BC Ferries Releases Third Quarter Results

VICTORIA, Feb. 25, 2013 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for fiscal 2012/13.  The company reported a net loss of $17.2 million for the three months ended December 31, 2012, compared to a net loss of $19.2 million in the same quarter last year.  Net earnings for the nine-month period ended December 31, 2012 were $52.6 million, up from $33.1 million for the same period in the previous year.

"Each year, we utilize this seasonal downturn in traffic volumes to initiate upgrades, major maintenance and refit programs, as well as undertake mandatory safety inspections on the majority of our vessels," said Mike Corrigan, BC Ferries' President and CEO.  "We continue to invest significant resources in our vessels, terminals and employees, in order to enhance the safety, reliability and value of our service to our customers."

Total revenue for the three-month period ended December 31, 2012 increased by $4.7 million to $169.6 million compared to the same quarter last year.  Total revenue for the nine months ended December 31, 2012 increased $27.0 million to $635.8 million.  Operating expenses increased from $166.7 million to $169.4 million compared to the same quarter last year as a result of increases in vessel and terminal maintenance, partially offset by a reduction in fuel costs.  For the nine months ended December 31, 2012, operating expenses increased from $523.4 million to $530.8 million compared to the same period of the prior year, mainly due to an increase in vessel and terminal maintenance and increases in depreciation and amortization expenses reflecting investments in new assets.  BC Ferries' financial statements (without notes) are attached as Appendix 1.

Capital expenditures in the three and nine-months ended December 31, 2012 totalled $18.0 million and $57.5 million respectively.  Projects included vessel overhauls and other improvements, terminal upgrades and information technology projects.

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, such as the deferred fuel cost accounts, that result from the regulated price cap setting process. 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.

In the third quarter of fiscal 2012/13, vehicle traffic declined 2.2 per cent (1.6 per cent year-to-date) and passenger traffic declined 2.4 per cent (1.9 per cent year-to-date), due primarily to the month of December, when total traffic decreased 5.6 per cent on the major routes over the prior year. In December, there was an extraordinary period of stormy weather with high winds that resulted in numerous sailing cancellations in and around the peak holiday season. The company expects annual traffic levels will be slightly lower than the previous year at year end.

While carrying out its mandate to ensure safety at all times, BC Ferries is actively managing its costs and anticipates reporting a modest profit for fiscal 2012/13, despite slightly lower than expected ridership.

On February 14, 2013, BC Ferries was advised by the credit rating agency Standard & Poor's that it revised BC Ferries' outlook from negative to stable.  The outlook revision reflects what Standard & Poor's views as an improvement in regulatory certainty as a result from the recent, favourable amendments to the Coastal Ferry Act.  At the same time, Standard & Poor's affirmed its "A+" long-term and senior unsecured debt ratings of the company.

From October 29 through December 21, 2012, the provincial government conducted a public consultation and engagement process for input on service level adjustments and on a long-term vision for coastal ferry service.  The Province has announced it will issue a report regarding this process.  In the fall of 2012, BC Ferries implemented service reductions on the three major routes connecting Vancouver Island and the Lower Mainland where the traffic levels no longer warranted extra service or where service was significantly underutilized.  These service reductions are expected to reduce costs by $4 million over the four years of performance term three, which ends on March 31, 2016. These service reductions form part of the objective set by the Province of $30 million in service adjustments over performance term three. This service objective was taken into account by the British Columbia Ferries Commissioner in the setting of the performance term three price caps.

On November 23, 2012, BC Ferries announced that the company was proceeding with its plans to design and build a cable ferry which will operate between Buckley Bay on Vancouver Island and Denman Island.  The cable ferry is expected to enter service in the fall of 2014.  Other notable events in the period include the November 30, 2012 removal of all fuel surcharges due to the decline in fuel prices.

