BC Ferries releases first quarter results

VICTORIA, Aug. 24, 2012 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its first quarter results today.  Net earnings were $3.3 million for the first three months ended June 30, 2012 compared to a net loss of $3.5 million in the first quarter of the previous year.

In the first quarter, revenues increased by 5.7 per cent to $197.6 million, with operating expenses increasing 2.1 per cent to $176.9 million, compared to the first quarter of last fiscal year.  $4.9 million of the $10.6 million increase in revenues is due to an increase in fuel surcharges levied as a result of higher fuel prices.  The $3.6 million increase in operating expenses is largely attributed to an increase in fuel prices and higher depreciation and amortization charges, partially offset by a decrease in fuel consumption, benefit costs, maintenance costs and lower salaries and wages.

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 rules in that it does not recognize assets and liabilities arising from rate-regulation, such as BC Ferries' deferred fuel cost accounts. As a result, rather than being charged to regulatory asset accounts on the company's balance sheet, 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.

Capital expenditures in the three months ended June 30, 2012 totalled $21.2 million as follows:

• $11.0 million in vessel upgrades and modifications;
• $4.6 million in information technology;
• $4.1 million in terminal marine structures;
• $1.5 million in terminal and building upgrades and equipment.

BC Ferries is undertaking a multi-year $39 million customer service program which will replace the aging point-of-sale and reservations systems to allow the company to respond in a more timely fashion to changing business needs and to support marketing, travel services and pricing initiatives.

In the first quarter of fiscal 2013, BC Ferries experienced a decline of 1.7 per cent in vehicle traffic and 2.4 per cent in passenger traffic as compared to the same period the year prior.

"We are managing our bottom line as efficiently as possible with our cost containment initiatives in order to reduce expenditures without compromising the safety of our operation," said Mike Corrigan, BC Ferries' President and CEO.  "The Province has announced a public engagement process regarding adjustments to service levels and the development of a long-term vision for connecting coastal communities.  We look forward to supporting this process with our technical assistance."

Significant events during the first quarter include the Coastal Ferry Service Contract amendments relating to performance term three, which is the period from April 1, 2012 to March 31, 2016. These amendments became effective on April 1, 2012.

On May 3, 2012, BC Ferries executed a contract for the development and analysis of initial design criteria for a cable ferry service on the Buckley Bay - Denman Island route, and in early June, the company issued a Request for Proposals (RFP) for detailed design engineering. On May 17, 2012, the company also issued an RFP for third parties interested in providing passenger and vehicle cable ferry service, under contract to BC Ferries, at a lower cost, while maintaining high levels of safety, quality and reliability.

On May 9, 2012, the Province announced additional payments totalling $79.5 million in order to reduce the pressure for future fare and price cap increases.  Of this, $25 million is a contribution to the company's equity and was received in April 2012.  The remaining $54.5 million will be received over fiscal years 2013 through 2016.

On July 20, 2012, fuel surcharges were reduced from 2.5 per cent to 2 per cent on the Horseshoe Bay - Langdale route and from 5 per cent to 2 per cent on the majority of BC Ferries' other routes.  These reductions reflect declining fuel prices.

Full financial statements, including notes and Management's Discussion & 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 20.2 million passengers and 7.8 million vehicles during the fiscal year ended March 31, 2012.  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; the additional payments to be received from the Province over the following four fiscal years, and the Province's role regarding service levels and a long-term vision for connecting coastal communities. 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.

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Financial Position (unaudited)
(Expressed in thousands of Canadian dollars)

		As at,
		June 30, 2012			March 31, 2012		April 1, 2011
Assets
Current assets
	Cash and cash equivalents	7,412			7,700		33,335
	Restricted short-term investments	35,705			35,705		37,040
	Other short-term investments	26,930			26,880		64,074
	Trade and other receivables	22,734			42,341		20,619
	Prepaid expenses	16,359			6,725		5,648
	Inventories	22,179			22,016		19,957
	Derivative assets	8			-		-
		131,327			141,367		180,673
Non-current assets
	Long-term loan receivable	24,515			24,515		24,247
	Long-term land lease	32,406			32,521		32,979
	Property, plant and equipment	1,581,121			1,596,507		1,593,194
	Intangible assets	44,267			41,758		34,929
		1,682,309			1,695,301		1,685,349
Total assets		1,813,636			1,836,668		1,866,022
Liabilities
Current liabilities
	Accounts payable and accrued liabilities	35,483			50,708		49,872
	Short-term debt	7,995			17,737		3,949
	Interest payable on long-term debt	14,977			18,249		18,261
	Deferred revenue	16,184			13,784		15,596
	Derivative liabilities	-			12		23
	Current portion of long-term debt	9,000			9,000		22,125
	Current portion of accrued employee future benefits	1,600			1,600		1,200
	Current portion of obligations under finance lease	974			974		1,040
	Provisions	50,183			50,481		49,571
		136,396			162,545		161,637
Non-current liabilities
	Accrued employee future benefits	14,363			14,506		14,459
	Long-term debt	1,285,475			1,285,232		1,327,014
	Obligations under finance lease	46,765			47,013		47,723
		1,346,603			1,346,751		1,389,196
Total liabilities		1,482,999			1,509,296		1,550,833
Equity
	Share capital	75,478			75,478		75,478
	Contributed surplus	25,000			25,000		-
	Retained earnings	227,982			224,717		239,711
	Total equity before reserves	328,460			325,195		315,189
	Revaluation reserve	2,177			2,177		-
Total equity including reserves		330,637			327,372		315,189
Total liabilities and equity		1,813,636			1,836,668		1,866,022

