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Section 1: 8-K (FORM 8-K)


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 


FORM 8-K
 


CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 9, 2016
 


Newcastle Investment Corp.
(Exact name of registrant as specified in its charter)
 


Maryland
(State or other jurisdiction of incorporation)

001-31458
81-0559116
(Commission File Number)
(IRS Employer Identification No.)
   
1345 Avenue of the Americas, 45th Floor
New York, New York
10105
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code (212) 798-6100

N/A
(Former name or former address, if changed since last report.)
 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 2.02. Results of Operations and Financial Condition.

On August 9, 2016, Newcastle Investment Corp. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter ended June 30, 2016. A copy of the Company’s press release is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

This Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit
Number
 
Description
     
99.1
 
Press release, dated August 9, 2016, issued by Newcastle Investment Corp.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NEWCASTLE INVESTMENT CORP.
 
(Registrant)
 
   
/s/ Justine A. Cheng
 
Justine A. Cheng
 
Chief Financial Officer, Chief Operating Officer & Treasurer
 

Date:  August 9, 2016


EXHIBIT INDEX


Exhibit
Number
 
Description
     
99.1
 
Press release, dated August 9, 2016, issued by Newcastle Investment Corp.


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)


Exhibit 99.1
 

Contact:
Investor Relations
212-479-3195

NEWCASTLE ANNOUNCES SECOND QUARTER 2016 RESULTS

 
NEW YORK—(BUSINESS WIRE)—August 9, 2016—Newcastle Investment Corp. (NYSE: NCT; “Newcastle”, the “Company”) today reported the following information for the second quarter ended June 30, 2016.

SECOND QUARTER FINANCIAL HIGHLIGHTS(A)
 
§
GAAP Income of $2 million, or $0.02 per basic share
 
§
Core Earnings of $14 million, or $0.21 per basic share
 
§
Adjusted Funds from Operations (“AFFO”) of $11 million, or $0.16 per basic share

SECOND QUARTER AND SUBSEQUENT HIGHLIGHTS
 
§
Real Estate Debt Portfolio As of June 30, 2016, the real estate debt portfolio asset face amount was $649 million, which consisted of $220 million of non-agency assets and $429 million of agency securities.(B)
 
During the quarter:
 
o
The portfolio generated $12 million of net investment income, or an 18% return.
 
o
In April 2016, the Company sold $19 million face amount of a real estate mezzanine loan at par, which generated $8 million of proceeds, and repaid $11 million of debt.

§
Golf Business As of June 30, 2016, the Company owned, leased and managed 85 golf properties across 13 states, of which 75% were located in the top 20 Metropolitan Statistical Areas.
 
o
American Golf Performance – On a same store basis, excluding managed courses, the golf business ended the second quarter with 8,861 full golf private members, an increase of 119 members over the prior year. On a same store basis, excluding managed courses, The Players Club membership for the public properties ended the second quarter with 40K members, an increase of 24K members over the prior year.  Both programs generated an additional $2 million of revenue in the quarter over the prior year.
 
o
Long-Term Golf Financing – Obtained third-party financing on 22 golf properties for a total of $102 million at a rate of 6.50% with a three-year term and the option for two one-year extensions.(C)  The Company received $33 million of proceeds after repayment of existing short-term debt.
 
o
Golf Innovation – Continued to work with Taylor Made Golf Company, Inc. to build out Drive Shack Holdings LLC (“Drive Shack”), an innovative global golf entertainment company.  Drive Shack intends to provide an active entertainment outlet that consists of technologically-enhanced golf ranges with hitting suites as well as bars and restaurant areas.

§
Cash Dividends – In July, Newcastle declared a second quarter common cash dividend of $0.12 per share, or $8 million.

