Safe restart funding helps BC Ferries address COVID-19 impacts on third quarter results

VICTORIA, BC, Feb. 22, 2021 /CNW/ - BC Ferries released its third quarter results today for the fiscal year ending March 31, 2021. The COVID-19 global pandemic continues to have a significant impact on the company's operations and financial results. During the quarter, BC Ferries carried 2.9 million passengers and 1.6 million vehicles, a decrease of 39.6 per cent and 22.3 per cent, respectively, compared to the same period in the prior year. Year-to-date, the company carried 10.6 million passengers and
5.3 million vehicles, a decrease of 42.1 per cent and 26.9 per cent, respectively, compared to the same period in the prior year.

As a regulated company, BC Ferries' allowable average annual fare increases and corresponding earning targets are set by the BC Ferries Commissioner to cover the cost of ferry service, along with required maintenance and vessel, terminal and IT upgrades and replacements, as well as debt servicing.

The effects of COVID-19 have negatively impacted BC Ferries' traffic and revenues over the current year. This trend is expected to continue in the near term as the province recovers from the effects of the pandemic.

In December 2020, BC Ferries received $308 million from the Safe Restart Program, a federal-provincial initiative intended to help provinces and territories safely restart their economies.  Assistance to the public transportation sector, including BC Ferries, is a critical part of the BC Safe Restart Plan.

The goals of the federal-provincial Safe Restart funding are to mitigate BC Ferries' revenue losses and additional COVID-19-related spending, help restore the level of annual earnings required to maintain service levels, and to keep fare increases to affordable levels through this performance term which ends March 31, 2024. Maintaining this level of earnings also supports the long-term sustainability, reliability and affordability of the ferry system and protects $380 million in essential vessel, terminal and IT investments over this year and next.

• BC Ferries applied nine months' worth of Safe Restart funding, or $154.8 million, to third quarter revenues. Without this relief, the net loss for the three months ended December 31, 2020 would have been $56.4 million.
• As a result of the funding, BC Ferries recorded net earnings of $98.4 million for the three months ended December 31, 2020, compared to a net loss of $8.3 million in the same quarter in the prior year.
• On a year-to-date basis, BC Ferries' net earnings were $74.3 million to December 31, 2020. Without federal-provincial Safe Restart funding, the company would have had a net loss of $80.5 million, compared to net earnings of $98.9 million in the same period in the prior year.

The positive net earnings in the quarter and year-to-date reflect nine months of Safe Restart funding as well as the seasonal nature of the business whereby traffic in the busy spring and summer months provide earnings that are typically offset by losses in the slower fall and winter months.

"We would again like to acknowledge the important contribution from the federal and provincial governments to address the profound impact COVID-19 has had on transportation and on the ferry system," said Mark Collins, BC Ferries' President and CEO. "The Safe Restart funding will protect the long term sustainability of the ferry system to recover our losses and maintain service and future investments in ferry dependent communities."

"Our valued employees continue to focus on our core business of delivering efficient service while protecting passengers who rely on us for essential travel," said Collins. "I can't thank our staff enough for their dedication and their work to keep our ships and terminals safe, while keeping communities connected during this difficult time."  

In the three months ended December 31, 2020, operating expenses decreased by
$6.7 million or 3.3 per cent ($68.8 million or 10.6 per cent year-to-date) compared to the same period in the prior year, mainly due to reduced round trips on the major routes and the deferral of certain discretionary costs as a result of COVID-19. The expense reduction includes reduced labour costs, fuel consumption, contracted services, depreciation expense and other miscellaneous costs.

Capital expenditures in the three and nine-months ended December 31, 2020 totalled $41.5 million and $90.8 million, respectively, and were financed in part through net earnings during the nine months. Significant investments included the four Island Class vessels and one Salish Class vessel that were already under construction prior to the pandemic. Given the impact of COVID-19 on the company's financial position, all capital plans are being reviewed to identify opportunities to defer any expenditures that are not regulatory, security or safety related, or operationally necessary.

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 21.7 million passengers and 8.8 million vehicles during the fiscal year ended March 31, 2020.
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, the requirements of the Coastal Ferry Services Contract, and the impact of the COVID-19 pandemic.

Forward looking statements included in this release include statements with respect to: the company's response to the COVID-19 pandemic, reductions in discretionary spending, capital investments, and the anticipated application of funding received under the Safe Restart Funding Program.  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.

February 22, 2021

SIGNIFICANT EVENTS THIRD QUARTER FISCAL 2021

Significant events during or subsequent to the Third Quarter of 2021 include the following:

• In December 2020, BC Ferries received $308 million pursuant to an agreement with the Province under the Safe Restart Funding Program, a federal-provincial initiative intended to help provinces and territories safely restart their economies and deal with the impacts of COVID-19. The Safe Restart Funding agreement for $308 million consists of three components. The first component is for base operating relief towards the estimated operational impacts of the COVID-19 pandemic of $280 million. The second component of $24 million is to limit fare increases to an average of 2.3 per cent in fiscal 2022, fiscal 2023 and fiscal 2024. The third component of $4 million is to cover the estimated costs of discretionary sailings for fiscal 2022 through fiscal 2024. In the three months ended December 31, 2020, Safe Restart Funding of $154.8 million was recognized in revenue.
  
  
• On December 16, 2020, BC Ferries and the BC Ferry & Marine Workers' Union announced the ratification of a Memorandum of Agreement that was reached on October 22, 2020. This agreement provides certainty for employees, helps ensure uninterrupted ferry service for customers and will mark 22 years of labour stability. The term of the new Collective Agreement is from October 31, 2020 through October 31, 2025 and provides for wage increases of 0 per cent, 2 per cent and 2 per cent over the first three years of the agreement, with year four and five having wage re-openers.
  
  
• On October 28 and December 17, 2020, respectively, BC Ferries' third and fourth Island Class vessels were launched at Damen Shipyards Galati in Romania. These ships will enter service on the Campbell River – Quadra Island route in 2022. The Island Class vessels are outfitted with hybrid-diesel electric propulsion and will operate as fully electric ships in the future when shore-side infrastructure is available.
  
  
• On December 19, 2020, BC Ferries' fourth Salish Class vessel was launched at Remontowa Shipbuilding S.A. in Gdansk, Poland. This vessel will enter service in the Southern Gulf Islands in 2022 and will be identical to the three existing Salish Class vessels, which are dual-duel capable, designed to run primarily on liquefied natural gas.

SOURCE British Columbia Ferry Services Inc.