Brookfield Asset Management Inc. (TSX: BAM) (NYSE: BAM) (AEX: BAMA)
Investors, analysts and other interested parties can access
Brookfield Asset Management's 2008 Q3 Results as well as the
Shareholders' Letter and Supplemental Information on Brookfield's
web site under the Investor Centre/Financial Reports section at
www.brookfield.com.
The 2008 Q3 Results conference call can be accessed via webcast
on November 7, 2008 at 11 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 604- 638-9010 (Password 2811).
Brookfield Asset Management Inc. (TSX: BAM) (NYSE: BAM) (AEX:
BAMA) today announced its results for the third quarter ended
September 30, 2008.
Cash Flow From Operations
Cash flow from operations for the third quarter totalled $355
million ($0.58 per share). Operating cash flow in the same quarter
in 2007 was $255 million ($0.40 per share) on a comparable basis,
which excludes a security disposition gain of $66 million, or $321
million ($0.52 per share) including the gain. On a comparable
basis, operating cash flow per share increased by 45%
quarter-over-quarter due to improved water levels and pricing in
the company's renewable power business and an increased
contribution from our commercial office business.
Three months ended Nine months ended
US$ millions (except per share September 30 September 30
amounts) 2008 2007 2008 2007
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Cash flow from operations
Comparable basis (excluding
security disposition gain) $ 355 $ 255 $ 1,176 $ 1,001
- per share 0.58 0.40 1.92 1.61
Total basis (including security
disposition gain) $ 355 $ 321 $ 1,176 $ 1,332
- per share 0.58 0.52 1.92 2.17
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"In the last few months we increased our overall cash holdings
and liquidity to more than $3.5 billion, most of that at the
Brookfield corporate level. This is one of the highest levels of
liquidity we have ever held, but given uncertainty in the markets
we want to be prepared for the unknowns, and opportunities which
may present themselves in this environment. In addition, our
operating performance in the quarter reflected the durability of
our cash flows, most of which are supported by long-term
contractual arrangements with credit-worthy counterparties, the
high quality of our asset base and operating platforms, and the
stability of our long duration investment grade capitalization,"
commented Bruce Flatt, Senior Managing Partner of Brookfield Asset
Management. "While we are exercising caution during these turbulent
times, and preserving a high level of liquidity, we are exploring a
number of potential opportunities to expand our operating platforms
and create additional shareholder value."
In the past months, the company completed the following capital
raising initiatives:
- Formed an investment fund in October 2008, managed by
Brookfield, into which a portion of the company's U.S. Pacific
Northwest freehold timberlands were sold. Brookfield retains an
approximate 40% direct and indirect interest in the timberlands.
Total proceeds were $1.2 billion, generating net cash proceeds to
Brookfield of approximately $600 million, and will result in a
modest gain that will be recorded in the fourth quarter.
- Closed the sale of the company's Lloyds Insurance business and
committed to sell the U.S. property and casualty business, which
will generate gross proceeds of approximately $310 million and net
proceeds of approximately $150 million prior to year end.
- Sold a group of transmission lines in Brazil for $275 million
net cash proceeds, which is to close in early 2009.
- Closed the sale of a 50% interest in the Canada Trust Tower
office property in Toronto for C$425 million, generating net
proceeds after debt repayment of approximately $200 million.
- Completed $1 billion of financings, including issuing $150
million of corporate debt with a 4.5 year term and a 6.5% blended
coupon, and $850 million of property-specific financings.
Net Income
Net income was $171 million in the third quarter of 2008
compared with $93 million on the same basis last year. Increases in
operating cash flows were offset by a higher level of non-cash
charges, including depreciation on assets purchased since the
second quarter of 2007. In the company's view, these assets should
generate increasing cash flows over an extended period of time due
to their high quality, long life and value appreciation potential.
The company believes that the depreciation and amortization being
recorded is far greater than the expenditures required to maintain
the assets.
Three months ended Nine months ended
US$ millions (except per share September 30 September 30
amounts) 2008 2007 2008 2007
---------------------------------------------------------------------------
Net income
- total $ 171 $ 93 $ 478 $ 441
- per share $ 0.27 $ 0.13 $ 0.75 $ 0.68
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This news release and accompanying financial statements make
reference to cash flow from operations on a total and per share
basis. Cash flow from operations is defined as net income excluding
depreciation and amortization, interests of non-controlling
shareholders, future income taxes and other items as described as
such in the consolidated statements of income, and including
dividends and disposition gains that are not otherwise included in
net income. Brookfield uses cash flow 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. The company provides the components of cash flow
from operations and a full reconciliation between cash flow from
operations and net income with the supplemental information
accompanying this news release. Cash flow from operations is a
non-GAAP measure which does not have any standard meaning
prescribed by GAAP and therefore may not be comparable to similar
measures presented by other companies.
