OKOTOKS, AB, Feb. 25 /PRNewswire-FirstCall/ - (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 $31.8 million in operating income.
A summary of the Fund's results for the quarter and year ended December 31, 2008, along with revenues and operating results by segment are as follows:
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SUMMARY Three Months Ended Twelve Months Ended
December 31 December 31
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(Unaudited)
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2008 2007 Change 2008 2007 Change
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($ 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
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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.
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SEGMENTED RESULTS Three Months Ended Twelve Months Ended
December 31 December 31
-------------------------- --------------------------
(Unaudited)
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2008 2007 Change 2008 2007 Change
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($ 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) -
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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) -
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Totals 81.2 49.4 64.4 273.3 209.1 30.7
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CONSOLIDATED BALANCE SHEETS
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($ 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
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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
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$ 1,882,077 $ 1,770,490
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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
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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)
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1,106,936 1,132,132
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$ 1,882,077 $ 1,770,490
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CONSOLIDATED STATEMENTS OF INCOME AND (DEFICIT) RETAINED EARNINGS
($ thousand)
Three Months Ended Twelve Months Ended
December 31 December 31
2008 2007 2008 2007
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(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
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Income (loss) before
income taxes and
earnings from equity
investments 9,999 (250,031) 111,034 (135,533)
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Provision for
income taxes:
Current (recovery) 1,650 (637) 1,814 (2,390)
Future (recovery) 3,381 (17,048) 2,502 (10,850)
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5,031 (17,685) 4,316 (13,240)
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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
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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)
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Deficit, end of
period $ (86,415) $ (54,601) $ (86,415) $ (54,601)
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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
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CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
Three Months Ended Twelve Months Ended
December 31 December 31
2008 2007 2008 2007
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(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
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71,915 44,745 246,148 193,783
Changes in non-cash
working capital items (2,927) 7,317 (42,383) 18,611
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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)
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(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
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(9,984) (29,844) (201,580) (92,495)
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Change in cash 291 (32,449) (78,864) 29,757
Cash, beginning
of period - 111,604 79,155 49,398
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Cash, end of period $ 291 $ 79,155 $ 291 $ 79,155
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Supplemental cash
flow information:
Interest paid $ 11,047 $ 8,814 $ 28,513 $ 21,808
Income taxes
received $ (93) $ (7,005) $ (1,167) $ (7,792)
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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 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.
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