The Churchill Corporation Reports Third Quarter Financial Results

    
    (TSX: CUQ)

    Third Quarter 2009 & YTD Financial Results
    ------------------------------------------

    -   Third quarter 2009 net earnings including the earnings from
        discontinued operations were $15.2 million ($0.86 per share) compared
        to $11.2 million ($0.62 per share) in the prior year.
    -   Net earnings for the nine months ended September 30, 2009 were $27.1
        million ($1.54 per share) compared to $25.2 million ($1.41 per share)
        for the same period of 2008.
    -   Contract income margin increased to 16.8% compared to 13.0% in Q3
        2008.
    -   $17.3 million of EBITDA from continuing operations in Q3 2009
        compared to $18.2 million in Q3 2008.
    -   $11.7 million of earnings ($0.66 per share) from continuing
        operations in Q3 2009 compared to $11.9 million of earnings ($0.66
        per share) from continuing operations in Q3 2008.
    -   $157.1 million in cash and cash equivalents as at September 30, 2009,
        compared to $100.8 million at December 31, 2008.
    -   $38.9 million of EBITDA from continuing operations in the nine month
        period ending September 30, 2009, compared to $38.6 million of EBITDA
        from continuing operations in the same nine month period of 2008.
    -   $25.4 million of net earnings from continuing operations for the nine
        months ended September 30, 2009 compared to $24.3 million of net
        earnings from continuing operations for the same period of 2008.

    Highlights & Significant Items

    -   Financial close of the Fort St. John Hospital project occurred on
        July 17, 2009 and resulted in $115 million being added to our backlog
        in Q3 2009.
    -   In July 2009, Stuart Olson was awarded the $44 million, Simon Fraser
        University Schrum Science Centre Renewal - Phase 1 Chemistry project.
    -   On August 12, 2009, the Corporation executed a purchase and sale
        agreement to divest itself of Triton's operations and certain assets
        and liabilities of the Corporate and Other segment receiving
        consideration of $18.3 million, resulting in a gain on sale of $4.2
        million. Also, the eventual sale of the Davies Road building is
        expected to generate $4.0 to $5.0 million in cash proceeds when
        completed.
    -   During the quarter, the Corporation completed the consolidation of
        its operating and corporate offices into Edmonton and Calgary. This
        initiative plus other restructuring is expected to generate $2
        million of cost savings annually.
    -   In August and September of 2009, Stuart Olson was awarded a $47
        million contract with the Department of Defense for CFB Esquimalt in
        Victoria, British Columbia and the $66 million Genesis Recreation
        Centre project in the Southern Alberta region.
    -   In late October, the Corporation created two new Vice President
        positions and reorganized existing internal resources to enhance
        the Corporate Centre's organizational capabilities in the areas of
        strategic planning and business development and to focus more
        resources on shareholder value creation.
    

CALGARY, Nov. 5 /CNW/ - The Churchill Corporation today announced EBITDA from continuing operations of $17.3 million in the third quarter of 2009. Earnings from continuing operations were $11.7 million ($0.66 per share) and as at September 30, 2009, our cash balance was $157.1 million or $8.93 per share.

    
    -------------------------------------------------------------------------
                                         Three months ended
                                         September 30, 2009
                           --------------------------------------------------
    ($ millions, except                                       $            %
     per share amounts)          2009         2008       Change       Change
    -------------------------------------------------------------------------

    Contract revenue           $161.5       $216.2        (54.7)        -25%
    Contract income              27.1         28.1         (1.0)         -4%
    EBITDA(1) from
     continuing operations       17.3         18.2         (0.9)         -5%
    Earnings from continuing
     operations before
     income taxes                16.2         17.1         (0.9)         -5%
    Net earnings from
     continuing operations       11.7         11.9         (0.2)         -2%
    EPS from continuing
     operations - basic         $0.66        $0.66         0.00           0%
    Net earnings and
     comprehensive income        15.2         11.2          4.0          36%
    EPS basic                   $0.86        $0.62         0.24          39%
    Work-in-hand(2)             770.2        556.0        214.2          39%
    Backlog(3)               $1,517.5     $1,422.1         95.4           7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                          Nine months ended
                                         September 30, 2009
                           --------------------------------------------------
    ($ millions, except                                       $            %
     per share amounts)          2009         2008       Change       Change
    -------------------------------------------------------------------------

     Contract revenue          $427.3       $576.0       (148.7)        -26%
     Contract income             67.2         66.2          1.0           2%
     EBITDA(1) from
      continuing operations      38.9         38.6          0.3           1%
     Earnings from continuing
      operations before
      income taxes               35.4         35.2          0.2           1%
     Net earnings from
      continuing operations      25.4         24.3          1.1           5%
     EPS  from continuing
      operations - basic        $1.44        $1.36         0.08           6%
     Net earnings and
      comprehensive income       27.1         25.2          1.9           8%
     EPS basic                  $1.54        $1.41         0.13           9%
     Work-in-hand(2)            770.2        556.0        214.2          39%
     Backlog(3)              $1,517.5     $1,422.1         95.4           7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) (2) (3) Refer to the "Terminology" section for further details.
    

