Le Lézard
Classified in: Transportation, Business
Subject: ERN

BC Ferries Releases Third Quarter Results


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.
Condensed Interim Consolidated Statements of Financial Position (Unaudited)
(Expressed in thousands of Canadian dollars)





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.
Condensed Interim Consolidated Statements of Comprehensive Income (Unaudited)
(Expressed in thousands of Canadian dollars)





Three months ended

December 31

Nine months ended
December 31


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.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
(Expressed in thousands of Canadian dollars)



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.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
(Expressed in thousands of Canadian dollars)




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.
Condensed Interim Condensed 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, 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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