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Mullen Group Ltd. Reports 2017 Financial Results including Record Trucking/Logistics Segment Financial Results

OKOTOKS, Alberta, Feb 07, 2018 (GLOBE NEWSWIRE via COMTEX) --

Mullen Group Ltd. (TSX:MTL) ("Mullen Group", "We", "Our" and/or the "Corporation"), one of Canada's largest suppliers of trucking and logistics services as well as specialized transportation services to the oil and natural gas industry in Canada, today reported its financial and operating results for the quarter and year ended December 31, 2017, with comparisons to the same period last year. Full details of our results may be found within our 2017 Annual Financial Review, which is available on SEDAR at www.sedar.com or on our website at www.mullen-group.com.

Key financial highlights for the fourth quarter of 2017 with comparison to 2016 are as follows:

HIGHLIGHTS
(unaudited)                                                      Three month periods ended
($ millions)                                                     December 31
                                                                 2017     2016   Change
                                                                 $        $      %
Revenue
Trucking/Logistics                                               206.6    173.0  19.4
Oilfield Services                                                89.4     84.4   5.9
Corporate and intersegment eliminations                          0.1      0.4    -
Total Revenue                                                    296.1    257.8  14.9
Operating income before depreciation and amortization
Trucking/Logistics                                               31.2     26.3   18.6
Oilfield Services                                                15.4     15.0   2.7
Corporate                                                        (0.6   ) 1.2    -
Total Operating income before depreciation and amortization      46.0     42.5   8.2
Operating income before depreciation and amortization - adjusted 45.9     40.2   14.2
Refer to notes section of Summary

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 December 31, 2017, are as follows:

-- generated consolidated revenue of $296.1 million, an increase of $38.3 million, or 14.9 percent, as compared to $257.8 million in 2016 due to:

? record revenue in the Trucking/Logistics ("T/L") segment, a $33.6 million increase to $206.6 million

? a $5.0 million increase in the Oilfield Services ("OFS") segment to $89.4 million

-- earned consolidated operating income before depreciation and amortization ("OIBDA") of $46.0 million, an increase of $3.5 million, or 8.2 percent, as compared to $42.5 million in 2016 due to:

? record fourth quarter OIBDA in the T/L segment of $31.2 million, an increase of $4.9 million or 18.6 percent

? a $0.4 million increase in the OFS segment

? a $1.8 million increase in Corporate Office costs due to a $2.2 million negative variance in foreign exchange

-- adjusting for the impact of foreign exchange at Corporate Office, operating income before depreciation and amortization ("OIBDA - adjusted") was $45.9 million, or 15.5 percent of revenue, as compared to $40.2 million, or 15.6 percent of revenue, in 2016. These results more accurately reflect our operating performance.

Fourth Quarter Financial Results

Revenue increased by $38.3 million, or 14.9 percent, to $296.1 million and is summarized as follows:

-- T/L segment grew by $33.6 million, or 19.4 percent, to $206.6 million - a record compared to any previous quarterly period. Incremental revenue from acquisitions was $14.5 million while fuel surcharge revenue rose by $3.0 million. Growth resulted from a stronger Canadian economy, market share gains and increased demand for freight services in western Canada which was mainly due to the recovery in the Alberta economy.

-- OFS segment grew by $5.0 million, or 5.9 percent - acquisitions accounted for $2.6 million. Growth was due to improved demand for fluid hauling being somewhat offset by lower revenue from our pipe and tubular Business Units and a decline in demand for large diameter pipeline hauling and stringing services.

OIBDA increased by $3.5 million, or 8.2 percent, to $46.0 million and is summarized as follows:

-- T/L segment grew by $4.9 million, or 18.6 percent, to $31.2 million - a record compared to any previous fourth quarter period. As a percentage of revenue, operating margin remained relatively stable at 15.1 percent as compared to 15.2 percent in 2016.

-- OFS segment up by $0.4 million to $15.4 million - increases from Business Units providing drilling and drilling related services was somewhat offset by a decline from those involved in the transportation of fluids and servicing of wells. Operating margin decreased to 17.2 percent compared to 17.8 percent in 2016 due to higher direct operating expenses ("DOE") as a percentage of segment revenue resulting primarily from increased pump sales at Canadian Dewatering L.P.

-- Corporate Office costs up $1.8 million due to a $2.2 million negative variance in foreign exchange.

Net income increased by $6.1 million to $5.4 million, or $0.05 per Common Share due to:

-- A $10.1 million positive variance in net foreign exchange, a $3.5 million increase in OIBDA and a $2.4 million decrease in finance costs.

-- The above was partially offset by a $7.8 million increase in depreciation of property, plant and equipment and a $1.4 million increase in the loss on sale of property, plant and equipment.

