BC Ferries releases third quarter results

VICTORIA, Feb. 13, 2015 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for fiscal 2014/15.  The company reported a net loss of $6.1 million for the three months ended December 31, 2014, as compared to a net loss of $12.3 million in the same quarter last year.  Net earnings for the nine-month period ended December 31, 2014 were $84.2 million, up from $56.3 million for the same period in the previous year. 

"Due to the seasonality of ferry travel, we typically generate higher earnings in the first and second quarters, which are followed by net losses in the third and fourth quarters when traffic is down and we make significant investments in maintaining our fleet and terminals," said Mike Corrigan, BC Ferries' President and CEO.  "We will continue to focus on fare affordability for our customers while we ensure we operate a safe and reliable marine transportation system."

Total revenue for the three-month period ended December 31, 2014 increased by $7.6 million to $182.4 million as compared to the same quarter last year.  Total revenue for the nine months ended December 31, 2014 increased by $33.4 million to $679.7 million as compared to the same period last year.  Operating expenses increased by $3.1 million to $174.2 million as compared to the same quarter last year.  For the nine months ended December 31, 2014, operating expenses increased from $539.1 million to $549.3 million as compared to the same period the year prior.  These operating expenses increased as a result of higher maintenance costs and depreciation and amortization costs from new capital assets that have entered service, partially offset by a decrease in fuel expenses.

Capital expenditures in the three and nine-months ended December 31, 2014 totalled $48.3 million and $101.0 million respectively.  Projects included vessel replacements, upgrades and modifications, terminal marine structures, information technology, and terminal building upgrades and equipment. 

During the three months ended December 31, 2014, BC Ferries provided over 41,000 sailings, compared to 45,000 sailings during the same period in the prior year.  This reduction in the number of sailings reflects service level adjustments announced by the Province in February 2014.   These service level adjustments have generated year-to-date savings in fuel and labour that more than offset the decline in revenue as a result of lower traffic levels and will help reduce upward pressure on future fares. System-wide, capacity utilization has improved by 1.7 per cent year-to-date as a result.  Since the implementation of the sailing reductions, capacity utilization on the affected routes has improved by 4.5 per cent.

During the quarter, the company carried 1.7 million vehicles and 4.2 million passengers.  Vehicle traffic decreased 0.7 per cent and passenger traffic decreased 1.1 per cent compared to the same quarter in the prior year.  Year to date, vehicle traffic decreased 0.4 per cent and passenger traffic decreased 0.3 per cent compared to the same period last year.  This reflects service level adjustments, reductions to passenger fare discounts for BC seniors and reduced student travel as a result of the teachers' labour dispute during the first two quarters of fiscal 2014/15.  On the major routes, year-to-date vehicle and passenger traffic levels are 0.3 per cent and 0.5 per cent higher respectively, than the prior year.  BC Ferries is optimistic that it will see a continued increase in major route traffic as a result of the weak Canadian dollar and lower gasoline prices.   

Significant events during the third quarter of fiscal 2014/15 include the November 25, 2014 approval of BC Ferries' application to the BC Ferries Commissioner to proceed with mid-life upgrades of the Spirit of Vancouver Island and Spirit of British Columbia, including conversion to dual-fuel propulsion, so they can operate on LNG or marine diesel fuel.  The company expects the conversion and hull modifications will result in significant fuel savings.

On November 28, 2014, the keel-laying of the cable ferry, which will provide service between Buckley Bay and Denman Island, took place at Seaspan's Vancouver Shipyards in North Vancouver.  The vessel is expected to enter into service in the summer of 2015.

On December 17, 2014, BC Ferries removed all fuel surcharges as a result of declining fuel prices and locking in pricing for a significant portion of the company's forecasted fuel consumption to the end of fiscal 2015/16.  This pricing is favourable to the set price established by the Commissioner at the start of Performance Term Three. When fuel prices are lower than the set price, it translates into a net benefit to customers.

