The Churchill Corporation Reports Record First Quarter Revenue and Earnings

EDMONTON, May 4 /CNW/ - The Churchill Corporation (TSX: CUQ) today
reported record revenues for Q1, 2007 and significantly increased net earnings
compared to the same quarter last year.

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Consolidated Financial Highlights

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Three months ended March 31
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($ millions, except $ %
per share amounts) 2007 2006 Change Change
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Contract Revenue $ 153.9 $ 111.8 42.1 38%
Contract Income 12.4 9.7 2.7 28%
EBITDA(1) 4.3 1.7 2.6 153%
Earnings before Tax 3.3 0.9 2.4 267%
Net Earnings 2.3 0.6 1.7 283%
Per Share - Basic 0.13 0.03 0.1 333%
Work-in-hand 596.6 313.1 283.5 91%
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(1) Refer to the "Terminology" section for further details.
>>

Record construction volume of $153.9 million lifted Churchill to the best
first quarter in company history. The Corporation reported earnings of
$0.13 per share ($2.3 million), a 333% increase over the $0.03 per share
($0.6 million) earned in the same period of last year. High activity levels in
the building construction and industrial electrical contracting segments
supported this growth.
The quarter was highlighted by the growth in work-in-hand to a record
$596.6 million. On a segmented basis, year-over-year work-in-hand increases in
the buildings segment of $312.5 million and $7.8 million in the industrial
general contracting segment were recorded. These were offset by declines of
$10.1 million and $26.6 million in the industrial insulation contracting and
industrial electrical contracting segments respectively.
"We are pleased with our record first quarter performance and the large
amount of new work obtained," said Churchill Chairman and Interim Chief
Executive Officer, Peter Adams. "This is our eighth consecutive quarter of
profitability and with an increasing work-in-hand balance, the outlook for the
remainder of 2007 looks positive."

RESULTS OF OPERATIONS

Buildings
---------
For the three months ended March 31, 2007, Stuart Olson's revenues
increased $41.0 million to $99.2 million, compared to $58.2 million in the
prior year. This was due to higher levels of activity, particularly in the
northern and southern Alberta offices. Southern Alberta operations benefited
from higher activity levels on projects such as the Peter Lougheed Hospital,
SAIT Residence and Bow Valley College expansions. Northern Alberta operations
were favourably impacted by construction activity for clients such as Bridge
Brand Food Services Ltd., Sysco Food Services and C.A. Knight Recreational
Facility.
Contract income in the first quarter increased to $6.2 million from
$3.7 million, an increase of $2.5 million. Contract income margin was
relatively unchanged at 6.2% in 2007 as compared to 6.3% in 2006. Earnings
before tax increased to $2.7 million in the first quarter of 2007, as compared
to $0.9 million in 2006. This is indicative of the strength of the company's
markets and improved operating efficiency.
Stuart Olson had work-in-hand of $422.0 million at December 31, 2006. For
the three months ended March 31, 2007, the company secured a further
$178.7 million of contracts, $69.6 million more than it secured in the same
quarter of 2006. The majority of the increase came from the southern Alberta
and British Columbia branches. During the quarter, the company executed and
took into revenue $99.2 million. The company completed the quarter with
$501.5 million of work-in-hand, of which $98.3 million is expected to
carryover into 2008.

Industrial General Contracting
------------------------------
Revenues at Triton of $9.3 million were $8.0 million lower than the same
quarter in 2006. The Corporation has lifted its planned volume restriction on
Triton's operations; however, Triton's lower backlog at the end of 2006 did
not allow it to generate sufficient volume to match its first quarter of 2006
results. Contract income margin was 9.9%, down from 18.0% in the first quarter
of 2006. Triton incurred a loss before tax of $0.9 million for the current
quarter, compared to earnings before tax of $0.9 million in 2006. The
decreases in margin and earnings before tax were partially due to 2005 loss
provisions of $1.0 million recovered in the first quarter of 2006. Earnings
before tax were also negatively impacted by a decrease in revenue as a result
of Triton entering 2007 with a reduced level of work-in-hand.
Triton entered the year with $13.2 million of work-in-hand. For the
quarter ending March 31, 2007, the company secured a further $24.7 million of
contracts, $10.2 million greater than the amount of work secured in the first
quarter of 2006. The increase in current quarter awards occurred primarily in
the maintenance division which was awarded contracts with Encana and Canadian
Natural Resources Ltd. The company executed $9.3 million of contractual work
during the period and as a result had $28.6 million of work-in-hand to
complete in the current year. Triton's management expects to secure additional
contracts as the year progresses, which are expected to increase the quarterly
revenue rate.

