Mullen Group Ltd. Reports 2012 Financial Results

OKOTOKS, AB, Feb. 20, 2013 /CNW/ - (TSX:MTL)  Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended December 31, 2012, with comparisons to the same period last year.

For the twelve month period ended December 31, 2012, Mullen Group generated record revenue of $1,427.6 million, operating income of $293.8 million and net cash from operating activities of $279.9 million. Cash was used, among other things, to acquire net property, plant and equipment of $103.2 million, pay cash dividends of $82.6 million and fund an acquisition of $5.8 million.

Mullen Group's revenue of $1,427.6 million for the year ended December 31, 2012, increased by $40.3 million or 2.9 percent from the $1,387.3 million generated in 2011.  The year over year increase in consolidated revenue was largely attributable to the revenue growth experienced in the first and second quarters of 2012 compared to the same quarters in 2011, which was somewhat offset by the decrease in consolidated revenue experienced in the third and fourth quarters of 2012 compared to same quarters in 2011.

The Oilfield Services segment generated $897.3 million in revenue for the year ended December 31, 2012, which represents a marginal 0.7 percent decrease in revenue compared to $903.8 million reported in 2011.  The increase in revenue in the first and second quarters of 2012 compared to 2011 resulted mainly from increased demand in drilling activity along with increased demand for core drilling services. However, the increases in revenue from the first and second quarters of 2012 were offset by decreases in revenue in the third and fourth quarters, which generally came from a slow down in drilling activity, the completion of the Thin Fine Tailings ("TFT") barge system project and the delay in pipeline construction activity.  The Trucking/Logistics segment generated $535.6 million in revenue for the year ended December 31, 2012, which represents a 9.5 percent increase in revenue compared to the $489.3 million reported in 2011.  This $46.3 million increase in the Trucking/Logistics segment's revenue is mainly attributable to recognizing a full year of Hi-Way 9 revenue, increased demand for multi-modal and specialized transportation services in western Canada and an increase in fuel surcharge revenue.

Mullen Group generated record operating income of $293.8 million in 2012, an increase of $5.8 million or 2.0 percent over the $288.0 million generated in 2011. The increase in operating income was the combined effect of a marginal $6.4 million decrease in operating income reported by the Oilfield Services segment which was more than offset by an $11.0 million increase in operating income reported by the Trucking/Logistics segment and decreased corporate costs.  Operating income as a percentage of revenue for 2012 was 20.6 percent compared to 20.8 percent in 2011.

"Mullen Group's record performance in 2012, in terms of revenue generation and operating income, reinforces the strength of our self-managed business unit model which provides Mullen Group diversity in service offerings in multiple geographical regions.  This is not to say that 2012 was not without its challenges. The combined effect of the completion of the TFT barge system project by Canadian Dewatering L.P. in the second quarter of 2012, decreased drilling activity in the last half of the year and the delay in a number of pipeline construction projects did have an unfavourable impact on our results in 2012.  However, the demand for core hole delineation services, well servicing and fluid hauling along with the continued demand for specialized and multi-modal transportation services benefited a number of our business units and was key in driving our record performance," said Mr. Stephen H. Lockwood, President and Co-Chief Executive Officer.

In 2012 Mullen Group generated net income of $130.9 million, or $1.58 per share, an increase of $11.5 million or 9.6 percent, as compared to $119.4 million or $1.50 per share in 2011.  The $11.5 million increase in net income was mainly attributable to an $11.6 million positive variance in unrealized foreign exchange and Mullen Group's improved operating performance, which contributed $5.8 million of additional operating income.  These increases were somewhat offset by $5.1 million of higher income tax expense and a $2.8 million negative 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 $133.0 million and adjusted earnings per share of $1.60, as compared to $125.4 million and $1.57 per share in 2011, respectively.  These adjustments more clearly reflect earnings from an operating perspective.

In the fourth quarter of 2012 Mullen Group generated revenue of $346.1 million, a decrease of $48.0 million or 12.2 percent from the $394.1 million generated for the same period in 2011.  The decrease in revenue is primarily due to decreased revenue experienced in the Oilfield Services segment, which reported a $47.7 million reduction in revenue in the fourth quarter of 2012 compared to the same period in 2011.  The decrease in revenue in the Oilfield Services segment generally reflects the completion of the TFT barge system project along with a reduction in revenue related to tailing reduction operations for a large oil sands customer, reduced drilling activity, and the delay of a number of large pipeline construction projects.  Revenue in the Trucking/Logistics segment was generally flat in the fourth quarter of 2012 compared to the same period last year.

