Mullen Group Ltd. — Annual Report 2019

Feb 13, 2020

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DECEMBER 31, 2019 ANNUAL FINANCIAL REPORT

INDEPENDENT AUDITORS' REPORT

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2019 ANNUAL FINANCIAL REVIEW

90

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2019 ANNUAL FINANCIAL REVIEW

91

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2019 ANNUAL FINANCIAL REVIEW

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

December 31 (thousands) Note 2019	December 31 2018
Assets Current assets: Cash and cash equivalents 6 $ 79,023 $ Trade and other receivables 7 211,209 Inventory 8 33,015 Prepaid expenses 15,461 Current tax receivable 10,623	3,916 218,089 33,878 11,838 4,404
349,331 Non-current assets: Property, plant and equipment 9 954,604 Right-of-use assets 10 36,799 Goodwill 11 268,707 Intangible assets 12 48,456 Investments 13 38,491 Deferred tax assets 18 8,070 Derivative financial instruments 14 41,375 Other assets 15 3,459	272,125 965,683 — 265,277 50,270 36,269 9,187 42,211 4,830
1,399,961	1,373,727
Total Assets $ 1,749,292 $	1,645,852
Liabilities and Equity Current liabilities: Bank indebtedness 6, 21 $ — $ Accounts payable and accrued liabilities 16 90,028 Dividends payable 17 5,241 Current tax payable 44 Lease liabilities – currentportion 19 10,711	30,000 99,276 5,241 5,905 —
106,024 Non-current liabilities: Convertible debentures – debt component 20 108,764 Long-term debt 21 467,392 Lease liabilities 19 29,975 Asset retirement obligations 1,647 Deferred tax liabilities 18 117,569	140,422 — 482,185 — 1,044 124,125
725,347 Equity: Share capital 22 946,910 Convertible debentures – equity component 20 9,116 Contributed surplus 16,860 Deficit (54,965)	607,354 946,910 — 15,477 (64,311)
917,921	898,076
Total Liabilities and Equity $ 1,749,292 $	1,645,852

The notes which begin on page 97 are an integral part of these consolidated financial statements.

Approved by the Board of Directors on February 12, 2020, after review by the Audit Committee.

"Signed: Murray K. Mullen"

Murray K. Mullen, Director

"Signed: Philip J. Scherman"

Philip J. Scherman, Director

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2019 ANNUAL FINANCIAL REVIEW

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(thousands, except per share amounts) Note	Years ended December 31	Years ended December 31
	2019	2018
Revenue 24 Direct operating expenses Sellingand administrative expenses	$ 1,278,502 909,911 167,679	$ 1,260,798 902,813 168,970
Operating income before depreciation and amortization Depreciation of property, plant and equipment 9 Depreciation of right-of-use assets 10 Impairment of goodwill 11 Amortization of intangible assets 12 Finance costs 26 Net foreign exchange (gain) loss 14 Other(income)expense 28	200,912 80,476 11,710 — 19,305 23,625 (14,140) (201)	189,015 72,050 — 100,000 15,439 20,027 8,537 (445)
Income (loss) before income taxes Income tax expense 18	80,137 7,896	(26,593) 17,194
Net income (loss) and total comprehensive income (loss)	$ 72,241	$ (43,787)
Earnings (loss) per share: 23 Basic Diluted	$ 0.69 $ 0.69	$ (0.42) $ (0.42)
Weighted average number of Common Shares outstanding: 23 Basic Diluted	104,825 104,825	104,274 104,274

The notes which begin on page 97 are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(thousands) Note Share capital Convertible debentures – equity component Contributed surplus Deficit	Total
Balance at January 1, 2019 $ 946,910 $ — $ 15,477 $ (64,311) Total comprehensive income for the period — — — 72,241 Convertible debentures issued 20 — 12,403 — — Deferred tax on convertible debentures — (3,287) — — Stock-based compensation expense — — 1,383 — Dividends declared to common shareholders 17 — — — (62,895)	$ 898,076 72,241 12,403 (3,287) 1,383 (62,895)
Balance at December 31, 2019 $ 946,910 $ 9,116 $ 16,860 $ (54,965)	$ 917,921

(thousands) Note Share capital Convertible debentures – equity component Contributed surplus Retained earnings (deficit)	Total
Balance at January 1, 2018 $ 933,303 $ 550 $ 13,807 $ 42,071 Total comprehensive income (loss) for the period — — — (43,787) Common Shares issued on conversion of convertible debentures 11,607 (550) — — Common shares issued on acquisition 5 2,000 — — — Stock-based compensation expense — — 1,670 — Dividends declared to common shareholders 17 — — — (62,595)	$ 989,731 (43,787) 11,057 2,000 1,670 (62,595)
Balance at December 31, 2018 $ 946,910 $ — $ 15,477 $ (64,311)	$ 898,076

The notes which begin on page 97 are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CASH FLOWS
(thousands) Note	Years ended December 31
	2019	2018
Cash provided by (used in): Cash flows from operating activities: Net income (loss) Adjustments for: Depreciation and amortization Impairment of goodwill 11 Finance costs 26 Stock-based compensation expense Foreign exchange loss (gain) on cross-currency swaps 14 Foreign exchange (gain) loss Change in fair value of investments 28 Loss on sale of property, plant and equipment 28 Earnings from equity investments 28 Accretion on asset retirement obligations 28 Income tax expense 18	$ 72,241 111,491 — 23,625 1,383 836 (14,396) (15) 2,667 (2,870) 17 7,896	$ (43,787) 87,489 100,000 20,027 1,670 (16,584) 24,255 3,135 281 (3,875) 14 17,194
Cash flows from operating activities before non-cash working capital items Changes in non-cash workingcapital items from operatingactivities 33	202,875 (466)	189,819 (26,452)
Cash generated from operating activities Income taxpaid	202,409 (31,756)	163,367 (22,657)
Net cash from operatingactivities	170,653	140,710
Cash flows from financing activities: Net proceeds of convertible debentures 20 Cash dividends paid to common shareholders Interest paid Repayment of long-term debt and loans 21 Proceeds from bank credit facility Repayment of bank credit facility Repayment of lease liabilities 19 Repayment of convertible debentures Changes in non-cash workingcapital items from financingactivities 33	119,797 (62,895) (23,962) (5,767) — (30,000) (12,133) — (112)	— (60,464) (21,499) (78,152) 30,000 — — (1,545) 187
Net cash used in financingactivities	(15,072)	(131,473)
Cash flows from investing activities: Acquisitions net of cash (bank indebtedness) acquired 5 Purchase of intangible assets Purchase of property, plant and equipment Proceeds on sale of property, plant and equipment Proceeds on sale (purchases) of investments Interest received Net investment in finance leases Dividends from equity investees Other assets Changes in non-cash workingcapital items from investingactivities 33	(15,699) (360) (75,022) 6,548 663 2,377 1,238 — 315 46	(45,836) (2,975) (99,709) 12,227 (2,000) 2,131 — 226 (5,272) 488
Net cash used in investingactivities	(79,894)	(140,720)
Change in cash and cash equivalents Cash and cash equivalents at January 1 Effect of exchange rate fluctuations on cash held	75,687 3,916 (580)	(131,483) 134,533 866
Cash and cash equivalents at December 31 6	$ 79,023	$ 3,916

The notes which begin on page 97 are an integral part of these consolidated financial statements.

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS

Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

1. Reporting Entity

Mullen Group Ltd. (" Mullen Group " and/or the " Corporation ") was incorporated pursuant to the laws of the Province of Alberta and is a publicly-traded company listed on the Toronto Stock Exchange (" TSX ") under the symbol 'MTL'. The Corporation maintains its registered office in Okotoks, Alberta, Canada. The business of Mullen Group is operated through wholly-owned (either directly or indirectly) subsidiaries and limited partnerships (" Business Units "). The business of Mullen Group is a diversified transportation and oilfield service organization with its activities divided into two distinct operating segments, namely Trucking/Logistics and Oilfield Services. These consolidated financial statements (" Annual Financial Statements ") include the accounts of the Corporation, its subsidiaries and its limited partnerships.

2. Basis of Presentation

• (a) Statement of Compliance

These Annual Financial Statements have been prepared in accordance to and comply with International Financial Reporting Standards (" IFRS "), which include the International Accounting Standards (" IAS ") and the interpretations developed by the International Financial Reporting Interpretations Committee (" IFRIC "), as issued by the International Accounting Standards Board (" IASB ").

• (b) Basis of Measurement

These Annual Financial Statements have been prepared on the historical cost basis except for investments (excluding investments accounted for by the equity method), and derivative financial instruments (" Derivatives "), which are measured at fair value through profit or loss (" FVTPL ").

• (c) Functional and Presentation Currency

These Annual Financial Statements are presented in Canadian dollars, which is the functional currency of the Corporation and each of its Business Units. All financial information presented in Canadian dollars has been rounded to the nearest thousand except for per share amounts.

• (d) Use of Estimates and Judgements

The preparation of these Annual Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates, judgements and assumptions. The carrying amount of assets, liabilities, accruals, provisions, other financial obligations, as well as the determination of fair values, contingent liabilities, reported income and expense in these Annual Financial Statements depends on the use of estimates, judgements and assumptions. In the process of applying the Corporation's accounting policies management takes into consideration existing circumstances and estimates at the date of these Annual Financial Statements, which affects the reported amounts of income and expenses during the reporting periods. Given the uncertainty inherent in determining these factors, actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Assessments about whether line items are sufficiently material to warrant separate presentation in the primary financial statements and, if not, whether they are sufficiently material to warrant separate presentation in the notes to the financial statements.

This section contains the Corporation's estimates and judgements that relate to the financial statements as a whole. When an estimate, judgement or accounting policy is acceptable to a specific note to the financial statements, the estimate, judgement or policy and related disclosures are provided within that note as identified in the table below:

Note Topic	Page	Note Topic	Page
6 Cash and cash equivalents 7 Trade and other receivables 8 Inventory 9 Property, plant and equipment 11 Goodwill 12 Intangible assets 14 Derivative Financial Instruments	106 107 108 108 110 113 113	16 Accounts payable and accrued liabilities 18 Income taxes 20 Convertible Unsecured Subordinated Debentures 23 Earnings per share 27 Share-based compensation plans 34 Operating segments	115 115 119 121 124 132

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant items impacted by such estimates and judgements are outlined below. Readers are cautioned that the foregoing list is not exhaustive and other items may also be affected by estimates and judgements.

Judgements

(i) Impairment Tests

Mullen Group assesses, at the end of each reporting period, whether there is an indication that an asset group may be impaired. If any indication of impairment exists, Mullen Group determines the recoverable amount of the asset group. External triggering events include, for example, changes in customer or industry dynamics, drilling and other technologies and economic declines, including the decline in the value of Mullen Group's Common Share price. Internal triggering events for impairment include, for example, lower profitability or planned restructuring.

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Estimates

(i) Acquisitions

The acquired assets, assumed liabilities (other than deferred taxes) and contingent consideration are recognized at fair value on the date Mullen Group effectively obtains control. The measurement of the assets and liabilities acquired in each business combination is based on the information available on the acquisition date. The estimate of fair value of the acquired intangible assets (including goodwill), property, plant and equipment and other assets and the liabilities assumed at the date of acquisition as well as the useful lives of the acquired intangible assets and property, plant and equipment is based on assumptions. The measurement is largely based on projected cash flows, discount rates and market conditions at the date of acquisition. Contingent consideration is based on the likelihood of various outcomes of specified future events.  For more information, refer to Note 5 .

(ii) Impairment Tests

Mullen Group's impairment tests compare the carrying amount of the asset or cash generating unit (" CGU ") to its recoverable amount. The recoverable amount is the higher of fair value less costs of disposal (" FVLCD ") and value in use (" VIU "). FVLCD is the amount obtainable from the sale of an asset or CGU in an arms-length transaction between knowledgeable, willing parties, less the costs of disposal. VIU is the present value of estimated future cash flows expected to arise from the continuing use of an asset or CGU and from the disposal at the end of its useful life. The determination of VIU requires the estimation and discounting of cash flows which involves key assumptions that consider all information available on the respective testing date. Management uses estimates, considering past and actual performance as well as expected developments in the respective markets and in the overall macro-economic environment and economic trends to model and discount future cash flows.  For more information, refer to Notes 11 and 12 .

3. Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these Annual Financial Statements.

(a) Basis of Consolidation

These Annual Financial Statements include the accounts of Mullen Group, its subsidiaries and its limited partnerships. The financial statements of such subsidiaries and limited partnerships controlled by Mullen Group are included in these Annual Financial Statements from the date that control commenced until the date that control ceases. Control is achieved when the Corporation is exposed to, or has rights to, variable returns from its subsidiaries and limited partnerships and has the ability to affect those returns through its power to direct their activities. The accounting policies of subsidiaries and limited partnerships are the same as those of the Corporation. For the year ended December 31, 2019, the scope of consolidation for these Annual Financial Statements encompassed 85 entities, of which four were a first time consolidation. The first time consolidations were a result of the acquisitions of Argus Carriers Ltd. (" Argus "), Inter-Urban Delivery Service Ltd. (" Inter-Urban ") and Jen Express Inc. (" Jen Express "). During 2019 three entities ceased existence due to internal corporate reorganizations.

• (b) Changes in Accounting Policies

IFRS 16 – Leases

Effective January 1, 2019, Mullen Group adopted IFRS 16 – Leases using the modified retrospective method. Under the modified retrospective method, comparative financial information is not restated and continues to be reported under the accounting standards in effect for those periods. The modified retrospective method does not require restatement of prior period financial information as it recognizes the cumulative effect as an adjustment to opening retained earnings (deficit).

Under IFRS 16 – Leases, the Corporation has recognized lease liabilities in relation to leases which were previously classified as "operating leases" under the principles of IAS 17 – Leases. Mullen Group assesses whether a contract is or contains a lease at inception of the contract. For contracts entered into before January 1, 2019, it was determined whether the arrangement was or contained a lease. As lease liabilities are recognized, there is a corresponding right-of-use asset recorded at the date of which the asset becomes available for use. As lease payments are made there is a reduction to the principal portion of the lease liability as well as an amount allocated to finance costs. The finance cost is expensed within the consolidated statement of comprehensive income over the lease term. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight line basis.

The Corporation uses a single discount rate for a portfolio of leases with reasonably similar characteristics. The Corporation is using the following practical expedients permitted under the new standard:

• (i) Leases with a remaining lease term of less than twelve months as at January 1, 2019 as short-term leases;

• (ii) Leases of low dollar value will continue to be expensed as incurred; and

• (iii) The Corporation will not apply any grandfathering practical expedients.

Effective January 1, 2019, Mullen Group adopted IFRS 16 – Leases which resulted in the initial recognition of right-of-use assets and lease liabilities of approximately $42.2 million.

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Judgements:

Mullen Group assesses whether a contract is or contains a lease at inception of the contract. For contracts entered into before January 1, 2019, it was determined whether the arrangement was or contained a lease. This assessment involves the exercise of judgement about whether it depends on a specified asset, whether Mullen Group obtains substantially all the economic benefits from the use of that asset, and whether Mullen Group has the right to direct the use of the asset. Furthermore, Mullen Group assesses and reassess the likelihood of it exercising renewal options.

Estimates:

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, Mullen Group's incremental borrowing rate. Generally, Mullen Group uses its incremental borrowing rate as the discount rate, which is estimated at the inception of the lease. At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at Mullen Group's incremental borrowing rate as at January 1, 2019. Mullen Group's incremental borrowing rate is estimated using prevailing interest rates, market precedents and Mullen Group's credit rating.

