Transat A.T. Inc. - Results for fiscal 2007: Revenues of $3 billion and record net income



    TRZ.B; TRZ.A (TSX)

    
    - Revenues of $3.0 billion, for an overall increase of 17% compared
      with 2006.
    - Margin(1) increased by 4.8% to $133.1 million compared to
      $126.9 million in 2006.
    - Provision of $11.2 million ($8.0 million after tax) on asset-backed
      commercial paper (ABCP)
    - Record net income of $80.5 million or $2.36 per share, fully diluted,
      ($74.5 million or $2.18 per share, fully diluted, before the impact of
      certain non-cash, non-operating items), compared to $65.8 million
      ($1.85 per share, fully diluted) in 2006.
    

    MONTREAL, Dec. 14 /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 $3.0 billion for the year ended October 31, 2007, compared
to $2.6 billion in 2006 - an increase of 17%. The Corporation recorded a
margin of $133.1 million, up 4.8% from $126.9 million in 2006. It posted
record net income of $80.5 million or $2.36 per share on a diluted basis
($74.5 million or $2.18 per share on a diluted basis after the provision on
ABCP securities, a write-down of goodwill and the favorable impact of new
hedge accounting standards), compared to $65.8 million ($1.85 per share, fully
diluted) in 2006 (Transat had posted earnings of $72.3 million in 2004).
    "Fiscal 2007 was a great year for Transat," said Jean-Marc Eustache,
President and Chief Executive Officer, Transat A.T. Inc. "Our efforts in
Ontario have born fruit and we are now the number one distributor of winter
sun packages all across Canada; in France, Look Voyages has recorded stellar
results and we acquired Amplitude Internationale, thus reinforcing our
position as one of the largest tour operators in the country; and despite very
high fuel costs and fierce competition, especially between Canada and the UK,
we are posting a record income."
    The net income in 2007 was impacted by the following non-cash,
non-operating items.

    1. Hedge accounting standards
    --------------------------

    The adoption of the new accounting standards related to hedge accounting,
which for the Corporation came into effect November 1, 2006, resulted in the
recording of a non-monetary gain of $26.6 million ($17.8 million after tax)
during the year. This gain relates to the mark to market adjustment on
derivative financial instruments used by the Corporation to manage risks
related to fuel price fluctuations.

    2. Asset-Backed Commercial Paper
    -----------------------------

    On August 22, pursuant to the disruption of credit markets, Transat
announced that $154.5 million of its available cash was invested in non-bank
asset-backed commercial paper (ABCP) with 10 different ABCP trusts. Fourth
quarter results include an $11.2 million ($8.0 million after tax) provision
for losses in respect of ABCP holdings reflecting the Corporation's estimated
reduction in the fair value of these investments as at October 31, 2007,
including a provision for its estimated share of restructuring costs.

    3. Write-down of goodwill
    ----------------------

    In the fourth quarter, the company recorded a write-down of goodwill of
$3.9 million related to its investment in Travel Superstore Inc.
    Excluding these non-cash, non-operational items, net income for the year
would have been $74.5 million, as shown in the following table:

    
              Impact of provisions on ABCP securities and hedge
              accounting standards on the Corporation's results

    -------------------------------------------------------------------------
    Twelve months                      2007                   2006 Variance
                      ------------------------------------            (2007
    (In thousands                Impact   Impact  Adjusted         adjusted
     of dollars,               of hedge       of                     versus
     except per-            As   accoun-   other                       2006)
     share amounts)   reported     ting  items(1)
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries'
     results           116,835  (26,577)  15,100   105,358  99,079      6.3%
    Net income          80,480  (17,807)  11,852    74,525  65,770     13.3%
    Diluted earnings
     per share            2.36    (0.52)    0.35      2.18    1.85     18.5%
    -------------------------------------------------------------------------
    (1) Other items include the impact of provisions on ABCP securities of
        $11.2 million ($8.0 million after tax) and the write-down of goodwill
        ($3.9 million).

    Total debt(2) stood at $370.4 million as at October 31, 2007, a
$37.3 million decrease compared with October 31, 2006. After deduction of
cash, cash equivalents not held in trust and temporary investments from total
debt, the Corporation's net debt(3) went from $192.6 million as at October 31,
2006, to $61.3 million as at October 31, 2007, a decrease of 68.2%.

