BC Ferries releases first quarter results

VICTORIA, Aug. 22, 2014 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its first quarter results today.  Net earnings for the first three months ended June 30, 2014 (the first quarter of fiscal 2015) were $13.9 million, compared to net earnings of $4.3 million in the first quarter of the previous year. These earnings reflect the effects of increased fares, higher ferry transportation fees, fuel surcharges and lower financing costs, partially offset by lower traffic levels, lower social program fees and operating cost increases.

In the first quarter of fiscal 2015, revenues increased by 6.6 per cent to $213.1 million, while operating expenses increased by 2.1 per cent to $182.5 million, compared to the first quarter of the previous fiscal year.

Capital expenditures for the three months ended June 30, 2014 totalled $26.1 million as follows:

• $8.5 million in vessel upgrades and modifications
• $10.8 million in terminal marine structures
• $5.2 million in information technology
• $1.6 million in terminal and building upgrades and equipment

"We continue to focus on fare affordability for our customers, keeping costs down below previously planned levels wherever possible without compromising safety," said Mike Corrigan,
BC Ferries' President and CEO. "In addition to achieving targeted savings, our catering and retail services, the drop trailer business and BC Ferries Vacations are all showing strong results, which help to improve our bottom line."

During the three months ended June 30, 2014, BC Ferries provided over 43,000 sailings, as compared to almost 46,000 sailings during the same quarter last year, carrying five million passengers and two million vehicles. Across the system, vehicle traffic decreased 0.4 per cent while passenger traffic increased 0.3 per cent, as compared to the same quarter last year.

On April 28, 2014, after six weeks of community consultation, feedback and further analysis of schedule refinement options, BC Ferries implemented new schedules for the Northern and regulated Other Routes to achieve a net savings of $14 million over the remainder of performance term three (PT3), which ends March 31, 2016. These new schedules relate to the service reductions determined by the Province in order to better align service levels with demand, and to ensure the coastal ferry system is affordable, efficient and sustainable.

Also on April 28, 2014, BC Ferries completed a private placement of $200 million of 30-year senior secured bonds with accredited investors. These bonds bear interest at a rate of 4.289 per cent per annum, payable semi-annually. The effective rate of this issue, net of hedging, is 4.45 per cent, the lowest effective bond interest rate in the 11-year history of the company. The net proceeds of this new issue, together with additional cash on hand, were used to repay the $250 million bond Series 04-01, which matured on May 27, 2014, and to fund the debt service reserve related to these bonds.

On July 3, 2014, BC Ferries awarded Remontowa Shipbuilding S.A. of Gdansk, Poland contracts totalling $165 million to build three new intermediate class vessels. The total project budget of $252 million includes financing and project management costs and includes $51 million for Canadian taxes and federal import duties. The contracts are design-build, fixed-price contracts that provide BC Ferries with substantial guarantees related to delivery dates, performance criteria, cost certainty and quality of construction. The vessels will be delivered in 2016 and 2017 and will replace the 49-year old Queen of Burnaby and the 50-year old Queen of Nanaimo. The new vessels will be dual-fuel capable, so they can operate on marine diesel fuel or liquefied natural gas, which will provide BC Ferries with the capability to significantly reduce fuels costs and emissions.

 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 19.7 million passengers and 7.6 million vehicles during the fiscal year ended March 31, 2014. 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: the service level adjustment plan, and BC Ferries' vessel replacement program for the Queen of Burnaby and the Queen of Nanaimo. 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, 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, 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,
						June 30, 2014		March 31, 2014
Assets
Current assets
	Cash and cash equivalents					42,505		71,365
	Restricted short-term investments					32,906		35,792
	Other short-term investments					50,535		81,006
	Trade and other receivables					16,379		16,577
	Prepaid expenses					18,178		6,934
	Inventories					26,090		25,073
						186,593		236,747
Non-current assets
	Long-term loan receivable					24,515		24,515
	Long-term land lease					31,490		31,604
	Property, plant and equipment					1,527,100		1,539,162
	Intangible assets					56,038		53,164
						1,639,143		1,648,445
Total assets						1,825,736		1,885,192
Liabilities
Current liabilities
	Accounts payable and accrued liabilities					35,993		48,134
	Interest payable on long-term debt					16,329		19,634
	Deferred revenue					19,424		14,563
	Derivative liabilities					33		5,274
	Current portion of long-term debt					24,000		270,250
	Current portion of accrued employee future benefits					2,204		2,204
	Current portion of obligations under finance lease					1,120		1,120
	Provisions					47,956		51,801
						147,059		412,980
Non-current liabilities
	Accrued employee future benefits					16,028		15,931
	Long-term debt					1,261,642		1,066,531
	Obligations under finance lease					44,543		44,821
						1,322,213		1,127,283
Total liabilities						1,469,272		1,540,263
Equity
	Share capital					75,478		75,478
	Contributed surplus					25,000		25,000
	Retained earnings					260,030		246,142
	Total equity before reserves					360,508		346,620
	Reserves					(4,044)		(1,691)
Total equity including reserves						356,464		344,929
Total liabilities and equity						1,825,736		1,885,192

