Stuart Olson Inc. Annual Report 2009

FY2009 Annual Report · Stuart Olson Inc.

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creating value
for our clients,
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our shareholders

CORPORATE PROFILE

Churchill is a diversified construction company
comprised of three strategic business units:
Buildings, Industrial Insulation Contracting and
Industrial Electrical Contracting. In aggregate,
these business units provided services to more
than 200 customers, employed 337 full-time
employees and 1,136 skilled trades people in 2009.
At December 31, 2009, total assets were $367
million, shareholder’s equity was $142 million and
market capitalization was $339 million. Churchill’s
operations are focused primarily in Western Canada.

Project Locations

Stuart Olson

IHI

Laird

Office Locations

Fort McMurray

Edmonton

Calgary

Saskatoon

Vancouver

Kelowna

Regina

Winnipeg Thunder Bay

TABLE OF CONTENTS

01
Project and Office Locations

02
Five Year Summary

03
Historical Results

06
Shareholders’ Message

10
Our Responsibility

14
The Market

20
Operations

34
Q&A with Management

37
MD&A and Financials

5 year summary

The following selected unaudited financial data has been derived from Churchill’s consolidated financial statements, which
have been audited by Deloitte & Touche LLP, Chartered Accountants. The information set forth below should be read in
conjunction with the Management’s Discussion & Analysis, Consolidated Financial Statements and Notes sections of this
Annual Report. The data below is presented on a continuing operations basis.

Years ended December 31

($ thousands, except share and per share
data and percentages)

INCOME STATEMENT DATA
Contract revenue
Contract income
Contract income (%)
Earnings (loss) before interest, tax

depreciation and amortization (“EBITDA”)

Interest expense
Depreciation and amortization expense
Earnings before income taxes
Net earnings from continuing operations

BALANCE SHEET DATA
Working capital
Shareholders’ equity
Total debt
Non-construction related assets

PER COMMON SHARE DATA
Net earnings per common share:

Basic from continuing operations
Fully diluted from continuing operations

Book value per share

OTHER DATA
Price to earnings multiple (12 month trailing)
Return on average shareholders’ equity (“ROE”)
Total shareholder return
Work-in-hand
Total backlog

COMMON SHARE INFORMATION
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted

Shares outstanding at year-end:

Basic
Fully diluted

Shares traded
Share price:
High
Low
Close

2009

2008

2007

2006

2005

$ 601,241
91,951
15.3%

$ 760,953
93,879
12.3%

$ 694,021
63,218
9.1%

$ 478,893
44,136
9.2%

$ 379,150
32,017
8.4%

51,322
240
4,435
46,647
33,479

$ 107,365
141,507
788
-

56,186
491
4,089
51,606
35,591

78,303
105,573
7,869
-

33,883
665
2,808
30,410
20,682

35,180
69,678
9,460
-

15,880
814
1,782
13,284
8,599

19,801
47,689
21,631
-

8,075
880
1,773
5,214
3,212

14,872
40,219
16,695
-

1.90
1.87
8.03

1.98
1.96
5.92

1.17
1.15
3.90

0.49
0.48
2.70

0.20
0.20
2.25

10.1
28%
168%
$ 784,237
$ 1,388,624

3.6
41%
(68%)
$ 565,259
$ 1,390,273

19.2
35%
275%
$ 668,780
$ 1,333,655

12.2
20%
90%
$ 480,628
$ 1,080,836

15.8
10%
29%
$ 223,501
n/a

17,620,454
17,935,551

17,928,037
18,109,979

17,730,644
17,995,235

17,746,020
17,960,636

15,739,334
15,885,305

17,619,259
18,832,502
15,729,584

17,822,091
18,341,751
20,315,900

17,886,991
18,204,491
19,195,481

17,667,491
18,239,158
4,452,191

17,895,686
18,500,686
2,632,200

20.94
6.33
19.27

24.49
4.45
7.19

29.90
5.11
22.50

6.35
3.00
6.00

3.50
1.86
3.15

Work-In-Hand ($millions)

Increase of 39% in 2009

CAGR of 37% over 4 years

Work-In-Hand ($millions)

Increase of 39% in 2009

CAGR of 37% over 4 years

Book Value

per Common Share ($)

