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For Immediate Release
20-009
February 21, 2020


BC Ferries releases third quarter results

VICTORIA –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.
 
– 30 –

Media Contact:
BC Ferries, Media Relations
Victoria: (250) 978-1267
Fax (250) 978-1119 www.bcferries.com/news
Note to newsrooms: For urgent media inquiries off-hours, call our off-hours at (250) 516-7211.

Customer Contact:
Victoria: (250) 386-3431
Toll-free: 1-888-BCFERRY (1-888-223-3779)

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.
     


December 31, 2019


March 31, 2019

Assets

Current assets

Cash and cash equivalents

227,409

59,888

Restricted short-term investments

33,588

31,651

Other short-term investments

120,632

74,648

Trade and other receivables

25,743

23,246

Prepaid expenses

12,687

8,306

Inventories

31,766

30,870

Derivative assets

2,514

8,145

454,339

236,754

Non-current assets

Loan receivable

24,515

24,515

Property, plant and equipment

1,831,438

1,820,232

Intangible assets

101,097

101,029

Derivative assets

955

-

1,958,005

1,945,776

Total assets

2,412,344

2,182,530

Liabilities

Current liabilities

Accounts payable and accrued liabilities

37,405

80,173

Interest payable on long-term debt

17,610

18,429

Contract liabilities

21,361

28,709

Current portion of long-term debt

25,374

57,183

Current portion of accrued employee future benefits

2,000

2,000

Current portion of lease liabilities

2,406

2,184

Provisions

67,637

62,778

Derivative liabilities

1

-

173,794

251,456

Non-current liabilities

Accrued employee future benefits

20,913

20,583

Long-term debt

1,434,547

1,222,860

Lease liabilities

39,317

39,797

Other liabilities

11,209

9,516

Derivative liabilities

145

-

1,506,131

1,292,756

Total liabilities

1,679,925

1,544,212


Equity

Share capital

75,478

75,478

Contributed surplus

25,000

25,000

Retained earnings

623,867

525,006

Total equity before reserves

724,345

625,484

Reserves

8,074

12,834

Total equity including reserves

732,419

638,318

Total liabilities and equity

2,412,344

2,182,530

BRITISH COLUMBIA FERRY SERVICES INC.

Condensed Interim Consolidated Statements of Changes in Equity (unaudited)
(Expressed in thousands of Canadian dollars)

December 31, 2019

March 31, 2019

Assets

Current assets

Cash and cash equivalents

227,409

59,888

Restricted short-term investments

33,588

31,651

Other short-term investments

120,632

74,648

Trade and other receivables

25,743

23,246

Prepaid expenses

12,687

8,306

Inventories

31,766

30,870

Derivative assets

2,514

8,145

454,339

236,754

Non-current assets

Loan receivable

24,515

24,515

Property, plant and equipment

1,831,438

1,820,232

Intangible assets

101,097

101,029

Derivative assets

955

-

1,958,005

1,945,776

Total assets

2,412,344

2,182,530

Liabilities

Current liabilities

Accounts payable and accrued liabilities

37,405

80,173

Interest payable on long-term debt

17,610

18,429

Contract liabilities

21,361

28,709

Current portion of long-term debt

25,374

57,183

Current portion of accrued employee future benefits

2,000

2,000

Current portion of lease liabilities

2,406

2,184

Provisions

67,637

62,778

Derivative liabilities

1

-

173,794

251,456

Non-current liabilities

Accrued employee future benefits

20,913

20,583

Long-term debt

1,434,547

1,222,860

Lease liabilities

39,317

39,797

Other liabilities

11,209

9,516

Derivative liabilities

145

-

1,506,131

1,292,756

Total liabilities

1,679,925

1,544,212

Equity

Share capital

75,478

75,478

Contributed surplus

25,000

25,000

Retained earnings

623,867

525,006

Total equity before reserves

724,345

625,484

Reserves

8,074

12,834

Total equity including reserves

732,419

638,318

Total liabilities and equity

2,412,344

2,182,530



Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income (unaudited) 
(Expressed in thousands of Canadian dollars)
Three months ended
December 31
Nine months ended December 31
2019 2018 2019 2018

Revenue

Vehicle and passenger fares

134,699

134,020

513,691

505,634

Net retail

14,583

14,200

55,249

52,820

Fuel surcharges (rebates)

1,620

-

5,440

(4,584)

