Mullen Group Ltd. Reports 2021 First Quarter Financial Results

OKOTOKS, AB , April 21, 2021 /CNW/ - (TSX: MTL) Mullen Group Ltd. (" Mullen Group ", " We ", " Our " and/or the " Corporation "), one of Canada's largest logistics providers with a wide range of service offerings including less-than-truckload, truckload, warehousing, logistics, transload, oversized and specialized hauling transportation, today reported its financial and operating results for the period ended March 31, 2021, with comparisons to the same period last year. Full details of our results may be found within our First Quarter Interim Report, which is available on SEDAR at www.sedar.com or on our website at www.mullen-group.com .

" The quarter was dominated by two main themes. Unfortunately, COVID-19 continued to capture the headlines remaining the major impediment to a return to economic growth in Canada . Government mandated business closures, disruptions to the supply chain, as well as multiple examples of manufacturing capacities being curtailed had a negative impact on freight demand, and our revenues, particularly during the first two months of the year. The frustrating part is that other countries that were more aggressive in addressing how the virus spread and secured vaccines well in advance of Canadian authorities, have seen a sharp rebound in economic activity. Until this situation is rectified, it is difficult to see any recovery in the Canadian economy .

" The second, and more positive point, relates to acquisitions. Since the start of 2021 we have announced two significant transactions, one which closed in April and the other we expect to close in the second quarter. Both companies, Bandstra Transportation Group, based in British Columbia , and APPS Transport Group, based in Ontario , are brand names easily recognizable in the Canadian transportation industry. These are precisely the type of companies we have waited to come to market, reinforcing our patient approach to acquisitions. Not only will we have two new platforms that will accelerate our growth in the near term, these companies when combined with our existing network provide our organization with an excellent opportunity to capture market share growth and enhance our bottom line .

" I am both excited and positive about the future of our company for a couple of reasons. It is only a matter of time before a sharp recovery in the Canadian economy takes place because the necessary conditions, including significant capital resources and consumer pent up demand, are waiting for COVID-19 to be brought under control. And, of course, the opportunities the new acquisitions bring to our company. In addition, I am of the view that the logistics and freight industry are ripe for further consolidation which we will be well positioned to capture, particularly "tuck-in" purchases ," commented Mr. Murray K. Mullen , Chairman and Chief Executive Officer.

Key financial highlights for the first quarter of 2021 with comparison to 2020 are as follows:

Mullen Group operates a diversified business model combined with a highly adaptable and variable cost structure. The financial results for the three month period ended March 31, 2021 , are as follows:

• generated consolidated revenue of $290.5 million , a decrease of $27.7 million , or 8.7 percent, as compared to $318.2 million in 2020 due to the negative impact of the COVID-19 pandemic (" COVID-19 ") resulting in:
• an increase of $7.8 million to $120.7 million in the Less-Than-Truckload segment
• a decrease of $4.9 million to $91.3 million in the Logistics & Warehousing segment
• a decrease of $32.0 million to $79.3 million in the Specialized & Industrial Services segment
• earned consolidated operating income before depreciation and amortization (" OIBDA ") of $47 .1 million, an increase of $1.9 million as compared to $45.2 million in 2020 due to cost control initiatives and $6.0 million received from the Canada Emergency Wage Subsidy (" CEWS ") resulting in:
• an increase of $6.0 million to $19.3 million in the Less-Than-Truckload segment
• a decrease of $0.5 million to $15.9 million in the Logistics & Warehousing segment
• a decrease of $2.4 million to $15.0 million in the Specialized & Industrial Services segment

First Quarter Financial Results

Revenue decreased by $ 27.7 million, or 8.7 percent, to $ 290.5 million and is summarized as follows :

• Less-Than-Truckload segment up $7.8 million , or 6.9 percent, to $120.7 million - revenue improved by $7.8 million due to the $5.9 million of incremental revenue generated from the acquisition of Pacific Coast Express Limited (" PCX ") and the steady nature of consumer demand being partially offset by COVID-19 and $0.2 million of lower fuel surcharge revenue.
• Logistics & Warehousing segment down $4.9 million , or 5.1 percent, to $91.3 million - revenue declined by $4.9 million due to COVID-19 and government restrictions which led to plant closures and supply chain disruptions resulting in lower freight volumes and spot prices along with $1.7 million of lower fuel surcharge revenue.
• Specialized & Industrial Services segment down $32 .0 million, or 28.8 percent, to $79 .3 million - revenue declined by $32 .0 million due to lower demand for specialized services including large diameter pipeline hauling and stringing services as well as fluid hauling and drilling related services resulting from a decline in the rig count in the Western Canadian Sedimentary Basin. Revenue also declined due to lower demand for civil construction services in northern Manitoba at Smook Contractors Ltd.

