The Churchill Corporation Reports Second Quarter Results



    Record Revenue and Earnings

    EDMONTON, Aug. 13 /CNW/ - The Churchill Corporation (TSX: CUQ) today
reported record revenues and record net earnings for Q2, 2007.

    
    Consolidated Financial Highlights

    -------------------------------------------------------------------------
                                              Three months ended
                                                    June 30
                                  -------------------------------------------
    ($ millions, except                                      $           %
     per share amounts)             2007        2006      Change      Change
    -------------------------------------------------------------------------
    Contract Revenue              $186.9      $121.6       $65.3         54%
    Contract Income                 16.9        11.4         5.5         48%
    EBITDA(1)                        8.3         2.4         5.9        246%
    Earnings before Tax              7.4         1.4         6.0        429%
    Net Earnings                     5.0         0.8         4.2        525%
      Per Share - Basic            $0.28       $0.05       $0.23        460%
    Work-in-hand                   757.4       353.7       403.7        114%
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                Six months ended
                                                    June 30
                                  -------------------------------------------
    ($ millions, except                                      $           %
     per share amounts)             2007        2006      Change      Change
    -------------------------------------------------------------------------
    Contract Revenue              $340.8      $233.4      $107.4         46%
    Contract Income                 29.3        21.1         8.2         39%
    EBITDA(1)                       12.6         4.2         8.4        200%
    Earnings before Tax             10.7         2.3         8.4        365%
    Net Earnings                     7.4         1.4         6.0        429%
      Per Share - Basic            $0.42       $0.08       $0.34        425%
    Work-in-hand                   757.4       353.7       403.7        114%
    -------------------------------------------------------------------------

    (1) Refer to the "Terminology" section for further details.
    

    Record construction volume of $186.9 million propelled Churchill to its
most profitable quarter in company history. The Corporation reported net
earnings of $5.0 million ($0.28 per share), a 525% increase over the net
earnings in 2006 of $0.8 million ($0.05 per share). High activity levels in
the building construction and industrial electrical contracting segments
supported this growth in volume. The quarter was highlighted by the
achievement of profit in all of our operating companies and growth of our
work-in-hand to a record $757.4 million.
    "We are pleased to report the best quarter of revenue and profits in
company history," said Churchill Chairman and Interim Chief Executive Officer,
Peter Adams. "Contract income margins continue to strengthen, particularly at
Triton as better margins are achieved on recently executed contracts.
Additionally, our backlog of work-in-hand continues to grow, primarily at
Stuart Olson. Looking ahead to the balance of 2007, we expect our industrial
operations to maintain their combined volume and Stuart Olson to continue
growing."

    RESULTS OF OPERATIONS

    Buildings
    ---------

    Stuart Olson had work-in-hand of $501.5 million at March 31, 2007. For
the three months ended June 30, 2007, the company secured a further
$291.5 million of contracts, $160.0 million more than it secured in the same
quarter of 2006. The backlog grew significantly in the Alberta region as
compared to British Columbia during the quarter. New contracts were added to
the backlog from clients such as the City of Red Deer, the Regional
Municipality of Wood Buffalo and the Edmonton Airport Authority. During the
quarter, the company executed and took into revenue $130.2 million. The
company ended the quarter with $662.8 million of work-in-hand, of which
$363.9 million is expected to carryover into 2008.
    For the three months ended June 30, 2007, Stuart Olson's revenues
increased by $61.5 million to $130.2 million, compared to $68.7 million in the
prior year. This increase in revenue was due to the greater backlog and higher
levels of activity, particularly in the Alberta offices. Year to date, Stuart
Olson has been active on projects for the Calgary Regional Health Authority,
Capital Health (Edmonton), the Regional Municipality of Wood Buffalo and
various private sector clients such as Sysco Food Services.
    Contract income in the second quarter increased to $8.3 million from
$4.0 million in 2006, an increase of $4.3 million. The contract income margin
percentage was higher at 6.4% in 2007 compared to 5.8% in 2006 as a result of
strong project execution. Earnings before tax increased to $4.5 million in the
second quarter of 2007, compared to $1.1 million in 2006. Earnings before tax
improved as a result of stronger margins and controlled spending on indirect
and administrative expenses.
    For the six months ended June 30, 2007, Stuart Olson reported revenues of
$229.3 million compared to revenues of $126.9 million last year. This
$102.4 million growth in revenue on a year-over-year basis was generated by
increased activity in the Alberta branches, while the British Columbia branch
declined slightly.
    Contract income for the first six months of 2007 was $14.5 million
compared to $7.7 million in 2006. Contract income margin percentage was 6.3%
compared to 6.1%, respectively. Earnings before tax increased to $7.2 million
compared to $2.0 million. A strong market combined with solid project
execution has allowed Stuart Olson to be more profitable.

