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 June 30, 2017, with comparisons to the same period
last year.
Key financial highlights for the second quarter
of 2017 with comparison to 2016 are as follows:
HIGHLIGHTS |
|
(unaudited)($
millions) |
Three month periods ended
June 30 |
2017 |
2016 |
Change |
|
$ |
$ |
% |
Revenue |
|
|
|
Trucking/Logistics |
183.2 |
169.3 |
8.2 |
Oilfield
Services |
90.8 |
79.5 |
14.2 |
Corporate
and intersegment eliminations |
(0.4) |
(1.8) |
- |
Total Revenue |
273.6 |
247.0 |
10.8 |
Operating
income before depreciation and amortization (1) |
|
|
|
Trucking/Logistics |
26.4 |
30.9 |
(14.6) |
Oilfield
Services |
17.4 |
17.9 |
(2.8) |
Corporate |
(4.0) |
(2.8) |
- |
Total Operating income before depreciation and amortization
(1) |
39.8 |
46.0 |
(13.5) |
Operating income before depreciation and amortization - adjusted
(1) |
42.3 |
46.6 |
(9.2) |
(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
ending June 30, 2017 are as follows:
- generated consolidated revenue of $273.6 million, an increase
of $26.6 million, or 10.8 percent, as compared to
$247.0 million in 2016 due to:
- a $13.9 million increase in the Trucking/Logistics segment
(record quarterly revenue of $183.2 million)
- an $11.3 million increase in the Oilfield Services segment
- earned consolidated operating income before depreciation and
amortization ("OIBDA") of $39.8 million, a
decrease of $6.2 million as compared to $46.0 million in 2016 due
to:
- a $4.5 million decrease in the Trucking/Logistics segment
- a $0.5 million decrease in the Oilfield Services segment
- a $1.2 million increase in Corporate Office costs related to a
$1.9 million negative variance in foreign exchange
- adjusting for the impact of foreign exchange at the Corporate
Office, operating income before depreciation and amortization
("OIBDA - adjusted") was $42.3 million, or 15.5
percent of revenue, as compared to $46.6 million, or 18.9
percent of revenue in 2016.
Second Quarter Financial
Results
For the three month period ended June 30, 2017,
revenue increased by $26.6 million, or 10.8 percent, to
$273.6 million as compared to $247.0 million in 2016.
This was attributable to a $13.9 million increase in revenue in the
Trucking/Logistics segment and an $11.3 million increase in the
Oilfield Services segment. The increase in the
Trucking/Logistics segment was mainly due to the incremental
revenue related to our recent acquisitions, greater demand for
freight services in western Canada along with a $3.2 million
increase in fuel surcharge revenue. These increases were
somewhat offset by the completion of several major capital projects
such as the Suncor Energy 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, those Business Units
involved in the transportation of fluids and servicing of wells,
from greater demand for pumps and related dewatering services and
from the incremental revenue generated by Envolve Energy Services
Corp. ("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 for the second quarter was $39.8 million,
a decrease of $6.2 million or 13.5 percent as compared to
$46.0 million in 2016. This was attributable to a $4.5
million decrease in the Trucking/Logistics segment, a
$1.2 million increase in Corporate Office costs due to foreign
exchange and a $0.5 million decrease in the Oilfield Services
segment. The Trucking/Logistics segment generated OIBDA of
$26.4 million, a decrease of $4.5 million from the $30.9 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. The Oilfield Services
segment generated OIBDA of $17.4 million, a slight decrease of $0.5
million from the $17.9 million in 2016 due to lower demand for
pipeline hauling and stringing services resulting from the timing
of certain projects. This decrease was somewhat offset by
improved drilling activity, the continued effects of cost control
measures previously implemented, the acquisition of Envolve and
from greater demand for pumps and dewatering services. As a
percentage of segment revenue, operating margin in the
Trucking/Logistics segment decreased to 14.4 percent from 18.3
percent in 2016 due to the change in revenue mix. Operating
margin in the Oilfield Services segment decreased to 19.2 percent
as compared to 22.5 percent in 2016, which was mainly due to a
reduction in pipeline hauling and stringing services.
