BC Ferries releases third quarter results

VICTORIA, Feb. 24, 2012 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for fiscal 2011/12.  The company reported a net loss of $23.1 million for the three months ended December 31, 2011, compared to a net loss of $12.5 million in the same quarter last year.  Net earnings for the nine-month period ended December 31, 2011 were $28.7 million, down from $42.8 million for the same period in the previous year.  The loss in the third quarter of fiscal 2010/11 included a one-time gain of $9.3 million from the sale of the company's former head office building.

BC Ferries' quarterly results are affected by the seasonality of leisure travel patterns. The second quarter, covering the summer period, experiences the highest traffic levels and the highest earnings of the year. The third and fourth quarters reflect a seasonal downturn in traffic and the company utilizes these off-peak periods to perform upgrades and major maintenance and refit programs, as well as to undertake mandatory inspections on the majority of its vessels.

For the three months ended December 31, 2011, total revenue decreased by $1 million to $161.3 million compared to the same period last year.  Total revenue for the nine months ended December 31, 2011 increased $1.4 million to $600.0 million.

For the three months ended December 31, 2011, total operating expenses increased $0.8 million to $166.4 million, compared to the same period last year, with expenses in the nine-month period ended December 31, 2011 increasing by $6.9 million to $517.4 million compared to the nine months ended December 31, 2010.

In the third quarter of fiscal 2011/12, vehicle traffic declined by 3.6 per cent and passenger traffic declined by 3.0 per cent compared to the same period the year prior.  The traffic decline has been relatively consistent throughout all three quarters of fiscal 2012 and is the largest year-over-year traffic decline that BC Ferries has experienced in recent years.

On December 6, 2012, BC Ferries' Board announced the appointment of Michael J. Corrigan as President and CEO effective January 1, 2012 to replace outgoing CEO David L. Hahn.   The Board stated that Corrigan's past business experience, as well as his nine years in the roles of Chief Operating Officer and of Executive Vice President of Business Development at BC Ferries have prepared him well to take on the leadership of the company.

"I am looking forward to working with the provincial government, the Ferries Commissioner and ferry dependent communities to ensure we provide a ferry system that is safe, reliable and affordable," said Mike Corrigan, BC Ferries' President and CEO.  "I am also cognizant of the economic challenges we face and I am committed to ensuring our financial sustainability, without in any way compromising our focus on safety."

Notable events since June 30, 2011 include, the issuance of the British Columbia Ferries Commissioner's report to the B.C. Minister of Transportation and Infrastructure as to how the Coastal Ferry Act could be amended to balance the interests of ferry users with the financial sustainability of BC Ferries. The report reconfirms that BC Ferries is an efficient and well run operation but clearly articulates the challenges ahead if the company continues to operate the same level of service with the same level of funding. The company is awaiting the Province's response to the Commissioner's report and recommendations.

The company reached a tentative agreement with the BC Ferry & Marine Workers' Union for a three year extension, to October 31, 2015, of the Collective Agreement. The agreement has been ratified by the Union membership.

Former B.C. Auditor General George Morfitt released a comprehensive report arising from his follow-up of the operational safety audit he conducted five years ago. The report notes a significant improvement in the safety culture and practices within BC Ferries and concluded the company continues to operate a safe system.

A Request for Expressions of Interest was issued to determine whether a third party, under contract to BC Ferries, can provide cable ferry service at a lower cost, while maintaining high levels of safety, quality and reliability.  The company intends to issue a Request for Proposals as the next phase of the procurement process.

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.

 

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; the extension of the Collective Agreement; our short-term and long-range business plans and cable ferry initiative; and the impact of the Commissioner's recommendations. 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)

 
    December 31, 2011
(unaudited)
      March 31, 2011
             
Assets            
Current assets:            
  Cash and cash equivalents $ 27,642     $ 33,335
  Restricted short-term investments   35,774       37,040
  Other short-term investments   26,880       64,074
  Accounts receivable   17,514       20,619
  Prepaid expenses   7,603       5,648
  Inventories   20,478       19,957
  Regulatory assets   1,194       3,703
    137,085       184,376
             
Property, plant and equipment   1,582,622       1,581,007
Intangible assets   38,380       34,929
Regulatory assets   997                 -
Long-term loan receivable   24,515       24,247
Long-term land lease   32,635       32,979
  $ 1,816,234     $ 1,857,538
Liabilities and Shareholders' Equity            
             
