Mullen Group Income Fund reports record 2006 financial results



    CALGARY, March 6 /CNW/ - Mullen Group Income Fund ("Mullen" and/or the
"Fund") reported its financial and operating results for the period ended
December 31, 2006 with comparisons to the same period last year. In comparing
these 2006 results with the results for 2005 consideration must be given to
the material impact on the Fund and its operations of the many significant
transactions that were successfully completed over the past 12 months.
    For the twelve months ended December 31, 2006, Mullen generated
consolidated revenues of $1.0 billion as compared to $591.7 million for 2005.
Net income increased to $128.1 million, or $1.86 per unit, up significantly
from last year's results of $70.0 million or $1.51 per unit. This 83.0 percent
increase in net income is mainly attributable to the income generated by the
acquisitions made in 2006 and the full inclusion of the acquisitions made in
2005. The increase was also attributable to modest price and volume increases
in the preexisting businesses in the Trucking/Logistics segment offset by a
reduction of revenue in some of the Oilfield Services businesses due to the
decline in natural gas drilling activity in Canada during the fourth quarter
of 2006.
    "2006 was an important year for the Fund. We hit the coveted $1 billion
dollars in revenues, improved profitability, paid out $118.1 million in
distributions to unitholders and strengthened the balance sheet with an equity
offering and a private debt placement. By most standards one would have to
conclude that it was a great year. But we are mindful that in spite of all
these accomplishments our long-term unitholders have witnessed a significant
decline in the value of their investment in Mullen. We believe this is only a
temporary set-back and once drilling activity picks up, investors will realize
on the value of the investments we made in 2006", commented Stephen Lockwood,
President and Co-Chief Executive Officer.
    For the three month period ended December 31, 2006, Mullen generated
consolidated revenues of $284.0 million compared to $160.7 million for the
same period one year ago, an improvement of $123.3 million or 76.7 percent.
The increase in revenues in this period is mainly due to the acquisitions made
in 2006, offset by a slowdown in natural gas drilling activity which caused a
decrease in the business units leveraged to drilling activity.
    Operating income in the fourth quarter improved considerably with an
increase of 66.6 percent to $53.3 million, up from last year's $32.0 million.
The increase was attributed to the acquisitions made in 2006 partially offset
by decreases in the preexisting business units leveraged to drilling activity.
Net income decreased by 43.3 percent to $14.0 million as compared to $24.7
million last year. This decrease in net income occurred because of the
following non-cash items; additional depreciation of $7.0 million and
increased amortization of intangibles of $3.7 million mainly due to the
acquisitions made in 2006, a $7.5 million unrealized foreign exchange loss
related to U.S. funds borrowed as part of the private debt placement and an
increase of approximately $8.5 million in future income tax expense due to
restrictions on the tax deductibility of interest on the Fund's internal debt.
In addition, the Fund's interest on long-term debt increased by $4.4 million
as a result of the private debt.
    "We are extremely pleased with our overall performance in the fourth
quarter particularly in light of the significant decline in drilling activity
in western Canada as compared to last year. On a percentage basis we
experienced a 25 percent decrease in the number of active drilling rigs this
quarter as compared to the same period last year. If drilling activity would
have been anywhere close to 2005 levels our Oilfield Services segment would
have benefited significantly. Our operating businesses leveraged to capital
spending, infrastructure and oilsands development as well as crude hauling and
production services performed reasonably well during the quarter as did most
of our business units in the Trucking/Logistics segment," stated Mr. Lockwood.
    The Fund is also pleased to announce that Murray K. Mullen, Chairman of
the Board of Directors, has been appointed as Chief Executive Officer and that
Stephen H. Lockwood will continue on in his role as Co-Chief Executive Officer
and President.

    A summary of the Company's results for the quarter and year ended
December 31, 2006, along with revenues and operating results by Segment are as
follows:

    
    -------------------------------------------------------------------------

    SUMMARY                  Three Months Ended        Twelve Months Ended
                                December 31                December 31
                        -----------------------------------------------------
                                (Unaudited)                 (Audited)
    -------------------------------------------------------------------------
                           2006     2005   Change     2006     2005   Change
    -------------------------------------------------------------------------
    ($ millions, except
     per unit amounts)        $        $        %        $        $        %


    Revenue               284.0    160.7     76.7  1,003.3    591.7     69.6

    Operating income
     before trust
     conversion costs(1)   53.3     32.0     66.6    202.1    117.1     72.6

    Operating income(2)    53.3     32.0     66.6    202.1    112.7     79.3

    Income before trust
     conversion costs(1)   14.0     24.7    (43.3)   128.1     73.9     73.3

