BC Ferries releases second quarter results

VICTORIA, BC, Nov. 21, 2013 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $64.3 million and $68.6 million for the three and six-month periods ended September 30, 2013, down from $66.5 million and $69.8 million for the three and six-month periods ended September 30, 2012.

Total revenue for the three-month period ended September 30, 2013 increased from $268.6 million to $271.5 million compared to the same period last year, despite the absence of fuel surcharges to date this year.  Operating expenses increased from $184.5 million to $189.2 million compared to the same period last year.  For the six months ended September 30, 2013, total revenue was $471.4 million, up from $466.2 million in the prior year.  Operating expenses for the same period were $368.0 million, up from $361.4 million in the prior year.

Net earnings in the three months ended September 30, 2013 were $2.2 million lower ($1.2 million year-to-date) than the same periods the year prior.  These net earnings reflect the absence of fuel surcharges, lower ferry transportation fees and operating expense increases.  Customer fare revenue was higher as a decline in passenger and vehicle traffic was more than offset by increased fares.

"We have continued with our cost containment strategies and we are well on our way to achieving the $54 million in savings that we have committed to over the current performance term to reduce upward pressure on fares," said Mike Corrigan, BC Ferries' President and CEO.

In the second quarter of fiscal 2014, BC Ferries experienced a 0.7 per cent decline in both vehicle and passenger traffic compared to the same period in the prior year.  The decline was due in part to storm activity at the end of the quarter and was partially offset by an increase in commercial traffic.

Capital expenditures in the three and six-months ended September 30, 2013 totalled $25.0 million and $46.7 million, respectively.  Projects included vessel upgrades and modifications, terminal marine structures, terminal and building upgrades and equipment, and information technology projects.

"Our first priority continues to be safety, and it is clear that our SailSafe program, which is a joint initiative with the BC Ferry & Marine Workers' Union, has positively affected our safety culture and employee engagement," said Corrigan.  "A testament to the program's success is the significant reduction of over 30 per cent in time loss injuries we have realized, which assists our bottom line."

Significant events during the second quarter include the July 19, 2013 approval by the BC Ferries Commissioner of the company's application to construct three new intermediate class vessels to replace the 48-year old Queen of Burnaby and the 49-year old Queen of Nanaimo.

On July 24, 2013, BC Ferries redeemed its $140 million bond series formerly due December 19, 2013.  This debt management initiative to reduce the company's interest costs in the short term was funded with cash on hand and $88 million in draws on its credit facility.

On October 25, 2013, BC Ferries announced the closing of a $200 million senior secured bond issue.  The privately placed bonds, which are rated A by DBRS and A+ by Standard & Poor's, were sold to accredited investors across Canada. The bonds bear interest at 4.702% per annum, and mature October 23, 2043. BC Ferries previously announced its intention to refinance the redeemed $140 million Series 08-2 Bonds, and this issuance is partially related to that early redemption.

On November 18, 2013, the Minister of Transportation and Infrastructure announced a series of service adjustments that are intended to save $18.9 million over the remainder of Performance Term 3.  These savings were originally taken into account when setting the current price caps.  As the service provider, BC Ferries is committed to implementing these changes as safely and efficiently as possible.

BC Ferries has a $250 million bond series that will mature in May 2014. It is the intention to refinance these bonds, and the company will be monitoring the capital markets for appropriate opportunities to do so.

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 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, our expectations of the impact of our cost containment program, and our intention to refinance bonds maturing in May 2014. 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,
    September 30, 2013 March 31, 2013
Assets      
Current assets      
  Cash and cash equivalents    13,888 36,641
  Restricted short-term investments   31,160 35,575
  Other short-term investments   34,508 43,403
  Trade and other receivables   18,285 18,118
  Prepaid expenses   10,120 10,706
  Inventories   25,641 23,257
    133,602 167,700
Non-current assets      
  Long-term loan receivable   24,515 24,515
  Long-term land lease   31,834 32,063
  Property, plant and equipment   1,528,927 1,552,062
  Intangible assets   49,386 47,942
    1,634,662 1,656,582
Total assets   1,768,264 1,824,282
       
Liabilities      
Current liabilities      
  Accounts payable and accrued liabilities   37,446 51,803
  Short-term debt   39,965                 -
  Interest payable on long-term debt   15,690 18,063
  Deferred revenue   13,584 13,634
  Derivative liabilities   1 12
  Current portion of long-term debt   259,000 149,000
  Current portion of accrued employee future benefits   2,204 2,204
  Current portion of obligations under finance lease   1,095 1,072
  Provisions   47,968 50,839
    416,953 286,627
Non-current liabilities      
  Accrued employee future benefits   16,085 16,604
  Long-term debt   883,243 1,137,212
  Obligations under finance lease   45,387 45,941
    944,715 1,199,757
Total liabilities   1,361,668 1,486,384
Equity      
  Share capital   75,478 75,478
  Contributed surplus   25,000 25,000
  Retained earnings   302,781 234,187
  Total equity before reserves   403,259 334,665
  Land revaluation reserve   3,233 3,233
  Employee future benefit revaluation reserve   104                  -
Total equity including reserves   406,596 337,898
Total liabilities and equity   1,768,264 1,824,282