"The Corporation delivered strong third quarter results, particularly in our Stuart Olson and Insulation Holdings business segments. Notwithstanding a difficult economic environment in 2009, both of these organizations are surpassing the profits they generated in 2008," said Jim Houck, President and Chief Executive Officer, The Churchill Corporation. "In addition we set a new record for backlog in the quarter at $1.5 billion and are optimistic regarding the possibility of securing additional awards prior to the end of the year."

Overall performance

For the third quarter of 2009 consolidated contract revenue was $161.5 million, compared to $216.2 million in the same period in 2008. Revenue decreased due to the cumulative effect of delays in project starts and tendering in our buildings segment in combination with lower levels of industrial contracting activity on a year-over-year basis in our industrial insulation and industrial electrical operations. For the first nine months of the year, revenues of $427.3 million were $148.7 million lower than the corresponding period of 2008 as weaker industrial market conditions and lower volumes from our buildings segment impacted results.

Contract income decreased from $28.1 million in the third quarter of 2008 to $27.1 million in Q3 2009 as stronger margins in our building construction segment and industrial insulation segments, were offset by lower contract income in the industrial electrical segment. Contract income for the first nine months of 2009 was $67.2 million compared to $66.2 million for the first nine months of 2008. The increase in contract income margin percentage in all business segments offset the decline in the executed volume of work.

Indirect and administrative expenses amounted to $10.1 million in the quarter, compared to $10.5 million in the comparable period of 2008. These reduced costs were driven by the restructuring activities in our operations at Laird and good expense management within IHI and Stuart Olson. Year-to-date indirect and administration expenses are $29.3 million compared to $30.0 million in the prior year.

Earnings before interest, taxes, depreciation and amortization in the quarter were $17.3 million, compared to $18.2 million in Q3 2008. EBITDA in the first nine months of 2009 was $38.9 million compared to $38.6 million.

Earnings from continuing operations before income taxes in Q3 2009 decreased to $16.2 million as compared to $17.1 million reported in Q3 2008. Net earnings from continuing operations were $11.7 million in Q3 2009 compared to $11.9 million in Q3 2008. Earnings from continuing operations before income taxes for the nine months ended September 30, 2009 were $35.4 million as compared to $35.2 million in the same period of 2008. Net earnings from continuing operations for the nine-month period ended September 30, 2009, were $25.4 million compared to $24.3 million in the comparable period of 2008. The increase in net earnings from continuing operations was due to the greater profitability derived from our buildings and industrial insulation segments.

New contract awards of $331.0 million were added to work-in-hand in the current quarter compared to $211.3 million in Q3 2008. Work-in-hand at September 30, 2009, was $770.2 million, compared to $556.0 million at September 30, 2008. On a segmented basis, year-over-year work-in-hand increased $190.0 million in the buildings segment, increased $3.9 million in the insulation contracting segment and increased $20.3 million in the electrical contracting segment.

Churchill's total backlog, including work-in-hand as at September 30, 2009, increased to a record $1.52 billion from $1.42 billion in the prior year. Year-over-year backlog in our buildings segment increased by $81.6 million, the insulation contracting segment backlog decreased by $1.5 million and the industrial electrical contracting backlog increased by $15.3 million. The Corporation's backlog consists of work-in-hand of $770.2 million, active backlog of $630.3 million and delayed backlog of $117.0 million. While the Corporation has not yet adjusted its volume of delayed backlog, the owner's budget for the Shaw Tower, a $25 million project, was partially approved in September and we are anticipating a construction start later this year. Management remains confident that the project delays associated with the Shaw Tower and Lethbridge Hospital can be overcome and that the majority of the Corporation's delayed backlog will be realized as revenue in future reporting periods.

Discontinued Operations

In August 2009, the Corporation completed the sale of its Industrial General Contracting segment ("Triton") and certain assets and liabilities of the Corporate and Other segment to an undisclosed third party. The segment had performed poorly over a period of time and as a result management felt that there may be a more advantaged owner of the assets held-for-sale and that Churchill could more profitably deploy its resources and the proceeds from disposition into its other operating segments. Accordingly, the results of operations and cashflows for the assets held-for-sale have been accounted for on a discontinued basis for the current and prior periods.

Proceeds from the sale recognized in the financial statements in the third quarter were $18.3 million of cash for Triton and certain assets and liabilities of the Corporate and Other segment sold to the purchaser immediately on closing. Of this amount $3.0 million is in escrow as security for the indemnification provided to the purchaser as part of the sale. A gain on sale of $4.2 million was realized. Also, the sale of the Davies Road building is expected to generate $4.0 to $5.0 million in cash proceeds, when completed.

The following tables reflect our earnings (loss) from discontinued operations relating to Triton and the assets held-for-sale for the three and nine month periods ended September 30, 2009 and 2008.

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
    -------------------------------------------------------------------------
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    Contract revenue      $     4,779  $    13,011  $    27,954  $    67,386
    Contract income               445          128        1,308        5,714

    Gain on sale of
     discontinued
     operations                 4,185            -        4,185            -
    Net operating
     earnings (loss)
     from discontinued
     operations(1)               (701)        (697)      (2,463)         902
    Total net earnings
     (loss)               $     3,484  $      (697) $     1,722  $       902
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net operating earnings (loss) from discontinued operations for the
        nine months ended September 30, 2009 includes income tax recovery of
        $1,030 (2008 - $427 expense)
    

RESULTS OF OPERATIONS

Buildings

For the three month period ended September 30, 2009, Stuart Olson's revenue was $135.0 million, compared to $158.4 million in the prior year. This decrease in revenue was a result of the cumulative impact of the delayed project starts and tendering referred to in the Corporation's first quarter MD&A.

