Mullen Group Income Fund reports record 2008 financial results



    OKOTOKS, AB, Feb. 25 /CNW/ - (TSX-MTL.UN) Mullen Group Income Fund
("Mullen" and/or the "Fund") reported its financial and operating results for
the period ended December 31, 2008 with comparisons to the same period last
year.
    For the twelve months ended December 31, 2008, Mullen generated record
consolidated revenues of approximately $1.3 billion, an increase of 17.4% over
the $1.1 billion generated in 2007. Operating income also increased on a year
over year basis by $64.2 million, or 30.7%, to a record $273.3 million from
$209.1 million last year. The year over year improvement and record results
were mainly attributable to:

    
    -   the Fund's acquisition of the transport division of Essential Energy
        Services Trust (the "Essential Assets"), R. E. Line Trucking
        (Coleville) Ltd. ("R.E. Line") and Pro North Oilfield Services ("Pro
        North"), which collectively added approximately $84.3 million of
        revenue and $19.3 million of operating income;

    -   the strong performance by the Trucking/Logistics Segment, which added
        approximately $48.2 million of revenue and $18.9 million of operating
        income;

    -   the strong demand for services related to the transportation of
        fluids and servicing of oil wells;

    -   the strong demand for specialized services related to the build out
        and servicing of projects related to the extraction of oilsands
        deposits; and

    -   the Fund's efforts to monitor and control costs.
    

    In a news release dated January 13, 2009, the Fund indicated it had
initiated its annual review of goodwill and intangibles to determine whether,
as a result of the current economic climate, the goodwill and intangibles it
had booked in 2006 in connection with its oilfield services acquisitions had
been further impaired. Such review has been completed and the Fund has
determined that as of December 31, 2008, its goodwill and intangibles had not
been further impaired.
    For the year ended December 31, 2008, the Fund generated $246.2 million
of funds from operations compared to $193.8 million in 2007, an increase of
$52.4 million. During the year, the Fund paid distributions to unitholders of
$144.8 million, funded net capital expenditures of $58.3 million, repaid
long-term debt of $23.3 million, and utilized $147.9 million to acquire the
Essential Assets, R.E. Line and the assets of M&L Trucking. At the end of
December 31, 2008, the Fund had access to $85.8 million of unused bank lines.
    For 2008, the Fund generated net income of $113.0 million, or $1.40 per
unit, compared to a net loss of $118.7 million, or $(1.45) per unit, in 2007.
This significant increase in net income was mainly as a result of the
following:

    
    -   in 2007 net income decreased by $275.0 million due to the recognition
        of a goodwill and intangible asset write-down;

    -   in 2007 the Fund recognized a $26.7 million unrealized gain on
        foreign exchange, whereas in 2008 it recognized a $49.3 million loss,
        a year over year negative variance of $76.0 million; and

    -   in 2008 the Fund generated record operating income of $273.3 million,
        an increase of $64.2 million compared to 2007.
    

    For the three month period ended December 31, 2008, Mullen generated
consolidated revenue of $354.8 million, compared to $273.6 million for the
same period last year. This significant increase in revenue was due to the
additional revenue generated by the Essential Assets, R. E. Line and Pro
North, increased revenue in all the other Oilfield Services Segment business
units and increased revenue in all the business units in the
Trucking/Logistics Segment. All the business units in both the Oilfield
Services Segment and the Trucking/Logistics Segment experienced increased
demand for their services, especially in western Canada. The strengthening of
the U.S. dollar on U.S. dollar sales also contributed to the increase in
revenue.
    Operating income in the fourth quarter increased by $31.8 million to
$81.2 million from $49.4 million in 2007. This increase was attributable to
the increased revenue generated by both the Oilfield Services Segment and the
Trucking/Logistics Segment and the continual and concerted effort by all
business units to increase productivity and reduce costs. The Fund generated
net income of $7.1 million, or $0.09 per unit for the quarter, compared to a
net loss of $231.6 million, or ($2.85) per unit in the fourth quarter of 2007.
However, in the fourth quarter of 2007 the Fund recognized an impairment of
goodwill and intangibles of $275.0 million. Without such impairment, the
Fund's net income for the fourth quarter of 2007 would have been $36.7
million. The decrease in net income of $29.6 million in 2008 as compared to
2007 (before the impairment of goodwill and intangibles), was primarily due to
a $37.6 million unrealized loss on foreign exchange in 2008 as compared to an
unrealized gain of $1.8 million in 2007. In addition, on a year over year
basis, depreciation increased by $2.1 million, unrealized losses on
investments increased by $2.1 million and interest increased by $2.1 million.
Partially offsetting all these costs was an increase of $31.8 million in
operating income.
    A summary of the Fund's results for the quarter and year ended December
31, 2008, along with revenues and operating results by segment are as follows:

