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Mullen Group Ltd. Reports 2013 Financial Results


OKOTOKS, AB, Feb. 12, 2014 /CNW/ - (TSX:MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported financial and operating results for the quarter and year ended December 31, 2013, with comparisons to the same periods last year.

For the three month period ended December 31, 2013, Mullen Group generated revenue of $367.4 million, an increase of $21.3 million or 6.2 percent as compared to $346.1 million in 2012. The majority of this increase in revenue was directly attributable to the Oilfield Services segment. Revenue in the Oilfield Services segment increased by $16.3 million, or 7.8 percent, to $226.1 million as compared to $209.8 million in the same period one year earlier primarily due to an increase in revenue generated by those Operating Entities providing services associated with large diameter pipeline construction projects as well as increased revenue generated by fluid hauling services tied to heavy oil. Revenue in the Trucking/Logistics segment increased by $4.3 million, or 3.1 percent, to $141.9 million as compared to $137.6 million in the same period one year earlier. This increase was due to incremental revenue resulting from the acquisition of Jay's Moving & Storage Ltd. ("Jay's"), as well as a $0.9 million increase in fuel surcharge revenue. These increases were offset by decreased demand for over-dimensional and heavy haul freight services related to the oil sands and mining sectors as well as decreased demand associated with inclement weather and the timing of the mid-week holidays in the month of December.

Operating income for the fourth quarter was $71.1 million, a decrease of $0.1 million or 0.1 percent over the same period in 2012. The decrease of $0.1 million was primarily due to the Trucking/Logistics segment that experienced a $4.4 million decrease, as well as an increase in Corporate costs that rose by $0.3 million on a year over year basis. This decrease was mostly offset by the Oilfield Services segment that experienced a $4.6 million increase in operating income. Heavy snowfall events and colder-than-normal temperatures during the quarter negatively affected productivity across nearly all of the Operating Entities. As a percentage of consolidated revenue, operating income decreased to 19.3 percent as compared to 20.6 percent in 2012.

For the three month period ended December 31, 2013, Mullen Group generated net income of $20.3 million or $0.22 per share, a decrease of $1.5 million, or 6.9 percent, compared to $21.8 million or $0.25 per share in 2012. The $1.5 million decrease in net income was mainly attributable to a $5.2 million negative variance in unrealized foreign exchange that was partially offset by a $1.8 million positive variance in the fair value of investments. Adjusting Mullen Group's net income and earnings per share to eliminate the impact of unrealized foreign exchange and the change in fair value of investments resulted in adjusted net income of $31.5 million and adjusted earnings per share of $0.35 for 2013 as compared to $29.7 million and $0.34 per share in 2012, respectively. These adjustments more clearly reflect earnings from an operating perspective.

"Our operating performance in the fourth quarter was somewhat below our expectations due to a couple of factors. First, the positive trends that we saw at the start of the quarter were negatively impacted by weather related issues. Western Canada experienced some extreme snowfall and a severe cold snap in December, which adversely affected our Operating Entities. Second, the timing of the mid-week holidays in the month of December resulted in a substantial slow down during the last 15-days of the month. Profitability was negatively impacted to an even greater extent due to a combination of reduced productivity levels and higher operating expenses notably wages, fuel, repairs and maintenance. Despite these external factors, Mullen Group increased revenue for the quarter, however, operating costs were significantly higher than normal," said Mr. Stephen H. Lockwood, President and Co-Chief Executive Officer.

For the year ended December 31, 2013, Mullen Group generated revenue of $1,437.2 million, an increase of $9.6 million or 0.7 percent as compared to $1,427.6 million in 2012. This was the highest level of annual revenue recorded by Mullen Group. The 2013 results include $23.7 million of revenue from the Jay's acquisition, which was acquired on May 31, 2013. Revenue, when adjusted for the completion of the non-recurring Thin Fine Tailings barge system project in the second quarter of 2012 by Canadian Dewatering L.P. (the "Non-Core Project"), increased by $39.4 million, or 2.8 percent as compared to last year.