Contract income in the third quarter of 2009 increased 22% to $20.8 million, from $17.1 million for the same period in 2008. The Q3 2009 contract income margin percentage was 15.4% compared to 10.8% in 2008. This margin increase was driven by the strength of the margins in Stuart Olson's backlog, strong project execution, own forces work and the ability to effectively manage construction costs.

Earnings before tax from the buildings segment were $15.7 million in Q3 2009, compared to $12.1 million in Q3 2008. This 30% improvement in pre-tax earnings was a result of the increased profit margin across all branches, particularly in Northern Alberta.

Revenue for the nine months ended September 30, 2009, was $346.4 million compared to $434.7 million in 2008. This decrease in revenue was a result of the lasting cumulative impact of the delayed project starts and tendering referred to in the Corporation's first quarter MD&A.

Contract income for the nine months ended September 30, 2009 increased by 22%, to $50.8 million from $41.7 million for the same period in 2008. Stuart Olson's contract income margin percentage increased to 14.7% compared to 9.6% year-over-year, driven by higher margins in the company's backlog and strong project execution.

Earnings before tax from the buildings segment for the nine month period ended September 30, 2009 were $36.1 million compared to $27.0 million in the prior year. This 34% increase resulted from higher margins across all branches, particularly in Northern Alberta, which has self-performed a significant volume of work during the past year.

Stuart Olson had work-in-hand of $496.5 million and a backlog of $1.23 billion as at June 30, 2009. In the three months ended September 30, 2009, Stuart Olson secured $292.0 million of new contracts and executed $135.0 million of work. The company finished the quarter with $653.6 million of work-in-hand, of which $146.3 million is expected to be executed in 2009. As at September 30, 2009, Stuart Olson's total backlog was $1.4 billion.

Stuart Olson continues to pursue new project opportunities which fit its strategy, expertise and price for value proposition. Government spending intentions are high, but possibly at risk due to growing deficit projections. We anticipate that in this environment, governments may resort to alternative financing strategies such as Public-Private Partnerships ("P3's") to finance their infrastructure spending until economic growth and budget surpluses resume.

Industrial Insulation Contracting

Industrial Insulation Contracting 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. Lakehead is a wholly-owned subsidiary of Fuller Austin.

Revenue for the three months ended September 30, 2009, was $17.7 million, compared to $19.4 million for the same period of 2008. The revenue decrease was the result of reduced capital spending mainly in the Saskatchewan industrial market.

Contract income in the third quarter of 2009 was $4.5 million compared to $4.5 million for the comparable period in 2008. The contract income margin percentage increased in Q3 2009 to 25.4% versus 23.2% in Q3 2008 due to strong project execution.

Earnings before tax were $3.0 million during the period ending September 30, 2009, compared to $2.9 million in the third quarter of 2008. Strong project execution by the insulation companies on a variety of maintenance and shutdown contracts allowed IHI to sustain its earnings, notwithstanding the corresponding $1.7 million revenue decline.

For the nine months ended September 30, 2009, Insulation Holdings reported revenue of $52.6 million compared to $53.0 million for the same period of 2008. The company's revenue for the first nine months of 2009 has remained robust as a result of its near record backlog of work.

Contract income for the first nine month period ended September 30, 2009, was $11.1 million compared to $10.5 million for the comparable period in 2008. The contract income margin percentage was 21.1% compared to 19.8%, respectively.

Earnings before tax increased 8% year-to-date to $6.9 million in the period ending September 30, 2009, compared to $6.4 million in 2008. These stronger earnings were a result of the higher contract margins earned year-to-date.

Industrial Insulation Contracting had work-in-hand of $63.1 million and a backlog of $68.5 million as at June 30, 2009. During Q3 2009, IHI secured new awards totalling $26.1 million and executed $17.7 million of contractual work. The insulation segment ended the quarter with $71.5 million of work-in-hand, of which $52.3 million is expected to carry over into 2010. At September 30, 2009, IHI's backlog amounted to $75.8 million compared to $77.4 million at the end of Q3 of the prior year.

With a strong backlog of projects, our belief is that Insulation Holdings is positioned to perform favourably over the next 15 months. However, industrial project delays and owner requests for rate resets continue to create increased competition for new work and apply downward pressure on contract income margins.

Industrial Electrical Contracting

For the three months ended September 30, 2009, Laird's contract revenue was $8.7 million compared to $38.4 million reported in Q3 2008. This decrease in revenue was primarily due to a reduction in activity levels associated with several oil sands projects in the Fort McMurray area and no significant shut down activity in the quarter. Management believes that activity levels are likely to remain lower on a year-over-year basis for the balance of 2009, but that future activity levels should exceed the low revenue volume delivered in Q3 2009.

Contract income was $1.9 million in Q3 2009 compared to $6.4 million during the prior year. This decrease was due to lower activity levels. The contract income margin percentage was higher at 21.8% during the third quarter of 2009 compared to 16.7% in Q3 2008 mainly due to strong project execution, changes in project mix, operational improvements and favourable resolution of project contingencies.

