Mullen Group Ltd. reports 2009 financial results

OKOTOKS, AB, Feb. 25 /CNW/ - (TSX-MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended December 31, 2009 with comparisons to the same period last year. On May 1, 2009, the holders of trust units of Mullen Group Income Fund (the "Fund") and the holders of Class B limited partnership units of Mullen Co. Limited Partnership approved a Plan of Arrangement that resulted in the conversion of the Fund from an open-ended income trust to a corporation called "Mullen Group Ltd." Mullen Group as the successor in interest to the Fund will be accounted for as a continuity of interest whereby the consolidated financial statements for the three and twelve month periods ended December 31, 2009 and comparables for the three and twelve month periods ended December 31, 2008 will reflect the financial position, results of operations and cash flows as if Mullen Group had always carried on the business formerly carried on by the Fund. Throughout this news release, references made to cash distributions declared, distributions payable and cash distributions paid reflect the business of the Fund that occurred prior to conversion from an open-ended income trust to a corporation.

For the twelve month period ended December 31, 2009, Mullen Group generated consolidated revenue of $978.0 million and operating income of $191.6 million. Mullen Group generated $121.0 million of funds from operations which was supplemented by $122.0 million of net proceeds from issuing convertible debentures and $91.2 million of changes in non-cash working capital items to repay long-term debt of $70.3 million, pay cash distributions and dividends totaling $40.3 million, acquire net property, plant and equipment in the amount of $12.1 million, and fund acquisitions of $5.3 million.

Mullen Group's revenue of $978.0 million for the year ended December 31, 2009 was a decrease of $336.2 million or 25.6 percent from the $1.3 billion generated in 2008. This decrease in consolidated revenue was attributable to lower revenues generated by both the Trucking/Logistics segment and the Oilfield Services segment. The Trucking/Logistics segment experienced lower revenues by virtue of the slowing economy and its impact on demand for freight services especially in western Canada, as well as less fuel surcharge revenue being generated due to the reduction in the average cost of diesel fuel on a year over year basis. The Oilfield Services segment experienced lower revenues by virtue of a decrease in demand for its services resulting from the significant year over year reduction in oil and natural gas drilling activity in western Canada. In addition, the business units leveraged to the transportation of fluids and the servicing of oil and natural gas wells experienced a decrease in revenue by virtue of the reduction in drilling activity, competitive pricing and less fuel surcharge revenue.

"The operating environment during 2009 was extremely challenging due to the combined impact of the slowing economy coupled with a significant decrease in drilling activity in western Canada. The planning we undertook during the last quarter of 2008 together with the diversity of our business model enabled us to somewhat mitigate the overall impact on our operating results. During 2009 there was a world wide economic crisis and a significant 50 percent year over year decline in oil and natural gas drilling activity in western Canada. Despite such a challenging operating environment, we were able to achieve an overall operating margin of 19.6 percent as compared to 20.8 percent in 2008," stated Mr. Steve Lockwood, President and Co-Chief Executive Officer.

Mullen Group generated operating income for the year ended December 31, 2009 of $191.6 million, a decrease of $81.7 million or 29.9 percent over the $273.3 million generated in 2008. The decrease in operating income was mainly attributable to the year over year decrease in consolidated revenues. Operating income decreased in the Trucking/Logistics segment by virtue of the impact of the slowing economy and in the Oilfield Services segment by virtue of the decrease in demand for their services resulting from the significant reduction in drilling activity in western Canada.

In 2009, Mullen Group generated net income of $90.8 million or $1.13 per share, a decrease of $22.2 million compared to $113.0 million or $1.40 per share in 2008. The $22.2 million decrease in net income was mainly due to the $81.7 million decrease in operating income coupled with a $16.5 million increase in the provision for income taxes all of which was offset by a $89.3 million increase in unrealized gain on foreign exchange. The $16.5 million increase in the provision for income taxes was mainly attributable to the conversion from an open-ended income trust to a corporation in May of 2009. The $89.3 million increase in unrealized gain on foreign exchange was mainly due to the impact of the change over the year in the value of the CDN. dollar relative to the U.S. dollar on the Corporation's $235.0 million of U.S. dollar denominated debt.

