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BC Ferries Releases Second Quarter Results

VICTORIA , Nov. 22, 2019 /CNW/ - BC Ferries released its second quarter results today for the three months ended September 30, 2019 .

BC Ferries (CNW Group/British Columbia Ferry Services Inc.)

During the quarter, BC Ferries provided over 48,000 sailings, carrying 7.7 million passengers and 2.9 million vehicles. Passenger traffic decreased by 1.5 per cent, while vehicle traffic increased by 0.1 per cent compared to the same quarter in the prior year. Year-to-date, BC Ferries has carried 13.5 million passengers and 5.3 million vehicles, an increase of 0.1 per cent and 1.2 per cent, respectively, compared to the same period in the prior year. 

The company's net earnings for the second quarter of fiscal 2020 were $95.0 million , compared to net earnings of $90.9 million for the same quarter of the previous year. Year-to-date, since April 1, 2019 , net earnings were $107.2 million , $10.3 million higher than in the same period in the prior year. Due to the seasonality of ferry travel, net earnings in the first and second quarters are typically reduced by net losses in the last two quarters of the fiscal year when routine vessel maintenance is scheduled and traffic declines.

"All net earnings are reinvested back into the coastal ferry system, which is critical to ensure we continue to operate a resilient and affordable service," said Mark Collins, BC Ferries' President & CEO. "It appears that the traffic growth has reached its peak and, coupled with the recent price cap ruling, this makes prioritizing capital expenditures even more important. We engage with the communities we serve to prioritize our capital investments and levels of service. We are focused on a safe, reliable and sustainable system to serve our customers over the long term."

All net earnings are used to the benefit of ferry users including:

  • Investing in infrastructure such as new vessels and terminals
  • Improving the service, including increasing the number of sailings provided on a number of routes
  • Offering discounts, reducing and freezing fares to provide more affordable travel
  • Minimizing borrowing to lower the interest paid on debt
  • Strengthening the ability to weather challenging economic conditions including weak traffic years


"Our 12-Year Capital Plan anticipates investing $3.9 billion to ensure system capacity, operational efficiency, resiliency and flexibility – all essential for efficient and sustainable operations," said Collins. "Our Clean Futures Plan outlines our strategy to reduce greenhouse gas emissions by replacing carbon intensive fossil fuels with clean energy. Ferry users expect us to both reinvest in the future and protect the pristine environment in which we operate." 

Capital expenditures in the three and six months ended September 30, 2019 totalled $29.9 million and $55.8 million respectively. Significant investments include the new Island Class vessels, Spirit Class mid-life upgrades, customer experience program, Texada Island wingwall replacement and various other projects.

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 Clean Futures Plan to reduce greenhouse gas, the number of sailings, Island Class vessels, Spirit Class mid-life upgrade, the customer experience program, the Texada Island wingwall replacement, and other investment projects, and our borrowing expectations.  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 SECOND QUARTER FISCAL 2020

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

General

  • The Coastal Ferry Act allows BC Ferries to submit additional information for the BC Ferries Commissioner's consideration in setting price caps generally, and in the final price cap determination, specifically. On September 5, 2019 , BC Ferries filed supplemental information to the Commissioner regarding capital expenditures and financial resilience that the company believes are required to meet the long-term needs of ferry users, communities and the public. 

  • On September 30, 2019 , the BC Ferries Commissioner issued a ruling that established final price cap increases of 2.3 per cent for each of the four years of performance term five, being the four year period commencing on April 1, 2020 and ending on March 31 , 2024. 

  • Also on September 30, 2019 , the Commissioner released a performance review of the efficiency of BC Ferries prepared by PwC. The report concludes that BC Ferries is exhibiting good cost control and should continue the current efforts to manage costs and increase efficiencies. The foregoing three documents are available on the Commissioner's website at: www.bcferrycommission.ca.

