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
quarter and year ended December 31, 2017, with comparisons to the
same period last year. Full details of our results may be
found within our 2017 Annual Financial Review, which is available
on SEDAR at www.sedar.com or on our website at
www.mullen-group.com.
Key financial highlights for the fourth quarter
of 2017 with comparison to 2016 are as follows:
HIGHLIGHTS |
|
(unaudited)($
millions) |
Three month periods
endedDecember 31 |
2017 |
|
2016 |
Change |
|
$ |
$ |
% |
Revenue |
|
|
|
Trucking/Logistics |
206.6 |
|
173.0 |
19.4 |
Oilfield Services |
89.4 |
|
84.4 |
5.9 |
Corporate and intersegment eliminations |
0.1 |
|
0.4 |
- |
Total Revenue |
296.1 |
|
257.8 |
14.9 |
Operating
income before depreciation and amortization (1) |
|
|
|
Trucking/Logistics |
31.2 |
|
26.3 |
18.6 |
Oilfield Services |
15.4 |
|
15.0 |
2.7 |
Corporate |
(0.6 |
) |
1.2 |
- |
Total Operating income before depreciation and amortization
(1) |
46.0 |
|
42.5 |
8.2 |
Operating income before depreciation and amortization - adjusted
(1) |
45.9 |
|
40.2 |
14.2 |
(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
ended December 31, 2017, are as follows:
- generated consolidated revenue of $296.1 million, an increase
of $38.3 million, or 14.9 percent, as compared to $257.8 million in
2016 due to:• record revenue in the Trucking/Logistics
("T/L") segment, a $33.6 million increase to
$206.6 million• a $5.0 million increase in the Oilfield Services
("OFS") segment to $89.4 million
- earned consolidated operating income before depreciation and
amortization ("OIBDA") of $46.0 million, an
increase of $3.5 million, or 8.2 percent, as compared to $42.5
million in 2016 due to:• record fourth quarter OIBDA in the T/L
segment of $31.2 million, an increase of $4.9 million or
18.6 percent• a $0.4 million increase in the OFS segment• a
$1.8 million increase in Corporate Office costs due to a $2.2
million negative variance in foreign exchange
- adjusting for the impact of foreign exchange at Corporate
Office, operating income before depreciation and amortization
("OIBDA - adjusted") was $45.9 million, or 15.5
percent of revenue, as compared to $40.2 million, or 15.6
percent of revenue, in 2016. These results more accurately
reflect our operating performance.
Fourth Quarter Financial
Results
Revenue increased by $38.3 million, or
14.9 percent, to $296.1 million and is summarized as
follows:
- T/L segment grew by $33.6 million, or 19.4 percent, to
$206.6 million - a record compared to any previous quarterly
period. Incremental revenue from acquisitions was $14.5
million while fuel surcharge revenue rose by $3.0 million.
Growth resulted from a stronger Canadian economy, market share
gains and increased demand for freight services in western Canada
which was mainly due to the recovery in the Alberta economy.
- OFS segment grew by $5.0 million, or 5.9 percent - acquisitions
accounted for $2.6 million. Growth was due to improved demand
for fluid hauling being somewhat offset by lower revenue from our
pipe and tubular Business Units and a decline in demand for large
diameter pipeline hauling and stringing services.
OIBDA increased by $3.5 million, or 8.2
percent, to $46.0 million and is summarized as
follows:
- T/L segment grew by $4.9 million, or 18.6 percent, to
$31.2 million - a record compared to any previous fourth quarter
period. As a percentage of revenue, operating margin remained
relatively stable at 15.1 percent as compared to 15.2 percent
in 2016.
- OFS segment up by $0.4 million to $15.4 million - increases
from Business Units providing drilling and drilling related
services was somewhat offset by a decline from those involved in
the transportation of fluids and servicing of wells.
Operating margin decreased to 17.2 percent compared to 17.8
percent in 2016 due to higher direct operating expenses
("DOE") as a percentage of segment revenue
resulting primarily from increased pump sales at Canadian
Dewatering L.P.
- Corporate Office costs up $1.8 million due to a $2.2 million
negative variance in foreign exchange.
Net income increased by $6.1 million to
$5.4 million, or $0.05 per Common Share due to:
- A $10.1 million positive variance in net foreign exchange, a
$3.5 million increase in OIBDA and a $2.4 million decrease in
finance costs.
