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Press release from CNW Group

Mullen Group Ltd. Reports 2012 Financial Results

Wednesday, February 20, 2013

Mullen Group Ltd. Reports 2012 Financial Results18:40 EST Wednesday, February 20, 2013OKOTOKS, AB, Feb. 20, 2013 /CNW/ - (TSX:MTL)  Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended December 31, 2012, with comparisons to the same period last year.For the twelve month period ended December 31, 2012, Mullen Group generated record revenue of $1,427.6 million, operating income of $293.8 million and net cash from operating activities of $279.9 million. Cash was used, among other things, to acquire net property, plant and equipment of $103.2 million, pay cash dividends of $82.6 million and fund an acquisition of $5.8 million.Mullen Group's revenue of $1,427.6 million for the year ended December 31, 2012, increased by $40.3 million or 2.9 percent from the $1,387.3 million generated in 2011.  The year over year increase in consolidated revenue was largely attributable to the revenue growth experienced in the first and second quarters of 2012 compared to the same quarters in 2011, which was somewhat offset by the decrease in consolidated revenue experienced in the third and fourth quarters of 2012 compared to same quarters in 2011.The Oilfield Services segment generated $897.3 million in revenue for the year ended December 31, 2012, which represents a marginal 0.7 percent decrease in revenue compared to $903.8 million reported in 2011.  The increase in revenue in the first and second quarters of 2012 compared to 2011 resulted mainly from increased demand in drilling activity along with increased demand for core drilling services. However, the increases in revenue from the first and second quarters of 2012 were offset by decreases in revenue in the third and fourth quarters, which generally came from a slow down in drilling activity, the completion of the Thin Fine Tailings ("TFT") barge system project and the delay in pipeline construction activity.  The Trucking/Logistics segment generated $535.6 million in revenue for the year ended December 31, 2012, which represents a 9.5 percent increase in revenue compared to the $489.3 million reported in 2011.  This $46.3 million increase in the Trucking/Logistics segment's revenue is mainly attributable to recognizing a full year of Hi-Way 9 revenue, increased demand for multi-modal and specialized transportation services in western Canada and an increase in fuel surcharge revenue.Mullen Group generated record operating income of $293.8 million in 2012, an increase of $5.8 million or 2.0 percent over the $288.0 million generated in 2011. The increase in operating income was the combined effect of a marginal $6.4 million decrease in operating income reported by the Oilfield Services segment which was more than offset by an $11.0 million increase in operating income reported by the Trucking/Logistics segment and decreased corporate costs.  Operating income as a percentage of revenue for 2012 was 20.6 percent compared to 20.8 percent in 2011."Mullen Group's record performance in 2012, in terms of revenue generation and operating income, reinforces the strength of our self-managed business unit model which provides Mullen Group diversity in service offerings in multiple geographical regions.  This is not to say that 2012 was not without its challenges. The combined effect of the completion of the TFT barge system project by Canadian Dewatering L.P. in the second quarter of 2012, decreased drilling activity in the last half of the year and the delay in a number of pipeline construction projects did have an unfavourable impact on our results in 2012.  However, the demand for core hole delineation services, well servicing and fluid hauling along with the continued demand for specialized and multi-modal transportation services benefited a number of our business units and was key in driving our record performance," said Mr. Stephen H. Lockwood, President and Co-Chief Executive Officer.In 2012 Mullen Group generated net income of $130.9 million, or $1.58 per share, an increase of $11.5 million or 9.6 percent, as compared to $119.4 million or $1.50 per share in 2011.  The $11.5 million increase in net income was mainly attributable to an $11.6 million positive variance in unrealized foreign exchange and Mullen Group's improved operating performance, which contributed $5.8 million of additional operating income.  These increases were somewhat offset by $5.1 million of higher income tax expense and a $2.8 million negative variance in the fair value of investments.  Adjusting Mullen Group's net income and earnings per share to eliminate the impact of unrealized foreign exchange and the change in fair value of investments resulted in adjusted net income of $133.0 million and adjusted earnings per share of $1.60, as compared to $125.4 million and $1.57 per share in 2011, respectively.  