TRZ.B; TRZ.A (TSX)
Strong demand drive revenues up, excess supply puts pressure on margins
- Revenues of $787.4 million, up 10.5% from $712.3 million in 2007,
reflecting increases in the numbers of travellers in Canada and Europe.
- Margin(1) of $15.9 million, down 39.1% from $26.2 million in 2007,
stemming from downward pressure on selling prices due to intense
competition and excess supply.
- Additional write-down of $14.0 million ($10.1 million after tax) on
asset-backed commercial paper (ABCP).
- Net loss of $10.1 million or $0.30 per share fully diluted compared to
net income of $2.0 million or $0.06 per share in 2007 (net income of
$1.2 million or $0.04 per share fully diluted for the quarter, compared
with $8.5 million or $0.25 per share in 2007 before impact of the
non-cash ABCP write-down and hedge accounting standards).
MONTREAL, March 12 /CNW Telbec/ - Transat A.T. Inc., one of the largest
integrated tourism companies in the world and Canada's holiday travel leader,
posted revenues of $787.4 million for the quarter ended January 31, 2008,
compared with $712.3 million in 2007-an increase of 10.5%. The Corporation
recorded a margin of $15.9 million, down 39.1% from $26.2 million in 2007, and
a net loss of $10.1 million, or $0.30 per share on a fully diluted basis,
compared with net income of $2.0 million ($0.06 per share on a fully diluted
basis) in 2007.
The unfavourable variance in net income is attributable to lower margins
on packages sold in Canada to southern destinations and to two non-cash,
non-operational items, namely an additional $14.0 million ($10.1 million after
tax) write-down related to the Corporation's asset-backed commercial paper
(ABCP) holdings, as well as the impact of hedge accounting standards (loss of
$2.0 million or $1.2 million after tax).
"As tour operators fight for market share and respond to solid demand by
adding capacity, selling prices are pressured, and so are our margins. In such
circumstances, serving the interest of our shareholders means dynamically
leveraging our vertically integrated business model, country-wide network of
gateways, and unique portfolio of destinations and exclusive hotels to
increase our volumes," stated Jean-Marc Eustache, President and Chief
Executive Officer of Transat A.T. Inc.
First quarter highlights
Transat recorded revenues of $787.4 million for the quarter ended
January 31, 2008, compared with $712.3 million in 2007. The 10.5%, or
$75.1 million increase, is primarily due to expanded business activity in both
North America and Europe, as well as to the additional revenue generated by
the July 2007 acquisition of Amplitude Internationale. Transat recorded a 23%
quarter over quarter increase in travellers as a result of a 19% rise in
travellers in North America and a 55% rise in Europe. The Corporation's
consolidated margins decreased from 3.7% in 2007 to 2.0% in 2008. Before
non-operating items, and despite fierce competition, Transat's net income is
$1.2 million ($0.04 per share fully diluted), compared with $8.5 million
($0.25 per share) in 2007.
Revenues of the Corporation's North American subsidiaries increased by
$55.4 million, or 8.9%, compared with the corresponding period in 2007. The
increase in revenue was largely due to the 19% increase in the number of
travellers over 2007, partially offset by a decrease in average selling prices
on travel packages. Margins in all major Canadian gateways have been adversely
impacted by the additional capacity added by tour operators in 2008. This has
resulted in lower sales prices on travel packages to the Caribbean and Mexico.
Consequently, margins of Transat's North American subsidiaries decreased from
5.4% in 2007 to 3.5% in 2008.
Revenues of European subsidiaries increased by $19.6 million, or 21.2%,
due to increases in volume at Look Voyages and Vacances Transat (France), as
well as the additional volume generated from the acquisition of Amplitude
Internationale. The Corporation's number of European travellers during the
quarter increased by 55%. In Europe, the Corporation reported a negative
margin of $7.6 million compared with a negative margin of $7.1 million in
As at January 31, 2008, the Corporation had $172.0 million in cash and
cash equivalents, compared with $166.8 million at October 31, 2007. Working
capital was negative $25.8 million, compared with $71.5 million as at
October 31, 2007. This fall rises from reclassification as long-term assets of
the Corporation's investments in ABCP. The Corporation holds or has access to
sufficient available cash to meet all of its financial, operational and
regulatory obligations. Cash in trust, representing deposits from customers,
as well as available cash, are held either as cash or invested in liquid
instruments (mainly cash and term deposits) with a broad range of large
financial institutions and have no exposure whatsoever to the current ABCP
market disruption. Total debt(2) stood at $416.4 million at January 31, 2008,
an increase of $45.3 million compared with October 31, 2007. The Corporation's
net debt(3) increased from $62.0 million at October 31, 2007, to
$126.2 million at January 31, 2008.
The company increased its provisions for potential write-downs on its
ABCP holdings as it received new information that update the underlying
assumptions used in the valuation of its ABCP holdings at January 31, 2008.
