BC Ferries Releases Second Quarter Results

VICTORIA, Nov. 20, 2015 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $84.5 million and $103.3 million for the three and six-month periods ended September 30, 2015, up from $76.4 million and $90.3 million for the three and six-month periods ended September 30, 2014. 

"Due to the seasonality of ferry travel, we typically generate higher net earnings in the first and second quarters, which are subsequently reduced by net losses in the last two quarters of the fiscal year," said Mike Corrigan, BC Ferries' President and CEO.  "Traffic volumes are higher in the spring and summer months, and when traffic slows down in the fall and winter months, we begin our refit season, making substantial investments in our vessels and terminals to maintain our high levels of service."

Total revenue for the three-month period ended September 30, 2015 increased from $284.2 million to $292.5 million compared to the same period last year, mainly due to increases in traffic. Operating expenses increased marginally, from $192.6 million to $194.0 million compared to the same period last year. For the six months ended September 30, 2015, total revenue was $510.2 million, up from $497.3 million in the prior year. Operating expenses for the same period were $378.6 million, up from $375.1 million in the prior year.

"We have an ambitious capital plan to invest over $3 billion over the next 12 years to replace aging vessels, marine structures, information technology systems and other capital assets required for continued safe and reliable ferry service," said Corrigan. "Earnings are important so we can continue to invest in projects such as new fuel-efficient vessels and new technology systems that will offer customers opportunities for discounted fares at off-peak travel times, a model we are currently testing with our 50 per cent off vehicles promotion."

Capital expenditures in the three and six-months ended September 30, 2015 totalled $28.7 million and $65.3 million, respectively. Projects included terminal marine structures, vessel upgrades and modifications, information technology investments, and terminal and building upgrades and equipment.

During the three months ended September 30, 2015, BC Ferries provided over 45,000 sailings. During this period, the company carried 7.1 million passengers and 2.6 million vehicles, an increase of 3.4 per cent and 3.5 per cent, respectively, compared to the same quarter in the prior year.

Significant events during or subsequent to the quarter included the first steel cut on the third new Salish-Class vessel on July 1, 2015. The construction of the other two vessels started earlier in the year and is progressing on schedule. The three new vessels will be dual-fuel, capable of running on either diesel or liquefied natural gas (LNG). On July 28, 2015, BC Ferries announced the names of the new Salish-Class vessels, the Salish Orca, Salish Eagle and Salish Raven. These new ferries are scheduled for delivery in August 2016, November 2016 and February 2017.

On July 9, 2015, BC Ferries announced the three shipyards, including one British Columbian yard, shortlisted for the mid-life upgrades of its two largest ships, the Spirit-Class. The mid-life upgrades include the potential conversion of the Spirit of British Columbia and the Spirit of Vancouver Island to dual-fuel vessels, capable of running on diesel or LNG. These two vessels have been in service for over twenty years and have an expected service life of 45 years. The mid-life upgrade of the Spirit of British Columbia is expected to be completed by the spring of 2018 and the Spirit of Vancouver Island is expected to be completed the following year.

On September 16, 2015, the British Columbia Ferries Commissioner issued Order 15-03 which established the final price cap increases of 1.9 per cent for each of the four years of performance term four (PT4), commencing April 1, 2016. The order also requires a fuel management plan to be submitted prior to the start of PT4 setting out strategies for fuel procurement, minimizing fuel consumption and the transition to alternate fuels during PT4.

On November 19, 2015, BC Ferries officially took ownership of the new cable ferry, the Baynes Sound Connector, with the title transfer from Seaspan's Vancouver Shipyards. BC Ferries will now be conducting its own rigorous crew training and familiarization, as well as undergoing Transport Canada certification. The Baynes Sound Connector is expected to commence service between Buckley Bay on Vancouver Island and Denman Island by early February 2016.

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, providing year-round vehicle and passenger service on 24 routes to 47 terminals, with a fleet of 35 vessels. In fiscal 2015, BC Ferries carried 19.8 million passengers and 7.7 million vehicles throughout coastal British Columbia.

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: capital expenditure levels, traffic levels, Salish-Class vessels, and Spirit-Class mid-life upgrades. 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: vendor non-performance; capital market access; interest rate, foreign currency, fuel price, and traffic volume fluctuations; the implementation of major capital projects; security, safety, and environmental incidents; confidential or sensitive information breaches; changes in laws; vessel repair facility limitations; economic regulatory environment changes; tax changes; and First Nation 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 International Financial Reporting Standards (IFRS), we present certain supplemental non-IFRS measures. These include, but are not limited to, vehicle and passenger traffic and number of sailings. 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, 2015

March 31, 2015

Assets



Current assets




Cash and cash equivalents

107,291

65,574


Restricted short-term investments

32,236

32,496


Other short-term investments

86,005

62,098


Trade and other receivables

19,400

19,490


Prepaid expenses

11,427

6,177


Inventories

25,700

25,393


282,059

211,228

Non-current assets




Loan receivable

24,515

24,515


Land lease

30,917

31,146


Property, plant and equipment

1,512,615

1,524,692


Intangible assets

71,352

65,031


1,639,399

1,645,384

Total assets

1,921,458

1,856,612




Liabilities



Current liabilities




Accounts payable and accrued liabilities

30,833

57,401


Interest payable on long-term debt

18,361

18,329


Deferred revenue

16,120

16,957


Derivative liabilities

4,506

4,433


Current portion of long-term debt

24,000

24,000


Current portion of accrued employee future benefits

2,400

2,400


Current portion of obligations under finance lease

1,481

1,309


Provisions

49,536

48,065


147,237

172,894

Non-current liabilities




Accrued employee future benefits

18,503

18,800


Long-term debt

1,229,905

1,241,699


Obligations under finance lease

42,765

43,514


Other liabilities

1,500

1,500


1,292,673

1,305,513

Total liabilities

1,439,910

1,478,407

Equity




Share capital

75,478

75,478


Contributed surplus

25,000

25,000


Retained earnings

392,481

289,177


Total equity before reserves

492,959

389,655


Reserves

(11,411)