Mullen Group generated operating income for the fourth quarter of $71.2 million, a decrease of $12.6 million or 15.0 percent over the same period in 2011.  Generally the decrease in operating income came from the reduced revenue recorded by the Oilfield Services segment while the Trucking/Logistics segment reported a marginal increase in operating income in the quarter.  Operating income as a percentage of revenue was 20.6 percent for the fourth quarter of 2012 compared to 21.3 percent in 2011.

"At the start of 2012, Mullen Group expected our operating results for the year to be consistent with 2011 as we did not see any catalyst for significant growth.  This, as our results show, was fairly accurate.  What I am particularly pleased with, in addition to our record operating results, is the validation that our business model works very well as is evidenced in the strength of Mullen Group's balance sheet which includes $122.8 million in cash.  This strength in our balance sheet is imperative as we enter what we expect to be somewhat of an unpredictable 2013. The fact remains that Mullen Group will continue to invest in our business units to ensure they remain best in class, be opportunistic when accretive acquisitions meeting our economic model are presented and very importantly, reward our shareholders,'' said Mr. Murray K. Mullen, Chairman and Chief Executive Officer.

A summary of Mullen Group's results for the quarter and year ended December 31, 2012, along with revenue and operating results by segment are as follows:

SUMMARY
(unaudited) (millions, except per share amounts)	Three month periods ended December 31				Twelve month periods ended December 31
	2012	2011	Change		2012	2011	Change
	$	$	%		$	$	%
Revenue	346.1	394.1	(12.2)		1,427.6	1,387.3	2.9
Operating income^(1)	71.2	83.8	(15.0)		293.8	288.0	2.0
Unrealized foreign exchange (gain) loss	2.7	(7.3)	(137.0)		(5.2)	6.4	181.3
Change in fair value of investments	6.0	—	(100.0)		6.7	3.9	(71.8)
Net income	21.8	47.5	(54.1)		130.9	119.4	9.6
Net Income - adjusted^(2)	29.7	38.8	(23.5)		133.0	125.4	6.1
Earnings per share^(3)	0.25	0.59	(57.6)		1.58	1.50	5.3
Earnings per share - adjusted^(2)	0.34	0.48	(29.2)		1.60	1.57	1.9
Net cash from operating activities	67.7	71.6	(5.5)		279.9	221.4	26.4
Net cash from operating activities per share^(3)	0.77	0.89	(13.5)		3.37	2.77	21.7
Cash dividends declared per Common Share	0.25	0.25	—		1.00	1.00	—

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
(unaudited) (millions)		Three month periods ended December 31				Twelve month periods ended December 31
		2012	2011	Change		2012	2011	Change
		$	$	%		$	$	%
Revenue
	Oilfield Services	209.8	257.5	(18.5)		897.3	903.8	(0.7)
	Trucking/Logistics	137.6	137.5	0.1		535.6	489.3	9.5
	Corporate	(0.1)	—	—		0.7	0.1	—
Intersegment eliminations
	Oilfield Services	(0.4)	(0.2)	—		(1.9)	(0.7)	—
	Trucking/Logistics	(0.8)	(0.7)	—		(4.1)	(5.2)	—
Total		346.1	394.1	(12.2)		1,427.6	1,387.3	2.9
Operating Income
	Oilfield Services	45.9	59.5	(22.9)		200.1	206.5	(3.1)
	Trucking/Logistics	26.3	25.8	1.9		98.4	87.4	12.6
	Corporate	(1.0)	(1.5)	—		(4.7)	(5.9)	—
Total		71.2	83.8	(15.0)		293.8	288.0	2.0

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(thousands)			December 31
			2012	2011
			$	$
Assets
Current assets:
	Cash and cash equivalents		122,772	65,934
	Trade and other receivables		219,423	262,587
	Inventory		32,097	38,826
	Prepaid expenses		10,663	10,498
	Current tax receivable		2,083	916
			387,038	378,761
Non-current assets:
Property, plant and equipment			843,318	798,362
Goodwill			239,595	241,513
Intangible assets			52,985	69,297
Investments			27,612	34,319
Deferred tax assets			5,029	4,583
Other assets			327	302
			1,168,866	1,148,376
Total Assets			1,555,904	1,527,137
Liabilities and Equity
Current liabilities:
	Accounts payable and accrued liabilities		104,810	125,002
	Dividends payable		21,917	20,209
	Current tax payable		20,902	12,724
	Current portion of long-term debt		1,471	4,974
			149,100	162,909
Non-current liabilities:
Long-term debt			392,814	399,232
Convertible debentures - debt component			39,773	103,276
Deferred tax liabilities			147,092	157,421
			579,679	659,929
Equity:
	Share capital		720,836	641,918
	Convertible debentures - equity component		1,843	4,826
	Contributed surplus		12,125	11,844
	Retained earnings		92,321	45,711
			827,125	704,299
Total Liabilities and Equity			1,555,904	1,527,137

