News Column

BC Ferries releases year-end results

June 20, 2014

VICTORIA, June 20, 2014 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its year-end results today for fiscal 2014. 

Consolidated net earnings were $18.0 million for fiscal 2014, an increase of $2.5 million from the prior year's net earnings of $15.5 million.  Fiscal 2014 net earnings reflect the effects of increased fares and lower financing costs, partially offset by lower traffic levels and lower transportation fees. As a result of ongoing cost containment efforts, the company's operating expenses, excluding fuel costs, were $13.3 million below previously planned levels for fiscal 2014.

Revenues for the year increased from $786.4 million to $800.2 million and operating expenses increased from $701.6 million to $714.3 million compared to the year prior. The $12.7 million increase in fiscal 2014 operating expenses mainly consists of increases in fuel expenses, collective agreement increases to wage rates, operational overtime and benefit costs. 

Capital expenditures in the three and twelve months ended March 31, 2014 totalled $40.8 million and $129.9 million, respectively.  For fiscal 2014, these investments include: $65.5 million in vessel upgrades and modifications; $43.6 million in terminal marine structures; $16.9 million in information technology; and $3.9 million in terminal and building upgrades and equipment. 

On February 5, 2014, the Province announced service level reductions on the northern and minor routes to better align service levels to demand, and to ensure BC Ferries is a strong, viable company to serve residents and tourists for years to come.  BC Ferries worked with the affected communities to implement these service level reductions in a manner intended to lessen their impact. 

"As the service provider, we work closely with the provincial government which sets service levels as a matter of public policy, and the BC Ferries Commission, which regulates our fares," said Mike Corrigan, BC Ferries' President and CEO.  "We understand the vital role we play in maintaining the quality of life of people who live, work and play in British Columbia, so we will stay focused on what we do best: serving our customers well and maintaining a safe, reliable and efficient fleet." The Commissioner, independent of both government and BC Ferries, regulates fares by balancing the interests of customers and taxpayers, while protecting the long term sustainability of the company.

In fiscal 2014, BC Ferries experienced a 1.3 per cent decline in vehicle traffic and a 1.1 per cent decline in passenger traffic compared to fiscal 2013.  Fiscal 2014 traffic was negatively impacted by the timing of the Easter holiday weekend. Fiscal 2014 included only one day of the Easter holiday weekend, while fiscal 2013 included seven such days.  BC Ferries believes that, when adjusted for the timing of Easter, fiscal 2014 traffic levels were generally flat compared to the prior year. 

Significant events during or subsequent to fiscal 2014 include: the July 24, 2013 redemption of all $140 million of the outstanding Series 08-02 Bonds, formerly due December 19, 2013; the October 25, 2013 completion of a private placement of $200 million of 30-year senior secured bonds that bear interest at a rate of 4.702 per cent; and the April 28, 2014 completion of a private placement of $200 million of 30-year senior secured bonds that bear interest at a rate of 4.289 per cent.  The effective rate of this issue, net of hedging, is 4.50 per cent, the lowest effective bond interest rate in the 11 year history of the company.

On February 26, 2014, after receiving confirmation from the BC Ferries Commissioner that the expenditures required to implement the cable ferry system on the Buckley BayDenman Island route are reasonable and prudent, Seaspan's Vancouver Shipyards was awarded the $15 million contract for construction of the cable ferry. 

On March 19, 2014, BC Ferries announced the award of contracts totalling $15 million for the construction of the Buckley Bay and Denman West cable ferry berths.  These contracts include an award to Vancouver Pile Driving Ltd. for supply of two concrete floating pontoons and another award to Ruskin Construction Ltd. for construction of the two berths. 

BC Ferries received WorkSafeBC's Certificate of Recognition (COR) for the successful implementation of the Safety Management System. As a result, the company received a rebate of $600,000 in WorkSafeBC premiums, in addition to the $500,000 in premium savings the company expects to realize this year.  The company also received the Lattitude Productions UK International Award for Inspiring Safety, as well as won the Lloyd's list North America Safety Award in the training category for improvements in navigation safety as a result of the new bridge simulation training program.

