OKOTOKS, AB, Feb. 25 /PRNewswire-FirstCall/ - (TSX-MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended December 31, 2009 with comparisons to the same period last year. On May 1, 2009, the holders of trust units of Mullen Group Income Fund (the "Fund") and the holders of Class B limited partnership units of Mullen Co. Limited Partnership approved a Plan of Arrangement that resulted in the conversion of the Fund from an open-ended income trust to a corporation called "Mullen Group Ltd." Mullen Group as the successor in interest to the Fund will be accounted for as a continuity of interest whereby the consolidated financial statements for the three and twelve month periods ended December 31, 2009 and comparables for the three and twelve month periods ended December 31, 2008 will reflect the financial position, results of operations and cash flows as if Mullen Group had always carried on the business formerly carried on by the Fund. Throughout this news release, references made to cash distributions declared, distributions payable and cash distributions paid reflect the business of the Fund that occurred prior to conversion from an open-ended income trust to a corporation.
For the twelve month period ended December 31, 2009, Mullen Group generated consolidated revenue of $978.0 million and operating income of $191.6 million. Mullen Group generated $121.0 million of funds from operations which was supplemented by $122.0 million of net proceeds from issuing convertible debentures and $91.2 million of changes in non-cash working capital items to repay long-term debt of $70.3 million, pay cash distributions and dividends totaling $40.3 million, acquire net property, plant and equipment in the amount of $12.1 million, and fund acquisitions of $5.3 million.
Mullen Group's revenue of $978.0 million for the year ended December 31, 2009 was a decrease of $336.2 million or 25.6 percent from the $1.3 billion generated in 2008. This decrease in consolidated revenue was attributable to lower revenues generated by both the Trucking/Logistics segment and the Oilfield Services segment. The Trucking/Logistics segment experienced lower revenues by virtue of the slowing economy and its impact on demand for freight services especially in western Canada, as well as less fuel surcharge revenue being generated due to the reduction in the average cost of diesel fuel on a year over year basis. The Oilfield Services segment experienced lower revenues by virtue of a decrease in demand for its services resulting from the significant year over year reduction in oil and natural gas drilling activity in western Canada. In addition, the business units leveraged to the transportation of fluids and the servicing of oil and natural gas wells experienced a decrease in revenue by virtue of the reduction in drilling activity, competitive pricing and less fuel surcharge revenue.
"The operating environment during 2009 was extremely challenging due to the combined impact of the slowing economy coupled with a significant decrease in drilling activity in western Canada. The planning we undertook during the last quarter of 2008 together with the diversity of our business model enabled us to somewhat mitigate the overall impact on our operating results. During 2009 there was a world wide economic crisis and a significant 50 percent year over year decline in oil and natural gas drilling activity in western Canada. Despite such a challenging operating environment, we were able to achieve an overall operating margin of 19.6 percent as compared to 20.8 percent in 2008," stated Mr. Steve Lockwood, President and Co-Chief Executive Officer.
Mullen Group generated operating income for the year ended December 31, 2009 of $191.6 million, a decrease of $81.7 million or 29.9 percent over the $273.3 million generated in 2008. The decrease in operating income was mainly attributable to the year over year decrease in consolidated revenues. Operating income decreased in the Trucking/Logistics segment by virtue of the impact of the slowing economy and in the Oilfield Services segment by virtue of the decrease in demand for their services resulting from the significant reduction in drilling activity in western Canada.
In 2009, Mullen Group generated net income of $90.8 million or $1.13 per share, a decrease of $22.2 million compared to $113.0 million or $1.40 per share in 2008. The $22.2 million decrease in net income was mainly due to the $81.7 million decrease in operating income coupled with a $16.5 million increase in the provision for income taxes all of which was offset by a $89.3 million increase in unrealized gain on foreign exchange. The $16.5 million increase in the provision for income taxes was mainly attributable to the conversion from an open-ended income trust to a corporation in May of 2009. The $89.3 million increase in unrealized gain on foreign exchange was mainly due to the impact of the change over the year in the value of the CDN. dollar relative to the U.S. dollar on the Corporation's $235.0 million of U.S. dollar denominated debt.