Impact of Adoption:

Lease payments on short-term leases with lease terms of less than twelve months or low value leases are accounted for as expenses within the consolidated statement of comprehensive income.

Assets and liabilities arising from a lease are initially measured on a present value basis. The value of lease liabilities includes the net present value of fixed payments, the value of any options to extend a lease where the Corporation is reasonably certain to do so, payments of penalties for terminating a lease, less any lease incentives received. The Corporation uses the cost model whereby right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liability adjusted for any lease payments made before the commencement date, any initial direct costs and restoration costs. The cost of the right-of-use assets is adjusted for any remeasurement of the lease liability and is less any accumulated depreciation and accumulated impairment losses, if any.

The impact of adopting IFRS 16 – Leases as at January 1, 2019, is as follows:

Consolidated Statement of Financial Position Adjustments As reported at Effect of adopting December 31, 2018 IFRS 16 – Leases	Restated balance at January 1, 2019
Assets Current Assets: Trade and other receivables(1) $ 218,089 $ 1,000 $	219,089
218,089 1,000 Non-current Assets: Right-of-use assets(1), (2), (3) — 38,176 Other assets(1) 4,830 2,088	219,089 38,176 6,918
4,830 40,264	45,094
Total Assets 222,919 41,264	264,183
Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities(3) 99,276 (914) Lease liabilities – currentportion(2) — 10,283	98,362 10,283
99,276 9,369 Non-current liabilities: Lease liabilities(2) — 31,895	108,645 31,895
— 31,895	31,895
Total Liabilities $ 99,276 $ 41,264 $	140,540

(1) This adjustment is to record $3.1 million of net investment in finance leases, which mainly related to subleases on real property with an offsetting amount recorded against right-of-use assets.

(2) This adjustment is to record $42.2 million of the initial lease liabilities with a corresponding amount recorded in right-of-use assets.

(3) This adjustment is to reclassify $0.9 million of lease inducements on real property leases that were previously recognized within accounts payable and accrued liabilities.

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

On adoption of IFRS 16 – Leases, Mullen Group recognized lease liabilities in relation to all lease arrangements measured at the present value of the remaining lease payments from commitments disclosed as at December 31, 2018. Certain contracts were adjusted by commitments in relation to service contracts, short-term and low-value leases, reviewing renewal and purchase options, and discounted using the Corporation's incremental borrowing rate of 3.2 percent as of January 1, 2019:

cremental borrowing rate of 3.2 percent as of January 1, 2019:
Operating lease commitments, disclosed as at December 31, 2018	$	46,140
Contract adjustments		137
Net lease liabilities		46,277
Discounted		(4,099)
Lease liabilities as at January 1, 2019	$	42,178

IFRIC 23 – Uncertainty over Income Tax Treatments

IFRIC 23 – Uncertainty over Income Tax Treatments specifies how to reflect uncertainty in accounting for income taxes and is mandatory for the accounting period beginning on January 1, 2019. There was no impact on the measurement of taxes as a consequence of this adoption.

Annual Improvements to IFRS Standards

On December 12, 2017, the IASB issued narrow-scope amendments to three standards as part of its annual improvements process. The amendments are effective on or after January 1, 2019. Each of the amendments has its own specific transition requirements. Amendments were made to the following standards:

• IFRS 3 – Business Combinations and IFRS 11 – Joint Arrangements – to clarify how an entity accounts for increasing its interest in a joint operation that meets the definition of a business;

• IAS 12 – Income Taxes – to clarify that all income tax consequences of dividends are recognized consistently with the transactions that generated the distributable profits; and

• IAS 23 – Borrowing Costs – to clarify that specific borrowings – i.e. funds borrowed specifically to finance the construction of a qualifying asset – should be transferred to the general borrowings pool once the construction of the qualifying asset has been completed. They also clarify that an entity includes funds borrowed specifically to obtain an asset other than a qualifying asset as part of general borrowings.

Mullen Group has adopted these amendments in its financial statements effective January 1, 2019. The extent of the impact of adoption of the amendments is not material.

(c) New Standards and Interpretations Not Yet Adopted

Mullen Group has reviewed new and revised standards and interpretations that have been approved by the IASB. There have been no new standards or interpretations issued during 2019 that significantly impact Mullen Group.

• (d) Investment Properties

Investment properties consist of real property that are held to earn rental income and are recorded at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition or the development of real property held to earn rental income. Subsequent to initial measurement, investment properties are measured using the cost model and are recorded at cost less accumulated depreciation. Depreciation is recorded annually on the buildings included within real property held to earn rental income on the declining balance basis at a rate of 2.5 percent per annum.

• (e) Foreign Currency

Transactions in foreign currencies are translated to Canadian dollars, Mullen Group's functional currency, at the exchange rate on the date of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

• (f) Impairment of Assets

Assets are assessed at the end of each reporting period to determine if any indication of impairment exists. If any such indication exists, Mullen Group estimates the recoverable amount of the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash flows of other assets. Recoverability is measured by comparing the carrying amount of the asset or the CGU to which the asset belongs to the higher of its FVLCD and its VIU. VIU is calculated using the estimated discounted future cash flows expected to be generated by the asset or its CGU. Mullen Group estimates FVLCD based upon current market prices for similar assets. If the carrying amount of the asset, or its respective CGU, exceeds its estimated recoverable amount, the difference is recognized as an impairment charge.

Impairment losses are recognized in net income. An impairment loss in respect of goodwill is irreversible. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amounts of any goodwill allocated to the CGU and then to reduce the carrying amount of other assets in the CGU on a pro rata basis.

Mullen Group's corporate assets, which do not generate separate cash inflows, are allocated to the CGUs on a reasonable basis for impairment testing purposes.

• (g) Financial Instruments

• (i) Mullen Group has adopted IFRS 9 (2010) Financial Instruments as it relates to classification and measurement of financial assets and financial liabilities in advance of its effective date. During 2013, the IASB removed the mandatory effective date, which was for annual periods beginning on or after January 1, 2015. The new mandatory effective date is January 1, 2018. Mullen Group early adopted IFRS 9 (2010) as it is consistent with Mullen Group's objective and approach to managing its financial assets and financial liabilities.

(ii) Non-Derivative Financial Assets

Financial Assets	Initial Measurement	Subsequent Measurement
Cash and cash equivalents	Fair value	Amortized cost
Trade and other receivables	Fair value	Amortized cost
Investments	Fair value	FVTPL
Investments – equity method	Fair value	Equity method
Other assets	Fair value	Amortized cost

Cash and cash equivalents are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition these financial assets are measured at amortized cost using the effective interest method.

Mullen Group initially recognizes trade and other receivables and other assets on the date that they originate. Impairment of trade and other receivables is recognized in selling and administrative expenses when evidence of impairment arises. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss, or a portion of such is reversed. The amount of the impairment loss reversed may not exceed the original impairment amount.

Mullen Group initially measures investments at fair value. Subsequent to initial recognition these financial assets are measured at FVTPL at the end of each reporting period. The purchase and sale of investments are recognized at the trade date of such transaction. When control of a Business Unit is lost, any retained interest is re-measured to its fair value with any resulting gain or loss being recognized within the statement of comprehensive income. As such, a gain or loss is recognized on the portion retained in addition to the gain or loss on the portion no longer owned.

Mullen Group initially recognizes equity investments at fair value. Subsequent to initial recognition these financial assets are measured using the equity method. Mullen Group uses the equity method to account for investments in which it has significant influence or joint control. Under the equity method, Mullen Group recognizes its share of profits or losses of the investee within the statement of comprehensive income. Dividends received from equity investments are recognized as a reduction in the carrying amount of the investment.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, Mullen Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Mullen Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by Mullen Group is recognized as a separate asset or liability.

(iii) Non-Derivative Financial Liabilities

Financial Liabilities	Initial Measurement	Subsequent Measurement
Accounts payable and accrued liabilities(1)	Fair value	Amortized cost
Dividends payable	Fair value	Amortized cost
Long-term debt	Fair value	Amortized cost
Convertible debentures – debt component	Fair value	Amortized cost

(1) Includes contingent consideration which is subsequently measured at fair value.

Financial liabilities are recognized initially on the trade date at which Mullen Group becomes a party to the contractual provisions of the instrument. Financial liabilities that are not designated at FVTPL are initially measured at fair value plus or minus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

method. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, Mullen Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Mullen Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

Accounts payable and accrued liabilities and dividends payable are recognized initially at fair value and are subsequently measured at amortized cost using the effective interest method.

Mullen Group initially recognizes debt securities issued and subordinated liabilities on the date that they originate. Mullen Group's longterm debt is comprised of a series of unsecured debt as follows: U.S. $117.0 million of Series G Notes, U.S. $112.0 million of Series H Notes, CDN. $30.0 million of Series I Notes, CDN. $3.0 million of Series J Notes, CDN. $58.0 million of Series K Notes and CDN. $80.0 million of Series L Notes (collectively, the " Private Placement Debt ").

In June 2019, Mullen Group issued an aggregate principal amount of $125.0 million of convertible unsecured subordinated debentures (the " 2019 Debentures "). The component parts of the 2019 Debentures issued by the Corporation were classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. At the date of issue, the fair value of the debt component was estimated using the prevailing market interest rate for similar non-convertible instruments. This amount was recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.

The fair value of the conversion option (labelled Convertible debentures – equity component) was determined at issue date by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This conversion option is recognized net of income tax effects as equity and is not subsequently re-measured. In addition, the conversion option remain in equity until the conversion option is exercised, in which case, the balance recognized in equity is transferred to share capital. No gain or loss is recognized in the statement of comprehensive income upon conversion or expiration of the conversion option. As such, a proportionate amount of any unamortized debt issuance costs and accretion related to the 2019 Debentures converted into Common Shares is transferred to share capital on the conversion date.

(iv) Derivative Financial Instruments

Derivatives consist of financial contracts that derive their value from underlying changes in foreign exchange rates, interest rates, credit spreads or other financial measures. Mullen Group uses Derivatives such as Cross-Currency Swaps (as hereafter defined on page 113) as part of its foreign exchange risk management strategy. Derivatives are measured initially at fair value. Subsequent to initial recognition, Derivatives are measured at FVTPL and are recorded in the statement of comprehensive income. Mullen Group has not designated any Derivatives as hedges for accounting purposes.

(v) Asset Retirement Obligations

Asset retirement obligations are measured at the present value of the expenditures expected to be incurred to remediate, reclaim and abandon the Corporation's disposal wells and related facilities in future periods. The Corporation uses an estimated inflation rate and a risk-free interest rate in the measurement of the present value of its asset retirement obligations. The associated asset retirement cost is capitalized within property, plant and equipment and is amortized over its estimated useful life. Any revisions to the estimated timing, amount of cash flows, inflation rate or risk-free interest rate are recognized as a change in the asset retirement obligation and the asset retirement cost. Accretion expense is recognized in the consolidated statement of comprehensive income within other (income) expense. The estimated future costs of the Corporation's asset retirement obligations are reviewed and adjusted as required at the end of each reporting period.

(vi) Equity

Common Shares are presented in share capital within equity. Incremental costs directly attributable to the issue of Common Shares and share options are recognized as a deduction from share capital, net of any tax effects. When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs net of any tax effects, is recognized as a deduction from share capital. When Common Shares are repurchased and cancelled, the stated value is deducted from share capital and the resulting surplus or deficit on the transaction is recorded against the retained earnings within equity.

(h) Provisions

A provision is recognized in the financial statements when Mullen Group has a material obligation, whether existing or potential, as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the obligation is determined to be material, then the estimated amount of the provision is determined by discounting the expected future cash outflows.

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

(i) Finance costs

Finance costs encompass interest expense on financial liabilities and accretion expense on debt and are recognized as an expense in the period in which they are incurred. Finance costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that purchase.

(j) Employee Benefits

(i) Short-Term Employee Benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under Mullen Group's profit share plans when a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be reliably estimated.

• (k) Acquisitions

Acquisitions of businesses are accounted for using the acquisition method. Acquired assets and assumed liabilities are recognized at their fair values at the acquisition date. For those acquisitions that include a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and subsequent changes in such fair value amounts are recognized in net income. Acquisition-related costs are recognized in net income as incurred.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, Mullen Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted retrospectively during the measurement period to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.

4. Determination of Fair Values

A number of Mullen Group's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in Note 2 and in notes specific to that asset or liability.

Financial instruments measured at fair value on the statement of financial position require classification into one of the following levels of the fair value hierarchy:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – Inputs for the asset or liability that are not based on observable market data.

The fair value hierarchy level at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

• (a) Trade and Other Receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

• (b) Property, Plant and Equipment

The fair value of property, plant and equipment recognized as a result of a business combination is based on fair values at date of acquisition. The fair value of items of property, plant and equipment is based on market or cost approaches using quoted market prices for similar items when available and replacement cost when appropriate.

• (c) Intangible Assets

The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.

The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

• (d) Investments

The fair value of financial assets designated as measured at fair value, is determined by reference to their quoted closing price at the reporting date. Other than investments accounted for by the equity method, the fair value of all of Mullen Group's investments were determined using Level 1 of the fair value hierarchy.

• (e) Derivative Financial Instruments

The fair value of Derivatives is determined using Level 2 of the fair value hierarchy. Level 2 fair values are determined by referencing observable market data, including future foreign currency curves, interest rates, credit spreads and other financial measures. Transaction costs are recognized in net income as incurred.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

(f) Accounts Payable and Accrued Liabilities

The fair value of accounts payable and accrued liabilities is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

• (g) Non-Derivative Financial Liabilities

Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

• (h) Private Placement Debt

The fair value of Private Placement Debt is determined using Level 2 of the fair value hierarchy. Level 2 values are determined by referencing observable market data, including changes to interest rates and foreign exchange fluctuations.

(i) Convertible debentures – debt component

The fair value of convertible debentures – debt component is determined using Level 1 of the fair value hierarchy. Level 1 values are determined using quoted prices in active markets.

Fair Values Versus Carrying Amounts

The following tables compare the fair value of financial assets and financial liabilities to its corresponding carrying amount as presented in the consolidated statement of financial position:

onsolidated statement of financial position:
December 31, 2019
Financial Instrument		Carrying Amount		Fair Value
Cash and cash equivalents	$	79,023	$	79,023
Trade and other receivables		211,209		211,209
Investments (excluding investments accounted for by using the equity method)		2,154		2,154
Other assets		3,459		3,459
Total financial assets	$	295,845	$	295,845
Bank indebtedness	$	—	$	—
Accounts payable and accrued liabilities		90,028		90,028
Dividends payable		5,241		5,241
Private Placement Debt		467,392		408,836
Convertible debentures - debt component		108,764		112,240
Total financial liabilities	$	671,425	$	616,345
December 31, 2018
Financial Instrument		Carrying Amount		Fair Value
Cash and cash equivalents	$	3,916	$	3,916
Trade and other receivables		218,089		218,089
Investments (excluding investments accounted for by using the equity method)		2,803		2,803
Other assets		4,830		4,830
Total financial assets	$	229,638	$	229,638
Bank indebtedness	$	30,000	$	30,000
Accounts payable and accrued liabilities		99,276		99,276
Dividends payable		5,241		5,241
Private Placement Debt		482,185		384,041
Total financial liabilities	$	616,702	$	518,558

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

5. Acquisitions

2019 Acquisitions

Argus Carriers Ltd. and Inter-Urban Delivery Service Ltd. – On July 1, 2019, Mullen Group acquired all of the issued and outstanding shares of Argus and Inter-Urban for total cash consideration of $20.0 million. Mullen Group recorded $14.2 million of cash used to acquire all of the issued and outstanding shares of Argus and Inter-Urban on its consolidated statement of cash flows, which consists of $20.0 million of total consideration less $5.8 million allocated to the repayment of shareholder loans. Both Argus and Inter-Urban provide transportation and logistics services in the Lower Mainland of British Columbia. Mullen Group acquired Argus and Inter-Urban as part of our strategy to invest in transportation and logistics companies that have a strong regional less-than-truckload (" LTL ") presence centrally located to serve consumers in large urban centres. Argus and Inter-Urban have been integrated into the operations of Tenold Transportation Ltd. (" Tenold "), whose financial results were included in the Trucking/Logistics segment.

