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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): November 4, 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 November 4, 2016, Newcastle Investment Corp. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter ended September 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 November 4, 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/ Lawrence A. Goodfield, Jr.
 
Lawrence A. Goodfield, Jr.
 
Chief Financial Officer, Chief Accounting Officer & Treasurer
 
 
Date:  November 4, 2016

EXHIBIT INDEX

Exhibit
 Number
  
Description
   
99.1
  
Press release, dated November 4, 2016, issued by Newcastle Investment Corp.



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Section 2: EX-99.1 (EXHIBIT 99.1)


Exhibit 99.1


Contact:                     
Investor Relations
212-479-3195

NEWCASTLE ANNOUNCES THIRD QUARTER 2016 RESULTS

NEW YORK—(BUSINESS WIRE)—November 4, 2016—Newcastle Investment Corp. (NYSE: NCT; “Newcastle”, the “Company”) today reported the following information for the third quarter ended September 30, 2016.

THIRD QUARTER FINANCIAL HIGHLIGHTS(A)
§
GAAP Income of $19 million, or $0.28 per basic share
§
Core Earnings of $23 million, or $0.35 per basic share
§
Adjusted Funds from Operations (“AFFO”) of $28 million, or $0.42 per basic share

THIRD QUARTER HIGHLIGHTS
§
Real Estate Debt Portfolio In the quarter, the Company monetized $120 million of principal recovery, including $110 million in repayment of a resort-related loan and $10 million from the sale of NCT CDO V bonds.

§
American Golf As of September 30, 2016, the Company owned, leased and managed 84 golf properties across 13 states, of which more than 75% were located in the top 20 Metropolitan Statistical Areas.
 
o
On a same store basis, excluding managed courses, the golf business ended the third quarter with 8,890 full golf private members, an increase of 99 members over the prior year, and approximately 42,000 Players Club members for public properties, an increase of approximately 23,000 members over the prior year. Private member dues generated an additional $1 million of revenue in the quarter over the prior year, and The Players Club program generated an additional $2 million of revenue in the quarter over the prior year.
 
§
Drive Shack The Company began developing an initial site in Orlando, Florida, which is expected to open in late 2017 or early 2018. The Company also continued to advance development of Drive Shack venues and is actively working through a pipeline of sites in markets across the U.S.

§
Cash Dividends – In October 2016, Newcastle declared a third quarter common cash dividend of $0.12 per share, or $8 million.

   
3Q 2016
 
3Q 2015
 
2Q 2016
 
GAAP Results:
         
 
  GAAP Income(B)
$19 million
 
$6 million
 
$2 million
 
  GAAP Income per WA Basic Share(B)
$0.28
 
$0.10
 
$0.02
             
 
Non-GAAP Results:
         
 
  Core Earnings(A)
$23 million
 
$10 million
 
$14 million
 
  Core Earnings per WA Basic Share(A)
$0.35
 
$0.16
 
$0.21
             
 
  AFFO(A)
$28 million
 
$16 million
 
$11 million
 
  AFFO per WA Basic Share(A)
$0.42
 
$0.25
 
$0.16

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)
GAAP Income for 3Q 2016 includes the impact of: 1) total depreciation and amortization of $6.7 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 3Q 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. 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.

1

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 Friday, November 4, 2016 at 9:30 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 1-866-393-1506 (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 Third 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 Friday, November 18, 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 “11898313.”
2


Unaudited Consolidated Statements of Operations
($ in thousands, except share data)
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2016
   
2015
   
2016
   
2015
 
Interest income
 
$
32,310
   
$
23,010
   
$
73,770
   
$
74,353
 
Interest expense
   
(13,138
)
   
(14,715
)
   
(39,089
)
   
(48,392
)
Net interest income
   
19,172
     
8,295
     
34,681
     
25,961
 
Impairment (Reversal)
                               
Valuation allowance on loans
   
611
     
3,010
     
3,454
     
7,684
 
Other-than-temporary impairment on securities and other investments
   
     
427
     
56
     
9,899
 
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)
   
     
23
     
54
     
(39
)
Total impairment
   
611
     
3,460
     
3,564
     
17,544
 
Net interest income after impairment
   
18,561
     
4,835
     
31,117
     
8,417
 
Operating Revenues
                               
Golf course operations
   
48,515
     
49,418
     
135,291
     
137,150
 
Sales of food and beverages - golf
   
19,913
     
20,035
     
55,086
     
53,991
 
Other golf revenue
   
14,734
     
13,411
     
39,427
     
35,352
 
Total operating revenues
   
83,162
     
82,864
     
229,804
     
226,493
 
Other Income (Loss)
                               
