BC Ferries Releases Third Quarter Results

VICTORIA, BC, Feb. 20, 2014 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for fiscal 2013/14.  The company reported a net loss of $12.3 million for the three months ended December 31, 2013, compared to a net loss of $17.2 million in the same quarter last year.  Net earnings for the nine-month period ended December 31, 2013 were $56.3 million, up from $52.6 million for the same period in the previous year.

BC Ferries' quarterly results are affected by the seasonality of 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.

Total revenue for the three-month period ended December 31, 2013 increased by $5.2 million to $174.8 million compared to the same quarter last year.  Total revenue for the nine months ended December 31, 2013 increased $10.5 million to $646.3 million compared to the same period last year.  Operating expenses increased from $169.4 million to $171.1 million compared to the same quarter last year.  For the nine months ended December 31, 2013, operating expenses increased from $530.8 million to $539.1 million compared to the same period the year prior. These operating expense increases result from higher fuel and labour costs, partially offset by a decrease in maintenance costs.

"Safety is of paramount importance at BC Ferries.  Within that context, we are maintaining tight control on discretionary expenses and reducing costs wherever we can," said Mike Corrigan, BC Ferries' President and CEO.  "We are well on our way to achieving the $54 million in savings tasked by the BC Ferries Commissioner and I expect that we will exceed this target by the end of performance term three."

Capital expenditures in the three and nine-months ended December 31, 2013 totalled $42.4 million and $89.1 million respectively.  Projects included vessel upgrades and modifications, terminal upgrades and information technology projects.

In the third quarter of fiscal 2013/14, vehicle traffic increased 0.8 per cent (0.6 per cent decrease year-to-date) and passenger traffic increased 1.0 per cent (0.5 per cent decrease year-to-date) compared to the same periods of the prior year.  Year-to-date traffic was negatively impacted by the timing of the Easter holiday and storm activity in the second quarter. 

Due to the high cost of fuel, on January 17, 2014, BC Ferries implemented a fuel surcharge of 3.5 per cent on average on all routes with the exception of the Port Hardy - Prince Rupert and Prince Rupert - Haida Gwaii routes.

Significant events in the third quarter of fiscal 2013/14 include the completion on October 25, 2013 of a private placement of $200 million of 30-year senior secured bonds with accredited investors.  These bonds bear interest at 4.702 per cent per annum, payable semi-annually.  As previously announced, it was BC Ferries' intention to refinance the redeemed $140 million Series 08-2 Bonds, and this issuance is partially related to that early redemption.

On February 5, 2014, the Province announced a service level adjustment plan for BC Ferries to achieve $14.0 million in net savings over the remainder of performance term three.  The plan includes the elimination of approximately 6,900 round trips per year, which is approximately 8 per cent of BC Ferries' total round trip sailings.  The plan will also change the current Monday to Thursday seniors' discount rate on most routes from 100 per cent to 50 per cent commencing April 1, 2014.  Further service adjustments to the major routes totalling $4.9 million are yet to be identified.

On December 9, 2013, BC Ferries issued a Request for Proposals (RFP) to five pre-qualified shipyards, including one Canadian proponent, to build three new intermediate class vessels to replace the 48-year old Queen of Burnaby and the 49-year old Queen of Nanaimo.  The RFP stipulates that these three vessels be designed to operate as dual-fuel capable, so they can run on liquefied natural gas or diesel fuel.

On February 20, 2014, in response to BC Ferries' December 20, 2013 application, the company received a decision from the BC Ferries Commissioner confirming that the expenditures required to implement the cable ferry system on the route connecting Buckley Bay and Denman Island are reasonable and prudent.  In conjunction with this decision, the BC Ferries Commissioner included reasonable conditions which BC Ferries is confident it will be able to meet.

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 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, and expectations of the impact of BC Ferries' cost containment program; BC Ferries' vessel replacement program for the Queen of Burnaby and the Queen of Nanaimo, and its cable ferry initiative; and BC Ferries' Standard and Poor's credit rating. 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,
			December 31, 2013		March 31, 2013
Assets
Current assets
	Cash and cash equivalents			99,788	36,641
	Restricted short-term investments			35,862	35,575
	Other short-term investments			96,514	43,403
	Trade and other receivables			13,036	18,118
	Prepaid expenses			8,599	10,706
	Inventories			24,968	23,257
				278,767	167,700
Non-current assets
	Long-term loan receivable			24,515	24,515
	Long-term land lease			31,719	32,063
	Property, plant and equipment			1,536,344	1,552,062
	Intangible assets			51,060	47,942
				1,643,638	1,656,582
Total assets				1,922,405	1,824,282
Liabilities
Current liabilities
	Accounts payable and accrued liabilities			41,785	51,803
	Interest payable on long-term debt			16,499	18,063
	Deferred revenue			13,123	13,634
	Derivative liabilities			-	12
	Current portion of long-term debt			266,500	149,000
	Current portion of accrued employee future benefits			2,204	2,204
	Current portion of obligations under finance lease			1,107	1,072
	Provisions			51,165	50,839
				392,383	286,627
Non-current liabilities
	Accrued employee future benefits			16,057	16,604
	Long-term debt			1,074,572	1,137,212
	Obligations under finance lease			45,106	45,941
				1,135,735	1,199,757
Total liabilities				1,528,118	1,486,384
Equity
	Share capital			75,478	75,478
	Contributed surplus			25,000	25,000
	Retained earnings			290,472	234,187
	Total equity before reserves			390,950	334,665
	Land revaluation reserve			3,233	3,233
	Employee future benefit revaluation reserve			104	-
Total equity including reserves				394,287	337,898
Total liabilities and equity				1,922,405	1,824,282

