Mullen Group Ltd. — Management Reports 2021

Feb 11, 2021

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A"), dated February 10, 2021, has been prepared by management of Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") for the fiscal year ended December 31, 2020, and should be read in conjunction with the audited annual consolidated financial statements for the fiscal year ended December 31, 2020 (the "Annual Financial Statements"). Unless otherwise specified, information in this MD&A is provided as at such date and any reference to "Mullen Group", "we", "us", "our" or the "Corporation" means Mullen Group Ltd., a corporation incorporated under the laws of the province of Alberta and includes its predecessors where context so requires. The Annual Financial Statements and other additional information on Mullen Group, including the Annual Information Form dated February 10, 2021, are available on SEDAR at www.sedar.com and at www.mullen-group.com. Such documents are also available upon request, free of charge, from the Corporate Investor Services group at ir@mullen-group.com. This MD&A and the Annual Financial Statements were reviewed by Mullen Group's Audit Committee and approved by the Board of Directors (the "Board") on February 10, 2021.

ACCOUNTING STANDARDS

The Annual Financial Statements have been prepared in accordance to and comply with International Financial Reporting Standards ("IFRS"), which include the International Accounting Standards ("IAS") and the interpretations developed by the International Financial Reporting Interpretations Committee ("IFRIC"), as issued by the International Accounting Standards Board ("IASB"). Unless otherwise indicated, all amounts contained in this MD&A are in Canadian funds, which is the functional currency of the Corporation.

ADVISORY:

Forward-looking statements - This MD&A reflects management's expectations regarding Mullen Group's future growth, financial condition, results of operations, performance, business prospects, strategies and opportunities and contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities laws. Wherever possible, words such as "anticipate", "may", "will", "believe", "expect", "potential", "continue", "view", "objective", "should", "plan", "intend", "ongoing", "estimate", "project" or similar expressions have been used to identify these forward-looking statements. These statements reflect management's current beliefs and assumptions and are based on information currently available to management. Forward-looking statements involve significant inherent risks and uncertainties, numerous assumptions and the risk that the predictions and forward-looking statements will not be achieved and that the actual results or events may differ materially from those anticipated in such forward-looking statements. A number of factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. Although the forward-looking statements contained in this MD&A are based upon what management believes to be reasonable beliefs and assumptions, Mullen Group cannot assure readers that actual results will be consistent with these forward-looking statements. Some of the risks and uncertainties include, but are not limited to certain strategic, financial and operational risks, most important of which are geopolitical risks including but not limited to a slowdown in the general economy, reduced oil and natural gas drilling and decreased oil sands and heavy oil activity; ecommerce and supply chain evolution; acquisitions; competition; foreign exchange rates; change in the return on fair value of investments; access to financing; reliance on major customers; customer relationships; impairment of goodwill or intangible assets; credit risk; prevailing interest rates; employees & labour relations; labour disruption and driver retention; cost escalation & fuel costs; accidents; cost of liability insurance; digital infrastructure & cyber security; business continuity, disaster recovery & crisis management; environmental liability risks; weather & seasonality; access to parts, development of new technology & relationships with key suppliers; regulatory framework governing matters such as tax and the environment in the jurisdictions in which the Corporation conducts and will conduct its business; and litigation. Given these risks and uncertainties, readers should not place undue reliance on the forward-looking statements contained in this MD&A. Readers are cautioned that the foregoing list of factors and risks is not exhaustive. Additional information on these and other factors and risks that could affect the operations or financial results of Mullen Group may be found under the heading "Principal Risks and Uncertainties" starting on page 64 as well as in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website at www.sedar.com. The forward-looking statements contained in this MD&A are made as of the date hereof and Mullen Group undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities law. Mullen Group relies on litigation protection for "forward-looking" statements. Additional information regarding the forward-looking statements contained in this MD&A and the material assumptions made in preparing such statements may be found under the heading "Forward-Looking Information Statements" beginning on page 84 of this MD&A.

Non-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 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 Terms are useful supplemental measures. These Non-GAAP Terms do not have standardized meanings and may not be comparable to similar measures presented by other entities. Specifically, operating margin 1 , net income – adjusted¹ , earnings per share – adjusted¹ , net capital expenditures¹ , net debt¹ , total net debt¹ and cash flow per share¹ are not measures recognized by Canadian GAAP and do not have standardized meanings prescribed by Canadian GAAP. For the reader's reference, the definition, calculation and reconciliation of Non-GAAP Terms are provided in the "Glossary of Terms and Reconciliation of Non-GAAP Terms" section of this MD&A. The Non-GAAP Terms should not be considered in isolation or as a substitute for measures prepared in accordance with Canadian GAAP. Investors are cautioned that these indicators should not replace the forgoing Canadian GAAP terms: net income, earnings per share, purchases of property, plant and equipment, proceeds on sale of property, plant and equipment and debt.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

PERFORMANCE:	Years ended December 31
(\$ millions, except share price and per share amounts)		2020		2019		2018
Financial Results
Revenue	\$	1,164.3	\$	1,278.5	\$	1,260.8
Operating income before depreciation and amortization(1)		217.6		200.9		189.0
Net foreign exchange (gain) loss		(2.4)		(14.1)		8.5
Decrease in fair value of investments		1.0		—		3.1
Impairment of goodwill		—		—		100.0
Net income (loss)		64.0		72.2		(43.8)
Net income – adjusted(2)		62.4		48.2		62.0
Net cash from operating activities		224.8		170.6		140.7
Cash dividends declared		33.2		62.9		62.6
Financial Position
Cash and cash equivalents	\$	105.3	\$	79.0	\$	3.9
Private Placement Debt		461.7		467.4		482.2
Private Placement Debt covenant (threshold 3.50:1)		2.10:1		2.30:1		2.46:1
Total assets		1,717.9		1,749.3		1,645.9
Share Information
Cash dividends declared per Common Share	\$	0.33	\$	0.60	\$	0.60
Earnings (loss) per share – basic and diluted	\$	0.64	\$	0.69	\$	(0.42)
Net cash from operating activities per share	\$	2.23	\$	1.63	\$	1.35
Earnings per share – adjusted(2)	\$	0.62	\$	0.46	\$	0.59
Share price – December 31	\$	10.90	\$	9.27	\$	12.21
Other Information
Net capital expenditures(2)	\$	50.4	\$	68.5	\$	87.5
Acquisitions	\$	20.2	\$	15.7	\$	45.8

FINANCIAL HIGHLIGHTS – CONSOLIDATED

(1) Management relies on operating income before depreciation and amortization ("OIBDA") as a measurement since it provides an indication of our ability to generate cash from our principal business activities prior to depreciation and amortization, financing or taxation in various jurisdictions. Effective January 1, 2019, the Corporation adopted IFRS 16 – Leases. As is permitted with this new standard, comparative information for previous years has not been restated.

(2) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

POSITION (as at December 31, 2020):

• Well-structured balance sheet
• Working capital: \$239.1 million (cash increased by \$26.3 million to \$105.3 million)
• Unused Bank Credit Facility of \$150.0 million
• Net debt¹ of \$357.3 million, which represents a debt to OIBDA ratio of 1.64:1
• Private Placement Debt of \$461.7 million (operating cash flow covenant at 2.10:1) with no scheduled maturities until 2024 (average fixed rate of 3.93 percent per annum)
• Net book value of property, plant and equipment of \$939.1 million, which includes \$591.6 million of carrying costs of owned land and buildings
• Book value of Derivative Financial Instruments of \$37.9 million, which swaps \$229.0 million of U.S. dollar debt at an average foreign exchange rate of \$1.1096

PROGRESS (for the year ended December 31, 2020):

• Revenue decreased by 8.9 percent due to changes in the economy associated with the COVID-19 pandemic ("COVID-19"):
• Less-Than-Truckload decreased by 1.7 percent to \$443.8 million
• Logistics & Warehousing decreased by 10.6 percent to \$362.0 million
• Specialized & Industrial Services decreased by 15.1 percent to \$362.0 million
• OIBDA increased 8.3 percent despite the decline in revenue, primarily due to:
• Increased OIBDA in each of the three operating segments
• Effective implementation of cost control initiatives
• Lower operating costs, including fuel that declined by \$19.3 million
• \$26.5 million received from the Canada Emergency Wage Subsidy ("CEWS")
• Repurchased 7,972,926 Common Shares in 2020 at an average price of \$6.70 per share under the NCIB
• Net cash from operating activities increased by \$54.2 million, or by 31.8 percent, to \$224.8 million
• Completed two acquisitions for total cash consideration of \$20.2 million

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

SELECTED FINANCIAL DATA

Consolidated – Seven Year

Years ended December 31 (\$ thousands)	2020	2019	2018	2017	2016	2015	2014
(unaudited)	\$	\$	\$	\$	\$	\$	\$
Revenue	1,164,331	1,278,502	1,260,798	1,138,489	1,035,059	1,214,372	1,427,851
Expenses
Direct operating expenses	796,541	909,911	902,813	811,378	711,847	844,025	985,163
Selling and administrative expenses	150,216	167,679	168,970	154,953	142,179	140,928	157,947
Operating income before depreciation
and amortization(1)	217,574	200,912	189,015	172,158	181,033	229,419	284,741
Depreciation and amortization	101,590	111,491	87,489	86,570	85,300	94,247	85,161
Finance costs	28,464	23,625	20,027	27,499	32,460	35,815	47,370(2)
Net foreign exchange (gain) loss	(2,393)	(14,140)	8,537	(21,693)	(5,778)	39,701	15,570
Other (income) expense	3,779	(201)	(445)	(504)	(2,694)	19,289	4,897
Impairment of goodwill	—	—	100,000	—	—	—	—
Gain on contingent consideration	—	—	—	(2,000)	—	(3,000)	—
Income (loss) before income taxes	86,134	80,137	(26,593)	82,286	71,745	43,367	131,743
Income tax expense	22,155	7,896	17,194	16,777	19,707	30,001	37,110
Net income (loss)	63,979	72,241	(43,787)	65,509	52,038	13,366	94,633

Segmented Information – Three Year

Years ended December 31 (\$ thousands)	2020	2019	2018
(unaudited)	\$	\$	\$
Less-Than-Truckload Segment
Revenue	443,792	451,582	429,286
Direct operating expenses	307,786	321,458	307,830
Selling and administrative expenses	61,018	59,503	58,120
Operating income before depreciation and amortization(1)	74,988	70,621	63,336
Operating margin(3)	16.9%	15.6%	14.8%
Logistics & Warehousing Segment
Revenue	362,007	404,840	424,852
Direct operating expenses	251,331	294,617	316,637
Selling and administrative expenses	39,090	45,394	46,931
Operating income before depreciation and amortization(1)	71,586	64,829	61,284
Operating margin(3)	19.8%	16.0%	14.4%
Specialized & Industrial Services Segment
Revenue	362,041	426,312	410,578
Direct operating expenses	243,504	302,946	288,925
Selling and administrative expenses	36,185	48,420	51,071
Operating income before depreciation and amortization(1)	82,352	74,946	70,582
Operating margin(3)	22.8%	17.6%	17.2%

(1) Effective January 1, 2019, the Corporation adopted IFRS 16 – Leases. As is permitted with this new standard, comparative information for previous years has not been restated.

(2) Includes a one-time \$20.0 million prepayment expense, which resulted from Mullen Group's decision to repay its Series A and Series B Notes prior to maturity.

(3) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Other Information

Years ended December 31 (\$ thousands)
(unaudited)	2020	2019	2018*	2017	2016	2015	2014
Ratios – Operating
Return on equity(1)	7.1%	8.0%	3.5%	6.7%	5.9%	1.6%	10.5%
Gross margin – percentage of revenue(2)	31.6%	28.8%	28.4%	28.7%	31.2%	30.5%	31.0%
Selling and administrative expenses – percentage of
revenue	12.9%	13.1%	13.4%	13.6%	13.7%	11.6%	11.1%
Operating margin(3)	18.7%	15.7%	15.0%	15.1%	17.5%	18.9%	19.9%
Operating ratio(4)	90.5%	93.2%	92.2%	92.4%	90.7%	90.4%	86.4%
Financial Position
Acid test ratio(5)	2.80:1	2.74:1	1.74:1	1.76:1	1.88:1	1.85:1	4.16:1
Property, plant and equipment	\$939,107	\$954,604	\$965,683	\$916,140	\$948,540	\$992,206	\$911,699
Total assets	\$1,717,936	\$1,749,292	\$1,645,852	\$1,750,657	\$1,873,027	\$1,817,035	\$1,862,137
Long-term debt (including current portion)	\$607,872	\$616,842	\$512,185	\$539,973	\$695,697	\$780,901	\$704,992
Equity	\$896,418	\$917,921	\$898,076	\$989,731	\$960,410	\$806,644	\$900,943
Debt-to-equity ratio(6)	0.68:1	0.67:1	0.57:1	0.55:1	0.72:1	0.97:1	0.78:1
Total net debt to operating cash flow(7)	2.10:1	2.30:1	2.46:1	2.40:1	2.37:1	3.33:1	2.42:1
Net cash from operating
activities	\$224,821	\$170,653	\$140,710	\$142,085	\$174,314	\$211,572	\$248,585
Share Data Net cash from operating
activities per share	\$2.23	\$1.63	\$1.35	\$1.37	\$1.76	\$2.31	\$2.72
Book value per share(8)	\$9.26	\$8.76	\$8.57	\$9.55	\$9.27	\$8.80	\$9.83
Earnings (loss) per share (basic)(9)	\$0.64	\$0.69	\$(0.42)	\$0.63	\$0.52	\$0.15	\$1.04
Price/earnings ratio(10)	17.0	13.4	37.0	25.0	38.1	93.4	20.5
Weighted number of shares outstanding (thousands)	100,624	104,825	104,274	103,654	99,165	91,653	91,377
Total shares outstanding (thousands)	96,852	104,825	104,825	103,654	103,654	91,661	91,611

* 2018 operating ratios and share data are calculated before the effect of the impairment of goodwill.

NOTES:

(1) Return on equity was calculated by dividing net income (loss) by average shareholders' equity.

(2) Gross margin was calculated by dividing revenue less direct operating costs by revenue.

(3) Operating margin was calculated by dividing operating income before depreciation and amortization by revenue.

(4) Operating ratio was calculated by dividing the total cost before impairment of goodwill, taxes, interest, earnings from equity investments and net gains and losses on foreign exchange, as a percentage of revenue.

(5) Acid test ratio was calculated by dividing cash (bank indebtedness) plus receivables by current liabilities.

(6) Debt-to-equity ratio was calculated by dividing total debt by shareholders' equity.

(7) Total net debt to operating cash flow was calculated as per the financial covenant terms within the Private Placement Debt agreement.

(8) Book value per share was calculated by dividing shareholders' equity by the number of shares outstanding.

(9) Earnings (loss) per share was calculated by dividing net income (loss) by the weighted average number of shares outstanding.

(10) Price/earnings ratio was calculated by dividing the year-end closing price by earnings (loss) per share adjusted for the impairment of goodwill.

SHAREHOLDER INFORMATION

Mullen Group's shares are listed on the Toronto Stock Exchange ("TSX") under the trading symbol MTL.

Our acquisition strategy is focused on generating free cash and is designed to ensure we build a better company – not a bigger company. Through our commitment to disciplined capital allocation and our diversified and stable portfolio of cash generating Business Units (as hereafter defined on page 13), we have generated substantial free cash in excess of our operating needs, year after year. This has allowed us to surpass \$1.3 billion in cumulative dividends and distributions to our investors in the past twenty years. In addition, during 2020 we returned a further \$53.4 million to shareholders by repurchasing and retiring 8.0 million Common Shares at an average price of \$6.70 per share.

The following graph illustrates the cumulative return of our Common Shares for 2020, assuming an initial investment of \$100 on December 31, 2019, compared to the S&P/TSX Composite Total Return Index, assuming the reinvestment of all declared dividends.

EXECUTIVE SUMMARY

Our results for 2020 need to be reviewed within the context of the outbreak of COVID-19. Business has been interrupted with some sectors of the economy bearing the brunt of the government mandated closures. The supply chain has been tested to the limit due to bottlenecks, constraints and changes in consumer buying habits, the most notable being an explosion in E-Commerce transactions. Yet through it all, our business performed remarkably well as evidenced by our fourth quarter and full year results. It is during disruptive times like this past year that having a diversified business model, both by service offering and geographic coverage, is validated and becomes more appreciated. But the real credit for our strong performance last year goes to our 34 independent managed Business Units (as hereafter defined on page 13) and the nearly 6,000 hard-working essential workers that somehow made it all happen. We couldn't be prouder of their professionalism, their support of each other and for keeping everyone safe.

2020 was a different kind of year but it was one that we think our shareholders will consider as pretty good. Our results were acceptable under the circumstances with operating profitability up year over year along with one of the strongest cash generating years we have ever had. We executed the share buyback program to near perfection, repurchasing 8.0 million Common Shares at an average price of \$6.70. And with over \$100.0 million of cash on the balance sheet, we are well positioned to capitalize on new opportunities or to meet the potential challenges that a lingering COVID-19 might bring. And while we are hopeful that this virus can be brought under control sooner rather than later, along with a return to something we can say is normal, the truth is no one knows for sure. So, we will keep one eye open for a good acquisition, one that makes financial sense and can provide a future platform for growth, but the other eye keenly focused on what we see in front of us, including working alongside and supporting our well managed Business Units. Positioning this organization to be successful over the long term is my number one objective.

Mullen Group operates a diversified business model which is highly correlated to consumer spending combined with a highly adaptable and variable cost structure. The financial results for the three month period ended December 31, 2020, are as follows:

• generated consolidated revenue of \$297.7 million, a decrease of \$16.9 million, or 5.4 percent, as compared to \$314.6 million in 2019 due to the negative impact of COVID-19 resulting in:
• an increase of \$2.1 million, or 1.8 percent, to \$116.3 million in the Less-Than-Truckload segment
• a decrease of \$5.4 million, or 5.3 percent, to \$96.8 million in the Logistics & Warehousing segment
• a decrease of \$15.2 million, or 15.2 percent, to \$84.8 million in the Specialized & Industrial Services segment
• earned consolidated OIBDA of \$52.2 million, an increase of \$2.3 million as compared to \$49.9 million in 2019 due to cost control initiatives and \$5.3 million received from the CEWS resulting in:
• an increase of \$2.1 million, or 12.6 percent, to \$18.8 million in the Less-Than-Truckload segment
• an increase of \$0.5 million, or 2.6 percent, to \$20.0 million in the Logistics & Warehousing segment
• an increase of \$0.9 million, or 5.4 percent, to \$17.7 million in the Specialized & Industrial Services segment

Fourth Quarter Financial Results

Revenue decreased by \$16.9 million, or 5.4 percent, to \$297.7 million and is summarized as follows:

• Less-Than-Truckload segment up \$2.1 million, or 1.8 percent, to \$116.3 million revenue improved by \$2.1 million due to the incremental revenue generated from the acquisition of Pacific Coast Express Limited ("PCX") and the steady nature of consumer demand being partially offset by COVID-19 and \$3.1 million of lower fuel surcharge revenue.
• Logistics & Warehousing segment down \$5.4 million, or 5.3 percent, to \$96.8 million revenue declined by \$5.4 million due to COVID-19 and government restrictions which led to plant closures and supply chain

disruptions resulting in lower freight volumes and spot prices along with \$2.4 million of lower fuel surcharge revenue.

• Specialized & Industrial Services segment down \$15.2 million, or 15.2 percent, to \$84.8 million – revenue declined by \$15.2 million due to lower demand for fluid hauling and drilling related services resulting from low oil prices, curtailed maintenance programs and a lack of drilling activity. Revenue also declined due to lower demand for water management services and pumps at Canadian Dewatering L.P. ("Canadian Dewatering"). These decreases were partially offset by greater demand for large diameter pipeline hauling and stringing services at Premay Pipeline Hauling L.P. ("Premay Pipeline").

OIBDA increased by \$2.3 million, or 4.6 percent, to \$52.2 million and is summarized as follows:

• Less-Than-Truckload segment up \$2.1 million, or 12.6 percent, to \$18.8 million OIBDA improved due to lower fuel costs, \$0.9 million of incremental OIBDA generated by PCX, and CEWS. Operating margin¹ increased to 16.2 percent (CEWS adjusted – 15.2 percent) from 14.6 percent in 2019 due to lower fuel prices and cost control initiatives.
• Logistics & Warehousing segment up \$0.5 million, or 2.6 percent, to \$20.0 million OIBDA improved due to strong results at DWS Logistics Inc. ("DWS"), the incremental OIBDA generated by International Warehousing & Distribution Inc. ("IWD"), and CEWS being partially offset by higher Contractors expense and the negative variance in foreign exchange. Operating margin¹ improved to 20.7 percent (CEWS adjusted – 19.5 percent) from 19.1 percent in 2019 due to lower diesel fuel prices.
• Specialized & Industrial Services segment up \$0.9 million, or 5.4 percent, to \$17.7 million OIBDA improved due to greater demand for large diameter pipeline hauling and stringing services, and CEWS. These increases were partially offset by lower OIBDA from those Business Units most directly tied to oil and natural gas drilling activity and from lower demand for water management services and pumps at Canadian Dewatering. Operating margin¹ improved to 20.9 percent (CEWS adjusted – 17.2 percent) from 16.8 percent in 2019 due to lower fuel costs, a greater proportion of higher margin revenue and cost control measures.

Net income increased by \$1.7 million to \$10.1 million, or \$0.10 per Common Share due to:

• A \$7.9 million decrease in depreciation of property, plant and equipment, a \$2.3 million increase in OIBDA and a \$0.8 million decrease in the amortization of intangible assets and depreciation of right-of-use assets.
• The above was partially offset by a \$4.3 million increase in the loss on sale of property, plant and equipment, a \$2.4 million negative variance in net foreign exchange, a \$1.0 million increase in income tax expense, a \$0.9 million increase in finance costs and a \$0.8 million decrease in earnings from equity investments.

Year End Financial Results

Revenue decreased by \$114.2 million, or 8.9 percent, to \$1,164.3 million and is summarized as follows:

• Less-Than-Truckload segment down \$7.8 million, or 1.7 percent, to \$443.8 million revenue declined slightly by 1.7 percent reflecting the steady nature of consumer demand. COVID-19 negatively impacted consumer demand in the spring but was largely offset by robust spending later in 2020. Revenue declined due to lower freight demand in Alberta and \$12.2 million of lower fuel surcharge revenue being partially offset by \$19.1 million of incremental revenue from acquisitions.
• Logistics & Warehousing segment down \$42.8 million, or 10.6 percent, to \$362.0 million revenue declined by \$42.8 million due to COVID-19 and government restrictions resulting in plant closures and a lack of investment by business as well as \$8.9 million of lower fuel surcharge revenue. This negatively impacted both freight volumes and spot prices.
• Specialized & Industrial Services segment down \$64.3 million, or 15.1 percent, to \$362.0 million revenue declined by \$64.3 million due to the collapse in oil prices resulting in customers significantly reducing both maintenance and drilling programs. Revenue also declined due to lower demand for water management

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

services and pumps at Canadian Dewatering. Somewhat offsetting these declines was greater demand for large diameter pipeline hauling and stringing services at Premay Pipeline as well as greater demand for civil construction services at Smook Contractors Ltd. ("Smook").

OIBDA increased by \$16.7 million, or 8.3 percent, to \$217.6 million and is summarized as follows:

• Less-Than-Truckload segment up \$4.4 million, or 6.2 percent, to \$75.0 million OIBDA improved due to the \$3.2 million of incremental OIBDA generated from acquisitions and \$4.7 million of CEWS. These increases were somewhat offset by COVID-19 and a weakened Alberta market. Operating margin¹ increased to 16.9 percent (CEWS adjusted – 15.8 percent) from 15.6 percent in 2019 due to lower fuel costs and cost control initiatives.
• Logistics & Warehousing segment up \$6.8 million, or 10.5 percent, to \$71.6 million OIBDA improved due to the strong performance at Kleysen Group Ltd. ("Kleysen") and \$6.1 million of CEWS. Despite COVID-19, operating margin¹ improved to 19.8 percent (CEWS adjusted – 18.1 percent) from 16.0 percent in 2019 due to lower overall operating costs.
• Specialized & Industrial Services segment up \$7.4 million, or 9.9 percent, to \$82.4 million OIBDA improved due to greater demand for large diameter pipeline hauling and stringing services, and \$15.7 million of CEWS. These increases were partially offset by lower OIBDA from those Business Units directly tied to oil and natural gas drilling activity, and from those involved in the transportation of fluids and servicing of wells. Operating margin¹ improved to 22.8 percent (CEWS adjusted – 18.4 percent) from 17.6 percent in 2019 due to a greater proportion of higher margin revenue and cost control initiatives.

Net income decreased by \$8.2 million to \$64.0 million, or \$0.64 per Common Share due to:

• A \$14.2 million increase in income tax expense, an \$11.7 million negative variance in net foreign exchange, a \$4.9 million increase in finance costs, a \$2.3 million increase in the loss on sale of property, plant and equipment, a \$1.1 million decrease in earnings from equity investments and a \$1.0 million negative variance in the fair value of investments.
• The above was partially offset by a \$16.7 million increase in OIBDA, an \$8.1 million decrease in depreciation of property, plant and equipment, a \$1.7 million decrease in amortization of intangible assets, and a \$0.4 million gain on fair value of equity investment.

Financial Position

The following summarizes our financial position as at December 31, 2020, along with some key changes that occurred during the fourth quarter of 2020:

• Working capital of \$239.1 million including \$105.3 million of cash and cash equivalents and an undrawn Bank Credit Facility (as hereafter defined on page 19) of \$150.0 million.
• Total net debt¹ (\$462.8 million) to operating cash flow (\$220.1 million) (as hereafter defined on page 41) of 2.10:1 as defined per our Private Placement Debt (as hereafter defined on page 24) agreement.
• Private Placement Debt of \$461.7 million with no scheduled maturities until 2024 (average fixed rate of 3.93 percent per annum). Private Placement Debt decreased by \$13.9 million due to the foreign exchange gain on our U.S. \$229.0 million debt.
• Book value of Derivative Financial Instruments down \$14.0 million to \$37.9 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 \$939.1 million, which includes \$591.6 million of carrying costs of owned real property.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

OUTLOOK

This past year is beyond anything one could imagine. The spread of this fast moving virus, known to all as COVID-19, virtually caught the world by surprise. It has disrupted lives, world economies and companies. And from our perspective there is little end in sight, other than the potential for a massive vaccination on a scale never witnessed before. We all live in hope.

Our 2020 results are a reflection of the diversified nature of our business model, which today is highly correlated to the consumer, the largest component of the economy, and remarkably the most resilient despite COVID-19. Consumer spending on everything from basic needs to discretionary household items was robust beginning in the later part of the second quarter, fueling the demand for trucking, logistics and warehousing during the last half of the year. In fact, demand remained quite strong right through year end as evidenced by our solid performance in the fourth quarter. Of course portions of the economy were not so fortunate, including the travel, hotel, hospitality and capital intensive industries like the oil industry, explaining why the overall Canadian economy underperformed. The net impact from COVID-19 was clearly negative from an economic perspective and is the reason our overall revenue was down 8.9 percent year over year. In terms of operating profitability, however, we were very successful with OIBDA actually increasing by 8.3 percent. We attribute the increase to having a well-thought-out COVID-19 Action Plan that was implemented the first week of March 2020, the outstanding performance of several of our independently managed Business Units (as hereafter defined on page 13) and government support in the form of CEWS. But even without the benefit of CEWS, our business performed very well and we are confident in saying that if COVID-19 had not emerged we would have actually had a great year and in line with what we articulated in the February 2020 shareholder update.

As we enter 2021, COVID-19 remains the single biggest obstacle that must be navigated. Expectations are for the consumer to remain the predominate economic engine accompanied by a recovery in the oil industry due to higher crude oil prices. However, we are realists and know that the economy will not reach full potential until the virus has been stopped. Our core business should be consistent with last year and we intend on using our balance sheet to pursue acquisitions, invest in strategic facilities and for growth capital. We enter 2021 with over \$100.0 million in cash, a well-structured balance sheet and an unused Bank Credit Facility (as hereafter defined on page 19) of \$150.0 million.

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CORPORATE OVERVIEW

Mullen Group is a publicly-traded company listed on the Toronto Stock Exchange ("TSX") under the symbol "MTL". We are one of Canada's largest logistics providers. Our network of independently operated businesses provide a wide range of service offerings including less-than-truckload ("LTL"), truckload, warehousing, logistics, transload, oversized and specialized hauling transportation. In addition, we provide a diverse set of specialized services related to the energy, mining, forestry and construction industries in western Canada, including water management, fluid hauling and environmental reclamation.

Objective – Maximize Shareholder Value

We strive to maximize the overall returns to shareholders, over the long-term, by focusing on the following strategies:

• Focused Growth
• Return Free Cash to Shareholders
• Maintain a Well-Structured Balance Sheet
• Strive for Operational Excellence
• Operate a Decentralized Business Model

Focused Growth

Our approach to achieving maximum overall returns to shareholders is based upon the following strategic components:

• Deploy capital to expand business over the long-term.
• Invest in sectors of the economy where we believe future growth opportunities exist.
• Invest in accretive acquisitions acquire competing, complementary or new business lines that can accelerate growth over the long-term.
• Diversify continue to grow and invest where opportunities exist in the three sectors of the economy where we have strong market penetration and customer relationships, namely, the Less-Than-Truckload segment through our final mile delivery network, the Logistics & Warehousing segment including a wide range of trucking and logistics services and the Specialized & Industrial Services segment providing specialized equipment and services to several different industries.

Since going public in 1993, Mullen Group, and its predecessors the Mullen Group Income Fund and Mullen Transportation Inc., have grown annual revenues from \$72.6 million in 1993 to approximately \$1.2 billion in 2020. During this period over 71 acquisitions have been completed.

Return Free Cash to Shareholders

One of our objectives is to build a business that generates cash in excess of our operating and financing requirements, funds that can be returned to shareholders through dividends or reinvested to grow the business.

During 2020 we paid dividends of \$0.35 per Common Share. In 2019 we paid annual dividends of \$0.60 per Common Share. On December 9, 2020, we announced our intention to pay annual dividends of \$0.48 per Common Share (\$0.04 per Common Share on a monthly basis) for 2021, subject to the Board approval. Since going public in 1993, we have distributed over \$1.3 billion in cash dividends and distributions to our shareholders.

Maintain a Well-Structured Balance Sheet

We strive to maintain a balance sheet structured in such a manner to ensure that sufficient liquidity is maintained to allow us to meet our liabilities and corporate objectives under both normal and stressed conditions. In terms of liabilities, we maintain sufficient liquidity to not only meet our obligations when due, but to avoid incurring unacceptable losses or risking damage to our reputation. Furthermore, we have balanced our equity with a reasonable proportionate use of structured long-term debt. Most notably, we use Private Placement Debt (as hereafter defined on page 24), which matures in 2024 and 2026 and has a 3.5 times total net debt¹ to operating cash flow (as hereafter defined on page 42) covenant.