Adjusting for Corporate Office costs related to the impact of
foreign exchange losses on U.S. dollar cash held, OIBDA - adjusted
was $42.3 million, a decrease of $4.3 million or 9.2 percent
as compared to $46.6 million in 2016. Stated as a percentage
of consolidated revenue, operating margin - adjusted decreased to
15.5 percent as compared to 18.9 percent in 2016.
In the second quarter of 2017, we recorded net
income of $19.6 million or $0.19 per share, an increase of
$5.9 million, or 43.1 percent, compared to net income of $13.7
million or $0.14 per share in 2016. The $5.9 million increase
was primarily due to the $4.0 million positive variance in the fair
value of investments, a $3.7 million positive variance in net
unrealized foreign exchange, a $2.7 million decrease in
depreciation and amortization and a $1.0 million decrease in
income tax expense. These increases were partially offset by
the $6.2 million decrease in OIBDA.
"This was the first quarter in several years
that we began to witness a broad based recovery across most of our
business lines, with the only exception being the development of
major capital projects in Alberta related to the oil sands and some
of the large diameter pipeline undertakings. These projects
neared completion and as such the transportation and logistics
component declined significantly year over year. Overall,
however, I was very pleased with our performance. Revenue
expanded in both segments with our Trucking/Logistics segment
achieving a record for any quarter. Operating profitability
and margins were negatively impacted for the reasons outlined above
but were definitely supported by the strengthening in the economy
and stronger drilling activity year over year. The
fundamentals clearly are more constructive today than they have
been for some time," commented Mr. Murray K. Mullen,
Chairman and Chief Executive Officer.
Financial Position
At June 30, 2017, we had $192.5 million
(December 31, 2016 - $243.1 million) of working capital that
included $250.0 million (December 31, 2016 - $270.3 million) of
cash and cash equivalents, of which $82.4 million
(December 31, 2016 - $81.0 million) was denominated in U.S.
currency. Included within non-cash working capital items is
$202.1 million of current portion of long-term debt which mainly
relates to the Series E (U.S. $85.0 million) and Series F ($20.0
million) Notes, which mature on September 27, 2017 and the Series D
($70.0 million) Notes which mature on June 30, 2018. At June
30, 2017, net debt was $286.4 million (December 31, 2016 -
$316.3 million) and we had access to additional funding of
$75.0 million from our undrawn bank credit facility. The
Corporation's long-term debt consists mainly of its Private
Placement Debt (which includes the Series D, Series E and Series F
Notes) of U.S. $314.0 million and Canadian $261.0 million.
The weighted average interest rate on our U.S. dollar debt and our
Canadian dollar debt is 4.43 percent and 4.58 percent,
respectively. 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 June 30, 2017, the carrying value of these
cross-currency swaps was $30.3 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 $932.4 million, the majority of which consists of
$461.7 million of real property (carrying cost of $518.3 million)
and $375.1 million (carrying cost of $740.8 million) of trucks and
trailers.
"It appears that the economic conditions have
improved measurably to the point that there is now a healthy
rebound in the economy, both nationally as well as in
Alberta. In fact we are seeing the supply/demand fundamentals
brought quickly into balance, which is alleviating the downward
pricing pressures on trucking rates. In the last 60 days
we have started to see some leverage in terms of spot market
pricing, a trend that should prevail given the current economic
indicators. In the oil and gas sector drilling activity
levels are expected to remain strong for the balance of the year,
particularly in the resource plays where the economics are more
compelling. Of course drilling and capital investment by the
oil and gas industry is highly dependent upon the price for crude
oil and natural gas, which can be very volatile.
Nevertheless, there is definitely more industry optimism today than
last year, which is the best indicator we have for our Oilfield
Services segment these days," added Mr. Mullen.
Six Month Period Ended Financial
Results
For the six month period ended June 30, 2017,
revenue increased by $39.8 million, or 7.7 percent, to $558.5
million as compared to $518.7 million in 2016. This was
attributable to a $20.9 million increase in revenue in the
Trucking/Logistics segment and a $16.1 million increase in the
Oilfield Services segment. The increase in the
Trucking/Logistics segment was mainly due to the incremental
revenue related to our recent acquisitions, from greater demand for
freight services in western Canada along with an increase in fuel
surcharge revenue. These increases were somewhat offset by
the completion of several major capital projects such as the Suncor
Energy 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, 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 and from lower
revenue generated by those Business Units involved in the
transportation of fluids and servicing of wells.
