Mullen Group Ltd. reports second quarter financial results
OKOTOKS, AB, July 29 /PRNewswire-FirstCall/ - (TSX-MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended June 30, 2010 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 was accounted for as a continuity of interests whereby the consolidated financial statements for the three and six month periods ended June 30, 2010 and comparables for the three and six month periods ended June 30, 2009 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 reflect the business of the Fund that occurred prior to conversion from an open-ended income trust to a corporation.
Mullen Group's consolidated revenue of $214.6 million for the three month period ended June 30, 2010, was an increase of $11.9 million or 5.9 percent from the $202.7 million generated for the same period last year. This increase in consolidated revenue was attributable to greater revenue generated by both the Trucking/Logistics segment and the Oilfield Services segment. The Trucking/Logistics segment experienced an increase in revenue which was mainly due to incremental revenue from acquisitions and higher revenue related to an increase in fuel surcharges associated with higher diesel fuel costs as compared to prior year levels. The Oilfield Services segment experienced higher revenue by virtue of an increase in demand for their services due to the deployment of capital on certain projects, including the development of Canada's oil sands deposits in northern Alberta. Demand in this segment also strengthened by virtue of year over year increase in oil and natural gas drilling activity in western Canada.
"As the second quarter of 2010 progressed, business activity continued the trend of strengthening demand for the majority of services provided by Mullen Group's business units. This trend continued despite inclement weather delaying projects and hampering drilling activity which had a significant impact on the performance of several business units within the Oilfield Services segment. Overall, even with the reinstatement of the 2010 profit share plan and the resulting accrual of $2.5 million for profit share, operating margins increased to 15.6 percent from 14.2 percent which displays the significant efforts made by many business units to reduce and control costs," stated Mr. Stephen Lockwood, President and Co-Chief Executive Officer.
Mullen Group generated operating income for the quarter of $33.5 million, an increase of $4.7 million or 16.3 percent over the same period last year. Operating income increased in both the Trucking/Logistics segment and the Oilfield Services segment. The increase in the Trucking/Logistics segment was mainly attributable to acquisitions and a year over year variance in foreign exchange gains. The increase in the Oilfield Services segment was mainly due to increased drilling activity and its impact on those business units depended on oil and natural gas drilling activity coupled with the cost control measures implemented by those business units.
For the quarter ended June 30, 2010, Mullen Group generated a net loss of $6.2 million (($0.07) per share), a decrease of $24.0 million from the $17.8 million ($0.22 per share) generated for the same period last year. The $24.0 million decrease in net income was mainly attributable to the $32.9 million year over year variance in unrealized foreign exchange. To a lesser extent, net income was also negatively impacted by a $1.4 million increase in interest expense by virtue of the Corporation's convertible debentures and a $1.5 million variance in gains on disposal of property, plant and equipment. These decreases were somewhat offset by the $4.7 million increase in operating income and a $7.6 million recovery in the provision for income taxes. Mullen Group's net income and earnings per share, adjusted, reflect the impact on net income and earnings per share as though Mullen Group had been a corporation since January 1, 2009 as well as before the impact of the unrealized foreign exchange gains or losses in 2010 and 2009. These adjustments reflect earnings from an operating perspective. Adjusted net income is $2.6 million ($0.03 per share) compared to $1.7 million ($0.02 per share) in 2009.
For the quarter ended June 30, 2010, Mullen Group generated funds from operations of $25.9 million, an increase of $6.0 million or 30.2 percent over the $19.9 million generated for the same period last year. These funds were supplemented by $18.8 million of non-cash working capital items. These funds were mainly used to repurchase $27.3 million of common shares under the Normal Course Issuer Bid, purchase investments of $19.8 million, fund acquisitions of $14.1 million, acquire net property, plant and equipment in the amount of $10.9 million, repay long-term debt of $10.2 million, pay cash dividends of $10.0 million, and finance other assets of $3.5 million.
For the six month period ended June 30, 2010, consolidated revenue decreased by 7.8 percent to $474.5 million from $514.7 million. Operating income decreased to $90.7 million, down 11.4 percent, from $102.4 million in 2009 and net income declined by 64.1 percent to $17.5 million from $48.8 million in 2009.
A summary of Mullen Group's results for the quarter ended June 30, 2010, along with revenues and operating results by segment are as follows:
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SUMMARY Three Months Ended Six Months Ended
June 30 June 30
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2010 2009 Change 2010 2009 Change
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(Unaudited)
($ millions, except per
share amounts) $ $ % $ $ %
Revenue 214.6 202.7 5.9 474.5 514.7 (7.8)
Operating income(1) 33.5 28.8 16.3 90.7 102.4 (11.4)
Net income (loss) (6.2) 17.8 - 17.5 48.8 (64.1)
Net income - adjusted(2) 2.6 1.7 52.9 21.5 32.9 (34.7)
Earnings (loss)
per share(3) $(0.07) $0.22 - $0.22 $0.60 (63.3)
Earnings per share -
adjusted(2) $0.03 $0.02 50.0 $0.27 $0.41 (34.1)
Funds from operations(4) 25.9 19.9 30.2 50.3 51.0 (1.4)
Funds from operations
per share(5) $0.33 $0.24 37.5 $0.63 $0.63 -
Cash dividends declared
per common share $0.125 - 100.0 $0.25 - 100.0
Cash Distributions
declared per unit - - - - $0.225 (100.0)
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Notes:
(1) Operating income is defined as net income before interest and
accretion, income taxes, depreciation on property, plant and
equipment, amortization on intangible assets, earnings from equity
investment, stock-based compensation, unrealized foreign exchange
gains or losses, changes in fair value of investments, and gains or
losses on sale of property, plant and equipment.
(2) Net income (loss) and earnings (loss) per share have been adjusted to
reflect earnings before the impact of unrealized foreign exchange
gains and losses. Net income (loss) and earnings (loss) per share
have also been adjusted for the tax impact as though Mullen Group had
been a corporation since January 1, 2009.
(3) Earnings (loss) per share is based on the weighted average number of
shares outstanding for the period.
(4) Funds from operations is defined as cash flow from operating
activities before changes in non-cash working capital items.
(5) 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 income as an indicator of GAAP performance.
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SEGMENTED RESULTS Three Months Ended Six Months Ended
June 30 June 30
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2010 2009 Change 2010 2009 Change
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(Unaudited)
($ millions) $ $ % $ $ %
Revenue
Oilfield Services 121.7 116.4 4.6 298.9 325.5 (8.2)
Trucking\Logistics 94.5 87.4 8.1 177.7 192.0 (7.4)
Corporate 0.1 0.1 - 0.3 0.5 -
Intersegment eliminations
Oilfield Services (1.3) (0.3) - (1.6) (1.9) -
Trucking\Logistics (0.4) (0.9) - (0.8) (1.4) -
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Totals 214.6 202.7 5.9 474.5 514.7 (7.8)
Operating income
Oilfield Services 19.7 18.1 8.8 65.7 75.9 (13.4)
Trucking\Logistics 16.1 13.6 18.4 29.2 30.5 (4.3)
Corporate (2.3) (2.9) - (4.2) (4.0) -
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Totals 33.5 28.8 16.3 90.7 102.4 (11.4)
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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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