We generated \$224.8 million in net cash from operating activities (2019 – \$170.6 million). At December 31, 2020, we had \$239.1 million of working capital (2019 – \$243.3 million), including \$105.3 million of cash and cash equivalents and an undrawn \$150.0 million Bank Credit Facility (as hereafter defined on page 19), a debt-to-equity ratio of 0.68:1 (2019 – 0.67:1) and a total net debt¹ to operating cash flow of 2.10:1 (2019 – 2.30:1). Our total net debt¹ to operating cash flow financial covenant under our Private Placement Debt enables the Corporation to include the trailing twelve months operating cash flows for acquisitions. We have not included the trailing twelve months of operating cash flows from our most recent acquisitions in our calculations.

Strive for Operational Excellence

Our business is managed upon the basic principles of generating superior profitability, striving for excellence in safety and committing to the process of continuous improvement. Operating in a team environment, we challenge ourselves to make decisions on all aspects relating to the operations of the business, improve customer service, enhance business processes, maintain cost controls, obtain excellence in safety and generate superior profitability. We evaluate operational excellence by benchmarking the financial performance, safety statistics and return on invested capital of each Business Unit.

Operate a Decentralized Business Model

We operate a decentralized business model that is non-hierarchical in nature. Each Business Unit is held accountable for its own performance and results. The management and employees of the Business Units (as hereafter defined on page 13) are remunerated based upon the performance of their respective business. Corporate Office (as hereafter defined on page 13) provides overall support to the Business Units by coordinating business strategies, monitoring financial and business performance and providing shared services on an as-needed basis. In addition, the Corporate Office has invested significantly in real estate holdings and operating facilities, mainly for use by the Business Units. The carrying costs of such holdings at December 31, 2020, was \$591.6 million (2019 – \$571.4 million).

We believe this model generally results in superior customer service, lower costs and provides greater operational flexibility as compared to a fully-integrated business model. Giving responsibility and the necessary authority to the Business Unit encourages greater entrepreneurship and innovation as the teams are empowered and rewarded for their actions.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Business

The business is operated through a network of wholly-owned companies and limited partnerships (the "Business Units"). The segments are differentiated by the type of service provided, equipment requirements and customer needs. Mullen Group provides the capital and financial expertise, legal support, technology and systems support, shared services and strategic planning (the "Corporate Office") for the Business Units. The Corporate Office also invests in certain public and private corporations. In addition, the Corporate Office, through its subsidiary MT Investments Inc. ("MT"), owns a network of real estate holdings and facilities that are leased primarily to the Business Units. Such properties are leased to the Business Units by MT on commercially reasonable terms. The day to day management of the Business Units is conducted at the subsidiary level.

2020 New Operating Segments

On January 1, 2020, we commenced reporting our financial results in three new segments: Less-Than-Truckload; Logistics & Warehousing; and Specialized & Industrial Services. The change in segment reporting structure more accurately reflects our strategic direction and the business of Mullen Group today and aligns with how financial information was reviewed internally for the purpose of decision-making; capital allocation and assessing performance. Our results were reported in the following segments.

Less-Than-Truckload Segment

Less-Than-Truckload consisted of 9 regionally focused Business Units and is often referred to as the final or last mile delivery of general freight consisting of smaller shipments, packages and parcels. Through an extensive terminal network the pickup, handling and delivery of a wide range of freight including ambient, temperature controlled and consumer goods is coordinated from regional hubs located in Ontario and western Canada. We are committed to investing in the most advanced technologies available ensuring the continued improvement in all aspects of our business, shortening delivery times and providing customers with visibility, via tracking and tracing, to their shipments during transit.

Service Offerings		Key Drivers and Considerations
•	Less-Than-Truckload Trucking (LTL)	• •	Regional network comprised of 109 terminals; Tied to consumer needs
•	Ambient Temperature Controlled Transportation	•	Tied to the movement of healthcare products

Less-Than-Truckload Segment:

			Number of Units
Business Unit	Primary Service Region	Power Units	Trailers	Other*
Argus Carriers Ltd.(1)	Lower Mainland British Columbia	59	48	13
Courtesy Freight Systems Ltd.	Northern Ontario	45	45	37
Gardewine Group Limited Partnership	Manitoba and Ontario	901	1710	344
Grimshaw Trucking L.P.	Northern Alberta	138	339	53
Hi-Way 9 Express Ltd.(2) (3) (4)	Southern Alberta	318	650	44
Inter-Urban Delivery Service Ltd.(1)	Lower Mainland British Columbia	50	34	—
Jay's Transportation Group Ltd.	Saskatchewan	232	380	165
Number 8 Freight Ltd.	Lower Mainland British Columbia	66	1	8
Pacific Coast Express Limited(5)	Western Canada	56	78	20

* Other includes miscellaneous equipment such as: pick-ups, warehousing and yard equipment.

(1) Acquired July 1, 2019.

(2) On January 1, 2019, the operations of Bernard Transport Ltd. were combined into Hi-Way 9 Express Ltd.

(3) Includes Jen Express Inc., which was acquired on May 1, 2019.

(4) On January 1, 2020, the operations of Load-Way Ltd. and Streamline Logistics Inc., were integrated into Hi-Way 9 Express Ltd.

(5) Acquired September 1, 2020.

Logistics & Warehousing Segment

The Logistics & Warehousing segment consisted of 10 Business Units that provide shippers throughout North America with a wide range of trucking and logistics service offerings including full truckload, specialized transportation, warehousing, fulfillment centres that handle e-commerce transactions, and transload facilities designed for intermodal and bulk shipments. Operations and customer service are supported by a robust suite of leading edge technology solutions including a fully integrated transportation management system, customized inventory management and warehouse systems along with our proprietary Moveitonline® and HaulisticTM technology platforms, applications that are positioning our organization for an evolving and changing supply chain.

Service Offerings		Key Drivers and Considerations
•	Long-Haul Trucking (T/L)	•	Tied to general economy (i.e., GDP)
•	Logistics, Intermodal and Transload Services	•	Requires less maintenance capital
•	Bulk Hauling	•	Primarily contract services

Logistics & Warehousing Segment:

			Number of Units
Business Unit	Primary Service Provided	Power Units	Trailers	Other*
24/7 The Storehouse (2015) Ltd.	Value-Added Warehousing and Distribution Services	—	—	25
Caneda Transport Ltd.	LTL & Irregular Route Truckload	55	91	8
Cascade Carriers L.P.	Dry Bulk Freight	91	385	12
DWS Logistics Inc.	Value-Added Warehousing and Distribution Services	—	—	62
International Warehousing & Distribution Inc.(1)	Value-Added Warehousing and Distribution Services	3	46	1
Kleysen Group Ltd.	Irregular Route Truckload & Multi-Modal	277	909	903
Mullen Trucking Corp.	Irregular Route Truckload & Specialized Transportation	104	279	38
Payne Transportation Ltd.	Irregular Route Truckload & Specialized Transportation	151	230	10
RDK Transportation Co. Inc.	Irregular Route Truckload & Specialized Transportation	59	108	4
Tenold Transportation Ltd.	Irregular Route Truckload & Specialized Transportation	66	59	33

* Other includes miscellaneous equipment such as: pick-ups, rail cars, containers, and warehousing and yard equipment.

(1) Acquired October 2020.

Specialized & Industrial Services Segment

Specialized & Industrial Services consisted of 15 Business Units and is comprised of a wide range of unique businesses providing specialized equipment and services to the oil and natural gas, environmental, construction, pipeline, utility, telecom and civil industries. Strategically located throughout western Canada, these specialty Business Units are focused on providing advanced technology solutions and leading edge service capabilities.

Service Offerings		Key Drivers and Considerations
•	Production Services	• Commodity prices (i.e., oil and natural gas)
•	Specialized Services	• Drilling trends and evolving technologies
	− oil sands, dewatering and infrastructure	• Take-away / Pipeline Capacity
•	Drilling and Drilling Related	• Drilling activity in western Canada

Specialized & Industrial Services	Segment:
			Number of Units
Business Unit	Primary Service Provided	Power Units	Trailers	Other*
Canadian Dewatering L.P.	Water Management Services	2	44	1,780
Cascade Energy Services L.P.	Production services, Turnaround and Industrial Cleaning Services	334	452	99
Canadian Hydrovac Ltd.	Hydrovac Excavation Services	29	—	9
E-Can Oilfield Services L.P.	Fluid Transportation	156	130	48
Envolve Energy Services Corp.	Processing and Disposal of Oilfield Fluids	—	—	3
Formula Powell L.P.	Mud / Fluid Transportation & Warehousing	50	420	78
Heavy Crude Hauling L.P.(1)	Fluid Transportation	138	325	28
Mullen Oilfield Services L.P.(2)	Rig Relocation Services	170	344	44
OK Drilling Services L.P.	Conductor Pipe Setting	8	18	24
Premay Equipment L.P.	Specialized Heavy Haul	34	315	40
Premay Pipeline Hauling L.P.	Large Diameter Pipe Transportation	84	225	90
Recon Utility Search L.P.	Hydrovac Excavation Services	15	5	7
Smook Contractors Ltd.	Civil Construction	43	74	110
Spearing Service L.P.	Fluid Transportation	219	582	55
TREO Drilling Services L.P.	Core Drilling	20	98	41

* Other includes miscellaneous equipment such as: pick-ups, mounted dri-prime diesel pumps, submersible pumps, earthmoving equipment, yard equipment and containers.

(1) On April 1, 2020, the operations of R. E. Line Trucking (Coleville) Ltd. were combined into Heavy Crude Hauling L.P.

(2) On January 1, 2020, the operations of Withers L.P. were combined into Mullen Oilfield Services L.P.

A more detailed description of the Business Units is set forth in the Annual Information Form, which is dated February 10, 2021, and is available on SEDAR at www.sedar.com, our website at www.mullen-group.com or upon request, free of charge, from the Corporate Investor Services group at ir@mullen-group.com.

Human Resources

As at December 31, 2020, approximately 5,600 people were employed or engaged by the Business Units and at Corporate Office. These people include owner operators and dedicated subcontractors engaged by the Business Units. This compares to approximately 6,100 people in 2019. This decrease is mainly due to a reduction in employee headcount within the Specialized & Industrial Services segment resulting from decreased activity levels. The Less-Than-Truckload segment experienced a slight decrease in the number of employees, while employment levels within the Logistics & Warehousing segment and the Corporate Office remained consistent on a year over year basis.

Capital Allocations

Normal Course Issuer Bid

On March 4, 2020, we announced a normal course issuer bid ("NCIB"), commencing March 9, 2020, to purchase for cancellation up to 7,972,926 Common Shares in the open market on or before March 8, 2021. As at December 31, 2020, we had repurchased and cancelled 7,972,926 Common Shares for \$53.4 million under this NCIB program. All purchases were made in accordance with the NCIB at prevalent market prices as permitted by the Toronto Stock Exchange. The NCIB can be cancelled at the discretion of the Corporation at any time. At December 31, 2020, the Corporation had 96,852,047 Common Shares issued and outstanding. This completed the NCIB as the Corporation repurchased the maximum allowable number of Common Shares under the program. Early in 2020, we announced a plan to allocate \$100.0 million over the course of three years to repurchase Common Shares of Mullen Group via an authorized share buyback program. In 2021 we intend on requesting approvals from the TSX to renew a share buyback program.

As at March 4, 2020, the average daily trading volume of the Common Shares on the Exchange ("ADTV") for the most recently completed six calendar months was 266,914. Pursuant to the Exchange policies, the maximum

number of Common Shares that may be purchased in one day pursuant to the NCIB was the greater of 1,000 and 25.0 percent of ADTV, which amounts to 66,728 Common Shares, subject to certain prescribed exceptions.

The Corporation entered into an automatic securities purchase plan (the "ASPP") with its broker, to allow for the repurchase of Common Shares at all times during the course of the NCIB including when the Corporation ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules or otherwise. The funding for the purchase of Common Shares under the NCIB is financed out of the working capital of the Corporation. The ASPP can be cancelled at the discretion of the Corporation at any time.

Dividends

On February 12, 2020, we announced our intention to pay annual dividends of \$0.60 per Common Share (\$0.05 per Common Share on a monthly basis) for 2020. On March 20, 2020, Mullen Group announced the temporary suspension of the monthly dividend of \$0.05 per Common Share for three months, effective April 1, 2020. The suspension of the dividend was in response to the government mandated closure of many businesses, steps initiated to stop the spread of COVID-19. On July 22, 2020, we announced the reinstatement of the monthly dividend by paying \$0.03 per Common Share on a monthly basis. In 2020 we declared dividends totalling \$0.33 per Common Share (2019 – \$0.60 per Common Share). At December 31, 2020, we had 96,852,047 Common Shares outstanding and a dividend payable of \$2.9 million (December 31, 2019 – \$5.2 million), which was paid on January 15, 2021.

On January 22, 2021, the Board declared a monthly dividend of \$0.04 per Common Share to be paid on February 16, 2021 to the holders of record at the close of business on January 31, 2021. On December 9, 2020, we announced our intention to pay annual dividends of \$0.48 per Common Share (\$0.04 per Common Share on a monthly basis) for 2021. The Board will continue to consider the amount of and the record date for the monthly dividend.

Capital Expenditures

In 2020 gross capital expenditures on a pre-consolidated basis were \$67.0 million as compared to \$80.5 million in 2019, including \$2.1 million of equipment transferred between segments, to improve asset utilization. These capital expenditures were comprised of \$25.2 million in the Less-Than-Truckload segment (2019 – \$26.3 million), \$7.7 million in the Logistics & Warehousing segment (2019 – \$17.2 million), \$11.4 million in the Specialized & Industrial Services segment (2019 – \$19.9 million) and \$22.7 million in the Corporate Office (2019 – \$17.1 million). The \$13.5 million decrease in gross capital expenditures was mainly due to the delay in new equipment arriving, which resulted from the impact of COVID-19 and the corresponding plant shutdowns and disruptions to the supply chain. The majority of the capital invested in the Less-Than-Truckload segment mainly consisted of trucks and trailers to support growth opportunities as well as replace some older less efficient equipment. The majority of the capital invested in the Logistics & Warehousing segment mainly consisted of growth capital to expand our service offerings and rail capacity at our Edmonton, Alberta distribution center as well as purchase trucks, trailers and various pieces of operating equipment to replace some older less efficient equipment. The majority of the capital invested in the Specialized & Industrial Services segment mainly consisted of various pieces of operating equipment to support strong demand at Premay Pipeline, to support growth opportunities at Cascade Energy Services L.P. ("Cascade Energy") and to replace some equipment at Smook. In the Corporate Office, capital was invested to continue the development of our real estate holdings, mainly through expanding our LTL network. In Regina, Saskatchewan, we completed the construction of our 24,000 square foot 40-door cross-dock facility situated on approximately nine acres of land to both expand and improve the operating efficiencies of Jay's Transportation Group Ltd. We also purchased several LTL facilities in Ontario that were previously leased by Gardewine Group Limited Partnership ("Gardewine"), which reduced our lease obligations on a go forward basis. In addition, we purchased strategic parcels of land in both Calgary, Alberta and Kamloops, British Columbia, which will be used to further expand our LTL network. Gross dispositions on a pre-consolidated basis were \$16.6 million in 2020 as compared to \$12.0 million in 2019. These gross dispositions were comprised of \$0.8 million in the Less-Than-Truckload segment (2019 – \$1.1 million), \$2.1 million in the Logistics & Warehousing segment (2019 – \$1.5 million), \$6.0 million in the Specialized & Industrial Services segment (2019 – \$9.4 million) and \$7.7 million in the Corporate Office (2019 – nil). The majority of the dispositions within the Corporate Office related to redundant real estate holdings.

On December 9, 2020, the Board approved a capital budget of \$60.0 million for 2021, exclusive of corporate acquisitions or investment in facilities, land and buildings, with \$50.0 million allocated towards maintenance capital

primarily to replace trucks, trailers, specialized equipment and technology to support the operations of the business. In addition, we will allocate \$10.0 million to fund growth and create jobs in Canada. In 2020, the Federal Government implemented the CEWS program. We will be directing these funds to create opportunities and employment for Canadians.

Convertible Debentures

In June 2019, we issued \$125.0 million of convertible unsecured subordinated debentures (the "Debentures"), by way of a bought deal, at a price of \$1,000 per Debenture. The Debentures are publicly traded and are listed on the TSX under the symbol "MTL.DB". The Debentures will mature on November 30, 2026 and bear interest at an annual rate of 5.75 percent payable semi-annually in arrears on May 31 and November 30 in each year beginning November 30, 2019.

Each \$1,000 Debenture is convertible into 71.4286 Common Shares of Mullen Group (such is based on a conversion price of \$14.00) at any time at the option of the holders of the Debentures. Thus, an aggregate of approximately 8.9 million Common Shares of Mullen Group may be issued if all the holders convert their principal amount. The proceeds of the offering will be used for general corporate purposes, which may include future acquisitions. As subordinated debt, the accounting value assigned to the Debentures including any related interest expense is excluded from our financial covenant calculations under our Private Placement Debt (as hereafter defined on page 24).

The Debentures shall not be redeemable by the Corporation prior to November 30, 2023. On or after November 30, 2023 and prior to November 30, 2025, the Debentures may be redeemed by the Corporation, in whole or in part from time to time, on not more than 60 days and not less than 40 days prior notice at a redemption price equal to their principal amount plus accrued and unpaid interest, if any, up to but excluding the date set for redemption, provided that the arithmetic average of the volume weighted average trading price of the Common Shares on the TSX for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is provided is at least 125.0 percent of the conversion price. On or after November 30, 2025 and prior to the maturity date, the Debentures may be redeemed in whole or in part at the option of the Corporation on not more than 60 days and not less than 40 days prior notice at a redemption price equal to their principal amount plus accrued and unpaid interest if any, up to but excluding the date set for redemption.

The Debentures are comprised of both a debt and equity component, which are presented separately on our consolidated statement of financial position. The debt component represents the total discounted present value of both the semi-annual interest obligations and the principal payment due at maturity, using the rate of interest that would have been applicable to a non-convertible debt instrument of comparable term and risk at the date of issue. The result is an accounting value assigned to the debt component of the Debentures, which is less than the principal amount due at maturity. The debt component presented on the consolidated statement of financial position will increase over the term of the Debentures to the full face value of the outstanding Debentures at maturity. This increase will be recognized in the financial statements through a notional increase to interest expense on the Debentures and a resulting decrease to net income. In the event the Debentures are converted prior to maturity, the difference between the carrying amount of such Debentures and their face value would be charged to interest expense. The equity component of the Debentures is presented under "Equity" in the consolidated statement of financial position. The equity component represents the difference between the face value of the Debentures (namely, \$125.0 million) and the accounting value assigned to the debt component of the Debentures at the date of issue (namely, \$112.6 million). Subject to the impact of the Debentures being converted, this equity component amount will remain constant over the term of the Debentures. Upon conversion of the Debentures into Common Shares, a proportionate amount of both the debt and equity components are transferred to shareholders' capital. Accretion and interest expense on the Debentures are reflected as finance costs in the consolidated statement of comprehensive income.

The transaction costs associated with the Debentures were \$5.2 million and are being amortized over the term of the Debentures. If the holders of the Debentures convert the principal portion to Common Shares prior to maturity, the unamortized transaction costs would be expensed and would thereby decrease earnings.

The details of the debt component of the Debentures are as follows:

(\$ millions)				December 31, 2020				December 31, 2019
Year of Maturity	Interest Rate		Face Value		Carrying Amount	Face Value			Carrying Amount
2026	5.75%	\$	125.0	\$	111.1	\$	125.0	\$	108.7

Acquisitions

The acquisitions set forth below have been accounted for by the acquisition method and the financial results of operations have been included in the accompanying Annual Financial Statements from the date of acquisition.

2020

Pacific Coast Express Limited – On August 1, 2018, we acquired 40.0 percent of the issued and outstanding shares of PCX for \$2.0 million. We used the equity method to account for this investment and recognized \$1.6 million of earnings from August 1, 2018 until September 1, 2020. On September 1, 2020, we acquired all of the remaining issued and outstanding shares of PCX including two of PCX's operating facilities, one in Calgary, Alberta and one in Winnipeg, Manitoba for cash consideration of \$14.4 million. We recorded \$14.4 million of cash used to acquire PCX in our consolidated statement of cash flows, which consists of \$14.2 million of cash consideration paid on closing and \$0.2 million of bank indebtedness acquired. The fair value of PCX was \$18.4 million on the date control was obtained resulting in a \$0.4 million gain on this equity investment being recognized within other (income) expense on the consolidated statement of comprehensive income. PCX is based out of the Lower Mainland of British Columbia and provides expedited handling of international less-than-truckload and truckload shipments to and from western Canada, the western United States and Mexico, along with shipments between multiple points in western Canada. PCX operates an owner operator and logistics model from four locations with its head office in Surrey, British Columbia, along with operating terminals in Edmonton and Calgary, Alberta and Winnipeg, Manitoba. We acquired PCX as part of our strategy to invest in the transportation sector in western Canada. The financial results of PCX's operations are included in the Less-Than-Truckload segment.

International Warehousing & Distribution Inc. – In October 2020, we announced an agreement to acquire all of the issued and outstanding shares of IWD for total cash consideration of \$5.7 million. IWD is based out of Mississauga, Ontario and provides sufferance warehousing and distribution services in Ontario. We acquired IWD as part of our strategy to invest in the warehousing and transportation sector in eastern Canada. The acquisition of IWD expands our service offering to the greater Toronto, Ontario market. The financial results of IWD's operations are included in the Logistics & Warehousing segment.

2019

Argus Carriers Ltd. and Inter-Urban Delivery Service Ltd. – On July 1, 2019, we acquired all of the issued and outstanding shares of Argus Carriers Ltd. ("Argus") and Inter-Urban Delivery Service Ltd. ("Inter-Urban") for total cash consideration of \$20.0 million. Both Argus and Inter-Urban provide transportation and logistics services in the Lower Mainland of British Columbia. We acquired Argus and Inter-Urban as part of our strategy to invest in transportation and logistics companies that have a strong regional LTL presence centrally located to serve consumers in large urban centres. Argus and Inter-Urban financial results were included in the Less-Than-Truckload segment.

Argus, a well-established company founded in 1948, has approximately 95 employees and dedicated owner operators and operates a fleet of 57 trucks and 46 trailers providing general freight services including: local pick-up and delivery, warehousing, regional LTL, dedicated and linehaul trucking from four British Columbia operating terminals – Burnaby, Kelowna, Victoria, and Nanaimo. In addition, Argus provides daily LTL service to the Pacific Northwest of the United States.

Inter-Urban, also a well-established company founded in 1974, has approximately 70 employees and dedicated owner operators and operates 43 trucks and 26 trailers focusing on critical same day delivery service for the healthcare sector including: cross-border linehaul, cross-border LTL cartage, dedicated and local pick-up and delivery. Inter-Urban operates from a terminal based in Abbotsford, British Columbia.

Jen Express Inc. – On May 1, 2019, we acquired the business and assets of Jen Express Inc. ("Jen Express") for cash consideration of \$1.5 million. Included in this amount is \$0.3 million of contingent consideration. Pursuant to the purchase and sale agreement, the vendor may receive cash consideration of up to \$0.3 million for achieving certain financial targets over the two year period ending May 1, 2021. In 2020 Jen Express achieved certain financial targets and the vendor received \$0.1 million of contingent consideration. The vendor may receive the remaining \$0.2 million of contingent consideration in 2021 if certain financial targets are met. The funds to settle this liability have been set aside in an escrow account, which have been presented within cash and cash equivalents. We acquired Jen Express as part of our strategy to invest in the transportation sector in western Canada. Located in Stettler, Alberta, Jen Express offers LTL services and has been integrated into the operations of Hi-Way 9 Express Ltd. ("Hi-Way 9"), whose financial results were included in the Less-Than-Truckload segment.

Intangible Assets

In the fourth quarter of 2020, we purchased a customer list for Hi-Way 9 from a third-party for \$0.2 million. In the second quarter of 2019, we purchased a customer list for Hi-Way 9 from a third-party for \$0.4 million. The customer lists that were purchased included LTL customers in the Alberta and British Columbia regions.

Bank Credit Facility Amendments

On October 24, 2018, we entered into an agreement to amend the amount available to be borrowed on the credit facility with the Royal Bank of Canada (the "Bank Credit Facility"). The amount available to be borrowed on the Bank Credit Facility was increased by \$50.0 million to \$125.0 million. On June 21, 2019, the amount available to be borrowed on the Bank Credit Facility was increased by \$25.0 million to \$150.0 million. All other terms under the Bank Credit Facility remain the same. This facility does not have any financial covenants, however, we cannot be in default of our Private Placement Debt (as hereafter defined on page 24) and we must be in compliance with certain reporting and general covenants. We are in compliance with all of these reporting and general covenants.

As at December 31, 2020, no amounts were drawn on this facility.

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2020 CONSOLIDATED FINANCIAL RESULTS

Our results for 2020 need to be reviewed within the context of the outbreak of a worldwide virus known as COVID-19. This single event had a material impact on the economy and our results for the year. Actions initiated by the various governments and health authorities influenced nearly every aspect of the economy, changing consumer buying habits, contributing to new trends such as e-commerce and online shopping, decimating the travel and hospitality industries and severely curtailing business investment along with disrupting the supply chain. In addition, governments provided significant stimulus to support displaced workers and businesses negatively impacted by mandated closures and shutdowns. Mullen Group was a recipient of the Federal Government program identified as CEWS. This program did not provide revenue contribution, however, it did support our profitability. In the absence of the outbreak of COVID-19, the economy most likely would have performed in line with our previously stated 2020 projections and as such we believe our results would have been stronger than reported. Nevertheless, we adapted and generated results consistent with 2019.

For the year, consolidated revenue was down primarily due to the underperformance of our two segments that are closely aligned with business spending. In the Logistics & Warehousing segment the demand for transportation of capital goods, equipment and machinery was down significantly as compared to prior years. The largest declines, however, were in the Specialized & Industrial Services segment due to the collapse in crude oil pricing in the first quarter and the subsequent retrenchment within the oil and natural gas industries throughout most of 2020. In contrast to declines associated with business investment, there was the robust spending by the consumer on everything from basic needs to discretionary items. As a result, the Less-Than-Truckload segment had a very strong year.

One of the highlights last year is how well our organization handled the market disruptions. In particular, our diversified business model, which today is highly correlated to consumer spending, provided a level of safety when certain segments of the economy or regions of the country come under temporary stress, which is precisely what occurred in 2020. In addition, having a strong well-structured balance sheet allowed our company the opportunity to manage through the events of last year. We attribute our strong performance last year to a number of factors, including:

• On March 7, 2020, we announced our COVID-19 Action Plan. By responding quickly and decisively to the fast-moving virus, we were able to reduce costs along with supporting our people. Prioritizing health, safety and providing financial support was our primary objective.
• Our Business Units responded by managing costs, maintaining business and protecting their employees. The trucking and logistics business was deemed early on by governments as an essential service. Our role then was to implement new health and safety protocols for our employees enabling service to our customers to be maintained.
• Several of our LTL Business Units improved margins capitalizing on the robust consumer spend, adding new service offerings such as Ambient and pivoting to the emerging direct to home delivery trend.
• Diesel fuel costs were down, partially due to declines in miles travelled, but primarily due to lower crude oil prices. This is an example of how our business model is quite adaptable – when crude oil prices decline the oil industry cuts back on spending, which negatively impacts revenue in those Business Units leveraged to the oil and natural gas industry. The offset is diesel costs also decline reducing our overall operating costs. In 2020 fuel costs were down \$19.3 million.
• Major pipeline construction remained strong throughout the year contributing to a record year at Premay Pipeline.
• Our investment in technology not only allowed many of our employees to work from the safety of their homes, it contributed to several Business Units capturing new business. Notably the team at DWS did a great job managing the explosion in e-commerce shipments for their customers, which can only be managed efficiently with a fully integrated technology platform.

• Once again, Kleysen had another strong year. The rail connected transload yard in Edmonton, Alberta attracted new business along with gains in the industrial salt business; both lines of business that are unique and difficult to replicate.
• And the Government of Canada reimbursed many businesses, including Mullen Group, for lost business associated with the mandatory closure of many parts of the Canadian economy. In total, we had 29 Business Units qualify for \$26.5 million in wage subsidies through the CEWS program.

Revenue

Revenue is generated by the Corporation through its Business Units. These Business Units are divided into three operating segments: Less-Than-Truckload, Logistics & Warehousing and Specialized & Industrial Services. The Business Units utilize a combination of company assets that are either owned by the Business Unit or leased ("Company Equipment"), owner operators who provide trucks and/or trailers and work exclusively for the Business Unit under annual contracts and subcontractors who own their own equipment and are used during times of peak demand (collectively, "Contractors").

Consolidated Revenue by Segment Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Less-Than-Truckload	443.8	38.0	451.6	35.2	(7.8)	(1.7)
Logistics & Warehousing	362.0	31.0	404.8	31.6	(42.8)	(10.6)
Specialized & Industrial Services	362.0	31.0	426.3	33.2	(64.3)	(15.1)
Corporate and intersegment eliminations	(3.5)	—	(4.2)	—	0.7	—
Total	1,164.3	100.0	1,278.5	100.0	(114.2)	(8.9)

*as a percentage of pre-consolidated revenue

Consolidated revenue decreased by \$114.2 million, or 8.9 percent, to \$1,164.3 million as compared to \$1,278.5 million in 2019. This decrease in revenue was primarily due to the negative effect of COVID-19 with the majority of the declines occurring in the second quarter. Declines by quarter were \$1.4 million, \$61.5 million, \$34.4 million and \$16.9 million, respectively.

Revenue in the Less-Than-Truckload segment fell by \$7.8 million, or 1.7 percent, to \$443.8 million as compared to \$451.6 million in 2019. This 1.7 percent decline reflected the steady nature of consumer demand in Canada. This segment did experience greatly reduced demand for freight services at the onset of COVID-19 in the spring but this decline was largely offset by robust consumer spending in the third and fourth quarters and incremental revenue related to our recent acquisitions. Revenue in the Logistics & Warehousing segment decreased by \$42.8 million, or 10.6 percent, to \$362.0 million as compared to \$404.8 million in 2019 due to lower demand for freight service due to plant closures and a lack of investment by business. The Specialized & Industrial Services segment revenue decreased by \$64.3 million, or 15.1 percent, to \$362.0 million as compared to \$426.3 million in 2019, primarily due to the collapse in oil prices and the lack of oilfield and maintenance activity that was offset by a substantial increase in demand for large diameter pipeline stringing and stockpiling services experienced by Premay Pipeline.