    Industrial General Contracting
    ------------------------------

    Triton had work-in-hand of $28.6 million at March 31, 2007. For the
quarter ending June 30, 2007, the company secured a further $2.7 million of
contracts, compared to $15.1 million of new work secured in Q2, 2006. The
company executed $10.6 million of contractual work during the quarter and as a
result had $20.7 million of work-in-hand to complete in the current year. The
level of new work secured this quarter was reduced due to delays in the
awarding of some contracts and other awarded packages going to competitors.
Triton's management expects to secure additional contracts as the year
progresses, which are expected to increase the backlog and revenue.
    Revenues at Triton of $10.6 million were $1.7 million lower than in the
second quarter of 2006. While Triton's second quarter revenue was lower than
in the previous year, this was a $1.3 million improvement on the amount
reported in the first quarter of 2007. Triton supplied fabrication,
maintenance and construction services during the second quarter to clients
including Metacor, Terasen, Encana and CNRL.
    Contract income margin percentage was 18.9% in Q2, 2007 an increase from
6.0% in the second quarter of 2006. Triton is beginning to demonstrate the
improvements in efficiency that Churchill management has been seeking. Triton
delivered earnings before tax of $0.5 million for the current quarter,
compared to a loss before tax of $1.0 million in 2006.
    For the six months ended June 30, 2007, Triton reported revenues of
$19.9 million compared to revenues of $29.6 million last year. The majority of
this revenue differential can be attributed to the construction segment at
Triton where it has proven more difficult to regain market share. This
$9.7 million year-over-year decrease in revenue during the first six months of
2007 is a result of Triton beginning 2007 with a backlog $10.5 million smaller
than in 2006 and securing $2.1 million less of new work, year to date.
    Contract income for the first six months of 2007 was $2.9 million
compared to $3.9 million in 2006. Contract income margin percentage in 2007
was 14.6% compared to 13.2%, in 2006. Contract income in the first half of
2006 included $2.2 million of recoveries on loss provisions recorded in
previous year; otherwise the 2006 contract income margin percentage would have
been 7.0%. Triton's year to date loss before tax was $0.2 million, compared to
earnings before tax of $0.1 million in 2006.

