Safe restart funding helps BC Ferries address COVID-19 impacts on third quarter results

VICTORIA, BC, Feb. 22, 2021 /CNW/ - BC Ferries released its third quarter results today for the fiscal year ending March 31, 2021. The COVID-19 global pandemic continues to have a significant impact on the company's operations and financial results. During the quarter, BC Ferries carried 2.9 million passengers and 1.6 million vehicles, a decrease of 39.6 per cent and 22.3 per cent, respectively, compared to the same period in the prior year. Year-to-date, the company carried 10.6 million passengers and
5.3 million vehicles, a decrease of 42.1 per cent and 26.9 per cent, respectively, compared to the same period in the prior year.

As a regulated company, BC Ferries' allowable average annual fare increases and corresponding earning targets are set by the BC Ferries Commissioner to cover the cost of ferry service, along with required maintenance and vessel, terminal and IT upgrades and replacements, as well as debt servicing.

The effects of COVID-19 have negatively impacted BC Ferries' traffic and revenues over the current year. This trend is expected to continue in the near term as the province recovers from the effects of the pandemic.

In December 2020, BC Ferries received $308 million from the Safe Restart Program, a federal-provincial initiative intended to help provinces and territories safely restart their economies.  Assistance to the public transportation sector, including BC Ferries, is a critical part of the BC Safe Restart Plan.

The goals of the federal-provincial Safe Restart funding are to mitigate BC Ferries' revenue losses and additional COVID-19-related spending, help restore the level of annual earnings required to maintain service levels, and to keep fare increases to affordable levels through this performance term which ends March 31, 2024. Maintaining this level of earnings also supports the long-term sustainability, reliability and affordability of the ferry system and protects $380 million in essential vessel, terminal and IT investments over this year and next.

• BC Ferries applied nine months' worth of Safe Restart funding, or $154.8 million, to third quarter revenues. Without this relief, the net loss for the three months ended December 31, 2020 would have been $56.4 million.
• As a result of the funding, BC Ferries recorded net earnings of $98.4 million for the three months ended December 31, 2020, compared to a net loss of $8.3 million in the same quarter in the prior year.
• On a year-to-date basis, BC Ferries' net earnings were $74.3 million to December 31, 2020. Without federal-provincial Safe Restart funding, the company would have had a net loss of $80.5 million, compared to net earnings of $98.9 million in the same period in the prior year.

The positive net earnings in the quarter and year-to-date reflect nine months of Safe Restart funding as well as the seasonal nature of the business whereby traffic in the busy spring and summer months provide earnings that are typically offset by losses in the slower fall and winter months.

"We would again like to acknowledge the important contribution from the federal and provincial governments to address the profound impact COVID-19 has had on transportation and on the ferry system," said Mark Collins, BC Ferries' President and CEO. "The Safe Restart funding will protect the long term sustainability of the ferry system to recover our losses and maintain service and future investments in ferry dependent communities."

"Our valued employees continue to focus on our core business of delivering efficient service while protecting passengers who rely on us for essential travel," said Collins. "I can't thank our staff enough for their dedication and their work to keep our ships and terminals safe, while keeping communities connected during this difficult time."  

In the three months ended December 31, 2020, operating expenses decreased by
$6.7 million or 3.3 per cent ($68.8 million or 10.6 per cent year-to-date) compared to the same period in the prior year, mainly due to reduced round trips on the major routes and the deferral of certain discretionary costs as a result of COVID-19. The expense reduction includes reduced labour costs, fuel consumption, contracted services, depreciation expense and other miscellaneous costs.

Capital expenditures in the three and nine-months ended December 31, 2020 totalled $41.5 million and $90.8 million, respectively, and were financed in part through net earnings during the nine months. Significant investments included the four Island Class vessels and one Salish Class vessel that were already under construction prior to the pandemic. Given the impact of COVID-19 on the company's financial position, all capital plans are being reviewed to identify opportunities to defer any expenditures that are not regulatory, security or safety related, or operationally necessary.

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 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, 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, capital investments, and the anticipated application of funding received under the Safe Restart Funding Program.  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.