- The above was partially offset by a $7.8 million increase in
depreciation of property, plant and equipment and a $1.4 million
increase in the loss on sale of property, plant and equipment.
"The changes we had expected in the trucking and
logistics industry intensified as the year unfolded due to a
combination of increased demand for freight services and a tight
labour market, which has now reached a point where adding industry
supply is not viable. This is a trend we had been
anticipating for some time and I believe will validate our strategy
of pursuing acquisitions in the trucking and logistics
sector. Our fourth quarter revenue in our Trucking/Logistics
segment set new records, which we hope to build upon as we enter
2018. In our Oilfield Services segment our results were
stronger than last year, primarily due to increased drilling
activity in western Canada year over year. However, we saw a
definite slowdown in early December as our customers reduced
spending, a clear sign that lower natural gas prices for western
Canadian producers impacted cash flows, and tightened their balance
sheets. Overall I am pleased with our fourth quarter
performance but more importantly I believe we can continue to grow
and improve the bottom line in 2018," commented Mr. Murray K.
Mullen, Chairman and Chief Executive Officer.
A summary of Mullen Group's results for the
quarter and year ended December 31, 2017, are as follows:
SUMMARY |
|
|
|
(unaudited)($ millions, except
per share amounts) |
Three month periods
endedDecember 31 |
|
Twelve month periods
endedDecember 31 |
2017 |
|
2016 |
|
Change |
|
|
2017 |
|
2016 |
|
Change |
|
|
$ |
|
$ |
|
% |
|
|
$ |
|
$ |
|
% |
|
Revenue |
296.1 |
|
257.8 |
|
14.9 |
|
|
1,138.5 |
|
1,035.1 |
|
10.0 |
|
|
|
|
|
|
|
|
|
Operating
income before depreciation and amortization(1) |
46.0 |
|
42.5 |
|
8.2 |
|
|
172.2 |
|
181.0 |
|
(4.9 |
) |
Operating
income before depreciation and amortization - adjusted(2) |
45.9 |
|
40.2 |
|
14.2 |
|
|
180.1 |
|
184.4 |
|
(2.3 |
) |
Net
foreign exchange loss (gain) |
1.3 |
|
11.4 |
|
(88.6 |
) |
|
(21.7 |
) |
(5.8 |
) |
274.1 |
|
Decrease
(increase) in fair value of investments |
(0.6 |
) |
(1.6 |
) |
(62.5 |
) |
|
0.7 |
|
(1.7 |
) |
(141.2 |
) |
Net
income (loss) |
5.4 |
|
(0.7 |
) |
(871.4 |
) |
|
65.5 |
|
52.0 |
|
26.0 |
|
Net
Income - adjusted(3) |
7.7 |
|
10.7 |
|
(28.0 |
) |
|
42.2 |
|
46.9 |
|
(10.0 |
) |
Earnings
(loss) per share(4) |
0.05 |
|
(0.01 |
) |
(600.0 |
) |
|
0.63 |
|
0.52 |
|
21.2 |
|
Earnings
per share - adjusted(3) |
0.08 |
|
0.10 |
|
(20.0 |
) |
|
0.41 |
|
0.47 |
|
(12.8 |
) |
Net cash
from operating activities |
58.3 |
|
46.5 |
|
25.4 |
|
|
142.1 |
|
174.3 |
|
(18.5 |
) |
Net cash
from operating activities per share(4) |
0.56 |
|
0.45 |
|
24.4 |
|
|
1.37 |
|
1.76 |
|
(22.2 |
) |
Cash dividends declared per Common Share |
0.09 |
|
0.09 |
|
- |
|
|
0.36 |
|
0.56 |
|
(35.7 |
) |
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. |
Year End Financial Results
Revenue increased by $103.4 million, or
10.0 percent, to $1,138.5 million and is summarized as
follows:
- T/L segment grew by $71.9 million, or 10.4 percent, to a
record of $761.4 million. Incremental revenue from
acquisitions was $45.3 million while fuel surcharge revenue rose by
$12.4 million. Experienced growth in our regional
less-than-truckload business due to market share gains and the
recovery in the Alberta economy. Truckload services excluding
acquisitions - down due to the completion of various major capital
projects in western Canada in 2016, most notable the Suncor Fort
Hills oil sands and North West Upgrader projects.
