SERVICE SECTOR / Mullen Transportation Inc. 1998 Interim Report to Shareholders
Nine Months Ended September 30, 1998
ALDERSYDE, AB, Nov. 3 /CNW/ -
SUMMARY
''FINANCIAL RESULTS''
Three Months Nine Months
(Unaudited) Ended September 30 Ended September 30
------------------ ------------------
(Millions of Dollars) 1998 1997 Change 1998 1997 Change
---- ---- ------ ---- ---- ------
GROSS REVENUES $49.1 $58.0 -15.3% $169.4 $168.4 0.6%
EBITDA $7.7 $11.4 -32.5% $30.6 $30.5 0.3%
(Earnings Before Interest,
Income Taxes, Depreciation,
Amortization)
NET INCOME $3.4 $5.1 -33.3% $14.1 $13.7 2.9%
EARNINGS PER SHARE
(Dollars) $0.26 $0.39 -33.3% $1.06 $1.04 1.9%
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Mullen Transportation Inc. (MTI) recorded lower consolidated revenues and
net income for the three month period ending September 30, 1998 as compared to
the same period one year earlier. The demand for transportation services was
negatively affected by the reduction in capital spending and investment
activity in the oil and gas industry. Other sectors of the economy, including
the building, construction and pipeline industries, remained relatively strong
during the third quarter, in what can only be described as a very difficult
period.
During the third quarter of 1998 MTI generated consolidated revenues of
$49.1 million as compared to $58.0 million the previous year. Profitability
was also lower with operating income declining to $7.7 million from $11.4
million. Net income fell to $3.4 million, $0.26 per share, from $5.1 million,
$0.39 per share. The declines were almost entirely related to the drop in
drilling activity in western Canada. Oil and gas companies reduced their
drilling exploration budgets as a result of depressed oil prices and lower
cash flows.
Results for the nine months ended September 30, 1998 remained above last
year's record performance. Revenues increased marginally to $169.4 million
from $168.4 million. Operating income was $30.6 million as compared to $30.5
million and net income was $14.1 million, or $1.06 per share, a slight
increase over last year's $13.7 million and $1.04 per share.
Business Unit Review
The decline in oil and gas drilling activity in western Canada
accelerated in the third quarter with less than one-third of the drilling rigs
working by the end of September. In comparison over 90 per cent of the rigs
were actively drilling last year. As a result, the Oilfield Services Division
experienced a decrease of 46.4 per cent in revenue and 81.1 per cent in EBITDA
margins. The cash flows of the oil and gas companies were severely impacted
by the drop in world oil prices contributing to a reduction in gas drilling,
even though gas prices appeared to justify such investments. The company
implemented several cost-saving steps during the quarter but these initiatives
were not enough to overcome the realities of lower equipment utilization rates
and pricing.
The Specialized Service Division was also affected by a reduction in
capital expenditures in the downstream segment of the oil and gas sector.
Several key projects slowed during the quarter which hurt the heavy
over-dimensional side of the business. On a more positive note the pipeline
business performed above expectations securing several key stringing and
stockpiling projects. Revenues were 2.7 per cent lower at $18.1 million and
operating income declined to $4.2 million, down 4.5 per cent from last year.
The overall demand for freight services in western Canada slowed during
the third quarter contributing to slightly lower revenues and operating
margins in both our Truckload and Regional L.T.L. Divisions. Both divisions
rely upon the oil and gas industry for a portion of their business and as a
result equipment utilization was negatively impacted.
Outlook
Our view of the future is not any clearer than that reported to our
shareholders in August, 1998. Business activity levels will continue to be
dragged down by lower oil and gas activity and market uncertainty. As such,
it will be difficult to match last year's fourth quarter results.
The overall Canadian economy, however, appears much stronger than that in
western Canada. Our equity investment in Mill Creek Inc. that was completed
on August 1, 1998, has met our expectations adding $0.02 per share to this
quarter's earnings. We will continue to look for companies like Mill Creek
that offer attractive growth opportunities and diversification to our
organization.
On behalf of your Board of Directors,
(SIGNED)
Murray K. Mullen
President & Chief Executive Officer
November 3, 1998
REVENUES AND OPERATING RESULTS BY DIVISION
THREE MONTHS NINE MONTHS
(Unaudited) Ended September 30 Ended September 30
(Millions of Dollars) 1998 1997 Change 1998 1997 Change
-------------------- --------------------
$ $ % $ $ %
REVENUES
OILFIELD SERVICES DIVISION 8.9 16.6 (46.4) 48.1 49.9 (3.6)
TRUCKLOAD DIVISION 16.7 17.3 (3.5) 52.2 50.0 4.4
SPECIALIZED SERVICES
DIVISION 18.1 18.6 (2.7) 53.1 52.2 1.7
REGIONAL L.T.L. DIVISION 5.5 5.7 (3.5) 16.5 17.1 (3.5)
OTHER AND CONSOLIDATING
ADJUSTMENTS (0.1) (0.2) (0.5) (0.8)
-------------------- --------------------
TOTALS 49.1 58.0 (15.3) 169.4 168.4 0.6
OPERATING INCOME (EBITDA)
OILFIELD SERVICES DIVISION 0.7 3.7 (81.1) 8.7 10.9 (20.1)
TRUCKLOAD DIVISION 2.0 2.3 (13.0) 6.6 6.4 3.1
SPECIALIZED SERVICES
DIVISION 4.2 4.4 (4.5) 12.5 10.9 14.7
REGIONAL L.T.L. DIVISION 0.7 0.7 0.0 2.0 2.1 (4.8)
CONSOLIDATING ADJUSTMENTS 0.1 0.3 0.8 0.2
-------------------- --------------------
TOTALS 7.7 11.4 (32.5) 30.6 30.5 0.3 |
