Mullen Group Income Fund reports 2007 financial results



    CALGARY, Feb. 27 /CNW/ - Mullen Group Income Fund ("Mullen" and/or the
"Fund") reported its financial and operating results for the period ended
December 31, 2007 with comparisons to the same period last year. In comparing
these 2007 results with the results for 2006 consideration must be given to
the material impact on the Fund and its operations of the many significant
transactions that were successfully completed during 2006.
    For the twelve months ended December 31, 2007, Mullen generated
consolidated revenues of approximately $1.1 billion, an increase of 11.6% over
the $1.0 billion generated in 2006. Operating income increased during the year
by $7.0 million, or 3.5%, to $209.1 million from $202.1 million last year.
This increase in operating income was primarily attributable to the full years
inclusion of Kleysen Group L.P. and Brady Oilfield Services L.P. and strong
performances by the Production Services, Specialized Services and Drilling
Services groups, offset by decreases in the Drilling Related Services group as
a result of lower drilling activity in Canada.
    At the December 31, 2007 year end the Fund recognized a goodwill
impairment of $250.0 million and an intangible asset impairment of
$25.0 million resulting in a net loss of $118.7 million or $1.45 per unit
compared to income of $128.1 million, or $1.86 per unit, in 2006. Net income
of $149.6 million or $1.83 per unit would have been generated if the
$275.0 million impairment of goodwill and intangible assets had not occurred.
    "The real story of 2007 was the strength of our diversified business
model. The significant loss in revenue and operating income experienced by our
Drilling Related Services group by virtue of the significant decline in
drilling activity was more than offset through increases in our other
business. Our Production Services group, which is leveraged to the production
side of the oilfield service industry, our Specialized Services group, which
is leveraged to the development of oilsands and related capital projects and
our Trucking/Logistic segment all experienced a significant increase in
revenue and operating income during 2007," stated Stephen H. Lockwood,
President & Co-Chief Executive Officer.
    For the three month period ended December 31, 2007, Mullen generated
consolidated revenue of $273.6 million compared to $284.0 million for the same
period one year ago. The decrease in revenue was due to the significant
declines in revenue experienced by those business units leveraged to natural
gas drilling activity in western Canada.
    Operating income in the fourth quarter decreased by $3.9 million to $49.4
 million from $53.3 million in 2006. This decrease was almost entirely due to
the decline in year over year revenue and lower pricing experienced by the
Drilling Related Services group. As a result of the recognition of the
$275.0 million impairment of goodwill and intangible assets, the Fund
generated a loss of $231.6 million, or $2.85 per unit, compared to net income
of $14.0 million, or $0.17 per unit, in 2006. The fourth quarter net income
would have been $36.7 million, or $0.45 per unit, if the impairment had not
occurred.
    "We are pleased with the overall operating performance of our business
units in the fourth quarter particularly in light of the significant
challenges faced by our Drilling Related Services group. The $30.7 million
decline in revenue they experienced is attributable to pricing pressures in
the marketplace and lower revenue. Our diversified business model, especially
through our Production Services and Specialized Services groups was able to
mitigate the full effects of the revenue decline experienced by the Drilling
Related Services group. We are however, very disappointed with the
$275.0 million impairment of goodwill and intangible assets that was
recognized. A number of factors came together to create this situation
including the new SIFT legislation, new royalty regime in Alberta and
depressed natural gas prices, and it is an issue that we are not happy about,"
stated Stephen H. Lockwood.
    A summary of the Fund's results for the quarter and year ended
December 31, 2007, along with revenues and operating results by segment are as
follows:


    
    -------------------------------------------------------------------------
    SUMMARY                 Three Months Ended         Twelve Months Ended
                                December 31                December 31
                         ----------------------------------------------------
                                (Unaudited)
    -------------------------------------------------------------------------
                           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    ($ millions, except
     per unit amounts)        $        $        %        $        $        %


    Revenue               273.6    284.0     (3.7) 1,119.5  1,003.3     11.6
    Operating income(1)    49.4     53.3     (7.3)   209.1    202.1      3.5