OIBDA increased by $ 1.9 million , or 4.2 percent, to $ 47.1 million and is summarized as follows:

• Less-Than-Truckload segment up $6.0 million , or 45.1 percent, to $19.3 million - OIBDA improved due to cost control initiatives, $1.1 million of incremental OIBDA generated by PCX, and CEWS. Operating margin increased to 16.0 percent (CEWS adjusted - 15.2 percent) from 11.8 percent in 2020 due to cost control initiatives.
• Logistics & Warehousing segment down $0.5 million , or 3.0 percent, to $15.9 million - OIBDA declined due to a $1.3 million negative variance in foreign exchange resulting from the strengthening of the Canadian dollar relative to the U.S. dollar and a higher cost of subcontractors in certain markets being partially offset by cost control initiatives and CEWS. Operating margin improved to 17.4 percent (CEWS and foreign exchange adjusted - 16.2 percent) from 17.0 percent (CEWS and foreign exchange adjusted - 15.8 percent) in 2020 due to the continued focus on cost controls.
• Specialized & Industrial Services segment down $2.4 million , or 13.8 percent, to $15.0 million - OIBDA declined due to lower OIBDA from those Business Units providing specialized services including pipeline stockpiling and stringing services and from those involved in the transportation of fluids and servicing of wells. Operating margin improved to 18.9 percent (CEWS adjusted - 14.1 percent) from 15.6 percent in 2020 due to CEWS. Adjusted for CEWS, operating margin decreased due to a change in revenue mix.

Net income increased by $8.3 million to $13.0 million , or $0.13 per Common Share due to :

• A $2.9 million positive variance in net foreign exchange, a $1.9 million increase in OIBDA, a $1.9 million positive variance in the fair value of investments, a $0 .7 million decrease in depreciation of property, plant and equipment, a $0.6 million decrease in income tax expense, a $0.2 million decrease in finance costs and a $0.2 million increase in the gain on sale of property, plant and equipment.
• The above was partially offset by a $0.1 million increase in depreciation of right-of-use assets.
  

A summary of Mullen Group's results for the three month periods ended March 31, 2021 and 2020 are as follows:

Financial Position

The following summarizes our financial position as at March 31, 2021 , along with some key changes that occurred during the first quarter of 2021:

• Working capital of $247.1 million including $117.7 million of cash and cash equivalents and an undrawn Bank Credit Facility of $150.0 million .
• Total net debt ( $459.4 million ) to operating cash flow ( $221.2 million ) of 2.08:1 as defined per our Private Placement Debt agreement.
• Private Placement Debt of $458.2 million with no scheduled maturities until 2024 (average fixed rate of 3.93 percent per annum). Private Placement Debt decreased by $3.6 million due to the foreign exchange gain on our U.S. $229.0 million debt.
• Book value of Derivative Financial Instruments down $3.5 million to $34.4 million , which swaps our $229.0 million of U.S. dollar debt at an average foreign exchange rate of $1.1096 .
• Net book value of property, plant and equipment of $932.7 million , which includes $592 .2 million of carrying costs of owned real property.
• Repurchased 304,028 Common Shares at an average price of $12.21 per share under our normal course issuer bid.
  

About Mullen Group Ltd.

Mullen Group is one of Canada's largest logistics providers. Our network of independently operated businesses provide a wide range of service offerings including less-than-truckload, truckload, warehousing, logistics, transload, oversized and specialized hauling transportation. In addition, we provide a diverse set of specialized services related to the energy, mining, forestry and construction industries in western Canada , including water management, fluid hauling and environmental reclamation. 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 .

Contact Information

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
Ms. Joanna K. Scott - Corporate Secretary & Vice President, Corporate Services

121A - 31 Southridge Drive
Okotoks, Alberta , Canada T1S 2N3
Telephone: 403-995-5200
Fax: 403-995-5296

Disclaimer

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, 40 and 41 of Mullen Group's Management's Discussion and Analysis.

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SOURCE Mullen Group Ltd.

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