  • On October 15, 2019 , BC Ferries completed a private placement of $250 million of 30-year senior secured bonds with accredited investors. These bonds bear interest at a rate of 2.794 per cent per annum, payable semi-annually. The net proceeds of this new issue will be used, together with additional cash on hand, to provide for capital expenditures, general corporate purposes and to fund the series reserve account. These bonds were rated "A (high)" by DBRS and "AA-" by Standard & Poor's ("S&P").

  • 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. These initiatives are in place through March 31, 2020 .


Vessels

  • On October 18, 2019 , the Commissioner issued Order 19- 02B , approving a supplementary application to amend the approved major capital expenditure amount for the construction and introduction of one new Salish Class vessel and four new Island Class vessels. The initial Order 19-02 granted on January 7, 2019 , and Order 19- 02B are available on the Commissioner's website at www.bcferrycommission.com.

  • On October 25, 2019 , contracts became effective with Damen Shipyard Group of Netherlands for the construction of four new Island Class vessels expected to enter service during fiscal 2023.  These four vessels are in addition to the two Island Class vessels which are expected to enter service in fiscal 2021.  The Island Class vessels will be outfitted with battery electric-hybrid propulsion and will each have a capacity of up to 450 passengers and approximately 47 vehicles. The total project budget for the four additional vessels, including financing and project management costs, is approximately $200 million .


BRITISH COLUMBIA FERRY SERVICES INC.

Condensed Interim Consolidated Statements of Financial Position (unaudited)

(Expressed in thousands of Canadian dollars)




September 30, 2019

March 31, 2019

Assets



Current assets



Cash and cash equivalents

134,897

59,888

Restricted short-term investments

31,341

31,651

Other short-term investments

76,617

74,648

Trade and other receivables

29,415

23,246

Prepaid expenses

14,027

8,306

Inventories

31,258

30,870

Derivative assets

1,317

8,145


318,872

236,754

Non-current assets



Loan receivable

24,515

24,515

Property, plant and equipment

1,785,321

1,820,232

Intangible assets

101,152

101,029

Derivative assets

5

-


1,910,993

1,945,776

Total assets

2,229,865

2,182,530

Liabilities



Current liabilities



Accounts payable and accrued liabilities

45,414

80,173

Interest payable on long-term debt

18,456

18,429

Contract liabilities

21,872

28,709

Current portion of long-term debt

74,104

57,183

Current portion of accrued employee future benefits

2,000

2,000

Current portion of lease liabilities

2,297

2,184

Provisions

66,145

62,778

Derivative liabilities

433

-


230,721

251,456

Non-current liabilities



Accrued employee future benefits

20,681

20,583

Long-term debt

1,188,748

1,222,860

Lease liabilities

39,983

39,797

Other liabilities

11,493

9,516

Derivative liabilities

977

-


1,261,882

1,292,756

Total liabilities

1,492,603

1,544,212

Equity



Share capital

75,478

75,478

Contributed surplus

25,000

25,000

Retained earnings

632,177

525,006

Total equity before reserves

732,655

625,484

Reserves

4,607

12,834

Total equity including reserves

737,262

638,318

Total liabilities and equity

2,229,865

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

September 30

Six months ended
September 30


2019

2018

2019

2018






Revenue





Vehicle and passenger fares

216,516

213,187

378,992

371,614

Net retail

23,869

23,061

40,666

38,620

Fuel surcharges (rebates)

2,981

(67)

3,820

(4,585)

Other income

3,532

3,433

6,569

6,240

Revenue from customers

246,898

239,614

430,047

411,889

Ferry service fees

74,579

68,581

129,988

118,380

Federal-Provincial Subsidy Agreement

7,835

7,626

15,670

15,252

Total revenue

329,312

315,821

575,705

545,521






Expenses





Operations

152,231

142,664

292,919

278,535

Maintenance

13,440

15,713

39,752

37,934

Administration

9,271

9,955

17,967

19,694

Depreciation and amortization

45,740

42,921

90,462

84,946

Total operating expenses

220,682

211,253

441,100

421,109

Operating profit

108,630

104,568

134,605

124,412






Net finance and other expenses





Finance expenses

15,330

15,268

30,321

30,240

Finance income

(1,508)

