Bruce Flatt, CEO of
Operating Results
Net income and funds from operations ("FFO") both grew significantly on a comparable basis as operating results for the third quarter benefited from the ongoing expansion of our business through fundraising, acquisitions, development projects and operating improvements.
Net income, prior to tax, was strong compared to last year, at
FFO from operating activities was $564 million, a 15% increase from the 2016 quarter. Growth in fee related earnings was 8% due to continued expansion of fee bearing capital, as our listed issuers generated strong growth in their capital base, and higher incentive distributions. Invested capital FFO increased by 19% due to contributions from acquisitions, particularly in our infrastructure business, higher generation and pricing in our renewable power business and gains on short-term portfolio investments. FFO inclusive of disposition gains and realized carried interest was
Dividend Declaration
The Board declared a quarterly dividend of US$0.14 per share (representing US$0.56 per annum), payable on December 29, 2017 to shareholders of record as at the close of business on November 30, 2017. The Board also declared all of the regular monthly and quarterly dividends on its preferred shares.
Highlights
Our fee bearing capital has reached
The capitalization of our listed issuers increased during the quarter as a result of strong market performance and capital deployment. During the quarter, we did not close any major funds although it is expected the first close of our real estate opportunity fund will occur in the fourth quarter.
Following the quarter, we announced the acquisition of Center Coast Capital, a
We made progress on several significant transactions during and following the quarter.
We recently completed the acquisition of a 51% interest in TerraForm Power and continued to advance the 100% acquisition of TerraForm Global. These transactions will deploy
We continued to advance our direct corporate credit business and expect to build up this business over time, as we see direct credit as an area where we can leverage our existing expertise by underwriting investments in businesses that we understand well. During the quarter, we sourced a
In addition to deploying capital in new investments, we have a large capital backlog of over
In real estate, our team is managing a robust
Our infrastructure business remains focused on executing on its large backlog, which currently stands at
Across our remaining businesses, we have a pipeline of over 1,000 megawatts being developed in our renewable power business and numerous follow-on capital projects throughout our private equity business. These projects continue to provide us with opportunities to put capital to work at very attractive returns, including in markets or sectors where acquisitions are highly priced.
We made progress on selling several investments and raised significant capital.
In our real estate operations, we agreed to sell Gazeley, an industrial real estate business in
We have substantial capital resources at our disposal, consisting of over
During the quarter, three of our listed issuers raised additional equity, which we participated in, in order to solidify their liquidity for the next wave of growth. We also issued
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 and 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 provide additional information on the determination of FFO and reconciliation between FFO and net income attributable to
Additional Information
The Letter to Shareholders and the company’s Supplemental Information for the three months ended September 30, 2017 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 interim financial statements for the three months ended September 30, 2017, which have been prepared using IFRS, as issued by the IASB. The amounts have not been audited by Brookfield’s external auditor.
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 2017 Third 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 November 9, 2017 at 11:00 a.m. Eastern Time at www.brookfield.com or via teleconference at 1-800-319-4610 toll free in
Brookfield Asset Management Inc. is a leading global alternative asset manager with over $265 billion in assets under management. The company has more than a 100-year history of owning and operating assets with a focus on real estate, renewable power, infrastructure and private equity.
