Brookfield Asset Management Inc. (TSX:BAM.A)(NYSE:BAM)(EURONEXT:BAMA) -
Investors, analysts and other interested parties can access Brookfield Asset
Management's 2012 Second Quarter Results as well as the Shareholders' Letter and
Supplemental Information on Brookfield's website under the Investor
Centre/Financial Reports section at www.brookfield.com.
The 2012 Second Quarter Results conference call can be accessed via webcast on
August 10, 2012 at 11:00 a.m. Eastern Time at www.brookfield.com or via
teleconference at 1-800-319-4610 toll free in North America. For overseas calls
please dial 1-604-638-5340, at approximately 10:50 a.m. Eastern Time. The
teleconference taped rebroadcast can be accessed at 1-800-319-6413 or
1-604-638-9010 (Password 2811#).
Brookfield Asset Management Inc. today announced its financial results for the
quarter ended June 30, 2012. The financial results are based on International
Financial Reporting Standards ("IFRS") unless otherwise noted.
Three months ended Six months ended
June 30 June 30
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US$ millions (except per share
amounts) 2012 2011 2012 2011
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Funds from operations(1), (2) $ 244 $ 309 $ 527 $ 540
Net income(1) 138 838 554 1,116
Total return(1), (2) 272 840 983 1,267
Per Brookfield share
Funds from operations(1), (2) $ 0.34 $ 0.45 $ 0.74 $ 0.78
Net income(1) 0.17 1.26 0.78 1.67
Total return(1), (2) 0.43 1.34 1.56 2.03
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1. Attributable to Brookfield shareholders. Excludes amounts attributable
to non-controlling interests
2. Non-IFRS measure. See Basis of Presentation on pages 3 and 4 for details
Bruce Flatt, CEO of Brookfield, commented that: "During the last few months we
completed a record number of acquisitions, and despite market volatility, most
of our operations achieved solid performance. Our strong capital position during
this environment enabled us to acquire a $600 million portfolio of U.S. hydro
power facilities, a joint controlling interest in a 3,200 kilometer Brazilian
toll road company, a UK utility business, a GBP 518 million portfolio of office
properties in London, and over $1.5 billion of office, retail and industrial
properties in the U.S. and Australia. Investors continue to allocate further
capital to our investment funds."
Financial Results
Despite the recent economic volatility, we recorded good financial results. We
generated a Total Return for Brookfield shareholders of $272 million, or $0.43
per share, which brings our Total Return for the first half of 2012 to nearly $1
billion, or $1.56 per share. Total Return includes our share of funds from
operations ("FFO"), which was $244 million, and $61 million of valuation gains;
less $33 million of preferred share dividends.
FFO totalled $613 million on a consolidated basis, of which $244 million (or
$0.34 per share) accrued to Brookfield shareholders, compared to $309 million of
FFO for Brookfield shareholders in the same quarter a year ago. FFO reflects
improved performance and economic conditions in most of our operations; however
these were partially offset by below average generation in our renewable power
operations and the unfavourable impact of market volatility on our investment
securities. In contrast, the 2011 quarter reflected slightly below average
hydroelectric power generation and a $61 million private equity monetization
gain, which together accounted for most of the variance in FFO.
Valuation gains include fair value changes recorded in net income and other
comprehensive income, as well as changes in incremental values that we record in
respect of items not otherwise revalued under IFRS. Net gains during the quarter
reflect continued increases in commercial property valuations, but these were
largely offset by the impact of declining interest rates on existing contracts
to lock in rates on future debt issuance, which despite being a great long-term
hedge, is marked to market in our results until the actual loans are refinanced.
The intrinsic value of our common equity was $41.81 per share at June 30,
compared to $40.99 at the beginning of the year, $39.31 at the end of the
comparable quarter in 2011 and $42.35 at March 31. The decline in the second
quarter is due largely to the impact of lower foreign exchange rates on non-U.S.
operations that more than offset the total return generated in the quarter.
Consolidated net income was $379 million, of which $138 million (or $0.17 per
share) accrued to Brookfield shareholders. Net income includes FFO as well as
non-cash revaluation items such as accounting depreciation and changes in the
appraised values of commercial properties. This compares to $838 million (or
$1.26 per share) in the second quarter of 2011, which was an exceptional quarter
in terms of increases in the value of commercial office and retail property
asset valuations, particularly in the U.S.
Operating Highlights
-- We continued to expand our asset management franchise with both listed
and private entities.
We closed on over $3 billion of capital across our private funds during the
quarter, of which $2 billion came from third party investors. We are moving
forward with capital campaigns on nine private funds seeking a further $4
billion of third party capital. We continue to advance the launch of our global
listed property business, which will rank as one of the largest and most
diversified public property businesses, and issued approximately $0.5 billion of
additional equity from our listed infrastructure entity in July. Our flagship
$2.6 billion infrastructure fund is almost fully committed, with a robust
pipeline of deals.
