Quarterly report pursuant to Section 13 or 15(d)

EQUITY AND EARNINGS PER SHARE

v3.19.1
EQUITY AND EARNINGS PER SHARE
3 Months Ended
Mar. 31, 2019
Equity and Earnings Per Share [Abstract]  
EQUITY AND EARNINGS PER SHARE EQUITY AND EARNINGS PER SHARE
 
Equity and Dividends

In February 2019, New Residential issued 46.0 million shares of its common stock in a public offering at a price to the public of $16.50 per share for net proceeds of approximately $751.7 million. 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 4.6 million shares of New Residential’s common stock at the public offering price, which had a fair value of approximately $3.8 million as of the grant date. The assumptions used in valuing the options were: a 2.40% risk-free rate, a 9.30% dividend yield, 19.26% volatility and a 10-year term.

On March 25, 2019, New Residential’s board of directors declared a first quarter 2019 dividend of $0.50 per common share or $207.7 million.

Approximately 2.4 million shares of New Residential’s common stock were held by Fortress, through its affiliates, at March 31, 2019.

Option Plan

As of March 31, 2019, New Residential’s outstanding options were summarized as follows:
Held by the Manager
8,760,167

Issued to the Manager and subsequently assigned to certain of the Manager’s employees
2,690,749

Issued to the independent directors
6,000

Total
11,456,916



The following table summarizes New Residential’s outstanding options as of March 31, 2019. The last sales price on the New York Stock Exchange for New Residential’s common stock in the quarter ended March 31, 2019 was $16.91 per share.
Recipient
Date of
Grant/
Exercise(A)
 
Number of Unexercised
Options
 
Options
Exercisable as of
March 31, 2019
 
Weighted
Average
Exercise
Price(B)
 
Intrinsic Value of Exercisable Options as of
March 31, 2019
(millions)
Directors
Various
 
6,000

 
6,000

 
$
13.07

 
$

Manager(C)
2016
 
400,000

 
400,000

 
13.29

 
1.5

Manager(C)
2017
 
1,130,916

 

 
14.09

 

Manager(C)
2018
 
5,320,000

 
1,256,965

 
16.76

 
0.2

Manager(C)
2019
 
4,600,000

 
153,333

 
16.50

 
0.1

Outstanding
 
 
11,456,916

 
1,816,298

 
 
 
 
 
(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. A portion of New Residential’s 2018 dividends was deemed to be a return of capital and the exercise prices were adjusted accordingly.
(C)
The Manager assigned certain of its options to its employees as follows:
    
Date of Grant to Manager
 
Range of Exercise
Prices
 
Total Unexercised
Inception to Date
2016
 
$13.29
 
400,000

2017
 
$14.09
 
1,130,916

2018
 
$16.68 to $18.15
 
1,159,833

Total
 
 
 
2,690,749


 
The following table summarizes activity in New Residential’s outstanding options:
 
 
Amount
 
Weighted Average Exercise Price
December 31, 2018 outstanding options
 
8,498,138

 
 
Options granted
 
4,600,000

 
$
16.50

Options exercised
 
(1,641,222
)
 
$
14.16

Options expired unexercised
 

 
 
March 31, 2019 outstanding options
 
11,456,916

 
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 months ended March 31, 2019, based on the treasury stock method, New Residential had 321,144 dilutive common stock equivalents outstanding. During the three months ended March 31, 2018, based on the treasury stock method, New Residential had 2,995,580 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 Servicer Advance Investments (Note 6), Shelter JVs (Note 8) and Consumer Loans (Note 9).