(1,610)

(2,681)

(2,867)

Net finance expense

13,822

13,658

27,640

27,373

(Gain) loss on disposal and revaluation of property,





plant and equipment and intangible assets

(194)

54

(206)

143

Net finance and other expenses

13,628

13,712

27,434

27,516

NET EARNINGS

95,002

90,856

107,171

96,896






Other comprehensive (loss) income





Items that are or may be reclassified subsequently





to net earnings           

(3,832)

1,445

(3,890)

9,324

Items not to be reclassified to net earnings

(126)

-

(126)

-

Total other comprehensive (loss) income

(3,958)

1,445

(4,016)

9,324

Total comprehensive income

91,044

92,301

103,155

106,220

 

BRITISH COLUMBIA FERRY SERVICES INC.

Condensed Interim Consolidated Statements of Cash Flows (unaudited)

(Expressed in thousands of Canadian dollars)




Six months ended

September 30


2019

2018

Cash flows from operating activities



Net earnings

107,171

96,896

Items not affecting cash



Net finance expense

27,640

27,373

Depreciation and amortization

90,462

84,946

Other non-cash changes to property, plant and equipment

(1,152)

(24)

Changes in:



Accrued employee future benefits

(28)

(507)

Derivative assets and liabilities recognized in net earnings

8

71

Provisions

3,367

2,343

Accrued financing costs

(434)

(276)

Total non-cash items

119,863

113,926

Movements in operating working capital



Trade and other receivables

(6,169)

(16,757)

Prepaid expenses

(5,721)

(4,247)

Inventories

(388)

(544)

Accounts payable and accrued liabilities

(34,759)

(1,856)

Contract liabilities

(6,837)

(1,593)

Change in non-cash working capital

(53,874)

(24,997)

Change attributable to capital asset acquisitions

23,550

18,456

Change in non-cash operating working capital

(30,324)

(6,541)

Cash generated from operating activities

196,710

204,281

Interest received

3,276

3,149

Interest paid

(32,211)

(32,891)

Net cash generated by operating activities

167,775

174,539

 

BRITISH COLUMBIA FERRY SERVICES INC.

Condensed Interim Consolidated Statements of Cash Flows (unaudited)

(Expressed in thousands of Canadian dollars)



Six months ended

September 30


2019

2018

Cash flows from financing activities



Repayment of long-term debt

(17,641)

(17,641)

Repayment of lease liabilities

(1,093)

(1,064)

Net cash used in financing activities

(18,734)

(18,705)

Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

295

41

Purchase of property, plant and equipment and intangible assets

(72,668)

(139,309)

Changes in debt service reserve

310

310

Net (purchase of) proceeds from short-term investments

(1,969)

1,626

Net cash used in investing activities

(74,032)

(137,332)

Net increase in cash and cash equivalents

75,009

18,502

Cash and cash equivalents, beginning of period

59,888

69,913

Cash and cash equivalents, end of period

134,897

88,415

 

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

-

-

96,896

96,896

-

96,896

Other comprehensive income

-

-

-

-

9,324

9,324

Realized hedge gains recognized in







fuel swaps

-

-

-

-

(7,517)

(7,517)

Hedge losses on interest rate forward







contract reclassified to net earnings

-

-

-

-

124

124

Balance as at September 30, 2018

75,478

25,000

575,751

676,229

10,905

687,134

Balance as at April 1, 2019

75,478

25,000

525,006

625,484

12,834

638,318

Net earnings

-

-

107,171

107,171

-

107,171

Other comprehensive loss

-

-

-

-

(4,016)

(4,016)

Realized hedge gains recognized in







fuel swaps

-

-

-

-

(4,335)

(4,335)

Hedge losses on interest rate forward







contract reclassified to net earnings

-

-

-

-

124

124

Balance as at September 30, 2019

75,478

25,000

632,177

732,655

4,607

737,262

 

SOURCE British Columbia Ferry Services Inc.


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