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Press release from Business Wire

Newcastle Announces First Quarter 2012 Results

<p> <b>FIRST QUARTER 2012 HIGHLIGHTS</b> </p> <ul> <li class='bwlistitemmargb'> Core Earnings of $0.33 per diluted share </li> <li class='bwlistitemmargb'> GAAP income of $0.68 per diluted share </li> <li class='bwlistitemmargb'> Cash Available for Distribution of $20 million </li> <li class='bwlistitemmargb'> Declared Common Dividend of $0.20 per share, or $21 million </li> <li class='bwlistitemmargb'> Current Unrestricted Cash to Invest of $51 million </li> </ul> <p> <b>FIRST QUARTER 2012 FINANCIAL RESULTS</b> </p>

Thursday, May 10, 2012

Newcastle Announces First Quarter 2012 Results00:57 EDT Thursday, May 10, 2012 NEW YORK (Business Wire) -- Newcastle Investment Corp. (NYSE: NCT) reported that in the first quarter of 2012, income available for common stockholders (“GAAP income”) was $72 million, or $0.68 per diluted share, compared to $108 million, or $1.73 per diluted share, in the first quarter of 2011. GAAP income of $72 million consisted of the following: Core Earnings: $35 million, or $0.33 per diluted share, which is equal to net interest income less expenses, net of preferred dividends Other Income/Loss: $30 million of other income related to a $5 million net gain on the settlement of investments, a $21 million gain on the extinguishment of CDO debt, and a $4 million non-cash mark-to-market gain primarily related to interest rate derivatives in the CDOs $7 million of non-cash mark-to-market net gain on loans held for sale and impairment recorded on investments During the first quarter of 2012, the Company generated $20 million of Cash Available for Distribution ("CAD"), compared to $18 million in the fourth quarter of 2011. On March 14, 2012, the Board of Directors declared a quarterly dividend of $0.20 per common share, or $21 million, for the first quarter of 2012. The Board of Directors also declared dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.75% Series B, 8.05% Series C and 8.375% Series D preferred stock, respectively, for the period beginning February 1, 2012 and ending April 30, 2012. In the first quarter of 2012, GAAP book value increased by $1.25 per share. As of March 31, 2012, GAAP book value was $2.49 per share, compared to $1.24 per share as of December 31, 2011. The following table summarizes the Company's operating results ($ in millions, except per share data):               Three Months EndedMarch 31,       December 31,       March 31,201220112011Summary Operating Results:   GAAP income $ 72 $ 19 $ 108   GAAP income, per diluted share$0.68$0.18$1.73     Non-GAAP Results:   Core earnings $ 35 $ 32 $ 26   Core earnings, per diluted share$0.33$0.30$0.41   Cash Available for Distribution $ 20 $ 18 $ 15   For a reconciliation of income available for common stockholders to core earnings and net cash flow provided by operating activities to cash available for distribution, please refer to the tables following the presentation of GAAP results. ADDITIONAL INFORMATION For additional information that management believes to be useful for investors, please refer to the “Quarterly Supplement – First Quarter 2012” presentation posted to the Investor Relations section of Newcastle's website, www.newcastleinv.com. For consolidated investment portfolio information, please refer to the Company's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, which are also available on the Company's website (www.newcastleinv.com) FIRST QUARTER 2012 INVESTMENT ACTIVITY$179 million of unrestricted cash invested or committed to invest: On March 6, 2012, the Company announced that it had signed definitive agreements to acquire its second investment in Excess Mortgage Servicing Rights (“Excess MSRs”) from Nationstar Mortgage LLC ("Nationstar") in connection with their acquisition of mortgage servicing assets from Aurora Bank. Newcastle expects to invest approximately $170 million to acquire an approximately 65% interest in the Excess MSRs. Nationstar will be the servicer of the loans and will invest alongside Newcastle by acquiring the remaining approximately 35% interest in the Excess MSRs. The unpaid principal balance of the total portfolio is expected to be approximately $63 billion at closing and be comprised of approximately 75% non-conforming loans in private label securitizations and approximately 25% conforming loans in GSE pools. The investment is expected to close at the end of May and is subject to regulatory and third-party approvals. The Company expects the investment to generate an 18% return and $341 million of total cash flow, or 2.0x its initial investment over an