OIBDA – adjusted for the first six months of
2017 was $85.0 million, a decrease of $7.1 million or 7.7 percent
as compared to $92.1 million in 2016. This was attributable
to an $11.1 million decrease in the Trucking/Logistics
segment. This decrease was somewhat offset by a $2.6 million
increase in the Oilfield Services segment and a $1.4 million
reduction in Corporate Office costs. The Trucking/Logistics
segment generated OIBDA of $47.8 million, a decrease of $11.1
million from the $58.9 million in 2016. This decrease was
mainly attributable to the completion of some major capital
projects that have not been replaced. The Oilfield Services
segment generated OIBDA of $39.0 million, an increase of $2.6
million from the $36.4 million in 2016 due to improved drilling
activity, the continued effects of cost control measures previously
implemented, the acquisition of Envolve and from greater demand for
pumps and dewatering services. 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 13.1 percent from 17.2 percent in 2016 due to the
completion of major capital projects, contracts that generated
higher margins due to the scope of work required. Operating
margin in the Oilfield Services segment decreased slightly to 20.0
percent as compared to 20.3 percent in 2016. Stated as a
percentage of consolidated revenue, operating margin - adjusted
decreased to 15.2 percent as compared to 17.8 percent in 2016.
In the first six months of 2017, we recorded net
income of $34.1 million or $0.33 per share, a decrease of
$1.0 million, or 2.8 percent, compared to net income of $35.1
million or $0.37 per share in 2016. The $1.0 million decrease
was primarily due to the $10.5 million negative variance in net
unrealized foreign exchange and a $3.4 million decrease in
OIBDA. These decreases were partially offset by the $6.6
million decrease in depreciation and amortization, a $3.1 million
positive variance in the fair value of investments, a $1.9 million
decrease in finance costs and a $1.5 million gain on the fair value
of an equity investment.
A summary of Mullen Group's results for the
three and six month periods ended June 30, 2017 and 2016 are as
follows:
SUMMARY |
|
|
|
(unaudited)($ millions, except
per share amounts) |
Three month periods endedJune
30 |
|
Six month periods endedJune
30 |
2017 |
2016 |
Change |
|
2017 |
2016 |
Change |
|
$ |
$ |
% |
|
$ |
$ |
% |
Revenue |
273.6 |
247.0 |
10.8 |
|
558.5 |
518.7 |
7.7 |
|
|
|
|
|
|
|
|
Operating
income before depreciation and amortization(1) |
39.8 |
46.0 |
(13.5) |
|
81.5 |
84.9 |
(4.0) |
Operating
income before depreciation and amortization - adjusted(2) |
42.3 |
46.6 |
(9.2) |
|
85.0 |
92.1 |
(7.7) |
Net
unrealized foreign exchange (gain) loss |
(9.4) |
(5.7) |
64.9 |
|
(11.7) |
(22.2) |
(47.3) |
Decrease
in fair value of investments |
0.2 |
4.2 |
(95.2) |
|
1.2 |
4.3 |
(72.1) |
Net
income |
19.6 |
13.7 |
43.1 |
|
34.1 |
35.1 |
(2.8) |
Net
income - adjusted(3) |
9.9 |
11.9 |
(16.8) |
|
21.5 |
17.3 |
24.3 |
Earnings
per share(4) |
0.19 |
0.14 |
35.7 |
|
0.33 |
0.37 |
(10.8) |
Earnings
per share - adjusted(3) |
0.10 |
0.12 |
(16.7) |
|
0.21 |
0.18 |
16.7 |
Net cash
from operating activities |
35.5 |
48.9 |
(27.4) |
|
39.8 |
83.4 |
(52.3) |
Net cash
from operating activities per share(4) |
0.34 |
0.50 |
(32.0) |
|
0.38 |
0.88 |
(56.8) |
Cash dividends declared per Common Share |
0.09 |
0.14 |
(35.7) |
|
0.18 |
0.38 |
(52.6) |
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 unrealized
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
unrealized 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 unrealized foreign exchange gains and losses and the change
in fair value of investments.(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, 56 and 57 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 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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