BC Ferries releases third quarter results

VICTORIA, Feb. 24, 2012 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for fiscal 2011/12.  The company reported a net loss of $23.1 million for the three months ended December 31, 2011, compared to a net loss of $12.5 million in the same quarter last year.  Net earnings for the nine-month period ended December 31, 2011 were $28.7 million, down from $42.8 million for the same period in the previous year.  The loss in the third quarter of fiscal 2010/11 included a one-time gain of $9.3 million from the sale of the company's former head office building.

BC Ferries' quarterly results are affected by the seasonality of leisure travel patterns. The second quarter, covering the summer period, experiences the highest traffic levels and the highest earnings of the year. The third and fourth quarters reflect a seasonal downturn in traffic and the company utilizes these off-peak periods to perform upgrades and major maintenance and refit programs, as well as to undertake mandatory inspections on the majority of its vessels.

For the three months ended December 31, 2011, total revenue decreased by $1 million to $161.3 million compared to the same period last year.  Total revenue for the nine months ended December 31, 2011 increased $1.4 million to $600.0 million.

For the three months ended December 31, 2011, total operating expenses increased $0.8 million to $166.4 million, compared to the same period last year, with expenses in the nine-month period ended December 31, 2011 increasing by $6.9 million to $517.4 million compared to the nine months ended December 31, 2010.

In the third quarter of fiscal 2011/12, vehicle traffic declined by 3.6 per cent and passenger traffic declined by 3.0 per cent compared to the same period the year prior.  The traffic decline has been relatively consistent throughout all three quarters of fiscal 2012 and is the largest year-over-year traffic decline that BC Ferries has experienced in recent years.

On December 6, 2012, BC Ferries' Board announced the appointment of Michael J. Corrigan as President and CEO effective January 1, 2012 to replace outgoing CEO David L. Hahn.   The Board stated that Corrigan's past business experience, as well as his nine years in the roles of Chief Operating Officer and of Executive Vice President of Business Development at BC Ferries have prepared him well to take on the leadership of the company.

"I am looking forward to working with the provincial government, the Ferries Commissioner and ferry dependent communities to ensure we provide a ferry system that is safe, reliable and affordable," said Mike Corrigan, BC Ferries' President and CEO.  "I am also cognizant of the economic challenges we face and I am committed to ensuring our financial sustainability, without in any way compromising our focus on safety."

Notable events since June 30, 2011 include, the issuance of the British Columbia Ferries Commissioner's report to the B.C. Minister of Transportation and Infrastructure as to how the Coastal Ferry Act could be amended to balance the interests of ferry users with the financial sustainability of BC Ferries. The report reconfirms that BC Ferries is an efficient and well run operation but clearly articulates the challenges ahead if the company continues to operate the same level of service with the same level of funding. The company is awaiting the Province's response to the Commissioner's report and recommendations.

The company reached a tentative agreement with the BC Ferry & Marine Workers' Union for a three year extension, to October 31, 2015, of the Collective Agreement. The agreement has been ratified by the Union membership.

Former B.C. Auditor General George Morfitt released a comprehensive report arising from his follow-up of the operational safety audit he conducted five years ago. The report notes a significant improvement in the safety culture and practices within BC Ferries and concluded the company continues to operate a safe system.

A Request for Expressions of Interest was issued to determine whether a third party, under contract to BC Ferries, can provide cable ferry service at a lower cost, while maintaining high levels of safety, quality and reliability.  The company intends to issue a Request for Proposals as the next phase of the procurement process.

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.

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, 2011.  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: traffic levels; the extension of the Collective Agreement; our short-term and long-range business plans and cable ferry initiative; and the impact of the Commissioner's recommendations. 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)

