BC FERRIES RELEASES SECOND QUARTER RESULTS

VICTORIA, Nov. 18 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $54.3 million and $55.2 million for the three- and six-month periods ended September 30, 2010, down from $64.2 million and $60.6 million for the three- and six-month periods ended September 30, 2009.

Total revenue for the three-month period ended September 30, 2010, decreased from $251.8 million to $246.0 million, while operating expenses increased from $170.3 million to $173.6 million, compared to the same period last year.  For the six-months ended September 30, 2010, total revenue was $436.3 million compared to $430.1 million for the six-month period ended September 30, 2009.  Operating expenses for the same period were $344.9 million, up from $336.4 million in the prior year. 

"BC Ferries will be facing significant challenges over the next 18 months. Revenue and traffic levels are not expected to return to past levels but we are planning to continue scheduled repairs and maintenance," said David L. Hahn, BC Ferries' President and CEO. "As such we expect to incur losses in the next fiscal year. However, with the recent announcement of duty remission from the Government of Canada, we will have more than enough cash to support our commitments."

During the second quarter, BC Ferries provided over 45,000 sailings, carrying 7.2 million passengers and over 2.6 million vehicles. However the Company experienced a traffic decline of 2.0 per cent in vehicle traffic and 0.5 per cent in passenger traffic compared to the same period last year.  BC Ferries does not anticipate that economic conditions will improve in the near term and is continuing its program of cost containment and deferrals, while maintaining safe and reliable service. 

Capital expenditures in the three and six months ended September 30, 2010 totalled $25.6 million and $51.6 million, respectively.  The next significant vessel renewal program will commence for the minor routes in the near future.

In August 2010, the Government of Canada announced stimulus funding for three projects: an overhead walkway at Horseshoe Bay; a foot passenger walkway at Campbell River; and a waste water facility at Langdale.  BC Ferries expects to receive approximately $2.1 million of the total project costs budgeted at $5.2 million.  This funding is in addition to eight sewage pump-ashore and waste water treatment projects previously announced.  The net funding for these projects that is expected to be received is $7.5 million.

BC Ferries' credit ratings at September 30, 2010, were A (DBRS) and A+ (Standard & Poor's), both with a stable trend.  At September 30, 2010, the Company's unrestricted cash and cash equivalents totalled $62 million and its credit facility was undrawn.

"BC Ferries was very pleased to receive confirmation this fall that the Government of Canada had granted our request for duty remission of $119.4 million (including related GST) on our four vessels built offshore," said David L. Hahn, BC Ferries' President and CEO.  "Our customers and all British Columbians will benefit greatly by this decision, as we utilize this funding for an across-the-board tariff reduction of approximately 2 per cent, and $20 million in upgrades to ship repair and maintenance facilities in the province."

Other notable events during the quarter include the continuation of fuel rebates of 2 per cent on average on the major routes.  On August 17, 2010, the fuel rebate on many of our other routes was reduced from 5 per cent to 2 per cent on average. On November 15, 2010, BC Ferries announced that all remaining fuel surcharges will be eliminated December 1, 2010. On August 31, 2010, BC Ferries filed a submission with the BC Ferries Commissioner to seek clarification that its drop trailer service is priced in a manner that reflects direct costs and an appropriate proportion of indirect costs, and that Company competes on a fair basis.  On September 30, 2010, the Company filed its submission with the Commissioner for the third performance term (April 1, 2012 - March 31, 2016).

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis are filed on SEDAR and will be available at www.sedar.com.

FORWARD LOOKING STATEMENTS

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, 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 our vessel renewal program, 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.

