BC Ferries Releases Second Quarter Results

VICTORIA, Nov. 20, 2015 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $84.5 million and $103.3 million for the three and six-month periods ended September 30, 2015, up from $76.4 million and $90.3 million for the three and six-month periods ended September 30, 2014. 

"Due to the seasonality of ferry travel, we typically generate higher net earnings in the first and second quarters, which are subsequently reduced by net losses in the last two quarters of the fiscal year," said Mike Corrigan, BC Ferries' President and CEO.  "Traffic volumes are higher in the spring and summer months, and when traffic slows down in the fall and winter months, we begin our refit season, making substantial investments in our vessels and terminals to maintain our high levels of service."

Total revenue for the three-month period ended September 30, 2015 increased from $284.2 million to $292.5 million compared to the same period last year, mainly due to increases in traffic. Operating expenses increased marginally, from $192.6 million to $194.0 million compared to the same period last year. For the six months ended September 30, 2015, total revenue was $510.2 million, up from $497.3 million in the prior year. Operating expenses for the same period were $378.6 million, up from $375.1 million in the prior year.

"We have an ambitious capital plan to invest over $3 billion over the next 12 years to replace aging vessels, marine structures, information technology systems and other capital assets required for continued safe and reliable ferry service," said Corrigan. "Earnings are important so we can continue to invest in projects such as new fuel-efficient vessels and new technology systems that will offer customers opportunities for discounted fares at off-peak travel times, a model we are currently testing with our 50 per cent off vehicles promotion."

Capital expenditures in the three and six-months ended September 30, 2015 totalled $28.7 million and $65.3 million, respectively. Projects included terminal marine structures, vessel upgrades and modifications, information technology investments, and terminal and building upgrades and equipment.

During the three months ended September 30, 2015, BC Ferries provided over 45,000 sailings. During this period, the company carried 7.1 million passengers and 2.6 million vehicles, an increase of 3.4 per cent and 3.5 per cent, respectively, compared to the same quarter in the prior year.

Significant events during or subsequent to the quarter included the first steel cut on the third new Salish-Class vessel on July 1, 2015. The construction of the other two vessels started earlier in the year and is progressing on schedule. The three new vessels will be dual-fuel, capable of running on either diesel or liquefied natural gas (LNG). On July 28, 2015, BC Ferries announced the names of the new Salish-Class vessels, the Salish Orca, Salish Eagle and Salish Raven. These new ferries are scheduled for delivery in August 2016, November 2016 and February 2017.

On July 9, 2015, BC Ferries announced the three shipyards, including one British Columbian yard, shortlisted for the mid-life upgrades of its two largest ships, the Spirit-Class. The mid-life upgrades include the potential conversion of the Spirit of British Columbia and the Spirit of Vancouver Island to dual-fuel vessels, capable of running on diesel or LNG. These two vessels have been in service for over twenty years and have an expected service life of 45 years. The mid-life upgrade of the Spirit of British Columbia is expected to be completed by the spring of 2018 and the Spirit of Vancouver Island is expected to be completed the following year.

On September 16, 2015, the British Columbia Ferries Commissioner issued Order 15-03 which established the final price cap increases of 1.9 per cent for each of the four years of performance term four (PT4), commencing April 1, 2016. The order also requires a fuel management plan to be submitted prior to the start of PT4 setting out strategies for fuel procurement, minimizing fuel consumption and the transition to alternate fuels during PT4.

On November 19, 2015, BC Ferries officially took ownership of the new cable ferry, the Baynes Sound Connector, with the title transfer from Seaspan's Vancouver Shipyards. BC Ferries will now be conducting its own rigorous crew training and familiarization, as well as undergoing Transport Canada certification. The Baynes Sound Connector is expected to commence service between Buckley Bay on Vancouver Island and Denman Island by early February 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. 

Under contract to the Province of British Columbia, BC Ferries is the service provider responsible for the delivery of safe, efficient and dependable ferry service along coastal British Columbia.