Jen Express Inc. – On May 1, 2019, Mullen Group acquired the business and assets of Jen Express for cash consideration of $1.5 million. Included in this amount is $0.3 million of contingent consideration. Pursuant to the purchase and sale agreement, the vendor may receive cash consideration of up to $0.3 million for achieving certain financial targets over the two year period ending May 1, 2021. Mullen Group has estimated the fair value of this contingent consideration to be $0.3 million. The funds to settle this liability have been set aside in an escrow account, which have been presented within cash and cash equivalents. Located in Stettler, Alberta, Jen Express offers LTL services and has been integrated into the operations of the HiWay 9 Group of Companies (" Hi-Way 9 "), whose financial results were included in the Trucking/Logistics segment.

2018 Acquisitions

Number 8 Freight Ltd. – Effective August 1, 2018, Mullen Group acquired the business and assets of 1007474 B.C. Ltd. doing business as Number 8 Freight, which were contributed to a newly formed corporation named Number 8 Freight Ltd. (" Number 8 ") for cash consideration of $5.0 million. Mullen Group recorded $5.0 million of cash used to acquire Number 8 on its consolidated statement of cash flows. Mullen Group acquired the business and assets of Number 8 as part of its strategy to invest in the transportation sector in western Canada. Number 8 operates a fleet of approximately 80 owner operators that provides same day LTL, full load and expedited transportation services to the greater Vancouver and Fraser Valley regions of British Columbia. Number 8 operates out of a facility located in Chilliwack, British Columbia and has been integrated into the operations of Tenold, whose financial results were included in the Trucking/Logistics segment.

Canadian Hydrovac Ltd. – Effective July 1, 2018, Mullen Group acquired Canadian Hydrovac Ltd. (" Canadian Hydrovac ") for total consideration of $11.9 million consisting of $9.9 million of cash consideration and $2.0 million of Common Shares of the Corporation by issuing 133,334 Common Shares. Mullen Group recorded $4.6 million of cash used to acquire all of the issued and outstanding shares of Canadian Hydrovac on its consolidated statement of cash flows, which consists of $9.9 million of total cash consideration less $5.3 million allocated to the repayment of long-term debt. Canadian Hydrovac is headquartered in Edmonton, Alberta and operates a fleet of approximately 50 pieces of specialized equipment including: hydrovacs, vacuum trucks, combo units and various other pieces of support equipment. Mullen Group acquired Canadian Hydrovac as part of its strategy to invest in the energy sector and its financial results were included in the Oilfield Services segment.

AECOM's Canadian Industrial Services Division – On June 25, 2018, Mullen Group acquired the business and assets of AECOM's Canadian Industrial Services Division (" AECOM ISD ") for cash consideration of $25.9 million. Mullen Group recorded $25.9 million of cash used to acquire AECOM ISD on its consolidated statement of cash flows. Mullen Group acquired the business and assets of AECOM ISD as part of its strategy to invest in the energy sector. AECOM ISD provides specialized oilfield services and operates largely within the heavy oil and oil sands regions of Alberta and has been integrated into the operations of Cascade Energy Services L.P., E-Can Oilfield Services L.P. and Heavy Crude Hauling L.P., whose financial results were included in the Oilfield Services segment.

Dacota Freight Services Ltd. – Effective April 1, 2018, Mullen Group acquired Dacota Freight Services Ltd. (" Dacota ") for cash consideration of $2.4 million, comprised of $2.1 million for all of the issued and outstanding shares and $0.3 million for the repayment of debt. Included in this amount is $0.2 million of contingent consideration. Pursuant to the purchase and sale agreement, the vendor may receive cash consideration of up to $0.2 million for achieving certain financial targets over the two year period ending March 31, 2020. Mullen Group has estimated the fair value of this contingent consideration to be $0.2 million, which was based on management's best estimate of Dacota's pro forma operating results. The funds to settle this liability have been set aside in an escrow account, which have been presented within cash and cash equivalents. Mullen Group recorded $2.1 million of cash used to acquire Dacota on its consolidated statement of cash flows, which consists of $2.4 million of total cash consideration less $0.3 million allocated to the repayment of long-term debt. Dacota is headquartered in Cranbrook, British Columbia and provides transportation and logistics services primarily in western Canada. Mullen Group acquired Dacota as part of its strategy to invest in the transportation sector in western Canada. Dacota has been integrated into the operations of Hi-Way 9, whose financial results were included in the Trucking/Logistics segment.

DWS Logistics Inc. – On February 9, 2018, Mullen Group acquired DWS Logistics Inc. (" DWS ") for cash consideration of $10.1 million, comprised of $8.3 million for all of the issued and outstanding shares and $1.8 million for the repayment of debt. Included in this amount is $1.0 million of contingent consideration. Pursuant to the purchase and sale agreement, the vendors could receive cash consideration of up to $1.0 million for achieving certain financial targets for the twelve month period ended December 31, 2018. Mullen Group initially estimated the fair value of this contingent consideration to be $1.0 million, which was based on management's best estimate of DWS' pro forma operating results. The funds to settle this liability have been set aside in an escrow account, which have been presented within cash and cash equivalents. DWS achieved the financial targets for the twelve month period ending December 31, 2018. Mullen Group recorded $8.3 million of cash used to acquire DWS on its consolidated statement of cash flows, which consists of $10.1 million of total cash consideration less $1.8 million allocated to the repayment of long-term debt. DWS is headquartered in Mississauga, Ontario and provides value-added warehousing and distribution services which includes warehousing, distribution, order fulfilment, cross docking and transloading, all of which are supported by a proprietary inventory management system. DWS has over 500,000 square feet of warehousing space situated in four distribution centres in the greater Toronto area and the Lower Mainland of British Columbia. Mullen Group acquired

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

DWS as part of its strategy to invest in the transportation and e-commerce sectors in Canada. The financial results from DWS' operations were included in the Trucking/Logistics segment.

These acquisitions have been accounted for by the acquisition method, and results of operations have been included in these Annual Financial Statements from the dates of acquisition. The goodwill acquired in these acquisitions primarily relates to the assembled workforce and the synergies from the integration of the acquired businesses.

Argus / Inter-Urban Jen Express 2019	2018
Assets: Non-cash working capital items $ 745 $ 27 $ 772 Property, plant and equipment 3,626 37 3,663 Right-of-use assets 1,852 679 2,531 Intangible assets 15,725 1,406 17,131 Goodwill(not deductible for taxpurposes) 3,430 — 3,430	$ 2,152 34,334 — 22,125 1,927
25,378 2,149 27,527 Assumed liabilities: Lease liabilities 1,852 679 2,531 Long-term debt — — — Due to shareholder 5,767 — 5,767 Deferred income taxes 3,530 — 3,530	60,538 — 7,113(1) 259 5,330
11,149 679 11,828 Net assets before cash and cash equivalents 14,229 1,470 15,699 Cash and cash equivalents(bank indebtedness) (95) — (95)	12,702 47,836 (1,769)
Net assets 14,134 1,470 15,604	46,067
Consideration: Cash 14,134 1,170 15,304 Share consideration — — — Contingent consideration — 300 300	42,917 2,000 1,150
$ 14,134 $ 1,470 $ 15,604	$ 46,067

(1) In 2018 long-term debt consisted of $5.1 million of bank debt and $2.0 million of finance leases.

6. Cash and Cash Equivalents

Policy: Cash and cash equivalents are comprised of cash and highly liquid short-term investments originally maturing within three months or less, net of bank indebtedness used for operational purposes. Bank indebtedness is repayable on demand and forms an integral part of the Corporation's cash management and is therefore included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Supporting information:

December 31 2019	December 31 2018
Cash $ 79,023(1) $ Bank indebtedness —	3,916(1) (30,000)
Cash and cash equivalents (bank indebtedness) $ 79,023 $	(26,084)

(1) Includes $0.8 million (2018 – $1.2 million) of cash held in escrow.  For more information refer to Note 5.

Cash and cash equivalents are comprised of cash and bank indebtedness held at Canadian financial institutions that are rated AA- and A-1 S&P Credit Rating as at December 31, 2019. Mullen Group has a $150.0 million revolving demand unsecured credit facility (the " Bank Credit Facility "). As at December 31, 2019, there were no amounts drawn on this facility.

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

7. Trade and Other Receivables

Policy: The Corporation applies an expected credit loss approach in determining provisions for financial assets (other than equity instruments) carried at amortized cost or fair value through net income and total comprehensive income. The approach that the Corporation has taken for trade receivables is a provision matrix approach whereby lifetime expected credit losses are recognized based on aging characterization and credit worthiness of customers. Specific provisions may be used where there is information that a specific customer's expected credit losses has increased. On transition to the amendments made to the standard, there was not a material change in the amount of provision recognized.

Estimates: The Corporation calculates the expected credit losses on accounts receivable using a provision matrix which is based on the Corporation's historical credit loss experience for accounts receivable to estimate the lifetime expected credit losses. The provision matrix specifies fixed provision rates depending on the number of days that a trade receivable is past due.

Supporting information:

December 31 2019	December 31 2018
Trade receivables $ 182,023 $ Other receivables(1) 26,907 Net investment in finance leases(2) 788 Contract assets 1,491	190,150 27,289 — 650
$ 211,209 $	218,089

(1) Includes $11.2 million (2018 – $9.3 million) of amounts due from related parties. Mullen Group has entered into $11.2 million (2018 – $13.7 million) of debenture agreements with Thrive and PCX (as hereafter defined on page 113). At December 31, 2019, there was $11.0 million (2018 – $12.1 million) drawn on these debentures. These debentures mature in 2020 and have therefore been classified as a current asset.

(2) Net investment in finance leases includes amounts owing within 12 months or less and mainly consist of the net investment in subleases on real property where the Business Unit has entered into the head lease.

A contract asset is recognition of Mullen Group's right to consideration in exchange for goods or services we have transferred to a customer that is conditional on something other than the passage of time. For Mullen Group, the majority of the contract assets consists of amounts recognized on a transportation contract that has been partially transported but not yet delivered to destination at period end.

The classification between current and non-current assets in respect of trade and other receivables was as follows:

he classification between current and non-current assets in respect of trade and other receivables was as follows:
December 31 2019	December 31 2018
Current $ 211,209 $ Non-current $ — $	218,089 —

The aging of trade receivables and allowance for doubtful accounts was as follows:

December 31 2019	December 31 2018
Current 0-30 days $ 94,931 $ Past due 31-60 days 56,728 Past due 61-90 days 17,689 More than 90 days 20,485	101,313 57,744 18,105 18,899
189,833 Allowance for doubtful accounts (7,810)	196,061 (5,911)
Total trade receivables (net of impairment) $ 182,023 $	190,150

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

The change in the allowance for doubtful accounts in respect of trade and other receivables during the year was as follows:

Balance at January 1 $ 5,911 $ Acquired during the year 7 Bad debts recognized (1,193) Allowance for doubtful accounts recorded 3,641 Allowance for doubtful accounts reversed (556)	4,435 177 (430) 1,970 (241)
Balance at December 31 $ 7,810 $	5,911

The expected credit loss allowance calculated as at December 31, 2019, was $7.8 million, which represents an increase of $1.9 million as compared to the allowance calculated in the prior year.

8. Inventory

Inventory consists primarily of repair parts, fuel and items for resale.

Policy: Inventory is stated at the lower of cost or net realizable value. The cost of inventory is accounted for on a weighted average basis and includes expenditures incurred in acquiring the inventory, and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated selling expenses.

Supporting information:

		December 31		December 31
		2019		2018
Inventory of repair parts and fuel	$	24,128	$	27,648
Inventory for resale		8,887		6,230
	$	33,015	$	33,878

9. Property, Plant and Equipment

Estimates: Depreciation and amortization are calculated using a systematic and rational basis, which are based upon an estimate of each assets useful life and residual value. The estimated useful life and residual value chosen are Mullen Group's best estimate of such and are based on industry norms, historical experience, market conditions and other estimates that consider the period and distribution of future cash inflows.

Judgements: Mullen Group's depreciation and amortization methods for trucks and trailers as well as other property, plant and equipment and intangible assets are based on management's judgement in selecting methods that most accurately match the pattern of economic benefits consumed by the Corporation from the use of such assets. These judgements are based upon industry norms and Mullen Group's historical experience.

Policy: Property, plant and equipment are recorded at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets.

When the cost of a part of an item of property, plant and equipment is significant in relation to the total cost of an item and the parts have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The costs of day-to-day servicing of property, plant and equipment are recognized in direct operating expenses. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount and are recognized net within other (income) expense. Depreciation of additions and disposals is prorated from the month of purchase or disposal. Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate. Except for leasehold improvements, depreciation is recorded annually over the estimated useful lives of the assets on the declining balance basis at the following depreciation rates:

the assets on the declining balance basis at the following depreciation rates:
Buildings	2.5 - 8%
Trucks and trailers	10 - 20%
Equipment, satellite communication equipment, furniture and fixtures, automobiles, computer hardware and
systems software ("Miscellaneous Equipment")	20 - 30%

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Supporting information:

	Land and buildings Trucks and trailers Miscellaneous Equipment Drilling equipment	Land and buildings Trucks and trailers Miscellaneous Equipment Drilling equipment
Cost Balance at January 1, 2019 $ Additions(1) Disposals	552,696 $ 780,052 $ 269,792 $ 30,150 18,805 39,867 20,643 — (72) (32,065) (9,780) —	$ 1,632,690 79,315 (41,917)
Balance at December 31, 2019	571,429 787,854 280,655 30,150	1,670,088
Accumulated Depreciation Balance at January 1, 2019 Depreciation expense Disposals	68,449 396,323 187,246 14,989 7,896 54,241 16,817 1,522 (51) (24,464) (7,484) —	667,007 80,476 (31,999)
Balance at December 31, 2019	76,294 426,100 196,579 16,511	715,484
Net book value at December 31, 2019 $	495,135 $ 361,754 $ 84,076 $ 13,639	$ 954,604
	Land and buildings Trucks and trailers Miscellaneous Equipment Drilling equipment	Total
Cost Balance at January 1, 2018 $ Additions(1) Disposals	528,154 $ 731,381 $ 259,724 $ 30,150 24,542 83,534 26,025 — — (34,863) (15,957) —	$ 1,549,409 134,101 (50,820)
Balance at December 31, 2018	552,696 780,052 269,792 30,150	1,632,690
Accumulated Depreciation Balance at January 1, 2018 Depreciation expense Disposals	60,643 374,854 184,474 13,298 7,806 45,497 17,057 1,691 — (24,028) (14,285) —	633,269 72,051 (38,313)
Balance at December 31, 2018	68,449 396,323 187,246 14,989	667,007
Net book value at December 31, 2018 $	484,247 $ 383,729 $ 82,546 $ 15,161	$ 965,683

(1) Additions include property, plant, and equipment purchased by way of business acquisitions of $3.7 million (2018 – $34.3 million).

