Mullen Group Income Fund reports 2007 financial results

CALGARY, Feb. 27 /PRNewswire-FirstCall/ -- 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
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.

Source: Mullen Group Income Fund

CONTACT: 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

2008-02-27 19:33:17 0300175 PRNEWSWIRE