BC Ferries Releases Second Quarter Results

VICTORIA, Nov. 25, 2016 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $95.2 million and $122.2 million for the three and six-month periods ended September 30, 2016, up from $84.5 million and $103.3 million for the three and six-month periods ended September 30, 2015. 

Due to the seasonality of ferry travel, BC Ferries typically generates net earnings in the first and second quarters, which are subsequently reduced by net losses in the last two quarters of the fiscal year.

 "Traffic numbers continued to increase during the summer, with many U.S. visitors taking advantage of our lower dollar and large numbers of Canadians taking staycations here in B.C.," said Mike Corrigan, BC Ferries' President and CEO. "It's important for us to achieve positive financial results, as we need to continuously invest in our infrastructure to provide safe and reliable marine transportation."   

"Our profits will help finance our new Salish Class vessels which will enter service next year, as well as the mid-life upgrade project for our two Spirit Class vessels including conversion to dual- fuel, so they can operate on natural gas or marine diesel," said Corrigan. "A major investment in the marine structures at our Langdale terminal is just one of the terminal projects currently underway, and the procurement process for two new 44-vehicle ferries is in progress."

Total revenue for the three-month period ended September 30, 2016 increased from $280.6 million to $298.9 million compared to the same period last year, mainly due to increases in traffic. Operating expenses increased from $182.1 million to $190.4 million compared to the same period last year. For the six months ended September 30, 2016, total revenue was $518.1 million, up from $489.6 million in the prior year. Operating expenses for the same period were $369.0 million, up from $358.0 million in the prior year.

Capital expenditures in the three and six-months ended September 30, 2016 totalled $24.3 million and $70.2 million, respectively. Projects included vessel upgrades and modifications, information technology investments, terminal marine structures, and terminal and building upgrades and equipment.

During the three months ended September 30, 2016, BC Ferries provided over 46,000 sailings. During this period, the company carried 7.4 million passengers and 2.7 million vehicles, an increase of 4.8 per cent and 5.1 per cent, respectively, compared to the same quarter in the prior year.

Significant events during or subsequent to the quarter included the August 19, 2016 announcement by the Board of Directors that BC Ferries' President and CEO Mike Corrigan would be stepping down from his role effective March 31, 2017, at the completion of his current contract. The Board of Directors has commenced an executive search to identify Mr. Corrigan's replacement, considering both internal and external candidates. 

On September 6, 2016, the Province announced its intent to start seasonal direct ferry service between Port Hardy and Bella Coola beginning in the summer of 2018. The new service will require the acquisition of a suitable vessel, having it approved by Transport Canada and modifying docks as necessary. An amendment to the Coastal Ferry Services Contract will need to be negotiated in respect of the specific service to be delivered and the service fees payable to BC Ferries.

On November 21, 2016, BC Ferries conditionally accepted the new intermediate vessel, the Salish Orca from Remontowa Shipbuilding S.A. of Gdansk, Poland. The vessel is scheduled to arrive in British Columbia in January 2017, and is expected to replace the 51-year old Queen of Burnaby on the ComoxPowell River route in the spring of 2017.

On November 22, 2016 and November 25, 2016, BC Ferries drew down $39 million and $6 million respectively for a total of $45 million, under the export loan agreement with KfW IPEX-Bank GmbH, to coincide with the contractual milestones for the Salish Orca. This amortizing loan will be repaid over a 12-year term and bear an annual interest rate of 2.09 per cent. The net proceeds from the loan will be used to partially finance the purchase of the Salish Orca.

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 20.7 million passengers and 8.1 million vehicles during the fiscal year ended March 31, 2016.  BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 24 routes, currently supported by 34 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, the Salish Class vessels, the Spirit Class mid-life upgrades, the minor vessel procurement process, the Langdale terminal project, the seasonal direct ferry service between Port Hardy and Bella Coola, and the loan agreement with KfW IPEX-Bank GmbH.  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.

NON-IFRS MEASURES

In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain financial measures that do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental financial 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 Condensed Consolidated Statements of Financial Position (unaudited)
(Expressed in thousands of Canadian dollars)




As at


September 30, 2016

March 31, 2016

Assets



Current assets




Cash and cash equivalents

131,920

79,113


Restricted short-term investments

31,736

31,986


Other short-term investments

109,514

61,464


Trade and other receivables

16,750

16,249


Prepaid expenses

12,164

8,550


Inventories

26,354

23,988


328,438

221,350

Non-current assets




Loan receivable

24,515

24,515


Land lease

30,459

30,688


Property, plant and equipment

1,523,634

1,539,957


Intangible assets

95,897

82,741


1,674,505

1,677,901

Total assets

2,002,943

1,899,251




Liabilities



Current liabilities




Accounts payable and accrued liabilities

47,577

53,575


Interest payable on long-term debt

18,274

18,262


Deferred revenue

16,993

18,883


Derivative liabilities

2,187

17,879


Current portion of long-term debt

24,000

24,000


Current portion of accrued employee future benefits

1,900

1,900


Current portion of obligations under finance lease

1,548

1,514


Provisions

54,993

53,321


167,472

189,334

Non-current liabilities




Accrued employee future benefits

20,761

19,361


Long-term debt

1,206,303

1,218,106


Obligations under finance lease

41,221

42,003


Other liabilities

1,500

1,500


1,269,785

1,280,970

Total liabilities

1,437,257

1,470,304




Equity




Share capital

75,478

75,478


Contributed surplus

25,000

25,000


Retained earnings

474,876

352,692


Total equity before reserves

575,354

453,170


Reserves

(9,668)

