Mullen Group Ltd. Reports Record 2011 Financial Results

OKOTOKS, AB, Feb. 22, 2012 /CNW/ - (TSX:MTL)  Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended December 31, 2011, with comparisons to the same period last year.  Effective January 1, 2011, the Corporation commenced reporting its financial operating results in accordance with International Financial Reporting Standards ("IFRS"), which requires the restatement of its prior year results for comparative purposes.

For the twelve month period ended December 31, 2011, Mullen Group generated record revenue of $1,387.3 million, operating income of $288.0 million and net cash from operating activities of $221.4 million.  Cash was used, among other things, to acquire net property, plant and equipment of $73.6 million, fund acquisitions of $72.1 million and pay cash dividends of $69.9 million.

Mullen Group's revenue of $1,387.3 million for the year ended December 31, 2011, increased by $348.2 million or 33.5 percent from the $1,039.1 million generated in 2010.  All business units experienced revenue gains with incremental revenue also being generated from acquisitions.  Revenue gains were strongest in the Oilfield Services segment, which contributed $253.1 million of additional revenue, while the Trucking/Logistics segment contributed $97.2 million of additional revenue.  The increase in revenue in the Oilfield Services segment resulted from improved industry conditions, including, an increase in the number of wells and meters drilled due to strong crude oil prices and the shift to higher levels of horizontal drilling, greater demand for fluid hauling and related well servicing and production services, robust oil sands development including incremental revenue from the Thin Fine Tailings ("TFT") barge system project and greater infrastructure project activity.  The Trucking/Logistics segment experienced increased revenue by virtue of incremental revenue from acquisitions, stronger demand for freight services related to capital investments in oil sands development, mining and over-dimensional freight and higher fuel surcharge revenue.

Mullen Group generated record operating income of $288.0 million in 2011, an increase of $86.8 million or 43.1 percent over the $201.2 million generated in 2010.  Operating income increased by $61.3 million in the Oilfield Services segment and by $21.2 million in the Trucking/Logistics segment, as a direct result of the increase in revenue experienced by both segments.

"We are very pleased with Mullen Group's record operating results for the 2011 year.  The momentum we experienced in the second and third quarters of 2011 continued into the fourth quarter and pushed our results to a record level.  Without exception, each of Mullen Group's operating businesses showed year over year improvement in terms of revenue generation and operating income.  The Oilfield Services segment contributed 64.9 percent of pre-consolidated revenue with the most notable contributions coming from those businesses tied to drilling activity, well servicing, fluid hauling and oil sands development.  The Trucking/Logistics segment also performed very well generating 35.1 percent of Mullen Group's 2011 pre-consolidated revenue with our businesses offering over-dimensional and multi-modal services witnessing increased demand throughout 2011. As well, we were very pleased with the performance of Hi-Way 9, which exceeded our expectations," stated Mr. Stephen H. Lockwood, President and Co-Chief Executive Officer.

In 2011 Mullen Group generated adjusted net income and adjusted earnings per share of $125.4 million and $1.57 per share, an increase of $64.7 million or $0.81 per share compared to the $60.7 million and $0.76 per share generated in 2010.  Adjusted net income and adjusted earnings per share exclude the impact of unrealized foreign exchange and changes in the fair value of investments to more clearly reflect earnings from an operating perspective.  This increase in adjusted net income and adjusted earnings per share was attributable to Mullen Group's strong operating performance, which contributed an additional $86.8 million of operating income on a year over year basis.  Mullen Group's net income and earnings per share in 2011 was $119.4 million or $1.50 per share compared to $79.3 million or $1.00 per share in 2010.  This increase in net income and earnings per share was negatively impacted by a $20.5 million year over year negative variance in unrealized foreign exchange and an $11.1 million negative variance in the fair value of investments.

In the fourth quarter of 2011 Mullen Group generated revenue of $394.1 million, an increase of $98.0 million or 33.1 percent from the $296.1 million generated for the same period in 2010.  This increase in revenue was attributable to greater revenue being generated in both the Oilfield Services segment and the Trucking/Logistics segment.  The increased revenue experienced in the Oilfield Services segment resulted from stronger demand for the services provided by virtually all business units in the segment.  The increased revenue experienced by the Trucking/Logistics segment was mainly attributable to stronger demand for transportation services, particularly for over-dimensional freight, incremental revenue from acquisitions and to greater fuel surcharge revenue.

Mullen Group generated operating income for the fourth quarter of $83.8 million, an increase of $26.1 million or 45.2 percent over the same period in 2010.  Operating income increased in both the Oilfield Services segment and the Trucking/Logistics segment as a direct result of the increase in revenue experienced by both segments.  Operating income as a percentage of revenue increased to 21.3 percent from 19.5 percent in 2010.

