Mullen Group Ltd. Reports Second Quarter Financial Results and the Pricing of $400.0 Million of Senior Unsecured Notes

Mullen Group Ltd. Reports Second Quarter Financial Results and the Pricing of 
$400.0 Million of Senior Unsecured Notes 
NEWS RELEASE TRANSMITTED BY Marketwired 
FOR: Mullen Group Ltd. 
TSX SYMBOL:  MTL 
JULY 23, 2014 
Mullen Group Ltd. Reports Second Quarter Financial Results and the Pricing of
$400.0 Million of Senior Unsecured Notes 
OKOTOKS, ALBERTA--(Marketwired - July 23, 2014) - Mullen Group Ltd. (TSX:MTL)
("Mullen Group" and/or the "Corporation"), one of
Canada's largest and most diversified oilfield services and transportation
companies, today reported its financial and operating results for the period
ended June 30, 2014, with comparisons to the same period last year. 
Key financial highlights for the second quarter were as follows: 
/T/ 
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HIGHLIGHTS                                                                  
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Three month                Six month  
periods ended            periods ended 
(unaudited)                                June 30                  June 30 
($ millions)                 2014    2013   Change    2014    2013   Change 
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$       $        %       $       $        %  
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Revenue                                                                     
  Oilfield Services         175.9   173.6      1.3   448.5   431.2      4.0 
  Trucking/Logistics        137.9   137.3      0.4   278.1   266.4      4.4 
  Corporate and                                                              
intersegment                                                              
eliminations              (0.4)   (0.6)       -    (1.2)   (1.8)       - 
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Total                       313.4   310.3      1.0   725.4   695.8      4.3 
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Operating Income                                                            
  Oilfield Services          33.6    33.0      1.8   103.5   101.6      1.9 
  Trucking/Logistics         21.1    24.1    (12.4)   42.2    44.2     (4.5)
  Corporate                  (2.7)   (1.1)       -    (2.5)   (2.0)       - 
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Operating income (1)         52.0    56.0     (7.1)  143.2   143.8     (0.4)
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Net income                   25.6    27.4     (6.6)   61.9    71.8    (13.8)
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Net Income - adjusted (1)    15.1    20.9    (27.8)   62.3    66.4     (6.2)
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(1) Refer to the Notes section in the Summary chart                          
/T/ 
For the three month period ended June 30, 2014, Mullen Group generated revenue
of $313.4 million, operating income of $52.0 million and net cash from
operations of $83.4 million. During the quarter Mullen Group paid dividends of
$27.4 million, incurred net capital expenditures of $16.5 million and paid
interest obligations of $9.4 million. 
Consolidated revenue in the second quarter increased by $3.1 million, or 1.0
percent, to $313.4 million as compared to $310.3 million in 2013. The majority
of this increase in revenue was directly attributable to the Oilfield Services
segment, which increased by $2.3 million, or 1.3 percent, to $175.9 million as
compared to $173.6 million in the same period one year earlier. The increase in
segment revenue was primarily due to an increase in drilling activity in
western Canada in those Operating Entities servicing the drilling industry.
Revenue in the Trucking/Logistics segment increased by $0.6 million, or 0.4
percent, to $137.9 million from $137.3 million primarily due to the $6.7
million of incremental revenue resulting from the acquisition of Jay's
Moving & Storage Ltd. ("Jay's"), which was largely offset by
lower demand for heavy haul freight services in western Canada as well as
construction services in northern Manitoba.  
Mullen Group generated operating income for the period ended June 30, 2014, of
$52.0 million, a decrease of $4.0 million or 7.1 percent over the $56.0 million
generated in 2013. The decrease of $4.0 million was due to a $3.0 million
decrease in operating income in the Trucking/Logistics segment and specifically
from those Operating Entities involved in heavy haul freight services in
western Canada along with construction services in northern Manitoba. In
addition, Corporate costs increased by $1.6 million on a year over year basis,
which negatively impacted operating income. These factors were somewhat offset
by a $0.6 million increase in the Oilfield Services segment's operating
income. As a percentage of consolidated revenue, operating income decreased to
16.6 percent as compared to 18.0 percent in 2013 due to a reduction in margin
experienced by the Trucking/Logistics segment. 
