EX-99.2 4 y52983ex99-2.txt PRESS RELEASE DATED AUGUST 3, 2001 1 Exhibit 99.2 BRASCAN NEWS RELEASE STOCK SYMBOL: BNN TSE/NYSE RECORD SECOND QUARTER EARNINGS OF $107 MILLION DESPITE DECLINE IN METAL AND FOREST PRODUCT PRICES TORONTO, AUGUST 3, 2001 - Brascan Corporation today announced record quarterly earnings from continuing operations of $107 million for the three months ended June 30, 2001, up from $104 million in the same quarter last year. Earnings from continuing operations for the six months ended June 30, 2001 were $196 million or $1.00 per share, up from $191 million or $0.96 per share in the same period of 2000. Total income for the first six months of 2000 was $451 million, which included gains of $260 million.
Three months ended Six months ended June 30 June 30 MILLIONS, EXCEPT PER SHARE AMOUNTS (CDN.$) 2001 2000 2001 2000 ---- ---- ---- ---- GROUP REVENUES $3,357 $3,437 $6,569 $6,638 ------ ------ ------ ------ INCOME FROM CONTINUING OPERATIONS $ 107 $ 104 $ 196 $ 191 Income and gain on sale of discontinued operations -- -- -- 260 ------ ------ ------ ------ NET INCOME $ 107 $ 104 $ 196 $ 451 ------ ------ ------ ------ PER DILUTED CLASS A AND CLASS B COMMON SHARE: Income from continuing operations $ 0.56 $ 0.53 $ 1.00 $ 0.96 Net income $ 0.56 $ 0.53 $ 1.00 $ 2.41 ====== ====== ====== ======
Improved returns from property, financial services and energy operations, along with property and security gains realized at the operating level, more than offset the impact of lower natural resource product prices and the strike at the Sudbury nickel operations, which was settled earlier this year. ROBERT HARDING, CHAIRMAN OF BRASCAN, ATTRIBUTED "THE COMPANY'S STRONG EARNINGS TO THE GROUP'S PARTICIPATION IN A NUMBER OF INDUSTRY SECTORS WITH VARYING BUSINESS CYCLES. DESPITE THE ECONOMIC SLOWDOWN AND A SIGNIFICANT DECLINE IN BASE METAL PRICES, THE GROUP'S OPERATIONS WERE ABLE TO ACHIEVE RECORD FINANCIAL RESULTS." 2001 HIGHLIGHTS - Over $800 million was invested during the first six months in new properties and production facilities, as part of the company's program to expand its operating base with high quality assets. - Over $400 million of group equity securities were repurchased at discounts to their underlying values, under an initiative started in 2000 to enhance shareholder values. - The common shares of Brascan and a number of affiliates increased in value during the first six months in response to the growing interest in value stocks. - Key executive appointments were made to implement the group's succession plans and broaden its management base. 2 OPERATING OVERVIEW Property operations contributed $92 million in the first six months of 2001, up from $56 million in the same period last year. This increase reflects improved returns from commercial properties as a result of proactive re-leasing programs as well as gains on the sale of part interests in three office properties: 53 and 75 State Street in Boston and Fifth Avenue Place in Calgary. Natural resource operations contributed $18 million in the first six months, down from $87 million last year. Mining and metals' earnings declined from $56 million to $15 million, mainly due to lower base metal prices and the impact of the strike at Falconbridge's nickel operations in Sudbury. These factors were partly offset by tax recoveries and a gain on the sale of Noranda's shares in Newmont Mining Corporation in May 2001. The contribution from forest products' operations declined from $31 million to $3 million, due mainly to lower lumber, panelboard and pulp prices, and provisions related to the closing of a paper mill in Ohio as part of the consolidation of the group's specialty paper operations. Energy operations contributed $47 million in the first six months, up from $40 million last year. Higher revenues from marketing operations and the return to more normal water flows on the lower Mississippi River more than offset the impact of lower precipitation levels early in the year at the company's operations in northern Ontario and western Quebec. Financial and other operations contributed $90 million in the first six months, up from $71 million last year, reflecting the growth in investment banking and asset management operations and security gains. The contribution from Brazilian operations for the period increased to $8 million from $6 million last year. BUSINESS