OKOTOKS, Alberta, Oct. 25, 2017 (GLOBE NEWSWIRE) -- Mullen Group Ltd. (TSX:MTL) ("Mullen
Group", "We", "Our" 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, 2017, with comparisons to the same
period last year.
Key financial highlights for the third quarter of 2017 with comparison to 2016 are as follows:
|
HIGHLIGHTS |
|
|
(unaudited)
($ millions) |
|
Three month periods ended
September 30 |
| |
2017
|
2016
|
Change |
| |
|
$ |
$ |
% |
| Revenue |
|
|
|
|
| Trucking/Logistics |
|
190.7 |
|
173.3 |
|
10.0 |
|
| Oilfield Services |
|
93.6 |
|
86.8 |
|
7.8 |
|
| Corporate and intersegment eliminations |
|
(0.4 |
) |
(1.5 |
) |
- |
|
| Total
Revenue |
|
283.9 |
|
258.6 |
|
9.8 |
|
| Operating income before depreciation and amortization
(1) |
|
|
|
|
| Trucking/Logistics |
|
30.7 |
|
31.5 |
|
(2.5 |
) |
| Oilfield Services |
|
19.8 |
|
21.0 |
|
(5.7 |
) |
| Corporate |
|
(5.8 |
) |
1.1 |
|
- |
|
| Total Operating income before
depreciation and amortization (1) |
|
44.7 |
|
53.6 |
|
(16.6 |
) |
| Operating income before depreciation and
amortization - adjusted (1) |
|
49.2 |
|
52.1 |
|
(5.6 |
) |
| (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, 2017 are as follows:
• generated consolidated revenue of $283.9 million, an increase of $25.3 million, or 9.8 percent, as compared to
$258.6 million in 2016 due to:
- a $17.4 million increase in the Trucking/Logistics segment (record quarterly revenue of $190.7 million)
- a $6.8 million increase in the Oilfield Services segment
• earned consolidated operating income before depreciation and amortization ("OIBDA") of $44.7
million, a decrease of $8.9 million as compared to $53.6 million in 2016 due to:
- a $0.8 million decrease in the Trucking/Logistics segment
- a $1.2 million decrease in the Oilfield Services segment
- a $6.9 million increase in Corporate Office costs mainly due to a $6.0 million negative variance in foreign exchange
• adjusting for the negative impact of foreign exchange losses at Corporate Office, operating income before
depreciation and amortization ("OIBDA - adjusted") was $49.2 million, or 17.3 percent of revenue, as compared to
$52.1 million, or 20.1 percent of revenue, in 2016. These results more accurately reflect our operating
performance.
Third Quarter Financial Results
For the three month period ended September 30, 2017, revenue increased by $25.3 million, or 9.8 percent, to
$283.9 million as compared to $258.6 million in 2016. This was attributable to a $17.4 million increase in revenue in the
Trucking/Logistics segment and a $6.8 million increase in the Oilfield Services segment. The increase in the
Trucking/Logistics segment was mainly due to $12.5 million of incremental revenue related to our recent acquisitions of Caneda
Transport Inc., Kel-West Carriers Ltd., RDK Transportation Co. Inc., Golden Transport Ltd., E.C.R. Enterprises Ltd. and Motrux
Inc. Revenue also increased due to greater demand for freight services in western Canada largely due to the modest recovery
in the oil and natural gas sector along with a $1.7 million increase in fuel surcharge revenue. These increases were somewhat
offset by the completion of several major capital projects, most notably the Suncor Fort Hills oil sands and North West Upgrader
projects that have not been replaced. The increase in the Oilfield Services segment was attributable to improved drilling
activity which benefited those Business Units most directly tied to oil and natural gas drilling activity, those Business Units
involved in the transportation of fluids and servicing of wells and from the $1.9 million of incremental revenue generated by
Envolve Energy Services Corp. ("Envolve"). These increases were partially offset by the loss of revenue at
both Canadian Dewatering L.P. and Heavy Crude Hauling L.P. resulting from a pipeline failure that occurred in Saskatchewan in the
fall of 2016, which has since been recommissioned. Revenue also decreased from lower demand for heavy haul freight services
due to the completion of several major capital projects and from a decline in demand for pipeline hauling and stringing services
due to the timing and regulatory hurdles of various projects.