 For more information refer to Note 5 .

At December 31, 2019, land and buildings include $32.0 million (2018 – $32.4 million) of investment properties held to earn rental income. The total cost and accumulated depreciation associated with investment properties was $35.5 million (2018 – $35.5 million) and $3.5 million (2018 – $3.1 million), respectively. Mullen Group generated $2.6 million of rental income (2018 – $2.6 million) from investment properties. At December 31, 2019, the fair market value of investment properties was $55.0 million (2018 – $39.2 million).

Property, plant and equipment are reviewed for impairment whenever events or conditions indicate that their net carrying amount may not be recoverable. During the year ended December 31, 2019, the Corporation recorded an impairment loss of $7.3 million that was recorded as additional depreciation. This impairment loss related mainly to specialty equipment within the Oilfield Services segment after an assessment of current market conditions for such equipment. During the year ended December 31, 2018, there was no impairment loss recorded on property, plant and equipment.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

10. Right-of-Use Assets

Cost Balance at January 1, 2019(1) $ 39,462 $ 2,716 $ Additions 5,126 5,980 Subleases(2) (3,484) (20) Disposals(3) (1,978) —	42,178 11,106 (3,504) (1,978)
Balance at December 31, 2019 39,126 8,676	47,802
Accumulated Depreciation Balance at January 1, 2019 — — Depreciation expense 9,316 2,394 Disposals (707) —	— 11,710 (707)
Balance at December 31, 2019 8,609 2,394	11,003
Net book value at December 31, 2019 $ 30,517 $ 6,282 $	36,799

(1) Includes $42.2 million of the initial lease liabilities with a corresponding amount recorded in right-of-use assets.

(2) Includes $3.5 million of net investment in finance leases, which mainly related to subleases on real property.

(3) Includes $0.9 million of lease inducements on real property.

11. Goodwill

In general terms, goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

Estimates: The recoverability of Goodwill that involves estimating future cash flows involving Mullen Group's best estimate of the set of economic conditions that are expected to exist over the forecast period, considering past and actual performance as well as expected developments in the perspective markets and in the overall macro-economic environment, forecasted changes in drilling activity and the Business Unit's respective markets. The fair value of each CGU was determined using Level 3 of the fair value hierarchy.

Judgements: Estimating future cash flows requires judgement, considering past and actual performance as well as expected developments in the respective markets and in the overall macro-economic environment. In addition, the allocation of shared corporate and administrative assets to our CGU's requires certain judgements. Key assumptions are detailed below.  For more information, refer to Note 11 (b) .

Policy: Mullen Group measures goodwill as the fair value of the consideration transferred, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that Mullen Group incurs in connection with a business combination are expensed as incurred.

For the purpose of calculating goodwill, fair values of acquired assets, assumed liabilities and contingent liabilities are determined by reference to market values or by discounting expected future cash flows to present value. This discounting is either performed using market rates or by using risk free interest rates and risk adjusted expected future cash flows.

Goodwill is reviewed for impairment annually at December 31, or more frequently if there are indications that impairment may have occurred. Goodwill impairment is tested at the CGU level and is determined based upon the recoverable amount of each CGU compared to the CGU's respective carrying amount. At Mullen Group, the CGUs consist of each of its Business Units. The recoverable amount is the higher of FVLCD and the VIU. If the impairment loss exceeds the carrying amount of goodwill, the goodwill is written off completely. Any impairment loss left over is allocated to the remaining assets of the CGU. Impairment losses in respect of goodwill are irreversible.

Supporting information:

The changes in the carrying amount of goodwill are shown below:

2019	2018
Gross amount of goodwill $ 1,263,277 $ Accumulated impairment 998,000	1,261,350 898,000
Balance at January 1 $ 265,277 $ Goodwill acquired during the year 3,430 Impairment ofgoodwill —	363,350 1,927 (100,000)
Balance at December 31 $ 268,707 $	265,277

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2019 ANNUAL FINANCIAL REVIEW

110

NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

At December 31, 2019, the Trucking/Logistics segment had a carrying value of $190.4 million of goodwill in 2019 as compared to $187.0 million in 2018. This $3.4 million increase was a result of recognizing goodwill on the Argus and Inter-Urban acquisitions. The Oilfield Services segment had a carrying value of $78.3 million of goodwill, which is consistent with the amount recorded in 2018.  For more information, refer to Note 5 .

The following table summarizes the significant carrying amounts of goodwill:

December 31 2019	December 31 2018
Cash Generating Unit Gardewine Group Limited Partnership $ 79,875 $ Kleysen Group Ltd. 34,099 Hi-Way 9 Group of Companies 23,902(1) Tenold Transportation Ltd. 18,791(1) Heavy Crude Hauling L.P. 16,989 E-Can Oilfield Services L.P. 12,094 Canadian Dewatering L.P. 11,674 Other CGUs 71,283	79,875 34,099 20,981 15,361 16,989 12,094 11,674 74,204
Total Goodwill $ 268,707 $	265,277

(1) In 2019, the increase in the carrying amount of goodwill within Hi-Way 9 and Tenold resulted from combining the operations of Bernard Transport Ltd. into Hi-Way 9 on January 1, 2019, and from the acquisition of Argus and Inter-Urban being integrated into Tenold.

(a) Impairment Testing for Cash Generating Units Containing Goodwill

At December 31, 2019, Mullen Group performed its annual impairment test for goodwill and concluded that there was no impairment of goodwill in any of its CGUs as the recoverable amount for these CGUs was higher than their respective carrying amount.

At December 31, 2018, (" Valuation Date ") Mullen Group performed its annual impairment test for goodwill and concluded that there was impairment of goodwill within certain CGUs in the Oilfield Services segment as the recoverable amount for these CGUs was lower than their respective carrying amount. Mullen Group recognized a $100.0 million impairment of goodwill in 2018 using the following discount and terminal value growth rates within each respective CGU: The impairment of goodwill within these CGUs resulted from the deterioration of the oil and natural gas industry in the fourth quarter of 2018, which led to Mullen Group revising its projected future cash flows. After recognizing this impairment of goodwill, the recoverable amount of these CGUs equaled its carrying amount. The recording of this impairment of goodwill is recognized as an expense and reduces book equity and net income but it does not impact cash flows.

Impairment of Goodwill Discount Rate	Terminal Value Growth Rate
Cash Generating Unit Formula Powell L.P. $ 45.6 11.5% Cascade Energy Services L.P. 37.6 12.0% Mullen Oilfield Services L.P. 5.8 12.0% Spearing Service L.P. 5.0 12.0% R. E. Line Trucking (Coleville) Ltd. 3.0 12.0% Withers L.P. 3.0 12.0%	2.5% 2.0% 2.0% 2.0% 2.5% 2.0%
Total impairment of goodwill $ 100.0

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

• (b) Recoverable Amount

Mullen Group determines the recoverable amount for its CGUs based on the higher of the FVLCD and VIU. The recoverable amount was determined using a discounted cash flow approach for all CGUs. The recoverable value was determined by discounting the future cash flows generated from Mullen Group's continuing use of the CGU. The discounted cash flow model employed by the Corporation reflects the specifics of each CGU and its business environment. The model calculates the present value of the estimated future earnings of each CGU.

Estimating future earnings requires judgement, considering past and actual performance as well as expected developments in the respective markets and in the overall macro-economic environment. The calculation of the recoverable amount using the discounted cash flow approach was based on the following key assumptions:

	Discount rate December 31 December 31 2019 2018	Discount rate December 31 December 31 2019 2018	Discount rate December 31 December 31 2019 2018
		December 31 2019	December 31 2018
Cash Generating Unit Gardewine Group Limited Partnership Kleysen Group Ltd. Hi-Way 9 Group of Companies Tenold Transportation Ltd. Heavy Crude Hauling L.P. E-Can Oilfield Services L.P. Canadian Dewatering L.P. Other	10.5% 10.5% 10.5% 10.5% 11.0% 11.0% 11.0% 11.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 11.0% - 12.0% 11.0% - 12.0%	2.0% 2.5% 2.5% 0.0% 2.0% 2.0% 2.5% 2.0% - 2.5%	2.0% 2.5% 2.5% 2.5% 2.0% 2.0% 2.5% 2.0% - 2.5%

(i) Cash flows were projected based on past experience, actual operating results and the one year business plan for the immediate year. Cash flows for a further four year period were extrapolated using constant growth rates of between 2.0 to 2.5 percent with adjustments reflecting an expectation of changes in the general economy, forecasted changes in drilling activity and the Business Unit's respective markets, and represents the Corporation's best estimate of the set of economic conditions that are expected to exist over the forecast period.

(ii) The terminal value growth rate is based on management's best estimate of the long-term growth rate for its CGUs after the forecast period, considering historic performance and future economic forecasts.

(iii) Each CGU's discount rate reflects their individual size, risk profile and circumstance and is based on past experience and industry average weighted average cost of capital.

The Corporation believes that the following changes in the key assumptions would result in a recoverable amount equal to the carrying value of the CGU, with any additional change in the assumptions causing goodwill to become impaired.

	Change in discount rate December 31 December 31 2019 2018	Change in terminal value growth rate	Change in terminal value growth rate
		December 31 2019	December 31 2018
Cash Generating Unit Gardewine Group Limited Partnership Kleysen Group Ltd. Hi-Way 9 Group of Companies Tenold Transportation Ltd. Heavy Crude Hauling L.P. E-Can Oilfield Services L.P. Canadian Dewatering L.P.	4.1% 5.0% 6.4% 8.3% 12.8% 12.7% 6.5% 11.3% 3.5% 1.3% 3.0% 2.4% 8.9% 7.8%	(6.1)% (10.3)% (29.2)% (8.4)% (5.4)% (4.4)% (17.5)%	(8.6)% (16.4)% (34.4)% (26.9)% (1.9)% (2.8)% (14.5)%

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2019 ANNUAL FINANCIAL REVIEW

112

NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

12. Intangible Assets

Intangible assets are mainly comprised of customer relationships and non-competition agreements acquired through business combinations. In 2019, Mullen Group acquired $17.1 million and $0.4 million by virtue of acquisitions and from purchasing a customer list, respectively. Intangible assets are amortized over their estimated useful lives on a straight line basis over a period of five years.

Policy: Intangible assets acquired as part of acquisitions are capitalized at fair value as determined at the date of acquisition and are subsequently stated at that capitalized cost less accumulated amortization and impairment losses.

Supporting information:

Opening balance at January 1 2018	Additions (Amortization) Closing balance at December 31 2018 Additions (Amortization)	Closing balance at December 31 2019
Cost $ 264,616 Amortization (224,007)	$ 25,100 $ 289,716 $ 17,491 (15,439) (239,446) (19,305)	$ 307,207 (258,751)
Carrying amount $ 40,609	$ 50,270	$ 48,456

13. Investments

nvestments
December 31 2019	December 31 2018
Investments $ 2,154 $ Investments – equitymethod 36,337	2,803 33,466
$ 38,491 $	36,269

(a) Investments

Mullen Group periodically invests in certain private and public corporations. Mullen Group did not purchase any investments in 2019 or 2018. During 2019, Mullen Group sold $0.7 million of investments. There were no investments sold in 2018.

(b) Investments accounted for by the equity method

In 2019 Mullen Group did not purchase or sell any equity investments. In 2018 Mullen Group invested $2.0 million to acquire a 40.0 percent equity interest in Pacific Coast Express Limited (" PCX "), a regional LTL company operating out of a number of facilities in western Canada. Mullen Group made this equity investment as part of its strategy to invest in the transportation sector in western Canada. The Corporation granted the majority shareholder of PCX an irrevocable option to sell all of the remaining shares of PCX to Mullen Group at a price to be agreed upon by both parties once certain financial targets have been achieved. In 2017, Mullen Group invested $0.2 million to acquire a 30.0 percent equity interest in Thrive Fluid Management Corp., a fluid management company operating in the Grande Prairie, Alberta region. On December 31, 2018, Thrive Fluid Management Corp. changed its name to Thrive Management Group Ltd. (" Thrive "). Mullen Group made this equity investment as part of its strategy to invest in the energy sector. In 2014, Mullen Group acquired a 30.0 percent interest in Kriska Transportation Group Limited (" Kriska Transportation "). Kriska Transportation is a growth oriented transportation and logistics company based in Prescott, Ontario. At December 31, 2019, the Corporation had a carrying value of $28.6 million (2018 – $27.3 million) related to its equity investment in Kriska Transportation. Mullen Group uses the equity method to account for investments from the date in which it obtains significant influence. In 2019, the aggregate amount of Mullen Group's share of net income and total comprehensive income from its investments accounted for by the equity method was $2.9 million (2018 – $3.8 million). In 2019, revenue and operating income before depreciation and amortization on the Corporation's equity investments was $275.1 million (2018 – $234.6 million) and $42.6 million (2018 – $26.8 million), respectively.  For more information refer to Note 28.

14. Derivative Financial Instruments

On July 25, 2014, Mullen Group entered into two cross-currency swap contracts with a Canadian bank to swap $117.0 million U.S. dollars and $112.0 million U.S. dollars into Canadian dollars (collectively, the " Cross-Currency Swaps ") at foreign exchange rates of $1.1047 and $1.1148 that mature on October 22, 2024 and October 22, 2026, respectively. These Cross-Currency Swaps hedge the principal amount of the Series G and Series H Notes. At December 31, 2019, the carrying value of these Cross-Currency Swaps was $41.4 million (2018 – $42.2 million) and was recorded in the consolidated statement of financial position within derivative financial instruments.

Estimates: Mullen Group utilizes Derivatives such as Cross-Currency Swaps to manage its exposure to foreign currency risks relating to its U.S. dollar debt. The fair value of Derivatives fluctuate depending on the estimate of certain underlying financial measures. The estimated fair value of Derivatives are based on observable market data, including foreign currency curves, interest rates and credit spreads.

Policy: Mullen Group adopted IFRS 9 (2010) – Financial Instruments as it relates to classification and measurement of financial assets and financial liabilities in advance of its effective date.  For more information refer to Note 3(g).