Mullen Group generated revenue of $233.6 million for the three month period ended December 31, 2009, a decrease of $121.2 million or 34.2 percent over the $354.8 million generated for the same period last year. The decrease in revenue was attributable to lower revenues generated by both the Trucking/Logistics segment and the Oilfield Services segment. The Trucking/Logistics segment experienced lower revenues by virtue of increased pricing pressure, less fuel surcharge revenue and the continued affects of the slowing economy and its impact on demand for freight services especially in western Canada. The Oilfield Services segment experienced lower revenues by virtue of the decrease in demand for its services resulting from the significant year over year reduction in oil and natural gas drilling activity in western Canada as well as a very competitive pricing environment.
Operating income in the fourth quarter decreased by $37.5 million to $43.7 million from $81.2 million in 2008. This decrease was mainly attributable to lower revenue generated by both the Oilfield Services segment and the Trucking/Logistics segment. Mullen Group generated net income of $11.1 million, or $0.14 per share for the quarter, compared to a $7.1 million, or $0.09 per share in the fourth quarter of 2008. The increase in net income was mainly attributable to a $42.3 million year over year swing in unrealized gain on foreign exchange which was partially offset by a $37.5 million decrease in operating income.
"The challenging operating environment we experienced through the third quarter of 2009 continued in the fourth quarter. Business activity remained soft resulting in competitive pricing pressures for most of our business units. In fact, there were several instances where long-term contract pricing fell to levels we considered unacceptable leaving us with no choice but to decline the work. We have consistently taken the position in all our businesses that we will price competitively, however we will not engage in predatory pricing nor provide services without receiving a reasonable return," stated Mr. Steve Lockwood.
"While there is no doubting the fact that 2009 was a difficult and challenging year it is important to put everything into perspective. Business is ultimately about being competitive and delivering value to your customers. It is not just about a yearly or quarterly result. The steps we took last year, while not always pleasant, were designed to ensure our competitiveness for years into the future. From this perspective I am quite confident that the Mullen Group and our 25 business units are well positioned to capitalize on market opportunities," commented Mr. Murray Mullen, Chairman and Chief Executive Officer.
"As the global economy recovers, we fully expect both segments in our business to benefit. For example, oil and natural gas drilling activity in western Canada is improving from multi-year lows. Investment in long-life capital projects like the oilsands is returning. These are just a couple of examples that indicate the worst is behind us. Combine economic growth with a strong balance sheet like we have at Mullen Group and good things can happen," added Mr. Murray Mullen.
A summary of Mullen Group's results for the quarter and year ended December 31, 2009, along with revenues and operating results by segment are as follows:
------------------------------------------------------------------------- SUMMARY Three Months Ended Twelve Months Ended December 31 December 31 ---------------------------------------------- -------------------------- 2009 2008 Change 2009 2008 Change ------------------------------------------------------------------------- (Unaudited) ($ millions, except per share amounts) $ $ % $ $ % Revenue 233.6 354.8 (34.2) 978.0 1,314.2 (25.6) Operating income(1) 43.7 81.2 (46.2) 191.6 273.3 (29.9) Net income 11.1 7.1 56.3 90.8 113.0 (19.6) Earnings per share(2) $0.14 $0.09 55.6 $1.13 $1.40 (19.3) Funds from operations(3) 33.5 72.0 (53.5) 121.0 246.2 (50.9) Funds from operations per share(4) $0.41 $0.89 (53.9) $1.50 $3.06 (51.0) Dividends declared per share $0.125 - 100.0 $0.25 - 100.0 Distributions declared per unit - $0.45 - $0.225 $1.80 (87.5) ------------------------------------------------------------------------- Notes: (1) Operating income is defined as net income before interest, income taxes, depreciation on property, plant and equipment, amortization on intangible assets, earnings or losses from equity investments, unrealized gains or losses on foreign exchange and investment and gains or losses on sale of property, plant and equipment and investments. (2) Earnings per share is based on weighted average number of shares outstanding