Share...

OKOTOKS, AB , Feb. 12, 2014 /CNW/ – (TSX:MTL)  Mullen Group Ltd. (” Mullen Group ” and/or the ” Corporation “) reported financial and operating results for the quarter and year ended December 31, 2013 , with comparisons to the same periods last year.

For the three month period ended December 31, 2013 , Mullen Group generated revenue of $367.4 million , an increase of $21.3 million or 6.2 percent as compared to $346.1 million in 2012.  The majority of this increase in revenue was directly attributable to the Oilfield Services segment. Revenue in the Oilfield Services segment increased by $16.3 million , or 7.8 percent, to $226.1 million as compared to $209.8 million in the same period one year earlier primarily due to an increase in revenue generated by those Operating Entities providing services associated with large diameter pipeline construction projects as well as increased revenue generated by fluid hauling services tied to heavy oil. Revenue in the Trucking/Logistics segment increased by $4.3 million , or 3.1 percent, to $141.9 million as compared to $137.6 million in the same period one year earlier. This increase was due to incremental revenue resulting from the acquisition of Jay’s Moving & Storage Ltd. (” Jay’s “), as well as a $0.9 million increase in fuel surcharge revenue. These increases were offset by decreased demand for over-dimensional and heavy haul freight services related to the oil sands and mining sectors as well as decreased demand associated with inclement weather and the timing of the mid-week holidays in the month of December.

Operating income for the fourth quarter was $71.1 million , a decrease of $0.1 million or 0.1 percent over the same period in 2012. The decrease of $0.1 million was primarily due to the Trucking/Logistics segment that experienced a $4.4 million decrease, as well as an increase in Corporate costs that rose by $0.3 million on a year over year basis. This decrease was mostly offset by the Oilfield Services segment that experienced a $4.6 million increase in operating income. Heavy snowfall events and colder-than-normal temperatures during the quarter negatively affected productivity across nearly all of the Operating Entities. As a percentage of consolidated revenue, operating income decreased to 19.3 percent as compared to 20.6 percent in 2012.

For the three month period ended December 31, 2013 , Mullen Group generated net income of $20.3 million or $0.22 per share, a decrease of $1.5 million , or 6.9 percent, compared to $21.8 million or $0.25 per share in 2012.  The $1.5 million decrease in net income was mainly attributable to a $5.2 million negative variance in unrealized foreign exchange that was partially offset by a $1.8 million positive 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 $31.5 million and adjusted earnings per share of $0.35 for 2013 as compared to $29.7 million and $0.34 per share in 2012, respectively.  These adjustments more clearly reflect earnings from an operating perspective.

“Our operating performance in the fourth quarter was somewhat below our expectations due to a couple of factors.  First, the positive trends that we saw at the start of the quarter were negatively impacted by weather related issues. Western Canada experienced some extreme snowfall and a severe cold snap in December, which adversely affected our Operating Entities.  Second, the timing of the mid-week holidays in the month of December resulted in a substantial slow down during the last 15-days of the month.  Profitability was negatively impacted to an even greater extent due to a combination of reduced productivity levels and higher operating expenses notably wages, fuel, repairs and maintenance.  Despite these external factors, Mullen Group increased revenue for the quarter, however, operating costs were significantly higher than normal,” said Mr. Stephen H. Lockwood , President and Co-Chief Executive Officer.

For the year ended December 31, 2013 , Mullen Group generated revenue of $1,437.2 million , an increase of $9.6 million or 0.7 percent as compared to $1,427.6 million in 2012. This was the highest level of annual revenue recorded by Mullen Group.  The 2013 results include $23.7 million of revenue from the Jay’s acquisition, which was acquired on May 31, 2013 . Revenue, when adjusted for the completion of the non-recurring Thin Fine Tailings barge system project in the second quarter of 2012 by Canadian Dewatering L.P. (the ” Non-Core Project “), increased by $39.4 million , or 2.8 percent as compared to last year.

Revenue in the Oilfield Services segment decreased by $11.0 million , or 1.2 percent, to $886.3 million as compared to $897.3 million in 2012. This decrease was primarily due to the $29.8 million reduction from the Non-Core Project that was somewhat offset by greater demand for services associated with pipeline activity and by fluid hauling services tied to heavy oil. On a comparative basis, after adjusting for the Non-Core Project, revenue from this segment’s core business increased by $18.8 million , or 2.2 percent, from the same period one year earlier. Revenue in the Trucking/Logistics segment increased by $18.3 million , or 3.4 percent, to $553.9 million as compared to $535.6 million in 2012. This increase was largely due to incremental revenue resulting from the acquisition of Jay’s, increased demand at most Operating Entities within this segment and a modest increase in fuel surcharge revenue. These increases were offset by decreased demand for over-dimensional and heavy haul freight services related to movement of equipment for the oil sands and mining sectors.