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.
Revenue for three months ended March 31, 2007, was $11.9 million,
compared to $22.6 million for the period ending March 31, 2006. Activity
levels in the first quarter of 2006 were supported by the continuation of work
on a major oil sands project. Despite the reduced volume of work, contract
income rose to $1.8 million, up from $1.7 million for the comparable period as
a result of higher contract income margins.
Earnings before tax in the Industrial Insulation Contracting segment
increased to $0.5 million for the quarter, compared to earnings before tax of
$0.3 million for the first quarter of 2006. The primary reason for the
improved earnings was the higher contract margin levels.
Industrial Insulation Contracting had combined work-in-hand of
$15.0 million at December 31, 2006. For the three months ended March 31, 2007,
they secured a further $18.7 million of contracts, which was $9.1 million
lower than in the same period of 2006. Due to a slowdown in insulation
contracting activity, the competition to secure new opportunities has been
vigorous. Awards were received in the current quarter from Nexen, Suncor
Energy Inc., and numerous other customers. The insulation companies executed
$11.9 million of work during the first quarter, resulting in a backlog of
$21.8 million of work-in-hand.

Industrial Electrical Contracting
---------------------------------
For the three months ended March 31, 2007, Laird's revenue increased by
$19.8 million to $33.6 million, compared to the $13.8 million reported for the
same period of 2006. This significant revenue increase was generated from site
work on various oil sands projects. Contract income improved from $0.9 million
in 2006 to $3.3 million in 2007, due to the higher volume of activity and
increased margins. Laird achieved earnings before tax of $1.4 million in the
first quarter compared to a loss before tax of $0.4 million in 2006.
Laird had recorded work-in-hand of $43.6 million at the end of 2006. In
the first quarter of 2007, new contract awards of $34.8 million were secured
compared to $26.6 million in 2006. New contract awards were received from
customers such as Nexen, TransAlta Corporation and Suncor Energy Inc. During
the period, $33.6 million of work was executed, leaving a backlog of
$44.8 million remaining to be completed as at March 31, 2007.

Corporate and Other
-------------------
In the first quarter, the Corporate and Other segment incurred
$0.6 million of indirect and administrative expenses, including net interest
costs. This compares to $1.1 million of indirect and administrative expenses
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 equivalents at March 31, 2007, totaled $57.9 million, which
compares with $50.4 million at the end of 2006. Of the $57.9 million of cash
and equivalents, $15.7 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 was not available for general operating purposes.
Cash provided from operating activities amounted to $5.3 million in the
quarter, which compares to $7.6 million of cash used in operations during the
first quarter of 2006. This favourable change of $12.9 million is a result of
the improved operating results generating greater net earnings in 2007 and
cash provided due to changes in the working capital accounts.
Investing activities resulted in a use of cash of $1.3 million, which
compares with cash used of $5.1 million in 2006. This investment was made in
property and equipment. The decrease in cash used year over year was primarily
due to the classification of $4.0 million as a long-term asset in the first
quarter of 2006. This classification was made due to a contractual restriction
in use of the cash.
Cash generated from financing activities amounted to $3.5 million,
compared to $4.4 million in 2006. At March 31, 2007, the Corporation had drawn
on $15.5 million of its $21.0 million line of credit. Proceeds received under
the line of credit during the first quarter amounted to $5.0 million while
repayments totaled $1.5 million. At March 31, 2007, long-term debt, including
the current portion amounted to $4.7 million, compared to $4.3 million at the
end of 2006. The increase is due to the use of finance contracts and leases to
acquire vehicles and equipment by the Corporation. During the quarter, the
Corporation repaid $0.4 million of long-term debt and $0.1 million of the
demand term loan.
At March 31, 2007, Churchill had working capital of $29.2 million which
was greater than the 2006 year-end working capital position of $27.4 million.
Working capital is defined as current assets less current liabilities
excluding that portion relating to any demand term loan which is scheduled to
be repaid beyond one year.
The Corporation remains a partner in two joint ventures. In each instance
the Corporation has provided a joint and several guarantee, increasing the
maximum potential payment to the full value of the work remaining under the
contract.
Shareholders' equity was $50.0 million at March 31, 2007, as compared to
$47.7 million at December 31, 2006. During the quarter contributed surplus
increased $7 thousand as a result of the recognition of stock-based
compensation. Retained earnings increased from $26.4 million at December 31,
2006 to $28.7 million reflecting the net earnings of $2.3 million for the
quarter.
At March 31, 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 March 31, 2007, to May 2, 2007, no new share
options were issued; and no share options were exercised.
The Corporation has an Employee Share Purchase Plan available to all
full-time employees. As at April 3, 2007, the Plan held 1,368,984 Churchill
Common Shares for the employees. Under the Plan, shares are acquired in the
open market.