Revenue in the Oilfield Services segment decreased by $11.0 million, or 1.2 percent, to $886.3 million as compared to $897.3 million in 2012. This decrease was primarily due to the $29.8 million reduction from the Non-Core Project that was somewhat offset by greater demand for services associated with pipeline activity and by fluid hauling services tied to heavy oil. On a comparative basis, after adjusting for the Non-Core Project, revenue from this segment's core business increased by $18.8 million, or 2.2 percent, from the same period one year earlier. Revenue in the Trucking/Logistics segment increased by $18.3 million, or 3.4 percent, to $553.9 million as compared to $535.6 million in 2012. This increase was largely due to incremental revenue resulting from the acquisition of Jay's, increased demand at most Operating Entities within this segment and a modest increase in fuel surcharge revenue. These increases were offset by decreased demand for over-dimensional and heavy haul freight services related to movement of equipment for the oil sands and mining sectors.

In 2013, Mullen Group generated operating income of $300.7 million, an increase of $6.9 million or 2.3 percent over the $293.8 million generated in 2012. This was the highest level recorded by Mullen Group. The increase of $6.9 million was primarily due to a $12.2 million increase generated by the Oilfield Services segment being somewhat offset by a $5.6 million decrease in the Trucking/Logistics segment. As a percentage of revenue, operating income increased to 20.9 percent as compared to 20.6 percent in 2012. This 0.3 percent increase in operating margin was directly attributable to the higher margins achieved on large diameter pipeline projects and other specialized services, as well as the completion of the Non-Core Project in 2012. On a comparative basis, after adjusting for revenue and expenses related to the Non-Core Project, consolidated operating margin in 2012 was 21.1 percent.

In 2013, Mullen Group generated net income of $143.3 million, or $1.60 per share, an increase of $12.4 million or 9.5 percent, as compared to $130.9 million or $1.58 per share in 2012. The $12.4 million increase in net income was mainly attributable to a $27.6 million positive variance in the fair value of investments and a $6.9 million increase in operating income. These increases were somewhat offset by a $21.4 million negative variance in unrealized foreign exchange. Adjusting Mullen Group's net income and earnings per share to eliminate the impact of unrealized foreign exchange and the change in fair value of investments resulted in adjusted net income of $141.0 million and adjusted earnings per share of $1.57, as compared to $133.0 million and $1.60 per share in 2012, respectively.

"I am pleased with our operating performance in 2013. This is all the more satisfying in light of the challenges we faced in 2013 of which there were many, including, slow economic growth, flat drilling activity year-over-year, a very competitive operating environment, adverse weather conditions and an extremely challenging December. Notwithstanding these challenges, we achieved record results, which speaks to the strength of our business model," said Mr. Murray K. Mullen, Chairman and Chief Executive Officer.

"For 2014 I am optimistic that the market conditions will provide Mullen Group the opportunity to produce another year of record results, although the improvements will be modest due to the competitiveness of the market. The outlook for GDP growth in North America is expected to be positive but at 2 - 3 percent that suggests our Trucking/Logistics segment will be challenged to grow. In our Oilfield Services segment the opportunities are brighter with overall spending by the oil and natural gas industry in western Canada projected to increase by 8 - 10 percent in 2014. This increased spend accompanied by the $100 million in new capital we will invest in our Operating Entities should translate into growth. I believe the foundation is in place for Mullen Group to have another record year," said Mr. Mullen.