Mullen Group generated revenue of $233.6 million for the three month period ended December 31, 2009, a decrease of $121.2 million or 34.2 percent over the $354.8 million generated for the same period last year. The decrease in revenue was attributable to lower revenues generated by both the Trucking/Logistics segment and the Oilfield Services segment. The Trucking/Logistics segment experienced lower revenues by virtue of increased pricing pressure, less fuel surcharge revenue and the continued affects of the slowing economy and its impact on demand for freight services especially in western Canada. The Oilfield Services segment experienced lower revenues by virtue of the decrease in demand for its services resulting from the significant year over year reduction in oil and natural gas drilling activity in western Canada as well as a very competitive pricing environment.

Operating income in the fourth quarter decreased by $37.5 million to $43.7 million from $81.2 million in 2008. This decrease was mainly attributable to lower revenue generated by both the Oilfield Services segment and the Trucking/Logistics segment. Mullen Group generated net income of $11.1 million, or $0.14 per share for the quarter, compared to a $7.1 million, or $0.09 per share in the fourth quarter of 2008. The increase in net income was mainly attributable to a $42.3 million year over year swing in unrealized gain on foreign exchange which was partially offset by a $37.5 million decrease in operating income.

"The challenging operating environment we experienced through the third quarter of 2009 continued in the fourth quarter. Business activity remained soft resulting in competitive pricing pressures for most of our business units. In fact, there were several instances where long-term contract pricing fell to levels we considered unacceptable leaving us with no choice but to decline the work. We have consistently taken the position in all our businesses that we will price competitively, however we will not engage in predatory pricing nor provide services without receiving a reasonable return," stated Mr. Steve Lockwood.

"While there is no doubting the fact that 2009 was a difficult and challenging year it is important to put everything into perspective. Business is ultimately about being competitive and delivering value to your customers. It is not just about a yearly or quarterly result. The steps we took last year, while not always pleasant, were designed to ensure our competitiveness for years into the future. From this perspective I am quite confident that the Mullen Group and our 25 business units are well positioned to capitalize on market opportunities," commented Mr. Murray Mullen, Chairman and Chief Executive Officer.

"As the global economy recovers, we fully expect both segments in our business to benefit. For example, oil and natural gas drilling activity in western Canada is improving from multi-year lows. Investment in long-life capital projects like the oilsands is returning. These are just a couple of examples that indicate the worst is behind us. Combine economic growth with a strong balance sheet like we have at Mullen Group and good things can happen," added Mr. Murray Mullen.

A summary of Mullen Group's results for the quarter and year ended December 31, 2009, along with revenues and operating results by segment are as follows:

    
    -------------------------------------------------------------------------
    SUMMARY                 Three Months Ended        Twelve Months Ended
                                December 31                December 31
    ---------------------------------------------- --------------------------
                           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    (Unaudited)
    ($ millions, except
     per share amounts)       $        $        %        $        $        %

    Revenue               233.6    354.8    (34.2)   978.0  1,314.2    (25.6)

    Operating income(1)    43.7     81.2    (46.2)   191.6    273.3    (29.9)
    Net income             11.1      7.1     56.3     90.8    113.0    (19.6)
    Earnings per
     share(2)             $0.14    $0.09     55.6    $1.13    $1.40    (19.3)

    Funds from
     operations(3)         33.5     72.0    (53.5)   121.0    246.2    (50.9)
    Funds from
     operations per
     share(4)             $0.41    $0.89    (53.9)   $1.50    $3.06    (51.0)
    Dividends declared
     per share           $0.125        -    100.0    $0.25        -    100.0
    Distributions
     declared per unit        -    $0.45        -   $0.225    $1.80    (87.5)
    -------------------------------------------------------------------------

    Notes:

    (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 share is based on weighted average number of shares
        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 share is calculated by dividing funds from
        operations by the weighted average number of shares outstanding for
        the period.

