EX-99.1 2 y49937ex99-1.txt FIRST QUARTER 2001 INTERIM REPORT 1 BRASCAN Q1/2001 STOCK SYMBOL: BNN TSE/NYSE INTERIM REPORT TO SHAREHOLDERS FOR THE THREE MONTHS ENDED MARCH 31, 2001 FIRST QUARTER EARNINGS FROM CONTINUING OPERATIONS INCREASED TO $89 MILLION, AS HIGHER CONTRIBUTIONS FROM PROPERTY AND FINANCIAL OPERATIONS OFFSET LOWER CONTRIBUTIONS FROM NATURAL RESOURCE OPERATIONS. FELLOW SHAREHOLDERS: Earnings from Brascan's continuing operations for the three months ended March 31, 2001 increased to $89 million or $0.44 per share from $87 million or $0.43 per share in the first quarter of 2000. Total income for the first quarter of 2000 was $347 million, which included gains of $260 million. Lower natural resource product prices, the strike at the Sudbury nickel operations and a paper mill close-down charge were more than offset by higher earnings from the company's other operations, including property and security gains realized in the quarter. Brascan's participation in industry sectors which have different business cycles enabled it to generate strong earnings despite a slowdown in one key sector. The group continues to focus on improving productivity, strengthening its asset base and surfacing value for shareholders.
Three months ended March 31 CDN. MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 ============================================================================ GROUP REVENUES $ 3,212 $ 3,201 --------------------- INCOME FROM CONTINUING OPERATIONS $ 89 $ 87 Income and gain on sale of discontinued operations -- 260 --------------------- NET INCOME $ 89 $ 347 --------------------- PER FULLY DILUTED CLASS A AND CLASS B COMMON SHARE: Income from continuing operations $ 0.44 $ 0.43 Net income $ 0.44 $ 1.88 ============================================================================
2001 HIGHLIGHTS TO DATE > Over $400 million was invested during the first quarter in new properties and production facilities, as part of the company's program to expand its base of operations with high quality assets. > Over $300 million of group equity securities were repurchased at discounts to their underlying values, under the initiative started in 2000 to capture additional value for continuing shareholders. Q1/2001 INTERIM REPORT 1 2 > The privatization of Great Lakes Power Inc. was completed, allowing the cash generated from these operations to flow directly to Brascan. > The price of Brascan's common shares increased by 17% during the first quarter, as investors increased their interest in value stocks. OPERATIONS REVIEW PROPERTY OPERATIONS contributed $39 million in the first quarter of 2001, up from $22 million in the same period last year. This increase reflects improved returns from commercial properties as a result of the re-leasing programs completed during 2000, as well as a gain on the sale of a 49% interest in two office buildings in Boston, 53 and 75 State Street, to a subsidiary of Deutsche Bank, A.G. NATURAL RESOURCE OPERATIONS contributed $5 million in the quarter, down from $41 million last year. Mining and metals' earnings declined from $25 million to $7 million, mainly due to lower base metal prices and the impact of the strike at Falconbridge's nickel operations in Sudbury. A new three-year agreement was reached in February and full production is expected to resume by mid-year. These factors were partly offset by a tax recovery. The contribution from forest product operations declined from $16 million to a loss of $2 million, due mainly to lower lumber and oriented strandboard prices and a charge for closing down a paper mill related to the consolidation of Nexfor's US Midwest paper operations. ENERGY OPERATIONS contributed $20 million in the quarter, unchanged from last year. Higher revenues from energy marketing operations and the return to more normal water flows on the lower Mississippi River were offset by the impact of lower water flows this winter at the company's operations in northern Ontario and western Quebec. FINANCIAL AND OTHER OPERATIONS contributed $51 million in the quarter, up from $36 million last year, reflecting the growth in investment banking and management operations and a gain realized on the sale of Trilon's minority shareholdings in Brookfield Properties Corporation. The contribution from Brazilian operations remained unchanged at $4 million. BUSINESS DEVELOPMENTS Progress continued during the quarter on the multi-year capital investment program to expand the group's production base and long-term earnings potential. PROPERTY OPERATIONS > CIBC World Markets signed a 30-year lease for 100% of the space in 300 Madison Avenue, a 1.2 million square foot office building Brookfield is constructing in midtown Manhattan for completion in early 2004. > Brookfield acquired a 50% interest in the 1.8 million square foot Bay-Adelaide Centre office project in downtown Toronto. This includes a one million square foot office tower, which Brookfield plans to develop once major tenancies are secured. 