Brascade Corporation
TSX : BCA.PR.B

November 11, 2005 17:34 ET

Brascade Announces 2005 Third Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Nov. 11, 2005) - Brascade Corporation (TSX:BCA.PR.B) reported net income for the nine months ended September 30, 2005 of $905.7 million, compared to $222.6 million for the same period last year. Net income for the three months ended September 30, 2005 was $400.2 million compared to $113.3 million in the third quarter of 2004. Results for the current quarter include a $430.2 million gain from the disposition of substantially all of Brascade's investment in Falconbridge Limited.

During the third quarter of 2005, Brascade disposed of substantially all of its investment in Falconbridge. In August, Brascade received approximately $230 million in proceeds on the redemption by Falconbridge of retractable preferred shares held by the company and approxi-mately $1.7 billion in proceeds on the sale by the company of substantially all its common shares of Falconbridge to Xstrata plc. Brascade's current ownership of Falconbridge consists of 1.3 million common shares, representing approximately 1% of the outstanding common shares, as well as $340 million junior preferred shares and $59 million convertible debentures.

Mining and metal investments contributed $87.0 million for the first nine months of 2005, compared with $89.3 million for the same period last year. The substantially improved earnings reported by Falconbridge were more than offset by the reduction in our interest in these earnings following the sale of Falconbridge common shares to Xstrata during the third quarter.

Forest product investments contributed $64.7 million for the first nine months of 2005, compared with $65.3 million for the same period last year. These results reflect an increase in ownership in Norbord Inc. from 22% to 36% and the continued strong performance of the company's invest-ment in the oriented strandboard business ("OSB"), partly offset by a reduction in OSB prices from their record levels in 2004.

The company's Board of Directors declared the regular quarterly dividends on its Senior Preferred Shares, Series B payable on December 31, 2005 to shareholders of record on December 20, 2005.

Brascade Corporation holds investments in the natural resources and property sectors. The common shares of Brascade are wholly owned by Brascan Corporation, an asset management company with a focus on property, power and other infrastructure assets.

Edward C. Kress, Chairman and President, will be available at( 416) 363-9491 to answer any questions on the company's financial results.

This news release contains forward-looking statements concerning the company's business and operations. The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and the company's actual results could differ materially from those expressed or implied in such statements. Reference should be made to the most recent Annual Information Form for a description of the major risk factors.



Consolidated Statement of Operations
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(unaudited) Three months Nine months
US$ millions, except ended Sept. 30 ended Sept. 30
per share amounts 2005 2004 2005 2004
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(Restated
- Note 7)

Income
Equity income from
Falconbridge Limited $ 10.8 $ 27.6 $ 87.0 $ 89.3
Equity income from Norbord Inc. 16.7 19.7 67.8 64.8
Equity loss from Fraser
Papers Inc. (2.1) 0.5 (3.1) 0.5
Foreign exchange gain (loss) (29.2) 2.4 (14.0) 1.7
Other income (15.9) (2.6) 27.4 0.7
Gains on disposition 430.2 66.0 789.6 66.0
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410.5 113.6 954.7 223.0
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Expenses
Interest expense 10.3 - 48.8 -
Corporate - 0.3 0.2 0.4
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10.3 0.3 49.0 0.4
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Net income $ 400.2 $ 113.3 $ 905.7 $ 222.6
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Net income per common share $ 10.27 $ 4.20 $ 30.49 $ 7.92
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Consolidated Statement of Retained Earnings (Deficit)
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(unaudited) Three months Nine months
US$ millions ended Sept. 30 ended Sept. 30
2005 2004 2005 2004
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(Restated
- Note 7)

Deficit, beginning of period $ (503.3) $ (33.4) $(1,008.8) $(126.5)
Net income for the period 400.2 113.3 905.7 222.6
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(103.1) 79.9 (103.1) 96.1
Preferred share dividends - (8.4) - (24.6)
Common share dividends (275.0) - (275.0) -
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Deficit, end of period $ (378.1) $ 71.5 $ (378.1) $ 71.5
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Consolidated Balance Sheet
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September 30 December 31
US$ millions 2005 2004
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(unaudited) (Restated
- Note 7)