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND RETAINED EARNINGS
	Three month periods ended December 31				Twelve month periods ended December 31
(thousands, except per share amounts)	2012		2011		2012	2011
	$		$		$	$
	(unaudited)
Revenue	346,166		394,069		1,427,640	1,387,293
Direct operating expenses	238,648		270,257		983,535	951,825
Selling and administrative expenses	36,332		40,009		150,298	147,493
	71,186		83,803		293,807	287,975
Depreciation on property, plant and equipment	18,026		16,574		65,335	61,803
Amortization on intangible assets	4,610		4,714		18,334	19,015
Finance costs	7,084		8,877		32,897	36,279
Unrealized foreign exchange (gain) loss	2,749		(7,332)		(5,194)	6,345
Other (income) expense	7,993		1,089		6,668	5,335
Income before income taxes	30,724		59,881		175,767	159,198
Income tax expense	8,954		12,388		44,858	39,765
Net income and total comprehensive income	21,770		47,493		130,909	119,433
Retained earnings (deficit), beginning of period	92,468		18,427		45,711	(538,917)
Dividends declared to common shareholders	(21,917)		(20,209)		(84,299)	(80,255)
Reduction of stated capital	—		—		—	545,450
Retained earnings, end of period	92,321		45,711		92,321	45,711
Earnings per share:
Basic	0.25		0.59		1.58	1.50
Diluted	0.25		0.54		1.52	1.43
Weighted average number of Common Shares outstanding:
Basic	87,384		80,835		82,961	79,885
Diluted	87,901		91,171		91,785	90,258

CONSOLIDATED STATEMENT OF CASH FLOWS
			Three month periods ended December 31				Twelve month periods ended December 31
(thousands)			2012	2011			2012	2011
			$	$			$	$
			(unaudited)
Cash provided by (used in):
Cash flows from operating activities:
	Net income		21,770	47,493			130,909	119,433
	Adjustments for:
		Depreciation on property, plant and equipment	18,026	16,574			65,335	61,803
		Amortization on intangible assets	4,610	4,714			18,334	19,015
		Finance costs	7,084	8,877			32,897	36,279
		Stock-based compensation expense	390	616			2,768	2,464
		Foreign exchange	2,615	(7,198)			(4,913)	5,983
		Change in fair value of investments	6,049	9			6,707	3,933
		Loss (gain) on sale of property, plant and equipment	944	1,080			(1,039)	1,402
		Income tax expense	8,954	12,388			44,858	39,765
		Impairment of goodwill	3,000	—			3,000	—
		Gain on contingent consideration	(2,000)	—			(2,000)	—
			71,442	84,553			296,856	290,077
Changes in non-cash working capital items from operating    activities:
	Trade and other receivables		10,794	(8,321)			45,097	(43,684)
	Inventory		78	(4,582)			6,915	(13,236)
	Prepaid expenses		1,410	612			(81)	(1,273)
	Accounts payable and accrued liabilities		(7,716)	3,927			(19,329)	16,215
Cash generated from operating activities			76,008	76,189			329,458	248,099
Income tax paid			(8,401)	(4,629)			(49,604)	(26,689)
Net cash from operating activities			67,607	71,560			279,854	221,410
Cash flows from financing activities:
	Cash dividends paid to common shareholders		(21,836)	(20,207)			(82,591)	(69,886)
	Interest paid		(10,050)	(11,631)			(31,538)	(35,488)
	Repayment of long-term debt and loans		(2,510)	(1,146)			(7,753)	(22,688)
	Net proceeds from Common Share issuances		5,451	106			7,054	2,141
	Changes in non-cash working capital items from financing    activities		33	(93)			(28)	34
Net cash used in financing activities			(28,912)	(32,971)			(114,856)	(125,887)
Cash flows from investing activities:
	Acquisitions		—	221			(5,781)	(72,100)
	Purchase of property, plant and equipment		(23,924)	(17,449)			(122,750)	(87,101)
	Proceeds on sale of property, plant and equipment		6,591	5,490			19,508	13,538
	Purchase of investments		—	(546)			—	(546)
	Interest received		316	119			931	740
	Other assets		2	10			(25)	1,466
	Changes in non-cash working capital items from investment    activities		(1,521)	779			238	739
Net cash used in investing activities			(18,536)	(11,376)			(107,879)	(143,264)
Change in cash and cash equivalents			20,159	27,213			57,119	(47,741)
Cash and cash equivalents, beginning of period			102,479	38,855			65,934	113,313
Effect of exchange rate fluctuations on cash held			134	(134)			(281)	362
Cash and cash equivalents, end of period			122,772	65,934			122,772	65,934

 

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.  Today the Mullen Group is recognized as the largest provider of specialized transportation and related services to the oil and natural gas industry in western Canada and as 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:  [phone]
Fax:  [phone]