BC Ferries releases year-end results

VICTORIA, June 10 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) today released its financial results for the year ended March 31, 2010.

Consolidated net earnings were $3.4 million for the year ended March 31, 2010, compared to net earnings of $9.0 million the previous year. As expected, the reduction in net earnings reflects increased amortization and financing costs of new capital assets that have entered service. BC Ferries' fleet and asset renewal program for the major and northern routes is now virtually complete. However, the company continues to invest significantly in its terminals and minor routes.

Revenues for the year increased from $681.8 million to $732.3 million, while operating expenses increased from $624.2 million to $660.0 million. The increase in expenses includes $22.1 million in amortization costs, $8.4 million in maintenance costs, and $6.3 million in wage rate increases from an average 3 per cent increase in accordance with the collective agreement. In addition, interest expense increased by $17.5 million over the previous fiscal year.

Capital expenditures in the three and twelve months ended March 31, 2010 totalled $30.4 million and $81.4 million, respectively.

In fiscal 2010, BC Ferries experienced an increase of 1.5 per cent in both passenger and vehicle traffic as economic conditions began to improve and fuel prices declined compared to the previous year. "While I am still concerned about the impacts that the world economy has on discretionary spending, I am optimistic that our traffic will continue to recover," said David L. Hahn, BC Ferries' President and CEO.

With the implementation of cost management initiatives including the reduction of exempt management positions last fiscal year, BC Ferries reduced administration expenses by $6.9 million or 18.5 per cent this fiscal year. The company reviews and updates its financial and operating plans on a regular basis to ensure appropriate alignment of expenses with revenues.

As part of the federal government's "Infrastructure Stimulus Fund" program, BC Ferries will qualify for partial reimbursements of eligible costs for eleven terminal upgrades including eight sewage pump-ashore and waste water treatment projects. The net funding expected to be received is $7.5 million.

During the fiscal year ended March 31, 2010, the new Northern Expedition entered service on the Inside Passage between Port Hardy and Prince Rupert and the Queen of Vancouver and the Queen of Prince Rupert were decommissioned. The Queen of Vancouver and the previously decommissioned Queen of Saanich were sold during the year, while the Queen of Prince Rupert remains available for sale.

Fourth quarter revenues increased from $128.5 million to $142.3 million compared to the same quarter in the prior year, while total expenses increased from $166.9 million to $179.1 million. BC Ferries reported a fourth quarter net loss of $36.8 million compared to a $38.4 million net loss in the same quarter the previous year. Due to the seasonality of ferry travel, BC Ferries typically generates higher earnings in the first two quarters, which are usually offset by net losses in the third and fourth quarter of the fiscal year.

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 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, turbulent financial markets, demographics, import duties remission, GST reduction, and the requirements of the Coastal Ferry Services Contract.

Forward looking statements included in this release include statements with respect to estimates of future customer demand, short and long-range business plans and our asset renewal programs for vessels and terminals. 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.

    Consolidated Balance Sheets
    (expressed in thousands)

                                                            As at March 31,
                                                         2010           2009
    Current assets:
      Cash and cash equivalents                   $    10,608    $    12,402
      Restricted cash equivalents and
       short-term investments                          37,240         37,240
      Other short-term investments                      7,678            153
      Accounts receivable                              17,707         13,181
      Prepaid expenses                                  6,813          8,132
      Inventories                                      18,040         16,835
      Regulatory assets                                 4,775          4,775
                                                      102,861         92,718
    Property, plant and equipment                   1,644,069      1,683,576
    Intangible assets                                  26,406         19,866
    Assets held for sale                                  200            435
    Regulatory assets                                       -         11,687
    Long-term land lease                               33,437         33,896
                                                  $ 1,806,973    $ 1,842,178
    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities    $    38,884    $    41,825
      Short-term debt                                       -         17,956
      Interest payable on long-term debt               18,319         18,395
      Accrued employee costs                           48,644         51,923
      Deferred revenue                                 16,023         15,409
      Derivative liabilities                                -            923
      Regulatory liabilities                                -          2,858
      Current portion of long-term debt                 9,000          9,000
      Current portion of accrued employee
       future benefits                                    800            800
      Current portion of obligations under
       capital lease                                      398            541
                                                      132,068        159,630