Consolidated Revenue Years ended December 31
(\$ millions)	2020			2019		Change
	\$	%	\$	%	\$	%
Company	854.4	73.4	910.4	71.2	(56.0)	(6.2)
Contractors	305.2	26.2	362.3	28.3	(57.1)	(15.8)
Other	4.7	0.4	5.8	0.5	(1.1)	(19.0)
Total	1,164.3	100.0	1,278.5	100.0	(114.2)	(8.9)

Revenue related to Company Equipment decreased by \$56.0 million, or 6.2 percent, to \$854.4 million as compared to \$910.4 million in 2019 and represented 73.4 percent of consolidated revenue in the current period as compared to 71.2 percent in 2019. Revenue related to Contractors decreased by \$57.1 million, or 15.8 percent, to \$305.2 million as compared to \$362.3 million in 2019, and represented 26.2 percent of consolidated revenue in the

current period as compared to 28.3 percent in 2019. The increase in proportion of revenue generated by Company Equipment was due to the relative strength of our Less-Than-Truckload segment and the increase in revenue at Premay Pipeline and Smook.

Direct Operating Expenses

Direct operating expenses ("DOE") include two main categories of expenses. The first category of DOE relates to the direct costs incurred to operate and maintain Company Equipment. The major DOE associated with operating Company Equipment are wages (which was offset by CEWS), fuel, repairs and maintenance, purchased transportation and operating supplies. The other expenses included under DOE – Company mainly consist of shortterm or low value leases, equipment rent, insurance and licensing costs. The second category of DOE are the costs incurred to hire Contractors, whether owner operators or subcontractors.

Consolidated Direct Operating Expenses Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	230.3	27.0	241.1	26.5	(10.8)	(4.5)
CEWS	(20.1)	(2.4)	—	—	(20.1)	—
Fuel	66.7	7.8	86.0	9.4	(19.3)	(22.4)
Repairs and maintenance	106.4	12.5	120.8	13.3	(14.4)	(11.9)
Purchased transportation	87.8	10.3	97.2	10.7	(9.4)	(9.7)
Operating supplies	65.5	7.7	67.1	7.4	(1.6)	(2.4)
Other	26.5	3.0	24.8	2.7	1.7	6.9
	563.1	65.9	637.0	70.0	(73.9)	(11.6)
Contractors	233.5	76.5	272.9	75.3	(39.4)	(14.4)
Total	796.6	68.4	909.9	71.2	(113.3)	(12.5)

*as a percentage of respective Consolidated revenue

DOE in 2020 were \$796.6 million as compared to \$909.9 million in 2019. The decrease of \$113.3 million, or 12.5 percent, was attributable to the \$114.2 million, or 8.9 percent, decrease in consolidated revenue. We actively managed all costs as part of our plan called the "COVID-19 Action Plan". This plan focused on adjusting staffing levels for current and anticipated revenue levels, implemented temporary pay cuts and managed all other costs, especially repairs and maintenance expense and monitoring bad debts. As a percentage of revenue these expenses decreased to 68.4 percent as compared to 71.2 percent in 2019 due to lower fuel prices and operational efficiency gains in all segments.

In 2020 DOE associated with Company Equipment decreased to \$563.1 million as compared to \$637.0 million in 2019. The decrease of \$73.9 million, or 11.6 percent, was attributable to the \$56.0 million, or 6.2 percent, decrease in Company revenue that occurred during the period. As a percentage of Company revenue these expenses decreased to 65.9 percent as compared to 70.0 percent in 2019. Adjusted for CEWS, these expenses declined as a percentage of revenue to 68.3 percent. The reduction in fuel expense accounted for the majority of the decrease. Total fuel expense decreased by 1.6 percent of Company revenue to 7.8 percent, or \$66.7 million, as compared to 9.4 percent or \$86.0 million in 2019.

Contractors expense in 2020 decreased by 14.4 percent to \$233.5 million, as compared to \$272.9 million in 2019. This \$39.4 million decrease was generally in line with the \$57.1 million, or 15.8 percent, decline in Contractors revenue. As a percentage of Contractors revenue, Contractors expense increased by 1.2 percent to 76.5 percent as compared to 75.3 percent in 2019 due to the effect of rate discounting, primarily by those Business Units involved in the transportation of fluids and servicing of wells in the Specialized & Industrial Services segment.

Selling and Administrative Expenses

Selling and administrative ("S&A") expenses include salaries (which was offset by CEWS), employee profit share and other administrative expenses incurred to support the operations of Mullen Group and its Business Units.

Consolidated Selling and Administrative Expenses Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Wages and benefits	92.4	7.9	98.9	7.7	(6.5)	(6.6)
CEWS	(6.4)	(0.5)	—	—	(6.4)	—
Communications, utilities and general supplies	42.2	3.6	46.9	3.7	(4.7)	(10.0)
Profit share(1)	13.1	1.1	12.5	1.0	0.6	4.8
Foreign exchange	0.7	0.1	0.8	0.1	(0.1)	(12.5)
Stock-based compensation	1.1	0.1	1.4	0.1	(0.3)	(21.4)
Rent and other	7.0	0.6	7.2	0.5	(0.2)	(2.8)
Total	150.1	12.9	167.7	13.1	(17.6)	(10.5)

(1) The profit share calculation excludes any benefits received from the CEWS program.

S&A expenses decreased to \$150.1 million in 2020 as compared to \$167.7 million in 2019. The decrease of \$17.6 million was primarily due to the cost control initiatives under our COVID-19 Action Plan. Adjusted for CEWS, S&A expenses were reduced by \$11.2 million but rose to 13.4 percent of revenue as compared to 13.1 percent in 2019. The reduction of \$11.2 million was mainly due to the \$6.5 million reduction in wages and benefits expense and other savings instituted under our COVID-19 Action Plan.

Operating Income Before Depreciation and Amortization

Operating income before depreciation and amortization ("OIBDA") is net income before depreciation of property, plant and equipment, depreciation of right-of-use assets, amortization of intangible assets, finance costs, net foreign exchange gains and losses, other (income) expense and income taxes.

Consolidated Operating Income Before Depreciation and Amortization Years ended December 31
(\$ millions)		2020		2019	Change
	\$	%	\$	%	\$	%
Less-Than-Truckload	75.0	34.5	70.6	35.1	4.4	6.2
Logistics & Warehousing	71.6	32.9	64.8	32.3	6.8	10.5
Specialized & Industrial Services	82.4	37.9	75.0	37.3	7.4	9.9
Corporate	(11.4)	(5.2)	(9.5)	(4.7)	(1.9)	20.0
Total	217.6	100.0	200.9	100.0	16.7	8.3

OIBDA for the period was \$217.6 million, or 18.7 percent of revenue, as compared to \$200.9 million, or 15.7 percent, in 2019. The \$16.7 million increase, or 8.3 percent, was due to the strong performance by all three segments, offset by a \$1.9 million increase in Corporate costs:

• a \$4.4 million increase in the Less-Than-Truckload segment;
• a \$6.8 million increase in the Logistics & Warehousing segment; and
• a \$7.4 million increase in the Specialized & Industrial Services segment.

Adjusted for CEWS, OIBDA declined to \$191.1 million, however, operating margin¹ improved by 0.7 percent to 16.4 percent as compared to 15.7 percent.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Depreciation of Property, Plant and Equipment

Depreciation of property, plant and equipment was \$72.4 million in 2020 as compared to \$80.5 million in 2019. This decrease of \$8.1 million was mainly attributable to a lower amount of depreciation being recorded in the Specialized & Industrial Services segment and, to a lesser degree, the Logistics & Warehousing segment. These decreases were somewhat offset by a greater amount of depreciation being recognized in the Less-Than-Truckload segment. Depreciation in the Corporate Office remained consistent on a year over year basis. Depreciation in the Specialized & Industrial Services segment decreased by \$8.7 million and was mainly due to additional depreciation recognized in 2019 on specialty equipment within Spearing Service L.P. ("Spearing") and Formula Powell L.P. ("Formula Powell") after an assessment of market conditions for such equipment. Depreciation also decreased due to the lower amount of capital expenditures made within this segment, the sale of older assets by certain Business Units and from the Corporation's declining balance method of depreciation. Depreciation in the Logistics & Warehousing segment decreased by \$1.1 million due to additional depreciation recognized in 2019 within Cascade Carriers L.P. ("Cascade Carriers") on certain trucks after an assessment of market conditions for that specific make and model of equipment. Depreciation in the Less-Than-Truckload segment increased by \$1.7 million due to a greater amount of capital expenditures being made within this segment and from the acquisitions of Argus, Inter-Urban and PCX.

Depreciation of Right-of-Use Assets

Depreciation of right-of-use assets was \$11.6 million in 2020 as compared to \$11.7 million in 2019. The majority of our right-of-use assets consist of real property leases within the Less-Than-Truckload segment and the Logistics & Warehousing segment. This decrease of \$0.1 million was mainly attributable to a lower amount of depreciation being recognized in the Specialized & Industrial Services segment, which was somewhat offset by a greater amount of depreciation of right-of-use assets being recorded in the Less-Than-Truckload segment. Depreciation in the Logistics & Warehousing segment remained consistent on a year over year basis. Depreciation in the Specialized & Industrial Services segment decreased by \$0.5 million and was mainly due to some real property leases that have come to the end of their term and were not renewed. Depreciation in the Less-Than-Truckload segment increased by \$0.5 million, which was mainly due to the incremental real property leases acquired in the acquisition of Argus, Inter-Urban and PCX.

Amortization of Intangible Assets

Intangible assets are normally acquired on acquisitions and are mainly comprised of customer relationship values and non-competition agreements that are amortized over their estimated life from the date of acquisition. Amortization of intangible assets was \$17.6 million in 2020 as compared to \$19.3 million in 2019. This decrease of \$1.7 million mainly resulted from certain intangible assets becoming fully amortized, which was somewhat offset by the additional amortization recorded on the intangible assets associated with the acquisitions of Argus, Inter-Urban and PCX.

Finance Costs

Finance costs mainly consist of:

• • Interest expense on financial liabilities, including:
• U.S. \$117.0 million of Series G Notes, U.S. \$112.0 million of Series H Notes, \$30.0 million of Series I Notes, \$3.0 million of Series J Notes, \$58.0 million of Series K Notes and \$80.0 million of Series L Notes (collectively, the "Private Placement Debt");
• the Debentures that were issued in June 2019;
• lease liabilities; and
• borrowings on the Bank Credit Facility
• Less any interest income generated from the debentures issued to investees and from cash and cash equivalents.

Finance costs were \$28.5 million in 2020 as compared to \$23.6 million in 2019. The increase of \$4.9 million was mainly attributable to the \$4.4 million of incremental interest expense being recorded on the Debentures (issued in June 2019) and from a greater amount of interest expense being recorded on our U.S. dollar debt as a result of the change in the value of the Canadian dollar relative to the U.S. dollar. These increases were somewhat offset by the reduction in interest expense from borrowings on the Bank Credit Facility.

Net Foreign Exchange (Gain) Loss

We recognize foreign exchange gains or losses at the end of each reporting period related to our U.S. dollar debt and from our two cross-currency swap contracts. In 2014 we entered into two cross-currency swap contracts to swap the principal portion of the Series G (U.S. \$117.0 million) and Series H (U.S. \$112.0 million) Notes (collectively, the "Cross-Currency Swaps") into Canadian dollars at foreign exchange rates of \$1.1047 and \$1.1148 that mature on October 22, 2024 and October 22, 2026, respectively. These swap contracts were entered into as a method of hedging the U.S. debt notes against any declines in the Canadian dollar vis-à-vis the U.S. dollar.

The net foreign exchange gain was \$2.4 million in 2020 as compared to a net foreign exchange gain of \$14.1 million in 2019. The net foreign exchange gain of \$2.4 million in 2020 resulted even though the principal portion of all our U.S. \$229.0 million debt is hedged by our Cross-Currency Swaps. This gain is due to how our U.S. dollar debt and our Cross-Currency Swaps are valued for accounting purposes. Our U.S. dollar debt is valued at the end of each quarter using the closing exchange rate between the Canadian dollar vis-à-vis the U.S. dollar (the "Spot Rate"). In addition to the Spot Rate, our Cross-Currency Swaps are valued using a discounted value from maturity of the forward rate, which is influenced by changes in interest rate differentials between Canada and the United States. As the Cross-Currency Swaps get closer to maturity, their accounting value should more closely correlate to the value of our U.S. dollar debt. The variance of \$11.7 million was mainly attributable to the change in the value of the Canadian dollar relative to the U.S. dollar. The details of the net foreign exchange (gain) loss are as follows:

Net Foreign Exchange (Gain) Loss	Years ended December 31
	CDN. \$ Equivalent
(\$ millions)	2020		2019
Foreign exchange (gain) loss on U.S. \$ debt	(5.9)		(14.9)
Foreign exchange loss (gain) on Cross-Currency Swaps	3.5		0.8
Net foreign exchange (gain) loss	(2.4)		(14.1)

Foreign Exchange (Gain) Loss on U.S. \$ Debt

We recorded a foreign exchange gain of \$5.9 million related to our U.S. dollar debt due to the \$0.0256 strengthening of the Canadian dollar relative to the U.S. dollar during 2020. In 2019 we recorded a foreign exchange gain of \$14.9 million due to the strengthening of the Canadian dollar relative to the U.S. dollar. The details of the foreign exchange gain on the U.S. dollar debt is summarized in the following table:

Foreign Exchange (Gain) Loss on U.S. \$ Debt	Years ended December 31
	2020 2019
(\$ millions, except exchange rate amounts)	U.S. \$ Debt	Exchange Rate	CDN. \$ Equivalent	U.S. \$ Debt	Exchange Rate	CDN. \$ Equivalent
Ending – December 31	229.0	1.2732	291.6	229.0	1.2988	297.5
Beginning – January 1	229.0	1.2988	297.5	229.0	1.3642	312.4
Foreign exchange (gain) loss on U.S. \$ debt			(5.9)			(14.9)

Foreign Exchange Loss (Gain) on Cross-Currency Swaps

On July 25, 2014, we entered into two Cross-Currency Swaps with a Canadian bank to swap U.S. \$117.0 million and U.S. \$112.0 million into Canadian currency at foreign exchange rates of \$1.1047 and \$1.1148 that mature on October 22, 2024 and October 22, 2026, respectively. The Cross-Currency Swaps convert the repayment of the principal portion of the Series G and Series H Notes into a Canadian currency equivalent of \$129.2 million and

\$124.9 million, respectively. We record the foreign exchange gain or loss relating to these Cross-Currency Swaps within net foreign exchange (gain) loss on the consolidated statement of comprehensive income, which is consistent with its underlying nature and purpose. The carrying value of these Cross-Currency Swaps are recorded within derivative financial instruments ("Derivatives") in the consolidated statement of financial position.

We recorded a foreign exchange loss on Cross-Currency Swaps of \$3.5 million in 2020 as compared to a \$0.8 million loss in 2019. This was due to the change over the period in the fair value of these Cross-Currency Swaps as summarized in the table below:

Foreign Exchange Loss (Gain) on Cross-Currency Swaps	Years ended December 31
		2020		2019
(\$ millions)	U.S. \$ Swaps	CDN. \$ Change in Fair Value of Swaps	U.S. \$ Swaps	CDN. \$ Change in Fair Value of Swaps
Cross-Currency Swap maturing October 22, 2024	117.0	1.9	117.0	1.1
Cross-Currency Swap maturing October 22, 2026	112.0	1.6	112.0	(0.3)
Foreign exchange loss (gain) on Cross-Currency Swaps		3.5		0.8

Other (Income) Expense

Other (income) expense consists of the change in fair value of investments, the gain or loss on sale of the Corporation's assets including property, plant and equipment, earnings from equity investments and the gain on fair value of equity investment. Other expense in 2020 was \$3.8 million, a \$4.0 million negative variance as compared to the \$0.2 million of other income recorded in 2019. The \$4.0 million negative variance was due to the factors set forth below:

Change in Fair Value of Investments (negative variance of \$1.0 million). We periodically invest in certain public corporations. In 2020 there was a decrease in the fair value of investments of \$1.0 million as compared to no change in the fair value of investments in 2019. There were no investments purchased or sold in 2020. There were \$0.7 million of investments sold in 2019 and no investments were purchased.

Loss on Sale of Property, Plant and Equipment (negative variance of \$2.3 million). We recognized a loss of \$5.0 million in 2020 on sale of property, plant and equipment on total consolidated proceeds on sale of \$14.5 million as compared to a \$2.7 million loss on sale of property, plant and equipment on total consolidated proceeds on sale of \$6.5 million in 2019. The \$5.0 million loss on sale of property, plant and equipment in 2020 mainly resulted from the sale of redundant land and buildings within the Corporate Office (loss of \$2.7 million) and from shutting in a disposal well at Envolve Energy Services Corp. ("Envolve") (loss of \$1.9 million). The \$2.7 million loss on sale of property, plant and equipment in 2019 mainly resulted from the sale of older equipment in both the Less-Than-Truckload and Specialized & Industrial Services segments.

Earnings from Equity Investments (negative variance of \$1.1 million). We recognized \$1.8 million of earnings from equity investments in 2020 as compared to earnings of \$2.9 million in 2019. We use the equity method to account for investments in which we obtain significant influence or joint control over the investee and we recognize earnings from these equity investments from the date thereof. There were no equity investments purchased in 2020 or 2019. In 2020 the aggregate amount of revenue and OIBDA generated by our equity investees was \$253.7 million (2019 – \$275.1 million) and \$47.9 million (2019 – \$42.6 million), respectively. The following table details our equity investments and the date from which we commenced recording earnings from them.

Equity Investment	Date of Significant Influence or Joint Control Obtained
Canol Oilfield Services Inc.	January 1, 2013
Kriska Transportation Group Limited	December 1, 2014
Cordova Oilfield Services Ltd.	April 17, 2015
Butler Ridge Energy Services (2011) Ltd.	July 1, 2015
Thrive Management Group Ltd.	September 27, 2017

Gain on Fair Value of Equity Investment (positive variance of \$0.4 million). We acquired control of PCX through a series of transactions. On August 1, 2018, we acquired 40.0 percent of the issued and outstanding shares of PCX for \$2.0 million and then recognized \$1.6 million of earnings from this equity investment until September 1, 2020, the date we obtained control. We acquired all the remaining issued and outstanding shares of PCX for cash consideration of \$14.4 million. The fair value of PCX was \$18.4 million on the date control was obtained resulting in a \$0.4 million gain on this equity investment.

Income Taxes

		Years ended December 31
(\$ millions)		2020		2019
Income before income taxes	\$	86.1	\$	80.1
Combined statutory tax rate		26%		27%
Expected income tax		22.4		21.6
Add (deduct):
Non-deductible (taxable) portion of net foreign exchange (gain) loss		—		(1.8)
Non-deductible (taxable) portion of the change in fair value of investments		0.1		—
Stock-based compensation expense		0.3		0.4
Changes in unrecognized deferred tax asset		—		(1.8)
Decrease in income tax due to changes in income tax rates		(0.1)		(9.5)
Other		(0.6)		(1.0)
Income tax expense	\$	22.1	\$	7.9

Income tax expense was \$22.1 million in 2020 as compared to \$7.9 million in 2019. The increase of \$14.2 million was mainly attributable to the decrease in income tax in 2019 due to the change in the substantively enacted tax rate in Alberta and from the variance in net foreign exchange.

Net Income

		Years ended December 31
(\$ millions, except share and per share amounts)		2020		2019	% Change
Net income	\$	64.0	\$	72.2	(11.4)
Weighted average number of Common Shares outstanding		100,624,227		104,824,973	(4.0)
Earnings per share – basic	\$	0.64	\$	0.69	(7.2)

Net income decreased to \$64.0 million in 2020 as compared to \$72.2 million in 2019. The factors contributing to the decrease in net income include:

• a \$14.2 million increase in income tax expense;
• an \$11.7 million negative variance in net foreign exchange;
• a \$4.9 million increase in finance costs;
• a \$2.3 million increase in the loss on sale of property, plant and equipment;
• a \$1.1 million decrease in earnings from equity investments; and
• a \$1.0 million negative variance in the fair value of investments.

These factors were somewhat offset by the following factors that increased net income:

• a \$16.7 million increase in OIBDA;
• an \$8.1 million decrease in depreciation of property, plant and equipment;
• a \$1.7 million decrease in amortization of intangible assets;
• a \$0.4 million gain on fair value of equity investment; and
• a \$0.1 million decrease in depreciation of right-of-use assets.

Basic earnings per share decreased to \$0.64 in 2020 as compared to \$0.69 in 2019. This decrease resulted from the effect of the \$8.2 million decrease in net income. The weighted average number of Common Shares outstanding decreased from 104,824,973 to 100,624,227, which was due to the repurchase and cancellation of 7,972,926 Common Shares under the NCIB in 2020.

Net Income – Adjusted and Earnings per Share – Adjusted

The following table illustrates net income and basic earnings per share before considering the impact of the net foreign exchange gains or losses, the change in fair value of investments, and the gain on fair value of equity investment. Net income and basic earnings per share have been adjusted to reflect earnings from a strictly operating perspective.

	Years ended December 31
(\$ millions, except share and per share amounts)		2020		2019
Income before income taxes	\$	86.1	\$	80.1
Add (deduct):
Net foreign exchange (gain) loss		(2.4)		(14.1)
Change in fair value of investments		1.0		—
Gain on fair value of equity investment		(0.4)		—
Income before income taxes – adjusted		84.3		66.0
Income tax rate		26%		27%
Computed expected income tax expense		(21.9)		(17.8)
Net income – adjusted(1)		62.4		48.2
Weighted average number of Common Shares outstanding – basic	100,624,227			104,824,973
Earnings per share – adjusted(1)	\$	0.62	\$	0.46

(1) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

2020 SEGMENTED INFORMATION

Year ended December 31, 2020 (\$ millions)	Less-Than -Truckload	Logistics & Warehousing	Specialized & Industrial Services	Corporate and intersegment eliminations	Total
	\$	\$	\$	\$	\$
Revenue	443.8	362.0	362.0	(3.5)	1,164.3
Direct operating expenses	307.8	251.4	243.5	(6.1)	796.6
Selling and administrative expenses	61.0	39.0	36.1	14.0(1)	150.1
Operating income before depreciation and amortization	75.0	71.6	82.4	(11.4)	217.6
Net capital expenditures(2)	24.4	5.6	5.4	15.0	50.4

Year ended December 31, 2019 (\$ millions)	Less-Than -Truckload	Logistics & Warehousing	Specialized & Industrial Services	Corporate and intersegment eliminations	Total
	\$	\$	\$	\$	\$
Revenue	451.6	404.8	426.3	(4.2)	1,278.5
Direct operating expenses	321.5	294.6	302.9	(9.1)	909.9
Selling and administrative expenses	59.5	45.4	48.4	14.4(3)	167.7
Operating income before depreciation and amortization	70.6	64.8	75.0	(9.5)	200.9
Net capital expenditures(2)	25.2	15.7	10.5	17.1	68.5

(1) Includes a \$1.1 million foreign exchange loss.

(2) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

(3) Includes a \$0.4 million foreign exchange loss.

LESS-THAN-TRUCKLOAD SEGMENT

Revenue

Revenue – Less-Than-Truckload Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%	\$	%	\$	%
Company	421.0	94.9	438.3	97.1	(17.3)	(3.9)
Contractors	22.5	5.1	13.1	2.9	9.4	71.8
Other	0.3	—	0.2	—	0.1	50.0
Total	443.8	100.0	451.6	100.0	(7.8)	(1.7)

Segment revenue fell by \$7.8 million, or 1.7 percent, to \$443.8 million as compared to \$451.6 million in 2019 and represented 38.0 percent of pre-consolidated revenue as compared to 35.2 percent in 2019. This decrease in revenue was due to the negative impacts of COVID-19 being partially offset by acquisitions. Prior to the pandemic, revenue rose by \$3.8 million in the first quarter. Revenue then fell by \$10.5 million in the second quarter and \$3.2 million in the third quarter and then rose by \$2.1 million in the fourth quarter. Specific factors affecting segment revenue were:

• a \$19.1 million increase in revenue generated from the acquisitions of Argus, Inter-Urban and PCX;

• market share gains in the first quarter that were more than offset by the negative effects of COVID-19;

• a decrease of \$12.2 million in fuel surcharge revenue to \$43.1 million, from the \$55.3 million generated in 2019 resulting from the decline in diesel fuel prices; and

• a more pronounced decline in freight demand in Alberta.

Direct Operating Expenses

Direct Operating Expenses – Less-Than-Truckload Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	114.3	27.1	115.0	26.2	(0.7)	(0.6)
CEWS	(3.8)	(0.9)	—	—	(3.8)	—
Fuel	38.2	9.1	47.2	10.8	(9.0)	(19.1)
Repairs and maintenance	45.1	10.7	45.0	10.3	0.1	0.2
Purchased transportation	79.7	18.9	89.4	20.4	(9.7)	(10.9)
Operating supplies	6.3	1.5	6.1	1.4	0.2	3.3
Other	13.5	3.3	11.8	2.7	1.7	14.4
	293.3	69.7	314.5	71.8	(21.2)	(6.7)
Contractors	14.5	64.4	7.0	53.4	7.5	107.1
Total	307.8	69.4	321.5	71.2	(13.7)	(4.3)

*as a percentage of respective Less-Than-Truckload revenue

DOE were \$307.8 million as compared to \$321.5 million in 2019. This decrease of \$13.7 million, or 4.3 percent, was due to the following key factors:

• a \$7.8 million decrease in segment revenue;
• a \$9.7 million reduction in purchased transportation;
• a \$9.0 million reduction in fuel expense due to lower fuel prices; and
• the offsetting benefit of \$3.8 million contribution from CEWS.

As a percentage of revenue, DOE decreased by 1.8 percent to 69.4 percent compared to 71.2 percent in 2019. Adjusted for CEWS, these expenses were reduced by 1.0 percent as a percentage of revenue to 70.2 percent as compared to 71.2 percent in 2019 due to cost control initiatives and lower diesel fuel costs.

DOE associated with Company Equipment decreased by \$21.2 million, or 6.7 percent, to \$293.3 million as compared to \$314.5 million in 2019. This decrease was directly related to the \$17.3 million decrease in Company revenue. As a percentage of Company revenue these expenses decreased by 2.1 percent to 69.7 percent as compared to 71.8 percent in 2019, primarily due to lower fuel costs. Fuel expense fell to 9.1 percent as a percentage of Company revenue from 10.8 percent in 2019. This 1.7 percent reduction was due to lower diesel fuel prices.

Contractors expense increased by \$7.5 million to \$14.5 million as compared to \$7.0 million in 2019. This increase was directly related to the \$9.4 million increase in Contractors revenue and was primarily as a result of the PCX acquisition. As a percentage of Contractors revenue, Contractors expense increased to 64.4 percent as compared to 53.4 percent in 2019.

Selling and Administrative Expenses

(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Wages and benefits	38.4	8.7	37.0	8.2	1.4	3.8
CEWS	(0.9)	(0.3)	—	—	(0.9)	—
Communications, utilities and general supplies	17.6	4.0	17.3	3.8	0.3	1.7
Profit share	3.5	0.8	3.4	0.8	0.1	2.9
Foreign exchange	—	—	—	—	—	—
Rent and other	2.4	0.5	1.8	0.4	0.6	33.3
Total	61.0	13.7	59.5	13.2	1.5	2.5

Selling and Administrative Expenses – Less-Than-Truckload

*as a percentage of total Less-Than-Truckload revenue

S&A expenses increased by \$1.5 million to \$61.0 million as compared to \$59.5 million in 2019, primarily due to the \$2.8 million of incremental S&A expenses associated with acquisitions being partially offset by CEWS of \$0.9 million. S&A expenses as a percentage of segment revenue increased by 0.5 percent to 13.7 percent as compared to 13.2 percent in 2019 due to the fixed nature of these expenses relative to the decline in revenue.

Operating Income Before Depreciation and Amortization

OIBDA increased by \$4.4 million, or 6.2 percent, to \$75.0 million as compared to \$70.6 million in 2019. The increase in OIBDA was due to the \$3.2 million increase from the incremental OIBDA generated from the acquisitions of Argus, Inter-Urban and PCX as well as CEWS. Operating margin¹ increased to 16.9 percent as compared to 15.6 percent in 2019. Adjusted for CEWS, operating margin¹ was 15.8 percent.

Capital Expenditures

Net capital expenditures¹ were \$24.4 million in 2020, a decrease of \$0.8 million as compared to \$25.2 million in 2019. The Less-Than-Truckload segment had gross capital expenditures of \$25.2 million and dispositions of \$0.8 million for net capital expenditures¹ of \$24.4 million in 2020. The majority of the capital invested in 2020 consisted of trucks and trailers to support growth opportunities at Gardewine as well as replace some older less efficient equipment. In 2019 gross capital expenditures were \$26.3 million and dispositions were \$1.1 million for net capital expenditures¹ of \$25.2 million.

LOGISTICS & WAREHOUSING SEGMENT

Revenue

Revenue – Logistics & Warehousing Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%	\$	%	\$	%
Company	143.7	39.7	141.3	34.9	2.4	1.7
Contractors	217.5	60.1	262.6	64.9	(45.1)	(17.2)
Other	0.8	0.2	0.9	0.2	(0.1)	(11.1)
Total	362.0	100.0	404.8	100.0	(42.8)	(10.6)

Segment revenue fell by \$42.8 million, or 10.6 percent, to \$362.0 million as compared to \$404.8 million in 2019 and represented 31.0 percent of pre-consolidated revenue as compared to 31.6 percent in 2019. Segment revenue decreased as a result of the effects of the outbreak of COVID-19 in North America and the government restrictions placed on many businesses. This negatively impacted both freight volumes and spot prices. Fuel surcharge revenue declined by \$8.9 million to \$19.1 million as compared to \$28.0 million in 2019 due to less fuel consumption

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

and lower fuel prices. Revenue in the first, second, third and fourth quarters declined by \$5.5 million, \$19.3 million, \$12.6 million and \$5.4 million, respectively.

Revenue related to Company Equipment increased by \$2.4 million, or 1.7 percent, to \$143.7 million as compared to \$141.3 million in 2019 and represented 39.7 percent of segment revenue in the current period as compared to 34.9 percent in 2019. Revenue related to Contractors decreased by \$45.1 million, or 17.2 percent, to \$217.5 million as compared to \$262.6 million in 2019 and represented 60.1 percent of segment revenue in the current period as compared to 64.9 percent in 2019.

