BC Ferries Releases Year-End Results

Earnings required to support funding for $3 billion capital program

VICTORIA, June 17, 2016 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its year-end results today for fiscal 2016. Consolidated net earnings were $69.6 million for fiscal 2016, compared to consolidated net earnings of $49.1 million for fiscal 2015.

"We are pleased with this year's net earnings as they reflect an improving economic outlook for BC in general, as well as the success of our cost containment practices over the past few years along with the recent increase in traffic. Put into context, this year's earnings are approximately the cost of one of the three new Salish-Class vessels currently under construction to replace 50-year old ships," said Mike Corrigan, BC Ferries' President and CEO. "Over the next 12 years, a $3 billion capital program is required to replace aging vessels, assets and information technology to ensure the long-term viability of our coastal ferry service. With the average age of our fleet at 33 years, we need to renew or replace a ship a year for the next decade and continue to invest in the future."    

Revenues increased from $841.1 million in fiscal 2015 to $869.8 million in fiscal 2016, primarily due to an increase in traffic volume, driven by a lower Canadian dollar and the general improvement in BC's economic activity. Operating expenses increased from $722.5 million in fiscal 2015 to $744.2 million in fiscal 2016. The $21.7 million increase is primarily due to increases in maintenance, labour, cost of goods sold and amortization costs, offset by lower fuel costs.

Capital expenditures in the three and twelve months ended March 31, 2016 totalled $70.3 million and $181.2 million, respectively. For fiscal 2016, $114.2 million of these investments were for vessel upgrades and modifications, with the remainder for terminal marine structures; terminal and building upgrades and equipment; and information technology. 

In fiscal 2016, BC Ferries experienced a 4.9 per cent increase in vehicle traffic and a 4.5 per cent increase in passenger traffic compared to fiscal 2015. Traffic was favourably impacted by lower fuel prices, the lower Canadian dollar and promotional fare incentives offered by BC Ferries in fiscal 2016. This increase in traffic sees a return to traffic levels experienced in 2009 prior to the turbulence in the Canadian and world economies.

Significant events during or subsequent to fiscal 2016 include the following:

On November 12, 2015, BC Ferries executed a loan agreement with KfW IPEX-Bank GmbH, a German export credit bank. This loan agreement is secured under a 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 and bear 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 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. This five-year agreement provides certainty for employees, helps ensure uninterrupted ferry service for our customers, and marks 17 years of labour stability.

On January 29, 2016, BC Ferries signed an agreement to receive up to a $10 million contribution from FortisBC Energy Inc. as part of the Natural Gas for Transportation incentive funding. The funding partially offsets the capital cost of converting the two Spirit-Class vessels to dual fuel capability.  While this agreement does not obligate the company to purchase natural gas from FortisBC, the funding is conditional upon a number of factors including a long-term natural gas procurement contract for these vessels.

On February 9, 2016, the new cable ferry, the Baynes Sound Connector, commenced regularly scheduled service between Buckley Bay on Vancouver Island and Denman Island following extensive crew training and familiarization and Transport Canada certification. The Baynes Sound Connector accommodates 50 vehicles and 150 passengers and crew. The cable ferry will provide environmental benefits and 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 March 24, 2016, BC Ferries announced the award of a contract totalling $140 million to Remontowa Ship Repair Yard S.A. of Gdansk, Poland to conduct the mid-life upgrades, including conversion to dual-fuel, of its two largest vessels, the Spirit of Vancouver Island and the Spirit of British Columbia. The mid-life upgrade of the Spirit of British Columbia is expected to be completed during the spring of 2018 and the mid-life upgrade of the Spirit of Vancouver Island is expected to be completed the following year. BC Ferries expects the conversion of these vessels to result in significant savings, as natural gas costs are significantly less than marine diesel.

