Welcome!

News Feed Item

Mullen Group Ltd. Reports Third Quarter Financial Results and Operating Update

OKOTOKS, ALBERTA -- (Marketwired) -- 10/19/16 -- Mullen Group Ltd. (TSX: MTL) ("Mullen Group" and/or the "Corporation"), one of Canada's largest suppliers of trucking and logistics services as well as specialized transportation services to the oil and natural gas industry in Canada, today reported its financial and operating results for the period ended September 30, 2016, with comparisons to the same period last year.

Key financial highlights for the third quarter of 2016 and 2015 are as follows:


----------------------------------------------------------------------------
----------------------------------------------------------------------------
HIGHLIGHTS
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited)                                     Three month periods ended
($ millions)                                           September 30
                                              ------------------------------
                                                   2016      2015    Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                      $         $         %
                                              ------------------------------
Revenue
  Trucking/Logistics                              173.3     183.1      (5.4)
  Oilfield Services                                86.8     122.0     (28.9)
  Corporate and intersegment eliminations          (1.5)     (0.4)        -
----------------------------------------------------------------------------
Total Revenue                                     258.6     304.7     (15.1)
----------------------------------------------------------------------------
Operating income before depreciation and
 amortization (1)
  Trucking/Logistics                               31.5      33.7      (6.5)
  Oilfield Services                                21.0      27.6     (23.9)
  Corporate                                         1.1       4.2         -
----------------------------------------------------------------------------
Total Operating income before depreciation and
 amortization (1)                                  53.6      65.5     (18.2)
----------------------------------------------------------------------------
Operating income before depreciation and
 amortization - adjusted (1)                       52.1      59.4     (12.3)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Refer to notes section of Summary

Mullen Group operates a diversified business model combined with a highly adaptable and variable cost structure. The financial results for the three month period ending September 30, 2016 were negatively impacted by: (i) the continued lack of demand in the Oilfield Services segment with drilling activity experiencing multi-year lows; (ii) the ongoing economic slowdown in Alberta; and (iii) a slowing of investment in major capital projects.

The highlights for the quarter are as follows:

--  increased cash balance by $25.1 million to $261.3 million
--  generated consolidated revenue of $258.6 million, a decrease of $46.1
    million, or 15.1 percent, as compared to $304.7 million in 2015 due to:
    --  a $35.2 million decline in the Oilfield Services segment
    --  a $9.8 million decline in the Trucking/Logistics segment
--  earned consolidated operating income before depreciation and
    amortization ("OIBDA") of $53.6 million, a decrease of $11.9 million as
    compared to $65.5 million in 2015 due to:
    --  a $6.6 million decline in the Oilfield Services segment
    --  a $2.2 million decline in the Trucking/Logistics segment
    --  a $3.1 million increase in Corporate Office costs due to a $4.6
        million negative variance in foreign exchange
--  adjusting for the impact of foreign exchange gains at Corporate Office,
    operating income before depreciation and amortization ("OIBDA -
    adjusted") was $52.1 million, or 20.1 percent of revenue, as compared to
    $59.4 million, or 19.5 percent of revenue in 2015. These results more
    accurately reflect the operating performance of Mullen Group.

Third Quarter Financial Results

For the three month period ended September 30, 2016, revenue decreased by $46.1 million, or 15.1 percent, to $258.6 million as compared to $304.7 million in 2015, due to a $35.2 million decline in revenue in the Oilfield Services segment and a $9.8 million decrease in the Trucking/Logistics segment. The $35.2 million decrease in revenue in the Oilfield Services segment was due to the prolonged decline in drilling activity and reduced capital investments in western Canada. Revenue declines were most notable in those Business Units involved in the transportation of fluids and servicing of wells, from those Business Units most directly tied to oil and natural gas drilling activity and to a lesser extent, lower demand for services related to large diameter pipeline construction projects and dewatering services. These decreases were somewhat offset by an increase in demand for specialized freight services associated with Alberta's oil sands region. The Trucking/Logistics segment experienced a $9.8 million decrease in revenue, which was mainly due to lower demand for freight services predominately within Alberta and lower fuel surcharge revenue. These decreases were somewhat offset by $3.3 million of incremental revenue generated from acquisitions as well as from greater revenue generated by Smook Contractors Ltd. and Mullen Trucking L.P. ("Mullen Trucking").

