Tour operator Transat A.T. Inc. has had to restate its financial statements for 2011 after it discovered a recurring accounting error in its British subsidiary going back to 2006.
Montreal-based Transat says amounts received from customers for services not yet rendered were not properly recorded for the fiscal years 2006 to 2011.
The company's own evaluation found that the recognition of deferred income of this unit failed to take into account the adjustments required to reflect customers' actual departure dates when data was transferred from one system to another for processing.
As a result, Transat has reduced its retained earnings at Nov. 1, 2010 by $11.7-million, the sum of the annual discrepancy in earnings for the years 2006 to 2010.
Transat has therefore increased its net loss for the year ended Oct. 31, 2011 to $14.7-million from $11.8-million.
The company said in a news release Wednesday that tougher reviews have been put in place at the subsidiary, which was acquired in 2006.
"We take our financial reporting obligations very seriously and our audits confirm that our internal controls are solid across all of our subsidiaries," Transat chief financial officer Denis Pétrin said in the news release.
Transat disclosed the accounting problems at the same time as it released fiscal 2012 fourth quarter results, one day ahead of their scheduled release.
It reported a net profit after goodwill impairment of $16.6-million or 43 cents per share, compared with a net loss of $7.3-million or 19 cents in the year-earlier period.
Before non-operating items, Transat posted adjusted after-tax profit of $28.7-million or 75 cents per share, compared with $7.3-million or 19 cents in the year-earlier period.
The 75-cents-per-share result easily beat Bloomberg's analyst consensus estimate of 42 cents.
Revenues in the fourth quarter were $763.4-million compared with $805.9-million.
"We achieved very good results on the transatlantic market last summer, and in fact it was one of our best-ever summers. Our product, frequencies, destinations and marketing efforts helped us deliver the expected results," Transat president and chief executive officer Jean-Marc Eustache said in a separate news release Wednesday.
The company said the fourth-quarter 5.3 per cent drop in revenues was due mainly to a decision to reduce capacity on its transatlantic and sun destinations outbound from Canada, with a resulting 6.3 per cent decline in the number of travellers.
Desjardins Securities analyst Benoit Poirier said in a research note Wednesday that Transat's "disciplined approach" to producing superior margins by focusing on capacity management and higher sales prices is paying off.
He characterized the fourth-quarter results as "stellar."