BC Ferries Releases First Quarter Results
Aug 24, 2012
(News Release) VICTORIA — British Columbia Ferry Services Inc. (BC Ferries) announced its first quarter results today. Net earnings were $3.3 million for the first three months ended June 30, 2012 compared to a net loss of $3.5 million in the first quarter of the previous year.
In the first quarter, revenues increased by 5.7 per cent to $197.6 million, with operating expenses increasing 2.1 per cent to $176.9 million, compared to the first quarter of last fiscal year. $4.9 million of the $10.6 million increase in revenues is due to an increase in fuel surcharges levied as a result of higher fuel prices. The $3.6 million increase in operating expenses is largely attributed to an increase in fuel prices and higher depreciation and amortization charges, partially offset by a decrease in fuel consumption, benefit costs, maintenance costs and lower salaries and wages.
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 rules in that it does not recognize assets and liabilities arising from rate-regulation, such as BC Ferries’ deferred fuel cost accounts. As a result, rather than being charged to regulatory asset accounts on the company’s balance sheet, 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.
Capital expenditures in the three months ended June 30, 2012 totalled $21.2 million as follows:
$11.0 million in vessel upgrades and modifications;
$4.6 million in information technology;
$4.1 million in terminal marine structures;
$1.5 million in terminal and building upgrades and equipment.
BC Ferries is undertaking a multi-year $39 million customer service program which will replace the aging point-of-sale and reservations systems to allow the company to respond in a more timely fashion to changing business needs and to support marketing, travel services and pricing initiatives.
In the first quarter of fiscal 2012, BC Ferries experienced a decline of 1.7 per cent in vehicle traffic and 2.4 per cent in passenger traffic as compared to the same period the year prior.
“We are managing our bottom line as efficiently as possible with our cost containment initiatives in order to reduce expenditures without compromising the safety of our operation,” said Mike Corrigan, BC Ferries’ President and CEO.
“The Province has announced a public engagement process regarding adjustments to service levels and the development of a long-term vision for connecting coastal communities. We look forward to supporting this process with our technical assistance.”
Significant events during the first quarter include the Coastal Ferry Service Contract amendments relating to performance term three, which is the period from April 1, 2012 to March 31, 2016. These amendments became effective on April 1, 2012.
On May 3, 2012, BC Ferries executed a contract for the development and analysis of initial design criteria for a cable ferry service on the Buckley Bay – Denman Island route, and in early June, the company issued a Request for Proposals (RFP) for detailed design engineering. On May 17, 2012, the company also issued an RFP for third parties interested in providing passenger and vehicle cable ferry service, under contract to BC Ferries, at a lower cost, while maintaining high levels of safety, quality and reliability.
On May 9, 2012, the Province announced additional payments totalling $79.5 million in order to reduce the pressure for future fare and price cap increases. Of this, $25 million is a contribution to the company’s equity and was received in April 2012. The remaining $54.5 million will be received over fiscal years 2013 through 2016.
On July 20, 2012, fuel surcharges were reduced from 2.5 per cent to 2 per cent on the Horseshoe Bay – Langdale route and from 5 per cent to 2 per cent on the majority of BC Ferries’ other routes. These reductions reflect declining fuel prices.
Full financial statements, including notes and Management’s Discussion & Analysis, are filed on SEDAR and will be available at www.sedar.com.