OIBDA for the third quarter was $53.6 million, a decrease of $11.9 million or 18.2 percent over the same period in 2015. Adjusting for the Corporate Office costs related to the impact of foreign exchange gains and losses on U.S. dollar cash held, OIBDA - adjusted was $52.1 million, a decrease of $7.3 million or 12.3 percent as compared to $59.4 million in 2015. The Oilfield Services segment generated OIBDA of $21.0 million, a decline of $6.6 million due to reduced drilling activity and a very challenging operating environment, while the Trucking/Logistics segment generated OIBDA of $31.5 million, a decrease of $2.2 million or 6.5 percent from 2015. Stated as a percentage of consolidated revenue, OIBDA - adjusted increased to 20.1 percent as compared to 19.5 percent in 2015. As a percentage of segment revenue, margins in the Oilfield Services segment increased to 24.2 percent from 22.6 percent in 2015 due to our highly adaptable and diversified business model along with cost control initiatives. Margins in the Trucking/Logistics segment decreased to 18.2 percent as compared to 18.4 percent and was mainly due to slightly higher selling and administrative expenses as a percentage of this segment's revenue.

In the third quarter of 2016, Mullen Group generated net income of $17.6 million or $0.17 per share, an increase of $10.3 million, or 141.1 percent, compared to $7.3 million or $0.08 per share in 2015. The $10.3 million increase in net income was mainly attributable to an $11.8 million positive variance in the fair value of investments and a $5.2 million positive variance in net unrealized foreign exchange. These increases were partially offset by an $11.9 million decrease in OIBDA.

"The markets remained under stress during the quarter with demand levels hampered by a lack of growth in the overall economy and continued weakness in the oil and gas sector. In addition, pricing pressures across most sectors of our markets continued to be negatively impacted by undisciplined competitors. As a result, both operating segments underperformed relative to last year. However, we were able to maintain respectable operating margins due to our continued focus on managing costs and improving operating efficiencies throughout all of our Business Units. In the absence of any growth we have adjusted our cost structure," said Mr. Murray K. Mullen, Chairman and Chief Executive Officer.

Financial Position

At September 30, 2016, Mullen Group had $238.8 million of working capital (December 31, 2015 - $187.1 million) including $261.3 million of cash and cash equivalents (December 31, 2015 - $147.2 million), net debt of $314.4 million (December 31, 2015 - $522.0 million) and had access to additional funding of $75.0 million from our undrawn bank credit facility. On May 17, 2016, Mullen Group closed a bought deal offering and a non-brokered private placement for net proceeds of $153.1 million. The Corporation's long-term debt consists mainly of its Private Placement Debt of U.S. $314.0 million and Canadian $261.0 million. The weighted average interest rate on our U.S. dollar debt and our Canadian dollar debt is 4.43 percent and 4.58 percent, respectively. The majority of this debt matures on October 22, 2024 and October 22, 2026. In July 2014 Mullen Group entered into two cross-currency swap contracts to swap the principal portion of $229.0 million of U.S. dollar debt into a Canadian currency equivalent of $254.1 million for an average exchange rate of $1.1096. At September 30, 2016, the carrying value of these cross-currency swaps was $34.4 million and is recorded within derivative financial instruments on Mullen Group's consolidated statement of financial position. The net book value of property, plant and equipment was $954.5 million, the majority consists of $459.7 million of real property (carrying cost of $510.7 million) and $397.5 million of trucks and trailers.