    Highlights of 2007
    ------------------

    The 17% overall increase in revenues is the result of a 10.6% growth in
revenues from North America, bolstered by a 41.1% growth in revenues from
European operations. The year-over-year increase in the number of travellers,
which stood at 14.4%, is one of the main factors behind the increase in
revenues: it stems from a 6.7% jump in the number of travellers in North
America, along with a 52.0% increase in Europe.

    North America

    In North America, revenues increased 16.7% during the 2007 winter season
compared with the corresponding period in 2006. The increase in revenue was
largely due to the 13.2% increase in the number of travellers over winter
2006.
    During the summer season, revenues increased 2.5%, as prices increased
slightly and the number of travellers was the same as the prior year.

    Europe

    In Europe, the Corporation's winter season revenues increased 27.8% due to
increases in volume at Look Voyages and Vacances Transat (France) as well as
the additional volume generated from the acquisition of Canadian Affair
(August 2006). The Corporation's number of European travellers during the
winter increased by 17.0%.
    Revenues for the summer season were up 48.5% mainly as a result of the
acquisition of Canadian Affair in August 2006 and Amplitude Internationale, in
July 2007. The number of travellers rose by 66.5%. Excluding the impact of
acquisitions, the number of travellers increased by 21.0%, mainly as a result
of growth at Look Voyages in France.

    2007 objectives

    In 2007, Transat made progress in achieving its strategic objectives as
set out in the Corporation's three year plan for the years 2006 to 2008:

    - Competitiveness was enhanced in Canada by expanding market share in
      Ontario and maintaining a leadership position in all other markets in
      Canada. In 2007, Transat became the leading tour operator selling sun
      packages in Ontario. The Corporation signed a seat-pooling agreement
      with MyTravel and renewed an agreement with Westjet to 2010. Both
      agreements bring added efficiency and flexibility.
    - Transat increased its market share and accelerated growth in Europe by
      expanding revenues in the United Kingdom through Canadian Affair, and
      increased its presence in France through the acquisition of Amplitude
      Internationale in July 2007, a French outgoing tour operator which
      specializes in travel to Tunisia. The European businesses also grew
      organically as the number of travellers, excluding the two business
      acquisitions, increased by 18.5% during the year.
    - Transat invested over $22 million in information technology
      infrastructure and software applications that will further enhance its
      ability to efficiently support business growth.

    Fourth quarter highlights
    -------------------------

    For the fourth quarter, the Corporation posted revenues of $680.4 million,
up $60.9 million, or 9.8%, from $619.5 million for the corresponding period of
2006. The increase is mainly attributable to growth in revenues of the
Canadian tour operators and growth in France related to organic growth at Look
Voyages and the acquisition of Amplitude Internationale in July 2007.
    During the quarter, the Corporation recorded a margin of $20.5 million, or
3.0%, compared with $28.8 million, or 4.7%, in 2006. Although our operations
in France continue to perform well, there was tremendous price pressure on
routes between Canada and the United Kingdom, which adversely affected margins
during the quarter, due to increased capacity by other operators and
additional passenger taxes on UK departures.
    Results during the quarter were affected by several non-cash items
including an $11.2 million ($8.0 million after tax) write-down on ACBP
securities, a $3.9 million write-down of goodwill related to the investment in
Travel Superstore Inc., an Ontario-based travel agency business and a
$13.6 million ($9.1 million after tax) gain on the mark to market adjustment
on derivative financial instruments related to fuel contracts.
    Net income in the fourth quarter was $7.7 million or $0.23 per share on a
diluted basis compared to $13.6 million or $0.39 per share in 2006. Excluding
the impact of certain non-cash, non-operating items mentioned above, net
income would be $10.4 million ($0.31 per share, fully diluted), compared to
$13.6 million ($0.39 per share, fully diluted) as described in the table
below:

    -------------------------------------------------------------------------
    Fourth quarter                     2007                   2006 Variance
                      ------------------------------------            (2007
    (In thousands                Impact   Impact  Adjusted         adjusted
     of dollars,               of hedge       of                     versus
     except per-            As   accoun-   other                       2006)
     share amounts)   reported     ting  items(1)
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries'
     results            11,333  (13,633)  15,100    12,800  20,445    (37.4%)
    Net income           7,655   (9,134)  11,852    10,373  13,552    (23.5%)
    Diluted earnings
     per share            0.23    (0.27)    0.35      0.31    0.39    (18.4%)
    -------------------------------------------------------------------------
    (1) Other items include the impact of provisions on ABCP securities of
        $11.2 million ($8 million after tax) and the write-down of goodwill
        ($3.9 million).