 
2Q 2016
 
1Q 2016
 
2Q 2015
GAAP Results:
         
  GAAP Income(D)
$2 million
 
$72 million
 
$17 million
  GAAP Income per WA Basic Share(D)
$0.02
 
$1.08
 
$0.26
           
Non-GAAP Results:
         
  Core Earnings(A)
$14 million
 
$3 million
 
$12 million
  Core Earnings per WA Basic Share(A)
$0.21
 
$0.05
 
$0.17
           
  AFFO(A)
$11 million
 
$81 million
 
$27 million
  AFFO per WA Basic Share(A)
$0.16
 
$1.21
 
$0.40
 
WA:  Weighted Average
 
(A)
For a reconciliation of GAAP Income (as well as a definition and statement of purpose) to Core Earnings and AFFO, please refer to the Reconciliation of Core Earnings and AFFO below.


(B)
Non-agency assets excludes the face amount of $73 million of assets that were valued at zero as of June 30, 2016.

(C)
Floating rate loan with a rate of L+4.70% and a LIBOR floor of 1.80%.  At the time of closing, we purchased a co-terminus LIBOR cap of 1.80%.

(D)
GAAP Income for 2Q 2016 includes the impact of: 1) total depreciation and amortization of $6.5 million, 2) $1.1 million of amortization of favorable or unfavorable leasehold intangibles and 3) $1.4 million of accretion on golf membership deposit liabilities. GAAP Income for 1Q 2016 includes the impact of: 1) total depreciation and amortization of $6.0 million, 2) $1.2 million of amortization of favorable or unfavorable leasehold intangibles and 3) $1.4 million of accretion on golf membership deposit liabilities. GAAP Income for 2Q 2015 includes the impact of:  1) total depreciation and amortization of $7.1 million, 2) $1.2 million of amortization of favorable or unfavorable leasehold intangibles and 3) $1.5 million of accretion on golf membership deposit liabilities.

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 and Annual Report on Form 10-K, which are available on the Company’s website, www.newcastleinv.com.

EARNINGS CONFERENCE CALL
 
Newcastle’s management will host a conference call on Tuesday, August 9, 2016 at 9:00 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 1-866-393-1506 (from within the U.S.) or 1-706-634-0623 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Newcastle Second Quarter 2016 Earnings Call.”

A simultaneous webcast of the conference call will be available to the public on a listen-only basis 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 call’s completion through 11:59 P.M. Eastern Time on Tuesday, August 23, 2016 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 “60658686.”
2

Unaudited Consolidated Statements of Operations
($ in thousands, except share data)
 
 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
 
2016
   
2015
   
2016
   
2015
 
Interest income
 
$
20,421
   
$
24,265
   
$
41,460
   
$
51,343
 
Interest expense
   
(12,417
)
   
(16,950
)
   
(25,951
)
   
(33,677
)
Net interest income
   
8,004
     
7,315
     
15,509
     
17,666
 
Impairment (Reversal)
                               
Valuation allowance on loans
   
645
     
4,317
     
2,843
     
4,674
 
Other-than-temporary impairment on securities and other investments
   
     
9,128
     
56
     
9,472
 
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)
   
     
234
     
54
     
(62
)
Total impairment
   
645
     
13,679
     
2,953
     
14,084
 
Net interest income (loss) after impairment
   
7,359
     
(6,364
)
   
12,556
     
3,582
 
Operating Revenues
                               
Golf course operations
   
48,057
     
48,778
     
86,776
     
87,732
 
Sales of food and beverages - golf
   
21,612
     
20,944
     
35,173
     
33,956
 
Other golf revenue
   
14,815
     
13,081
     
24,693
     
21,941
 
Total operating revenues
   
84,484
     
82,803
     
146,642
     
143,629
 
Other Income (Loss)
                               
Gain (loss) on settlement of investments, net
   
154
     
26,776
     
(1,512
)
   
27,791
 
Gain on deconsolidation
   
     
     
82,130
     
 
Other income (loss), net
   
(1,102
)
   
2,597
     
(1,123
)
   
2,083
 
Total other income (loss)
   
(948
)
   