Corporate

Also in the quarter, Mullen Group acquired three small businesses at compelling valuations. First, Motrux Inc., a truckload carrier based in the lower mainland of British Columbia, operating a fleet of 17 owner operators was integrated into Mullen Trucking. Second, Mullen Group acquired the business and assets of Northern Frontier Logistics LP and Northern Frontier GP Corp. (collectively, "Northern Frontier") from a receiver. Formerly known as Central Water & Equipment Services Ltd., Northern Frontier provides hydrostatic-testing services to the pipeline industry and midstream sector, as well as fluid transfer and water management services to construction and mine sites, municipalities and the energy sector. Northern Frontier's business and assets were integrated into Canadian Dewatering L.P. Third, Mullen Group executed an agreement to acquire Calgary based Caneda Transport Inc. ("Caneda") and its Calgary terminal on October 1, 2016. In addition to Calgary, Alberta, Caneda operates terminals in Mississauga, Ontario and Mira Loma, California and provides less-than-truckload, truckload, dedicated and intermodal services throughout Canada and western United States. Caneda operates a fleet of 55 power units and 110 trailers, employing 50 personnel and 41 owner operators. Caneda will operate as a stand-alone Business Unit within the Trucking/Logistics segment.

"The challenging market conditions are now creating acquisition opportunities that we have not seen for many years. In the quarter we completed a sequence of investments that fit our strategic as well as our disciplined financial approach to acquisitions. And while not significant in terms of size, these transactions do indicate that the market for acquisitions has changed significantly this year. Acquisitions are the only viable way of mitigating this slow growth business cycle and I fully expect we can use our strong balance sheet as a competitive advantage, positioning Mullen Group for the future," added Mr. Mullen.

Nine Month Period Ended Financial Results

Consolidated revenue in the first nine months of 2016 decreased to $777.3 million, or 16.1 percent, as compared to $926.7 million in 2015. Revenue in the Oilfield Services segment decreased by $125.3 million, or 32.0 percent, to $266.1 million as compared to $391.4 million in the same period one year earlier. This decrease was due to lower revenue generated by those Business Units involved in the transportation of fluids and servicing of wells, a reduction in revenue from those Business Units most directly tied to oil and natural gas drilling activity in western Canada, lower demand for services from Alberta's oil sands region along with the cancellation of core drilling programs. These decreases were partially offset by greater demand for services related to large diameter pipeline construction projects. Revenue in the Trucking/Logistics segment decreased by $20.8 million, or 3.9 percent, to $516.5 million from $537.3 million in 2015. This decrease was due to decreased demand for most freight services in western Canada, and Alberta in particular and lower fuel surcharge revenue. These decreases were partially offset by revenue generated by Kleysen Group L.P. related to increased demand for transload services, modestly increased demand and market share gains in Manitoba and Saskatchewan as well as the incremental revenue related to the acquisition of Courtesy Freight Systems Ltd.

OIBDA - adjusted for the first nine months of 2016 decreased to $144.2 million, or 12.2 percent, as compared to $164.3 million generated in the same period last year. The decrease of $20.1 million was primarily due to the Oilfield Services segment that experienced a $23.0 million decrease in OIBDA. This decrease was somewhat offset by the Trucking/Logistics segment that experienced a $2.3 million increase in OIBDA. Excluding the impact of foreign exchange gains and losses on U.S. dollar cash held, the Corporate Office recorded a $0.6 million decrease in its operating loss on a year over year basis due to lower salaries and stock-based compensation expense.

Net income in the first nine months of 2016 increased to $52.7 million, as compared to $11.0 million in 2015. The increase of $41.7 million was mainly attributable to a $46.3 million positive variance in net unrealized foreign exchange, a $16.0 million positive variance in the fair value of investments and an $11.2 million decrease in income tax expense. These increases were somewhat offset by a $38.2 million decrease in OIBDA.

A summary of Mullen Group's results for the three and nine month periods ended September 30, 2016 and 2015 are as follows:


----------------------------------------------------------------------------
----------------------------------------------------------------------------
SUMMARY
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited)                                     Three month periods ended
($ millions, except per share amounts)                 September 30
                                              ------------------------------
                                                   2016       2015   Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                      $          $        %
                                              ------------------------------
Revenue                                           258.6      304.7    (15.1)

