Q3 2006 CHC Helicopter Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning ladies and gentlemen. Thank you for standing by. Welcome to the CHC Helicopter Corporation third-quarter results conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) I would like to remind everyone that this conference call is being recorded on Tuesday, March 14, 2006 at 10:30 AM Eastern time. I will now turn the conference over to Sylvain Allard, President and CEO. Mr. Allard please go ahead.

SYLVAIN ALLARD, PRESIDENT, CEO, CHC HELICOPTER CORPORATION: Good morning everyone; thank you for joining this conference call. As for the Safe Harbor clause we are going to discuss certain subjects that may contain forward-looking information. The company cautions you that actual results could differ materially from those that may be projected in these discussions. Additional detailed information concerning a number of factors that could cause results to differ materially from the information that will be given is readily available on the Company's form 20-F annual information form and other filings with U.S. and Canadian security authorities.

Before we discuss the results of our third quarter, I would like to make a short statement concerning a press release that we issued a few hours ago indicating that CHC's controlling shareholders and executive chairman Mr. Craig Dobbin has filed today earlier an amended schedule 13-D with the SEC describing preliminary discussions between Mr. Dobbin and two unaffiliated private equity firms regarding a potential acquisition of CHC. As disclosed in the 13-D filing Mr. Dobbin is evaluating the feasibility of such a transaction on the following nonbinding terms.

One, a price per class A subordinated share and class B multiple voting shares in the range of Canadian $30 to $32.50 per share. Two, an equity interest of Mr. Dobbin and the newly formed acquisition vehicle of approximately 14% through a combination of common equity and options. Three, minority board representation rights and minority protective provisions for Mr. Dobbin. Four, preemptive rights for Mr. Dobbin. And five, entry by Mr. Dobbin into a voting agreement in favor of the proposed transaction in the event that the definitive agreements are executed. Mr. Dobbin has granted the private equity firms an exclusivity period that expires on April 30, 2006 to evaluate the proposed transaction and has agreed in this capacity as a shareholder that until July 31, 2006 he will not enter into or support any alternative transaction.

The Board of Directors of CHC has established a special committee of independent directors to consider any potential transaction that may result from the matters disclosed in the 13-D. The special committee has retained independent legal and financial advisers. For further details I would like to refer you to our press release on the subject.

The purpose of this call is to discuss the results of our third-quarter results and not to comment any further on the press release relative to the filing of the schedule 13-D. As I'm sure you can understand we won't engage in discussions or speculations about this filing and I would appreciate if you restrict your questions later on to the third quarter results only. Further disclosure on this potential transaction will be issued in a timely fashion as the process evolves.

Now let's review the third quarter for fiscal 2006. As you read in our press release our third-quarter results showed continued growth in all operating divisions. But we were again affected by the continued strengthening of the Canadian dollar on our operating results. Excluding the impact of foreign exchange revenue and segment EBITDAR increased in all our operating divisions. Year-to-date foreign exchange has negatively affected our revenue by $60 million and our segment EBITDAR by $17.3 million. In this quarter alone our revenue was negatively impacted by over $19 million and segment EBITDAR by more than $7.5 million. Let me tell you these are big numbers. In spite of this foreign exchange headwind revenue for the third quarter was $257.5 million, an increase of 15.2 million and a segment EBITDAR only decreased slightly from the same period last year. Excluding FX revenue in global operations increased by 25.2% from the third quarter last year and segment EBITDAR increased by 20.3%.

Net earnings from continuing operations for the third quarter was $24 million or $0.52 per diluted share, an increase of 8.8 million or $0.19 per diluted share from the same period last year. Several significant factors impacted net earnings in the quarter compared to last year. First, we incurred a $3.7 million charge and restructurings or $0.06 per share in addition to a further $1.1 million or $0.02 per share spent on SG&A incurred in the restructuring process, primarily as a result of new systems implementation. In Europe we settled on a late delivery charge from the new aircraft to one of our customers at the cost of $1.6 million or $0.03 per share.

We also spent $3.2 million or $0.05 per diluted share in support of future growth including recruiting, relocation, training, marketing and aircraft deployment costs. Not only did we spend on the [personal] side we continued to invest in aircraft deposits, aircraft purchases and working capital to support future growth which was a contributing factor in higher interest expense of $2.9 million or $0.5 per diluted share.

Last but certainly not least, foreign exchange negatively impacted operating income by $5.6 million or $0.09 per diluted share. Also our financing costs were impacted by a further $0.11 per share that Joe Mark will explain later on in this portion of his call. On the positive side our ongoing support and general administration costs were reduced by approximately $2.6 million or $0.04 per diluted share as a result of our restructuring efforts and we posted a gain on sale of our interest of Inversiones of $15.7 million or $0.34 per share.

I will now provide highlights of operating results by segment. First, in our global operations segment; revenue from the Company's global operations segment for the third quarter was $87.5 million, an increase of $13.8 million from the same period last year. This increase was primarily the result of increased flying and revenue of $14.4 million from new and expanded contracts in Turkey, Southeast Asia, Ivory Coast, Canada and Azerbaijan which was partially offset by negative foreign exchange impact of $4.8 million. Buying activity increased by 3197 hours in the third quarter compared to the same period last year. And by 2124 hours compared to the second quarter of this year.

Segment EBITDAR for the third quarter was $26.6 million an increase of $3.1 million from the same period last year. This increase was primarily due to a segment EBITDAR increase of $4.8 million earned on increased revenue offset by unfavorable foreign exchange impact of $1.7 million. Excluding FX …