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BC Ferries Releases First Quarter Results

VICTORIA , Aug. 15, 2019 /CNW/ - Ferries released its first quarter results today for the three months ended June 30, 2019 . Passenger and vehicle traffic levels are the highest the company has ever experienced in the first quarter of a fiscal year.  

Net earnings for the first quarter of fiscal 2020 were $12.2 million , compared to net earnings of $6.0 million for the same quarter of the previous year.

"Net earnings are essential for us to fulfill our commitment to support the growing needs of coastal communities," said Mark Collins, BC Ferries' President and CEO. "With the public interest in mind, we reinvest all earnings back into the ferry system. This is evidenced by our $26 million of investments this quarter which is more than our $12.2 million of net earnings. This enables expanded service to communities, larger ships, upgraded terminals, debt reduction and financial sustainability." 

To improve customer experience, accommodate the higher traffic volumes, and deliver the increased service levels agreed to with the Province, BC Ferries provided more than 700 additional round trips compared to the same period in the prior year. The company also introduced the Northern Sea Wolf and re-introduced the upgraded Spirit of Vancouver Island into service. These actions contributed to a 7.3 per cent increase in revenue and a corresponding 5.0 per cent increase in expenses compared to the first quarter of the previous fiscal year.

In this quarter, BC Ferries invested $26 million as part of its $3.9 billion 12-Year Capital Plan that is focused on replacing ships and upgrading terminals. "Our Capital Plan is vital to maintain an efficient ferry service that meets the increasing demands on the system," said Collins. "We need to replace half of our fleet over the next 15 years as we incorporate clean technology and increase capacity."

BC Ferries continues to focus on fare affordability. At the start of fiscal 2019 ( April 1, 2018 ), BC Ferries, with partial funding from the Province, reduced fares on the minor and northern routes by 15 per cent. Fares on the three Metro Vancouver – Vancouver Island routes were held constant. There are no fare increases being introduced in fiscal 2020.

"Focusing on cost improvements in fuel, maintenance, labour and increasing diversified revenues are ways we reduce upward pressure on fares," said Collins.

In the three months ended June 30, 2019 , BC Ferries delivered over 45,000 sailings, an average of 497 sailings per day for its customers. In the interest of the travelling public, there were 3,268 more round trips provided than required under the Coastal Ferry Services Contract this quarter. The company carried 5.8 million passengers and 2.4 million vehicles, an increase of 2.2 per cent and 2.5 per cent, respectively, compared to the same quarter in the prior 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 22.3 million passengers and 8.9 million vehicles during the fiscal year ended March 31 , 2019.  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: net earnings, fares, the 12-Year Capital Plan, the Spirit of Vancouver Island mid-life upgrade, and the vessel replacement 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.

SIGNIFICANT EVENTS FIRST QUARTER FISCAL 2020

Significant events during or subsequent to the First Quarter of 2020 include the following:

Cost of Travel

  • On April 1, 2019 , as agreed with and partially funded by the Province, fares on all routes for fiscal 2020 were held at the fiscal 2019 level. On April 1, 2018 , BC Ferries applied a fare reduction of 15% on the Northern Routes, the regulated Other Routes and on the Major Route connecting Horseshoe Bay and Langdale. Fares were held constant on the three Major Routes connecting Metro Vancouver with mid and southern Vancouver Island. Also on April 1, 2018 , the BC seniors' passenger discount increased from 50% to 100% for travel Monday to Thursday on the Major and Other Routes. The total estimated value of these initiatives over fiscal 2019 and fiscal 2020 is approximately $98 million , of which BC Ferries will contribute $39 million in foregone revenue. In fiscal 2019, the Province partially funded the fare reductions and the increase to the BC seniors' discount with a contribution of $26.5 million , and in fiscal 2020 the Province will contribute $32.5 million .

  • On June 1, 2019 , due to current fuel market conditions, the company implemented a fuel surcharge of 1.5 per cent on average on all routes with the exception of the Port Hardy – Prince Rupert , Prince Rupert – Haida Gwaii and Port Hardy – Central Coast routes.


Vessels

  • April 18, 2019 , the Spirit of Vancouver Island returned to service on the Tsawwassen – Swartz Bay route following its mid-life upgrade. This mid-life upgrade, which will enable the vessel to operate for another 25 years, included major upgrades to the customer amenities, and the conversion to dual-fuel so the vessel can operate on LNG or ultra-low sulphur marine diesel.

  • On May 18, 2019 , the Northern Sea Wolf entered service in the Central Coast region. The Northern Sea Wolf, a 75-metre vessel built in 2000, underwent extensive upgrades necessary to bring it up to BC Ferries and Transport Canada's standards of safety and reliability. The vessel accommodates approximately 35 vehicles and 150 passengers and crew. On June 3, 2019 , the Northern Sea Wolf began direct seasonal service between Bella Coola and Port Hardy .


General

  • On April 1, 2019 , the BC Ferries Commissioner released its Preliminary Decision on Price Caps for Performance Term Five, setting increases in price caps at 2.3 per cent per year from April 1, 2020 through March 31, 2024 . BC Ferries reviewed the preliminary decision and provided additional information for consideration to the Commissioner. The Commissioner will issue its decision on final price caps by no later than September 30, 2019 .