"The changes we had expected in the trucking and logistics industry intensified as the year unfolded due to a combination of increased demand for freight services and a tight labour market, which has now reached a point where adding industry supply is not viable. This is a trend we had been anticipating for some time and I believe will validate our strategy of pursuing acquisitions in the trucking and logistics sector. Our fourth quarter revenue in our Trucking/Logistics segment set new records, which we hope to build upon as we enter 2018. In our Oilfield Services segment our results were stronger than last year, primarily due to increased drilling activity in western Canada year over year. However, we saw a definite slowdown in early December as our customers reduced spending, a clear sign that lower natural gas prices for western Canadian producers impacted cash flows, and tightened their balance sheets. Overall I am pleased with our fourth quarter performance but more importantly I believe we can continue to grow and improve the bottom line in 2018," commented Mr. Murray K. Mullen, Chairman and Chief Executive Officer.

A summary of Mullen Group's results for the quarter and year ended December 31, 2017, are as follows:

SUMMARY
(unaudited)                                                                                           Three month periods ended                                                                                                 Twelve month periods ended
($ millions, except per share amounts)                                                                December 31                                                                                                               December 31
                                                                                                      2017                                                                                                    2016    Change    2017                                                                                                    2016      Change
                                                                                                      $                                                                                                       $       %         $                                                                                                       $         %
Revenue                                                                                               296.1                                                                                                   257.8   14.9      1,138.5                                                                                                 1,035.1   10.0
Operating income before depreciation and amortization                                                 46.0                                                                                                    42.5    8.2       172.2                                                                                                   181.0     (4.9   )
Operating income before depreciation and amortization - adjusted                                      45.9                                                                                                    40.2    14.2      180.1                                                                                                   184.4     (2.3   )
Net foreign exchange loss (gain)                                                                      1.3                                                                                                     11.4    (88.6  )  (21.7                                                                                                 ) (5.8    ) 274.1
Decrease (increase) in fair value of investments                                                      (0.6                                                                                                  ) (1.6  ) (62.5  )  0.7                                                                                                     (1.7    ) (141.2 )
Net income (loss)                                                                                     5.4                                                                                                     (0.7  ) (871.4 )  65.5                                                                                                    52.0      26.0
Net Income - adjusted                                                                                 7.7                                                                                                     10.7    (28.0  )  42.2                                                                                                    46.9      (10.0  )
Earnings (loss) per share                                                                             0.05                                                                                                    (0.01 ) (600.0 )  0.63                                                                                                    0.52      21.2
Earnings per share - adjusted                                                                         0.08                                                                                                    0.10    (20.0  )  0.41                                                                                                    0.47      (12.8  )
Net cash from operating activities                                                                    58.3                                                                                                    46.5    25.4      142.1                                                                                                   174.3     (18.5  )
Net cash from operating activities per share                                                          0.56                                                                                                    0.45    24.4      1.37                                                                                                    1.76      (22.2  )
Cash dividends declared per Common Share                                                              0.09                                                                                                    0.09    -         0.36                                                                                                    0.56      (35.7  )
Notes:
(1)  Operating income before depreciation and amortization ("OIBDA") is defined as net income before depreciation of property, plant and equipment, amortization of intangible assets, finance costs, net foreign exchange gains and losses, other (income) expense and income taxes.
(2)  Operating income before depreciation and amortization - adjusted ("OIBDA - adjusted") is defined as net income before depreciation of property, plant and equipment, amortization of intangible assets, finance costs, net foreign exchange gains and losses, other (income) expense, income taxes and foreign exchange gains and losses recognized within the Corporate office.
(3)  Net income - adjusted and earnings per share - adjusted are calculated by adjusting net income and basic earnings per share by the amount of any net foreign exchange gains and losses, the change in fair value of investments, the gain on contingent consideration and the gain on fair value of equity investment.
(4)  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.
Non-GAAP and Additional GAAP Terms - Mullen Group reports on certain financial performance measures that are described and presented in order to provide shareholders and potential investors with additional measures to evaluate Mullen Group's ability to fund its operations and information regarding its liquidity.  In addition, these measures are used by management in its evaluation of performance. These financial performance measures ("Non-GAAP and Additional GAAP Terms") are not recognized financial terms under Canadian generally accepted accounting principles ("Canadian GAAP"). For publicly accountable enterprises, such as Mullen Group, Canadian GAAP is governed by principles based on IFRS and interpretations of IFRIC.  Management believes these Non-GAAP and Additional GAAP Terms are useful supplemental measures.  These Non-GAAP and Additional GAAP Terms do not have standardized meanings and may not be comparable to similar measures presented by other entities.  Specifically, OIBDA, operating margin, OIBDA - adjusted, operating margin - adjusted, net income - adjusted and earnings per share - adjusted are not recognized terms under IFRS and do not have standardized meanings prescribed by IFRS.  Management believes these measures are useful supplemental measures.  Investors should be cautioned that these indicators should not replace net income and earnings per share as an indicator of performance.

Year End Financial Results

Revenue increased by $103.4 million, or 10.0 percent, to $1,138.5 million and is summarized as follows:

-- T/L segment grew by $71.9 million, or 10.4 percent, to a record of $761.4 million. Incremental revenue from acquisitions was $45.3 million while fuel surcharge revenue rose by $12.4 million. Experienced growth in our regional less-than-truckload business due to market share gains and the recovery in the Alberta economy. Truckload services excluding acquisitions - down due to the completion of various major capital projects in western Canada in 2016, most notable the Suncor Fort Hills oil sands and North West Upgrader projects.