29,373
     
79,495
     
29,874
 
Expenses
                               
Loan and security servicing expense
   
1
     
118
     
38
     
214
 
Operating expenses - golf
   
65,499
     
65,438
     
122,104
     
120,375
 
Cost of sales - golf
   
9,217
     
9,108
     
15,428
     
15,161
 
General and administrative expense
   
3,722
     
3,487
     
6,622
     
5,200
 
Management fee to affiliate
   
2,676
     
2,674
     
5,351
     
5,342
 
Depreciation and amortization
   
6,484
     
7,119
     
12,515
     
13,872
 
Total expenses
   
87,599
     
87,944
     
162,058
     
160,164
 
Income from continuing operations before income tax
   
3,296
     
17,868
     
76,635
     
16,921
 
Income tax expense
   
138
     
27
     
182
     
73
 
Income from continuing operations
   
3,158
     
17,841
     
76,453
     
16,848
 
Income from discontinued operations, net of tax
   
     
524
     
     
639
 
Net Income
   
3,158
     
18,365
     
76,453
     
17,487
 
Preferred dividends
   
(1,395
)
   
(1,395
)
   
(2,790
)
   
(2,790
)
Net (income) loss attributable to noncontrolling interests
   
(112
)
   
49
     
12
     
230
 
Income Applicable to Common Stockholders
 
$
1,651
   
$
17,019
   
$
73,675
   
$
14,927
 
                                 
Income Applicable to Common Stock, per share
                               
Basic
 
$
0.02
   
$
0.26
   
$
1.11
   
$
0.22
 
Diluted
 
$
0.02
   
$
0.25
   
$
1.07
   
$
0.22
 
Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interests
                               
Basic
 
$
0.02
   
$
0.25
   
$
1.11
   
$
0.22
 
Diluted
 
$
0.02
   
$
0.24
   
$
1.07
   
$
0.21
 
Income from discontinued operations per share of common stock
                               
Basic
 
$
   
$
0.01
   
$
   
$
0.01
 
Diluted
 
$
   
$
0.01
   
$
   
$
0.01
 
Weighted Average Number of Shares of Common Stock Outstanding
                               
Basic
   
66,681,248
     
66,426,980
     
66,667,923
     
66,425,751
 
Diluted
   
68,899,515
     
69,204,717
     
68,592,206
     
69,055,495
 
Dividends Declared per Share of Common Stock
 
$
   
$
0.12
   
$
0.12
   
$
0.24
 
3

Consolidated Balance Sheets
($ in thousands, except share data)

   
June 30, 2016
(Unaudited)
   
December 31, 2015
 
Assets
           
Real estate securities, available-for-sale
 
$
12,988
   
$
59,034
 
Real estate securities, available-for-sale - pledged as collateral
   
452,815
     
105,963
 
Real estate related and other loans, held-for-sale, net
   
143,526
     
149,198
 
Residential mortgage loans, held-for-sale, net
   
442
     
532
 
Subprime mortgage loans subject to call option
   
362,931
     
380,806
 
Investments in real estate, net of accumulated depreciation
   
228,195
     
227,907
 
Intangibles, net of accumulated amortization
   
69,908
     
74,472
 
Other investments
   
21,339
     
20,595
 
Cash and cash equivalents
   
52,261
     
45,651
 
Restricted cash
   
5,864
     
4,469
 
Receivables from brokers, dealers and clearing organizations
   
373,097
     
361,341
 
Receivables and other assets
   
44,288
     
38,014
 
Total Assets
 
$
1,767,654
   
$
1,467,982
 
                 
Liabilities and Equity
               
Liabilities
               
CDO bonds payable
 
$
   
$
92,933
 
Other bonds and notes payable
   
     
16,162
 
Repurchase agreements
   
361,085
     
418,458
 
Credit facilities and obligations under capital leases
   
112,843
     
11,258
 
Financing of subprime mortgage loans subject to call option
   
362,931
     
380,806
 
Junior subordinated notes payable
   
51,221
     
51,225
 
Dividends payable
   
     
8,929
 
Membership deposit liabilities
   
86,027
     
83,210
 
Payables to brokers, dealers and clearing organizations
   
453,116
     
105,940
 
Accounts payable, accrued expenses and other liabilities
   
84,792
     
88,939
 
Total Liabilities
 
$
1,512,015
   
$
1,257,860
 
                 
Commitments and contingencies
               
                 
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 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 June 30, 2016 and December 31, 2015
 
