Friday, September 25, 2020
Financial Results News

Mullen Group Reports Second Quarter Financial Results, Revenue were $257.5 Million

Mullen Group operates a diversified business model combined with a highly adaptable and variable cost structure.  The financial results for the three month period ended June 30, 2020, are as follows:

  • generated consolidated revenue of $257.5 million, a decrease of $61.5 million, or 19.3 percent, as compared to $319.0 million in 2019 due to:
    • a decrease of $10.5 million, or 9.3 percent, to $101.9 million in the Less-Than-Truckload segment
    • a decrease of $19.3 million, or 18.9 percent, to $82.8 million in the Logistics & Warehousing segment
    • a decrease of $31.6 million, or 30.1 percent, to $73.5 million in the Specialized & Industrial Services segment
  • earned consolidated operating income before depreciation and amortization (“OIBDA“) of $55.0 million, an increase of $3.6 million as compared to $51.4 million in 2019 due to:
    • an increase of $1.0 million, or 5.1 percent, to $20.5 million in the Less-Than-Truckload segment
    • an increase of $2.0 million, or 12.9 percent, to $17.5 million in the Logistics & Warehousing segment
    • an increase of $1.7 million, or 9.4 percent, to $19.8 million in the Specialized & Industrial Services segment
  • record net cash from operating activities in the second quarter being up by $39.0 million, or 85.3 percent, to $84.7 million

Second Quarter Financial Results

Revenue decreased by $61.5 million, or 19.3 percent, to $257.5 million and is summarized as follows:

  • Less-Than-Truckload segment down $10.5 million, or 9.3 percent, to $101.9 million – revenue declined by $10.5 million due to lower demand resulting from the negative effects of the COVID-19 pandemic and lower fuel surcharge revenue being partially offset by the incremental revenue generated from the acquisitions of Argus Carriers Ltd. (“Argus“) and Inter-Urban Delivery Service Ltd. (“Inter-Urban“).
  • Logistics & Warehousing segment down $19.3 million, or 18.9 percent, to $82.8 million – revenue declined by $19.3 million due to the outbreak of the COVID-19 virus in North America resulting in business closures as well as lower fuel surcharge revenue.  These decreases were partially offset by a strong performance by Kleysen Group Ltd. (“Kleysen“) due to greater demand for transload services from expanding our service offerings at our Edmonton, Alberta distribution center and from slightly higher industrial salt sales.
  • Specialized & Industrial Services segment down $31.6 million, or 30.1 percent, to $73.5 million – revenue declined by $31.6 million due to extremely low oil prices, mandated curtailments and a poor drilling environment along with customers curtailing capital spending and postponing certain maintenance programs.   Somewhat offsetting these declines were greater demand for large diameter pipeline hauling and stringing services at Premay Pipeline Hauling L.P. as well as improved results at Smook Contractors Ltd.

OIBDA increased by $3.6 million, or 7.0 percent, to $55.0 million and is summarized as follows:

  • Less-Than-Truckload segment up $1.0 million, or 5.1 percent, to $20.5 million – OIBDA improved due to the incremental OIBDA generated from the acquisitions of Argus and Inter-Urban and from $1.9 million recognized in the quarter from the Canada Emergency Wage Subsidy (“CEWS“) program.   These increases were somewhat offset by a weakened Alberta market.  Operating margin increased to 20.1 percent (CEWS Adjusted – 18.3 percent) from 17.3 percent in 2019 due to the CEWS, lower diesel prices and cost control initiatives.
  • Logistics & Warehousing segment up $2.0 million, or 12.9 percent, to $17.5 million – OIBDA improved due to $2.7 million being recognized in the quarter from the CEWS program.  Operating margin improved to 21.1 percent (CEWS Adjusted – 17.9 percent) from 15.2 percent in 2019 due to the CEWS, the strong performance at Kleysen, lower diesel prices and cost control measures.
  • Specialized & Industrial Services segment up $1.7 million, or 9.4 percent, to $19.8 million – OIBDA improved due to recognizing $6.3 million in the quarter from the CEWS program and from greater demand for large diameter pipeline hauling and stringing services.  These increases were partially offset by lower OIBDA from those Business Units involved in the transportation of fluids and servicing of wells and from those directly tied to oil and natural gas drilling activity.  Operating margin improved to 26.9 percent (CEWS Adjusted – 18.4 percent) from 17.2 percent in 2019 due to the CEWS, a greater proportion of higher margin revenue, lower diesel prices and cost control measures.

Net income decreased by $8.7 million to $23.0 million, or $0.23 per Common Share due to:

  • A $10.5 million increase in income tax expense, a $1.8 million increase in finance costs and a $1.6 million negative variance in net foreign exchange.
  • The above was partially offset by a $3.6 million increase in OIBDA, a $1.1 million decrease in amortization of intangible assets, a $0.3 million positive variance in the fair value of investments and a $0.3 million increase in earnings from equity investments.

Financial Position

The following summarizes our financial position as at June 30, 2020, along with some key changes that occurred during the second quarter of 2020:

  • Working capital of $244.7 million including $111.9 million of cash and cash equivalents and an undrawn Bank Credit Facility of $150.0 million.
  • Total net debt ($464.1 million) to operating cash flow ($209.5 million) of 2.22:1 as defined per our Private Placement Debt agreement.
  • Private Placement Debt of $482.2 million with no scheduled maturities until 2024 (average fixed rate of 3.93 percent per annum).  Private Placement Debt decreased by $12.8 million due to the foreign exchange gain on our U.S. $229.0 million debt.
  • Book value of Derivative Financial Instruments down $7.7 million to $58.4 million, which swaps our $229.0 million of U.S. dollar debt at an average foreign exchange rate of $1.1096.
  • Net book value of property, plant and equipment of $942.8 million, which includes $577.4 million of carrying costs of owned real property.
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