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Press release from CNW Group

MULLEN GROUP LTD. REPORTS 2010 FINANCIAL RESULTS

Thursday, February 24, 2011

MULLEN GROUP LTD. REPORTS 2010 FINANCIAL RESULTS08:00 EST Thursday, February 24, 2011OKOTOKS, AB, Feb. 24 /CNW/ - (TSX-MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended December 31, 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 is accounted for as a continuity of interests whereby the consolidated financial statements for the three and twelve month periods ended December 31, 2010 and comparables for the three and twelve month periods ended December 31, 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.For the twelve month period ended December 31, 2010, Mullen Group generated revenue of $1,039.8 million, operating income of $204.0 million and funds from operations of $150.1 million. Cash was used, among other things, to acquire net property, plant and equipment for $43.7 million, pay cash dividends totaling $39.8 million, fund acquisitions of $39.2 million, repurchase common shares for $27.3 million and purchase investments of $27.2 million.Mullen Group's revenue of $1,039.8 million for the year ended December 31, 2010 increased by $61.8 million or 6.3 percent from the $978.0 million generated in 2009. This increase in revenue was attributable to greater revenues generated by both the Oilfield Services segment and the Trucking/Logistics segment. The increase in revenue experienced by the Oilfield Services segment resulted from both a year over year increase in oil and natural gas drilling activity in western Canada and from the revenue generated on certain oil sands projects. The Trucking/Logistics segment experienced increased revenue by virtue of the incremental revenue generated by acquisitions as well as higher fuel surcharge revenue.Mullen Group generated operating income for the year ended December 31, 2010 of $204.0 million, an increase of $11.4 million or 5.9 percent over the $192.6 million generated in 2009. Operating income increased in the Oilfield Services segment and the Trucking/Logistics segment as a direct result of the increase in revenue experienced by both segments."The diversified nature of Mullen Group's business model, by geographic region and service, enabled Mullen Group to strategically allocate its resources and thereby recover from a very slow first half and maintain its historical margins throughout the year. Over the second half of 2010, our Operating Entities experienced revenue growth of 22.2 percent and generated growth in operating income of 25.6 percent compared to the same period in 2009. We are obviously very pleased with our performance in 2010," stated Mr. Stephen Lockwood, President and Co-Chief Executive Officer.In 2010, Mullen Group generated net income of $79.1 million or $1.00 per share, a decrease of $11.7 million compared to $90.8 million or $1.13 per share in 2009. The $11.7 million decrease in net income was mainly attributable to a $25.9 million year over year decrease in unrealized foreign exchange gain and a $5.8 million increase in the provision for income taxes. These items were somewhat offset by the $11.4 million increase in operating income, a $5.9 million change in the fair value of investments, and a $4.1 million decrease in depreciation expense. Mullen Group's adjusted net income was $66.0 million or $0.83 per share compared to $50.1 million or $0.62 per share in 2009. Adjusted net income and earnings per share 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 in 2010 and 2009. These adjustments reflect earnings from an operating perspective.Mullen Group's revenue of $296.4 million for the three month period ended December 31, 2010, was an increase of $62.8 million or 26.9 percent from the $233.6 million generated for the same period last year. This increase in revenue was attributable to greater revenue being generated by both the Oilfield Services segment and the Trucking/Logistics segment. The increased revenue experienced by the Oilfield Services segment was mainly attributable to the revenue generated by Operating Entities most directly tied to oil and natural gas drilling activity and the revenue generated from certain oil sands projects. The increase in revenue experienced by the Trucking/Logistics segment was mainly attributable to incremental revenue from acquisitions and stronger demand for transportation services particularly in western Canada.Mullen Group generated operating income for the fourth quarter of $58.3 million, an increase of $14.3 million or 32.5 percent over the same period last year. Operating income increased in both the Oilfield Services segment and the Trucking/Logistics segment as a direct result of the increase in revenue experienced by both segments. Operating income as a percentage of revenue increased to 19.7 percent from 18.8 percent in 2009."The fourth quarter of 2010 continued the trend of strengthening demand for the majority of services provided by Mullen Group's Operating Entities. This was driven primarily by a robust recovery in western Canada which is benefiting from higher oil pricing as well as the introduction of new drilling technologies. This combination has reenergized oil focused drilling and is now a major contributor to Mullen Group's growth," stated Mr. Murray Mullen, Chairman and Chief Executive Officer."Today we are in near full recovery mode, with the lone exception being our business directly tied to drilling activity - in particular rig moving, which will not return to prior activity and profit levels any time soon. Overall, however, we expect virtually all 26 Operating Entities in the Mullen Group to show year over year growth with the highest growth levels in those businesses with close ties to oil sands activity and oil production, two sectors in which we will continue to deploy capital," stated Mr. Murray Mullen.A summary of Mullen Group's results for the quarter and year ended December 31, 2010, along with revenues and operating results by segment are as follows: << ------------------------------------------------------------------------- SUMMARY Three Months Ended Twelve Months Ended December 31 December 31 -------------------------------------------- --------------------------- 2010 2009 Change 2010 2009 Change ------------------------------------------------------------------------- (Unaudited) ($ millions, except per share and per unit amounts) $ $ % $ $ % Revenue 296.4 233.6 26.9 1,039.8 978.0 6.3 Operating income (1) 58.3 44.0 32.5 204.0 192.6 5.9 Unrealized foreign exchange gain 9.4 4.7 100.0 14.1 40.0 (64.8) Net income 33.2 11.1 199.1 79.1 90.8 (12.9) Net income - adjusted(2) 23.3 5.9 294.9 66.0 50.1 31.7 Earnings per share (3) $0.42 $0.14 200.0 $1.00 $1.13 (11.5) Earnings per share - adjusted(2) $0.30 $0.07 328.6 $0.83 $0.62 33.9 Funds from operations (4) 52.3 33.5 56.1 150.1 121.0 24.1 Funds from operations per share (5) $0.66 $0.41 61.0 $1.89 $1.50 26.0 Cash dividends declared per common share $0.125 $0.125 - $0.50 $0.25 100.0 Cash distributions declared per unit - - - - $0.225 (100.0) ------------------------------------------------------------------------- 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 expense, 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 and earnings per share have been adjusted to eliminate the impact of unrealized foreign exchange gains and losses. As well as the tax impact as though Mullen Group had been a corporation since January 1, 2009. (3) Earnings per share is based on the weighted average number of common 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 from operating activities. (5) Funds from operations per share is calculated by dividing funds from operations by the weighted average number of common shares outstanding for the period ended. Operating income, funds from operations and funds from operations per share are not recognized measures under Canadian generally accepted accounting principles ("Canadian 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 Canadian GAAP and do not have standardized meanings prescribed by Canadian GAAP. Investors should be cautioned that these indicators should not replace net income as an indicator of Canadian GAAP performance. ------------------------------------------------------------------------- ------------------------------------------------------------------------- SEGMENTED RESULTS Three Months Ended Twelve Months Ended December 31 December 31 ------------------------- --------------------------- -------------------------------------------- --------------------------- 2010 2009 Change 2010 2009 Change ------------------------------------------------------------------------- (Unaudited) ($ millions) $ $ % $ $ % Revenue Oilfield Services 189.2 146.1 29.5 650.7 612.6 6.2 Trucking/ Logistics 107.9 89.5 20.6 392.1 372.1 5.4 Corporate 0.3 0.3 - 0.9 0.9 - Intersegment eliminations Oilfield Services (0.3) (1.8) - (1.9) (4.9) - Trucking/ Logistics (0.7) (0.5) - (2.0) (2.7) - ------------------------------------------------------------------------- Totals 296.4 233.6 26.9 1,039.8 978.0 6.3 Operating income Oilfield Services 41.4 31.3 32.3 145.2 139.5 4.1 Trucking/ Logistics 18.7 14.8 26.4 66.2 61.6 7.5 Corporate (1.8) (2.1) - (7.4) (8.5) - ------------------------------------------------------------------------- Totals 58.3 44.0 32.5 204.0 192.6 5.9 ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------- December 31, 2010 and 2009 2010 2009 ($ thousands) Assets Current assets: Cash and cash equivalents $ 113,313 $ 204,899 Accounts receivable 204,898 151,049 Inventory 25,053 22,505 Prepaid expenses 8,809 7,922 Investments 37,706 6,101 ------------------------------------------------------------------------- 389,779 392,476 Property, plant and equipment 622,262 613,281 Goodwill 851,549 846,441 Intangible assets 62,546 72,406 Other assets 14,878 2,283 ------------------------------------------------------------------------- $ 1,941,014 $ 1,926,887 ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 96,864 $ 69,288 Dividends payable 9,840 10,076 Current portion of future income taxes 32,170 26,719 Income tax payable 5,171 36,044 Current portion of long-term debt 3,035 1,830 ------------------------------------------------------------------------- 147,080 143,957 Long-term debt 396,994 410,811 Convertible debentures - debt component 117,067 116,162 Future income taxes 98,145 88,726 Shareholders' equity: Share capital 1,158,022 1,185,821 Convertible debentures - equity component 7,192 7,200 Contributed surplus 10,186 8,103 Retained earnings (deficit) 6,328 (33,893) ------------------------------------------------------------------------- 1,181,728 1,167,231 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ 1,941,014 $ 1,926,887 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT) ($ thousand, except share and per share amounts) Three Months Ended Twelve Months Ended December 31 December 31 2010 2009 2010 2009 ------------------------------------------------------------------------- (Unaudited) Revenue $ 296,389 $ 233,568 $ 1,039,804 $ 978,046 Direct operating expenses 204,163 159,701 709,443 662,522 Selling and administrative expenses 33,950 29,945 126,406 122,960 Depreciation on property, plant and equipment 15,332 16,011 57,511 61,576 Amortization on intangible assets 4,478 4,702 18,963 18,608 Interest and accretion expense 9,436 9,828 39,098 36,163 Unrealized foreign exchange gain (9,400) (4,700) (14,100) (39,950) Change in fair value of investments (2,439) (787) (7,244) (1,381) Stock-based compensation expense 299 255 2,120 946 (Gain) loss on sale of property, plant and equipment (1,049) 5,361 1,962 5,056 ------------------------------------------------------------------------- Income before income taxes and earnings from equity investment 41,619 13,252 105,645 111,546 ------------------------------------------------------------------------- Provision for income taxes: Current (recovery) (3,170) 983 16,418 36,465 Future (reduction) 11,579 1,184 10,127 (15,607) ------------------------------------------------------------------------- 8,409 2,167 26,545 20,858 ------------------------------------------------------------------------- Income before earnings from equity investment 33,210 11,085 79,100 90,688 Earnings from equity investment - - - 122 ------------------------------------------------------------------------- Net income and comprehensive income $ 33,210 $ 11,085 $ 79,100 $ 90,810 Deficit, beginning of period $ (17,042) $ (34,902) $ (33,893) $ (86,415) Cash distributions declared to unitholders - - - (18,136) Cash dividends declared to common shareholders (9,840) (10,076) (39,592) (20,152) Repurchase of common shares - - 713 - ------------------------------------------------------------------------- Retained earnings (deficit), end of period $ 6,328 $ (33,893) $ 6,328 $ (33,893) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share: Basic $ 0.42 $ 0.14 $ 1.00 $ 1.13 Diluted $ 0.40 $ 0.14 $ 0.98 $ 1.10 Weighted average number of common shares outstanding: Basic 78,707 80,605 79,411 80,605 Diluted 90,341 92,254 91,047 88,421 ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ($ thousands) Three Months Ended Twelve Months Ended December 31 December 31 2010 2009 2010 2009 ------------------------------------------------------------------------- (Unaudited) Cash provided by (used in): Operations: Net income $ 33,210 $ 11,085 $ 79,100 $ 90,810 Items not involving cash: Depreciation on property, plant and equipment 15,332 16,011 57,511 61,576 Amortization on intangible assets 4,478 4,702 18,963 18,608 Stock-based compensation expense 299 255 2,120 946 Amortization of debt issuance costs 128 167 886 520 Interest expense on convertible debentures settled in common shares 3 - 3 - Unrealized foreign exchange gain (9,400) (4,700) (14,100) (39,950) Accretion on convertible debentures 203 198 791 527 Change in fair value of investments (2,439) (787) (7,244) (1,381) (Gain) loss on sale of property, plant and equipment (1,049) 5,361 1,962 5,056 Future income taxes (reduction) 11,579 1,184 10,127 (15,607) Earnings from equity investment - - - (122) ------------------------------------------------------------------------- 52,344 33,476 150,119 120,983 Changes in non-cash working capital items from operating activities (9,150) (950) (55,608) 91,219 ------------------------------------------------------------------------- 43,194 32,526 94,511 212,202 Financing activities: Proceeds of convertible debentures - - - 125,000 Debt issuance costs - - - (3,036) Repayment of long-term debt and loans (1,552) (740) (14,637) (70,262) Net proceeds from share issuances - - 12 - Cash dividends paid to common shareholders (9,838) (10,076) (39,828) (10,076) Cash distributions paid to unitholders - - - (30,227) Repurchase of common shares - - (27,276) - ------------------------------------------------------------------------- (11,390) (10,816) (81,729) 11,399 Investing activities: Acquisitions (6,223) (1,332) (25,182) (5,337) Property, plant and equipment additions (22,272) (11,657) (61,600) (28,307) Proceeds on sale of property, plant and equipment 7,995 5,773 17,926 16,237 Proceeds on sale of investments - - 2,826 - Purchases of investments (4,192) - (27,187) - Other assets (12,911) (1,778) (14,009) (1,586) Changes in non-cash working capital items from investing activities 2,858 - 2,858 - ------------------------------------------------------------------------- (34,745) (8,994) (104,368) (18,993) ------------------------------------------------------------------------- Change in cash and cash equivalents (2,941) 12,716 (91,586) 204,608 Cash and cash equivalents, beginning of period 116,254 192,183 204,899 291 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 113,313 $ 204,899 $ 113,313 $ 204,899 ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 12,017 $ 12,763 $ 37,492 $ 36,376 Income taxes paid (received) $ 2,252 $ (84) $ 47,161 $ 2,056 ------------------------------------------------------------------------- >>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 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.For further information: Mr. Murray K. Mullen - Chairman of the Board and Chief Executive Officer, Mr. Stephen H. Lockwood - Co-Chief Executive Officer and President, Mr. P. Stephen Clark - Chief Financial Officer, 121A, 31 Southridge Drive, Okotoks, Alberta, Canada, T1S 2N3, Tel: (403) 995-5200, Fax: (403) 995-5296