Quarterly report pursuant to Section 13 or 15(d)

EQUITY AND EARNINGS PER SHARE

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EQUITY AND EARNINGS PER SHARE
3 Months Ended
Mar. 31, 2014
Equity And Earnings Per Share  
EQUITY AND EARNINGS PER SHARE
13. EQUITY AND EARNINGS PER SHARE

 

Equity and Dividends

 

On April 26, 2013, Newcastle announced that its board of directors had formally declared the distribution of shares of common stock of New Residential, a then wholly owned subsidiary of Newcastle. Following the spin-off, New Residential is an independent, publicly-traded REIT primarily focused on investing in residential mortgage related assets. The spin-off was completed on May 15, 2013 and New Residential began trading on the New York Stock Exchange under the symbol “NRZ.” The spin-off transaction was effected as a taxable pro rata distribution by Newcastle of all the outstanding shares of common stock of New Residential to the stockholders of record of Newcastle as of May 6, 2013. The stockholders of Newcastle as of the record date received one share of New Residential common stock for each share of Newcastle common stock held.

 

On April 29, 2013, New Residential’s certificate of incorporation was amended so that its authorized capital stock now consists of 2,000,000,000 shares of common stock, par value $0.01 per share, and 100,000,000 shares of preferred stock, par value $0.01 per share. At the time of the completion of the spin-off, there were 253,025,645 outstanding shares of common stock which was based on the number of Newcastle’s shares of common stock outstanding on May 6, 2013 and a distribution ratio of one share of New Residential common stock for each share of Newcastle common stock.

 

For recent activity related to New Residential’s common stock and options thereon, see Note 18.

 

On December 17, 2013, New Residential declared a quarterly dividend of $0.175 per common share and a special cash dividend of $0.075 per common share, totaling $63.3 million, for the quarter ended December 31, 2013. The combined dividend of $0.25 was paid on January 31, 2014. On March 19, 2014, New Residential declared a quarterly dividend of $0.175 per common share, or $44.3 million, for the quarter ended March 31, 2014, which was paid in April 2014.

 

Approximately 5.3 million shares of New Residential’s common stock were held by Fortress, through its affiliates, and its principals at March 31, 2014.

 

Option Plan

 

New Residential’s outstanding options at March 31, 2014 consisted of the following:

 

      Number of Options     Strike Price     Maturity Date
        343,275     $ 13.86     05/25/14
        162,500       16.95     11/22/14
        330,000       15.97     01/12/15
        2,000       16.68     08/01/15
        170,000       15.87     11/01/16
        242,000       16.90     01/23/17
        456,000       14.96     04/11/17
        1,580,166       3.29     03/29/21
        2,424,833       2.49     09/27/21
        2,000       2.74     12/20/21
        1,867,167       3.41     04/03/22
        2,265,000       3.67     05/21/22
        2,499,167       3.67     07/31/22
        5,750,000       5.12     01/11/23
        2,300,000       5.74     02/15/23
        8,000       6.79     06/02/23
Total/Weighted Average       20,402,108     $ 5.11  

 

As of March 31, 2014, New Residential’s outstanding options were summarized as follows:

 

Held by the Manager     15,232,638  
Issued to the Manager and subsequently transferred to certain of the Manager’s employees     5,157,470  
Issued to the independent directors     12,000  
Total     20,402,108  

 

For recent activities related to option exercises, see Note 18.

 

Income and Earnings Per Share

 

Net income earned prior to the spin-off is included in additional paid-in capital instead of retained earnings since the accumulation of retained earnings began as of the date of spin-off.

 

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 stock options. During the three months ended March 31, 2014, based on the treasury stock method, New Residential had 6,630,915 dilutive common stock equivalents. During the three months ended March 31, 2013, New Residential did not have any dilutive common stock equivalents outstanding.

 

For the purposes of computing EPS for periods prior to the spin-off on May 15, 2013, New Residential treated the common shares issued in connection with the spin-off as if they had been outstanding for all periods presented, similar to a stock split. For the purposes of computing diluted EPS for periods prior to the spin-off on May 15, 2013, New Residential treated the 21.5 million options issued on the spin-off date as a result of the conversion of Newcastle options as if they were granted on May 15, 2013 since no New Residential awards were outstanding prior to that date.

 

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).