Newcastle Announces Third Quarter 2013 Results

  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
 
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