"We enter 2012 with most business units operating at or near full capacity both in terms of equipment utilization and deployment of our people, strong indicators that the markets Mullen Group serves are very robust. Overall we expect business activity to remain strong, however, we are reluctant to predict significant growth, particularly compared to the exceptional performance last year. Our focus for 2012 will be on operational excellence and margin expansion, which is aligned with the announced increase in capital expenditures to $100.0 million for 2012.  New equipment, strategic investments in land and buildings along with acquisitions that meet our financial and operational criteria formulate part of our 2012 business plan," stated Mr. Murray K. Mullen, Chairman and Chief Executive Officer.

A summary of Mullen Group's results for the quarter and year ended December 31, 2011, along with revenue and operating results by segment are as follows:

SUMMARY
(unaudited)		Three month periods ended December 31				Twelve month periods ended December 31
(millions, except per share amounts)		2011	2010	Change		2011	2010	Change
		$	$	%		$	$	%
Revenue		394.1	296.1	33.1		1,387.3	1,039.1	33.5
Operating income^(^1)		83.8	57.7	45.2		288.0	201.2	43.1
Unrealized foreign exchange (gain) loss		(7.3)	(9.4)	(22.3)		6.4	(14.1)	(145.4)
Change in fair value of investments		-	(2.4)	(100.0)		3.9	(7.2)	(154.2)
Net income		47.5	33.3	42.6		119.4	79.3	50.6
Net Income - adjusted^(2^)		38.8	21.5	80.5		125.4	60.7	106.6
Earnings per share^(3)		0.59	0.42	40.5		1.50	1.00	50.0
Earnings per share - adjusted^(2)		0.48	0.27	77.8		1.57	0.76	106.6
Net cash from operating activities		71.6	55.3	29.5		221.4	131.9	67.9
Net cash from operating activities per share^(3)		0.89	0.70	27.1		2.77	1.66	66.9
Cash dividends declared per Common Share		0.25	0.125	100.0		1.00	0.50	100.0
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
(unaudited)		Three month periods ended December 31				Twelve month periods ended December 31
(millions)		2011	2010	Change		2011	2010	Change
		$	$	%		$	$	%
Revenue
	Oilfield Services	257.5	189.2	36.1		903.8	650.7	38.9
	Trucking/Logistics	137.5	107.9	27.4		489.3	392.1	24.8
	Corporate	-	-	-		0.1	0.2	-
Intersegment eliminations
	Oilfield Services	(0.2)	(0.3)	-		(0.7)	(1.9)	-
	Trucking/Logistics	(0.7)	(0.7)	-		(5.2)	(2.0)	-
Total		394.1	296.1	33.1		1,387.3	1,039.1	33.5
Operating Income
	Oilfield Services	59.5	41.4	43.7		206.5	145.2	42.2
	Trucking/Logistics	25.8	18.7	38.0		87.4	66.2	32.0
	Corporate	(1.5)	(2.4)	-		(5.9)	(10.2)	-
Total		83.8	57.7	45.2		288.0	201.2	43.1

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
			December 31
(thousands)			2011	2010
			$	$
Assets
Current assets:
	Cash and cash equivalents		65,934	113,313
	Trade and other receivables		262,587	204,898
	Inventory		38,826	25,053
	Prepaid expenses		10,498	8,809
	Current tax receivable		916	914
			378,761	352,987
Non-current assets:
Property, plant and equipment			798,362	727,128
Goodwill			241,513	206,549
Intangible assets			69,297	62,546
Investments			34,319	37,706
Deferred tax assets			4,583	2,043
Other assets			302	14,878
			1,148,376	1,050,850
Total Assets			1,527,137	1,403,837
Liabilities and Equity
Current liabilities:
	Accounts payable and accrued liabilities		125,002	96,864
	Dividends payable		20,209	9,840
	Current tax payable		12,724	6,085
	Current portion of long-term debt		4,974	3,035
			162,909	115,824
Non-current liabilities:
Long-term debt			399,232	396,994
Convertible debentures - debt component			103,276	117,067
Deferred tax liabilities			157,421	139,137
			659,929	653,198
Equity:
	Share capital		641,918	1,158,020
	Convertible debentures - equity component		4,826	5,526
	Contributed surplus		11,844	10,186
	Retained earnings (deficit)		45,711	(538,917)
			704,299	634,815
Total Liabilities and Equity			1,527,137	1,403,837