Operating income before depreciation and
 amortization(1)                                   53.6       65.5    (18.2)
Operating income before depreciation and
 amortization - adjusted(2)                        52.1       59.4    (12.3)
Net unrealized foreign exchange loss (gain)         5.0       10.2    (51.0)
Decrease (increase) in fair value of
 investments                                       (4.4)       7.4   (159.5)
Net income                                         17.6        7.3    141.1
Net Income - adjusted(3)                           18.9       24.1    (21.6)
Earnings per share(4)                              0.17       0.08    112.5
Earnings per share - adjusted(3)                   0.18       0.26    (30.8)
Net cash from operating activities                 44.4       42.2      5.2
Net cash from operating activities per
 share(4)                                          0.43       0.46     (6.5)
Cash dividends declared per Common Share           0.09       0.30    (70.0)
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
SUMMARY
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited)                                      Nine month periods ended
($ millions, except per share amounts)                 September 30
                                              ------------------------------
                                                   2016       2015   Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                      $          $        %
                                              ------------------------------
Revenue                                           777.3      926.7    (16.1)

Operating income before depreciation and
 amortization(1)                                  138.5      176.7    (21.6)
Operating income before depreciation and
 amortization - adjusted(2)                       144.2      164.3    (12.2)
Net unrealized foreign exchange loss (gain)       (17.2)      29.1   (159.1)
Decrease (increase) in fair value of
 investments                                       (0.1)      15.9   (100.6)
Net income                                         52.7       11.0    379.1
Net Income - adjusted(3)                           36.2       60.2    (39.9)
Earnings per share(4)                              0.54       0.12    350.0
Earnings per share - adjusted(3)                   0.37       0.65    (43.1)
Net cash from operating activities                127.8      146.8    (12.9)
Net cash from operating activities per
 share(4)                                          1.31       1.60    (18.1)
Cash dividends declared per Common Share           0.47       0.90    (47.8)
----------------------------------------------------------------------------

Notes:
(1) Operating income before depreciation and amortization ("OIBDA") is
defined as net income before depreciation of property, plant and equipment,
amortization of intangible assets, finance costs, net unrealized foreign
exchange gains and losses, other (income) expense and income taxes.
(2) Operating income before depreciation and amortization - adjusted ("OIBDA
- adjusted") is defined as net income before depreciation of property, plant
and equipment, amortization of intangible assets, finance costs, net
unrealized foreign exchange gains and losses, other (income) expense, income
taxes and foreign exchange gains and losses recognized within its Corporate
Office.
(3) Net income - adjusted and earnings per share - adjusted are calculated
by adjusting net income and basic earnings per share by the amount of any
net unrealized foreign exchange gains and losses and the change in fair
value of investments.
(4) 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.

Non-GAAP and Additional GAAP Terms - Mullen Group reports on certain
financial performance measures that are described and presented in order to
provide shareholders and potential investors with additional measures to
evaluate Mullen Group's ability to fund its operations and information
regarding its liquidity. In addition, these measures are used by management
in its evaluation of performance. These financial performance measures
("Non-GAAP and Additional GAAP Terms") are not recognized financial terms
under Canadian generally accepted accounting principles ("Canadian GAAP").
For publicly accountable enterprises, such as Mullen Group, Canadian GAAP is
governed by principles based on IFRS and interpretations of IFRIC.
Management believes these Non-GAAP and Additional GAAP Terms are useful
supplemental measures. These Non-GAAP and Additional GAAP Terms do not have
standardized meanings and may not be comparable to similar measures
presented by other entities. Specifically, OIBDA, OIBDA - adjusted, 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. The forward-looking information contained herein is made as of the date of this news release and Mullen Group disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable Canadian securities laws. Mullen Group relies on litigation protection for "forward-looking" statements. Additional information regarding the forward-looking statements is found on pages 1, 50 and 51 of Mullen Group's Management's Discussion and Analysis.

Mullen Group is a company that owns a network of independently operated businesses. The Corporation is recognized as one of the leading suppliers of trucking and logistics services in Canada and provides a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada - two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. The corporate office 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:
Mr. Murray K. Mullen
Chairman of the Board, Chief Executive Officer and President

Mr. P. Stephen Clark
Chief Financial Officer

Mr. Richard J. Maloney
Senior Vice President
403-995-5200
403-995-5296 (FAX)

