BC Ferries releases third quarter results



    VICTORIA, Feb. 20 /CNW/ - British Columbia Ferry Services Inc. (BC
Ferries) today released its third quarter results for fiscal 2008/09. The
company reported a net loss of $14.6 million for the three months ended
December 31, 2008, compared to a net loss of $7.8 million in the same quarter
last year. Net earnings for the nine-month period ended December 31, 2008 were
$47.5 million, down from $67.7 million for the same period in the previous
year.
    Due to the seasonality of ferry travel, BC Ferries typically generates
higher net earnings in the first and second quarters, which are subsequently
reduced by net losses in the last two quarters of its fiscal year. The company
utilizes the third and fourth quarters to perform upgrades, maintenance and
refits and to undertake mandatory inspections on the majority of its vessels.
    For the three months ended December 31, 2008, total revenue increased by
$12.9 million to $149.4 million while total expenses increased $19.7 million
to $164.0 million, compared to the same period last year. Revenues for the
nine months ended December 31, 2008 increased $36.9 million to $553.4 million
with expenses in the same period increasing $57.1 million to $505.9 million,
compared to the nine months ended December 31, 2007. Of this increase in
expenses, over $32 million is due to higher fuel expense primarily as a result
of a lift in fuel prices as established by the British Columbia Ferries
Commissioner. Amortization and interest expense have increased $17.2 million
and $12.5 million respectively, due to our significant asset renewal program.
    BC Ferries has experienced a decrease in traffic in all three quarters of
fiscal 2009 compared to the same period last year, generally reflecting
deteriorating economic conditions and volatile fuel prices. For the nine
months ended December 31, 2008, vehicle and passenger traffic levels were down
5.1 per cent and 4.5 per cent respectively, compared to the same period in the
prior year. These reductions in traffic include an approximate 10 per cent
decrease in December during which three weeks of severe weather conditions
were experienced in our service areas.
    "These are turbulent times. As a result, BC Ferries has taken a number of
measures to reduce overhead and other operating costs from previously planned
levels," said David L. Hahn, BC Ferries' President and CEO. "In addition, with
our comprehensive fuel hedging strategy in place and the recent drop in fuel
prices, we eliminated fuel surcharges in December. The province is
contributing $1.7 million towards paying down the fuel deferral accounts,
which enabled us to implement fuel rebates for the minor routes and the
Horseshoe Bay-Langdale route earlier this month." This provincial contribution
arises from the duty remission for the Northern Adventure.
    Capital expenditures totalled $58.2 million in the three months ended
December 31, 2008 and $304.3 million in the nine months ended December 31,
2008. During the third quarter ended December 31, 2008, $43.5 million was
invested in new vessels including the two new Super C-class vessels, the
Island Sky and the Northern Expedition, as well as upgrades to existing ships.
    On November 21, 2008, the third and final new Super-C class vessel, the
Coastal Celebration commenced service on the Swartz Bay-Tsawwassen route
following extensive crew training and familiarization.
    On December 9, 2008, BC Ferries took delivery of the 102-metre Island
Sky, which entered service on the Earls Cove-Saltery Bay route this month.
This vessel was built at Vancouver Shipyards in North Vancouver, and is
currently licensed to carry 450 passengers and 125 vehicles.
    Capital expenditures for the nine-month period ended December 31, 2008
also included $35.1 million in the life extension of the Queen of New
Westminster and a $6.0 million upgrade and replacement of the propulsion and
safety equipment on the Quinitsa.
    "Our credit ratings were recently confirmed by both Standard & Poor's
Ratings Services and DBRS Limited at A- and A (low), respectively, which
demonstrates our strong cash flow and our ability to service our debt," said
Hahn. "I'm pleased that both agencies have assessed our rating outlook as
positive."
    A dividend of $80 per Class "C" Preferred share was declared payable on
March 31, 2009 to the holders of record of such shares on that date. Currently
all outstanding Class "C" Preferred shares are held by the Province of British
Columbia.
    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, one of the largest ferry operators in the world based on
passengers transported annually and transportation infrastructure, carried
more than 21 million passengers and 8.5 million vehicles during the fiscal
year ended March 31, 2008. BC Ferries provides frequent year-round ferry
transportation services to the West Coast of Canada on 25 routes, currently
supported by 37 vessels and 47 terminals, and also manages other remote routes
through contracts with independent operators.

    This release contains historical information and may contain certain
forward-looking statements that relate to future events or future performance.
These forward-looking statements are based upon management's current
expectations and assumptions as to a number of factors, including, the risks,
uncertainties and other factors as described in BC Ferries' Management's
Discussion & Analysis and certain of the other BC Ferries' documents available
at www.sedar.com. These forward-looking statements are based upon information
currently available to management and BC Ferries assumes no obligation to
update or revise them to reflect new events or circumstances. If management's
expectations and assumptions prove to be incorrect, or factors change, then
actual results could differ materially from the forward-looking information
contained in this release.



