BC Ferries Releases First Quarter Results

VICTORIA, Aug. 18, 2017 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its first quarter results today.

Passenger traffic levels were the highest BC Ferries has experienced in the past 20 years and vehicle traffic levels were the highest the company has ever experienced as compared to the same quarter in prior years.  During this quarter, passenger traffic increased 3.8 per cent and vehicle traffic increased 4.4 per cent compared to the same quarter in the prior year.

"This first quarter has been very busy for our company as we carried historically high volumes and focused on improving the customer experience," said Mark Collins, BC Ferries' President and CEO.  "We have added additional sailings, provided numerous fare discount opportunities and introduced efficient new vessels with modern customer amenities on-board."

Net earnings for the three months ended June 30, 2017 (the first quarter of fiscal 2018) were $17.3 million, compared to net earnings of $27.0 million in the first quarter of the previous year.  "Our net earnings have decreased compared to first quarter last year as BC Ferries invests in this improved customer experience.  We have held ticket prices stable, absorbed increased operating costs due to higher traffic and delivered additional capacity to customers. In particular, our targeted discount program has led to increased travel by some of our customers and shifted demand to previously underutilized sailings. In fact, on our major routes, there was a 7 per cent reduction in overloads for passenger vehicles year-over-year despite the higher traffic levels."

Revenues increased by 3.1 per cent to $225.9 million primarily as a result of the increased traffic volumes, while the average tariff revenue per passenger remained unchanged and the average tariff revenue per vehicle decreased on the major routes. 

Operating expenses increased by 8.8 per cent to $194.4 million, compared to the first quarter of the previous fiscal year. This was mainly due to an increase in fuel consumption, labour and training related costs that resulted from higher traffic volumes, an increase in round trips provided and the introduction of new ships.

"We remain focused on prudent fiscal management while striking the right balance between earnings and operational costs.  All earnings are reinvested in services and infrastructure for our customers," said Collins.  "During this quarter alone, we invested $91 million in new vessels, vessel upgrades and terminal improvements." 

BC Ferries' 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 21.0 million passengers and 8.3 million vehicles during the fiscal year ended March 31, 2017.  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 U.S. 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: traffic levels, the capital plan, the Salish-Class vessels, the supply agreement with Point Hope Maritime Ltd., the minor class vessel replacements, the New Building Canada Fund, the seasonal direct ferry service between Port Hardy and Bella Coola, and pricing promotions.  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 Nations 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.

NON-IFRS MEASURES
In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain financial measures that do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental financial 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.

CUSTOMER SERVICE IMPROVEMENTS AND SIGNIFICANT EVENTS DURING OR SUBSEQUENT TO THE FIRST QUARTER OF FISCAL 2018

Customer Service Improvements:
BC Ferries has recently made many customer service improvements, including the introduction of three new dual-fuel Salish Class vessels to the fleet, addition of extra sailings to meet demand, stable ticket prices, targeted discount pricing promotions and peak season activities on board the ships and at the terminals.

This year, no passenger or vehicle fare increases were implemented on any of the minor routes.  On the three major routes connecting Metro Vancouver with mid and southern Vancouver Island, passenger fares were not increased.  Average vehicle fare increases of 1.9 per cent on the major routes enabled BC Ferries to provide promotional fares with significant discounts on many sailings.

The "Sunrise and Sunset Savings" promotion offers customers significant discounts on over 1,600 select early morning and late evening sailings on routes between Metro Vancouver – Vancouver Island, and Metro Vancouver – Sunshine Coast throughout the summer. 

The "Size up the Savings" promotion offers customers with private passenger vehicles longer than 20 feet (6.1 metres) significant discounts on over 1,000 select sailings on two routes between Metro Vancouver and Vancouver Island; the TsawwassenSwartz Bay and the TsawwassenDuke Point routes from June through September.

Reservation fees were reduced by $5 from $15 to $10 for customers who book seven days in advance on reservable routes. Reservations made less than seven days and up to one day prior decreased from $18.50 to $17.  Reservations booked day of travel decreased from $22 to $21.  With these reductions, customers who book reservations pay the same or less than they did last year for the total cost of ferry travel.

On 13 different routes throughout the fleet, BC Ferries added over 4,800 sailings into the annual service plan above what is required in the government ferry services contract.  This additional service responds to input from local Ferry Advisory Committees and demand. The Buckley Bay – Denman Island, and Denman IslandHornby Island services operate in shuttle mode at peak times to transport customers as quickly as possible to their destinations.  More summer service has been added on the Horseshoe Bay – Langdale route and extra trips are scheduled in the fall.  

