Mullen Group Ltd. Reports Second Quarter Financial Results and Increase to Capital Budget
OKOTOKS, AB, July 24, 2013 /CNW/ - (TSX:MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") is pleased to report its financial and operating results for the period ended June 30, 2013, with comparisons to the same period last year.
For the three month period ended June 30, 2013, Mullen Group generated consolidated revenue of $310.3 million and operating income of $56.0 million. Mullen Group generated net cash from operating activities of $75.1 million, which was used, among other things, to acquire net property, plant and equipment of $49.0 million, pay dividends of $27.0 million, fund the acquisition of Jay's Moving & Storage Ltd. ("Jay's") for $21.2 million, consisting of $15.8 million for the shares and $5.4 million of associated debt, and pay interest obligations of $9.5 million.
Mullen Group's consolidated revenue of $310.3 million was a decrease of $9.8 million, or 3.1 percent, from the $320.1 million generated in 2012. A significant portion of this decrease in revenue, specifically $8.0 million, was directly attributable to the reduction in revenue from Canadian Dewatering L.P. as a result of its completion of the design, build and commissioning of a Thin Fine Tailings ("TFT") barge system project for a large oil sands customer during the second quarter of 2012. On a comparative basis, after adjusting for the non-recurring TFT barge system project revenue, Mullen Group's revenue from its core business decreased by only $1.8 million, or 0.6 percent.
The Oilfield Services segment contributed revenue of $173.6 million, a decrease of $14.4 million from 2012, which was primarily due to a $12.0 million decline in revenue from those Operating Entities directly tied to drilling activity, most notably from rig relocation services, and the $8.0 million decline from the TFT barge system project. These decreases were partially offset by an increase in revenue generated from the greater demand for services related to large diameter pipeline construction projects and from the additional demand for fluid hauling services in the heavy oil resource plays. The Trucking/Logistics segment contributed revenue of $137.3 million, an increase of $3.6 million over the prior year period, which was primarily due to the incremental revenue generated from the acquisition of Jay's.
Mullen Group's operating income increased by $2.9 million, or 5.5 percent, to $56.0 million from the $53.1 million generated in 2012. Operating income in the Oilfield Services segment accounted for $2.5 million of the increase, the Trucking/Logistics segment accounted for $0.2 million and Corporate costs declined by $0.2 million. The Oilfield Services segment generated a $2.5 million increase in operating income on a year over year basis. However, when factoring out the net operating loss of $3.8 million related to the completion of the TFT barge system project in the second quarter of 2012, operating income from this segment's core business decreased by only $1.3 million, or 3.8 percent.
"Overall we are pleased with Mullen Group's operating performance for the quarter considering economic fundamentals that are indicative of a no growth or, at best, a slow growth economy. In terms of revenue from our core business, we were down marginally due to the decrease in demand for our services tied to drilling activity that experienced a slow down in western Canada, which in part was the result of unfavourable weather conditions. Revenue also declined as a result of the completion of the TFT barge system project that was completed in the second quarter of last year. However, offsetting these two factors was the continued demand for our Premay Pipeline Hauling L.P. services, which are directly tied to the build out of new pipeline takeaway capacity in Canada, in addition to the increased revenue generated by Heavy Crude Hauling L.P. as a result of it being awarded a major crude oil and fluid hauling contract in the Lloydminster region. Even more satisfying is the 5.5 percent increase in operating income Mullen Group recorded in the quarter compared to last year despite a decrease in revenue. These operating results speak to the strength and diversity of our business model," stated Mr. Stephen H. Lockwood, President and Co-Chief Executive Officer.
"Also of note is the improvement of our earnings per share in the second quarter that was positively impacted by gains made in our strategic investments," added Mr. Stephen H. Lockwood.
In the second quarter of 2013, Mullen Group generated net income of $27.4 million or $0.30 per share, an increase of $20.0 million, or 270.3 percent, compared to $7.4 million or $0.09 per share in 2012. The $20.0 million increase in net income was mainly attributable to a $23.4 million positive variance in the fair value of investments. These increases were somewhat offset by the $3.5 million negative variance in foreign exchange and a $2.9 million increase in operating income. Adjusting Mullen Group's net income and earnings per share to eliminate the impact of unrealized foreign exchange and change in the fair value of investments results in adjusted net income of $20.9 million and adjusted earnings per share of $0.23 for 2013, as compared to $18.5 million and $0.23 per share in 2012, respectively. These adjustments more clearly reflect earnings from an operating perspective.
