Transat A.T. Inc. - Second Quarter 2008 Results - Growth continues despite intense competition and high cost of fuel



    
    - Revenues of $1,075.2 million, up 18.0% from $911.4 million in 2007,
      reflecting increases in the numbers of travellers in Canada and Europe.
    - Margin(1) of $69.3 million, up 7.0% from $64.8 million in 2007.
    - Additional write-down of $17.9 million ($15.2 million after tax) on
      asset-backed commercial paper (ABCP).
    - Net income of $40.7 million, or $1.21 per share fully diluted, compared
      to net income of $53.8 million, or $1.57 per share in 2007 (net income
      of $41.8 million, or $1.24 per share fully diluted, compared with
      $41.2 million, or $1.20 per share, in 2007 before impact of the
      non-cash ABCP write-down and hedge accounting standards).
    

    MONTREAL, June 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 $1,075.2 million for the quarter ended April 30, 2008,
compared with $911.4 million in 2007-an increase of 18.0%. The Corporation
recorded a margin(1) of $69.3 million, up 7.0% from $64.8 million in 2007, and
a net income of $40.7 million, or $1.21 per share on a fully diluted basis,
compared with net income of $53.8 million ($1.57 per share on a fully diluted
basis) in 2007.
    The unfavourable variance in net income is mainly attributable to an
additional $17.9 million ($15.2 million after tax) write-down related to the
Corporation's asset-backed commercial paper (ABCP) holdings.
    "Demand has remained firm over the winter and both bookings and prices
for next summer are up compared with last year, fueling our growth.
Competition remains intense and we are anticipating lower margins in the next
two quarters compared with last year, mainly due to aircraft fuel prices,
which are significantly higher and remain unpredictable. Our economies of
scale, financial situation and know-how lead us to be reasonably optimistic,"
stated Jean-Marc Eustache, President and Chief Executive Officer of
Transat A.T. Inc.

    Highlights for the quarter and six-month period
    -----------------------------------------------

    The Corporation's revenues rose $163.8 million and $238.8 million for the
quarter and six-month period, respectively, compared with the corresponding
periods of fiscal 2007. The overall increase in the Corporation's revenues was
driven by revenue growth over the quarter and the six-month period of 17.2%
and 13.5%, respectively, in North America and 21.8% and 21.6%, respectively,
in Europe. This was mainly attributable to greater business activity,
primarily in North America and at Look Voyages, where the Corporation expanded
its supply, but also by the 2007 acquisition of Amplitude Internationale
("Amplitude"). Compared with the corresponding periods of the previous year,
the volume of travellers was up 34.0% and 29.2% for the quarter and six-month
period, respectively, owing to the enhanced supply in various markets.
    Margins expressed as a percentage of revenues narrowed over the quarter
and six-month period to 6.5% and 4.6% respectively, from 7.1% and 5.6%,
respectively, for the corresponding periods of 2007. These slimmer margins
resulted primarily from downward price pressure due to excess supply in the
marketplace, particularly in North America.
    During the second quarter and six-month period, revenues in North America
were up 17.2% and 13.5%, respectively, and the volume of travellers grew 26.8%
and 23.5%, respectively, compared with the corresponding periods of 2007. For
the quarter and six-month period, the Corporation posted margins of 7.2% and
5.6%, respectively, compared with 7.8% and 6.7%, respectively, for the
corresponding periods of 2007. These slimmer margins resulted primarily from
downward price pressure due to excess supply in the marketplace and an
environment that remains highly competitive.
    Revenues of European subsidiaries were up from the corresponding quarter
and six-month period in 2007. These increases stemmed primarily from
heightened business activity, mainly at our French subsidiaries and from the
acquisition of Amplitude in 2007. The volume of travellers rose 84.1% and
72.6% over the quarter and six-month period, respectively, compared with the
corresponding periods of 2007. Excluding Amplitude travellers, the volume of
travellers grew 45.1%. and 39.3% over the quarter and the six-month period,
respectively. European operations reported a margin of $6.1 million over the
quarter compared with $5.7 million for the corresponding period of 2007. For
the six-month period, European operations reported a negative margin of
$1.5 million, compared with a negative margin of $1.4 million in the
corresponding period of 2007.
    Net income for the six-month period ending April 30, 2008 was
$30.6 million, or $0.91 per share on a fully diluted basis, compared with net
income of $55.8 million ($1.63 per share on a fully diluted basis) in 2007.
    As at April 30, 2008, cash and cash equivalents totalled $289.7 million
compared with $166.8 million as at October 31, 2007. Cash and cash equivalents
in trust or otherwise reserved amounted to $196.4 million as at the end of the
second quarter of 2008 compared with $168.2 million as at October 31, 2007.
The Corporation's balance sheet reflects working capital of $31.7 million and
a current ratio of 1.04 compared with $71.5 million and 1.11 as at October 31,
2007. This decline, resulting from the reclassification of our investments in
ABCP in long-term assets, was offset by the favourable net change in
derivative financial instruments.
    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 $418.7 million at April 30, 2008, an increase of $47.6 million compared
with October 31, 2007. The Corporation's net debt(3) decreased from
$62.0 million at October 31, 2007, to $28.7 million at April 30, 2008.