On April 1, 2016, BC Ferries implemented average tariff increases in accordance with the BC Ferries Commissioner's Order 15-03 dated September 16, 2015. Tariff increases were 1.9 per cent on average. Also on April 1, 2016, due to lower fuel prices, coupled with the fact that the company has locked in pricing for a significant portion of its forecast fuel consumption to the end of 2017 through its hedging program, a fuel rebate increase of 1.9 per cent was implemented across the system. This fuel rebate increase completely offset the 1.9 per cent average tariff increase, effectively resulting in no net increase to our customers at the beginning of Performance Term Four. Fuel rebates increased from 1.0 per cent to 2.9 per cent on the major and minor routes and a fuel rebate of 1.9 per cent was implemented on the northern routes.

On June 2, 2016, the Salish Eagle and the Salish Raven, the second and third of the new Salish-Class vessels, were launched and christened at Remontowa Shipbuilding S.A. in Gdansk, Poland. The Salish Orca was previously launched and christened on November 24, 2015. The contracts with Remontowa Shipbuilding S.A, with a total value of $165 million, form the majority of the total project budget of $206 million. The original project budget of $252 million has been reduced by $46 million reflecting the elimination of tariffs to import the vessels into Canada. These vessels will be dual-fuel capable, designed to run primarily on natural gas with marine diesel as a backup. 

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis, as well as the Statement of Executive Compensation, 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: capital expenditure levels, the loan agreement with KfW IPEX-Bank GmbH, the agreement with FortisBC Energy Inc. regarding incentive funding, the Baynes Sound Connector, the Spirit Class mid-life upgrades, and the Salish-Class vessels.  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.
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars)







As at March 31



2016

2015

Assets



Current assets




Cash and cash equivalents

79,113

65,574


Restricted short-term investments

31,986

32,496


Other short-term investments

61,464

62,098


Trade and other receivables

16,249

19,490


Prepaid expenses

8,550

6,177


Inventories

23,988

25,393



221,350

211,228

Non-current assets




Loan receivable

24,515

24,515


Land lease

30,688

31,146


Property, plant and equipment

1,539,957

1,524,692


Intangible assets

82,741

65,031



1,677,901

1,645,384

Total assets

1,899,251

1,856,612





Liabilities



Current liabilities




Accounts payable and accrued liabilities

53,575

57,401


Interest payable on long-term debt

18,262

18,329


Deferred revenue

18,883

16,957


Derivative liabilities

17,879

4,433


Current portion of long-term debt

24,000

24,000


Current portion of accrued employee future benefits

1,900

2,400


Current portion of obligations under finance lease

1,514

1,309


Provisions

53,321

48,065

Non-current liabilities




Accrued employee future benefits

19,361

18,800


Long-term debt

1,218,106

1,241,699


Obligations under finance lease

42,003

43,514


Other liabilities

1,500

1,500



1,280,970

1,305,513

Total liabilities

1,470,304

1,478,407

Equity




Share capital

75,478

75,478


Contributed surplus

25,000

25,000


Retained earnings

352,692

289,177


Total equity before reserves

453,170

389,655


Reserves

(24,223)

(11,450)

Total equity including reserves

428,947

378,205

Total liabilities and equity

1,899,251

1,856,612

 

 

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




Years ended



March 31



2016

2015

Revenue




Vehicle and passenger fares

561,233

519,991


Ferry service fees

172,373

175,935


Retail

87,077

80,635


Federal-Provincial Subsidy Agreement

28,730

28,355


Fuel (rebates) surcharges

(6,356)

13,195


Regulated other income

18,078

14,511


Other income

8,679

8,526

Total revenue

869,814

841,148




Expenses




Operations

449,642

447,261


Maintenance

79,387

68,070


Administration

34,513

32,023


Cost of retail goods sold

35,198

32,405


Depreciation and amortization

145,521

142,806

Total operating expenses

744,261

722,565

Operating profit

125,553

118,583





Net finance and other expenses




Net finance expenses





Finance income

4,607

4,310



Finance expenses

(60,568)