February 22, 2021

SIGNIFICANT EVENTS THIRD QUARTER FISCAL 2021

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

• In December 2020, BC Ferries received $308 million pursuant to an agreement with the Province under the Safe Restart Funding Program, a federal-provincial initiative intended to help provinces and territories safely restart their economies and deal with the impacts of COVID-19. The Safe Restart Funding agreement for $308 million consists of three components. The first component is for base operating relief towards the estimated operational impacts of the COVID-19 pandemic of $280 million. The second component of $24 million is to limit fare increases to an average of 2.3 per cent in fiscal 2022, fiscal 2023 and fiscal 2024. The third component of $4 million is to cover the estimated costs of discretionary sailings for fiscal 2022 through fiscal 2024. In the three months ended December 31, 2020, Safe Restart Funding of $154.8 million was recognized in revenue.
  
  
• On December 16, 2020, BC Ferries and the BC Ferry & Marine Workers' Union announced the ratification of a Memorandum of Agreement that was reached on October 22, 2020. This agreement provides certainty for employees, helps ensure uninterrupted ferry service for customers and will mark 22 years of labour stability. The term of the new Collective Agreement is from October 31, 2020 through October 31, 2025 and provides for wage increases of 0 per cent, 2 per cent and 2 per cent over the first three years of the agreement, with year four and five having wage re-openers.
  
  
• On October 28 and December 17, 2020, respectively, BC Ferries' third and fourth Island Class vessels were launched at Damen Shipyards Galati in Romania. These ships will enter service on the Campbell River – Quadra Island route in 2022. The Island Class vessels are outfitted with hybrid-diesel electric propulsion and will operate as fully electric ships in the future when shore-side infrastructure is available.
  
  
• On December 19, 2020, BC Ferries' fourth Salish Class vessel was launched at Remontowa Shipbuilding S.A. in Gdansk, Poland. This vessel will enter service in the Southern Gulf Islands in 2022 and will be identical to the three existing Salish Class vessels, which are dual-duel capable, designed to run primarily on liquefied natural gas.

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statements of Financial Position (unaudited)
(Expressed in thousands of Canadian dollars)
	As at
	December 31, 2020	March 31, 2020
Assets
Current assets
Cash and cash equivalents	323,329	169,141
Restricted short-term investments	33,198	33,393
Other short-term investments	144,529	91,588
Trade and other receivables	23,176	19,488
Prepaid expenses	10,615	11,057
Inventories	36,806	31,897
Derivative assets	-	28
	571,653	356,592
Non-current assets
Loan receivable	24,515	24,515
Property, plant and equipment	1,837,311	1,879,517
Intangible assets	96,692	99,893
	1,958,518	2,003,925
Total assets	2,530,171	2,360,517
Liabilities
Current liabilities
Accounts payable and accrued liabilities	98,637	132,296
Provisions	2,297	1,794
Current portion of lease liabilities	2,772	2,536
Contract liabilities	136,088	21,702
Current portion of long-term debt	15,317	21,644
Interest payable on long-term debt	17,490	21,512
Current portion of accrued employee future benefits	2,500	3,000
Derivative liabilities	8,539	15,507
	283,640	219,991
Non-current liabilities
Lease liabilities	36,557	38,675
Contract liabilities	36,941	-
Long-term debt	1,419,558	1,427,426
Accrued employee future benefits	20,608	20,151
Other liabilities	10,039	10,962
Derivative liabilities	9,707	17,212
	1,533,410	1,514,426
Total liabilities	1,817,050	1,734,417
Equity
Share capital	75,478	75,478
Contributed surplus	25,000	25,000
Retained earnings	622,012	547,745
Total equity before reserves	722,490	648,223
Reserves	(9,369)	(22,123)
Total equity including reserves	713,121	626,100
Total liabilities and equity	2,530,171	2,360,517

