Transat A.T. Inc. - Third Quarter 2007 Results: Increase in net income, margin and revenues



    TRZ.B; TRZ.A (TSX)

    
    - Revenues of $741.8 million for the third quarter and $2.4 billion for
      the first nine months, for overall increases of 21.4% and 19.2%
      respectively compared with 2006.
    - Margins(1) of $24.7 million for the third quarter and $112.6 million
      for the first nine months, compared with $15.6 million and
      $98.1 million respectively in 2006.
    - Net income of $16.7 million for the third quarter, or $0.49 per share
      fully diluted ($14.1 million, or $0.41 per share fully diluted,
      excluding the impact of new hedge accounting standard) compared with
      $4.2 million and $0.12 per share in 2006.
    

    MONTREAL, Sept. 6 /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 $741.8 million for its third quarter ended July 31, 2007,
compared with $611.1 million for the same period in 2006-an increase of 21.4%.
The Corporation recorded a margin of $24.7 million, up 58.4% from
$15.6 million for the corresponding quarter of 2006. Net income for the
quarter amounted to $16.7 million, or $0.49 per share on a fully diluted
basis, compared with $4.2 million ($0.12 per share on a fully diluted basis)
for the third quarter of 2006.
    "We are satisfied with these results. While competition remains very
intense, we are reporting substantial increases in net income, margin and
revenues," stated Jean-Marc Eustache, President and Chief Executive Officer of
Transat A.T. Inc.
    Revenues increased by $130.7 million for the quarter and $381.2 million
for the nine-month period, compared with the corresponding periods in 2006.
The overall revenue growth stems from revenue increases of 6.3% for the
quarter and 13.8% for the nine-month period in North America, and increases of
62.3% for the quarter and 43.6% for the nine-month period in Europe. These
increases were primarily due to acquisitions made in 2006 as well as expanded
business activity, particularly in France. Total number of travellers grew by
23.7% for the quarter and 18.9% for the nine-month period.
    The increase in net income was impacted by two non-cash, non-operational
items.
    First, 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 $3.9 million ($2.6 million
after tax) during the quarter. 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. Excluding this gain, net
earnings for the quarter would have been $14.1 million, as shown in the
following table:

    
                     Impact of new accounting standards
                        on the Corporation's results

    -------------------------------------------------------------------------
    Third quarter                     2007                   2006   Variance
                        -------------------------------                (2007
                              As     Impact   Adjusted              adjusted
                        reported     of new                           versus
    (In thousands of             accounting                             2006)
     dollars, except              standards
     per-share amounts)
    -------------------------------------------------------------------------
    Income before taxes
     and non-controlling
     interest in
     subsidiaries'
     results              23,462     (3,904)    19,558      7,750      152.3%
    Net income            16,749     (2,616)    14,133      4,205      236.1%
    Diluted earnings
     per share              0.49      (0.08)      0.41       0.12      241.7%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    First nine months                 2007                   2006   Variance
                        -------------------------------                (2007
                              As     Impact   Adjusted              adjusted
                        reported     of new                           versus
    (In thousands of             accounting                             2006)
     dollars, except              standards
     per-share amounts)
    -------------------------------------------------------------------------
    Income before taxes
     and non-controlling
     interest in
     subsidiaries'
     results             105,502    (12,944)    92,558     78,634       17.7%
    Net income            72,825     (8,672)    64,153     52,218       22.9%
    Diluted earnings
     per share              2.13      (0.25)      1.88       1.45       29.7%
    -------------------------------------------------------------------------

    Second, the results benefited from the favourable impact of foreign
exchange on the Company's debt, which resulted in a non-cash gain of
$1.8 million in 2007, compared with a non-cash loss of $0.5 million in 2006,
representing a $2.3-million variance.
    As at July 31, 2007, the Corporation had $336.5 million in cash and cash
equivalents and short-term investments, compared with $214.9 million at
October 31, 2006. This increase includes customer deposits of $49.0 million
received from clients of Canadian Affair. Working capital was $125.0 million,
compared with $97.6 million as at October 31, 2006. As at July 31, 2007, total
debt(2) stood at $313.5 million 2007, a decrease of $94.2 million compared
with October 31, 2006.

    Geographic segment highlights
    -----------------------------

    In North America, revenue growth for the quarter is mainly attributable to
a 9.3% increase in the number of travellers. However, the Corporation
experienced downward price pressures on routes to the UK, its largest summer
market, due to increased market supply. For the nine-month period, revenue
growth was fuelled primarily by a 9.0% increase in the number of travellers,
while competition continued to exert downward pressure on prices, particularly
in Quebec during the winter season. Overall, margins stood at 2.0% and 5.4%
for the quarter and nine-month period respectively, down from 2.3% and 5.9%
for the corresponding periods of 2006.
    In Europe, revenues increased over the corresponding quarter and
nine-month period in 2006. This growth resulted mainly from the acquisition in
2006 of Canadian Affair and heightened business activity, particularly at Look
Voyages, but also from the euro's strength against the dollar. Total number of
travellers was up 138% during the quarter and 82% over the nine-month period
compared with the corresponding periods of 2006. Excluding Canadian Affair's
travellers, volume of travellers rose 21.0% and 17.6%, respectively, compared
with the same quarter and nine-month period of 2006. In terms of margins,
European operations posted a margin of 5.6% and 2.6% for the quarter and
nine-month period, respectively, up from 3.4% and 0.1% for the corresponding
periods of 2006.

    Dividend
    --------

    On September 5, 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
October 15, 2007, to shareholders of record as at September 30, 2007.

    Other
    -----

    On August 22, pursuant to the disruption of credit markets, particularly
asset-backed commercial paper (ABCP), Transat announced that a portion
totalling $154.5 million of its cash available was invested in 10 different
ABCP trusts. Despite liquidity concerns related to ABCP products, Transat has
sufficient cash available 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. Over 90% of Transat's ABCP investments are in trusts rated
R1-High by Dominion Bond Rating Service (DBRS) on the basis of professional
advice from National Bank of Canada.

    Outlook
    -------

    The Corporation expects fourth-quarter demand to be higher than in 2006.
However, in light of heightened competition and the supply situation, the
Corporation anticipates narrower margins in North America for the next
quarter, primarily on U.K.-bound routes.
    In Europe, bookings for the fourth quarter are tracking ahead of their
2006 levels, and the Corporation expects margin growth for the fourth quarter,
compared with the corresponding quarter in 2006.

    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, destination
services and distribution. (TSX: TRZ.B, TRZ.A)

    Third quarter 2007 conference call: Thursday September 6, 2007, 10 a.m.
Dial 1-800-564-3880 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 3231630 pound sign, until October 6, 2007.

    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).

    Caution regarding forward-looking statements

    This news release contains certain forward-looking statements regarding
the Corporation's expectation that travel reservations will continue to be
higher than the prior year, that margins will be narrowed, that the
Corporation expects the margins to be higher in Europe compared with 2006. 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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