BC Ferries releases year-end results

VICTORIA, June 20, 2014 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its year-end results today for fiscal 2014. 

Consolidated net earnings were $18.0 million for fiscal 2014, an increase of $2.5 million from the prior year's net earnings of $15.5 million.  Fiscal 2014 net earnings reflect the effects of increased fares and lower financing costs, partially offset by lower traffic levels and lower transportation fees. As a result of ongoing cost containment efforts, the company's operating expenses, excluding fuel costs, were $13.3 million below previously planned levels for fiscal 2014.

Revenues for the year increased from $786.4 million to $800.2 million and operating expenses increased from $701.6 million to $714.3 million compared to the year prior. The $12.7 million increase in fiscal 2014 operating expenses mainly consists of increases in fuel expenses, collective agreement increases to wage rates, operational overtime and benefit costs. 

Capital expenditures in the three and twelve months ended March 31, 2014 totalled $40.8 million and $129.9 million, respectively.  For fiscal 2014, these investments include: $65.5 million in vessel upgrades and modifications; $43.6 million in terminal marine structures; $16.9 million in information technology; and $3.9 million in terminal and building upgrades and equipment. 

On February 5, 2014, the Province announced service level reductions on the northern and minor routes to better align service levels to demand, and to ensure BC Ferries is a strong, viable company to serve residents and tourists for years to come.  BC Ferries worked with the affected communities to implement these service level reductions in a manner intended to lessen their impact. 

"As the service provider, we work closely with the provincial government which sets service levels as a matter of public policy, and the BC Ferries Commission, which regulates our fares," said Mike Corrigan, BC Ferries' President and CEO.  "We understand the vital role we play in maintaining the quality of life of people who live, work and play in British Columbia, so we will stay focused on what we do best: serving our customers well and maintaining a safe, reliable and efficient fleet." The Commissioner, independent of both government and BC Ferries, regulates fares by balancing the interests of customers and taxpayers, while protecting the long term sustainability of the company.

In fiscal 2014, BC Ferries experienced a 1.3 per cent decline in vehicle traffic and a 1.1 per cent decline in passenger traffic compared to fiscal 2013.  Fiscal 2014 traffic was negatively impacted by the timing of the Easter holiday weekend. Fiscal 2014 included only one day of the Easter holiday weekend, while fiscal 2013 included seven such days.  BC Ferries believes that, when adjusted for the timing of Easter, fiscal 2014 traffic levels were generally flat compared to the prior year. 

Significant events during or subsequent to fiscal 2014 include: the July 24, 2013 redemption of all $140 million of the outstanding Series 08-02 Bonds, formerly due December 19, 2013; the October 25, 2013 completion of a private placement of $200 million of 30-year senior secured bonds that bear interest at a rate of 4.702 per cent; and the April 28, 2014 completion of a private placement of $200 million of 30-year senior secured bonds that bear interest at a rate of 4.289 per cent.  The effective rate of this issue, net of hedging, is 4.50 per cent, the lowest effective bond interest rate in the 11 year history of the company.

On February 26, 2014, after receiving confirmation from the BC Ferries Commissioner that the expenditures required to implement the cable ferry system on the Buckley Bay – Denman Island route are reasonable and prudent, Seaspan's Vancouver Shipyards was awarded the $15 million contract for construction of the cable ferry. 

On March 19, 2014, BC Ferries announced the award of contracts totalling $15 million for the construction of the Buckley Bay and Denman West cable ferry berths.  These contracts include an award to Vancouver Pile Driving Ltd. for supply of two concrete floating pontoons and another award to Ruskin Construction Ltd. for construction of the two berths. 

BC Ferries received WorkSafeBC's Certificate of Recognition (COR) for the successful implementation of the Safety Management System. As a result, the company received a rebate of $600,000 in WorkSafeBC premiums, in addition to the $500,000 in premium savings the company expects to realize this year.  The company also received the Lattitude Productions UK International Award for Inspiring Safety, as well as won the Lloyd's list North America Safety Award in the training category for improvements in navigation safety as a result of the new bridge simulation training program.

A project to construct three new intermediate class ferries is underway.  BC Ferries is currently reviewing the responses to the Request for Proposals the company issued in December 2013. The new vessels are expected to enter into service in 2016 and 2017, and will replace the 49-year old Queen of Burnaby and the 50-year old Queen of Nanaimo.  These new ships will be designed to operate as dual-fuel capable, so they can run on liquefied natural gas or marine diesel oil. 

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis, as well as the Statement of Executive Compensation, 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 based on passengers transported annually and transportation infrastructure, and carried 19.7 million passengers and 7.6 million vehicles during the fiscal year ended March 31, 2014.  BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 24 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, traffic levels, BC Ferries' vessel replacement program for the Queen of Burnaby and the Queen of Nanaimo, and its cable ferry initiative. 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, 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, total comprehensive income adjusted for the effect of rate regulation, and 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.
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars)