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Why Federal cloud? What is in Federal Clouds and integrations? This session will identify the process and the FedRAMP initiative. But is it sufficient? What is the remedy for keeping abreast of cutting-edge technology? In his session at 21st Cloud Expo, Rasananda Behera will examine the proposed solutions: Private or public or hybrid cloud Responsible governing bodies How can we accomplish?
SYS-CON Events announced today that Cedexis will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Cedexis is the leader in data-driven enterprise global traffic management. Whether optimizing traffic through datacenters, clouds, CDNs, or any combination, Cedexis solutions drive quality and cost-effectiveness.
SYS-CON Events announced today that Suzuki Inc. will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Suzuki Inc. is a semiconductor-related business, including sales of consuming parts, parts repair, and maintenance for semiconductor manufacturing machines, etc. It is also a health care business providing experimental research for...
Cloud applications are seeing a deluge of requests to support the exploding advanced analytics market. “Open analytics” is the emerging strategy to deliver that data through an open data access layer, in the cloud, to be directly consumed by external analytics tools and popular programming languages. An increasing number of data engineers and data scientists use a variety of platforms and advanced analytics languages such as SAS, R, Python and Java, as well as frameworks such as Hadoop and Spark...
SYS-CON Events announced today that Ryobi Systems will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Ryobi Systems Co., Ltd., as an information service company, specialized in business support for local governments and medical industry. We are challenging to achive the precision farming with AI. For more information, visit http:...
SYS-CON Events announced today that Daiya Industry will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Daiya Industry specializes in orthotic support systems and assistive devices with pneumatic artificial muscles in order to contribute to an extended healthy life expectancy. For more information, please visit https://www.daiyak...
Cloud-based disaster recovery is critical to any production environment and is a high priority for many enterprise organizations today. Nearly 40% of organizations have had to execute their BCDR plan due to a service disruption in the past two years. Zerto on IBM Cloud offer VMware and Microsoft customers simple, automated recovery of on-premise VMware and Microsoft workloads to IBM Cloud data centers.
In his session at @ThingsExpo, Greg Gorman is the Director, IoT Developer Ecosystem, Watson IoT, will provide a short tutorial on Node-RED, a Node.js-based programming tool for wiring together hardware devices, APIs and online services in new and interesting ways. It provides a browser-based editor that makes it easy to wire together flows using a wide range of nodes in the palette that can be deployed to its runtime in a single-click. There is a large library of contributed nodes that help so...
SYS-CON Events announced today that mruby Forum will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. mruby is the lightweight implementation of the Ruby language. We introduce mruby and the mruby IoT framework that enhances development productivity. For more information, visit http://forum.mruby.org/.
SYS-CON Events announced today that N3N will exhibit at SYS-CON's @ThingsExpo, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. N3N’s solutions increase the effectiveness of operations and control centers, increase the value of IoT investments, and facilitate real-time operational decision making. N3N enables operations teams with a four dimensional digital “big board” that consolidates real-time live video feeds alongside IoT sensor data a...
Internet of @ThingsExpo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 21st Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devic...
Mobile device usage has increased exponentially during the past several years, as consumers rely on handhelds for everything from news and weather to banking and purchases. What can we expect in the next few years? The way in which we interact with our devices will fundamentally change, as businesses leverage Artificial Intelligence. We already see this taking shape as businesses leverage AI for cost savings and customer responsiveness. This trend will continue, as AI is used for more sophistica...
SYS-CON Events announced today that SourceForge has been named “Media Sponsor” of SYS-CON's 21st International Cloud Expo, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. SourceForge is the largest, most trusted destination for Open Source Software development, collaboration, discovery and download on the web serving over 32 million viewers, 150 million downloads and over 460,000 active development projects each and every month.
There is a huge demand for responsive, real-time mobile and web experiences, but current architectural patterns do not easily accommodate applications that respond to events in real time. Common solutions using message queues or HTTP long-polling quickly lead to resiliency, scalability and development velocity challenges. In his session at 21st Cloud Expo, Ryland Degnan, a Senior Software Engineer on the Netflix Edge Platform team, will discuss how by leveraging a reactive stream-based protocol,...
Today most companies are adopting or evaluating container technology - Docker in particular - to speed up application deployment, drive down cost, ease management and make application delivery more flexible overall. As with most new architectures, this dream takes significant work to become a reality. Even when you do get your application componentized enough and packaged properly, there are still challenges for DevOps teams to making the shift to continuous delivery and achieving that reducti...