- OFS segment grew by $27.9 million, or 8.0 percent -
acquisitions accounting for $7.6 million. Growth was due to
improved drilling activity which benefitted those Business Units
most directly tied to oil and natural gas drilling activity as well
as from greater demand for pumps and related dewatering
services. 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 decreased by $8.8 million, or 4.9
percent, to $172.2 million and is summarized as
follows:
- T/L segment decreased by $7.0 million, or 6.0 percent, to
$109.7 million due to the completion of major capital projects that
have not been replaced being partially offset by incremental OIBDA
from acquisitions, market share gains and the recovery in the
Alberta economy. As a percentage of revenue, operating margin
decreased to 14.4 percent from 16.9 percent in 2016 due to the
change in revenue mix, competitive pricing and from the acquisition
of asset light businesses which have lower margin but higher return
on invested capital.
- OFS segment up by $1.8 million to $74.2 million due to improved
drilling activity and from the acquisition of Envolve Energy
Services Corp. Specifically, increases from Business Units
providing drilling and drilling related services was mostly offset
by a decline from those leveraged to the oil sands and pipeline
construction projects. Operating margin decreased to 19.6
percent compared to 20.7 percent in 2016 due to a change in revenue
mix and higher DOE as a percentage of segment revenue from
increased pump sales at Canadian Dewatering L.P.
- Corporate Office costs up $3.6 million due to a $4.5 million
negative variance in foreign exchange.
Net income increased by $13.5 million to
$65.5 million, or $0.63 per Common Share due to:
- A $15.9 million positive variance in net foreign exchange, a
$5.0 million decrease in finance costs, a $2.9 million decrease in
income tax expense, a $2.8 million decrease in amortization of
intangible assets and a $2.0 million gain on contingent
consideration.
- The above was partially offset by an $8.8 million decrease in
OIBDA, a $4.1 million increase in depreciation of property,
plant and equipment and a $2.4 million negative variance in the
fair value of investments.
Financial Position
The following summarizes our financial position
as at December 31, 2017, along with some of the key changes that
occurred during 2017:
- Repaid U.S. $85.0 million (5.90 percent Series E Notes) and
$20.0 million (5.47 percent Series F Notes) of debt reducing our
annual interest obligation by approximately $7.5 million.
- Reduced the weighted average interest rate on our debt to 4.21
percent.
- Exited 2017 with working capital of $181.6 million that
included $134.5 million of cash and cash equivalents.
- Total net debt ($421.8 million) to operating cash flow ($175.8
million) of 2.40:1 as defined per our Private Placement Debt
agreement.
- Net book value of property, plant and equipment of $916.1
million consisting of $467.6 million of real property (carrying
cost of $527.7 million).
- Cross-currency swaps valued at $25.6 million that swaps the
principal portion of our U.S. $229.0 million debt to a Canadian
currency equivalent of $254.1 million.
- Series D ($70.0 million) Notes and $12.4 million of Debentures
(conversion price of $10.73) mature on June 30, 2018 and July 1,
2018, respectively.
This news release may contain forward-looking
information that is subject to risk factors associated with the oil
and natural gas business and the overall economy. This
information relates to future events and Mullen Group's future
performance. All information and statements contained herein
that are not clearly historical in nature constitute
forward-looking information, and the words "may", "will", "should",
"could", "expect", "plan", "intend", "anticipate", "believe",
"estimate", "propose", "predict", "potential", "continue", "aim",
or the negative of these terms or other comparable terminology are
generally intended to identify forward-looking information.
Such information represents Mullen Group's internal projections,
estimates, expectations, beliefs, plans, objectives, assumptions,
intentions or statements about future events or performance.
This information involves known or unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
information. Mullen Group believes that the expectations reflected
in this forward-looking information are reasonable; however, undue
reliance should not be placed on this forward-looking information,
as there can be no assurance that the plans, intentions or
expectations upon which they are based will occur. For
further information on any strategic, financial, operational and
other outlook on Mullen Group's business please refer to Mullen
Group's Management's Discussion and Analysis available for viewing
on SEDAR at www.sedar.com. The risks and other factors are
described under "Principal Risks and Uncertainties" in Mullen
Group's Annual Information Form and Management's Discussion and
Analysis. The forward-looking information contained in this
news release is expressly qualified by this cautionary
statement. 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.
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 PresidentMr. P. Stephen Clark - Chief Financial OfficerMr.
Richard J. Maloney - Senior Vice President
121A - 31 Southridge DriveOkotoks, Alberta,
Canada T1S 2N3Telephone: 403-995-5200Fax:
403-995-5296
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