DEVELOPMENT Progress continues on the multi-year capital investment program to expand the group's production base and long-term earnings potential. Property Operations - Construction has started on the 1.2 million square foot CIBC World Markets office tower at 300 Madison Avenue in midtown Manhattan for completion in early 2004. - A 50% interest was acquired in the 1.8 million square foot Bay-Adelaide Centre office project in downtown Toronto. This includes a 1.2 million square foot office tower, which Brookfield plans to develop on securing major tenancies. - A 25% interest was acquired in a partnership formed to redevelop the Hudson Bay Centre, a one million square foot office-retail complex in midtown Toronto. Natural Resource Operations - The Antamina copper-zinc mine in Peru began shipping copper concentrate in July destined for Noranda's Gaspe copper smelter. Commercial production is now scheduled for the fourth quarter, more than two months ahead of schedule. - The Lomas Bayas copper mine and the adjacent Fortuna de Cobre copper deposit in northern Chile were acquired for US$175 million. 2 Brascan Corporation 3 - The group's mineral reserves were increased with the purchase of the Montcalm nickel-copper deposit in Ontario and an agreement to purchase the El Pachon copper deposit in central western Argentina. - Construction is near completion on two panelboard projects - the new $180 million Barton oriented strandboard mill in 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 the Powell River hydroelectric facilities in British Columbia. This added 82 megawatts of capacity to the group's power production base, increasing it to 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 and Other - Trilon launched the Tricap Restructuring Fund to focus on corporate restructurings and turnaround situations. - Brascan Imobiliaria acquired an interest in two large residential land assemblies to broaden its strong residential land base in Rio de Janeiro and Sao Paulo. CAPITAL REPURCHASE PROGRAM Shares of Brascan and its affiliates continued to be repurchased during the quarter to increase value for the benefit of the group's continuing shareholders. During the first half of 2001, $434 million of group securities were acquired. - Brascan acquired 4.3 million publicly held common shares of Great Lakes Power Inc. in accordance with a going-private transaction approved by Great Lakes' shareholders. These shares were acquired in exchange for $250,000 in cash and 3.9 million Class A common shares of Brascan. - Brascan acquired 883,400 of its Class A common shares during the first six months of 2001 through normal course purchases. - Brascan acquired 3,676,700 common shares of Nexfor Inc. during the first five months of 2001 through normal course purchases, increasing its ownership of Nexfor to 36%. - Brookfield acquired an additional $92 million of common equity interests in its principal US operating subsidiary. - Trilon acquired 14.5 million of its common shares under a substantial issuer bid, increasing Brascan's ownership of Trilon to 71%. Second Quarter 2001 Press Release 3 4 MANAGEMENT APPOINTMENTS During the quarter, a number of key management appointments were made within the Brascan group. These changes reflect the implementation of the company's succession planning process initiated two years ago. - The board of directors of Brascan approved the appointment of Bruce Flatt as President and Chief Executive, effective March 31, 2002. During the past five years, Bruce Flatt, currently President and Chief Executive of Brookfield, together with Brookfield's Chairman Gordon Arnell, transformed Brookfield into one of North America's premier office property companies. - Upon stepping down as President and Chief Executive of Brascan, Jack Cockwell will become a Group Chairman, with group-wide responsibility for capital allocation, partnership building and industry trend analysis. - Richard ("Ric") Clark, currently President and Chief Executive of Brookfield's US office property subsidiary, was appointed President and Chief Executive of Brookfield effective March 31, 2002. Ric has played a key role in the rapid and extremely successful expansion of the company's US office property operations. - Derek Pannell, who has held a number of senior operating roles in the Noranda group, including overseeing the successful development of the