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis, are filed on SEDAR and will be 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: traffic levels; our short-term and long-range business plans, and our cable ferry initiative; a modest profit for fiscal 2012/13, and our expectations of the impact of our cost containment program; the amount of savings to be achieved through service level adjustments, and the Province's role regarding service levels and a long-term vision for connecting coastal communities; and our expectations regarding the impacts of IFRS. 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,
  December 31, 2012   March 31, 2012   April 1, 2011
Assets          
Current assets          
  Cash and cash equivalents 32,417   7,700   33,335
  Restricted short-term investments 35,640   35,705   37,040
  Other short-term investments 78,298   26,880   64,074
  Trade and other receivables 19,999   42,341   20,619
  Prepaid expenses 8,956   6,725   5,648
  Inventories 23,316   22,016   19,957
  198,626   141,367   180,673
Non-current assets          
  Long-term loan receivable 24,515   24,515   24,247
  Long-term land lease 32,177   32,521   32,979
  Property, plant and equipment 1,548,041   1,596,507   1,593,194
  Intangible assets 45,781   41,758   34,929
  1,650,514   1,695,301   1,685,349
Total assets 1,849,140   1,836,668   1,866,022
           
Liabilities          
Current liabilities          
  Accounts payable and accrued liabilities 34,376   50,708   49,872
  Short-term debt -        17,737   3,949
  Interest payable on long-term debt 15,174   18,249   18,261
  Deferred revenue 12,229   13,784   15,596
  Derivative liabilities -        12   23
  Current portion of long-term debt 149,000   9,000   22,125
  Current portion of accrued employee future benefits 2,204   2,204   1,351
  Current portion of obligations under finance lease 998   974   1,040
  Provisions 50,594   47,022   46,788
  264,575   159,690   159,005
Non-current liabilities          
  Accrued employee future benefits 16,858   17,361   17,091
  Long-term debt 1,141,469   1,285,232   1,327,014
  Obligations under finance lease 46,260   47,013   47,723
  1,204,587   1,349,606   1,391,828
Total liabilities 1,469,162   1,509,296   1,550,833
Equity          
  Share capital 75,478   75,478   75,478
  Contributed surplus 25,000   25,000   -      
  Retained earnings 277,323   224,717   239,711
  Total equity before reserves 377,801   325,195   315,189
  Land revaluation reserve 2,177   2,177   -      
Total equity including reserves 379,978   327,372   315,189
Total liabilities and equity 1,849,140   1,836,668   1,866,022
           

 
BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Comprehensive (Loss) Income (unaudited)
(Expressed in thousands of Canadian dollars)
 
    Three months ended Nine months ended
    December 31, December 31,
2012 2011 2012 2011
           
Revenue          
  Vehicle and passenger fares   100,273 98,601 380,519 374,987
  Ferry service fees   40,218 35,237 143,847 124,857
  Retail   16,472 16,590 62,663 63,024
  Federal-Provincial Subsidy Agreement   7,019 6,872 21,058 20,615
  Fuel surcharges   1,337 3,369 11,467 8,884
  Regulated other income   2,723 2,828 11,009 11,599
  Other income   1,593 1,433 5,283 4,864
Total revenue   169,635 164,930 635,846 608,830
           
Expenses          
  Operations   101,434 103,532 333,755 332,054
  Maintenance   20,818 16,346 49,627 46,654
  Administration   7,160 6,827 21,484 22,723
  Cost of retail goods sold   6,492 6,472 24,068 23,902
  Depreciation and amortization   33,518 33,539 101,931 98,060
Total operating expenses   169,422 166,716 530,865 523,393
           
Operating profit (loss)   213 (1,786) 104,981 85,437
           
Net finance and other expenses          
  Net finance expenses          
    Finance income   804 580 1,993 1,782
    Finance expenses   (18,207) (17,951) (54,307) (54,118)
  Total net finance expenses   (17,403) (17,371) (52,314) (52,336)
  (Loss) gain on disposal of capital assets   -      (25) (61) 12
Total net finance and other expenses   (17,403) (17,396) (52,375) (52,324)
           
Net (loss) earnings   (17,190) (19,182) 52,606 33,113
           
Other comprehensive income   -      -      -      -     
Total comprehensive (loss) income   (17,190) (19,182) 52,606 33,113
           

 
BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
 
  Nine months ended
December 31,
  2012   2011
       
Cash flows from operating activities      
       
Net earnings 52,606   33,113
       
Items not affecting cash      
  Net finance costs recognized in net earnings 52,314   52,336
  Depreciation and amortization of non-current assets 101,931   98,060
  Loss (gain) on disposal of property, plant and equipment 61   (12)
  (Decrease) increase in long-term accrued employee future benefits (503)   804
  Decrease in derivative liabilities (12)   (23)
  Increase in provisions 3,572   2,223
  Other non-cash adjustments to property, plant & equipment 124   97
  Decrease in long-term land lease 344   344
  Increase in accrued net financing 301   1,139
Total non-cash items 158,132   154,968
       
