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 October 21, 2015 - 6:30 PM EDT
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Mullen Group Ltd. Reports Third Quarter Financial Results

OKOTOKS, ALBERTA--(Marketwired - Oct. 21, 2015) - (TSX:MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation"), one of Canada's largest and most diversified oilfield services and transportation companies, today reported its financial and operating results for the period ended September 30, 2015, with comparisons to the same period last year.

Key financial highlights for the third quarter of 2015 and 2014 were as follows:

HIGHLIGHTS        
(unaudited) Three month periods ended
September 30
  Nine month periods ended
September 30
 
($ millions, except per share amounts) 2015   2014   Change   2015   2014   Change  
  $   $   %   $   $   %  
Revenue                        
  Oilfield Services 122.0   210.8   (42.1 ) 391.4   659.3   (40.6 )
  Trucking/Logistics 183.1   146.7   24.8   537.3   424.8   26.5  
  Corporate and intersegment eliminations (0.4 ) (0.2 ) 100.0   (2.0 ) (1.4 ) 42.9  
Total Revenue 304.7   357.3   (14.7 ) 926.7   1,082.7   (14.4 )
Operating Income                        
  Oilfield Services 27.6   51.8   (46.7 ) 80.4   155.3   (48.2 )
  Trucking/Logistics 33.7   26.0   29.6   88.1   68.2   29.2  
  Corporate 4.2   (1.2 ) (450.0 ) 8.2   (3.7 ) (321.6 )
Total Operating Income (1) 65.5   76.6   (14.5 ) 176.7   219.8   (19.6 )
Net income 7.3   10.5   (30.5 ) 11.0   72.4   (84.8 )
Net income - adjusted (1) 24.1   36.4   (33.8 ) 60.2   98.7   (39.0 )
Earnings per share (1) 0.08   0.11   (27.3 ) 0.12   0.79   (84.8 )
Earnings per share - adjusted (1) 0.26   0.40   (35.0 ) 0.65   1.08   (39.8 )
(1) Refer to notes section of Summary  

For the three month period ended September 30, 2015, Mullen Group generated consolidated revenue of $304.7 million, operating income of $65.5 million and net cash from operations of $42.2 million. During the quarter Mullen Group paid dividends of $27.5 million, incurred net capital expenditures of $12.7 million predominately within the Trucking/Logistics segment and paid semi-annual interest obligations of $4.3 million. Mullen Group ended the third quarter with approximately $140.6 million of cash and cash equivalents.

Consolidated revenue in the third quarter of 2015 decreased by $52.6 million or 14.7 percent as compared to $357.3 million in 2014, due to an $88.8 million decline in revenue in the Oilfield Services segment offset by a $36.4 million increase in the Trucking/Logistics segment. The impact of significantly lower commodity prices negatively impacted industry cash flows reducing capital investment and drilling activity in western Canada. As a result virtually all Operating Entities within this segment experienced revenue decreases. Segment revenue declined during the quarter by 42.1 percent to $122.0 million as compared to $210.8 million last year. Specifically, the decrease was due to a reduction in revenue generated by those Operating Entities involved in the transportation of fluids and servicing of wells and from lower revenue generated by those Operating Entities most directly tied to oil and natural gas drilling activity in western Canada due to low customer demand, intense competition and pricing pressures. Revenue also decreased due to a reduction in demand for services related to dewatering services. These decreases were somewhat offset by greater demand for pipeline hauling associated with large diameter pipeline construction projects and from the incremental revenue generated from acquiring the business of Recon Utility Search N.A. Inc. Conversely, revenue in the Trucking/Logistics segment increased to $183.1 million, which is the highest level of quarterly revenue ever attained by this segment. The 24.8 percent increase in segment revenue is attributable to incremental revenue generated by the acquisition of Gardewine Group Limited Partnership ("Gardewine") and Bernard Transport Ltd. ("Bernard"), offset by the loss of revenue associated with the disposition of Mill Creek Motor Freight L.P.