    Operating income, funds from operations and funds from operations per
    share 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 Corporation's principal business activities
    prior to financing activities, amortization of assets, or taxation in
    various jurisdictions. Funds from operations indicate the Corporation'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 share 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
    ---------------------------------------------- --------------------------
                           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    (Unaudited)
    ($ millions)              $        $        %        $        $        %

    Revenue
      Oilfield Services   146.1    233.4    (37.4)   612.6    835.2    (26.7)
      Trucking/Logistics   89.5    123.8    (27.7)   372.1    485.2    (23.3)
      Corporate             0.3      0.2        -      0.9      2.2        -
    Intersegment
     eliminations
      Oilfield Services    (1.8)    (1.5)       -     (4.9)    (3.4)       -
      Trucking/Logistics   (0.5)    (1.1)       -     (2.7)    (5.0)       -
    -------------------------------------------------------------------------
    Totals                233.6    354.8    (34.2)   978.0  1,314.2    (25.6)

    Operating income
      Oilfield Services    31.3     55.0    (43.1)   139.5    196.4    (29.0)
      Trucking/Logistics   14.8     24.2    (38.8)    61.6     83.2    (26.0)
      Corporate            (2.4)     2.0        -     (9.5)    (6.3)       -
    -------------------------------------------------------------------------
    Totals                 43.7     81.2    (46.2)   191.6    273.3    (29.9)
    -------------------------------------------------------------------------



    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    December 31, 2009 and 2008                             2009         2008
    ($ thousands)

    Assets
    Current assets:
      Cash and cash equivalents                     $   204,899  $       291
      Accounts receivable                               151,049      245,294
      Inventory                                          22,505       22,980
      Prepaid expenses                                    7,922       10,999
      Investments                                         6,101        3,344
    -------------------------------------------------------------------------
                                                        392,476      282,908

    Investment                                                -        1,510
    Property, plant and equipment                       613,281      663,088
    Goodwill                                            846,441      844,420
    Intangible assets                                    72,406       89,081
    Other assets                                          2,283        1,070
    -------------------------------------------------------------------------
                                                    $ 1,926,887  $ 1,882,077
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities      $    69,288  $   109,946
      Distributions payable                                   -       12,091
      Dividends payable                                  10,076            -
      Income tax payable                                 36,044        1,635
      Current portion of long-term debt                   1,830        3,438
    -------------------------------------------------------------------------
                                                        117,238      127,110

    Long-term debt                                      410,811      518,007
    Convertible debentures - debt component             116,162            -

    Future income taxes                                 115,445      130,024

    Shareholders' equity:
      Shareholders' capital                           1,185,821    1,185,821
      Convertible debentures - equity component           7,200            -
      Contributed surplus                                 8,103        7,530
      Deficit                                           (33,893)     (86,415)
    -------------------------------------------------------------------------
                                                      1,167,231    1,106,936
    -------------------------------------------------------------------------
                                                    $ 1,926,887  $ 1,882,077
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT
    ($ thousand, except per share amounts)

                                Three Months Ended       Twelve Months Ended
                                    December 31              December 31
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
                                    (Unaudited)
    Revenue               $   233,568  $   354,778  $   978,046  $ 1,314,224

    Direct operating
     expenses                 159,701      233,818      662,522      884,911
    Selling and
     administrative
     expenses                  30,200       39,764      123,906      155,987
    Depreciation on
     property, plant and
     equipment                 16,011       16,952       61,576       62,285
    Amortization on
     intangible assets          4,702        4,678       18,608       16,818
    Interest and accretion
     expense                    9,828        8,348       36,163       28,146
    Unrealized (gain) loss
     on foreign exchange       (4,700)      37,600      (39,950)      49,314
    Unrealized (gain) loss
     on investments              (787)       2,090       (1,381)       6,760
    Loss (gain) on sale of
     property, plant and
     equipment                  5,361        1,529        5,056       (1,031)
    -------------------------------------------------------------------------
    Income before income
     taxes and earnings
     from equity
     investments               13,252        9,999      111,546      111,034
    -------------------------------------------------------------------------

    Provision for income
     taxes:
      Current                     983        1,650       36,465        1,814
      Future (recovery)         1,184        3,381      (15,607)       2,502
    -------------------------------------------------------------------------
                                2,167        5,031       20,858        4,316
    -------------------------------------------------------------------------

    Income before earnings
     from equity
     investments               11,085        4,968       90,688      106,718
    Earnings from equity
     investments                    -        2,133          122        6,283
    -------------------------------------------------------------------------
    Net income and other
     comprehensive
     income               $    11,085  $     7,101  $    90,810  $   113,001