average life of 5.6 years. Newcastle invested $9 million to repurchase $30 million face amount of a Newcastle CDO X Class A-3 bond at a price of 30.5% of par, with an expected return of 18% and an average life of 9.8 years. $60 million of restricted CDO cash invested: Newcastle invested $60 million to purchase $70 million face amount of assets at an average price of 86.6% of par, with an expected average yield of 10% and an average life of 5.2 years, including the following: Invested $15 million to purchase $22 million face amount of a CMBS and a ABS at an average price of 68.3% of par, with an expected average yield of 9%, an average life of 7.3 years, and an average rating of BBB. Invested $45 million to purchase $48 million face amount of three commercial real estate loans at an average price of 94.7% of par, with an expected average yield of 10%, an average loan-to-value ratio of 53%, and an expected average life of 4.3 years. CASH AND RECOURSE FINANCING As of May 8, 2012, the Company's cash and recourse financings, excluding junior subordinated notes, were as set forth below: Unrestricted Cash – The Company had $221 million of unrestricted cash, of which $170 million is committed to purchase the Aurora Excess MSR, leaving $51 million of unrestricted cash to invest. Restricted CDO Cash - The Company had $80 million of restricted cash available for reinvestment within its consolidated CDOs, of which $25 million is committed and expected to settle within the next 10 days. Recourse Financing – The Company had $224 million related to the financing of FNMA and FHLMC securities and $2 million related to the financing of senior Newcastle CDO bonds it repurchased. I.REAL ESTATE DEBT PORTFOLIO As of March 31, 2012, the Company's real estate debt portfolio consisted of $3.8 billion of diversified assets financed with $2.8 billion of primarily match funded, non-recourse debt. Assets included 357 commercial, residential and corporate real estate securities and loan investments with an average investment size of $10 million, and 9,721 mortgage loans backed by residential real estate. During the first quarter of 2012, the portfolio generated total cash flow of $35 million of which $27 million contributed to CAD. During the quarter, the weighted average carrying value of the March 31, 2012 portfolio changed from a price of 76.8 to 79.5, an increase of 3.5% or $101 million. Newcastle CDO financings As of March 31, 2012, Newcastle's five CDOs were comprised of $3.3 billion face amount of collateral (value of 79.2% of par) financed with $2.4 billion of debt. During the first quarter of 2012, the CDOs generated $24.5 million of total cash flow which included: $20.0 million of CDO cash receipts consisting of $15.4 million of excess interest, $3.1 million of interest on retained and repurchased CDO debt, and $1.5 million of senior collateral management fees $4.5 million of principal repayments on repurchased CDO debt, of which $1.7 million contributed to CAD The following table summarizes the cash receipts in the first quarter of 2012 from the Company's consolidated CDO financings and the results of their related coverage tests ($ in thousands):                 InterestCoverage% Excess (Deficiency)April 30,                                       PrimaryOver-Collateralization Excess (Deficiency) (2)(3)CollateralCashApril 30, 2012March 31, 2012December 31, 2011TypeReceipts (1)   2012(2)%$%$%$ CDO IV Securities $ 416 42.8 % -2.1 % (4,070 ) -2.1 % (4,070 ) -2.3 % (4,622 ) CDO VI Securities 138 -203.1 % -63.3 % (177,751 ) -63.2 % (177,539 ) -60.7 % (174,289 ) CDO VIII Loans 6,215 387.6 % 8.8 % 55,821 8.3 % 53,094 8.6 % 55,614 CDO IX Loans 7,046 439.5 % 14.9 % 96,061 18.9 % 121,772 13.0 % 84,174 CDO X Securities   6,221 332.8 % 7.1 % 81,190 8.2 % 93,725 8.4 % 96,025 Total$20,036   (1)   Cash receipts exclude principal repayments from repurchased bonds. Cash receipts for the quarter ended March 31, 2012 may not be indicative of cash receipts for subsequent periods. See Forward-Looking Statements below for risks and uncertainties that could cause cash receipts for subsequent periods to differ materially from these amounts. (2) Represents the excess or deficiency under the applicable interest coverage or over-collateralization test to the first threshold at which cash flow would be redirected. The Company generally does not receive material interest cash flow from a CDO until a deficiency is corrected. The information regarding coverage tests is based on data from the most recent remittance date on or before April 30, 2012, March 31, 2012 or December 31, 2011, as applicable. The CDO IV test is conducted only on a quarterly basis (December, March, June and September). (3) As of the April 2012 remittance, the face amount of assets on negative watch for possible downgrade by at least one rating agency (Moody's, S&P, or Fitch) for CDOs VIII, IX, and CDO X were $30 million, $7 million, and $88 million, respectively.   