BC Ferries Releases First Quarter Results

VICTORIA, BC, Aug. 20, 2020 /CNW/ - BC Ferries released its first quarter results today for the three months ended June 30, 2020. The COVID-19 global pandemic had a significant impact on first quarter results. Net losses for the first quarter of fiscal 2021 were $62 million, compared to net earnings of $12.2 million for the same quarter of the previous year.

"While COVID-19 continues to have a profound impact on our business, I want to express my deep appreciation to our frontline staff who came to work every day in the depths of the pandemic to provide lifeline service to coastal communities," said Mark Collins, BC Ferries' President and CEO. "I also want to thank our customers for their patience as we all work towards a new normal."

Revenue for the quarter ended June 30, 2020, at $137.4 million, was down $109 million year-over-year. This impact to earnings was partially offset by reductions in operating expenses of $36.7 million compared to the same quarter of the prior year.

In response to COVID-19, BC Ferries deferred capital expenditures and has, and will continue to, reduce discretionary spending while operating a sustainable, safe and reliable service. The company also worked with the Province to reduce sailings to match the significant drop in traffic.  

"We made prudent decisions to remove costs for the health of the ferry system. This is decisive action to safeguard the coastal ferry service for the long term, while continuing to provide essential services to customers and communities," said Collins. "We have been bringing back service capacity to coastal communities ahead of gradually increasing demand."

At the outset of the pandemic, ferry traffic dropped dramatically and was down 75 to 80 per cent across the system in a matter of days. With the Province's recent easing of travel restrictions, traffic at the end of June partially recovered and was down approximately 35 per cent compared to this period last year.

During the three months ended June 30, 2020, BC Ferries delivered 18,249.5 round trips, a decrease of 2,340 or 11.4 per cent compared to the same period in the prior year. The company carried 2.2 million passengers and 1.3 million vehicles during the quarter, a decrease of 61.5 per cent and 46.7 per cent, respectively, compared to the same quarter in the prior year. 

On August 11, 2020, the Province announced BC Ferries is one of the entities included in the federal government's previously announced transit funding of $540 million in response to the impact of COVID-19. This transit funding is to be matched equally by the Province for a total funding envelope of $1.08 billion.

As part of the company's capital plan, in mid-June 2020 BC Ferries brought into service two new Island Class vessels. Island Discovery now sails on the Powell River – Texada Island route and Island Aurora commenced service between Port McNeill, Alert Bay and Sointula Island. These two new Island Class vessels are hybrid-electric ships designed for future full electric operation. The addition of these vessels allowed for the retirement of two older ships. BC Ferries will carry on with essential investments in safety and core services, as well as construction of four more Island Class ferries and one additional Salish Class ferry currently underway.  

As the company responds to COVID-19, it will continue to provide resilient ferry service in the public interest. BC Ferries will aid B.C. in its economic and social recovery through the vital role it plays in serving the needs of coastal communities.

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 21.7 million passengers and 8.8 million vehicles during the fiscal year ended March 31, 2020.

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.

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, the requirements of the Coastal Ferry Services Contract, and the impact of the COVID-19 pandemic.

Forward looking statements included in this release include statements with respect to: the company's response to the COVID-19 pandemic, reductions in discretionary spending, essential investments, and the construction of Island Class and Salish Class ferries.  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 Aboriginal rights and title 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.

SIGNIFICANT EVENTS FIRST QUARTER FISCAL 2021

Significant events during or subsequent to the First Quarter of 2021 include the following:

COVID-19 Pandemic Response Update

• The Coastal Ferry Services Contract ("CFSC") was initially amended in April 2020 for a 60-day period, expiring in early June, to reflect temporary reduced service levels in response to the COVID-19 pandemic. On June 2, 2020, the CFSC with the Province was amended to extend temporary service level adjustments through to September 7, 2020. The initial reductions meant that capacity across our network was reduced by approximately 24 per cent compared to the same quarter in fiscal 2020. The majority of the service reductions were on the Major Routes. The current service level plan gradually increases service levels across multiple routes to match ferry service to demand and meet the needs of customers and communities. As we increase service levels in accordance with the service level plan, our capacity is planned to exceed projected summer demand by an average of 20 per cent.
  
  
• Our priorities are protecting passengers and employees aboard our ferries and in all workplaces, and adhering to provincial and federal guidelines during this gradual resumption of service.  We are following the directives and guidance provided by the Province and Transport Canada.  These government measures were put in place and include limiting passenger capacity to support physical distancing, screening customers on arrival at the terminal, allowing customers to remain in their vehicles on all decks during the sailing, and enhanced cleaning.
  
