Brookfield Asset Management Inc. (NYSE:BAM) (TSX:BAM.A)
(Euronext:BAMA), a leading global alternative asset manager, today
announced financial results for the quarter ended March 31,
2018.
Bruce Flatt, CEO of Brookfield, stated, “We
reported record results and significantly advanced our business
plan. Fundraising for our latest flagship real estate fund is well
advanced and we recently launched fundraising for our next flagship
private equity fund. Investment performance has been strong across
our business, and we continue to monetize assets at attractive
valuations.”
Operating Results
UnauditedFor the periods ended March 31(US$ millions,
except per share amounts) |
Three Months Ended |
|
Last Twelve Months |
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Net income |
$ |
1,855 |
|
$ |
518 |
|
|
$ |
5,888 |
|
$ |
3,220 |
|
Per Brookfield
share1 |
0.84 |
|
(0.08 |
) |
|
2.26 |
|
1.25 |
|
Funds from
operations1,2 |
$ |
1,170 |
|
$ |
674 |
|
|
$ |
4,306 |
|
$ |
3,208 |
|
Per Brookfield share1,2 |
1.16 |
|
0.65 |
|
|
4.25 |
|
3.15 |
|
1. Excludes amounts attributable to
non-controlling interests2. See Basis of
Presentation on page 3 and a reconciliation of net income to FFO on
page 9
Net income increased significantly for both the
quarter and the last twelve months ("LTM"). The increase reflects
improvements at existing operations as well as strong contributions
from acquisitions across each of our businesses. We also recorded a
higher level of valuation gains in our opportunistic real estate
portfolio and a gain on the sale of a utility asset whereas the
prior period included the impact of lower stock market prices on
market-valued investments.
First quarter funds from operations (“FFO”) also
increased significantly to $1.2 billion, an increase of 74% from
the prior year. Fee related earnings continue to increase as a
result of the growth in fee bearing capital and higher performance
fee income. This was due to fee bearing capital growth generated by
both increases in new private fund capital and listed issuers. We
received a performance fee from Brookfield Business Partners in the
quarter as the partnership continues to exceed performance hurdles.
The increased contribution from our invested capital reflects
improved results across our businesses, including higher pricing in
our renewable power and private equity operations. FFO included
$473 million of disposition gains from assets sold, including the
aforementioned utility asset and a partial sale of a core office
property.
Dividend Declaration
The Board declared a quarterly dividend of
US$0.15 per share (representing US$0.60 per annum), payable on
June 29, 2018 to shareholders of record as at the close of business
on May 31, 2018. The Board also declared all the regular monthly
and quarterly dividends on its preferred shares.
Operating Highlights
Fee bearing capital reached $127 billion, a 12%
increase over March 2017. Growth during this quarter was led by our
private funds and our public securities businesses.
We continue to raise capital for our third real
estate flagship fund, which is now over $9 billion after the first
close. This already matches the total capital in the predecessor
fund in that series, and we expect to raise substantial further
capital throughout the remainder of 2018 to make this our largest
real estate fund to date. As we continue to grow our private funds,
our capital base is diversifying with increased commitments from
clients outside of North America, and increased allocations from
both public and private pension plans. We are also progressing
significant initiatives with high net worth clients.
Our current private equity flagship fund is over
90% committed and invested and we launched the successor fund in
the quarter, with a first close anticipated later in the year. Our
latest infrastructure flagship fund is 50% committed and
invested.
In addition to establishing new funds, we are
also continuing to expand through targeted acquisitions and
strategic partnerships. In our public securities business we
completed the previously announced acquisition of an investment
advisor with an established retail distribution network and $4
billion of fee bearing capital. We also recently announced the
acquisition of a 25% strategic interest in a European alternative
credit manager, expanding our reach in Europe, and broadening our
credit platform scale and experience.
As our managed capital expands, ongoing fee
related earnings and carry potential grow. Carry potential is also
benefiting from our funds progressing into more mature phases of
their lives.
Fee related earnings increased by 56% to over
$1.0 billion over the LTM, attributable to new capital raised
across multiple fund strategies and stronger market valuations of
our listed partnerships. Earnings included performance fees of $143
million in the quarter from continued strong unit price performance
by Brookfield Business Partners.