Movements in operating working capital      
  Decrease in accounts receivable 22,342   3,105
  Increase in prepaid expenses (2,231)   (1,955)
  Increase in inventories (1,300)   (521)
  Decrease in accounts payable and accrued liabilities (16,332)   (11,789)
  Decrease in deferred revenue (1,555)   (1,872)
  Increase in current portion of accrued employee future benefits -        302
  Change in non-cash working capital 924   (12,730)
  Change attributable to capital asset acquisitions 16,122   (4,552)
  Change attributable to contributed surplus (25,000)   -     
  Change in non-cash operating working capital (7,954)   (17,282)
       
Cash generated from operating activities 202,784   170,799
       
  Interest rate support received 742   638
  Interest received 1,249   1,242
  Interest paid (58,276)   (59,143)
       
Net cash generated by operating activities 146,499   113,536
   

 
BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
 
    Nine months ended
December 31,
    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   (729)   (798)
Contributed surplus payment from Province   25,000   -     
         
Net cash generated by (used in) financing activities   2,034   (56,122)
         
         
Cash flows from investing activities        
         
Proceeds from disposal of property, plant and equipment   75   107
Purchase of property, plant and equipment and intangibles   (72,538)   (101,406)
Advancement of long-term loan   -        (268)
Reduction of debt service reserve   65   1,266
(Purchase of) proceeds from short-term investments   (51,418)   37,194
         
Net cash used in investing activities   (123,816)   (63,107)
         
Net increase (decrease) in cash and cash equivalents   24,717   (5,693)
         
Cash and cash equivalents, beginning of period   7,700   33,335
         
Cash and cash equivalents, end of period   32,417   27,642
       

                       
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 nine months ended
December 31, 2011
-        -        33,113   33,113   -        33,113
                       
Other comprehensive income for the nine months ended
December 31, 2011
-        -        -        -        -        -     
                       
Balance as at December 31, 2011 75,478   -        272,824   348,302   -        348,302
                       
Balance as at April 1, 2012 75,478   25,000   224,717   325,195   2,177   327,372
                       
Net earnings for the nine months ended
December 31, 2012
-        -        52,606   52,606   -        52,606
                       
Other comprehensive income for the nine months ended
December 31, 2012
-        -        -        -        -        -     
                       
Balance as at December 31, 2012 75,478   25,000   277,323   377,801   2,177   379,978

 
BRITISH COLUMBIA FERRY SERVICES INC.
Pro forma Interim Consolidated Statement of Comprehensive (Loss) Income (unaudited)
Reflecting the Effect of Regulatory Assets and Regulatory Liabilities
(Expressed in thousands of Canadian dollars)
           
    Three months ended
December 31,
Nine months ended
December 31,
    2012 2011 2012 2011
           
Revenue          
  Vehicle and passenger fares   100,273 98,602 382,980 376,060
  Ferry service fees   39,753 34,417 142,245 122,287
  Retail   16,472 16,590 62,663 63,024
  Federal-Provincial Subsidy Agreement   7,019 6,872 21,058 20,615
  Fuel surcharges   -      -      -      -     
  Regulated other income   2,723 2,828 11,009 11,599
  Other income   1,593 1,432 5,283 4,863
Total revenue   167,833 160,741 625,238 598,448
           
Expenses          
  Operations   100,060 97,863 325,467 317,705
  Maintenance   20,818 16,346 49,627 46,654
  Administration   7,160 6,827 21,484 22,629
  Cost of retail goods sold   6,492 6,472 24,068 23,902
  Depreciation and amortization   33,538 34,732 101,992 101,641
Total operating expenses   168,068 162,240 522,638 512,531
           
Operating (loss) profit   (235) (1,499) 102,600 85,917
           
Net finance and other expenses          
  Net finance expenses          
    Finance income   804 580 1,993 1,782
    Finance expenses   (18,207) (17,953) (54,303) (54,176)
  Total net finance expenses   (17,403) (17,373) (52,310) (52,394)
  (Loss) gain on disposal of capital assets   - (25) (61) 12
Total net finance and other expenses   (17,403) (17,398) (52,371) (52,382)
           
Net (loss) earnings   (17,638) (18,897) 50,229 33,535
           
Other comprehensive income   -      -     -      -     
Total comprehensive (loss) income   (17,638) (18,897) 50,229 33,535
           

 

 

SOURCE: British Columbia Ferry Services Inc.

For further information:

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