Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Welcome to the CHC Helicopter Corporation's first-quarter results conference call. (OPERATOR INSTRUCTIONS). I would like to remind everyone that this conference call is being recorded today, Friday September 14, 2007, at 10:30 AM Eastern Time for replay purposes. I would now like to turn the conference over to Mr. Sylvain Allard, President and Chief Executive Officer, and Mr. Rick Davis, Senior Vice President and Chief Financial Officer.
SYLVAIN ALLARD, PRESIDENT AND CEO, CHC HELICOPTER CORPORATION: Good morning, everyone, and thank you for joining this conference call. As per 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 in the Company's Form 20-S annual information form, and in other filings with US and Canadian security authorities. The Company disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise.
As you read in our press release, we reported another quarter of record revenue, with a 20% increase compared to the first quarter last year. The increase in revenue of $57 million includes a positive FX impact of $2 million for total revenue of $320 million for the quarter.
Our Global Operations segment continues to be the major contributor to our revenue growth with an increase in revenue of 35% to $124 million and segment EBITDAR of 35 million, an increase of 13%.
European Operations performance strengthened during the first quarter, with an increase in revenue of $13 million, or 10%, to 148 million, and an increase in segment EBITDAR of 4 million, or 18%, reaching $27 million.
Heli-One also had a strong first quarter with an increase in revenue of 25%, or 10 million, and an increase in segment EBITDAR of 15%, or 9 million. The revenue increase is for external revenue.
During the first quarter we added a total of five new aircraft, and we expect to add another 30 aircraft before the end of fiscal year. Consistent with previous quarters, we have expensed $3.5 million, or $2.7 million after tax, in aircraft introduction costs during the quarter, primarily relating to the training and pre-deployment lease and interest costs of those aircraft.
Net earnings for the quarter were $28.2 million, or $0.61 per diluted share, an increase of 19.4 million from the same quarter last year. Just to go over several factors that impacted net earnings in the quarter compared to last year.
First, aircraft availability issues and customers continued to have -- customer penalties continued to have a negative impact during the first quarter in Europe, although to a lesser extent than in previous periods, but still affected our results by 2.3 million, or $0.04 per share. In addition, as I said earlier, we spent $3.5 million in aircraft introduction costs, or $0.06 per share.
During the first quarter we were negatively impacted by major component exchange costs of 3.2 million, or $0.05 per share, which was partially offset by a net refund [of] PBH of $1.1 million on certain engine and major components removed from third-party PBH programs. In addition, we recognized a 2.4 million, or $0.04 per share, impairment loss on six older aircraft held for sale as the estimated sale price for these aircraft was less than the carrying value. On the positive side, there was a tax recovery during the first quarter of $3.1 million, or $0.07 per share, relating to a tax rate reduction in the UK. And as we sold Survival-One, we recognized an after-tax gain of $16.4 million, or $0.35 per share diluted.
Now I'll go over each of the segments, first in Global Operations. Global Operations is continuing its record-breaking pace, recording a 35% revenue increase, as I said earlier, to 124 million, and an EBITDAR increase of 13% to 35 million. That's excluding FX. The revenue increase was from the continued expansion of the fleet at higher rates and the consolidation of BHS in Brazil. Flying hours increased by nearly 3800 hours in the first quarter, 19% higher than last year.
Despite this increase in revenue, the segment EBITDAR margin has decreased from 32.7 to 27.9 compared to last year. The decrease is due to the cost incurred during the quarter to exit certain low-margin contracts, and we also reversed -- last year we had the reversal of 2.7 million in provisions for trade receivables, compared to 1.2 in the first quarter this year.
And also, although we acquired BHS which resulted in a significant increase in revenue for Global Ops, EBITDAR margins have been affected by lower availability rates than expected in Brazil due to our Puma fleet, because we had to reinforce the airframe on the Puma MK2, just like we did in Europe. So that put one aircraft down for a certain long period down there.
We anticipate that the revenue and the EBITDAR in Global Operations will grow in future periods as we focus on continuing on new opportunities in possible jurisdictions and growing markets, and that the Brazilian serviceability now is back up, and it will improve also as we get more new aircraft in Brazil.
Now let's talk about Europe. As I mentioned earlier, European's performance has improved compared with the same period last year, as aircraft availability improves and operating -- operations begin on new and renewed contracts, specifically the Statoil contracts started, as well as a new contract at improved rates in the Netherlands and the Danish business units. Excluding the impact of foreign exchange, revenue in Europe increased 10% to $148 million, and segment EBITDAR increased 18% to 27 million.
European Operations is still investing heavily in training in its personnel and new aircraft [type], and we continue to experience, as I said earlier, some aircraft availability issues, although to a lesser extent. Our availability rate on new technology is continuing to improve; it's approximately 90%. And we are finally coming out of the very intense heavy maintenance program. In fact, if you look at what we did, a total of 40 aircraft required scheduled major inspections, repair or modification upgrades to meet contract requirements in the last 15 months. That's the highest we've ever seen. Our forecast for the second half of the year has significantly less aircraft requiring major inspections or mod in Europe. That's should help bring us back to a serviceability rate that would be at a normal level.
During the first quarter, operations began on the interim UK SAR contract. This contract and associated facilities are considered to be in a pre-operating period right now. So all expenses incurred during the pre-operating phase are deferred, and all revenues earned during this period are offset against the deferred expense. Therefore, this new contract had no impact on European Operations results for this first quarter, but we will begin to see the impact as we start transitioning the period in October. The first base will be fully operational with an S-92; we're just finishing training in October, in fact.