    
    -------------------------------------------------------------------------
    SUMMARY                 Three Months Ended        Twelve Months Ended
                               December 31                December 31
                        -------------------------- --------------------------
                               (Unaudited)
    -------------------------------------------------------------------------
                           2008     2007   Change     2008     2007   Change
    -------------------------------------------------------------------------
    ($ millions, except       $        $        %        $        $        %
     per unit amounts)

    Revenue               354.8    273.6     29.7  1,314.2  1,119.5     17.4
    Operating income(1)    81.2     49.4     64.4    273.3    209.1     30.7

    Income before
     impairment of
     goodwill and
     intangible assets      7.1     36.7    (80.7)   113.0    149.6    (24.5)
    Net income (loss)       7.1   (231.6)       -    113.0   (118.7)       -

    Earnings per unit
     before impairment
     of goodwill and
     intangible assets
     (dollars)(2)         $0.09    $0.45    (80.0)   $1.40    $1.83    (23.5)
    Earnings (loss) per
     unit (dollars)(2)    $0.09   $(2.85)       -    $1.40   $(1.45)       -

    Funds from
     operations(3)         72.0     44.8     60.7    246.2    193.8     27.0
    Funds from
     operations per
     unit (dollars)(4)    $0.89    $0.56     58.9    $3.06    $2.38     28.6
    -------------------------------------------------------------------------
    Note:
    (1) Operating income is defined as net income before interest, income
        taxes, depreciation on property, plant and equipment, amortization on
        intangible assets, earnings or losses from equity investments,
        unrealized gains or losses on foreign exchange and investment and
        gains or losses on sale of property, plant and equipment and
        investments.
    (2) Earnings per unit is based on weighted average number of units
        outstanding for the period.
    (3) Funds from operations is defined as cash flow from operating
        activities before changes 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 for
        the period.
    Operating income, 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 financing activities, amortization of assets, or taxation in various
    jurisdictions. Funds from operations indicate the Fund's ability to
    generate funds from its operations without the seasonality effect on its
    working capital. References to operating income, funds from operations
    and funds from operations per unit are not measures recognized by GAAP
    and do not have standardized meanings prescribed by GAAP. Investors
    should be cautioned that these indicators should not replace net earnings
    as an indicator of GAAP performance.
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    SEGMENTED RESULTS       Three Months Ended        Twelve Months Ended
                               December 31                December 31
                        -------------------------- --------------------------
                               (Unaudited)
    -------------------------------------------------------------------------
                           2008     2007   Change     2008     2007   Change
    -------------------------------------------------------------------------
    ($ millions)              $        $        %        $        $        %

    Revenues
      Oilfield Services   233.4    160.2     45.7    835.2    685.4     21.9
      Trucking/Logistics  123.8    113.7      8.9    485.2    437.0     11.0
      Other                 0.2      1.4        -      2.2      2.7        -
    Intersegment
     eliminations
      Oilfield Services    (1.5)    (1.4)       -     (3.4)    (3.1)       -
      Trucking/Logistics   (1.1)    (0.3)       -     (5.0)    (2.5)       -
    -------------------------------------------------------------------------
    Totals                354.8    273.6     29.7  1,314.2  1,119.5     17.4