-- We raised $12.1 billion of capital since March 31 through asset sales,
equity issuance, fund formations and debt financings, totalling $15.7
billion of capital raised year to date.
Low interest rates, receptive credit markets and strong investor interest in our
income-generating, high quality assets continued to support our capital raising
and refinancing initiatives. These activities enhanced our liquidity, refinanced
near-term maturities, lowered our cost of capital, extended terms and funded new
investment initiatives.
-- We made significant investments in most of our major operating
businesses, expanding the capital deployed by both our listed and
private entities. We also completed a number of organic growth
initiatives that increased the value of our assets and the associated
cash flows.
We acquired or agreed to acquire a number of assets at attractive valuations,
all of which we believe to have significant growth potential. Our property
business acquired a portfolio of six office buildings and development sites in
the City of London for GBP 518 million, expanding our presence in this major
global financial centre. Our renewable power unit is investing $600 million in
four hydroelectric facilities that add 378 megawatts of generating capacity for
customers in the southeastern United States, expanding our portfolio into a
high-growth region. Our infrastructure business continues to expand its South
American toll road portfolio and has reached an agreement to acquire and
recapitalize a utility business in the United Kingdom, which will have an
enterprise value in excess of $1 billion.
We announced the launch of a one million square foot office building in Toronto
with a global professional services firm as our lead tenant, opened a fully
leased office building in Perth and leased 2.7 million square feet of commercial
property at rents substantially higher than the expiring leases. Our U.S. retail
business is attracting new tenants, increasing occupancy across the portfolio
and are considering plans of 11 anchor pads in malls acquired from a major
retailer. Initial rents for new leases in our U.S. mall portfolio increased by
9.6% on a comparable basis from 2011.
In our power business, we began commercial operations at Canada's largest wind
power facility and continue to advance construction on four projects with a
further 99 megawatts of installed capacity. Within our infrastructure
operations, we have largely completed our $600 million Australian rail
expansion, which is now contributing meaningfully to FFO, and have completed the
majority of construction on our Texas transmission network. Our Brazilian
residential businesses completed R$358 million of launches and contracted sales
of R$737 million, a more sustainable velocity than previously experienced. We
are seeing a slow but steady recovery in U.S. housing markets, which is
benefitting a number of cyclical investments that are tied to U.S. homebuilding
activity.
In total, we completed $1.2 billion of acquisitions and capital expansions, and
plan to complete another $3.7 billion of acquisitions we have already announced,
which will deploy approximately $2.6 billion of equity capital for our operating
platforms and our clients.
Intrinsic Value of Common Equity
The intrinsic value of Brookfield's common equity was $41.81 per share at June
30, 2012. This includes net tangible asset value of $35.35 per share and $6.46
per share related to the company's asset management franchise.
Dividend Declaration
The Board of Directors declared a quarterly dividend of US$0.14 per share
(representing US$0.56 per annum), payable on November 30, 2012, to shareholders
of record as at the close of business on November 1, 2012. The Board also
declared all of the regular monthly and quarterly dividends on its preferred
shares.
Information on Brookfield Asset Management's declared share dividends can be
found on the company's website under Investors/Stock and Dividend Information.
Basis of Presentation
This news release and accompanying financial statements make reference to total
return, funds from operations, invested capital and intrinsic value.
Total return is defined as comprehensive income excluding deferred tax expenses
and the impact of foreign currency fluctuations on the long-term capital
invested in non U.S. operations, and including incremental valuation adjustments
for assets not otherwise revalued under IFRS. Brookfield uses total return to
assess the performance of the overall business as well as individual business
units.
Funds from operations is defined as net income prior to fair value changes,
depreciation and amortization, and deferred income taxes, and includes certain
disposition gains that are not otherwise included in net income as determined
under IFRS. Brookfield uses funds from operations to assess its operating
results and the value of its business and believes that many of its shareholders
and analysts also find this measure of value to them.
Invested capital represents the capital invested by the company in its
operations on a segmented basis, net of the underlying liabilities and
non-controlling interests. These balances are derived from the company's IFRS
balance sheets and are adjusted to exclude deferred income taxes and to include
adjustments to present the fair value of assets and liabilities that are carried
at historical book values or otherwise not reflected in the company's IFRS
balance sheets. Common equity on this basis is referred to as net tangible asset
value.
