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 
OKOTOKS, ALBERTA -- (Marketwired) -- 07/23/14 --   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: 


 
 
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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                         

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: 


 
 
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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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                                $       $        %       $       $        % 
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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.                                                                

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. 
Contacts:
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 (FAX) 
Mullen Group Ltd.
Mr. P. Stephen Clark
Chief Financial Officer
403-995-5200 or Toll-free: 1-866-995-7711
403-995-5296 (FAX)
www.mullen-group.com
 
 
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