    Industrial Insulation Contracting
    ---------------------------------

    Industrial Insulation Contracting (also referred to as Insulation
Holdings Inc.) operates under three business units - Fuller Austin, Northern
Industrial Insulation and Lakehead Insulation - all providing insulation
related contracting services for capital projects and maintenance work.
    Industrial Insulation Contracting had combined work-in-hand of
$21.8 million at March 31, 2007. For the three months ended June 30, 2007,
they secured a further $16.3 million of contracts, which was $3.9 million
greater than in the same period of 2006. Awards were received in the current
quarter from Agrium, Suncor, Sherritt and AMEC. The insulation companies
executed $10.9 million of work during the second quarter, resulting in a
backlog of $27.2 million of work-in-hand, $3.3 million of which is expected to
carry forward into 2008.
    Revenue for three months ended June 30, 2007, was $10.9 million, compared
to $16.1 million for the period ending June 30, 2006. During the quarter, the
insulation companies were engaged to complete projects for clients including
Suncor, Syncrude and Nexen. Activity levels in the second quarter of 2006 were
supported by the continuation of work on a major oil sands project.
    Despite the reduced volume of work in the quarter, contract income was
$2.5 million, almost unchanged from the $2.6 million achieved in the
comparable period of 2006. The similar contract income was as a result of
strong project execution by the insulation companies. The contract income
margin percentage was 22.9% in Q2, 2007 compared to 16.1% in Q2, 2006.
    Earnings before tax in the Industrial Insulation Contracting segment was
$1.3 million for the quarter, unchanged from the second quarter of 2006. The
primary reason for the consistent earnings was the higher contract income
margin percentage.
    For the six months ended June 30, 2007, the Industrial Insulation segment
reported revenues of $22.8 million compared to revenues of $38.5 million last
year. The majority of the $15.7 million revenue differential is associated
with work completed in 2006 by Fuller Austin on a major oil sands project.
    Contract income for the first six months of 2007 was $4.2 million
compared to $4.3 million in the comparable period of 2006. Contract income
margin percentage was 18.4% compared to 11.2%, respectively. This increase in
contract income margin percentage was due to solid project execution in 2007
and the inclusion in 2006 of a major oil sands contract which was bid at a
lower margin. Earnings before tax year to date increased to $1.9 million
compared to $1.8 million in 2006.

    Industrial Electrical Contracting
    ---------------------------------

    Laird reported work-in-hand of $44.8 million at the end of March 2007. In
the second quarter of 2007, new contract awards of $37.1 million were secured
compared to $3.2 million in 2006. New contract awards were received from
customers such as Nexen, TransAlta and Suncor. During the period,
$35.3 million of work was executed, leaving a backlog of $46.6 million
remaining to be completed as at June 30, 2007.
    For the three months ended June 30, 2007, Laird's revenue increased by
$10.8 million to $35.3 million, compared to $24.5 million reported for the
same period of 2006. This significant revenue increase was generated from site
work for Suncor, Nexen, Albian and TransAlta.
    Contract income improved from $3.8 million in Q2, 2006 to $4.1 million in
Q2, 2007 due to the higher volume of activity. Laird achieved earnings before
tax of $2.6 million in the second quarter of 2007 compared to earnings before
tax of $1.6 million in 2006. The improvement in earnings before tax was a
result of unchanged indirect and administrative expenses notwithstanding a
significant increase in the volume of work executed.
    For the six months ended June 30, 2007, Laird reported revenues of
$68.9 million compared to revenues of $38.3 million last year. A significant
portion of this $30.6 million increase has been from maintenance related
activities for a major oil sands client.
    Contract income for the first six months of 2007 was $7.4 million
compared to $4.7 million in 2006. Contract income margin percentage was 10.7%
compared to 12.3%, respectively. Earnings before tax year to date increased to
$4.3 million compared to $1.4 million in 2006. Record volumes and solid
expense management has allowed Laird to generate greater earnings.

    Corporate and Other
    -------------------

    In the second quarter of 2007, the Corporate and Other segment incurred
$1.6 million of indirect and administrative expenses unchanged from $1.6
million of indirect and administrative expenses in the second quarter of 2006.
For the six months ended June 30, 2007, the Corporate and Other segment
incurred indirect and administrative expenses of $2.5 million compared to $3.1
million for the same period in 2006. Expenses attributed to Churchill were
reduced due to a change in the allocation of information technology expenses
as well as a temporary reduction in headcount at the corporate office.