Intrinsic value includes net tangible asset value, as represented by its
invested capital, as well as the value attributed to the company's asset
management franchise. Asset management franchise value represents management's
estimate of the value attributable to the company's asset management activities
that is not otherwise included in net tangible asset value, based on current
capital under management, associated fee arrangements, and potential growth.
Total return, funds from operations, invested capital and intrinsic value and
their per share equivalents are non-IFRS measures which do not have any standard
meaning prescribed by IFRS and therefore may not be comparable to similar
measures presented by other companies. The company provides additional
information on the determination of funds from operations, invested capital and
intrinsic value and a reconciliation between funds from operations and net
income attributable to Brookfield shareholders and invested capital and
intrinsic value and common equity in the Supplemental Information available at
www.brookfield.com.
Additional Information
The Letter to Shareholders and the company's Supplemental Information for the
quarter ended June 30, 2012 contain further information on the company's
strategy, operations and financial results. Shareholders are encouraged to read
these documents, which are available on the company's website.
The attached statements are based primarily on information that has been
extracted from our unaudited interim financial statements for the quarter ended
June 30, 2012, which have been prepared using IFRS. The amounts have not been
audited and are not subject to review by Brookfield's external auditor.
Brookfield Asset Management Inc. is a global alternative asset manager with over
$150 billion in assets under management. The company has over a 100-year history
of owning and operating assets with a focus on property, renewable power,
infrastructure and private equity. It has a range of public and private
investment products and services, which leverage its expertise and experience
and provide Brookfield with a competitive advantage in the markets where it
operates. Brookfield is co-listed on the New York and Toronto Stock Exchanges
under the symbol BAM and BAM.A, respectively, and on NYSE Euronext under the
symbol BAMA. For more information, please visit our website at
www.brookfield.com.
Please note that Brookfield's previous audited annual and unaudited quarterly
reports have been filed on EDGAR and SEDAR and can also be found in the investor
section of its website at www.brookfield.com. Hard copies of the annual and
quarterly reports can be obtained free of charge upon request.
For more information, please visit our website at www.brookfield.com.
Note: This news release contains "forward-looking information" within the
meaning of Canadian provincial securities laws and "forward-looking statements"
within the meaning of Section 27A of the U.S. Securities Act of 1933, as
amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended,
"safe harbor" provisions of the United States Private Securities Litigation
Reform Act of 1995 and in any applicable Canadian securities regulations.
Forward-looking statements include statements that are predictive in nature,
depend upon or refer to future events or conditions, include statements
regarding the operations, business, financial condition, expected financial
results, performance, prospects, opportunities, priorities, targets, goals,
ongoing objectives, strategies and outlook of the company and its subsidiaries,
as well as the outlook for North American and international economies for the
current fiscal year and subsequent periods, and include words such as "expects,"
"anticipates," "plans," "believes," "estimates," "seeks," "intends," "targets,"
"projects," "forecasts" or negative versions thereof and other similar
expressions, or future or conditional verbs such as "may," "will," "should,"
"would" and "could."
Although we believe that our anticipated future results, performance or
achievements expressed or implied by the forward-looking statements and
information are based upon reasonable assumptions and expectations, the reader
should not place undue reliance on forward-looking statements and information
because they involve known and unknown risks, uncertainties and other factors,
many of which are beyond our control, which may cause the actual results,
performance or achievements of the company to differ materially from anticipated
future results, performance or achievement expressed or implied by such
forward-looking statements and information.
Factors that could cause actual results to differ materially from those
contemplated or implied by forward-looking statements include, but are not
limited to: the impact or unanticipated impact of general economic, political
and market factors in the countries in which we do business; the behavior of
financial markets, including fluctuations in interest and foreign exchanges
rate; global equity and capital markets and the availability of equity and debt
financing and refinancing within these markets; strategic actions including
dispositions; the ability to complete and effectively integrate acquisitions
into existing operations and the ability to attain expected benefits; changes in
accounting policies and methods used to report financial condition (including
uncertainties associated with critical accounting assumptions and estimates);
the effect of applying future accounting changes; business competition;
operational and reputational risks; technological change; changes in government
regulation and legislation within the countries in which we operate; changes in
tax laws, catastrophic events, such as earthquakes and hurricanes; the possible
impact of international conflicts and other developments including terrorist
acts; and other risks and factors detailed from time to time in our documents
filed with the securities regulators in Canada and the United States.
