Quarterly report pursuant to Section 13 or 15(d)

EQUITY AND EARNINGS PER SHARE

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EQUITY AND EARNINGS PER SHARE
9 Months Ended
Sep. 30, 2021
Earnings Per Share [Abstract]  
EQUITY AND EARNINGS PER SHARE EQUITY AND EARNINGS PER SHARE
 
Equity and Dividends

On February 11, 2020, the Company priced its underwritten public offering of 14,000,000 of its 6.375% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share, with a liquidation preference of $25.00 per share for net proceeds of approximately $389.5 million. The offering closed on February 14, 2020. In connection with the offering, the underwriters exercised an option to purchase up to an additional 2,100,000 shares of preferred stock. 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 1.6 million shares of New Residential’s common stock at the closing price per share of common stock on the pricing date, which had a fair value of approximately $1.0 million as of the grant date.

On February 16, 2021, New Residential announced that its board of directors had authorized the repurchase of up to $200.0 million of its common stock through December 31, 2021. Repurchases may be made from time to time through open market purchases or privately negotiated transactions, pursuant to one or more plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 or by means of one or more tender offers, in each case, as permitted by securities laws and other legal requirements. No share repurchases have been made as of the date of issuance of these Consolidated Financial Statements. The share repurchase program may be suspended or discontinued at any time.

On April 14, 2021, the Company priced its underwritten public offering of 45,000,000 shares of its common stock at a public offering price of $10.10 per share. In connection with the offering, the Company granted the underwriters an option for a period of 30 days to purchase up to an additional 6,750,000 shares of common stock at a price of $10.10 per share. On April 16, 2021, the underwriters exercised their option, in part, to purchase an additional 6,725,000 shares of common stock. The offering closed on April 19, 2021. To compensate the Manager for its successful efforts in raising capital for New Residential, the Company granted options to the Manager relating to 5.2 million shares of New Residential’s common stock at $10.10 per share.

On May 19, 2021, New Residential entered into a Distribution Agreement to sell shares of its common stock, par value $0.01 per share (the “ATM Shares”), having an aggregate offering price of up to $500.0 million, from time to time, through an “at-the-market” equity offering program (the “ATM Program”). No share issuances were made during the three months ended September 30, 2021.

On September 14, 2021, the Company priced its underwritten public offering of 17,000,000 of its 7.00% Fixed-Rate Reset Series D Cumulative Redeemable Preferred Stock, par value $0.01 per share, with a liquidation preference of $25.00 per share for net proceeds of approximately $449.5 million. The offering closed on September 17, 2021. In connection with the offering, New Residential granted the underwriters an option for a period of 30 days to purchase up to an additional 2,550,000 shares of preferred stock at a price of $24.2125 per share. On September 22, 2021, the underwriters exercised their option, in part, to purchase an additional 1,600,000 shares of preferred stock. To compensate the Manager for its successful efforts in raising capital for New Residential, the Company granted options to the Manager relating to approximately 1.9 million shares of New Residential’s common stock at $10.89 per share.

Pursuant to our certificate of incorporation, we are authorized to designate and issue up to 100.0 million shares of preferred stock, par value of $0.01 per share, in one or more classes or series. The table below summarizes preferred stock:
Dividends Declared per Share
Number of Shares Three Months Ended
September 30,
Nine Months Ended
September 30,
Series September 30, 2021 December 31, 2020
Liquidation Preference(A)
Issuance Discount
Carrying Value(B)
2021 2020 2021 2020
Series A, 7.50% issued July 2019(C)
6,210  6,210  $ 155,250  3.15  % $ 150,026  $ 0.47  $ 0.47  $ 1.41  $ 1.41 
Series B, 7.125% issued August 2019(C)
11,300  11,300  282,500  3.15  % 273,418  0.45  0.45  1.34  1.34 
Series C, 6.375% issued February 2020(C)
16,100  16,100  402,500  3.15  % 389,548  0.40  0.40  1.20  1.20 
Series D, 7.00%, issued September 2021(D)
18,600  —  465,000  3.15  % 449,506  0.28  —  0.28  — 
Total 52,210  33,610  $ 1,305,250  $ 1,262,498  $ 1.60  $ 1.32  $ 4.23  $ 3.95 
(A)Each series has a liquidation preference or par value of $25.00 per share.
(B)Carrying value reflects par value less discount and issuance costs.
(C)Fixed-to-floating rate cumulative redeemable preferred.
(D)Fixed-rate reset cumulative redeemable preferred.

On September 22, 2021, New Residential’s board of directors declared third quarter 2021 preferred dividends of $0.47 per share of Preferred Series A, $0.45 per share of Preferred Series B, $0.40 per share of Preferred Series C, and $0.28 per share of Preferred Series D or $2.9 million, $5.0 million, $6.4 million, and $1.2 million, respectively.

Common dividends have been declared as follows:
Declaration Date Payment Date Per Share Total Amounts Distributed (millions)
Quarterly Dividend
March 31, 2020
April 2020
$ 0.05  $ 20.8 
June 22, 2020
July 2020
0.10  41.6 
September 23, 2020 October 2020 0.15  62.4 
December 16, 2020 January 2021 0.20  82.9 
March 24, 2021 April 2021 0.20  82.9 
June 16, 2021 August 2021 0.20  93.3 
August 23, 2021 October 2021 0.25  116.6 

Approximately 2.4 million shares of New Residential’s common stock were held by Fortress, through its affiliates, at September 30, 2021.