In 2013, Mullen Group generated operating income of $300.7 million , an increase of $6.9 million or 2.3 percent over the $293.8 million generated in 2012. This was the highest level recorded by Mullen Group. The increase of $6.9 million was primarily due to a $12.2 million increase generated by the Oilfield Services segment being somewhat offset by a $5.6 million decrease in the Trucking/Logistics segment. As a percentage of revenue, operating income increased to 20.9 percent as compared to 20.6 percent in 2012. This 0.3 percent increase in operating margin was directly attributable to the higher margins achieved on large diameter pipeline projects and other specialized services, as well as the completion of the Non-Core Project in 2012. On a comparative basis, after adjusting for revenue and expenses related to the Non-Core Project, consolidated operating margin in 2012 was 21.1 percent.

In 2013, Mullen Group generated net income of $143.3 million , or $1.60 per share, an increase of $12.4 million or 9.5 percent, as compared to $130.9 million or $1.58 per share in 2012.  The $12.4 million increase in net income was mainly attributable to a $27.6 million positive variance in the fair value of investments and a $6.9 million increase in operating income. These increases were somewhat offset by a $21.4 million negative 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 resulted in adjusted net income of $141.0 million and adjusted earnings per share of $1.57 , as compared to $133.0 million and $1.60 per share in 2012, respectively.

“I am pleased with our operating performance in 2013.  This is all the more satisfying in light of the challenges we faced in 2013 of which there were many, including, slow economic growth, flat drilling activity year-over-year, a very competitive operating environment, adverse weather conditions and an extremely challenging December.  Notwithstanding these challenges, we achieved record results, which speaks to the strength of our business model,” said Mr. Murray K. Mullen , Chairman and Chief Executive Officer.

“For 2014 I am optimistic that the market conditions will provide Mullen Group the opportunity to produce another year of record results, although the improvements will be modest due to the competitiveness of the market.  The outlook for GDP growth in North America is expected to be positive but at 2 – 3 percent that suggests our Trucking/Logistics segment will be challenged to grow.  In our Oilfield Services segment the opportunities are brighter with overall spending by the oil and natural gas industry in western Canada projected to increase by 8 – 10 percent in 2014.  This increased spend accompanied by the $100 million in new capital we will invest in our Operating Entities should translate into growth.  I believe the foundation is in place for Mullen Group to have another record year,” said Mr. Mullen.

A summary of Mullen Group’s results for the quarter and year ended December 31, 2013 , 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
	2013	2012	Change		2013	2012	Change
	$	$	%		$	$	%
Revenue	367.4	346.1	6.2		1,437.2	1,427.6	0.7
Operating income (1)	71.1	71.2	(0.1)		300.7	293.8	2.3
Unrealized foreign exchange loss (gain)	7.9	2.7	(192.6)		16.2	(5.2)	(411.5)
Decrease (increase) in fair value of investments	4.2	6.0	30.0		(20.9)	6.7	411.9
Net income	20.3	21.8	(6.9)		143.3	130.9	9.5
Net Income – adjusted (2)	31.5	29.7	6.1		141.0	133.0	6.0
Earnings per share (3)	0.22	0.25	(12.0)		1.60	1.58	1.3
Earnings per share – adjusted (2)	0.35	0.34	2.9		1.57	1.60	(1.9)
Net cash from operating activities	67.6	67.7	(0.1)		214.4	279.9	(23.4)
Net cash from operating activities per share (3)	0.75	0.77	(2.6)		2.39	3.37	(29.1)
Cash dividends declared per Common Share	0.30	0.25	20.0		1.20	1.00	20.0

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) (millions)		Three month periods ended December 31				Twelve month periods ended December 31
		2013	2012	Change		2013	2012	Change
		$	$	%		$	$	%
Revenue
	Oilfield Services	226.1	209.8	7.8		886.3	897.3	(1.2)
	Trucking/Logistics	141.9	137.6	3.1		553.9	535.6	3.4
	Corporate	0.4	(0.1)	–		1.0	0.7	–
Intersegment eliminations
	Oilfield Services	(0.1)	(0.4)	–		(1.0)	(1.9)	–
	Trucking/Logistics	(0.9)	(0.8)	–		(3.0)	(4.1)	–
Total		367.4	346.1	6.2		1,437.2	1,427.6	0.7
Operating Income
	Oilfield Services	50.5	45.9	10.0		212.3	200.1	6.1
	Trucking/Logistics	21.9	26.3	(16.7)		92.8	98.4	(5.7)
	Corporate	(1.3)	(1.0)	–		(4.4)	(4.7)	–
Total		71.1	71.2	(0.1)		300.7	293.8	2.3

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(thousands)			December 31
			2013		2012
			$		$
Assets
Current assets:
	Cash and cash equivalents		58,236		122,772
	Trade and other receivables		234,485		219,423
	Inventory		34,143		32,097
	Prepaid expenses		10,946		10,663
	Current tax receivable		6,318		2,083
			344,128		387,038
Non-current assets:
Property, plant and equipment			903,256		843,318
Goodwill			244,440		239,595
Intangible assets			41,742		52,985
Investments			49,463		27,612
Deferred tax assets			3,015		5,029
Other assets			1,565		327
			1,243,481		1,168,866
Total Assets			1,587,609		1,555,904
Liabilities and Equity
Current liabilities:
	Accounts payable and accrued liabilities		108,963		104,810
	Dividends payable		9,066		21,917
	Current tax payable		4,993		20,902
	Current portion of long-term debt		277		1,471
			123,299		149,100
Non-current liabilities:
Long-term debt			409,209		392,814
Convertible debentures – debt component			16,070		39,773
Deferred tax liabilities			138,919		147,092
			564,198		579,679
Equity:
	Share capital		760,310		720,836
	Convertible debentures – equity component		738		1,843
	Contributed surplus		11,327		12,125
	Retained earnings		127,737		92,321
			900,112		827,125
Total Liabilities and Equity			1,587,609		1,555,904

