BC Ferries posts positive year-end results

VICTORIA, June 21, 2013 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its financial results for the year ended March 31, 2013.

"BC Ferries has had a positive year, despite ridership being down," said Mike Corrigan, BC Ferries' President and CEO. "With an aggressive cost containment program, we've been able to post a modest profit. Our retained earnings, after we pay the annual dividend to the Province, will be invested in our infrastructure to ensure the ongoing safety and reliability of our operations."

Consolidated net earnings were $15.5 million for fiscal 2013, compared to a net loss of $9.0 million the previous year.  Fiscal 2013 net earnings reflect the effects of a $32.6 million increase in revenues, offset by a modest increase in operating expenses of $8.6 million.

Revenues for the year increased from $753.8 million to $786.4 million as a result of higher provincial transportation fees and increased fares, while operating expenses increased from $693.0 million in fiscal 2012 to $701.6 million in fiscal 2013.  Although operating expenses increased modestly over the prior year, these expenses, excluding fuel costs, were $27.2 million below previously planned levels as outlined in BC Ferries' published business plan for fiscal 2013.

Capital expenditures in the three and twelve months ended March 31, 2013 totalled $39.1 million and $96.6 million, respectively.  For fiscal 2013, these investments include: $41.3 million in vessel upgrades and modifications; $27.5 million in terminal marine structures; $20.6 million in information technology; and $7.2 million in terminal and building upgrades and equipment.

"By navigating through challenging times with prudent fiscal stewardship we are pleased to return to a position of profitability," said Corrigan. "While carrying out our mandate to ensure safety at all times, we have been actively managing our costs to achieve these positive results."

BC Ferries experienced a 1.1 per cent decline in vehicle traffic and a 1.2 per cent decline in passenger traffic in fiscal 2013 compared to the prior year. In three of the last five months of fiscal 2013, total traffic was higher than the same periods in the year prior.  Increases of 2.9 per cent in vehicle traffic and 3.0 per cent in passenger traffic on the major routes were experienced in the last quarter of fiscal 2013.

On February 14, 2013, BC Ferries was advised by the credit rating agency Standard & Poor's (S&P) that it revised BC Ferries' outlook from negative to stable reflecting their view of an improvement in regulatory certainty.  At the same time, S&P affirmed its "A+" long-term rating of the company. On March 26, 2013, the credit rating agency DBRS Inc. affirmed BC Ferries' "A" rating.

On March 5, 2013, the Province released its report summarizing the feedback it received during the fall 2012 public consultation and engagement process for input on service level adjustments and on a long-term vision for coastal ferry service.

On April 3, 2013, the Coastal Ferry Services Contract was amended to extend the deadline for identifying service level adjustments in order to provide sufficient time to the Province to further consult with stakeholders regarding future service changes.  As part of the agreement, the Province agreed to pay BC Ferries $7.1 million in ferry transportation fees to compensate for the change in the deadline, and reduce the target for service adjustments over the current performance term by a similar amount.

As of April 1, 2012, BC Ferries began reporting its financial position and results of operations in accordance with International Financial Reporting Standards (IFRS). For comparative purposes, the prior year figures have been restated to comply with IFRS.

IFRS differs significantly from previous accounting standards. IFRS does not have a standard for rate-regulated activities, and therefore does not permit BC Ferries to report in the company's financial statements, the assets and liabilities, such as the deferred fuel cost accounts, that result from the regulated price cap setting process. Rather than being charged to regulatory asset accounts on the Statement of Financial Position, fuel surcharges collected or rebates granted are now included in revenue, and increases or decreases in fuel prices from those approved in price caps are now included in operating expenses. While this is a significant accounting change for BC Ferries, it does not change the treatment of these types of assets and liabilities for regulatory purposes. A pro forma income statement reflecting the results of rate-regulated activities is included as Appendix 2.

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 19.9 million passengers and 7.7 million vehicles during the fiscal year ended March 31, 2013.  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: our short-term and long-range business plans; and the amount of savings to be achieved through service level adjustments. 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.