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND RETAINED EARNINGS (DEFICIT)
		Three month periods ended December 31			Twelve month periods ended December 31
(thousands, except per share amounts)		2011	2010		2011	2010
		$	$		$	$
		(unaudited)
Revenue		394,069	296,111		1,387,293	1,039,119
Direct operating expenses		270,257	204,163		951,825	709,443
Selling and administrative expenses		40,009	34,249		147,493	128,526
		83,803	57,699		287,975	201,150
Depreciation on property, plant and equipment		16,574	15,332		61,803	57,511
Amortization on intangible assets		4,714	4,478		19,015	18,963
Finance costs		8,877	9,158		36,279	38,413
Unrealized foreign exchange (gain) loss		(7,332)	(9,400)		6,345	(14,100)
Other (income) expense		1,089	(3,488)		5,335	(5,282)
Income before income taxes		59,881	41,619		159,198	105,645
Income tax expense		12,388	8,351		39,765	26,340
Net income and total comprehensive income		47,493	33,268		119,433	79,305
Retained earnings (deficit), beginning of period		18,427	(562,345)		(538,917)	(579,343)
Dividends declared to common shareholders		(20,209)	(9,840)		(80,255)	(39,592)
Reduction of stated capital		—	—		545,450	—
Repurchase of Common Shares		—	—		—	713
Retained earnings (deficit), end of period		45,711	(538,917)		45,711	(538,917)
Earnings per share:
	Basic	0.59	0.42		1.50	1.00
	Diluted	0.54	0.40		1.43	0.98
Weighted average number of Common Shares outstanding:
	Basic	80,835	78,707		79,885	79,411
	Diluted	91,171	90,341		90,258	91,047

CONSOLIDATED STATEMENT OF CASH FLOWS
			Three month periods ended December 31			Twelve month periods ended December 31
(thousands)			2011	2010		2011	2010
			$	$		$	$
			(unaudited)
Cash provided by (used in):
Cash flows from operating activities:
	Net income		47,493	33,268		119,433	79,305
	Adjustments for:
		Depreciation on property, plant and equipment	16,574	15,332		61,803	57,511
		Amortization on intangible assets	4,714	4,478		19,015	18,963
		Finance costs	8,877	9,158		36,279	38,413
		Stock-based compensation expense	616	299		2,464	2,120
		Foreign exchange	(7,198)	(9,163)		5,983	(13,636)
		Change in fair value of investments	9	(2,439)		3,933	(7,244)
		Loss (gain) on sale of property, plant and equipment	1,080	(1,049)		1,402	1,962
		Income tax expense	12,388	8,351		39,765	26,340
			84,553	58,235		290,077	203,734
Changes in non-cash working capital items from operating activities:
	Trade and other receivables		(8,321)	(7,912)		(43,684)	(43,219)
	Inventory		(4,582)	1,794		(13,236)	(925)
	Prepaid expenses		612	779		(1,273)	(432)
	Accounts payable and accrued liabilities		3,927	4,969		16,215	19,860
Cash generated from operating activities			76,189	57,865		248,099	179,018
Income tax paid			(4,629)	(2,611)		(26,689)	(47,161)
Net cash from operating activities			71,560	55,254		221,410	131,857
Cash flows from financing activities:
	Cash dividends paid to common shareholders		(20,207)	(9,838)		(69,886)	(39,828)
	Interest paid		(11,631)	(12,018)		(35,488)	(37,492)
	Repayment of long-term debt and loans		(1,146)	(1,552)		(22,688)	(14,637)
	Net proceeds from Common Share issuances		106	—		2,141	12
	Repurchase of Common Shares		—	—		—	(27,276)
Changes in non-cash working capital items from financing activities			(93)	(83)		34	(75)
Net cash used in financing activities			(32,971)	(23,491)		(125,887)	(119,296)
Cash flows from investing activities:
	Acquisitions		221	(6,223)		(72,100)	(25,182)
	Purchase of property, plant and equipment		(17,449)	(22,272)		(87,101)	(61,600)
	Proceeds on sale of property, plant and equipment		5,490	7,995		13,538	17,926
	Purchase of investments		(546)	(4,192)		(546)	(27,187)
	Proceeds on sale of investments		—	—		—	2,826
	Interest received		119	278		740	685
	Other assets		10	(12,911)		1,466	(14,009)
Changes in non-cash working capital items from investment activities			779	2,858		739	2,858
Net cash used in investing activities			(11,376)	(34,467)		(143,264)	(103,683)
Change in cash and cash equivalents			27,213	(2,704)		(47,741)	(91,122)
Cash and cash equivalents, beginning of period			38,855	116,254		113,313	204,899
Effect of exchange rate fluctuations on cash held			(134)	(237)		362	(464)
Cash and cash equivalents, end of period			65,934	113,313		65,934	113,313

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.

 

 

 

 

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]