We also achieved growth in economic net income
from our asset management activities, which more than doubled from
the prior LTM period to $2.1 billion. Unrealized carried
interest was $1.5 billion before costs, or $1.0 billion
net of costs in the last twelve months, more than triple that of
the prior period. The step-change is a result of our earlier
vintage funds starting to generate significant amounts of carried
interest for the first time. As our fund series have been growing
and should continue to grow, we expect to see continued increases
in carried interest, as carry eligible capital grows.
We continue to generate increasingly significant
free cash at the corporate level. We receive significant cash flow
from our asset management business as well as distributions from
our invested capital, which adds to our robust liquidity
profile.
On an annual basis, we receive approximately $1
billion in asset management fee related earnings and
$1.5 billion of cash distributions from our invested capital
annually based on our current profile. After paying approximately
$500 million of interest expense, preferred share dividends
and corporate costs, we are generating approximately $2 billion of
cash flows before common share dividends that is available for
distribution or reinvestment. We have few capital requirements at
the corporate level and this positions us well to use our cash flow
to support larger fund transactions, providing bridge capital, and
seeding new fund products.
We have significant liquidity to deploy for
future opportunities. This includes $22 billion of third-party
private fund commitments and $10 billion of core
liquidity.
We continue to focus on asset sales and capital
structure in strong markets. We generated almost $500 million
from disposition gains in the quarter.
In March, our infrastructure business closed the
sale of a 28% interest in Transelec, a Chilean electricity
transmission business with approximately 10,000 kilometers of
lines. During our ownership, we re-invested capital within the
business to expand and grow the system, and returned cash dividends
to us and our partners of over $1 billion. Our infrastructure
business sold its share of the investment for $1.3 billion
($390 million at BAM's share). BAM recognized a disposition
gain of approximately $245 million in FFO on the sale.
Asset sales also included the sale of a 50%
interest in the Bay Adelaide Centre West and East towers located in
downtown Toronto for C$850 million. Brookfield developed both
towers which were completed in 2009 and 2015, respectively, and
with the sale has realized net proceeds of $292 million to BPY, and
$164 million net to BAM. In April, our private equity business
completed an IPO of GrafTech, selling an approximate 13% interest
in the company for gross proceeds of $571 million, and in February,
we completed a $1.5 billion refinancing of GrafTech which
resulted in a $1.1 billion dividend to us and our partners. We have
now returned 2.1x our invested capital, and still own approximately
87% of GrafTech’s equity and a $750 million
promissory note.
Basis of Presentation
This news release and accompanying financial
statements are based on International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board
(“IASB”), unless otherwise noted.
We make reference to Funds from Operations
(“FFO”). We define FFO as net income attributable to shareholders
prior to fair value changes, depreciation and amortization, and
deferred income taxes, and include realized disposition gains that
are not recorded in net income as determined under IFRS. FFO also
includes the company’s share of equity accounted investments’ FFO
on a fully diluted basis. FFO consists of the following
components:
- FFO from Operating Activities represents the company’s share of
revenues less direct costs and interest expenses; excludes realized
carried interest and disposition gains, fair value changes,
depreciation and amortization and deferred income taxes; and
includes our proportionate share of FFO from operating activities
recorded by equity accounted investments on a fully diluted basis.
We present this measure as we believe it assists in describing our
results and variances within FFO.
- Realized Carried Interest represents our contractual share of
investment gains generated within a private fund after considering
our clients minimum return requirements. Realized carried interest
is determined on third-party capital that is no longer subject to
future investment performance.
- Realized Disposition Gains are included in FFO because we
consider the purchase and sale of assets to be a normal part of the
company’s business. Realized disposition gains include gains and
losses recorded in net income and equity in the current period, and
are adjusted to include fair value changes and revaluation surplus
balances recorded in prior periods which were not included in prior
period FFO.
We use FFO to assess our operating results and
the value of Brookfield’s business and believe that many
shareholders and analysts also find this measure of value to
them.
We note that FFO, its components, and its per
share equivalent 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.