On January 16, 2015, the first steel cut for the first of the three new intermediate class ferries took place at Remontowa Shipbuilding SA in Gdansk, Poland.  The new vessels are scheduled for delivery in August 2016, October 2016 and February 2017.  Two of the vessels will replace the 50-year old Queen of Burnaby and the 51-year old Queen of Nanaimo. The third vessel will augment service during the peak and shoulder season and provide relief when other vessels are in refit. The new vessels will be dual-fuel capable.

On February 2, 2015, conditional approval of the company's application for the Fare Flexibility and Digital Experience Initiative was received from the BC Ferries Commissioner.

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 19.7 million passengers and 7.6 million vehicles during the fiscal year ended March 31, 2014.  BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 24 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, capital expenditure levels, the amount of savings to be achieved through service level reductions, the vessel replacement program for the Queen of Burnaby and the Queen of Nanaimo, the cable ferry initiative, the Spirit Class mid-life upgrades, and the Fare Flexibility and Digital Experience Initiative. 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, 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, capacity utilized, 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,



December 31, 2014

March 31, 2014

Assets




Current assets




Cash and cash equivalents 


96,632

71,365

Restricted short-term investments


32,651

35,792

Other short-term investments


62,698

81,006

Trade and other receivables


10,807

16,577

Prepaid expenses


8,854

6,934

Inventories


26,037

25,073



237,679

236,747

Non-current assets




Long-term loan receivable


24,515

24,515

Long-term land lease


31,260

31,604

Property, plant and equipment


1,525,607

1,539,162

Intangible assets


61,184

53,164



1,642,566

1,648,445

Total assets


1,880,245

1,885,192





Liabilities




Current liabilities




Accounts payable and accrued liabilities


35,453

48,134

Interest payable on long-term debt


16,563

19,634

Deferred revenue


14,568

14,563

Derivative liabilities


7,359

5,274

Current portion of long-term debt


24,000

270,250

Current portion of accrued employee future benefits


2,204

2,204

Current portion of obligations under finance lease


1,225

1,120

Provisions


48,140

51,801



149,512

412,980

Non-current liabilities




Accrued employee future benefits


18,885

15,931

Long-term debt


1,249,847

1,066,531

Obligations under finance lease


43,882

44,821

Long-term liabilities


1,500

-



1,314,114

1,127,283

Total liabilities


1,463,626

1,540,263





Equity




Share capital


75,478

75,478

Contributed surplus


25,000

25,000

Retained earnings


330,304

246,142

Total equity before reserves


430,782

346,620

Reserves


(14,163)

(1,691)

Total equity including reserves


416,619

344,929

Total liabilities and equity


1,880,245

1,885,192









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






Three months ended

Nine months ended



December 31,

December 31,

2014

2013

2014

2013







Revenue






Vehicle and passenger fares


111,074

105,206

422,087

400,751

Ferry service fees


38,913

40,643

138,155

141,822

Retail


17,386

17,172

65,887

64,902

Federal-Provincial Subsidy Agreement


7,089

7,094

21,267

21,280

Fuel surcharges 1


3,045

-

13,193

-

Regulated other income


2,979

2,978

12,500

11,658

Other income


1,899

1,718

6,572

5,837

Total revenue


182,385

174,811

679,661

646,250







Expenses






Operations


105,074

106,253

345,457

345,142

Maintenance


19,188

17,431

48,305

45,177

Administration


7,364

7,428

22,997

21,950

Cost of retail goods sold


7,169

6,842

26,315

25,252

Depreciation and amortization


35,354

33,148

106,200

101,575

Total operating expenses


174,149

171,102

549,274

539,096







Operating profit


8,236

3,709

130,387

107,154







Net finance and other expenses






Net finance expense






Finance income


1,056

1,078

3,092

2,603

Finance expenses


(15,432)

(17,039)

(49,268)

(53,403)

Net finance expense


(14,381)