			December 31, 2011 (unaudited)				March 31, 2011
Assets
Current assets:
	Cash and cash equivalents	$	27,642			$	33,335
	Restricted short-term investments		35,774				37,040
	Other short-term investments		26,880				64,074
	Accounts receivable		17,514				20,619
	Prepaid expenses		7,603				5,648
	Inventories		20,478				19,957
	Regulatory assets		1,194				3,703
			137,085				184,376
Property, plant and equipment			1,582,622				1,581,007
Intangible assets			38,380				34,929
Regulatory assets			997				-
Long-term loan receivable			24,515				24,247
Long-term land lease			32,635				32,979
		$	1,816,234			$	1,857,538
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities	$	39,625			$	51,249
	Short-term debt		-				3,949
	Interest payable on long-term debt		15,324				18,261
	Accrued employee costs		50,812				48,194
	Deferred revenue		13,348				15,596
	Derivative liabilities		-				23
	Current portion of long-term debt		9,000				22,125
	Current portion of accrued employee future benefits		1,200				1,200
	Current portion of obligations under capital lease		974				1,040
			130,283				161,637
Accrued employee future benefits			11,823				10,907
Regulatory liabilities			-				1,558
Long-term debt			1,289,491				1,327,014
Obligations under capital lease			47,258				47,723
			1,478,855				1,548,839
Shareholders' equity:
	Share capital		75,478				75,478
	Retained earnings		261,901				233,221
			337,379				308,699
		$	1,816,234			$	1,857,538

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

				Three months ended							Nine months ended
				December 31							December 31
				2011			2010				2011				2010
Revenue:
	Tariffs		$	98,601		$	99,086			$	376,060			$	373,007
	Ferry service fees			34,420			33,954				122,287				118,892
	Federal-Provincial Subsidy Agreement			6,872			6,731				20,615				20,193
	Retail			16,590			17,208				63,024				65,351
	Other income			4,804			5,344				18,032				21,134
				161,287			162,323				600,018				598,577
Expenses:
	Operations			97,902			96,676				317,493				315,201
	Maintenance			23,932			26,815				63,142				63,289
	Administration			6,818			7,531				22,624				22,365
	Cost of retail goods sold			6,473			6,525				23,903				24,482
	Amortization			31,305			28,059				90,229				85,188
				166,430			165,606				517,391				510,525
(Loss) earnings from operations				(5,143)			(3,283)				82,627				88,052
Gain on foreign exchange				37			67				214				173
Interest expense				(17,953)			(18,367)				(54,173)				(54,354)
(Loss) gain on disposal of capital assets				(25)			9,146				12				8,893
Net (loss) earnings				(23,084)			(12,437)				28,680				42,764
Other comprehensive income				-			-				-				-
Net (loss) earnings and comprehensive income				(23,084)			(12,437)				28,680				42,764
Retained earnings, beginning of period				284,985			290,679				233,221				235,478
Retained earnings, end of period			$	261,901		$	278,242			$	261,901			$	278,242

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

							Three months ended							Nine months ended
							December 31							December 31
							2011			2010				2011			2010
Cash provided by (used in):
Operations:
	Net (loss) earnings					$	(23,084)		$	(12,437)			$	28,680		$	42,764
	Items not involving cash:
		Amortization					31,305			28,059				90,229			85,188
		Other non-cash charges					2,379			(8,874)				4,227			(7,084)
	Long-term regulatory costs deferred						(1,855)			(1,628)				(2,555)			(6,904)
	Change in non-cash operating working capital						1,431			7,931				(16,867)			(414)
							10,176			13,051				103,714			113,550
Financing:
	Repayment of long-term debt						-			-				(51,375)			(4,500)
	Repayment of short-term loans						-			-				(3,949)			-
	Repayment of capital lease obligations						(259)			(318)				(798)			(715)
							(259)			(318)				(56,122)			(5,215)
Investing:
	Proceeds from disposal of property, plant and equipment						23			11,040				107			11,118
	Purchase of property, plant and  equipment and intangible assets						(35,873)			(34,420)				(91,584)			(78,196)
	Recovery of import duties and related taxes						-			119,449				-			119,449
	Reduction of debt service reserves						(29)			-				1,266			200
	Advancement of long-term loan						-			(24,247)				(268)			(24,247)
	Proceeds from (purchase of) short-term investments						32,230			(51,382)				37,194			(51,601)
							(3,649)			20,440				(53,285)			(23,277)
Increase (decrease) in cash and cash equivalents							6,268			33,173				(5,693)			85,058
Cash and cash equivalents, beginning of period							21,374			62,493				33,335			10,608
Cash and cash equivalents, end of period						$	27,642	$		95,666		$		27,642	$		95,666

 

Media Contact:
BC Ferries, Media Relations
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