Extra staff are scheduled at the terminals and on the vessels to "surprise and delight" customers with water stations, food samples, face painting and a variety of employee-driven activities.  The hours of the Customer Service Centre were extended to assist customers with their travel plans. 

Significant events during or subsequent to the first quarter of fiscal 2018 include the following:

August 3, 2017 and June 21, 2017: Salish Raven and Salish Eagle, respectively, commenced regularly scheduled service in the Southern Gulf Islands.  The introduction of these new vessels will enable the retirement of the 53-year old Queen of Nanaimo.  On May 16, 2017, the first of the three Salish Class vessels, the Salish Orca, commenced regularly scheduled service between Comox and Powell River. The Salish Orca replaced the 52-year old Queen of Burnaby. 

June 1, 2017: BC Ferries entered into a five-year supply agreement with Point Hope Maritime Ltd. in Victoria, B.C. for the maintenance of eight of its minor vessels.  BC Ferries has approximately 20 scheduled dry-dockings for the minor vessels over the next five years and this strategic partnership ensures a local and secure supply of services.

April 13, 2017: BC Ferries entered into design and build contracts totalling $60 million for the construction of two minor class vessels.  On March 14, 2017, the Government of Canada approved funding of up to $28.3 million under the New Building Canada Fund toward the purchase of two minor vessels.  These vessels will each have a capacity of up to 300 passengers and approximately 44 vehicles.  When these new vessels are placed into service, it will allow the company to retire the 59-year old North Island Princess and the 53-year old Howe Sound Queen.  BC Ferries intends to deploy the first new vessel to provide service from Powell River to Texada Island and the second new vessel to provide service from Port McNeill to Alert Bay and Sointula. 

April 7, 2017: BC Ferries finalized an agreement to acquire a 75-metre vessel with ownership to transfer in August 2017. The vessel, built in 2000, will accommodate approximately 35 vehicles and 150 passengers and crew and will be deployed on the mid-coast, including a new seasonal direct ferry service between Port Hardy and Bella Coola starting next summer.

BRITISH COLUMBIA FERRY SERVICES INC.

Interim Condensed Consolidated Statements of Financial Position (unaudited)

(Expressed in thousands of Canadian dollars)



As at


June 30, 2017

March 31, 2017

Assets



Current assets




Cash and cash equivalents

72,112

72,032


Restricted short-term investments

32,776

32,426


Other short-term investments

115,582

115,582


Trade and other receivables

18,334

15,319


Prepaid expenses

19,792

7,454


Inventories

27,218

28,257


Derivative assets

733

1,604


286,547

272,674

Non-current assets




Loan receivable

24,515

24,515


Land lease

30,115

30,230


Property, plant and equipment

1,673,887

1,621,802


Intangible assets

97,865

97,673


1,826,382

1,774,220

Total assets

2,112,929

2,046,894




Liabilities



Current liabilities




Accounts payable and accrued liabilities

49,351

55,173


Interest payable on long-term debt

16,307

18,458


Deferred revenue

40,506

20,705


Derivative liabilities

4,587

1,048


Current portion of long-term debt

34,486

30,939


Current portion of accrued employee future benefits

1,400

1,400


Current portion of obligations under finance lease

1,600

1,582


Provisions

57,550

55,711


205,787

185,016

Non-current liabilities




Accrued employee future benefits

20,173

20,913


Long-term debt

1,307,778

1,273,860


Obligations under finance lease

40,016

40,423


Other liabilities

5,250

5,250


1,373,217

1,340,446

Total liabilities

1,579,004

1,525,462




Equity




Share capital

75,478

75,478


Contributed surplus

25,000

25,000


Retained earnings

441,371

424,020


Total equity before reserves

541,849

524,498


Reserves

(7,924)

(3,066)

Total equity including reserves

533,925

521,432

Total liabilities and equity

2,112,929

2,046,894

 

BRITISH COLUMBIA FERRY SERVICES INC.