Dividend Declaration
The Board of Directors declared a dividend of US$0.13 per Class
A Common Share, payable on February 28, 2009, to shareholders of
record as at the close of business on February 1, 2009. 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 web site under Investor
Centre/Stock and Dividend Information.
Additional Information
The Letter to Shareholders and the company's Supplemental
Information for the nine months ended September 30, 2008 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 web site.
Brookfield Asset Management Inc., focused on property, power and
infrastructure assets, has approximately $90 billion of assets
under management and is co-listed on the New York and Toronto Stock
Exchanges under the symbol BAM and on NYSE Euronext under the
symbol BAMA. For more information, please visit our web site at
www.brookfield.com.
Please note that Brookfield's audited annual and unaudited
quarterly reports have been filed on Edgar and Sedar and can also
be found in the investor section of our web site 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 web site 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. The words, "sustainable," "should," "may," "prepared,"
"uncertainty," "exploring," "expand," "create," "increasing,"
"extended," "potential," "preserving," "generate," "appreciation,"
"believe," derivations thereof, and other expressions which are
predictions of or indicate future events, trends or prospects and
which do not relate to historical matters identify forward-looking
statements. Forward-looking statements in this news release include
statements in regards to durability of the company's cash flows,
future gains and proceeds, potential opportunities, the company's
ability to increase cash flows over an extended period of time, the
company's long-term contractual arrangements, the stability of its
long duration investment grade capitalization and the expenditures
required to maintain assets purchased since the second quarter of
2007. Although Brookfield Asset Management believes that its
anticipated future results, performance or achievements expressed
or implied of such assets 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 as such statements and information
involve known and unknown risks, uncertainties and other factors
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: economic and financial conditions in the countries in
which we do business; the behaviour of financial markets, including
fluctuations in interest and exchange rates; market demand for an
infrastructure company, which is unknown; ability to compete for
new acquisitions in the competitive infrastructure space;
availability of equity and debt financing; strategic actions
including dispositions; the ability to effectively integrate
acquisitions into existing operations and the ability to attain
expected benefits; the company's continued ability to attract
institutional partners to its Specialty Investment Funds; adverse
hydrology conditions; regulatory and political factors within the
countries in which the company operates; acts of God, 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 the company's
form 40-F filed with the Securities and Exchange Commission as well
as other documents filed by the company with the securities
regulators in Canada and the United States including the company's
most recent Annual Information Form under the heading "Business
Environment and Risks."
We caution that the foregoing factors that may affect future
results is not exhaustive. When relying on our forward-looking
statements to make decisions with respect to Brookfield Asset
Management, 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, as a result of new
information, future events or otherwise.
CONSOLIDATED STATEMENTS OF CASH FLOW FROM OPERATIONS
(Unaudited) Three months ended Nine months ended
US$ millions (except per September 30 September 30
share amounts) 2008 2007 2008 2007
---------------------------------------------------------------------------
Fees earned $ 109 $ 96 $ 336 $ 323
Revenues less direct
operating costs
Commercial properties(1) 595 350 1,474 1,134
Power generation 213 105 728 463
Infrastructure(2) 36 54 128 257
Development and other
properties 62 40 245 303
Specialty funds 32 16 255 137
Investment and other income 247 319 682 866
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1,294 980 3,848 3,483
Expenses
Interest 535 454 1,537 1,276
Other operating costs 167 108 480 323
Current income taxes 2 (6) 40 40
Non-controlling interests 235 103 615 512
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Cash flow from operations $ 355 $ 321 $ 1,176 $ 1,332
---------------------------------------------------------------------------
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Cash flow from operations
per common share
Diluted $ 0.58 $ 0.52 $ 1.92 $ 2.17
Diluted - excluding
security disposition
gain $ 0.58 $ 0.40 $ 1.92 $ 1.61
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(1) Commercial properties includes $31 million (2007 - $nil) of dividend
income recognized in the first three months of 2008 from Canary Wharf
Group which is included in "Investment and Other Income" in the
company's consolidated financial statements, which are prepared in
accordance with Canadian GAAP
(2) Infrastructure includes the results of the company's Chilean
transmission operations, which are recorded on a consolidated basis for
the first six months of 2007 and on an equity accounted basis in 2008
Notes
Cash flow from operations is reconciled to net income before
