BC Ferries Releases Third Quarter Results

VICTORIA, Feb. 21, 2020 /CNW/ - BC Ferries released its third quarter results today for the fiscal year ending March 31, 2020.

In the three months ended December 31, 2019, BC Ferries delivered over 44,000 sailings across the system. The company carried 4.8 million passengers and 2.0 million vehicles, an increase of 0.7 per cent and 1.6 per cent respectively, compared to the same quarter in the prior year. Year-to-date, the company has carried 18.3 million passengers and 7.3 million vehicles, an increase of 0.2 per cent and 1.3 per cent respectively, compared to the same period in the prior year.

The company reported a net loss of $8.3 million for the three months ended December 31, 2019, as compared to a net loss of $3.7 million reported in the same quarter last year. Year-to-date, since April 1, 2019, net earnings were $98.9 million, $5.6 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 traffic is lower and routine vessel maintenance is scheduled.

Total revenue for the three-month period ended December 31, 2019 increased by $3.2 million to $210.9 million as compared to the same quarter last year. Total revenue for the nine months ended December 31, 2019 increased by $33.4 million to $786.7 million as compared to the same period last year. The increase in revenue is mainly a result of increased vehicle traffic, retail revenue and the provincial contribution for its portion of the fare initiatives.

Operating expenses increased by $7.4 million to $205.7 million as compared to the same quarter last year. For the nine months ended December 31, 2019, operating expenses increased by $27.4 million from $619.4 million to $646.8 million as compared to the same period the year prior. The increase in operating expenses is mainly due to higher labour costs and staffing level changes. These result partly from additional round trips from the service level adjustments as agreed to with the Province, the expanded service of the Central Coast seasonal route and increased service on the major routes to accommodate higher traffic volumes and improve the customer experience.

"Last fall, the British Columbia Ferries Commissioner authorized an average rate increase of 2.3 per cent annually that goes into effect April 1, 2020 to March 31, 2024," said Mark Collins, BC Ferries' President & CEO. "We believe that this regulatory decision, being lower than we expected, may make it more challenging to achieve our corporate objectives, which include replacing our aging fleet, upgrading technology, providing operational resiliency and delivering improved customer service."

Capital expenditures, net of funding from the New Building Canada Fund and FortisBC, in the three and nine months periods ended December 31, 2019 totalled $92.0 million and $147.7 million, respectively. Significant investments include the new Island Class vessels, the Skeena Queen and Spirit Class mid-life upgrades, and upgrading technology.

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 in this release include statements with respect to: net earnings, fares, the number of sailings, traffic levels, vessel maintenance, Island Class vessels, Spirit Class and Skeena Queen mid-life upgrades, technology investments, and the impact of regulatory decisions.  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 THIRD QUARTER FISCAL 2020

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

Vessels

• On October 25, 2019, contracts became effective with Damen Shipyard Group of the 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 that arrived in Canada on January 18, 2020 and are expected to enter service in fiscal 2021. The Island Class vessels will be outfitted with hybrid diesel-electric 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.
  
  
• On December 20, 2019, a contract became effective with Remontowa Shipbuilding S.A. of Gdansk, Poland to build a new Salish Class vessel. The new vessel will be identical to the three existing Salish Class vessels which are dual-fuel capable, designed to run primarily on LNG with marine diesel fuel as a backup. This fourth Salish Class vessel will replace the 55-year old Mayne Queen and is expected to enter service in fiscal 2023.  

Regulatory

• On October 18, 2019, the British Columbia Ferries 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 December 24, 2019, the Commissioner issued Order 16-02B, approving a supplemental application to amend the previously approved amount for the Fare Flexibility and Digital Experience Initiative. The initial Order 16-02 granted on September 21, 2016 is available on the Commissioner's website at www.bcferrycommission.com.

General

• On October 15, 2019, BC Ferries completed a private placement of $250 million of 30-year senior secured bonds. 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.
  
  
• On December 17, 2019, BC Ferries eliminated fuel surcharges as a result of declining fuel prices. Surcharges of 1.5 per cent on average, on all routes with the exception of the Northern Routes, had been in place since June 1, 2019.
  
  
• On February 19, 2020, BC Ferries was named one of B.C.'s Top Employers for the fourth consecutive year. The award recognizes companies that offer exceptional workplaces for their employees by providing forward-thinking and progressive programs. BC Ferries works to create a positive environment for its employees who are focused on delivering great service to customers every day.

BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statements of Financial Position (unaudited)
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Condensed Interim Consolidated Statements of Cash Flows (unaudited)
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BRITISH COLUMBIA FERRY SERVICES INC.
Condensed Interim Consolidated Statements of Cash Flows (unaudited)
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SOURCE British Columbia Ferry Services Inc.