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Transat A.T. Inc.: Restatement of Fiscal 2011 Financial Statements
Transat A.T. Inc. has restated its financial statements for fiscal 2011 following discovery of a recurring accounting error starting in 2006 within its U.K. subsidiary, which was acquired that year. Amounts received from customers for services not yet rendered were not properly recorded in conformity with the Corporation’s accounting policy in current liabilities under Customer deposits and deferred income for fiscal years 2006 to 2011. Based on the Corporation’s evaluation, the recognition of deferred income of this subsidiary did not take into account the adjustments required to reflect customers’ actual departure dates when transactional data was transferred from one system to another for processing.
Accordingly, the Corporation has reduced its retained earnings as at November 1, 2010 by $11.7 million, which is the sum of the annual variance in earnings for the years 2006 to 2010 (the negative variance is $3.1 million in 2006, $3.8 million in 2007, $1.6 million in 2008, $2.1 million in 2009 and $1.1 million in 2010). For the year ended October 31, 2011, the Corporation increased its net loss by $2.9 million or $0.08 per share, from $11.8 million to $14.7 million.
On the balance sheet, income taxes receivable as at October 31, 2011 have increased by $2.3 million and customer deposits and deferred income has increased by $16.7 million.
Consequently, the financial statements for fiscal 2011 have been restated. Those of the previous years will not be refiled.
Following this discovery, remedial actions have been adopted and implemented or are currently undergoing implementation, in particular: more stringent review and validation of key balance sheet items of the subsidiary; review of the subsidiary’s end of period financial statement closing process; review of the subsidiary’s information technology controls; periodic review by internal audit of the existence and effectiveness of the newly adopted remedial actions.
“We take our financial reporting obligations very seriously and our audits confirm that our internal controls are solid across all of our subsidiaries,” stated Denis Pétrin, Vice-President, Finance and Administration and Chief Financial Officer.
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, accommodation and distribution. (TSX: TRZ.B, TRZ.A)
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. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, extreme weather conditions, fuel prices, armed conflicts, terrorist attacks, general industry, market and economic conditions, disease outbreaks, changes in demand due to the seasonal nature of the business, the ability to reduce operating costs and employee counts, labour relations, collective bargaining and labour disputes, pension issues, exchange and interest rates, availability of financing in the future, statutory changes, adverse regulatory developments or procedures, pending litigation and actions by third parties, 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 the Corporation’s 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, 2011, 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 legislation.