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CONSOLIDATED BALANCE SHEETS

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March 31, December 31,
2007 2006(*)
($ thousands) (Unaudited)
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ASSETS
Current assets
Cash and equivalents $ 57,948 $ 50,387
Accounts receivable 122,635 83,369
Inventories and prepaid expenses 2,582 1,174
Costs in excess of billings - 620
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183,165 135,550

Long-term cash and equivalents 4,000 4,000
Future income tax assets 672 631
Property and equipment 18,473 17,816
Goodwill 7,315 7,315
Intellectual property 168 189
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$ 213,793 $ 165,501
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LIABILITIES
Current liabilities
Line of credit $ 15,500 $ 12,000
Accounts payable 101,096 86,191
Contract advances and unearned income 30,718 -
Income taxes payable 367 4,327
Future income tax liabilities 4,458 3,902
Demand term loan 6,565 6,825
Current portion of long-term debt 1,058 917
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159,762 114,162

Long-term debt 3,652 3,419
Future income tax liabilities 364 231
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163,778 117,812
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SHAREHOLDERS' EQUITY
Share capital 15,508 15,508
Contributed surplus 5,786 5,779
Retained earnings 28,721 26,402
Accumulated other comprehensive income - -
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50,015 47,689
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$ 213,793 $ 165,501
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(*) Figures excerpted from the 2006 audited consolidated financial
statements.

CONSOLIDATED STATEMENTS OF EARNINGS

Three months ended March 31 (Unaudited)
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($ thousands, except per share amounts) 2007 2006
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Contract revenue $ 153,904 $ 111,836
Contract costs 141,470 102,166
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Contract income 12,434 9,670

Interest income 413 126
Sundry income 4 179
Indirect and administrative expenses (8,580) (8,228)
Depreciation and amortization (740) (598)
Interest expense (194) (269)
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Earnings before income taxes 3,337 880
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Income tax expense
Current income tax (370) (20)
Future income tax (648) (296)
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(1,018) (316)
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Net earnings $ 2,319 $ 564
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Net earnings per Common Share
Basic $ 0.13 $ 0.03
Fully diluted $ 0.13 $ 0.03
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended March 31 (Unaudited)
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($ thousands) 2007 2006
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Net earnings $ 2,319 $ 564
Other comprehensive income - -
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Comprehensive income for the period $ 2,319 $ 564
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND
ACCUMULATED OTHER COMPREHENSIVE INCOME

Retained earnings, beginning of period $ 26,402 $ 18,993
Net earnings 2,319 564
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Retained earnings, end of period $ 28,721 $ 19,557

Accumulated other comprehensive income,
beginning of period $ - $ -
Other comprehensive income - -
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Accumulated other comprehensive income,
end of period $ - $ -
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CONSOLIDATED STATEMENTS OF CASH FLOW

Net earnings $ 2,319 $ 564
Non-cash items
Depreciation and amortization 740 598
Gain on disposal of equipment (2) (7)
Stock-based compensation 7 11
Future income taxes 648 296
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3,712 1,462

Net change in accounts receivable,
inventories and prepaid expenses (40,674) (5,916)
Net change in accounts payable 14,905 (20,092)
Net change in contract advances and unearned
income and cost in excess of billings 31,338 16,948
Net change in income taxes payable (3,960) -
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5,321 (7,598)
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INVESTING ACTIVITIES

Long-term cash and equivalents - (4,000)
Proceeds on disposal of equipment 2 20
Additions to intellectual property - (253)
Additions to property and equipment (1,304) (837)
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(1,302) (5,070)
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FINANCING ACTIVITIES

Proceeds under line of credit 5,000 4,420
Repayments under line of credit (1,500) -
Issuance of long-term debt 564 283
Repayment of long-term debt (262) (155)
Repayment of demand term loan (260) (195)
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3,542 4,353
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Increase (decrease) in cash 7,561 (8,315)
Cash, beginning of period 50,387 29,177
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Cash, end of period $ 57,948 $ 20,862
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SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 164 $ 193
Income taxes $ 4,330 $ 20
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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
contracts that have been awarded but not yet commenced construction, as well
as 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 First Quarter Report 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: 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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