    Net income             14.0     24.7    (43.3)   128.1     70.0     83.0

    Earnings per unit
     before trust
     conversion costs
     (Dollars)(1)         $0.17    $0.52    (67.3)   $1.86    $1.60     16.3

    Earnings per unit
     (Dollars)(3)         $0.17    $0.52    (67.3)   $1.86    $1.51     23.2

    Funds from
     operations(4)         50.9     32.0     59.1    195.3    100.8     93.8

    Funds from operations
     per unit
     (Dollars)(5)         $0.62    $0.68     (8.8)   $2.84    $2.18     30.3
    -------------------------------------------------------------------------

    Note:
    (1) Trust conversion costs consist of professional fees and additional
        unit-based compensation costs due to the accelerated vesting of
        stock options pursuant to the Plan of Arrangement.
    (2) Operating income is defined as net 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 losses on foreign exchange.
    (3) Earnings per Unit based on weighted average number of units for the
        period.
    (4) Funds from operations is defined as cash provided by operations
        before change in non-cash working capital items.
    (5) 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)                 (Audited)
    ---------------------------------------------- --------------------------
                           2006     2005   Change     2006     2005   Change
    ---------------------------------------------- --------------------------
    ($ millions)              $        $        %        $        $        %

    Revenues
      Oilfield Services   174.7     87.2    100.3    604.3    338.7     78.4
      Trucking            109.9     73.8     48.9    400.4    256.4     56.2
      Other                 0.4      0.3        -      2.3      0.3        -
    Intersegment
     Eliminations
      Oilfield Services    (0.6)    (0.2)       -     (1.9)    (1.6)       -
      Trucking             (0.4)    (0.4)       -     (1.8)    (2.1)       -
    ---------------------------------------------- --------------------------
    Totals                284.0    160.7     76.7  1,003.3    591.7     69.6

    Operating Income
      Oilfield Services    35.5     21.3     66.7    141.6     78.4     80.6
      Trucking             18.9     10.7     76.6     60.8     38.8     56.7
      Other                (1.1)       -        -     (0.3)    (4.5)       -
    ---------------------------------------------- --------------------------
    Totals                 53.3     32.0     66.6    202.1    112.7     79.3

    -------------------------------------------------------------------------



    -------------------------------------------------------------------------

    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    (in thousands of dollars)                              2006         2005
                                                               (Audited)
    Assets
    Current assets:
      Cash and cash equivalents                     $    49,398  $         -
      Accounts receivable                               209,545      112,521
      Income taxes recoverable                            6,834        2,815
      Prepaid expenses                                   27,675       13,453
    -------------------------------------------------------------------------
                                                        293,452      128,789
    Investments                                           1,825        6,628
    Property, plant and equipment                       558,522      218,357
    Goodwill                                          1,041,827      131,344
    Intangible assets                                   116,284        8,800
    Other assets                                          9,335       14,701
    -------------------------------------------------------------------------
                                                    $ 2,021,245  $   508,619
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current liabilities:
      Bank indebtedness                             $         -  $    21,867
      Accounts payable and accrued liabilities          107,423       54,464
      Distributions payable                              12,291        6,380
      Current portion of long-term debt                  21,734          549
    -------------------------------------------------------------------------
                                                        141,448       83,260

    Long-term debt                                      325,002       50,985
    Future income taxes                                 130,729       46,502
    Unitholders' equity:
      Unitholders' capital                            1,201,677       98,991
      Contributed surplus                                 7,839          330
      Retained earnings                                 214,550      228,551
    -------------------------------------------------------------------------
                                                      1,424,066      327,872
    -------------------------------------------------------------------------
                                                    $ 2,021,245  $   508,619
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------

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

                                Three Months Ended       Twelve Months Ended
                                   December 31               December 31
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------

                                 (Unaudited)                (Audited)

    Revenue               $   283,995  $   160,715  $ 1,003,287  $   591,728

    Expenses:
      Direct operating        198,117      112,368      682,132      411,893
      Selling and
       administrative          32,640       16,292      119,090       67,118
    -------------------------------------------------------------------------
                               53,238       32,055      202,065      112,717

    Depreciation on
     property, plant and
     equipment                 12,790        5,771       41,730       21,145
    Amortization on
     intangible assets          4,207          531       10,905        1,345
    Interest on long-term
     debt                       5,149          692       13,410        1,853
    Other interest                 67           31          202           66
    Unrealized loss on
     foreign exchange           7,500            -        7,500            -
    (Gain) loss on sale of
     property, plant and
     equipment                    211         (192)      (1,256)        (214)
    Gain on sale of
     investments                    -            -         (115)           -
    -------------------------------------------------------------------------
    Income before income
     taxes and earnings
     from equity
     investments               23,314       25,222      129,689       88,522
    -------------------------------------------------------------------------

