BC Ferries releases second quarter results

VICTORIA, BC, Nov. 21, 2013 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $64.3 million and $68.6 million for the three and six-month periods ended September 30, 2013, down from $66.5 million and $69.8 million for the three and six-month periods ended September 30, 2012.

Total revenue for the three-month period ended September 30, 2013 increased from $268.6 million to $271.5 million compared to the same period last year, despite the absence of fuel surcharges to date this year.  Operating expenses increased from $184.5 million to $189.2 million compared to the same period last year.  For the six months ended September 30, 2013, total revenue was $471.4 million, up from $466.2 million in the prior year.  Operating expenses for the same period were $368.0 million, up from $361.4 million in the prior year.

Net earnings in the three months ended September 30, 2013 were $2.2 million lower ($1.2 million year-to-date) than the same periods the year prior.  These net earnings reflect the absence of fuel surcharges, lower ferry transportation fees and operating expense increases.  Customer fare revenue was higher as a decline in passenger and vehicle traffic was more than offset by increased fares.

"We have continued with our cost containment strategies and we are well on our way to achieving the $54 million in savings that we have committed to over the current performance term to reduce upward pressure on fares," said Mike Corrigan, BC Ferries' President and CEO.

In the second quarter of fiscal 2014, BC Ferries experienced a 0.7 per cent decline in both vehicle and passenger traffic compared to the same period in the prior year.  The decline was due in part to storm activity at the end of the quarter and was partially offset by an increase in commercial traffic.

Capital expenditures in the three and six-months ended September 30, 2013 totalled $25.0 million and $46.7 million, respectively.  Projects included vessel upgrades and modifications, terminal marine structures, terminal and building upgrades and equipment, and information technology projects.

"Our first priority continues to be safety, and it is clear that our SailSafe program, which is a joint initiative with the BC Ferry & Marine Workers' Union, has positively affected our safety culture and employee engagement," said Corrigan.  "A testament to the program's success is the significant reduction of over 30 per cent in time loss injuries we have realized, which assists our bottom line."

Significant events during the second quarter include the July 19, 2013 approval by the BC Ferries Commissioner of the company's application to construct three new intermediate class vessels to replace the 48-year old Queen of Burnaby and the 49-year old Queen of Nanaimo.

On July 24, 2013, BC Ferries redeemed its $140 million bond series formerly due December 19, 2013.  This debt management initiative to reduce the company's interest costs in the short term was funded with cash on hand and $88 million in draws on its credit facility.

On October 25, 2013, BC Ferries announced the closing of a $200 million senior secured bond issue.  The privately placed bonds, which are rated A by DBRS and A+ by Standard & Poor's, were sold to accredited investors across Canada. The bonds bear interest at 4.702% per annum, and mature October 23, 2043. BC Ferries previously announced its intention to refinance the redeemed $140 million Series 08-2 Bonds, and this issuance is partially related to that early redemption.

On November 18, 2013, the Minister of Transportation and Infrastructure announced a series of service adjustments that are intended to save $18.9 million over the remainder of Performance Term 3.  These savings were originally taken into account when setting the current price caps.  As the service provider, BC Ferries is committed to implementing these changes as safely and efficiently as possible.

BC Ferries has a $250 million bond series that will mature in May 2014. It is the intention to refinance these bonds, and the company will be monitoring the capital markets for appropriate opportunities to do so.

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 19.9 million passengers and 7.7 million vehicles during the fiscal year ended March 31, 2013.  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 service level adjustment plan, our expectations of the impact of our cost containment program, and our intention to refinance bonds maturing in May 2014. 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.

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,
			September 30, 2013	March 31, 2013
Assets
Current assets
	Cash and cash equivalents		13,888	36,641
	Restricted short-term investments		31,160	35,575
	Other short-term investments		34,508	43,403
	Trade and other receivables		18,285	18,118
	Prepaid expenses		10,120	10,706
	Inventories		25,641	23,257
			133,602	167,700
Non-current assets
	Long-term loan receivable		24,515	24,515
	Long-term land lease		31,834	32,063
	Property, plant and equipment		1,528,927	1,552,062
	Intangible assets		49,386	47,942
			1,634,662	1,656,582
Total assets			1,768,264	1,824,282
Liabilities
Current liabilities
	Accounts payable and accrued liabilities		37,446	51,803
	Short-term debt		39,965	-
	Interest payable on long-term debt		15,690	18,063
	Deferred revenue		13,584	13,634
	Derivative liabilities		1	12
	Current portion of long-term debt		259,000	149,000
	Current portion of accrued employee future benefits		2,204	2,204
	Current portion of obligations under finance lease		1,095	1,072
	Provisions		47,968	50,839
			416,953	286,627
Non-current liabilities
	Accrued employee future benefits		16,085	16,604
	Long-term debt		883,243	1,137,212
	Obligations under finance lease		45,387	45,941
			944,715	1,199,757
Total liabilities			1,361,668	1,486,384
Equity
	Share capital		75,478	75,478
	Contributed surplus		25,000	25,000
	Retained earnings		302,781	234,187
	Total equity before reserves		403,259	334,665
	Land revaluation reserve		3,233	3,233
	Employee future benefit revaluation reserve		104	-
Total equity including reserves			406,596	337,898
Total liabilities and equity			1,768,264	1,824,282

