BC Ferries releases second quarter results

VICTORIA, Nov. 16, 2012 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $66.5 million and $69.8 million for the three and six-month periods ended September 30, 2012, up from $55.8 million and $52.3 million for the three and six-month periods ended September 30, 2011.

Total revenue for the three-month period ended September 30, 2012 increased from $256.9 million to $268.6 million.  After a soft first four months of the fiscal year, there was a noticeable improvement in traffic during August and September.  Revenue results also reflect an increase in ferry transportation fees from the Province of $7.4 million.  Operating expenses increased from $183.4 million to $184.5 million, compared to the same period last year.  For the six-months ended September 30, 2012, total revenue was $466.2 million compared to $443.9 million for the six-month period ended September 30, 2011, including an increase in transportation fees of $12.9 million.  Operating expenses for the same period were $361.4 million, up from $356.7 million in the prior year, mainly due to increases in the price of fuel.  BC Ferries' financial statements (without notes) are attached as Appendix 1.

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 standards. IFRS does not have a standard for rate-regulated activities and therefore, does not permit BC Ferries to report in the company's financial statements, the assets and liabilities that result from the regulated price cap setting process, such as the deferred fuel cost accounts. Rather than being charged to regulatory asset accounts on the Statement of Financial Position, 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.  A pro forma income statement reflecting the results of rate-regulated activities is included as Appendix 2.

Capital expenditures in the three and six-months ended September 30, 2012 totalled $18.3 million and $39.5 million, respectively.  Projects included vessel upgrades and modifications, terminal marine structures, terminal and building upgrades and equipment, and information technology projects.

BC Ferries and the Province finalized amendments to the Coastal Ferry Services Contract for performance term three on June 30, 2012.  The amending agreement includes increases of $54.5 million in aggregate ferry transportation fees, which are in addition to a one-time $25 million equity contribution.  These funds, totalling $79.5 million, are intended to reduce the pressure for future fare cap and price cap increases.  The amending agreement also includes a principle-based process for identifying $30 million in service level adjustments over the term.  The company must also find $54.2 million in internal efficiencies.

"BC Ferries is working hard to find efficiencies in all areas of our business to ensure the operation is cost effective and financially viable, without compromising safety," said Mike Corrigan, BC Ferries' President and CEO. "It is our job as the service provider to deliver safe, efficient and flexible ferry service along coastal British Columbia that meets the changing needs of our customers over the long term."

On September 30, 2012, the BC Ferries Commissioner released his final price cap order for the remaining three years of performance term three, April 1, 2013 to March 31, 2016.  The order outlined price cap increases of 4.1 per cent, 4.0 per cent and 3.9 per cent for all route groups on April 1 of  2013, 2014 and 2015, respectively.

Other significant events during the second quarter include, as a result of declining fuel prices, the July 20, 2012 reduction in fuel surcharges from 2.5 per cent to 2.0 per cent on the Horseshoe Bay - Langdale route and from 5.0 per cent to 2.0 per cent on all other routes with the exception of the northern routes.  No surcharges or rebates were in place on our northern routes.