Other Real Estate Related Investments As of March 31, 2012, other real estate related investments were comprised of $579 million face amount of assets (value of 85.6% of par) financed with $418 million of debt. During the first quarter of 2012, these investments generated $10.3 million of total cash flow which included: $5.3 million consisting of excess interest, interest on retained debt, and senior collateral management fees $5.0 million of principal repayments from a commercial real estate loan II.EXCESS MSRs As of March 31, 2012, Newcastle's Excess MSRs portfolio consisted of one investment with a carrying value of $42.6 million, representing a 65% interest in an Excess MSR on an unpaid principal balance of $9.4 billion. During the quarter, this investment generated $4.5 million of total cash flow, of which $2.0 million contributed to CAD. In the first five months of the investment, the Company received $7.4 million of total cash flow, or 17% of the initial $44 million investment. Actual life-to-date IRR of 23%, compared to an initial expected IRR of 20% Constant prepayment rate was 12.9% in April compared to an initial projection of 30% Recapture rate was 36% in April compared to an initial projection of 35% INVESTMENT PORTFOLIO The following table describes the investment portfolio as of March 31, 2012 ($ in millions):                     % of       Carrying             WeightedFaceBasisTotalValueNumber ofAverageAmount $     Amount $ (5)     Basis       Amount $     Investments     Credit (6)     Life (years) (7)I. Real Estate Related InvestmentsCommercial Assets CMBS $ 1,502 $ 1,125 38.3% $ 1,187 196 BB+ 4.0 Mezzanine Loans 584 462 15.7% 462 16 73% 2.4 B-Notes 187 163 5.5% 163 6 60% 2.9 Whole Loans 30 30 1.0% 30 3 48% 1.7 CDO Securities (1) 87 68 2.3% 65 3 BB+ 3.3 Other Investments (2)   25       25     0.9%   25 1 -- -- Total Commercial Assets 2,415 1,873 63.7% 1,932 3.4   Residential Assets MH and Residential Loans 367 318 10.8% 318 9,721 704 6.5 Subprime Securities 255 127 4.3% 132 63 B 7.0 Real Estate ABS   52       38     1.3%   37 13 B+ 8.2 674 483 16.4% 487 6.8   FNMA/FHLMC Securities   227       238     8.1%   240 32 AAA 4.6 Total Residential Assets 901 721 24.5% 727 6.3   Corporate Assets REIT Debt 120 119 4.1% 123 18 BB+ 2.4 Corporate Bank Loans   296       184     6.3%   184 6 CC 2.9 Total Corporate Assets 416 303 10.4% 307 2.8                   Total Real Estate Related Investments (3)   3,732       2,897     98.6%   2,9664.0   II. Excess MSR Investments Portfolio 1 43 41 1.4% 43 1 -- 6.0                   Total Portfolio/Weighted Average (4)$3,775     $2,938     100.0%$3,0094.0   (1)   Represents non-consolidated CDO securities, excluding ten securities with a zero value that had an aggregate face amount of $117 million. (2) Relates to an equity investment in a REO property. (3) Total Real Estate Related Investments excludes $98 million of CDO cash available for reinvestment. (4) Excludes operating real estate held for sale of $8 million and loans subject to call option with a face amount of $406 million. (5) Net of impairment. (6) Credit represents the weighted average of minimum ratings 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 for non-rated residential assets and an implied and assumed AAA rating for FNMA/FHLMC securities. Ratings provided herein were determined by third party rating agencies as of a particular date, may not be current and are subject to change at any time. (7) Weighted average life is based on the timing of expected principal reduction on the asset.   CONFERENCE CALL Newcastle's management will conduct a live conference call on 8:30 A.M. Eastern Time to review the financial results for the first quarter 2012. A copy of the earnings press release is 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 First Quarter 2012 Earnings Call.” A simultaneous webcast of the conference call will be available to the public on a listen-only basis at http://www.newcastleinv.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available until 11:59 P.M. Eastern Time on Thursday, May 17, 2012 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 “78203390”. ABOUT NEWCASTLE The Company invests in real estate debt and other real estate related assets, including excess mortgage servicing rights. The Company is organized and 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. For more information regarding the Company or to be added to our e-mail distribution list, please visit http://www.newcastleinv.com. 