BC Ferries Releases Third Quarter Results

VICTORIA, Feb. 25, 2013 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) released its third quarter results today for fiscal 2012/13.  The company reported a net loss of $17.2 million for the three months ended December 31, 2012, compared to a net loss of $19.2 million in the same quarter last year.  Net earnings for the nine-month period ended December 31, 2012 were $52.6 million, up from $33.1 million for the same period in the previous year.

"Each year, we utilize this seasonal downturn in traffic volumes to initiate upgrades, major maintenance and refit programs, as well as undertake mandatory safety inspections on the majority of our vessels," said Mike Corrigan, BC Ferries' President and CEO.  "We continue to invest significant resources in our vessels, terminals and employees, in order to enhance the safety, reliability and value of our service to our customers."

Total revenue for the three-month period ended December 31, 2012 increased by $4.7 million to $169.6 million compared to the same quarter last year.  Total revenue for the nine months ended December 31, 2012 increased $27.0 million to $635.8 million.  Operating expenses increased from $166.7 million to $169.4 million compared to the same quarter last year as a result of increases in vessel and terminal maintenance, partially offset by a reduction in fuel costs.  For the nine months ended December 31, 2012, operating expenses increased from $523.4 million to $530.8 million compared to the same period of the prior year, mainly due to an increase in vessel and terminal maintenance and increases in depreciation and amortization expenses reflecting investments in new assets.  BC Ferries' financial statements (without notes) are attached as Appendix 1.

Capital expenditures in the three and nine-months ended December 31, 2012 totalled $18.0 million and $57.5 million respectively.  Projects included vessel overhauls and other improvements, terminal upgrades and information technology projects.

As of April 1, 2012, BC Ferries began reporting its financial position and results of operations in accordance with International Financial Reporting Standards (IFRS). For comparative purposes, the prior year figures have been restated to comply with IFRS.

IFRS differs significantly from previous accounting standards. IFRS does not have a standard for rate-regulated activities, and therefore does not permit BC Ferries to report in the company's financial statements, the assets and liabilities, such as the deferred fuel cost accounts, that result from the regulated price cap setting process. Rather than being charged to regulatory asset accounts on the Statement of Financial Position, fuel surcharges collected or rebates granted are now included in revenue, and increases or decreases in fuel prices from those approved in price caps are now included in operating expenses. While this is a significant accounting change for BC Ferries, it does not change the treatment of these types of assets and liabilities for regulatory purposes.  A pro forma income statement reflecting the results of rate-regulated activities is included as Appendix 2.

In the third quarter of fiscal 2012/13, vehicle traffic declined 2.2 per cent (1.6 per cent year-to-date) and passenger traffic declined 2.4 per cent (1.9 per cent year-to-date), due primarily to the month of December, when total traffic decreased 5.6 per cent on the major routes over the prior year. In December, there was an extraordinary period of stormy weather with high winds that resulted in numerous sailing cancellations in and around the peak holiday season. The company expects annual traffic levels will be slightly lower than the previous year at year end.

While carrying out its mandate to ensure safety at all times, BC Ferries is actively managing its costs and anticipates reporting a modest profit for fiscal 2012/13, despite slightly lower than expected ridership.

On February 14, 2013, BC Ferries was advised by the credit rating agency Standard & Poor's that it revised BC Ferries' outlook from negative to stable.  The outlook revision reflects what Standard & Poor's views as an improvement in regulatory certainty as a result from the recent, favourable amendments to the Coastal Ferry Act.  At the same time, Standard & Poor's affirmed its "A+" long-term and senior unsecured debt ratings of the company.

From October 29 through December 21, 2012, the provincial government conducted a public consultation and engagement process for input on service level adjustments and on a long-term vision for coastal ferry service.  The Province has announced it will issue a report regarding this process.  In the fall of 2012, BC Ferries implemented service reductions on the three major routes connecting Vancouver Island and the Lower Mainland where the traffic levels no longer warranted extra service or where service was significantly underutilized.  These service reductions are expected to reduce costs by $4 million over the four years of performance term three, which ends on March 31, 2016. These service reductions form part of the objective set by the Province of $30 million in service adjustments over performance term three. This service objective was taken into account by the British Columbia Ferries Commissioner in the setting of the performance term three price caps.

On November 23, 2012, BC Ferries announced that the company was proceeding with its plans to design and build a cable ferry which will operate between Buckley Bay on Vancouver Island and Denman Island.  The cable ferry is expected to enter service in the fall of 2014.  Other notable events in the period include the November 30, 2012 removal of all fuel surcharges due to the decline in fuel prices.

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 20.2 million passengers and 7.8 million vehicles during the fiscal year ended March 31, 2012.  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 included in this release include statements with respect to: traffic levels; our short-term and long-range business plans, and our cable ferry initiative; a modest profit for fiscal 2012/13, and our expectations of the impact of our cost containment program; the amount of savings to be achieved through service level adjustments, and the Province's role regarding service levels and a long-term vision for connecting coastal communities; and our expectations regarding the impacts of IFRS. 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, limitations of vessel repair facilities, 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.

SOURCE: British Columbia Ferry Services Inc.