BC Ferries releases first quarter results

50% discounts on regular passenger fares coming this fall fleetwide at off-peak times

VICTORIA, Aug. 21, 2015 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its first quarter results today.  Net earnings for the first three months ended June 30, 2015 (the first quarter of fiscal 2016) were $18.8 million, compared to net earnings of $13.9 million in the first quarter of the previous year.  These positive earnings reflect the results of favourable traffic and increased retail sales, among other contributing factors.

Along with releasing BC Ferries' first quarter results at the Annual General Meeting of B.C. Ferry Authority and the Annual Public Meeting of British Columbia Ferry Services Inc., President and CEO Mike Corrigan also announced plans for a series of pricing promotions, starting next month with a 50 per cent discount on passenger fares during certain off-peak periods.

Across the system, passenger traffic increased 5.0 per cent and vehicle traffic increased 4.7 per cent, as compared to the first quarter last year.  During the three months ended June 30, 2015, BC Ferries provided over 41,000 sailings, carrying over five million passengers and two million vehicles. 

From September 8 to October 15, regular passenger fares will be discounted by 50 per cent on off-peak days of the week and certain off-peak times of the day on the major and minor routes.  From October 1 – 31, regular passenger fares will be discounted by 50 per cent on all sailings on the northern routes. 

"While we are uncertain how long this current growth in traffic will last, this promotion allows us an opportunity this fall to test variable pricing concepts in order to understand their impact on traffic trends, customer responses, and operations," said Mike Corrigan, BC Ferries' President and CEO.  "This will help us gather information as we prepare pricing strategies for our Fare Flexibility and Digital Experience Initiative in 2017, which will make variable pricing a permanent part of our service delivery model."

"The fact that the positive trend in B.C. tourism and in our passenger traffic is going against the general trend in the Canadian economy makes it difficult to say exactly how long it will last, however we intend to leverage the resulting strong financial results to keep fare increases at approximately the rate of inflation, fund our $3 billion capital program to replace aging vessels, terminal and information technology infrastructure, as well as test variable pricing promotions for the remainder of this fiscal year," said Corrigan.

In the first quarter of fiscal 2016, revenues increased by 2.2 per cent to $217.7 million, while operating expenses increased by 1.2 per cent to $184.6 million compared to the first quarter of the previous fiscal year. 

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 19.8 million passengers and 7.7 million vehicles during the fiscal year ended March 31, 2015.  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, fares, economic conditions, traffic levels, pricing promotions, and the Fare Flexibility and Digital Experience Initiative. 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.

In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain supplemental non-IFRS measures. These include, but are not limited to, vehicle and passenger traffic and number of sailings. 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.

BC FERRIES OFFERS 50 PER CENT SAVINGS ON ALL PASSENGER FARES ON SELECT SAILINGS ON ALL ROUTES THIS FALL

• BC Ferries announced today a major fleetwide pricing promotion of 50 per cent savings on all regular passenger fares coming soon. 
  
• From September 8 through October 15 on the major and minor routes, the 50 per cent passenger fare discount will be in effect Monday through Thursday on select middle of the day sailings and on Saturday afternoon and evening sailings. 
  
• From October 1 – 31 on the northern routes, the half-price discount for all passengers will apply on all sailings.
  
• For example, adult passengers on the Tsawwassen – Swartz Bay route will save $8.45 during the promotion.  This rate is similar to the fare from 1997.
  
• For example, adult passengers travelling on the Port Hardy – Prince Rupert Inside Passage route will save $72.75 during the promotion.  This rate is similar to the fare 12 years ago.
  
• During the promotion, Monday through Thursday, BC Seniors travelling on the major and minor routes will receive a 50 per cent discount off the regular seniors' fare during this promotion, so they'll pay just 25 per cent of the regular adult passenger fare. 
  
• During the promotion, Experience Card, Northern Resident and Group Discounts will be increased to match the promotional discounts of 50 per cent off the regular fare.
  
• This off-peak pricing promotion will not apply on Thanksgiving Monday (October 12) on the major and minor routes, as traditionally that day is always a busy day for ferry travel.
  
• For the purpose of this promotion, the major routes are the Metro Vancouver – Vancouver Island and Horseshoe Bay – Langdale routes.  The minor routes are the Southern and Northern Gulf Island routes and the Port McNeill – Alert Bay Sointula route.
  
• For the purpose of this promotion, the northern routes are the Port Hardy – Prince Rupert, Prince Rupert – Haida Gwaii, Alliford Bay – Skidegate routes and the Discovery Coast connector.
  
• BC Ferries is planning some other pricing promotions for late fall and next spring that customers will enjoy.  Stay tuned for details. 