OIBDA for the third quarter was $44.7 million, a decrease of $8.9 million or 16.6 percent as compared to
$53.6 million in 2016. This was attributable to a $0.8 million decrease in the Trucking/Logistics segment, a
$1.2 million decrease in the Oilfield Services segment and a $6.9 million increase in Corporate Office costs due mainly
to foreign exchange. The Trucking/Logistics segment generated OIBDA of $30.7 million, a decrease of $0.8 million from
the $31.5 million in 2016. This decrease was mainly attributable to a change in revenue mix resulting from the completion of
some major capital projects that have not been replaced. This decrease was somewhat offset by the incremental OIBDA generated
from our recent acquisitions. The Oilfield Services segment generated OIBDA of $19.8 million, a decrease of $1.2 million from
the $21.0 million in 2016 due to lower demand resulting from the completion of certain major projects in 2016. These decreases were
somewhat offset by improved drilling activity, the continued effects of cost control measures previously implemented and from the
acquisition of Envolve. As a percentage of segment revenue, operating margin in the Trucking/Logistics segment decreased to
16.1 percent from 18.2 percent in 2016. Operating margin in the Oilfield Services segment decreased to 21.2 percent
as compared to 24.2 percent in 2016. Adjusting for Corporate Office costs related to the impact of foreign exchange on U.S.
dollar cash held, OIBDA - adjusted was $49.2 million, a decrease of $2.9 million or 5.6 percent as compared to $52.1 million
in 2016. Stated as a percentage of consolidated revenue, operating margin - adjusted decreased to 17.3 percent as compared to
20.1 percent in 2016.
In the third quarter of 2017, we recorded net income of $26.0 million or $0.25 per share, an increase of $8.4
million, or 47.7 percent, compared to net income of $17.6 million or $0.17 per share in 2016. The $8.4 million increase was
primarily due to the $16.3 million positive variance in net foreign exchange, a $2.7 million decrease in income tax expense, a $2.0
million gain on contingent consideration and a $0.8 million decrease in deprecation of property, plant and equipment. These
increases to net income were somewhat offset by the $8.9 million decrease in OIBDA and a $4.5 million negative variance in the
fair value of investments.
"Overall I was pleased with our performance last quarter and the progress we have made in transitioning our
organization for the future. Our Business Units did a great job managing through what I can only describe as very competitive
markets. We completed three acquisitions, all of which are smaller in size but are excellent fits in our organization, a
meaningful contributor to the 10.0 percent year over year revenue growth in the quarter. Our operating profitability, while
down from last year, was still respectable given that there were no new capital projects of size in 2017. We continued to
make progress on the build out and development of MoveitonlineTM, our proprietary online logistics marketplace, which
included a strategic investment in Trakopolis IoT Corp., a Calgary, Alberta based technology company. And we deleveraged the
balance sheet," commented Mr. Murray K. Mullen, Chairman and Chief Executive Officer.
Financial Position
On September 27, 2017, we used cash and cash equivalents to repay U.S. $85.0 million of Series E Notes and $20.0
million of Series F Notes. The Series E and Series F Notes matured on September 27, 2017. The repayment of these notes
will reduce our annual interest obligation by approximately $7.5 million when using an average Canadian to U.S. dollar exchange
rate of $1.2855 (or $0.7779). The weighted average interest rate on our U.S. dollar debt and our Canadian dollar debt after
repaying the Series E and Series F Notes is 3.89 percent and 4.51 percent, respectively. At September 30, 2017, we had
$181.4 million (December 31, 2016 - $243.1 million) of working capital that included $123.6 million (December 31, 2016 - $270.3
million) of cash and cash equivalents, of which $6.6 million (December 31, 2016 - $81.0 million) was denominated in U.S.