BC Ferries is one of the largest ferry operators in the world, providing year-round vehicle and passenger service on 24 routes to 47 terminals, with a fleet of 35 vessels. In fiscal 2015, BC Ferries carried 19.8 million passengers and 7.7 million vehicles throughout coastal British Columbia.

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: capital expenditure levels, traffic levels, Salish-Class vessels, and Spirit-Class mid-life upgrades. 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 Nation 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 International Financial Reporting Standards (IFRS), we present certain supplemental non-IFRS measures. These include, but are not limited to, vehicle and passenger traffic and number of sailings. 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, 2015	March 31, 2015
Assets
Current assets
	Cash and cash equivalents	107,291	65,574
	Restricted short-term investments	32,236	32,496
	Other short-term investments	86,005	62,098
	Trade and other receivables	19,400	19,490
	Prepaid expenses	11,427	6,177
	Inventories	25,700	25,393
		282,059	211,228
Non-current assets
	Loan receivable	24,515	24,515
	Land lease	30,917	31,146
	Property, plant and equipment	1,512,615	1,524,692
	Intangible assets	71,352	65,031
		1,639,399	1,645,384
Total assets		1,921,458	1,856,612
Liabilities
Current liabilities
	Accounts payable and accrued liabilities	30,833	57,401
	Interest payable on long-term debt	18,361	18,329
	Deferred revenue	16,120	16,957
	Derivative liabilities	4,506	4,433
	Current portion of long-term debt	24,000	24,000
	Current portion of accrued employee future benefits	2,400	2,400
	Current portion of obligations under finance lease	1,481	1,309
	Provisions	49,536	48,065
		147,237	172,894
Non-current liabilities
	Accrued employee future benefits	18,503	18,800
	Long-term debt	1,229,905	1,241,699
	Obligations under finance lease	42,765	43,514
	Other liabilities	1,500	1,500
		1,292,673	1,305,513
Total liabilities		1,439,910	1,478,407
Equity
	Share capital	75,478	75,478
	Contributed surplus	25,000	25,000
	Retained earnings	392,481	289,177
	Total equity before reserves	492,959	389,655
	Reserves	(11,411)	(11,450)
Total equity including reserves		481,548	378,205
Total liabilities and equity		1,921,458	1,856,612

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
			2015	2014	2015	2014
Revenue
	Vehicle and passenger fares		192,580	179,641	335,924	311,013
	Ferry service fees		54,526	54,195	95,785	99,242
	Retail		30,229	28,557	51,555	48,501
	Federal-Provincial Subsidy Agreement		7,183	7,089	14,365	14,178
	Fuel (rebates) surcharges		(2,126)	5,786	(3,752)	10,148
	Regulated other income		7,236	6,122	11,307	9,521
	Other income		2,857	2,777	5,000	4,673
Total revenue			292,485	284,167	510,184	497,276
Expenses
	Operations		124,441	125,359	236,671	240,383
	Maintenance		13,570	12,468	34,162	29,117
	Administration		8,236	8,020	16,220	15,633
	Cost of retail goods sold		11,911	11,157	20,562	19,146
	Depreciation and amortization		35,816	35,612	70,927	70,846
Total operating expenses			193,974	192,616	378,542	375,125
Operating profit			98,511	91,551	131,642	122,151
Net finance and other expenses
	Net finance expense
		Finance income	1,456	969	2,353	2,036
		Finance expenses	(15,248)	(16,124)	(30,490)	(33,836)
	Net finance expense		(13,792)	(15,155)	(28,137)	(31,800)
	(Loss) gain on disposal and revaluation of property,
		plant and equipment, intangible assets and
		inventory	(212)	23	(201)	(44)
Net finance and other expenses			(14,004)	(15,132)	(28,338)	(31,844)
Net earnings			84,507	76,419	103,304	90,307
Other comprehensive loss
	Items not to be reclassified to net earnings		-	(2,890)	-	(2,890)
	Items to be reclassified to net earnings		(3,543)	-	(85)	(2,396)
Total other comprehensive loss			(3,543)	(2,890)	(85)	(5,286)
Total comprehensive income			80,964	73,529	103,219	85,021