US$2.3 billion Antamina copper-zinc mine in Peru, was appointed President and Chief Operating Officer of Noranda. In his new role, he will be responsible for enhancing the profitability of Noranda's world-wide mining and metallurgical operations. - With the appointment of Derek Pannell, David Kerr, currently Chief Executive of Noranda, will also assume the role of Chairman. As Chairman and Chief Executive, he will continue to be responsible for the renewal of Noranda's mineral reserves and the expansion of its production base as well as the development of key joint venture and other partner relationships. - Catharine Johnston was recently appointed Executive Vice-President, Business Excellence of Noranda, with responsibility for increasing Noranda's organizational effectiveness and ensuring that best management and operational practices are adopted across the company. - Richard Legault, in addition to his role as Brascan's Chief Financial Officer, was recently appointed Executive Vice-President of Great Lakes Power with responsibility for implementing the group's plan to expand its power generating base. In a related initiative, Bruce Flatt together with a number of other senior group executives plan to increase their effective ownership interests in Brascan. This will be achieved through Canadian Express Limited, which currently owns 3.3 million Brascan Class A common shares and recently filed a prospectus to raise $100 million by issuing fixed rate preferred shares of a subsidiary, with the proceeds dedicated to acquire additional Brascan Class A shares. 4 Brascan Corporation 5 CORPORATE AND OUTLOOK The regular quarterly dividend of $0.25 per share was declared, payable on November 30, 2001 to Class A and Class B common shareholders of record at the close of business on November 1, 2001. ROBERT HARDING, BRASCAN'S CHAIRMAN, IN COMMENTING ON THE OUTLOOK FOR THE CURRENT YEAR, STATED THAT: "WE HAVE ESTABLISHED SOLID BUSINESS OPERATIONS WITH QUALITY ASSETS IN THREE VALUE SECTORS - COMMERCIAL PROPERTIES, POWER GENERATION AND NATURAL RESOURCES - AS WELL AS A STRONG AND GROWING FINANCIAL SERVICES BUSINESS. WE WILL CONTINUE TO ENHANCE VALUE BY SELECTIVELY EXPANDING OUR BUSINESS BASE AND BY EMPLOYING A VALUE-ADDING APPROACH TO EACH OF OUR OPERATIONS. WE ARE DETERMINED TO TRANSLATE THESE VALUES INTO INCREASED SHAREHOLDER RETURNS." * * * * * * * BRASCAN CORPORATION is focussed on increasing shareholder value through building businesses owning and operating high quality assets and capable of generating attractive returns. The Brascan group employs over 50,000 people in operating more than 120 major commercial properties and natural resource production facilities, principally in North and South America. Brascan is listed on the Toronto and New York Stock Exchanges under the symbol BNN. For more information, please visit our web site at www.brascancorp.com or contact the following individuals:
MEDIA: INVESTOR AND FINANCIAL ANALYSTS: Robert J. Harding Richard Legault Katherine C. Vyse Chairman Senior Vice-President and Vice-President 416-363-9491 Chief Financial Officer Investor Relations 416-956-5183 416-369-8246
A conference call has been arranged for investors and analysts to discuss Brascan's second quarter results with senior management on FRIDAY, AUGUST 3 AT 10:00 A.M. (E.N.T.). The call can be accessed by dialing 416-641-6671 (local and overseas) or 1-888-424-1091 (toll free in North America) at approximately 9:50 a.m. A taped rebroadcast of the teleconference will be available until August 31, 2001 by calling 416-626-4100 and entering reservation number 19313066. This conference call will also be Webcast live on our web site at www.brascancorp.com, where it will be archived for future reference. * * * * * * * Note: This news release 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. Second Quarter 2001 Press Release 5 6 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET
JUNE 30 December 31 MILLIONS 2001 2000 ---- ---- ASSETS Cash and cash equivalents $ 259 $ 347 Securities 2,451 2,371 Accounts and notes receivable 2,430 2,833 Investments accounted for using equity method 3,726 3,654 Property, plant and equipment 2,159 2,018 Other assets 397 378 ------- ------- $11,422 $11,601 ======= ======= LIABILITIES Accounts payable and other $ 756 $ 812 Corporate borrowings 1,351 1,360 Subsidiary company borrowings 2,349 2,420 ------- ------- 4,456 4,592 DEFERRED CREDITS 390 395 CAPITAL BASE Minority interests 1,497 1,701 Shareholders' equity (Note 3) 5,079 4,913 ------- ------- 6,576 6,614 ------- ------- $11,422 $11,601 ======= =======