Supporting information: For the year ended December 31, 2019, Mullen Group recorded a net foreign exchange (gain) loss of $(14.1) million (2018 – $8.5 million). This was due to the impact of the change over the period in the value of the Canadian dollar relative to the U.S. dollar on the Corporation's U.S. dollar debt and from the change in the fair value of its Cross-Currency Swaps as summarized in the table below:

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Net Foreign Exchange (Gain) Loss	CDN. $ Equivalent	CDN. $ Equivalent
	Years ended December 31
	2019	2018
Foreign exchange (gain) loss on U.S. $ debt Foreign exchange loss(gain)on Cross-CurrencySwaps	$ (14,976) 836	$ 25,121 (16,584)
Net foreign exchange (gain) loss	$ (14,140)	$ 8,537

For the year ended December 31, 2019, Mullen Group recorded a foreign exchange (gain) loss on U.S. dollar debt of $(15.0) million (2018 – $25.1 million) as summarized in the table below:

Foreign Exchange (Gain) Loss on U.S. $ Debt ($ thousands, except exchange rate amounts)		Years ended December 31	Years ended December 31
	2019	CDN. $ Equivalent	2018
	U.S. $ Debt Exchange Rate		U.S. $ Debt Exchange Rate	CDN. $ Equivalent
Ending – December 31 Beginning – January 1	229,000 1.2988 229,000 1.3642	297,426 312,402	229,000 1.3642 229,000 1.2545	312,402
				287,281
Foreign exchange (gain) loss on U.S. $ debt		(14,976)		25,121

For the year ended December 31, 2019, Mullen Group recorded a foreign exchange loss (gain) on its Cross-Currency Swaps of $0.8 million (2018 – $(16.6) million). This was due to the change over the period in the fair value of these Cross-Currency Swaps as summarized in the table below:

Foreign Exchange Loss (Gain) on Cross-Currency Swaps		Years ended December 31	Years ended December 31	Years ended December 31
		2019 CDN. $ Change in Fair Value **of Swaps **	2018
	U.S. $ Swaps		U.S. $ Swaps	CDN. $ Change in Fair Value **of Swaps **
Cross-Currency Swap maturing October 22, 2024 Cross-CurrencySwapmaturingOctober 22, 2026	117,000 112,000	1,153 (317) 836	117,000 112,000	(9,116)
				(7,468)
Foreign exchange loss (gain) on Cross-Currency Swaps				(16,584)

15. Other Assets

		December 31,		December 31,
		2019		2018
Debentures – equity investee	$	—	$	3,200
Promissory notes		767		1,037
Net investment in finance leases(1)		2,284		—
Other		408		593
	$	3,459	$	4,830

(1) Net investment in finance leases includes amounts owing after 12 months and mainly consists of the net investment in subleases on real property where the Business Unit has entered into the head lease.

At December 31, 2019, Mullen Group has entered into $8.0 million (2018 – $10.5 million) of debenture agreements with Thrive of which there was $7.8 million (2018 – $8.9 million) drawn on these debentures. These debentures mature in 2020 and have therefore been classified as a current asset. Mullen Group has entered into a $3.2 million debenture agreement with PCX. This debenture matures in 2020 and has therefore been classified as a current asset.  For more information refer to Note 7. Mullen Group has a general security interest in all of PCX's assets.

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2019 ANNUAL FINANCIAL REVIEW

114

NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

16. Accounts Payable and Accrued Liabilities

Policy: Accounts payable and accrued liabilities are obligations to pay for goods or services that have been purchased in the normal course of business and are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

Supporting information:

December 31 2019	December 31 2018
Trade payables $ 30,322 $ Amounts due to related parties 17 Non-tradepayables and accrued liabilities 59,689	33,160 20 66,096
$ 90,028 $	99,276

17. Dividends Payable

For the year ended December 31, 2019, Mullen Group declared monthly dividends of $0.05 per Common Share totalling $0.60 per Common Share (2018 – $0.60 per Common Share). On February 12, 2020, Mullen Group announced its intention to pay annual dividends of $0.60 per Common Share ($0.05 per Common Share on a monthly basis) for 2020. At December 31, 2019, Mullen Group had 104,824,973 Common Shares outstanding and a dividend payable of $5.2 million (December 31, 2018 – $5.2 million), which was paid on January 15, 2020. Mullen Group also declared a dividend of $0.05 per Common Share on January 22, 2020, to the holders of record at the close of business on January 31, 2020.

18. Income Taxes

Estimates: The realization of deferred tax assets depends on the future taxable income of the respective Mullen Group subsidiaries. The continued recognition of deferred tax assets is based on estimates of internal projections of future earnings, tax deductions and anticipated income tax rates.

Policy: Income tax expense for the period consists of current and deferred tax. Tax is recognized in net income, except to the extent that it relates to a business combination or items recognized in other comprehensive income or directly in equity.

Taxable income differs from net income as reported in the consolidated statement of comprehensive income. As a result, current tax is the expected tax due on taxable income less adjustments to prior periods using tax rates enacted, or substantively enacted as at the reporting date in jurisdictions where Mullen Group operates.

In general, deferred income taxes are recognized based on temporary differences arising between the tax value of assets and liabilities and their carrying amounts in the Annual Financial Statements. Deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill and are not accounted for if they arise from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable income. Deferred income taxes are calculated on the basis of the tax laws enacted or substantively enacted as at the reporting date and apply to when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets are recognized to the extent it is probable that future taxable income will be generated and available to use against the deductible temporary differences, unused tax losses and unused tax credits. Current and deferred income tax assets and liabilities are offset when there is a legally enforceable right to settle on a net basis and when such assets and liabilities relate to income taxes imposed by the same taxation authority.

The provision for income tax expense differs from the amounts that would be obtained by applying the expected Canadian statutory tax rates enacted or substantively enacted as at the respective reporting dates.

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2019 ANNUAL FINANCIAL REVIEW

115

NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Supporting information:

Deferred tax assets totalling $8.1 million (2018 – $9.2 million) consist mainly of the temporary differences arising from the purchase of goodwill on asset acquisitions, intangible assets and from loss carry forward balances. Recognized deferred tax assets and liabilities consist of the following:

December 31, 2019 Assets Liabilities	Net
Property, plant and equipment $ 149 $ (100,452) Goodwill – asset acquisitions 5,891 (2,002) Intangible assets 910 (9,763) Investments — (1,852) Loss carry-forwards 778 — Financing fees 148 — Holdbacks and deferred interest — (448) Convertible debentures — (2,660) Right-of-use assets 194 (392)	$ (100,303) 3,889 (8,853) (1,852) 778 148 (448) (2,660) (198)
$ 8,070 $ (117,569)	$ (109,499)
December 31, 2018 Assets Liabilities	Net
Property, plant and equipment $ 96 $ (109,866) Goodwill – asset acquisitions 6,908 (2,051) Intangible assets 690 (11,085) Investments — (933) Loss carry-forwards 844 — Financing fees 649 — Holdbacks and deferred interest — (190)	$ (109,770) 4,857 (10,395) (933) 844 649 (190)
$ 9,187 $ (124,125)	$ (114,938)

The analysis of the components of net deferred tax is as follows:

he analysis of the components of net deferred tax is as follows:
	Years ended	December 31
	2019	2018
Deferred tax to be settled within 12 months Deferred tax to be settled after more than 12 months	$ (7,457) (102,042)	$ (6,726) (108,212)
	$ (109,499)	$ (114,938)

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2019 ANNUAL FINANCIAL REVIEW

116

NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

The following tables summarize the movement of temporary differences during the period:

	rary differences during the period:	rary differences during the period:
	Recognized in net income Acquired in business combinations Recognized directly in equity
Property, plant and equipment $ (109,770) Goodwill – asset acquisitions 4,857 Intangible assets (10,395) Investments (933) Loss carry-forwards 844 Financing fees 649 Holdbacks (190) Debentures — Right-of-use assets —	$ 9,337 $ 130 $ — (968) — — 5,203 (3,661) — (919) — — (66) — — (501) — — (258) — — 627 — (3,287) (198) — —	$ (100,303) 3,889 (8,853) (1,852) 778 148 (448) (2,660) (198)
$ (114,938)	$ 12,257 $ (3,531) $ (3,287)	$ (109,499)
Balance January 1 2018	Recognized in net income Acquired in business combinations Recognized directly in equity	Balance December 31 2018
Property, plant and equipment $ (112,337) Goodwill – asset acquisitions (184) Intangible assets (9,797) Investments (833) Loss carry-forwards 164 Financing fees 1,085 Debt financing costs 355 Holdbacks (496) Debentures (11)	$ 3,564 $ (997) $ — 5,041 — — 3,735 (4,333) — (100) — — 680 — — (436) — — (355) — — 306 — — 9 — 2	$ (109,770) 4,857 (10,395) (933) 844 649 — (190) —
$ (122,054)	$ 12,444 $ (5,330) $ 2	$ (114,938)

Income tax expense of $7.9 million (2018 – $17.2 million) is comprised of current and deferred tax as follows:

	Years ended	December 31
	2019	2018
Current Deferred	$ 20,153 (12,257)	$ 29,638 (12,444)
	$ 7,896	$ 17,194

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

The combined statutory tax rate was approximately 27.0 percent in 2019 (2018 – 27.0 percent). The reconciliation of the effective tax rate is as follows:

	Years ended	December 31
	2019	2018
Income (loss) before income taxes Combined statutory tax rate Expected income tax Add (deduct): Impairment of goodwill Non-deductible (taxable) of net foreign exchange (gain) loss Non-deductible (taxable) of the change in fair value of investments Stock-based compensation expense Decrease in income tax due to changes in income tax rates Changes in unrecognized deferred tax asset Other	$ 80,137 27% 21,637 — (1,874) (2) 367 (9,469) (1,874) (889)	$ (26,593) 27% (7,180) 21,388 1,152 423 451 — 1,152 (192)
Income tax expense	$ 7,896	$ 17,194

19. Lease Liabilities

Lease Liabilities
		Year ended December 31, 2019
Beginning – January 1, 2019	$	42,178
Additions		11,105
Disposals		(464)
Lease payments		(13,512)
Interest expense		1,379
Ending balance – December 31, 2019		40,686
Less:
Lease liabilities – currentportion		10,711
Lease liabilities	$	29,975

The following are the contractual maturities of lease liabilities, including the value of any options to extend a lease where Mullen Group is reasonably certain to do so:

		December 31, 2019
Twelve months or less	$	12,125
2021 – 2022		16,615
2023 – 2024		7,381
Thereafter		7,633
Contractual cash flows	$	43,754
Carrying amount	$	40,686

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Mullen Group's lease liabilities mainly relate to real property leases that are utilized by the Business Units within their operations. Certain Business Units have also entered into leases pertaining to various pieces of operating equipment including rail cars, trucks and trailers. Leases are entered into and terminated when they meet specific business requirements. The Corporation has recognized these lease liabilities, which are measured at the present value of the remaining lease payments at an average incremental borrowing rate of 3.2 percent.

On adoption of IFRS 16 – Leases, the Corporation has recognized lease liabilities in relation to all lease arrangements measured at the present value of the remaining lease payments from commitments disclosed as at December 31, 2018, adjusted by commitments in relation to arrangements not containing leases, service contracts, short-term and low-value leases, and discounted using the Corporation's incremental borrowing rate as of January 1, 2019. The associated right-of-use assets were measured at the amount equal to the lease liabilities on January 1, 2019, adjusted by the amount of any lease inducements and subleases relating to the lease recognized in the statement of financial position immediately before the date of transition, with no impact on retained earnings (deficit). There was no impact to lessor accounting from the adoption of IFRS 16 – Leases.

For the year ended December 31, 2019, Mullen Group incurred variable lease payments, short-term and low dollar value lease expense of $4.2 million, $6.0 million and $0.07 million, respectively. The Corporation also recognized $0.05 million of sublease income during the period.

20. Convertible Unsecured Subordinated Debentures

In June 2019, Mullen Group issued convertible unsecured subordinated debentures (the " 2019 Debentures ") at a price of $1,000 per 2019 Debenture. The 2019 Debentures mature on November 30, 2026 and are publicly-traded and listed on the TSX under the symbol 'MTL.DB'. The 2019 Debentures bear interest at a rate of 5.75% per annum, payable semi-annually in arrears on May 31 and November 30 of each year, with the first interest payment on November 30, 2019. The November 30, 2019 interest payment will represent accrued interest from the closing to, but excluding, November 30, 2019. Mullen Group may elect to satisfy its interest obligation on any interest payment date by issuing and delivering, subject to regulatory approval, Common Shares to debenture holders. Each $1,000 2019 Debenture is convertible into 71.4286 Common Shares of Mullen Group (or a conversion price of $14.00) at any time at the option of the holders of the 2019 Debentures. As at the date of issuance, an aggregate of 8,928,575 Common Shares would be issued if all holders converted their principal amount. In the event that a holder of the 2019 Debentures exercises their conversion right, such holder will be entitled to receive accrued and unpaid interest, in addition to the applicable number of Common Shares to be received on conversion, for the period from the date of the last interest payment to the date of conversion.

The 2019 Debentures shall not be redeemable by the Corporation prior to November 30, 2023. On or after November 30, 2023 and prior to November 30, 2025, the 2019 Debentures may be redeemed by the Corporation, in whole or in part from time to time, on not more than 60 days and not less than 40 days prior notice at a redemption price equal to their principal amount plus accrued and unpaid interest, if any, up to but excluding the date set for redemption, provided that the arithmetic average of the volume weighted average trading price of the Common Shares on the TSX for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is provided is at least 125.0 percent of the conversion price. On or after November 30, 2025 and prior to the maturity date, the 2019 Debentures may be redeemed in whole or in part at the option of the Corporation on not more than 60 days and not less than 40 days prior notice at a redemption price equal to their principal amount plus accrued and unpaid interest if any, up to but excluding the date set for redemption.

The 2019 Debentures are comprised of both a debt and equity component. The debt component represents the total discounted present value of both the semi-annual interest obligations and the principal payment due at maturity, using the rate of interest that would have been applicable to a nonconvertible debt instrument of comparable term and risk at the date of issue. In the event the 2019 Debentures are converted prior to maturity, the difference between the carrying amount of such 2019 Debentures and their face value would be charged to interest expense. The remaining equity component of the 2019 Debentures represents the difference between the face value of the 2019 Debentures (namely, $125.0 million) and the accounting value assigned to the debt component of the 2019 Debentures at the date of issue (namely, $112.6 million). Subject to the impact of the 2019 Debentures being converted, this equity component amount will remain constant over the term of the 2019 Debentures. Upon conversion of the 2019 Debentures into common shares, a proportionate amount of both the debt and equity components are transferred to Shareholders' capital. Accretion and interest expense on the 2019 Debentures are reflected as finance costs in the consolidated statement of comprehensive income.

The transaction costs associated with the 2019 Debentures were $5.2 million and are being amortized over the term of the 2019 Debentures. If the holders of the 2019 Debentures convert the principal portion to Common Shares prior to maturity, the unamortized transaction costs would be expensed at that time.

As subordinated debt, the accounting value assigned to the 2019 Debentures including any related interest expense is excluded from our financial covenant calculations under our Private Placement Debt.

The details of the 2019 Debentures are as follows:

Year of Maturity Interest Rate		December 31, 2019 Face Value Carrying Amount	December 31, 2018	December 31, 2018
			Face Value	Carrying Amount
2026 5.75%	$	125,000 $ 108,764	$ — $	—

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

The cumulative carrying amount of the 2019 Debentures is as follows:

		Cumulative as at December 31, 2019
Proceeds from issue of the 2019 Debentures	$	125,000
Debt issuance costs		(5,203)
Net proceeds		119,797
Amount classified as equity		(12,403)
Accretion on debt		1,370
Carrying amount of the 2019 Debentures	$	108,764

21. Long-Term Debt and Credit Facility

In 2019, Mullen Group repaid $5.8 million of debt and shareholder loans assumed on acquisitions (2018 – $78.2 million). In 2018, Mullen Group used cash to repay $70.0 million of Series D Notes that matured on June 30, 2018. Mullen Group also repaid $7.4 million of debt and shareholder loans assumed on acquisitions in 2018.

