Mullen Group Ltd. reports second quarter financial results

OKOTOKS, AB, July 30 /PRNewswire-FirstCall/ - (TSX-MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended June 30, 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 six month periods ended June 30, 2009 and comparables for the three and six month periods ended June 30, 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 and cash distributions paid reflect business of the Fund that occurred prior to conversion from an open-ended income trust to Mullen Group.

For the three month period ended June 30, 2009, Mullen Group generated consolidated revenue of $202.7 million and operating income of $28.6 million. Mullen Group generated $19.9 million of funds from operations, which were supplemented by $52.6 million of non-cash working capital items. These funds were mainly used to fund the final $6.0 million of cash distributions as an income trust paid on April 15, 2009, repay long-term debt of $21.9 million and fund net capital expenditures of $2.3 million.

Mullen Group's revenue of $202.7 million for the three month period ended June 30, 2009 was a decrease of $46.4 million or 18.6 percent over the $249.1 million generated for the same period last year. 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 continuing recession 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. Demand in this segment was also weakened by virtue of lower activity in the Alberta oilsands. New infrastructure projects were postponed while the build out of a number of ongoing projects was delayed due to the impact of lower commodity prices and restricted credit markets.

"The operating environment within the second quarter of 2009 was extremely challenging due to the combined impact of the continuing recession coupled with a significant decrease in drilling activity in western Canada. However, we are relatively pleased with our overall financial performance. The flexibility and strength of our business model provided us with the opportunity to adapt our cost structure within such a challenging operating environment to the point where we were able to maintain our operating margin on a year over year basis. However, we continue to be diligent and aggressive in pursuing opportunities to reduce costs and improve processes and productivity." stated Mr. Stephen Lockwood, President and Co-Chief Executive Officer.

Mullen Group generated operating income for the quarter of $28.6 million, a decrease of $6.0 million or 17.3 percent over the same period last year. The decrease in operating income was mainly attributable to the year over year decrease in consolidated revenues. Operating income decreased in both the Trucking/Logistics segment and the Oilfield Services segment by virtue of the decrease in demand for their services resulting from the impact of the continuing recession and the reduction in drilling activity, respectively.

For the quarter ended June 30, 2009, Mullen Group generated funds from operations of $19.9 million, a decrease of $9.0 million or 31.1 percent over the $28.9 million generated for the same period last year. This decrease was mainly due to a $21.1 million year over year variance in unrealized gain on foreign exchange which resulted from the change in the value of the CDN. dollar relative to the U.S. dollar and its impact on the Corporation's $235.0 million U.S. dollar denominated debt. This variance was somewhat offset by the year over year increase of $13.8 million in future tax expense which mainly resulted from the tax implications surrounding the change in corporate structure required to facilitate the conversion from an income trust to a corporation.

For the quarter ended June 30, 2009, Mullen Group generated net income of $17.8 million ($0.22 per unit), a decrease of $2.1 million, or 10.6 percent from the $19.9 million ($0.25 per unit) generated for the same period last year. The $2.1 million decrease in net income was mainly due to the $6.0 million decrease in operating income and a $14.3 million increase in the provision for income taxes which were offset by a $21.1 million increase in the unrealized gain on foreign exchange. To a lesser extent, net income was negatively impacted by a $2.6 million increase in interest expense on the Corporation's long-term debt and convertible unsecured subordinated debentures.

For the six month period ended June 30, 2009, consolidated revenue decreased by 15.2 percent to $514.7 million from $607.2 million. Operating income decreased to $102.0 million, down 13.7 percent, from $118.2 million in 2008 and net income declined by 30.0 percent to $48.8 million from $69.7 million in 2008.

A summary of Mullen Group's results for the quarter ended June 30, 2009, along with revenues and operating results by segment are as follows:

    -------------------------------------------------------------------------
    SUMMARY                      Three Months Ended       Six Months Ended
                                      June 30                  June 30
    -------------------------------------------------  ---------------------
                                2009    2008  Change    2009    2008  Change
    -------------------------------------------------------------------------
    (Unaudited)
    ($ millions, except per
     share amounts)                $       $       %       $       $       %

    Revenue                    202.7   249.1   (18.6)  514.7   607.2   (15.2)

    Operating income(1)         28.6    34.6   (17.3)  102.0   118.2   (13.7)
    Net income                  17.8    19.9   (10.6)   48.8    69.7   (30.0)
    Earnings per share(2)      $0.22   $0.25   (12.0)  $0.60   $0.87   (31.0)

    Funds from operations(3)    19.9    28.9   (31.1)   51.0   106.8   (52.2)
    Funds from operations
     per share(4)              $0.24   $0.36   (33.3)  $0.63   $1.33   (52.6)
    Distributions declared
     per unit                      -   $0.45   100.0  $0.225   $0.90   (75.0)
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    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.
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    -------------------------------------------------------------------------
    SEGMENTED RESULTS            Three Months Ended       Six Months Ended
                                      June 30                  June 30
    -------------------------------------------------  ---------------------
                                2009    2008  Change    2009    2008  Change
    -------------------------------------------------------------------------
    (Unaudited)
    ($ millions)                   $       $       %       $       $       %

    Revenue
      Oilfield Services        116.4   132.3   (12.0)  325.5   375.0   (13.2)
      Trucking\Logistics        87.4   117.0   (25.3)  192.0   232.7   (17.5)
      Corporate                  0.1     0.6       -     0.6     1.4       -
    Intersegment eliminations
      Oilfield Services         (0.3)   (0.4)      -    (2.0)   (0.8)      -
      Trucking\Logistics        (0.9)   (0.4)      -    (1.4)   (1.1)      -
    -------------------------------------------------------------------------
    Totals                     202.7   249.1   (18.6)  514.7   607.2   (15.2)

    Operating income
      Oilfield Services         18.1    20.8   (13.0)   75.9    89.2   (14.9)
      Trucking\Logistics        13.6    17.7   (23.2)   30.5    34.9   (12.6)
      Corporate                 (3.1)   (3.9)      -    (4.4)   (5.9)      -
    -------------------------------------------------------------------------
    Totals                      28.6    34.6   (17.3)  102.0   118.2   (13.7)
    -------------------------------------------------------------------------

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. 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.

SOURCE Mullen Group Ltd.