We make reference to Economic Net Income
("ENI"). We use ENI as a supplement to FFO for our Asset Management
segment to assess operating performance, including the fee revenues
and carried interest generated on unrealized changes in value of
our private fund investment portfolios. We use this measure to
evaluate the total value created within our funds in a period and
it is a leading indicator for future growth of our Asset Management
FFO.
We make reference to Invested Capital. Invested
Capital is defined as the amount of common equity in our segments
and underlying businesses within the segments.
We make reference to cash flows before common
share dividends that is Available for distribution or reinvestment.
It is the sum of our Asset Management segment FFO and distributions
received from our ownership of listed investments, net of Corporate
FFO and preferred share dividends. This provides insight into
earnings received by the corporation that are available for
distribution to common shareholders or to be reinvested into the
business.
We also make reference to Unrealized Carried
Interest, which represents our share of fund profits if all of our
funds were wound up and liquidated at period end values. We
use this measure to gain additional insight into how investment
performance is impacting our ability to earn carried interest in
the future.
We provide additional information on key terms
and non-IFRS measures in our filings available at
www.brookfield.com.
Additional Information
The Letter to Shareholders and the company’s
Supplemental Information for the three months ended March 31,
2018 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 financial statements
for the quarter ended March 31, 2018, which have been prepared
using IFRS, as issued by the IASB. The amounts have not been
audited by Brookfield’s external auditor.
Brookfield's Board of Directors have reviewed
and approved this document, including the summary unaudited
consolidated financial statements prior to its release.
Information on our dividends can be found on our
website under Stock & Distributions/Distribution History.
Quarterly Earnings Call
Details
Investors, analysts and other interested parties
can access Brookfield Asset Management’s 2018 First Quarter Results
as well as the Shareholders’ Letter and Supplemental Information on
Brookfield’s website under the Reports & Filings section at
www.brookfield.com.
The conference call can be accessed via webcast
on May 10, 2018 at 11:00 a.m. Eastern Time at
www.brookfield.com or via teleconference at 1-866-521-4909 toll
free in North America. For overseas calls please dial
1-647-427-2311, at approximately 10:50 a.m. Eastern Time. A
recording of the teleconference can be accessed at 1-800-585-8367
or 1-416-621-4642 (password: 2377377).
Brookfield Asset Management
Inc. is a leading global alternative asset manager with
approximately $285 billion in assets under management. The
company has more than a 100-year history of owning and operating
assets with a focus on property, renewable power, infrastructure
and private equity. Brookfield offers a range of public and private
investment products and services, and is co-listed on the New York,
Toronto and Euronext stock exchanges under the symbol BAM, BAM.A
and BAMA, respectively. 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 or contact:
Claire Holland
Communications & Media Tel: (416) 369-8236Email:
claire.holland@brookfield.com |
|
Linda Northwood
Investor Relations Tel: (416) 359-8647 Email:
linda.northwood@brookfield.com |
Forward-Looking Statements
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
Brookfield 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 Brookfield
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 exchange rates; 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 ability to appropriately
manage human capital; 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; governmental
investigations; litigation; changes in tax laws; ability to collect
amounts owed; catastrophic events, such as earthquakes and
hurricanes; the possible impact of international conflicts and
other developments including terrorist acts and cyber terrorism;
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,
Brookfield 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.
This release does not constitute an offer of any
Brookfield fund.