Gain (loss) on settlement of investments, net
   
6,350
     
(3,168
)
   
4,838
     
24,623
 
Gain (loss) on extinguishment of debt, net
   
(227
)
   
14,878
     
(607
)
   
15,367
 
Gain on deconsolidation
   
     
     
82,130
     
 
Other income, net
   
987
     
277
     
244
     
1,871
 
Total other income
   
7,110
     
11,987
     
86,605
     
41,861
 
Expenses
                               
Loan and security servicing expense
   
32
     
41
     
70
     
255
 
Operating expenses - golf
   
67,027
     
67,984
     
189,131
     
188,359
 
Cost of sales - golf
   
8,250
     
8,842
     
23,678
     
24,003
 
General and administrative expense
   
3,656
     
3,876
     
10,278
     
9,076
 
Management fee to affiliate
   
2,676
     
2,675
     
8,027
     
8,017
 
Depreciation and amortization
   
6,735
     
7,111
     
19,250
     
20,983
 
Total expenses
   
88,376
     
90,529
     
250,434
     
250,693
 
Income from continuing operations before income tax
   
20,457
     
9,157
     
97,092
     
26,078
 
Income tax expense (benefit)
   
(38
)
   
1,257
     
144
     
1,330
 
Income from continuing operations
   
20,495
     
7,900
     
96,948
     
24,748
 
Income from discontinued operations, net of tax
   
     
7
     
     
646
 
Net Income
   
20,495
     
7,907
     
96,948
     
25,394
 
Preferred dividends
   
(1,395
)
   
(1,395
)
   
(4,185
)
   
(4,185
)
Net (income) loss attributable to noncontrolling interests
   
(177
)
   
(13
)
   
(165
)
   
217
 
Income Applicable to Common Stockholders
 
$
18,923
   
$
6,499
   
$
92,598
   
$
21,426
 
Income Applicable to Common Stock, per share
                               
Basic
 
$
0.28
   
$
0.10
   
$
1.39
   
$
0.32
 
Diluted
 
$
0.27
   
$
0.09
   
$
1.35
   
$
0.31
 
Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interests
                               
Basic
 
$
0.28
   
$
0.10
   
$
1.39
   
$
0.31
 
Diluted
 
$
0.27
   
$
0.09
   
$
1.35
   
$
0.30
 
Income from discontinued operations per share of common stock
                               
Basic
 
$
   
$
   
$
   
$
0.01
 
Diluted
 
$
   
$
   
$
   
$
0.01
 
Weighted Average Number of Shares of Common Stock Outstanding
                               
Basic
   
66,730,583
     
66,484,962
     
66,688,962
     
66,445,705
 
Diluted
   
69,072,676
     
69,069,659
     
68,753,532
     
69,053,302
 
Dividends Declared per Share of Common Stock
 
$
0.12
   
$
0.12
   
$
0.24
   
$
0.36
 


3


Consolidated Balance Sheets
($ in thousands, except share data)
   
September 30, 2016
     
   
(Unaudited)
   
December 31, 2015
 
Assets
           
Real estate securities, available-for-sale
 
$
3,430
   
$
59,034
 
Real estate securities, available-for-sale - pledged as collateral
   
663,559
     
105,963
 
Real estate related and other loans, held-for-sale, net
   
52,874
     
149,198
 
Subprime mortgage loans subject to call option
   
353,347
     
380,806
 
Investments in real estate, net of accumulated depreciation
   
227,327
     
227,907
 
Intangibles, net of accumulated amortization
   
67,738
     
74,472
 
Other investments
   
21,724
     
20,595
 
Cash and cash equivalents
   
134,289
     
45,651
 
Restricted cash
   
6,725
     
4,469
 
Receivables from brokers, dealers and clearing organizations
   
858,233
     
361,341
 
Receivables and other assets
   
47,693
     
38,546
 
Total Assets
 
$
2,436,939
   
$
1,467,982
 
                 
Liabilities and Equity
               
Liabilities
               
CDO bonds payable
 
$
   
$
92,933
 
Other bonds and notes payable
   
     
16,162
 
Repurchase agreements
   
831,741
     
418,458
 
Credit facilities and obligations under capital leases
   
114,697
     
11,258
 
Financing of subprime mortgage loans subject to call option
   
353,347
     
380,806
 
Junior subordinated notes payable
   
51,219
     
51,225
 
Dividends payable
   
     
8,929
 
Membership deposit liabilities
   
87,539
     
83,210
 
Payables to brokers, dealers and clearing organizations
   
663,456
     
105,940
 
Accounts payable, accrued expenses and other liabilities
   
77,292
     
88,939
 
Total Liabilities
 
$
2,179,291
   
$
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 September 30, 2016 and December 31, 2015
 