British Columbia Ferry Services Inc. Interim Consolidated Statements of Comprehensive Income (unaudited) (Expressed in thousands of Canadian dollars)
			Three months ended		Nine months ended
			December 31,		December 31,
			2013	2012	2013	2012
Revenue
	Vehicle and passenger fares		105,206	100,273	400,751	380,519
	Ferry service fees		40,643	40,218	141,822	143,847
	Retail		17,172	16,472	64,902	62,663
	Federal-Provincial Subsidy Agreement		7,094	7,019	21,280	21,058
	Fuel surcharges		-	1,337	-	11,467
	Regulated other income		2,978	2,723	11,658	11,009
	Other income		1,718	1,593	5,837	5,283
Total revenue			174,811	169,635	646,250	635,846
Expenses
	Operations		106,253	101,434	345,142	333,755
	Maintenance		17,431	20,818	45,177	49,627
	Administration		7,428	7,160	21,950	21,484
	Cost of retail goods sold		6,842	6,492	25,252	24,068
	Depreciation and amortization		33,148	33,518	101,575	101,931
Total operating expenses			171,102	169,422	539,096	530,865
Operating profit			3,709	213	107,154	104,981
Net finance and other expenses
	Net finance expenses
	Finance income		1,078	804	2,603	1,993
	Finance expenses		(17,039)	(18,207)	(53,403)	(54,307)
	Total net finance expenses		(15,961)	(17,403)	(50,800)	(52,314)
	Loss on disposal of capital assets		(57)	-	(69)	(61)
Total net finance and other expenses			(16,018)	(17,403)	(50,869)	(52,375)
Net (loss) earnings			(12,309)	(17,190)	56,285	52,606
Other comprehensive income			-	-	104	-
Total comprehensive (loss) income			(12,309)	(17,190)	56,389	52,606

British Columbia Ferry Services Inc. Interim Consolidated Statements of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
		Nine months ended
		December 31,
		2013	2012
Cash flows from operating activities
Net earnings		56,285	52,606
Items not affecting cash
	Net finance costs recognized in net earnings	50,800	52,314
	Depreciation and amortization of non-current assets	101,575	101,931
	Loss on disposal of property, plant and equipment	69	61
	Other non-cash adjustments to property, plant & equipment	(62)	124
	Changes in
	Long-term accrued employee future benefits	(443)	(503)
	Derivative liabilities	(12)	(12)
	Provisions	326	3,572
	Long-term land lease	344	344
	Accrued interest costs	(1,020)	301
Total non-cash items		151,577	158,132
Movements in operating working capital
	Trade and other receivables	5,082	22,342
	Prepaid expenses	2,107	(2,231)
	Inventories	(1,711)	(1,300)
	Accounts payable and accrued liabilities	(10,018)	(16,332)
	Deferred revenue	(511)	(1,555)
	Change in non-cash working capital	(5,051)	924
	Change attributable to capital asset acquisitions	(91)	16,122
	Change attributable to contributed surplus	-	(25,000)
	Change in non-cash operating working capital	(5,142)	(7,954)
Cash generated from operating activities		202,720	202,784
	Interest rate support received	-	742
	Interest received	3,586	1,249
	Interest paid	(56,589)	(58,276)
Net cash generated by operating activities		149,717	146,499

British Columbia Ferry Services Inc. Interim Consolidated Statements of Cash Flows (unaudited) (Expressed in thousands of Canadian dollars)
	Nine months ended
	December 31,
	2013	2012
Cash flows from financing activities
Proceeds from issuance of bonds	200,000	-
Repayment of long-term debt	(144,500)	(4,500)
Proceeds from (repayment of) short-term debt	-	(17,737)
Repayment of finance lease obligations	(800)	(729)
Contributed surplus payment from Province	-	25,000
Deferred financing costs incurred	(1,387)	-
Net cash provided by financing activities	53,313	2,034
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	39	75
Purchase of property, plant and equipment and intangible assets	(86,524)	(72,538)
Changes in debt service reserve	(287)	65
Purchase of short-term investments	(53,111)	(51,418)
Net cash used in investing activities	(139,883)	(123,816)
Net increase in cash and cash equivalents	63,147	24,717
Cash and cash equivalents, beginning of period	36,641	7,700
Cash and cash equivalents, end of period	99,788	32,417

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 nine months ended December 31, 2012	-	-	52,606	52,606	-	-	52,606
Other comprehensive income for the nine months ended December 31, 2012	-	-	-	-	-	-	-
Balance as at December 31, 2012	75,478	25,000	277,323	377,801	2,177	-	379,978
Balance as at March 31, 2013	75,478	25,000	234,187	334,665	3,233	-	337,898
Net earnings for the nine months ended December 31, 2013	-	-	56,285	56,285	-	-	56,285
Other comprehensive income for the nine months ended December 31, 2013	-	-	-	-	-	104	104
Balance as at December 31, 2013	75,478	25,000	290,472	390,950	3,233	104	394,287

 

 

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)

Note to newsrooms: For urgent media inquiries off-hours, call our emergency pager at [phone].