BC Ferries releases second quarter results

VICTORIA, Nov. 16, 2012 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $66.5 million and $69.8 million for the three and six-month periods ended September 30, 2012, up from $55.8 million and $52.3 million for the three and six-month periods ended September 30, 2011.

Total revenue for the three-month period ended September 30, 2012 increased from $256.9 million to $268.6 million.  After a soft first four months of the fiscal year, there was a noticeable improvement in traffic during August and September.  Revenue results also reflect an increase in ferry transportation fees from the Province of $7.4 million.  Operating expenses increased from $183.4 million to $184.5 million, compared to the same period last year.  For the six-months ended September 30, 2012, total revenue was $466.2 million compared to $443.9 million for the six-month period ended September 30, 2011, including an increase in transportation fees of $12.9 million.  Operating expenses for the same period were $361.4 million, up from $356.7 million in the prior year, mainly due to increases in the price of fuel.  BC Ferries' financial statements (without notes) are attached as Appendix 1.

As of April 1, 2012, BC Ferries began reporting its financial position and results of operations in accordance with International Financial Reporting Standards (IFRS). For comparative purposes, the prior year figures have been restated to comply with IFRS.

IFRS differs significantly from previous accounting standards. IFRS does not have a standard for rate-regulated activities and therefore, does not permit BC Ferries to report in the company's financial statements, the assets and liabilities that result from the regulated price cap setting process, such as the deferred fuel cost accounts. Rather than being charged to regulatory asset accounts on the Statement of Financial Position, fuel surcharges collected or rebates granted are now included in revenue, and increases or decreases in fuel prices from those approved in price caps are now included in operating expenses. While this is a significant accounting change for BC Ferries, it does not change the treatment of these types of assets and liabilities for regulatory purposes.  A pro forma income statement reflecting the results of rate-regulated activities is included as Appendix 2.

Capital expenditures in the three and six-months ended September 30, 2012 totalled $18.3 million and $39.5 million, respectively.  Projects included vessel upgrades and modifications, terminal marine structures, terminal and building upgrades and equipment, and information technology projects.

BC Ferries and the Province finalized amendments to the Coastal Ferry Services Contract for performance term three on June 30, 2012.  The amending agreement includes increases of $54.5 million in aggregate ferry transportation fees, which are in addition to a one-time $25 million equity contribution.  These funds, totalling $79.5 million, are intended to reduce the pressure for future fare cap and price cap increases.  The amending agreement also includes a principle-based process for identifying $30 million in service level adjustments over the term.  The company must also find $54.2 million in internal efficiencies.

"BC Ferries is working hard to find efficiencies in all areas of our business to ensure the operation is cost effective and financially viable, without compromising safety," said Mike Corrigan, BC Ferries' President and CEO. "It is our job as the service provider to deliver safe, efficient and flexible ferry service along coastal British Columbia that meets the changing needs of our customers over the long term."

On September 30, 2012, the BC Ferries Commissioner released his final price cap order for the remaining three years of performance term three, April 1, 2013 to March 31, 2016.  The order outlined price cap increases of 4.1 per cent, 4.0 per cent and 3.9 per cent for all route groups on April 1 of  2013, 2014 and 2015, respectively.

Other significant events during the second quarter include, as a result of declining fuel prices, the July 20, 2012 reduction in fuel surcharges from 2.5 per cent to 2.0 per cent on the Horseshoe Bay - Langdale route and from 5.0 per cent to 2.0 per cent on all other routes with the exception of the northern routes.  No surcharges or rebates were in place on our northern routes.

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis are filed on SEDAR and are available at www.sedar.com.

BC Ferries is one of the largest ferry operators in the world based on passengers transported annually and transportation infrastructure, and carried 20.2 million passengers and 7.8 million vehicles during the fiscal year ended March 31, 2012.  BC Ferries provides frequent year-round ferry transportation services to the West Coast of Canada on 25 routes, currently supported by 35 vessels and 47 terminals, and also manages other remote routes through contracts with independent operators.

FORWARD LOOKING STATEMENTS
This release contains certain "forward looking statements". These statements relate to future events or future performance and reflect management's expectations regarding our growth, results of operations, performance, business prospects and opportunities and industry performance and trends. They reflect management's current internal projections, expectations or beliefs and are based on information currently available to management. Some of the market conditions and factors that have been considered in formulating the assumptions upon which forward looking statements are based include traffic, the Canadian Dollar relative to the US Dollar, fuel costs, construction costs, the state of the local economy, fluctuating financial markets, demographics, tax changes, and the requirements of the Coastal Ferry Services Contract.

Forward looking statements included in this release include statements with respect to: the additional payments to be received from the Province, the amount of savings to be achieved through service level adjustments, and the efficiency target to be achieved for performance term three. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider various factors including, but not limited to, the risks and uncertainties associated with traffic volume and tariff revenue risk, safety and security, asset risk, accident risk, tax risk, environmental risk, regulatory risk, labour disruption risk, limitations of vessel repair facilities, risk of default under material contracts and aboriginal land claims.

