BC Ferries releases second quarter results

VICTORIA, Nov. 17, 2011 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $57.3 million and $51.8 million for the three and six-month periods ended September 30, 2011, up from $54.3 million and down from $55.2 million for the three and six-month periods ended September 30, 2010.

Total revenue for the three-month period ended September 30, 2011 increased from $246.0 million to $252.1 million, while operating expenses increased from $173.6 million to $176.7 million, compared to the same period last year.  For the six-months ended September 30, 2011, total revenue was $438.7 million compared to $436.2 million for the six-month period ended September 30, 2010.  Operating expenses for the same period were $350.9 million, up from $344.9 million in the prior year.

In the second quarter of fiscal 2012, BC Ferries experienced a decline of 3.5 per cent in vehicle traffic and 2.9 per cent in passenger traffic compared to the same period in the year prior. In the six-months ended September 30, 2011, BC Ferries' traffic is at a 20-year low in passenger levels and an 11-year low in vehicle traffic.

On September 27, 2011, BC Ferries' Board of Directors announced that the President and CEO elected to retire on December 31, 2011.

On the same day, BC Ferries announced a major cost containment initiative in an effort to address the significant drop in revenues in the first half of the fiscal year as a result of declining traffic. Cost saving actions include: a hiring freeze of all non-essential positions; two-year wage and salary freeze; eighteen-month delay in select capital expenditures; elimination of many charitable and community donations; and select early retirements. In addition, BC Ferries applied to the Province to reduce up to 400 round trips on the major routes in response to traffic declines and anticipated revenue reduction.

"We've initiated a cost containment program to reduce our operating and capital expenditures in the near term in order to manage the Company in a fiscally prudent manner through our current economic reality," said David L. Hahn, BC Ferries' President and CEO.  "Our cost containment initiatives should generate more than $11 million in savings from previously planned levels, and we are well on our way to achieving these targeted savings. However, we still expect to incur a loss in excess of $20 million this fiscal year."

Capital expenditures in the three and six-months ended September 30, 2011 totalled $31.1 million and $56.8 million, respectively.  Projects included berth replacements and refurbishments at major and minor terminals, vessel upgrades and modifications and information technology projects.

Other notable events during the quarter include the July 26, 2011 announcement of a 90-day, one-time only refund to customers who purchased assured loading tickets between 1984 and July 25, 2011.

On August 18, 2011, BC Ferries received approval from the Department of Fisheries and Oceans under the Canadian Environmental Assessment Act for a cable ferry project.  The Company is considering replacing the existing conventional ferry service between Buckley Bay on Vancouver Island and Denman Island with a cable ferry service.  Cable ferries are less costly to build and operate.   The service could be operated by BC Ferries or by a private operator under contract to BC Ferries.  

The flexibility provided by the receipt of $119.4 million in duty remission from the Federal Government allowed BC Ferries to pay down, in September, $45 million in principal, amounts outstanding under two of its 12-year loans.

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 20.7 million passengers and 8.1 million vehicles during the fiscal year ended March 31, 2011.  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; a net loss in fiscal 2012 larger than $20 million; our expectations regarding the amount of savings that should be generated from our cost containment initiatives; and our short-term and long-range business plans. 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.
Consolidated Balance Sheets
(expressed in thousands)

 
  September 30, 2011
(unaudited)
  March 31, 2011
           
Assets          
Current assets:          
  Cash and cash equivalents $ 21,374   $ 33,335
  Restricted short-term investments   35,745     37,040
  Other short-term investments   59,110     64,074
  Accounts receivable   20,833     20,619
  Prepaid expenses   8,204     5,648
  Inventories   20,946     19,957
  Derivative assets   14             -
  Regulatory assets   2,387     3,703
    168,613     184,376
Property, plant and equipment   1,579,178     1,581,007
Intangible assets   36,336     34,929
Long-term loan receivable   24,515     24,247
Long-term land lease   32,750     32,979
   $ 1,841,392   $ 1,857,538
Liabilities and Shareholders' Equity          
Current liabilities:          
  Accounts payable and accrued liabilities $ 38,559   $ 51,249
  Short-term debt   -     3,949
  Interest payable on long-term debt   18,287     18,261
  Accrued employee costs   49,492     48,194
  Deferred revenue   14,408     15,596
  Derivative liabilities          -            23
  Current portion of long-term debt   9,000     22,125
  Current portion of accrued employee future benefits   1,200     1,200
  Current portion of obligations under capital lease   991     1,040
    131,937     161,637
Accrued employee future benefits   11,388     10,907
Regulatory liabilities   858     1,558
Long-term debt   1,289,247     1,327,014
Obligations under capital lease   47,499     47,723
    1,480,929     1,548,839
Shareholders' equity:          
  Share capital   75,478     75,478
  Retained earnings   284,985     233,221
    360,463     308,699
Commitments          
  $ 1,841,392   $ 1,857,538
           