BRITISH COLUMBIA FERRY SERVICES INC. Interim Consolidated Statements of Financial Position (unaudited) (Expressed in thousands of Canadian dollars)
		As at
		June 30, 2015	March 31, 2015
Assets
Current assets
	Cash and cash equivalents	70,048	65,574
	Restricted short-term investments	32,401	32,496
	Other short-term investments	58,079	62,098
	Trade and other receivables	19,903	19,490
	Prepaid expenses	15,995	6,177
	Inventories	26,095	25,393
		222,521	211,228
Non-current assets
	Loan receivable	24,515	24,515
	Land lease	31,032	31,146
	Property, plant and equipment	1,521,837	1,524,692
	Intangible assets	69,385	65,031
		1,646,769	1,645,384
Total assets		1,869,290	1,856,612
Liabilities
Current liabilities
	Accounts payable and accrued liabilities	50,607	57,401
	Interest payable on long-term debt	16,196	18,329
	Deferred revenue	21,825	16,957
	Derivative liabilities	997	4,433
	Current portion of long-term debt	24,000	24,000
	Current portion of accrued employee future benefits	2,400	2,400
	Current portion of obligations under finance lease	1,394	1,309
	Provisions	50,057	48,065
		167,476	172,894
Non-current liabilities
	Accrued employee future benefits	18,598	18,800
	Long-term debt	1,238,052	1,241,699
	Obligations under finance lease	43,142	43,514
	Other liabilities	1,500	1,500
		1,301,292	1,305,513
Total liabilities		1,468,768	1,478,407
Equity
	Share capital	75,478	75,478
	Contributed surplus	25,000	25,000
	Retained earnings	307,974	289,177
	Total equity before reserves	408,452	389,655
	Reserves	(7,930)	(11,450)
Total equity including reserves		400,522	378,205
Total liabilities and equity		1,869,290	1,856,612

BRITISH COLUMBIA FERRY SERVICES INC. Interim Consolidated Statements of Comprehensive Income (unaudited) (Expressed in thousands of Canadian dollars)
			Three months ended June 30,
			2015	2014
Revenue
	Vehicle and passenger fares		143,344	131,372
	Ferry service fees		41,259	45,047
	Retail		21,326	19,944
	Federal-Provincial Subsidy Agreement		7,182	7,089
	Fuel (rebates) surcharges		(1,626)	4,362
	Regulated other income		4,071	3,399
	Other income		2,143	1,896
Total revenue			217,699	213,109
Operating expenses
	Operations		112,230	115,024
	Maintenance		20,592	16,649
	Administration		7,984	7,613
	Cost of retail goods sold		8,651	7,989
	Depreciation and amortization		35,111	35,234
Total operating expenses			184,568	182,509
Operating profit			33,131	30,600
Net finance and other expenses
	Net finance expenses
		Finance income	897	1,067
		Finance expenses	(15,242)	(17,712)
	Net finance expenses		(14,345)	(16,645)
	Gain (loss) on disposal and revaluation of property, plant and
		equipment and intangible assets	11	(67)
Net finance and other expenses			(14,334)	(16,712)
Net earnings			18,797	13,888
Other comprehensive income (loss)
	Items to be reclassified to net earnings		3,458	(2,396)
Total other comprehensive income (loss)			3,458	(2,396)
Total comprehensive income			22,255	11,492

BRITISH COLUMBIA FERRY SERVICES INC. Interim Consolidated Statements of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
			Three months ended June 30,
			2015	2014
Cash flows from operating activities
Net earnings			18,797	13,888
Items not affecting cash
	Net finance expense		14,345	16,645
	Depreciation and amortization		35,111	35,234
	(Gain) loss on disposal and revaluation of property, plant and
		equipment and intangible assets	(11)	67
	Other non-cash adjustments to property, plant and equipment		79	(405)
	Changes in
		Accrued employee future benefits	(202)	97
		Derivative liabilities recognized in net earnings	23	15
		Provisions	1,992	(3,845)
		Long-term land lease	114	114
		Accrued interest costs	514	20
Total non-cash items			51,965	47,942
Movements in operating working capital
	Trade and other receivables		(413)	198
	Prepaid expenses		(9,818)	(11,244)
	Inventories		(702)	(1,017)
	Accounts payable and accrued liabilities		(6,794)	(12,141)
	Deferred revenue		4,868	4,861
	Change in non-cash working capital		(12,859)	(19,343)
	Change attributable to capital asset acquisitions		(3,142)	6,116
	Change in non-cash operating working capital		(16,001)	(13,227)
Cash generated from operating activities			54,761	48,603
	Interest received		391	1,045
	Interest paid		(18,494)	(21,496)
Net cash generated by operating activities			36,658	28,152

BRITISH COLUMBIA FERRY SERVICES INC. Interim Consolidated Statements of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
	Three months ended June 30,
	2015	2014
Cash flows from financing activities
Proceeds from issuance of bonds	-	200,000
Repayment of long-term debt	(3,750)	(250,000)
Repayment of finance lease obligations	(287)	(278)
Deferred financing costs incurred	-	(1,315)
Hedge losses on interest rate forward contracts	-	(7,652)
Net cash used in financing activities	(4,037)	(59,245)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	12	43
Purchase of property, plant and equipment and intangible assets	(32,273)	(31,167)
Decrease of debt service reserves	95	2,886
Net proceeds from short-term investments	4,019	30,471
Net cash (used in) provided by investing activities	(28,147)	2,233
Net increase (decrease) in cash and cash equivalents	4,474	(28,860)
Cash and cash equivalents, beginning of year	65,574	71,365
Cash and cash equivalents, end of year	70,048	42,505

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	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 three
	months ended June 30, 2014	-	-	13,888	13,888	-	13,888
Other comprehensive loss 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
Balance as at March 31, 2015		75,478	25,000	289,177	389,655	(11,450)	378,205
Net earnings for the three months
	ended June 30, 2015	-	-	18,797	18,797	-	18,797
Other comprehensive income for the
	three months ended June 30, 2015	-	-	-	-	3,458	3,458
Hedge losses reclassified to net
	earnings	-	-	-	-	62	62
Balance as at June 30, 2015		75,478	25,000	307,974	408,452	(7,930)	400,522

SOURCE British Columbia Ferry Services Inc.

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