    CASH FLOW, FINANCING, CAPITAL REQUIREMENTS, LIQUIDITY

    Cash and cash equivalents at June 30, 2007, totaled $67.4 million, which
compares with $50.4 million at the end of 2006. Of the $67.4 million of cash
and cash equivalents, $12.9 million was subject to deemed trust conditions
under the British Columbia Lien Act, compared to $10.7 million at December 31,
2006. As such, this cash is restricted to the payment of direct costs related
to specific construction projects.
    Cash provided from operating activities amounted to $11.4 million in the
quarter, which compares to $6.1 million of cash provided from operations
during the second quarter of 2006. This favourable change of $5.3 million is a
result of greater net earnings in 2007 and cash positive changes in the
working capital accounts.
    Investing activities resulted in a use of cash of $1.7 million during the
second quarter of 2007, which compares with cash used of $0.5 million in Q2,
2006. This increased use of cash year-over-year, resulted from greater
investment in property and construction equipment.
    Cash used in financing activities amounted to $0.3 million in the quarter
ended June 30, 2007, compared to $1.0 million of cash provided from financing
activities in Q2, 2006. At June 30, 2007, the Corporation had drawn on
$15.5 million of its $21.0 million operating line of credit. Proceeds and
repayments applied to the line of credit during the second quarter were nil
compared to $1.2 million of proceeds received from the line of credit in the
second quarter of 2006. The Corporation increased long-term debt by use of
finance contracts in the amount of $0.2 million to acquire vehicles in the
second quarter of 2007 and 2006. During the second quarter, the Corporation
repaid $0.4 million of long-term debt (2006 - $0.2 million) and $0.1 million
of the demand term loan (2006 - $0.2 million).
    Cash provided from operating activities of $16.7 million in the first six
months of 2007 was $18.2 million greater than in the same period last year.
This year-over-year improvement can be attributed to increased earnings and
lower working capital investment.
    For the six months ended June 30, 2007, investing activities resulted in
a use of cash of $3.0 million compared to $5.5 million of cash used in the
prior year. The Corporation has primarily used cash for additions to property
and equipment in 2007, while in 2006 $4.0 million of cash was classified as a
long-term asset.
    For the six months ended June 30, 2007, cash generated from financing
activities amounted to $3.2 million compared to $5.3 million in 2006. Proceeds
and repayments applied to the line of credit year to date equaled $3.5 million
of cash received, compared to $5.6 million of cash utilized in 2006. Issuances
and repayments of long-term debt were similar in 2007 and 2006. Also
repayments associated with the demand term loan in 2007 and 2006 were equal.
At June 30, 2007, long-term debt, including the current portion amounted to
$4.8 million, compared to $4.3 million at the end of 2006. As at June 30,
2007, the Corporation was in compliance with the repayment terms associated
with its long term obligations.
    At June 30, 2007, Churchill had working capital of $33.1 million which
was greater than the 2006 year-end working capital position of $27.4 million.
    Shareholders' equity was $55.1 million at June 30, 2007, as compared to
$47.7 million at December 31, 2006. Year to date contributed surplus has
increased $37 thousand as a result of the recognition of stock-based
compensation. Retained earnings increased from $26.4 million at December 31,
2006, to $33.8 million, reflecting the year to date net earnings of
$7.4 million.
    At June 30, 2007, there were 17,667,491 Common Shares and 455,000 options
outstanding (December 31, 2006 - 17,667,491 Common Shares and 571,667
options). During the period from July 1, 2007, to August 9, 2007, no new share
options were issued; and 50,000 share options were exercised.
    The Corporation has an Employee Share Purchase Plan available to all
full-time employees. As at July 3, 2007, the Plan held 1,323,080 Churchill
Common Shares for the employees. Under the Plan, shares are acquired in the
open market.

    
    Consolidated Balance Sheets

    ($ thousands)
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007        2006(*)
                                                    (unaudited)
    -------------------------------------------------------------------------
    ASSETS
    Current Assets
      Cash and cash equivalents                     $   67,390    $   50,387
      Accounts receivable                              140,353        83,369
      Inventories and prepaid expenses                   2,118         1,174
      Costs in excess of billings                            -           620
    -------------------------------------------------------------------------
                                                       209,861       135,550

    Long-term cash and equivalents                       4,000         4,000
    Future income tax assets                               634           631
    Property and equipment                              19,611        17,816
    Intellectual property                                  147           189
    Goodwill                                             7,315         7,315
    -------------------------------------------------------------------------
                                                    $  241,568    $  165,501
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current Liabilities
      Operating line of credit                      $   15,500    $   12,000
      Accounts payable and accrued liabilities         120,492        86,191
      Contract advances and unearned income             34,002             -
      Income taxes payable                                 433         4,327
      Future income tax liabilities                      4,519         3,902
      Demand term loan                                   6,435         6,825
      Current portion of long-term debt                  1,113           917
    -------------------------------------------------------------------------
                                                       182,494       114,162