Assets
Loans receivable $ 136.4 $ 102.6
Securities 433.7 103.3
Investment in Falconbridge Limited - 803.8
Investment in Norbord Inc. 185.0 177.3
Investment in Fraser Papers Inc. 206.9 203.8
Investment in Canary Wharf Group, plc 414.6 524.8
Other assets 0.8 8.4
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$ 1,377.4 $ 1,924.0
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Liabilities
Accounts payable $ 211.3 $ 208.9
Term debt (Note 4) - 291.7
Retractable preferred shares (Note 5) 478.2 1,865.7
Shareholders' equity (deficiency) (Note 6) 687.9 (442.3)
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$ 1,377.4 $ 1,924.0
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Consolidated Statement of Cash Flows
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(unaudited) Three months Nine months
US$ millions ended Sept. 30 ended Sept. 30
2005 2004 2005 2004
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(Restated
- Note 7)

Cash flow from (used in)
operating activities
Dividend received $ 12.4 $ 59.6 $ 86.0 $ 77.6
Other income, net of expenses (36.4) (7.8) (39.6) (4.6)
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(24.0) 51.8 46.4 73.0
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Cash flow from (used in)
financing activities
Issuance of exchangeable
debentures - 188.5 - 188.5
Common share dividend paid (275.0) - (275.0) -
Preferred share dividend paid - (8.4) - (24.6)
Share issuance - 19.2 - 19.2
Share redemption (1,807.7) - (1,807.7) -
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(2,082.7) 199.3 (2,082.7) 183.1
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Cash flow from (used in)
investing activities
Investment in Canary
Wharf Group, plc - (19.2) - (19.2)
Investment in Fraser
Papers Inc. (2.4) - (5.9) -
Proceeds on sale of Canary
Wharf Group, plc - 27.9 - 27.9
Proceeds on sale of
Norbord Inc. - 94.1 - 94.1
Proceeds on sale of
Falconbridge Limited 1,702.3 - 1,702.3 -
Loans receivable (37.2) (290.7) (104.1) (295.7)
Dividend from Canary
Wharf Group, plc 110.2 - 110.2 -
Securities 333.8 (63.2) 333.8 (63.2)
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2,106.7 (251.1) 2,036.3 (256.1)
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Net change and closing
cash balance $ - $ - $ - $ -
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. REORGANIZATION

On September 13, 2004, Brascade Resources Inc. ("Brascade Resources") amalgamated with 4250231 Canada Limited, a wholly owned subsidiary of Brascan Corporation ("Brascan"), to form Brascade Corporation (the "company"). At the time of the amalgamation, Brascade Resources owned approximately 25% of the common shares of Noranda Inc. ("Noranda"), 21% of the common shares of Fraser Papers Inc. ("Fraser Papers") and 21% of the common shares of Norbord Inc. ("Norbord"), and 4250231 Canada Limited owned approximately 21% of the common shares of Fraser Papers, 21% of the common shares of Norbord and 16% of the ordinary shares of Canary Wharf Group, plc. 4250231 Canada Limited acquired its interests in Fraser Papers and Norbord from Brascan immediately prior to the amalgama-tion. In conjunction with this amalgamation, Brascan became the sole holder of the company's common shares. The publicly traded Preferred Shares of Brascade Resources, Series B and Series C, were exchanged for Senior Preferred Shares of the company, Series B and Series A, respectively, having the same terms, except for the elimination of their general voting rights and the addition of redemption rights at the option of the holders. The details of the reorganization and amalgamation are set out in the Brascade Resources' Management Proxy Circular dated August 20, 2004. At the time of the reorganization and amalgamation, Brascade Resources and 4250231 Canada Limited were controlled by Brascan and, accordingly, the accounts of the company are prepared on a continuity of interest basis with the assets and liabilities being combined at their carrying values in the accounts of their predecessors, with the differ-ences from exchange amounts being recorded as an adjustment to retained earnings (deficit).