Interim Condensed Consolidated Statements of Comprehensive Income (unaudited)

(Expressed in thousands of Canadian dollars)



Three months ended June 30


2017

2016




Revenue




Vehicle and passenger fares

163,119

158,364


Ferry service fees

42,899

42,156


Net retail

14,923

13,711


Federal-Provincial Subsidy Agreement

7,446

7,289


Fuel rebates

(4,868)

(4,699)


Other income

2,370

2,378

Total revenue

225,889

219,199




Expenses




Operations

124,922

112,712


Maintenance

20,869

21,073


Administration

9,958

8,027


Depreciation and amortization

38,641

36,840

Total operating expenses

194,390

178,652

Operating profit

31,499

40,547




Net finance and other expenses




Net finance expense





Finance income

1,063

1,035



Finance expenses

(15,169)

(14,412)


Net finance expense

(14,106)

(13,377)


Loss on disposal and revaluation of property, plant and




equipment, intangible assets and inventory

(42)

(185)

Net finance and other expenses

(14,148)

(13,562)

Net earnings

17,351

26,985




Other comprehensive (loss) income




Items to be reclassified to net earnings

(5,716)

10,328

Total other comprehensive (loss) income

(5,716)

10,328

Total comprehensive income

11,635

37,313

 

BRITISH COLUMBIA FERRY SERVICES INC.

Interim Condensed Consolidated Statements of Cash Flows (unaudited)

(Expressed in thousands of Canadian dollars)



Three months ended June 30


2017

2016

Cash flows from operating activities






Net earnings

17,351

26,985

Items not affecting cash




Net finance expense

14,106

13,377


Depreciation and amortization

38,641

36,840


Loss on disposal and revaluation of property, plant and




equipment, intangible assets and inventory

42

185


Other non-cash changes to property, plant and equipment

593

(345)


Changes in





Accrued employee future benefits

(740)

(93)



Derivative liabilities recognized in net earnings

(510)

(1)



Provisions

1,839

1,404



Long-term land lease

115

115



Accrued financing costs

322

316

Total non-cash items

54,408

51,798




Movements in operating working capital




Trade and other receivables

(3,015)

(4,931)


Prepaid expenses

(12,338)

(8,526)


Inventories

1,039

(1,681)


Accounts payable and accrued liabilities

(5,822)

(7,130)


Deferred revenue

19,801

4,223


Change in non-cash working capital

(335)

(18,045)


Change attributable to capital asset acquisitions

7,261

(1,990)


Change in non-cash operating working capital

6,926

(20,035)




Cash generated from operating activities

78,685

58,748


Interest received

572

704


Interest paid

(18,569)

(18,316)

Net cash generated by operating activities

60,688

41,136

 

BRITISH COLUMBIA FERRY SERVICES INC.

Interim Condensed Consolidated Statements of Cash Flows (unaudited)

(Expressed in thousands of Canadian dollars)



Three months ended June 30


2017

2016

Cash flows from financing activities



Proceeds from long-term debt

45,264

-

Repayment of long-term debt

(6,571)

(3,750)

Repayment of finance lease obligations

(389)

(372)

Deferred financing costs incurred

(1,470)

-

Net cash generated by (used in) financing activities

36,834

(4,122)

Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

23

63

Purchase of property, plant and equipment and intangible assets

(97,115)

(41,907)

Changes in debt service reserve

(350)

95

Net proceeds from short-term investments

-

3,715

Net cash used in investing activities

(97,442)

(38,034)

Net increase (decrease) in cash and cash equivalents

80

(1,020)

Cash and cash equivalents, beginning of period

72,032

79,113

Cash and cash equivalents, end of period

72,112

78,093

 

BRITISH COLUMBIA FERRY SERVICES INC.

Interim Condensed 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 March 31, 2016

75,478

25,000

352,692

453,170

(24,223)

428,947

Net earnings

-

-

26,985

26,985

-

26,985

Other comprehensive income

-

-

-

-

10,328

10,328

Realized hedge losses recognized








in fuel swaps

-

-

-

-

2,319

2,319

Hedge losses on interest rate








forward contract reclassified to








net earnings

-

-

-

-

62

62

Balance as at June 30, 2016

75,478

25,000

379,677

480,155

(11,514)

468,641








Balance as at March 31, 2017

75,478

25,000

424,020

524,498

(3,066)

521,432

Net earnings

-

-

17,351

17,351

-

17,351

Other comprehensive loss

-

-

-

-

(5,716)

(5,716)

Realized hedge losses recognized








in fuel swaps

-

-

-

-

796

796

Hedge losses on interest rate








forward contract reclassified to








net earnings

-

-

-

-

62

62

Balance as at June 30, 2017

75,478

25,000

441,371

541,849

(7,924)

533,925

 

SOURCE British Columbia Ferry Services Inc.

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)

RELATED LINKS
http://www.bcferries.ca

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