                   

BRITISH COLUMBIA FERRY SERVICES INC. Interim Consolidated Statements of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
				Six months ended September 30
				2015	2014
Cash flows from operating activities
Net earnings				103,304	90,307
Items not affecting cash
		Net finance expense		28,137	31,800
		Depreciation and amortization		70,927	70,846
		Loss on disposal and revaluation of property, plant and
			equipment, intangible assets and inventory	201	44
		Other non-cash adjustments to property, plant and equipment		(54)	(1,781)
		Changes in
			Accrued employee future benefits	(297)	205
			Derivative liabilities recognized in net earnings	(12)	(14)
			Provisions	1,471	(5,139)
			Long-term land lease	229	229
			Accrued interest costs	609	246
Total non-cash items				101,211	96,436
Movements in operating working capital
		Trade and other receivables		90	3,958
		Prepaid expenses		(5,250)	(5,027)
		Inventories		(307)	(2,125)
		Accounts payable and accrued liabilities		(26,568)	(15,529)
		Deferred revenue		(837)	222
		Change in non-cash working capital		(32,872)	(18,501)
		Change attributable to capital asset acquisitions		18,917	7,103
		Change in non-cash operating working capital		(13,955)	(11,398)
Cash generated from operating activities				190,560	175,345
		Interest received		1,769	1,827
		Interest paid		(32,791)	(36,167)
		Net cash generated by operating activities		159,538	141,005

BRITISH COLUMBIA FERRY SERVICES INC.
Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
	Six months ended September 30
	2015	2014
Cash flows from financing activities
Proceeds from issuance of bonds	-	200,000
Repayment of long-term debt	(12,000)	(258,250)
Repayment of finance lease obligations	(577)	(557)
Deferred financing costs incurred	-	(1,315)
Hedge losses on interest rate forward contracts	-	(7,652)
Net cash used in financing activities	(12,577)	(67,774)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	146	72
Purchase of property, plant and equipment and intangible assets	(81,743)	(56,531)
Decrease of debt service reserves	260	3,046
Net (purchase of) proceeds from short-term investments	(23,907)	24,971
Net cash used in investing activities	(105,244)	(28,442)
Net increase in cash and cash equivalents	41,717	44,789
Cash and cash equivalents, beginning of period	65,574	71,365
Cash and cash equivalents, end of period	107,291	116,154

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	Reserves	Total equity including reserves
Balance as at March 31, 2014		75,478	25,000	246,142	346,620	(1,691)	344,929
Net earnings for the six months ended		-	-	90,307	90,307	-	90,307
	September 30, 2014
Other comprehensive loss for the six		-	-	-	-	(5,286)	(5,286)
	months ended September 30, 2014
Hedge losses reclassified to net earnings		-	-	-	-	105	105
Balance as at September 30, 2014		75,478	25,000	336,449	436,927	(6,872)	430,055
Balance as at March 31, 2015		75,478	25,000	289,177	389,655	(11,450)	378,205
Net earnings for the six months ended		-	-	103,304	103,304	-	103,304
	September 30, 2015
Other comprehensive loss for the six		-	-	-	-	(85)	(85)
	months ended September 30, 2015
Hedge losses reclassified to net earnings		-	-	-	-	124	124
Balance as at September 30, 2015		75,478	25,000	392,481	492,959	(11,411)	481,548

SOURCE British Columbia Ferry Services Inc.

For further information: Media Contact: BC Ferries, Media Relations, Victoria: [phone]; Customer Contact: Victoria: [phone], Toll-free: 1-888-BCFERRY (1-888-223-3779)