In the second quarter of 2014, Mullen Group generated net income of $25.6
million, or $0.28 per share, a decrease of $1.8 million, or 6.6 percent
compared to $27.4 million, or $0.30 per share in 2013. The $1.8 million
decrease in net income was mainly attributable to a $13.3 million negative
variance in the fair value of investments, a $4.0 million decrease in operating
income and a $3.8 million increase in the loss on sale of property, plant and
equipment. These decreases were somewhat offset by a $17.4 million positive
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 during the second quarter
of 2014 resulted in adjusted net income of $15.1 million and adjusted earnings
per share of $0.16, as compared to $20.9 million and $0.23 per share in 2013,
respectively. These adjustments more clearly reflect earnings from an operating
perspective. 
"We are operating in competitive markets today and for the most part our
Operating Entities continue to be challenged by the lack of any incremental new
demand for their services. While the Canadian economy continued to show some
pockets of moderate strength, there was no significant growth in the second
quarter. As a result our Trucking/Logistics segment did not perform to our
expectations or to last year. In our Oilfield Services segment, drilling
activity in western Canada was up year over year. However, weather related
issues, most recently in southeastern Saskatchewan and Manitoba where
significant flooding washed out roads and limited access to well-site locations
negatively impacted activity levels. Margins came under pressure primarily due
to rising operating costs including fuel, operating supplies and repairs and
maintenance - costs which were not fully recoverable from customers through
pricing increases or productivity gains. Overall just a challenging
quarter," said Mr. Murray K. Mullen, Chairman, Chief Executive Officer and
President. 
Mullen Group's consolidated revenue in the first six months of 2014
increased by $29.6 million, or 4.3 percent, to $725.4 million as compared to
$695.8 million in 2013. The majority of this increase in revenue, specifically
$26.5 million, occurred in the first quarter. Revenue in the Oilfield Services
segment increased by $17.3 million, or 4.0 percent, to $448.5 million as
compared to $431.2 million in the same period one year earlier. This increase
was due to the combined effect of an increase in revenue related to oil sands
and pipeline construction projects, increased revenue generated by Heavy Crude
Hauling L.P. as a result of a major crude oil and fluid hauling contract in the
Lloydminster region and a modest increase in drilling activity in western
Canada. These increases were partially offset by decreased revenue due to the
challenging operating environment in western Canada resulting from the
combination of competitive pricing, continued pipeline and infrastructure
bottlenecks in certain markets as well as extreme cold weather in the first
quarter and rain and flood related issues in the second quarter. Revenue in the
Trucking/Logistics segment increased by $11.7 million, or 4.4 percent, to
$278.1 million from $266.4 million in the same period one year earlier. This
$11.7 million increase was largely due to incremental revenue resulting from
the acquisition of Jay's as well as a $2.2 million increase in fuel
surcharge revenue. These increases were partially offset by decreased demand
for over-dimensional and heavy haul freight services as well as construction
activity in northern Manitoba remained soft and below 2013 levels. 
Operating income for the first six months of 2014 decreased to $143.2 million,
or 0.4 percent, as compared to $143.8 million generated in the same period last
year. The decrease of $0.6 million was primarily due to the Trucking/Logistics
segment that experienced a $2.0 million decrease in operating income. In
addition, Corporate costs rose by $0.5 million on a year over year basis. These
factors were somewhat offset by the Oilfield Services segment that experienced
a $1.9 million increase in operating income. As a percentage of revenue,
operating income decreased to 19.7 percent as compared to 20.7 percent in 2013.
This 1.0 percent decrease in operating margin largely was due to a generally
more competitive environment in the Trucking/Logistics segment. 
Net income in the first six months of 2014 decreased to $61.9 million, or 13.8
percent, as compared to $71.8 million in 2013. The decrease of $9.9 million was
mainly attributable to a $20.7 million negative variance in the fair value of
investments and a $4.3 million increase in the loss on sale of property, plant
and equipment. These decreases were somewhat offset by a $12.6 million positive
variance in unrealized foreign exchange and a $2.5 million reduction in income
tax expense. Mullen Group's adjusted net income and earnings per share in
the first six months of 2014 was $62.3 million and $0.68 per share, as compared
to $66.4 million and $0.75 per share in 2013, respectively. 