    Deficit, beginning of
     period               $   (34,902) $   (57,243) $   (86,415) $   (54,601)
    Cash distributions
     declared to
     unitholders                    -      (36,273)     (18,136)    (144,815)
    Cash dividends declared
     to shareholders          (10,076)           -      (20,152)           -
    -------------------------------------------------------------------------
    Deficit, end of
     period               $   (33,893) $   (86,415) $   (33,893) $   (86,415)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share:
      Basic               $      0.14  $      0.09  $      1.13  $      1.40
      Diluted             $      0.14  $      0.09  $      1.10  $      1.40
    Weighted average
     number of shares
     outstanding:
      Basic                    80,605       80,605       80,605       80,492
      Diluted                  92,254       80,605       88,421       80,492



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    ($ thousands)
                                Three Months Ended       Twelve Months Ended
                                    December 31              December 31
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
                                    (Unaudited)
    Cash provided by
     (used in):
    Operations:
      Net income          $    11,085  $     7,101  $    90,810  $   113,001
      Items not involving
       cash:
      Depreciation on
       property, plant and
       equipment               16,011       16,952       61,576       62,285
      Amortization on
       intangible assets        4,702        4,678       18,608       16,818
      Stock-based
       compensation               255          717          946        2,782
      Amortization of
       debt issuance costs        167            -          520            -
      Unrealized (gain)
       loss on foreign
       exchange                (4,700)      37,600      (39,950)      49,314
      Accretion on
       convertible
       debentures                 198            -          527            -
      Unrealized (gain)
       loss on investments       (787)       2,090       (1,381)       6,760
      Loss (gain) on sale
       of property, plant
       and equipment            5,361        1,529        5,056       (1,031)
      Future income taxes
       (recovery)               1,184        3,381      (15,607)       2,502
      Earnings from equity
       investments                  -       (2,133)        (122)      (6,283)
    -------------------------------------------------------------------------
                               33,476       71,915      120,983      246,148
    Changes in non-cash
     working capital items       (950)      (2,927)      91,219      (42,383)
    -------------------------------------------------------------------------
                               32,526       68,988      212,202      203,765
    Financing activities:
      Proceeds of
       convertible
       debentures                   -            -      125,000            -
      Proceeds of long-term
       debt                         -            -            -       85,681
      Debt issuance costs           -            -       (3,036)           -
      Repayment of long-term
       debt                      (740)     (18,789)     (70,262)     (23,260)
      Net proceeds from
       share issuances              -            -            -        1,366
      Dividends paid to
       shareholders           (10,076)           -      (10,076)           -
      Distributions paid to
       unitholders                  -      (36,272)     (30,227)    (144,836)
      Cheques issued in
       excess of cash               -       (3,652)           -            -
    -------------------------------------------------------------------------
                              (10,816)     (58,713)      11,399      (81,049)
    Investing activities:
      Acquisitions             (1,332)      (1,002)      (5,337)    (147,936)
      Cash distributions
       from equity
       investment                   -        4,853            -        4,853
      Property, plant and
       equipment additions    (11,657)     (21,594)     (28,307)     (79,982)
      Proceeds on sale of
       property, plant and
       equipment                5,773        7,012       16,237       21,746
      Proceeds on sale of
       equity investment            -          549            -          549
      Purchase of equity
       investment                   -            -            -       (1,225)
      Other assets             (1,778)         198       (1,586)         415
    -------------------------------------------------------------------------
                               (8,994)      (9,984)     (18,993)    (201,580)
    -------------------------------------------------------------------------
    Change in cash             12,716          291      204,608      (78,864)
    Cash, beginning of
     period                   192,183            -          291       79,155
    -------------------------------------------------------------------------
    Cash, end of period   $   204,899  $       291  $   204,899  $       291
    -------------------------------------------------------------------------

    Supplemental cash
     flow information:
      Interest paid       $    12,763  $    11,047  $    36,376  $    28,513
      Income taxes paid
       (received)         $       (84) $       (93) $     2,056  $    (1,167)
    -------------------------------------------------------------------------
    

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

Mullen Group is a company 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 Mullen Group has strong business relationships and industry leadership. Mullen Group provides management and financial expertise, technology and systems support to its independent businesses.

Mullen Group is a publicly traded corporation listed on the Toronto Stock Exchange under the symbol "MTL". Additional information is available on our website at www.mullen-group.com.

%SEDAR: 00028425E

SOURCE Mullen Group Ltd.

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

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