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)		2013	2012		2013	2012
		$	$		$	$
		(unaudited)
Revenue		367,388	346,166		1,437,166	1,427,640
Direct operating expenses		257,494	238,648		983,382	983,535
Selling and administrative expenses		38,847	36,332		153,101	150,298
		71,047	71,186		300,683	293,807
Depreciation on property, plant and equipment		18,498	18,026		69,499	65,335
Amortization on intangible assets		3,873	4,610		16,743	18,334
Finance costs		6,591	7,084		26,305	32,897
Unrealized foreign exchange loss (gain)		7,825	2,749		16,144	(5,194)
Other (income) expense		4,351	7,993		(20,710)	6,668
Income before income taxes		29,909	30,724		192,702	175,767
Income tax expense		9,558	8,954		49,407	44,858
Net income and total comprehensive income		20,351	21,770		143,295	130,909
Retained earnings, beginning of period		134,568	92,468		92,321	45,711
Dividends declared to common shareholders		(27,182)	(21,917)		(107,879)	(84,299)
Retained earnings, end of period		127,737	92,321		127,737	92,321
Earnings per share:
	Basic	0.22	0.25		1.60	1.58
	Diluted	0.22	0.25		1.57	1.52
Weighted average number of Common Shares outstanding:
	Basic	90,559	87,384		89,764	82,961
	Diluted	92,695	87,901		92,502	91,785

CONSOLIDATED STATEMENT OF CASH FLOWS
		Three month periods ended December 31			Twelve month periods ended December 31
(thousands)		2013	2012		2013	2012
		$	$		$	$
		(unaudited)
Cash provided by (used in):
Cash flows from operating activities :
Net income		20,351	21,770		143,295	130,909
Adjustments for:
	Depreciation on property, plant and equipment	18,498	18,026		69,499	65,335
	Amortization on intangible assets	3,873	4,610		16,743	18,334
	Finance costs	6,591	7,084		26,305	32,897
	Stock-based compensation expense	836	390		2,588	2,768
	Foreign exchange	7,380	2,615		15,294	(4,913)
	Change in fair value of investments	4,206	6,049		(20,935)	6,707
	Loss (gain) on sale of property, plant and equipment	173	944		1,118	(1,039)
	Income tax expense	9,558	8,954		49,407	44,858
	Earnings from equity investment	(28)	–		(893)	–
	Impairment of goodwill	–	3,000		–	3,000
	Gain on contingent consideration	–	(2,000)		–	(2,000)
		71,438	71,442		302,421	296,856
Changes in non-cash working capital items from operating activities:
	Trade and other receivables	13,304	10,794		(10,413)	45,097
	Inventory	(1,166)	78		(1,776)	6,915
	Prepaid expenses	1,711	1,410		(10)	(81)
	Accounts payable and accrued liabilities	(3,659)	(7,716)		2,466	(19,329)
Cash generated from operating activities		81,628	76,008		292,688	329,458
Income tax paid		(13,987)	(8,401)		(78,287)	(49,604)
Net cash from operating activities		67,641	67,607		214,401	279,854
Cash flows from financing activities:
	Cash dividends paid to common shareholders	(27,158)	(21,836)		(120,730)	(82,591)
	Interest paid	(9,476)	(10,050)		(26,210)	(31,538)
	Proceeds of long-term debt	311	–		311	–
	Repayment of long-term debt and loans	(238)	(2,510)		(7,423)	(7,753)
	Net proceeds from Common Share issuances	3,367	5,451		10,407	7,054
	Changes in non-cash working capital items from financing activities	8	33		86	(28)
Net cash used in financing activities		(33,186)	(28,912)		(143,559)	(114,856)
Cash flows from investing activities:
	Acquisitions	–	–		(15,665)	(5,781)
	Purchase of property, plant and equipment	(32,208)	(23,924)		(133,686)	(122,750)
	Proceeds on sale of property, plant and equipment	5,560	6,591		14,315	19,508
	Purchase of investments	–	–		(23)	–
	Interest received	167	316		839	931
	Other assets	3	2		(1,238)	(25)
	Changes in non-cash working capital items from investment activities	(330)	(1,521)		(770)	238
Net cash used in investing activities		(26,808)	(18,536)		(136,228)	(107,879)
Change in cash and cash equivalents		7,647	20,159		(65,386)	57,119
Cash and cash equivalents, beginning of period		50,144	102,479		122,772	65,934
Effect of exchange rate fluctuations on cash held		445	134		850	(281)
Cash and cash equivalents, end of period		58,236	122,772		58,236	122,772

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 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.