(11,450)

Total equity including reserves

481,548

378,205




Total liabilities and equity

1,921,458

1,856,612




 

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

2015

2014

2015

2014






Revenue






Vehicle and passenger fares

192,580

179,641

335,924

311,013


Ferry service fees

54,526

54,195

95,785

99,242


Retail

30,229

28,557

51,555

48,501


Federal-Provincial Subsidy Agreement

7,183

7,089

14,365

14,178


Fuel (rebates) surcharges

(2,126)

5,786

(3,752)

10,148


Regulated other income

7,236

6,122

11,307

9,521


Other income

2,857

2,777

5,000

4,673

Total revenue

292,485

284,167

510,184

497,276






Expenses






Operations

124,441

125,359

236,671

240,383


Maintenance

13,570

12,468

34,162

29,117


Administration

8,236

8,020

16,220

15,633


Cost of retail goods sold

11,911

11,157

20,562

19,146


Depreciation and amortization

35,816

35,612

70,927

70,846

Total operating expenses

193,974

192,616

378,542

375,125






Operating profit

98,511

91,551

131,642

122,151






Net finance and other expenses






Net finance expense







Finance income

1,456

969

2,353

2,036



Finance expenses

(15,248)

(16,124)

(30,490)

(33,836)


Net finance expense

(13,792)

(15,155)

(28,137)

(31,800)


(Loss) gain on disposal and revaluation of property,







plant and equipment, intangible assets and







inventory

(212)

23

(201)

(44)

Net finance and other expenses

(14,004)

(15,132)

(28,338)

(31,844)






Net earnings

84,507

76,419

103,304

90,307






Other comprehensive loss






Items not to be reclassified to net earnings

-

(2,890)

-

(2,890)


Items to be reclassified to net earnings

(3,543)

-

(85)

(2,396)

Total other comprehensive loss

(3,543)

(2,890)

(85)

(5,286)






Total comprehensive income

80,964

73,529

103,219

85,021

                   

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)



Six months ended September 30


2015

2014




Cash flows from operating activities






Net earnings

103,304

90,307




Items not affecting cash




Net finance expense

28,137

31,800


Depreciation and amortization

70,927

70,846


Loss on disposal and revaluation of property, plant and





equipment, intangible assets and inventory

201

44


Other non-cash adjustments to property, plant and equipment

(54)

(1,781)


Changes in





Accrued employee future benefits

(297)

205



Derivative liabilities recognized in net earnings

(12)

(14)



Provisions

1,471

(5,139)



Long-term land lease

229

229



Accrued interest costs

609

246

Total non-cash items

101,211

96,436




Movements in operating working capital




Trade and other receivables

90

3,958


Prepaid expenses

(5,250)

(5,027)


Inventories

(307)

(2,125)


Accounts payable and accrued liabilities

(26,568)

(15,529)


Deferred revenue

(837)

222


Change in non-cash working capital

(32,872)

(18,501)


Change attributable to capital asset acquisitions

18,917

7,103


Change in non-cash operating working capital

(13,955)

(11,398)




Cash generated from operating activities

190,560

175,345






Interest received

1,769

1,827


Interest paid

(32,791)

(36,167)


Net cash generated by operating activities

159,538

141,005

 

BRITISH COLUMBIA FERRY SERVICES INC.

Interim Consolidated Statements of Cash Flows (unaudited)

(Expressed in thousands of Canadian dollars)




Six months ended September 30


2015

2014

Cash flows from financing activities






Proceeds from issuance of bonds

-

200,000

Repayment of long-term debt

(12,000)

(258,250)

Repayment of finance lease obligations

(577)

(557)

Deferred financing costs incurred

-

(1,315)

Hedge losses on interest rate forward contracts

-

(7,652)

Net cash used in financing activities

(12,577)

(67,774)




Cash flows from investing activities






Proceeds from disposal of property, plant and equipment

146

72

Purchase of property, plant and equipment and intangible assets

(81,743)

(56,531)

Decrease of debt service reserves

260

3,046

Net (purchase of) proceeds from short-term investments

(23,907)

24,971

Net cash used in investing activities

(105,244)

(28,442)




Net increase in cash and cash equivalents

41,717

44,789




Cash and cash equivalents, beginning of period

65,574

71,365

Cash and cash equivalents, end of period

107,291

116,154

 


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

Total
equity
including
reserves








Balance as at March 31, 2014

75,478

25,000

246,142

346,620

(1,691)

344,929

Net earnings for the six months ended

-

-

90,307

90,307

-

90,307


September 30, 2014

Other comprehensive loss for the six

-

-

-

-

(5,286)

(5,286)


months ended September 30, 2014

Hedge losses reclassified to net earnings

-

-

-

-

105

105

Balance as at September 30, 2014

75,478

25,000

336,449

436,927

(6,872)

430,055








Balance as at March 31, 2015

75,478

25,000

289,177

389,655

(11,450)

378,205

Net earnings for the six months ended

-

-

103,304

103,304

-

103,304


September 30, 2015

Other comprehensive loss for the six

-

-

-

-

(85)

(85)


months ended September 30, 2015

Hedge losses reclassified to net earnings

-

-

-

-

124

124

Balance as at September 30, 2015

75,478

25,000

392,481

492,959

(11,411)

481,548

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)

RELATED LINKS
http://www.bcferries.ca

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