BC Ferries Releases Third Quarter Results

VICTORIA, BC, Feb. 20, 2014 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for fiscal 2013/14.  The company reported a net loss of $12.3 million for the three months ended December 31, 2013, compared to a net loss of $17.2 million in the same quarter last year.  Net earnings for the nine-month period ended December 31, 2013 were $56.3 million, up from $52.6 million for the same period in the previous year.

BC Ferries' quarterly results are affected by the seasonality of travel patterns. The second quarter, covering the summer period, experiences the highest traffic levels and the highest earnings of the year. The third and fourth quarters reflect a seasonal downturn in traffic and the company utilizes these off-peak periods to perform upgrades and major maintenance and refit programs, as well as to undertake mandatory inspections on the majority of its vessels.

Total revenue for the three-month period ended December 31, 2013 increased by $5.2 million to $174.8 million compared to the same quarter last year.  Total revenue for the nine months ended December 31, 2013 increased $10.5 million to $646.3 million compared to the same period last year.  Operating expenses increased from $169.4 million to $171.1 million compared to the same quarter last year.  For the nine months ended December 31, 2013, operating expenses increased from $530.8 million to $539.1 million compared to the same period the year prior. These operating expense increases result from higher fuel and labour costs, partially offset by a decrease in maintenance costs.

"Safety is of paramount importance at BC Ferries.  Within that context, we are maintaining tight control on discretionary expenses and reducing costs wherever we can," said Mike Corrigan, BC Ferries' President and CEO.  "We are well on our way to achieving the $54 million in savings tasked by the BC Ferries Commissioner and I expect that we will exceed this target by the end of performance term three."

Capital expenditures in the three and nine-months ended December 31, 2013 totalled $42.4 million and $89.1 million respectively.  Projects included vessel upgrades and modifications, terminal upgrades and information technology projects.

In the third quarter of fiscal 2013/14, vehicle traffic increased 0.8 per cent (0.6 per cent decrease year-to-date) and passenger traffic increased 1.0 per cent (0.5 per cent decrease year-to-date) compared to the same periods of the prior year.  Year-to-date traffic was negatively impacted by the timing of the Easter holiday and storm activity in the second quarter. 

Due to the high cost of fuel, on January 17, 2014, BC Ferries implemented a fuel surcharge of 3.5 per cent on average on all routes with the exception of the Port Hardy - Prince Rupert and Prince Rupert - Haida Gwaii routes.

Significant events in the third quarter of fiscal 2013/14 include the completion on October 25, 2013 of a private placement of $200 million of 30-year senior secured bonds with accredited investors.  These bonds bear interest at 4.702 per cent per annum, payable semi-annually.  As previously announced, it was BC Ferries' intention to refinance the redeemed $140 million Series 08-2 Bonds, and this issuance is partially related to that early redemption.

On February 5, 2014, the Province announced a service level adjustment plan for BC Ferries to achieve $14.0 million in net savings over the remainder of performance term three.  The plan includes the elimination of approximately 6,900 round trips per year, which is approximately 8 per cent of BC Ferries' total round trip sailings.  The plan will also change the current Monday to Thursday seniors' discount rate on most routes from 100 per cent to 50 per cent commencing April 1, 2014.  Further service adjustments to the major routes totalling $4.9 million are yet to be identified.

On December 9, 2013, BC Ferries issued a Request for Proposals (RFP) to five pre-qualified shipyards, including one Canadian proponent, to build three new intermediate class vessels to replace the 48-year old Queen of Burnaby and the 49-year old Queen of Nanaimo.  The RFP stipulates that these three vessels be designed to operate as dual-fuel capable, so they can run on liquefied natural gas or diesel fuel.

On February 20, 2014, in response to BC Ferries' December 20, 2013 application, the company received a decision from the BC Ferries Commissioner confirming that the expenditures required to implement the cable ferry system on the route connecting Buckley Bay and Denman Island are reasonable and prudent.  In conjunction with this decision, the BC Ferries Commissioner included reasonable conditions which BC Ferries is confident it will be able to meet.