$
61,583
   
$
61,583
 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 66,712,338 and 66,654,598 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
   
667
     
667
 
Additional paid-in capital
   
3,172,619
     
3,172,370
 
Accumulated deficit
   
(2,990,932
)
   
(3,057,538
)
Accumulated other comprehensive income
   
11,971
     
33,297
 
Total Newcastle Stockholders’ Equity
   
255,908
     
210,379
 
Noncontrolling interests
   
(269
)
   
(257
)
Total Equity
 
$
255,639
   
$
210,122
 
                 
Total Liabilities and Equity
 
$
1,767,654
   
$
1,467,982
 
 
4

Reconciliation of Core Earnings
($ in thousands)
 
   
Three Months Ended
June 30, 2016
   
Three Months Ended
March 31, 2016
   
Three Months Ended
June 30, 2015
 
Income applicable to common stockholders
 
$
1,651
   
$
72,024
   
$
17,019
 
  Add (Deduct):
                       
Impairment
   
645
     
2,308
     
13,679
 
Other (income) loss(A)
   
1,322
     
(80,072
)
   
(29,044
)
Impairment (reversal), other (income) loss and other adjustments from discontinued operations
   
-
     
-
     
(317
)
Depreciation and amortization(B)
   
9,029
     
8,665
     
9,837
 
Acquisition, restructuring, and spin-off related expenses
   
1,246
     
491
     
333
 
Core Earnings
 
$
13,893
   
$
3,416
   
$
11,507
 

(A)
Other (income) loss for 2Q 2016, 1Q 2016, and 2Q 2015 excludes the income from a JV equity investment in a real estate property of $0.4 million, $0.4 million and $0.3 million, respectively.
 
(B)
Depreciation and amortization charges for 2Q 2016 includes $6.5 million of depreciation and amortization, $1.1 million of amortization of favorable or unfavorable leasehold intangibles and $1.4 million of accretion on the golf membership deposit liabilities. Depreciation and amortization charges for 1Q 2016 includes $6.0 million of depreciation and amortization, $1.2 million of amortization of favorable or unfavorable leasehold intangibles and $1.4 million of accretion on the golf membership deposit liabilities. Depreciation and amortization charges for 2Q 2015 includes $7.1 million of depreciation and amortization, $1.2 million of amortization of favorable or unfavorable leasehold intangibles and $1.5 million of accretion on the golf membership deposit liabilities.

CORE EARNINGS
 
The following primary variables impact our operating performance: (i) the current yield earned on our 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 we earn from our non-recourse financing structures, (iii) the interest expense and dividends incurred under our recourse debt and preferred stock, (iv) the net operating income on our real estate and golf investments, (v) our operating expenses and (vi) our realized and unrealized gains or losses, net of related provision for income taxes, including any impairment, on our investments, derivatives and debt obligations. Core earnings is a non-GAAP measure of our operating performance excluding the sixth variable listed above. Core earnings also excludes depreciation and amortization charges, including the accretion of membership deposit liabilities and the impact of the application of acquisition accounting, acquisition and spin-off related expenses and restructuring expenses. Core earnings is used by management to evaluate our performance without taking into account gains and losses, net of related provision for income taxes, which, although they represent a part of our recurring operations, are subject to significant variability and are only a potential indicator of future performance. These adjustments to our income applicable to common stockholders are not indicative of the performance of the assets that form the core of our activity.

Management utilizes core earnings as a measure in its decision-making process relating to the underlying fundamental operations of our investments, as well as the allocation of resources between those investments, and management also relies on core earnings as an indicator of the results of such decisions.  As such, core earnings is not intended to reflect all of our activity and should be considered as only one of the factors in assessing our performance, along with GAAP net income, which is inclusive of all of our activities.  Management also believes that the exclusion from core earnings of the items specified above allows investors and analysts to readily identify and track 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 our current core performance using the same measure that management uses to operate the business.