    
    BRITISH COLUMBIA FERRY SERVICES INC.
    Consolidated Balance Sheets
    (expressed in thousands)
    -------------------------------------------------------------------------
                                           December 31, 2008  March 31, 2008
                                                  (unaudited)
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash and cash equivalents                 $    132,307    $    116,319
      Restricted cash                                 35,645          14,090
      Short-term investments                           4,530          17,040
      Accounts receivable                             20,020          14,463
      Prepaid expenses                                10,593           7,285
      Inventories                                     16,589          17,055
      Derivative assets                               24,064          18,144
      Regulatory assets                                4,775           4,775
      -----------------------------------------------------------------------
                                                     248,523         209,171

    Capital assets                                 1,544,733       1,303,644
    Deferred financing costs                               -             669
    Assets held for sale                                 376               -
    Regulatory assets                                 16,512           7,729
    Derivative assets                                     54               -
    Long-term land lease                              28,946          29,238
    -------------------------------------------------------------------------
                                                $  1,839,144    $  1,550,451
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities  $     43,881    $     91,263
      Short-term debt                                 52,974               -
      Interest payable on long-term debt              14,285          15,718
      Accrued employee costs                          51,527          53,213
      Deferred revenue                                13,635          15,108
      Derivative liabilities                           7,847               -
      Regulatory liabilities                               -           3,558
      Current portion of accrued employee
       future benefits                                   800             800
      Current portion of obligations under
       capital lease                                     580             690
      -----------------------------------------------------------------------
                                                     185,529         180,350

    Accrued employee future benefits                  12,521          13,020
    Regulatory liabilities                            24,525          16,833
    Long-term debt                                 1,257,766       1,028,872
    Obligations under capital lease                      612             719
    Other long-term liabilities                          152              76
    -------------------------------------------------------------------------
                                                   1,481,105       1,239,870
    -------------------------------------------------------------------------

    Shareholders' equity:
      Share capital                                   75,478          75,478
      Retained earnings                              282,561         235,103
      -----------------------------------------------------------------------
                                                     358,039         310,581

    -------------------------------------------------------------------------
                                                $  1,839,144    $  1,550,451
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                   Three months ended     Nine months ended
                                       December 31           December 31
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Revenue:
      Tariffs                     $  91,611  $  79,711  $ 351,600  $ 312,808
      Ferry service fees             29,090     26,855     98,549     94,892
      Federal-Provincial Subsidy
       Agreement                      6,573      6,464     19,720     19,392
      Retail                         16,784     17,057     63,675     64,664
      Other income                    5,299      6,473     19,806     24,729
      -----------------------------------------------------------------------
                                    149,357    136,560    553,350    516,485
    -------------------------------------------------------------------------

    Expenses:
      Operations                     89,802     77,826    291,548    250,709
      Maintenance                    20,780     23,482     55,592     65,641
      Administration                 10,752     12,524     34,059     36,098
      Cost of retail goods sold       6,340      6,551     23,202     23,998
      Amortization                   23,403     16,538     66,100     48,930
      -----------------------------------------------------------------------
                                    151,077    136,921    470,501    425,376
    -------------------------------------------------------------------------

    (Loss) earnings from
     operations                      (1,720)      (361)    82,849     91,109

    Gain on foreign exchange             33          2        253        152
    Interest expense                (12,068)    (7,336)   (35,894)   (23,410)
    (Loss) gain on disposal of
     capital assets                    (889)       (68)       250       (188)
    -------------------------------------------------------------------------
    Net (loss) earnings             (14,644)    (7,763)    47,458     67,663

    Other comprehensive income            -          -          -          -

    -------------------------------------------------------------------------
    Net (loss) earnings and
     comprehensive income           (14,644)    (7,763)    47,458     67,663
    -------------------------------------------------------------------------

    Retained earnings, beginning
     of period                      297,205    279,473    235,103    203,569
    Adjustment to retained earnings       -          -          -        478
    -------------------------------------------------------------------------
    Restated balance, beginning
     of period                      297,205    279,473    235,103    204,047
    -------------------------------------------------------------------------

    Retained earnings, end
     of period                    $ 282,561  $ 271,710  $ 282,561  $ 271,710
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                   Three months ended     Nine months ended
                                       December 31           December 31
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operations:
      Net (loss) earnings         $ (14,644) $  (7,763) $  47,458  $  67,663
      Items not involving cash:
        Amortization                 23,403     16,538     66,100     48,930
        Other non-cash charges        1,339        476        730        761
      Regulatory costs deferred      (3,488)     5,281     (2,747)    10,223
      Change in operating
       working capital                1,664      4,703    (23,739)    (8,537)
      -----------------------------------------------------------------------
                                      8,274     19,235     87,802    119,040
    -------------------------------------------------------------------------

    Financing:
      Proceeds from issuance
       of long-term debt            140,000          -    230,000          -
      Proceeds from short-term
       loans                        122,798     39,836    203,556     39,836
      Repayment of short-term
       loans                        (80,790)       (98)  (150,581)   (24,806)
      Repayment of capital
       lease obligations               (204)         -       (534)         -
      Deferred financing costs
       incurred                        (708)       (95)      (951)      (255)
      -----------------------------------------------------------------------
                                    181,096     39,643    281,490     14,775
    -------------------------------------------------------------------------

    Investing:
      Proceeds from (cost of)
       disposal of capital assets        59        (39)     1,440        (14)
      Purchase of capital assets    (61,514)  (167,135)  (345,699)  (274,968)
      (Increase) decrease in
       restricted cash              (12,156)         -    (21,555)     7,174
      Proceeds from (purchase of)
       short-term investments        10,319        (32)    12,510    (11,198)
      -----------------------------------------------------------------------
                                    (63,292)  (167,206)  (353,304)  (279,006)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents           126,078   (108,328)    15,988   (145,191)

    Cash and cash equivalents,
     beginning of period              6,229    136,086    116,319    172,949

    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $ 132,307  $  27,758  $ 132,307  $  27,758
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental cash flow
     information:
    -------------------------------------------------------------------------
    Cash paid during the period
     for interest                 $  17,561  $  15,135  $  49,178  $  36,581
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Non-cash transactions:
    -------------------------------------------------------------------------
    Capital assets acquired
     under capital lease          $      59  $       -  $     381  $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00020627E




For further information:

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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