A summary of Mullen Group's results for the quarter and year ended December 31, 2013, along with revenue and operating results by segment are as follows:


                                                                  
    SUMMARY                                                                
                                                
    (unaudited)      Three month periods ended   Twelve month periods ended
    (millions,              December 31                 December 31
    except per share
    amounts)          2013  2012        Change      2013    2012     Change
                         $     $             %         $       $          %
    Revenue          367.4 346.1           6.2   1,437.2 1,427.6        0.7
                                                                           
    Operating income                            
    (1)               71.1  71.2         (0.1)     300.7   293.8        2.3
    Unrealized                                  
    foreign exchange
    loss (gain)        7.9   2.7       (192.6)      16.2   (5.2)    (411.5)
    Decrease                                    
    (increase) in
    fair value of
    investments        4.2   6.0          30.0    (20.9)     6.7      411.9
    Net income        20.3  21.8         (6.9)     143.3   130.9        9.5
    Net Income -                                
    adjusted(2)       31.5  29.7           6.1     141.0   133.0        6.0
    Earnings per                                
    share(3)          0.22  0.25        (12.0)      1.60    1.58        1.3
    Earnings per                                
    share - adjusted
    (2)               0.35  0.34           2.9      1.57    1.60      (1.9)
    Net cash from                               
    operating
    activities        67.6  67.7         (0.1)     214.4   279.9     (23.4)
    Net cash from                               
    operating
    activities per
    share(3)          0.75  0.77         (2.6)      2.39    3.37     (29.1)
    Cash dividends                              
    declared per
    Common Share      0.30  0.25          20.0      1.20    1.00       20.0
    Notes:  
      (1)  Operating income is defined as net income before depreciation on
           property, plant and equipment, amortization on intangible
           assets,
           finance costs, unrealized foreign exchange gains and losses,
           other (income) expense and income tax expense.
      (2)  Net income - adjusted and earnings per share - adjusted are
           calculated by adjusting net income and basic earnings per share
           by the
           amount of any unrealized foreign exchange gains and losses and
           by the change in fair value of investments.
      (3)  Earnings per share and net cash from operating activities per
           share are calculated based on the weighted average number of
           Common Shares outstanding for the period.
            
    Operating income, net income - adjusted and earnings per share -
    adjusted are not recognized terms under IFRS and do not have
    standardized meanings prescribed by IFRS. Management believes these
    measures are useful supplemental measures. 
    Investors should be cautioned that these indicators should not replace
    net income and earnings per share as indicators of performance.
     
                                                                
    SEGMENTED RESULTS                                                    
                                              
                         Three month periods
                                ended          Twelve month periods ended
                             December 31              December 31
    (unaudited)
    (millions)           2013   2012  Change      2013    2012     Change
                             $     $       %         $       $          %
    Revenue                                                              
      Oilfield Services  226.1 209.8     7.8     886.3   897.3      (1.2)
      Trucking/Logistics 141.9 137.6     3.1     553.9   535.6        3.4
      Corporate            0.4 (0.1)       -       1.0     0.7          -
    Intersegment                                                         
    eliminations
      Oilfield Services  (0.1) (0.4)       -     (1.0)   (1.9)          -
      Trucking/Logistics (0.9) (0.8)       -     (3.0)   (4.1)          -
    Total                367.4 346.1     6.2   1,437.2 1,427.6        0.7
    Operating Income                                                     
      Oilfield Services   50.5  45.9    10.0     212.3   200.1        6.1
      Trucking/Logistics  21.9  26.3  (16.7)      92.8    98.4      (5.7)
      Corporate          (1.3) (1.0)       -     (4.4)   (4.7)          -
    Total                 71.1  71.2   (0.1)     300.7   293.8        2.3
    
                                                                        
    CONSOLIDATED STATEMENT OF FINANCIAL POSITION                        
                                                          December 31
    (thousands)                                         2013        2012
                                                           $           $
    Assets                                                              
    Current assets:                                                     
      Cash and cash equivalents                       58,236     122,772
      Trade and other receivables                    234,485     219,423
      Inventory                                       34,143      32,097
      Prepaid expenses                                10,946      10,663
      Current tax receivable                           6,318       2,083
                                                     344,128     387,038
    Non-current assets:                                                 
    Property, plant and equipment                    903,256     843,318
    Goodwill                                         244,440     239,595
    Intangible assets                                 41,742      52,985
    Investments                                       49,463      27,612
    Deferred tax assets                                3,015       5,029
    Other assets                                       1,565         327
                                                   1,243,481   1,168,866
    Total Assets                                   1,587,609   1,555,904
                                                                        
