Bruce Flatt, CEO of
Operating Results
| Unaudited For the periods ended March 31 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months Ended | ||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net (loss) income1 | $ | (157 | ) | $ | 1,256 | $ | 3,941 | $ | 6,889 | |||
| Per Brookfield share2,3 | (0.20 | ) | 0.39 | 1.13 | 2.12 | |||||||
| Funds from operations2,4 | $ | 884 | $ | 1,051 | $ | 4,022 | $ | 4,282 | ||||
| Per Brookfield share2,3,4 | 0.55 | 0.69 | 2.57 | 2.82 | ||||||||
1. Consolidated basis – includes amounts attributable to non-controlling interests.
2. Excludes amounts attributable to non-controlling interests.
3. 2020 and 2019 per share amounts have been updated to reflect BAM’s three-for-two stock split effective April 1, 2020.
4. See Basis of Presentation on page 9 and a reconciliation of net (loss) income to FFO on page 6.
Most of our operations continued to generate favorable operating profits, reflecting the essential and durable nature of their services and activities, however these were offset by the impact of non-cash, unrealized adjustments including mark-to-market movements during the last month of the quarter. As a result, we recorded a net loss of
Funds from operations (“FFO”) were
Realized carried interest and disposition gains during the current quarter were lower due to the timing of dispositions being delayed, largely as a result of the current environment. We expect that any planned dispositions and associated realized carried interest initially forecasted to be recognized in the first half of 2020 will be recognized later in 2020 or into 2021. We have no required asset monetizations, and therefore capital recycling initiatives will be done opportunistically on a value basis.
Dividend Declaration
The Board declared a quarterly dividend of
Operating Highlights
We raised
Assets under management and fee-bearing capital grew over the last twelve months to
Growth in our fee-related earnings is attributable to private fund capital raised in our infrastructure and private equity flagship funds, and across our perpetual private fund strategies as noted above. These fees are stable, based primarily on value of initial commitments and not subject to market volatility. In addition, fee-related earnings benefited from increased listed partnership fee revenues over the LTM period, as well as two quarters of fee-related earnings from Oaktree.
We realized
We realized
Annualized fee revenues and target carried interest now stand at a run-rate of
Annualized fee revenues and annualized fee-related earnings are now
We generated over
As of quarter end, we had uncalled fund commitments of
Our liquidity is increasingly supplemented by our CAFDR, which is underpinned by perpetual and long-dated fee revenues contracts and stable distributions from our listed affiliates. We generated
We invested
During the quarter, we closed on a number of previously announced transactions, including the acquisition of a 49% interest in BrandSafway within our Private Equity business, and a number of global investments within our Real Estate business. Our Renewable Power business announced a merger agreement to take TerraForm Power private, which we expect to be completed in the second half of 2020.
We deployed
Given the market dislocation, Oaktree has significantly increased its pace of deployment, putting approximately
Subsequent to quarter end, we have deployed approximately
Management Information Circular
Due to the current environment and consistent with the latest guidance from public health and government authorities, this year’s meeting will be held in a virtual meeting format. Shareholders of
As previously announced, Howard Marks, Co-Chairman of Oaktree, joined the Board on February 13, 2020 and is standing for election for the first time. Since co-founding Oaktree in 1995, Mr. Marks has been responsible for ensuring Oaktree’s adherence to its core investment philosophy; communicating closely with clients concerning products and strategies; and contributing his experience to big-picture decisions relating to investments and corporate direction.