    Long-term debt                                       3,642         3,419
    Future income tax liabilities                          353           231
    -------------------------------------------------------------------------
                                                       186,489       117,812
    SHAREHOLDERS' EQUITY
    Share capital                                       15,508        15,508
    Contributed surplus                                  5,816         5,779
    Retained earnings                                   33,755        26,402
    Accumulated other comprehensive income                   -             -
    -------------------------------------------------------------------------
                                                        55,079        47,689
    -------------------------------------------------------------------------

                                                    $  241,568    $  165,501
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (*) Figures excerpted from the 2006 audited consolidated financial
        statements



    Consolidated Statements of Earnings and Retained Earnings

    ($ thousands,               Three months ended          Six months ended
     except share data)         June 30 (Unaudited)       June 30 (Unaudited)
    -------------------------------------------------------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------

      Contract revenue    $   186,937  $   121,592  $   340,841  $   233,428
      Contract costs          170,063      110,204      311,533      212,370
    -------------------------------------------------------------------------
      Contract income          16,874       11,388       29,308       21,058

      Interest income             516          186          929          312
      Sundry income               292          190          296          369
      Indirect and
       administrative
       expenses                (9,370)      (9,415)     (17,950)     (17,643)
      Depreciation and
       amortization              (770)        (652)      (1,510)      (1,250)
      Interest expense           (179)        (306)        (373)        (575)
    -------------------------------------------------------------------------
    Earnings before
     income taxes               7,363        1,391       10,700        2,271
    -------------------------------------------------------------------------
    Income tax expense
      Current income tax       (2,241)        (100)      (2,611)        (120)
      Future income tax           (88)        (479)        (736)        (775)
    -------------------------------------------------------------------------
                               (2,329)        (579)      (3,347)        (895)
    -------------------------------------------------------------------------
    Net earnings                5,034          812        7,353        1,376

    Retained earnings,
     beginning of period       28,721       19,557       26,402       18,993
    Return of Laird
     escrowed shares                -         (731)           -         (731)
    -------------------------------------------------------------------------
    Retained earnings,
     end of period        $    33,755  $    19,638  $    33,755  $    19,638

    Net earnings per
     common share
      Basic               $      0.28  $      0.05  $      0.42  $      0.08
      Fully diluted       $      0.28  $      0.04  $      0.41  $      0.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     common shares:
      Basic                17,667,491   17,881,992   17,667,491   17,887,080
      Diluted              17,949,780   18,129,943   17,932,268   18,123,415
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Comprehensive Earnings and Accumulated
    Comprehensive Earnings

                                Three months ended          Six months ended
    ($ thousands)               June 30 (Unaudited)       June 30 (Unaudited)
    -------------------------------------------------------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net earnings          $     5,034  $       812  $     7,353  $     1,376
    Other comprehensive
     earnings, net                  -            -            -            -
    -------------------------------------------------------------------------
    Comprehensive
     earnings             $     5,034  $       812  $     7,353  $     1,376
    -------------------------------------------------------------------------

    Accumulated
     comprehensive
     earnings, beginning
     of period            $         -  $         -  $         -  $         -
    Other comprehensive
     earnings for the
     period                         -            -            -            -
    -------------------------------------------------------------------------
    Accumulated
     comprehensive
     earnings, end of
     period               $         -  $         -  $         -  $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flow

                                Three months ended          Six months ended
    ($ thousands)               June 30 (Unaudited)       June 30 (Unaudited)
    -------------------------------------------------------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net earnings          $     5,034  $       812  $     7,353  $     1,376
      Depreciation and
       amortization               770          652        1,510        1,250
      Gain on disposal of
       equipment                  (14)          (3)         (16)         (10)
      Future income taxes          88          479          736          775
      Stock-based
       compensation                30           68           37           79
    -------------------------------------------------------------------------
                                5,908        2,008        9,620        3,470