Operating income for the third quarter was $65.5 million, a decrease of $11.1 million or 14.5 percent over the same period in 2014. The decrease was attributable to the Oilfield Services segment that experienced a $24.2 million decrease in operating income, primarily due to the negative impact of low commodity prices on customer demand for the services offered by those Operating Entities involved in the transportation of fluids and servicing of wells, from those Operating Entities most directly tied to oil and natural gas drilling activity in western Canada and from dewatering services. The declines in the Oilfield Services segment were somewhat offset by gains of $7.7 million in the Trucking/Logistics segment, which mainly resulted from the acquisition of Gardewine and Bernard. Operating income in the Trucking/Logistics segment increased by 29.6 percent to $33.7 million, which is the highest level of quarterly operating income ever attained by this segment. Corporate costs decreased by $5.4 million on a year over year basis, which was mainly attributable to a $6.1 million foreign exchange gain recorded in 2015. As a percentage of consolidated revenue, operating income increased to 21.5 percent as compared to 21.4 percent in 2014. This 0.1 percent increase in operating margin was mainly due to the foreign exchange gain and improved operating margin within the Trucking/Logistics segment, which benefitted from lower direct operating expenses being somewhat offset by the acquisition of Gardewine that generated an operating margin below the segment average. These increases were somewhat offset by a reduction in operating margin in the Oilfield Services segment due to the loss of revenue and a generally more competitive environment.

In the third quarter of 2015, Mullen Group generated net income of $7.3 million or $0.08 per share, a decrease of $3.2 million, or 30.5 percent, compared to $10.5 million or $0.11 per share in 2014. The $3.2 million decrease in net income was mainly attributable to an $11.1 million decrease in operating income and a $4.6 million negative variance in the fair value of investments. These decreases were somewhat offset by a $19.0 million one-time expense in 2014 related to the prepayment of the Series A and Series B Notes. Adjusting Mullen Group's net income and earnings per share to eliminate the impact of the one-time expense in 2014 related to the prepayment of the Series A and Series B Notes, the net unrealized foreign exchange gains and losses and the change in fair value of investments during the third quarter of 2015 resulted in adjusted net income of $24.1 million and adjusted earnings per share of $0.26, as compared to $36.4 million and $0.40 per share in 2014, respectively. These adjustments more clearly reflect earnings from an operating perspective.

"Our strategy of operating a diversified business model is certainly validated today. In one of the most challenging markets I have witnessed, our operating and financial performance is very respectable. It is from this perspective I am very pleased with our overall performance," said Mr. Murray K. Mullen, Chairman and Chief Executive Officer.

Mullen Group's consolidated revenue in the first nine months of 2015 decreased by $156.0 million, or 14.4 percent, to $926.7 million as compared to $1,082.7 million in 2014. The decrease in revenue was due to a significant decline in revenue generated by the Oilfield Services segment being partially offset by a rise in revenue generated by the Trucking/Logistics segment. Revenue decreased by $74.8 million, $28.6 million and $52.6 million in the first, second and third quarters, respectively. Revenue in the Oilfield Services segment decreased by $267.9 million, or 40.6 percent, to $391.4 million as compared to $659.3 million in the same period one year earlier. This decrease was primarily due to a decrease in demand for oilfield services in western Canada due to the steep and rapid decline in crude oil and natural gas pricing, which began in the last half of 2014, that negatively impacted industry cash flows resulting in significant reductions in drilling activity and investments into capital projects including core drilling in the oil sands. Revenue in the Trucking/Logistics segment increased by $112.5 million, or 26.5 percent, to $537.3 million from $424.8 million in 2014. This $112.5 million increase was largely due to incremental revenue resulting from the acquisition of Gardewine and Bernard. This increase was partially offset by a $13.4 million decrease in fuel surcharge revenue as well as decreased demand for over-dimensional and heavy haul freight services. 

Operating income for the first nine months of 2015 decreased to $176.7 million, or 19.6 percent, as compared to $219.8 million generated in 2014. The decrease of $43.1 million was primarily due to the Oilfield Services segment that experienced a $74.9 million decrease in operating income. This was somewhat offset by the Trucking/Logistics segment that experienced a $19.9 million increase in operating income. In addition, Corporate costs declined by $11.9 million on a year over year basis primarily due to a $12.4 million foreign exchange gain. As a percentage of revenue, operating income decreased to 19.0 percent as compared to 20.3 percent in 2014. This 1.3 percent decrease in operating margin was largely due to a generally more competitive environment in the Oilfield Services segment. Adjusted for the $12.4 million foreign exchange gain, operating income would have been $164.3 million or 17.7 percent of consolidated revenue.

