05:59:05 EDT Fri 29 Mar 2024
Enter Symbol
or Name
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CA



Mullen Group Ltd
Symbol MTL
Shares Issued 91,586,897
Close 2014-07-23 C$ 30.40
Market Cap C$ 2,784,241,669
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Mullen Group earns $25.6-million in Q2

2014-07-23 17:49 ET - News Release

Mr. Murray Mullen reports

MULLEN GROUP LTD. REPORTS SECOND QUARTER FINANCIAL RESULTS AND THE PRICING OF $400.0 MILLION OF SENIOR UNSECURED NOTES

Mullen Group Ltd. has released its financial and operating results for the period ended June 30, 2014, with comparisons with the same period last year.

Key financial highlights for the second quarter were as set out in the attached table.

                          HIGHLIGHTS
                         ($ millions)  

                               Three-month         Six-month
                             periods ended     periods ended
                                 June 30,         June 30,
                              2014    2013      2014    2013
Revenue
Oil field services          $175.9  $173.6    $448.5  $431.2
Trucking/logistics           137.9   137.3     278.1   266.4
Corporate and
intersegment
eliminations                  (0.4)   (0.6)     (1.2)   (1.8)
Total                        313.4   310.3     725.4   695.8
Operating income
Oil field services            33.6    33.0     103.5   101.6
Trucking/logistics            21.1    24.1      42.2    44.2
Corporate                     (2.7)   (1.1)     (2.5)   (2.0)
Operating income              52.0    56.0     143.2   143.8
Net income                    25.6    27.4      61.9    71.8
Net income -- adjusted        15.1    20.9      62.3    66.4

For the three-month period ended June 30, 2014, Mullen Group generated revenue of $313.4-million, operating income of $52.0-million and net cash from operations of $83.4-million. During the quarter, Mullen Group paid dividends of $27.4-million, incurred net capital expenditures of $16.5-million and paid interest obligations of $9.4-million.

Consolidated revenue in the second quarter increased by $3.1-million, or 1.0 per cent, to $313.4-million, as compared with $310.3-million in 2013. The majority of this increase in revenue was directly attributable to the oil field services segment, which increased by $2.3-million, or 1.3 per cent, to $175.9-million, as compared with $173.6-million in the same period one year earlier. The increase in segment revenue was primarily due to an increase in drilling activity in Western Canada in those operating entities servicing the drilling industry. Revenue in the trucking/logistics segment increased by $600,000, or 0.4 per cent, to $137.9-million from $137.3-million primarily due to the $6.7-million of incremental revenue resulting from the acquisition of Jay's Moving & Storage Ltd., which was largely offset by lower demand for heavy haul freight services in Western Canada, as well as construction services in Northern Manitoba.

Mullen Group generated operating income for the period ended June 30, 2014, of $52.0-million, a decrease of $4.0-million or 7.1 per cent over the $56.0-million generated in 2013. The decrease of $4.0-million was due to a $3.0-million decrease in operating income in the trucking/logistics segment and specifically from those operating entities involved in heavy haul freight services in Western Canada, along with construction services in Northern Manitoba. In addition, corporate costs increased by $1.6-million on a year-over-year basis, which negatively impacted operating income. These factors were somewhat offset by a $600,000 increase in the oil field services segment's operating income. As a percentage of consolidated revenue, operating income decreased to 16.6 per cent, as compared with 18.0 per cent in 2013 due to a reduction in margin experienced by the trucking/logistics segment.

In the second quarter of 2014, Mullen Group generated net income of $25.6-million, or 28 cents per share, a decrease of $1.8-million, or 6.6 per cent, compared with $27.4-million, or 30 cents per share in 2013. The $1.8-million decrease in net income was mainly attributable to a $13.3-million negative variance in the fair value of investments, a $4.0-million decrease in operating income, and a $3.8-million increase in the loss on sale of property, plant and equipment. These decreases were somewhat offset by a $17.4-million positive 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 during the second quarter of 2014 resulted in adjusted net income of $15.1-million and adjusted earnings per share of 16 cents, as compared with $20.9-million and 23 cents per share in 2013, respectively. These adjustments more clearly reflect earnings from an operating perspective.