    Provision for income
     taxes:
      Current (recovery)       (2,134)        (415)      (4,311)      14,017
      Future                   11,795          779        6,866        4,933
    -------------------------------------------------------------------------
                                9,661          364        2,555       18,950
    -------------------------------------------------------------------------

    Income before earnings
     from equity investments   13,653       24,858      127,134       69,572
    Earnings (loss) from
     equity investments           410         (199)         998          391
    -------------------------------------------------------------------------

    Net income            $    14,063  $    24,659  $   128,132  $    69,963

    Retained earnings,
     beginning of period  $   237,360  $   223,031  $   228,551  $   196,832
    Distributions declared
     to unitholders           (36,873)     (19,139)    (124,037)     (38,244)
    Split off of Horizon
     North Logistics Inc.           -            -      (18,096)           -
    -------------------------------------------------------------------------
    Retained earnings,
     end of period        $   214,550  $   228,551  $   214,550  $   228,551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per unit:
      Basic               $      0.17  $      0.52  $      1.86  $      1.51
      Diluted             $      0.17  $      0.52  $      1.86  $      1.51
    Weighted average
     number of units
     outstanding:
      Basic                    81,938       47,256       68,886       46,261
      Diluted                  81,938       47,684       68,886       46,322



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

                                Three Months Ended       Twelve Months Ended
                                   December 31               December 31
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------

                                 (Unaudited)                (Audited)
    Cash provided by
     (used in):
    Operations:
      Net income          $    14,063  $    24,659  $   128,132  $    69,963
      Items not involving
       cash:
      Depreciation on
       property, plant and
       equipment               12,790        5,771       41,730       21,145
      Amortization on
       intangible assets        4,207          531       10,905        1,345
      Unit-based
       compensation               799          196        2,581          330
      Stock-based
       compensation                 -            -            -        3,660
      Unrealized loss on
       foreign exchange         7,500            -        7,500            -
      (Gain) loss on sale
       of equipment               211         (192)      (1,256)        (214)
      Gain on sale of
       investments                  -            -         (115)           -
      Future income taxes      11,795          779        6,866        4,933
      (Earnings) loss
       from equity
       investments               (410)         199         (998)        (391)
    -------------------------------------------------------------------------
      Funds provided from
       operations              50,955       31,943      195,345      100,771
      Changes in non-cash
       working capital
        items                   2,242      (17,646)      (3,168)     (30,105)
    -------------------------------------------------------------------------
                               53,197       14,297      192,177       70,666
    Financing activities:
      Change in bank
       indebtedness               103       12,475      (28,018)      16,616
      Proceeds of
       long-term debt          16,692            -      334,100       10,370
      Repayment of
       long-term debt          (2,946)        (414)    (162,393)           -
      Proceeds from
       common share
       issuances                    -            -            -        3,146
      Proceeds from Trust
       Unit issuances             114            -       97,036        9,055
      Distributions paid      (36,872)     (19,139)    (118,124)     (31,864)
      Dividends paid                -            -            -       (3,765)
    -------------------------------------------------------------------------
                              (22,909)      (7,078)     122,601        3,558
    Investing activities:
      Acquisitions            (16,968)        (842)    (182,139)     (46,155)
      Property, plant and
       equipment additions    (35,711)      (7,854)    (102,705)     (32,790)
      Proceeds on sale of
       property, plant and
       equipment                5,578        3,653       17,408        7,916
      Proceeds on sale of
       investments                  -            -          141            -
      Cash distributions
       from equity
       investees                    -            -            -          494
      Investments                   -         (150)           -         (150)
      Other assets               (241)      (2,026)       1,915       (3,539)
    -------------------------------------------------------------------------
                              (47,342)      (7,219)    (265,380)     (74,224)
    -------------------------------------------------------------------------
    Change in cash            (17,054)           -       49,398            -
    Cash, beginning of
     period                    66,452            -            -            -
    -------------------------------------------------------------------------
    Cash, end of period   $    49,398  $         -  $    49,398  $         -
    -------------------------------------------------------------------------

    Supplemental cash
     flow information:
      Interest paid       $     6,902  $       723  $    10,798  $     1,919
      Income taxes paid
       (received)         $    (1,823) $         -  $    11,537  $    19,833

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    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 2006 Financial Report,
which includes the audited annual consolidated financial statements and
Management's Discussion and Analysis for the year and quarter ended
December 31, 2006, 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

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Mullen Group Ltd.

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