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings
(unaudited)
(expressed in thousands)

                             
  Three months ended   Six months ended
  September 30   September 30
      2011   2010     2011     2010
                     
Revenue:                    
  Tariffs $ 161,985 $ 155,709   $ 277,458   $ 273,921
  Ferry service fees   48,456   46,408     87,867     84,939
  Federal-Provincial Subsidy Agreement   6,872   6,731     13,743     13,462
  Retail   27,035   28,052     46,434     48,142
  Other income   7,697   9,115     13,228     15,790
    252,045         246,015     438,730     436,254
                     
Expenses:                    
  Operations   114,553   114,908     219,590     218,524
  Maintenance   14,183   12,623     39,210     36,475
  Administration   8,449   7,317     15,806     14,834
  Cost of retail goods sold   9,967   10,277     17,430     17,957
  Amortization   29,530   28,441     58,924     57,129
    176,682   173,566     350,960     344,919
                     
Earnings from operations   75,363   72,449     87,770     91,335
                     
Gain on foreign exchange   155   31           176             106
Interest expense   (18,254)   (17,959)     (36,220)     (35,987)
Gain (loss) on disposal of capital assets              9         (239)             38     (253)
Net earnings   57,273     54,282        51,764     55,201
                     
Other comprehensive income      -       -            -           -
                     
Net earnings and comprehensive income   57,273     54,282       51,764     55,201
                     
Retained earnings, beginning of period   227,712   236,397     233,221     235,478
                     
Retained earnings, end of period $ 284,985 $ 290,679   $ 284,985   $ 290,679
                     

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Cash Flows (unaudited)
(expressed in thousands)

                           
  Three months ended   Six months ended
    September 30       September 30
    2011     2010     2011     2010
                       
Cash provided by (used in):                      
                       
Operations:                      
  Net earnings $ 57,273   $   54,282   $ 51,764   $ 55,201
  Items not involving cash:                      
  Amortization   29,530     28,441     58,924     57,129
  Other non-cash charges   864         1,401     1,848     1,790
  Long-term regulatory costs deferred   (159)     (2,927)     (700)     (5,276)
  Change in non-cash operating working capital          286         2,957     (18,298)     (8,345)
    87,794       84,154     93,538     100,499
                       
Financing:                      
  Repayment of long-term debt   (49,500)     (4,500)     (51,375)     (4,500)
  Repayment of short-term loans      -         -       (3,949)        -
  Repayment of capital lease obligations   (263)     (286)     (539)     (397)
    (49,763)     (4,786)     (55,863)     (4,897)
                       
Investing:                      
  Proceeds from  disposal of property, plant and equipment            55              52              84              78
  Purchase of property, plant and  equipment and intangible assets   (27,868)     (23,137)     (55,711)     (43,776)
  Reduction of debt service reserves   1,295            200         1,295            200
  Advancement of long-term loan        -          -     (268)          -
  (Purchase of) proceeds from short-term investments   (36)     (57)         4,964     (219)
    (26,554)     (22,942)     (49,636)     (43,717)
                       
Increase (decrease) in cash and cash equivalents 11,477     56,426     (11,961)     51,885
                       
Cash and cash equivalents, beginning of period 9,897     6,067     33,335     10,608
                       
Cash and cash equivalents, end of period $ 21,374   $ 62,493   $ 21,374   $ 62,493

 

 

 

 

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)

 


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