"We are operating in competitive markets today, and for the most part, our operating entities continue to be challenged by the lack of any incremental new demand for their services. While the Canadian economy continued to show some pockets of moderate strength, there was no significant growth in the second quarter. As a result, our trucking/logistics segment did not perform to our expectations or to last year. In our oil field services segment, drilling activity in Western Canada was up year over year. However, weather-related issues, most recently in southeastern Saskatchewan and Manitoba, where significant flooding washed out roads and limited access to well site locations, negatively impacted activity levels. Margins came under pressure primarily due to rising operating costs, including fuel, operating supplies, and repairs and maintenance -- costs which were not fully recoverable from customers through pricing increases or productivity gains. Over all -- just a challenging quarter," said Murray K. Mullen, chairman, chief executive officer and president.

Mullen Group's consolidated revenue in the first six months of 2014 increased by $29.6-million, or 4.3 per cent, to $725.4-million, as compared with $695.8-million in 2013. The majority of this increase in revenue, specifically $26.5-million, occurred in the first quarter. Revenue in the oil field services segment increased by $17.3-million, or 4.0 per cent, to $448.5-million as compared with $431.2-million in the same period one year earlier. This increase was due to the combined effect of an increase in revenue related to oil sands and pipeline construction projects, increased revenue generated by Heavy Crude Hauling LP as a result of a major crude oil and fluid hauling contract in the Lloydminster region, and a modest increase in drilling activity in Western Canada. These increases were partially offset by decreased revenue due to the challenging operating environment in Western Canada resulting from the combination of competitive pricing and continued pipeline and infrastructure bottlenecks in certain markets, as well as extreme cold weather in the first quarter and rain- and flood-related issues in the second quarter. Revenue in the trucking/logistics segment increased by $11.7-million, or 4.4 per cent, to $278.1-million from $266.4-million in the same period one year earlier. This $11.7-million increase was largely due to incremental revenue resulting from the acquisition of Jay's, as well as a $2.2-million increase in fuel surcharge revenue. These increases were partially offset by decreased demand for overdimensional and heavy haul freight services. Construction activity in Northern Manitoba remained soft and below 2013 levels.

Operating income for the first six months of 2014 decreased to $143.2-million, or 0.4 per cent, as compared with $143.8-million generated in the same period last year. The decrease of $600,000 was primarily due to the trucking/logistics segment that experienced a $2.0-million decrease in operating income. In addition, corporate costs rose by $500,000 on a year-over-year basis. These factors were somewhat offset by the oil field services segment that experienced a $1.9-million increase in operating income. As a percentage of revenue, operating income decreased to 19.7 per cent as compared with 20.7 per cent in 2013. This 1.0-per-cent decrease in operating margin largely was due to a generally more competitive environment in the trucking/logistics segment.

Net income in the first six months of 2014 decreased to $61.9-million, or 13.8 per cent, as compared with $71.8-million in 2013. The decrease of $9.9-million was mainly attributable to a $20.7-million negative variance in the fair value of investments and a $4.3-million increase in the loss on sale of property, plant and equipment. These decreases were somewhat offset by a $12.6-million positive variance in unrealized foreign exchange and a $2.5-million reduction in income tax expense. Mullen Group's adjusted net income and earnings per share in the first six months of 2014 were $62.3-million and 68 cents per share, as compared with $66.4-million and 75 cents per share in 2013, respectively.

"Two thousand fourteen has begun very much as we expected. Markets are competitive, demand has remained elusive and costs are rising. I am optimistic, however, that the balance of the year will be more positive primarily due to our expectations that drilling activity in Canada will be stronger as the year progresses. Our strategy is to remain focused on operating efficiencies and to raise pricing as market fundamentals improve," added Mr. Mullen.

Also today, Mullen Group announces that it has priced a proposed offering of senior unsecured notes on a private placement basis with a principal amount of approximately $400.0-million. The notes have an average term of approximately 11 years and a weighted-average fixed-interest rate of approximately 3.95 per cent per annum. The private placement is subject to customary due diligence and closing conditions and is expected to close on or about Oct. 22, 2014. Mullen Group intends to use the proceeds to repay portions of its existing private placement debt and for general corporate purposes.

"Maintaining a strong and well-structured balance sheet is one of Mullen Group's key strategic objectives, which is why I am so pleased with today's announcement. Investors see the value and diversity in our business model, as well as our consistent financial performance, evidenced by the strong investor demand associated with the offering. We have reduced our cost of borrowing and positioned Mullen Group for the future," said Mr. Mullen.

We seek Safe Harbor.

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