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

				September 30, 2010 (unaudited)			March 31, 2010
Assets
Current assets:
				Cash and cash equivalents	$	62,493	$	10,608
				Restricted cash equivalents and short-term investments		37,040		37,240
				Other short-term investments		7,897		7,678
				Accounts receivable		140,965		17,707
				Prepaid expenses		7,883		6,813
				Inventories		18,784		18,040
				Regulatory assets		-		4,775
						275,062		102,861
Property, plant and equipment						1,563,614		1,644,069
Intangible assets						32,754		26,406
Assets held for sale						200		200
Long-term land lease						33,208		33,437
					$	1,904,838	$	1,806,973
Liabilities and Shareholders' Equity
Current liabilities:
				Accounts payable and accrued liabilities	$	43,234	$	38,884
				Interest payable on long-term debt		18,373		18,319
				Accrued employee costs		45,676		48,644
				Deferred revenue		13,066		16,023
				Regulatory liabilities		1,899		-
				Current portion of long-term debt		14,625		9,000
				Current portion of accrued employee future benefits		800		800
				Current portion of obligations under capital lease		1,161		398
						138,834		132,068
Accrued employee future benefits						11,440		11,130
Regulatory liabilities						1,437		4,325
Long-term debt						1,338,536		1,348,183
Obligations under capital lease						48,225		139
Other long-term liabilities						209		172
						1,538,681		1,496,017
Shareholders' equity:
				Share capital		75,478		75,478
				Retained earnings		290,679		235,478
						366,157		310,956
					$	1,904,838	$	1,806,973

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
					2010		2009				2010			2009
Revenue:
			Tariffs	$	155,709	$	161,336			$	273,921	$		269,379
			Ferry service fees		46,408		45,614				84,939			83,848
			Federal-Provincial Subsidy Agreement		6,731		6,731				13,462			13,462
			Retail		28,052		28,875				48,142			48,764
			Other income		9,115		9,267				15,790			14,625
					246,015		251,823				436,254			430,078
Expenses:
		Operations			114,908		110,076				218,524			210,535
		Maintenance			12,623		14,130				36,475			37,832
		Administration			7,317		7,016				14,834			14,462
		Cost of retail goods sold			10,277		10,350				17,957			17,883
		Amortization			28,441		28,748				57,129			55,703
					173,566		170,320				344,919			336,415
Earnings from operations					72,449		81,503				91,335			93,663
Gain on foreign exchange					31		34				106			37
Interest expense					(17,959)		(17,307)				(35,987)			(33,072)
Loss on disposal of capital assets					(239)		(25)				(253)			(25)
Net earnings					54,282		64,205				55,201			60,603
Other comprehensive income					-		-				-			-
Net earnings and comprehensive income					54,282		64,205				55,201			60,603
Retained earnings, beginning of period					236,397		234,492				235,478			238,094
Retained earnings, end of period				$	290,679	$	298,697			$	290,679	$		298,697

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

					Three months ended						Six months ended
					September 30						September 30
						2010		2009			2010		2009
Cash provided by (used in):
Operations:
	Net earnings				$	54,282	$	64,205		$	55,201	$	60,603
	Items not involving cash:
		Amortization				28,441		28,748			57,129		55,703
		Other non-cash charges				1,401		467			1,790		(249)
	Long-term regulatory costs deferred					(2,927)		3,529			(5,276)		6,254
	Change in non-cash operating working capital					2,957		(19,189)			(8,345)		(20,983)
						84,154		77,760			100,499		101,328
Financing:
	Repayment of long-term debt					(4,500)		(4,500)			(4,500)		(4,500)
	Repayment of short-term loans					-		(19,990)			-		(17,956)
	Repayment of capital lease obligations					(286)		(142)			(397)		(297)
						(4,786)		(24,632)			(4,897)		(22,753)
Investing:
	Proceeds from  disposal of property, plant and equipment and intangible assets					52		-			78		4
	Purchase of property, plant and  equipment and intangible assets					(23,137)		(13,456)			(43,776)		(35,916)
	Reduction of debt service reserves					200		-			200		-
	Purchase of short-term investments					(57)		(25)			(219)		(25)
						(22,942)		(13,481)			(43,717)		(35,937)
Increase in cash and cash equivalents						56,426		39,647			51,885		42,638
Cash and cash equivalents, beginning of period						6,067		15,393			10,608		12,402
Cash and cash equivalents, end of period					$	62,493	$	55,040		$	62,493	$	55,040

%SEDAR: 00020627E

For further information:

Media Contact: BC Ferries, Media Relations Victoria:  [phone]

Customer Contact: Victoria: [phone] Toll-free:  1-888-BCFERRY (1-888-223-3779)