Direct Operating Expenses

Direct Operating Expenses – Logistics & Warehousing Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	34.2	23.8	36.6	25.9	(2.4)	(6.6)
CEWS	(4.2)	(2.9)	—	—	(4.2)	—
Fuel	9.2	6.4	12.4	8.8	(3.2)	(25.8)
Repairs and maintenance	17.7	12.3	19.3	13.7	(1.6)	(8.3)
Purchased transportation	4.8	3.3	5.0	3.5	(0.2)	(4.0)
Operating supplies	21.4	14.9	20.5	14.5	0.9	4.4
Other	4.7	3.3	4.9	3.5	(0.2)	(4.1)
	87.8	61.1	98.7	69.9	(10.9)	(11.0)
Contractors	163.6	75.2	195.9	74.6	(32.3)	(16.5)
Total	251.4	69.4	294.6	72.8	(43.2)	(14.7)

*as a percentage of respective Logistics & Warehousing revenue

DOE were \$251.4 million as compared to \$294.6 million in 2019. This decrease of \$43.2 million, or 14.7 percent, was due to the following key factors:

• a \$42.8 million decrease in segment revenue;
• a \$3.2 million reduction in fuel expense due to lower fuel prices;
• a \$2.4 million reduction in wages and benefits expense;
• a \$1.6 million reduction in repairs and maintenance expense; and
• the offsetting benefit of \$4.2 million contribution from CEWS.

As a percentage of revenue, DOE decreased by 3.4 percent to 69.4 percent compared to 72.8 percent in 2019. Adjusted for CEWS, these expenses were reduced by 2.2 percent as a percentage of revenue to 70.6 percent as compared to 72.8 percent in 2019 due to cost control initiatives and lower fuel costs.

DOE related to Company Equipment decreased by \$10.9 million, or 11.0 percent, to \$87.8 million as compared to \$98.7 million in 2019. In terms of a percentage of revenue, Company expenses decreased by 8.8 percent to 61.1 percent as compared to 69.9 percent in 2019. This decrease was primarily due to lower wages and benefits expense as a result of our COVID-19 Action Plan. Adjusted for CEWS, DOE related to Company Equipment decreased by 5.9 percent as a percentage of revenue to 64.0 percent as compared to 69.9 percent in 2019, primarily due to lower fuel expense that declined by 2.4 percent to 6.4 percent as well as lower wages and benefits expense that declined by 2.1 percent.

Contractors expense decreased by \$32.3 million to \$163.6 million as compared to \$195.9 million in 2019. This decrease was generally in line with the \$45.1 million decrease in Contractors revenue. As a percentage of Contractors revenue, Contractors expense increased by 0.6 percent to 75.2 percent as compared to 74.6 percent in 2019, largely due to the rise in these costs experienced in the fourth quarter.

Selling and Administrative Expenses

(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Wages and benefits	26.0	7.2	27.9	6.9	(1.9)	(6.8)
CEWS	(1.9)	(0.5)	—	—	(1.9)	—
Communications, utilities and general supplies	9.7	2.7	11.2	2.8	(1.5)	(13.4)
Profit share	4.4	1.2	4.2	1.0	0.2	4.8
Foreign exchange	(0.5)	(0.1)	0.3	0.1	(0.8)	(266.7)
Rent and other	1.3	0.3	1.8	0.4	(0.5)	(27.8)
Total	39.0	10.8	45.4	11.2	(6.4)	(14.1)

Selling and Administrative Expenses – Logistics & Warehousing

*as a percentage of total Logistics & Warehousing revenue

S&A expenses were \$39.0 million as compared to \$45.4 million in 2019. The decrease of \$6.4 million was primarily due to the \$0.8 million positive variance in foreign exchange, the cost control initiatives under our COVID-19 Action Plan and CEWS. S&A expenses as a percentage of segment revenue decreased by 0.4 percent to 10.8 percent as compared to 11.2 percent in 2019. Excluding the effects of foreign exchange and CEWS, S&A expenses as a percentage of segment revenue was 11.4 percent as compared to 11.1 percent in 2019.

Operating Income Before Depreciation and Amortization

OIBDA increased by \$6.8 million, or 10.5 percent, to \$71.6 million as compared to \$64.8 million generated in 2019. The majority of this increase in OIBDA was due to a number of factors, including:

• a strong performance by Kleysen;
• the \$6.1 million recognized from the CEWS program;
• lower overall operating costs; and
• the positive year over year variance in foreign exchange.

Operating margin¹ increased by 3.8 percent to 19.8 percent as compared to 16.0 percent in 2019, primarily due to CEWS. Adjusted for CEWS, operating margin¹ increased to 18.1 percent as compared to 16.0 percent in 2019 due to our COVID-19 Action Plan, a strong performance by Kleysen and the beneficial effect of lower diesel prices.

Capital Expenditures

Net capital expenditures¹ were \$5.6 million in 2020, a decrease of \$10.1 million as compared to \$15.7 million in 2019. The Logistics & Warehousing segment had gross capital expenditures of \$7.7 million and dispositions of \$2.1 million for net capital expenditures¹ of \$5.6 million in 2020. The majority of the capital invested in 2020 consisted of growth capital to expand our service offerings and rail capacity at our Edmonton, Alberta distribution center as well as purchase trucks, trailers and various pieces of operating equipment to replace some older less efficient equipment. In 2019 gross capital expenditures were \$17.2 million and dispositions were \$1.5 million for net capital expenditures¹ of \$15.7 million.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

SPECIALIZED & INDUSTRIAL SERVICES SEGMENT

Revenue

Revenue – Specialized & Industrial Services Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%	\$	%	\$	%
Company	289.7	80.0	330.7	77.6	(41.0)	(12.4)
Contractors	71.6	19.8	94.6	22.2	(23.0)	(24.3)
Other	0.7	0.2	1.0	0.2	(0.3)	(30.0)
Total	362.0	100.0	426.3	100.0	(64.3)	(15.1)

Segment revenue declined by \$64.3 million, or 15.1 percent, to \$362.0 million as compared to \$426.3 million in 2019 and represented 31.0 percent of pre-consolidated revenue as compared to 33.2 percent of pre-consolidated revenue in 2019. This decline in revenue was mainly attributable to the collapse in oilfield activity due to the negative effects on demand for oil being partially offset by the rise in demand for large diameter pipeline hauling and stringing services. Segment revenue increased by \$1.6 million in the first quarter and then fell by \$31.6 million, \$19.1 million and \$15.2 million in the second, third and fourth quarters, respectively. Specific factors affecting the segment revenue were:

• A \$56.0 million decrease in revenue generated by those Business Units involved in the transportation of fluids and servicing of wells due to the sharp decline in demand as a result of the oil price collapse that fell dramatically during March before recovering somewhat during the second quarter and slowly improving thereafter.
• A \$22.5 million decrease in revenue generated by those Business Units most directly tied to oil and natural gas drilling activity as the demand for most services was severely impacted as customers reduced drilling programs.
• A \$14.2 million increase in revenue generated by those Business Units providing specialized services to the oil sands, environmental, construction, pipeline, utility, telecom and water management industries including a \$28.3 million increase in pipeline hauling and stringing services revenue as well as an \$8.2 million increase in demand for civil construction services at Smook. These increases were partially offset by lower demand for heavy haul transportation, pumps and water management services, and hydrovac services.

Direct Operating Expenses – Specialized & Industrial Services Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	81.7	28.2	89.6	27.1	(7.9)	(8.8)
CEWS	(12.1)	(4.2)	—	—	(12.1)	—
Fuel	19.3	6.7	26.4	8.0	(7.1)	(26.9)
Repairs and maintenance	43.6	15.1	56.5	17.1	(12.9)	(22.8)
Purchased transportation	3.3	1.1	2.8	0.8	0.5	17.9
Operating supplies	37.8	13.0	40.5	12.2	(2.7)	(6.7)
Other	8.1	2.8	9.1	2.8	(1.0)	(11.0)
	181.7	62.7	224.9	68.0	(43.2)	(19.2)
Contractors	61.8	86.3	78.0	82.5	(16.2)	(20.8)
Total	243.5	67.3	302.9	71.1	(59.4)	(19.6)

Direct Operating Expenses

*as a percentage of respective Specialized & Industrial Services revenue

DOE were \$243.5 million as compared to \$302.9 million in 2019. The decrease of \$59.4 million, or 19.6 percent, was directly related to the \$64.3 million, or 15.1 percent, decline in segment revenue. As a percentage of revenue

these expenses decreased by 3.8 percent to 67.3 percent as compared to 71.1 percent in 2019. Adjusted for CEWS, these expenses decreased by 0.5 percent as a percentage of revenue to 70.6 percent as compared to 71.1 percent in 2019 due to a change in revenue mix, cost savings initiatives and lower fuel costs.

DOE associated with Company Equipment decreased by \$43.2 million, or 19.2 percent, to \$181.7 million as compared to \$224.9 million in 2019. This decrease was directly related to the \$41.0 million, or 12.4 percent, decrease in Company revenue. As a percentage of Company revenue these expenses decreased by 5.3 percent to 62.7 percent as compared to 68.0 percent in 2019, primarily due to CEWS, lower fuel costs as well as lower repairs and maintenance expense. Adjusted for CEWS, these expenses decreased as a percentage of revenue by 1.1 percent to 66.9 percent as compared to 68.0 percent in 2019.

Contractors expense decreased by \$16.2 million to \$61.8 million as compared to \$78.0 million in 2019. As a percentage of Contractors revenue, Contractors expense increased to 86.3 percent as compared to 82.5 percent due to the effect of rate discounting, primarily by those Business Units involved in the transportation of fluids and servicing of wells as well as the use of sub-contracted rail services in Premay Pipeline's operations.

Selling and Administrative Expenses – Specialized & Industrial Services Years ended December 31
(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Wages and benefits	21.6	6.0	27.0	6.3	(5.4)	(20.0)
CEWS	(3.6)	(1.0)	—	—	(3.6)	—
Communications, utilities and general supplies	11.5	3.2	14.7	3.4	(3.2)	(21.8)
Profit share	5.2	1.4	4.9	1.1	0.3	6.1
Foreign exchange	—	—	—	—	—	—
Rent and other	1.4	0.4	1.8	0.6	(0.4)	(22.2)
Total	36.1	10.0	48.4	11.4	(12.3)	(25.4)

Selling and Administrative Expenses

*as a percentage of total Specialized & Industrial Services revenue

S&A expenses decreased by \$12.3 million to \$36.1 million as compared to \$48.4 million in 2019, primarily as a result of a reduction in wages and benefits expense and CEWS. S&A expenses as a percentage of segment revenue decreased by 1.4 percent to 10.0 percent as compared to 11.4 percent in 2019. Adjusted for CEWS, these expenses decreased by 0.4 percent as a percentage of revenue to 11.0 percent as compared to 11.4 percent in 2019 due to cost control initiatives.

Operating Income Before Depreciation and Amortization

OIBDA increased by \$7.4 million, or 9.9 percent, to \$82.4 million as compared to \$75.0 million in 2019. Operating margin¹ increased to 22.8 percent as compared to 17.6 percent in 2019. The margin gain was due to the change in revenue mix associated with certain large diameter pipeline projects that had a beneficial effect on margin, and CEWS being largely offset by the significant decline in margin generated by those Business Units most directly tied to drilling related activity. More specific changes to OIBDA include:

• an \$11.0 million increase relating to those Business Units providing specialized services including pipeline stockpiling and stringing services;
• a \$1.6 million decrease in those Business Units involved in the transportation of fluids and servicing of wells; and
• a \$2.0 million decrease from those Business Units tied to drilling and drilling related activity.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Capital Expenditures

Net capital expenditures¹ were \$5.4 million in 2020, a decrease of \$5.1 million as compared to \$10.5 million in 2019. The Specialized & Industrial Services segment had gross capital expenditures of \$11.4 million and dispositions of \$6.0 million for net capital expenditures¹ of \$5.4 million in 2020. The majority of the capital invested consisted of various pieces of operating equipment to support strong demand at Premay Pipeline, to support growth opportunities at Cascade Energy and to replace some equipment at Smook. In 2019 gross capital expenditures were \$19.9 million and dispositions were \$9.4 million for net capital expenditures¹ of \$10.5 million. The majority of the dispositions in 2019 related to the transferring of trucks, trailers and some hydrovac equipment to other segments to improve asset utilization.

CORPORATE

The Corporate Office provides support to the Business Units including coordinating business strategies, monitoring financial and business performance and providing shared services such as payroll services, human resource support, information technology support, legal support and accounting services. The Corporate Office also owns a network of real estate holdings and facilities, through its subsidiary MT, which are leased primarily to the Business Units. Such properties are leased on commercially reasonable terms. In addition, the Corporate Office is responsible for capital allocation to the Business Units as well as all regulatory and public reporting.

The Corporate Office recorded a loss of \$11.4 million in 2020 as compared to a loss of \$9.5 million in 2019. The \$1.9 million increase in loss was mainly attributable to a lower amount of costs recovered from our Business Units, from lower income generated from investments and from a \$0.7 million negative variance in foreign exchange. In 2020 the Corporate Office recorded a foreign exchange loss of \$1.1 million as compared to a foreign exchange loss of \$0.4 million in 2019. These increases were somewhat offset by lower salaries resulting from cost control initiatives.

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¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

CAPITAL RESOURCES AND LIQUIDITY

	Years ended December 31
(\$ millions)	2020		2019
Net cash from operating activities	\$ 224.8	\$	170.6
Net cash used in financing activities	(128.9)		(15.0)
Net cash used in investing activities	(68.7)		(79.9)
Change in cash and cash equivalents	27.2		75.7
Effect of exchange rate fluctuations on cash held	(0.9)		(0.6)
Cash and cash equivalents, beginning of period	79.0		3.9
Cash and cash equivalents, end of period	\$ 105.3	\$	79.0

Consolidated Cash Flow Summary

Annual Sources and Uses of Cash

Mullen Group continues to generate cash in excess of its operating needs by generating \$224.8 million in 2020 as compared to \$170.6 million in 2019. Net cash used in financing activities in 2020 was \$128.9 million as compared to using \$15.0 million in 2019. The \$113.9 million increase in cash used was mainly due to issuing the Debentures in 2019 and from using \$53.4 million to repurchase and cancel 7,972,926 Common Shares under the NCIB in 2020. These items were somewhat offset by the \$30.0 million repayment of the Bank Credit Facility in 2019 and from a decrease in dividends paid to common shareholders in 2020. Net cash used in investing activities decreased by \$11.2 million due to a reduction in cash used on net capital expenditures¹ in 2020, which was somewhat offset by a greater amount of cash used on acquisitions in 2020. Specific changes in cash flow are set forth below.

Cash From Operating Activities

Net cash from operating activities increased to \$224.8 million in 2020 as compared to \$170.6 million in 2019. The increase of \$54.2 million, or 31.8 percent was mainly due to a \$23.1 million increase in cash generated from noncash working capital items, from a \$14.4 million decrease in cash taxes paid and a \$16.7 million increase in OIBDA.

The change in non-cash working capital items from operating activities is detailed in the table below:

Changes in Non-Cash Working Capital Items from Operating Activities
	Years ended December 31
(\$ millions)	2020	2019	Variance
	\$	\$	\$
Sources (uses) of cash
Trade and other receivables	24.4	13.3	11.1
Inventory	2.9	0.9	2.0
Prepaid expenses	2.0	(3.5)	5.5
Accounts payable and accrued liabilities	(6.7)	(11.2)	4.5
Total sources (uses) of cash from non-cash working capital items	22.6	(0.5)	23.1

In 2020 we generated \$22.6 million of cash from changes in non-cash working capital items from operating activities as compared to using \$0.5 million of cash in 2019. This \$23.1 million variance was mainly due to the following factors.

• An additional \$11.1 million of cash was generated from trade and other receivables that resulted from the combined effect of a \$24.4 million source of cash in 2020 as compared to a \$13.3 million source of cash in 2019.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

• An additional \$2.0 million of cash was generated from inventory that resulted from the combined effect of a \$2.9 million source of cash in 2020 as compared to a \$0.9 million source of cash in 2019.
• An additional \$5.5 million of cash was generated from prepaid expenses that resulted from the combined effect of a \$2.0 million source of cash in 2020 as compared to a \$3.5 million use of cash in 2019.
• An additional \$4.5 million of cash was generated from accounts payable and accrued liabilities that resulted from the combined effect of a \$6.7 million use of cash in 2020 as compared to an \$11.2 million use of cash in 2019.

Cash Used In Financing Activities

Net cash used in financing activities was \$128.9 million in 2020 as compared to using \$15.0 million in 2019. This \$113.9 million variance was mainly due to the factors set forth below.

• A \$119.8 million variance in cash from issuing the Debentures in the second quarter of 2019.
• A \$53.4 million increase in cash used in 2020 by repurchasing and cancelling 7,972,926 Common Shares under the NCIB.
• A \$3.5 million increase in interest paid in 2020.
• A \$0.4 million increase in the repayment of lease liabilities in 2020.

Somewhat offsetting these items were the following:

• A \$30.0 million decrease in cash used resulting from the repayment of borrowings on the Bank Credit Facility in 2019.
• A \$27.4 million decrease in cash used on paying dividends to common shareholders.
• A \$5.8 million decrease in the repayment of long-term debt and loans.

Cash Used In Investing Activities

Net cash used in investing activities decreased to \$68.7 million in 2020 as compared to \$79.9 million in 2019. This \$11.2 million decrease was mainly due to the factors set forth below.

• An \$18.1 million decrease in net capital expenditures¹ . In 2020 net capital expenditures¹ were \$50.4 million as compared to \$68.5 million in 2019.
• A \$0.2 million change in net investment in finance leases.
• A \$0.2 million decrease in cash used on the purchase of intangible assets.

Somewhat offsetting these items were the following:

• A \$4.5 million increase in cash used on acquisitions.
• A \$0.8 million variance in changes in non-cash working capital items from investing activities.
• A \$1.0 million decrease in interest received from cash and cash equivalents.
• A \$0.7 million decrease in cash generated on investments due to selling some portfolio investments in 2019.
• A \$0.3 million change in other assets.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

The following charts present the sources and uses of cash for comparative purposes.

Year ended December 31, 2020

Year ended December 31, 2019

In addition to the \$224.8 million (2019 – \$170.6 million) of net cash from operating activities, we also received \$2.8 million (2019 – \$124.5 million) of cash from other sources, which mainly consisted of interest income generated from cash and cash equivalents and from cash received on net investment in finance leases. Cash from other sources in 2019 mainly consisted of receiving \$119.8 million from the Debentures. Cash was used to repurchase and cancel 7,972,926 Common Shares for \$53.4 million, repay finance leases and debt of \$12.5 million (2019 – \$17.9 million), fund acquisitions of \$20.2 million (2019 – \$15.7 million), pay dividends totalling \$35.5 million (2019 – \$62.9 million), incur net capital expenditures¹ of \$50.4 million (2019 – \$68.5 million) and pay interest obligations of \$27.4 million (2019 – \$23.9 million). In 2019 cash was also used to repay the Bank Credit Facility of \$30.0 million. We also had \$1.9 million (2019 – \$1.1 million) of other uses.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Working Capital

At December 31, 2020, we had \$239.1 million (December 31, 2019 – \$243.3 million) of working capital, which included \$105.3 million of cash and cash equivalents, of which \$24.2 million was denominated in U.S. currency. On June 21, 2019, our Bank Credit Facility was increased by \$25.0 million to \$150.0 million. This working capital also includes a current liability of \$11.4 million (December 31, 2019 – \$10.7 million) related to the current portion of lease liabilities. This working capital, the Bank Credit Facility and the anticipated cash flow from operating activities in 2021 are available to finance our ongoing working capital requirements, our dividend, our 2021 capital budget, as well as various special projects and acquisition opportunities.

Generally, over the course of an economic cycle, our maintenance capital expenditures approximate our annual depreciation on property, plant and equipment. Our diverse business model, and wide range of operations, provide us with the ability to redeploy certain assets over different regions for greater utilization. In 2020 there were \$2.0 million (2019 – \$5.4 million) of trucks and trailers transferred amongst our Business Units. It also provides us with considerable flexibility in the amount of maintenance capital expenditure requirements in any given fiscal period.

The following chart summarizes our capital expenditures and depreciation for facilities as well as trucks, trailers and specialized equipment for the last number of years.

Capital Expenditures and Depreciation Summary	Years ended December 31
(\$ millions)	2020	2019	2018	2017
	\$	\$	\$	\$
Facilities
Gross capital expenditures	22.6	18.7	22.4	2.5
Net capital expenditures(1)	15.2	18.7	22.4	1.8
Depreciation	8.4	7.9	7.8	7.7
Trucks, trailers and specialized equipment
Gross capital expenditures	42.3	56.3	77.3	30.6
Net capital expenditures(1)	35.2	49.8	65.1*	18.0
Depreciation	64.0	72.6	64.3	67.7
Total
Gross capital expenditures	64.9	75.0	99.7	33.1
Net capital expenditures(1)	50.4	68.5	87.5	19.8
Depreciation	72.4	80.5	72.1	75.4

(1) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

* Included \$8.9 million of net capital expenditures for special projects.

Debt

As at December 31, 2020, we had net debt¹ outstanding of \$357.3 million, (December 31, 2019 – \$362.8 million), which consisted of total debt of \$607.8 million (December 31, 2019 – \$616.8 million) less working capital (excluding the current portion of lease liabilities) of \$250.5 million (December 31, 2019 – \$254.0 million). The primary reason for the decrease in the carrying value of the long-term debt was due to the impact of the strengthening of the Canadian dollar relative to the U.S. dollar on our U.S. dollar denominated debt. Total debt is comprised of the Private Placement Debt, the Debentures, lease liabilities and the Bank Credit Facility. The following table summarizes our total debt and net debt15 as at December 31, 2020, and December 31, 2019:

		December 31, 2020 December 31, 2019
(\$ millions)	Interest Rate		U.S. Dollar		CDN. Dollar Equivalent	U.S. Dollar	CDN. Dollar Equivalent	Change in CDN. Dollar Equivalent
Private Placement Debt:
Series G - matures October 22, 2024	3.84%	\$	117.0	\$	149.0	\$ 117.0	\$ 151.9	\$ (2.9)
Series H - matures October 22, 2026	3.94%		112.0		142.6	112.0	145.5	(2.9)
Series I - matures October 22, 2024	3.88%		—		30.0	—	30.0	—
Series J - matures October 22, 2026	4.00%		—		3.0	—	3.0	—
Series K - matures October 22, 2024	3.95%		—		58.0	—	58.0	—
Series L - matures October 22, 2026	4.07%		—		80.0	—	80.0	—
Bank Credit Facility	variable(1)		—		—	—	—	—
Less:
Unamortized debt issuance costs			—		(0.9)	—	(1.0)	0.1
Long-term debt (including the current portion)			229.0		461.7	229.0	467.4	(5.7)
Debentures – debt component	5.75%		—		111.1	—	108.7	2.4
Lease liabilities (including the current portion)	3.20%		—		35.0	—	40.7	(5.7)
Total debt		\$	229.0	\$	607.8	\$ 229.0	\$ 616.8	\$ (9.0)
Less:
Working capital (excluding the Bank
Credit Facility and the current portion of
leases)					250.5		254.0	(3.5)
Net debt(2)				\$	357.3		\$ 362.8	\$ (5.5)

(1) Bank prime rate plus 0.5 percent or bankers' acceptance rates plus 1.5 percent.

(2) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Total Net Debt¹ to Operating Cash Flow. Mullen Group's total net debt¹ cannot exceed 3.5 times operating cash flow calculated using the trailing twelve months' financial results normalized for acquisitions. The term total net debt¹ means all debt excluding the Debentures less any unrealized gain on Cross-Currency Swaps plus any unrealized loss on Cross-Currency Swaps as disclosed within Derivatives on the consolidated statement of financial position but includes the Private Placement Debt, lease liabilities, the Bank Credit Facility and letters of credit. The term "operating cash flow", as defined within the 2014 Note Purchase Agreement, means, for any quarterly period, the trailing twelve months' consolidated net income adjusted for all amounts deducted in the computation thereof on account of (i) taxes imposed on or measured by income or excess profits; (ii) depreciation and amortization taken during such period; (iii) total interest charges, including interest on the Debentures; and (iv) non-cash charges. Total net debt¹ to operating cash flow financial covenant under our Private Placement Debt enables us to include the trailing twelve months operating cash flows from acquisitions. Although permitted, we have not included any operating cash flows generated prior to the date of the acquisition from our recent acquisitions in this financial covenant calculation.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Total net debt¹ to operating cash flow was calculated as follows:

Total net debt(1) to operating cash flow	December 31 2020	December 31 2019
Total net debt(1)	\$ 462.8	\$ 470.6
Operating cash flow	\$ 220.1	\$ 204.7
Total net debt(1) to operating cash flow	2.10:1	2.30:1

(1) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Total Earnings Available for Fixed Charges to Total Fixed Charges. The fixed charge coverage ratio cannot be less than 1.75:1 calculated using the trailing twelve months financial results.

The term "total earnings available for fixed charges" means, for any period, consolidated net income plus all amounts deducted in the computation thereof on account of (i) taxes imposed on or measured by income or excess profits, (ii) the depreciation and amortization taken during such period, (iii) consolidated fixed charges, (iv) interest charges with respect to convertible debentures, and (v) non-cash charges, and less any non-cash gains included in the computation of consolidated net income. The term "total fixed charges" means, for any period, the sum of total interest charges and rental charges for such period.

Total Earnings Available for Fixed Charges to Total Fixed Charges	December 31 2020	December 31 2019
Total earnings available for fixed charges	\$ 222.4	\$ 207.2
Total fixed charges	\$ 22.5	\$ 23.2
Total earnings available for fixed charges to total fixed charges	9.87:1	8.94:1

Mullen Group, as evidenced by the table below, is in compliance with both of the aforementioned covenants.

Financial Covenants	Financial Covenant Threshold	December 31 2020	December 31 2019
Private Placement Debt Covenants
(a) Total net debt(1) to operating cash flow cannot exceed	3.50:1	2.10:1	2.30:1
(b) Total earnings available for fixed charges to total fixed charges cannot be less than	1.75:1	9.87:1	8.94:1

(1) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Total net debt¹ to operating cash flow was 2.10:1 at December 31, 2020. Assuming the \$462.8 million of total net debt¹ remains constant, we would need to generate approximately \$132.2 million of operating cash flow on a trailing twelve month basis to remain in compliance with this financial covenant. When a business is acquired, the trailing twelve months of operating cash flows generated by the newly acquired business may be added to our trailing twelve months' operating cash flows from the date of acquisition for financial covenant calculation purposes.

Mullen Group is also subject to a priority debt covenant. The term "priority debt" means all indebtedness secured by permitted liens excluding certain qualified subsidiary debt. Priority debt cannot exceed 15.0 percent of total assets. At December 31, 2020, the priority debt was \$0.7 million or an insignificant percentage of total assets.

Our debt-to-equity ratio was 0.68:1 at December 31, 2020, as compared to 0.67:1 at December 31, 2019. This increase in the debt-to-equity ratio was due to the net effect of a \$9.0 million decrease in total debt (including the current portion) and a \$21.5 million decrease in equity as compared to December 31, 2019. The \$9.0 million decrease in total debt was due to the \$5.9 million foreign exchange gain on the Corporation's U.S. dollar debt and from a \$5.7 million reduction in lease liabilities, being somewhat offset by a \$2.4 million increase in the debt component of the Debentures. The \$21.5 million decrease in equity mainly resulted from the \$33.2 million of dividends declared to shareholders in 2020 and the 7,972,926 Common Shares repurchased and cancelled for \$53.4 million. These items were somewhat offset by the \$64.0 million of net income being recognized in 2020.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Contractual Obligations

The following table summarizes the contractual maturities of financial liabilities using the contractual cash flows.

		Maximum Payments
	Total	2021 1 year	2022-2023 2 – 3 years	2024-2025 4 – 5 years	5 years and thereafter
(\$ millions)	\$	\$	\$	\$	\$
Long-term debt(1)	462.6	—	—	237.0	225.6
Interest on long-term debt(1)	90.7	18.2	36.3	27.2	9.0
Debentures	125.0	—	—	—	125.0
Interest on the Debentures	42.6	7.2	14.4	14.4	6.6
Purchase obligations	13.1	13.1	—	—	—
Lease liabilities	37.5	12.4	13.7	6.4	5.0
Total Contractual Obligations	771.5	50.9	64.4	285.0	371.2

(1) Assumes a U.S. dollar foreign exchange rate of \$1.2732.

We ended 2020 with long-term debt (including the current portion thereof) of \$461.7 million, a decrease of \$5.7 million as compared to the \$467.4 million of long-term debt at the beginning of the year. This decrease was due to the \$5.9 million foreign exchange gain on the Corporation's U.S. dollar debt. The long-term debt consists of the Private Placement Debt, which matures in 2024 and 2026.

In June 2019, we issued \$125.0 million of the Debentures, by way of a bought deal, at a price of \$1,000 per Debenture. The Debentures mature on November 30, 2026, and bear interest at an annual rate of 5.75 percent payable semi-annually in arrears on the last day of May and November of each year. Each \$1,000 Debenture is convertible into 71.4286 Common Shares (or a conversion price of \$14.00) at any time at the option of the holders of the Debentures. As at the date of issuance, an aggregate of 8,928,575 Common Shares would be issued if all holders converted their principal amount.

As at December 31, 2020, we entered into various capital expenditure purchase obligations totalling \$13.1 million. The majority of these purchase obligations relate to the acquisition of trucks and trailers given that certain manufacturers require purchase obligations in advance so that manufacturing can commence and expected delivery times can be met.

Effective January 1, 2019, we adopted IFRS 16 – Leases using the modified retrospective method whereby comparative financial information is not restated and continues to be reported under the accounting standards in effect for those periods. The majority of our lease liabilities relate to real property leases that are mainly utilized by certain Business Units within the Logistics & Warehousing and the Less-Than-Truckload segments. Some Business Units have also entered into leases pertaining to various pieces of operating equipment including rail cars, trucks and trailers. As at December 31, 2020, we had total contractual cash commitments of \$37.5 million while the carrying amount of these lease liabilities on our consolidated statement of financial position was \$35.0 million. The carrying amount is measured at the present value of the remaining lease payments at an average incremental borrowing rate of 3.2 percent.

Share Capital

The authorized share capital of the Corporation consists of an unlimited number of Common Shares and an unlimited number of Preferred Shares, issuable in series. The number of, and the specific rights, privileges, restrictions and conditions attaching to any series of Preferred Shares shall be determined by the Board prior to the creation and issuance thereof. As at the date hereof, no series of Preferred Shares has been created.

Common Shares

Common Shares Authorized: Unlimited Number	# of Common Shares	Amount (\$ millions)
Balance at December 31, 2019	104,824,973	\$ 946.9
Common Shares repurchased and cancelled	(7,972,926)	(72.0)
Balance at December 31, 2020	96,852,047	\$ 874.9

At December 31, 2020, there were 96,852,047 Common Shares outstanding representing \$874.9 million in share capital. In 2020 we repurchased and cancelled 7,972,926 Common Shares under the NCIB program.