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

           
    Three months ended Six months ended
    September 30, September 30,
2013 2012 2013 2012
           
Revenue          
  Vehicle and passenger fares   171,162 165,824 295,545 280,246
  Ferry service fees   57,120 57,402 101,179 103,629
  Retail   28,075 27,029 47,730 46,191
  Federal-Provincial Subsidy Agreement   7,093 7,019 14,186 14,039
  Fuel surcharges         - 4,100      - 10,130
  Regulated other income   5,737 5,177 8,680 8,286
  Other income   2,283 2,059 4,119 3,690
Total revenue   271,470 268,610 471,439 466,211
           
Expenses          
  Operations   124,712 121,314 238,889 232,321
  Maintenance   12,186 11,591 27,746 28,809
  Administration   7,491 7,155 14,522 14,324
  Cost of retail goods sold   10,685 10,068 18,410 17,576
  Depreciation and amortization   34,114 34,412 68,427 68,413
Total operating expenses   189,188 184,540 367,994 361,443
           
Operating profit   82,282 84,070 103,445 104,768
           
Net finance and other expenses          
  Net finance expenses          
    Finance income   726 653 1,525 1,189
    Finance expenses   (18,672) (18,112) (36,364) (36,100)
  Total net finance expenses   (17,946) (17,459) (34,839) (34,911)
  Loss on disposal of capital assets   (16) (79) (12) (61)
Total net finance and other expenses   (17,962) (17,538) (34,851) (34,972)
           
Net earnings   64,320 66,532 68,594 69,796
           
Other comprehensive income   104     - 104     -
           
Total comprehensive income   64,424 66,532 68,698 69,796
           



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

     
  Six months ended
  September 30,
  2013 2012
     
Cash flows from operating activities    
     
Net earnings 68,594 69,796
Items not affecting cash    
  Net finance costs recognized in net earnings 34,839 34,911
  Depreciation and amortization of non-current assets 68,427 68,413
  Loss on disposal of property, plant and equipment 12 61
  Other non-cash adjustments to property, plant & equipment (662) 200
  Changes in    
    Long-term accrued employee future benefits (415) (515)
    Derivative liabilities (11) (8)
    Provisions (2,871) 610
    Long-term land lease 229 229
    Accrued net financing 236 539
Total non-cash items 99,784 104,440
Movements in operating working capital    
  Trade and other receivables (167) 14,162
  Prepaid expenses 586 (4,395)
  Inventories (2,384) (748)
  Accounts payable and accrued liabilities (14,357) (14,440)
  Deferred revenue (50) (1,708)
  Change in non-cash working capital (16,372) (7,129)
  Change attributable to capital asset acquisitions 5,670 11,387
  Change attributable to contributed surplus - (25,000)
  Change in non-cash operating working capital (10,702) (20,742)
     
Cash generated from operating activities 157,676 153,494
     
  Interest rate support received      - 412
  Interest received 1,230 600
  Interest paid (39,594) (36,870)
     
Net cash generated by operating activities 119,312 117,636



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

     
  Six months ended
  September 30,
  2013 2012
     
Cash flows from financing activities    
     
Repayment of long-term debt (144,500) (4,500)
Proceeds from (repayment of) short-term debt 39,966 (17,737)
Repayment of finance lease obligations (530) (487)
Contributed surplus payment from Province - 25,000
     
Net cash (used in) provided by financing activities (105,064) 2,276
     
     
Cash flows from investing activities    
     
Proceeds from disposal of property, plant and equipment 32 80
Purchase of property, plant and equipment and intangible assets (50,343) (50,182)
Reduction of debt service reserve 4,415 65
Proceeds from (purchase of) short-term investments 8,895 (34,550)
     
Net cash used in investing activities (37,001) (84,587)
     
Net (decrease) increase in cash and cash equivalents (22,753) 35,325
     
Cash and cash equivalents, beginning of period 36,641 7,700
     
Cash and cash equivalents, end of period 13,888 43,025



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 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
                             
Balance as at March 31, 2013   75,478   25,000   234,187   334,665   3,233       -   337,898
                             
Net earnings for the six months
ended September 30, 2013
       -           -   68,594   68,594             -       -   68,594
                             
Other comprehensive income for
the six months ended September
30, 2013
         -            -             -            -             -   104            104
                             
Balance as at September 30, 2013   75,478   25,000   302,781   403,259   3,233   104   406,596

 

 

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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