On October 24, 2018, Mullen Group entered into an agreement with its lender to amend the amount available to be borrowed on its credit facility (the " Bank Credit Facility "). The amount available to be borrowed on the Bank Credit Facility was increased by $50.0 million to $125.0 million. On June 21, 2019, the amount available to be borrowed on the Bank Credit Facility was increased by $25.0 million to $150.0 million. Interest on the Bank Credit Facility is payable monthly and is based on either the bank prime rate plus 0.50 percent or bankers' acceptance rates plus an acceptance fee of 1.50 percent. As at December 31, 2019, no amounts were drawn on this facility. All other terms under the Bank Credit Facility remain the same. This facility does not have any financial covenants, however, Mullen Group cannot be in default of its Private Placement Debt and it must be in compliance with certain reporting and general covenants. Mullen Group is in compliance with all of these reporting and general covenants.

Mullen Group has $3.9 million of letters of credit outstanding, which were issued to guarantee certain performance and payment obligations. These letters of credit reduce the amount available under the Bank Credit Facility.

Mullen Group's long-term debt is mainly comprised of Private Placement Debt, the details of which are set forth below:

Series G $ Series H $ Series I $ Series J $ Series K $ Series L $	117,000 U.S. October 22, 2024 3.84% 112,000 U.S. October 22, 2026 3.94% 30,000 CDN. October 22, 2024 3.88% 3,000 CDN. October 22, 2026 4.00% 58,000 CDN. October 22, 2024 3.95% 80,000 CDN. October 22, 2026 4.07%

(1) Interest is payable semi-annually.

Mullen Group's unamortized debt issuance costs of $1.0 million related to its Private Placement Debt have been netted against its carrying value at December 31, 2019 (December 31, 2018 – $1.2 million). Mullen Group has certain financial covenants that must be met under its unsecured Private Placement Debt, which include a total net debt to operating cash flow ratio and a total earnings available for fixed charges to total fixed charges ratio. Mullen Group's total net debt cannot exceed 3.5 times operating cash flow calculated using the trailing twelve months financial results normalized for acquisitions. The term " total net debt " means all debt including the Private Placement Debt, lease liabilities, the Bank Credit Facility and letters of credit less any unrealized gain on Cross-Currency Swaps plus any unrealized loss on Cross-Currency Swaps, as disclosed within Derivatives on the consolidated statement of financial position. The term " operating cash flow " means, for any quarterly period, the trailing twelve month consolidated net income adjusted for all amounts deducted in the computation thereof on account of (i) taxes imposed on or measured by income or excess profits, (ii) depreciation and amortization taken during such period, (iii) total interest charges, including interest on the Debentures and lease liabilities; and (iv) non-cash charges. Mullen Group cannot have a fixed charge coverage ratio less than 1.75:1 calculated using the trailing twelve months financial results. Mullen Group is in compliance with all the Private Placement Debt financial covenants.

Mullen Group entered into Cross-Currency Swaps to swap the Series G and Series H Notes into Canadian dollars at foreign exchange rates of $1.1047 and $1.1148 that mature on October 22, 2024 and October 22, 2026, respectively.  For more information, refer to Note 14 .

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

The following table summarizes the Corporation's total debt:

December 31, 2019	December 31, 2018
Current liabilities: Private Placement Debt $ — $ Lease liabilities – current portion 10,711 Bank Credit Facility —	— — 30,000
10,711 Non-current liabilities: Private Placement Debt 467,392 Lease liabilities 29,975	30,000 482,185 —
497,367	482,185
$ 508,078 $	512,185

The details of long-term debt, as at the date hereof, are as follows:

Year of Maturity	Interest Rate	December 31, 2019 Face Value Carrying Amount	December 31, 2018	December 31, 2018
			Face Value	Carrying Amount
Bank Credit Facility — Lease liabilities 2020 – 2028 Private Placement Debt 2024 – 2026	Variable 3.20% 3.84% - 4.07%	$ $	$	$
		— — 43,754 40,686 468,425 467,392	30,000 — 483,402	30,000 — 482,185
		512,179 508,078	513,402	512,185

22. Share Capital

The authorized share capital of Mullen Group consists of an unlimited number of no par value Common Shares and an unlimited number of Preferred Shares, issuable in series.

The number of, and the specific rights, privileges, restrictions and conditions attaching to any series of Preferred Shares shall be determined by the Board of Directors (the " Board ") of Mullen Group prior to the creation and issuance thereof. With respect to the payment of dividends and distribution of assets in the event of liquidation, dissolution or winding-up of Mullen Group, whether voluntarily or involuntarily, the Preferred Shares are entitled to preference over the Common Shares and any other shares ranking junior to the Preferred Shares from time to time and may also be given such other preferences over the Common Shares and any other shares ranking junior to the Preferred Shares as may be determined at the time of creation of such series. As at the date hereof, no series of Preferred Shares had been created.

All of the issued Common Shares of Mullen Group have been paid in full.

	2019	2018
Issued Common Shares at January 1 Common Shares issued on acquisition 5 Common Shares issued on conversion of 2009 Debentures(1) 20	104,824,973 — —	103,654,316 133,334 1,037,323
Issued Common Shares at December 31	104,824,973	104,824,973

(1) On May 1, 2009, Mullen Group issued convertible unsecured subordinated debentures (the " 2009 Debentures ") at a price of $1,000 per 2009 Debenture. The 2009 Debentures matured on July 1, 2018, and were either converted into Common Shares of the Corporation or repaid with cash.

23. Earnings per Share

Policy: Basic per share amounts are calculated using the weighted average number of Common Shares outstanding during the period. Diluted per share amounts are calculated considering the effects of all dilutive potential ordinary shares. Mullen Group's dilutive potential ordinary shares assumes dilutive stock options are exercised and that the proceeds obtained on the exercise of dilutive stock options would be used to purchase Common Shares at the average market price during the period. The weighted average number of Common Shares outstanding is then adjusted accordingly.

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2019 ANNUAL FINANCIAL REVIEW

121

NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Supporting information:

• (a) Basic Earnings per Share

Basic earnings per share is calculated as net income (loss) attributable to common shareholders divided by the weighted average number of Common Shares outstanding for the period. Net income (loss) attributable to common shareholders for the year ended December 31, 2019, was $72.2 million (2018 – $(43.8) million). The weighted average number of Common Shares outstanding for the years ended December 31, 2019 and 2018 was calculated as follows:

Note	Years ended December 31
	2019 2018
Issued Common Shares at beginning of period 22 Effect of Common Shares issued 5 Effect of stock options exercised Effect of the 2009 Debentures converted 20	104,824,973 103,654,316 — 66,484 — — — 552,708
Weighted average number of Common Shares at end of period – basic	104,824,973 104,273,508

• (b) Diluted Earnings per Share

Diluted earnings per share is calculated by adjusting net income (loss) attributable to common shareholders and the basic weighted average number of Common Shares outstanding by the effects of all potentially dilutive transactions to existing common shareholders. In calculating diluted earnings per share, net income (loss) was adjusted as follows:

	Years ended December 31	Years ended December 31
	2019	2018
Net income (loss) Effect of the 2019 Debentures Effect on finance costs from conversion of the 2009 Debentures(net of tax)	$ 72,241 $ — —	(43,787) — —
Net income (loss) – adjusted	$ 72,241 $	(43,787)

The diluted weighted average number of Common Shares was calculated as follows:

	Years ended December 31	Years ended December 31
	2019	2018
Weighted average number of Common Shares – basic Effect of "in the money" stock options Effect of the 2019 Debentures Effect of conversion of the 2009 Debentures	104,824,973 — — —	104,273,508 — — —
Weighted average number of Common Shares at end of period – diluted	104,824,973	104,273,508

For the year ended December 31, 2019, 3,280,000 stock options (2018 – 3,462,500) were excluded from the diluted weighted average number of Common Shares calculation as their effect would have been anti-dilutive. The average market value of the Corporation's Common Shares for the purposes of calculating the dilutive effect of stock options was based on quoted market prices for the periods ended December 31, 2019 and 2018. For the year ended December 31, 2019, the 8,928,575 Common Shares that would be issued upon conversion of the 2019 Debentures were excluded in the calculation as their effect was anti-dilutive.  For more information on Debentures and stock options, refer to Notes 20 and 27, respectively .

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2019 ANNUAL FINANCIAL REVIEW

122

NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

24. Revenue

Policy : Mullen Group's services are provided based upon orders and contracts with customers that include fixed or determinable prices and are based upon daily, hourly or contracted rates. Contract terms do not include the provision of post-service obligations. Mullen Group recognizes the amount of revenue to which it expects to be entitled for the transfer of promised services or goods to customers. Revenue is measured based on the consideration specified in a contract with a customer on either an "over time" or "point in time" basis.

Mullen Group's primary service offering is the transportation of goods. The transportation of goods involves the physical process of transporting commodities and goods from point of origin to destination using company equipment and contracted owner operators. Each individual Business Unit offers published rates or signed master service agreements with specific customers that dictate future services it is to perform for a customer at the time a bill of lading or service request is received. Each bill of lading represents a separate distinct performance obligation that the company is obligated to satisfy. The transaction price is generally in the form of a fixed fee determined at the inception of the bill of lading. Transportation services revenue is recognized using the "over time" method.

Mullen Group's second highest revenue stream is logistics services. Logistics services involves the planning, implementing, and controlling the efficient, effective forward and reverse transport of goods. These services are governed by contract law. Mullen Group uses Subcontractors to perform the work. Subcontractors have their own insurance and operating authorities. When Mullen Group hires a Subcontractor, it remains the primary obligor, have the ability to set prices, retain the risk of loss in the event of a cargo claim and bear the credit risk of customer default. As such, Mullen Group acts as the principal of the arrangement and recognize revenue on a gross basis. Logistics services revenue is recognized using the "point in time" method.

The business of Mullen Group is operated through its Business Units, which are divided into two distinct operating segments for reporting purposes – Trucking/Logistics and Oilfield Services. The segments are differentiated by the type of service provided, equipment requirements and customer needs. Mullen Group provides the capital and financial expertise, technology and systems support, shared services and strategic planning (the " Corporate Office ") for the Business Units. The Corporate Office also invests in certain public and private corporations. In addition, the Corporate Office, through its subsidiary MT Investments Inc. (" MT "), owns a network of real estate holdings and facilities that are leased primarily to the Business Units. Such properties are leased by MT to the Business Units on commercially reasonable terms. The day to day management of the Business Units is conducted at the subsidiary level.

At December 31, 2019, the Trucking/Logistics segment consisted of 14 Business Units, offering a diversified range of truckload and LTL general freight services to customers in Canada and the United States. The primary service offering of the Trucking/Logistics segment is transportation services. These services include transporting a wide range of goods including general freight, specialized commodities such as cable, pipe and steel, overdimensional loads such as heavy equipment, compressors and over-sized goods and dry bulk commodities such as cement and frac sand. In addition, the Trucking/Logistics segment provides logistics, warehousing and distribution, transload and intermodal services primarily in western Canada, as well as road construction and the production, excavation and transportation of various aggregate products.

At December 31, 2019, the Oilfield Services segment consisted of 17 Business Units that utilize their highly trained personnel and equipment to provide specialized transportation services, drilling, well-servicing and dewatering services to the oil and natural gas industry. The primary service offering of the Oilfield Services segment is transportation services. The Oilfield Services segment provides services including the transporting of oversize and overweight shipments, conductor pipe setting, core drilling, casing setting, the transportation, handling, storage and computerized inventory management of oilfield fluids, tubulars and drilling mud, pipe stockpiling and stringing, a broad range of services related to the processing and production of heavy oil, including well servicing and handling, transportation and disposal of fluids, as well as frac support, dredging, water management, dewatering, pond reclamation services, hydrovac excavation and drilling rig relocation services.

Disaggregation of revenue:

The following table details Mullen Group's revenue by type of service and timing of the transfer of goods or services by segment:

	pe of service and timing of the transfer of goods or services by segme	pe of service and timing of the transfer of goods or services by segme
	Oilfield Services Corporate Intersegment eliminations
Revenue by service line Transportation $ 670,560 Logistics 114,238 Other(1) 108,671 Eliminations (11,845)	$ 217,197 $ — $ — 4,764 — — 181,567 3,881 — (3,392) — (7,139)	$ 887,757 119,002 294,119 (22,376)
$ 881,624	$ 400,136 $ 3,881 $ (7,139)	$ 1,278,502
Timing of revenue recognition Over time $ 699,863 Point in time 193,606 Eliminations (11,845)	$ 272,416 $ 2,585 $ — 131,112 1,296 — (3,392) — (7,139)	$ 974,864 326,014 (22,376)
$ 881,624	$ 400,136 $ 3,881 $ (7,139)	$ 1,278,502

(1) Included within other revenue is $40.1 million of rental revenue comprised of $33.1 million, $4.4 million and $2.6 million recorded in the Oilfield Services segment, the Trucking/Logistics segment and Corporate, respectively.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS

Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Year ended December 31, 2018 Trucking/ Logistics	Oilfield Services Corporate Intersegment eliminations	Total
Revenue by service line Transportation $ 671,250 Logistics 119,312 Other(1) 94,319 Eliminations (11,544)	$ 224,876 $ — $ — 6,739 — — 161,738 5,071 — (3,419) — (7,544)	$ 896,126 126,051 261,128 (22,507)
$ 873,337	$ 389,934 $ 5,071 $ (7,544)	$ 1,260,798
Timing of revenue recognition Over time $ 694,333 Point in time 190,548 Eliminations (11,544)	$ 280,757 $ 4,446 $ — 112,596 625 — (3,419) — (7,544)	$ 979,536 303,769 (22,507)
$ 873,337	$ 389,934 $ 5,071 $ (7,544)	$ 1,260,798

(1) Included within other revenue is $46.3 million of rental revenue comprised of $37.6 million, $4.4 million and $4.3 million recorded in the Oilfield Services segment, Corporate and the Trucking/Logistics segment, respectively.

During the year, 93.9 percent of revenue was from the rendering of services, 4.2 percent of revenue was from the sale of goods and 1.9 percent was from construction contracts as compared to 93.4 percent, 3.9 percent, and 2.7 percent, respectively, for the year ended December 31, 2018.

25. Personnel Costs

ersonnel Costs
	Years ended December 31
	2019	2018
Wages, salaries and benefits Stock-based compensation expense	$ 383,186 $ 1,383	371,437 1,670
	$ 384,569 $	373,107

In 2019 personnel costs of $271.8 million (2018 – $263.8 million) were recognized within direct operating expenses and $112.8 million (2018 – $109.3 million) were recognized within selling and administrative expenses.

26. Finance Costs

Finance Costs
	Years ended December 31
	2019	2018
Interest expense on financial liabilities measured at amortized cost Accretion on debt	$ 24,449 $ 1,553	21,917 241
Finance expense Less: Interest income from cash and cash equivalents	26,002 (2,377)	22,158 (2,131)
Finance costs	$ 23,625 $	20,027

27. Share-Based Compensation Plans

Mullen Group grants stock options to directors, officers, employees and consultants of Mullen Group or its affiliates under its stock option plan (" Stock Option Plan "). Options under the Stock Option Plan are normally granted at the weighted average trading price of the Common Shares of Mullen Group for the five consecutive trading days immediately preceding the day of grant of the stock option. Stock options vest in the manner determined by the Board at the time of the grant. The term of an option is five to ten years from the date of grant.

Estimates: Mullen Group estimates the fair value of its stock options using the Black-Scholes option pricing model. This requires the estimation of certain variables including: the expected risk-free interest rate, the expected life of the stock option, the forfeiture rate, the expected dividend yield of Mullen Group's Common Shares and expected share price volatility.