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: [email protected] |
Linda Northwood Investor Relations Tel: (416) 359-8647 Email: [email protected] |
|
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
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: 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
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,
This release does not constitute an offer of any
CONSOLIDATED BALANCE SHEETS
| Unaudited (US$ millions) |
September 30 | December 31 | ||
| 2017 | 2016 | |||
| Assets | ||||
| Cash and cash equivalents | $ | 4,538 | $ | 4,299 |
| Other financial assets | 5,860 | 4,700 | ||
| Accounts receivable and other | 11,300 | 9,133 | ||
| Inventory | 6,648 | 5,349 | ||
| Assets classified as held for sale | 2,304 | 432 | ||
| Equity accounted investments | 28,155 | 24,977 | ||
| Investment properties | 56,923 | 54,172 | ||
| Property, plant and equipment | 47,130 | 45,346 | ||
| Intangible assets | 14,628 | 6,073 | ||
| Goodwill | 5,310 | 3,783 | ||
| Deferred income tax assets | 1,781 | 1,562 | ||
| Total Assets | $ | 184,577 | $ | 159,826 |
| Liabilities and Equity | ||||
| Accounts payable and other | $ | 17,045 | $ | 11,915 |
| Liabilities associated with assets classified as held for sale | 1,004 | 127 | ||
| Corporate borrowings | 5,705 | 4,500 | ||
| Non-recourse borrowings | ||||
| Property-specific mortgages | 58,095 | 52,442 | ||
| Subsidiary borrowings | 9,487 | 7,949 | ||
| Deferred income tax liabilities | 12,233 | 9,640 | ||
| Subsidiary equity obligations | 3,677 | 3,565 | ||
| Equity | ||||
| Preferred equity | 4,196 | 3,954 | ||
| Non-controlling interests | 50,171 | 43,235 | ||
| Common equity | 22,964 | 22,499 | ||
| Total Equity | 77,331 | 69,688 | ||
| Total Liabilities and Equity | $ | 184,577 | $ | 159,826 |
CONSOLIDATED STATEMENTS OF OPERATIONS
| UNAUDITED FOR THE PERIODS ENDED SEP. 30 (US$ MILLIONS, EXCEPT PER SHARE AMOUNTS) |
Three Months Ended | Nine Months Ended | |||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Revenues | $ | 12,276 | $ | 6,285 | $ | 27,721 | $ | 17,476 | |||||
| Direct costs | (10,034 | ) | (4,590 | ) | (21,753 | ) | (12,568 | ) | |||||
| Other income and gains | (29 | ) | 325 | 236 | 391 | ||||||||
| Equity accounted income | 505 | 454 | 1,090 | 1,041 | |||||||||
| Expenses | |||||||||||||
| Interest | (932 | ) | (825 | ) | (2,640 | ) | (2,407 | ) | |||||
| Corporate costs | (24 | ) | (20 | ) | (69 | ) | (68 | ) | |||||
| 1,762 | 1,629 | 4,585 | 3,865 | ||||||||||
| Fair value changes | 132 | (59 | ) | 141 | 358 | ||||||||
| Depreciation and amortization | (643 | ) | (541 | ) | (1,755 | ) | (1,538 | ) | |||||
| Income tax | (259 | ) | 992 | (503 | ) | 556 | |||||||
| Net income | $ | 992 | $ | 2,021 | $ | 2,468 | $ | 3,241 | |||||
| Net income attributable to: | |||||||||||||
shareholders |
$ | 228 | $ | 1,036 | $ | 416 | $ | 1,478 | |||||
| Non-controlling interests | 764 | 985 | 2,052 | 1,763 | |||||||||
| $ | 992 | $ | 2,021 | $ | 2,468 | $ | 3,241 | ||||||
| Net income per share | |||||||||||||
| Diluted | $ | 0.20 | $ | 1.03 | $ | 0.32 | $ | 1.41 | |||||
| Basic | 0.20 | 1.05 | 0.32 | 1.44 | |||||||||
SUMMARIZED FINANCIAL RESULTS
| UNAUDITED FOR THE PERIODS ENDED SEP. 30 (US$ MILLIONS, EXCEPT PER SHARE AMOUNTS) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Asset management | $ | 211 | $ | 178 | $ | 922 | $ | 695 | |||||
| Real estate | 382 | 545 | 1,736 | 1,759 | |||||||||
| Renewable power | 45 | 49 | 203 | 192 | |||||||||
| Infrastructure | 87 | 89 | 357 | 334 | |||||||||