A project to construct three new intermediate class ferries is underway.  BC Ferries is currently reviewing the responses to the Request for Proposals the company issued in December 2013. The new vessels are expected to enter into service in 2016 and 2017, and will replace the 49-year old Queen of Burnaby and the 50-year old Queen of Nanaimo.  These new ships will be designed to operate as dual-fuel capable, so they can run on liquefied natural gas or marine diesel oil. 

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis, as well as the Statement of Executive Compensation, are filed on SEDAR and will be available at www.sedar.com

Under contract to the Province of British Columbia, BC Ferries is the service provider responsible for the delivery of safe, efficient and dependable ferry service along coastal British Columbia.

BC Ferries is one of the largest ferry operators in the world based on passengers transported annually and transportation infrastructure, and carried 19.7 million passengers and 7.6 million vehicles during the fiscal year ended March 31, 2014.  BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 24 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: the service level adjustment plan, traffic levels, BC Ferries' vessel replacement program for the Queen of Burnaby and the Queen of Nanaimo, and its cable ferry initiative. 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 traffic volume and tariff revenue risk, safety and security, asset risk, accident risk, tax risk, environmental risk, regulatory risk, labour disruption risk, risk of default under material contracts and aboriginal land 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.

In addition to providing measures prepared in accordance with IFRS, we present certain supplemental non-IFRS measures. These include, but are not limited to, total comprehensive income adjusted for the effect of rate regulation, and vehicle and passenger traffic. These measures do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental non-IFRS 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.

BRITISH COLUMBIA FERRY SERVICES INC.

Consolidated Statements of Financial Position

(Expressed in thousands of Canadian dollars)



As at,



March 31, 2014

March 31, 2013

Assets





Current assets





Cash and cash equivalents

71,365

36,641

Restricted short-term investments

35,792

35,575

Other short-term investments

81,006

43,403

Trade and other receivables

16,577

18,118

Prepaid expenses

6,934

10,706

Inventories

25,073

23,257



236,747

167,700

Non-current assets





Long-term loan receivable

24,515

24,515

Long-term land lease

31,604

32,063

Property, plant and equipment

1,539,162

1,552,062

Intangible assets

53,164

47,942



1,648,445

1,656,582

Total assets

1,885,192

1,824,282







Liabilities





Current liabilities





Accounts payable and accrued liabilities

48,134

51,803

Interest payable on long-term debt

19,634

18,063

Deferred revenue

14,563

13,634

Derivative liabilities

5,274

12

Current portion of long-term debt

270,250

149,000

Current portion of accrued employee future benefits

2,204

2,204

Current portion of obligations under finance lease

1,120

1,072

Provisions

51,801

50,839



412,980

286,627

Non-current liabilities





Accrued employee future benefits

15,931

16,604

Long-term debt

1,066,531

1,137,212

Obligations under finance lease

44,821

45,941



1,127,283

1,199,757

Total liabilities

1,540,263

1,486,384

Equity





Share capital

75,478

75,478

Contributed surplus

25,000

25,000

Retained earnings

246,142

234,187

Total equity before reserves

346,620

334,665

Reserves

(1,691)

3,233

Total equity including reserves

344,929

337,898

Total liabilities and equity

1,885,192

1,824,282









 

BRITISH COLUMBIA FERRY SERVICES INC.

Consolidated Statements of Comprehensive Income

(Expressed in thousands of Canadian dollars)





Years ended



March 31,

2014

2013







Revenue





Vehicle and passenger fares

489,305

468,780

Ferry service fees

180,076

182,100

Retail

78,932

76,496

Federal-Provincial Subsidy Agreement

28,373

28,078

Fuel surcharges

2,689

11,469

Regulated other income

13,458

12,848

Other income

7,328

6,602

Total revenue

800,161

786,373







Expenses





Operations

451,670

436,812

Maintenance

63,240

69,938

Administration

31,636

29,632

Cost of retail goods sold

30,860

29,500

Depreciation and amortization

136,896

135,675

Total operating expenses

714,302

701,557







Operating profit

85,859

84,816







Net finance and other expenses





Net finance expenses





Finance income

3,721

2,922

Finance expenses

(71,030)