Janice Fukakusa is also being presented as a new director nominee. Ms. Fukakusa is the former Chief Administrative Officer and Chief Financial Officer of the Royal Bank of
The Circular also describes the ownership of the Class B Limited Voting Shares (“Class B shares”) of the company that, for close to 50 years, have been held by executives of the Corporation in partnership with one another (the “Partnership”). The Partnership has today agreed to refine the ownership structure of the Class B shares by placing stewardship of the Class B shares with a trust that is controlled by a number of longstanding members of the Partnership, which is designed to further reinforce the long-term stability of ownership of these shares. While there is no material impact on any workings of the Partnership, the Partnership is nonetheless required to announce the transfer of all 85,120 Class B shares and file an Early Warning Report, which can be obtained from the SEDAR profile of
CONSOLIDATED BALANCE SHEETS
| Unaudited (US$ millions) |
March 31 | December 31 | ||||||||||
| 2020 | 2019 | |||||||||||
| Assets | ||||||||||||
| Cash and cash equivalents | $ | 9,868 | $ | 6,778 | ||||||||
| Other financial assets | 11,206 | 12,468 | ||||||||||
| Accounts receivable and other | 19,356 | 21,971 | ||||||||||
| Inventory | 9,719 | 10,272 | ||||||||||
| Equity accounted investments | 39,747 | 40,698 | ||||||||||
| Investment properties | 95,479 | 96,686 | ||||||||||
| Property, plant and equipment | 85,143 | 89,264 | ||||||||||
| Intangible assets | 25,151 | 27,710 | ||||||||||
| Goodwill | 13,338 | 14,550 | ||||||||||
| Deferred income tax assets | 3,576 | 3,572 | ||||||||||
| Total Assets | $ | 312,583 | $ | 323,969 | ||||||||
| Liabilities and Equity | ||||||||||||
| Corporate borrowings | $ | 7,235 | $ | 7,083 | ||||||||
| Accounts payable and other | 40,808 | 44,767 | ||||||||||
| Non-recourse borrowings in entities that we manage | 133,760 | 136,292 | ||||||||||
| Subsidiary equity obligations | 4,158 | 4,132 | ||||||||||
| Deferred income tax liabilities | 14,175 | 14,849 | ||||||||||
| Equity | ||||||||||||
| Preferred equity | $ | 4,145 | $ | 4,145 | ||||||||
| Non-controlling interests in net assets | 79,637 | 81,833 | ||||||||||
| Common equity | 28,665 | 112,447 | 30,868 | 116,846 | ||||||||
| Total Liabilities and Equity | $ | 312,583 | $ | 323,969 | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
| Unaudited For the periods ended March 31 (US$ millions, except per share amounts) |