Growth of 36% in 2009

CAGR of 37% over 4 years

Revenue ($millions)

CAGR of 12% over 4 years

$200

$100

Book Value
$0
per Common Share ($)

07
Growth of 36% in 2009
CAGR of 37% over 4 years

$10

EBITDA ($millions)

$60

$50

$40

$30

$20

$10

EBITDA ($millions)
$0
06

Revenue ($millions)
CAGR of 12% over 4 years

$60

$800
$50

$700
$40
$600
$30
$500

$400
$20

$300
$10
$200
$0
$100

Revenue ($millions)
06
08
CAGR of 12% over 4 years

Work-In-Hand ($millions)

Increase of 39% in 2009

CAGR of 37% over 4 years

Book Value
per Common Share ($)

Growth of 36% in 2009
06
08
CAGR of 37% over 4 years

$800

$700

$600

$500

$400

$300

$200

$100

$800

$700

$600

$10

$500

$400

$300

$200

$100

$2
$30

$20
$0

$10

EBITDA ($millions)

$60

Revenue ($millions)
CAGR of 12% over 4 years

$800

$700

$600

$500

$400

$300

$200

$100

Work-In-Hand ($millions)
06
07
09
Increase of 39% in 2009
CAGR of 37% over 4 years
Book Value
per Common Share ($)

$800

$700

$600

$500

$400

$10

Growth of 36% in 2009
CAGR of 37% over 4 years

historical
results

$6
$50

$60

EBITDA ($millions)

$4
$40

$300

Work-In-Hand ($millions)

Increase of 39% in 2009

CAGR of 37% over 4 years

Book Value

per Common Share ($)

Growth of 36% in 2009

CAGR of 37% over 4 years

EBITDA ($millions)

Churchill 009 Annual Report

Net Earnings ($millions)
CAGR Growth of 80% over 4 years

Earnings per Share ($)
CAGR of 68% over 4 years

Stuart Olson

Revenue

($millions)

Insulation Holdings

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Stuart Olson
Revenue
($millions)

$800

$700

$600

$500

$400

$300

$200

$100

$10

$60

$50

$40

$30

$20

$10

$800

$700

$600

$500

$400

$300

$200

$100

$40

$35

$30

$25

$20

$15

$10

$2.00

$1.50

$1.00

$0.50

$0.00

Stuart Olson

Revenue

($millions)

Laird

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Stuart Olson

Revenue

($millions)

Laird

Revenue

400

($millions)

600

500

400

300

200

100

600

500

120

300

100

200

100

120

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Insulation Holdings

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

600

500

400

300

200

100

120

100

600

500

400

300

200

100

120

100

120

Growth of 36% in 2009

Earnings per Share ($)

CAGR of 68% over 4 years

400
Book Value
per Common Share ($)
300

Net Earnings ($millions)
CAGR Growth of 80% over 4 years

$800

$700

$600

$500

$400

$300

$200

$100

$40

$35

$30

$25

$20

$15

$10

$40

$35

$30

$2.00

$25

$20

$1.50

$15

$10

$1.00

$0.50

$2.00

$1.50

$1.00

$0.50

$0.00

Net Earnings ($millions)

CAGR Growth of 80% over 4 years

Earnings per Share ($)

CAGR of 68% over 4 years

Earnings per Share ($)

CAGR of 68% over 4 years

EBITDA ($millions)

Insulation Holdings

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Laird

Revenue

($millions)

2009

Jun 2009

Insulation Holdings

Aug 2009

Sep 2009

Jul 2009

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Insulation Holdings

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Stuart Olson

Revenue

($millions)

$0.00

Earnings per Share ($)

CAGR of 68% over 4 years

Revenue ($millions)

CAGR of 12% over 4 years

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Net Earnings ($millions)

CAGR Growth of 80% over 4 years

Laird

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

CAGR of 37% over 4 years

100

200

100

120

100

Earnings per Share ($)

CAGR of 68% over 4 years

Revenue ($millions)
CAGR of 12% over 4 years
08

600

Net Earnings ($millions)
CAGR Growth of 80% over 4 years

Work-In-Hand ($millions)
500
Increase of 39% in 2009
CAGR of 37% over 4 years

Net Earnings ($millions)
CAGR Growth of 80% over 4 years
07

600

500
09

400

300

200

100

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Stuart Olson
0
08
Revenue
($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Laird