Stock Option Plan

	Options	Weighted average exercise price
Outstanding – December 31, 2019	3,280,000	\$ 19.22
Forfeited	(285,000)	(17.50)
Outstanding – December 31, 2020	2,995,000	19.38
Exercisable – December 31, 2020	2,990,000	19.39

There are 3,772,500 options available to be issued under our stock option plan. In 2020 there were 285,000 stock options forfeited. As at December 31, 2020, Mullen Group had 2,995,000 stock options outstanding under the stock option plan. As at January 31, 2021, there were 2,690,000 stock options outstanding under the stock option plan.

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FOURTH QUARTER 2020 – CONSOLIDATED FINANCIAL RESULTS

Revenue

Q4 Consolidated Revenue by Segment Three month periods ended December 31
(unaudited) (\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Less-Than-Truckload	116.3	39.0	114.2	36.1	2.1	1.8
Logistics & Warehousing	96.8	32.5	102.2	32.3	(5.4)	(5.3)
Specialized & Industrial Services	84.8	28.5	100.0	31.6	(15.2)	(15.2)
Corporate and intersegment eliminations	(0.2)	—	(1.8)	—	1.6	—
Total	297.7	100.0	314.6	100.0	(16.9)	(5.4)

*as a percentage of pre-consolidated revenue

Consolidated revenue in the fourth quarter decreased by \$16.9 million, or 5.4 percent, declining to \$297.7 million as compared to \$314.6 million in 2019. The negative effects of COVID-19 continued to impact the demand for most trucking and logistics services. In our Less-Than-Truckload segment revenue declined by only 0.4 percent year over year, once adjusted for fuel surcharge fluctuations and the acquisition of PCX, reflecting the steady nature of the consumer demand. The demand for Logistics & Warehousing segment services was much softer than 2019 due to plant closures and supply chain disruptions. This segment experienced a revenue decline of 5.3 percent or \$5.4 million. In our Specialized & Industrial Services segment, revenue declined by 15.2 percent, or \$15.2 million, due to the collapse in oil prices and the lack of oilfield and maintenance activity that was offset by strong pipeline construction activity. Fuel surcharge revenue was \$16.1 million as compared to \$21.7 million in 2019.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Q4 Consolidated Revenue Three month periods ended December 31
(unaudited) (\$ millions)	2020		2019		Change
	\$	%	\$	%	\$	%
Company	218.5	73.4	234.6	74.6	(16.1)	(6.9)
Contractors	78.0	26.2	79.0	25.1	(1.0)	(1.3)
Other	1.2	0.4	1.0	0.3	0.2	20.0
Total	297.7	100.0	314.6	100.0	(16.9)	(5.4)

Revenue generated by Company Equipment decreased by \$16.1 million, or 6.9 percent, to \$218.5 million as compared to \$234.6 million in 2019 and represented 73.4 percent of consolidated revenue in the current period as compared to 74.6 percent in 2019. Revenue related to Contractors decreased by \$1.0 million, or 1.3 percent, to \$78.0 million as compared to \$79.0 million in 2019 and represented 26.2 percent of consolidated revenue in the current period as compared to 25.1 percent in 2019.

Direct Operating Expenses

Q4 Consolidated Direct Operating Expenses Three month periods ended December 31
(unaudited) (\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	58.3	26.7	58.8	25.1	(0.5)	(0.8)
CEWS	(3.8)	(1.8)	—	—	(3.8)	—
Fuel	16.6	7.6	22.1	9.4	(5.5)	(24.9)
Repairs and maintenance	27.1	12.4	29.4	12.5	(2.3)	(7.8)
Purchased transportation	23.9	10.9	26.9	11.5	(3.0)	(11.2)
Operating supplies	17.2	7.9	20.0	8.5	(2.8)	(14.0)
Other	7.1	3.3	6.3	2.7	0.8	12.7
	146.4	67.0	163.5	69.7	(17.1)	(10.5)
Contractors	59.1	75.8	58.8	74.4	0.3	0.5
Total	205.5	69.0	222.3	70.7	(16.8)	(7.6)

*as a percentage of respective Consolidated revenue

DOE were \$205.5 million in the fourth quarter as compared to \$222.3 million in 2019. This decrease of \$16.8 million, or 7.6 percent, once adjusted for the effect of CEWS, was generally in line with the \$16.9 million decrease in consolidated revenue. Adjusted for CEWS, these expenses declined as a percentage of revenue to 70.3 percent as compared to 70.7 percent in 2019.

DOE associated with Company Equipment decreased to \$146.4 million as compared to \$163.5 million in 2019. This decrease of \$17.1 million, or 10.5 percent, was attributable to the \$16.1 million, or 6.9 percent, decrease in Company revenue that occurred during the quarter. As a percentage of Company revenue these expenses decreased by 2.7 percent to 67.0 percent as compared to 69.7 percent in 2019. Adjusted for CEWS, as a percentage of Company revenue these expenses decreased by 1.0 percent to 68.7 percent as compared to 69.7 percent in 2019. The reduction in fuel expense accounted for the majority of the decrease. Total fuel expense decreased by 1.8 percent of Company revenue to 7.6 percent, or \$16.6 million, as compared to 9.4 percent or \$22.1 million in 2019. Somewhat offsetting this reduction in fuel expense was a rise in wages and benefits expense as a percentage of revenue.

Contractors expense in the fourth quarter increased to \$59.1 million as compared to \$58.8 million in 2019. This \$0.3 million, or 0.5 percent, increase was generally in line with the \$1.0 million, or 1.3 percent, decline in Contractors revenue. As a percentage of revenue, Contractors expense increased by 1.4 percent to 75.8 percent as compared to 74.4 percent in 2019 and was primarily attributable to the effect of rate discounting, primarily by those Business Units involved in the transportation of fluids and servicing of wells.

Selling and Administrative Expenses

Q4 Consolidated Selling and Administrative Expenses

Three month periods ended December 31

(unaudited)

(\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Wages and benefits	23.8	8.0	24.6	7.8	(0.8)	(3.3)
CEWS	(1.5)	(0.5)	—	—	(1.5)	—
Communications, utilities and general supplies	11.1	3.7	12.0	3.8	(0.9)	(7.5)
Profit share	3.5	1.2	3.4	1.1	0.1	2.9
Foreign exchange	1.5	0.5	0.4	0.1	1.1	275.0
Stock-based compensation	0.1	—	0.4	0.1	(0.3)	(75.0)
Rent and other	1.5	0.5	1.6	0.6	(0.1)	(6.3)
Total	40.0	13.4	42.4	13.5	(2.4)	(5.7)

*as a percentage of total Consolidated revenue

S&A expenses for the period declined by \$2.4 million to \$40.0 million as compared to \$42.4 million in 2019, largely due to cost control initiatives and CEWS being partially offset by the \$1.1 million negative variance in foreign exchange expense that related to the year over year change in the Canadian dollar relative to the U.S. dollar and the \$1.5 million of incremental S&A expenses associated with acquisitions. Adjusted for CEWS and foreign exchange, S&A expenses were consistent as a percentage of revenue at 13.4 percent as compared to 13.4 percent in 2019.

Operating Income Before Depreciation and Amortization

Q4 Consolidated Operating Income Before Depreciation and Amortization Three month periods ended December 31
(unaudited) (\$ millions)		2020 2019		Change
	\$	%	\$	%	\$	%
Less-Than-Truckload	18.8	36.0	16.7	33.5	2.1	12.6
Logistics & Warehousing	20.0	38.3	19.5	39.1	0.5	2.6
Specialized & Industrial Services	17.7	33.9	16.8	33.6	0.9	5.4
Corporate	(4.3)	(8.2)	(3.1)	(6.2)	(1.2)	38.7
Total	52.2	100.0	49.9	100.0	2.3	4.6

OIBDA for the period was \$52.2 million, or 17.5 percent of revenue, as compared to \$49.9 million, or 15.9 percent, in 2019. The \$2.3 million increase in OIBDA was comprised of a \$2.1 million increase in the Less-Than-Truckload segment, a \$0.5 million increase in the Logistics & Warehousing segment, a \$0.9 million increase in the Specialized & Industrial Services segment and a \$1.2 million increase in Corporate costs. Adjusted for CEWS, OIBDA was \$46.9 million for an operating margin¹ of 15.8 percent, fairly consistent with the 15.9 percent operating margin¹ achieved in 2019.

Depreciation of Property, Plant and Equipment

Depreciation of property, plant and equipment was \$18.8 million in the fourth quarter as compared to \$26.7 million in 2019. This decrease of \$7.9 million was mainly attributable to a lower amount of depreciation being recognized in the Specialized & Industrial Services segment and the Logistics & Warehousing segment, which was somewhat offset by a greater amount of depreciation being recorded in the Less-Than-Truckload segment. Depreciation in the Corporate Office remained consistent on a year over year basis. Depreciation in the Specialized & Industrial Services segment decreased by \$7.0 million and was mainly due to additional depreciation recognized in 2019 on specialty equipment within Spearing and Formula Powell after an assessment of market conditions for such equipment. Depreciation also decreased due to the lower amount of capital expenditures made within this segment, the sale of older assets by certain Business Units and from the Corporation's declining balance method of

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

depreciation. Depreciation in the Logistics & Warehousing segment decreased by \$1.2 million due to additional depreciation recognized in 2019 within Cascade Carriers on certain trucks after an assessment of market conditions for that specific make and model of equipment. Depreciation in the Less-Than-Truckload segment increased by \$0.3 million due to a greater amount of capital expenditures being made within this segment.

Depreciation of Right-of-Use Assets

Depreciation of right-of-use assets was \$3.0 million in the fourth quarter as compared to \$3.3 million in 2019. This decrease of \$0.3 million was mainly attributable to a lower amount of depreciation of right-of-use assets being recorded in the Logistics & Warehousing segment and the Specialized & Industrial Services segment. Depreciation in the Less-Than-Truckload segment remained consistent on a year over year basis. Depreciation in the Logistics & Warehousing segment and the Specialized & Industrial Services segment decreased by \$0.2 million and \$0.1 million, respectively. These decreases were mainly due to some real property leases that have come to the end of their term and were not renewed.

Amortization of Intangible Assets

Amortization of intangible assets was \$4.8 million in the fourth quarter as compared to \$5.3 million in 2019. This decrease of \$0.5 million resulted from certain intangible assets becoming fully amortized, which was somewhat offset by the additional amortization recorded on the intangible assets associated with the acquisition of PCX and IWD.

Finance Costs

Finance costs were \$7.3 million in the fourth quarter as compared to \$6.4 million in 2019. The increase of \$0.9 million was mainly attributable to a greater amount of interest expense being recorded on our U.S. dollar debt as a result of the change in the value of the Canadian dollar relative to the U.S. dollar. The Corporation also generated a lower amount of interest income in 2020 due to a decrease in the debentures issued to our equity investees.

Net Foreign Exchange Loss (Gain)

The net foreign exchange loss was \$0.1 million in the fourth quarter as compared to a gain of \$2.3 million in 2019. The components of net foreign exchange loss (gain) were as follows:

Net Foreign Exchange Loss (Gain)	Three month periods ended December 31
	CDN. \$ Equivalent
(unaudited) (\$ millions)	2020		2019
Foreign exchange (gain) loss on U.S. \$ debt	(13.9)		(5.8)
Foreign exchange loss (gain) on Cross-Currency Swaps	14.0		3.5
Net foreign exchange loss (gain)	0.1		(2.3)

Foreign Exchange (Gain) Loss on U.S. \$ Debt

We recorded a foreign exchange gain of \$13.9 million related to our U.S. dollar debt due to the \$0.0607 strengthening of the Canadian dollar relative to the U.S. dollar during the fourth quarter. For the same period in 2019, we recorded a foreign exchange gain of \$5.8 million due to the \$0.0255 strengthening of the Canadian dollar relative to the U.S. dollar. The details of the foreign exchange gain on the U.S. dollar debt is summarized in the following table:

Foreign Exchange (Gain) Loss on U.S. \$ Debt	Three month periods ended December 31
	2020				2019
(unaudited) (\$ millions, except exchange rate amounts)	U.S. \$ Debt	Exchange Rate	CDN. \$ Equivalent	U.S. \$ Debt	Exchange Rate	CDN. \$ Equivalent
Ending – December 31	229.0	1.2732	291.6	229.0	1.2988	297.5
Beginning – September 30	229.0	1.3339	305.5	229.0	1.3243	303.3
Foreign exchange (gain) loss on U.S. \$ debt			(13.9)			(5.8)

Foreign Exchange Loss (Gain) on Cross-Currency Swaps

The foreign exchange loss on Cross-Currency Swaps of \$14.0 million in the fourth quarter was due to the change over the period in the fair value of these Cross-Currency Swaps as summarized in the table below:

Foreign Exchange Loss (Gain) on Cross-Currency Swaps	Three month periods ended December 31
		2020		2019
(unaudited) (\$ millions)	U.S. \$ Swaps	CDN. \$ Change in Fair Value of Swaps	U.S. \$ Swaps	CDN. \$ Change in Fair Value of Swaps
Cross-Currency Swap maturing October 22, 2024	117.0	7.1	117.0	1.9
Cross-Currency Swap maturing October 22, 2026	112.0	6.9	112.0	1.6
Foreign exchange loss (gain) on Cross-Currency Swaps		14.0		3.5

Other (Income) Expense

Other expense was \$5.3 million in the fourth quarter of 2020 as compared to \$0.3 million of other expense recorded in 2019. The \$5.0 million negative variance was due to the factors set forth below:

Change in Fair Value of Investments (positive variance of \$0.1 million). We recorded an increase in the fair value of investments of \$0.4 million in the fourth quarter as compared to a \$0.3 million increase in 2019.

Loss on Sale of Property, Plant and Equipment (negative variance of \$4.3 million). We recognized a loss of \$5.2 million on sale of property, plant and equipment on total consolidated proceeds on sale of \$8.7 million in the fourth quarter as compared to a \$0.9 million loss on sale of property, plant and equipment on total consolidated proceeds on sale of \$2.8 million in 2019. The \$5.2 million loss on sale of property, plant and equipment in 2020 mainly resulted from the sale of redundant land and buildings within the Corporate Office (loss of \$3.3 million) and from shutting in a disposal well at Envolve (loss of \$1.9 million). The \$0.9 million loss on sale of property, plant and equipment in 2019 resulted from the sale of older assets by Business Units within the Specialized & Industrial Services segment.

Earnings from Equity Investments (negative variance of \$0.8 million). We recognized a \$0.5 million loss from equity investments in the fourth quarter as compared to \$0.3 million of earnings in 2019. There were no equity investments purchased or sold in the fourth quarter of 2020 and 2019.

Income Taxes

		Three month periods ended December 31
(unaudited) (\$ millions)		2020		2019
Income before income taxes	\$	12.9	\$	10.2
Combined statutory tax rate		26%		27%
Expected income tax		3.4		2.7
Add (deduct):
Non-deductible (taxable) portion of net foreign exchange loss (gain)		—		(0.2)
Stock-based compensation expense		0.1		0.1
Changes in unrecognized deferred tax asset		—		(0.2)
Decrease in income tax due to changes in income tax rate		(0.1)		—
Other		(0.6)		(0.6)
Income tax expense	\$	2.8	\$	1.8

Income tax expense increased to \$2.8 million in the fourth quarter as compared to \$1.8 million in 2019. This increase of \$1.0 million was mainly attributable to the greater amount of income generated in the fourth quarter of 2020 as compared to the prior year period and from the variance in net foreign exchange.

Net Income

		Three month periods ended December 31
(unaudited) (\$ millions, except share and per share amounts)	2020	2019	% Change
Net income	\$ 10.1	\$ 8.4	20.2
Weighted average number of Common Shares outstanding	96,870,540	104,824,973	(7.6)
Earnings per share – basic	\$ 0.10	\$ 0.08	25.0

Net income increased to \$10.1 million in the fourth quarter of 2020 as compared to \$8.4 million in 2019. The factors contributing to the increase in net income include:

• a \$7.9 million decrease in depreciation of property, plant and equipment;
• a \$2.3 million increase in OIBDA;
• a \$0.5 million decrease in amortization of intangible assets;
• a \$0.3 million decrease in depreciation of right-of-use assets; and
• a \$0.1 million positive variance in the fair value of investments.

These factors were somewhat offset by the following factors that decreased net income:

• a \$4.3 million increase in the loss on sale of property, plant and equipment;
• a \$2.4 million negative variance in net foreign exchange;
• a \$1.0 million increase in income tax expense;
• a \$0.9 million increase in finance costs; and
• a \$0.8 million decrease in earnings from equity investments.

Basic earnings per share increased to \$0.10 in 2020 as compared to \$0.08 in 2019. This increase resulted from the effect of the \$1.7 million increase in net income. The weighted average number of Common Shares outstanding decreased from 104,824,973 to 96,870,540, which was due to the repurchase and cancellation of 7,972,926 Common Shares under the NCIB in 2020.

Net Income – Adjusted and Earnings per Share – Adjusted

The following table illustrates net income and basic earnings per share before considering the impact of the net foreign exchange gains or losses and the change in fair value of investments. Net income and basic earnings per share have been adjusted to reflect earnings from a strictly operating perspective.

		Three month periods ended December 31
(unaudited) (\$ millions, except share and per share amounts)		2020		2019
Income before income taxes	\$	12.9	\$	10.2
Add (deduct):
Net foreign exchange loss (gain)		0.1		(2.3)
Change in fair value of investments		(0.4)		(0.3)
Income before income taxes – adjusted		12.6		7.6
Income tax rate		26%		27%
Computed expected income tax expense		(3.3)		(2.0)
Net income – adjusted(1)		9.3		5.6
Weighted average number of Common Shares outstanding – basic		96,870,540		104,824,973
Earnings per share – adjusted(1)	\$	0.10	\$	0.05

(1) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

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FOURTH QUARTER 2020 – SEGMENTED INFORMATION

Three month period ended December 31, 2020 (unaudited) (\$ millions)	Less-Than -Truckload	Logistics & Warehousing	Specialized & Industrial Services	Corporate and intersegment eliminations	Total
	\$	\$	\$	\$	\$
Revenue	116.3	96.8	84.8	(0.2)	297.7
Direct operating expenses	81.2	66.2	58.6	(0.5)	205.5
Selling and administrative expenses	16.3	10.6	8.5	4.6(1)	40.0
Operating income before depreciation and amortization	18.8	20.0	17.7	(4.3)	52.2
Net capital expenditures(2)	10.2	(0.6)	(0.7)	9.8	18.7

Three month period ended December 31, 2019 (unaudited) (\$ millions)	Less-Than -Truckload	Logistics & Warehousing	Specialized & Industrial Services	Corporate and intersegment eliminations	Total
	\$	\$	\$	\$	\$
Revenue	114.2	102.2	100.0	(1.8)	314.6
Direct operating expenses	81.7	71.4	71.7	(2.5)	222.3
Selling and administrative expenses	15.8	11.3	11.5	3.8(3)	42.4
Operating income before depreciation and amortization	16.7	19.5	16.8	(3.1)	49.9
Net capital expenditures(2)	7.7	3.1	(0.7)	10.8	20.9

(1) Includes a \$1.1 million foreign exchange loss.

(2) Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

(3) Includes a \$0.2 million foreign exchange loss.

LESS-THAN-TRUCKLOAD SEGMENT

Summary – Trailing Eight Quarters

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Revenue

Q4 Revenue – Less-Than-Truckload Three month periods ended December 31
(unaudited) (\$ millions)	2020 2019 Change
	\$	%	\$	%	\$	%
Company	107.8	92.7	112.2	98.2	(4.4)	(3.9)
Contractors	8.5	7.3	1.9	1.7	6.6	347.4
Other	—	—	0.1	0.1	(0.1)	(100.0)
Total	116.3	100.0	114.2	100.0	2.1	1.8

Segment revenue increased by \$2.1 million, or 1.8 percent, to \$116.3 million as compared to \$114.2 million in 2019 and represented 39.0 percent of pre-consolidated revenue as compared to 36.1 percent in 2019. This increase in revenue was mainly attributable to the acquisition of PCX being partially offset by a reduction in fuel surcharge revenue as well as the negative effects of COVID-19. Specific factors affecting segment revenue were:

• a \$5.7 million increase in revenue generated from the acquisition of PCX;
• a decrease of \$3.1 million in fuel surcharge revenue to \$10.4 million, from the \$13.5 million generated in 2019 resulting from the decline in diesel fuel prices; and
• a pronounced decline in freight demand in Alberta.

Direct Operating Expenses

Q4 Direct Operating Expenses – Less-Than-Truckload Three month periods ended December 31
(unaudited) (\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	29.1	27.0	28.4	25.3	0.7	2.5
CEWS	(0.8)	(0.7)	—	—	(0.8)	—
Fuel	9.6	8.9	12.0	10.7	(2.4)	(20.0)
Repairs and maintenance	11.4	10.6	11.1	9.9	0.3	2.7
Purchased transportation	21.0	19.5	24.7	22.0	(3.7)	(15.0)
Operating supplies	1.9	1.8	1.6	1.4	0.3	18.8
Other	3.7	3.3	3.3	3.0	0.4	12.1
	75.9	70.4	81.1	72.3	(5.2)	(6.4)
Contractors	5.3	62.4	0.6	31.6	4.7	783.3
Total	81.2	69.8	81.7	71.5	(0.5)	(0.6)

*as a percentage of respective Less-Than-Truckload revenue

DOE were \$81.2 million as compared to \$81.7 million in 2019. This decrease of \$0.5 million, or 0.6 percent, was despite the \$2.1 million increase in segment revenue due to the following key factors:

• a \$3.7 million reduction in purchased transportation;
• a \$2.4 million reduction in fuel expense due to lower fuel prices; and
• the offsetting benefit of \$0.8 million contribution from CEWS.

As a percentage of revenue these expenses decreased by 1.7 percent to 69.8 percent as compared to 71.5 percent in 2019 due to cost controls and efficiency gains. Adjusted for CEWS, these expenses decreased by 1.0 percent as a percentage of revenue to 70.5 percent as compared to 71.5 percent in 2019.

DOE associated with Company Equipment decreased by \$5.2 million, or 6.4 percent, to \$75.9 million as compared to \$81.1 million in 2019. This decrease was generally in line with the \$4.4 million, or 3.9 percent, decrease in Company revenue. As a percentage of Company revenue these expenses decreased by 1.9 percent to 70.4 percent as compared to 72.3 percent in 2019, primarily due to lower fuel costs. Fuel expense was reduced to 8.9 percent as a percentage of Company revenue as compared 10.7 percent in 2019.

Contractors expense increased by \$4.7 million to \$5.3 million as compared to \$0.6 million in 2019. This increase was directly related to the \$6.6 million increase in Contractors revenue, primarily due to the nature of PCX's assetlight operations.

Selling and Administrative Expenses

Q4 Selling and Administrative Expenses – Less-Than-Truckload Three month periods ended December 31
(unaudited) (\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Wages and benefits	10.4	8.9	9.9	8.7	0.5	5.1
CEWS	(0.3)	(0.2)	—	—	(0.3)	—
Communications, utilities and general supplies	4.9	4.2	4.5	3.9	0.4	8.9
Profit share	0.9	0.8	0.8	0.7	0.1	12.5
Foreign exchange	—	—	—	—	—	—
Rent and other	0.4	0.3	0.6	0.5	(0.2)	(33.3)
Total	16.3	14.0	15.8	13.8	0.5	3.2

*as a percentage of total Less-Than-Truckload revenue

S&A expenses increased by \$0.5 million to \$16.3 million as compared to \$15.8 million in 2019, primarily due to the \$1.1 million of incremental S&A expenses associated with the acquisition of PCX. S&A expenses as a percentage of segment revenue increased by 0.2 percent to 14.0 percent as compared to 13.8 percent in 2019. Adjusted for CEWS, S&A expenses as a percentage of segment revenue were 14.3 percent.

Operating Income Before Depreciation and Amortization

OIBDA increased by \$2.1 million, or 12.6 percent, to \$18.8 million as compared to \$16.7 million in 2019. The increase in OIBDA was due to lower fuel costs, \$0.9 million of incremental OIBDA generated by PCX and CEWS. Operating margin¹ increased to 16.2 percent as compared to 14.6 percent in 2019. Adjusted for CEWS, operating margin¹ improved to 15.2 percent.

Capital Expenditures

Net capital expenditures¹ were \$10.2 million in the fourth quarter, an increase of \$2.5 million as compared to \$7.7 million in 2019. The Less-Than-Truckload segment had gross capital expenditures of \$10.5 million and dispositions of \$0.3 million for net capital expenditures¹ of \$10.2 million in 2020. The majority of the capital invested in the fourth quarter of 2020 consisted of trucks and trailers to support growth opportunities as well as replace some older less efficient equipment. In 2019 gross capital expenditures were \$8.0 million and dispositions were \$0.3 million for net capital expenditures¹ of \$7.7 million.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

LOGISTICS & WAREHOUSING SEGMENT

Summary – Trailing Eight Quarters

Revenue

Q4 Revenue – Logistics & Warehousing Three month periods ended December 31
(unaudited) (\$ millions)	2020		2019		Change
	\$	%	\$	%	\$	%
Company	42.9	44.3	43.0	42.1	(0.1)	(0.2)
Contractors	53.8	55.6	59.0	57.7	(5.2)	(8.8)
Other	0.1	0.1	0.2	0.2	(0.1)	(50.0)
Total	96.8	100.0	102.2	100.0	(5.4)	(5.3)

Segment revenue fell by \$5.4 million, or 5.3 percent, to \$96.8 million as compared to \$102.2 million in 2019 and represented 32.5 percent of pre-consolidated revenue as compared to 32.3 percent in 2019. Segment revenue decreased as a result of the effects of COVID-19. This negatively impacted both freight volumes and spot prices. Further, fuel surcharge revenue declined by \$2.4 million to \$4.3 million as compared to \$6.6 million in 2019 due to lower diesel fuel prices.

Revenue related to Company Equipment decreased by \$0.1 million, or 0.2 percent, to \$42.9 million as compared to \$43.0 million in 2019 and represented 44.3 percent of segment revenue in the current period as compared to 42.1 percent in 2019. Revenue related to Contractors decreased by \$5.2 million, or 8.8 percent, to \$53.8 million as compared to \$59.0 million in 2019 and represented 55.6 percent of segment revenue in the current period as compared to 57.7 percent in 2019.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Direct Operating Expenses

Q4 Direct Operating Expenses – Logistics & Warehousing

Three month periods ended December 31

(unaudited)

(\$ millions)	2020		2019			Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	9.0	21.0	9.1	21.2	(0.1)	(1.1)
CEWS	(0.7)	(1.7)	—	—	(0.7)	—
Fuel	2.4	5.6	3.1	7.2	(0.7)	(22.6)
Repairs and maintenance	4.9	11.4	4.9	11.4	—	—
Purchased transportation	1.4	3.3	1.3	3.0	0.1	7.7
Operating supplies	7.9	18.4	8.2	19.1	(0.3)	(3.7)
Other	0.9	2.1	1.0	2.3	(0.1)	(10.0)
	25.8	60.1	27.6	64.2	(1.8)	(6.5)
Contractors	40.4	75.1	43.8	74.2	(3.4)	(7.8)
Total	66.2	68.4	71.4	69.9	(5.2)	(7.3)

*as a percentage of respective Logistics & Warehousing revenue

DOE were \$66.2 million as compared to \$71.4 million in 2019. This decrease of \$5.2 million, or 7.3 percent, was due to the following key factors:

• a \$5.4 million decrease in segment revenue;
• a \$3.4 million decrease in Contractors expense;
• a \$0.7 million reduction in fuel expense due to lower fuel prices; and
• the offsetting benefit of \$0.7 million contribution from CEWS.

As a percentage of revenue, DOE decreased by 1.5 percent to 68.4 percent as compared to 69.9 percent in 2019 due to cost controls and efficiency gains. Adjusted for CEWS, these expenses decreased by 0.8 percent as a percentage of revenue to 69.1 percent.

DOE associated with Company Equipment decreased by \$1.8 million, or 6.5 percent, to \$25.8 million as compared to \$27.6 million in 2019. This decrease, once adjusted for CEWS, was generally in line with the \$0.1 million decrease in Company revenue. As a percentage of Company revenue these expenses decreased by 4.1 percent to 60.1 percent as compared to 64.2 percent in 2019, due to lower fuel costs. Fuel expense was reduced to 5.6 percent as a percentage of Company revenue as compared to 7.2 percent in 2019.

Contractors expense decreased by \$3.4 million to \$40.4 million as compared to \$43.8 million in 2019. This decrease was generally in line with the \$5.2 million decrease in Contractors revenue. As a percentage of Contractors revenue, Contractors expense increased by 0.9 percent to 75.1 percent as compared to 74.2 percent in 2019 due to the lack of availability of subcontractors in certain markets.

Selling and Administrative Expenses

Three month periods ended December 31
(unaudited) (\$ millions)	2020		2019			Change
	\$	%*	\$	%*	\$	%
Wages and benefits	6.8	7.0	6.7	6.6	0.1	1.5
CEWS	(0.4)	(0.4)	—	—	(0.4)	—
Communications, utilities and general supplies	2.3	2.4	2.7	2.6	(0.4)	(14.8)
Profit share	1.4	1.4	1.5	1.5	(0.1)	(6.7)
Foreign exchange	0.3	0.3	0.1	0.1	0.2	200.0
Rent and other	0.2	0.3	0.3	0.3	(0.1)	(33.3)
Total	10.6	11.0	11.3	11.1	(0.7)	(6.2)

Q4 Selling and Administrative Expenses – Logistics & Warehousing

*as a percentage of total Logistics & Warehousing revenue

S&A expenses were \$10.6 million as compared to \$11.3 million in 2019. The decrease of \$0.7 million was primarily due to cost control initiatives being partially offset by the \$0.2 million negative variance in foreign exchange. S&A expenses as a percentage of segment revenue declined by 0.1 percent to 11.0 percent as compared to 11.1 percent in 2019. Adjusted for CEWS and foreign exchange, S&A expenses as a percentage of segment revenue was fairly consistent at 11.1 percent as compared to 11.0 percent in 2019.

Operating Income Before Depreciation and Amortization

OIBDA increased by \$0.5 million, or 2.6 percent, to \$20.0 million as compared to \$19.5 million generated in 2019. The majority of this rise in OIBDA was due to \$1.1 million of CEWS being partially offset by higher Contractors expense and the negative variance in foreign exchange. Operating margin¹ increased by 1.6 percent to 20.7 percent as compared to 19.1 percent in 2019. Adjusted for CEWS and foreign exchange, operating margin¹ was consistent at 19.8 percent as compared to 19.2 percent in 2019.