    Non-operating items
    -------------------

    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 April 30, 2008.
Based on these new assumptions, the company has increased its provisions for
write-downs to $43.3 million resulting in an additional write-down of
$17.9 million ($15.2 million after tax) during the quarter ended April 30,
2008. The total provision at April 30, 2008 represents 30.2% of the initial
value on ABCP holdings of $143.5 million.
    The Corporation recorded non cash gains of $20.9 million ($14.1 million
after tax) in the second quarter of 2008 and of $18.8 million ($12.6 million
after tax) in the second quarter of 2007. 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 gain, the
Corporation recorded the following operating results compared to the prior
year.

    
                         Impact of non-cash charges
    -------------------------------------------------------------------------

    Second quarter                       2008                         2007
                      ------------------------------------------
    (In thousands
     of dollars,                             Impact of
     except                       Impact of     ABCP
     per-share            As        hedge      write-
     amounts)          reported   accounting    down   Adjusted     Adjusted
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries'
     results            62,326     (20,942)    17,915    59,299       57,419
    Net income          40,678     (14,137)    15,228    41,769       41,190
    Diluted earnings
     per share            1.21       (0.42)      0.45      1.24         1.20
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------

    First Six months                     2008                         2007
                      ------------------------------------------
    (In thousands
     of dollars,                             Impact of
     except                       Impact of     ABCP
     per-share            As        hedge      write-
     amounts)          reported   accounting    down   Adjusted     Adjusted
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries'
     results            51,358     (18,975)    32,137    64,520       72,542
    Net income          30,584     (12,943)    25,330    42,971       49,014
    Diluted earnings
     per share            0.91       (0.38)      0.75      1.28         1.45
    -------------------------------------------------------------------------


    Dividend
    --------

    On June 11, 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 July 15,
2008, to shareholders of record as at June 30, 2008.

    Outlook
    -------

    Bookings and selling prices for the 2008 summer season are generally
higher than for the prior year at the same date. However, competition is
intense, and given the price-sensitivity of demand, our margins remain exposed
to the rising and unpredictable cost of aircraft fuel. Consequently, we
anticipate both higher revenues and significantly lower margins for the summer
of 2008, considering the current price of fuel.
    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)

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

    Second quarter 2008 conference call: Thursday June 12, 2008, 10.00 a.m.
Dial 1-866-862-3912 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 3263096 pound sign, until July 12, 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), temporary investments and investments in ABCP's (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 revenues will be higher and margins
lower than in 2007. In making these statements, the Corporation has assumed
that the trends in reservations will continue throughout the remainder of the
season and that fuel prices will remain high. 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, 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.
    %SEDAR: 00002758EF




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


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