In addition to providing measures prepared in accordance with IFRS, we present certain supplemental non-IFRS measures. These include, but are not limited to, total comprehensive (loss) income adjusted for the effect of rate regulation, and 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.
Consolidated Statement of Financial Position
(Expressed in thousands of Canadian dollars)
                           
                             
            As at,
            March 31, 2013       March 31, 2012       April 1, 2011
Assets                            
Current assets                            
  Cash and cash equivalents           36,641       7,700       33,335
  Restricted short-term investments           35,575       35,705       37,040
  Other short-term investments           43,403       26,880       64,074
  Trade and other receivables           18,118       42,341       20,619
  Prepaid expenses           10,706       6,725       5,648
  Inventories           23,257       22,016       19,957
            167,700       141,367       180,673
Non-current assets                            
  Long-term loan receivable           24,515       24,515       24,247
  Long-term land lease           32,063       32,521       32,979
  Property, plant and equipment           1,552,062       1,596,507       1,593,194
  Intangible assets           47,942       41,758       34,929
            1,656,582       1,695,301       1,685,349
Total assets           1,824,282       1,836,668       1,866,022
                             
Liabilities                            
Current liabilities                            
  Accounts payable and accrued liabilities           51,803       50,708       49,872
  Short-term debt           -       17,737       3,949
  Interest payable on long-term debt           18,063       18,249       18,261
  Deferred revenue           13,634       13,784       15,596
  Derivative liabilities           12       12       23
  Current portion of long-term debt           149,000       9,000       22,125
  Current portion of accrued employee future benefits           2,204       2,204       1,351
  Current portion of obligations under finance lease           1,072       974       1,040
  Provisions           50,839       47,022       46,788
            286,627       159,690       159,005
Non-current liabilities                            
  Accrued employee future benefits           16,604       17,361       17,091
  Long-term debt           1,137,212       1,285,232       1,327,014
  Obligations under finance lease           45,941       47,013       47,723
            1,199,757       1,349,606       1,391,828
Total liabilities           1,486,384       1,509,296       1,550,833
Equity                            
  Share capital           75,478       75,478       75,478
  Contributed surplus           25,000       25,000           -
  Retained earnings           234,187       224,717       239,711
  Total equity before reserves           334,665       325,195       315,189
  Land revaluation reserve           3,233       2,177           -
Total equity including reserves           337,898       327,372       315,189
Total liabilities and equity           1,824,282       1,836,668       1,866,022
                             

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statement of Comprehensive Income (Loss)
(Expressed in thousands of Canadian dollars)
                               
                                 
                      Years ended
March 31,
                      2013         2012
                                 
Revenue                                
  Vehicle and passenger fares                     468,780         458,392
  Ferry service fees                     182,100         158,261
  Retail                     76,496         76,522
  Federal-Provincial Subsidy Agreement                     28,078         27,487
  Fuel surcharges                     11,469         13,098
  Regulated other income                     12,848         13,768
  Other income                     6,602         6,266
Total revenue                     786,373         753,794
                                 
Expenses                                
  Operations                     436,812         433,157
  Maintenance                     69,938         65,926
  Administration                     29,632         31,187
  Cost of retail goods sold                     29,500         29,132
  Depreciation and amortization                     135,675         133,549
Total operating expenses                     701,557         692,951
                                 
Operating profit                     84,816         60,843
                                 
Net finance and other expenses                                
  Net finance expenses                                
    Finance income                     2,922         2,404
    Finance expenses                     (72,076)         (71,870)
  Total net finance expenses                     (69,154)         (69,466)
  Loss on disposal of property, plant and equipment                     (154)         (333)
Total net finance and other expenses                     (69,308)         (69,799)
                                 
Net earnings (loss)                     15,508         (8,956)
                                 
Other comprehensive income                                
  Gain on revaluation of land assets                     1,056         2,177
Total other comprehensive income                     1,056         2,177
                                 
Total comprehensive income (loss)                     16,564         (6,779)
                                 

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statement of Cash Flows
(Expressed in thousands of Canadian dollars)
                     
                       
            Years ended
March 31,
            2013         2012
                       
Cash flows from operating activities                      
                       
Net earnings (loss)           15,508         (8,956)
Items not affecting cash                      
  Net finance costs recognized in net earnings           69,154         69,466
  Depreciation and amortization of non-current assets           135,675         133,549
  Loss on disposal of property, plant and equipment           154         333
  (Decrease) increase in long-term accrued employee future benefits           (757)         304
  Increase (decrease) in derivative liabilities               -         (11)
  Increase in provisions           3,817         350
  Other non-cash adjustments to property, plant & equipment           (791)         100
  Decrease in long-term land lease           458         458
  Increase in accrued net financing           246         689
Total non-cash items           207,956         205,238
                       