These adjustments more clearly reflect earnings from an operating perspective.In the fourth quarter of 2012 Mullen Group generated revenue of $346.1 million, a decrease of $48.0 million or 12.2 percent from the $394.1 million generated for the same period in 2011.  The decrease in revenue is primarily due to decreased revenue experienced in the Oilfield Services segment, which reported a $47.7 million reduction in revenue in the fourth quarter of 2012 compared to the same period in 2011.  The decrease in revenue in the Oilfield Services segment generally reflects the completion of the TFT barge system project along with a reduction in revenue related to tailing reduction operations for a large oil sands customer, reduced drilling activity, and the delay of a number of large pipeline construction projects.  Revenue in the Trucking/Logistics segment was generally flat in the fourth quarter of 2012 compared to the same period last year.Mullen Group generated operating income for the fourth quarter of $71.2 million, a decrease of $12.6 million or 15.0 percent over the same period in 2011.  Generally the decrease in operating income came from the reduced revenue recorded by the Oilfield Services segment while the Trucking/Logistics segment reported a marginal increase in operating income in the quarter.  Operating income as a percentage of revenue was 20.6 percent for the fourth quarter of 2012 compared to 21.3 percent in 2011."At the start of 2012, Mullen Group expected our operating results for the year to be consistent with 2011 as we did not see any catalyst for significant growth.  This, as our results show, was fairly accurate.  What I am particularly pleased with, in addition to our record operating results, is the validation that our business model works very well as is evidenced in the strength of Mullen Group's balance sheet which includes $122.8 million in cash.  This strength in our balance sheet is imperative as we enter what we expect to be somewhat of an unpredictable 2013. The fact remains that Mullen Group will continue to invest in our business units to ensure they remain best in class, be opportunistic when accretive acquisitions meeting our economic model are presented and very importantly, reward our shareholders,'' said Mr. Murray K. Mullen, Chairman and Chief Executive Officer.A summary of Mullen Group's results for the quarter and year ended December 31, 2012, along with revenue and operating results by segment are as follows:    SUMMARY   (unaudited)(millions, except per share amounts)Three month periods ended December 31 Twelve month periods ended December 31 20122011Change 20122011Change $$% $$%Revenue346.1394.1(12.2) 1,427.61,387.32.9        Operating income(1)71.283.8(15.0) 293.8288.02.0Unrealized foreign exchange (gain) loss2.7(7.3)(137.0) (5.2)6.4181.3Change in fair value of investments6.0—(100.0) 6.73.9(71.8)Net income21.847.5(54.1) 130.9119.49.6Net Income - adjusted(2)29.738.8(23.5) 133.0125.46.1Earnings per share(3)0.250.59(57.6) 1.581.505.3Earnings per share - adjusted(2)0.340.48(29.2) 1.601.571.9Net cash from operating activities67.771.6(5.5) 279.9221.426.4Net cash from operating activities per share(3)0.770.89(13.5) 3.372.7721.7Cash dividends declared per Common Share0.250.25— 1.001.00—Notes:  (1)Operating income is defined as net income before depreciation on property, plant and equipment, amortization on intangible assets, finance costs, unrealized foreign exchange gains and losses, other (income) expense and income tax expense.  (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 unrealized foreign exchange gains and losses and by the change infair 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 IFRSand do not have standardized meanings prescribed by IFRS.  Management believes these measures are usefulsupplemental measures.  Investors should be cautioned that these indicators should not replace net income and earnings per share as indicators of performance.    SEGMENTED RESULTS   (unaudited)(millions)Three month periods ended December 31 Twelve month periods ended December 31 20122011Change 20122011Change $$% $$%Revenue        Oilfield Services209.8257.5(18.5) 897.3903.8(0.7) Trucking/Logistics137.6137.50.1 535.6489.39.5 Corporate(0.1)—— 0.70.1—Intersegment eliminations        Oilfield Services(0.4)(0.2)— (1.9)(0.7)— Trucking/Logistics(0.8)(0.7)— (4.1)(5.2)—Total346.1394.1(12.2) 1,427.61,387.32.9Operating Income        Oilfield Services45.959.5(22.9) 200.1206.5(3.1) Trucking/Logistics26.325.81.9 98.487.412.6 Corporate(1.0)(1.5)— (4.7)(5.9)—Total71.283.8(15.0) 293.8288.02.0     CONSOLIDATED STATEMENT OF FINANCIAL POSITION   (thousands) December 3120122011  $$Assets   Current assets:    Cash and cash equivalents 122,77265,934 Trade and other receivables 219,423262,587 Inventory 32,09738,826 Prepaid expenses 10,66310,498 Current tax receivable 2,083916  387,038378,761Non-current