Laird reported earnings before tax of $0.6 million for the period, compared to earnings before income tax of $4.2 million in Q3 2008. Laird's initiatives to right size the organization for the anticipated reduced activity levels paid dividends this quarter as the company was able to withstand a significant revenue drop. The company was able to offset the impact of lower revenues in the period with higher margins and control of its indirect and administrative expenses.

For the nine months ended September 30, 2009, Laird's reported revenue was $28.4 million compared to $88.2 million reported in 2008. This decrease in revenue was primarily due to a reduction in activity levels associated with several oil sands projects in the Fort McMurray area and a significant decrease in shut down and maintenance activity year-to-date.

Contract income for the nine months ended September 30, 2009 was $5.3 million compared to $13.7 million during 2008. This decrease in contract income due to lower activity levels was partially offset by higher contract income margins (18.7% in 2009 compared to 15.5% in 2008) due to operational efficiency in the field, changes in project contracting methods and favourable resolution of project contingencies.

Laird reported earnings before tax of $1.0 million for the nine month period ending September 30, 2009, compared to earnings before tax of $7.5 million in 2008. The variance in earnings is attributable to lower levels of client activity.

Laird's reported Q2 2009 work-in-hand and backlog was $40.9 million. New contract awards of $12.9 million were secured in the third quarter of 2009 and $8.7 million of contracts were executed. Laird concluded the third quarter with $45.1 million of work-in-hand and backlog, of which $29.3 million is expected to be completed in future years. This compares to a backlog of $29.8 million at the end of Q3 2008.

Laird has increased its focus on business development activities during this slowdown and is successfully partnering with Fuller Austin on bids, securing electrical infrastructure projects and pursuing industrial opportunities in the Saskatchewan marketplace.

Corporate and Other

During the third quarter, management received board approval to undertake a new enterprise resource planning ("ERP") system. The capital cost and the expenses associated with this implementation will be recognized over subsequent reporting periods into 2011.

In the third quarter of 2009, the Corporate and Other segment incurred a loss before tax of $3.1 million compared to a loss before tax of $2.1 million in 2008. For the nine months ended September 30, 2009 and 2008 the Corporate and Other segment generated a loss before tax of $8.7 million and $5.7 million respectively. The increase in 2009 Corporate and Other expenditures is attributable to indirect and administrative expenses associated primarily with implementation of a new incentive based compensation program more closely aligned with shareholder interests, stock based compensation expenses, increased professional fees, increased travel expenses and office relocation costs.

CAPITAL RESOURCES AND LIQUIDITY

Cash and cash equivalents at September 30, 2009, totaled $157.1 million, which compares with $100.8 million at the end of 2008. Included in the cash and cash equivalents balance is $12.8 million which is subject to deemed trust conditions under the British Columbia Builders Lien Act, compared to $17.5 million at December 31, 2008. As such, this cash is restricted to the payment of direct costs related to specific construction projects.

Cash flow provided from operating activities was $12.2 million, compared to $14.8 million of cash generated during the third quarter of 2008. The Corporation has increased its cash and cash equivalents from the proceeds associated with the sale of its discontinued operations.

Investing activities resulted in a use of cash of $0.6 million during the third quarter of 2009, which compares with cash used of $1.6 million in Q3 2008. The cash was invested in the acquisition of construction equipment for long term projects under contract.

During the third quarter of 2009, cash used in financing activities associated with net repayments of long term debt amounted to $0.2 million, compared to cash used in financing of $0.4 million in Q3 2008. Subsequent to the quarter, the Corporation paid off a $1.1 million mortgage associated with the Davies Road building which carried an interest rate of 6.47%.

Cash generated from operations of $44.8 million in the first nine months of 2009 was in contrast to cash used in operations of $15.4 million in the same period of 2008. This reversal can be attributed to the collection of accounts receivables and lower activity in the Corporation's industrial operations.

Investing activities resulted in a use of cash of $2.1 million during the nine months ended September 30, 2009, which compares with cash used of $4.8 million in the same period of 2008. The cash was invested in the acquisition of construction equipment.

For the nine months ended September 30, 2009, cash used in financing amounted to $7.8 million, compared to cash used in financing of $1.2 million in 2008. Net repayments of long-term debt in the nine month period ended September 30, 2009, amounted to $7.0 million, compared to net repayments of $1.5 million in 2008. The Corporation expended $1.0 million under its Normal Course Issuer Bid ("NCIB") during the first 9 months of 2009 compared to nil in the same period of 2008. Stock options exercised by directors and officers of the Corporation contributed $0.2 million of cash in the nine months of 2009 compared to adding $0.3 million of cash in the period ending September 30, 2008.

As at September 30, 2009, Churchill had working capital of $103.9 million, compared to its working capital position of $78.3 million at December 31, 2008.

Management believes that the Corporation has the capital resources and liquidity necessary to meet its commitments, support its operations and finance its growth strategies. In addition to the Corporation's cash and cash equivalents, ability to generate cash from operations, and its $60.0 million credit facility, the Corporation is also able to issue additional common shares to access further capital.

The Corporation is a partner in three joint ventures. In each instance the Corporation has provided a joint and several guarantee, increasing the maximum potential exposure to the full value of the work remaining under the contract. Public-Private Partnership infrastructure projects may expose the Corporation to financial penalties or liquidated damages under the contract for project delays. P3 projects require security in the form of letters of credit to support the obligations that the Corporation undertakes on these projects.