Judgement: The estimation of certain variables within the Black-Scholes model require judgement. The risk-free interest rates used were the Canadian Treasury zero-coupon rates for bonds matching the expected term of the option on the date of grant. In determining the expected term of the option grants, Mullen Group has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant. The expected forfeiture rate was determined based on the Corporation's prior historical forfeiture rates on the date of grant. This estimate is adjusted to reflect the actual experience. The expected dividend yield of Mullen Group's Common Shares over the expected term of the option was determined based on the Corporation's dividend policy on the date of grant. The expected stock price volatility at the time of the particular stock option grant, Mullen Group relies on observations of historical volatility trends.

Policy: Mullen Group accounts for stock-based compensation using the fair-value method of valuing any stock options granted using the Black-Scholes model. Under the fair value method, the fair value of options is calculated at the date of grant and that value is recorded as compensation expense over the vesting periods of those grants, with a corresponding increase to contributed surplus less an estimated forfeiture rate. The forfeiture rate is

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

based on past experience of actual forfeitures. When options are exercised, the proceeds received by Mullen Group, along with the amount in contributed surplus, will be credited to share capital.

Supporting information:

On May 3, 2017, Mullen Group's shareholders approved a resolution to amend the Stock Option Plan. The amendment increases the number of Common Shares reserved for issuance by 4,000,000. As such, 3,487,500 (2018 – 3,305,000) options are available to be issued under the Stock Option Plan as at December 31, 2019. Each stock option will entitle the option-holder to acquire one Common Share of Mullen Group. Under the Stock Option Plan, the exercise price of a stock option granted shall be as determined by the Board when the stock option is granted subject to any limitations imposed by any relevant stock exchange or regulatory authority, and shall be an amount at least equal to the weighted average trading price of the Common Shares of Mullen Group for the five consecutive trading days immediately preceding the day of grant of the stock option. These options vest in one to five years and expire in five to ten years.

Volatility was determined on the basis of the daily closing prices over a historical period corresponding to the expected term of the options.

olatility was determined on the basis of the daily closing prices over a historical period corresponding to the expected term of the options.	olatility was determined on the basis of the daily closing prices over a historical period corresponding to the expected term of the options.
Stock Option Plan: Options Weighted average exercise price
OutstandingDecember 31, 2017 3,587,500 $	19.20
Granted 80,000 Exercised — Forfeited (205,000)	16.28 — (19.00)
OutstandingDecember 31, 2018 3,462,500 $	19.15
Granted — Exercised — Forfeited (182,500)	— — (17.91)
Outstanding December 31, 2019 3,280,000 $	19.22
Stock options exercisable December 31, 2018 2,422,490 $	20.21
Stock options exercisable December 31, 2019 2,794,981 $	19.66

The range of exercise prices for options outstanding at December 31, 2019 was as follows:

Range of Exercise Prices		Options Outstanding Weighted average remaining contractual life (years) Weighted average exercise price	Exercisable Options	Exercisable Options
	Number		Number	Weighted average exercise price
$16.15 to $16.72 $16.73 to $20.77 $20.78 to $28.07	1,527,500 1,207,500 545,000	7.22 $ 16.67 4.19 20.35 3.18 23.85 5.44 $ 19.22	1,042,481 1,207,500 545,000	$ 16.67 20.35 23.85
$16.15 to $28.07	3,280,000		2,794,981	$ 19.66

There were no stock options issued in 2019. The following weighted average assumptions were used to determine the fair value of options issued in 2018 under the Stock Option Plan on the date of grant:

	2019	2018
Fair value	—	2.65
Risk-free interest rate	—	2.15%
Expected life	—	5 years
Forfeiture rate	—	5.0% per annum
Expected dividend	—	$0.60 per share per annum
Expected share price volatility	—	26.4

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2019 ANNUAL FINANCIAL REVIEW

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

28. Other (Income) Expense

ther (Income) Expense
	Years ended December 31
	2019 2018
Change in fair value of investments Loss on sale of property, plant and equipment Earnings from equity investments Accretion on asset retirement obligations	$ (15) $ 3,135 2,667 281 (2,870) (3,875) 17 14
Other (income) expense	$ (201) $ (445)

29. Contingent Liabilities

Mullen Group is involved in various claims and actions arising in the course of its operations and is subject to various legal actions and possible claims. Although the outcome of these claims cannot be predicted with certainty, Mullen Group does not expect these matters to have a material adverse effect on its financial position, cash flows or results from operations. Accruals for litigation, claims and assessments are recognized if Mullen Group determines that the loss is probable and the amount can be reasonably estimated. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on Mullen Group's consolidated net earnings in the period in which the outcome is determined.

30. Capital Commitments

Capital expenditures approved and committed to but not provided for in these accounts at December 31, 2019, amounted to $12.0 million. The majority of these capital expenditure commitments will be completed in fiscal 2020.

31. Financial Instruments

Mullen Group's operating activities expose it to a variety of financial risks. These financial risks consist of certain credit, liquidity, and market risks associated with Mullen Group's financial assets and financial liabilities. Mullen Group has established and follows certain policies and procedures to mitigate these risks and continually monitors its exposure to all significant risks to assess the impact on its operating activities. Mullen Group does not hold or use any derivative financial instruments for trading or speculative purposes. The following details Mullen Group's exposure to credit, liquidity, and market risks.

• (a) Credit Risk

Credit risk is the possibility of a financial loss to Mullen Group if a customer or counterparty to a financial asset fails to meet its contractual obligations. This risk arises predominately from Mullen Group's trade and other receivables from its customers. The carrying amount of financial assets represents Mullen Group's maximum credit risk exposure. The maximum exposure to credit risk at the reporting date was as follows:

			December 31		December 31
Carrying amount	Note		2019		2018
Cash and cash equivalents	6	$	79,023	$	3,916
Trade and other receivables	7		211,209		218,089
Derivative financial instruments	14		41,375		42,211
Other assets	15		3,459		4,830
		$	335,066	$	269,046

Credit risk related to trade and other receivables is initially managed by each Business Unit. Each Business Unit is responsible for reviewing the credit risk for each of their customers before standard payment and delivery terms and conditions are offered. The Business Units review consists of external ratings, when available, and in some cases bank and trade references. Management has established a credit policy under which new customers are analyzed for creditworthiness before Mullen Group extends credit. Mullen Group monitors its trade and other receivables aging on an ongoing basis as part of its process in managing its credit risk. Mullen Group also manages credit risk related to trade and other receivables on a consolidated basis whereby the aggregate exposure to individual customers is reviewed and their credit quality is assessed. In the unlikely event of default by its customers, Mullen Group secures a security interest for items in possession prior to commencing work and registers liens when appropriate. Further, the federal Bill of Lading Act, its provincial counterparts and various other acts afford Mullen Group further protection in the event of default. Mullen Group also attends industry forums to assess credit worthiness of customers related predominately to the oil and natural gas industry. No customer accounted for more than ten percent of Mullen Group's consolidated revenue for the fiscal years ended 2019 and 2018.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Impairment losses arise when trade receivables are written off directly against the financial asset, which results from customers who cannot pay their outstanding balance. In 2019 an impairment loss of $1.2 million (2018 – $0.4 million) was recognized which related to customers that were not able to pay their outstanding balances, mainly due to the customer having insufficient cash or other financial assets. During the period, the impairment loss as a percentage of consolidated revenue was less than 0.09 percent (2018 – 0.04 percent). Mullen Group establishes, on a specific account basis, an allowance for impairment loss that represents its estimate of potential losses in respect of trade receivables.  For more information refer to Note 7 .

• (b) Liquidity Risk

Liquidity risk is the risk that Mullen Group will not be able to satisfy its obligations associated with its financial liabilities that are to be settled by delivering cash as they become due. Mullen Group's approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to satisfy its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Mullen Group's reputation. Typically, Mullen Group ensures that it has sufficient cash or available credit facilities to meet expected operational expenses; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Mullen Group manages liquidity risk by preparing, monitoring and approving annual operating budgets to ensure it has sufficient cash to meet operational requirements, and to ensure its ongoing compliance with its Private Placement Debt covenants. The Board also considers liquidity risk when approving Mullen Group's annual net capital expenditure budget and when declaring dividends to shareholders. Mullen Group's surplus cash is invested in short-term highly liquid term deposits. At December 31, 2019, Mullen Group did not have any amounts drawn on its $150.0 million Bank Credit Facility.  For more information refer to Note 21 .

The following are the contractual maturities of financial liabilities, excluding the impact of any option to purchase equipment at the end of the term:

December 31, 2019 Carrying amount	Contractual cash flows Twelve months or less 2021 - 2022 2023 - 2024	Thereafter
Private Placement Debt $ 467,392 Interest on Private Placement Debt 3,526 2019 Debentures 108,764 Interest on the 2019 Debentures 599 Lease liabilities 40,686 Accounts payable and accrued liabilities(1) 85,903 Dividendspayable 5,241	$ 468,425 $ — $ — $ 239,960 110,203 18,398 36,795 36,795 125,000 — — — 49,714 7,188 14,375 14,375 43,754 12,125 16,615 7,381 85,903 85,903 — — 5,241 5,241 — —	$ 228,465 18,215 125,000 13,776 7,633 — —
Total $ 712,111	$ 888,240 $ 128,855 $ 67,785 $ 298,511	$ 393,089

* Assumes a U.S. dollar foreign exchange rate of $1.2988.

(1) Accounts payable and accrued liabilities of $85,903 plus $3,526 of interest on Private Placement Debt and $599 of interest on the 2019 Debentures agrees to the $90,028 of accounts payable and accrued liabilities on the Consolidated Statement of Financial Position.

	Contractual cash flows Twelve months or less 2020 - 2021 2022 - 2023	Contractual cash flows Twelve months or less 2020 - 2021 2022 - 2023
Private Placement Debt $ 482,185 Interest on Private Placement Debt 3,638 Bank indebtedness 30,000 Accounts payable and accrued liabilities(1) 95,638 Dividendspayable 5,241	$ 483,402 $ — $ — $ — 132,672 18,980 37,960 37,960 30,000 30,000 — — 95,638 95,638 — — 5,241 5,241 — —	$ 483,402 37,772 — — —
Total $ 616,702	$ 746,953 $ 149,859 $ 37,960 $ 37,960	$ 521,174

* Assumes a U.S. dollar foreign exchange rate of $1.3642.

(1) Accounts payable and accrued liabilities of $95,638 plus $3,638 of interest on Private Placement Debt agrees to the $99,276 of accounts payable and accrued liabilities on the Consolidated Statement of Financial Position.

All of the above amounts relate to non-derivative financial instruments.

(c) Market Risk

Market risk is the potential for adverse changes associated with fluctuations in foreign exchanges rates, interest rates and equity prices and their corresponding impact on the fair value or future cash flows of Mullen Group's financial instruments. The objective of management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

(i) Foreign Exchange Risk

Foreign exchange risk arises as Mullen Group enters into commercial transactions that are not denominated in its functional currency. Mullen Group is exposed to foreign exchange risk, primarily with respect to the U.S. dollar which mainly arises from its U.S. $229.0 million Senior Guaranteed Unsecured Notes (" U.S. Notes "). These U.S. Notes mature in 2024 (U.S. $117.0 million) and in 2026 (U.S. $112.0 million). Mullen Group has mitigated its foreign exchange risk with respect to the principal portion of its U.S. Notes by entering into the Cross-Currency Swaps. Annual interest of U.S. $8.9 million is payable on these U.S. Notes which also exposes Mullen Group to foreign exchange risk. This foreign exchange risk is mitigated as some of Mullen Group's Business Units generate a portion of their revenue in U.S. dollars in excess of their U.S. dollar expenses. At December 31, 2019, Mullen Group had U.S. dollar cash of $12.5 million (2018 – $7.4 million), U.S. dollar trade receivables of $5.1 million (2018 – $6.4 million) and U.S. dollar accounts payable and accrued liabilities of $2.9 million (2018 – $2.3 million). Mullen Group does not hedge any of its U.S. dollar denominated commercial and financing transactions.

All of the amounts expressed in the following table are in U.S. dollars and set forth Mullen Group's exposure to foreign currency risk:

		December 31		December 31
		2019		2018
Cash and cash equivalents	$	12,452	$	7,443
Trade and other receivables		5,149		6,419
Derivative financial instruments		31,857		30,942
Private Placement Debt		(229,000)		(229,000)
Accountspayable and accrued liabilities		(2,858)		(2,338)
Net exposure	$	(182,400)	$	(186,534)

At December 31, 2019, assuming all other variables were held constant, a $0.01 strengthening of the Canadian dollar relative to the U.S. dollar would have increased income before income taxes by approximately $1.8 million. Similarly, a $0.01 weakening of the Canadian dollar relative to the U.S. dollar at December 31, 2019 would have had the equal but opposite effect on income before income taxes.

(ii) Interest Rate Risk and Fair Value Sensitivity Analysis for Fixed Rate Instruments

Interest rate risk arises on borrowings issued at variable rates which exposes risk to future cash flows if interest rates were to rise. This risk would be partially offset by cash held at variable rates. Mullen Group's Private Placement Debt and the 2019 Debentures are issued at fixed rates while the Bank Credit Facility is issued at variable rates. Borrowings issued at fixed rates expose Mullen Group to fair value interest rate risk. Mullen Group is susceptible to the opportunity costs associated with interest rate decreases as the interest rate on the majority of its borrowings is at fixed interest rates. Assuming all other variables were held constant, if interest rates increase by 1.0 percent on the contractual cash flows of $593.4 million of Mullen Group's Private Placement Debt and the 2019 Debentures, Mullen Group would incur additional annual interest expense of approximately $5.9 million. Mullen Group does not account for any fixed rate financial assets and liabilities at FVTPL. Mullen Group does not hedge interest rates or have any interest rate swaps.

(iii) Price Risk

Price risk arises from changes in quoted prices on investments in equity securities that impact the underlying value of investments. Mullen Group has investments measured at fair value with an initial cost of $11.5 million. A $15,000 increase in the fair value of these investments was recorded in 2019 as compared to a $3.1 million decrease in 2018. Mullen Group recorded a $9.3 million decrease in the fair value of these investments on a cumulative basis. Assuming all other variables were held constant, a 1.0 percent increase in the value of the investments would have increased income before income taxes by approximately $22,000. Similarly, a 1.0 percent decrease in the value of investments would have an equal but opposite effect on income before income taxes.

(d) Capital Management

Mullen Group's objectives when managing capital are to safeguard the Corporation's ability to continue as a going concern, and manage capital that will maintain compliance with its financial covenants so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. Mullen Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, Mullen Group may adjust the amount of dividends paid to shareholders, issue new debt, sell assets to reduce debt, or issue new shares.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Consistent with others in the industry, Mullen Group also monitors capital on the basis of debt-to-equity and total debt to operating cash flow. The debt-to-equity ratio is calculated as total debt divided by equity. Total debt is calculated as the total of bank indebtedness, current portion of long-term debt, long-term debt and the debt component of the 2019 Debentures. Equity comprises all of the components of equity (i.e. share capital, 2019 Debentures – equity component, contributed surplus and retained earnings (deficit). Mullen Group's strategy is to maintain its debtto-equity ratio below 1:1. The debt-to-equity ratio calculations at December 31, 2019 and at December 31, 2018 were as follows:

December 31 2019	December 31 2018
Bank indebtedness $ — $ Lease liabilities 40,686 Long-term debt 467,392 2019 Debentures – debt component 108,764	30,000 — 482,185 —
Total debt 616,842 Share capital 946,910 2019 Debentures – equity component 9,116 Contributed surplus 16,860 Retained Deficit (54,965)	512,185 946,910 — 15,477 (64,311)
Equity $ 917,921 $ Debt to equity 0.67:1	898,076 0.57:1

Mullen Group also monitors capital on the basis of total debt to operating cash flow. The total debt to operating cash flow ratio is calculated as per the Private Placement Debt agreements. Other than the financial covenants under its Private Placement Debt, Mullen Group is not subject to externally imposed capital requirements.  For more information refer to Note 21 .