6 Brascan Corporation 7 CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 2001 2000 ---- ---- ---- ---- GROUP REVENUES $3,357 $3,437 $6,569 $6,638 Revenue of equity accounted affiliates 3,079 3,150 5,965 6,077 ------ ------ ------ ------ Consolidated revenues 278 287 604 561 Equity in pre-tax earnings of affiliates 84 130 150 236 ------ ------ ------ ------ INCOME BEFORE THE UNDERNOTED ITEMS 362 417 754 797 Operating expenses 139 141 304 284 Interest expense 62 60 134 125 Minority interests 34 46 71 80 Taxes and other provisions 20 66 49 117 ------ ------ ------ ------ INCOME FROM CONTINUING OPERATIONS 107 104 196 191 Income and gain on the sale of discontinued operations (Note 5) -- -- -- 260 ------ ------ ------ ------ NET INCOME $ 107 $ 104 $ 196 $ 451 ====== ====== ====== ====== PER BASIC CLASS A AND CLASS B COMMON SHARE Income from continuing operations $ 0.56 $ 0.53 $ 1.00 $ 0.96 Net income $ 0.56 $ 0.53 $ 1.00 $ 2.45 ====== ====== ====== ====== PER DILUTED CLASS A AND CLASS B COMMON SHARE Income from continuing operations $ 0.56 $ 0.53 $ 1.00 $ 0.96 Net income $ 0.56 $ 0.53 $ 1.00 $ 2.41 ====== ====== ====== ======
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 MILLIONS 2001 2000 2001 2000 ---- ---- ---- ---- BALANCE, BEGINNING OF PERIOD $2,401 $2,230 $2,367 $1,938 Net income 107 104 196 451 ------ ------ ------ ------ 2,508 2,334 2,563 2,389 ------ ------ ------ ------ SHAREHOLDER DISTRIBUTIONS Convertible note interest 1 2 2 4 Preferred share dividends 10 11 21 21 Common share dividends 42 42 85 85 ------ ------ ------ ------ 53 55 108 110 ------ ------ ------ ------ BALANCE, END OF PERIOD $2,455 $2,279 $2,455 $2,279 ====== ====== ====== ======
Second Quarter 2001 Press Release 7 8 CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended June 30 Six months ended June 30 MILLIONS 2001 2000 2001 2000 ---- ---- ---- ---- GROUP OPERATING CASH FLOW $ 351 $ 491 $ 697 $ 962 Operating cash flows of equity accounted affiliates 222 361 458 729 ----- ----- ----- ----- CONSOLIDATED CASH FLOW FROM OPERATIONS 129 130 239 233 ----- ----- ----- ----- FINANCING AND SHAREHOLDER DISTRIBUTIONS Corporate borrowings: Issuances 31 7 57 10 Repayments -- (16) (80) (306) Subsidiary company borrowings: Issuances 42 156 123 176 Repayments (45) (1) (214) (7) Minority interests -- -- (176) -- Convertible note repurchases -- (40) -- (40) Shares: Issuances -- -- -- 1 Repurchases (5) (1) (22) (1) Convertible note interest paid (1) (2) (2) (4) Dividends paid (52) (53) (106) (106) ----- ----- ----- ----- (30) 50 (420) (277) ----- ----- ----- ----- INVESTING Securities: Purchases (123) (117) (219) (117) Sales 20 114 139 175 Loans and other receivables: Advances (209) (154) (549) (622) Collections 432 86 922 215 Investment in property and equipment (51) (54) (135) (118) Corporate investments sold -- -- -- 619 Other (108) (44) (65) (103) ----- ----- ----- ----- (39) (169) 93 49 ----- ----- ----- ----- CASH AND CASH EQUIVALENTS Increase (decrease) 60 11 (88) 5 Balance, beginning of period 199 94 347 100 ----- ----- ----- ----- Balance, end of period $ 259 $ 105 $ 259 $ 105 ===== ===== ===== =====
8 Brascan Corporation 9 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 In the first quarter of 2001, the company 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
June 30 December 31 MILLIONS 2001 2000 ---- ---- Convertible notes $ 99 $ 99 Class A Preference shares 732 732 Class A and Class B common shares 4,248 4,082 ------ ------ $5,079 $4,913 ====== ======
4. COMMON SHARES OUTSTANDING
JUNE 30 December 31 2001 2000 ---- ---- Class A and Class B common shares issued 172,438,247 169,375,803 Unexercised options 3,493,917 3,012,707 Reserved for conversion of subordinated notes 3,106,847 3,116,782 ----------- ----------- Total fully diluted Class A and Class B common shares 179,039,011 175,505,292 =========== =========== Exercisable options 1,986,547 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. Second Quarter 2001 Press Release 9 10 6. SEGMENTED INCOME STATEMENT The company's business segments are based on the industry sectors which the company uses to manage its businesses and assess their operating performance.