Based on these new assumptions, the company has increased its provisions for
write-downs to $25.2 million resulting in an additional write-down of
$14.0 million during the quarter ended January 31, 2008. The total provision
at January 31, 2008 represents 17.6% of the initial value on ABCP holdings of
Also, the company adopted new accounting standards at the beginning of
2007 related to hedge accounting standards on derivative forward contracts on
the purchase of aircraft fuel. Following the adoption of the said new
accounting standards, the Corporation recorded an additional non cash expense
of $9.7 million ($6.5 million after tax) in the first quarter of 2007 and an
expense of $2.0 million ($1.2 million after tax) in the first quarter of 2008.
These charges represent the change in the fair value of the forward contracts
it uses to manage fuel price fluctuation risks.
Excluding the impact of the ABCP write-down and the non-cash loss on
hedge accounting standards, the Corporation recorded the following operating
results compared to the prior year.
Impact of non-cash charges
First quarter 2008 2007
(In thousands of of hedge of ABCP
dollars, except As accoun- write-
per-share amounts) reported ting down Adjusted Adjusted
before taxes and
results (10,968) 1,967 14,222 5,221 15,123
Net income (loss) (10,094) 1,194 10,102 1,202 8,524
(loss) per share (0.30) 0.04 0.30 0.04 0.25
On March 12, 2008, Transat's Board of Directors approved a quarterly
dividend of $0.09 payable to holders of Class B Voting Shares and Class A
Variable Voting Shares. The next dividend payment will be payable on April 15,
2008, to shareholders of record as at March 31, 2008
For the winter season, Transat expects demand to remain higher than in
2007 on all markets. However, in Canada, heightened competition and excess
capacity continue to exert pressure on selling prices. For the summer,
bookings are generally tracking ahead compared with 2007, especially for our
Transat A.T. Inc. is an integrated international tour operator with more
than 60 destination countries and that distributes products in over
50 countries. A holiday travel specialist, Transat operates mainly in Canada
and Europe, as well as in the Caribbean, Mexico and the Mediterranean Basin.
Montreal-based Transat is also active in air transportation, accommodation,
destination services and distribution. (TSX: TRZ.B, TRZ.A)
First quarter 2008 conference call: Wednesday March 12, 2008, 2.00 p.m.
Dial 1-877-461-2815 or 514-861-1531. Name of conference: Transat. Webcast
www.transat.com. The archived call will be available at 1-800-408-3053 or
514-861-2272 access code 3254452 pound sign, until April 11, 2008.
Transat prepares its financial statements in accordance with Canadian
generally accepted accounting principles ("GAAP"). We will occasionally refer
to non-GAAP financial measures in the news release. These non-GAAP financial
measures do not have any meaning prescribed by GAAP and are therefore unlikely
to be comparable to similar measures presented by other issuers. They are
furnished to provide additional information and should not be considered as a
substitute for measures of performance prepared in accordance with GAAP.
(1)Revenues less operating expenses (non-GAAP financial measure used by
management as an indicator to evaluate ongoing and recurring
(2)Debt plus off-balance sheet arrangements (non-GAAP financial measure
used by management to assess the Corporation's future liquidity
(3)Total debt less cash and cash equivalents (not in trust or otherwise
reserved), temporary investments and investments in ABCP's (non-GAAP
financial measure used by management to assess its liquidity
Caution regarding forward-looking statements
This news release contains certain forward-looking statements regarding
the Corporation's expectation that the assumptions used in the valuation of
the ABCP securities will materialize, that travel reservations in North
America can be maintained at similar levels as the prior year and will
continue to be higher than the prior year in Europe. In making these
statements, the Corporation has assumed that the trends in reservations will
continue throughout the remainder of the season. If this assumption proves
incorrect, actual results and developments may differ materially from those
contemplated by the forward-looking statements contained in this press
release. Factors that could lead actual results to differ also include general
economic conditions, competition, extreme weather conditions, disease
outbreaks, war, terrorism, and other risks detailed from time to time in the
Corporation's continuous disclosure documents.
These forward-looking statements, by their nature, necessarily involve
risks and uncertainties that could cause actual results to differ materially
from those contemplated by these forward-looking statements. The Corporation
considers the assumptions on which these forward-looking statements are based
to be reasonable, but cautions the reader that these assumptions regarding
future events, many of which are beyond its control, may ultimately prove to
be incorrect since they are subject to risks and uncertainties that affect the
Corporation. For additional information with respect to these and other
factors, see the Annual Information Form and Annual Report for the year ended
October 31, 2007, filed with Canadian securities commissions. The Corporation
disclaims any intention or obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, other than as required by law.
For further information:
For further information: Media: Jean-Michel Laberge, (514) 987-1616,
ext. 4662; Financial analysts: François Laurin, Vice-President, Finance and
Administration and Chief Financial Officer, (514) 987-1660; Source: Transat
A.T. Inc., www.transat.com