    Operating income
      Oilfield Services    55.0     31.2     76.3    196.4    151.3     29.8
      Trucking/Logistics   24.2     19.1     26.7     83.2     64.3     29.4
      Other                 2.0     (0.9)       -     (6.3)    (6.5)       -
    -------------------------------------------------------------------------
    Totals                 81.2     49.4     64.4    273.3    209.1     30.7
    -------------------------------------------------------------------------



    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    ($ thousands)                                          2008         2007


    Assets
    Current assets:
      Cash and cash equivalents                     $       291  $    79,155
      Accounts receivable                               245,294      185,475
      Income taxes recoverable                                -        1,488
      Inventory                                          22,980            -
      Prepaid expenses                                   10,999       27,715
    -------------------------------------------------------------------------
                                                        279,564      293,833
    Investments                                           4,854        9,884
    Property, plant and equipment                       663,088      586,823
    Goodwill                                            844,420      794,448
    Intangible assets                                    89,081       82,674
    Other assets                                          1,070        2,828
    -------------------------------------------------------------------------
                                                    $ 1,882,077  $ 1,770,490
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities      $   109,946  $   100,480
      Distributions payable                              12,091       12,112
      Income tax payable                                  1,635            -
      Current portion of long-term debt                   3,438        3,817
    -------------------------------------------------------------------------
                                                        127,110      116,409

    Long-term debt                                      518,007      398,592

    Future income taxes                                 130,024      123,357

    Unitholders' equity:
      Unitholders' capital                            1,185,821    1,185,340
      Trust Units repurchased, pending
       cancellation                                           -       (5,880)
      Contributed surplus                                 7,530        7,273
      Deficit                                           (86,415)     (54,601)
    -------------------------------------------------------------------------
                                                      1,106,936    1,132,132
    -------------------------------------------------------------------------
                                                    $ 1,882,077  $ 1,770,490
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF INCOME AND (DEFICIT) RETAINED EARNINGS
    ($ thousand)

                                Three Months Ended       Twelve Months Ended
                                   December 31               December 31
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
                                   (Unaudited)

    Revenue               $   354,778  $   273,647  $ 1,314,224  $ 1,119,499

    Direct operating
     expenses                 233,818      191,094      884,911      764,992
    Selling and
     administrative
     expenses                  39,764       33,088      155,987      145,377
    Depreciation on
     property, plant
     and equipment             16,952       14,860       62,285       57,684
    Amortization on
     intangible assets          4,678        4,389       16,818       16,761
    Interest on
     long-term debt             8,209        6,182       27,933       20,970
    Other interest                139           35          213          194
    Unrealized loss (gain)
     on foreign exchange       37,600       (1,726)      49,314      (26,641)
    Loss (gain) on sale
     of property, plant
     and equipment              1,529          756       (1,031)         725
    Unrealized loss on
     investment                 2,090            -        6,760            -
    Gain on sale of
     investments                    -            -            -          (30)
    Impairment of goodwill
     and intangible assets          -      275,000            -      275,000
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     earnings from equity
     investments                9,999     (250,031)     111,034     (135,533)
    -------------------------------------------------------------------------

    Provision for
     income taxes:
      Current (recovery)        1,650         (637)       1,814       (2,390)
      Future (recovery)         3,381      (17,048)       2,502      (10,850)
    -------------------------------------------------------------------------
                                5,031      (17,685)       4,316      (13,240)
    -------------------------------------------------------------------------

    Income (loss) before
     earnings from equity
     investments                4,968     (232,346)     106,718     (122,293)
    Earnings from equity
     investments                2,133          750        6,283        3,598
    -------------------------------------------------------------------------
    Net income (loss) and
     other comprehensive
     income               $     7,101  $  (231,596) $   113,001  $  (118,695)

