BC Ferries releases second quarter results

VICTORIA, Nov. 19 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $64.2 million and $60.6 million for the three- and six-month periods ended September 30, 2009, up from $53.7 million for the three-months ended September 30, 2008 and down from $62.1 million for the six-months ended September 30, 2008.

During the second quarter, vehicle and passenger traffic increased by 4.3 per cent and 1.7 per cent respectively over the same period last year. During the quarter, BC Ferries provided over 48,000 sailings, carrying 7.2 million customers and 2.7 million vehicles. "Many customers took advantage of our summer CoastSaver fare program," said David L. Hahn, BC Ferries' President and CEO.

Total revenue for the three-month period ended September 30, 2009, increased from $232.1 million to $251.8 million, while operating expenses increased from $165.9 million to $170.3 million, compared to the same period last year. For the six-month period ended September 30, 2009, total revenue was $430.1 million compared to $404.0 million for the six-months ended September 30, 2008. Operating expenses for the same six-month period were $336.4 million, up from $319.4 million in the prior year.

"We continue to see the benefits of the cost containment program we implemented last year," said Hahn. "In this period of economic uncertainty, we must continue to manage our business in a fiscally prudent manner." Administration expenses decreased $1.4 million for the three-months ($2.9 million for the six-months) ended September 30, 2009, as compared to the prior year. These savings result primarily from staff reductions, as well as lower travel, marketing, consulting and advertising expenditures.

As expected, amortization and interest expense increased as a result of new vessels (Coastal Inspiration, Coastal Celebration, Northern Expedition and Island Sky) coming into service, and a major ship upgrade (Queen of New Westminster). Amortization expense increased by $6.2 million for the three-months ($13.0 million for the six-months) ended September 30, 2009. Interest expense increased by $4.7 million for the three-months ($9.3 million for the six-months), primarily due to new borrowing to finance these acquisitions and the upgrade.

BC Ferries completed its major financing requirements in fiscal 2009. The company's ongoing capital expenditures are expected to be significantly lower than in the previous few years. At September 30, 2009, BC Ferries' unrestricted cash and cash equivalents totalled $55.0 million. The company's credit ratings were A low (DBRS) and A- (Standard & Poor's) at September 30, 2009, and both rating agencies have assessed BC Ferries' current rating outlook as positive.

Notable events during the period included increases in fuel rebates from 5 per cent to 8 per cent for minor routes on July 15, 2009. On September 1, 2009, the fuel rebates increased to 10 per cent on these routes. On September 24, 2009, the provincial government announced, as part of the federal government's Infrastructure Stimulus Fund program, that BC Ferries will qualify for partial reimbursements of eligible costs of seven sewage pump-ashore projects, as well as other terminal projects. The net funding is expected to be $7.5 million.

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 20.7 million passengers and 8.1 million vehicles during the fiscal year ended March 31, 2009. 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 historical information and may contain certain forward-looking statements that relate to future events or future performance. These forward-looking statements are based upon management's currentexpectations and assumptions as to a number of factors, including, the risks, uncertainties and other factors as described in BC Ferries' Management's Discussion & Analysis and certain of the other BC Ferries' documents available at www.sedar.com. These forward-looking statements are based upon information currently availableto management and BC Ferries assumes no obligation to update or revise them to reflect new events orcircumstances. If management's expectations and assumptions prove to be incorrect, or factors change, thenactual results could differ materially from the forward-looking information contained in this release.

    
    BRITISH COLUMBIA FERRY SERVICES INC.
    Consolidated Balance Sheets
    (expressed in thousands)

    -------------------------------------------------------------------------
                                          September 30, 2009  March 31, 2009
                                                  (unaudited)
    -------------------------------------------------------------------------
    Assets

    Current assets:
      Cash and cash equivalents                 $     55,040    $     12,402
      Restricted cash and short-term
       investments                                    37,240          37,240
      Other short-term investments                       178             153
      Accounts receivable                             19,192          12,883
      Prepaid expenses                                 5,748           8,132
      Inventories                                     19,274          16,835
      Derivative assets                                1,810               -
      Regulatory assets                                4,775           4,775
      -----------------------------------------------------------------------
                                                     143,257          92,420

    Property, plant and equipment                  1,652,354       1,683,576
    Intangible assets                                 23,782          19,866
    Assets held for sale                               3,308             435
    Regulatory assets                                    312          11,687
    Long-term land lease                              33,666          33,896
    -------------------------------------------------------------------------
                                                $  1,856,679    $  1,841,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities  $     26,942    $     41,153
      Short-term debt                                      -          17,956
      Interest payable on long-term debt              18,427          18,395
      Accrued employee costs                          48,660          51,923
      Deferred revenue                                13,680          15,783
      Derivative liabilities                              75             923
      Regulatory liabilities                             103           2,858
      Current portion of long-term debt                9,000           9,000
      Current portion of accrued employee
       future benefits                                   800             800
      Current portion of obligations under
       capital lease                                     459             541
      -----------------------------------------------------------------------
                                                     118,146         159,332