    New credit facility
    -------------------

    In November 2007, Transat A.T. entered into an agreement with a Canadian
chartered bank to provide a five-year, $150 million unsecured revolving credit
facility and a five-year $60 million secured revolving letter of credit
facility. The funds are earmarked for acquisitions and general corporate
purposes.

    Acquisition of hotels
    ---------------------

    On November 27, 2007 Transat A.T. announced that it intended to invest in
a joint venture with H10 Hotels to own and operate five existing hotels in
Mexico and Dominican Republic. H10 Hotels, a Catalan hotel chain with more
than 40 hotels in 14 destinations, will retain a 65% interest in the new
company, while Transat acquired the remaining 35% (with an option to go to 45%
within five years of closing) by contributing to the joint venture through a
capital increase representing a consideration of US$55 million in cash. The
transaction was closed on December 10, 2007.

    Dividend
    --------

    On December 13, 2007, 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 January
15, 2008, to shareholders of record as at December 31, 2007.

    ABCP situation
    --------------

    The Canadian market for third party sponsored ABCP suffered a liquidity
disruption in mid-August 2007 following which a group of financial
institutions and other parties agreed, pursuant to the Montréal Accord (the
"Accord"), to a standstill period in respect of ABCP sold by twenty-three
conduit issuers. Participants to the Accord also agreed in principle to the
conversion of the ABCP investments into longer-term financial instruments with
maturities corresponding to the underlying assets. A Pan-Canadian Investors
Committee was subsequently established to oversee the orderly restructuring of
these instruments during this standstill period. The signatories to the
Montréal Accord have recently agreed to extend the standstill period to
December 14, 2007. Transat is not a signatory to the Accord.
    Over 90% of Transat's ABCP investments are rated AAA (the highest rating)
by Dominion Bond Rating Service (DBRS) in its latest publication on November
6, 2007. Since there is no active market for ABCP securities, Transat
management has estimated the fair value of these assets using a valuation
model that incorporates management's best estimates of credit risk
attributable to underlying assets, the relevant market interest rate, amounts
to be received, maturity dates and assumptions regarding the probability that
the restructuring process will proceed as planned by the Investors Committee.
    Transat's estimate of the fair value of the ABCP investments as at October
31, 2007 is subject to significant uncertainty. While management believes that
its valuation technique is appropriate in the circumstances, changes in
assumptions could significantly affect the value to ABCP securities in the
next quarters. The resolution of these uncertainties could be such that the
ultimate fair value of these investments may vary significantly from
management's current best estimate and the magnitude of any such difference
could be material to our financial results.
    The liquidity disruption in the Canadian market for third party sponsored
ABCP has had no significant impact on Transat's operations or financial
position. Transat has sufficient cash available and available credit
facilities 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.

    Outlook
    -------

    In North America, winter bookings are slightly ahead of last year at the
same date. Excess supply and late bookings translate into more downward
pressure than last year on selling prices and margins in the first quarter. It
is too early to comment on volumes and margins for the whole winter season.
    In Europe, reservations for the winter season are up compared with last
year. The Corporation expects to improve margins slightly for the winter
season.
    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, hotels,
destination services and distribution. (TSX: TRZ.B, TRZ.A)

    Conference Call
    ---------------

    Fourth quarter 2007 conference call: Friday December 14, 2007, 10 a.m.
Dial 1-866-696-5911 or 514-868-2590. 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 3245195 pound sign, until January 13, 2008.

    Non-GAAP measures
    -----------------

    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
        operational performance)).
    (2) Debt plus off-balance sheet arrangements (non-GAAP financial measure
        used by management to assess the Corporation's future liquidity
        requirements).
    (3) Total debt less cash and cash equivalents not in trust or otherwise
        reserved and temporary investments (non-GAAP financial measure used
        by management to assess its liquidity position).
    

    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, that margins will be
lower in North America and that the Corporation expects the margins to be
higher in Europe compared with 2007. In making these statements, the
Corporation has assumed that the trends in reservations will continue
throughout the remainder of the season and that margins will continue to be
impacted by the competitive environment. If these assumptions prove 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, 2006, 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.
    %SEDAR: 00002758EF




For further information:

For further information: for media representatives: Jean-Michel Laberge,
(514) 987-1616, ext. 4662; for financial analysts: François Laurin,
Vice-President, Finance and Administration and Chief Financial Officer, (514)
987-1660; Source: Transat A.T. Inc., www.transat.com


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