	As at,
	March 31, 2014	March 31, 2013
Assets
Current assets
Cash and cash equivalents	71,365	36,641
Restricted short-term investments	35,792	35,575
Other short-term investments	81,006	43,403
Trade and other receivables	16,577	18,118
Prepaid expenses	6,934	10,706
Inventories	25,073	23,257
	236,747	167,700
Non-current assets
Long-term loan receivable	24,515	24,515
Long-term land lease	31,604	32,063
Property, plant and equipment	1,539,162	1,552,062
Intangible assets	53,164	47,942
	1,648,445	1,656,582
Total assets	1,885,192	1,824,282
Liabilities
Current liabilities
Accounts payable and accrued liabilities	48,134	51,803
Interest payable on long-term debt	19,634	18,063
Deferred revenue	14,563	13,634
Derivative liabilities	5,274	12
Current portion of long-term debt	270,250	149,000
Current portion of accrued employee future benefits	2,204	2,204
Current portion of obligations under finance lease	1,120	1,072
Provisions	51,801	50,839
	412,980	286,627
Non-current liabilities
Accrued employee future benefits	15,931	16,604
Long-term debt	1,066,531	1,137,212
Obligations under finance lease	44,821	45,941
	1,127,283	1,199,757
Total liabilities	1,540,263	1,486,384
Equity
Share capital	75,478	75,478
Contributed surplus	25,000	25,000
Retained earnings	246,142	234,187
Total equity before reserves	346,620	334,665
Reserves	(1,691)	3,233
Total equity including reserves	344,929	337,898
Total liabilities and equity	1,885,192	1,824,282

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)

	Years ended
	March 31,
	2014	2013
Revenue
Vehicle and passenger fares	489,305	468,780
Ferry service fees	180,076	182,100
Retail	78,932	76,496
Federal-Provincial Subsidy Agreement	28,373	28,078
Fuel surcharges	2,689	11,469
Regulated other income	13,458	12,848
Other income	7,328	6,602
Total revenue	800,161	786,373
Expenses
Operations	451,670	436,812
Maintenance	63,240	69,938
Administration	31,636	29,632
Cost of retail goods sold	30,860	29,500
Depreciation and amortization	136,896	135,675
Total operating expenses	714,302	701,557
Operating profit	85,859	84,816
Net finance and other expenses
Net finance expenses
Finance income	3,721	2,922
Finance expenses	(71,030)	(72,076)
Total net finance expenses	(67,309)	(69,154)
Loss on disposal and revaluation of property, plant and equipment and intangible assets	(557)	(154)
Total net finance and other expenses	(67,866)	(69,308)
Net earnings	17,993	15,508
Other comprehensive (loss) income
Items not to be reclassified to net earnings	116	1,056
Items to be reclassified to net earnings	(5,040)	-
Total other comprehensive (loss) income	(4,924)	1,056
Total comprehensive income	13,069	16,564

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)

	Years ended
	March 31,
	2014	2013
Cash flows from operating activities
Net earnings	17,993	15,508
Items not affecting cash
Net finance costs recognized in net earnings	67,309	69,154
Depreciation and amortization of non-current assets	136,896	135,675
Loss on disposal and revaluation of property, plant and equipment and intangible assets	557	154
Other non-cash adjustments to property, plant & equipment	523	(791)
Change in derivative liabilities recognized in net earnings	222	-
Changes in
Long-term accrued employee future benefits	(569)	(757)
Provisions	962	3,817
Long-term land lease	459	458
Accrued interest costs	(1,110)	246
Total non-cash items	205,249	207,956
Movements in operating working capital
Trade and other receivables	1,541	24,223
Prepaid expenses	3,772	(3,981)
Inventories	(1,816)	(1,241)
Accounts payable and accrued liabilities	(3,669)	1,095
Deferred revenue	929	(150)
Change in non-cash working capital	757	19,946
Change attributable to capital asset acquisitions	(1,908)	6,653
Change attributable to contributed surplus	-	(25,000)
Change in non-cash operating working capital	(1,151)	1,599
Cash generated from operating activities	222,091	225,063
Interest rate support received	-	742
Interest received	4,554	2,268
Interest paid	(71,402)	(73,471)
Net cash generated by operating activities	155,243	154,602

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)

	Years ended
	March 31,
	2014	2013
Cash flows from financing activities
Proceeds from issuance of bonds	200,000	-
Repayment of long-term debt	(149,000)	(9,000)
Repayment of short-term debt	-	(17,737)
Repayment of finance lease obligations	(1,072)	(974)
Contributed surplus payment from Province	-	25,000
Dividends paid on preferred shares	(6,038)	(6,038)
Deferred financing costs incurred	(1,390)	-
Net cash generated by (used in) financing activities	42,500	(8,749)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	53	120
Purchase of property, plant and equipment and intangible assets	(125,252)	(100,639)
(Increase) decrease of debt service reserve	(217)	130
Purchase of short-term investments	(37,603)	(16,523)
Net cash used in investing activities	(163,019)	(116,912)
Net increase in cash and cash equivalents	34,724	28,941
Cash and cash equivalents, beginning of year	36,641	7,700
Cash and cash equivalents, end of year	71,365	36,641

                                                                                                                                            

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars)

	Share capital	Contributed surplus	Retained earnings	Total equity before reserves	Reserves	Total equity including reserves
Balance as at April 1, 2012	75,478	25,000	224,717	325,195	2,177	327,372
Net earnings for the year ended March 31, 2013	-	-	15,508	15,508	-	15,508
Other comprehensive income for the year ended March 31, 2013	-	-	-	-	1,056	1,056
Preferred share dividends	-	-	(6,038)	(6,038)	-	(6,038)
Balance as at March 31, 2013	75,478	25,000	234,187	334,665	3,233	337,898
Net earnings for the year ended March 31, 2014	-	-	17,993	17,993	-	17,993
Other comprehensive loss for the year ended March 31, 2014	-	-	-	-	(4,924)	(4,924)
Preferred share dividends	-	-	(6,038)	(6,038)	-	(6,038)
Balance as at March 31, 2014	75,478	25,000	246,142	346,620	(1,691)	344,929

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)