    Income before
     impairment of
     goodwill and
     intangible assets     36.7     14.0    162.1    149.6    128.1     16.8
    Net (loss) income    (231.6)    14.0 (1,754.3)  (118.7)   128.1   (192.7)

    Earnings per unit
     before impairment
     of goodwill and
     intangible assets
     (dollars)(2)         $0.45    $0.17    164.7    $1.83    $1.86     (1.6)
    Earnings per unit
     (dollars)(2)        $(2.85)   $0.17 (1,776.5)  $(1.45)   $1.86   (178.0)

    Funds from
     operations(3)         44.8     50.9    (12.0)   193.8    195.3     (0.8)
    Funds from
     operations per
     unit (dollars)(4)    $0.56    $0.62     (9.7)   $2.38    $2.84    (16.2)
    -------------------------------------------------------------------------

    Note:
    (1) Operating income is defined as net (loss) income before interest,
        income taxes, depreciation, amortization, earnings from equity
        investments, gains or losses on sale of property, plant and equipment
        and investments and unrealized gains or losses on foreign exchange
        and impairment of goodwill and intangible assets.
    (2) Earnings per unit based on weighted average number of units for the
        period.
    (3) Funds from operations is defined as cash provided by operations
        before change in non-cash working capital items.
    (4) Funds from operations per unit is calculated by dividing funds from
        operations by the weighted average number of units outstanding.

    Operating income (EBITDA), funds from operations, and funds from
    operations per unit are not recognized measures under Canadian generally
    accepted accounting principles ("GAAP"). Management believes these
    measures are useful supplemental measures. Operating income provides an
    indication of the results generated by the Fund's principal business
    activities prior to how these activities are financed, assets are
    amortized, or how the results are taxed in various jurisdictions. Funds
    from operations indicate the funds available for finance and investing
    activities. Investors should be cautioned that operating income, funds
    from operations and funds from operations per unit may differ from
    calculations of other companies, and accordingly may not be comparable to
    measures used by other companies.
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    SEGMENTED RESULTS       Three Months Ended         Twelve Months Ended
                                December 31                December 31
                         ------------------------- --------------------------
                                (Unaudited)
    ---------------------------------------------- --------------------------
                           2007     2006   Change     2007     2006   Change
    ---------------------------------------------- --------------------------
    ($ millions)              $        $        %        $        $        %

    Revenues
      Oilfield Services   160.2    174.7     (8.3)   685.4    604.3     13.4
      Trucking/Logistics  113.7    109.9      3.5    437.0    400.4      9.1
      Other                 1.4      0.4               2.7      2.3
    Intersegment
     eliminations
      Oilfield Services    (1.4)    (0.6)             (3.1)    (1.9)
      Trucking/Logistics   (0.3)    (0.4)             (2.5)    (1.8)
    ---------------------------------------------- --------------------------
    Totals                273.6    284.0     (3.7) 1,119.5  1,003.3     11.6

    Operating income
      Oilfield Services    31.2     35.6    (12.4)   151.3    141.6      6.9
      Trucking/Logistics   19.1     18.9      1.1     64.3     60.7      5.9
      Other                (0.9)    (1.2)             (6.5)    (0.2)
    ---------------------------------------------- --------------------------
    Totals                 49.4     53.3     (7.3)   209.1    202.1      3.5
    -------------------------------------------------------------------------



    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    (in thousands of dollars)                              2007         2006

    Assets
    Current assets:
      Cash and cash equivalents                     $    79,155  $    49,398
      Accounts receivable                               185,475      209,545
      Income taxes recoverable                            1,488        6,834
      Prepaid expenses                                   27,715       27,675
    -------------------------------------------------------------------------
                                                        293,833      293,452
    Investments                                           9,884        1,825
    Property, plant and equipment                       586,823      558,522
    Goodwill                                            794,448    1,041,827
    Intangible assets                                    82,674      116,284
    Other assets                                          2,828        9,335
    -------------------------------------------------------------------------
                                                    $ 1,770,490  $ 2,021,245
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities      $   100,480  $   107,423
      Distributions payable                              12,112       12,291
      Current portion of long-term debt                   3,817       21,734
    -------------------------------------------------------------------------
                                                        116,409      141,448