Three months ended June 30 Six months ended June 30 MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 2001 2000 ---- ---- ---- ---- REVENUES Property operations $ 53 $ 34 $ 92 $ 56 Natural resource operations 13 46 18 87 Energy operations 27 20 47 40 Financial and other operations 39 35 90 71 Investment and other income 18 29 38 49 ----- ----- ----- ----- 150 164 285 303 ----- ----- ----- ----- UNALLOCATED EXPENSES Interest expense 24 25 50 53 Minority interests 16 16 33 33 Operating and other costs 3 19 6 26 ----- ----- ----- ----- 43 60 89 112 ----- ----- ----- ----- EARNINGS FROM CONTINUING OPERATIONS 107 104 196 191 Income and gain on sale of discontinued operations -- -- -- 260 ----- ----- ----- ----- NET INCOME $ 107 $ 104 $ 196 $ 451 ===== ===== ===== ===== EARNINGS PER DILUTED CLASS A AND CLASS B COMMON SHARE Income from continuing operations $0.56 $0.53 $1.00 $0.96 Net income $0.56 $0.53 $1.00 $2.41 ===== ===== ===== =====
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 June 30, 2001 and December 31, 2000, were as follows:
JUNE 30 December 31 MILLIONS Affiliate 2001 2000 -------- --------- ---- ---- OPERATING ASSETS Property operations Brookfield $ 1,409 $ 1,332 Natural resource operations Noranda 1,783 1,809 Nexfor 421 400 Energy operations Great Lakes 818 692 Financial and other operations Trilon 1,423 1,376 Brascan Brazil 406 399 FINANCIAL AND OTHER ASSETS 1,034 1,137 ------- ------- $ 7,294 $ 7,145 ======= ======= LIABILITIES Accounts payable and other $ 45 $ 42 Company borrowings 1,351 1,360 ------- ------- 1,396 1,402 DEFERRED CREDITS 213 224 CAPITAL BASE Minority interests 606 606 Shareholders' equity 5,079 4,913 ------- ------- 5,685 5,519 ------- ------- $ 7,294 $ 7,145 ======= =======
10 Brascan Corporation 11 8. NET ASSET VALUE The composition of the company's net asset value by business sector and the principal affiliates operating in each sector at June 30, 2001 and December 31, 2000 are set out in the following table:
Number of Common Shares JUNE 30 December 31 MILLIONS Affiliate and Equivalents 2001 2000 -------- --------- --------------- ---- ---- OPERATING ASSETS Property operations Brookfield 78.1 $ 2,265 $ 2,062 Natural resource operations Noranda 94.1 1,534 1,407 Nexfor 51.1 406 337 Energy operations Great Lakes 121.1 1,678 1,534 Financial and other operations Trilon 106.1 1,377 1,247 Brascan Brazil 56.0 640 640 FINANCIAL AND OTHER ASSETS 1,034 1,137 ------- ------- $ 8,934 $ 8,364 ======= ======= LOANS AND ACCOUNTS PAYABLE $ 1,396 $ 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 6,100 5,524 ------- ------- $ 8,934 $ 8,364 ======= ======= PER FULLY DILUTED CLASS A AND CLASS B COMMON SHARE $ 34.76 $ 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 Great Lakes is after eliminating $744 million of affiliate preference shares and is based on the market price of the company's shares immediately prior to Brascan's acquisition of 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. -30- Second Quarter 2001 Press Release 11