Increased Traffic Positively Impacts BC Ferries' Year-end Results

Earnings Reinvested in New Vessels, Terminal Upgrades and Information Technology

VICTORIA, June 30, 2017 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its year-end results today for fiscal 2017 and for the second consecutive year, BC Ferries' positive results have allowed the company to hold the cost of travel for passengers and vehicles at 2015 rates on the majority of its routes. Consolidated net earnings were $77.4 million for fiscal 2017.

"This strong financial performance will be essential in helping us renew the fleet, pay down debt, as well as reduce our future borrowing and associated costs. As a more sustainable ferry service provider, we will be better able to deliver fare stability, and continue to provide safe and reliable service to our customers," said Mark Collins, BC Ferries' President and CEO.  "B.C.'s coastal ferry network needs about a ship each year for the next 12 years at an average cost of $70 million.  Solid earnings from the growth in traffic is helping build a strong system for the communities we serve." 

In fiscal 2017, BC Ferries experienced a 2.9 per cent increase in vehicle traffic and a 1.7 per cent increase in passenger traffic compared to fiscal 2016.  These traffic levels are the highest
BC Ferries has experienced since fiscal 2008. The general increase in travel and tourism experienced in B.C. has a positive economic effect on coastal communities and BC Ferries.

Revenues for the year increased $24.7 million, from $834.6 million to $859.3 million, primarily due to higher traffic levels and retail sales, partially offset by an additional $11.7 million in fuel rebates provided to customers. Higher traffic levels also affected operating expenses, which increased $17.2 million, from $709.0 million to $726.2 million, compared to the year prior. The main increases were in labour costs, contracted services, training activities, and parts and supplies, partially offset by lower fuel costs.

"A significant step forward this year is the introduction of the Salish Class natural gas-fuelled vessels which are cleaner and less costly to operate.  We are well on our way to building a standardized, interoperable fleet which will reduce costs, improve our environmental footprint and further increase safety," said Collins.  "Starting later this year, we will convert the Spirit of British Columbia and the Spirit of Vancouver Island – the largest vessels in our fleet – to cleaner, less expensive natural gas."

Capital expenditures in the 12 months ended March 31, 2017 were $243.7 million.

For fiscal 2017, these expenditures include:

  • $177.1 million in vessel acquisitions, upgrades and modifications
  • $30.9 million in information technology
  • $22.9 million in terminal marine structures and
  • $12.8 million in terminal and building upgrades and equipment. 

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis, as well as the company's Statement of Executive Compensation for fiscal 2017, 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 21.0 million passengers and 8.3 million vehicles during the fiscal year ended March 31, 2017.  BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 24 routes, currently supported by 34 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 U.S. 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: economic conditions, traffic levels, the Salish-Class vessels, asset renewal programs for vessels and terminals, Spirit Class mid-life upgrades, capital expenditure levels, minor class vessel replacements, the Fare Flexibility and Digital Experience Initiative, the New Building Canada Fund, and the direct ferry service between Port Hardy and Bella Coola.  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.

NON-IFRS MEASURES

In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain financial measures that do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental financial 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.

BACKGROUNDER

SIGNIFICANT EVENTS IN FISCAL 2017

Significant events during or subsequent to fiscal 2017 include the following:

June 1, 2017: BC Ferries entered into a five-year supply agreement for the maintenance of eight of its minor vessels.  The company has approximately 20 scheduled dry-dockings for the minor vessels over the next five years and this strategic partnership ensures a local and secure supply of services.

May 16, 2017: Salish Orca, the first Salish Class vessel, commenced regularly scheduled service between Comox and Powell River.  Salish Orca replaced the 52-year old Queen of Burnaby.  On June 21, 2017, Salish Eagle, the second Salish Class vessel, commenced regularly scheduled service on the TsawwassenSouthern Gulf Islands route.  In the fall, Salish Eagle will replace the 53-year old Queen of Nanaimo.   On June 7, 2017, Salish Raven, the third Salish Class ship, arrived in British Columbia after its 41-day, 10,440 nautical mile journey from Gdansk, Poland.  This vessel will commence service in the fall.

