BC Ferries releases second quarter results

VICTORIA, Nov. 16, 2012 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) announced its second quarter results today with net earnings of $66.5 million and $69.8 million for the three and six-month periods ended September 30, 2012, up from $55.8 million and $52.3 million for the three and six-month periods ended September 30, 2011.

Total revenue for the three-month period ended September 30, 2012 increased from $256.9 million to $268.6 million.  After a soft first four months of the fiscal year, there was a noticeable improvement in traffic during August and September.  Revenue results also reflect an increase in ferry transportation fees from the Province of $7.4 million.  Operating expenses increased from $183.4 million to $184.5 million, compared to the same period last year.  For the six-months ended September 30, 2012, total revenue was $466.2 million compared to $443.9 million for the six-month period ended September 30, 2011, including an increase in transportation fees of $12.9 million.  Operating expenses for the same period were $361.4 million, up from $356.7 million in the prior year, mainly due to increases in the price of fuel.  BC Ferries' financial statements (without notes) are attached as Appendix 1.

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 that result from the regulated price cap setting process, such as the deferred fuel cost accounts. 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.

Capital expenditures in the three and six-months ended September 30, 2012 totalled $18.3 million and $39.5 million, respectively.  Projects included vessel upgrades and modifications, terminal marine structures, terminal and building upgrades and equipment, and information technology projects.

BC Ferries and the Province finalized amendments to the Coastal Ferry Services Contract for performance term three on June 30, 2012.  The amending agreement includes increases of $54.5 million in aggregate ferry transportation fees, which are in addition to a one-time $25 million equity contribution.  These funds, totalling $79.5 million, are intended to reduce the pressure for future fare cap and price cap increases.  The amending agreement also includes a principle-based process for identifying $30 million in service level adjustments over the term.  The company must also find $54.2 million in internal efficiencies.

"BC Ferries is working hard to find efficiencies in all areas of our business to ensure the operation is cost effective and financially viable, without compromising safety," said Mike Corrigan, BC Ferries' President and CEO. "It is our job as the service provider to deliver safe, efficient and flexible ferry service along coastal British Columbia that meets the changing needs of our customers over the long term."

On September 30, 2012, the BC Ferries Commissioner released his final price cap order for the remaining three years of performance term three, April 1, 2013 to March 31, 2016.  The order outlined price cap increases of 4.1 per cent, 4.0 per cent and 3.9 per cent for all route groups on April 1 of  2013, 2014 and 2015, respectively.

Other significant events during the second quarter include, as a result of declining fuel prices, the July 20, 2012 reduction in fuel surcharges from 2.5 per cent to 2.0 per cent on the Horseshoe Bay - Langdale route and from 5.0 per cent to 2.0 per cent on all other routes with the exception of the northern routes.  No surcharges or rebates were in place on our northern routes.

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis are filed on SEDAR and are 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: the additional payments to be received from the Province, the amount of savings to be achieved through service level adjustments, and the efficiency target to be achieved for performance term three. 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.