"2014 has begun very much as we expected. Markets are competitive, demand
has remained elusive and costs are rising. I am optimistic, however, that the
balance of the year will be more positive primarily due to our expectations
that drilling activity in Canada will be stronger as the year progresses. Our
strategy is to remain focused on operating efficiencies and to raise pricing as
market fundamentals improve," added Mr. Mullen. 
Also today, Mullen Group announces that it has priced a proposed offering of
senior unsecured notes on a private placement basis with a principal amount of
approximately $400.0 million. The notes have an average term of approximately
11 years and a weighted average fixed interest rate of approximately 3.95
percent per annum. The private placement is subject to customary due diligence
and closing conditions and is expected to close on or about October 22, 2014.
Mullen Group intends to use the proceeds to repay portions of our existing
private placement debt and for general corporate purposes. 
"Maintaining a strong and well structured balance sheet is one of Mullen
Group's key strategic objectives, which is why I am so pleased with
today's announcement. Investors see the value and diversity in our
business model as well as our consistent financial performance, evidenced by
the strong investor demand associated with the offering. We have reduced our
cost of borrowing and positioned Mullen Group for the future," said Mr.
Mullen. 
A summary of Mullen Group's results for the three and six month periods
ended June 30, 2014 and 2013 are as follows: 
/T/ 
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SUMMARY                                                                     
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Three month                Six month  
periods ended            periods ended 
(unaudited)                                June 30                  June 30 
($ millions, except per                                                     
 share amounts)              2014    2013   Change    2014    2013   Change 
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$       $        %       $       $        %  
--------------------------------------------------
Revenue                     313.4   310.3      1.0   725.4   695.8      4.3  
Operating income (1)         52.0    56.0     (7.1)  143.2   143.8     (0.4)
Unrealized foreign                                                          
 exchange (gain) loss        (9.0)    8.4   (207.1)    0.8    13.4    (94.0)
Loss on sale of property,                                                   
 plant and equipment          4.6     0.8    475.0     4.5     0.2  2,150.0 
Decrease (increase) in                                                      
 fair value of investments   (3.0)  (16.3)   (81.6)   (0.1)  (20.8)   (99.5)
Net income                   25.6    27.4     (6.6)   61.9    71.8    (13.8)
Net Income - adjusted (2)    15.1    20.9    (27.8)   62.3    66.4     (6.2)
Earnings per share (3)       0.28    0.30     (6.7)   0.68    0.81    (16.0)
Earnings per share -                                                        
 adjusted (2)                0.16    0.23    (30.4)   0.68    0.75     (9.3)
Net cash from operating                                                     
 activities                  83.4    75.1     11.1   118.5    92.5     28.1 
Net cash from operating                                                     
 activities per share (3)    0.91    0.83      9.6    1.30    1.04     25.0 
Cash dividends declared                                                     
 per Common Share            0.30    0.30        -    0.60    0.60        - 
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Notes:                                                                      
 (1) Operating income is defined as net income before depreciation of        
property, plant and equipment, amortization of intangible assets,       
finance costs, unrealized foreign exchange gains and losses, other      
(income) expense and income taxes.                                     
 (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 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 an indicator of     
performance.                                                                 
/T/ 
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, shared services and
strategic planning 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. 
-30-
FOR FURTHER INFORMATION PLEASE CONTACT: 
Mullen Group Ltd.
Mr. Murray K. Mullen
Chairman of the Board, Chief Executive Officer and President
403-995-5200 or Toll-free: 1-866-995-7711
403-995-5296
or
Mullen Group Ltd.
Mr. P. Stephen Clark
Chief Financial Officer
403-995-5200 or Toll-free: 1-866-995-7711
403-995-5296 
INDUSTRY:  Transportation and Logistics - Trucking 
SUBJECT:  ERN 
-0-
-0- Jul/23/2014 21:39 GMT
 
 
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