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:
- The portfolio generated $12 million of
net investment income, or an 18% return.
- 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.
- 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.
- 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.
- 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) $1.5 million of accretion
on golf membership deposit liabilities.
ADDITIONAL INFORMATION
For additional information that management believes to be useful
for investors, please refer to the presentation posted on the
Investor Relations section of Newcastle’s website,
www.newcastleinv.com. For consolidated investment portfolio
information, please refer to the Company’s Quarterly Report on Form
10-Q and Annual Report on Form 10-K, which are available on the
Company’s website, www.newcastleinv.com.
EARNINGS CONFERENCE CALL
Newcastle’s management will host a conference call on Tuesday,
August 9, 2016 at 9:00 A.M. Eastern Time. A copy of the earnings
release will be posted to the Investor Relations section of
Newcastle’s website, www.newcastleinv.com.
All interested parties are welcome to participate on the live
call. The conference call may be accessed by dialing 1-866-393-1506
(from within the U.S.) or 1-706-634-0623 (from outside of the U.S.)
ten minutes prior to the scheduled start of the call; please
reference “Newcastle Second Quarter 2016 Earnings Call.”
A simultaneous webcast of the conference call will be available
to the public on a listen-only basis at www.newcastleinv.com.
Please allow extra time prior to the call to visit the website and
download any necessary software required to listen to the internet
broadcast.
A telephonic replay of the conference call will also be
available two hours following the call’s completion through 11:59
P.M. Eastern Time on Tuesday, August 23, 2016 by dialing
1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from
outside of the U.S.); please reference access code “60658686.”
Unaudited Consolidated Statements of
Operations($ 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 inother comprehensive income (loss), net
of the reversal of othercomprehensive 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, afterpreferred 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
Consolidated Balance Sheets($ in
thousands, except share data)
June 30, 2016 December 31,
2015 (Unaudited) 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, 1,347,321shares of 9.75% Series B
Cumulative Redeemable Preferred Stock, 496,000shares of 8.05%
Series C Cumulative Redeemable Preferred Stock, and620,000 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, 66,712,338and 66,654,598 shares
issued and outstanding at June 30, 2016 and December31, 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
Reconciliation of Core Earnings($
in thousands)
Three Months EndedJune 30,
Three Months EndedMarch 31,
Three Months EndedJune 30,
2016 2016 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
andother 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.
Reconciliation of AFFO($ in
thousands)
Three Months EndedJune 30,
Three Months EndedMarch 31,
Three Months EndedJune 30,
2016 2016 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 estate‐related 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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Newcastle Investment Corp.Investor Relations212-479-3195
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