currency. Included within non-cash working capital items is $71.3 million of current portion of long-term debt mainly related
to the Series D ($70.0 million) Notes, which mature on June 30, 2018 and $12.4 million of convertible unsecured subordinated
debentures (the "Debentures") which mature on July 1, 2018. Each $1,000 of Debentures are convertible into
93.2 Common Shares of Mullen Group (or a conversion price of $10.73). Thus, an aggregate of approximately 1,159,874
Common Shares of Mullen Group would be issued if all holders convert their principal amount. At September 30, 2017, net debt
was $273.9 million (December 31, 2016 - $316.3 million) and we continued to have access to our $75.0 million undrawn bank credit
facility. The Corporation's long-term debt consists mainly of its Private Placement Debt of U.S. $229.0 million and
Canadian $241.0 million. The majority of this debt matures on October 22, 2024 and October 22, 2026. In July 2014, we
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, 2017, the carrying value of
these cross-currency swaps was $25.5 million and was recorded within derivative financial instruments on the consolidated
statement of financial position. The net book value of property, plant and equipment was $932.9 million, the majority of
which consists of $464.6 million of real property (carrying cost of $523.1 million) and $371.3 million of trucks and
trailers.
"The trends we have spoken about throughout the year continue to be confirmed with economic activity levels
remaining positive accompanied by a rebound in the oil and gas sector, which we believe is still in the early stages of a
recovery. Unfortunately there is one negative trend for the oil and gas industry and that relates to the lack of development
of major capital projects such as the oil sands, LNG development and large diameter pipeline undertakings, an essential component
required to facilitate Canada's oil and gas industry access to new markets and away from the dependence on the U.S. market," added
Mr. Mullen.
Nine Month Period Ended Financial Results
For the nine month period ended September 30, 2017, revenue increased by $65.1 million, or 8.4 percent, to
$842.4 million as compared to $777.3 million in 2016. This was attributable to a $38.3 million increase in revenue in
the Trucking/Logistics segment and a $22.9 million increase in the Oilfield Services segment. The increase in the
Trucking/Logistics segment was mainly due to the $33.8 million of incremental revenue related to our recent acquisitions, market
share gains and an increase in demand for freight services in western Canada. These increases were partially offset by the
completion of various major capital projects in western Canada. The increase in the Oilfield Services segment was
attributable to improved drilling activity which benefited those Business Units most directly tied to oil and natural gas drilling
activity, from greater demand for pumps and related dewatering services and from the incremental revenue generated by
Envolve. These increases were partially offset by a decline in demand for pipeline hauling and stringing services due to the
timing and regulatory hurdles of various projects.
OIBDA - adjusted for the first nine months of 2017 was $134.2 million, a decrease of $10.0 million or 6.9
percent as compared to $144.2 million in 2016. This was attributable to an $11.9 million decrease in the Trucking/Logistics
segment. This decrease was somewhat offset by a $1.4 million increase in the Oilfield Services segment and a $0.5 million
reduction in Corporate Office costs. The Trucking/Logistics segment generated OIBDA of $78.5 million, a decrease of $11.9
million from the $90.4 million in 2016. This decrease was mainly attributable to the completion of some major capital
projects that have not been replaced. This decrease was partially offset by the incremental OIBDA generated from our recent
acquisitions. The Oilfield Services segment generated OIBDA of $58.8 million, an increase of $1.4 million from the $57.4
million in 2016 due to improved drilling activity, the continued effects of cost control measures previously implemented and from
the acquisition of Envolve. These improvements were somewhat offset by lower demand for pipeline hauling and stringing
services due to the timing of certain projects. As a percentage of segment revenue, operating margin in the
Trucking/Logistics segment decreased to 14.1 percent from 17.5 percent in 2016. Operating margin in the Oilfield
Services segment decreased slightly to 20.3 percent as compared to 21.6 percent in 2016. Stated as a percentage of
consolidated revenue, operating margin - adjusted decreased to 15.9 percent as compared to 18.6 percent in 2016.