-- OFS segment grew by $27.9 million, or 8.0 percent - acquisitions accounting for $7.6 million. Growth was due to improved drilling activity which benefitted those Business Units most directly tied to oil and natural gas drilling activity as well as from greater demand for pumps and related dewatering services. These increases were partially offset by a decline in demand for pipeline hauling and stringing services due to the timing and regulatory hurdles of various projects.

OIBDA decreased by $8.8 million, or 4.9 percent, to $172.2 million and is summarized as follows:

-- T/L segment decreased by $7.0 million, or 6.0 percent, to $109.7 million due to the completion of major capital projects that have not been replaced being partially offset by incremental OIBDA from acquisitions, market share gains and the recovery in the Alberta economy. As a percentage of revenue, operating margin decreased to 14.4 percent from 16.9 percent in 2016 due to the change in revenue mix, competitive pricing and from the acquisition of asset light businesses which have lower margin but higher return on invested capital.

-- OFS segment up by $1.8 million to $74.2 million due to improved drilling activity and from the acquisition of Envolve Energy Services Corp. Specifically, increases from Business Units providing drilling and drilling related services was mostly offset by a decline from those leveraged to the oil sands and pipeline construction projects. Operating margin decreased to 19.6 percent compared to 20.7 percent in 2016 due to a change in revenue mix and higher DOE as a percentage of segment revenue from increased pump sales at Canadian Dewatering L.P.

-- Corporate Office costs up $3.6 million due to a $4.5 million negative variance in foreign exchange.

Net income increased by $13.5 million to $65.5 million, or $0.63 per Common Share due to:

-- A $15.9 million positive variance in net foreign exchange, a $5.0 million decrease in finance costs, a $2.9 million decrease in income tax expense, a $2.8 million decrease in amortization of intangible assets and a $2.0 million gain on contingent consideration.

-- The above was partially offset by an $8.8 million decrease in OIBDA, a $4.1 million increase in depreciation of property, plant and equipment and a $2.4 million negative variance in the fair value of investments.

Financial Position

The following summarizes our financial position as at December 31, 2017, along with some of the key changes that occurred during 2017:

-- Repaid U.S. $85.0 million (5.90 percent Series E Notes) and $20.0 million (5.47 percent Series F Notes) of debt reducing our annual interest obligation by approximately $7.5 million.

-- Reduced the weighted average interest rate on our debt to 4.21 percent.

-- Exited 2017 with working capital of $181.6 million that included $134.5 million of cash and cash equivalents.

-- Total net debt ($421.8 million) to operating cash flow ($175.8 million) of 2.40:1 as defined per our Private Placement Debt agreement.

-- Net book value of property, plant and equipment of $916.1 million consisting of $467.6 million of real property (carrying cost of $527.7 million).

-- Cross-currency swaps valued at $25.6 million that swaps the principal portion of our U.S. $229.0 million debt to a Canadian currency equivalent of $254.1 million.

-- Series D ($70.0 million) Notes and $12.4 million of Debentures (conversion price of $10.73) mature on June 30, 2018 and July 1, 2018, respectively.

This news release may contain forward-looking information that is subject to risk factors associated with the oil and natural gas business and the overall economy. This information relates to future events and Mullen Group's future performance. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and the words "may", "will", "should", "could", "expect", "plan", "intend", "anticipate", "believe", "estimate", "propose", "predict", "potential", "continue", "aim", or the negative of these terms or other comparable terminology are generally intended to identify forward-looking information. Such information represents Mullen Group's internal projections, estimates, expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. This information involves known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Mullen Group believes that the expectations reflected in this forward-looking information are reasonable; however, undue reliance should not be placed on this forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. For further information on any strategic, financial, operational and other outlook on Mullen Group's business please refer to Mullen Group's Management's Discussion and Analysis available for viewing on SEDAR at www.sedar.com. The risks and other factors are described under "Principal Risks and Uncertainties" in Mullen Group's Annual Information Form and Management's Discussion and Analysis. The forward-looking information contained in this news release is expressly qualified by this cautionary statement. The forward-looking information contained herein is made as of the date of this news release and Mullen Group disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable Canadian securities laws. Mullen Group relies on litigation protection for "forward-looking" statements.

Mullen Group is a company that owns a network of independently operated businesses. The Corporation is recognized as one of the leading suppliers of trucking and logistics services in Canada and provides a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada - two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. The corporate office provides the capital and financial expertise, legal support, technology and systems support, shared services and strategic planning 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 or on SEDAR at www.sedar.com.

For further information, please contact:

Mr. Murray K. Mullen - Chairman of the Board, Chief Executive Officer and President

Mr. P. Stephen Clark - Chief Financial Officer

Mr. Richard J. Maloney - Senior Vice President

121A - 31 Southridge Drive

Okotoks, Alberta, Canada T1S 2N3

Telephone: 403-995-5200

Fax: 403-995-5296

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