    Long-term debt                                      398,592      325,002
    Future income taxes                                 123,357      130,729
    Unitholders' equity:
      Unitholders' capital                            1,185,340    1,201,677
      Trust Units repurchased, pending cancellation      (5,880)           -
      Contributed surplus                                 7,273        7,839
      Retained earnings                                 (54,601)     214,550
    -------------------------------------------------------------------------
                                                      1,132,132    1,424,066
    -------------------------------------------------------------------------
                                                    $ 1,770,490  $ 2,021,245
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF INCOME AND (DEFICIT) RETAINED EARNINGS
    (in thousands of dollars, except per unit amounts)

                                Three Months Ended        Twelve Months Ended
                                    December 31               December 31
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
                                  (Unaudited)

    Revenue               $   273,647  $   283,995  $ 1,119,499  $ 1,003,287

    Expenses:
      Direct operating        191,094      198,117      764,992      682,132
      Selling and
       administrative          33,088       32,640      145,377      119,090
    -------------------------------------------------------------------------
                               49,465       53,238      209,130      202,065

    Depreciation on
     property, plant and
     equipment                 14,860       12,790       57,684       41,730
    Amortization on
     intangible assets          4,389        4,207       16,761       10,905
    Interest on long-term
     debt                       6,182        5,149       20,970       13,410
    Other interest                 35           67          194          202
    Unrealized (gain) loss
     on foreign exchange       (1,726)       7,500      (26,641)       7,500
    Loss (gain) on sale of
     property, plant and
     equipment                    756          211          725       (1,256)
    Gain on sale of
     investments                    -            -          (30)        (115)
    Impairment of goodwill
     and intangible assets    275,000            -      275,000            -
    -------------------------------------------------------------------------
    (Loss) income before
     income taxes and
     earnings from equity
     investments             (250,031)      23,314     (135,533)     129,689
    -------------------------------------------------------------------------

    Provision for income
     taxes:
      Current (recovery)         (637)      (2,134)      (2,390)      (4,311)
      Future (recovery)       (17,048)      11,795      (10,850)       6,866
    -------------------------------------------------------------------------
                              (17,685)       9,661      (13,240)       2,555
    -------------------------------------------------------------------------

    (Loss) income before
     earnings from equity
     investments             (232,346)      13,653     (122,293)     127,134
    Earnings from equity
     investments                  750          410        3,598          998
    -------------------------------------------------------------------------
    Net (loss) income     $  (231,596) $    14,063  $  (118,695) $   128,132

    Retained earnings,
     beginning of period  $   215,451  $   237,360  $   214,550  $   228,551
    Distributions declared
     to unitholders           (36,567)     (36,873)    (146,804)    (124,037)
    Repurchase of Trust
     Units                     (1,889)           -       (3,652)           -
    Split off of Horizon
     North Logistics Inc.           -            -            -      (18,096)
    -------------------------------------------------------------------------
    (Deficit) retained
     earnings, end of
     period               $   (54,601) $   214,550  $   (54,601) $   214,550
    -------------------------------------------------------------------------

    Earnings per unit:
      Basic               $     (2.85) $      0.17  $     (1.45) $      1.86
      Diluted             $     (2.85) $      0.17  $     (1.45) $      1.86
    Weighted average
     number of units
     outstanding:
      Basic                    81,382       81,938       81,596       68,886
      Diluted                  81,382       81,938       81,596       68,886



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands of dollars)

                                Three Months Ended        Twelve Months Ended
                                    December 31               December 31
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
                                  (Unaudited)