Core earnings does not represent an alternative to net income as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our liquidity, and is not indicative of cash available to fund cash needs. Our calculation of core earnings may be different from the calculation used by other companies and, therefore, comparability may be limited.
5

Reconciliation of AFFO
($ in thousands)
 
   
Three Months Ended
June 30, 2016
   
Three Months Ended
March 31, 2016
   
Three Months Ended
June 30, 2015
 
Income applicable to common stockholders
 
$
1,651
   
$
72,024
   
$
17,019
 
  Add:
                       
     Depreciation and amortization(A)
   
9,029
     
8,665
     
9,837
 
AFFO
 
$
10,680
   
$
80,689
   
$
26,856
 

(A)
Depreciation and amortization charges for 2Q 2016 includes $6.5 million of depreciation and amortization, $1.1 million of amortization of favorable or unfavorable leasehold intangibles and $1.4 million of accretion on the golf membership deposit liabilities. Depreciation and amortization charges for 1Q 2016 includes $6.0 million of depreciation and amortization, $1.2 million of amortization of favorable or unfavorable leasehold intangibles and $1.4 million of accretion on the golf membership deposit liabilities.  Depreciation and amortization charges for 2Q 2015 includes $7.1 million of depreciation and amortization, $1.2 million of amortization of favorable or unfavorable leasehold intangibles and $1.5 million of accretion on the golf membership deposit liabilities.

ADJUSTED FUNDS FROM OPERATIONS
 
We define AFFO as net income applicable to common stockholders plus depreciation and amortization, including accretion of membership deposit liabilities and amortization of favorable and unfavorable leasehold intangibles. We believe AFFO provides useful information to investors regarding our performance, because it provides a measure of operating performance without regard to depreciation and amortization, which reduce the value of real estate assets over time even though actual real estate values may fluctuate with market conditions, accretion of membership deposit liabilities and amortization of favorable and unfavorable leasehold intangibles. We believe AFFO is useful because it facilitates the evaluation of the performance on our portfolio of assets between periods on a consistent basis.

AFFO does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income (loss) as an indicator of our operating performance or as an alternative to cash flow as a measure of our liquidity, and it is not necessarily indicative of cash available to fund cash needs. Our calculation of AFFO may be different from the calculation used by other companies and, therefore, comparability may be limited. Our definition of AFFO differs from the definition of FFO established by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income (or loss) (computed in accordance with GAAP) excluding losses or gains from sales of depreciable property, impairment of depreciable real estate, real estaterelated depreciation and amortization and the portion of such items related to unconsolidated affiliates.

AFFO for 2Q 2016 includes the impact of: 1) total impairment of $0.6 million, 2) gain on settlement of investments of $0.2 million, 3) other loss of $1.6 million, which excludes $0.4 million income from a JV equity investment in a real estate property and 4) acquisition, transactional, and restructuring costs of $1.2 million. AFFO for 1Q 2016 includes the impact of: 1) total impairment of $2.3 million, 2) loss on settlement of investments of $1.6 million, 3) gain on deconsolidation of $82.1 million, 4) other loss of $0.4 million, which excludes $0.4 million income from a JV equity investment in a real estate property and 5) acquisition, transactional, and restructuring costs of $0.5 million. AFFO for 2Q 2015 includes the impact of: 1) total impairment of $13.7 million, 2) gain on settlement of investments of $27.1 million ($0.3 million of gain related to the sale of 3 real estate properties in Dayton, OH, which is recorded in income from discontinued operations), 3) other income of $2.2 million, which excludes $0.3 million income from a JV equity investment in a real estate property, and 4) acquisition, transactional, and restructuring costs of $0.2 million.  See reconciliation to income applicable to common stockholders.

ABOUT NEWCASTLE
Newcastle focuses on investing in, and actively managing, real estate related assets. Newcastle conducts its operations to qualify as a REIT for federal income tax purposes. Newcastle 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 statements regarding the Company’s ability to create, develop and market Drive Shack, and Drive Shack’s ability to provide an active entertainment outlet. 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 Newcastle’s control. 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 Operations” 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 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.
 
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