Shareholders' equity was $133.0 million at September 30, 2009, as compared to $105.6 million at December 31, 2008.

Share Data

On October 15, 2008, the Corporation commenced a Normal Course Issuer Bid ("NCIB"), under which it was entitled to purchase up to 1,391,090 common shares in a 12 month period. During the third quarter of 2009, no common shares were repurchased under the NCIB. In total, the Corporation repurchased and cancelled 432,500 common shares at an average cost of $6.73. The NCIB expired on October 14, 2009.

As at November 3, 2009, the Corporation had 17,599,491 common shares issued and outstanding and 1,274,016 options convertible into common shares upon exercise (December 31, 2008 - 17,822,091 common shares and 519,660 options).

The Corporation has an Employee Share Purchase Plan (the "ESPP") available to all full-time employees. At September 30, 2009, the ESPP held 822,327 common shares for employees. Under the ESPP, common shares are acquired in the open market.

OUTLOOK

Laird Electric continues to be challenged as the slowdown in oil sands projects experienced earlier in the year endures. Laird's current financial performance mirrors that of key client spending and emphasizes the importance of management's efforts to achieve market and product diversification. A number of high-profile corporate transactions and a rebound in commodity prices to the $70-$80 per barrel range are expected to lead to increased capital expenditures in 2010, and an improvement in Laird's results.

With their performance in the first three quarters of 2009 behind them, Insulation Holdings is forecasting the second best year in their history with upside potential for a record year. Positive developments in our end-markets include identification of possible future contracting opportunities with clients in the oil sands and industrial market such as PCL, Horton CBI, Jacobs and others. Overall, project delays and cancellations in the industrial market have resulted in significant competition for available work. Significant levels of backlog and work-in-hand are expected to drive 2010 revenues higher albeit at lower margins. To maintain market share our industrial companies have had to adjust bidding practices accordingly.

During the third quarter, Stuart Olson was awarded and closed approximately $290 million of new projects, which is a level of secured work only exceeded by their Q2 2007 results. Our goal of maintaining and growing the backlog at Stuart Olson for the whole year is within reach. However, because of the competitive landscape new projects acquired and included in the company's backlog may not result in future profit margins being as robust as those delivered year-to-date. In September, Stuart Olson embarked on a strategy of organic growth by opening an office in Saskatoon, Saskatchewan. Stuart Olson looks forward to re-introducing itself to owner groups and building a successful branch in this market. In addition, there are several significant opportunities within the Alberta and British Columbia regions, to add to our backlog before the end of the year. Stuart Olson continues to track the development of new P3 projects with a view to increasing their participation in projects available in Alberta and British Columbia.

    
             CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE
                         INCOME AND RETAINED EARNINGS

    (unaudited,
     $ thousands,
     except per share         Three months ended         Nine months ended
     amounts)                     September 30              September 30
    ---------------------------------- ------------ ------------ ------------

                                 2009         2008         2009         2008
    ---------------------------------- ------------ ------------ ------------

    Contract revenue      $   161,453  $   216,181  $   427,301  $   575,967
    Contract costs            134,352      188,101      360,084      509,769
    ---------------------------------- ------------ ------------ ------------
    Contract income            27,101       28,080       67,217       66,198

    Interest income               133          566          480        2,091
    Sundry income                 241           53          504          247
    Indirect and admin-
     istrative expenses       (10,146)     (10,485)     (29,315)     (29,998)
    Depreciation and
     amortization              (1,075)      (1,044)      (3,302)      (2,951)
    Interest expense              (30)        (117)        (210)        (385)
    ---------------------------------- ------------ ------------ ------------

    Earnings from
     continuing
     operations before
     income taxes              16,224       17,053       35,374       35,202
    ---------------------------------- ------------ ------------ ------------
    Income tax (expense)
     recovery
      Current income tax       (7,215)      (6,669)     (29,854)     (15,503)
      Future income tax         2,680        1,491       19,885        4,647
    ---------------------------------- ------------ ------------ ------------
                               (4,535)      (5,178)      (9,969)     (10,856)
    ---------------------------------- ------------ ------------ ------------
    Net earnings from
     continuing operations
     and comprehensive
     income                    11,689       11,875       25,405       24,346
    Net earnings (loss)
     from discontinued
     operations                 3,484         (697)       1,722          902
    ---------------------------------- ------------ ------------ ------------
    Net earnings and
     comprehensive income      15,173       11,178       27,127       25,248

    Retained earnings,
     beginning of period       93,416       61,598       83,132       47,528
      Adjustment arising
       from shares pur-
       chased under a
       normal course
       issuer bid                   -            -       (1,670)           -
    ---------------------------------- ------------ ------------ ------------
    Retained earnings,
     end of period        $   108,589  $    72,776  $   108,589  $    72,776
    ---------------------------------- ------------ ------------ ------------
    ---------------------------------- ------------ ------------ ------------

    Net earnings per
     common share:
      Basic from
       continuing
       operations         $      0.66  $      0.66  $      1.44  $      1.36
      Basic from
       discontinued
       operations         $      0.20  $     (0.04) $      0.10  $      0.05
      Basic net
       earnings per
       share              $      0.86  $      0.62  $      1.54  $      1.41
    ---------------------------------- ------------ ------------ ------------