  
• Effective June 15, 2020, in keeping with directives and guidance provided by Transport Canada, BC Ferries requires passengers travelling on the ferry to be in possession of a face covering that covers their mouth and nose, and we ask them to wear this covering in situations when a physical separation of two metres cannot be maintained. Beginning August 24, 2020, BC Ferries will require customers to wear non-medical masks or face coverings at terminals and while on board ferries.
  
  
• Late in June 2020, we carefully introduced limited food services on select routes.  Early July 2020, we announced the reopening of additional terminal and onboard amenities across the fleet.
  
  
• We continue to review and amend both operating and capital plans to reduce costs and defer spending in order to preserve cash.
  
  
• On August 11, 2020, the Province announced BC Ferries is one of the entities included in the Federal Government's previously announced transit funding of $540 million in response to the impact of COVID-19. This transit funding is to be matched equally by the Province for a total funding envelope of $1.08 billion. Over the past few months, BC Ferries has been working closely with the Province, having formed a task force to collaboratively work together on strategic options to sustain the ferry system for the long term. The task force consists of representatives from the B.C. Ferry Authority Board, the BC Ferries Board, BC Ferries management, the Ministry of Transportation, and the Ministry of Finance.

Tariffs

• On April 1, 2020, we delayed adjustments to fares for fiscal 2021 in light of the COVID-19 pandemic, with the date for applying fare adjustments to be determined.  As of April 1, 2020, a fuel rebate of 1.5 per cent was implemented on all routes as a result of recent fuel prices.

Vessels

• On June 10, 2020, the Island Discovery commenced service between Powell River and Texada Island and on June 18, 2020, the Island Aurora commenced service between Port McNeill, Alert Bay and Sointula. These two new Island Class vessels, constructed by Damen Shipyard Group are hybrid-electric ships designed for future full electric operation.  The addition of the Island Discovery and the Island Aurora allowed us to retire the 62-year old North Island Princess in the first quarter of fiscal 2021 and the 54-year old Howe Sound Queen in fiscal 2020.   

General

• On May 1, 2020, S&P Global Ratings revised our credit rating trend from "AA-" with a stable outlook to "AA-" with a negative outlook, while at the same time, affirming the Company's "AA-" long-term issuer credit and senior secured debt ratings, as a result of COVID-19 preventative measures and travel restrictions triggering an unprecedented decline in ridership.
  
  
• On May 27, 2020, DBRS Morningstar ("DBRS") changed the trend to negative from stable on the company's "A (high)" rating and senior secured bonds rating, reflecting the impact of COVID-19 on key financial metrics during fiscal 2021 and uncertainties on speed of recovery.

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statement of Financial Position (unaudited)
(Expressed in thousands of Canadian dollars)
				As at
				June 30, 2020		March 31, 2020
Assets
Current assets
Cash and cash equivalents				102,443		169,141
Restricted short-term investments				33,313		33,393
Other short-term investments				67,635		91,588
Trade and other receivables				17,395		19,488
Prepaid expenses				19,854		11,057
Inventories				33,914		31,897
Derivative assets				9		28
				274,563		356,592
Non-current assets
Loan receivable				24,515		24,515
Property, plant and equipment				1,856,282		1,879,517
Intangible assets				100,827		99,893
				1,981,624		2,003,925
Total assets				2,256,187		2,360,517
Liabilities
Current liabilities
Accounts payable and accrued liabilities				100,787		132,296
Provisions				1,754		1,794
Interest payable on long-term debt				17,286		21,512
Contract liabilities				22,491		21,702
Current portion of long-term debt				19,786		21,644
Current portion of accrued employee future benefits				2,300		3,000
Current portion of lease liabilities				2,639		2,536
Derivative liabilities				12,842		15,507
				179,885		219,991
Non-current liabilities
Accrued employee future benefits				18,835		20,151
Long-term debt				1,424,804		1,427,426
Lease liabilities				37,962		38,675
Other liabilities				10,685		10,962
Derivative liabilities				15,464		17,212
				1,507,750		1,514,426
Total liabilities				1,687,635		1,734,417
Equity
Share capital				75,478		75,478
Contributed surplus				25,000		25,000
Retained earnings				485,709		547,745
Total equity before reserves				586,187		648,223
Reserves				(17,635)		(22,123)
Total equity including reserves				568,552		626,100
Total liabilities and equity				2,256,187		2,360,517