2. SUMMARY OF ACCOUNTING POLICIES

Reference is made to the most recently issued Annual Report of the company, which includes information necessary or useful for understanding the company's businesses and financial statement presentation. In particular, the company's significant accounting policies and practices are presented as Note 2 to the Consolidated Financial Statements included in that Report, and have been consistently applied in the preparation of these interim financial statements, except for the changes in accounting policies, described in Note 3.

The interim financial statements are unaudited and follow the accounting policies summarized in the notes to the annual financial statements. Financial information in this interim 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 Canadian generally accepted accounting principles.

The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current period's presentation.

3. CHANGE IN ACCOUNTING POLICIES

Consolidation of Variable Interest Entities, AcG 15

Effective January 1, 2005, the company implemented the new Canadian Institute of Chartered Accountants ("CICA") issued Accounting Guideline 15, "Consolidation of Variable Interest Entities" (AcG 15) with retroactive restatement of prior periods. AcG 15 provides guidance for applying the principles in handbook section 1590, "Subsidiaries", to those entities (defined as variable Interest Entities ("VIEs")), in which either the equity at risk is not sufficient to permit that entity to finance its activities without additional subordinated financial support from other parties, or equity investors lack voting control, an obligation to absorb expected losses, or the right to share expected residual returns. AcG 15 requires consolidation of VIEs by the Primary Beneficiary, which is defined as the party which has exposure to them majority of a VIEs expected losses and/or expected residual returns. The adoption of AcG 15 resulted in the reclassifi-cation of the C$255 million debentures, exchangeable for up to 20 million common shares of Norbord, that were issued on September 30, 2004 to accounts payable. There was no impact to common equity.

Liabilities and Equity, CICA Handbook Section 3861

Effective January 1, 2005, the company adopted the amendment to CICA Handbook Section 3861, Financial Instruments: Disclosure and Presentation with retroactive restatement of prior periods. The amendment requires cer-tain obligations that must or could be settled with a variable number of the issuer's own equity instruments to be pre-sented as a liability. As a result, dividends and interests paid on these equity instruments have been reclassified as interest expense and unrealized foreign exchange movements have been recorded in income in 2004 by the company's equity accounted investee. The retroactive adoption of this amendment resulted in a cumulative adjustment to opening retained earnings at January 1, 2004 of $10 million. Net income attributable to common shares for the year ended December 31, 2004 will be reduced reflecting the foregoing items by $8 million. The impact on net income attributable to common shares for the nine months ended September 30, 2005 was $nil (2004 - $-4 million).

4. TERM DEBT

The term debt was due to a common control company, bears interest at 6.5% and was repaid on September 15, 2005 by issuing 9,568,070 Class 2 Junior Preferred Shares.



5. RETRACTABLE PREFERRED SHARES

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September 30 December 31
US$ millions, except number of shares 2005 2004
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(unaudited)
5,264,536 Class 1 Senior Preferred
Shares, Series B (2004 - 6,846,504) $ 181.6 $ 228.3
9,568,070 Class 2 Junior Preferred
Shares, Series A (2004 - 52,807,686) 296.6 1,637.4
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$ 478.2 $ 1,865.7
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6. SHAREHOLDERS' EQUITY

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September 30 December 31
US$ millions, except number of shares 2005 2004
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(unaudited)
46,040,326 Common shares (2004 - 25,000,003) $ 1,044.3 $ 512.9
Deficit (378.1) (1,008.8)
Cumulative translation adjustment 21.7 53.6
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$ 687.9 $ (442.3)
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7. RESTATED COMPARATIVE FIGURES

Certain comparative information has been restated to reflect the adoption of amendments to the CICA Handbook Section 3861, "Financial Instruments - Disclosure and Presentation" and the implementation of Accounting Guideline 15, "Consolidation of Variable Interest Entities".

Contact Information

  • Brascade Corporation
    Edward C. Kress
    Chairman and President
    (416) 363-9491