(15,961)

(46,176)

(50,800)

Loss on disposal of property, plant and equipment


(5)

(57)

(49)

(69)

Net finance and other expenses


(14,381)

(16,018)

(46,225)

(50,869)







Net (loss) earnings


(6,145)

(12,309)

84,162

56,285







Other comprehensive (loss) income






Items not to be reclassified to net earnings


-

-

(2,890)

104

Items to be reclassified to net earnings


(7,354)

-

(9,750)

-

Total other comprehensive (loss) income


(7,354)

-

(12,640)

104

Total comprehensive (loss) income


(13,499)

(12,309)

71,522

56,389







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



Nine months ended


December 31,


2014

2013




Cash flows from operating activities






Net earnings

84,162

56,285

 

Items not affecting cash



Net finance expense

46,176

50,800

Depreciation and amortization

106,200

101,575

Loss on disposal of property, plant and equipment

49

69

Other non-cash adjustments to property, plant and equipment

(888)

(62)

Changes in



Long-term accrued employee future benefits

64

(443)

Derivative liabilities recognized in net earnings

(13)

(12)

Provisions

(3,661)

326

Long-term land lease

344

344

Accrued interest costs

55

(1,020)

Total non-cash items

148,326

151,577

 

Movements in operating working capital



Trade and other receivables

5,770

5,082

Prepaid expenses

(1,920)

2,107

Inventories

(964)

(1,711)

Accounts payable and accrued liabilities

(12,681)

(10,018)

Deferred revenue

5

(511)

Change in non-cash working capital

(9,790)

(5,051)

Change attributable to capital asset acquisitions

4,229

(91)

Change in non-cash operating working capital

(5,561)

(5,142)




Cash generated from operating activities

226,927

202,720




Interest received

3,453

3,586

Interest paid

(54,639)

(56,589)




Net cash generated by operating activities

175,741

149,717




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



Nine months ended


December 31,


2014

2013




Cash flows from financing activities






Proceeds from issuance of bonds

200,000

200,000

Repayment of long-term debt

(262,000)

(144,500)

Repayment of finance lease obligations

(834)

(800)

Deferred financing costs incurred

(1,315)

(1,387)

Hedge losses on interest rate forward contracts

(7,652)

-




Net cash (used in) generated by financing activities

(71,801)

53,313







Cash flows from investing activities






Proceeds from disposal of property, plant and equipment

115

39

Purchase of property, plant and equipment and intangible assets

(100,237)

(86,524)

Changes in debt service reserves

3,141

(287)

Net proceeds from (purchase of) short-term investments

18,308

(53,111)




Net cash used in investing activities

(78,673)

(139,883)




Net increase in cash and cash equivalents

25,267

63,147




Cash and cash equivalents, beginning of period

71,365

36,641




Cash and cash equivalents, end of period

96,632

99,788





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, 2013

75,478

25,000

234,187

334,665

3,233

337,898








Net earnings for the nine months ended December 31, 2013

-

-

56,285

56,285

-

56,285








Other comprehensive income for the nine months ended December 31, 2013

-

-

-

-

104

104








Balance as at December 31, 2013

75,478

25,000

290,472

390,950

3,337

394,287








Balance as at March 31, 2014

75,478

25,000

246,142

346,620

(1,691)

344,929








Net earnings for the nine months ended December 31, 2014

-

-

84,162

84,162

-

84,162








Other comprehensive income for the nine months ended December 31, 2014

-

-

-

-

(12,640)

(12,640)








Hedge losses reclassified to net earnings





168

168








Balance as at December 31, 2014

75,478

25,000

330,304

430,782

(14,163)

416,619








_______________________________
1 For the purpose of rate regulation, fuel surcharges collected are applied to deferred fuel cost accounts and not included as revenue in determination of earnings. For additional information see Note 11 to BC Ferries' Interim Consolidated Financial Statements for the nine months ended December 31, 2014 and 2013.

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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