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income (Loss)
(unaudited)
(Expressed in thousands of Canadian dollars)
	Three months ended		Nine months ended
	December 31		December 31
	2020	2019	2020	2019
Revenue
Vehicle and passenger fares	94,691	134,699	343,441	513,691
Net retail	4,811	14,583	13,975	55,249
Fuel (rebates) surcharges	(1,525)	1,620	(5,432)	5,440
Other income	1,937	2,754	5,546	9,323
Revenue from customers	99,914	153,656	357,530	583,703
Safe restart funding	154,802	-	154,802	-
Ferry service fees	49,118	49,457	160,535	179,445
Federal-Provincial Subsidy Agreement	8,007	7,835	24,021	23,505
Total revenue	311,841	210,948	696,888	786,653
Expenses
Operations	120,616	128,339	352,740	421,258
Maintenance	24,290	22,166	62,533	61,918
Administration	8,514	9,312	28,594	27,279
Depreciation and amortization	45,613	45,913	134,159	136,375
Total operating expenses	199,033	205,730	578,026	646,830
Operating profit	112,808	5,218	118,862	139,823
Net finance and other expenses
Finance expenses	15,445	16,056	45,988	46,377
Finance income	(1,077)	(2,520)	(3,361)	(5,201)
Net finance expense	14,368	13,536	42,627	41,176
Loss (gain) on disposal and revaluation of property,
plant and equipment and intangible assets	4	(8)	1,968	(214)
Net finance and other expenses	14,372	13,528	44,595	40,962
NET EARNINGS (LOSS)	98,436	(8,310)	74,267	98,861
Other comprehensive income (loss)
Items that are or may be reclassified subsequently
to net earnings (loss)	7,585	4,645	2,042	755
Items not to be reclassified to net earnings (loss)	-	-	(1,933)	(126)
Total other comprehensive income	7,585	4,645	109	629
Total comprehensive income (loss)	106,021	(3,665)	74,376	99,490

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
	Nine months ended December 31
	2020	2019
Operating activities
Net earnings	74,267	98,861
Items not affecting cash:
Net finance expense	42,627	41,176
Depreciation and amortization	134,159	136,375
Loss (gain) on disposal and revaluation of property,
plant and equipment and intangible assets	1,968	(214)
Other non-cash changes to property, plant and equipment	(294)	(686)
Changes in:
Accrued employee future benefits	(1,976)	204
Derivative assets and liabilities recognized in net loss	55	2
Provisions	503	4,859
Accrued financing costs	(270)	89
Total non-cash items	176,772	181,805
Movements in operating working capital:
Trade and other receivables	(3,688)	(2,497)
Prepaid expenses	442	(4,381)
Inventories	(4,909)	(896)
Accounts payable and accrued liabilities	(33,659)	(42,768)
Contract liabilities	151,327	(7,348)
Change in non-cash working capital	109,513	(57,890)
Change in non-cash working capital attributable
to investing activities	25,673	32,324
Change in non-cash operating working capital	135,186	(25,566)
Cash generated from operating activities before interest	386,225	255,100
Interest received	3,628	5,272
Interest paid	(55,769)	(50,468)
Cash generated from operating activities	334,084	209,904

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)
	Nine months ended December 31
	2020	2019
Financing activities
Repayment of long-term debt	(14,837)	(69,212)
Repayment of lease liabilities	(1,886)	(1,650)
Proceeds from the issue of bonds	-	250,000
Transaction costs related to bonds	-	(1,587)
Cash (used in) from financing activities	(16,723)	177,551
Investing activities
Proceeds from disposal of property, plant and equipment	93	309
Purchase of property, plant and equipment and intangible assets	(110,520)	(172,322)
Changes in restricted short-term investments	195	(1,937)
Net purchase of other short-term investments	(52,941)	(45,984)
Cash used in investing activities	(163,173)	(219,934)
Net increase in cash and cash equivalents	154,188	167,521
Cash and cash equivalents, beginning of period	169,141	59,888
Cash and cash equivalents, end of period	323,329	227,409

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 April 1, 2019	75,478	25,000	525,006	625,484	12,834	638,318
Net earnings	-	-	98,861	98,861	-	98,861
Other comprehensive income	-	-	-	-	629	629
Realized hedge gains recognized in
fuel swaps	-	-	-	-	(5,575)	(5,575)
Hedge losses on interest rate forward
contract reclassified to net earnings	-	-	-	-	186	186
Balance as at December 31, 2019	75,478	25,000	623,867	724,345	8,074	732,419
Balance as at April 1, 2020	75,478	25,000	547,745	648,223	(22,123)	626,100
Net earnings	-	-	74,267	74,267	-	74,267
Other comprehensive income	-	-	-	-	109	109
Realized hedge losses recognized in
fuel swaps	-	-	-	-	12,459	12,459
Hedge losses on interest rate forward
contract reclassified to net earnings	-	-	-	-	186	186
Balance as at December 31, 2020	75,478	25,000	622,012	722,490	(9,369)	713,121

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