Current liabilities:            
  Accounts payable and accrued liabilities $ 39,625     $ 51,249
  Short-term debt           -                3,949
  Interest payable on long-term debt   15,324       18,261
  Accrued employee costs   50,812       48,194
  Deferred revenue   13,348       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   974       1,040
    130,283       161,637
             
Accrued employee future benefits   11,823       10,907
Regulatory liabilities                    -       1,558
Long-term debt   1,289,491       1,327,014
Obligations under capital lease   47,258       47,723
    1,478,855       1,548,839
             
Shareholders' equity:            
  Share capital   75,478       75,478
  Retained earnings   261,901       233,221
    337,379       308,699
  $ 1,816,234     $ 1,857,538



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

                         
      Three months ended     Nine months ended
      December 31     December 31
      2011     2010     2011     2010
                         
Revenue:                        
  Tariffs   $    98,601   $     99,086   $ 376,060   $ 373,007
  Ferry service fees        34,420         33,954     122,287     118,892
  Federal-Provincial Subsidy Agreement          6,872           6,731     20,615     20,193
  Retail        16,590         17,208     63,024     65,351
  Other income          4,804           5,344     18,032     21,134
      161,287       162,323     600,018     598,577
                         
Expenses:                        
  Operations     97,902         96,676     317,493     315,201
  Maintenance        23,932         26,815     63,142     63,289
  Administration     6,818           7,531     22,624     22,365
  Cost of retail goods sold          6,473           6,525     23,903     24,482
  Amortization     31,305         28,059     90,229     85,188
      166,430       165,606     517,391     510,525
                         
(Loss) earnings from operations         (5,143)         (3,283)     82,627     88,052
                         
Gain on foreign exchange              37                67     214     173
Interest expense     (17,953)     (18,367)     (54,173)     (54,354)
(Loss) gain on disposal of capital assets             (25)         9,146             12         8,893
Net (loss) earnings       (23,084)       (12,437)        28,680        42,764
                         
Other comprehensive income         -         -             -           -
                         
Net (loss) earnings and comprehensive income       (23,084)       (12,437)        28,680        42,764
                         
Retained earnings, beginning of period     284,985     290,679     233,221     235,478
                         
Retained earnings, end of period   $ 261,901   $ 278,242   $ 261,901   $ 278,242



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

                               
          Three months ended       Nine months ended
          December 31       December 31
          2011     2010       2011     2010
                               
Cash provided by (used in):                              
                               
Operations:                              
  Net (loss) earnings       $ (23,084)   $ (12,437)     $ 28,680   $ 42,764
  Items not involving cash:                              
            Amortization         31,305     28,059       90,229     85,188
            Other non-cash charges         2,379     (8,874)       4,227     (7,084)
  Long-term regulatory costs deferred             (1,855)     (1,628)       (2,555)     (6,904)
  Change in non-cash operating working capital         1,431     7,931       (16,867)     (414)
            10,176     13,051       103,714     113,550
                               
Financing:                              
  Repayment of long-term debt              -           -       (51,375)     (4,500)
  Repayment of short-term loans              -           -       (3,949)          -
  Repayment of capital lease obligations         (259)     (318)       (798)     (715)
          (259)     (318)       (56,122)     (5,215)
                               
Investing:                              
  Proceeds from disposal of property, plant and equipment                    23     11,040                107     11,118
  Purchase of property, plant and  equipment and intangible assets         (35,873)     (34,420)       (91,584)     (78,196)
  Recovery of import duties and related taxes               -     119,449          -     119,449
  Reduction of debt service reserves         (29)        -            1,266     200
  Advancement of long-term loan              -     (24,247)               (268)     (24,247)
  Proceeds from (purchase of) short-term investments            32,230     (51,382)           37,194     (51,601)
          (3,649)     20,440          (53,285)     (23,277)
                               
Increase (decrease) in cash and cash equivalents         6,268     33,173       (5,693)     85,058
                               
Cash and cash equivalents, beginning of period         21,374     62,493       33,335     10,608
                               
Cash and cash equivalents, end of period       $ 27,642 $   95,666   $   27,642 $   95,666


 

SOURCE British Columbia Ferry Services Inc.

For further information:

Media Contact:
BC Ferries, Media Relations
Victoria:  (250) 978-1267


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