Results hit by decline in selling prices at end of quarter
Revenues of $1.2 billion, compared with $1.1 billion in 2011.
Net loss of $13.2 million, compared with net income of $8.7 million in
Adjusted after-tax loss3 of $24.5 million, compared with $0.6 million in 2011.
MONTREAL, June 14, 2012 /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 $1.2 billion for the quarter ended
April 30, 2012, compared with $1.1 billion in 2011, an increase of
$111.3 million, or 10.1%. The Corporation recorded an operating loss1 of $26.2 million, compared with a margin of $9.3 million in 2011, and a
net loss of $13.2 million ($0.35 per share on a diluted basis),
compared with a net income of $8.7 million ($0.23 per share on a
diluted basis) in 2011. Before non-cash and non-operating items,
Transat reported an adjusted after-tax loss3 of $24.5 million ($0.64 per share on a diluted basis), compared with
$0.6 million ($0.02 per share on a diluted basis) in 2011.
"Selling prices of sun destination packages to Mexico and Caribbean
declined sharply in the second half of the quarter, while fuel costs
remained higher, with negative impact on margins. We remain focused our
previously announced plan to return to profitability, which unfolds as
planned," said President and Chief Executive Officer Jean-Marc
Second quarter highlights
The Corporation's second-quarter revenues increased by $111.3 million.
It recorded an operating loss of $26.2 million, compared to a margin of
$9.3 million in 2011.
Revenues of North American business units, which are generated by sales
in Canada and abroad, increased by $118.5 million (13.0%) compared with
the same period in 2011. The increase is largely attributable to the
acquisition of Vacances Tours Mont-Royal, which represented $69.5
million in revenues, as well as to an increase in the number of
travellers. In the sun destinations market, selling prices were
inferior to the previous year, mainly due to a sharp decline in the
second half of the quarter, while fuel and hotel costs were higher.
Load factors also declined, especially in the second half of the
quarter. Consequently, North American operations resulted in an
operating loss of $19.6 million, compared to a margin of $9.8 million
Revenues of European business units, which are generated by sales made
in Europe and in Canada, decreased by $7.2 million (3.7%) over 2011. In
France, market conditions during low season were extremely difficult
for the whole industry, especially on North African destinations.
European operations resulted in an operating loss of $6.6 million for
the quarter, compared with $0.5 million in 2011.
First six-month period highlights
For the first six months, the Corporation's revenues increased by $130.5
million over 2011 and an operating loss of $58.1 million, compared with
$5.2 million in 2011. The Corporation has been unable to increase
selling prices, while operating costs, especially for fuel (on all
markets) and hotels (in the second quarter) were higher, and the
Canadian dollar was weaker versus the US dollar.
Revenues of North American business units increased by $143.8 million
(9.1%) compared with the same period in 2011. The increase is
attributable in part to the acquisition of Vacances Tours Mont-Royal,
as well as to an increase in the number of travellers. For the period,
North American business units recorded an operating loss of $38.7
million, compared with a margin of $3.9 million in 2011. The decrease
is attributable to higher operating costs, mostly fuel and hotels, as
well as intense competition.
Revenues of European business units decreased by $13.3 million over
2011. Selling prices and the number of travellers were lower. European
operations resulted in an operating loss of $19.3 million for the
second half, compared with $9.1 million in 2011. The increased loss
stems mainly from a lower number of travellers and very difficult
market conditions in France.
The Corporation's free cash totalled $264.1 million as at April 30,
2012, compared with $ 278.2 million as at April 30, 2011. Working
capital ratio stood at 0.93 compared with 1.03 and deposits from
customers for future travel were $464.7 million, similar to the
previous year at the same date. Off-balance-sheet agreements stood at
$595.8 million as at April 30, 2012, the decrease over the same date in
2011 stemming from payments made during the period.
As at April 30, 2012, certain terms of $100.0 million credit facility
agreement were not met. The lenders have waived this default so that
the Corporation is in compliance with all its commitments to its
lenders. On June 13, 2012, the Corporation arranged to reduce the
amount of this facility. Accordingly, the Corporation now has a
$50.0 million revolving term credit facility with National Bank of
Canada and Bank of Nova Scotia, maturing in 2015. The agreement will be
secured by a first movable hypothec on a universality of assets,
present and future, of the Corporation's Canadian subsidiaries subject
to certain exceptions and will be further secured by the pledging of
certain marketable securities of main European subsidiaries. The terms
of the agreement require the Corporation to comply with certain
financial criteria and ratios.
Furthermore, early in the third quarter, the Corporation sold a portion
of its asset-backed commercial paper (ABCP) with a notional amount of
$80 million for $57.4 million.
International Financial Reporting Standards (IFRS)
The condensed interim consolidated financial statements for the
three-month period ended April 30, 2012 were prepared in accordance
with International Financial Reporting Standards ("IFRS"). The 2011
comparative figures have been restated to reflect this change. In
summary, the adoption of IFRS has had a minor impact on Transat. It
decreased the total equity's carrying value by $25.4 million as at
October 31, 2011, compared to previous Canadian GAAP's carrying value
as at the same dates. For the three-month period ended April 30, 2011,
the consolidated net loss attributable to shareholders has been reduced
by $0.1 million compared to the figures disclosed last year under
Canadian GAAP ($0.2 million for the six-month period). Please see the
Management Discussion & Analysis for more details.