British Columbia Ferry Services Inc. Interim Consolidated Statements of Comprehensive Income  (unaudited) (Expressed in thousands of Canadian dollars)
				Three months ended,
				June 30, 2014	June 30, 2013
Revenue
	Vehicle and passenger fares			131,372	124,383
	Ferry service fees			45,047	44,059
	Retail			19,944	19,654
	Federal-Provincial Subsidy Agreement			7,089	7,093
	Fuel surcharges			4,362	-
	Regulated other income			3,399	2,944
	Other income			1,896	1,836
Total revenue				213,109	199,969
Expenses
	Operations			115,024	114,178
	Maintenance			16,649	15,560
	Administration			7,613	7,031
	Cost of retail goods sold			7,989	7,725
	Depreciation and amortization			35,234	34,313
Total operating expenses				182,509	178,807
Operating profit				30,600	21,162
Net finance and other expenses
	Net finance expense
		Finance income		1,067	799
		Finance expenses		(17,712)	(17,692)
	Net finance expense			(16,645)	(16,893)
	(Loss) gain on disposal of property, plant and equipment			(67)	4
Net finance and other expenses				(16,712)	(16,889)
Net earnings				13,888	4,273
Other comprehensive (loss) income
Items to be reclassified to net earnings				(2,396)	-
Total other comprehensive loss				(2,396)	-
Total comprehensive income				11,492	4,273

British Columbia Ferry Services Inc. Interim Consolidated Statements of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
			Three months ended,
			June 30, 2014	June 30, 2013
Cash flows from operating activities
Net earnings			13,888	4,273
Items not affecting cash
	Net finance expense		16,645	16,893
	Depreciation and amortization		35,234	34,313
	Loss (gain) on disposal of property, plant and equipment		67	(4)
	Other non-cash adjustments to property, plant & equipment		(405)	-
	Changes in
		Long-term accrued employee future benefits	97	(271)
		Derivative assets	-	(13)
		Derivative liabilities recognized in net earnings	15	(12)
		Provisions	(3,845)	2,649
		Long-term land lease	114	115
		Accrued interest costs	20	394
Total non-cash items			47,942	54,064
Movements in operating working capital
	Trade and other receivables		198	(651)
	Prepaid expenses		(11,244)	(5,694)
	Inventories		(1,017)	(555)
	Accounts payable and accrued liabilities		(12,141)	(16,762)
	Deferred revenue		4,861	3,984
	Change in non-cash working capital		(19,343)	(19,678)
	Change attributable to capital asset acquisitions		6,116	7,088
	Change in non-cash operating working capital		(13,227)	(12,590)
Cash generated from operating activities			48,603	45,747
	Interest received		1,045	392
	Interest paid		(21,496)	(21,370)
Net cash generated by operating activities			28,152	24,769

British Columbia Ferry Services Inc. Interim Consolidated Statements of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
	Three months ended,
	June 30, 2014	June 30, 2013
Cash flows from financing activities
Proceeds from issuance of bonds	200,000	-
Repayment of long-term debt	(250,000)	-
Repayment of finance lease obligations	(278)	(264)
Deferred financing costs incurred	(1,315)	-
Hedge losses on interest rate forward contracts	(7,652)	-
Net cash used in financing activities	(59,245)	(264)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	43	15
Purchase of property, plant and equipment and intangible assets	(31,167)	(28,004)
Decrease of debt service reserves	2,886	-
Proceeds from short-term investments	30,471	9,453
Net cash provided by (used in) investing activities	2,233	(18,536)
Net (decrease) increase in cash and cash equivalents	(28,860)	5,969
Cash and cash equivalents, beginning of period	71,365	36,641
Cash and cash equivalents, end of period	42,505	42,610

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 (note 8 (a))	Total equity including reserves
Balance as at March 31, 2013	75,478	25,000	234,187	334,665	3,233	337,898
Net earnings for the three months ended June 30, 2013	-	-	4,273	4,273	-	4,273
Other comprehensive income for the three months ended June 30, 2013	-	-	-	-	-	-
Balance as at June 30, 2013	75,478	25,000	238,460	338,938	3,233	342,171
Balance as at March 31, 2014	75,478	25,000	246,142	346,620	(1,691)	344,929
Net earnings for the three months ended June 30, 2014	-	-	13,888	13,888	-	13,888
Other comprehensive income for the three months ended June 30, 2014	-	-	-	-	(2,396)	(2,396)
Hedge losses reclassified to net earnings	-	-	-	-	43	43
Balance as at June 30, 2014	75,478	25,000	260,030	360,508	(4,044)	356,464

SOURCE: British Columbia Ferry Services Inc.

For further information: Media Contact: BC Ferries, Media Relations, Victoria: [phone]; Customer Contact: Victoria: [phone], Toll-free: 1-888-BCFERRY (1-888-223-3779)