VICTORIA, Feb. 23, 2018 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for the fiscal year ending March 31, 2018. The company reported a net loss of $14.8 million for the three months ended December 31, 2017, as compared to a net loss of $4.0 million in the same quarter last year.
Due to the seasonality of ferry travel, BC Ferries typically generates higher net earnings in the first and second quarters, which are substantially reduced by net losses in the last two quarters of the fiscal year. Consequently, the company expects year-end net earnings to be lower than experienced to date. Net earnings for the nine-month period ended December 31, 2017 were $100.9 million, down from $118.2 million for the same period in the previous year. These lower results reflect a commitment to improve the customer experience. BC Ferries implemented service enhancements and provided additional round trips to accommodate the higher traffic volumes (439.5 additional round trips in the quarter; 1,210.5 year-to-date). The additional trips and the sea trials associated with the introduction of three new vessels in the nine months ended December 31, 2017 resulted in an increase in fuel consumption, labour and training related costs. Also maintenance costs were significantly higher, as anticipated, mainly attributed to the timing of refit activity undertaken in B.C. during this quarter to ensure vessel coverage while the Spirit of British Columbia is undergoing its mid-life upgrade.
"The sustainability of the ferry service to coastal communities is important to BC Ferries, which is why we strive to maximize the value for fare payers," said Mark Collins, BC Ferries' President and CEO. "Positive earnings are essential to support safe and reliable service to coastal communities. At the same time, we are reinvesting in the ferry service on behalf of ferry users."
All net earnings are used to the benefit of ferry users in the following ways:
"BC Ferries is a capital intensive business, in a constant state of renewal," said Collins. Capital expenditures in the three and nine-months ended December 31, 2017 totalled $47.8 million and $191.3 million respectively. Projects included vessel replacements, vessel upgrades and modifications such as the Northern Sea Wolf, terminal marine structures, information technology, and terminal building upgrades and equipment.
"Fare affordability is important to BC Ferries and we share the government's commitment to making travel more affordable for coastal communities," said Collins. "With increased traffic, BC Ferries has had two strong years financially and the company is pleased to contribute to government's fare initiatives. This will see a fare freeze on the major routes, a reduction in fares by 15 per cent on the minor and northern routes and the reinstatement of the full seniors' passenger discount Monday through Thursday starting April 1, 2018."
In the three months ended December 31, 2017, BC Ferries carried 1.9 million vehicles and 4.6 million passengers on over 42,000 sailings. Vehicle traffic increased 5.2 per cent and passenger traffic increased 5.1 per cent compared to the same quarter in the prior year. Vehicle and passenger traffic levels were the highest the company has experienced in the third quarter since the third quarter ended December 31, 2004.
BC Ferries' financial statements, including notes and Management's Discussion and Analysis are filed on SEDAR and will be available at www.sedar.com.