Despite the current decrease in fuel costs, the net impact on margin has
been negative, due to the rise of the US dollar and the decline of the
euro compared to the Canadian dollar. Bookings are similar to last year
at the same date, but the business environment remains challenging.
Economic and political uncertainty in Europe, both a source and
destination market for Transat, as well as the major impact of last
minute bookings on average selling prices make any forecast for the
second half very difficult.
The transatlantic market accounts for a very significant portion of
Transat's business in the summer. For the period going from May to
October 2012, the Corporation's capacity is approximately 4% lower than
the actual capacity offered in 2011. To date, load factors and prices
are slightly higher than last year.
In the sun destinations market from Canada, Transat's capacity is 13%
inferior compared to last year. Load factors are similar and selling
prices are inferior.
In France, booking are slightly higher, and prices are similar, compared
to last year.
The implementation of the measures contained in the Corporation's plan
to return to profitability is proceeding.
The results were affected by non-cash and non-operating items, as
summarized in the following table:
Highlights and impact of non-operating items on results
(In millions of CAD)
First 6-month period
Operating margin ( loss) 1
Result before taxes
Impact of fuel hedging accounting
Impact of ABCP revaluation
NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS
Impact of fuel hedging accounting
Impact of ABCP revaluation
ADJUSTED AFTER-TAX LOSS3
DILUTED LOSS PER SHARE
Impact of fuel hedging accounting
Impact of ABCP revaluation
ADJUSTED AFTER-TAX LOSS PER SHARE3
Hedging—The Corporation records any gains or losses resulting from
mark-to-market adjustments of the derivative financial instruments used
to manage aircraft fuel price risk in the statement of income. For the
second quarter 2012, this translates into a $4.4 million non-cash gain
($3.1 million after income taxes) compared with a $8.2 million gain
($5.8 million after income taxes) in 2011. For the first six months of
2012, this translates into a $6.0 million non-cash gain ($4.3 million
after income taxes) compared with a $12.0 million gain ($8.6 million
after income taxes) in 2011.
The Corporation also uses hedging instruments to mitigate exchange rate
exposure stemming from its expenses and/or revenues in foreign
currencies. Accordingly, under applicable accounting standards, any
fluctuations resulting from mark-to-market adjustments of these
instruments are recorded in the balance sheet and statement of
comprehensive income rather than in the statement of income. For the
second quarter 2012, Transat recorded a $6.7 million loss ($4.7 million
after income taxes) on these foreign-currency hedging instruments,
compared with a $3.6 million loss ($2.5 million after income taxes) in
2011. For the first six months of 2012, Transat recorded a $6.3 million
loss ($4.5 million after income taxes) on these foreign-currency
hedging instruments, compared with a $4.0 million gain ($3.0 million
after income taxes) in 2011.
Commercial paper—Results for the quarter include a $8.8 million gain ($8.2 million after
income taxes) stemming from the revaluation of the Corporation's
investments in asset-backed commercial paper (ABCP). In 2011, Transat
had recorded a revaluation gain of $3.5 million ($3.5 million after
income taxes). As of April 30, 2012, the total accumulated provision
represented 25.8% of the notional amount of the Corporation's $115.0
million in ABCP investments.
Summary of non-cash items—Before the aforementioned non-cash and non-operating items, Transat
posted an adjusted after-tax loss of $24.5 million for the second
quarter of 2012 ($0.64 per share on a diluted basis) compared with an
adjusted after-tax loss of $0.6 million ($0.02 per share on a diluted
basis) in 2011, and an adjusted after-tax loss of $54.5 million ($1.43
per share on a diluted basis) for the six-month period, compared with
$19.9 million ($0.53 per share on a diluted basis) in 2011.
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)
The following are non-IFRS financial measures used by management as
indicators to evaluate ongoing and recurring operational performance.
(1) MARGIN (OPERATING LOSS): Revenues less operating expenses.
(2) ADJUSTED INCOME (LOSS): Income (loss) before income taxes, impact of
fuel hedge accounting, ABCP revaluation, and restructuring charges (or
(3) ADJUSTED AFTER-TAX INCOME (LOSS): Net income (loss) attributable to
shareholders before impact of fuel hedge accounting, ABCP revaluation
and restructuring charges (or gains), net of related taxes.
(4) NET CASH: Cash and cash equivalents not held in trust or otherwise
reserved, less balance sheet debt.
Second quarter 2012 conference call: Thursday, June 14, 2012, 10.00 a.m.
Dial 1 800 763-6564. Name of conference: Transat. Webcast: www.transat.com. The archived call will be available at 1 800 633-8625 or 416 626-4144,
access code 21593206 pound sign, until July 14, 2012.
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. All amounts are in
Canadian dollars unless otherwise indicated.
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, and that travel
reservations will follow the trends. In making these statements, the
Corporation has assumed that the trends in reservations and selling
prices will continue, and that fuel prices, other costs and the value
of the Canadian dollar against foreign currencies will remain stable.
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 include, among others, extreme weather
conditions, war, terrorism, market and general economic conditions,
disease outbreaks, demand fluctuations related to seasonality in the
travel industry, ability to reduce operating costs and workforce,
labour relations, collective agreements and labour conflicts, issues
related to pensions, exchange rate, interest rates, future funding,
evolution of legal environment, introduction of unfavourable
regulations, lawsuits and legal challenges, 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, 2010, 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 securities laws.
SOURCE TRANSAT A.T. INC.
For further information:
Source: Transat A.T. Inc. (www.transat.com)
514 987-1616, ext. 4662
Financial analysts :
Chief Financial Officer