BC Ferries releases first quarter results

VICTORIA, Aug. 22, 2014 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its first quarter results today.  Net earnings for the first three months ended June 30, 2014 (the first quarter of fiscal 2015) were $13.9 million, compared to net earnings of $4.3 million in the first quarter of the previous year. These earnings reflect the effects of increased fares, higher ferry transportation fees, fuel surcharges and lower financing costs, partially offset by lower traffic levels, lower social program fees and operating cost increases.

In the first quarter of fiscal 2015, revenues increased by 6.6 per cent to $213.1 million, while operating expenses increased by 2.1 per cent to $182.5 million, compared to the first quarter of the previous fiscal year.

Capital expenditures for the three months ended June 30, 2014 totalled $26.1 million as follows:

  • $8.5 million in vessel upgrades and modifications
  • $10.8 million in terminal marine structures
  • $5.2 million in information technology
  • $1.6 million in terminal and building upgrades and equipment

"We continue to focus on fare affordability for our customers, keeping costs down below previously planned levels wherever possible without compromising safety," said Mike Corrigan,
BC Ferries' President and CEO. "In addition to achieving targeted savings, our catering and retail services, the drop trailer business and BC Ferries Vacations are all showing strong results, which help to improve our bottom line."

During the three months ended June 30, 2014, BC Ferries provided over 43,000 sailings, as compared to almost 46,000 sailings during the same quarter last year, carrying five million passengers and two million vehicles. Across the system, vehicle traffic decreased 0.4 per cent while passenger traffic increased 0.3 per cent, as compared to the same quarter last year.

On April 28, 2014, after six weeks of community consultation, feedback and further analysis of schedule refinement options, BC Ferries implemented new schedules for the Northern and regulated Other Routes to achieve a net savings of $14 million over the remainder of performance term three (PT3), which ends March 31, 2016. These new schedules relate to the service reductions determined by the Province in order to better align service levels with demand, and to ensure the coastal ferry system is affordable, efficient and sustainable.

Also on April 28, 2014, BC Ferries completed a private placement of $200 million of 30-year senior secured bonds with accredited investors. These bonds bear interest at a rate of 4.289 per cent per annum, payable semi-annually. The effective rate of this issue, net of hedging, is 4.45 per cent, the lowest effective bond interest rate in the 11-year history of the company. The net proceeds of this new issue, together with additional cash on hand, were used to repay the $250 million bond Series 04-01, which matured on May 27, 2014, and to fund the debt service reserve related to these bonds.

On July 3, 2014, BC Ferries awarded Remontowa Shipbuilding S.A. of Gdansk, Poland contracts totalling $165 million to build three new intermediate class vessels. The total project budget of $252 million includes financing and project management costs and includes $51 million for Canadian taxes and federal import duties. The contracts are design-build, fixed-price contracts that provide BC Ferries with substantial guarantees related to delivery dates, performance criteria, cost certainty and quality of construction. The vessels will be delivered in 2016 and 2017 and will replace the 49-year old Queen of Burnaby and the 50-year old Queen of Nanaimo. The new vessels will be dual-fuel capable, so they can operate on marine diesel fuel or liquefied natural gas, which will provide BC Ferries with the capability to significantly reduce fuels costs and emissions.

 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.

Under contract to the Province of British Columbia, BC Ferries is the service provider responsible for the delivery of safe, efficient and dependable ferry service along coastal British Columbia.

BC Ferries is one of the largest ferry operators in the world based on passengers transported annually and transportation infrastructure, and carried 19.7 million passengers and 7.6 million vehicles during the fiscal year ended March 31, 2014. BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 24 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 BC Ferries' vessel replacement program for the Queen of Burnaby and the Queen of Nanaimo. 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, 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, 



June 30, 2014

March 31, 2014

Assets




Current assets





Cash and cash equivalents


42,505

71,365


Restricted short-term investments


32,906

35,792


Other short-term investments


50,535

81,006


Trade and other receivables


16,379

16,577


Prepaid expenses


18,178

6,934


Inventories


26,090

25,073



186,593

236,747

Non-current assets





Long-term loan receivable


24,515

24,515


Long-term land lease


31,490

31,604


Property, plant and equipment


1,527,100

1,539,162


Intangible assets


56,038

53,164



1,639,143

1,648,445

Total assets


1,825,736

1,885,192





Liabilities




Current liabilities





Accounts payable and accrued liabilities


35,993

48,134


Interest payable on long-term debt


16,329

19,634


Deferred revenue


19,424

14,563


Derivative liabilities


33

5,274


Current portion of long-term debt


24,000

270,250


Current portion of accrued employee future benefits


2,204

2,204


Current portion of obligations under finance lease


1,120

1,120


Provisions


47,956

51,801



147,059

412,980

Non-current liabilities





Accrued employee future benefits


16,028

15,931


Long-term debt


1,261,642

1,066,531


Obligations under finance lease


44,543

44,821



1,322,213

1,127,283

Total liabilities


1,469,272

1,540,263





Equity





Share capital


75,478

75,478


Contributed surplus


25,000

25,000


Retained earnings


260,030

246,142


Total equity before reserves


360,508

346,620


Reserves


(4,044)

(1,691)

Total equity including reserves


356,464

344,929

Total liabilities and equity


1,825,736

1,885,192





 

British Columbia Ferry Services Inc.