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 U.S. 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: the Spirit of British Columbia mid-life upgrade, the Northern Sea Wolf upgrades, and the Provincial government initiatives. 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 Nations 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 include, but are not limited to, average tariff revenue per vehicle and per passenger. 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 during or subsequent to the third quarter of fiscal 2018 include the following:
Vessels
General
BRITISH COLUMBIA FERRY SERVICES INC. | |||
December 31, 2017 |
March 31, 2017 | ||
Assets |
|||
Current assets |
|||
Cash and cash equivalents |
105,282 |
72,032 | |
Restricted short-term investments |
32,466 |
32,426 | |
Other short-term investments |
143,195 |
115,582 | |
Trade and other receivables |
26,075 |
15,319 | |
Prepaid expenses |
8,042 |
7,454 | |
Inventories |
29,163 |
28,257 | |
Derivative assets |
11,617 |
1,604 | |
355,840 |
272,674 | ||
Non-current assets |
|||
Loan receivable |
24,515 |
24,515 | |
Land lease |
29,886 |
30,230 | |
Property, plant and equipment |
1,691,973 |
1,621,802 | |
Intangible assets |
98,889 |
97,673 | |
1,845,263 |
1,774,220 | ||
Total assets |
2,201,103 |
2,046,894 | |
Liabilities |
|||
Current liabilities |
|||
Accounts payable and accrued liabilities |
62,610 |
55,173 | |
Interest payable on long-term debt |
16,522 |
18,458 | |
Deferred revenue |
33,355 |
20,705 | |
Derivative liabilities |
- |
1,048 | |
Current portion of long-term debt |
34,573 |
30,939 | |
Current portion of accrued employee future benefits |
1,400 |
1,400 | |
Current portion of obligations under finance lease |
1,617 |
1,582 | |
Provisions |
59,537 |
55,711 | |
209,614 |
185,016 | ||
Non-current liabilities |
|||
Accrued employee future benefits |
22,282 |
20,913 | |
Long-term debt |
1,290,621 |
1,273,860 | |
Obligations under finance lease |
39,208 |
40,423 | |
Other liabilities |
7,750 |
5,250 | |
1,359,861 |
1,340,446 | ||
Total liabilities |
1,569,475 |
1,525,462 | |
Equity |
|||
Share capital |
75,478 |
75,478 | |
Contributed surplus |
25,000 |
25,000 | |
Retained earnings |
524,931 |
424,020 | |
Total equity before reserves |
625,409 |
524,498 | |
Reserves |
6,219 |
(3,066) | |
Total equity including reserves |
631,628 |
521,432 | |
Total liabilities and equity |
2,201,103 |
2,046,894 |
BRITISH COLUMBIA FERRY SERVICES INC. | |||||||
Three months ended December 31 |
Nine months ended | ||||||
2017 |
2016 |
2017 |
2016 | ||||
Revenue |
|||||||
Vehicle and passenger fares |
136,201 |
127,066 |
524,626 |
502,443 | |||
Ferry service fees |
40,380 |
38,866 |
141,874 |
138,909 | |||
Net retail |
13,147 |
12,090 |
49,950 |
45,807 | |||
Federal-Provincial Subsidy Agreement |
7,446 |
7,289 |
22,337 |
21,868 | |||
Fuel rebates |
(4,169) |
(3,787) |
(15,783) |
(14,764) | |||
Other income |
2,243 |
2,139 |
7,741 |
7,512 | |||
Total revenue |
195,248 |
183,663 |
730,745 |
701,775 | |||
Expenses |
|||||||
Operations |
117,637 |
110,191 |
376,538 |
353,964 | |||
Maintenance |
28,185 |
18,009 |
62,751 |
53,252 | |||
Administration |
9,020 |
8,577 |
28,243 |
25,361 | |||
Depreciation and amortization |
40,453 |
37,065 |
119,101 |
110,278 | |||
Total operating expenses |
195,295 |
173,842 |
586,633 |
542,855 | |||
Operating (loss) profit |
(47) |
9,821 |
144,112 |
158,920 | |||
Net finance and other expenses |
|||||||
Finance income |
1,501 |
1,262 |
3,929 |
3,446 | |||
Finance expenses |
(15,284) |
(15,073) |
(45,872) |
(44,018) | |||
Net finance expense |
(13,783) |
(13,811) |
(41,943) |
(40,572) | |||
(Loss) gain on disposal and revaluation of property, |
|||||||
plant and equipment, intangible assets and inventory |
(1,009) |
25 |