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis are filed on SEDAR and are 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: the additional payments to be received from the Province, the amount of savings to be achieved through service level adjustments, and the efficiency target to be achieved for performance term three. 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,
					September 30, 2012			March 31, 2012			April 1, 2011
Assets
Current assets
	Cash and cash equivalents				43,025			7,700			33,335
	Restricted short-term investments				35,640			35,705			37,040
	Other short-term investments				61,430			26,880			64,074
	Trade and other receivables				28,179			42,341			20,619
	Prepaid expenses				11,120			6,725			5,648
	Inventories				22,764			22,016			19,957
					202,158			141,367			180,673
Non-current assets
	Long-term loan receivable				24,515			24,515			24,247
	Long-term land lease				32,292			32,521			32,979
	Property, plant and equipment				1,563,700			1,596,507			1,593,194
	Intangible assets				45,474			41,758			34,929
					1,665,981			1,695,301			1,685,349
Total assets					1,868,139			1,836,668			1,866,022
Liabilities
Current liabilities
	Accounts payable and accrued liabilities				36,268			50,708			49,872
	Short-term debt				-			17,737			3,949
	Interest payable on long-term debt				18,220			18,249			18,261
	Deferred revenue				12,076			13,784			15,596
	Derivative liabilities				4			12			23
	Current portion of long-term debt				9,000			9,000			22,125
	Current portion of accrued employee future benefits				2,204			2,204			1,351
	Current portion of obligations under finance lease				986			974			1,040
	Provisions				47,632			47,022			46,788
					126,390			159,690			159,005
Non-current liabilities
	Accrued employee future benefits				16,846			17,361			17,091
	Long-term debt				1,281,221			1,285,232			1,327,014
	Obligations under finance lease				46,514			47,013			47,723
					1,344,581			1,349,606			1,391,828
Total liabilities					1,470,971			1,509,296			1,550,833
Equity
	Share capital				75,478			75,478			75,478
	Contributed surplus				25,000			25,000			-
	Retained earnings				294,513			224,717			239,711
	Total equity before reserves				394,991			325,195			315,189
	Land revaluation reserve				2,177			2,177			-
Total equity including reserves					397,168			327,372			315,189
Total liabilities and equity					1,868,139			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		Six months ended
								September 30,		September 30,
								2012	2011	2012	2011
Revenue
	Vehicle and passenger fares							165,824	161,985	280,246	276,386
	Ferry service fees							57,402	49,370	103,629	89,620
	Retail							27,029	27,035	46,191	46,434
	Federal-Provincial Subsidy Agreement							7,019	6,872	14,039	13,743
	Fuel surcharges							4,100	4,359	10,130	5,515
	Regulated other income							5,177	5,372	8,286	8,771
	Other income							2,059	1,949	3,690	3,431
Total revenue								268,610	256,942	466,211	443,900
Expenses
	Operations							121,314	119,718	232,321	228,522
	Maintenance							11,591	12,662	28,809	30,308
	Administration							7,155	8,475	14,324	15,896
	Cost of retail goods sold							10,068	9,966	17,576	17,430
	Depreciation and amortization							34,412	32,583	68,413	64,521
Total operating expenses								184,540	183,404	361,443	356,677
Operating profit								84,070	73,538	104,768	87,223
Net finance and other expenses
	Net finance expenses
		Finance income						653	531	1,189	1,202
		Finance expenses						(18,112)	(18,232)	(36,100)	(36,167)
	Total net finance expenses							(17,459)	(17,701)	(34,911)	(34,965)
	(Loss) gain on disposal of capital assets							(79)	9	(61)	37
Total net finance and other expenses								(17,538)	(17,692)	(34,972)	(34,928)
Net earnings								66,532	55,846	69,796	52,295
Other comprehensive income								-	-	-	-
Total comprehensive income								66,532	55,846	69,796	52,295

BRITISH COLUMBIA FERRY SERVICES INC. Interim Consolidated Statement of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
							Six months ended
							September 30,
							2012			2011
Cash flows from operating activities
Net earnings							69,796			52,295
Items not affecting cash
	Net finance costs recognized in net earnings						34,911			34,965
	Depreciation and amortization of non-current assets						68,413			64,521
	Loss (gain) on disposal of property, plant and equipment						61			(37)
	(Decrease) increase in long-term accrued employee future benefits						(515)			645
	(Increase) in derivative assets						-			(14)
	Decrease in derivative liabilities						(8)			(23)
	Increase in provisions						610			878
	Other non-cash adjustments to property, plant & equipment						200			(57)
	Decrease in long-term land lease						229			229
	Increase in accrued net financing						539			1,059
Total non-cash items							104,440			102,166
Movements in operating working capital
	Decrease (increase) in accounts receivable						14,162			(214)
	Increase in prepaid expenses						(4,395)			(2,556)
	Increase in inventories						(748)			(989)
	Decrease in accounts payable and accrued liabilities						(14,440)			(12,831)
	Decrease in deferred revenue						(1,708)			(435)
	Increase in current portion of accrued employee future benefits						-			302
	Change in non-cash working capital						(7,129)			(16,723)
	Change attributable to capital asset acquisitions						11,387			(1,798)
	Change attributable to contributed surplus						(25,000)			-
	Change in non-cash operating working capital						(20,742)			(18,521)
Cash generated from operating activities							153,494			135,940
	Interest rate support received						412			638
	Interest received						600			387
	Interest paid						(36,870)			(37,532)
Net cash generated by operating activities							117,636			99,433