Interim Consolidated Statements of Comprehensive Income  (unaudited)

(Expressed in thousands of Canadian dollars)






Three months ended,



June 30, 2014

June 30, 2013





Revenue





Vehicle and passenger fares


131,372

124,383


Ferry service fees


45,047

44,059


Retail


19,944

19,654


Federal-Provincial Subsidy Agreement


7,089

7,093


Fuel surcharges


4,362

-


Regulated other income


3,399

2,944


Other income


1,896

1,836

Total revenue


213,109

199,969





Expenses





Operations


115,024

114,178


Maintenance


16,649

15,560


Administration


7,613

7,031


Cost of retail goods sold


7,989

7,725


Depreciation and amortization


35,234

34,313

Total operating expenses


182,509

178,807





Operating profit


30,600

21,162





Net finance and other expenses





Net finance expense






Finance income


1,067

799



Finance expenses


(17,712)

(17,692)


Net finance expense


(16,645)

(16,893)


(Loss) gain on disposal of property, plant and equipment


(67)

4

Net finance and other expenses


(16,712)

(16,889)





Net earnings


13,888

4,273





Other comprehensive (loss) income




Items to be reclassified to net earnings


(2,396)

-

Total other comprehensive loss


(2,396)

-

Total comprehensive income


11,492

4,273





 

British Columbia Ferry Services Inc.

Interim Consolidated Statements of Cash Flows (unaudited)

(Expressed in thousands of Canadian dollars)




Three months ended,


June 30, 2014

June 30, 2013




Cash flows from operating activities






Net earnings

13,888

4,273

 

Items not affecting cash




Net finance expense

16,645

16,893


Depreciation and amortization

35,234

34,313


Loss (gain) on disposal of property, plant and equipment

67

(4)


Other non-cash adjustments to property, plant & equipment

(405)

-


Changes in



Long-term accrued employee future benefits

97

(271)



Derivative assets

-

(13)



Derivative liabilities recognized in net earnings

15

(12)



Provisions

(3,845)

2,649



Long-term land lease

114

115



Accrued interest costs

20

394

Total non-cash items

47,942

54,064

 

Movements in operating working capital




Trade and other receivables

198

(651)


Prepaid expenses

(11,244)

(5,694)


Inventories

(1,017)

(555)


Accounts payable and accrued liabilities

(12,141)

(16,762)


Deferred revenue

4,861

3,984


Change in non-cash working capital

(19,343)

(19,678)


Change attributable to capital asset acquisitions

6,116

7,088


Change in non-cash operating working capital

(13,227)

(12,590)




Cash generated from operating activities

48,603

45,747





Interest received

1,045

392


Interest paid

(21,496)

(21,370)




Net cash generated by operating activities

28,152

24,769




 

British Columbia Ferry Services Inc.

Interim Consolidated Statements of Cash Flows (unaudited)

(Expressed in thousands of Canadian dollars)





Three months ended,


June 30, 2014

June 30, 2013




Cash flows from financing activities






Proceeds from issuance of bonds

200,000

-

Repayment of long-term debt

(250,000)

-

Repayment of finance lease obligations

(278)

(264)

Deferred financing costs incurred

(1,315)

-

Hedge losses on interest rate forward contracts

(7,652)

-




Net cash used in financing activities

(59,245)

(264)







Cash flows from investing activities






Proceeds from disposal of property, plant and equipment

43

15

Purchase of property, plant and equipment and intangible assets

(31,167)

(28,004)

Decrease of debt service reserves

2,886

-

Proceeds from short-term investments

30,471

9,453




Net cash provided by (used in) investing activities

2,233

(18,536)




Net (decrease) increase in cash and cash equivalents

(28,860)

5,969




Cash and cash equivalents, beginning of period

71,365

36,641




Cash and cash equivalents, end of period

42,505

42,610




 


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

Reserves
(note 8 (a))

Total equity
including
reserves








Balance as at March 31, 2013

75,478

25,000

234,187

334,665

3,233

337,898








Net earnings for the three months ended June 30, 2013

-

-

4,273

4,273

-

4,273








Other comprehensive income for the three months ended June 30, 2013

-

-

-

-

-

-








Balance as at June 30, 2013

75,478

25,000

238,460

338,938

3,233

342,171








Balance as at March 31, 2014

75,478

25,000

246,142

346,620

(1,691)

344,929








Net earnings for the three months ended June 30, 2014

-

-

13,888

13,888

-

13,888








Other comprehensive income for the three months ended June 30, 2014

-

-

-

-

(2,396)

(2,396)








Hedge losses reclassified to net earnings

-

-

-

-

43

43








Balance as at June 30, 2014

75,478

25,000

260,030

360,508

(4,044)

356,464








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)