Quarterly report pursuant to Section 13 or 15(d)

EQUITY AND EARNINGS PER SHARE

v3.7.0.1
EQUITY AND EARNINGS PER SHARE
6 Months Ended
Jun. 30, 2017
Equity and Earnings Per Share [Abstract]  
EQUITY AND EARNINGS PER SHARE
EQUITY AND EARNINGS PER SHARE
 
Equity and Dividends

On January 26, 2017, New Residential’s board of directors declared a first quarter 2017 dividend of $0.48 per common share or $147.5 million, which was paid on April 28, 2017 to stockholders of record as of March 27, 2017.

On June 21, 2017, New Residential’s board of directors declared a second quarter 2017 dividend of $0.50 per common share or $153.7 million, which was paid on July 28, 2017 to stockholders of record as of July 3, 2017.

In February 2017, New Residential issued 56.5 million shares of its common stock in a public offering at a price to the public of $15.00 per share for net proceeds of approximately $834.5 million. One of New Residential’s executive officers participated in this offering and purchased 18,600 shares at the public offering price. To compensate the Manager for its successful efforts in raising capital for New Residential, in connection with this offering, New Residential granted options to the Manager relating to 5.7 million shares of New Residential’s common stock at the public offering price, which had a fair value of approximately $8.1 million as of the grant date. The assumptions used in valuing the options were: a 2.38% risk-free rate, a 10.82% dividend yield, 28.64% volatility and a 10-year term.

Approximately 2.4 million shares of New Residential’s common stock were held by Fortress, through its affiliates, and its principals at June 30, 2017.

Option Plan

As of June 30, 2017, New Residential’s outstanding options were summarized as follows:
Held by the Manager
16,128,730

Issued to the Manager and subsequently transferred to certain of the Manager’s employees
2,367,458

Issued to the independent directors
6,000

Total
18,502,188



The following table summarizes New Residential’s outstanding options as of June 30, 2017. The last sales price on the New York Stock Exchange for New Residential’s common stock in the quarter ended June 30, 2017 was $15.56 per share.
Recipient
Date of
Grant/
Exercise(A)
 
Number of Unexercised
Options
 
Options
Exercisable
as of
June 30, 2017
 
Weighted
Average
Exercise
Price(B)
 
Intrinsic
Value of Exercisable Options as of
June 30, 2017
(millions)
Directors
Various
 
6,000

 
6,000

 
$
13.99

 
$

Manager(C)
2012
 
25,000

 
25,000

 
7.19

 
0.2

Manager(C)
2013
 
835,571

 
835,571

 
11.48

 
3.4

Manager(C)
2014
 
1,437,500

 
1,437,500

 
12.20

 
4.8

Manager(C)
2015
 
8,543,539

 
7,218,165

 
15.45

 
1.5

Manager(C)
2016
 
2,000,000

 
666,667

 
14.20

 
0.9

Manager(C)
2017
 
5,654,578

 
753,944

 
15.00

 
0.4

Outstanding
 
 
18,502,188

 
10,942,847

 
 
 
 
 
(A)
Options expire on the tenth anniversary from date of grant.
(B)
The exercise prices are subject to adjustment in connection with return of capital dividends.
(C)
The Manager assigned certain of its options to Fortress’s employees as follows:
    
Date of Grant
 
Range of Exercise
Prices
 
Total Unexercised
Inception to Date
2014
 
$12.20
 
258,750

2015
 
$15.25 to $15.88
 
1,708,708

2016
 
$14.20
 
400,000

Total
 
 
 
2,367,458


 
The following table summarizes activity in New Residential’s outstanding options:
 
 
Amount
 
Weighted Average Exercise Price
December 31, 2016 outstanding options
 
13,196,610

 
 
Options granted
 
5,654,578

 
$
15.00

Options exercised
 

 
$

Options expired unexercised
 
(349,000
)
 
 
June 30, 2017 outstanding options
 
18,502,188

 
See table above


Income and Earnings Per Share
 
New Residential is required to present both basic and diluted earnings per share (“EPS”). Basic EPS is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period. New Residential’s common stock equivalents are its outstanding options. During the three and six months ended June 30, 2017, based on the treasury stock method, New Residential had 2,047,638 and 1,845,375 dilutive common stock equivalents outstanding. During the three and six months ended June 30, 2016, based on the treasury stock method, New Residential had 361,363 and 214,437 dilutive common stock equivalents outstanding.
 
Noncontrolling Interests
 
Noncontrolling interests is comprised of the interests held by third parties in consolidated entities that hold New Residential’s investments in Servicer Advances (Note 6) and Consumer Loans (Note 9).