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, the expected average life of an investment, the expected returns, or expected yield on an investment, statements relating to our liquidity, future losses and impairment charges, our ability to acquire assets with attractive returns and the delinquent and loss rates on our subprime portfolios. 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. Newcastle can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Newcastle's expectations include, but are not limited to, the risk that market conditions cause downgrades of a significant number of our securities or the recording of additional impairment charges or reductions in shareholders' equity; the risk that we can find additional suitably priced investments; the risk that investments made or committed to be made cannot be financed on the basis and for the term at which we expect; the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested; actual recapture rates with respect to any Excess MSR investment; and the relative spreads between the yield on the assets we invest in and the cost and availability of debt and equity financing. 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 affect 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 Annual Report on Form 10-K or Quarterly Report on Form 10-Q, which is available on the Company's website (www.newcastleinv.com). In addition, 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. Newcastle 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. CAUTIONARY NOTE REGARDING EXPECTED RETURNS AND EXPECTED YIELDS PRESENTED IN THIS PRESS RELEASE Expected returns and expected yields are estimates of the annualized effective rate of return that we presently expect to be earned over the expected average life of an investment (i.e., IRR), after giving effect, in the case of returns, to existing leverage, and calculated on a weighted average basis. Expected returns and expected yields reflect our estimates of an investment's coupon, amortization of premium or discount, and costs and fees, and they contemplate our assumptions regarding prepayments, defaults and loan losses, among other things. In the case of Excess MSRs, these assumptions include the recapture rate. Income recognized by the Company in future periods may be significantly less than the income that would have been recognized if an expected return or expected yield were actually realized, and the estimates we use to calculate expected returns and expected yields could differ materially from actual results. Statements about expected returns and expected yields in this press release are forward-looking statements. You should carefully read the cautionary statement above under the caption “Forward-looking Statements,” which directly applies to our discussion of expected returns and expected yields.   Newcastle Investment Corp.Consolidated Statements of Operations (Unaudited)(dollars in thousands, except share data)             Three Months Ended March 312012       2011 Interest income $ 74,899 $ 72,203 Interest expense   30,165     38,165   Net interest income   44,734     34,038     Impairment (Reversal) Valuation allowance (reversal) on loans (9,031 ) (41,307 ) Other-than-temporary impairment on securities 5,883 3,112 Portion of other-than-temporary impairment on   securities recognized in other comprehensive income (loss),   net of reversal of other comprehensive loss into net income (loss)   (3,932 )   989     (7,080 )   (37,206 )   Net interest income after impairment 51,814 71,244   Other Income (Loss) Gain (loss) on settlement of investments, net 4,823 34,092 Gain on extinguishment of debt 20,743 11,042 Other income (loss), net   4,186     335     29,752     45,469   Expenses Loan and security servicing expense 1,098 1,060 General and administrative expense 2,285 1,601 Management fee to affiliate   4,976     4,189     8,359     6,850     Income from continuing operations 73,207 109,863 Income (loss) from discontinued operations   264     (190 ) Net Income 73,471 109,673 Preferred dividends   (1,395 )   (1,395 ) Income Available for Common Stockholders $ 72,076   $ 108,278     Income Per Share of Common Stock Basic $ 0.68   $ 1.73   Diluted $ 0.68   $ 1.73     Income from continuing operations per share of common stock,after preferred dividends Basic $ 0.68   $ 1.73   Diluted $ 0.68   $ 1.73     Income (loss) from discontinued operations per shareof common stock Basic $ -   $ -   Diluted $ -   $ -     Weighted Average Number of Shares of Common Stock Outstanding Basic   105,181,009     62,602,184   Diluted   