BC Ferries releases third quarter results

by Tim Flanagan on February 21, 2009

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VICTORIA – British Columbia Ferry Services Inc. (BC Ferries) today released its third quarter results for fiscal 2008/09. The company reported a net loss of $14.6 million for the three months ended December 31, pharmacy 2008, youth health compared to a net loss of $7.8 million in the same quarter last year. Net earnings for the nine-month period ended December 31, buy cialis 2008 were $47.5 million, down from $67.7 million for the same period in the previous year.

Due to the seasonality of ferry travel, BC Ferries typically generates higher net earnings in the first and second quarters, which are subsequently reduced by net losses in the last two quarters of its fiscal year. The company utilizes the third and fourth quarters to perform upgrades, maintenance and refits and to undertake mandatory inspections on the majority of its vessels.

For the three months ended December 31, 2008, total revenue increased by $12.9 million to $149.4 million while total expenses increased $19.7 million to $164.0 million, compared to the same period last year. Revenues for the nine months ended December 31, 2008 increased $36.9 million to $553.4 million with expenses in the same period increasing $57.1 million to $505.9 million, compared to the nine months ended December 31, 2007. Of this increase in expenses, over $32 million is due to higher fuel expense primarily as a result of a lift in fuel prices as established by the British Columbia Ferries Commissioner. Amortization and interest expense have increased $17.2 million and $12.5 million respectively, due to our significant asset renewal program.

BC Ferries has experienced a decrease in traffic in all three quarters of fiscal 2009 compared to the same period last year, generally reflecting deteriorating economic conditions and volatile fuel prices. For the nine months ended December 31, 2008, vehicle and passenger traffic levels were down 5.1 per cent and 4.5 per cent respectively, compared to the same period in the prior year. These reductions in traffic include an approximate 10 per cent decrease in December during which three weeks of severe weather conditions were experienced in our service areas.

“These are turbulent times. As a result, BC Ferries has taken a number of measures to reduce overhead and other operating costs from previously planned levels,” said David L. Hahn, BC Ferries’ President and CEO. “In addition, with our comprehensive fuel hedging strategy in place and the recent drop in fuel prices, we eliminated fuel surcharges in December. The province is contributing $1.7 million towards paying down the fuel deferral accounts, which enabled us to implement fuel rebates for the minor routes and the Horseshoe Bay – Langdale route earlier this month.” This provincial contribution arises from the duty remission for the Northern Adventure.

Capital expenditures totaled $58.2 million in the three months ended December 31, 2008 and $304.3 million in the nine months ended December 31, 2008. During the third quarter ended December 31, 2008, $43.5 million was invested in new vessels including the two new Super-C class vessels, the Island Sky and the Northern Expedition, as well as upgrades to existing ships.

On November 21, 2008, the third and final new Super-C class vessel, the Coastal Celebration commenced service on the Swartz Bay – Tsawwassen route following extensive crew training and familiarization. On December 9, 2008, BC Ferries took delivery of the 102-metre Island Sky, which entered service on the Earls Cove – Saltery Bay route this month. This vessel was built at Vancouver Shipyards in North Vancouver, and is currently licensed to carry 450 passengers and 125 vehicles.

Capital expenditures for the nine-month period ended December 31, 2008 also included $35.1 million in the life extension of the Queen of New Westminster and a $6.0 million upgrade and replacement of the propulsion and safety equipment on the Quinitsa.

“Our credit ratings were recently confirmed by both Standard & Poor’s Ratings Services and DBRS Limited at A- and A (low), respectively, which demonstrates our strong cash flow and our ability to service our debt,” said Hahn. “I’m pleased that both agencies have assessed our rating outlook as positive.”

A dividend of $80 per Class “C” Preferred share was declared payable on March 31, 2009 to the holders of record of such shares on that date. Currently all outstanding Class “C” Preferred shares are held by the Province of British Columbia.

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.

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