other items on page 7 of this news release as follows:
Three months ended Nine months ended
(Unaudited) September 30 September 30
US$ millions 2008 2007 2008 2007
---------------------------------------------------------------------------
Net income excluding other items
(see page 7) $ 350 $ 250 $ 1,159 $ 986
Dividends from equity accounted
investments(1) 5 5 17 15
Gain on sale of exchangeable
debentures(1) - 66 - 331
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Cash flow from operations (per
above) $ 355 $ 321 $ 1,176 $ 1,332
---------------------------------------------------------------------------
-
---------------------------------------------------------------------------
-
(1) Included in "Investment and Other Income" in the Statements of Cash
Flow
from Operations
The consolidated statements of cash flow from operations above
are prepared on a basis that is consistent with management's
discussion and analysis and differ from the company's consolidated
financial statements presented in its interim report, which are
prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). Management uses cash flow from operations as a
key measure to evaluate performance and to determine the underlying
value of its businesses. Readers are encouraged to consider both
measures in assessing Brookfield Asset Management's results. Cash
flow from operations is equal to net income excluding "other items"
as presented in the following consolidated statements of income and
including dividends from investments and the gain on the sale of an
exchangeable debenture investment. The exchangeable debenture gain
would have been included in income prior to the implementation of a
change in accounting requirements but, as a result of a
transitional provision, has been recorded in shareholders'
equity.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30 December 31
US$ millions 2008 2007
---------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 1,670 $ 1,561
Financial assets 1,038 1,529
Operating assets
Securities 1,327 1,646
Loans and notes receivable 2,285 909
Property, plant and equipment 38,186 37,972
Investments 949 1,352
Intangible assets 1,838 1,773
Goodwill 1,811 1,528
Accounts receivable and other 6,868 7,327
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$ 55,972 $ 55,597
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Liabilities and Shareholders' Equity
Liabilities
Corporate borrowings $ 2,348 $ 2,048
Non-recourse borrowings
Property specific mortgages 24,167 21,644
Other debt of subsidiaries 5,216 7,463
Accounts payable and other liabilities 9,286 10,055
Intangible liabilities 963 1,047
Capital securities 1,618 1,570
Non-controlling interests of others in assets 5,683 4,256
Preferred equity 870 870
Common equity 5,821 6,644
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$ 55,972 $ 55,597
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Note
Investment in Canary Wharf Group included in "Commercial
Properties" with a carried value of $182 million (2007 $182
million) is included in "Securities" in the company's consolidated
financial statements, which are prepared in accordance with
Canadian GAAP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three months ended Nine months ended
US$ millions (except per September 30 September 30
share amounts) 2008 2007 2008 2007
--------------------------------------------------------------------------
Total revenues $ 3,216 $ 2,219 $ 9,862 $ 6,185
Fees earned $ 109 $ 96 $ 336 $ 323
Revenues less direct
operating costs
Commercial properties(1) 595 350 1,474 1,134
Power generation 213 105 728 463
Infrastructure(2) 36 54 128 257
Development and other
properties 62 40 245 303
Specialty funds 32 16 255 137
Investment and other
income 242 248 665 520
--------------------------------------------------------------------------
1,289 909 3,831 3,137
Expenses
Interest 535 454 1,537 1,276
Other operating costs 167 108 480 323
Current income taxes 2 (6) 40 40
Non-controlling interests 235 103 615 512
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350 250 1,159 986
Other items
Depreciation and
amortization (333) (250) (975) (740)
Equity accounted losses
from investments (6) - (34) (68)
Provisions and other 104 (33) (5) (17)
Future income taxes (105) 11 (84) (123)
Non-controlling interests
in the foregoing items 161 115 417 403
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Net income $ 171 $ 93 $ 478 $ 441
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Net income per common
share
Diluted $ 0.27 $ 0.13 $ 0.75 $ 0.68
Basic $ 0.27 $ 0.13 $ 0.76 $ 0.70
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(1) Commercial properties includes $31 million (2007 - $nil) of dividend
income recognized in the first three months of 2008 from Canary Wharf
Group which is included in "Investment and Other Income" in the
company's consolidated financial statements, which are prepared in
accordance with Canadian GAAP
(2) Infrastructure includes the results of the company's Chilean
transmission operations, which are recorded on a consolidated basis for
the first six months of 2007 and on an equity accounted basis in 2008
Note
The consolidated statements of income are prepared on a basis
consistent with the company's financial statements presented in its
interim report, which are prepared in accordance with Canadian
GAAP.
Contacts: Brookfield Asset Management Denis Couture, SVP,
Investor Relations and Corporate and International Affairs (416)
956-5189 (416) 363-2856 (FAX) Email: dcouture@brookfield.com
Website: www.brookfield.com
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