    Accrued employee future benefits                   11,130         12,047
    Regulatory liabilities                              4,325              -
    Long-term debt                                  1,348,183      1,356,239
    Obligations under capital lease                       139            537
    Other long-term liabilities                           172            153
                                                    1,496,017      1,528,606
    Shareholders' equity:
      Share capital                                    75,478         75,478
      Retained earnings                               235,478        238,094
                                                      310,956        313,572
                                                  $ 1,806,973    $ 1,842,178

    Consolidated Statements of Earnings, Comprehensive Income and Retained
    (expressed in thousands)

                                                        Years ended March 31,
                                                         2010           2009

      Tariffs                                     $   450,508    $   429,063
      Ferry service fees                              149,507        124,485
      Federal-Provincial Subsidy Agreement             26,924         26,294
      Retail                                           80,809         78,060
      Other income                                     24,557         23,898
                                                      732,305        681,800

      Operations                                      398,792        387,782
      Maintenance                                      85,579         77,124
      Administration                                   30,330         37,220
      Cost of retail goods sold                        30,127         28,929
      Amortization                                    115,175         93,088
                                                      660,003        624,143

    Earnings from operations                           72,302         57,657

    Gain on foreign exchange                              144            244
    Interest expense                                  (67,638)       (50,111)
    (Loss) gain on disposal and impairment of
     capital assets                                    (1,386)         1,239
    Net earnings                                        3,422          9,029

    Other comprehensive income                              -              -

    Net earnings and comprehensive income               3,422          9,029

    Retained earnings, beginning of year              238,094        235,103

    Preferred share dividend                           (6,038)        (6,038)


    Retained earnings, end of year                $   235,478    $   238,094

    Notes to Consolidated Financial Statements
    Years ended March 31, 2010 and 2009
    (columnar dollars expressed in thousands)

                                                        Years ended March 31,
                                                         2010           2009

    Cash provided by (used in):

      Net earnings                                $     3,422    $     9,029
      Items not involving cash:
        Amortization                                  115,175         93,088
        Other non-cash charges                          1,854           (289)
      Long-term regulatory costs deferred              10,314         (6,039)
      Change in non-cash operating working
       capital                                         (9,468)        (6,783)
                                                      121,297         89,006

      Dividends paid on preferred shares               (6,038)        (6,038)
      Proceeds from issuance of bonds and
       other long-term debt                                 -        338,000
      Debt service reserves                                 -         (8,170)
      Repayment of long-term debt                      (9,000)             -
      (Repayment of) proceeds from
       short-term loans                               (17,956)        17,956
      Repayment of capital lease obligations             (541)          (775)
      Deferred financing costs incurred                     -         (1,704)
                                                      (33,535)       339,269

      Proceeds from disposal of property,
       plant and equipment                              2,135          1,697
      Purchase of property, plant and
       equipment and intangible assets                (84,166)      (530,713)
      Increase in lands under long-term lease               -         (5,083)
      (Purchase of) proceeds from other
       short-term investments                          (7,525)         1,897
                                                      (89,556)      (532,202)

    (Decrease) in cash and cash equivalents            (1,794)      (103,927)

    Cash and cash equivalents, beginning of year       12,402        116,329

    Cash and cash equivalents, end of year        $    10,608    $    12,402

%SEDAR: 00020627E

SOURCE British Columbia Ferry Services Inc.

For further information: For further information: Media Contact: BC Ferries, Media Relations, Victoria: (250) 978-1267; Customer Contact: Victoria: (250) 386-3431, Toll-free: 1-888-BCFERRY (1-888-223-3779)

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