Actual results may differ materially from any forward looking statement. Although management believes that the forward looking statements contained in this release are based upon reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this release, and British Columbia Ferry Services Inc. assumes no obligation to update or revise them to reflect new events or circumstances except as may be required by applicable law.

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Financial Position (unaudited)
(Expressed in thousands of Canadian dollars)
                     
        As at,
        September 30, 2012     March 31, 2012     April 1, 2011
Assets                    
Current assets                    
  Cash and cash equivalents       43,025     7,700     33,335
  Restricted short-term investments       35,640     35,705     37,040
  Other short-term investments       61,430     26,880     64,074
  Trade and other receivables       28,179     42,341     20,619
  Prepaid expenses       11,120     6,725     5,648
  Inventories       22,764     22,016     19,957
        202,158     141,367     180,673
Non-current assets                    
  Long-term loan receivable       24,515     24,515     24,247
  Long-term land lease       32,292     32,521     32,979
  Property, plant and equipment       1,563,700     1,596,507     1,593,194
  Intangible assets       45,474     41,758     34,929
        1,665,981     1,695,301     1,685,349
Total assets       1,868,139     1,836,668     1,866,022
                     
Liabilities                    
Current liabilities                    
  Accounts payable and accrued liabilities       36,268     50,708     49,872
  Short-term debt                             -     17,737     3,949
  Interest payable on long-term debt       18,220     18,249     18,261
  Deferred revenue       12,076     13,784     15,596
  Derivative liabilities       4     12     23
  Current portion of long-term debt       9,000     9,000     22,125
  Current portion of accrued employee future benefits       2,204     2,204     1,351
  Current portion of obligations under finance lease       986     974     1,040
  Provisions       47,632     47,022     46,788
        126,390     159,690     159,005
Non-current liabilities                    
  Accrued employee future benefits       16,846     17,361     17,091
  Long-term debt       1,281,221     1,285,232     1,327,014
  Obligations under finance lease       46,514     47,013     47,723
        1,344,581     1,349,606     1,391,828
Total liabilities       1,470,971     1,509,296     1,550,833
Equity                    
  Share capital       75,478     75,478     75,478
  Contributed surplus       25,000     25,000                -
  Retained earnings       294,513     224,717     239,711
  Total equity before reserves       394,991     325,195     315,189
  Land revaluation reserve       2,177     2,177                -
Total equity including reserves       397,168     327,372     315,189
Total liabilities and equity       1,868,139     1,836,668     1,866,022
                     
                     

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Comprehensive Income (Loss) (unaudited)
(Expressed in thousands of Canadian dollars)
                   
            Three months ended Six months ended
            September 30, September 30,
             2012  2011  2012  2011
Revenue                  
  Vehicle and passenger fares           165,824 161,985 280,246 276,386
  Ferry service fees           57,402 49,370 103,629 89,620
  Retail           27,029 27,035 46,191 46,434
  Federal-Provincial Subsidy Agreement           7,019 6,872 14,039 13,743
  Fuel surcharges           4,100 4,359 10,130 5,515
  Regulated other income           5,177 5,372 8,286 8,771
  Other income           2,059 1,949 3,690 3,431
Total revenue           268,610 256,942 466,211 443,900
                   
Expenses                  
  Operations           121,314 119,718 232,321 228,522
  Maintenance           11,591 12,662 28,809 30,308
  Administration           7,155 8,475 14,324 15,896
  Cost of retail goods sold           10,068 9,966 17,576 17,430
  Depreciation and amortization           34,412 32,583 68,413 64,521
Total operating expenses           184,540 183,404 361,443 356,677
                   
Operating profit           84,070 73,538 104,768 87,223
                   
Net finance and other expenses                  
  Net finance expenses                  
    Finance income           653 531 1,189 1,202
    Finance expenses           (18,112) (18,232) (36,100) (36,167)
  Total net finance expenses           (17,459) (17,701) (34,911) (34,965)
  (Loss) gain on disposal of capital assets           (79) 9 (61) 37
Total net finance and other expenses           (17,538) (17,692) (34,972) (34,928)
                   
Net earnings           66,532 55,846 69,796 52,295
                   
Other comprehensive income                            -                  -                  -                  -
Total comprehensive income           66,532 55,846 69,796 52,295
                   
                   

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
                 
                   
            Six months ended
            September 30,
            2012     2011
                   
Cash flows from operating activities                  
                   
Net earnings           69,796     52,295
Items not affecting cash                  
  Net finance costs recognized in net earnings           34,911     34,965
  Depreciation and amortization of non-current assets           68,413     64,521
  Loss (gain) on disposal of property, plant and equipment           61     (37)
  (Decrease) increase in long-term accrued employee future benefits           (515)     645
  (Increase) in derivative assets                          -     (14)
  Decrease in derivative liabilities           (8)     (23)
  Increase in provisions           610     878
  Other non-cash adjustments to property, plant & equipment           200     (57)
  Decrease in long-term land lease           229     229
  Increase in accrued net financing           539     1,059
Total non-cash items           104,440     102,166
Movements in operating working capital                  
  Decrease (increase) in accounts receivable           14,162     (214)
  Increase in prepaid expenses           (4,395)     (2,556)
  Increase in inventories           (748)     (989)
  Decrease in accounts payable and accrued liabilities           (14,440)     (12,831)
  Decrease in deferred revenue           (1,708)     (435)
  Increase in current portion of accrued employee future benefits                          -                 302
  Change in non-cash working capital           (7,129)     (16,723)
  Change attributable to capital asset acquisitions           11,387     (1,798)
  Change attributable to contributed surplus           (25,000)                 -
  Change in non-cash operating working capital           (20,742)     (18,521)
                   
