BC Ferries Releases Third Quarter Results

VICTORIA, Feb. 22, 2019 /CNW/ - BC Ferries released its third quarter results today for the fiscal year ending March 31, 2019. The company reported a net loss of $3.7 million for the three months ended December 31, 2018, as compared to a net loss of $14.8 million reported in the same quarter last year.

In the three months ended December 31, 2018, BC Ferries delivered over 42,000 sailings, an average of 466 sailings per day for its customers. The company carried 4.7 million passengers and 2.0 million vehicles, an increase of 1.7 per cent and 2.6 per cent respectively, compared to the same quarter in the prior year. These passenger traffic levels are the highest the company has experienced in over 20 years and vehicle traffic levels are the highest ever experienced.

Due to the seasonality of ferry travel, BC Ferries generates higher net earnings in the first and second quarters – the spring and summer months – which are typically reduced by net losses in the third and fourth quarters, when fewer discretionary customers are travelling. BC Ferries performs vessel refits and major maintenance programs on its fleet during the fall and winter months to minimize the impact on ferry passengers.

Year-to-date net earnings were $93.2 million, $7.7 million lower than the same period last year. These lower results reflect a reduction in fares, additional sailings, costs associated with the reintroduction of the Spirit of British Columbia following its mid-life upgrade and service enhancements for ferry users.

Capital expenditures in the three and nine months periods ended December 31, 2018 totalled $45.0 million and $171.8 million, respectively. In the nine months ended December 31, 2018, the total spent in British Columbia was approximately $105 million with firms such as Esquimalt Drydock Company, Fraser River Pile & Dredge (GP) Inc., Point Hope Maritime Ltd., Vancouver Drydock Co., and Vancouver Shipyards Co. Ltd., as well as at BC Ferries' own maintenance facility in Richmond. In the three and nine months ended December 31, 2018, $11.3 million in grant funding was recorded ($0.8 million from FortisBC in the three months ended December 31, 2018 and $10.5 million from the federal New Building Canada Fund in the nine months ended December 31, 2018).

"We are expecting to have a busy year as we carry record high levels of traffic, deliver new vessels and commence major construction projects, while continuing to provide the best possible service to ferry users," said Mark Collins, BC Ferries' President and CEO.

Last fall, BC Ferries filed its Performance Term Five Submission to the British Columbia Ferries Commissioner. The submission provides information to assist the Commissioner to establish price caps for all regulated routes as specified in the Coastal Ferry Services Contract, for the period of April 1, 2020 – March 31, 2024. The Commissioner will release his preliminary ruling by March 31, 2019, with the final ruling expected by September 30, 2019.

A key element of the Performance Term Five Submission is BC Ferries' 12-Year Capital Plan, which details plans to invest more than $3.9 billion. This will be the largest capital plan in BC Ferries' history. "The capital plan emphasizes more system capacity, operational efficiency, resiliency and travel certainty. These are the things ferry users tell us they want," said Collins.

This spring will see the Spirit of Vancouver Island re-enter service with its advanced liquefied natural gas propulsion system and mid-life upgrade. This investment lowers greenhouse gas emissions and particulate emissions, as well as reducing fuel spend. It is a major step in BC Ferries' Clean Technology Adoption Plan.

This fall will see the delivery of two new Island Class vessels outfitted with hybrid diesel-electric propulsion.  They will be built to be capable of conversion to all-electric propulsion as the technology permits and the necessary infrastructure becomes available. These 81-metre ships will accommodate 450 passengers and crew and approximately 47 vehicles. They are expected to enter service on the Texada Island – Powell River and Port McNeill – Alert Bay – Sointula Island routes in 2020. Their arrival is the next significant step in BC Ferries' Clean Technology Adoption Plan.   

"Another major capital investment expected to start later this year is our Langdale terminal redevelopment project, which includes the long-anticipated construction of an overhead foot passenger walkway," said Collins. The project also incorporates a new terminal building, ticketing plaza as well as parking lot and pick-up and drop-off area upgrades. "The entire project is expected to be finished within three years and will improve the travel experience, increase on-time performance and improve safety at the terminal."

"As we continue to connect communities, it's important to engage with our customers to understand and consider the improvements they would like to see," said Collins. "For example, Texada Island representatives have asked for direct access to and from Comox. As a result, this spring we are upgrading the terminal infrastructure at Texada Island to handle our Salish Class vessels on a regular basis. In the fall, we'll start a bi-weekly pilot service with a triangle run between Comox, Texada Island and Powell River. Powell River has been very supportive of their neighbours on Texada Island. We're pleased to be a part of such great community spirit."

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 22.0 million passengers and 8.7 million vehicles during the fiscal year ended March 31, 2018. 
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: traffic levels, the 12-Year Capital Plan, the Performance Term Five Submission, the Province's Review of Coastal Ferry Services, BC Ferries' Clean Technology Adoption Plan, the Island Class vessels, the Langdale terminal redevelopment plan, the Texada Island pilot, the minor class vessel replacements, and the major class vessel replacements.  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.