| Private equity and other | 113 | 107 | 440 | 529 | |||||||||
| Cash and financial assets | 54 | 8 | 163 | 63 | |||||||||
| Interest expense and operating costs | (83 | ) | (93 | ) | (298 | ) | (368 | ) | |||||
| Funds from operations1,2 | $ | 809 | $ | 883 | $ | 3,523 | $ | 3,204 | |||||
| Per share | $ | 0.79 | $ | 0.87 | $ | 3.47 | $ | 3.15 | |||||
| UNAUDITED FOR THE PERIODS ENDED SEP. 30 (US$ MILLIONS, EXCEPT PER SHARE AMOUNTS) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| FFO from operating activities2 | $ | 564 | $ | 491 | $ | 2,252 | $ | 2,056 | |||||
| Realized carried interest3 | 25 | — | 177 | — | |||||||||
| Realized disposition gains2 | 220 | 392 | 1,094 | 1,148 | |||||||||
| Funds from operations1,2 | 809 | 883 | 3,523 | 3,204 | |||||||||
| Realized disposition gains not in income | (185 | ) | (231 | ) | (945 | ) | (672 | ) | |||||
| Fair value changes | (137 | ) | (104 | ) | (895 | ) | 80 | ||||||
| Depreciation and amortization | (221 | ) | (222 | ) | (884 | ) | (868 | ) | |||||
| Income tax | (38 | ) | 710 | (210 | ) | 412 | |||||||
| Net income attributable to shareholders | $ | 228 | $ | 1,036 | $ | 589 | $ | 2,156 | |||||
| Per share | $ | 0.20 | $ | 1.03 | $ | 0.46 | $ | 2.07 | |||||
Notes:
1. Non-IFRS measure – see Basis of Presentation on page 3 and a reconciliation of net income to FFO on page 8
2. Excludes amounts attributable to non-controlling interests
3. Excludes carried interest generated that is subject to future investment performance
EARNINGS PER SHARE
| UNAUDITED FOR THE PERIODS ENDED SEP. 30 (US$ MILLIONS, EXCEPT PER SHARE AMOUNTS) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Net income | $ | 992 | $ | 2,021 | $ | 2,565 | $ | 4,428 | |||||
| Non-controlling interests | (764 | ) | (985 | ) | (1,976 | ) | (2,272 | ) | |||||
| Net income attributable to shareholders | 228 | 1,036 | 589 | 2,156 | |||||||||
| Preferred share dividends | (35 | ) | (33 | ) | (139 | ) | (134 | ) | |||||
| Net income available to common shareholders | $ | 193 | $ | 1,003 | $ | 450 | $ | 2,022 | |||||
| Weighted average shares | 958.9 | 959.1 | 958.8 | 958.9 | |||||||||
| Dilutive effect of the conversion of options and escrowed shares using treasury stock method1 | 21.6 | 18.8 | 16.5 | 18.2 | |||||||||
| Shares and share equivalents | 980.5 | 977.9 | 975.3 | 977.1 | |||||||||
| Diluted earnings per share | $ | 0.20 | $ | 1.03 | $ | 0.46 | $ | 2.07 | |||||
Notes:
1. Includes management share option plan and escrowed stock plan
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
| UNAUDITED FOR THE PERIODS ENDED SEP. 30 (US$ MILLIONS) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Net income | $ | 992 | $ | 2,021 | $ | 2,565 | $ | 4,428 | |||||
| Equity accounted fair value changes and other non-FFO items | (15 | ) | (18 | ) | 546 | 159 | |||||||
| Fair value changes | (132 | ) | 59 | 347 | (952 | ) | |||||||
| Depreciation and amortization | 643 | 541 | 2,237 | 1,968 | |||||||||
| Deferred income taxes | 162 | (1,030 | ) | 441 | (503 | ) | |||||||
| Realized disposition gains in fair value changes or prior periods1 | 232 | 235 | 1,079 | 996 | |||||||||
| Non-controlling interests | (1,073 | ) | (925 | ) | (3,692 | ) | (2,892 | ) | |||||
| Funds from operations1,2 | $ | 809 | $ | 883 | $ | 3,523 | $ | 3,204 | |||||
Notes:
1. Non-IFRS measure – see Basis of Presentation on page 3
2. Excludes amounts attributable to non-controlling interests
Source: Brookfield Asset Management Inc
| Title | Document |
|---|---|
English |
|
Q3 2017 Supplemental |
|
Q3 2017 Letter to Shareholders |
|
Q3 2017 Transcript |