Cash generated from operating activities           153,494     135,940
                   
  Interest rate support received           412     638
  Interest received           600     387
  Interest paid           (36,870)     (37,532)
                   
Net cash generated by operating activities           117,636     99,433
                   
                   

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
                   
                     
            Six months ended
            September 30,
            2012       2011
                     
Cash flows from financing activities                    
                     
Repayment of long-term debt           (4,500)       (51,375)
Repayment of short-term loans           (17,737)       (3,949)
Repayment of finance lease obligations           (487)       (539)
Contributed surplus payment from Province           25,000                   -
                     
Net cash generated by (used in) financing activities           2,276       (55,863)
                     
                     
Cash flows from investing activities                    
                     
Proceeds from disposal of property, plant and equipment           80       84
Purchase of property, plant and equipment and intangibles           (50,182)       (61,606)
Advancement of long-term loan                    -       (268)
Reduction of debt service reserve           65                   -
(Purchase of) proceeds from short-term investments           (34,550)       6,259
                     
Net cash used in investing activities           (84,587)       (55,531)
                     
Net increase (decrease) in cash and cash equivalents           35,325       (11,961)
                     
Cash and cash equivalents, beginning of period           7,700       33,335
                     
Cash and cash equivalents, end of period           43,025       21,374
                     
                     

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Changes in Equity (unaudited)
(Expressed in thousands of Canadian dollars)
                                         
        Share
Capital
      Contributed
Surplus
    Retained
Earnings
    Total
Equity
Before
Reserves
    Land
Revaluation
Reserve
    Total
Equity
Including
Reserves
Balance as at April 1, 2011       75,478               -     239,711     315,189               -     315,189
                                         
Net earnings for the six months ended September 30, 2011            -               -     52,295     52,295               -     52,295
                                         
Other comprehensive income for the six months ended
September 30, 2011
             -                -               -              -               -              -
                                         
Balance as at September 30, 2011       75,478               -     292,006     367,484               -     367,484
                                         
Balance as at April 1, 2012       75,478       25,000     224,717     325,195     2,177     327,372
                                         
Net earnings for the six months ended September 30, 2012             -                -     69,796     69,796                -     69,796
                                         
Other comprehensive income for the six months ended
September 30, 2012
             -                -               -              -               -              -
                                         
Balance as at September 30, 2012       75,478       25,000     294,513     394,991     2,177     397,168
                                         
                                         

BRITISH COLUMBIA FERRY SERVICES INC.
Pro forma Interim Consolidated Statement of Comprehensive Income (unaudited)
Reflecting the Effect of Regulatory Assets and Regulatory Liabilities
(Expressed in thousands of Canadian dollars)
                   
            Three months ended Six months ended
            September 30, September 30,
            2012 2011 2012 2011
                   
Revenue                  
  Vehicle and passenger fares           165,824 161,985 282,707 277,458
  Ferry service fees           56,823 48,458 102,492 87,870
  Retail           27,029 27,035 46,191 46,434
  Federal-Provincial Subsidy Agreement           7,019 6,872 14,039 13,743
  Fuel surcharges                    -          -          -          -
  Regulated other income           5,177 5,372 8,286 8,771
  Other income           2,059 1,949 3,690 3,431
Total revenue           263,931 251,671 457,405 437,707
                   
Expenses                  
  Operations           118,342 114,643 225,407 219,842
  Maintenance           11,591 12,662 28,809 30,308
  Administration           7,155 8,444 14,324 15,802
  Cost of retail goods sold           10,068 9,966 17,576 17,430
  Depreciation and amortization           34,432 33,777 68,454 66,909
Total operating expenses           181,588 179,492 354,570 350,291
                   
Operating profit           82,343 72,179 102,835 87,416
                   
Net finance and other expenses                  
  Net finance expenses                  
    Finance income           653 531 1,189 1,202
    Finance expenses           (18,111) (18,255) (36,096) (36,223)
  Total net finance expenses           (17,458) (17,724) (34,907) (35,021)
  (Loss) gain on disposal of capital assets           (79) 9 (61) 37
Total net finance and other expenses           (17,537) (17,715) (34,968) (34,984)
                   
Net earnings           64,806 54,464 67,867 52,432
                   
Other comprehensive income                            -                  -                  -                  -
Total comprehensive income           64,806 54,464 67,867 52,432
                   

 

SOURCE: British Columbia Ferry Services Inc.

For further information:

Media Contact:
BC Ferries, Media Relations
Victoria:  (250) 978-1267

Customer Contact:
Victoria: (250) 386-3431
Toll-free:  1-888-BCFERRY (1-888-223-3779)