Capital Expenditures

Net capital expenditures¹ were \$(0.6) million in the fourth quarter, a decrease of \$3.7 million as compared to \$3.1 million in 2019. The Logistics & Warehousing segment had gross capital expenditures of \$0.5 million and dispositions of \$1.1 million for net capital expenditures¹ of \$(0.6) million in 2020. The majority of the capital was invested to purchase trucks, trailers and various pieces of operating equipment and to replace some older less efficient equipment. In 2019 gross capital expenditures were \$3.7 million and dispositions were \$0.6 million for net capital expenditures¹ of \$3.1 million.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

SPECIALIZED & INDUSTRIAL SERVICES SEGMENT

Revenue OIBDA Operating Margin¹

Summary – Trailing Eight Quarters

Revenue

Q4 Revenue – Specialized & Industrial Services
(unaudited) (\$ millions)	2020 2019				Change
	\$	%	\$	%	\$	%
Company	67.9	80.1	79.3	79.3	(11.4)	(14.4)
Contractors	16.7	19.7	20.5	20.5	(3.8)	(18.5)
Other	0.2	0.2	0.2	0.2	—	—
Total	84.8	100.0	100.0	100.0	(15.2)	(15.2)

Segment revenue declined by \$15.2 million, or 15.2 percent, to \$84.8 million as compared to \$100.0 million in 2019 and represented 28.5 percent of pre-consolidated revenue as compared to 31.6 percent of pre-consolidated revenue in 2019. This decline in revenue was mainly attributable to lower demand for fluid hauling and drilling related services being partially offset by the rise in demand for large diameter pipeline hauling and stringing services. Specific factors affecting the segment revenue were:

• A \$9.6 million decrease in revenue generated by those Business Units involved in the transportation of fluids and servicing of wells due to the sharp decline in demand as a result of low oil prices.
• A \$4.5 million decrease in revenue generated by those Business Units most directly tied to oil and natural gas drilling activity as the demand for most services was severely impacted by the loss of drilling activity in the Western Canadian Sedimentary Basin ("WCSB").
• a \$1.4 million decrease in revenue generated by those Business Units providing specialized services to the oil sands, environmental, construction, pipeline, utility, telecom and water management industries including a \$5.6 million decrease in demand for water management services and pumps at Canadian Dewatering, and hydrovac services. These decreases were partially offset by a \$6.2 million increase in pipeline hauling and stringing services revenue.

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

Direct Operating Expenses

Q4 Direct Operating Expenses – Specialized & Industrial Services
(unaudited) (\$ millions)	2020		2019		Change
	\$	%*	\$	%*	\$	%
Company
Wages and benefits	20.2	29.7	21.4	27.0	(1.2)	(5.6)
CEWS	(2.3)	(3.3)	—	—	(2.3)	—
Fuel	4.6	6.8	6.9	8.7	(2.3)	(33.3)
Repairs and maintenance	10.8	15.9	13.4	16.9	(2.6)	(19.4)
Purchased transportation	1.6	2.4	0.8	1.0	0.8	100.0
Operating supplies	7.4	10.9	10.2	12.9	(2.8)	(27.5)
Other	1.9	2.7	2.2	2.7	(0.3)	(13.6)
	44.2	65.1	54.9	69.2	(10.7)	(19.5)
Contractors	14.4	86.2	16.8	82.0	(2.4)	(14.3)
Total	58.6	69.1	71.7	71.7	(13.1)	(18.3)

*as a percentage of respective Specialized & Industrial Services revenue

DOE were \$58.6 million as compared to \$71.7 million in 2019. The decrease of \$13.1 million, or 18.3 percent, was directly related to the \$15.2 million, or 15.2 percent, decline in segment revenue. As a percentage of revenue these expenses decreased by 2.6 percent to 69.1 percent as compared to 71.7 percent in 2019. Adjusted for CEWS, these expenses increased by 0.1 percent as a percentage of revenue to 71.8 percent as compared to 71.7 percent in 2019.

DOE associated with Company Equipment decreased by \$10.7 million, or 19.5 percent, to \$44.2 million as compared to \$54.9 million in 2019. This decrease, once adjusted for CEWS, was generally in line with the \$11.4 million, or 14.4 percent, decrease in Company revenue. As a percentage of Company revenue these expenses decreased by 4.1 percent to 65.1 percent as compared to 69.2 percent in 2019, due to lower fuel costs and lower repairs and maintenance expense. Adjusted for CEWS, DOE associated with Company Equipment as a percentage of Company revenue were reduced by 0.7 percent to 68.5 percent.

Contractors expense decreased by \$2.4 million to \$14.4 million as compared to \$16.8 million in 2019. As a percentage of Contractors revenue, Contractors expense increased to 86.2 percent as compared to 82.0 percent due to the effect of rate discounting, primarily by those Business Units involved in the transportation of fluids and servicing of wells.

Q4 Selling and Administrative Expenses – Specialized & Industrial Services (unaudited) (\$ millions) 2020 2019 Change \$ %* \$ %* \$ % Wages and benefits 5.0 5.9 6.3 6.3 (1.3) (20.6) CEWS (0.8) (0.9) — — (0.8) — Communications, utilities and general supplies 2.8 3.3 3.7 3.7 (0.9) (24.3) Profit share 1.2 1.4 1.1 1.1 0.1 9.1 Foreign exchange — — — — — — Rent and other 0.3 0.3 0.4 0.4 (0.1) (25.0) Total 8.5 10.0 11.5 11.5 (3.0) (26.1)

Selling and Administrative Expenses

*as a percentage of total Specialized & Industrial Services revenue

S&A expenses decreased by \$3.0 million to \$8.5 million as compared to \$11.5 million in 2019, primarily due to the reduction in wages and benefits expense and other cost control initiatives. S&A expenses as a percentage of segment revenue declined by 1.5 percent to 10.0 percent as compared to 11.5 percent in 2019. Adjusted for CEWS,

S&A expenses as a percentage of revenue were reduced to 11.0 percent due to cost savings initiatives under our COVID-19 Action Plan.

Operating Income Before Depreciation and Amortization

OIBDA increased by \$0.9 million, or 5.4 percent, to \$17.7 million as compared to \$16.8 million in 2019. Operating margin¹ increased to 20.9 percent as compared to 16.8 percent in 2019. The margin gain was due to a change in revenue mix associated with certain large diameter pipeline projects that had a beneficial effect on margin, and CEWS, being largely offset by the significant decline in margin generated by those Business Units most directly tied to drilling related activity. Specifically, the \$0.9 million year over year increase in OIBDA can be attributed to the following:

• a \$2.0 million increase relating to those Business Units providing specialized services including pipeline stockpiling and stringing services;
• a \$0.1 million decrease in those Business Units involved in the transportation of fluids and servicing of wells; and
• a \$1.0 million decrease from those Business Units tied to drilling and drilling related activity.

Capital Expenditures

Net capital expenditures¹ were \$(0.7) million in the fourth quarter, which is consistent with the \$(0.7) million recorded in 2019. The Specialized & Industrial Services segment had gross capital expenditures of \$1.3 million and dispositions of \$2.0 million for net capital expenditures¹ of \$(0.7) million in 2020. The majority of the capital invested consisted of various pieces of operating equipment to support growth opportunities at Cascade Energy and to replace some equipment at Smook. In 2019 gross capital expenditures were \$2.6 million and dispositions were \$3.3 million for net capital expenditures¹ of \$(0.7) million.

CORPORATE

The Corporate Office recorded a loss of \$4.3 million in the fourth quarter of 2020 as compared to a loss of \$3.1 million in 2019. The \$1.2 million increase in loss was mainly attributable to a \$0.9 million negative variance in foreign exchange and from a lower amount of costs recovered from our Business Units. In the fourth quarter of 2020, the Corporate Office recorded a foreign exchange loss of \$1.1 million as compared to a foreign exchange loss of \$0.2 million in 2019. These increases were somewhat offset by lower stock-based compensation expense.

[The remainder of this page intentionally left blank.]

¹ Refer to the section entitled "Glossary of Terms and Reconciliation of Non-GAAP Terms".

SUMMARY OF QUARTERLY RESULTS

Seasonality of Operations

Revenue and profitability within the Less-Than-Truckload segment and the Logistics & Warehousing segment are generally lower in the first quarter than during the remainder of the year as freight volumes are typically lower following the holiday season due to less consumer demand and customers reducing shipments. Operating expenses also tend to increase within these segments in the winter months due to decreased fuel efficiency and increased repairs and maintenance expense resulting from cold weather conditions. The Less-Than-Truckload segment and the Logistics & Warehousing segment represents approximately 70.0 percent of our pre-consolidated revenue on an annualized basis. Generally speaking, our third and fourth quarters tend to be the strongest in terms of demand for the services in these segments. As a result, our consolidated revenue is generally higher in these quarters compared to the first and second quarters of the year.

A significant portion of the operations within the Specialized & Industrial Services segment is comprised of a wide range of unique businesses providing specialized equipment and services to the oil and gas, environmental, construction, pipeline, utility, telecom and civil industries, predominantly in western Canada. Activity levels, revenue and earnings are influenced by the seasonal activity pattern of western Canada's oil and natural gas exploration industry whereby activity peaks in the winter months and declines during the spring when wet weather and the spring thaw make the ground unstable. Consequently, municipalities and provincial transportation departments enforce road bans that restrict the movement of heavy equipment, thereby reducing activity levels. Additionally, certain oil and natural gas producing areas are only accessible in the winter months because the ground surrounding the drilling sites in these areas consists of swampy terrain. Seasonal factors and unpredictable weather patterns may lead to declines in the activity levels and demand for certain services. As a result, the demand for these services is traditionally highest in the first quarter and lowest in the second quarter.

	TTM(1)			2020					2019
(unaudited)		Q4	Q3	Q2	Q1		Q4	Q3	Q2	Q1
(\$ millions, except per share amounts)	\$	\$	\$	\$	\$		\$	\$	\$	\$
Revenue	1,164.3	297.7	290.9	257.5	318.2		314.6	325.3	319.0	319.6
Operating income before depreciation and amortization	217.6	52.2	65.2	55.0	45.2		49.9	55.6	51.4	44.0
Net income	64.0	10.1	26.2	23.0	4.7		8.4	20.5	31.7	11.6
Earnings per share
Basic	0.64	0.10	0.27	0.23	0.04	0.08	0.08	0.20	0.30	0.11
Diluted	0.64	0.10	0.26	0.23	0.04	0.08	0.08	0.20	0.30	0.11
Other Information
Net foreign exchange (gain) loss	(2.4)	0.1	(0.1)	(5.2)	2.8		(2.3)	(3.9)	(6.8)	(1.1)
Decrease (increase) in fair value of investments	1.0	(0.4)	0.1	(0.2)	1.5		(0.3)	0.3	0.1	(0.1)

Financial Results

(1) TTM represents the "trailing twelve months" and consists of a summary of the Corporation's financial results for the most recently completed four quarters.

Consolidated revenue in the fourth quarter of 2020 decreased by \$16.9 million to \$297.7 million as compared to \$314.6 million in 2019. Revenue generated by the Less-Than-Truckload segment increased by \$2.1 million to \$116.3 million due to the incremental revenue generated from the acquisition of PCX being somewhat offset by the negative effects of COVID-19 and lower fuel surcharge revenue. Revenue generated by the Logistics & Warehousing segment decreased by \$5.4 million to \$96.8 million due to COVID-19 resulting in supply chain disruptions, a lack of capital projects, business closures and lower fuel surcharge revenue. Revenue generated by the Specialized & Industrial Services segment decreased by \$15.2 million to \$84.8 million due to low oil prices, mandated curtailments and a poor drilling environment being moderately offset by improved results from Premay Pipeline. Net income in the fourth quarter was \$10.1 million, an increase of \$1.7 million from the \$8.4 million of net income generated in 2019. The \$1.7 million increase in net income was mainly attributable to a \$7.9 million

decrease in depreciation of property, plant and equipment, a \$2.3 million increase in OIBDA, and a \$0.5 million decrease in amortization of intangible assets. These increases were partially offset by a \$4.3 million increase in the loss on sale of property, plant and equipment, a \$2.4 million negative variance in net foreign exchange and a \$1.0 million increase in income tax expense. As a result, basic earnings per share in the fourth quarter of 2020 was \$0.10, an increase of \$0.02, from the \$0.08 of earnings per share generated in 2019.

Consolidated revenue in the third quarter of 2020 decreased by \$34.4 million to \$290.9 million as compared to \$325.3 million in 2019. Revenue generated by the Less-Than-Truckload segment decreased by \$3.2 million to \$112.7 million due to the negative effects of COVID-19 and lower fuel surcharge revenue. Revenue generated by the Logistics & Warehousing segment decreased by \$12.6 million to \$86.2 million due to COVID-19 resulting in supply chain disruptions, a lack of capital projects, business closures and lower fuel surcharge revenue. Revenue generated by the Specialized & Industrial Services segment decreased by \$19.1 million to \$92.4 million due to extremely low oil prices, mandated curtailments and a poor drilling environment being moderately offset by improved results from Premay Pipeline and Smook. Net income in the third quarter was \$26.2 million, an increase of \$5.7 million from the \$20.5 million of net income generated in 2019. The \$5.7 million increase in net income was mainly attributable to a \$9.6 million increase in OIBDA, a \$1.3 million increase in the gain on sale of property, plant and equipment, a \$1.1 million decrease in amortization of intangible assets and depreciation of property, plant and equipment and a \$0.4 million gain on fair value of equity investment. These increases were partially offset by a \$3.8 million negative variance in net foreign exchange and a \$3.0 million increase in income tax expense. As a result, basic earnings per share in the third quarter of 2020 was \$0.27, an increase of \$0.07, from the \$0.20 of earnings per share generated in 2019.

Consolidated revenue in the second quarter of 2020 decreased by \$61.5 million to \$257.5 million as compared to \$319.0 million in 2019. Revenue generated by the Less-Than-Truckload segment decreased by \$10.5 million to \$101.9 million due to the negative effects of COVID-19 and lower fuel surcharge revenue being somewhat offset by the incremental revenue generated from the acquisitions of Argus and Inter-Urban. Revenue generated by the Logistics & Warehousing segment decreased by \$19.3 million to \$82.8 million due to COVID-19 resulting in supply chain disruptions and business closures, and lower fuel surcharge revenue. These decreases were somewhat offset by a strong performance by Kleysen due to greater demand for transload services. Revenue generated by the Specialized & Industrial Services segment decreased by \$31.6 million to \$73.5 million due to extremely low oil prices, mandated curtailments and a poor drilling environment being moderately offset by improved results from Premay Pipeline and Smook. Net income in the second quarter was \$23.0 million, a decrease of \$8.7 million from the \$31.7 million of net income generated in 2019. The \$8.7 million decrease in net income was mainly attributable to a \$10.5 million variance in income tax expense, a \$1.8 million increase in finance costs and a \$1.6 million negative variance in net foreign exchange. These decreases were partially offset by a \$3.6 million increase in OIBDA. As a result, basic earnings per share in the second quarter of 2020 was \$0.23, a decrease of \$0.07, from the \$0.30 of earnings per share generated in 2019.

Consolidated revenue in the first quarter of 2020 decreased by \$1.4 million to \$318.2 million as compared to \$319.6 million in 2019. Revenue generated by the Logistics & Warehousing segment decreased by \$5.5 million, which was mainly attributable to reduced demand for logistics and trucking services related to government mandated closures during the month of March as well as supply chain disruptions related to rail blockades in January. These decreases were somewhat offset by greater revenue generated by Kleysen, which continued to generate solid results from transload operations and a seasonal increase in industrial salt sales. Revenue generated by the Specialized & Industrial Services segment increased by \$1.6 million, which was mainly attributable to greater demand for large diameter pipeline hauling and stringing services as well as revenue increases at Canadian Dewatering and Smook. These increases were somewhat offset by lower revenue generated by those Business Units involved in the transportation of fluids and servicing of wells and from those Business Units providing drilling and drilling related services. Revenue generated by the Less-Than-Truckload segment increased by \$3.8 million due to revenue gains at Gardewine and the acquisitions of Argus and Inter-Urban. Net income in the first quarter was \$4.7 million, a decrease of \$6.9 million from the \$11.6 million of net income generated in 2019. The \$6.9 million decrease in net income was mainly attributable to a \$3.9 million negative variance in net foreign exchange, a \$2.3 million increase in finance costs, a \$1.6 million negative variance in the fair value of investments and a \$0.6 million increase in amortization of intangible assets. These decreases were partially offset by a \$1.2 million increase in OIBDA, a \$0.6 million decrease in the loss on sale of property, plant and equipment and a \$0.3 million decrease in income tax expense. As a result, basic earnings per share in the first quarter of 2020 was \$0.04, a decrease of \$0.07, from the \$0.11 of earnings per share generated in 2019.

TRANSACTIONS WITH RELATED PARTIES

Key Management Personnel Compensation

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the business activities of the Corporation, including all its directors along with certain executives. Directors are remunerated for services rendered in their capacity as directors by way of a combination of retainer fees and meeting attendance fees. The overall compensation program for executives is comprised of base salary and benefits, annual profit share and stock-based compensation. Our Executives do not have formal employment contracts. Similar to the employment processes established for employees, each executive's personnel file contains a memorandum outlining the basic terms of an executive's employment relationship with the Corporation. There are no agreements or arrangements with any executive for the payment of compensation in the case of resignation, retirement, or termination of employment, a change of control of Mullen Group or its Business Units or a change in an executive's responsibilities following a change of control. Key management personnel do not participate in a defined benefit or actuarial pension plan, however, key management personnel do participate in the Stock Option Plan. Total remuneration to key management personnel including directors' fees, salaries and benefits, annual profit share, and the value attributable to stock-based compensation expense was as follows:

(\$ millions) Years Ended December 31
Category		2020		2019
Salaries and benefits (including profit share)	\$	1.6	\$	1.6
Share-based payments		—		0.1
Total	\$	1.6	\$	1.7

There are no outstanding amounts owing to or amounts receivable from directors and officers as at December 31, 2020 and 2019, with respect to the overall compensation program for the executives. As at December 31, 2020, directors and officers of Mullen Group collectively held 5,550,064 Common Shares (2019 – 5,505,008) representing 5.7 percent (2019 – 5.3 percent) of all Common Shares of the Corporation. As at December 31, 2020, directors and officers of Mullen Group held \$4.9 million of the Debentures under the same terms and conditions as those issued to unrelated third parties. The majority of the Debentures outstanding at December 31, 2020, were held by Murray K. Mullen (\$4.4 million). Other than these \$4.9 million of Debentures, Mullen Group has no contracts with its key management personnel.

Related Party Transactions

During the year, we generated revenue of \$17,418 (2019 – \$16,000) and incurred expenses of \$934 (2019 – \$25,000) with entities that are related by virtue of David E. Mullen, a Board member having control or joint control over the other entities. There was \$3,733 of accounts receivable amounts due from these related parties as at December 31, 2020.

During the year, we generated revenue of \$3.0 million (2019 – \$4.9 million), incurred expenses of \$0.5 million (2019 – \$0.6 million) and sold \$81,309 (2019 – nil) of property, plant and equipment with our equity investees, which are accounted for by the equity method of accounting. As at December 31, 2020, there was \$2.9 million (2019 – \$11.2 million) of accounts receivable amounts due from our equity investees, including debentures and there was \$37,946 of accounts payable amounts due to our equity investees. Mullen Group had \$2.7 million (2019 – \$7.8 million) of debentures owing from Thrive Management Group Ltd. ("Thrive") at an interest rate of 10.0 percent per annum calculated and payable semi-annually that mature in 2021. In 2020, Murray K. Mullen purchased a condominium in Palm Springs, California from the Corporation for \$0.4 million resulting in a \$0.2 million gain on sale of property, plant and equipment recognized within other (income) expense on the consolidated statement of comprehensive income.

All related party transactions were provided in the normal course of business materially under the same commercial terms and conditions as transactions with unrelated companies and recorded at the exchange amount.

PRINCIPAL RISKS AND UNCERTAINTIES

The nature of both our business and our strategy means that we face a number of inherent risks and uncertainties. We endeavor to manage these risks within the context of our understanding of market trends and our strategic goal of achieving satisfactory shareholder returns.

The operational complexities inherent in our business, together with the highly regulated and competitive environment of the industries in which we operate, leave Mullen Group exposed to a number of risks and uncertainties (collectively the "risks"). The transportation business and other related activities are directly affected by fluctuations in the general economy, including the amount of trade between Canada and the United States and the value of the Canadian dollar as compared to the U.S. dollar. Our Specialized & Industrial Services segment is directly affected by fluctuations in the levels of oil and gas drilling activity, oil sands development and production activity carried on by its customers, which in turn is dictated by numerous factors, including but not limited to world energy prices and government policies.

Many risks, for example, the cyclical and volatile nature of the oil and gas industry, may be mitigated to a certain degree but still remain outside of our control. The Board is responsible for approving our organization's level of risk tolerance and for overseeing the management of the risks the organization faces. Risk oversight guidance is set forth in the Mullen Group Board mandate. We define risk as: "The possibility that an event, action or circumstance may adversely affect the organization's ability to achieve its business objectives." A risk management review process has been formalized to assist in mitigating risk. The risk management review process highlights the significant risks that our business is exposed to, which then leads to mitigation plans. Although we have developed and implemented these mitigation plans to assist in managing these risks, there is no certainty these strategies will be successful in whole or in part. In addition, the inability to identify, assess and respond to known and unknown risks through the risk management review process could lead to, among other things, our inability to capture opportunities, recognize threats and inefficiencies and comply with laws and regulations, all of which may have a material adverse effect on our business or share price.

We believe that the risks described below are the ones that could have the most significant impact on the Corporation. Readers are cautioned that the list of risks is not exhaustive and new information, future events or changing circumstances could affect our operations and financial results, which may reduce or restrict our ability to pay a dividend to our shareholders and may materially affect the market price of our securities. We encourage you to review and carefully consider the risks described below, which may impact or materially adversely affect our business, financial condition, results of operations, cash flows or prospects. In turn, this could have a material adverse effect on the trading price of our Common Shares and Debentures. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also adversely affect our business and operations.

The most significant risks identified by Mullen Group are categorized and described as follows:

OPERATIONAL RISKS:
employees & labour relations cost escalation & fuel costs potential operating risks & insurance digital infrastructure & cyber security business continuity, disaster recovery & crisis management environmental liability risks weather & seasonality access to parts, development of new technology & relationships with key suppliers regulation litigation

STRATEGIC RISKS:

Geopolitical Risks:

Geopolitical risk is viewed as the major strategic risk to our organization impacting everything from the general economy to oil and gas development in western Canada. Political shocks and surprises of the past few years show how easily assumptions about rational markets, legal certainty, international relations and trade can be shaken. In our view, geopolitical volatility has become a key driver of uncertainty, and will remain one over the next few years.

Risk Description & Trend

Geopolitical risk is the risk associated with legislative, judicial, political, economic and regulatory uncertainty. For instance, unexpected events can cause a spike in commodity prices or an unexpected change in trade patterns or currency valuations.

Trend: In the recent past, the rise of populism, the repudiation of existing economic and political systems, global trade tensions and certain judicial decisions have created uncertainty that have negatively impacted investment sentiment in Canada and in the oil and gas sector specifically.

Potential Impact

There are a variety of decisions that various levels of government and the judiciary can make that can negatively affect individual businesses, industries and the overall economy. These include, but not limited to, regulatory approvals, currency valuation, trade tariffs, labour laws, taxes and carbon pricing, environmental and other regulations. More specifically, we identify geopolitical risks may impact the following strategic risks:

• General economy
• Natural gas and oil drilling and oil sands development
• Changes in legal framework

In consideration of this risk, we strive to be flexible and resilient, monitor risks proactively, and have adopted a diversification strategy. We service an extensive customer base from diverse industries covering a broad geographic area. In addition, we actively manage the mix of Company Equipment and Contractors we use to service our customers. In our opinion, these diversification and operating strategies ensure, as much as possible, that we are not overly exposed to any single economic trend.

Geopolitical Risks – General Economy:

Our results are affected by the state of the economy and trade patterns and the associated demand for freight transportation and logistics services. These general economic factors, as well as instability in financial and credit markets or lockdown measures and government restrictions, which are beyond our control, could adversely affect our business, financial condition, results of operations and cash flows.

Risk Description & Trend

Mullen Group is a significant provider of trucking and logistics services to customers throughout North America. Our results are affected by the state of the economy and trade patterns, both in North America and globally, and the associated demand for freight transportation and logistics services. Trade disruptions may pose a substantial risk to Mullen Group.

Trend: Canada, the United States and other world economies experienced a significant decline in economic activity in 2020 due to COVID-19. The outbreak prompted governments to impose strict containment measures including travel restrictions, lockdowns and curfews. These measures impeded the economy and resulted in an unprecedented sharp decline in economic activity in the spring of 2020. After an initial recovery, the months-long slow recovery was initiated. The prospects of wide vaccination programs in 2021 has improved the outlook for growth in the medium term, however, until COVID-19 is under control and government restrictions are no longer required, a full recovery will remain elusive and the economic recovery will likely remain choppy and uneven for the foreseeable future. As such unemployment in North America will remain elevated, particularly for workers in non-essential high-contact service industries, and growth will remain constrained. Over the medium term, consumption is expected to gain momentum as more people are vaccinated and employment rises.

Potential Impact

General economic activity is the main driver of demand levels for our Less-Than-Truckload and Logistics & Warehousing segments. Uncertainty with regard to the health of the North American economy or trade patterns could have a material adverse effect on the operations of our Less-Than-Truckload and Logistics & Warehousing segments and, to a lesser degree, our Specialized & Industrial Services segment (to the extent that the economy affects commodity pricing with respect to oil and gas, in particular), and our overall financial condition.

An economic recession may result in a decrease or substantial reduction in revenue as a result of:

• lower overall freight levels, which negatively affects our asset utilization and margin;
• customers bidding out freight or selecting competitors that offer lower

rates, in an attempt to lower their costs, forcing us to lower our rates or lose freight; and

• customers with credit issues and cash flow problems.

Mitigation

Mitigation

In consideration of this risk, we service an extensive customer base from diverse industries covering a broad geographic area. In addition, we actively manage the mix of Company Equipment and Contractors we use to service our customers. During periods of peak demand, we tend to use a higher volume of Contractors, which yield lower margins, but protects us from the downside risk and fixed costs associated with a larger fleet of Company Equipment during periods of lower demand. In addition, it has been recognized that transportation and supply chain management is an essential service. Further, we have been able to adapt to the changes in consumer spending patterns and the evolution and prominence of e-commerce purchases and supply chain change. In our opinion, these diversification and operating strategies ensure, as much as possible, that we are not overly exposed to any single economic trend.

As a service provider to the oil and gas industry we are reliant on the levels of capital expenditures made by oil sands, oil and gas producers. Our results may be affected by the level of capital expenditures in the WCSB, including investments in natural gas and both for conventional and unconventional oil and oil sands development. Pipeline approvals and natural gas export facilities are critical to the future development of Canada's natural gas and oil resource development.

Risk Description & Trend

Approximately one-fifth of our revenue is directly related to oil and gas drilling activity and oil sands development in western Canada. As a service provider to the oil and gas industries we are reliant on the levels of capital expenditures made by oil and gas exploration and production companies ("E&Ps"). In our experience, the level of capital investment made by E&Ps is based on several factors including, but not limited to:

• net hydrocarbon prices and the related impacts of fluctuating light/heavy and sweet/sour crude oil differentials;
• market access and long-term takeaway capacity, including pipeline and rail infrastructure;
• anticipated and actual aggregate production levels;
• access to capital;
• regulatory and stakeholder approvals for exploration and development activities;
• changes in demand for refinery feedstock;
• fuel conservation measures, long-term demand for fossil fuels, the evolution of electric vehicles ("EV") and alternative forms of transportation;
• changes to royalty and tax legislation;
• aboriginal claims or protests; and
• environmental regulations and approvals.

Negative public perception of oil sands, conventional oil and natural gas development, pipelines, hydraulic fracturing and fossil fuels generally may further impede industry growth in the WCSB. Operators and producers tend to examine long-term fundamentals affecting the foregoing factors before they adjust their capital budgets to reflect these assessments. There can be no certainty that investments will be made by E&Ps, or that approvals for infrastructure or export facilities by regulators or the judiciary will be forthcoming. Market access and longterm takeaway capacity are critical factors to western Canadian oil production growth. Further, the development of LNG export facilities and pipeline infrastructure are critical to the future development of Canada's natural gas sector.

In addition, a change in this regulatory regime may impact our customers and our operations. Climate change regulations and carbon taxes may lead to project delays and additional costs to producers affecting both their profitability and their investments in oil, oil sands and natural gas. Given the evolving nature of the debate related to climate change, it is not currently possible to predict the nature of, or the impact on, our operations and future financial condition, however, it seems unlikely that major oil sands expansion, as seen in the recent past, will be forthcoming.

Further, the industry may become subject to new environmental regulations, which could negatively affect future capital expenditures. In addition to Green House Gas ("GHG") emissions regulations, oil sands producers are subject to tailings management regulations, which may become more stringent and require additional capital in order to satisfy. To date, regulations relating to tailings management, such as the Alberta Government's Directive 74, have had no demonstrable or quantifiable negative effect on our business.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and gas, and technological advances in fuel economy and energy generation devices could reduce the demand for crude oil and other liquid hydrocarbons.

Trend: COVID-19 caused an unprecedented and rapid decline in demand for oil that resulted in a brisk decline in oil prices in the spring of 2020. Declines in drilling activity and supply management by OPEC+ resulted in a recovery in prices by year end. Oil prices are expected to remain at or near recent levels, however, much economic uncertainty and downside risks remain. As such, Canadian E&Ps capital expenditures were reduced in 2020, which negatively affected Mullen Group. In 2021 investment in the oil and gas industry in western Canada is expected to remain constrained. In the medium term, the LNG Canada project in Kitimat, British Columbia may eventually boost E&Ps' capital expenditures and add roughly 1.7 bcf/d of export capacity.

Potential Impact

As a service provider to this sector, we are directly impacted by and reliant on the level of capital and operational expenditures. Another sudden decline as experienced in 2020 or a more prolonged decline of oil and/or natural gas prices will have a negative impact on drilling activity and oil sands maintenance as well as further oil sands development that would negatively affect the operations in our Specialized & Industrial Services segment as well as our overall financial condition. Conversely, a resurgence of oil and/or natural gas prices should have a positive impact on the operations in our Specialized & Industrial Services segment as well as our overall financial condition.

Ultimately, the prices of our services are subject to aggregate industry demand and the availability of service equipment and qualified personnel. In addition, the longterm impact of changing demand for oil and gas products could have a material adverse effect on our business, results of operations and financial condition.