(24,223)

Total equity including reserves

565,686

428,947




Total liabilities and equity

2,002,943

1,899,251

 

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Condensed Consolidated Statements of Comprehensive Income (unaudited)
(Expressed in thousands of Canadian dollars)





Three months ended

September 30

Six months ended
September 30


2016

2015

2016

2015






Revenue






Vehicle and passenger fares

217,013

199,816

375,377

347,231


Ferry service fees

57,887

54,526

100,043

95,785


Net retail

20,006

18,318

33,717

30,993


Federal-Provincial Subsidy Agreement

7,290

7,183

14,579

14,365


Fuel rebates

(6,278)

(2,126)

(10,977)

(3,752)


Other income

2,995

2,857

5,373

5,000

Total revenue

298,913

280,574

518,112

489,622






Expenses






Operations

131,061

124,441

243,773

236,671


Maintenance

14,170

13,570

35,243

34,162


Administration

8,757

8,236

16,784

16,220


Depreciation and amortization

36,373

35,816

73,213

70,927

Total operating expenses

190,361

182,063

369,013

357,980






Operating profit

108,552

98,511

149,099

131,642






Net finance and other expenses






Net finance expense







Finance income

1,148

1,456

2,183

2,353



Finance expenses

(14,533)

(15,248)

(28,945)

(30,490)


Net finance expense

(13,385)

(13,792)

(26,762)

(28,137)


Gain (loss) on disposal and revaluation of







property, plant and equipment, intangible
assets and inventory

32

(212)

(153)

(201)

Net finance and other expenses

(13,353)

(14,004)

(26,915)

(28,338)






Net earnings

95,199

84,507

122,184

103,304






Other comprehensive (loss) income






Items not to be reclassified to net earnings

(1,240)

-

(1,240)

-


Items to be reclassified to net earnings

208

(3,543)

10,536

(85)

Total other comprehensive (loss) income

(1,032)

(3,543)

9,296

(85)






Total comprehensive income

94,167

80,964

131,480

103,219

 

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





Six months ended September 30


2016

2015

Cash flows from operating activities






Net earnings

122,184

103,304




Items not affecting cash




Net finance expense

26,762

28,137


Depreciation and amortization

73,213

70,927


Loss on disposal and revaluation of property, plant and
equipment, intangible assets and inventory

153

201

Other non-cash adjustments to property, plant and equipment

(931)

(54)

Changes in




Accrued employee future benefits

161

(297)


Derivative liabilities recognized in net earnings

(20)

(12)


Provisions

1,672

1,471


Long-term land lease

229

229


Accrued financing costs

360

609

Total non-cash items

101,599

101,211




Movements in operating working capital




Trade and other receivables

(501)

90


Prepaid expenses

(3,614)

(5,250)


Inventories

(2,366)

(307)


Accounts payable and accrued liabilities

(5,998)

(26,568)


Deferred revenue

(1,890)

(837)


Change in non-cash working capital

(14,369)

(32,872)


Change attributable to capital asset acquisitions

1,565

18,917


Change in non-cash operating working capital

(12,804)

(13,955)




Cash generated from operating activities

210,979

190,560


Interest received

1,797

1,769


Interest paid

(32,281)

(32,791)




Net cash generated by operating activities

180,495

159,538

 

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




Six months ended September 30


2016

2015

Cash flows from financing activities



Repayment of long-term debt

(12,000)

(12,000)

Repayment of finance lease obligations

(748)

(577)

Net cash used in financing activities

(12,748)

(12,577)




Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

101

146

Purchase of property, plant and equipment and intangible assets

(67,241)

(81,743)

Changes in debt service reserve

250

260

Net purchase of short-term investments

(48,050)

(23,907)

Net cash used in investing activities

(114,940)

(105,244)




Net increase in cash and cash equivalents

52,807

41,717




Cash and cash equivalents, beginning of period

79,113

65,574




Cash and cash equivalents, end of period

131,920

107,291

 

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Condensed 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, 2015

75,478

25,000

289,177

389,655

(11,450)

378,205

Net earnings

-

-

103,304

103,304

-

103,304

Other comprehensive loss

-

-

-

-

(3,263)

(3,263)

Realized hedge losses recognized in fuel swaps

-

-

-

-

3,178

3,178

Hedge losses on interest rate forward contract reclassified to net earnings

-

-

-

-

124

124








Balance as at September 30, 2015

75,478

25,000

392,481

492,959

(11,411)

481,548








Balance as at March 31, 2016

75,478

25,000

352,692

453,170

(24,223)

428,947

Net earnings

-

-

122,184

122,184

-

122,184

Other comprehensive income

-

-

-

-

9,296

9,296

Realized hedge losses recognized in fuel swaps

-

-

-

-

5,135

5,135

Hedge losses on interest rate forward contract reclassified to net earnings

-

-

-

-

124

124








Balance as at September 30, 2016

75,478

25,000

474,876

575,354

(9,668)

565,686

 

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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