BC Ferries Releases Third Quarter Results

Passenger discounts and increases in fuel rebates in effect this spring

VICTORIA, Feb. 26, 2016 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for the fiscal year ending March 31, 2016. The company reported a net loss of $3.7 million for the three months ended December 31, 2015, as compared to a net loss of $6.1 million in the same quarter last year. Net earnings for the nine-month period ended December 31, 2015 were $99.6 million, up from $84.2 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 the fiscal year. 

In the third quarter of fiscal 2016, BC Ferries carried 1.8 million vehicles and 4.4 million passengers. Vehicle traffic increased 5.3 per cent (4.4 per cent year-to-date) and passenger traffic increased 3.9 per cent (4.0 per cent year-to-date) compared to the same period in the prior year.

"The lower Canadian dollar and the falling price of gasoline have helped contribute to a strong year for BC Ferries from a traffic standpoint.  This allows us to focus on fare stability for our customers, while we ensure we operate a safe and reliable marine transportation system," said Dennis Dodo, BC Ferries' Chief Financial Officer. "With the price of fuel dropping, we are in a position to offer a larger fuel rebate this spring, offsetting the scheduled tariff increase, which is welcome news for the travelling public."

From March 10 – 29, 2016, regular passenger fares will be discounted by 30 per cent on off-peak days of the week and certain times of the day on all routes throughout the fleet. This spring promotion will help BC Ferries gather information as it prepares pricing strategies for the Fare Flexibility and Digital Experience Initiative currently scheduled to launch in 2017, which will make variable pricing a permanent part of the company's service delivery model.

On April 1, 2016, BC Ferries will increase its fuel rebate from 1.0 per cent to 2.9 per cent on the major and minor routes and will implement a 1.9 per cent fuel rebate on the northern routes. As a result, customers will not see an increase in the cost of ferry travel this spring.

Total revenue for the three-month period ended December 31, 2015 increased by $4.2 million to $186.6 million as compared to the same quarter last year. Total revenue for the nine months ended December 31, 2015 increased by $17.1 million to $696.8 million as compared to the same period last year.  Operating expenses increased by $2.2 million to $176.4 million as compared to the same quarter last year.  For the nine months ended December 31, 2015, operating expenses increased from $549.3 million to $555.0 million as compared to the same period the year prior. 

Capital expenditures in the three and nine months ended December 31, 2015 totalled $45.6 million and $110.9 million respectively. Projects included vessel replacements, upgrades and modifications, terminal marine structures, information technology, and terminal building upgrades and equipment. 

Significant events during the third quarter of fiscal 2016 include the November 12, 2015 execution of a loan agreement with KfW IPEX-Bank GmbH, a German export credit bank. This loan agreement is secured under the Master Trust Indenture and allows for three loans of up to $45 million each. These amortizing loans will be repaid over a 12-year term with an annual interest rate of 2.09 per cent. The net proceeds from the loans will be used to partially finance the purchase of the three new Salish Class vessels.

On November 19, 2015, BC Ferries officially took ownership of the new cable ferry, the Baynes Sound Connector. Following extensive crew training and familiarization, and Transport Canada certification, the vessel commenced regularly scheduled service between Buckley Bay on Vancouver Island and Denman Island on February 9, 2016. The cable ferry will provide significant fuel cost savings, using less than half the fuel of the Quinitsa which was previously on the route, and will serve the route for the next 40 years.

On November 24, 2015, the Salish Orca, the first of the new Salish Class vessels, was launched and christened at Remontowa Shipbuilding S.A. in Gdansk, Poland. The construction of the other two vessels is progressing on schedule. These vessels will be dual-fuel capable, designed to operate primarily on liquefied natural gas with marine diesel as a backup. The Salish Orca, Salish Eagle and the Salish Raven are scheduled for delivery in August 2016, November 2016 and February 2017 respectively.

On December 18, 2015, BC Ferries announced the ratification of a Memorandum of Agreement that was reached on October 30, 2015 with the BC Ferry & Marine Workers' Union. The five-year term of this Collective Agreement provides stability for employees and marks 17 years of labour stability.

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 19.8 million passengers and 7.7 million vehicles during the fiscal year ended March 31, 2015. 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: economic conditions, traffic levels, the Salish-Class vessels, the loan agreement with KfW IPEX-Bank GmbH, the Baynes Sound Connector, pricing promotions, and fuel rebates. 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. 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, 2015

March 31, 2015

Assets




Current assets





Cash and cash equivalents


95,408

65,574


Restricted short-term investments


32,146

32,496


Other short-term investments


100,510

62,098


Trade and other receivables


12,614

19,490


Prepaid expenses


8,688

6,177


Inventories


25,032

25,393




274,398

211,228

Non-current assets





Loan receivable


24,515

24,515


Land lease


30,802

31,146


Property, plant and equipment


1,516,727

1,524,692


Intangible assets


77,215

65,031




1,649,259

1,645,384

Total assets


1,923,657

1,856,612

Liabilities




Current liabilities





Accounts payable and accrued liabilities


39,776

57,401


Interest payable on long-term debt


16,346

18,329


Deferred revenue


15,947

16,957


Derivative liabilities


16,278

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


1,497

1,309


Provisions


52,602

48,065




168,846

172,894

Non-current liabilities





Accrued employee future benefits


18,482

18,800


Long-term debt


1,226,257

1,241,699


Obligations under finance lease


42,385

43,514


Other liabilities


1,500

1,500




1,288,624

1,305,513

Total liabilities


1,457,470

1,478,407

Equity





Share capital


75,478

75,478


Contributed surplus


25,000

25,000


Retained earnings


388,796

289,177


Total equity before reserves


489,274

389,655


Reserves


(23,087)

(11,450)

Total equity including reserves


466,187

378,205

Total liabilities and equity


1,923,657

1,856,612

 

 

British Columbia Ferry Services Inc.