In the first nine months of 2017, we recorded net income of $60.1 million or $0.58 per share, an increase of
$7.4 million, or 14.0 percent, as compared to net income of $52.7 million or $0.54 per share in 2016. The
$7.4 million increase was primarily due to the $5.8 million positive variance in net foreign exchange, a $7.1 million decrease
in depreciation and amortization, a $2.6 million decrease in finance costs, a $2.0 million gain on contingent consideration and a
$1.9 million decrease in income tax expense. These increases were partially offset by the $12.3 million decrease in
OIBDA.
A summary of Mullen Group's results for the three and nine month periods ended September 30, 2017 and 2016 are
as follows:
|
SUMMARY |
|
|
|
(unaudited)
($ millions, except per share amounts) |
Three month periods ended
September 30 |
|
Nine month periods ended
September 30 |
| 2017 |
2016 |
Change |
|
2017 |
2016 |
Change |
| |
$ |
$ |
% |
|
$ |
$ |
% |
| Revenue |
283.9 |
|
258.6 |
|
9.8 |
|
|
842.4 |
|
777.3 |
|
8.4 |
|
| |
|
|
|
|
|
|
|
| Operating income before depreciation and
amortization(1) |
44.7 |
|
53.6 |
|
(16.6) |
|
|
126.2 |
|
138.5 |
|
(8.9) |
|
| Operating income before depreciation and amortization -
adjusted(2) |
49.2 |
|
52.1 |
|
(5.6) |
|
|
134.2 |
|
144.2 |
|
(6.9) |
|
| Net foreign exchange (gain) loss |
(11.3) |
|
5.0 |
|
(326.0) |
|
|
(23.0) |
|
(17.2) |
|
33.7 |
|
| Decrease (increase) in fair value of investments |
0.1 |
|
(4.4) |
|
(102.3) |
|
|
1.3 |
|
(0.1) |
|
(1,400.0) |
|
| Net income |
26.0 |
|
17.6 |
|
47.7 |
|
|
60.1 |
|
52.7 |
|
14.0 |
|
| Net Income - adjusted(3) |
13.0 |
|
18.9 |
|
(31.2) |
|
|
34.5 |
|
36.2 |
|
(4.7) |
|
| Earnings per share(4) |
0.25 |
|
0.17 |
|
47.1 |
|
|
0.58 |
|
0.54 |
|
7.4 |
|
| Earnings per share - adjusted(3) |
0.12 |
|
0.18 |
|
(33.3) |
|
|
0.33 |
|
0.37 |
|
(10.8) |
|
| Net cash from operating activities |
44.0 |
|
44.4 |
|
(0.9) |
|
|
83.8 |
|
127.8 |
|
(34.4) |
|
| Net cash from operating activities per share(4) |
0.42 |
|
0.43 |
|
(2.3) |
|
|
0.81 |
|
1.31 |
|
(38.2) |
|
| Cash dividends declared per Common Share |
0.09 |
|
0.09 |
|
- |
|
|
0.27 |
|
0.47 |
|
(42.6) |
|
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 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 foreign exchange gains and losses, other (income) expense, income taxes and foreign
exchange gains and losses recognized within the 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 foreign exchange gains and losses, the change in fair value of investments, the gain on
contingent consideration and the gain on fair value of equity investment.
(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, operating margin, OIBDA -
adjusted, operating margin - 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, 57 and 58 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 the capital and financial expertise,
legal support, 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.
For further information, please contact:
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
121A - 31 Southridge Drive
Okotoks, Alberta, Canada T1S 2N3
Telephone: 403-995-5200
Fax: 403-995-5296