    (Deficit) retained
     earnings, beginning
     of period            $   (57,243) $   215,451  $   (54,601) $   214,550
    Distributions
     declared to
     unitholders              (36,273)     (36,567)    (144,815)    (146,804)
    Repurchase of Trust
     Units                          -       (1,889)           -       (3,652)
    -------------------------------------------------------------------------
    Deficit, end of
     period               $   (86,415) $   (54,601) $   (86,415) $   (54,601)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per
     unit:
      Basic               $      0.09  $     (2.85) $      1.40  $     (1.45)
      Diluted             $      0.09  $     (2.85) $      1.40  $     (1.45)
    Weighted average
     number of units
     outstanding:
      Basic                    80,605       81,382       80,492       81,596
      Diluted                  80,605       81,382       80,492       81,596



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    ($ thousands)

                                Three Months Ended       Twelve Months Ended
                                   December 31               December 31
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
                                   (Unaudited)
    Cash provided by
     (used in):
    Operations:
      Net income (loss)   $     7,101  $  (231,596) $   113,001  $  (118,695)
      Items not
       involving cash:
      Depreciation on
       property, plant
       and equipment           16,952       14,860       62,285       57,684
      Amortization on
       intangible assets        4,678        4,389       16,818       16,761
      Unit-based
       compensation               717          860        2,782        3,427
      Unrealized loss
       (gain) on foreign
       exchange                37,600       (1,726)      49,314      (26,641)
      Unrealized loss
       on investment            2,090            -        6,760            -
      Loss (gain) on sale
       of property, plant
       and equipment            1,529          756       (1,031)         725
      Gain on sale of
       investments                  -            -            -          (30)
      Future income taxes
       (recovery)               3,381      (17,048)       2,502      (10,850)
      Earnings from
       equity investments      (2,133)        (750)      (6,283)      (3,598)
      Impairment of
       goodwill and
       intangibles                  -      275,000            -      275,000
    -------------------------------------------------------------------------
                               71,915       44,745      246,148      193,783
    Changes in non-cash
     working capital items     (2,927)       7,317      (42,383)      18,611
    -------------------------------------------------------------------------
                               68,988       52,062      203,765      212,394
    Financing activities:
      Cheques issued in
       excess of cash          (3,652)           -            -            -
      Proceeds of
       long-term debt               -        2,041       85,681      107,914
      Repayment of
       long-term debt         (18,789)        (951)     (23,260)     (23,664)
      Proceeds from Trust
       Unit issuances               -          110        1,366        1,247
      Repurchase of
       Trust Units                  -      (19,185)           -      (28,656)
      Distributions paid      (36,272)     (36,682)    (144,836)    (146,983)
    -------------------------------------------------------------------------
                              (58,713)     (54,667)     (81,049)     (90,142)
    Investing activities:
      Acquisitions             (1,002)      (9,555)    (147,936)     (11,915)
      Property, plant
       and equipment
       additions              (21,594)     (21,923)     (79,982)     (96,653)
      Proceeds on sale
       of property, plant
       and equipment            7,012        2,915       21,746       16,450
      Proceeds on sale
       of investments             549            -          549           46
      Cash distributions
       from equity
       investment               4,853        3,123        4,853        3,123
      Purchase of
       investments                  -       (7,553)      (1,225)      (7,553)
      Other assets                198        3,149          415        4,007
    -------------------------------------------------------------------------
                               (9,984)     (29,844)    (201,580)     (92,495)
    -------------------------------------------------------------------------
    Change in cash                291      (32,449)     (78,864)      29,757
    Cash, beginning
     of period                      -      111,604       79,155       49,398
    -------------------------------------------------------------------------
    Cash, end of period   $       291  $    79,155  $       291  $    79,155
    -------------------------------------------------------------------------

    Supplemental cash
     flow information:
      Interest paid       $    11,047  $     8,814  $    28,513  $    21,808
      Income taxes
       received           $       (93) $    (7,005) $    (1,167) $    (7,792)

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

    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 2008 Financial Report,
which includes the audited annual consolidated financial statements and
Management's Discussion and Analysis for the year and quarter ended December
31, 2008, 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, 121A, 31 Southridge Drive, Okotoks, Alberta, Canada, T1S
2N3, Tel: (403) 995-5200, Fax: (403) 995-5296

Organization Profile

Mullen Group Ltd.

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