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 19.9 million passengers and 7.7 million vehicles during the fiscal year ended March 31, 2013.  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 service level adjustment plan, and expectations of the impact of BC Ferries' cost containment program; BC Ferries' vessel replacement program for the Queen of Burnaby and the Queen of Nanaimo, and its cable ferry initiative; and BC Ferries' Standard and Poor's credit rating. 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.

In addition to providing measures prepared in accordance with IFRS, we present certain supplemental non-IFRS measures. These include, but are not limited to, vehicle and passenger traffic. These measures do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental non-IFRS measures are provided to assist readers in determining our ability to generate cash from operations and improve the comparability of our results from one period to another. We believe these measures are useful in assessing operating performance of our ongoing business on an overall basis.

British Columbia Ferry Services Inc.
Interim Consolidated Statements of Financial Position (unaudited)
(Expressed in thousands of Canadian dollars)
     
    As at,
    December 31, 2013 March 31, 2013
Assets      
Current assets      
  Cash and cash equivalents    99,788 36,641
  Restricted short-term investments   35,862 35,575
  Other short-term investments   96,514 43,403
  Trade and other receivables   13,036 18,118
  Prepaid expenses   8,599 10,706
  Inventories   24,968 23,257
    278,767 167,700
Non-current assets      
  Long-term loan receivable   24,515 24,515
  Long-term land lease   31,719 32,063
  Property, plant and equipment   1,536,344 1,552,062
  Intangible assets   51,060 47,942
    1,643,638 1,656,582
Total assets   1,922,405 1,824,282
       
Liabilities      
Current liabilities      
  Accounts payable and accrued liabilities   41,785 51,803
  Interest payable on long-term debt   16,499 18,063
  Deferred revenue   13,123 13,634
  Derivative liabilities                   - 12
  Current portion of long-term debt   266,500 149,000
  Current portion of accrued employee future benefits   2,204 2,204
  Current portion of obligations under finance lease   1,107 1,072
  Provisions   51,165 50,839
    392,383 286,627
Non-current liabilities      
  Accrued employee future benefits   16,057 16,604
  Long-term debt   1,074,572 1,137,212
  Obligations under finance lease   45,106 45,941
    1,135,735 1,199,757
Total liabilities   1,528,118 1,486,384
Equity      
  Share capital   75,478 75,478
  Contributed surplus   25,000 25,000
  Retained earnings   290,472 234,187
  Total equity before reserves   390,950 334,665
  Land revaluation reserve   3,233 3,233
  Employee future benefit revaluation reserve   104                    -
Total equity including reserves   394,287 337,898
Total liabilities and equity   1,922,405 1,824,282


British Columbia Ferry Services Inc.
Interim Consolidated Statements of Comprehensive Income (unaudited)
(Expressed in thousands of Canadian dollars)

       
    Three months ended Nine months ended
    December 31, December 31,
2013 2012 2013 2012
           
Revenue          
  Vehicle and passenger fares   105,206 100,273 400,751 380,519
  Ferry service fees   40,643 40,218 141,822 143,847
  Retail   17,172 16,472 64,902 62,663
  Federal-Provincial Subsidy Agreement   7,094 7,019 21,280 21,058
  Fuel surcharges         - 1,337       - 11,467
  Regulated other income   2,978 2,723 11,658 11,009
  Other income   1,718 1,593 5,837 5,283
Total revenue   174,811 169,635 646,250 635,846
           
Expenses          
  Operations   106,253 101,434 345,142 333,755
  Maintenance   17,431 20,818 45,177 49,627
  Administration   7,428 7,160 21,950 21,484
  Cost of retail goods sold   6,842 6,492 25,252 24,068
  Depreciation and amortization   33,148 33,518 101,575 101,931
Total operating expenses   171,102 169,422 539,096 530,865
           