      Diluted from
       continuing
       operations         $      0.65  $      0.67  $      1.42  $      1.34
      Diluted from
       discontinued
       operations         $      0.20  $     (0.04) $      0.10  $      0.05
      Diluted net
       earnings per
       share              $      0.85  $      0.63  $      1.52  $      1.39
    ---------------------------------- ------------ ------------ ------------
    ---------------------------------- ------------ ------------ ------------

    Weighted average
     common shares:
      Basic                17,599,491   17,927,430   17,627,519   17,927,430
    ---------------------------------- ------------ ------------ ------------
      Diluted              17,943,969   18,127,052   17,856,303   18,119,649
    ---------------------------------- ------------ ------------ ------------
    ---------------------------------- ------------ ------------ ------------



                         CONSOLIDATED BALANCE SHEETS

    (unaudited, $ thousands)
    ------------------------------------------------------------ ------------
                                                   September 30, December 31,
                                                           2009         2008
    ------------------------------------------------------------ ------------
    ASSETS
    Current Assets
      Cash and cash equivalents                     $   157,113  $   100,768
      Accounts receivable                               170,043      119,248
      Inventories and prepaid expenses                    1,289        1,285
      Costs in excess of billings                         6,517       17,692
      Income taxes recoverable                               56        3,615
      Future income tax assets                           38,722        1,390
      Assets held-for-sale                                    -       24,528
    ------------------------------------------------------------ ------------
                                                        373,740      268,526

    Long-term receivable                                  3,000            -
    Future income tax assets                                936          568
    Property and equipment                               15,465       16,547
    Assets held-for-sale                                  2,715        9,844
    Goodwill and intangible assets                        7,315        7,336
    ------------------------------------------------------------ ------------
                                                    $   403,171  $   302,821
    ------------------------------------------------------------ ------------
    ------------------------------------------------------------ ------------
    LIABILITIES
    Current Liabilities
      Accounts payable and accrued liabilities      $   129,966  $   134,194
      Contract advances and unearned income              98,064       41,088
      Income taxes payable                               20,665        2,462
      Future income tax liabilities                      19,386        3,177
      Current portion of long-term debt                     629        1,082
      Liabilities related to assets held-for-sale         1,114        8,220
    ------------------------------------------------------------ ------------
                                                        269,824      190,223

    Long-term debt                                          335        6,787
    Future income tax liabilities                            22          238
    ------------------------------------------------------------ ------------
                                                        270,181      197,248

    SHAREHOLDERS' EQUITY
    Share capital                                        16,625       16,663
    Shares repurchased under a normal course
     issuer bid, not cancelled                                -         (956)
    Contributed surplus                                   7,776        6,734
    Retained earnings                                   108,589       83,132
    ------------------------------------------------------------ ------------
                                                        132,990      105,573
    ------------------------------------------------------------ ------------
                                                    $   403,171  $   302,821
    ------------------------------------------------------------ ------------
    ------------------------------------------------------------ ------------



                     CONSOLIDATED STATEMENTS OF CASH FLOW

                                Three months ended        Nine months ended
    (unaudited, $ thousands)       September 30              September 30
    ---------------------------------- ------------ ------------ ------------
                                 2009         2008         2009         2008
    ---------------------------------- ------------ ------------ ------------

    OPERATING ACTIVITIES
    Net earnings from
     continuing operations
     and comprehensive
     income               $    11,689  $    11,875  $    25,405  $    24,346
      Depreciation and
       amortization             1,075        1,044        3,302        2,951
      Gain on disposal
       of equipment               (22)         (18)         (40)         (38)
      Share-based
       compensation               469          326        1,103          696
      Future income taxes      (2,680)      (1,831)     (19,885)      (4,214)
    ---------------------------------- ------------ ------------ ------------
                               10,531       11,396        9,885       23,741

    Change in non-cash
     balances relating to
     operations                 1,683        3,354       34,886      (39,111)
    ---------------------------------- ------------ ------------ ------------
                               12,214       14,750       44,771      (15,370)
    ---------------------------------- ------------ ------------ ------------

    INVESTING ACTIVITIES
    Proceeds on disposal of
     equipment                     73           (4)         225          178
    Additions to property
     and equipment               (677)      (1,595)      (2,334)      (4,966)
    ---------------------------------- ------------ ------------ ------------
                                 (604)      (1,599)      (2,109)      (4,788)
    ---------------------------------- ------------ ------------ ------------

    FINANCING ACTIVITIES
    Proceeds under
     operating line of
     credit                         -            -            -        9,000
    Repayments under
     operating line of
     credit                         -            -            -       (9,000)
    Repayment of
     long-term debt              (201)        (424)      (6,953)      (1,478)
    Share purchase under
     a normal course
     issuer bid                     -            -         (970)           -
    Issuance of common
     shares                         -           51          158          287
    ---------------------------------- ------------ ------------ ------------
                                 (201)        (373)      (7,765)      (1,191)
    ---------------------------------- ------------ ------------ ------------

    Cash provided by
     (used in) continuing
     operations                11,409       12,778       34,897      (21,349)
    Cash provided by (used
     in) discontinued
     operations                13,887      (10,262)      21,448       (8,331)
    ---------------------------------- ------------ ------------ ------------

    Change in cash and
     cash equivalents
     during the period         25,296        2,516       56,345      (29,680)