    Liabilities and Equity                                              
    Current liabilities:                                                
      Accounts payable and accrued liabilities       108,963     104,810
      Dividends payable                                9,066      21,917
      Current tax payable                              4,993      20,902
      Current portion of long-term debt                  277       1,471
                                                     123,299     149,100
    Non-current liabilities:                                            
    Long-term debt                                   409,209     392,814
    Convertible debentures - debt component           16,070      39,773
    Deferred tax liabilities                         138,919     147,092
                                                     564,198     579,679
    Equity:                                                             
      Share capital                                  760,310     720,836
      Convertible debentures - equity component          738       1,843
      Contributed surplus                             11,327      12,125
      Retained earnings                              127,737      92,321
                                                     900,112     827,125
                                                                        
    Total Liabilities and Equity                   1,587,609   1,555,904
                                                           
    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND RETAINED
    EARNINGS
                      Three month periods   Twelve month periods ended
                             ended                 December 31
                          December 31
    (thousands,           2013       2012        2013             2012
    except per share
    amounts)
                             $          $           $                $
                            (unaudited)                               
    Revenue            367,388    346,166   1,437,166        1,427,640
                                                                      
    Direct operating   257,494    238,648     983,382          983,535
    expenses
    Selling and         38,847     36,332     153,101          150,298
    administrative
    expenses
                        71,047     71,186     300,683          293,807
                                                                      
    Depreciation on     18,498     18,026      69,499           65,335
    property, plant
    and equipment
    Amortization on      3,873      4,610      16,743           18,334
    intangible assets
    Finance costs        6,591      7,084      26,305           32,897
    Unrealized           7,825      2,749      16,144          (5,194)
    foreign exchange
    loss (gain)
    Other (income)       4,351      7,993    (20,710)            6,668
    expense
    Income before       29,909     30,724     192,702          175,767
    income taxes
                                                                      
    Income tax           9,558      8,954      49,407           44,858
    expense
                                                                      
    Net income and      20,351     21,770     143,295          130,909
    total
    comprehensive
    income
                                                                      
    Retained           134,568     92,468      92,321           45,711
    earnings,
    beginning of
    period
    Dividends         (27,182)   (21,917)   (107,879)         (84,299)
    declared to
    common
    shareholders
    Retained           127,737     92,321     127,737           92,321
    earnings, end of
    period
                                                                      
    Earnings per                                                      
    share:
      Basic               0.22       0.25        1.60             1.58
      Diluted             0.22       0.25        1.57             1.52
    Weighted average                                                  
    number of Common
    Shares
    outstanding:
      Basic             90,559     87,384      89,764           82,961
      Diluted           92,695     87,901      92,502           91,785
                                                       
    CONSOLIDATED STATEMENT OF CASH FLOWS
                      Three month periods   Twelve month periods ended
                             ended                 December 31
                          December 31
    (thousands)           2013       2012        2013             2012
                             $          $           $                $
                            (unaudited)                               
    Cash provided by                                                  
    (used in):
    Cash flows from                                                   
    operating
    activities:
    Net income          20,351     21,770     143,295          130,909
    Adjustments for:                                                  
      Depreciation on   18,498     18,026      69,499           65,335
      property, plant
      and equipment
      Amortization on    3,873      4,610      16,743           18,334
      intangible
      assets
      Finance costs      6,591      7,084      26,305           32,897
      Stock-based          836        390       2,588            2,768
      compensation
      expense
      Foreign            7,380      2,615      15,294          (4,913)
      exchange
      Change in fair     4,206      6,049    (20,935)            6,707
      value of
      investments
      Loss (gain) on       173        944       1,118          (1,039)
      sale of
      property, plant
      and equipment
      Income tax         9,558      8,954      49,407           44,858
      expense
      Earnings from       (28)          -       (893)                -
      equity
      investment
      Impairment of          -      3,000           -            3,000
      goodwill
      Gain on                -    (2,000)           -          (2,000)
      contingent
      consideration
                        71,438     71,442     302,421          296,856
    Changes in                                                        
    non-cash working
    capital items
    from operating
    activities:
      Trade and other   13,304     10,794    (10,413)           45,097
      receivables
      Inventory        (1,166)         78     (1,776)            6,915
      Prepaid            1,711      1,410        (10)             (81)
      expenses
      Accounts         (3,659)    (7,716)       2,466         (19,329)
      payable and
      accrued
      liabilities
    Cash generated      81,628     76,008     292,688          329,458
    from operating
    activities
    Income tax paid   (13,987)    (8,401)    (78,287)         (49,604)
    Net cash from       67,641     67,607     214,401          279,854
    operating
    activities
                                                                      