for the period. (3) Funds from operations is defined as cash flow from operating activities before changes in non-cash working capital items. (4) Funds from operations per share is calculated by dividing funds from operations by the weighted average number of shares outstanding for the period. Operating income, funds from operations and funds from operations per share are not recognized measures under Canadian generally accepted accounting principles ("GAAP"). Management believes these measures are useful supplemental measures. Operating income provides an indication of the results generated by the Corporation's principal business activities prior to financing activities, amortization of assets, or taxation in various jurisdictions. Funds from operations indicate the Corporation's ability to generate funds from its operations without the seasonality effect on its working capital. References to operating income, funds from operations and funds from operations per share are not measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Investors should be cautioned that these indicators should not replace net earnings as an indicator of GAAP performance. ------------------------------------------------------------------------- ------------------------------------------------------------------------- SEGMENTED RESULTS Three Months Ended Twelve Months Ended December 31 December 31 ---------------------------------------------- -------------------------- 2009 2008 Change 2009 2008 Change ------------------------------------------------------------------------- (Unaudited) ($ millions) $ $ % $ $ % Revenue Oilfield Services 146.1 233.4 (37.4) 612.6 835.2 (26.7) Trucking/Logistics 89.5 123.8 (27.7) 372.1 485.2 (23.3) Corporate 0.3 0.2 - 0.9 2.2 - Intersegment eliminations Oilfield Services (1.8) (1.5) - (4.9) (3.4) - Trucking/Logistics (0.5) (1.1) - (2.7) (5.0) - ------------------------------------------------------------------------- Totals 233.6 354.8 (34.2) 978.0 1,314.2 (25.6) Operating income Oilfield Services 31.3 55.0 (43.1) 139.5 196.4 (29.0) Trucking/Logistics 14.8 24.2 (38.8) 61.6 83.2 (26.0) Corporate (2.4) 2.0 - (9.5) (6.3) - ------------------------------------------------------------------------- Totals 43.7 81.2 (46.2) 191.6 273.3 (29.9) ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------- December 31, 2009 and 2008 2009 2008 ($ thousands) Assets Current assets: Cash and cash equivalents $ 204,899 $ 291 Accounts receivable 151,049 245,294 Inventory 22,505 22,980 Prepaid expenses 7,922 10,999 Investments 6,101 3,344 ------------------------------------------------------------------------- 392,476 282,908 Investment - 1,510 Property, plant and equipment 613,281 663,088 Goodwill 846,441 844,420 Intangible assets 72,406 89,081 Other assets 2,283 1,070 ------------------------------------------------------------------------- $ 1,926,887 $ 1,882,077 ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 69,288 $ 109,946 Distributions payable - 12,091 Dividends payable 10,076 - Income tax payable 36,044 1,635 Current portion of long-term debt 1,830 3,438 ------------------------------------------------------------------------- 117,238 127,110 Long-term debt 410,811 518,007 Convertible debentures - debt component 116,162 - Future income taxes 115,445 130,024 Shareholders' equity: Shareholders' capital 1,185,821 1,185,821 Convertible debentures - equity component 7,200 - Contributed surplus 8,103 7,530 Deficit (33,893) (86,415) ------------------------------------------------------------------------- 1,167,231 1,106,936 ------------------------------------------------------------------------- $ 1,926,887 $ 1,882,077 ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT ($ thousand, except per share amounts) Three Months Ended Twelve Months Ended December 31 December 31 2009 2008 2009 2008 ------------------------------------------------------------------------- (Unaudited) Revenue $ 233,568 $ 354,778 $ 978,046 $ 1,314,224 Direct operating expenses 159,701 233,818 662,522 884,911 Selling and administrative expenses 30,200 39,764 123,906 155,987 Depreciation on property, plant and equipment 16,011 16,952 61,576 62,285 Amortization on intangible assets 4,702 4,678 18,608 16,818 Interest and accretion expense 9,828 8,348 36,163 28,146 Unrealized (gain) loss on foreign exchange (4,700) 37,600 (39,950) 49,314 Unrealized (gain) loss on investments (787) 2,090 (1,381) 6,760 Loss (gain) on sale of property, plant and equipment 5,361 1,529 5,056 (1,031) ------------------------------------------------------------------------- Income before income taxes and earnings from equity investments 13,252 9,999 111,546 111,034 ------------------------------------------------------------------------- Provision for income taxes: Current 983 1,650 36,465 1,814 Future (recovery) 1,184 3,381 (15,607) 2,502 ------------------------------------------------------------------------- 2,167 5,031 20,858 4,316 ------------------------------------------------------------------------- Income before earnings from equity investments 11,085 4,968 90,688 106,718 Earnings from equity investments - 2,133 122 6,283 ------------------------------------------------------------------------- Net income and other comprehensive income $ 11,085 $ 7,101 $ 90,810 $ 113,001 Deficit, beginning of period $ (34,902) $ (57,243) $ (86,415) $ (54,601) Cash distributions declared to unitholders - (36,273) (18,136) (144,815) Cash dividends declared to shareholders (10,076) - (20,152) - ------------------------------------------------------------------------- Deficit, end of period $ (33,893) $ (86,415) $ (33,893) $ (86,415) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share: Basic $ 0.14 $ 0.09 $ 1.13 $ 1.40 Diluted $ 0.14 $ 0.09 $ 1.10 $ 1.40 Weighted average number of shares outstanding: Basic 80,605 80,605 80,605 80,492 Diluted 92,254 80,605 88,421 80,492 CONSOLIDATED STATEMENTS OF CASH FLOWS ($ thousands) Three Months Ended Twelve Months Ended December 31 December 31 2009 2008 2009 2008 ------------------------------------------------------------------------- (Unaudited) Cash provided by (used in): Operations: Net income $ 11,085 $ 7,101 $ 90,810 $ 113,001 Items not involving cash: Depreciation on property, plant and equipment 16,011 16,952 61,576 62,285 Amortization on intangible assets 4,702 4,678 18,608 16,818 Stock-based compensation 255 717 946 2,782 Amortization of debt issuance costs 167 - 520 - Unrealized (gain) loss on foreign exchange (4,700) 37,600 (39,950) 49,314 Accretion on convertible debentures 198 - 527 - Unrealized (gain) loss on investments (787) 2,090 (1,381) 6,760 Loss (gain) on sale of property, plant and equipment 5,361 1,529 5,056 (1,031) Future income taxes (recovery) 1,184 3,381 (15,607) 2,502 Earnings from equity investments - (2,133) (122) (6,283) ------------------------------------------------------------------------- 33,476 71,915 120,983 246,148 Changes in non-cash working capital items (950) (2,927) 91,219 (42,383) ------------------------------------------------------------------------- 32,526 68,988 212,202 203,765 Financing activities: Proceeds of convertible debentures - - 125,000 - Proceeds of long-term debt - - - 85,681 Debt issuance costs - - (3,036) - Repayment of long-term debt (740) (18,789) (70,262) (23,260) Net proceeds from share issuances - - - 1,366 Dividends paid to shareholders (10,076) - (10,076) - Distributions paid to unitholders - (36,272) (30,227) (144,836) Cheques issued in excess of cash - (3,652) - - ------------------------------------------------------------------------- (10,816) (58,713) 11,399 (81,049) Investing activities: Acquisitions (1,332) (1,002) (5,337) (147,936) Cash distributions from equity investment - 4,853 - 4,853 Property, plant and equipment additions (11,657) (21,594) (28,307) (79,982) Proceeds on sale of property, plant and equipment 5,773 7,012 16,237 21,746 Proceeds on sale of equity investment - 549 - 549 Purchase of equity investment - - - (1,225) Other assets (1,778) 198 (1,586) 415 ------------------------------------------------------------------------- (8,994) (9,984) (18,993) (201,580) ------------------------------------------------------------------------- Change in cash 12,716 291 204,608 (78,864) Cash, beginning of period 192,183 - 291 79,155 ------------------------------------------------------------------------- Cash, end of period $ 204,899 $ 291 $ 204,899 $ 291 ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 12,763 $ 11,047 $ 36,376 $ 28,513 Income taxes paid (received) $ (84) $ (93) $ 2,056 $ (1,167) -------------------------------------------------------------------------
This press 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 press release are reasonable, but results may be affected by a variety of variables. Mullen Group relies on litigation protection for "forward-looking" statements.
Mullen Group is a company that owns a network of independently operated businesses. Today the Mullen Group is recognized as the largest provider of specialized transportation and related services to the oil and natural gas industry in western Canada and 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. Mullen Group provides management and financial expertise, technology and systems support 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.
SOURCE Mullen Group Ltd.
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