    Net change in
     accounts receivable,
     inventories and
     prepaid expenses         (17,254)     (10,182)     (57,928)     (16,098)
    Net change in
     accounts payable          19,396        5,583       34,301      (14,509)
    Net change in contract
     advances and unearned
     income and costs in
     excess of billings         3,284        5,760       34,622       22,708
    Net change in income
     taxes payable                 66        2,900       (3,894)       2,900
    -------------------------------------------------------------------------
                               11,400        6,069       16,721       (1,529)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Long-term cash and
     equivalents                    -            -            -       (4,000)
    Proceeds on disposal
     of equipment                 148          177          150          197
    Additions to
     intellectual property          -            -            -         (253)
    Additions to property
     and equipment             (1,805)        (638)      (3,109)      (1,475)
    -------------------------------------------------------------------------
                               (1,657)        (461)      (2,959)      (5,531)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds under line
     of credit                      -        3,050        5,000        7,470
    Repayments under line
     of credit                      -       (1,900)      (1,500)      (1,900)
    Issuance of long-term
     debt                         202          190          766          473
    Repayment of long-term
     debt                        (373)        (172)        (635)        (327)
    Repayment of demand
     term loan                   (130)        (195)        (390)        (390)
    -------------------------------------------------------------------------
                                 (301)         973        3,241        5,326
    -------------------------------------------------------------------------

    Increase (decrease)
     in cash                    9,442        6,581       17,003       (1,734)
    Cash, beginning
     of period                 57,948       20,862       50,387       29,177
    -------------------------------------------------------------------------
    Cash, end of period   $    67,390  $    27,443  $    67,390  $    27,443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTAL CASH
     FLOW INFORMATION
    -------------------------------------------------------------------------
    Cash paid (received)
     during the year for:
      Interest            $       198  $       187  $       362  $       380
      Income taxes        $     2,175  $    (2,800) $     6,505  $    (2,780)
    -------------------------------------------------------------------------
    

    The Churchill Corporation provides building construction, industrial
construction and maintenance services throughout western Canada. Churchill
common shares are listed on The Toronto Stock Exchange under the symbol "CUQ".

    TERMINOLOGY

    Throughout this Press Release, and other documents referred to,
management refers to certain terms when explaining its financial results that
do not have any standardized meaning under Canadian GAAP as set out in the
CICA Handbook. Specifically, the terms "contract income margin percentage",
"work-in-hand", "working capital" "EBITDA" and "book value per share" have
been defined as:
    Contract income margin percentage is the percentage derived by dividing
contract income by contract revenue. Contract income is calculated by
deducting all associated direct and indirect costs from contract revenue in
the period.
    Work-in-hand is the unexecuted portion of work that has been
contractually awarded for construction to the Corporation. It includes an
estimate of the revenue to be generated from maintenance contracts during the
shorter of (a) twelve months, or (b) the remaining life of the contract.
    Working capital is current assets less current liabilities excluding that
portion relating to any demand term loan which is scheduled to be repaid
beyond one year.
    EBITDA is equal to earnings before interest expense, taxes, depreciation
and amortization. This measure as reported by the Corporation may not be
comparable to similar measures presented by other reporting issuers.
    Book value per share is the value of shareholders' equity less value of
preferred stock divided by basic shares outstanding at the end of the period.

    FORWARD LOOKING STATEMENTS

    Certain statements in this Second Quarter Press Release may constitute
"forward-looking statements". Although management of Churchill believes its
expectations regarding future performance of the Corporation are based on
reasonable assumptions and currently available competitive, financial and
economic data, market conditions and operating plans, it can give no assurance
its expectations will be achieved. Such forward-looking statements involve
risk, uncertainties and other factors that might cause the actual results,
performance or achievements of the Corporation to vary significantly from any
future results, performance or achievements expressed or implied in any
forward-looking statements.





For further information:

For further information: Peter F. Adams, Ph.D., P.Eng., Chairman and
Interim Chief Executive Officer, The Churchill Corporation, (780) 454-3667,
www.churchillcorporation.com


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