CONSOLIDATED BALANCE SHEETS
Unaudited (US$ millions) |
|
March 31 |
|
|
December 31 |
|
|
2018 |
|
|
2017 |
|
Assets |
|
|
Cash and cash
equivalents |
$ |
6,044 |
|
$ |
5,139 |
|
Other financial
assets |
5,271 |
|
4,800 |
|
Accounts receivable and
other |
12,257 |
|
11,973 |
|
Inventory |
6,638 |
|
6,311 |
|
Assets classified as
held for sale |
302 |
|
1,605 |
|
Equity accounted
investments |
30,750 |
|
31,994 |
|
Investment
properties |
58,309 |
|
56,870 |
|
Property, plant and
equipment |
54,431 |
|
53,005 |
|
Intangible assets |
14,231 |
|
14,242 |
|
Goodwill |
5,516 |
|
5,317 |
|
Deferred income tax
assets |
2,186 |
|
1,464 |
|
Total Assets |
$ |
195,935 |
|
$ |
192,720 |
|
|
|
|
Liabilities and
Equity |
|
|
Accounts payable and
other |
$ |
18,656 |
|
$ |
17,965 |
|
Liabilities associated
with assets classified as held for sale |
568 |
|
1,424 |
|
Corporate
borrowings |
6,476 |
|
5,659 |
|
Non-recourse
borrowings |
|
|
Property-specific mortgages |
65,901 |
|
63,721 |
|
Subsidiary borrowings |
7,938 |
|
9,009 |
|
Deferred income tax
liabilities |
11,146 |
|
11,409 |
|
Subsidiary equity
obligations |
3,935 |
|
3,661 |
|
Equity |
|
|
Preferred
equity |
4,192 |
|
4,192 |
|
Non-controlling interests in net assets |
52,667 |
|
51,628 |
|
Common equity |
24,456 |
|
24,052 |
|
Total
Equity |
81,315 |
|
79,872 |
|
Total Liabilities and Equity |
$ |
195,935 |
|
$ |
192,720 |
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
UnauditedFor the three months ended March 31(US$
millions, except per share amounts) |
|
|
2018 |
|
|
2017 |
|
Revenues |
$ |
12,631 |
|
$ |
6,001 |
|
Direct costs |
(10,091 |
) |
(4,387 |
) |
Other income and
gains |
342 |
|
265 |
|
Equity accounted
income |
288 |
|
335 |
|
Expenses |
|
|
Interest |
(1,037 |
) |
(843 |
) |
Corporate
costs |
(27 |
) |
(25 |
) |
Fair value changes |
572 |
|
(204 |
) |
Depreciation and
amortization |
(670 |
) |
(499 |
) |
Income tax |
(153 |
) |
(125 |
) |
Net income |
$ |
1,855 |
|
$ |
518 |
|
|
|
|
Net income (loss)
attributable to: |
|
|
Brookfield shareholders |
$ |
857 |
|
$ |
(37 |
) |
Non-controlling interests |
998 |
|
555 |
|
|
$ |
1,855 |
|
$ |
518 |
|
|
|
|
Net income (loss) per
share |
|
|
Diluted |
$ |
0.84 |
|
$ |
(0.08 |
) |
Basic |
0.85 |
|
(0.08 |
) |
|
|
SUMMARIZED FINANCIAL RESULTS
RECONCILIATION OF NET INCOME TO FUNDS
FROM OPERATIONS
Unaudited For the periods ended March 31 (US$
millions) |
Three Months Ended |
|
Last Twelve MonthsEnded |
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Net income |
$ |
1,855 |
|
$ |
518 |
|
|
$ |
5,888 |
|
$ |
3,220 |
|
Equity
accounted fair value changes and other non-FFO items |
333 |
|
122 |
|
|
1,067 |
|
306 |
|
Fair
value changes |
(572 |
) |
204 |
|
|
(1,197 |
) |
686 |
|
Depreciation and amortization |
670 |
|
499 |
|
|
2,516 |
|
2,038 |
|
Deferred
income taxes |
(74 |
) |
108 |
|
|
145 |
|
(620 |
) |
Realized
disposition gains in fair value changes or prior periods |
420 |
|
152 |
|
|
1,384 |
|
706 |
|
Non-controlling interests |
(1,462 |
) |
(929 |
) |
|
(5,497 |
) |
(3,128 |
) |
Funds from operations1 |
$ |
1,170 |
|
$ |
674 |
|
|
$ |
4,306 |
|
$ |
3,208 |
|
|
|
SEGMENT FUNDS FROM
OPERATIONS
UnauditedFor the periods ended March 31(US$ millions,
except per share amounts) |
Three Months Ended |
|