2 BRASCAN CORPORATION 3 > Brookfield acquired a 25% interest in a partnership formed to refurbish and reposition the Hudson Bay Centre, a one million square foot office-retail complex in midtown Toronto. NATURAL RESOURCE OPERATIONS > Construction of the US$2.3 billion Antamina copper-zinc mine in Peru is virtually completed, with initial start-up scheduled in the third quarter and full production expected by the year end. > Noranda and Falconbridge agreed to acquire the Lomas Bayas copper mine and adjacent Fortuna de Cobre copper deposit in northern Chile, with closing expected in the second quarter. > Commercial production started at the $360 million Huntingdon high-speed aluminum mill in Tennessee. When all phases of the mill are completed, it will produce 100,000 tonnes of aluminum foil annually for industrial and packaging users. > Engineering and construction are 90% and 30% completed, respectively, on the $260 million Altonorte copper smelter expansion in Chile, which will nearly double its annual copper production to 290,000 tonnes and triple annual sulphuric acid output to 700,000 tonnes. > Construction continued on two projects to increase the group's panelboard production capacity - the new $185 million oriented strandboard mill in Barton, Alabama and a $40 million particleboard line installation at the Cowie mill in Scotland. ENERGY OPERATIONS > Great Lakes Hydro Income Fund acquired a 50% interest in Powell River Energy in British Columbia. This added 82 megawatts of capacity to the group's power production base, which now stands at 987 megawatts. > Construction commenced on four new hydroelectric generating stations in Ontario, British Columbia and southern Brazil, with an aggregate capacity of 121 megawatts. FINANCIAL SERVICES Progress was also made on several initiatives in the group's financial services operations. > Trilon's investment management affiliate, Highstreet Asset Management, issued $287 million of an innovative investment product, "Highstreet Years". > Trilon launched the $500 million Tricap Restructuring Fund to focus on corporate restructurings and turnaround situations. > Trilon agreed to purchase Brascan's 40% interest in its Brazilian financial services joint-venture, Banco Brascan, for US$41 million, thereby consolidating all the group's financial services under Trilon. CAPITAL REPURCHASE PROGRAM Progress also continued on the program to repurchase shares in Brascan and its affiliates, which commenced in 2000 to capture value for the benefit of the group's continuing shareholders. During the first quarter of 2001, $314 million of group securities were acquired. Q1/2001 INTERIM REPORT 3 4 > Trilon acquired 14.5 million of its common shares in January 2001 under a substantial issuer bid, increasing Brascan's ownership of Trilon to 71%. > Brascan acquired the outstanding 4.3 million publicly held common shares of Great Lakes Power Inc., following a going-private transaction approved by Great Lakes' shareholders on February 28, 2001. These shares were acquired in exchange for approximately $250,000 in cash and 3.9 million Class A common shares of Brascan. > Brascan acquired 682,500 of its Class A common shares during the quarter under its normal course issuer bid which concluded on April 2, 2001. Since this bid commenced in April 2000, a total of 5.5 million shares were acquired for $109.5 million at an average price per share of $19.95. As previously announced, Brascan received approval in April 2001 for a new one-year normal course issuer bid to purchase up to 5% of its Class A common shares. Purchases under this bid will be made through the facilities of The Toronto Stock Exchange and the New York Stock Exchange. CORPORATE AND OUTLOOK The regular quarterly dividend of $0.25 per share was declared payable on August 31, 2001 to Class A and Class B common shareholders of record at the close of business on August 1, 2001. Brascan has established solid business operations with quality assets in three value sectors - commercial properties, natural resources and power generation - as well as a strong and growing financial services business. The company will continue to enhance