assets:   Property, plant and equipment 843,318798,362Goodwill 239,595241,513Intangible assets 52,98569,297Investments 27,61234,319Deferred tax assets 5,0294,583Other assets 327302  1,168,8661,148,376Total Assets 1,555,9041,527,137    Liabilities and Equity   Current liabilities:    Accounts payable and accrued liabilities 104,810125,002 Dividends payable 21,91720,209 Current tax payable 20,90212,724 Current portion of long-term debt 1,4714,974  149,100162,909Non-current liabilities:   Long-term debt 392,814399,232Convertible debentures - debt component 39,773103,276Deferred tax liabilities 147,092157,421  579,679659,929Equity:    Share capital 720,836641,918 Convertible debentures - equity component 1,8434,826 Contributed surplus 12,12511,844 Retained earnings 92,32145,711  827,125704,299    Total Liabilities and Equity 1,555,9041,527,137  CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND RETAINED EARNINGS  Three month periods ended December 31 Twelve month periods ended December 31(thousands, except per share amounts)20122011 20122011 $$ $$ (unaudited)   Revenue346,166394,069 1,427,6401,387,293      Direct operating expenses238,648270,257 983,535951,825Selling and administrative expenses36,33240,009 150,298147,493 71,18683,803 293,807287,975      Depreciation on property, plant and equipment18,02616,574 65,33561,803Amortization on intangible assets4,6104,714 18,33419,015Finance costs7,0848,877 32,89736,279Unrealized foreign exchange (gain) loss2,749(7,332) (5,194)6,345Other (income) expense7,9931,089 6,6685,335Income before income taxes30,72459,881 175,767159,198      Income tax expense8,95412,388 44,85839,765      Net income and total comprehensive income21,77047,493 130,909119,433      Retained earnings (deficit), beginning of period92,46818,427 45,711(538,917)Dividends declared to common shareholders(21,917)(20,209) (84,299)(80,255)Reduction of stated capital—— —545,450Retained earnings, end of period92,32145,711 92,32145,711      Earnings per share:         Basic0.250.59 1.581.50    Diluted0.250.54 1.521.43Weighted average number of Common Shares outstanding:         Basic87,38480,835 82,96179,885    Diluted87,90191,171 91,78590,258 CONSOLIDATED STATEMENT OF CASH FLOWS Three month periods ended December 31 Twelve month periods ended December 31(thousands)20122011 20122011 $$ $$                 (unaudited)   Cash provided by (used in):     Cash flows from operating activities:      Net income21,77047,493 130,909119,433 Adjustments for:       Depreciation on property, plant and equipment18,02616,574 65,33561,803  Amortization on intangible assets4,6104,714 18,33419,015  Finance costs7,0848,877 32,89736,279  Stock-based compensation expense390616 2,7682,464  Foreign exchange2,615(7,198) (4,913)5,983  Change in fair value of investments6,0499 6,7073,933  Loss (gain) on sale of property, plant and equipment9441,080 (1,039)1,402  Income tax expense8,95412,388 44,85839,765  Impairment of goodwill3,000— 3,000—  Gain on contingent consideration(2,000)— (2,000)— 71,44284,553 296,856290,077Changes in non-cash working capital items from operating   activities:      Trade and other receivables10,794(8,321) 45,097(43,684) Inventory78(4,582) 6,915(13,236) Prepaid expenses1,410612 (81)(1,273) Accounts payable and accrued liabilities(7,716)3,927 (19,329)16,215Cash generated from operating activities76,00876,189 329,458248,099Income tax paid(8,401)(4,629) (49,604)(26,689)Net cash from operating activities67,60771,560 279,854221,410      Cash flows from financing activities:      Cash dividends paid to common shareholders(21,836)(20,207) (82,591)(69,886) Interest paid(10,050)(11,631) (31,538)(35,488) Repayment of long-term debt and loans(2,510)(1,146) (7,753)(22,688) Net proceeds from Common Share issuances5,451106 7,0542,141 Changes in non-cash working capital items from financing   activities33(93) (28)34Net cash used in financing activities(28,912)(32,971) (114,856)(125,887)Cash flows from investing activities:      Acquisitions—221 (5,781)(72,100) Purchase of property, plant and equipment(23,924)(17,449) (122,750)(87,101) Proceeds on sale of property, plant and equipment6,5915,490 19,50813,538 Purchase of investments—(546) —(546) Interest received316119 931740 Other assets210 (25)1,466 Changes in non-cash working capital items from investment   activities(1,521)779 238739Net cash used in investing activities(18,536)(11,376) (107,879)(143,264)Change in cash and cash equivalents20,15927,213 57,119(47,741)Cash and cash equivalents, beginning of period102,47938,855 65,934113,313Effect of exchange rate fluctuations on cash held134(134) (281)362Cash and cash equivalents, end of period122,77265,934 122,77265,934       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.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 or on SEDAR at Mullen Group Ltd.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 Telephone:  403-995-5200 Fax:  403-995-5296