105,670,102     62,611,070     Dividends Declared per Share of Common Stock $ 0.20   $ -       Newcastle Investment Corp.Consolidated Balance Sheets(dollars in thousands)             March 31, 2012     (Unaudited)December 31, 2011Assets   Non-Recourse VIE Financing Structures Real estate securities, available for sale $ 1,536,251 $ 1,479,214 Real estate related loans, held for sale, net 838,818 807,214 Residential mortgage loans, held for investment, net 321,347 331,236 Subprime mortgage loans subject to call option 404,979 404,723 Operating real estate, held for sale 7,739 7,741 Other investments 18,883 18,883 Restricted cash 107,875 105,040 Derivative assets 1,832 1,954 Receivables and other assets   22,147     23,319     3,259,871     3,179,324   Recourse Financing Structures and Unlevered Assets Real estate securities, available for sale 248,638 252,530 Real estate related loans, held for sale, net - 6,366 Residential mortgage loans, held for sale, net 2,775 2,687 Investments in excess mortgage servicing rights at fair value 42,587 43,971 Other investments 6,024 6,024 Cash and cash equivalents 156,425 157,356 Receivables and other assets   3,226     3,541     459,675     472,475   $ 3,719,546   $ 3,651,799     Liabilities and Stockholders' Equity (Deficit)LiabilitiesNon-Recourse VIE Financing Structures CDO bonds payable $ 2,365,537 $ 2,403,605 Other bonds and notes payable 190,091 200,377 Repurchase agreements 5,644 6,546 Financing of subprime mortgage loans subject to call option 404,979 404,723 Derivative liabilities 108,774 119,320 Accrued expenses and other liabilities   15,723     16,112     3,090,748     3,150,683   Recourse Financing Structures and Other Liabilities Repurchase agreements 228,080 233,194 Junior subordinated notes payable 51,247 51,248 Dividends payable 21,966 16,707 Due to affiliates 1,659 1,659 Accrued expenses and other liabilities   2,824     6,219     305,776     309,027     3,396,524     3,459,710     Stockholders' Equity (Deficit) 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 March 31, 2012 and December 31, 2011 61,583 61,583 Common stock, $0.01 par value, 500,000,000 shares authorized, 105,181,009 shares issued and outstanding at March 31, 2012 and December 31, 2011 1,052 1,052 Additional paid-in capital 1,275,792 1,275,792 Accumulated deficit (1,022,212 ) (1,073,252 ) Accumulated other comprehensive income (loss)   6,807     (73,086 )   323,022     192,089   $ 3,719,546   $ 3,651,799       Newcastle Investment Corp.Consolidated Statements of Cash Flows (Unaudited)(dollars in thousands)             Three Months Ended March 312012       2011Cash flows From Operating Activities Net income 73,471 109,673 Adjustment to reconcile net income to net cash provided by (used in) operating activities (inclusive of amounts related to discontinued operations): Depreciation and amortization 87 46 Accretion of discount and other amortization (12,213 ) (10,771 ) Interest income in CDOs redirected for reinvestment or CDO bond pay down (1,230 ) (3,724 ) Interest income on investments accrued to principal balance (5,293 ) (4,535 ) Interest expense on debt accrued to principal balance 109 410 Deferred interest received - 1,027 Valuation allowance (reversal) on loans (9,031 ) (41,307 ) Other-than-temporary impairment on securities 1,951 4,101 Impairment on real estate held-for-sale - 433 Change in fair value on investments in excess mortgage servicing rights (1,216 ) - Gain on settlement of investments (net) and real estate held-for-sale (4,823 ) (33,158 ) Unrealized loss on non-hedge derivatives and hedge ineffectiveness (2,087 ) 201 Gain on extinguishment of debt (20,743 ) (11,042 ) Change in: Restricted cash 286 109 Receivables and other assets 555 (40 ) Due to affiliates - (68 ) Accrued expenses and other liabilities   (559 )   (61 ) Net cash provided by (used in) operating activities   19,264     11,294     Cash Flows From Investing Activities Principal repayments from repurchased CDO debt 4,497 9,726 Principal repayments from CDO securities 198 - Return of investment in excess mortgage servicing rights 2,425 - Principal repayments from loans and non-CDO securities 22,894 37,605 Purchase of real estate securities (4,340 ) (89,601 ) Acquisition of investments in excess mortgage servicing rights (3,072 ) - Acquisition of servicing rights   -     (2,082 ) Net cash provided by (used in) investing activities   22,602     (44,352 )   Cash flows From Financing Activities Repurchases of CDO bonds payable (9,159 ) (1,083 ) Repayments of other bonds payable (10,450 ) (10,460 ) Borrowings under repurchase agreements 4,117 79,978 Repayments of repurchase agreements (10,133 ) (2,907 ) Issuance of common stock - 98,843 Costs related to issuance of common stock - (58 ) Common Stock dividends paid (15,777 ) - Preferred Stock dividends paid   (1,395 )   (4,185 ) Net cash provided by (used in) financing activities   (42,797 )   160,128     Net Increase (Decrease) in Cash and Cash Equivalents (931 ) 127,070   Cash and Cash Equivalents, Beginning of Period   157,356     33,524     Cash and Cash Equivalents, End of Period $ 156,425   $ 160,594     Supplemental Disclosure of Cash Flow Information Cash paid during the period for interest expense $ 20,726 $ 28,759   Supplemental Schedule of Non-Cash Investing and Financing Activities   Common stock dividends declared but not paid $ 21,036 $ - Preferred stock dividends declared but not paid $ 930 $ 930     Newcastle Investment Corp.Reconciliation of Core Earnings(dollars in thousands)           Three Months Ended March 31,2012       2011 Income available for common stockholders $ 72,076 $ 108,278 Add (Deduct): Impairment (reversal) (7,080 ) (37,206 ) Other income (29,752 ) (45,469 ) Loss (Income) from discontinued operations   (264 )   (190 ) $ 34,980   $ 25,413     Core EarningsCore 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. Management views this measure as Newcastle's “core” current earnings, while gains and losses (including impairment) are simply a potential indicator of future earnings. 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 our liquidity and is not necessarily 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.   Newcastle Investment Corp.Reconciliation of Cash Available for Distribution(dollars in thousands)           Three Months Ended March 31,2012       2011Reconciliation of Cash Available for Distribution: Net cash provided by operating activities 19,264 11,294   Principal repayments from CDOs bought at a discount(1) 4,695 9,726 Less: Return of capital included above(2)   (3,005 )   (4,595 ) Subtotal 1,690 5,131   Preferred dividends(3)   (1,395 )   (1,395 ) Cash Available for Distribution$19,559   $15,030     Other data from the Consolidated Statements of Cash Flows: Net cash provided by (used in) investing activities $ 22,602 $ (44,352 ) Net cash provided by (used in) financing activities (42,797 ) 160,128 Net increase (decrease) in cash and cash equivalents (931 ) 127,070   (1)   Excludes principal repayments on assets purchased at par or assets where the principal received is required to pay down Newcastle's debt (assets held in our CDO's, MH loans and Agency Securities). (2) Represents the portion of principal repayments from repurchased CDO debt and from CDO securities computed based on the ratio of Newcastle's purchase price of such debt or securities to the aggregate principal payments expected to be received from such debt or securities. (3) Represents preferred dividends to be paid on an accrual basis (payments are made at the end of Jan, Apr, Jul and Oct).   Cash Available for Distribution (“CAD”)We believe that CAD is useful for investors because it is a meaningful measure of our operating liquidity. It represents GAAP net cash provided by operating activities adjusted for two factors:1.Principal payments received from Newcastle's investments in repurchased CDO debt and CDO securities in excess of the portion that represent a return of Newcastle's invested capital. In other words, although these net principal repayments are reported as investing activities for GAAP purposes, they actually represent a portion of Newcastle's return on these investments (or yield), rather than a return of Newcastle's invested capital.2.Preferred dividends. Although these dividends are reported as financing activities for GAAP purposes, they represent a recurring use of Newcastle's operating cash flow similar to interest payments on debt.Management uses CAD as an important input in determining cash available to pay dividends to Newcastle's common stockholders.CAD excludes principal repayments on assets purchased at par or assets where the principal received is required to pay down Newcastle's debt (assets held in our CDOs, MH loans and Agency Securities). Furthermore, net cash provided by operating activities, a primary element of CAD, includes timing differences based on changes in accruals. For these reasons CAD is limited in its usefulness and does not represent cash generated from operating activities in accordance with GAAP and 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 our liquidity and is not necessarily indicative of cash available to fund cash needs. Our calculation of CAD may be different from the calculation used by other companies and therefore comparability may be limited. Newcastle Investment Corp.Investor Relations, 212-479-3195