value through fostering a performance culture, by expanding its business base and by employing a value-adding approach to each of its actions. Brascan is determined to translate the significant values created in recent years into increased shareholder returns. Robert J. Harding Jack L. Cockwell Chairman President and Chief Executive Officer April 26, 2001 Note: This interim report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Reliance should not be placed on forward-looking statements because they 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 achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include general economic conditions, interest rates, availability of equity and debt financing and other risks detailed from time to time in the company's continuous disclosure documents, including its 40-F filed with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 4 BRASCAN CORPORATION 5 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET
MARCH 31 December 31 MILLIONS 2001 2000 ------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 199 $ 347 Securities 2,348 2,371 Accounts and notes receivable 2,714 2,833 Investments accounted for using equity method 3,681 3,654 Property, plant and equipment 2,146 2,018 Other assets 414 378 ------------------------------------------------------------------------- $11,502 $11,601 ========================================================================= LIABILITIES Accounts payable and other $ 803 $ 812 Corporate borrowings 1,367 1,360 Subsidiary company borrowings 2,414 2,420 ------------------------------------------------------------------------- 4,584 4,592 DEFERRED CREDITS 394 395 CAPITAL BASE Minority interests 1,494 1,701 Shareholders' equity (Note 3) 5,030 4,913 ------------------------------------------------------------------------- 6,524 6,614 ------------------------------------------------------------------------- $11,502 $11,601 =========================================================================
Q1/2001 INTERIM REPORT 5 6 CONSOLIDATED STATEMENT OF INCOME -------------------------------------------------------------------------------
Three months ended March 31 MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 ======================================================================================== GROUP REVENUES $3,212 $3,201 Revenue of equity accounted affiliates 2,886 2,927 ---------------------------------------------------------------------------------------- Consolidated revenues 326 274 Equity in pre-tax earnings of affiliates 66 106 ---------------------------------------------------------------------------------------- INCOME BEFORE THE UNDERNOTED ITEMS 392 380 Operating expenses 165 143 Interest expense 72 65 Minority interests 37 34 Taxes and other provisions 29 51 ---------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS 89 87 Income and gain on sale of discontinued operations (Note 5) -- 260 ---------------------------------------------------------------------------------------- NET INCOME $ 89 $ 347 ======================================================================================== PER BASIC CLASS A AND CLASS B COMMON SHARE Income from continuing operations $ 0.44 $ 0.43 Net income $ 0.44 $ 1.93 ======================================================================================== PER FULLY DILUTED CLASS A AND CLASS B COMMON SHARE Income from continuing operations $ 0.44 $ 0.43 Net income $ 0.44 $ 1.88 ========================================================================================
CONSOLIDATED STATEMENT OF RETAINED EARNINGS ----------------------------------------------------------------------------
Three months ended March 31 MILLIONS 2001 2000 ============================================================================ BALANCE, BEGINNING OF PERIOD $2,367 $1,938 Net income 89 347 ---------------------------------------------------------------------------- 2,456 2,285 ---------------------------------------------------------------------------- SHAREHOLDER DISTRIBUTIONS Convertible note interest 1 2 Preferred share dividends 11 10 Common share dividends 43 43 ---------------------------------------------------------------------------- 55 55 ---------------------------------------------------------------------------- BALANCE, END OF PERIOD $2,401 $2,230 ============================================================================
6 BRASCAN CORPORATION 7 CONSOLIDATED STATEMENT OF CASH FLOWS --------------------------------------------------------------------------------