    Cash flows from                                                   
    financing
    activities:
      Cash dividends  (27,158)   (21,836)   (120,730)         (82,591)
      paid to common
      shareholders
      Interest paid    (9,476)   (10,050)    (26,210)         (31,538)
      Proceeds of          311          -         311                -
      long-term debt
      Repayment of       (238)    (2,510)     (7,423)          (7,753)
      long-term debt
      and loans
      Net proceeds       3,367      5,451      10,407            7,054
      from Common
      Share issuances
      Changes in             8         33          86             (28)
      non-cash
      working capital
      items from
      financing
      activities
    Net cash used in  (33,186)   (28,912)   (143,559)        (114,856)
    financing
    activities
    Cash flows from                                                   
    investing
    activities:
      Acquisitions           -          -    (15,665)          (5,781)
      Purchase of     (32,208)   (23,924)   (133,686)        (122,750)
      property, plant
      and equipment
      Proceeds on        5,560      6,591      14,315           19,508
      sale of
      property, plant
      and equipment
      Purchase of            -          -        (23)                -
      investments
      Interest             167        316         839              931
      received
      Other assets           3          2     (1,238)             (25)
      Changes in         (330)    (1,521)       (770)              238
      non-cash
      working capital
      items from
      investment
      activities
    Net cash used in  (26,808)   (18,536)   (136,228)        (107,879)
    investing
    activities
    Change in cash       7,647     20,159    (65,386)           57,119
    and cash
    equivalents
    Cash and cash       50,144    102,479     122,772           65,934
    equivalents,
    beginning of
    period
    Effect of              445        134         850            (281)
    exchange rate
    fluctuations on
    cash held
    Cash and cash       58,236    122,772      58,236          122,772
    equivalents, end
    of period

This news release may contain forward-looking statements that are subject to 
risk factors associated with the oil and natural gas business and the overall 
economy.  Mullen Group believes that the expectations reflected in this news 
release are reasonable, but results may be affected by a variety of variables. 
 Mullen Group relies on litigation protection for "forward-looking" statements.

Mullen Group is a company that owns a network of independently operated 
businesses.  Mullen Group provides a wide range of specialized transportation 
and related services to the oil and natural gas industry in western Canada and 
is one of the leading suppliers of trucking and logistics services in Canada - 
two sectors of the economy in which Mullen Group has strong business 
relationships and industry leadership.  Mullen Group provides management and 
financial expertise, technology and systems support to its independent 
businesses.

Mullen Group is a publicly traded corporation listed on the Toronto Stock 
Exchange under the symbol "MTL".  Additional information is available on our 
website at www.mullen-group.com or on SEDAR at www.sedar.com.

SOURCE Mullen Group Ltd.

Mr. Murray K. Mullen - Chairman of the Board and Chief Executive Officer Mr. Stephen H. Lockwood - Co-Chief Executive Officer and President Mr. P. Stephen Clark - Chief Financial Officer

121A - 31 Southridge Drive Okotoks, Alberta, Canada   T1S 2N3 Telephone:  403-995-5200 Fax:  403-995-5296

To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/February2014/12/c9787.html

CO: Mullen Group Ltd. ST: Alberta NI: TRN

-0- Feb/13/2014 00:11 GMT

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