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.

Media Contact:
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Customer Contact:
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Toll-free:  1-888-BCFERRY (1-888-223-3779)