    Cash and cash
     equivalents,
     beginning of
     period                   131,817       75,909      100,768      108,105
    ---------------------------------- ------------ ------------ ------------

    Cash and cash
     equivalents, end
     of period            $   157,113  $    78,425  $   157,113  $    78,425
    ---------------------------------- ------------ ------------ ------------
    ---------------------------------- ------------ ------------ ------------

    SUPPLEMENTAL CASH FLOW
     INFORMATION
    ---------------------------------- ------------ ------------ ------------
    Cash received (paid)
     during the year for:
      Interest            $        57  $       461  $       251  $     1,716
      Income taxes        $       931  $      (997) $    (7,511) $   (23,680)
    ---------------------------------- ------------ ------------ ------------



                   SELECTED FINANCIAL STATEMENT DISCLOSURE

    Three months
     ended September              Industrial Industrial Corporate
     30, 2009          Buildings  Insulation  Electric  and Other      Total
    -------------------------------------------------------------------------

    Contract revenue   $ 135,034  $  17,680  $   8,739  $       -  $ 161,453
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)             16,255      3,111        836     (2,873)    17,329
    Depreciation and
     amortization            540         91        263        181      1,075
    Interest expense           2          2          5         21         30
    -------------------------------------------------------------------------
    Earnings (loss)
     from continuing
     operations before
     income taxes      $  15,713  $   3,018  $     568  $  (3,075) $  16,224
                                                                  -----------
    Income taxes                                                      (4,535)
                                                                  -----------
    Net earnings from
     continuing
     operations                                                       11,689
    Net earnings from
     discontinued
     operations                                                    $   3,484
                                                                  -----------
    Net earnings and
     comprehensive
     income                                                        $  15,173
                                                                  -----------
                                                                  -----------
    Goodwill and intangible assets                                 $   7,315
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Assets in
     continuing
     operations        $ 277,975  $  23,803  $  22,796  $  75,882  $ 400,456
    Assets
     held-for-sale                                                     2,715
                                                                  -----------
    Total assets                                                   $ 403,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital ex-
     penditures        $     414  $     197  $     148  $     (82) $     677
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Three months
     ended September              Industrial Industrial Corporate
     30, 2008          Buildings  Insulation  Electric  and Other      Total
    -------------------------------------------------------------------------

    Contract revenue   $ 158,385  $  19,423  $  38,373  $       -  $ 216,181
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)             12,668      2,950      4,438     (1,842)    18,214
    Depreciation and
     amortization            511         55        267        211      1,044
    Interest expense          13          1         15         88        117
    -------------------------------------------------------------------------
    Earnings (loss)
     from continuing
     operations before
     income taxes      $  12,144  $   2,894  $   4,156  $  (2,141) $  17,053
                                                                  -----------
    Income taxes                                                      (5,178)
    Net earnings from
     continuing
     operations                                                       11,875
    Net loss from
     discontinued
     operations                                                    $    (697)
                                                                  -----------
    Net earnings and
     comprehensive
     income                                                        $  11,178
                                                                  -----------
                                                                  -----------
    Goodwill and
     intangible
     assets                                                        $   7,357
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Assets in
     continuing
     operations        $ 219,208  $  24,320  $  42,658  $  15,283  $ 301,469
    Assets
     held-for-sale                                                    40,967
    Total assets                                                   $ 342,436
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital
     expenditures      $     913  $     200  $     432  $     281  $   1,826
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to the "Terminology" section for further details.



    Nine months
     ended September              Industrial Industrial Corporate
     30, 2009          Buildings  Insulation  Electric  and Other      Total
    -------------------------------------------------------------------------

    Contract revenue   $ 346,373  $  52,554  $  28,374  $       -  $ 427,301
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)             37,789      7,156      1,877     (7,936)    38,886
    Depreciation and
     amortization          1,651        243        803        605      3,302
    Interest expense          34          4         28        144        210
    -------------------------------------------------------------------------
    Earnings (loss)
     from continuing
     operations before
     income taxes      $  36,104  $   6,909  $   1,046  $  (8,685) $  35,374
                                                                  -----------
    Income taxes                                                      (9,969)
                                                                  -----------
    Net earnings from
     continuing
     operations                                                       25,405
                                                                  -----------
    Net earnings from
     discontinued
     operations                                                    $   1,722
                                                                  -----------
    Net earnings and
     comprehensive
     income                                                        $  27,127
                                                                  -----------
                                                                  -----------
    Goodwill and
     intangible assets                                             $   7,315
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Assets in
     continuing
     operations        $ 277,975  $  23,803  $  22,796  $  75,882  $ 400,456
    Assets
     held-for-sale                                                     2,715
    Total assets                                                   $ 403,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital
     expenditures      $   1,285  $     393  $     419  $     283  $   2,380
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Nine months
     ended September              Industrial Industrial Corporate
     30, 2008          Buildings  Insulation  Electric  and Other      Total
    -------------------------------------------------------------------------