Three Months Ended | ||||||
| 2020 | 2019 | ||||||
| Revenues | $ | 16,586 | $ | 15,208 | |||
| Direct costs | (12,709 | ) | (11,585 | ) | |||
| Other income and gains | 241 | 32 | |||||
| Equity accounted (loss) income | (212 | ) | 344 | ||||
| Expenses | |||||||
| Interest | (1,852 | ) | (1,616 | ) | |||
| Corporate costs | (24 | ) | (26 | ) | |||
| Fair value changes | (414 | ) | 169 | ||||
| Depreciation and amortization | (1,409 | ) | (1,034 | ) | |||
| Income tax | (364 | ) | (236 | ) | |||
| Net (loss) income | $ | (157 | ) | $ | 1,256 | ||
| Net (loss) income attributable to: | |||||||
shareholders |
$ | (293 | ) | $ | 615 | ||
| Non-controlling interests | 136 | 641 | |||||
| $ | (157 | ) | $ | 1,256 | |||
| Net (loss) income per share1 | |||||||
| Diluted | $ | (0.20 | ) | $ | 0.39 | ||
| Basic | (0.20 | ) | 0.39 | ||||
1. Adjusted to reflect the three-for-two stock split effective April 1, 2020.
SUMMARIZED FINANCIAL RESULTS
RECONCILIATION OF NET (LOSS) INCOME TO FUNDS FROM OPERATIONS
| Unaudited For the periods ended March 31 (US$ millions) |
Three Months Ended | Last Twelve Months Ended | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net (loss) income | $ | (157 | ) | $ | 1,256 | $ | 3,941 | $ | 6,889 | ||||||
| Realized disposition gains in fair value changes or prior periods | 93 | 232 | 482 | 1,257 | |||||||||||
| Non-controlling interests | (1,981 | ) | (1,602 | ) | (7,540 | ) | (6,155 | ) | |||||||
| Financial statement components not included in FFO | |||||||||||||||
| Equity accounted fair value changes and other non-FFO items | 938 | 251 | 830 | 1,202 | |||||||||||
| Fair value changes | 414 | (169 | ) | 1,414 | (1,391 | ) | |||||||||
| Depreciation and amortization | 1,409 | 1,034 | 5,251 | 3,466 | |||||||||||
| Deferred income taxes | 168 | 49 | (356 | ) | (986 | ) | |||||||||
| Funds from operations1,2 | $ | 884 | $ | 1,051 | $ | 4,022 | $ | 4,282 | |||||||
SEGMENT FUNDS FROM OPERATIONS
| Unaudited For the periods ended March 31 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months Ended | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Asset management | $ | 380 | $ | 323 | $ | 1,654 | $ | 1,277 | |||||||
| Real estate | 219 | 250 | 1,154 | 1,597 | |||||||||||
| Renewable power | 66 | 154 | 245 | 382 | |||||||||||
| Infrastructure | 137 | 194 | 407 | 455 | |||||||||||
| Private equity | 165 | 175 | 834 | 916 | |||||||||||
| Residential | (9 | ) | (22 | ) | 138 | 60 | |||||||||
| Corporate | (74 | ) | (23 | ) | (410 | ) | (405 | ) | |||||||
| Funds from operations1,2 | $ | 884 | $ | 1,051 | $ | 4,022 | $ | 4,282 | |||||||
| Per share3,4 | $ | 0.55 | $ | 0.69 | $ | 2.57 | $ | 2.82 | |||||||
- Non-IFRS measure – see Basis of Presentation on page 9.
- Excludes amounts attributable to non-controlling interests.
- Adjusted to reflect the three-for-two stock split effective April 1, 2020.
- Per share amounts are inclusive of dilutive effect of mandatorily redeemable preferred shares held in a consolidated subsidiary.
EARNINGS PER SHARE
| Unaudited For the periods ended March 31 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months Ended | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| Net (loss) income | $ | (157 | ) | $ | 1,256 | $ | 3,941 | $ | 6,889 | ||||||||
| Non-controlling interests | (136 | ) | (641 | ) | (2,042 | ) | (3,547 | ) | |||||||||
| Net (loss) income attributable to shareholders | (293 | ) | 615 | 1,899 | 3,342 | ||||||||||||
| Preferred share dividends | (35 | ) | (37 | ) | (150 | ) | (150 | ) | |||||||||
| Dilutive effect of conversion of subsidiary preferred shares | 19 | (13 | ) | (42 | ) | (85 | ) | ||||||||||
| Net (loss) income available to common shareholders | $ | (309 | ) | $ | 565 | $ | 1,707 | $ | 3,107 | ||||||||
| Weighted average shares1 | 1,511.6 | 1,433.0 | 1,475.4 | 1,435.4 | |||||||||||||
| Dilutive effect of the conversion of options and escrowed shares using treasury stock method1,2 | — | 29.6 | 30.1 | 28.3 | |||||||||||||
| Shares and share equivalents1 | 1,511.6 | 1,462.6 | 1,505.5 | 1,463.7 | |||||||||||||
| Diluted earnings per share1,3 | $ | (0.20 | ) | $ | 0.39 | $ | 1.13 | $ | 2.12 | ||||||||
- Adjusted to reflect the three-for-two stock split effective April 1, 2020.
- Includes management share option plan and escrowed stock plan.
- Per share amounts are inclusive of dilutive effect of mandatorily redeemable preferred shares held in a consolidated subsidiary.
CASH AVAILABLE FOR DISTRIBUTION AND/OR REINVESTMENT
| Unaudited For the periods ended March 31 (US$ millions) |
Three Months Ended | Last Twelve Months Ended | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Fee-related earnings1, excluding performance fees | $ | 286 | $ | 238 | $ | 1,217 | $ | 889 | |||||||
| Our share of Oaktree’s distributable earnings | 55 | — | 97 | — | |||||||||||
| Distributions from investments | 562 | 383 | 1,777 | 1,691 | |||||||||||
| Other invested capital earnings | |||||||||||||||
| Corporate interest expense | (89 | ) | (87 | ) | (350 | ) | (332 | ) | |||||||
| Corporate costs and taxes | (37 | ) | (37 | ) | (135 | ) | (163 | ) | |||||||
| Other wholly owned investments | (46 | ) | (39 | ) | (43 | ) | 40 | ||||||||
| (172 | ) | (163 | ) | (528 | ) | (455 | ) | ||||||||
| Preferred share dividends | (35 | ) | (37 | ) | (150 | ) | (150 | ) | |||||||
| Add back: equity-based compensation | 25 | 21 | 91 | 82 | |||||||||||
| Cash available for distribution and/or reinvestment before carried interest and performance fees | 721 | 442 | 2,504 | 2,057 | |||||||||||
| Realized carried interest, net, excluding Oaktree1,2 | 30 | 85 | 331 | 253 | |||||||||||
| Performance fees | — | — | — | 135 | |||||||||||
| Cash available for distribution and/or reinvestment | $ | 751 | $ | 527 | $ | 2,835 | $ | 2,445 | |||||||
- Excludes our share of Oaktree’s fee-related earnings and carried interest.