Three months ended March 31 MILLIONS 2001 2000 ======================================================================================== GROUP OPERATING CASH FLOWS $ 346 $ 471 Operating cash flows of equity accounted affiliates 236 368 ---------------------------------------------------------------------------------------- CONSOLIDATED CASH FLOW FROM OPERATIONS 110 103 ---------------------------------------------------------------------------------------- FINANCING AND SHAREHOLDER DISTRIBUTIONS Corporate borrowings: Issuances -- 4 Repayments (54) (291) Subsidiary company borrowings: Issuances 123 20 Repayments (167) (6) Minority interests (176) -- Shares repurchased (17) -- Convertible note interest paid (1) (2) Dividends paid (54) (53) ---------------------------------------------------------------------------------------- (346) (328) ---------------------------------------------------------------------------------------- INVESTING Securities: Purchases (96) -- Sales 119 61 Loans and other receivables: Advanced (340) (468) Collected 467 129 Investment in property and equipment (126) (64) Corporate investments sold -- 619 Other 64 (58) ---------------------------------------------------------------------------------------- 88 219 ---------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS Increase (Decrease) (148) (6) Balance, beginning of period 347 100 ---------------------------------------------------------------------------------------- Balance, end of period $ 199 $ 94 ========================================================================================
Q1/2001 INTERIM REPORT 7 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES Reference is made to the company's most recently issued Annual Report, which includes information necessary or useful to understanding the company's businesses and financial statement presentation. In particular, the company's significant accounting policies and practices are presented as Note 1 to the Consolidated Financial Statements included in that Report. The quarterly financial statements are unaudited. Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with generally accepted accounting principles in Canada. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain prior year amounts have been restated or reclassified to conform to the current year's presentation. 2. CHANGE IN ACCOUNTING POLICIES This quarter, the company has adopted the new accounting standard issued by the Canadian Institute of Chartered Accountants on Earnings Per Share. The new section harmonizes Canadian standards with the United States standards for the calculation of diluted earnings per share. All earnings per share numbers have been retroactively restated and the changes are not significant. 3. SHAREHOLDERS' EQUITY
MARCH 31 December 31 MILLIONS 2001 2000 ----------------------------------------------------------- Convertible notes $ 99 $ 99 Class A Preference shares 732 732 Class A and Class B common shares 4,199 4,082 ----------------------------------------------------------- $5,030 $4,913 ===========================================================
4. SHARES OUTSTANDING
MARCH 31 December 31 2001 2000 ------------------------------------------------------------------------------------- Class A common shares issued 172,548,083 169,290,683 Class B common shares issued 85,120 85,120 ------------------------------------------------------------------------------------- 172,633,203 169,375,803 Reserved for conversion of subordinated notes 3,106,847 3,116,782 ------------------------------------------------------------------------------------- Total fully diluted Class A and Class B common shares 175,740,050 172,492,585 ===================================================================================== Unexercised options 3,450,867 3,012,707 ------------------------------------------------------------------------------------- Exercisable options 2,561,197 1,965,037 =====================================================================================
5. INCOME AND GAIN ON SALE OF DISCONTINUED OPERATIONS In March 2000, the company sold its investment in Canadian Hunter Exploration Inc. for gross proceeds of $619 million. After providing for taxes and other costs in connection with the sale, the company realized a net gain of $250 million. Brascan's share of Canadian Hunter's income in 2000 prior to its sale was $10 million. 8 BRASCAN CORPORATION 9 6. SEGMENTED INCOME STATEMENT The company's business segments are based on the industry sectors in which the company operates and uses to assess business decisions and operating performance.