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statement of Comprehensive Income (Loss) (unaudited)
(Expressed in thousands of Canadian dollars)

			Three months ended,
				June 30, 2012	June 30, 2011
Revenue
	Vehicle and passenger fares			114,422	114,401
	Ferry service fees			46,228	40,249
	Retail			19,162	19,399
	Federal-Provincial Subsidy Agreement			7,019	6,872
	Fuel surcharges			6,030	1,155
	Regulated other income			3,109	3,399
	Other income			1,630	1,482
Total revenue				197,600	186,957
Expenses
	Operations			111,006	108,808
	Maintenance			17,217	17,645
	Administration			7,169	7,418
	Cost of retail goods sold			7,508	7,463
	Depreciation and amortization			34,001	31,939
Total operating expenses				176,901	173,273
Operating profit				20,699	13,684
Net finance and other expenses
	Net finance expenses
		Finance income		537	671
		Finance expenses		(17,988)	(17,935)
	Total net finance expenses			(17,451)	(17,264)
	Loss on disposal of capital assets			17	29
Total net finance and other expenses				(17,434)	(17,235)
Net earnings (loss)				3,265	(3,551)
Other comprehensive income (loss)				-	-
Total comprehensive income (loss)				3,265	(3,551)

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

		Three months ended,
		June 30, 2012	June 30, 2011
Cash flows from operating activities
Net earnings (loss)		3,265	(3,551)
Items not affecting cash
	Net finance costs recognized in net income	17,451	17,264
	Depreciation and amortization of non-current assets	34,001	31,938
	Gain on disposal of property, plant and equipment	(17)	(29)
	(Decrease) increase in employee future benefits	(143)	581
	Increase in derivative assets	(8)	-
	Decrease in derivative liabilities	(12)	(12)
	(Decrease) increase in provisions	(298)	995
	Other non-cash adjustments to property, plant & equipment	(275)	206
	Decrease in long-term land lease	115	114
	Increase in accrued net financing	589	375
Total non-cash items		51,403	51,432
Movements in operating working capital
	Decrease (increase) in accounts receivable	19,607	(2,634)
	Increase in prepaid expenses	(9,634)	(10,245)
	Increase in inventories	(162)	(896)
	Decrease in accounts payable and accrued liabilities	(15,225)	(7,781)
	Increase in deferred revenue	2,400	4,599
	Change in non-cash working capital	(3,014)	(16,957)
	Change attributable to capital asset acquisitions	11,313	(3,527)
	Change attributable to contributed surplus	(25,000)	-
	Change in non-cash operating working capital	(16,701)	(20,484)
Cash generated from operating activities		37,967	27,397
	Interest rate support received	-	638
	Interest received	149	186
	Interest paid	(21,656)	(21,860)
Net cash generated by operating activities		16,460	6,361

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

	Three months ended,
	June 30, 2012	June 30, 2011
Cash flows from financing activities
Repayment of long-term debt	-	(1,875)
Repayment of short-term loans	(9,743)	(3,949)
Repayment of finance lease obligations	(248)	(276)
Contributed surplus payment from Province	25,000	-
Net cash generated by (used in) financing activities	15,009	(6,100)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	29	29
Purchase of property, plant and equipment and intangibles	(31,736)	(28,460)
Advancement of long-term loan	-	(268)
(Purchase of) proceeds from short-term investments	(50)	5,000
Net cash used in investing activities	(31,757)	(23,699)
Net decrease in cash and cash equivalents	(288)	(23,438)
Cash and cash equivalents, beginning of period	7,700	33,335
Cash and cash equivalents, end of period	7,412	9,897

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

	Share Capital	Contributed Surplus	Retained Earnings	Total Equity Before Reserves	Revaluation Reserve	Total Equity Including Reserves
Balance as at April 1, 2011	75,478	-	239,711	315,189	-	315,189
Net loss for the three months ended June 30, 2011	-	-	(3,551)	(3,551)	-	(3,551)
Other comprehensive income for the three months ended June 30, 2011	-	-	-	-	-	-
Balance as at June 30, 2011	75,478	-	236,160	311,638	-	311,638
Balance as at April 1, 2012	75,478	25,000	224,717	325,195	2,177	327,372
Net earnings for the three months ended June 30, 2012	-	-	3,265	3,265	-	3,265
Other comprehensive income for the three months ended June 30, 2012	-	-	-	-	-	-
Balance as at June 30, 2012	75,478	25,000	227,982	328,460	2,177	330,637

 

SOURCE: British Columbia Ferry Services Inc.

Media Contact:
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Customer Contact:
Victoria: [phone]
Toll-free:  1-888-BCFERRY (1-888-223-3779)