(72,076)

Total net finance expenses

(67,309)

(69,154)

Loss on disposal and revaluation of property, plant and equipment and intangible assets

(557)

(154)

Total net finance and other expenses

(67,866)

(69,308)







Net earnings

17,993

15,508







Other comprehensive (loss) income





Items not to be reclassified to net earnings

116

1,056

Items to be reclassified to net earnings

(5,040)

-

Total other comprehensive (loss) income

(4,924)

1,056







Total comprehensive income

13,069

16,564









 

BRITISH COLUMBIA FERRY SERVICES INC.

Consolidated Statements of Cash Flows

(Expressed in thousands of Canadian dollars)





Years ended



March 31,

2014

2013







Cash flows from operating activities











Net earnings

17,993

15,508

 

Items not affecting cash





Net finance costs recognized in net earnings

67,309

69,154

Depreciation and amortization of non-current assets

136,896

135,675

Loss on disposal and revaluation of property, plant and equipment and intangible assets

557

154

Other non-cash adjustments to property, plant & equipment

523

(791)

Change in derivative liabilities recognized in net earnings

222

-

Changes in





   Long-term accrued employee future benefits

(569)

(757)

   Provisions

962

3,817

   Long-term land lease

459

458

   Accrued interest costs

(1,110)

246

Total non-cash items

205,249

207,956

 

Movements in operating working capital





Trade and other receivables

1,541

24,223

Prepaid expenses

3,772

(3,981)

Inventories

(1,816)

(1,241)

Accounts payable and accrued liabilities

(3,669)

1,095

Deferred revenue

929

(150)

Change in non-cash working capital

757

19,946

Change attributable to capital asset acquisitions

(1,908)

6,653

Change attributable to contributed surplus

-

(25,000)

Change in non-cash operating working capital

(1,151)

1,599







Cash generated from operating activities

222,091

225,063







Interest rate support received

-

742

Interest received

4,554

2,268

Interest paid

(71,402)

(73,471)







Net cash generated by operating activities

155,243

154,602



 

BRITISH COLUMBIA FERRY SERVICES INC.

Consolidated Statements of Cash Flows

(Expressed in thousands of Canadian dollars)





Years ended



March 31,

2014

2013







Cash flows from financing activities











Proceeds from issuance of bonds

200,000

-

Repayment of long-term debt

(149,000)

(9,000)

Repayment of short-term debt

-

(17,737)

Repayment of finance lease obligations

(1,072)

(974)

Contributed surplus payment from Province

-

25,000

Dividends paid on preferred shares

(6,038)

(6,038)

Deferred financing costs incurred

(1,390)

-







Net cash generated by (used in) financing activities

42,500

(8,749)













Cash flows from investing activities











Proceeds from disposal of property, plant and equipment

53

120

Purchase of property, plant and equipment and intangible assets

(125,252)

(100,639)

(Increase) decrease of debt service reserve

(217)

130

Purchase of short-term investments

(37,603)

(16,523)







Net cash used in investing activities

(163,019)

(116,912)







Net increase in cash and cash equivalents

34,724

28,941







Cash and cash equivalents, beginning of year

36,641

7,700







Cash and cash equivalents, end of year

71,365

36,641



                                                                                                                                            

BRITISH COLUMBIA FERRY SERVICES INC.

Consolidated Statements of Changes in Equity

(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, 2012

75,478

25,000

224,717

325,195

2,177

327,372















Net earnings for the year ended March 31, 2013

-

-

15,508

15,508

-

15,508















Other comprehensive income for the year ended March 31, 2013

-

-

-

-

1,056

1,056















Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)















Balance as at March 31, 2013

75,478

25,000

234,187

334,665

3,233

337,898















Net earnings for the year ended March 31, 2014

-

-

17,993

17,993

-

17,993















Other comprehensive loss for the year ended March 31, 2014

-

-

-

-

(4,924)

(4,924)















Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)















Balance as at March 31, 2014

75,478

25,000

246,142

346,620

(1,691)

344,929



 

SOURCE British Columbia Ferry Services Inc.


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