  • On May 16, 2019 , the Province enacted legislation to amend the Coastal Ferry Act (the "Act") based on the recommendations from the review conducted by government of coastal ferry services in British Columbia . The amendments include: 
  • On May 22, 2019 , three board members resigned from the British Columbia Ferry Services Inc. Board following the introduction of a newly enacted amendment to the Coastal Ferry Act that sets term limits of board members to a maximum of eight consecutive years.


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





June 30, 2019

March 31, 2019

Assets



Current assets



Cash and cash equivalents

60,333

59,888

Restricted short-term investments

31,531

31,651

Other short-term investments

58,173

74,648

Trade and other receivables

32,815

23,246

Prepaid expenses

20,302

8,306

Inventories

30,605

30,870

Derivative assets

3,844

8,145


237,603

236,754

Non-current assets



Loan receivable

24,515

24,515

Property, plant and equipment

1,801,960

1,820,232

Intangible assets

100,432

101,029

Derivative assets

1,279

-


1,928,186

1,945,776

Total assets

2,165,789

2,182,530

Liabilities



Current liabilities



Accounts payable and accrued liabilities

55,131

80,173

Interest payable on long-term debt

16,033

18,429

Contract liabilities

32,365

28,709

Current portion of long-term debt

77,831

57,183

Current portion of accrued employee future benefits

2,000

2,000

Current portion of lease liabilities

2,301

2,184

Provisions

65,110

62,778


250,771

251,456

Non-current liabilities



Accrued employee future benefits

20,377

20,583

Long-term debt

1,195,868

1,222,860

Lease liabilities

39,400

39,797

Other liabilities

11,840

9,516


1,267,485

1,292,756

Total liabilities

1,518,256

1,544,212

Equity



Share capital

75,478

75,478

Contributed surplus

25,000

25,000

Retained earnings

537,175

525,006

Total equity before reserves

637,653

625,484

Reserves

9,880

12,834

Total equity including reserves

647,533

638,318

Total liabilities and equity

2,165,789

2,182,530

 

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income (unaudited)
(Expressed in thousands of Canadian dollars)




Three months ended June 30


2019

2018




Revenue



Vehicle and passenger fares

162,476

158,427

Net retail

16,797

15,559

Fuel surcharges (rebates)

839

(4,517)

Other income

3,037

2,808

Revenue from customers

183,149

172,277

Ferry service fees

55,409

49,797

Federal-Provincial Subsidy Agreement

7,835

7,626

Total revenue

246,393

229,700




Expenses



Operations

140,688

135,872

Maintenance

26,312

22,221

Administration

8,696

9,739

Depreciation and amortization

44,722

42,025

Total operating expenses

220,418

209,857




Operating profit

25,975

19,843




Net finance and other expenses



Finance expenses

14,991

14,972

Finance income

(1,173)

(1,257)

Net finance expense

13,818

13,715

(Gain) loss on disposal and revaluation of property, 




plant and equipment and intangible assets

(12)

88

Net finance and other expenses

13,806

13,803

NET EARNINGS

12,169

6,040







Other comprehensive (loss) income



Items that will be reclassified subsequently to net




earnings

(58)

7,879

Total other comprehensive (loss) income

(58)

7,879

Total comprehensive income

12,111

13,919

 

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




Three months ended June 30


2019

2018

Cash flows from operating activities



Net earnings

12,169

6,040

Items not affecting cash



Net finance expense

13,818

13,715

Depreciation and amortization

44,722

42,025

Other non-cash changes to property, plant and equipment

(46)

412

Changes in:



Accrued employee future benefits

(206)

(536)

Derivative assets and liabilities recognized in net earnings

7

62

Provisions

2,332

2,385

Accrued financing costs

635

503

Total non-cash items

61,262

58,566




Movements in operating working capital



Trade and other receivables

(9,569)

(13,990)

Prepaid expenses

(11,996)

(11,086)

Inventories

265

121

Accounts payable and accrued liabilities

(25,042)

7,648

Contract liabilities

3,656

4,609

Change in non-cash working capital

(42,686)

(12,698)

Change attributable to capital asset acquisitions

26,940

1,178

Change in non-cash operating working capital

(15,746)

(11,520)

Cash generated from operating activities

57,685

53,086

Interest received

700

767

Interest paid

(18,582)

(18,919)

Net cash generated by operating activities

39,803

34,934

 

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




Three months ended June 30


2019

2018

Cash flows from financing activities



Repayment of long-term debt

(6,571)

(6,571)

Repayment of lease liabilities

(552)

(529)

Net cash used in financing activities

(7,123)

(7,100)




Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

95

14

Purchase of property, plant and equipment and intangible assets

(48,925)

(72,446)

Changes in debt service reserve

120

120

Net proceeds from short-term investments

16,475

25,846

Net cash used in investing activities

(32,235)

(46,466)

Net increase (decrease) in cash and cash equivalents

445

(18,632)

Cash and cash equivalents, beginning of period

59,888

69,913

Cash and cash equivalents, end of period

60,333

51,281

 

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, 2018

75,478

25,000

478,855

579,333

8,974

588,307

Net earnings

-

-

6,040

6,040

-

6,040

Other comprehensive income

-

-

-

-

7,879

7,879

Realized hedge gains recognized in fuel swaps

-

-

-

-

(3,322)

(3,322)

Hedge losses on interest rate








forward contract reclassified to
net earnings

-

-

-

-

62

62

Balance as at June 30, 2018

75,478

25,000

484,895

585,373

13,593

598,966

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

 

SOURCE British Columbia Ferry Services Inc.


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