Three months ended March 31 MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 ------------------------------------------------------------------------------------- REVENUES Property operations $ 39 $ 22 Natural resource operations 5 41 Energy operations 20 20 Financial and other operations 51 36 Investment and other income 20 20 ------------------------------------------------------------------------------------- 135 139 ------------------------------------------------------------------------------------- UNALLOCATED EXPENSES Interest expense 26 28 Minority interests 17 17 Operating and other costs 3 7 ------------------------------------------------------------------------------------- 46 52 ------------------------------------------------------------------------------------- EARNINGS FROM CONTINUING OPERATIONS 89 87 Income and gain on sale of discontinued operations -- 260 ------------------------------------------------------------------------------------- NET INCOME $ 89 $347 ===================================================================================== EARNINGS PER FULLY DILUTED CLASS A AND CLASS B COMMON SHARE Income from continuing operations $0.44 $0.43 Net income $0.44 $1.88 =====================================================================================
7. SEGMENTED BALANCE SHEET ANALYSIS Brascan's segmented balance sheets, which show the equity investment in each business segment and the principal affiliates operating in each sector as at March 31, 2001 and December 31, 2000, were as follows:
MARCH 31 December 31 MILLIONS AFFILIATE 2001 2000 OPERATING ASSETS Property operations Brookfield $1,371 $1,332 Natural resource operations Noranda 1,796 1,809 Nexfor 400 400 Energy operations Great Lakes 802 692 Financial and other operations Trilon 1,405 1,376 Brascan Brazil 416 399 FINANCIAL AND OTHER ASSETS 1,082 1,137 ---------------------------------------------------------------------------------- $7,272 $7,145 ================================================================================== LIABILITIES Accounts payable and other $ 51 $ 42 Company borrowings 1,367 1,360 ---------------------------------------------------------------------------------- 1,418 1,402 DEFERRED CREDITS 218 224 CAPITAL BASE Minority interests 606 606 Shareholders' equity 5,030 4,913 ---------------------------------------------------------------------------------- 5,636 5,519 ---------------------------------------------------------------------------------- $7,272 $7,145 ==================================================================================
Q1/2001 INTERIM REPORT 9 10 8. NET ASSET VALUE The composition of the company's net asset value by business segment and the principal affiliates operating in each sector at March 31, 2001 and December 31, 2000 is set out in the following table:
NUMBER OF COMMON SHARES MARCH 31 December 31 MILLIONS AFFILIATE AND EQUIVALENTS 2001 2000 ---------------------------------------------------------------------------------------------------------------------- OPERATING ASSETS Property operations Brookfield 78.1 $2,054 $2,062 Natural resource operations Noranda 94.1 1,491 1,407 Nexfor 48.8 351 337 Energy operations Great Lakes 121.1 1,678 1,534 Financial and other operations Trilon 106.1 1,432 1,247 Brascan Brazil 56.0 640 640 FINANCIAL AND OTHER ASSETS 1,082 1,137 ---------------------------------------------------------------------------------------------------------------------- $8,728 $8,364 ====================================================================================================================== LOANS AND ACCOUNTS PAYABLE $1,418 $1,402 DEFERRED CREDITS 100 100 CAPITAL BASE Minority interests 606 606 Preference shares 732 732 Class A and Class B common shares and convertible notes 5,872 5,524 ---------------------------------------------------------------------------------------------------------------------- $8,728 $8,364 ====================================================================================================================== PER FULLY DILUTED CLASS A AND CLASS B COMMON SHARE $33.42 $32.02 ======================================================================================================================