British Columbia Ferry Services Inc.
Interim Consolidated Statements of Comprehensive Income (unaudited)
(Expressed in thousands of Canadian dollars)

				Three months ended		Six months ended
				September 30,		September 30,
				2013	2012	2013	2012
Revenue
	Vehicle and passenger fares			171,162	165,824	295,545	280,246
	Ferry service fees			57,120	57,402	101,179	103,629
	Retail			28,075	27,029	47,730	46,191
	Federal-Provincial Subsidy Agreement			7,093	7,019	14,186	14,039
	Fuel surcharges			-	4,100	-	10,130
	Regulated other income			5,737	5,177	8,680	8,286
	Other income			2,283	2,059	4,119	3,690
Total revenue				271,470	268,610	471,439	466,211
Expenses
	Operations			124,712	121,314	238,889	232,321
	Maintenance			12,186	11,591	27,746	28,809
	Administration			7,491	7,155	14,522	14,324
	Cost of retail goods sold			10,685	10,068	18,410	17,576
	Depreciation and amortization			34,114	34,412	68,427	68,413
Total operating expenses				189,188	184,540	367,994	361,443
Operating profit				82,282	84,070	103,445	104,768
Net finance and other expenses
	Net finance expenses
		Finance income		726	653	1,525	1,189
		Finance expenses		(18,672)	(18,112)	(36,364)	(36,100)
	Total net finance expenses			(17,946)	(17,459)	(34,839)	(34,911)
	Loss on disposal of capital assets			(16)	(79)	(12)	(61)
Total net finance and other expenses				(17,962)	(17,538)	(34,851)	(34,972)
Net earnings				64,320	66,532	68,594	69,796
Other comprehensive income				104	-	104	-
Total comprehensive income				64,424	66,532	68,698	69,796

British Columbia Ferry Services Inc.
Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)

			Six months ended
			September 30,
			2013	2012
Cash flows from operating activities
Net earnings			68,594	69,796
Items not affecting cash
	Net finance costs recognized in net earnings		34,839	34,911
	Depreciation and amortization of non-current assets		68,427	68,413
	Loss on disposal of property, plant and equipment		12	61
	Other non-cash adjustments to property, plant & equipment		(662)	200
	Changes in
		Long-term accrued employee future benefits	(415)	(515)
		Derivative liabilities	(11)	(8)
		Provisions	(2,871)	610
		Long-term land lease	229	229
		Accrued net financing	236	539
Total non-cash items			99,784	104,440
Movements in operating working capital
	Trade and other receivables		(167)	14,162
	Prepaid expenses		586	(4,395)
	Inventories		(2,384)	(748)
	Accounts payable and accrued liabilities		(14,357)	(14,440)
	Deferred revenue		(50)	(1,708)
	Change in non-cash working capital		(16,372)	(7,129)
	Change attributable to capital asset acquisitions		5,670	11,387
	Change attributable to contributed surplus		-	(25,000)
	Change in non-cash operating working capital		(10,702)	(20,742)
Cash generated from operating activities			157,676	153,494
	Interest rate support received		-	412
	Interest received		1,230	600
	Interest paid		(39,594)	(36,870)
Net cash generated by operating activities			119,312	117,636

British Columbia Ferry Services Inc.
Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)

	Six months ended
	September 30,
	2013	2012
Cash flows from financing activities
Repayment of long-term debt	(144,500)	(4,500)
Proceeds from (repayment of) short-term debt	39,966	(17,737)
Repayment of finance lease obligations	(530)	(487)
Contributed surplus payment from Province	-	25,000
Net cash (used in) provided by financing activities	(105,064)	2,276
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	32	80
Purchase of property, plant and equipment and intangible assets	(50,343)	(50,182)
Reduction of debt service reserve	4,415	65
Proceeds from (purchase of) short-term investments	8,895	(34,550)
Net cash used in investing activities	(37,001)	(84,587)
Net (decrease) increase in cash and cash equivalents	(22,753)	35,325
Cash and cash equivalents, beginning of period	36,641	7,700
Cash and cash equivalents, end of period	13,888	43,025

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		Land revaluation reserve		Employee future benefit revaluation reserve		Total equity including reserves
Balance as at March 31, 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
Balance as at March 31, 2013		75,478		25,000		234,187		334,665		3,233		-		337,898
Net earnings for the six months ended September 30, 2013		-		-		68,594		68,594		-		-		68,594
Other comprehensive income for the six months ended September 30, 2013		-		-		-		-		-		104		104
Balance as at September 30, 2013		75,478		25,000		302,781		403,259		3,233		104		406,596

 

 

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)