    Cash provided by (used in):
    Operations:
      Net (loss) income   $  (231,596) $    14,063  $  (118,695) $   128,132
      Items not involving
       cash:
      Depreciation on
       property, plant and
       equipment               14,860       12,790       57,684       41,730
      Amortization on
       intangible assets        4,389        4,207       16,761       10,905
      Unit-based
       compensation               860          799        3,427        2,581
      Unrealized (gain) loss
       on foreign exchange     (1,726)       7,500      (26,641)       7,500
      Loss (gain) on sale of
       equipment                  756          211          725       (1,256)
      Gain on sale of
       investments                  -            -          (30)        (115)
      Future income taxes
       (recovery)             (17,048)      11,795      (10,850)       6,866
      Earnings from equity
       investments               (750)        (410)      (3,598)        (998)
      Impairment of goodwill
       and intangibles        275,000            -      275,000            -
    -------------------------------------------------------------------------
      Funds provided from
       operations              44,745       50,955      193,783      195,345
      Changes in non-cash
       working capital items    7,317        2,242       18,611       (3,168)
    -------------------------------------------------------------------------
                               52,062       53,197      212,394      192,177
    Financing activities:
      Change in bank
       indebtedness                 -          103            -      (28,018)
      Proceeds of long-term
       debt                     2,041       16,692      107,914      334,100
      Repayment of long-term
       debt                      (951)      (2,946)     (23,664)    (162,393)
      Net proceeds from Trust
       Unit issuances             110          114        1,247       97,036
      Repurchase of Trust
       Units                  (19,185)           -      (28,656)
      Distributions paid      (36,682)     (36,872)    (146,983)    (118,124)
    -------------------------------------------------------------------------
                              (54,667)     (22,909)     (90,142)     122,601
    Investing activities:
      Acquisitions             (9,555)     (16,968)     (11,915)    (182,139)
      Property, plant and
       equipment additions    (21,922)     (35,711)     (96,652)    (102,705)
      Proceeds on sale of
       property, plant and
        equipment               2,914        5,578       16,449       17,408
      Proceeds on sale of
       investments                  -            -           46          141
      Cash distributions from
       equity investees         3,123            -        3,123            -
      Purchase of
       investments             (7,553)           -       (7,553)           -
      Other assets              3,149         (241)       4,007        1,915
    -------------------------------------------------------------------------
                              (29,844)     (47,342)     (92,495)    (265,380)
    -------------------------------------------------------------------------
    Change in cash            (32,449)     (17,054)      29,757       49,398
    Cash, beginning of
     period                   111,604       66,452       49,398            -
    -------------------------------------------------------------------------
    Cash, end of period   $    79,155  $    49,398  $    79,155  $    49,398
    -------------------------------------------------------------------------

    Supplemental cash flow
     information:
      Interest paid       $     8,814  $     6,902  $    21,808  $    10,798
      Income taxes paid
       (received)         $        (5) $    (1,823) $    (7,792) $    11,537
    -------------------------------------------------------------------------
    

    This press release may contain forward-looking statements that are
subject to risk factors associated with the oil and gas business and the
overall economy. The Fund believes that the expectations reflected in this
press release are reasonable, but results may be affected by a variety of
variables. The Fund relies on litigation protection for "forward-looking"
statements.

    Mullen is an open-ended income fund that owns a network of independently
operated businesses. Today the Mullen Group is recognized as the largest
provider of specialized transportation and related services to the oil and
natural gas industry in western Canada and as one of the leading suppliers of
trucking and logistics services in Canada - two sectors of the economy in
which the Fund has strong business relationships and industry leadership.
Administration of the Fund is delegated to Mullen Group Inc. which, in
addition to managing the Fund, provides management and financial expertise,
technology and systems support to its independent businesses.
    Additional information on the Fund, including the 2007 Financial Report,
which includes the audited annual consolidated financial statements and
Management's Discussion and Analysis for the year and quarter ended December
31, 2007, is available on our website at www.mullen-group.com. and on
www.sedar.com. The above is provided to unitholders and interested parties on
an information only basis.
    Mullen is a publicly traded income trust listed on the Toronto Stock
Exchange under the symbol "MTL.UN". Additional information is available on our
website at www.mullen-group.com.

    %SEDAR: 00022408E




For further information:

For further information: Mr. Murray K. Mullen - Chairman of the Board
and Chief Executive Officer, Mr. Stephen H. Lockwood - Co-Chief Executive
Officer and President, Mr. David E. Olson - Vice President, Finance and Chief
Financial Officer, P.O. Box 87, 1 Maple Leaf Road, Aldersyde, Alberta, Canada,
T0L 0A0, Tel: (403) 652-8888, Fax: (403) 601-8301

Organization Profile

Mullen Group Ltd.

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