Movements in operating working capital                      
  Decrease (increase) in trade and other receivables           24,223         (21,722)
  Increase in prepaid expenses           (3,981)         (1,077)
  Increase in inventories           (1,241)         (2,060)
  Increase in accounts payable and accrued liabilities           1,095         836
  Decrease in deferred revenue           (150)         (1,812)
  Increase in current portion of accrued employee future benefits                  -         702
  Change in non-cash working capital           19,946         (25,133)
  Change attributable to capital asset acquisitions           6,653         (9,378)
  Change attributable to contributed surplus           (25,000)         25,000
  Change in non-cash operating working capital           1,599         (9,511)
                       
Cash generated from operating activities           225,063         186,771
                       
  Interest rate support received           742         1,337
  Interest received           2,268         1,922
  Interest paid           (73,471)         (74,507)
                       
Net cash generated by operating activities           154,602         115,523
                       

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statement of Cash Flows
(Expressed in thousands of Canadian dollars)
                     
                       
            Years ended
March 31,
            2013         2012
                       
Cash flows from financing activities                      
                       
Repayment of long-term debt           (9,000)         (55,875)
(Repayment of) proceeds from short-term debt           (17,737)         13,788
Repayment of finance lease obligations           (974)         (1,042)
Contributed surplus payment from Province           25,000         -
Dividends paid on preferred shares           (6,038)         (6,038)
                       
Net cash used in financing activities           (8,749)         (49,167)
                       
                       
Cash flows from investing activities                      
                       
Proceeds from disposal of property, plant and equipment           120         118
Purchase of property, plant and equipment and intangible assets           (100,639)         (130,370)
Advance of long-term loan           -         (268)
Reduction of debt service reserve           130         1,335
(Purchase of) proceeds from short-term investments           (16,523)         37,194
                       
Net cash used in investing activities           (116,912)         (91,991)
                       
Net increase (decrease) in cash and cash equivalents           28,941         (25,635)
                       
Cash and cash equivalents, beginning of year           7,700         33,335
                       
Cash and cash equivalents, end of year           36,641         7,700
                       

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statement of Changes in Equity
(Expressed in thousands of Canadian dollars)
                                         
                                           
            Share
capital
    Contributed
surplus
    Retained
earnings
    Total
equity
before
reserves
    Land
revaluation
reserve
    Total
equity
including
reserves
Balance as at April 1, 2011           75,478     -     239,711     315,189     -     315,189
                                           
Contribution from the Province           -     25,000           -     25,000     -     25,000
                                           
Net loss for the year ended March 31, 2012           -     -     (8,956)     (8,956)     -     (8,956)
                                           
Other comprehensive income for the year
 ended March 31, 2012
          -     -     -     -     2,177     2,177
                                           
Preferred share dividends           -     -     (6,038)     (6,038)     -     (6,038)
                                           
Balance as at March 31, 2012           75,478           25,000     224,717     325,195     2,177     327,372
                                           
Net earnings for the year ended March 31, 2013           -     -     15,508     15,508     -     15,508
                                           
Other comprehensive income for the year
 ended March 31, 2013
          -     -     -     -     1,056     1,056
                                           
Preferred share dividends           -     -     (6,038)     (6,038)     -     (6,038)
                                           
Balance as at March 31, 2013           75,478     25,000     234,187     334,665     3,233     337,898
                                           

BRITISH COLUMBIA FERRY SERVICES INC.
Pro forma Consolidated Statement of Comprehensive (Loss) Income (unaudited)
Reflecting the Effect of Regulatory Assets and Regulatory Liabilities
(Expressed in thousands of Canadian dollars)
                     
                       
            Years ended
March 31,
            2013         2012
                       
Revenue                      
  Vehicle and passenger fares           471,241         457,003
  Ferry service fees           179,627         154,959
  Retail           76,496         76,522
  Federal-Provincial Subsidy Agreement           28,078         27,487
  Fuel surcharges                    -                  -
  Regulated other income           12,848         13,768
  Other income           6,602         6,265
Total revenue           774,892         736,004
                       
Expenses                      
  Operations           425,546         413,671
  Maintenance           69,938         65,926
  Administration           29,632         31,092
  Cost of retail goods sold           29,500         29,132
  Depreciation and amortization           135,756         138,324
Total operating expenses           690,372         678,145
                       
Operating (loss) profit           84,520         57,859
                       
Net finance and other expenses                      
  Net finance expenses                      
    Finance income           2,922         2,404
    Finance expenses           (72,072)         (71,909)
  Total net finance expenses           (69,150)         (69,505)
  Loss on disposal of capital assets           (154)         (333)
Total net finance and other expenses           (69,304)         (69,838)
                       
Net (loss) earnings           15,216         (11,979)
                       
Other comprehensive income           1,056         2,177
Total comprehensive (loss) income           16,272         (9,802)
                   

 

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)


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