Operating profit   3,709 213 107,154 104,981
           
Net finance and other expenses          
  Net finance expenses          
     Finance income   1,078 804 2,603 1,993
     Finance expenses   (17,039) (18,207) (53,403) (54,307)
  Total net finance expenses   (15,961) (17,403) (50,800) (52,314)
  Loss on disposal of capital assets   (57)     - (69) (61)
Total net finance and other expenses   (16,018) (17,403) (50,869) (52,375)
           
Net (loss) earnings   (12,309) (17,190) 56,285 52,606
           
Other comprehensive income      -     - 104        -
           
Total comprehensive (loss) income   (12,309) (17,190) 56,389 52,606
           


British Columbia Ferry Services Inc.
Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
 
  Nine months ended
  December 31,
  2013 2012
     
Cash flows from operating activities    
     
Net earnings 56,285 52,606
     
Items not affecting cash    
  Net finance costs recognized in net earnings 50,800 52,314
  Depreciation and amortization of non-current assets 101,575 101,931
  Loss on disposal of property, plant and equipment 69 61
  Other non-cash adjustments to property, plant & equipment (62) 124
  Changes in    
     Long-term accrued employee future benefits (443) (503)
     Derivative liabilities (12) (12)
     Provisions 326 3,572
     Long-term land lease 344 344
     Accrued interest costs (1,020) 301
Total non-cash items 151,577 158,132
       
Movements in operating working capital    
  Trade and other receivables 5,082 22,342
  Prepaid expenses 2,107 (2,231)
  Inventories (1,711) (1,300)
  Accounts payable and accrued liabilities (10,018) (16,332)
  Deferred revenue (511) (1,555)
  Change in non-cash working capital (5,051) 924
  Change attributable to capital asset acquisitions (91) 16,122
  Change attributable to contributed surplus - (25,000)
  Change in non-cash operating working capital (5,142) (7,954)
     
Cash generated from operating activities 202,720 202,784
     
  Interest rate support received - 742
  Interest received 3,586 1,249
  Interest paid (56,589) (58,276)
     
Net cash generated by operating activities 149,717 146,499


British Columbia Ferry Services Inc.
Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
 
   
  Nine months ended
  December 31,
  2013 2012
     
Cash flows from financing activities    
     
Proceeds from issuance of bonds 200,000 -
Repayment of long-term debt (144,500) (4,500)
Proceeds from (repayment of) short-term debt - (17,737)
Repayment of finance lease obligations (800) (729)
Contributed surplus payment from Province - 25,000
Deferred financing costs incurred (1,387) -
     
Net cash provided by financing activities 53,313 2,034
     
     
Cash flows from investing activities    
     
Proceeds from disposal of property, plant and equipment 39 75
Purchase of property, plant and equipment and intangible assets (86,524) (72,538)
Changes in debt service reserve (287) 65
Purchase of short-term investments (53,111) (51,418)
     
Net cash used in investing activities (139,883) (123,816)
     
Net increase in cash and cash equivalents 63,147 24,717
     
Cash and cash equivalents, beginning of period 36,641 7,700
     
Cash and cash equivalents, end of period 99,788 32,417


British Columbia Ferry Services Inc.
Interim Consolidated Statements of Changes in Equity (unaudited)
(Expressed in thousands of Canadian dollars)
 
  Share
capital
Contributed
surplus
Retained
earnings
Total
equity
before
reserves
Land
revaluation
reserve
Employee
future
benefit
revaluation
reserve
Total
equity
including
reserves
               
Balance as at March 31, 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
               
Balance as at March 31, 2013 75,478 25,000 234,187 334,665 3,233     - 337,898
               
Net earnings for the nine months ended December 31, 2013      -         - 56,285 56,285           -     - 56,285
               
Other comprehensive income for the nine months ended December 31, 2013        -          -      -     -           - 104          104
               
Balance as at December 31, 2013 75,478 25,000 290,472 390,950 3,233 104 394,287

 

 

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)

Note to newsrooms: For urgent media inquiries off-hours, call our emergency pager at (250) 516-7211.