,237,757 262,792,986 134,619,858 Diluted 301,027,917 166,429,120 269,057,682 135,869,332 Dividends Declared per Share of Common $ 0.10 $ 0.22 $ 0.49 $ 0.62 Stock Consolidated Balance Sheet ($ in thousands) September30, 2013 December31, 2012 (Unaudited) Assets Real estate securities, $ 825,499 $ 1,691,575 available-for-sale Real estate related and other 795,297 843,132 loans, held-for-sale, net Residential mortgage loans, 260,463 292,461 held-for-investment, net Residential mortgage loans, 2,236 2,471 held-for-sale, net Subprime mortgage loans subject 406,217 405,814 to call option Investments in real estate, net 409,041 169,473 of accumulated depreciation Intangibles, net of accumulated 41,371 19,086 amortization Equity method investment in 57,384 - Local Media Group Other investments 25,133 24,907 Cash and cash equivalents 92,134 231,898 Restricted cash 1,827 2,064 Derivative assets 43,172 165 Receivables and other assets 27,003 17,197 Assets of discontinued - 245,069 operations Total Assets $ 2,986,777 $ 3,945,312 Liabilities and Stockholders' Equity Liabilities CDO bonds payable $ 718,473 $ 1,091,354 Other bonds and notes payable 153,798 183,390 Repurchase agreements 376,886 929,435 Mortgage notes payable 335,238 120,525 Financing of subprime mortgage 406,217 405,814 loans subject to call option Junior subordinated notes 51,239 51,243 payable Derivative liabilities 17,115 31,576 Dividends Payable 30,279 38,884 Due to affiliates 4,911 3,620 Accrued expenses and other 25,266 15,931 liabilities Liabilities of discontinued 2,380 480 operations Total Liabilities $ 2,121,802 $ 2,872,252 Commitments and contingencies Stockholders' Equity Preferred stock, $0.01 par value, 100,000,000 shares authorized, 1,347,321 shares of 9.75% Series B Cumulative Redeemable Preferred Stock, 496,000 shares of 8.05% Series C Cumulative Redeemable $ 61,583 $ 61,583 Preferred Stock, and 620,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, issued and outstanding as of September 30, 2013 and December 31, 2012 Common stock, $0.01 par value, 1,000,000,000 and 500,000,000 shares authorized, 293,488,981 and 172,525,645 shares issued 2,935 1,725 and outstanding, at September 30, 2013 and December 31, 2012, respectively Additional paid-in capital 2,670,442 1,710,083 Accumulated deficit (1,941,805 ) (771,095 ) Accumulated other comprehensive 71,820 70,764 income Total Stockholders' Equity $ 864,975 $ 1,073,060 Total Liabilities and $ 2,986,777 $ 3,945,312 Stockholders' Equity Reconciliation of Core Earnings and Pro forma Core Earnings* ($ in thousands) Three Months Ended Three Months September 30, Ended June 30, 2013 2012 2013 Income available for common $ 27,849 $ 271,826 $ 52,328 stockholders Add (Deduct): Impairment (12,998 ) 5,014 3,201 (reversal) Other (income) loss (7,168 ) (234,008 ) (8,090 ) Impairment (reversal), other (income) loss and 2,386 (1,772 ) (8,534 ) other adjustments from discontinued operations Depreciation and 8,677 2,385 4,070 amortization Acquisition and spin-off related 5,168 1,697 6,192 expenses Core Earnings $ 23,914 $ 45,142 $ 49,167 Three Months Ended June 30, 2013 Pro forma income (loss) from continuing operations $ 27,785 after preferred dividends Add (Deduct): Impairment (reversal) (555 ) Other (income) loss (8,032 ) Depreciation and amortization 4,070 Acquisition and spin-off related expenses 5,726 Pro forma Core Earnings $ 28,994 Pro forma core earnings excludes the 45 days of earnings in the three months * ended June 30, 2013 generated by New Residential prior to New Residential’s spin-off from Newcastle on May 15, 2013. CORE EARNINGS Newcastle has the following primary variables that impact its operating performance: (i) the current yield earned on its investments that are not included in non-recourse financing structures (i.e., unlevered investments, including investments in equity method investees and investments subject to recourse debt), (ii) the net yield it earns from its non-recourse financing structures, (iii) the interest expense and dividends incurred under its recourse debt and preferred stock, (iv) the net operating income on its real estate investments, (v) its operating expenses and (vi) its realized and unrealized gains or losses, including any impairment, on its investments, derivatives and debt obligations. Core Earnings is a non-GAAP measure of the operating performance of Newcastle excluding the sixth variable listed above and adjusting the consumer loans portfolio accounting to a level yield methodology. It also excludes depreciation and amortization charges and acquisition and spin-off related expenses. Core Earnings is used by management to gauge the current performance of Newcastle without taking into account gains and losses, which, although they represent a part of our recurring operations, are subject to significant variability and are only a potential indicator of future economic performance. It is the judgment of management that depreciation and amortization charges are not indicative of operating performance and that acquisition and spin-off related expenses are not part of our core operations. Management believes that the exclusion from Core Earnings of the items specified above allows investors and analysts to readily identify the operating performance of the assets that form the core of our activity, assists in comparing the core operating results between periods, and enables investors to evaluate Newcastle’s current performance using the same measure that management uses to operate the business, which is among the factors considered when determining the amount of distributions to our shareholders. Newcastle changed its definition of Core Earnings to exclude acquisition and spin-off related expenses in the third quarter of 2013. The calculation of Core Earnings has been retroactively adjusted for all periods presented. Management believes that this measure provides investors with useful information regarding Newcastle’s “core” current earnings, and it enables investors to evaluate Newcastle’s current performance using the same measure that management uses to operate the business. Core Earnings does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of its liquidity and is not necessarily indicative of cash available to fund cash needs. The Company’s calculation of Core Earnings may be different from the calculation used by other companies and, therefore, comparability may be limited. ABOUT NEWCASTLE Newcastle focuses on investing in, and actively managing, real estate related assets and primarily invests in: (1) Senior Housing Assets and (2) Real Estate & Other Debt, in addition to other opportunistic investments. The Company conducts its operations to qualify as a real estate investment trust ("REIT") for federal income tax purposes. The Company is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm. FORWARD-LOOKING STATEMENTS Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to the planned spin-off of New Media Investment Group Inc. (“New Media”)and expected cash flows from the resecuritization of CDO VI. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. For example, the spin-off of New Media is subject to certain conditions, such as GateHouse Media, Inc.’s emergence from bankruptcy, the declaration of New Media’s registration statement effective by the SEC, the filing and approval of an application to list New Media’s common stock on the NYSE and the formal declaration of the distribution by the Board of Directors. The Company can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company or GateHouse to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based. Contact: Newcastle Investment Corp. Investor Relations, 212-479-3195
Newcastle Announces Third Quarter 2013 Results
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