32. Subsidiaries

The tables set forth below provide information relative to Mullen Group's significant subsidiaries and its Business Units, including each entity's name, its jurisdiction of incorporation/formation, the percentage of securities directly or indirectly owned by Mullen Group, a brief description of the entity, and the market areas served, if applicable. The percentages of ownership set forth below include the approximate one percent interest owned by the general partner of each limited partnership.

Significant Subsidiaries:
Company	Percentage owned by
(Jurisdiction of Incorporation /	Mullen Group		Primary
Formation)	(directly / indirectly)	Overview	Market Area
MT Investments Inc.	100%	Wholly-owned subsidiary of Mullen Group Ltd. It was formed on	N/A
(Alberta)		July 1, 2005, when Mullen Transportation Inc. was amalgamated with
		certain other corporations pursuant to a plan of arrangement under the
		Business Corporations Act(Alberta) to form a corporation known as
		MT Investments Inc.
MGL Holding Co. Ltd.	100%	Wholly-owned subsidiary of MT Investments Inc., which was	N/A
(Alberta)		incorporated in Alberta on December 22, 2016. It is the limited partner
		of various Business Units.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Trucking/Logistics segment:
Business Unit	Percentage owned by Mullen Group	Primary
(Jurisdiction of Incorporation / Formation)	(indirectly)	Market Area
Caneda Transport Ltd.	100%	Canada and U.S.
(Alberta)
Cascade Carriers L.P.	100%	Western Canada
(Alberta)
Courtesy Freight Systems Ltd.	100%	Northwestern Ontario
(Ontario)
DWS Logistics Inc.(1)	100%	Ontario
(Ontario)
Gardewine Group Limited Partnership	100%	Manitoba and Ontario
(Manitoba)
Grimshaw Trucking L.P.	100%	Western Canada
(Alberta)
Hi-Way 9 Express Ltd.(2) (3) (4) (5)	100%	Western Canada
(Alberta)
Jay's Transportation Group Ltd.	100%	Saskatchewan
(Saskatchewan)
Kleysen Group Ltd.	100%	Western Canada
(Alberta)
Mullen Trucking Corp.	100%	Canada and U.S.
(Alberta)
Payne Transportation Ltd.	100%	Canada and U.S.
(Alberta)
RDK Transportation Co. Inc.	100%	Canada and U.S.
(Saskatchewan)
Smook Contractors Ltd.	100%	Northern Manitoba
(Manitoba)
Tenold Transportation Ltd.(6) (7)	100%	Canada and U.S.
(Alberta)

(1) Acquired February 9, 2018.

(2) On January 1, 2019, the operations of Bernard Transport Ltd. were combined into Hi-Way 9 Express Ltd.

(3) Includes Dacota Freight Services Ltd., which was acquired on April 6, 2018.

(4) Includes Jen Express Inc., which was acquired on May 1, 2019.

(5) On January 1, 2020, the operations of Load-Way Ltd. and Streamline Logistics Inc., were integrated into Hi-Way 9 Express Ltd.

(6) Includes the business and assets contributed to Number 8 Freight Ltd., which were acquired on August 1, 2018.

(7) Includes Argus Carriers Ltd. and Inter-Urban Delivery Service Ltd., which were acquired on July 1, 2019.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Oilfield Services segment:
Business Unit	Percentage owned by Mullen Group	Primary
(Jurisdiction of Incorporation / Formation)	(indirectly)	Market Area
Canadian Dewatering L.P.	100%	Western Canada
(Alberta)
Cascade Energy Services L.P.(1)	100%	Western Canada
(Alberta)
Canadian Hydrovac Ltd.(2)	100%	Western Canada
(Alberta)
E-Can Oilfield Services L.P.(1)	100%	Western Canada
(Alberta)
Envolve Energy Services Corp.	100%	Western Canada
(Alberta)
Formula Powell L.P.	100%	Western Canada
(Alberta)
Heavy Crude Hauling L.P.(1)	100%	Western Canada
(Alberta)
Mullen Oilfield Services L.P.	100%	Western Canada
(Alberta)
OK Drilling Services L.P.	100%	Western Canada
(Alberta)
Pe Ben Oilfield Services L.P.	100%	Western Canada
(Alberta)
Premay Equipment L.P.	100%	Western Canada
(Alberta)
Premay Pipeline Hauling L.P.	100%	Western Canada
(Alberta)
R. E. Line Trucking (Coleville) Ltd.	100%	Western Canada
(Saskatchewan)
Recon Utility Search L.P.	100%	Western Canada
(Alberta)
Spearing Service L.P.	100%	Western Canada
(Alberta)
TREO Drilling Services L.P.	100%	Western Canada
(Alberta)

(1) Includes a portion of AECOM's Canadian Industrial Services Division, which was acquired on June 25, 2018.

(2) Acquired July 1, 2018.

33. Changes in non-cash working capital

Changes in non-cash working capital
	Years ended December 31
	2019	2018
Trade and other receivables Inventory Prepaid expenses Accountspayable and accrued liabilities	$ 13,335 $ 863 (3,472) (11,258)	(26,186) (3,674) (89) 4,172
	$ (532) $	(25,777)
	Years ended December 31
	2019	2018
Changes in non-cash working capital items from: Operating activities Financing activities Investingactivities	$ (466) $ (112) 46	(26,452) 187 488
	$ (532) $	(25,777)

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

34. Operating Segments

Judgements: Judgements are made by management in applying the aggregation criteria to allow two or more operating segments to be aggregated based upon similar economic characteristic and other similarities.

Policy: Business Units are grouped into two distinct operating segments: Trucking/Logistics and Oilfield Services (the " Operating Segments "), both of which are supported by a Corporate segment. The Business Units within each of the Operating Segments share common economic characteristics and are differentiated by the type of service provided, equipment requirements and customer needs. The Operating Segments' financial results are reviewed regularly by the Corporation's chief operating decision-makers who make decisions about resource allocation and assess segment performance based on the internally prepared segment information.

Supporting information:

Mullen Group has two operating segments. These two operating segments have been differentiated by the sector of the economy in which the businesses operate, the type of services provided, the equipment requirements and the customer needs. The Trucking/Logistics segment provides both long haul and local transportation services to customers in various industries predominantly within Canada. The Oilfield Services segment primarily provides specialized transportation, fluid hauling, waste disposal, warehousing, drilling, well-servicing and dewatering services to the oil and natural gas industry in western Canada, which includes exploration and development companies and production and natural gas transmission companies. The following tables provide financial results by segment:

Year ended December 31, 2019	Trucking/ Logistics	Oilfield Services Corporate	Intersegment eliminations	Total
			Trucking/ Logistics Oilfield Services
Revenue Income before income taxes Depreciation of property, plant and equipment Amortization of intangible assets Capital expenditures(1) Total assets at December 31, 2019	$	$ $	$ $	$
	881,624 65,284 27,856 15,309 44,421 643,015	400,136 3,881 3,366 11,487 46,474 6,146 3,996 — 18,519 17,092 450,938 655,339	(5,596) (1,543) — — — — — — (268) (4,742) — —	1,278,502 80,137 80,476 19,305 75,022 1,749,292

(1) Excludes business acquisitions

	Trucking/ Logistics	Oilfield Services Corporate	Intersegment eliminations	Total
			Trucking/ Logistics Oilfield Services
Revenue Income (loss) before income taxes Depreciation of property, plant and equipment Amortization of intangible assets Capital expenditures(1) Total assets at December 31, 2018	$	$ $	$ $	$
	873,337 73,393 23,502 11,969 52,034 573,859	389,934 5,071 (90,452) (9,534) 42,212 6,336 3,470 — 29,011 20,574 501,857 570,136	(5,777) (1,767) — — — — — — (39) (1,871) — —	1,260,798 (26,593) 72,050 15,439 99,709 1,645,852

(1) Excludes business acquisitions

Performance is measured based on segment income before income tax, as included in the internal management reports that are reviewed by Mullen Group's CEO and President. Segment income is used to measure performance as management believes that such information is the most relevant in evaluating the results of segments relative to other entities that operate within these industries.

In the first quarter of 2020, we will commence with reporting our financial results in three new segments: Less-Than-Truckload; Logistics & Warehousing; and Specialized & Industrial Services. The change in the segment reporting structure more accurately reflects our strategic direction and the business of Mullen Group today and aligns with how financial information will be regularly reviewed internally for the purposes of decision making, capital allocation and assessing performance. Our results will be reported in the following segments.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

Less-Than-Truckload

Less-Than-Truckload or LTL is often referred to as the final or last mile delivery of general freight consisting of smaller shipments, packages and parcels. Through an extensive terminal network the pickup, handling and delivery of a wide range of freight including ambient, temperature controlled and consumer goods is coordinated from regional hubs located in Ontario and western Canada. We are committed to investing in the most advanced technologies available ensuring the continued improvement in all aspects of our business, shortening delivery times and providing customers with visibility, via tracking and tracing, to their shipments during transit. The segment will initially be comprised of eight Business Units.

Logistics & Warehousing

The Logistics & Warehousing segment provides shippers throughout North America with a wide range of trucking and logistics service offerings including full truckload, specialized transportation, warehousing, fulfillment centres that handle e-commerce transactions, and transload facilities designed for intermodal and bulk shipments. Operations and customer service are supported by a robust suite of leading edge technology solutions including a fully integrated transportation management system, customized inventory management and warehouse systems along with our proprietary Moveitonline[®] and Haulistic[TM] technology platforms, applications that are positioning our organization for an evolving and changing supply chain. The segment currently consists of nine Business Units.

Specialized & Industrial Services

The Specialized & Industrial Services segment is comprised of a wide range of unique businesses providing specialized equipment and services to the oil and natural gas, environmental, construction, pipeline, utility, telecom and civil industries. Strategically located throughout western Canada these specialty Business Units are focused on providing advanced technology solutions and leading edge service capabilities. The segment includes 17 Business Units.

The following table provides financial information that conforms to the Corporation's new segment presentation commencing in the first quarter of 2020 on a retrospective basis for comparative purposes:

	Less-than- Truckload	Logistics & Warehousing Specialized & Industrial Services Corporate	Intersegment eliminations	Intersegment eliminations
			Less-than- Truckload Logistics & Warehousing Specialized & Industrial Services
Revenue Income before income taxes Depreciation of property, plant and equipment Amortization of intangible assets Capital expenditures Total assets at December 31, 2019	$	$ $ $	$ $ $	$
	451,582 30,833 13,351 9,215 26,280 355,764	404,840 426,312 3,881 33,832 3,985 11,487 12,281 48,698 6,146 6,094 3,996 — 17,160 19,907 17,092 263,161 475,028 655,339	(503) (5,808) (1,802) — — — — — — — — — (7) (670) (4,740) — — —	1,278,502 80,137 80,476 19,305 75,022 1,749,292

Year ended December 31, 2018	Less-than- Truckload	Logistics & Warehousing Specialized & Industrial Services Corporate	Intersegment eliminations	Total
			Less-than- Truckload Logistics & Warehousing Specialized & Industrial Services
Revenue Income (loss) before income taxes Depreciation of property, plant and equipment Amortization of intangible assets Capital expenditures Total assets at December 31, 2018	$	$ $ $	$ $ $	$
	429,286 34,129 11,597 6,046 24,606 306,309	424,852 410,578 5,071 38,994 (90,182) (9,534) 9,465 44,652 6,336 5,922 3,471 — 25,585 30,582 20,574 245,555 523,852 570,136	(525) (6,326) (2,138) — — — — — — — — — (47) (138) (1,453) — — —	1,260,798 (26,593) 72,050 15,439 99,709 1,645,852

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS Years ended December 31, 2019 and 2018 (Tabular amounts in thousands, except share and per share amounts)

35. Related Party Disclosures

(a) Key Management Personnel Compensation

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the business activities of Mullen Group, including all of its directors along with certain executives. Directors are remunerated for services rendered in their capacity as directors by way of a combination of retainer fees and meeting attendance fees. The overall compensation program for executives is comprised of base salary and benefits, annual profit share and share-based compensation payments. Executives of Mullen Group do not have formal employment contracts. Similar to the employment processes established for all Mullen Group employees, each executive's personnel file contains a memorandum outlining the basic terms of an executive's employment relationship with Mullen Group. Mullen Group has no agreement or arrangement with any executive for the payment of compensation in the case of resignation, retirement, or termination of employment, a change of control of Mullen Group or its Business Units or a change in an executive's responsibilities following a change of control. Key management personnel do not participate in a defined benefit or actuarial pension plan, however, key management personnel do participate in the Stock Option Plan. Total remuneration to key management personnel including directors' fees, salaries and benefits, annual profit share, and the value attributable to stock-based compensation expense was as follows:  For more information refer to Note 27 .

Years Ended December 31 Category 2019 2018	Years Ended December 31 Category 2019 2018
Salaries and benefits (including profit share) $ 1,636 Share-basedpayments 50	$ 1,569 61
Total $ 1,686	$ 1,630

Mullen Group had no outstanding amounts owing to or amounts receivable from directors or officers at December 31, 2019, and 2018, with respect to the overall compensation program for executives. As at December 31, 2019, directors and officers of Mullen Group collectively held 5,505,008 Common Shares (2018 – 5,498,699) representing 5.3 percent (2018 – 5.3 percent) of all Common Shares of the Corporation. As at December 31, 2019, directors and officers of Mullen Group held $4.8 million of the 2019 Debentures under the same terms and conditions as those issued to unrelated third parties. Other than these $4.8 million of 2019 Debentures, Mullen Group has no contracts with any related party.

(b) Related Party Transactions

During the year, Mullen Group generated revenue of $16,070 (2018 – $7,670) and incurred expenses of $25,025 (2018 – $6,300) with entities that are related by virtue of a certain member of the Board having control or joint control over the other entities. There were no (2018 – nil) accounts receivable amounts due from these related parties as at December 31, 2019.

During the year, Mullen Group generated revenue of $4.9 million (2018 – $3.0 million), incurred expenses of $0.6 million (2018 – $0.2 million) and sold nil (2018 – $0.1 million) of property, plant and equipment with its equity investees, which are accounted for by the equity method of accounting. As at December 31, 2019, there was $0.2 million (2018 – $0.4 million) of accounts receivable amounts due from equity investees, excluding debentures, and there was $16,554 (2018 – $19,931) of accounts payable amounts due to these related party transactions. At December 31, 2019, Mullen Group had $7.8 million (10.0 percent annual interest rate) and $3.2 million (8.5 percent annual interest rate) of debentures owing from Thrive and PCX, respectively. The debentures with Thrive mature in October 2020, while the PCX debenture matures in December 2020.

All related party transactions were provided in the normal course of business materially under the same commercial terms and conditions as transactions with unrelated companies and recorded at the exchange amount.

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