SIGNIFICANT EVENTS IN THE THIRD QUARTER FISCAL 2019

Significant events during or subsequent to the Third Quarter of 2019 include the following:

On February 22, 2019, the Province released its report on the Review of Coastal Ferry Services.

On January 25, 2019, the Commissioner issued Order 19-03, which supercedes Order 17-02, in which he re-established the criteria for determining a major capital expenditure which requires advance approval. The Commissioner's orders are available on the Commissioner's website at www.bcferrycommission.com.

On January 7, 2019, the British Columbia Ferries Commissioner approved the company's application of a major capital expenditure for four Island Class vessels and one Salish Class vessel. The procurement process includes two Requests for Proposals (RFP) open to local, national and international shipyards. The first RFP issued in November 2018 is for the construction of one vessel, identical to BC Ferries' Salish Class vessels, with a capacity of 600 passengers and crew and approximately 138 vehicles. The Salish Class will be dual-fuel capable, running primarily on liquefied natural gas using marine diesel as a back-up. The second RFP issued in December 2018 is for the construction of four 81-metre Island Class ferries, each with a capacity of up to 450 passengers and crew and approximately 47 vehicles. The Island Class vessels will have hybrid diesel-electric propulsion and will be built to be capable of conversion to all-electric propulsion as the technology permits and the necessary infrastructure is put in place to support it.     

On October 5, 2018, the company issued a Request for Expression of Interest for the procurement of five new major vessels to replace aged fleet assets with the procurement process open to local, national and international shipyards. These new major vessels will reflect capacity and levels of service consistent with the current Coastal and Spirit Class vessels in size, capabilities and passenger amenities. These vessels are anticipated to begin service in 2023 on our Major Routes between Metro Vancouver and Vancouver Island. 

BRITISH COLUMBIA FERRY SERVICES INC. Condensed Interim Consolidated Statements of Financial Position (Unaudited) (Expressed in thousands of Canadian dollars)
	December 31, 2018	March 31, 2018
Assets
Current assets
Cash and cash equivalents	109,642	69,913
Restricted short-term investments	31,841	32,276
Other short-term investments	90,498	114,259
Trade and other receivables	27,291	26,258
Prepaid expenses	11,265	8,434
Inventories	30,421	31,584
Derivative assets	2,426	12,530
	303,384	295,254
Non-current assets
Loan receivable	24,515	24,515
Land lease	-	29,771
Property, plant and equipment	1,788,657	1,713,080
Intangible assets	100,322	99,802
	1,913,494	1,867,168
Total assets	2,216,878	2,162,422
Liabilities
Current liabilities
Accounts payable and accrued liabilities	72,919	77,233
Interest payable on long-term debt	16,375	18,537
Deferred revenue	26,991	32,034
Derivative liabilities	1,330	-
Current portion of long-term debt	34,662	34,594
Current portion of accrued employee future benefits	1,800	3,000
Current portion of lease liability	2,222	1,652
Provisions	63,723	60,372
	220,022	227,422
Non-current liabilities
Accrued employee future benefits	20,717	21,299
Long-term debt	1,256,223	1,279,775
Lease liability	39,960	38,769
Other liabilities	9,621	7,750
	1,326,521	1,347,593
Total liabilities	1,546,543	1,575,015
Equity
Share capital	75,478	75,478
Contributed surplus	25,000	25,000
Retained earnings	572,071	477,955
Total equity before reserves	672,549	578,433
Reserves	(2,214)	8,974
Total equity including reserves	670,335	587,407
Total liabilities and equity	2,216,878	2,162,422

BRITISH COLUMBIA FERRY SERVICES INC. Condensed Interim Consolidated Statements of Comprehensive (Loss) Income (Unaudited) (Expressed in thousands of Canadian dollars)
	Three months ended  December 31		Nine months ended December 31
	2018	2017	2018	2017
Revenue
Vehicle and passenger fares	134,020	136,201	505,634	524,626
Net retail	14,200	13,147	52,820	49,950
Fuel rebates	-	(4,169)	(4,584)	(15,783)
Other income	2,297	2,610	8,537	8,827
Revenue from customers	150,517	147,789	562,407	567,620
Ferry service fees	49,554	40,380	167,934	141,874
Federal-Provincial Subsidy Agreement	7,626	7,446	22,878	22,337
Total revenue	207,697	195,615	753,219	731,831
Expenses
Operations	122,759	118,004	401,294	377,624
Maintenance	22,355	28,185	60,289	62,751
Administration	9,654	9,020	29,348	28,243
Depreciation and amortization	43,568	40,453	128,514	119,101
Total operating expenses	198,336	195,662	619,445	587,719
Operating profit (loss)	9,361	(47)	133,774	144,112
Net finance and other expenses
Finance expenses	14,713	15,284	44,953	45,872
Finance income	(1,701)	(1,501)	(4,568)	(3,929)
Net finance expense	13,012	13,783	40,385	41,943
Loss on disposal and revaluation of property, plant and equipment and intangible assets	30	1,009	173	1,258
Net finance and other expenses	13,042	14,792	40,558	43,201
NET (LOSS) EARNINGS	(3,681)	(14,839)	93,216	100,911
Other comprehensive (loss) income
Items not to be reclassified to net earnings	-	-	-	(1,943)
Items to be reclassified to net earnings	(10,962)	9,731	(1,638)	10,541
Total other comprehensive (loss) income	(10,962)	9,731	(1,638)	8,598
Total comprehensive (loss) income	(14,643)	(5,108)	91,578	109,509