Other income

2,754

2,297

9,323

8,537

Revenue from customers

153,656

150,517

583,703

562,407

Ferry service fees

49,457

49,554

179,445

167,934

Federal-Provincial Subsidy Agreement

7,835

7,626

23,505

22,878

Total revenue

210,948

207,697

786,653

753,219

Expenses

Operations

128,339

122,759

421,258

401,294

Maintenance

22,166

22,355

61,918

60,289

Administration

9,312

9,654

27,279

29,348

Depreciation and amortization

45,913

43,568

136,375

128,514

Total operating expenses

205,730

198,336

646,830

619,445

Operating profit

5,218

9,361

139,823

133,774

Net finance and other expenses

Finance expenses

16,056

14,713

46,377

44,953

Finance income

(2,520)

(1,701)

(5,201)

(4,568)

Net finance expense

13,536

13,012

41,176

40,385

(Gain) loss on disposal and revaluation of property, plant and equipment and intangible assets

(8)

30

(214)

173

Net finance and other expenses

13,528

13,042

40,962

40,558

NET (LOSS) EARNINGS

(8,310)

(3,681)

98,861

93,216

Other comprehensive income (loss)

Items that are or may be reclassified subsequently to net earnings

4,645

(10,962)

755

(1,638)

Items that will not be reclassified to net earnings

-

-

(126)

-

Total other comprehensive income (loss)

4,645

(10,962)

629

(1,638)

Total comprehensive (loss) income

(3,665)

(14,643)

99,490

91,578



Condensed Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)

Nine months ended December 31

2019

2018

Operating activities

Net earnings

98,861

93,216

Items not affecting cash:

Net finance expense

41,176

40,385

Depreciation and amortization

136,375

128,514

(Gain) loss on disposal and revaluation of property, plant and equipment

and intangible assets

(214)

173

Other non-cash changes to property, plant and equipment

(686)

199

Changes in:

Accrued employee future benefits

204

(1,782)

Derivative assets and liabilities recognized in net earnings

2

59

Provisions

4,859

3,351

Accrued financing costs

89

(47)

Total non-cash items

181,805

170,852

Movements in operating working capital:

Trade and other receivables

(2,497)

(1,033)

Prepaid expenses

(4,381)

(2,831)

Inventories

(896)

1,163

Accounts payable and accrued liabilities

(42,768)

(4,314)

Contract liabilities

(7,348)

(4,143)

Change in non-cash working capital

(57,890)

(11,158)

Change attributable to capital asset acquisitions

32,324

3,704

Change in non-cash operating working capital

(25,566)

(7,454)

Cash generated from operating activities

255,100

256,614

Interest received

5,272

4,333

Interest paid

(50,468)

(51,110)

Cash generated by operating activities

209,904

209,837



Condensed Interim Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)

Nine months ended December 31

2019

2018

Financing activities

Repayment of long-term debt

(69,212)

(24,211)

Repayment of lease liabilities

(1,650)

(1,623)

Proceeds from the issue of bonds

250,000

-

Transactions costs related to bonds

(1,587)

-

Cash from (used in) financing activities

177,551

(25,834)

Investing activities

Proceeds from disposal of property, plant and equipment

309

46

Purchase of property, plant and equipment and intangible assets

(172,322)

(168,516)

Changes in debt service reserve

(1,937)

435

Net (purchase of) proceeds from short-term investments

(45,984)

23,761

Cash used in investing activities

(219,934)

(144,274)

Net increase in cash and cash equivalents

167,521

39,729

Cash and cash equivalents, beginning of period

59,888

69,913

Cash and cash equivalents, end of period

227,409

109,642



Condensed Interim Consolidated Statements of Changes in Equity (unaudited)
(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, 2018

75,478

25,000

478,855

579,333

8,974

588,307

Net earnings

-

-

93,216

93,216

-

93,216

Other comprehensive loss

-

-

-

-

(1,638)

(1,638)

Realized hedge gains recognized in fuel swaps

-

-

-

-

(9,736)

(9,736)

Hedge losses on interest rate forward contract reclassified to net earnings

-

-

-

-

186

186

Balance as at December 31, 2018

75,478

25,000

572,071

672,549

(2,214)

670,335

Balance as at April 1, 2019

75,478

25,000

525,006

625,484

12,834

638,318

Net earnings

-

-

98,861

98,861

-

98,861

Other comprehensive income

-

-

-

-

629

629

Realized hedge gains recognized in fuel swaps

-

-

-

-

(5,575)

(5,575)

Hedge losses on interest rate forward contract reclassified to net earnings

-

-

-

-

186

186

Balance as at December 31, 2019

75,478

25,000

623,867

724,345

8,074

732,419