OKOTOKS, AB, Feb. 24 /CNW/ - (TSX-MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended December 31, 2010 with comparisons to the same period last year. On May 1, 2009, the holders of trust units of Mullen Group Income Fund (the "Fund") and the holders of Class B limited partnership units of Mullen Co. Limited Partnership approved a Plan of Arrangement that resulted in the conversion of the Fund from an open-ended income trust to a corporation called "Mullen Group Ltd." Mullen Group as the successor in interest to the Fund is accounted for as a continuity of interests whereby the consolidated financial statements for the three and twelve month periods ended December 31, 2010 and comparables for the three and twelve month periods ended December 31, 2009 reflect the financial position, results of operations and cash flows as if Mullen Group had always carried on the business formerly carried on by the Fund. Throughout this news release, references made to cash distributions declared reflect the business of the Fund that occurred prior to conversion from an open-ended income trust to a corporation.
For the twelve month period ended December 31, 2010, Mullen Group generated revenue of $1,039.8 million, operating income of $204.0 million and funds from operations of $150.1 million. Cash was used, among other things, to acquire net property, plant and equipment for $43.7 million, pay cash dividends totaling $39.8 million, fund acquisitions of $39.2 million, repurchase common shares for $27.3 million and purchase investments of $27.2 million.
Mullen Group's revenue of $1,039.8 million for the year ended December 31, 2010 increased by $61.8 million or 6.3 percent from the $978.0 million generated in 2009. This increase in revenue was attributable to greater revenues generated by both the Oilfield Services segment and the Trucking/Logistics segment. The increase in revenue experienced by the Oilfield Services segment resulted from both a year over year increase in oil and natural gas drilling activity in western Canada and from the revenue generated on certain oil sands projects. The Trucking/Logistics segment experienced increased revenue by virtue of the incremental revenue generated by acquisitions as well as higher fuel surcharge revenue.
Mullen Group generated operating income for the year ended December 31, 2010 of $204.0 million, an increase of $11.4 million or 5.9 percent over the $192.6 million generated in 2009. Operating income increased in the Oilfield Services segment and the Trucking/Logistics segment as a direct result of the increase in revenue experienced by both segments.
"The diversified nature of Mullen Group's business model, by geographic region and service, enabled Mullen Group to strategically allocate its resources and thereby recover from a very slow first half and maintain its historical margins throughout the year. Over the second half of 2010, our Operating Entities experienced revenue growth of 22.2 percent and generated growth in operating income of 25.6 percent compared to the same period in 2009. We are obviously very pleased with our performance in 2010," stated Mr. Stephen Lockwood, President and Co-Chief Executive Officer.
In 2010, Mullen Group generated net income of $79.1 million or $1.00 per share, a decrease of $11.7 million compared to $90.8 million or $1.13 per share in 2009. The $11.7 million decrease in net income was mainly attributable to a $25.9 million year over year decrease in unrealized foreign exchange gain and a $5.8 million increase in the provision for income taxes. These items were somewhat offset by the $11.4 million increase in operating income, a $5.9 million change in the fair value of investments, and a $4.1 million decrease in depreciation expense. Mullen Group's adjusted net income was $66.0 million or $0.83 per share compared to $50.1 million or $0.62 per share in 2009. Adjusted net income and earnings per share reflect the impact on net income and earnings per share as though Mullen Group had been a corporation since January 1, 2009 as well as before the impact of the unrealized foreign exchange gains in 2010 and 2009. These adjustments reflect earnings from an operating perspective.
Mullen Group's revenue of $296.4 million for the three month period ended December 31, 2010, was an increase of $62.8 million or 26.9 percent from the $233.6 million generated for the same period last year. This increase in revenue was attributable to greater revenue being generated by both the Oilfield Services segment and the Trucking/Logistics segment. The increased revenue experienced by the Oilfield Services segment was mainly attributable to the revenue generated by Operating Entities most directly tied to oil and natural gas drilling activity and the revenue generated from certain oil sands projects. The increase in revenue experienced by the Trucking/Logistics segment was mainly attributable to incremental revenue from acquisitions and stronger demand for transportation services particularly in western Canada.
Mullen Group generated operating income for the fourth quarter of $58.3 million, an increase of $14.3 million or 32.5 percent over the same period last year. Operating income increased in both the Oilfield Services segment and the Trucking/Logistics segment as a direct result of the increase in revenue experienced by both segments. Operating income as a percentage of revenue increased to 19.7 percent from 18.8 percent in 2009.
"The fourth quarter of 2010 continued the trend of strengthening demand for the majority of services provided by Mullen Group's Operating Entities. This was driven primarily by a robust recovery in western Canada which is benefiting from higher oil pricing as well as the introduction of new drilling technologies. This combination has reenergized oil focused drilling and is now a major contributor to Mullen Group's growth," stated Mr. Murray Mullen, Chairman and Chief Executive Officer.
"Today we are in near full recovery mode, with the lone exception being our business directly tied to drilling activity - in particular rig moving, which will not return to prior activity and profit levels any time soon. Overall, however, we expect virtually all 26 Operating Entities in the Mullen Group to show year over year growth with the highest growth levels in those businesses with close ties to oil sands activity and oil production, two sectors in which we will continue to deploy capital," stated Mr. Murray Mullen.