Net asset values are derived by valuing the company's publicly traded affiliates at their quoted market values at the end of the reporting period, and by valuing Brascan Brazil at a 25% discount from the estimated domestic market value. The net asset value of the company's investment in Great Lakes is after eliminating $744 million of affiliate preference shares and is based on the market price of this company's shares immediately prior to Brascan acquiring the minority shareholdings. These net asset values do not reflect underlying values or control premiums attributable to these businesses nor the transaction costs or taxes that may result from their sale. Restructuring and tax provisions are excluded in determining the underlying values, as these largely relate to accounting adjustments and tax timing differences. Currency and other general financial provisions of $100 million have, however, been deducted. Values used for the company's financial and other assets and loans and accounts payable are included at their recorded book values. 10 BRASCAN CORPORATION 11 QUARTERLY FINANCIAL STATISTICS
2001 2000 1999 ------ -------------------------------------- --------------------------------------- Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 ---------------------------------------------------------------------------------------------------------------------------- TOTAL (millions) Net income (1) $ 89 $ 91 $ 106 $ 104 $ 347 $ 203 $ 90 $ 72 $ 58 Shareholders' equity (2) $5,030 $4,913 $4,788 $4,817 $4,755 $4,462 $4,391 $4,356 $4,293 Common shares outstanding (2) 172.6 169.4 169.9 174.1 173.9 173.9 173.8 173.4 170.2 ---------------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE Net income (1),(3) $ 0.44 $ 0.45 $ 0.55 $ 0.53 $ 1.88 $ 1.08 $ 0.45 $ 0.35 $ 0.27 Dividends $ 0.25 $ 0.25 $0.245 $0.245 $0.245 $0.245 $0.245 $0.245 $0.245 Book value (2),(3) $24.46 $24.24 $24.02 $23.61 $23.35 $21.72 $20.84 $20.70 $20.61 Share price (2) $25.75 $21.95 $19.60 $17.40 $18.00 $19.10 $20.80 $22.45 $17.90 ============================================================================================================================
1. Net income for Q1/2000 includes a net investment gain of $250 million or $1.40 per share on the sale of Canadian Hunter. Net income for Q4/1999 includes a deferred net investment gain of $110 million or $0.62 per share related principally to the company's investment in Trilon. 2. At quarter end. 3. Fully diluted. SHAREHOLDER INFORMATION STOCK EXCHANGE LISTINGS
------------------------------------------------------------------- Symbol Stock Exchange ------------------------------------------------------------------- CLASS A LIMITED VOTING SHARES BNN.A Toronto, New York, Brussels CLASS A PREFERENCE SHARES: Series 1 BNN.PR.A Toronto Series 2 BNN.PR.B Toronto Series 3 BNN.PR.F Canadian Series 4 BNN.PR.C Toronto Series 8 BNN.PR.E Toronto
DIVIDEND RECORD AND PAYMENT DATES(1)
Record Date Payment Date ---------------------------------------------------------------------------------------------------- CLASS A LIMITED VOTING SHARES First day of February, May, Last day of February, May August and November August and November CLASS A PREFERENCE SHARES: Series 1, 2 and 4 15th day of March, June Last day of March, June, September and December September and December Series 3 Second Wednesday of each month Thursday following second Wednesday of each month Series 8 15th day of January, April, First day of February, May, July and October August and November ----------------------------------------------------------------------------------------------------
1. All dividends are subject to declaration by the Board of Directors. Q1/2001 INTERIM REPORT 11 12 BRASCAN BRASCAN CORPORATION is focussed on increasing shareholder value through owning businesses with leadership positions in the property, natural resources, energy and financial services industries. The Brascan group employs over 50,000 people in managing and operating more than 120 major properties and production facilities in North and South America and Europe. Brascan is listed on The Toronto Stock Exchange and the New York Stock Exchange under the symbol BNN. ENQUIRIES Enquiries relating to the operations of the company should be directed to the company's Head Office: BRASCAN CORPORATION Suite 4400, 181 Bay Street BCE Place, P.O. Box 762 Toronto, Ontario M5J 2T3 Telephone: 416-363-9491 Facsimile: 416-363-2856 Web Site: www.brascancorp.com e-mail: enquiries@brascancorp.com SHAREHOLDER AND GENERAL ENQUIRIES: Alan V. Dean Senior Vice-President, Public and Corporate Affairs Telephone: 416-956-5124 e-mail: adean@brascancorp.com Enquiries relating to dividends, address changes and share certificates should be directed to the company's Transfer Agent: CIBC MELLON TRUST COMPANY P.O. Box 7010, Adelaide Street Postal Station Toronto, Ontario M5C 2W9 Telephone: 416-643-5500 or 1-800-387-0825 (Toll free in Canada and U.S.A.) Facsimile: 416-643-5501 Web Site: www.cibcmellon.com e-mail: inquiries@cibcmellon.com INVESTOR ENQUIRIES: Katherine C. Vyse Vice-President, Investor Relations and Communications Telephone: 416-369-8246 e-mail: kvyse@brascancorp.com M. Diane Horton Director, Investor Relations Telephone: 416-956-5144 e-mail: dhorton@brascancorp.com