    Contract revenue   $ 434,715  $  53,027  $  88,225  $       -  $ 575,967
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)             28,530      6,521      8,325     (4,838)    38,538
    Depreciation and
     amortization          1,460        163        754        574      2,951
    Interest expense          42          1         55        287        385
    -------------------------------------------------------------------------
    Earnings (loss)
     from continuing
     operations before
     income taxes      $  27,028  $   6,357  $   7,516  $  (5,699) $  35,202
                                                                  -----------
    Income taxes                                                     (10,856)
                                                                  -----------
    Net earnings from
     continuing
     operations                                                       24,346
    Net earnings from
     discontinued
     operations                                                          902
                                                                  -----------
    Net earnings and
     comprehensive
     income                                                        $  25,248
                                                                  -----------
                                                                  -----------
    Goodwill and
     intangible
     assets                                                        $   7,357
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Assets in
     continuing
     operations        $ 219,208  $  24,320  $  42,658  $  15,283  $ 301,469
    Assets
     held-for-sale                                                    40,967
                                                                  -----------
    Total assets                                                   $ 342,436
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital
     expenditures      $   2,573  $     262  $   1,058  $   1,266  $   5,159
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to the "Terminology" section for further details.
    

About The Churchill Corporation:

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

TERMINOLOGY

Throughout this third quarter MD&A, 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", "backlog", "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.

Backlog means the total value of work including work-in-hand that has not yet been completed that; (a) is assessed by the Corporation as having high certainty of being performed by the Corporation or its subsidiaries by either the existence of a contract or work order specifying job scope, value and timing; or (b) has been awarded to the Corporation or its subsidiaries, as evidenced by an executed binding or non-binding letter of intent or agreement, describing the general job scope, value and timing of such work, and with the finalization of a formal contract respecting such work currently assessed by the Corporation as being reasonably assured. All projects within backlog are classified as active unless the Company has received written or verbal notification from the client that a job/project/contract has been delayed, at which point the backlog is classified as delayed backlog. The Corporation provides no assurance that additional clients will not choose to defer or cancel their projects in the future. There can be no assurance that the client will resume the project or that the delayed backlog will not be retendered. Jobs or projects subsequently retendered and not awarded to the Corporation or its subsidiaries would at that time be removed from the Corporation's backlog.

    
    As at September 30, 2009
    ($ millions )
                             Active      Delayed       Total
    Work-in-hand            Backlog      Backlog     Backlog
    ---------------------------------------------------------
    $770.2                   $630.3       $117.0    $1,517.5
    ---------------------------------------------------------
    ---------------------------------------------------------

    As at December 31, 2008
    ($ millions)
                             Active      Delayed       Total
    Work-in-hand            Backlog      Backlog     Backlog
    ---------------------------------------------------------
    $565.2                   $794.8        $30.3    $1,390.3
    ---------------------------------------------------------
    ---------------------------------------------------------
    

Working capital is current assets less current liabilities. Our calculation of working capital is provided in the table below:

    
    -------------------------------------------------------------------------
    As at                                              Sept. 30, December 31,
    ($ millions)                                           2009         2008
    -------------------------------------------------------------------------
    Current assets                                       $373.7       $268.5
    Less:
      Current liabilities                                 269.8        190.2

    -------------------------------------------------------------------------

    Working Capital                                      $103.9        $78.3
    -------------------------------------------------------------------------
    

EBITDA is a common financial measure widely used by investors to facilitate an "enterprise level" valuation of an entity. The Corporation follows the standardized definition of EBITDA. Standardized EBITDA represents an indication of the Corporation's capacity to generate income from operations before taking into account management's financing decisions and costs of consuming tangible and intangible capital assets, which vary according to their vintage, technological currency, and management's estimate of their useful life. Accordingly standardized EBITDA comprises revenues less operating cost before interest expense, capital asset amortization and impairment charges, and income taxes. This measure as reported by the Corporation may not be comparable to similar measures presented by other reporting issuers. The following is a reconciliation of net earnings to EBITDA from continuing operations for each of the periods presented in this MD&A in accordance with GAAP.

    
    -------------------------------------------------------------------------
                                Three months ended          Six months ended
    ($ millions)                          Sept. 30,                 Sept. 30,
                                -------------------       -------------------
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Net Earnings                $11.7        $11.9        $25.4        $24.3
    Add:
      Income Taxes                4.5          5.2         10.0         10.9
      Depreciation &
       Amortization               1.1          1.0          3.3          3.0
      Interest expense            0.0          0.1          0.2          0.4
    -------------------------------------------------------------------------

    EBITDA                      $17.3        $18.2        $38.9        $38.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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 Third Quarter Press Release may constitute "forward-looking statements". Forward-looking statements include, without limitation, statements regarding the future financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of the Corporation. Many of these statements can be identified by looking for words such as "believes," "expects," "may," "will," "intends," "anticipates," "estimates," "continues," or the negative thereof, or other variations thereon. 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. The Corporation cautions that, by their nature, forward-looking statements, involve risks, and uncertainties and that its actual actions, and/or results could differ materially from those expressed or implied in such forward-looking statements, and that the aforementioned risks, uncertainties and actions could affect the extent to which a particular projection materializes. The Corporation assumes no obligation to update the forward-looking statements should circumstances or the Corporation's management's estimates or opinions change.

%SEDAR: 00003704E

For further information: For further information: James C. Houck, B.Sc., MBA, President & Chief Executive Officer, The Churchill Corporation, (403) 685-7777; www.churchillcorporation.com; or Andrew Apedoe, Vice President Investor Relations & Secretary, The Churchill Corporation, (403) 685-7775, Email: inquiries@churchill-cuq.com; www.churchillcorporation.com


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