A summary of Mullen Group's results for the quarter and year ended December 31, 2010, along with revenues and operating results by segment are as follows:
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SUMMARY Three Months Ended Twelve Months Ended
December 31 December 31
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2010 2009 Change 2010 2009 Change
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(Unaudited)
($ millions,
except per share
and per unit
amounts) $ $ % $ $ %
Revenue 296.4 233.6 26.9 1,039.8 978.0 6.3
Operating
income (1) 58.3 44.0 32.5 204.0 192.6 5.9
Unrealized foreign
exchange gain 9.4 4.7 100.0 14.1 40.0 (64.8)
Net income 33.2 11.1 199.1 79.1 90.8 (12.9)
Net income
- adjusted(2) 23.3 5.9 294.9 66.0 50.1 31.7
Earnings per
share (3) $0.42 $0.14 200.0 $1.00 $1.13 (11.5)
Earnings per share
- adjusted(2) $0.30 $0.07 328.6 $0.83 $0.62 33.9
Funds from
operations (4) 52.3 33.5 56.1 150.1 121.0 24.1
Funds from
operations per
share (5) $0.66 $0.41 61.0 $1.89 $1.50 26.0
Cash dividends
declared per
common share $0.125 $0.125 - $0.50 $0.25 100.0
Cash distributions
declared per unit - - - - $0.225 (100.0)
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Notes:
(1) Operating income is defined as net income before interest and
accretion, income taxes, depreciation on property, plant and
equipment, amortization on intangible assets, earnings from equity
investment, stock-based compensation expense, unrealized foreign
exchange gains or losses, changes in fair value of investments, and
gains or losses on sale of property, plant and equipment.
(2) Net income and earnings per share have been adjusted to eliminate
the impact of unrealized foreign exchange gains and losses. As well
as the tax impact as though Mullen Group had been a corporation
since January 1, 2009.
(3) Earnings per share is based on the weighted average number of
common shares outstanding for the period.
(4) Funds from operations is defined as cash flow from operating
activities before changes in non-cash working capital items from
operating activities.
(5) Funds from operations per share is calculated by dividing funds
from operations by the weighted average number of common shares
outstanding for the period ended. Operating income, funds from
operations and funds from operations per share are not recognized
measures under Canadian generally accepted accounting principles
("Canadian GAAP"). Management believes these measures are useful
supplemental measures.
Operating income provides an indication of the results generated by the
Corporation's principal business activities prior to financing
activities, amortization of assets, or taxation in various
jurisdictions. Funds from operations indicate the Corporation's ability
to generate funds from its operations without the seasonality effect on
its working capital. References to operating income, funds from
operations and funds from operations per share are not measures
recognized by Canadian GAAP and do not have standardized meanings
prescribed by Canadian GAAP. Investors should be cautioned that these
indicators should not replace net income as an indicator of Canadian
GAAP performance.
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SEGMENTED RESULTS Three Months Ended Twelve Months Ended
December 31 December 31
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2010 2009 Change 2010 2009 Change
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(Unaudited)
($ millions) $ $ % $ $ %
Revenue
Oilfield
Services 189.2 146.1 29.5 650.7 612.6 6.2
Trucking/
Logistics 107.9 89.5 20.6 392.1 372.1 5.4
Corporate 0.3 0.3 - 0.9 0.9 -
Intersegment
eliminations
Oilfield
Services (0.3) (1.8) - (1.9) (4.9) -
Trucking/
Logistics (0.7) (0.5) - (2.0) (2.7) -
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Totals 296.4 233.6 26.9 1,039.8 978.0 6.3
Operating income
Oilfield
Services 41.4 31.3 32.3 145.2 139.5 4.1
Trucking/
Logistics 18.7 14.8 26.4 66.2 61.6 7.5
Corporate (1.8) (2.1) - (7.4) (8.5) -
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Totals 58.3 44.0 32.5 204.0 192.6 5.9
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CONSOLIDATED BALANCE SHEETS
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December 31, 2010 and 2009 2010 2009
($ thousands)
Assets
Current assets:
Cash and cash equivalents $ 113,313 $ 204,899
Accounts receivable 204,898 151,049
Inventory 25,053 22,505
Prepaid expenses 8,809 7,922
Investments 37,706 6,101
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389,779 392,476
Property, plant and equipment 622,262 613,281
Goodwill 851,549 846,441
Intangible assets 62,546 72,406
Other assets 14,878 2,283
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$ 1,941,014 $ 1,926,887
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 96,864 $ 69,288
Dividends payable 9,840 10,076
Current portion of future income taxes 32,170 26,719
Income tax payable 5,171 36,044
Current portion of long-term debt 3,035 1,830
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147,080 143,957
Long-term debt 396,994 410,811
Convertible debentures - debt component 117,067 116,162
Future income taxes 98,145 88,726
Shareholders' equity:
Share capital 1,158,022 1,185,821
Convertible debentures - equity component 7,192 7,200
Contributed surplus 10,186 8,103
Retained earnings (deficit) 6,328 (33,893)
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1,181,728 1,167,231