Last Twelve MonthsEnded |
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Asset management |
$ |
363 |
|
$ |
166 |
|
|
$ |
1,167 |
|
$ |
848 |
|
Property |
439 |
|
325 |
|
|
2,118 |
|
1,513 |
|
Renewable power |
100 |
|
67 |
|
|
303 |
|
179 |
|
Infrastructure |
341 |
|
83 |
|
|
603 |
|
386 |
|
Private equity |
54 |
|
102 |
|
|
285 |
|
430 |
|
Residential |
(33 |
) |
(8 |
) |
|
9 |
|
70 |
|
Corporate |
(94 |
) |
(61 |
) |
|
(179 |
) |
(218 |
) |
Funds from operations1 |
$ |
1,170 |
|
$ |
674 |
|
|
$ |
4,306 |
|
$ |
3,208 |
|
|
|
|
|
|
|
Per
share |
$ |
1.16 |
|
$ |
0.65 |
|
|
$ |
4.25 |
|
$ |
3.15 |
|
|
|
RECONCILIATION OF ASSET MANAGEMENT FFO
TO ECONOMIC NET INCOME
Unaudited For the periods ended March 31 (US$
millions) |
Three Months Ended |
Last Twelve MonthsEnded |
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Asset Management
FFO |
$ |
363 |
|
$ |
166 |
|
|
$ |
1,167 |
|
$ |
848 |
|
Less: Realized carried
interest, net |
(20 |
) |
(3 |
) |
|
(91 |
) |
(152 |
) |
Less: Realized
disposition gains |
— |
|
— |
|
|
— |
|
(5 |
) |
Unrealized carried interest generated in the period, net |
246 |
|
137 |
|
|
1,037 |
|
330 |
|
Economic
net income |
$ |
589 |
|
$ |
300 |
|
|
$ |
2,113 |
|
$ |
1,021 |
|
|
Notes:
- Excludes amounts attributable to non-controlling interests
EARNINGS PER SHARE
Unaudited For the periods ended March 31 (US$ millions,
except per share amounts) |
Three Months Ended |
|
Last Twelve MonthsEnded |
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Net income |
$ |
1,855 |
|
$ |
518 |
|
|
$ |
5,888 |
|
$ |
3,220 |
|
Non-controlling interests |
(998 |
) |
(555 |
) |
|
(3,532 |
) |
(1,863 |
) |
Net income attributable
to shareholders |
857 |
|
(37 |
) |
|
2,356 |
|
1,357 |
|
Preferred share
dividends |
(38 |
) |
(36 |
) |
|
(147 |
) |
(136 |
) |
Net income available to common shareholders |
$ |
819 |
|
$ |
(73 |
) |
|
$ |
2,209 |
|
$ |
1,221 |
|
|
|
|
|
|
|
Weighted average
shares |
957.9 |
|
958.5 |
|
|
958.6 |
|
958.8 |
|
Dilutive effect of the
conversion of options and escrowed shares using treasury stock
method1 |
19.1 |
|
— |
|
|
19.5 |
|
15.3 |
|
Shares and share equivalents |
977.0 |
|
958.5 |
|
|
978.1 |
|
974.1 |
|
|
|
|
|
|
|
Diluted
earnings per share |
$ |
0.84 |
|
$ |
(0.08 |
) |
|
$ |
2.26 |
|
$ |
1.25 |
|
|
|
CASH AVAILABLE FOR
DISTRIBUTION
Unaudited For the periods ended March 31 (US$
millions) |
Three Months Ended |
|
Last Twelve MonthsEnded |
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Asset management
FFO |
$ |
363 |
|
$ |
166 |
|
|
$ |
1,167 |
|
$ |
848 |
|
Dividends received from
listed investments |
343 |
|
307 |
|
|
1,313 |
|
1,215 |
|
Corporate activities
FFO |
|
|
|
|
|
Financial
assets earnings |
22 |
|
19 |
|
|
148 |
|
123 |
|
Corporate
costs, cash taxes and other |
(38 |
) |
(18 |
) |
|
(50 |
) |
(94 |
) |
Corporate interest expense |
(78 |
) |
(62 |
) |
|
(277 |
) |
(247 |
) |
|
(94 |
) |
(61 |
) |
|
(179 |
) |
(218 |
) |
Preferred
share dividends |
(38 |
) |
(36 |
) |
|
(147 |
) |
(136 |
) |
Available
for distribution/reinvestment |
$ |
574 |
|
$ |
376 |
|
|
$ |
2,154 |
|
$ |
1,709 |
|
|
Notes:
- Includes management share option plan and escrowed stock
plan
Brookfield Asset Managem... (TSX:BAM.A)
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