BC Ferries releases first quarter results

VICTORIA, BC, Aug. 18 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its first quarter results today. Net earnings were $0.9 million for the first three months ended June 30, 2010 compared to net losses of $3.6 million in the first quarter of the previous year.

In the first quarter, revenues increased by 6.7 per cent to $190.2 million, with total expenses increasing 4.1 per cent to $189.3 million, compared to the first quarter last fiscal year. The increase in expenses is largely attributed to fuel, interest and amortization expenses, as well as wage rate increases in accordance with the Collective Agreement,.

Capital expenditures in the three months ended June 30, 2010 totalled $26.0 million as follows:

    -   $10.3 million in terminal marine structures;
    -   $7.3 million in information technology;
    -   $5.3 million in building upgrades and equipment;
    -   $3.1 million in vessel upgrades and modifications.

"We remain concerned about the soft state of tourism currently in B.C. and as a result we are closely monitoring our expenditures," said David L. Hahn, BC Ferries' President and CEO. "The summer months are typically the time of year when BC Ferries generates its annual profits and strong numbers in July and August are important to our bottom line."

In the first quarter of fiscal 2011, BC Ferries experienced a decline of 1.6 per cent in vehicle traffic and 1.2 per cent in passenger traffic compared to the same quarter last year, while drop-trailer and other commercial traffic increased.

Significant events during the first quarter include the May 11, 2010 opening of BC Ferries new Vacations Centre located across the street from the expanded Convention Centre in downtown Vancouver. In addition, on May 18, 2010, the 28-year old Quinsam returned to service on the Gabriola route following an extensive $19 million upgrade to prepare the ship for another 17 years of service.

Currently BC Ferries offers fuel rebates of two per cent of tariffs on average on the majority of its routes. The mid-week CoastSaver promotional fares were offered on the three major routes from May 25, 2010 through July 29, 2010.

On June 3, 2010, Bill 20 - Miscellaneous Statutes Amendment Act (No.3), 2010 (Bill 20) received Royal Assent. Bill 20 amends several statutes, including the Coastal Ferry Act. It includes changes to the governance and regulatory framework within which BC Ferries operates. The costs to BC Ferries to implement the regulatory, governance and administrative changes resulting from Bill 20 are uncertain at this time.

As part of the federal government's Infrastructure Stimulus Fund program, BC Ferries will qualify for partial reimbursement of eligible costs for eleven terminal upgrades including eight sewage pump-ashore and waste water treatment projects. The net funding expected to be received is $7.5 million.

BC Ferries continued its multi-year project to upgrade security at nine terminals which includes fencing, lighting, access control and closed circuit television, as well as upgrades to foot passenger ticketing areas and baggage screening. BC Ferries received $9.1 million (including $3.2 million this quarter) of federal funding through the Transport Canada Marine Security Contribution Program to help offset the cost of this project.

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 21 million passengers and 8.3 million vehicles during the fiscal year ended March 31, 2010. BC Ferries provides frequent year-round ferry transportation services to the West Coast of Canada on 25 routes, currently supported by 36 vessels and 47 terminals, and also manages other remote routes through contracts with independent operators.

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, turbulent financial markets, demographics, import duties remission, tax changes, and the requirements of the Coastal Ferry Services Contract.

Forward looking statements included in this release include statements with respect to estimates of future customer demand, and our expectations of funding under the Infrastructure Stimulus Fund program. 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.

    Consolidated Balance Sheets
    (expressed in thousands)

                                                      June 30,      March 31,
                                                         2010           2010

    Current assets:
      Cash and cash equivalents                   $     6,067    $    10,608
      Restricted cash equivalents and
       short-term investments                          37,240         37,240
      Other short-term investments                      7,840          7,678
      Accounts receivable                              17,691         17,707
      Prepaid expenses                                 12,796          6,813
      Inventories                                      18,185         18,040
      Derivative assets                                    27              -
      Regulatory assets                                 4,775          4,775
                                                      104,621        102,861

    Property, plant and equipment                   1,637,390      1,644,069
    Intangible assets                                  31,556         26,406
    Assets held for sale                                  200            200
    Long-term land lease                               33,323         33,437
                                                  $ 1,807,090    $ 1,806,973
    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities    $    41,084    $    38,884
      Interest payable on long-term debt               15,243         18,319
      Accrued employee costs                           47,551         48,644
      Deferred revenue                                 18,119         16,023
      Current portion of long-term debt                10,875          9,000
      Current portion of accrued employee
       future benefits                                    800            800
      Current portion of obligations under
       capital lease                                      339            398
                                                      134,011        132,068

    Accrued employee future benefits                   11,229         11,130
    Regulatory liabilities                              3,170          4,325
    Long-term debt                                  1,346,546      1,348,183
    Obligations under capital lease                        87            139
    Other long-term liabilities                           172            172
                                                    1,495,215      1,496,017

    Shareholders' equity:
      Share capital                                    75,478         75,478
      Retained earnings                               236,397        235,478
                                                      311,875        310,956
                                                  $ 1,807,090    $ 1,806,973

    Consolidated Statements of Earnings (Loss), Comprehensive Income and
    Retained Earnings (unaudited)
    (expressed in thousands)

                                                  For the three months ended
                                                June 30, 2010  June 30, 2009

      Tariffs                                     $   118,212    $   108,043
      Ferry service fees                               38,531         38,234
      Federal-Provincial Subsidy Agreement              6,731          6,731
      Retail                                           20,090         19,889
      Other income                                      6,675          5,358
                                                      190,239        178,255

      Operations                                      103,617        100,460
      Maintenance                                      23,851         23,702
      Administration                                    7,517          7,446
      Cost of retail goods sold                         7,680          7,533
      Amortization                                     28,688         26,955
                                                      171,353        166,096

    Earnings from operations                           18,886         12,159

    Gain on foreign exchange                               75              3
    Interest expense                                  (18,028)       (15,765)
    (Loss) Gain on disposal of capital assets             (14)             1
    Net earnings (loss)                                   919         (3,602)

    Other comprehensive income                              -              -

    Net earnings (loss) and comprehensive income          919         (3,602)

    Retained earnings, beginning of period            235,478        238,094

    Retained earnings, end of period              $   236,397    $   234,492

    Consolidated Statements of Cash Flows (unaudited)
    (expressed in thousands)

                                                  For the three months ended
                                                June 30, 2010  June 30, 2009

    Cash provided by (used in):

      Net earnings(loss)                          $       919    $    (3,602)
      Items not involving cash:
        Amortization                                   28,688         26,955
        Other non-cash charges                            389           (716)
      Long-term regulatory costs deferred              (2,349)         2,725
      Change in non-cash operating working
       capital                                        (11,302)        (1,794)
                                                       16,345         23,568

      Proceeds from short-term loans                        -          2,034
      Repayment of capital lease obligations             (111)          (155)
                                                         (111)         1,879

      Proceeds from disposal of property,
       plant and equipment                                 26              4
      Purchase of property, plant and equipment
       and intangible assets                          (20,639)       (22,460)
      Purchase of short-term investments                 (162)             -
                                                      (20,775)       (22,456)

    (Decrease) increase in cash and cash
     equivalents                                       (4,541)         2,991

    Cash and cash equivalents, beginning of
     period                                            10,608         12,402

    Cash and cash equivalents, end of  period     $     6,067    $    15,393

%SEDAR: 00020627E

SOURCE British Columbia Ferry Services Inc.

For further information: 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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