Mitigation

In consideration of this risk and potential uncertainty we endeavour to ensure that our capital allocation, costs and pricing are appropriate for the anticipated level of oil sands, oil and natural gas development. In addition, we recognize the cyclical and volatile nature of drilling activity and mitigate the risks associated with this volatility as reasonably possible through the combination of a disciplined capital allocation process and a focus on maintaining long-term relationships with large-cap oil and gas companies. We also continually assess the requirements for further investments in our Specialized & Industrial Services segment and have diversified our operations by further investing in the more stable Less-Than-Truckload segment to further mitigate this risk.

We may be adversely affected by changes to existing laws and regulations, trade agreements, change in the permitting process as it relates to oil and natural gas infrastructure projects and subsequent court challenges.

Risk Description:

Our operations are subject to a variety of federal, provincial and local laws, regulations and guidelines and income tax laws ("Regulations"). In addition, the operations of Mullen Group may be affected by international trade agreements and the ability to seamlessly cross international borders.

Our customers in the oil and gas sector are subject to various Regulations such as royalties, environmental regulations and the reduction of GHG emissions. In addition, before proceeding with most major projects, including the building of a pipeline, an LNG export facility or significant changes to an existing oil sands plant, E&Ps must obtain various federal, provincial, state and municipal permits and regulatory approvals. These permits may be

challenged and subject to denial or the imposition of further conditions by the judiciary.

Potential Impact

There can be no assurance that such Regulations, including those relating to the oil and gas industry and the transportation industry, as well as environmental and otherwise applicable operating legislation will not be changed in a manner that adversely affects our organization. Any such change could have a material adverse effect on our business, results of operations and financial condition. Our customers are similarly subject to Regulations and there can be no assurance that the Regulations governing our customers will not be changed in a manner that adversely affects them and, thereby, Mullen Group.

Mitigation

The diversity of our Business Units and our decentralized business model may diminish the effect that a change in the legal framework could have on Mullen Group as a whole. This diversification strategy has resulted in investment in several sectors of the economy, most notably in transportation and logistics and oilfield services, as well as in many geographic regions. We monitor proposed legislative changes and participate with various industry associations in advocating for reasonable and non-disruptive regulatory changes.

E-Commerce and Supply Chain Evolution:

Our results may be affected by disruptive technologies and supply chain innovations. Technology continues to evolve at a rapid pace, which has the potential to impact everything, including how markets conduct transactions as well as how we manage our business. As the retail marketplace continues to evolve, digital technology is disrupting traditional operations. The impact on supply chain management is particularly great as businesses reinvent their supply chain strategies.

Risk Description & Trend

Disruptive technologies continue to change the structure of the North American economy due to the continuous growth of e-commerce. The use of web based and mobile technology is increasingly becoming the preferred method by consumers and retailers to both shop for and ship orders. As a result, supply chains have undergone enormous change with more frequent direct to consumer shipments replacing transportation from distribution centers to traditional retail stores. In addition, our organization is reliant on certain Information Technology ("IT") systems (see Digital Infrastructure and Cyber Security on page 75).

Trend: Containment measures implemented by governments caused an acceleration in e-commerce sales. E-commerce sales in Canada peaked at 16.0 percent of total retail sales as compared to 6.0 percent of total retail sales in 2019. This resulted in greater demand for LTL transportation and home delivery options.

Potential Impact

E-commerce and omni-channel marketing requires a different distribution model than traditional retail or big-box store logistics. Generally, it is negatively affecting demand for truckload and long-haul transportation services, however, it is creating greater demand for warehousing as well as LTL and small package Final Mile™ deliveries.

The added complexity of e-commerce and the change in the supply chain presents an opportunity to expand our logistics revenue.

Mitigation

In consideration of this risk, we have expanded our LTL and warehousing network in western Canada and continue to focus on supply chain efficiencies. Our ability to meet customer demands in respect of ecommerce and supply management will depend upon innovation and our ability to reasonably anticipate market trends and change management execution. We continue to focus on technology, invest in hybrid courier vehicles and our logistics HaulisticTM app and Moveitonline® marketplace.

Acquisitions:

Our company strategy includes pursuing selected and strategic acquisitions focused primarily on the segments of the economy where we have strong market penetration and customer relationships, however, we may not be able to execute or integrate future acquisitions successfully.

Risk Description & Trend

Historically, a key component of our growth strategy has been to pursue acquisitions of strategic and/or complementary businesses. We continually evaluate acquisition candidates and may acquire assets and businesses that we believe complement our existing businesses or enhance our service offerings.

The processes of evaluating acquisitions and performing due diligence procedures include risks. Further, we face competition from both peer group and non-peer group firms for acquisition opportunities. This external competition may hinder our ability to identify and/or consummate future acquisitions successfully. If the prices sought by sellers of these potential acquisitions were to rise or otherwise be deemed unacceptable, we may find fewer suitable acquisition opportunities.

Achieving the benefits of acquisitions will depend, in part, on successfully consolidating functions and integrating operations and procedures in a timely and efficient manner. In addition, noncore assets may be periodically disposed of so that we can focus our efforts and resources more efficiently. Depending on the state of the market such non-core assets, if disposed of, could realize a price less than their carrying value resulting in a loss on disposal.

Trend: Opportunities for acquisitions continue. In 2020 we successfully acquired two new businesses for total consideration of \$20.2 million as compared to three new businesses in 2019 for total consideration of \$21.5 million¹ .

Potential Impact

Entities that are acquired may not increase our OIBDA or yield other anticipated benefits. The possible difficulties of integration include, among others:

• we may be unable to retain customers or key employees including drivers and Contractors;
• the business may not achieve anticipated revenue, earnings, or cash flows;
• we may be unable to integrate successfully and realize the anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays;
• we may have limited experience in the acquiree's market and may experience difficulties operating in its market;
• we may assume liabilities beyond our estimates or what was disclosed to us;
• the acquisition could disrupt our ongoing business, distract our management, and divert our resources; and
• we may incur indebtedness or issue additional Common Shares.

The risks involved in successful integration could be heightened if we were to complete a large acquisition or multiple acquisitions within a short period of time.

If any one, or a combination, of the described possibilities results in our failure to execute our acquisition strategy successfully in the future, it could limit our ability to continue to grow in terms of revenue, OIBDA and cash flow. In addition, there is a risk of impairment of acquired goodwill and intangible assets. This risk of impairment to goodwill and intangible assets exists because the assumptions used in the initial valuation of these assets, such as interest rate or forecasted cash flows, may change when testing for impairment is required.

Mitigation

In consideration of the risk relating to identifying and realizing the benefits of acquisitions and disposals, we endeavour to create a balanced and diverse portfolio in our operating segments by using considerable experience and the financial modeling to assess potential targets for, among other things, potential synergies, financial returns, cultural fit and integration.

In addition, we manage our cash flows diligently and maintain our capital allocation disciplines to ensure that we maintain what we believe is a suitable level of liquidity and leverage.

There is no assurance that we will be successful in identifying, negotiating, consummating or integrating any future acquisitions. If the Corporation does not make any future acquisitions, our growth rate could be materially and adversely affected.

1 Includes the repayment of shareholders' loans.

Competition:

We operate in a highly competitive industry, and certain market segments have mature characteristics and face commoditization. Our business could suffer if we are unable to adequately address downward pricing pressures and other factors that could adversely affect our profitability.

Risk Description & Trend

Our various Business Units operate in highly competitive and fragmented industries with low barriers to entry, especially within the trucking industry. We compete with several large companies both in the transportation and energy services industries that may have greater financial and other resources. There can be no assurance that such competitors will not substantially increase the resources devoted to the development and marketing of services that we compete for or that new competitors will not enter our various markets.

Trend: North American freight volumes and economic growth deteriorated during 2020, however, economic activity and freight volumes began to recover after the initial COVID-19 shock. This recovery allowed volumes and freight rates in the spot market to recover. Contract rates in the Less-Than-Truckload segment generally increased at the rate of inflation. Due to continued containment measures by all levels of government, we expect the economy to continue to experience short-term interruptions. As such, there is no certainty that freight rates will continue to improve in 2021.

Potential Impact

Numerous competitive factors could impair our ability to maintain or improve our profitability. These factors include but are not limited to the following:

• Many of our competitors periodically reduce their rates to gain business, especially during times of reduced oilfield activity or economic recessions. This may make it difficult for us to maintain or increase rates, or may require us to reduce our rates, or lose business. Additionally, it may limit our ability to maintain or expand our business.
• Competition from logistics and brokerage companies may negatively impact our customer relationships and rates.
• Higher prices and higher fuel surcharges to our customers may cause some of our customers to consider alternatives, including deciding to transport more of their own product with their own assets or substituting trucking for rail transportation.
• Many customers periodically solicit bids from multiple providers for their transportation needs, which may depress freight rates or

result in a loss of business to competitors.

Mitigation

In consideration of this risk we endeavour to use technological change and innovation to remain competitive in our various businesses. Furthermore, the diversity of our Business Units and our decentralized business model may diminish the effect that new competitive forces might have on our organization. In addition, we believe that our Human Resources strategies enable us to retain and attract drivers or qualified Contractors thereby enabling us to service our clients through all business cycles.

In certain aspects of our business, we believe we have competitive advantages such as lower overhead costs and specialized regional strengths including a robust network of LTL terminals.

In addition, from time to time, we acquire competing, complementary or new business lines, which allows us to consolidate a market we serve, expand our geographic footprint or expand our service offerings thereby lessening the effects of competition.

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FINANCIAL RISKS

Foreign Exchange Rates:

Our consolidated financial statements are presented in Canadian dollars, however, a portion of our revenue is derived in U.S. dollars and a portion of our debt is denominated in U.S. currency.

Risk Description & Trend

Mullen Group has foreign exchange risk relating to the relative value of the Canadian dollar vis-à-vis the U.S. dollar. A stronger Canadian dollar is beneficial as it results in a foreign exchange gain on our U.S. dollar debt recognized on our consolidated income statement, as well as an equivalent reduction in the carrying value of such debt on the balance sheet. However, a stronger Canadian dollar also has the potential to reduce the level of Canadian exports thereby potentially negatively affecting the results of operations in the Less-Than-Truckload and Logistics & Warehousing segments. Conversely, a weakening Canadian dollar results in a foreign exchange loss and an equivalent increase in the carrying value related to the U.S. dollar debt. A weaker Canadian dollar has the potential to increase the level of Canadian exports and thereby potentially positively affect the results of operations in the Less-Than-Truckload and Logistics & Warehousing segments. In addition, many of our parts and equipment are built in the U.S. and priced in U.S. dollars. A decrease in the relative value of the Canadian dollar vis-à-vis the U.S. dollar increases the costs of these parts and equipment.

Trend: Foreign exchange rates between the U.S. and Canadian dollar remain volatile. During 2020 the exchange rate fluctuated between \$0.6898 and \$0.7863 closing the year at \$0.7849 as compared to \$0.7699 at December 31, 2019.

Potential Impact

At the end of each reporting period we recognize foreign exchange gains or losses as they relate to financial contracts, assets and liabilities held in foreign currencies. This risk mainly arises from our U.S. \$229.0 million of Senior Guaranteed Unsecured Notes ("U.S. Notes"). Specifically, our U.S. Notes are comprised of Series G (U.S. \$117.0 million) and Series H (U.S. \$112.0 million) Notes that mature in 2024 and 2026, respectively.

At December 31, 2020, we also had U.S. dollar cash of \$24.2 million, U.S. dollar trade receivables of \$6.8 million and U.S. dollar trade payables and accrued liabilities of \$2.0 million.

Mitigation

We have mitigated a significant portion of the foreign exchange risk by entering into the Cross-Currency Swaps to convert the principal portion of the Series G and Series H Notes into a Canadian currency equivalent of \$129.2 million and \$124.9 million, respectively.

We are also exposed to foreign exchange risk related to approximately U.S. \$8.9 million of annual interest payable on our U.S. Notes. This risk is partially offset by the fact that our business generates surplus U.S. funds in our operations, predominately within the Logistics & Warehousing segment. This surplus U.S. dollar cash being generated acts as a natural hedge as it is used to repay our annual interest obligation on the U.S. Notes.

Investments:

Mullen Group invests in both private and public companies. The value of these investments fluctuate.

Risk Description & Trend

Mullen Group invests in both private and public companies. Fair values of public company investments are based on quoted prices in active markets. There is a risk that the value of an investment may fluctuate as a result of changes in market conditions, whether those changes are caused by factors specific to the individual investment, classes of investments or factors affecting all investments traded in the market. As such, there is a risk that a portion of the original investment may be lost.

Trend: In 2020 we recorded a decrease in the fair value of investments of \$1.0 million. In 2019 we sold \$0.7 million of investments.

Potential Impact

Our investments in public companies are measured at fair value and have an initial cost of \$11.5 million. At December 31, 2020, the fair value of these investments was \$1.2 million.

We use the equity method to account for investments in private companies in which we have significant influence or joint control. At December 31, 2020, the carrying value of these investments totalled \$34.6 million and consisted of the investments in Canol Oilfield Services Inc., Kriska Transportation Group Limited, Cordova Oilfield Services Ltd., Butler Ridge Energy Services (2011) Ltd. and Thrive.

The timing of future dispositions and the realized share price are uncertain. There is no assurance that the Corporation will realize any benefits from its investment portfolio.

Mitigation

We accept a certain amount of risk and consider the underlying risk and possible market volatility of our investments. We strive to mitigate this risk by investing in areas that we have industry knowledge and expertise and we invest for the long-term. Risk capital is limited to a level that is deemed acceptable to Mullen Group.

We may find it necessary in the future to obtain additional debt or equity financing to support ongoing operations, to undertake capital expenditures or to fund acquisitions.

Risk Description & Trend

We may find it necessary in the future to obtain additional debt or equity financing to support ongoing operations, to undertake capital expenditures or to fund acquisitions. There can be no assurance that additional financing will be available when needed or on acceptable terms, which could limit our growth and could have a material adverse effect on our business, results of operations and financial condition. In addition, we have certain financial and other covenants under our Private Placement Debt that are customary for financings of this type including, but not limited to, a maximum leverage ratio and a minimum interest coverage ratio. A breach of a covenant and failure to obtain appropriate amendments to or waivers under the applicable financing arrangement may cause our borrowings under such facilities to be immediately declared due and payable.

Trend: At December 31, 2020, our debt covenant leverage ratio was 2.10:1 as compared to 2.30:1 in 2019.

Potential Impact

We may need to incur additional debt, or issue debt or equity securities in the future. We could face constraints on generating sufficient cash from operations, obtaining sufficient financing on favorable terms, or maintaining compliance with financial and other covenants in our financing agreements.

If any of these events occur, then we may face liquidity constraints and it may impair our future ability to secure financing on satisfactory terms, or at all. A liquidity constraint may impair Mullen Group's ability to continue as a going concern. Although we expect that we will be able to obtain additional financing when needed, in the amounts required and on acceptable terms there is no assurance that such would occur.

Mitigation

We manage our cash flows diligently to ensure that we maintain what we believe is a suitable level of liquidity and leverage. Our approach to managing liquidity is to ensure, to the extent possible, that we will always have sufficient liquidity to meet our liabilities when due, under both normal and stressed conditions. Consistent with others in the industry, we monitor capital on the basis of debt-to-equity. This ratio is calculated as total debt divided by shareholders' equity. Total debt is calculated as the total of: current portion of long-term debt, longterm debt, lease liabilities and the debt component of Debentures. Equity is comprised of share capital, convertible debentures – equity component, contributed surplus and retained earnings. The debt-to-equity ratio calculation at December 31, 2020, was 0.68:1 (2019 – 0.67:1).

Reliance on Major Customers:

There is an inherent risk that arises to all businesses when economic dependence on a major customer hinders a company's ability to maximize profit.

Risk Description & Trend

Although we do not have a significant customer concentration, the growth of our business could be materially impacted and our results of operations would be adversely affected if we lost all or a portion of the business of some of our large customers because they:

• chose to divert all or a portion of their business with us to one of our competitors;
• demand pricing concessions for our services;
• require us to provide enhanced services that increase our costs; or
• develop their own shipping and distribution capabilities.

Trend: In 2020 our top ten customers accounted for 18.6 percent of revenue (2019 – 16.6 percent), and the largest customer accounted for approximately 2.9 percent (2019 – 3.0 percent) of such revenue.

Potential Impact

The loss of one or more major customers, any significant decrease in services provided, decreases in rates charged, or any other changes to the terms of service with customers, could have a material adverse effect on our business, results of operations and financial condition. Furthermore, a concentration of revenue with a major customer, or a small group of major customers, may lead to an enhanced ability of those customers to influence pricing and other contract terms, which may have a material adverse effect on our results.

Mitigation

We strive to mitigate this risk through a diversification strategy in an attempt to ensure that our organization does not become reliant on any single customer. Furthermore, we operate a decentralized business model whereby we utilize the expertise of management at each Business Unit to negotiate its own contracts that have pricing and terms that are competitive according to their specific market and/or geographic region.

Our total assets include goodwill and intangible assets. If we determine that these assets have become impaired in the future, our net income could be adversely affected.

Risk Description & Trend

There is also a risk of impairment of acquired goodwill and intangible assets. This risk of impairment of goodwill and intangible assets exists because the assumptions used in the initial valuation of these assets, such as the interest rate or forecasted cash flows, may change when testing for impairment is conducted either annually or upon a triggering event.

Trend: At December 31, 2020, our goodwill and intangible assets accounted for \$317.2 million, or 18.5 percent of our total assets as compared to \$317.2 million, or 18.1 percent of total assets in 2019.

Potential Impact

Our regular review of the carrying value of our goodwill and intangible assets has resulted, from time to time, in significant impairments, and we may in the future be required to recognize additional impairment charges. Such did occur in 2007 when the Federal government implemented changes to the tax regime governing specified investment flow-through ("SIFT") entities such as Mullen Group's predecessor Mullen Group Income Fund. In addition, the Alberta Government announced changes to the oil and gas royalty regime in Alberta that impacted many of our customers.

Changes in government regulations, or economic or market conditions have resulted and may result in further substantial impairments of our goodwill or intangible assets. In 2018 Mullen Group recognized a \$100.0 million goodwill impairment charge. As at December 31, 2020, we had goodwill of \$271.3 million and intangible assets of \$45.9 million. Our impairment testing in 2020 produced no indication of impairment. The results of our impairment evaluations, assumptions and sensitivities can be found on page 79.

Mitigation

We strive to mitigate this risk through a disciplined acquisition strategy in an attempt to ensure that our organization does not overpay for entities resulting in overvalued goodwill balances. In addition, we use professional skepticism and advisors to value goodwill and intangible assets values upon acquisition, thereby mitigating the risk of misevaluation of goodwill or intangible assets upon initial recognition.

Credit Risk:

Credit risk is the risk of financial loss to Mullen Group if a customer or counterparty to a financial asset fails to meet its contractual obligations. This risk arises predominately from our trade receivables generated from our customers.

Risk Description & Trend

A significant portion of our accounts receivable are with customers involved in the oil and gas industry, whose revenues may be impacted by fluctuations in commodity prices thereby potentially impacting their ability to meet contractual obligations. Although collection of these receivables could be influenced by this and other economic factors affecting the industries we serve, management considers the risk of a significant loss to be remote at this time.

Trend: At December 31, 2020, accounts receivable were \$192.5 million comprised of \$62.5 million within our Less-Than-Truckload segment, \$55.1 million within our Logistics & Warehousing segment, \$72.0 million within our Specialized & Industrial Services segment and \$2.9 million within the Corporate Office.

Potential Impact

Our exposure to credit risk is influenced mainly by the individual characteristics of each customer. Economic conditions and capital markets may adversely affect our customers and their ability to remain solvent. We transport a wide variety of freight for a broad customer base that spans numerous industries. The financial failure of a customer may impair our ability to collect on all or a portion of the accounts receivable balance. In addition, we have counter-party risk with our Derivatives and other financial assets.

Mitigation

Credit risk related to trade and other receivables is initially managed by each Business Unit. Each Business Unit is responsible for reviewing the credit risk for each of their customers before standard payment and delivery terms and conditions are offered. The Business Units' review consists of external ratings, when available, and in some cases bank and trade references. Our Corporate Office has established a credit policy under which new customers are analyzed for creditworthiness before credit is extended. Corporate Office monitors its trade and other receivables aging on an ongoing basis and communicates concerns to all of our Business Units as part of its process in managing its credit risk. We also manage credit risk related to trade and other receivables on a consolidated basis whereby the aggregate exposure to individual customers is reviewed and their credit quality is assessed. We also attend industry forums to assess credit worthiness of customers related predominately to the oil and gas industry. No individual customer accounted for more than ten percent of Mullen Group's consolidated revenue for the fiscal years ended 2020 and 2019.

Interest Rates:

Changes in interest rates may result in fluctuations in our future cash flows.

Risk Description & Trend

We are susceptible to fluctuations in interest rates. Our Bank Credit Facility is priced at variable rates, however, it remains undrawn. To the extent we utilize our Bank Credit Facility we incur the risk of interest rates rising. Our Private Placement Debt, the Debentures and our Various Financing Loans are issued at fixed rates. The majority of our long-term debt, specifically \$461.7 million, matures in 2024 and 2026.

Trend: At December 31, 2020, we had \$607.8 million (2019 – \$616.8 million) of borrowings at an average interest rate of 4.2 percent.

Potential Impact

Borrowings issued at fixed rates, like our Private Placement Debt, expose Mullen Group to fair value interest rate risk. More specifically, we are susceptible to the opportunity costs associated with interest rate decreases considering that the interest rates on the majority of our borrowings are fixed. In theory, assuming all other variables were held constant, if interest rates increased by 1.0 percent on our \$607.8 million debt, we would incur additional annual interest expense of approximately \$6.1 million upon renewal.

Mitigation

We do not hedge interest rates or have any interest rate swaps, but we have mitigated the negative risk of rising interest rates by financing most of our debt, specifically \$607.8 million, at fixed rates.

OPERATIONAL RISKS

Employees and Labour Relations:

We depend on our employees to support our business operations and future growth opportunities. If our relationship with our employees deteriorates or if we have difficulty attracting and retaining employees, we could be faced with labour inefficiencies, disruptions, work stoppages, or delayed growth, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Risk Description & Trend

The success of Mullen Group is dependent upon attracting and retaining key personnel. Any loss of the services of such persons could have a material adverse effect on our business, results of operations and financial condition. We anticipate that our ability to expand services will be dependent upon attracting additional qualified employees, which is constrained in times of strong industry activity. Our senior management team is an important part of our business and loss of key employees could have a material adverse effect on our business, results of operations and financial condition.

Trend: At December 31, 2020, we employed 5,638 employees, owner operators and dedicated subcontractors as compared to 6,124 in 2019.

Potential Impact

The failure to attract and retain a sufficient number of qualified personnel could have a material adverse effect on our profitability. The largest components of our overall expenses are salary, wages, benefits and costs of Contractors. Any significant increase in these expenses could impact our financial performance. In addition, we are at risk if there are any labour disruptions. Some of our Business Units are subject to collective agreements with their employees. Any work stoppages, or unbudgeted or unexpected increases in compensation could have a material adverse effect on our profitability and reduce cash flow from operating activities.

Further, we benefit from the leadership and experience of our senior management team and other key employees and depend on their continued services to successfully implement our business strategy. The unexpected loss of key employees or inability to execute our succession planning strategies could have an adverse effect on our business, results of operations, and financial condition.

Mitigation

In order to reasonably mitigate this risk, we aim to be an employer of choice by offering competitive wages and incentive-based pay, establishing superior safety programs and fostering a strong reputation as an ethical company. In addition, the Board reviews its succession plans for the senior executive team on an annual basis. These endeavours are designed to attract the best people at every level of our business, establish them in their roles, manage their development and identify successor candidates for senior roles. In addition to providing specific job-related and safety training, we encourage all of our employees to continue their education, training and skills upgrading and provide employees with the resources required to achieve and maintain our operational excellence.

Cost Escalation and Fuel Costs:

Our ability to control our costs is critical to servicing customers at attractive rates and remaining profitable.

Risk Description & Trend

Cost escalations due to rising labour and other costs, the effect of inflation, the price of fuel, equipment and other input costs, insurance costs, interest rates, fluctuations in customers' business cycles and national and regional economic conditions are factors over which we have little or no control. Of these costs, fuel represents a significant operating expense for us. Fuel prices fluctuate greatly due to factors beyond our control, such as global supply and demand for crude oil, political events, price and supply decisions by oil producing countries and cartels, terrorist activities, the depreciation of the Canadian dollar relative to other currencies, hurricanes and other natural disasters as well as fuel and carbon taxes.

Trend: The average wholesale rack price of diesel fuel in Canada for 2020

was \$0.5660 per litre as compared to \$0.7870 per litre in 2019.

Potential Impact

GHG regulations are likely to continue to impact the design and cost of equipment utilized in our operations as well as fuel costs. Significant increases in fuel prices, labour costs, equipment prices, other input prices, interest rates or insurance costs, to the extent not offset by increases in rates or fuel surcharges, would reduce profitability and could adversely affect our ability to carry out our strategic plans. We cannot predict the impact of future economic conditions and there is no assurance that our operations will continue to be profitable.

Mitigation

To reasonably mitigate the risk of potential for cost escalation, we focus on operational excellence, synergies between our Business Units and cost control. We rely on, among other things, long-term planning, budgeting processes, and internal benchmarking to achieve our profitability targets. Additionally, we mitigate the risk of inflation by owning a large network of terminals. We also mitigate our exposure to rising fuel costs through the implementation of various fuel surcharge programs, which pass the majority of cost increases to our customers and have implemented policies that focus on fuel efficiency, including fuel economy, asset utilization and minimizing dead-head mileage, proper repairs and maintenance of equipment, idling and speed policies.

Potential Operating Risks and Insurance:

Our success is dependent on our ability to manage operational risks. The transportation and other various service sectors that we operate in are subject to inherent risks. Failure to manage these operational risks may have a material adverse effect on our business, results of operations, financial condition, and cash flows.

Risk Description & Trend

Our transportation operations are subject to risks inherent in the transportation industry, including potential liability that could result from, among other things, personal injury or property damage arising from motor vehicle accidents. Our Specialized & Industrial Services segment is subject to risks inherent in the oil and gas industry, such as equipment defects, malfunction, failures and natural disasters. These risks could expose Mullen Group to substantial liability for personal injury, loss of life, business interruption, property damage or destruction, pollution and other environmental damages.

Trend: Our 2020 total recordable injury frequency rate, a leading indicator of operational excellence, was 2.99 as compared to 3.10 in 2019.

Potential Impact

Claims may be asserted against us related to accidents, cargo loss or damage, property damage, personal injury, employment and environmental or other issues occurring in our operations. Although we have obtained insurance coverage against certain of the risks to which we are exposed, such insurance is subject to deductibles and coverage limits and no assurance can be given that such insurance will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the frequency and/or severity of claims increase, our operating results could be adversely affected. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, results of operations and financial condition may be materially adversely affected.

Mitigation

We have insurance and risk management programs in place to protect our assets, operations and employees and also have programs in place to address compliance with current safety and regulatory standards so as to reasonably mitigate against the risks to which we are exposed. Each Business Unit has a health and safety coordinator responsible for maintaining and developing policies and monitoring operations vis-à-vis those policies. The health and safety coordinators are required to report incidents directly to the Corporate Office in a timely manner. Internal and external audits are conducted on a regular basis to ensure the proper functioning of the Health, Safety and Environment program and the reporting systems.

We are dependent on computer and communications systems; and a systems failure or data breach could cause a significant disruption to our business.

Risk Description

We believe that a well-functioning and efficient IT system is a prerequisite to growth, operational excellence and superior customer service, aids day-today operational management and provides accurate financial information. Our business involves high transaction volumes, complex logistics, the tracking of thousands of orders, the geopositioning of trucks and trailers as well as the communication with drivers and field personnel in real time. We are therefore heavily dependent on certain software, communication systems and network infrastructure. A serious prolonged failure in this area may materially affect our business.

Potential Impact

Our IT systems may be susceptible to damage, disruptions or shutdowns due to: hardware failures, power outages, fire, natural disasters, telecommunications failure, internet failures, computer viruses, data

breaches or attacks by computer hackers or malicious actors, user errors or catastrophic events. Such failures or unauthorized access could disrupt our business and could result in the loss of confidential information, intellectual property, litigation, remediation costs, damage to our reputation and negatively impact our ability to service our customers. In addition, the cost and operational consequences of reinstituting our IT systems capabilities or implementing further data or system protection measures could be significant.

Mitigation

Each of our Business Units run separate instances of our Enterprise Resource Planning ("ERP") software package that supports our business processes. As part of our entity wide IT risk mitigation policy, we regularly engage third-party vendors to complete security assessments of our IT systems, consisting of external and internal penetration tests. At both the corporate level and within the individual Business Units, IT systems are subject to stringent guidelines, standardization, vigorous virus and access protection, back-up systems and replicated data. We employ project management techniques to manage new software developments and/or system implementations. We have a disaster recovery plan in place that is evaluated regularly and portions thereof are tested on a regular basis. Hosted by a reputable third-party, our primary data and back-up data centres have high levels of durability and redundancy built into them. Our back-up data centre allows our organization to continue processing data in the event of a major incident involving our primary data centre. In addition, we have purchased cyber insurance coverage to assist with mitigating the unlikely risk that an outside threat gains access to our IT systems.

Business Continuity, Disaster Recovery and Crisis Management:

In the event of a serious incident, the inability to restore or replace critical capacity in a timely manner may impact our business and operations.

Risk Description

Our operations are widespread and geographically diverse. Severe weather conditions and other natural or manmade disasters, including storms, floods, fires, epidemics or pandemics, conflicts or unrest, terrorist attacks or other events affecting one of our major facilities or areas of operations could result in a significant interruption in or disruption of our business.

Potential Impact

A serious event could result in decreased revenue, as our ability to service our customers may be impeded or we may incur increased costs to operate our business, which could have an adverse effect on our results of operations. In addition, a serious event may reduce our customers' needs for our services.

Mitigation

This risk is mitigated by the development of business continuity arrangements, including disaster recovery plans and back-up delivery systems, to minimize the significance of any business disruption in the event of a major disaster. Insurance coverage may minimize losses in certain circumstances.

Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties. The costs of compliance with existing or future environmental laws and regulations may be significant and could adversely impact our business, results of operations, financial condition, and cash flows.

Risk Description

The risk of incurring environmental liabilities is inherent in oilfield service and transportation operations. Historically, activities associated with such operations and the ownership, management or control of real estate pose an environmental risk. Some of our Business Units will routinely deal with natural gas, oil and other petroleum products. Our operations are subject to numerous laws, regulations and guidelines governing the management, handling, transportation and disposal of nonregulated and regulated substances and otherwise relating to the protection of the environment. These laws, regulations and guidelines include those relating to the remediation of spills, releases, emissions and discharges of regulated substances into the environment and those requiring removal or remediation of pollutants or contaminants.