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statement of Profit or Loss and Other Comprehensive (Loss) Income (unaudited)
(Expressed in thousands of Canadian dollars)
				Three months ended June 30
				2020		2019
Revenue
Vehicle and passenger fares				78,781		162,476
Net retail				783		16,797
Fuel (rebates) surcharges				(1,242)		839
Other income				1,044		3,037
Revenue from customers				79,366		183,149
Ferry service fees				50,029		55,409
Federal-Provincial Subsidy Agreement				8,007		7,835
Total revenue				137,402		246,393
Expenses
Operations				105,322		140,688
Maintenance				23,081		26,312
Administration				11,243		8,696
Depreciation and amortization				44,048		44,722
Total operating expenses				183,694		220,418
Operating (loss) profit				(46,292)		25,975
Net finance and other expenses
Finance expenses				15,107		14,991
Finance income				(1,222)		(1,173)
Net finance expense				13,885		13,818
Loss (gain) on disposal and revaluation of property,
plant and equipment and intangible assets				1,859		(12)
Net finance and other expenses				15,744		13,806
NET (LOSS) EARNINGS				(62,036)		12,169
Other comprehensive (loss) income
Items that are or may be reclassified subsequently
to net (loss) earnings				(397)		(58)
Total other comprehensive (loss) income				(397)		(58)
Total comprehensive (loss) income				(62,433)		12,111

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statement of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
				Three months ended June 30
				2020		2019
Operating activities
Net (loss) earnings				(62,036)		12,169
Items not affecting cash:
Net finance expense				13,885		13,818
Depreciation and amortization				44,048		44,722
Loss (gain) on disposal and revaluation of property,
plant and equipment and intangible assets				1,859		(12)
Other non-cash changes to property, plant and equipment				(173)		(34)
Changes in:
Accrued employee future benefits				(2,016)		(206)
Derivative assets and liabilities recognized in net loss				32		7
Provisions				(40)		36
Accrued financing costs				246		635
Total non-cash items				57,841		58,966
Movements in operating working capital:
Trade and other receivables				2,093		(9,569)
Prepaid expenses				(8,797)		(11,996)
Inventories				(2,017)		265
Accounts payable and accrued liabilities				(31,509)		(22,746)
Contract liabilities				789		3,656
Change in non-cash working capital				(39,441)		(40,390)
Change in non-cash working capital attributable
to investing activities				22,789		26,940
Change in non-cash operating working capital				(16,652)		(13,450)
Cash (used in) generated from operating activities				(20,847)		57,685
Interest received				991		700
Interest paid				(21,481)		(18,582)
Cash (used in) generated from operating activities				(41,337)		39,803

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statement of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
				Three months ended June 30
				2020		2019
Financing activities
Repayment of long-term debt				(4,696)		(6,571)
Repayment of lease liabilities				(610)		(552)
Cash used in financing activities				(5,306)		(7,123)
Investing activities
Proceeds from disposal of property, plant and equipment				53		95
Purchase of property, plant and equipment and intangible assets				(44,141)		(48,925)
Changes in restricted short-term investments				80		120
Net proceeds from other short-term investments				23,953		16,475
Cash used in investing activities				(20,055)		(32,235)
Net (decrease) increase in cash and cash equivalents				(66,698)		445
Cash and cash equivalents, beginning of period				169,141		59,888
Cash and cash equivalents, end of period				102,443		60,333

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statement of Changes in Equity (unaudited)
(Expressed in thousands of Canadian dollars)
	Share capital		Contributed surplus		Retained earnings		Total equity before reserves		Reserves		Total equity before eserves
Balance as at April 1, 2019	75,478		25,000		525,006		625,484		12,834		638,318
Net earnings	-		-		12,169		12,169		-		12,169
Other comprehensive loss	-		-		-		-		(58)		(58)
Realized hedge gains recognized in
fuel swaps	-		-		-		-		(2,957)		(2,957)
Hedge losses on interest rate
forward contract reclassified to
net earnings	-		-		-		-		61		61
Balance as at June 30, 2019	75,478		25,000		537,175		637,653		9,880		647,533
Balance as at April 1, 2020	75,478		25,000		547,745		648,223		(22,123)		626,100
Net loss	-		-		(62,036)		(62,036)		-		(62,036)
Other comprehensive loss	-		-		-		-		(397)		(397)
Realized hedge losses recognized in
fuel swaps	-		-		-		-		4,823		4,823
Hedge losses on interest rate
forward contract reclassified to
net earnings	-		-		-		-		62		62
Balance as at June 30, 2020	75,478		25,000		485,709		586,187		(17,635)		568,552

SOURCE British Columbia Ferry Services Inc.

Media Contact: BC Ferries, Media Relations, Communications, Victoria: [phone]; Customer Contact: Victoria: [phone], Toll-free: 1-888-BCFERRY (1-888-223-3779)

Related Links

http://www.bcferries.ca