Common Stock Purchase Warrants

During the second quarter of 2020, the Company issued warrants (the “2020 Warrants”) in conjunction with the issuance of a term loan, which was fully repaid in the third quarter of 2020, that provide the holders the right to acquire, subject to anti-dilution adjustments, up to 43.4 million shares of the Company’s common stock in the aggregate. The 2020 Warrants are exercisable in cash or on a cashless basis and expire on May 19, 2023 and are exercisable, in whole or in part, at any time or from time to time after September 19, 2020 at the following prices (subject to certain anti-dilution adjustments): approximately 24.6 million shares of common stock at $6.11 per share and approximately 18.9 million shares of common stock at $7.94 per share.

The 2020 Warrants were valued using a Black-Scholes option valuation model that resulted in a fair value of approximately $53.5 million on the Issuance Date and is not subject to subsequent remeasurement. The Company used the following assumptions in the application of the Black-Scholes option valuation model: an exercise price ranging between $6.11 and $7.94, a term of 3.0 years, a risk-free interest rate of 0.24%, and volatility of 35%. The 2020 Warrants met the definition of derivatives under the guidance in ASC 815, Derivatives and Hedging; however, because these instruments are determined to be indexed to the Company’s own stock and met the criteria for equity classification under ASC 815, the 2020 Warrants are accounted for as an equity transaction and recorded in Additional Paid-in-Capital. The 2020 Warrants have a dilutive effect on net income per share and book value to the extent that the market value per share of the Company’s common stock at the time of exercise exceeds the strike price of the 2020 Warrants.
The table below summarizes the 2020 Warrants at September 30, 2021:
Number of Warrants
(in millions)
Weighted Average Exercise Price
(per share)
Outstanding warrants - December 31, 2020
43.4  $ 6.79 
Granted —  — 
Exercised —  — 
Expired —  — 
Outstanding warrants - September 30, 2021
43.4  6.58 
(A)
(A)Reflects a reduction in weighted average exercise price due to anti-dilution adjustments effective for dividends in excess of $0.10 a share.

Option Plan

As of September 30, 2021, outstanding options were as follows:
Held by the Manager 18,700,175 
Issued to the Manager and subsequently assigned to certain of the Manager’s employees
2,753,980 
Issued to the independent directors 6,000 
Total 21,460,155 

The following table summarizes outstanding options as of September 30, 2021. The last sales price on the New York Stock Exchange for New Residential’s common stock in the quarter ended September 30, 2021 was $11.00 per share.
Recipient
Date of
Grant/
Exercise(A)
Number of Unexercised
Options
Options
Exercisable
as of
September 30, 2021
Weighted
Average
Exercise
Price(B)
Intrinsic Value of Exercisable Options as of
September 30, 2021
(millions)
Directors Various 6,000  6,000  $ 13.46  $ — 
Manager(C)
2017 1,130,916  1,130,916  13.78  — 
Manager(C)
2018 5,320,000  5,320,000  16.50  — 
Manager(C)
2019 6,351,000  6,000,800  15.93  — 
Manager(C)
2020 1,619,739  1,025,835  17.23  — 
Manager(C)
2021 7,032,500  862,083  10.10  0.78
Outstanding 21,460,155  14,345,634 
(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 its employees as follows:
Date of Grant to Manager Range of Exercise
Prices
Total Unexercised
Inception to Date
2018
$16.37 to $17.84
1,159,833 
2019
$14.96 to $16.50
1,270,200 
2020
$16.84 to $17.23
323,947 
Total 2,753,980 
 
The following table summarizes activity in outstanding options:
Amount Weighted Average Exercise Price
Outstanding options - December 31, 2020
14,428,655 
Granted 7,032,500  $ 10.31 
Exercised —  — 
Expired (1,000) 12.36 
Outstanding options - September 30, 2021
21,460,155  See table above

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.

The following table summarizes the basic and diluted earnings per share calculations:
Three Months Ended
September 30, 2021
Nine Months Ended
September 30,
2021 2020 2021 2020
Net income (loss) $ 170,681  $ 103,920  $ 617,743  $ (1,459,206)
Noncontrolling interests in income of consolidated subsidiaries
9,001  11,640  28,448  34,118 
Dividends on preferred stock 15,533  14,359  44,249  39,938 
Net income (loss) attributable to common stockholders $ 146,147  $ 77,921  $ 545,046  $ (1,533,262)
Basic weighted average shares of common stock outstanding 466,579,920  415,744,518  446,085,657  415,665,441 
Dilutive effect of stock options and common stock purchase warrants(A)
15,702,775  5,224,108  15,608,824  — 
Diluted weighted average shares of common stock outstanding 482,282,695  420,968,626  461,694,481  415,665,441 
Basic earnings per share attributable to common stockholders $ 0.31  $ 0.19  $ 1.22  $ (3.69)
Diluted earnings per share attributable to common stockholders $ 0.30  $ 0.19  $ 1.18  $ (3.69)
(A)Stock options and common stock purchase warrants that could potentially dilute basic earnings per share in the future were not included in the computation of diluted earnings per share for the periods where a loss has been recorded because they would have been anti-dilutive for the period presented.

The Company excluded the following weighted-average potential common shares from the calculation of diluted net income (loss) per share during the applicable periods because their inclusion would have been anti-dilutive:
Three Months Ended
September 30, 2021
Nine Months Ended
September 30,
2021 2020 2021 2020
Stock options and common stock purchase warrants —  —  —  5,966,141