April 1, 2017: BC Ferries limited tariff increases to 1.9 per cent on vehicle fares on three of the Major Routes only: the Tsawwassen to Swartz Bay, Tsawwassen to Duke Point and Horseshoe Bay to Departure Bay routes, fully offset by reduced reservation fees from $15 to $10.  No increase in passenger fares was implemented on these routes. 

Vehicle and passenger fares on all the other routes were unchanged from the year before.

March 14, 2017: Government of Canada approved funding under the New Building Canada Fund to assist with the purchase of two new minor vessels for the Northern Gulf Islands.

March 21, 2017: Government of Canada approved funding support towards a major upgrade of the Langdale terminal, and the purchase of a used vessel to service a new route between Port Hardy and Bella Coola and related terminal improvements. 

April 7, 2017: BC Ferries finalized an agreement to acquire a 75-metre vessel with ownership to transfer in August 2017.  The vessel, built in 2000, will accommodate approximately 35 vehicles and 150 passenger and crew and will be deployed on the mid-coast. 

February 27, 2017: BC Ferries Commissioner conditionally approved BC Ferries' application of a major capital expenditure to acquire two new minor class vessels that will have the capacity to carry approximately 44 vehicles and 300 passengers.  The company plans to deploy the first new vessel to the Powell River – Texada Island route and the second vessel to the Port McNeillAlert Bay – Sointula Island route. 

April 13, 2017: BC Ferries concluded a design and build $60 million contract with Damen Shipyard Group of Netherlands for the construction of two minor class vessels.  This contract became effective on May 17, 2017. 

February 10, 2017: BC Ferries' Board of Directors announced the appointment of Mark Collins as President and CEO effective April 1, 2017.  A senior marine executive for the past 20 years, Mr. Collins' experience includes roles as the President of marine firms in Brazil and Italy, and Vice President of global technical services for an international shipping firm.   Mr. Collins was previously Vice President of Strategic Planning and Community Engagement at BC Ferries and Vice President of Engineering between 2004 and 2012.  Former President and CEO Mike Corrigan stepped down on March 31, 2017.

September 21, 2016: BC Ferries Commissioner approved BC Ferries supplemental application to replace the company's website, e-commerce platform and reservations systems, and upgrade the point-of-sale system.  The investment will allow BC Ferries to respond to changing business needs and support marketing, travel services and pricing initiatives. On September 23, 2016,
BC Ferries signed a contract with the system integrator, to deliver project elements while ensuring existing enterprise applications are secure.

 

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


As at March 31


2017

2016

Assets



Current assets




Cash and cash equivalents

72,032

79,113


Restricted short-term investments

32,426

31,986


Other short-term investments

115,582

61,464


Trade and other receivables

15,319

16,249


Prepaid expenses

7,454

8,550


Inventories

28,257

23,988


Derivative assets

1,604

-


272,674

221,350

Non-current assets




Loan receivable

24,515

24,515


Land lease

30,230

30,688


Property, plant and equipment

1,621,802

1,539,957


Intangible assets

97,673

82,741


1,774,220

1,677,901

Total assets

2,046,894

1,899,251




Liabilities



Current liabilities




Accounts payable and accrued liabilities

55,173

58,206


Interest payable on long-term debt

18,458

18,262


Deferred revenue

20,705

18,883


Derivative liabilities

1,048

17,879


Current portion of long-term debt

30,939

24,000


Current portion of accrued employee future benefits

1,400

1,900


Current portion of obligations under finance lease

1,582

1,514


Provisions

55,711

48,690


185,016

189,334

Non-current liabilities




Accrued employee future benefits

20,913

19,361


Long-term debt

1,273,860

1,218,106


Obligations under finance lease

40,423

42,003


Other liabilities

5,250

1,500


1,340,446

1,280,970

Total liabilities

1,525,462

1,470,304




Equity




Share capital

75,478

75,478


Contributed surplus

25,000

25,000


Retained earnings

424,020

352,692


Total equity before reserves

524,498

453,170


Reserves

(3,066)

(24,223)

Total equity including reserves

521,432

428,947




Total liabilities and equity

2,046,894

1,899,251

 

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


Years ended


March 31


2017

2016




Revenue




Vehicle and passenger fares

608,713

579,311


Ferry service fees

174,871

172,373


Net retail

55,139

51,879


Federal-Provincial Subsidy Agreement

29,158

28,730


Fuel rebates

(18,068)

(6,356)