BRITISH COLUMBIA FERRY SERVICES INC. Condensed Interim Consolidated Statements of Cash Flows (Unaudited) (Expressed in thousands of Canadian dollars)
	Nine months ended December 31
	2018	2017
Cash flows from operating activities
Net earnings	93,216	100,911
Items not affecting cash
Net finance expense	40,385	41,943
Depreciation and amortization	128,514	119,101
Loss on disposal and revaluation of property, plant and equipment
and intangible assets	173	1,258
Other non-cash changes to property, plant and equipment	199	481
Changes in:
Accrued employee future benefits	(1,782)	(574)
Derivative assets and liabilities recognized in net earnings	59	(20)
Provisions	3,351	3,826
Long-term land lease	-	344
Accrued financing costs	(47)	136
Total non-cash items	170,852	166,495
Movements in operating working capital
Trade and other receivables	(1,033)	(10,756)
Prepaid expenses	(2,831)	(588)
Inventories	1,163	(906)
Accounts payable and accrued liabilities	(4,314)	7,437
Deferred revenue	(4,143)	12,650
Change in non-cash working capital	(11,158)	7,837
Change attributable to capital asset acquisitions	3,704	(1)
Change in non-cash operating working capital	(7,454)	7,836
Cash generated from operating activities	256,614	275,242
Interest received	4,333	3,624
Interest paid	(51,110)	(51,434)
Net cash generated by operating activities	209,837	227,432

BRITISH COLUMBIA FERRY SERVICES INC. Condensed Interim Consolidated Statements of Cash Flows (Unaudited) (Expressed in thousands of Canadian dollars)
	Nine months ended December 31
	2018	2017
Cash flows from financing activities
Proceeds from long-term debt	-	45,264
Repayment of long-term debt	(24,211)	(24,241)
Repayment of lease liabilities	(1,623)	(1,180)
Deferred financing costs	-	(1,417)
Net cash (used in) generated by financing activities	(25,834)	18,426
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	46	471
Purchase of property, plant and equipment and intangible assets	(168,516)	(185,426)
Changes in debt service reserve	435	(40)
Net proceeds from (purchase of) short-term investments	23,761	(27,613)
Net cash used in investing activities	(144,274)	(212,608)
Net increase in cash and cash equivalents	39,729	33,250
Cash and cash equivalents, beginning of period	69,913	72,032
Cash and cash equivalents, end of period	109,642	105,282

BRITISH COLUMBIA FERRY SERVICES INC. Condensed Interim Consolidated Statements of Changes in Equity (Unaudited) (Expressed in thousands of Canadian dollars)
	Share capital	Contributed surplus	Retained earnings	Total equity before reserves	Reserves	Total equity including reserves
Balance as at March 31, 2017	75,478	25,000	424,020	524,498	(3,066)	521,432
Net earnings	-	-	100,911	100,911	-	100,911
Other comprehensive income	-	-	-	-	8,598	8,598
Realized hedge losses  recognized in fuel swaps	-	-	-	-	501	501
Hedge losses on interest rate forward contract reclassified to net earnings	-	-	-	-	186	186
Balance as at December 31, 2017	75,478	25,000	524,931	625,409	6,219	631,628
Balance as at March 31, 2018	75,478	25,000	477,955	578,433	8,974	587,407
Impact of adoption of IFRS 15	-	-	900	900	-	900
Balance as at April 1, 2018	75,478	25,000	478,855	579,333	8,974	588,307
Net earnings	-	-	93,216	93,216	-	93,216
Other comprehensive loss	-	-	-	-	(1,638)	(1,638)
Realized hedge gains recognized in fuel swaps	-	-	-	-	(9,736)	(9,736)
Hedge losses on interest rate forward contract reclassified to net earnings	-	-	-	-	186	186
Balance as at December 31, 2018	75,478	25,000	572,071	672,549	(2,214)	670,335

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)

Related Links

http://www.bcferries.ca