Our customers are subject to various laws, regulations, and guidelines that prescribe, among other things, limits on emissions into the air and discharges into surface and sub-surface waters. While regulatory developments that may follow in subsequent years could have the effect of reducing industry activity, we cannot predict the nature of the restrictions that may be imposed.

Potential Impact

Failure to comply with an environmental law or regulation may impose civil and criminal penalties. Certain of our Business Units carry significant volumes of dangerous goods. This involves specific insurance requirements, training programs and appropriate permits with the various provinces and states in which our Business Units operate.

We may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations.

We operate out of numerous owned and leased facilities throughout Canada where storage tanks may be used or may have been used at some prior date. Canadian laws generally impose potential liability on the present or former owners or occupants of properties on which contamination has occurred. Although we are not aware of any contamination which, if remediation or clean-up were required, could have a material adverse effect on Mullen Group. Certain facilities have been in operation for many years and, over such time, Mullen Group or the prior owners, operators or custodians of the properties may have generated and disposed of substances which are or may be considered hazardous.

Mitigation

There can be no assurance that we will not be required at some future date to comply with new environmental laws, or that our operations, business or assets will not otherwise be further affected by current or future environmental laws. While we maintain liability insurance, including insurance for certain environmental incidents, the insurance is subject to coverage limits and certain of our policies exclude coverage for damages resulting from environmental contamination. There can be no assurance that insurance will continue to be available to us on commercially reasonable terms, that the types of liabilities that we may incur will be covered by our insurance, or that the dollar amount of such liabilities will not exceed our policy limits.

In regards to the transportation of dangerous goods, we ensure that strict guidelines are met before a Business Unit and the individual drivers are permitted to manage, handle or transport such dangerous goods.

We have programs to address compliance with current environmental standards and monitor our practices concerning the handling of environmentally hazardous materials. We endorse a formalized quality program and strive to be the best in class in areas of safety and environmental excellence. We believe in a balanced approach to sustainable development and are committed to best in class environmental management systems. In addition, we work with government, industry groups and the public to improve and develop environmental standards and further our understanding of environmental issues. We also promote the participation and certification of our Business Units in the SmartWay Certification Program, a Government of Canada program designed to reduce GHG.

Due diligence procedures in the context of potential acquisitions and appropriate terms in purchase and sale agreements related to acquisitions also assist with reasonably mitigating the risk of environmental liabilities.

Our operations could be impacted by seasonal fluctuations or harsh weather conditions.

Risk Description & Trend

Harsh weather conditions can impede the movement of goods and increase operating costs.

Revenue and profitability within our Less-Than-Truckload and our Logistics & Warehousing segments are generally lower in the first quarter than during the remainder of the year as freight volumes are typically lower following the holiday season due to less consumer demand and customers reducing shipments.

The level of activity in the Canadian oilfield service industry is influenced by seasonal weather patterns. Typically activity levels are reduced in the spring when wet weather and the spring thaw make the ground unstable. Consequently, municipalities and provincial transportation departments enforce road bans that restrict the movement of heavy equipment.

Additionally, certain oil and gas producing areas are only accessible in the winter months because the ground surrounding the drilling sites in these areas consists of swampy terrain.

Trend: In 2020 revenue was affected by COVID-19. Revenue, excluding the effect of acquisitions, was 27.3 percent of total annual revenue in the first quarter, 22.1 percent in the second quarter, 25.3 percent in the third quarter and 25.3 percent in the fourth quarter.

Potential Impact

An unexpected or harsh weather event could result in decreased revenue, as our ability to service our customer is impeded or we may incur increased costs to operate our business, which could have an adverse effect on our results of operations.

Seasonal factors typically lead to declines in activity levels. In the Less-Than-Truckload and the Logistics & Warehousing segments, operating expenses tend to increase in the winter months due to decreased fuel efficiency and increased repairs and maintenance expense resulting from cold weather conditions at a time when demand is seasonally lower.

In the Specialized & Industrial Services segment, a significant portion of our operations relates to the moving of heavy equipment, drilling rigs and drilling supplies in northern and western Canada. Activity levels, revenue and earnings are influenced by the seasonal activity pattern of western Canada's oil and gas exploration industry whereby activity peaks in the winter months and declines during the spring.

Mitigation

We mitigate some of this risk by charging standby fees or by positioning equipment in strategic locations in order to take advantage of good weather conditions when they occur. We also manage some of this risk by diversifying our operations and by using subcontractors and owner operators, which requires no investment by Mullen Group, to handle seasonal peaks.

Our growth through acquisition, in the last number of years, into businesses not directly tied to oil and gas drilling activity has lessened the seasonal nature of our overall performance.

Access to Parts, Development of New Technology and Relationships with Key Suppliers:

We depend on suppliers for fuel, equipment, parts, and services that are critical to our operations. A disruption in the availability of or a significant increase in the cost to obtain these supplies could adversely impact our business and results of operations.

Risk Description

Our ability to compete and expand is most directly tied to our having access at a reasonable cost to equipment, parts and components, which are at least technologically equivalent to those utilized by competitors, and to the development and acquisition of new and competitive technologies.

Potential Impact

Although we have individual distribution agreements with various key suppliers, there can be no assurance that those sources of equipment, parts, components or relationships with key suppliers will be maintained. If these are not maintained, our ability to compete may be impaired by virtue of diminished availability and/or increased cost of securing certain equipment and parts. We have access to certain distributors and secure discounts on parts and components that would not be available if it were not for our relationships with certain key suppliers. Should the relationships with key suppliers cease the availability and cost of securing certain equipment and parts may be adversely affected.

Mitigation

In consideration of this risk we assess our suppliers and endeavour to ensure that our suppliers are financially viable or that suitable alternatives exist if relationships with current suppliers were to become compromised. In addition, we also retain what we consider an appropriate level of inventory of critical parts and supplies.

Regulation:

Various federal, provincial and state agencies exercise broad regulatory powers over the transportation industry, generally governing our activities.

Risk Description

Notwithstanding that the transportation industry is largely deregulated in terms of entry into the industry, each carrier must obtain a license from, or register with, provincial regulatory authorities in order to carry goods extra-provincially or to transport goods within any province. Our operations are subject to a variety of Regulations relating to, among other things: safety, equipment weight, equipment dimensions, driver hours-of-service and the transportation of hazardous materials. Licensing is also required from regulatory authorities in the United States for the transportation of goods between Canada and the United States. In addition, our operations are subject to hours of service regulations and

electronic logging and, in certain cases, random drug testing.

Potential Impact

Changes in regulations applicable to Mullen Group could increase operating costs and have a material adverse effect on our business, results of operations and financial condition. The right to continue to hold applicable licenses and permits is generally subject to maintaining satisfactory compliance with regulatory and safety guidelines, policies and regulations. Although we are committed to compliance and safety through our operational excellence initiatives, there is no assurance that we will be in full compliance at all times with such policies, guidelines and regulations. Consequently, at some future time, we could be required to incur significant costs to maintain or improve our compliance record.

Mitigation

In consideration of this risk we monitor regulatory frameworks with a particular focus on hours of service, overdimensional freight and transportation of fluids and work, in conjunction with industry associations, to advocate our need to regulators and ensure that equipment meets regulations and that sufficient capital is invested to meet current and anticipated regulatory requirements.

Litigation:

From time to time, Mullen Group or its Business Units may be the subject of litigation, claims, administrative proceedings and regulatory actions ("Claims") arising out of its operations or business in general.

Risk Description

Our business is subject to the risk of litigation by employees, customers, vendors, government agencies, shareholders and other parties. Various types of Claims may be made against Mullen Group or its Business Units including but not limited to those pertaining to negligence, breach of contract, environmental, tax, patent infringement, employment matters and safety incidents.

Potential Impact

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The outcome of litigation is difficult to assess or quantify, and the magnitude of potential loss relating to such Claims made against Mullen Group or its Business Units may be material or may be indeterminate. The outcome of any such Claims cannot be predicted with certainty and may impact our business, financial condition, results of operations or cash flows. Further, unfavourable outcomes of settlements of Claims could encourage the commencement of additional Claims. We may also be subject to negative publicity with respect to such Claims regardless of fault. We may also be required to incur significant expenses and devote significant resources in defence of any such Claims.

Mitigation

In consideration of this risk we have insurance and risk management programs in place. For Claims that do not fall under such programs, we endorse a formalized quality program and strive to be the best in class in respect of operational excellence so as to reasonably mitigate this risk. When required we retain expert legal counsel to defend Mullen Group or its Business Units so as to reasonably mitigate the risk of an unfavourable outcome of a claim.

CRITICAL ACCOUNTING ESTIMATES

This MD&A summarizes Mullen Group's financial condition and results of operations, which are based upon our Annual Financial Statements that have been prepared in accordance with IFRS. The Annual Financial Statements require management to select significant accounting policies, which are contained within the notes to such statements. These significant accounting policies involve critical accounting estimates regarding matters that are inherently uncertain and require management to make estimates, complex judgements and assumptions. These estimates, complex judgements and assumptions are based on the circumstances that exist at the reporting date and may affect the reported amounts of income and expenses during the reporting periods and the carrying amounts of assets, liabilities, accruals, provisions, contingent liabilities, other financial obligations, as well as the determination of fair values. The following describes critical accounting estimates we used in preparing the Annual Financial Statements and are an important part in understanding such statements:

Impairment tests

We assess, at the end of each reporting period, whether there is an indication that an asset group may be impaired. We have three significant asset groups that are reviewed for impairment. First, goodwill is reviewed for impairment annually, or more frequently if there are indications that impairment may have occurred. The second and third asset groups consist of intangible assets and long-lived assets. Intangible assets are normally acquired on acquisitions and are mainly comprised of customer relationship values and non-competition agreements, which are amortized over their estimated life from the date of acquisition. Long-lived assets include property, plant and equipment and other assets. These asset groups are tested for impairment when events or changes in circumstances indicate that their carrying amount may not be recoverable. If any indication of impairment exists we estimate the recoverable amount of the asset group. External triggering events include, for example, changes in customer or industry dynamics, drilling and other technologies and economic declines, including the decline in the value of our Common Share price. Internal triggering events for impairment include lower profitability or planned restructuring.

The impairment tests compare the carrying amount of the asset of the cash generating unit ("CGU") to its recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal ("FVLCD") and the determination of value in use ("VIU"). The determination of VIU requires the estimation and discounting of cash flows, which involve key assumptions that consider all information available on the respective testing date. Management uses its judgement, considering past and actual performance as well as expected developments in the respective markets and in the overall macro-economic environment and economic trends to model and discount future cash flows.

Impairment of Goodwill

In general terms, goodwill represents the excess of the purchase price of a business combination over the net amount of identifiable assets acquired less the liabilities assumed. At December 31, 2020 and 2019 we performed our annual impairment test for goodwill and concluded that there was no impairment of goodwill in any of our CGUs as the recoverable amount for these CGUs was higher than their respective carrying amount.

The recoverable amount was determined using a discounted cash flow approach for all CGUs. The discounted cash flow model employed by the Corporation reflects the specifics of each CGU and its business environment. The model calculates the present value of the estimated future earnings of each CGU.

Estimating future earnings requires judgement, considering past and actual performance as well as expected developments in the respective markets and in the overall macro-economic environment. The calculation of the recoverable amount using the discounted cash flow approach was based on the following key assumptions:

	Discount rate		Terminal value growth rate
	December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Cash Generating Unit
Gardewine Group Limited Partnership	10.5%	10.5%	2.0%	2.0%
Kleysen Group Ltd.	10.5%	10.5%	2.5%	2.5%
Hi-Way 9 Express Ltd.	11.0%	11.0%	2.5%	2.5%
Tenold Transportation Ltd.	11.0%	11.0%	2.5%	—
Heavy Crude Hauling L.P.	12.0%	12.0%	2.0%	2.0%
E-Can Oilfield Services L.P.	12.0%	12.0%	2.0%	2.0%
Canadian Dewatering L.P.	12.0%	12.0%	2.5%	2.5%
Others	11.0% – 12.0%	11.0% – 12.0%	2.0% – 2.5%	2.0% – 2.5%

• (i) Cash flows were projected based on past experience, actual operating results and the one year business plan for the immediate year. Cash flows for a further four year period were extrapolated using constant growth rates of between 2.0 to 2.5 percent with adjustments reflecting an expectation of changes in the general economy, forecasted changes in drilling activity and the Business Unit's respective markets, and represents the Corporation's best estimate of the set of economic conditions that are expected to exist over the forecast period.
• (ii) The terminal value growth rate is based on management's best estimate of the long-term growth rate for its CGUs after the forecast period, considering historic performance and future economic forecasts.
• (iii) Each CGU's discount rate reflects their individual size, risk profile and circumstance and is based on past experience and industry average weighted average cost of capital.

The Corporation believes that the following changes in the key assumptions would result in a recoverable amount equal to the carrying value of the CGU, with any additional change in the assumptions causing goodwill to become impaired.

		Change in discount rate	Change in terminal value growth rate
	December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Cash Generating Unit
Gardewine Group Limited Partnership	4.0%	4.1%	(6.0)%	(6.1)%
Kleysen Group Ltd.	6.3%	6.4%	(10.7)%	(10.3)%
Hi-Way 9 Express Ltd.	9.7%	12.8%	(18.5)%	(29.2)%
Tenold Transportation Ltd.	4.4%	6.5%	(6.9)%	(8.4)%
Heavy Crude Hauling L.P.	1.6%	3.5%	(2.2)%	(5.4)%
E-Can Oilfield Services L.P.	3.2%	3.0%	(4.8)%	(4.4)%
Canadian Dewatering L.P.	9.4%	8.9%	(18.7)%	(17.5)%

Intangible assets

Intangible assets are mainly comprised of customer relationships and non-competition agreements. The fair value of these assets are calculated when an intangible asset or a business is acquired and then amortized on a straightline basis over their estimated life. At December 31, 2020, intangible assets totalled \$45.9 million (2019 – \$48.5 million). Property, plant and equipment are mainly comprised of trucks and trailers, land and buildings. The net book value of property, plant and equipment at December 31, 2020, was \$939.1 million (2019 – \$954.6 million).

Acquisitions

The acquired assets, assumed liabilities (other than deferred taxes) and contingent consideration are recognized at fair value on the date we effectively obtain control. The measurement of business combinations is based on the information available on the acquisition date. The determination of fair value of the acquired intangible assets (including goodwill), property, plant and equipment and other assets and the liabilities assumed at the date of acquisition, as well as the useful lives of the acquired intangible assets and property, plant and equipment, is based on assumptions. The measurement is largely based on projected cash flows and market conditions at the date of acquisition. Contingent consideration is based on the likelihood of various outcomes of specified future events.

Property, plant and equipment and intangible assets

Property, plant and equipment are initially recognized at cost and include all expenditures directly attributable to bringing the asset to its intended use. The method and rates used in calculating depreciation of property, plant and equipment is an estimate. We calculate depreciation of property, plant and equipment using the declining balance method for the majority of our assets. No changes were made to the methods or rates we used to estimate depreciation expense on property, plant and equipment during the past two years.

We believe the methods and rates of depreciation reasonably reflect the annual decline in the value of property, plant and equipment. These methods and rates used are validated by the fact that net gains or losses on sale of property, plant and equipment over the last ten years have been minimal, which indicates that the net book value of assets approximates fair market value over an extended period of time. At December 31, 2020, the Less-Than-Truckload segment had a carrying value of property, plant, and equipment of \$135.8 million (2019 – \$125.3 million), the Logistics & Warehousing segment had a carrying value of \$82.3 million (2019 – \$100.2 million) and the Specialized & Industrial Services segment had a carrying value of \$230.0 million (2019 – \$255.8 million). The carrying value of property, plant and equipment within the Corporate Office was \$491.0 million at December 31, 2020 (2019 – \$473.3 million).

Intangible assets are amortized on a straight line basis over a period of five to ten years. Mullen Group determines the length of the amortization period at the date of acquisition. The method used in determining the amortization period is based upon the anticipated present value of future cash flows generated from customer relationships purchased on acquisitions. At December 31, 2020, the Less-Than-Truckload segment had a carrying value of intangible assets of \$26.1 million (2019 – \$23.5 million), the Logistics & Warehousing segment had a carrying value of \$14.1 million (2019 – \$15.8 million) and the Specialized & Industrial Services segment had a carrying value of \$5.7 million (2019 – \$9.2 million).

Derivative Financial Instruments

We utilize Derivatives such as cross-currency swaps to manage our exposure to foreign currency risks relating to our U.S. dollar debt. The fair value of Derivatives fluctuate depending on the estimate of certain underlying financial measures. The estimated fair value of Derivatives are based on observable market data, including foreign currency curves, interest rates and credit spreads.

Trade and other receivables

Impairment of trade and other receivables is constantly monitored. Evidence of impairment could, for example, occur when the financial difficulties of a debtor become known or payment delays occur. Impairments are based on historical values, observed customer solvency, the aging of trade and other receivables and customer-specific and industry risks. In addition, we review external credit ratings as well as bank and trade references when available. At December 31, 2020, we recognized a reserve for bad debts of \$6.4 million (2019 – \$7.8 million) against total gross trade and other receivables of \$198.9 million (2019 – \$219.0 million).

Income Taxes

Mullen Group's deferred income tax assets and liabilities are determined based on "temporary differences" (differences between the accounting basis and the tax basis of the assets and liabilities), and are measured using the currently enacted, or substantively enacted, tax rates and laws expected to apply when these differences reverse. We operate in several provincial jurisdictions and are subject to various rates of taxation. The actual amount of tax ultimately paid in these jurisdictions may differ from the estimated amount.

SIGNIFICANT ACCOUNTING POLICIES

New Standards and Interpretations Not Yet Adopted

Mullen Group has reviewed new and revised standards and interpretations that have been approved by the IASB. There have been no new standards or interpretations issued during 2020 that significantly impact Mullen Group.

Changes in Accounting Policies

Other than the newly adopted accounting policy as described below, there have been no changes to our accounting policies in 2020 as compared to those disclosed in our audited annual consolidated financial statements for the fiscal year ended December 31, 2019.

In 2020 the Corporation adopted the following accounting policy as a result of qualifying for the CEWS program as enacted on April 11, 2020, by the federal Government of Canada.

Government Subsidies

Policy: Government subsidies are recognized when there is reasonable assurance that the subsidy will be received and that the Corporation will comply with all relevant conditions. Government subsidies related to current expenses are recorded as a reduction of the related expenses.

Supporting Information: During the twelve month period ending December 31, 2020, we qualified for the CEWS program and recognized \$26.5 million as a reduction to wage expense with \$20.2 million and \$6.3 million allocated to direct operating expenses, and selling and administrative expenses, respectively.

IFRS 16 – Leases

Effective January 1, 2019, Mullen Group adopted IFRS 16 – Leases using the modified retrospective method. Under the modified retrospective method, comparative financial information is not restated and continues to be reported under the accounting standards in effect for those periods. The modified retrospective method does not require restatement of prior period financial information as it recognizes the cumulative effect as an adjustment to opening retained earnings (deficit).

IFRS 3 – Business Combinations

IFRS 3 – Business Combinations has been amended to revise the definition of a business to include an input and a substantive process that together significantly contribute to the ability to create outputs. The amendment to IFRS 3 is effective for the years beginning on or after January 1, 2020. This amendment is not expected to have a material impact on the Corporation's consolidated financial statements.

IFRIC 23 – Uncertainty over Income Tax Treatments

IFRIC 23 – Uncertainty over Income Tax Treatments specifies how to reflect uncertainty in accounting for income taxes and is mandatory for the accounting period beginning on January 1, 2019. There was no impact on the measurement of taxes as a consequence of this adoption.

Annual Improvements to IFRS Standards

On December 12, 2017, the IASB issued narrow-scope amendments to three standards as part of its annual improvements process. The amendments are effective on or after January 1, 2019. Each of the amendments has its own specific transition requirements. Amendments were made to the following standards:

• IFRS 3 Business Combinations and IFRS 11 Joint Arrangements to clarify how an entity accounts for increasing its interest in a joint operation that meets the definition of a business;
• IAS 12 Income Taxes to clarify that all income tax consequences of dividends are recognized consistently with the transactions that generated the distributable profits; and
• IAS 23 Borrowing Costs to clarify that specific borrowings (i.e. funds borrowed specifically to finance the construction of a qualifying asset) should be transferred to the general borrowings pool once the construction of the qualifying asset has been completed. They also clarify that an entity includes funds borrowed specifically to obtain an asset other than a qualifying asset as part of general borrowings.

Mullen Group has adopted these amendments in its financial statements effective January 1, 2019. The extent of the impact of adoption of the amendments is not material.

DISCLOSURE AND INTERNAL CONTROLS

Disclosure Controls and Internal Controls over Financial Reporting

As at December 31, 2020, an evaluation of the effectiveness of our disclosure controls and procedures as defined under the rules adopted by the Canadian securities regulatory authorities was carried out under the supervision and with the participation of management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"). Based on this evaluation, the CEO and the CFO concluded that, as at December 31, 2020, the design and operation of our disclosure controls and procedures was effective.

Internal control over financial reporting is a process designed by or under the supervision of management and effected by the Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and preparation of consolidated financial statements for external purposes in accordance with IFRS. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, no matter how well designed, has inherent limitations and can provide only reasonable assurance with respect to the preparation and fair presentation of published financial statements. Under the supervision and with the participation of the CEO and CFO, management conducted an evaluation of the effectiveness of its internal control over financial reporting as at December 31, 2020.

Based on this evaluation, the CEO and CFO concluded that as at December 31, 2020, our internal control over financial reporting was effective. We utilize the Internal Control – Integrated Framework (2013) as issued by the Committee of Sponsoring Organizations of the Treadway Commission. As at December 31, 2020 there was no change in our internal control over financial reporting that materially affected or is reasonably likely to materially affect our internal control over financial reporting.

FORWARD-LOOKING INFORMATION STATEMENTS

This MD&A contains forward-looking statements within the meaning of applicable Canadian Securities laws. Readers are cautioned that expectations, estimates, projections and assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The following is a list of forward-looking statements contained within this MD&A, along with the respective assumptions:

• Mullen Group's comment that we have over \$100.0 million of cash on the balance sheet, we are well positioned to capitalize on new opportunities or to meet the potential challenges that a lingering COVID-19 might bring, as referred to in the Executive Summary section beginning on page 7. This forward-looking statement is based on the assumption that we are hopeful that this virus can be brought under control sooner rather than later, along with a return to something we can say is normal, the truth is no one knows for sure. So, we will keep one eye open for a good acquisition, one that makes financial sense and can provide a future platform for growth, but the other eye keenly focused on what we see in front of us, including working alongside and supporting our well managed Business Units. Our number one objective is to position this organization to be successful over the long term.
• Mullen Group's comment that our core business should be consistent with last year and we intend on using our balance sheet to pursue acquisitions, invest in strategic facilities and for growth capital, as referred to in the Outlook section beginning on page 10. These forward-looking statements are based on the assumption that as we enter 2021, COVID-19 remains the single biggest obstacle that must be navigated. Expectations are for the consumer to remain the predominate economic engine accompanied by a recovery in the oil industry due to higher crude oil prices. However, we are realists and know that the economy will not reach full potential until the virus has been stopped. We enter 2021 with over \$100.0 million in cash, a well-structured balance sheet and an unused Bank Credit Facility of \$150.0 million.
• Mullen Group's intention to pay annual dividends of \$0.48 per Common Share (\$0.04 per Common Share on a monthly basis) for 2021, subject to Board approval, as referred to in the Corporate Overview section beginning on page 11. This forward-looking statement is based on the assumption that we will generate sufficient cash in excess of our financial obligations to support the dividend.
• Mullen Group's announcement of the plan to allocate \$100.0 million over the course of three years to repurchase our Common Shares via an authorized share buyback program, as referred to in the Corporate Overview section beginning on page 11. This forward-looking statement is based on the assumption that we will obtain approvals from the TSX to renew a share buyback program and that we will generate sufficient cash in excess of our financial obligations to support the share buyback program.
• Mullen Group's intention to invest \$60.0 million in capital expenditures, exclusive of corporate acquisitions or investment in facilities, land and buildings, with \$50.0 million allocated towards maintenance capital primarily to replace trucks, trailers, specialized equipment and technology to support the operations of the business. In addition, we will allocate \$10.0 million to fund growth and create jobs in Canada, as referred to in the Corporate Overview section beginning on page 11. This forward-looking statement is based on the assumption that our Business Units will require capital to support their ongoing operations and growth opportunities and that we will generate sufficient cash in excess of our financial obligations to support the capital expenditures.
• Mullen Group's intention to use working capital, the Bank Credit Facility and the anticipated cash flow from operating activities in 2021 to finance our ongoing working capital requirements, our dividend, our 2021 capital budget, as well as various special projects and acquisition opportunities, as referred to in the Capital Resources and Liquidity section beginning on page 37. This forward-looking statement is based on our belief that our access to cash will exceed our expected requirements.

Although we believe that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct.

Forward-looking statements address future events and conditions and, therefore, involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to certain strategic, financial and operational risks, most important of which are geopolitical risks including but not limited to a slowdown in the general economy, reduced oil and natural gas drilling and decreased oil sands and heavy oil activity; e-commerce and supply chain evolution; acquisitions; competition; foreign exchange rates; change in the return on fair value of investments; access to financing; reliance on major customers; customer relationships; impairment of goodwill or intangible assets; credit risk; prevailing interest rates; employees & labour relations; labour disruption and driver retention; cost escalation & fuel costs; accidents; cost of liability insurance; digital infrastructure & cyber security; business continuity, disaster recovery & crisis management; environmental liability risks; weather & seasonality; access to parts, development of new technology & relationships with key suppliers; regulatory framework governing matters such as tax and the environment in the jurisdictions in which the Corporation conducts and will conduct its business; and litigation. Accordingly, readers should not place undue reliance on the forward-looking statements contained in this MD&A.

Readers are cautioned that the foregoing list of factors and risks is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Mullen Group along with the forward-looking statements in this MD&A, may be found in the Advisory on page 1 as well as in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website at www.sedar.com. The forward-looking statements contained in this MD&A are made as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities law. We rely on litigation protection for "forward-looking" statements.

GLOSSARY OF TERMS AND RECONCILIATION OF NON-GAAP TERMS

The Annual Financial Statements attached and referred to in this MD&A were prepared according to Canadian GAAP. References to operating margin, net income – adjusted, earnings per share – adjusted, net capital expenditures, net debt, total net debt and cash flow per share are not measures recognized by Canadian GAAP and do not have standardized meanings prescribed by Canadian GAAP. This MD&A reports on certain financial performance measures that are described and presented in order to provide shareholders and potential investors with additional measures to evaluate our ability to fund our operations and information regarding our liquidity. In addition, these measures are used by management in its evaluation of performance. These Non-GAAP Terms may not be comparable to similar measures presented by other issuers and should not be considered in isolation or as a substitute for measures prepared in accordance with Canadian GAAP. Investors are cautioned that these indicators should not replace the foregoing Canadian GAAP terms: net income, earnings per share, purchases of property, plant and equipment, proceeds on sale of property, plant and equipment and debt.

Operating Margin

Operating margin is a Non-GAAP term and is defined as OIBDA divided by revenue. Management relies on operating margin as a measurement since it provides an indication of our ability to generate an appropriate return as compared to the associated risk and the amount of assets employed within our principal business activities.

	Three month periods ended December 31				Years ended December 31
(unaudited) (\$ millions)		2020		2019	2020			2019
Operating income before depreciation and amortization	\$	52.2	\$	49.9	\$	217.6	\$	200.9
Revenue	\$	297.7	\$	314.6	\$	1,164.3	\$	1,278.5
Operating margin		17.5%		15.9%		18.7%		15.7%

Net Income – Adjusted and Earnings per Share – Adjusted

Net income – adjusted and earnings per share – adjusted are calculated by adjusting net income and basic earnings per share by the impact of any net foreign exchange gains and losses, from the change in fair value of investments and from the gain on fair value of equity investment. Management adjusts net income and earnings per share by excluding these specific factors to more clearly reflect earnings from an operating perspective. See pages 28 and 51 for detailed calculations of net income – adjusted and earnings per share – adjusted.

Net Capital Expenditures

Net capital expenditures are calculated by subtracting the amount of cash received from the sale of property, plant and equipment from the amount of cash used to purchase property, plant and equipment. Management calculates net capital expenditures to evaluate and manage its capital expenditure budget and to assist in allocating capital amongst its Business Units.

	Three month periods ended	December 31		Years ended December 31
(unaudited) (\$ millions)	2020		2019		2020		2019
Purchase of property, plant and equipment	\$ 27.4	\$	23.7	\$	64.9	\$	75.0
Proceeds on sale of property, plant and equipment	(8.7)		(2.8)		(14.5)		(6.5)
Net capital expenditures	\$ 18.7	\$	20.9	\$	50.4	\$	68.5

Net Debt

Net debt is calculated by subtracting total working capital (current assets less current liabilities) from total debt (longterm debt plus the debt component of lease liabilities and Debentures). Management calculates net debt to monitor its capital structure and makes adjustments to it in light of changes in economic conditions.

(unaudited) (\$ millions)	December 31, 2020	December 31, 2019
Long-term debt	\$ 461.7 \$	467.4
Convertible debentures - debt component	111.1	108.7
Lease liabilities (non-current portion)	23.6	30.0
Total debt	596.4	606.1
Less working capital:
Current assets	345.3	349.3
Current liabilities	(106.2)	(106.0)
Total working capital	239.1	243.3
Net debt	\$ 357.3 \$	362.8

Total Net Debt

The term "total net debt" means all debt excluding the Debentures but includes the Private Placement Debt, lease liabilities, the Bank Credit Facility and letters of credit less any unrealized gain on Cross-Currency Swaps plus any unrealized loss on Cross-Currency Swaps, as disclosed within Derivatives on the consolidated statement of financial position. Management calculates total net debt to monitor its capital structure and makes adjustments to it in light of changes in economic conditions.

(unaudited) (\$ millions)	December 31, 2020
Private Placement Debt	\$ 461.7
Lease liabilities (including the current portion)	35.0
Letters of credit	4.0
Total debt	500.7
Less: unrealized gain on Cross-Currency Swaps	(37.9)
Add: unrealized loss on Cross-Currency Swaps	—
Total net debt	\$ 462.8

Cash Flow per Share

Cash flow per share is calculated by dividing net cash from operating activities by the weighted average number of Common Shares outstanding. Management measures cash flow per share to provide investors with an indication of the amount of cash being generated on a per share basis, after consideration of working capital and income taxes paid.

	Three month periods ended December 31				Years ended December 31
(unaudited) (\$ millions, except share and per share amounts)		2020		2019	2020		2019
Net cash from operating activities	\$	52.5	\$	54.2	\$ 224.8	\$	170.6
Weighted average number of Common Shares outstanding		96,870,540		104,824,973	100,624,227		104,824,973
Cash flow per share	\$	0.54	\$	0.52	\$ 2.23	\$	1.63