Interim Consolidated Statements of Comprehensive Income/(Loss) (unaudited)

(Expressed in thousands of Canadian dollars)




Three months ended

Nine months ended



December 31

December 31

2015

2014

2015

2014








Revenue







Vehicle and passenger fares


117,006

111,074

452,930

422,087


Ferry service fees


39,110

38,913

134,895

138,155


Retail


19,275

17,386

70,830

65,887


Federal-Provincial Subsidy Agreement


7,182

7,089

21,547

21,267


Fuel (rebates) surcharges


(1,350)

3,045

(5,102)

13,193


Regulated other income


3,686

2,979

14,993

12,500


Other income


1,674

1,899

6,674

6,572

Total revenue


186,583

182,385

696,767

679,661








Expenses







Operations


105,681

105,074

342,353

345,457


Maintenance


18,512

19,188

52,673

48,305


Administration


8,445

7,364

24,665

22,997


Cost of retail goods sold


7,952

7,169

28,514

26,315


Depreciation and amortization


35,840

35,354

106,767

106,200

Total operating expenses


176,430

174,149

554,972

549,274

Operating profit


10,153

8,236

141,795

130,387








Net finance and other expenses







Net finance expense








Finance income


1,048

1,056

3,401

3,092



Finance expenses


(15,119)

(15,432)

(45,609)

(49,268)


Net finance expense


(14,071)

(14,376)

(42,208)

(46,176)


Gain (loss) on disposal and revaluation of property,








plant and equipment, intangible assets and inventory


233

(5)

32

(49)

Net finance and other expenses


(13,838)

(14,381)

(42,176)

(46,225)

Net earnings (loss)


(3,685)

(6,145)

99,619

84,162








Other comprehensive loss







Items not to be reclassified to net earnings


-

-

-

(2,890)


Items to be reclassified to net earnings


(11,739)

(7,354)

(11,824)

(9,750)

Total other comprehensive loss


(11,739)

(7,354)

(11,824)

(12,640)

Total comprehensive income (loss)


(15,424)

(13,499)

87,795

71,522

 

 

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





Nine months ended December 31




2015

2014






Cash flows from operating activities






Net earnings

99,619

84,162




Items not affecting cash




Net finance expense

42,208

46,176


Depreciation and amortization

106,767

106,200


(Gain) loss on disposal and revaluation of property, plant and

(32)

49


equipment, intangible assets and inventory


Other non-cash adjustments to property, plant and equipment

(4)

(888)


Changes in





Accrued employee future benefits

(318)

64



Derivative liabilities recognized in net earnings

21

(13)



Provisions

4,537

(3,661)



Long-term land lease

344

344



Accrued interest costs

(97)

55

Total non-cash items

153,426

148,326

Movements in operating working capital




Trade and other receivables

6,876

5,770


Prepaid expenses

(2,511)

(1,920)


Inventories

361

(964)


Accounts payable and accrued liabilities

(17,625)

(12,681)


Deferred revenue

(1,010)

5


Change in non-cash working capital

(13,909)

(9,790)


Change attributable to capital asset acquisitions

9,417

4,229


Change in non-cash operating working capital

(4,492)

(5,561)

Cash generated from operating activities

248,553

226,927


Interest received

3,428

3,453


Interest paid

(51,065)

(54,639)

Net cash generated by operating activities

200,916

175,741

 

 

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




Nine months ended December 31


2015

2014

Cash flows from financing activities



Proceeds from issuance of bonds

-

200,000

Repayment of long-term debt

(15,750)

(262,000)

Repayment of finance lease obligations

(941)

(834)

Deferred financing costs incurred

-

(1,315)

Hedge losses on interest rate forward contracts

-

(7,652)

Net cash used in financing activities

(16,691)

(71,801)

Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

214

115

Purchase of property, plant and equipment and intangible assets

(116,543)

(100,237)

Changes in debt service reserves

350

3,141

Net (purchase of) proceeds from short-term investments

(38,412)

18,308

Net cash used in investing activities

(154,391)

(78,673)

Net increase in cash and cash equivalents

29,834

25,267

Cash and cash equivalents, beginning of period

65,574

71,365

Cash and cash equivalents, end of period

95,408

96,632

 

 

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 nine months ended

-

-

84,162

84,162

-

84,162


December 31, 2014


Other comprehensive loss for the nine

-

-

-

-

(12,640)

(12,640)


months ended December 31, 2014


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








Balance as at March 31, 2015

75,478

25,000

289,177

389,655

(11,450)

378,205

Net earnings for the nine months ended

-

-

99,619

99,619

-

99,619


December 31, 2015


Other comprehensive loss for the nine

-

-

-

-

(11,824)

(11,824)


months ended December 31, 2015


Hedge losses reclassified to net earnings

-

-

-

-

187

187

Balance as at December 31, 2015

75,478

25,000

388,796

489,274

(23,087)

466,187

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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