- Non-IFRS measure – see Basis of Presentation on page 9.
Additional Information
The Letter to Shareholders and the company’s Supplemental Information for the three months ended March 31, 2020, 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 statements contained herein are based primarily on information that has been extracted from our financial statements for the quarter ended March 31, 2020, 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 summarized 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 2020 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.
To participate in the Conference Call, please dial 1-866-688-9425 toll free in
Brookfield Asset Management Inc. is a leading global alternative asset manager with over $515 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit. Brookfield owns and operates long-life assets and businesses, many of which form the backbone of the global economy. Utilizing its global reach, access to large-scale capital and operational expertise,
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:
| Communications & Media: Claire Holland Tel: (416) 369-8236 Email: [email protected] |
Investor Relations Linda Northwood Tel: (416) 359-8647 Email: [email protected] |
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 issuers and entities.
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 available for distribution and/or reinvestment, which is referring to the sum of our Asset Management segment FFO and distributions received from our ownership of investments, net of Corporate activities FFO, equity-based compensation 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 provide additional information on key terms and non-IFRS measures in our filings available at www.brookfield.com.
Notice to Readers
This news release contains “forward-looking information” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of the
Where this news release refers to “target carried interest” it is based on an assumption that existing funds meet their target gross returns. Target gross returns are typically ~20% for opportunistic funds; 10% to 15% for value add, credit and core funds. Fee terms vary by investment strategy and may change over time.
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
Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: (i) investment returns that are lower than target; (ii) the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business including as a result of Covid-19; (iii) the behavior of financial markets, including fluctuations in interest and foreign exchange rates; (iv) global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; (v) strategic actions including dispositions; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits; (vi) changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates); (vii) the ability to appropriately manage human capital; (viii) the effect of applying future accounting changes; (ix) business competition; (x) operational and reputational risks; (xi) technological change; (xii) changes in government regulation and legislation within the countries in which we operate; (xiii) governmental investigations; (xiv) litigation; (xv) changes in tax laws; (xvi) ability to collect amounts owed; (xvii) catastrophic events, such as earthquakes, hurricanes and epidemics/pandemics; (xviii) the possible impact of international conflicts and other developments including terrorist acts and cyberterrorism; (xix) the introduction, withdrawal, success and timing of business initiatives and strategies; (xx) the failure of effective disclosure controls and procedures and internal controls over financial reporting and other risks; (xxi) health, safety and environmental risks; (xxii) the maintenance of adequate insurance coverage; (xxiii) the existence of information barriers between certain businesses within our asset management operations; (xxiv) risks specific to our business segments including our real estate, renewable power, infrastructure, private equity, and residential development activities; and (xxv) factors detailed from time to time in our documents filed with the securities regulators in
We caution that the foregoing list of important factors that may affect future results is not exhaustive and other factors could also adversely affect its results. Investors and other readers are urged to consider the foregoing risks, as well as other uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information. Except as required by law, the corporation 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.
Past performance is not indicative nor a guarantee of future results. There can be no assurance that comparable results will be achieved in the future, that future investments will be similar to the historic investments discussed herein (because of economic conditions, the availability of investment opportunities or otherwise), that targeted returns, diversification or asset allocations will be met or that an investment strategy or investment objectives will be achieved.
Target returns set forth in this news release are for illustrative and informational purposes only and have been presented based on various assumptions made by
Certain of the information contained herein is based on or derived from information provided by independent third-party sources. While
Source: Brookfield Asset Management Inc
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