Other income

9,470

8,679

Total revenue

859,283

834,616




Expenses




Operations

467,300

449,642


Maintenance

74,165

79,387


Administration

35,804

34,513


Depreciation and amortization

148,952

145,521

Total operating expenses

726,221

709,063

Operating profit

133,062

125,553




Net finance and other expenses




Net finance expenses




 Finance income

4,651

4,607


 Finance expenses

(58,759)

(60,568)


Net finance expenses

(54,108)

(55,961)


Loss on disposal and revaluation of property, plant and equipment,
intangible assets and inventory

(1,588)

(39)

Net finance and other expenses

(55,696)

(56,000)

Net earnings

77,366

69,553




Other comprehensive income (loss)




Items not to be reclassified to net earnings

2,480

392


Items to be reclassified to net earnings

12,119

(24,156)

Total other comprehensive income (loss)

14,599

(23,764)

Total comprehensive income

91,965

45,789




 

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


Years ended


March 31

2017

2016

Cash flows from operating activities



Net earnings

77,366

69,553

Items not affecting cash



Net finance expense

54,108

55,961

Depreciation and amortization

148,952

145,521

Loss on disposal and revaluation of property, plant and equipment,
intangible assets and inventory

1,588

39

Other non-cash adjustments to property, plant and equipment

(1,867)

2,462

Changes in



Accrued employee future benefits

(188)

61

Derivative (assets) liabilities recognized in net earnings

(5)

32

Provisions

7,021

4,901

Long-term land lease

458

458

Accrued financing costs

286

(88)

Total non-cash items affecting net earnings

210,353

209,347

 

Movements in operating working capital



Trade and other receivables

930

3,241

Prepaid expenses

1,096

(2,373)

Inventories

(4,269)

1,405

Accounts payable and accrued liabilities

(3,033)

(3,471)

Deferred revenue

1,822

1,926

Change in non-cash working capital

(3,454)

728

Change attributable to capital asset acquisitions

2,357

6,995

Change in non-cash operating working capital

(1,097)

7,723

Cash generated from operating activities

286,622

286,623

Interest received

4,339

4,616

Interest paid

(64,526)

(65,256)

Net cash generated by operating activities

226,435

225,983

 

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


Years ended


March 31

2017

2016

Cash flows from financing activities



Proceeds from long-term debt

90,122

-

Repayment of long-term debt

(24,934)

(24,000)

Repayment of finance lease obligations

(1,512)

(1,307)

Dividends paid on preferred shares

(6,038)

(6,038)

Deferred financing costs incurred

(2,965)

-

Net cash generated by (used in) financing activities

54,673

(31,345)

Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

137

217

Purchase of property, plant and equipment and intangible assets

(233,768)

(182,460)

Changes in debt service reserve

(440)

510

Net (purchase of) proceeds from short-term investments

(54,118)

634

Net cash used in investing activities

(288,189)

(181,099)

Net (decrease) increase in cash and cash equivalents

(7,081)

13,539

Cash and cash equivalents, beginning of year

79,113

65,574

Cash and cash equivalents, end of year

72,032

79,113

 

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, 2015

75,478

25,000

289,177

389,655

(11,450)

378,205

Net earnings for the year ended
March 31, 2016

-

-

69,553

69,553

-

69,553

Other comprehensive loss for the
year ended March 31, 2016

-

-

-

-

(23,764)

(23,764)

Realized hedge losses
recognized in fuel swaps

-

-

-

-

10,742

10,742

Hedge losses on interest rate
forward contract reclassified to
net earnings

-

-

-

-

249

249

Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)

Balance as at March 31, 2016

75,478

25,000

352,692

453,170

(24,223)

428,947

Net earnings for the year ended
March 31, 2017

-

-

77,366

77,366

-

77,366

Other comprehensive income for
the year ended March 31, 2017

-

-

-

-

14,599

14,599

Realized hedge losses
recognized in fuel swaps

-

-

-

-

6,310

6,310

Hedge losses on interest rate
forward contract reclassified to
net earnings

-

-

-

-

248

248

Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)

Balance as at March 31, 2017

75,478

25,000

424,020

524,498

(3,066)

521,432

SOURCE British Columbia Ferry Services Inc.

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)

RELATED LINKS
http://www.bcferries.ca

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