For the six month period ended June 30, 2013, consolidated revenue decreased by 6.7 percent to $695.8 million from $746.1 million in the same period last year. Operating income decreased to $143.8 million, down 5.5 percent from $152.2 million in 2012. Net income increased to $71.8 million, up 8.5 percent from $66.2 million in 2012.
Mullen Group is also pleased to announce that the Board of Directors approved a $20.0 million increase to the 2013 capital expenditure budget to $100.0 million. The majority of the increase will be allocated towards the purchase of specialized operating equipment for the Oilfield Services segment, most notably for Canadian Dewatering L.P. and for those businesses involved in the transporting of production related fluids. Not included in the revised $100.0 million capital expenditure budget are amounts related to real property or facilities. During the quarter, Mullen Group invested an additional $21.0 million in real property and will continue to invest in real property and facilities considered strategic to Mullen Group.
"This is a very difficult market to read, a real dilemma when trying to determine the appropriate level of capital to deploy. Entering 2013 we took a very measured approach to capital allocation given the prospects for the overall economy as well as the oil and natural gas industry. Today, however, we are of the view that the foundation is set for a rebound in oil and natural gas activity levels. Crude oil pricing remains strong accompanied by significant optimism related to the export of natural gas from western Canada through the west coast. Increasing our capital budget by $20.0 million this year will ensure our operating entities can meet the expected increase in demand for services and ensure our people have access to the very best operating equipment," stated Mr. Murray K. Mullen, Chairman and Chief Executive Officer.
A summary of Mullen Group's results for the three and six month periods ended June 30, 2013, and 2012, along with revenue and operating results by segment are as follows:
| SUMMARY |
Three month period ended June 30 |
Six month period ended June 30 |
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(unaudited) ($ millions, except per share amounts) |
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| 2013 | 2012 | Change | 2013 | 2012 | Change | ||||
| $ | $ | % | $ | $ | % | ||||
| Revenue | 310.3 | 320.1 | (3.1) | 695.8 | 746.1 | (6.7) | |||
| Operating income(1) | 56.0 | 53.1 | 5.5 | 143.8 | 152.2 | (5.5) | |||
| Unrealized foreign exchange loss | 8.4 | 4.9 | 71.4 | 13.4 | 0.3 | - | |||
| Decrease (increase) in fair value of investments | (16.3) | 7.1 | 329.6 | (20.8) | 6.1 | 441.0 | |||
| Net income | 27.4 | 7.4 | 270.3 | 71.8 | 66.2 | 8.5 | |||
| Net Income - adjusted(2) | 20.9 | 18.5 | 13.0 | 66.4 | 72.5 | (8.4) | |||
| Earnings per share(3) | 0.30 | 0.09 | 233.3 | 0.81 | 0.82 | (1.2) | |||
| Earnings per share -adjusted(2) | 0.23 | 0.23 | - | 0.75 | 0.89 | (15.7) | |||
| Net cash from operating activities | 75.1 | 83.4 | (10.0) | 92.5 | 137.7 | (32.8) | |||
| Net cash from operating activities per share(3) | 0.83 | 1.03 | (19.4) | 1.04 | 1.70 | (38.8) | |||
| Cash dividends declared per Common Share | 0.30 | 0.25 | 20.0 | 0.60 | 0.50 | 20.0 | |||
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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 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. |
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| SEGMENTED RESULTS |
Three month period ended June 30 |
Six month period ended June 30 |
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|
(unaudited) ($ millions) |
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| 2013 | 2012 | Change | 2013 | 2012 | Change | ||
| $ | $ | % | $ | $ | % | ||
| Revenue | |||||||
| Oilfield Services | 173.6 | 188.0 | (7.7) | 431.2 | 484.6 | (11.0) | |
| Trucking/Logistics | 137.3 | 133.7 | 2.7 | 266.4 | 264.3 | 0.8 | |
| Corporate | 0.2 | 0.5 | - | 0.3 | 0.5 | - | |
| Intersegment eliminations | |||||||
| Oilfield Services | (0.2) | (0.7) | - | (0.7) | (0.9) | - | |
| Trucking/Logistics | (0.6) | (1.4) | - | (1.4) | (2.4) | - | |
| Total | 310.3 | 320.1 | (3.1) | 695.8 | 746.1 | (6.7) | |
| Operating Income | |||||||
| Oilfield Services | 33.0 | 30.5 | 8.2 | 101.6 | 107.8 | (5.8) | |
| Trucking/Logistics | 24.1 | 23.9 | 0.8 | 44.2 | 45.9 | (3.7) | |
| Corporate | (1.1) | (1.3) | - | (2.0) | (1.5) | - | |
| Total | 56.0 | 53.1 | 5.5 | 143.8 | 152.2 | (5.5) | |
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.