Net income in the first nine months of 2015 decreased to $11.0 million as compared to $72.4 million in 2014. The decrease of $61.4 million was mainly attributable to a $43.1 million decrease in operating income, an $18.2 million negative variance in net unrealized foreign exchange, and a $13.2 million negative variance in the fair value of investments. These decreases were somewhat offset by a $19.0 million one-time expense in 2014 related to the prepayment of the Series A and Series B Notes, a $4.0 million decrease in loss on sale of property, plant and equipment and a $2.9 million decrease in income tax expense. Mullen Group's adjusted net income and earnings per share in the first nine months of 2015 was $60.2 million and $0.65 per share, as compared to $98.7 million and $1.08 per share in 2014, respectively.

At September 30, 2015, Mullen Group had $193.7 million of working capital which included $140.6 million of cash and cash equivalents and $499.3 million of net debt. Mullen Group also has access to additional funding of $75.0 million from its bank credit facility, which continues to remain undrawn. The long-term debt consists mainly of its private placement debt of U.S. $314.0 million and Canadian $331.0 million. The weighted average interest rate on our U.S. dollar debt and our Canadian debt is 4.43 percent and 4.80 percent, respectively. The majority of this debt matures on October 22, 2024 and October 22, 2026. In July 2014 Mullen Group 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.

"Acquisitions focused on the trucking and logistics sector of the economy were both timely as well as accretive to our financial results this year. However, there are real challenges associated with the steep declines in crude oil and natural gas prices. Drilling activity levels along with other forms of capital investment projects by the oil and natural gas companies are down significantly, negatively affecting many of our Operating Entities and our people in western Canada. And while I expect the next few quarters to remain challenging for the oil and natural gas service industry, Mullen Group is well prepared. I am not sure our competitors are," commented Mr. Mullen.

A summary of Mullen Group's results for the three and nine month periods ended September 30, 2015 and 2014 are as follows:

SUMMARY        
(unaudited) Three month periods ended
September 30
  Nine month periods ended
September 30
 
($ millions, except per share amounts) 2015 2014 Change   2015 2014 Change  
  $ $ %   $ $ %  
Revenue 304.7 357.3 (14.7 ) 926.7 1,082.7 (14.4 )
                 
Operating income(1) 65.5 76.6 (14.5 ) 176.7 219.8 (19.6 )
Net unrealized foreign exchange loss 10.2 10.1 1.0   29.1 10.9 167.0  
Decrease in fair value of investments 7.4 2.8 164.3   15.9 2.7 488.9  
Net income 7.3 10.5 (30.5 ) 11.0 72.4 (84.8 )
Net income - adjusted(2) 24.1 36.4 (33.8 ) 60.2 98.7 (39.0 )
Earnings per share(3) 0.08 0.11 (27.3 ) 0.12 0.79 (84.8 )
Earnings per share - adjusted(2) 0.26 0.40 (35.0 ) 0.65 1.08 (39.8 )
Net cash from operating activities 42.2 51.0 (17.3 ) 146.8 169.5 (13.4 )
Net cash from operating activities per share(3) 0.46 0.56 (17.9 ) 1.60 1.86 (14.0 )
Cash dividends declared per Common Share 0.30 0.30 -   0.90 0.90 -  
Notes: 
(1) Operating income 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) 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.
(3) 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.
   
  Operating income, 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. Mullen Group relies on litigation protection for "forward-looking" statements. Additional information regarding the forward-looking statements is found on pages 1, 47, 48 and 49 of Mullen Group's Management's Discussion and Analysis.

Mullen Group is a company that owns a network of independently operated businesses providing a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada and is recognized as one of the leading suppliers of trucking and logistics services in Canada - two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. The corporate office provides management and financial expertise, 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.

Mullen Group Ltd.
Mr. Murray K. Mullen
Chairman of the Board, Chief Executive Officer and President
403-995-5296
403-995-5200

Mullen Group Ltd.
Mr. P. Stephen Clark
Chief Financial Officer
403-995-5296
403-995-5200

Mullen Group Ltd.
Mr. Richard J. Maloney
Senior Vice President
403-995-5296
403-995-5200


Source: Marketwired (October 21, 2015 - 6:30 PM EDT)

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