$
61,583
   
$
61,583
 
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 66,734,136 and 66,654,598 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
   
667
     
667
 
Additional paid-in capital
   
3,172,721
     
3,172,370
 
Accumulated deficit
   
(2,980,016
)
   
(3,057,538
)
Accumulated other comprehensive income
   
2,785
     
33,297
 
Total Newcastle Stockholders’ Equity
   
257,740
     
210,379
 
Noncontrolling interests
   
(92
)
   
(257
)
Total Equity
 
$
257,648
   
$
210,122
 
                 
Total Liabilities and Equity
 
$
2,436,939
   
$
1,467,982
 
                 

4

Reconciliation of Core Earnings
($ in thousands)
   
Three Months Ended
September 30, 2016
   
Three Months Ended
September 30, 2015
   
Three Months Ended
June 30, 2016
 
Income applicable to common stockholders
 
$
18,923
   
$
6,499
   
$
1,651
 
  Add (Deduct):
                       
     Impairment
   
611
     
3,460
     
645
 
     Other loss (income)(A)
   
(6,725
)
   
(10,458
)
   
1,322
 
     Depreciation and amortization(B)
   
9,259
     
9,791
     
9,029
 
Acquisition, restructuring and spin-off related expenses(C)
   
1,093
     
1,131
     
1,246
 
Core Earnings
 
$
23,161
   
$
10,423
   
$
13,893
 

(A)
Net of $0.4 million, $0.3 million and $0.4 million related to other income from an equity method investment during the three months ended September 30, 2016, September 30, 2015 and June 30, 2016, respectively. Net of $1.2 million of provision for income taxes relating to the gain on extinguishment of debt during the three months ended September 30, 2015.
(B)
Including depreciation and amortization of $6.7 million, accretion of membership deposit liabilities of $1.4 million and amortization of favorable or unfavorable leasehold intangibles of $1.1 million in the three months ended September 30, 2016.  Including depreciation and amortization of $7.1 million, accretion of membership deposit liabilities of $1.5 million and amortization of favorable or unfavorable leasehold intangibles of $1.2 million in the three months ended September 30, 2015. Including depreciation and amortization of $6.5 million, accretion of membership deposit liabilities of $1.4 million and amortization of favorable or unfavorable leasehold intangibles of $1.1 million in the three months ended June 30, 2016. The accretion of membership deposit liabilities was recorded to interest expense and the amortization of favorable or unfavorable leasehold intangibles was recorded to operating expenses - golf.
(C)
Including acquisition and transaction expenses of $1.1 million during the three months ended September 30, 2016. Including acquisition and transaction expenses of $1.0 million and restructuring expenses of $0.1 million during the three months ended September 30, 2015. Including acquisition and transaction expenses of $1.2 million during the three months ended June 30, 2016. The acquisition and transaction costs were recorded to general and administrative expense and restructuring expenses were recorded to operating expenses - golf.

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
September 30, 2016
   
Three Months Ended
September 30, 2015
   
Three Months Ended
June 30, 2016
 
Income applicable to common stockholders
 
$
18,923
   
$
6,499
   
$
1,651
 
  Add:
                       
     Depreciation and amortization(A)
   
9,259
     
9,791
     
9,029
 
AFFO
 
$
28,182
   
$
16,290
   
$
10,680
 

(A)
Including depreciation and amortization of $6.7 million, accretion of membership deposit liabilities of $1.4 million and amortization of favorable or unfavorable leasehold intangibles of $1.1 million in the three months ended September 30, 2016.  Including depreciation and amortization of $7.1 million, accretion of membership deposit liabilities of $1.5 million and amortization of favorable or unfavorable leasehold intangibles of $1.2 million in the three months ended September 30, 2015. Including depreciation and amortization of $6.5 million, accretion of membership deposit liabilities of $1.4 million and amortization of favorable or unfavorable leasehold intangibles of $1.1 million in the three months ended June 30, 2016. The accretion of membership deposit liabilities was recorded to interest expense and the amortization of favorable or unfavorable leasehold intangibles was recorded to operating expenses - golf.

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 or 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 or 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.

ABOUT NEWCASTLE
Newcastle focuses on investing in, and actively managing, real estate related assets, including traditional and innovative golf 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 open a Drive Shack site in Orlando, Florida in late 2017 or early 2018, and the Company’s pipeline. 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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