Net Income of $1.9 billion or $0.84 per share, FFO of $1.2 billion
or $1.16 per share
BROOKFIELD, NEWS, May 10, 2018
(GLOBE NEWSWIRE) -- Brookfield Asset Management Inc. (NYSE:BAM)
(TSX:BAM.A) (Euronext:BAMA), a leading global alternative asset
manager, today announced financial results for the quarter ended
March 31, 2018.
Bruce Flatt, CEO of Brookfield,
stated, "We reported record results and significantly advanced our
business plan. Fundraising for our latest flagship real estate fund
is well advanced and we recently launched fundraising for our next
flagship private equity fund. Investment performance has been
strong across our business, and we continue to monetize assets at
attractive valuations."
Operating
Results
Unaudited
For the periods ended March 31
(US$ 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
interests
2. 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) 369-8236
Email: 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
Unaudited
For 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
Months
Ended |
|
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
Unaudited
For the periods ended March 31
(US$ millions, except per share
amounts) |
Three Months
Ended |
|
Last Twelve
Months
Ended |
|
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
Months
Ended |
|
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
Months
Ended |
|
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
Months
Ended |
|
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