(1,258) |
(128) | |||
Net finance and other expenses |
(14,792) |
(13,786) |
(43,201) |
(40,700) | |||
NET (LOSS) EARNINGS |
(14,839) |
(3,965) |
100,911 |
118,220 | |||
Other comprehensive income |
|||||||
Items not to be reclassified to net earnings |
- |
- |
(1,943) |
(1,240) | |||
Items to be reclassified to net earnings |
9,731 |
6,325 |
10,541 |
16,861 | |||
Total other comprehensive income |
9,731 |
6,325 |
8,598 |
15,621 | |||
Total comprehensive (loss) income |
(5,108) |
2,360 |
109,509 |
133,841 |
BRITISH COLUMBIA FERRY SERVICES INC. | ||||
Nine months ended December 31 | ||||
2017 |
2016 | |||
Cash flows from operating activities |
||||
Net earnings |
100,911 |
118,220 | ||
Items not affecting cash |
||||
Net finance expense |
41,943 |
40,572 | ||
Depreciation and amortization |
119,101 |
110,278 | ||
Loss on disposal and revaluation of property, plant and |
||||
equipment, intangible assets and inventory |
1,258 |
128 | ||
Other non-cash changes to property, plant and equipment |
481 |
(1,604) | ||
Changes in: |
||||
Accrued employee future benefits |
(574) |
361 | ||
Derivative assets and liabilities recognized in net earnings |
(20) |
(10) | ||
Provisions |
3,826 |
4,347 | ||
Long-term land lease |
344 |
344 | ||
Accrued financing costs |
136 |
271 | ||
Total non-cash items |
166,495 |
154,687 | ||
Movements in operating working capital |
||||
Trade and other receivables |
(10,756) |
3,529 | ||
Prepaid expenses |
(588) |
(400) | ||
Inventories |
(906) |
(2,244) | ||
Accounts payable and accrued liabilities |
7,437 |
(9,379) | ||
Deferred revenue |
12,650 |
(1,991) | ||
Change in non-cash working capital |
7,837 |
(10,485) | ||
Change attributable to capital asset acquisitions |
(1) |
3,040 | ||
Change in non-cash operating working capital |
7,836 |
(7,445) | ||
Cash generated from operating activities |
275,242 |
265,462 | ||
Interest received |
3,624 |
3,149 | ||
Interest paid |
(51,434) |
(50,469) | ||
Net cash generated by operating activities |
227,432 |
218,142 |
BRITISH COLUMBIA FERRY SERVICES INC. | ||
Nine months ended December 31 | ||
2017 |
2016 | |
Cash flows from financing activities |
||
Proceeds from long-term debt |
45,264 |
44,858 |
Repayment of long-term debt |
(24,241) |
(15,750) |
Repayment of finance lease obligations |
(1,180) |
(1,129) |
Deferred financing costs incurred |
(1,417) |
(1,495) |
Net cash generated by financing activities |
18,426 |
26,484 |
Cash flows from investing activities |
||
Proceeds from disposal of property, plant and equipment |
471 |
137 |
Purchase of property, plant and equipment and intangible assets |
(185,426) |
(149,705) |
Changes in debt service reserve |
(40) |
(130) |
Net purchase of short-term investments |
(27,613) |
(56,395) |
Net cash used in investing activities |
(212,608) |
(206,093) |
Net increase in cash and cash equivalents |
33,250 |
38,533 |
Cash and cash equivalents, beginning of period |
72,032 |
79,113 |
Cash and cash equivalents, end of period |
105,282 |
117,646 |
BRITISH COLUMBIA FERRY SERVICES INC. | |||||||
Share |
Contributed |
Retained |
Total equity |
Reserves |
Total | ||
Balance as at March 31, 2016 |
75,478 |
25,000 |
352,692 |
453,170 |
(24,223) |
428,947 | |
Net earnings |
- |
- |
118,220 |
118,220 |
- |
118,220 | |
Other comprehensive income |
- |
- |
- |
- |
15,621 |
15,621 | |
Realized hedge losses recognized in fuel swaps |
- |
- |
- |
- |
6,015 |
6,015 | |
Hedge losses on interest rate forward contract |
|||||||
reclassified to net earnings |
- |
- |
- |
- |
186 |
186 | |
Balance as at December 31, 2016 |
75,478 |
25,000 |
470,912 |
571,390 |
(2,401) |
568,989 | |
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 |
SOURCE British Columbia Ferry Services Inc.
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