2015–2016 & B.C
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BRITISH COLUMBIA FERRY SERVICES INC. ANNUAL REPORT 2015–2016 & B.C. FERRY AUTHORITY This report 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 document include statements with respect to: • Traffic levels, economic conditions, and fares; • Our expectations of the rebate we expect to receive from WorkSafeBC on our 2015 assessed premiums; • Our short-term and long-range business plans; • Our asset renewal programs for vessels and terminals; and • Our capital expenditure levels, asset renewal programs for vessels and terminals, Fare Flexibility and Digital Experience Initiative, pricing promotions, Salish Class vessels, the Baynes Sound Connector, liquefied natural gas plans, and Spirit Class mid-life upgrades. 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 First Nation claims. Actual results may differ materially from any forward looking statement. Although management believes that the forward looking statements contained in this report 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 report, 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. In addition to providing measures prepared in accordance with 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 include, but are not limited to, total comprehensive income adjusted for the effect of rate regulation. 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. COVER IMAGE: BAYNES SOUND CONNECTOR 2015/16 ANNUAL REPORT BRITISH COLUMBIA FERRY SERVICES INC. 3 CONTENTS BRITISH COLUMBIA FERRY SERVICES INC. 4 Corporate Profile 6 Message from the Chair 7 Message from the President & CEO 8 Key Accomplishments 16 Performance Measures 18 Management’s Discussion and Analysis of Financial Condition and Financial Performance 87 Consolidated Financial Statements 119 Corporate Directory B.C. FERRY AUTHORITY 121 A Message from the Chair 122 Annual Report 128 Consolidated Financial Statements 135 Corporate Directory 4 CORPORATE PROFILE BRITISH COLUMBIA FERRY SERVICES INC. BC Ferries is one of the largest ferry operators in the world, providing year-round vehicle and passenger service on 24 routes to 47 terminals, with a fleet of 34 vessels. We are an essential transportation link that connects coastal communities and facilitates the movement of people, goods and services. In fiscal 2016, we carried more than 20 million passengers and 8 million vehicles throughout coastal British Columbia. 2015/16 ANNUAL REPORT CORPORATE PROFILE 5 OUR VISION To provide a continuously improving west coast travel experience that consistently exceeds customer expectations and reflects the innovation and pride of our employees. OUR MISSION Deliver on our mandate to provide safe, reliable and efficient marine transportation services that consistently exceed the expectations of our customers, employees and communities, through the creation of enterprise value. STRATEGIC GOALS OUR VALUES Our strategic goals focus on the outcomes we will pursue to Safety Ensure that the safety and security of our customers and achieve our vision and mission, and underlie the tactics that staff is a primary concern in all aspects of doing business. we will undertake this year to: Quality Be motivated by customer expectations in providing quality 1 Ensure Safe, Reliable and Efficient Operations facilities and services. 2 Deliver a Customer-Focused Travel Experience Integrity Be accountable for all our actions and ensure we 3 Foster a Productive, Motivated and Engaged Workforce demonstrate integrity in our business relations, utilization of 4 Be a Leader in Environmental and Social Governance resources, treatment of our customers and staff, and in the general conduct of our business. 5 Grow and Profitably Diversify Our Revenue Base Partnerships Work openly and constructively with our various 6 Drive Prudent Investment in Our Capital Assets business and community stakeholders to exceed the expectations of our customers and advance each other’s interests. Environment Conduct our operations in a manner that is environmentally responsible and incorporate environmental factors into our decision making. Employees Always deal from a position of honesty, integrity and mutual respect, and ensure that our employees develop to their full potential. BAYNES SOUND CONNECTOR MESSAGE FROM THE CHAIR 6 OF THE BOARD OF DIRECTORS BRITISH COLUMBIA FERRY SERVICES INC. On behalf of the Board of Directors of British Columbia Ferry Services successful bidding process, BC Ferries awarded Remontowa Inc., I would like to recognize our employees for their continued Ship Repair Yard S.A. of Gdansk, Poland, a contract to conduct the dedication to safety, customer service and reliability while delivering Spirit Class mid-life upgrades. These upgrades include the conversion ferry service along coastal British Columbia. As I reflect on the year, of both vessels to dual-fuel so they can operate on natural gas. there are many accomplishments we can be proud of at BC Ferries The projects detailed above show BC Ferries’ dedication to and also many things to look forward to in the upcoming year. safeguarding the environment and improving the sustainability of Customer service remains a key focus, and an increase of 2 our operations. This year BC Ferries was certified by Green Marine, per cent over the previous year to an 87 per cent rating on the a globally recognized, voluntary, industry sustainability initiative customer satisfaction survey demonstrates ongoing success for ship operators, ports, terminals and shipyards. This certification and improvement. BC Ferries also continues focusing on the reinforces our existing environmental commitment and ensures we communities we serve and performed 28 marine rescues this year, continue to look for ways to apply best practices and be a leader in responding to many more as well. sustainable marine transportation. This year, BC Ferries took 20.7 million passengers on 170,261 sailings. Finally, I would like to acknowledge the achievements of the We saw increases of 4.5 per cent in passenger traffic and 4.9 per cent executive management team for their strong financial leadership in vehicle traffic over the previous year. This trend can be attributed and all BC Ferries employees for their continued efforts. Their to a number of factors but is primarily due to a low Canadian dollar contributions towards realizing cost savings throughout the and softening gas prices. organization have provided outstanding results. BC Ferries invested in several ships that underwent extensive refits to Over the next year, we will continue to concentrate on safety as our prepare the vessels for many more years of safe and reliable service, number one priority, as well as improving the travel experience and and also provide a better travelling experience for customers. The focusing on our capital plan to replace ships, terminal infrastructure Queen of Capilano completed a $13 million mid-life upgrade and and IT projects. Looking ahead, BC Ferries is entering innovative times the Queen of Oak Bay completed a three-quarter life upgrade. The with the introduction of dual-fuel technology as well as infrastructure Queen of Cumberland’s $18 million upgrade at Esquimalt Drydocking improvements.