    Accrued employee future benefits                  11,647          12,047
    Long-term debt                                 1,352,211       1,356,239
    Obligations under capital lease                      322             537
    Other long-term liabilities                          178             153
    -------------------------------------------------------------------------
                                                   1,482,504       1,528,308
    -------------------------------------------------------------------------

    Shareholders' equity:
      Share capital                                   75,478          75,478
      Retained earnings                              298,697         238,094
      -----------------------------------------------------------------------
                                                     374,175         313,572
    Commitments
    -------------------------------------------------------------------------
                                                $  1,856,679    $  1,841,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    BRITISH COLUMBIA FERRY SERVICES INC.
    Consolidated Statements of Earnings, Comprehensive Income and Retained
    Earnings (unaudited)
    (expressed in thousands)

    -------------------------------------------------------------------------
                                   Three months ended      Six months ended
                                      September 30           September 30
                                     2009       2008       2009       2008
    -------------------------------------------------------------------------

    Revenue:
      Tariffs                     $ 161,336  $ 151,994  $ 269,379  $ 259,989
      Ferry service fees             45,614     37,811     83,848     69,459
      Federal-Provincial
       Subsidy Agreement              6,731      6,574     13,462     13,147
      Retail                         28,875     27,198     48,764     46,891
      Other income                    9,267      8,506     14,625     14,507
      -----------------------------------------------------------------------
                                    251,823    232,083    430,078    403,993
    -------------------------------------------------------------------------

    Expenses:
      Operations                    110,076    108,833    210,535    207,584
      Maintenance                    14,130     16,477     37,832     34,812
      Administration                  7,016      8,401     14,462     17,469
      Cost of retail goods sold      10,350      9,688     17,883     16,862
      Amortization                   28,748     22,443     55,703     42,697
      -----------------------------------------------------------------------
                                    170,320    165,842    336,415    319,424
    -------------------------------------------------------------------------

    Earnings from operations         81,503     66,241     93,663     84,569

    Gain on foreign exchange             34        123         37        220
    Interest expense                (17,307)   (12,556)   (33,072)   (23,826)
    (Loss) gain on disposal
     of capital assets                  (25)       (62)       (25)     1,139
    -------------------------------------------------------------------------
    Net earnings                     64,205     53,746     60,603     62,102

    Other comprehensive income            -          -          -          -
    -------------------------------------------------------------------------
    Net earnings and
     comprehensive income            64,205     53,746     60,603     62,102

    Retained earnings, beginning
     of period                      234,492    243,459    238,094    235,103
    -------------------------------------------------------------------------

    Retained earnings, end
     of period                    $ 298,697  $ 297,205  $ 298,697  $ 297,205
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    BRITISH COLUMBIA FERRY SERVICES INC.
    Consolidated Statements of Cash Flows (unaudited)
    (expressed in thousands)

    -------------------------------------------------------------------------
                                   Three months ended      Six months ended
                                      September 30           September 30
                                     2009       2008       2009       2008
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operations:
      Net earnings                $  64,205  $  53,746  $  60,603  $  62,102
      Items not involving cash:
        Amortization                 28,748     22,443     55,703     42,697
        Other non-cash charges          467       (112)      (249)    (1,084)
      Long-term regulatory
       costs deferred                 3,529      1,737      6,254        741
      Change in non-cash
       operating working capital    (19,189)    (4,296)   (20,983)   (26,045)
      -----------------------------------------------------------------------
                                     77,760     73,518    101,328     78,411
    -------------------------------------------------------------------------

    Financing:
      Proceeds from issuance
       of bonds                           -          -          -     90,000
      Establishment of debt
       service reserve                    -          -          -     (2,225)
      Repayment of
       long-term debt                (4,500)         -     (4,500)         -
      (Repayment of) proceeds
        from short-term loans       (19,990)    10,974    (17,956)    10,974
      Repayment of capital
       lease obligations               (142)      (202)      (297)      (330)
      Deferred financing
       costs incurred                     -         (3)         -       (243)
      -----------------------------------------------------------------------
                                    (24,632)    10,769    (22,753)    98,176
    -------------------------------------------------------------------------

    Investing:
      (Cost of) proceeds from
        disposal of property,
        plant and equipment
        and intangible assets             -        (28)         4      1,381
      Purchase of property,
       plant and  equipment
       and intangible assets        (13,456)   (88,252)   (35,916)  (283,075)
      (Purchase of) proceeds
        from short-term
        investments                     (25)     2,399        (25)    (4,993)
      -----------------------------------------------------------------------
                                    (13,481)   (85,881)   (35,937)  (286,687)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents            39,647     (1,594)    42,638   (110,100)

    Cash and cash equivalents,
     beginning of period             15,393      7,823     12,402    116,329
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $  55,040   $  6,229  $  55,040  $   6,229
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%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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