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$ 1,941,014 $ 1,926,887
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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT)
($ thousand, except share and per share amounts)
Three Months Ended Twelve Months Ended
December 31 December 31
2010 2009 2010 2009
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(Unaudited)
Revenue $ 296,389 $ 233,568 $ 1,039,804 $ 978,046
Direct operating
expenses 204,163 159,701 709,443 662,522
Selling and
administrative expenses 33,950 29,945 126,406 122,960
Depreciation on property,
plant and equipment 15,332 16,011 57,511 61,576
Amortization on
intangible assets 4,478 4,702 18,963 18,608
Interest and accretion
expense 9,436 9,828 39,098 36,163
Unrealized foreign
exchange gain (9,400) (4,700) (14,100) (39,950)
Change in fair value of
investments (2,439) (787) (7,244) (1,381)
Stock-based
compensation expense 299 255 2,120 946
(Gain) loss on sale of
property, plant and
equipment (1,049) 5,361 1,962 5,056
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Income before income
taxes and earnings
from equity investment 41,619 13,252 105,645 111,546
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Provision for income
taxes:
Current (recovery) (3,170) 983 16,418 36,465
Future (reduction) 11,579 1,184 10,127 (15,607)
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8,409 2,167 26,545 20,858
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Income before earnings
from equity investment 33,210 11,085 79,100 90,688
Earnings from equity
investment - - - 122
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Net income and
comprehensive income $ 33,210 $ 11,085 $ 79,100 $ 90,810
Deficit, beginning of
period $ (17,042) $ (34,902) $ (33,893) $ (86,415)
Cash distributions
declared to unitholders - - - (18,136)
Cash dividends declared
to common shareholders (9,840) (10,076) (39,592) (20,152)
Repurchase of common
shares - - 713 -
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Retained earnings
(deficit), end of
period $ 6,328 $ (33,893) $ 6,328 $ (33,893)
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Earnings per share:
Basic $ 0.42 $ 0.14 $ 1.00 $ 1.13
Diluted $ 0.40 $ 0.14 $ 0.98 $ 1.10
Weighted average number
of common shares
outstanding:
Basic 78,707 80,605 79,411 80,605
Diluted 90,341 92,254 91,047 88,421
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CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
Three Months Ended Twelve Months Ended
December 31 December 31
2010 2009 2010 2009
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(Unaudited)
Cash provided by (used
in):
Operations:
Net income $ 33,210 $ 11,085 $ 79,100 $ 90,810
Items not involving
cash:
Depreciation on
property, plant and
equipment 15,332 16,011 57,511 61,576
Amortization on
intangible assets 4,478 4,702 18,963 18,608
Stock-based
compensation expense 299 255 2,120 946
Amortization of debt
issuance costs 128 167 886 520
Interest expense on
convertible
debentures settled
in common shares 3 - 3 -
Unrealized foreign
exchange gain (9,400) (4,700) (14,100) (39,950)
Accretion on
convertible
debentures 203 198 791 527
Change in fair value
of investments (2,439) (787) (7,244) (1,381)
(Gain) loss on sale
of property, plant
and equipment (1,049) 5,361 1,962 5,056
Future income taxes
(reduction) 11,579 1,184 10,127 (15,607)
Earnings from equity
investment - - - (122)
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52,344 33,476 150,119 120,983
Changes in non-cash
working capital items
from operating
activities (9,150) (950) (55,608) 91,219
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43,194 32,526 94,511 212,202
Financing activities:
Proceeds of
convertible debentures - - - 125,000
Debt issuance costs - - - (3,036)
Repayment of long-term
debt and loans (1,552) (740) (14,637) (70,262)
Net proceeds from
share issuances - - 12 -
Cash dividends paid to
common shareholders (9,838) (10,076) (39,828) (10,076)
Cash distributions
paid to unitholders - - - (30,227)
Repurchase of common
shares - - (27,276) -
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(11,390) (10,816) (81,729) 11,399
Investing activities:
Acquisitions (6,223) (1,332) (25,182) (5,337)
Property, plant and
equipment additions (22,272) (11,657) (61,600) (28,307)
Proceeds on sale of
property, plant and
equipment 7,995 5,773 17,926 16,237
Proceeds on sale of
investments - - 2,826 -
Purchases of
investments (4,192) - (27,187) -
Other assets (12,911) (1,778) (14,009) (1,586)
Changes in non-cash
working capital
items from investing
activities 2,858 - 2,858 -
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(34,745) (8,994) (104,368) (18,993)
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Change in cash and cash
equivalents (2,941) 12,716 (91,586) 204,608
Cash and cash
equivalents, beginning
of period 116,254 192,183 204,899 291
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Cash and cash
equivalents, end of
period $ 113,313 $ 204,899 $ 113,313 $ 204,899
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Supplemental cash flow
information:
Interest paid $ 12,017 $ 12,763 $ 37,492 $ 36,376
Income taxes paid
(received) $ 2,252 $ (84) $ 47,161 $ 2,056
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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 press 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.