(64,689)


Net finance expenses

(55,961)

(60,379)


Loss on disposal and revaluation of property, plant and equipment,

(39)

(9,131)



intangible assets and inventory



Net finance and other expenses

(56,000)

(69,510)

Net earnings

69,553

49,073





Other comprehensive loss




Items not to be reclassified to net earnings

392

(3,138)


Items to be reclassified to net earnings

(24,156)

(6,850)

Total other comprehensive loss

(23,764)

(9,988)

Total comprehensive income

45,789

39,085

 

 

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




Years ended



March 31



2016

2015

Cash flows from operating activities



Net earnings

69,553

49,073

Items not affecting cash




Net finance expense

55,961

60,379


Depreciation and amortization

145,521

142,806


Loss on disposal and revaluation of property, plant and equipment,

39

9,131


 intangible assets and inventory


Other non-cash adjustments to property, plant and equipment

2,462

(926)


Changes in





Accrued employee future benefits

61

175



Derivative liabilities recognized in net earnings

32

(39)



Provisions

5,256

(3,736)



Long-term land lease

458

458



Accrued financing costs

(88)

(298)

Total non-cash items

209,702

207,950




Movements in operating working capital




Trade and other receivables

3,241

(2,913)


Prepaid expenses

(2,373)

757


Inventories

1,405

(320)


Accounts payable and accrued liabilities

(3,826)

9,267


Deferred revenue

1,926

2,394


Change in non-cash working capital

373

9,185


Change attributable to capital asset acquisitions

6,995

4,652


Change in non-cash operating working capital

7,368

13,837

Cash generated from operating activities

286,623

270,860


Interest rate support received

-

442


Interest received

4,616

4,582


Interest paid

(65,256)

(69,188)

Net cash generated by operating activities

225,983

206,696

 

 

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





Years ended


March 31

2016

2015

Cash flows from financing activities



Proceeds from issuance of bonds

-

200,000

Repayment of long-term debt

(24,000)

(270,250)

Repayment of finance lease obligations

(1,307)

(1,118)

Dividends paid on preferred shares

(6,038)

(6,038)

Deferred financing costs incurred

-

(1,326)

Hedge losses on interest rate forward contracts

-

(7,652)

Net cash used in financing activities

(31,345)

(86,384)

Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

217

121

Purchase of property, plant and equipment and intangible assets

(182,460)

(148,428)

Changes in debt service reserve

510

3,296

Net proceeds from short-term investments

634

18,908

Net cash used in investing activities

(181,099)

(126,103)

Net increase (decrease) in cash and cash equivalents

13,539

(5,791)

Cash and cash equivalents, beginning of year

65,574

71,365

Cash and cash equivalents, end of year

79,113

65,574

 

 

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars)









Share
capital

Contributed
surplus

Retained
earnings

Total equity
before
reserves

Reserves

Total
equity
including
reserves

Balance as at April 1, 2014

75,478

25,000

246,142

346,620

(1,691)

344,929

Net earnings for the year ended

-

-

49,073

49,073

-

49,073


March 31, 2015


Other comprehensive loss for the

-

-

-

-

(9,988)

(9,988)


year ended March 31, 2015


Hedge losses on interest rate 

-

-

-

-

229

229


forward contract reclassified to
net earnings


Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)

Balance as at March 31, 2015

75,478

25,000

289,177

389,655

(11,450)

378,205

Net earnings for the year ended

-

-

69,553

69,553

-

69,553


March 31, 2016


Other comprehensive loss for the

-

-

-

-

(23,764)

(23,764)


year ended March 31, 2016


Realized hedge losses

-

-

-

-

10,742

10,742


recognized in fuel swaps


Hedge losses on interest rate

-

-

-

-

249

249


forward contract reclassified to
net earnings


Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)

Balance as at March 31, 2016

75,478

25,000

352,692

453,170

(24,223)

428,947

 

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

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890