BRITISH COLUMBIA FERRY SERVICES INC. Interim Consolidated Statement of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
						Six months ended
						September 30,
						2012				2011
Cash flows from financing activities
Repayment of long-term debt						(4,500)				(51,375)
Repayment of short-term loans						(17,737)				(3,949)
Repayment of finance lease obligations						(487)				(539)
Contributed surplus payment from Province						25,000				-
Net cash generated by (used in) financing activities						2,276				(55,863)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment						80				84
Purchase of property, plant and equipment and intangibles						(50,182)				(61,606)
Advancement of long-term loan						-				(268)
Reduction of debt service reserve						65				-
(Purchase of) proceeds from short-term investments						(34,550)				6,259
Net cash used in investing activities						(84,587)				(55,531)
Net increase (decrease) in cash and cash equivalents						35,325				(11,961)
Cash and cash equivalents, beginning of period						7,700				33,335
Cash and cash equivalents, end of period						43,025				21,374

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			Land Revaluation Reserve			Total Equity Including Reserves
Balance as at April 1, 2011				75,478				-			239,711			315,189			-			315,189
Net earnings for the six months ended September 30, 2011				-				-			52,295			52,295			-			52,295
Other comprehensive income for the six months ended September 30, 2011				-				-			-			-			-			-
Balance as at September 30, 2011				75,478				-			292,006			367,484			-			367,484
Balance as at April 1, 2012				75,478				25,000			224,717			325,195			2,177			327,372
Net earnings for the six months ended September 30, 2012				-				-			69,796			69,796			-			69,796
Other comprehensive income for the six months ended September 30, 2012				-				-			-			-			-			-
Balance as at September 30, 2012				75,478				25,000			294,513			394,991			2,177			397,168

BRITISH COLUMBIA FERRY SERVICES INC. Pro forma Interim Consolidated Statement of Comprehensive Income (unaudited) Reflecting the Effect of Regulatory Assets and Regulatory Liabilities (Expressed in thousands of Canadian dollars)
								Three months ended		Six months ended
								September 30,		September 30,
								2012	2011	2012	2011
Revenue
	Vehicle and passenger fares							165,824	161,985	282,707	277,458
	Ferry service fees							56,823	48,458	102,492	87,870
	Retail							27,029	27,035	46,191	46,434
	Federal-Provincial Subsidy Agreement							7,019	6,872	14,039	13,743
	Fuel surcharges							-	-	-	-
	Regulated other income							5,177	5,372	8,286	8,771
	Other income							2,059	1,949	3,690	3,431
Total revenue								263,931	251,671	457,405	437,707
Expenses
	Operations							118,342	114,643	225,407	219,842
	Maintenance							11,591	12,662	28,809	30,308
	Administration							7,155	8,444	14,324	15,802
	Cost of retail goods sold							10,068	9,966	17,576	17,430
	Depreciation and amortization							34,432	33,777	68,454	66,909
Total operating expenses								181,588	179,492	354,570	350,291
Operating profit								82,343	72,179	102,835	87,416
Net finance and other expenses
	Net finance expenses
		Finance income						653	531	1,189	1,202
		Finance expenses						(18,111)	(18,255)	(36,096)	(36,223)
	Total net finance expenses							(17,458)	(17,724)	(34,907)	(35,021)
	(Loss) gain on disposal of capital assets							(79)	9	(61)	37
Total net finance and other expenses								(17,537)	(17,715)	(34,968)	(34,984)
Net earnings								64,806	54,464	67,867	52,432
Other comprehensive income								-	-	-	-
Total comprehensive income								64,806	54,464	67,867	52,432

 

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)