We caution that the foregoing list of important factors that may affect future
results is not exhaustive. When relying on our forward-looking statements,
investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. Except as required by law, the company
undertakes no obligation to publicly update or revise any forward-looking
statements or information, whether written or oral, that may be as a result of
new information, future events or otherwise.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30 December 31
US$ millions 2012 2011
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Assets
Cash and cash equivalents $ 2,539 $ 2,027
Other financial assets 3,468 3,773
Accounts receivable and other 6,974 6,723
Inventory 6,354 6,060
Investments 10,514 9,401
Investment properties 29,612 28,366
Property, plant and equipment 26,160 22,832
Timber 3,131 3,155
Intangible assets 4,147 3,968
Goodwill 2,549 2,607
Deferred income tax asset 1,746 2,110
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Total Assets $ 97,194 $ 91,022
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Liabilities and Equity
Accounts payable and other $ 9,837 $ 9,266
Corporate borrowings 4,354 3,701
Non-recourse borrowings
Property-specific mortgages 31,332 28,415
Subsidiary borrowings 5,549 4,441
Deferred income tax liability 5,482 5,817
Capital securities 1,263 1,650
Interests of others in consolidated funds 356 333
Equity
Preferred equity 2,443 2,140
Non-controlling interests in net assets 19,655 18,516
Common equity 16,923 16,743
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Total equity 39,021 37,399
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Total Liabilities and Equity $ 97,194 $ 91,022
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CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three months ended Six months ended
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For the period ended June 30
US$ millions (except per share
amounts) 2012 2011 2012 2011
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Total revenues $ 4,293 $ 3,963 $ 8,337 $ 7,376
Asset management and other
services 108 95 185 171
Revenues less direct operating
costs
Property 498 421 969 765
Renewable power 170 227 418 417
Infrastructure 210 191 408 372
Private equity 167 131 281 234
Equity accounted income 258 1,017 648 1,228
Investment and other income 76 71 253 204
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1,487 2,153 3,162 3,391
Expenses
Interest 613 564 1,267 1,110
Operating costs 119 116 240 228
Current income taxes 42 21 69 54
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Net income prior to other items 713 1,452 1,586 1,999
Other items
Fair value changes (106) 310 200 558
Depreciation and amortization (287) (231) (584) (452)
Deferred income taxes 59 (103) (103) (107)
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Net income $ 379 $ 1,428 $ 1,099 $ 1,998
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Net income attributable to:
Brookfield shareholders $ 138 $ 838 $ 554 $ 1,116
Non-controlling interests 241 590 545 882
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$ 379 $ 1,428 $ 1,099 $ 1,998
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Net income per share
Diluted $ 0.17 $ 1.26 $ 0.78 $ 1.67
Basic $ 0.17 $ 1.32 $ 0.80 $ 1.74
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Note:
The foregoing table includes the results attributable to non-controlling
interests whereas the corporation's segmented operating results discussed
elsewhere in this release do not.
RECONCILIATION OF NET INCOME TO TOTAL RETURN(1)
(Unaudited) Three months ended Six months ended
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For the period ended June 30
US$ millions (except per share
amounts) 2012 2011 2012 2011
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Net income attributable to
Brookfield shareholders (see
page 7)(2) $ 138 $ 838 $ 554 $ 1,116
Fair value changes included in
other comprehensive income(2) (74) 40 86 278
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64 878 640 1,394
remove: deferred income taxes(2) (49) 49 75 (210)
add: fair value changes not
included in IFRS 290 (61) 330 134
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305 866 1,045 1,318
less: preferred share dividends (33) (26) (62) (51)
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Total return(3) $ 272 $ 840 $ 983 $ 1,267
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- Per share $ 0.43 $ 1.34 $ 1.56 $ 2.03
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(Unaudited) Three months ended Six months ended
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For the period ended June 30
US$ millions 2012 2011 2012 2011
----------------------------------------------------------------------------
Total return consists of
Funds from operations(3) (see
below) $ 244 $ 309 $ 527 $ 540
Valuation gains(3) 61 557 518 778
less: preferred share
dividends (33) (26) (62) (51)
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$ 272 $ 840 $ 983 $ 1,267
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Notes:
1. See Basis of Presentation on pages 3 and 4 for details
2. Excludes amounts attributable to non-controlling interests and foreign
currency revaluations
3. Total return, valuation gains and funds from operations are non-IFRS
measures
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS(1)
(Unaudited) Three months ended Six months ended
--------------------------------------------
For the period ended June 30
US$ millions 2012 2011 2012 2011
----------------------------------------------------------------------------
Net income prior to other items
(see page 7) $ 713 $ 1,452 $ 1,586 $ 1,999
Adjust for: fair value changes
within equity accounted
income (111) (844) (362) (878)
Disposition gains recorded in
equity under IFRS 11 61 11 64
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613 669 1,235 1,185
Non-controlling interest (369) (360) (708) (645)
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Funds from operations(2) $ 244 $ 309 $ 527 $ 540
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Notes:
1. See Basis of Presentation on pages 3 and 4 for details
2. Non-IFRS measure
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