Revenue

($millions)

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Laird
Revenue
($millions)

Insulation Holdings

100

Revenue

($millions)

$800

$700

$600

$500

$400

$300

$200

$100

$10

$60

$50

$40

$30

$20

$10

$800

$700

$600

$500

$400

$300

$200

$100

$40

$35

$30

$25

$20

$15

$10

$2.00

$1.50

$1.00

$0.50

$0.00

$50
$800

$40
$700

$600
$30

$500
$20
$400

$10
$300

$200
$0

$100

$800

$700

$40
$600

$35
$500

$30
$400

$25
$300

$20
$200

$15
$100

$10
$0

$40

$35

$30

$2.00

$25

$20

$1.50

$15

$10

$1.00

$0.50

$0.00

$2.00

$1.50

$1.00

$0.50

$0.00

the vision

Churchill 009 Annual Report

To be the most
admired construction
and industrial services
company in Canada

Core Values

in all we do.

Mission
• Creating value for our clients, employees, partners and

ultimately our shareholders.

• Attracting, retaining and developing the best people.

• Exceeding customer expectations by being results driven.

• Achieving sustainable growth through continuous

improvement.

• Delivering consistently superior operating and financial results.

• Contributing positively to the community in which we work,

live and play.

Strategy
• Emphasizing value added construction and other partnering

methods of project delivery.

• Securing contracts for larger projects.

• Targeted geographic expansion.

• Industry sector diversification.

• Product and service line diversification.

• Ensuring the Corporation has a strong balance sheet to

support its growth objectives.

Acting with
integrity by
respecting and
trusting people

Striving for
excellence in an
exciting team
environment

Demonstrating
innovation and
entrepreneurial
spirit

Being
conscious
of safety,
health and the
environment

the executive

From left to right:
Joette Decore, James Houck,
David LeMay, Greg Phaneuf,
Ron Martineau, Daryl Sands,
Andrew Apedoe, Don Pearson

Shareholders’ Message

Dear fellow shareholders,

The past year marked another excellent year for the company. Our
financial performance once again exceeded expectations.

We began 2009 in the midst of great uncertainty, as commodity prices declined dramatically
impacting our industrial businesses, the housing market in places like the United States and
United Kingdom stalled and financial markets were in crisis due to the collapse of several
financial institutions and significant losses.

As a result, we took a hard look at our business operations and began looking for ways for us
and our customers to reduce costs and improve our business models. Churchill’s employees
adapted quickly to the change in the economic environment and how we conduct our
business. The success we experienced in 2009 could not have been accomplished without
their hard work and commitment. We significantly restructured all of our industrial businesses
and eventually sold Triton, our industrial general contracting segment, to an organization who
could grow and derive more value from that business than we could. Afterwards, we relocated
and restructured the corporate offices which resulted in new locations for Laird Electric, IHI
and the corporate centre. By making these improvements we were better able to meet the four
key objectives that we use to assess our financial performance.

Our performance objectives for 2009 were:
• Achieving total shareholder returns which would place us in the first quartile of our peer group;

• Positioning for growth in our financial results;

• Sustaining and growing our backlog; and

• Maintaining a strong balance sheet.

Churchill 009 Annual Report

The outlook for 2010 is for a gradual return to economic
growth across most regions of Canada and in particular
Western Canada, where we operate. Our focus will be on
growth in the years to come as we execute our strategy
of expanding geographically and adding new services to
our business mix. Your management team and board of
directors are committed to building shareholder value.

In 2009, we achieved:
• A total shareholder return of 168%, placing us at the top of our peer group and one of the

better performing companies on the TSX;

• Net earnings of $34.8 million, and earnings per share of $1.98;

• Our backlog began and finished the year at $1.4 billion;

• Our balance sheet remained strong with cash growing from $100.7 million at the beginning of

the year to $184.4 million; and

• Restructured our debt by paying down $7.1 million and negotiating a $60 million credit facility

which remains substantially unutilized.

We are also pleased with our performance as it relates to safety. We have taken significant
steps to impart a stronger culture of safety awareness throughout the organization. Most
recently, the Board of Directors approved the formation of a health, safety and environment
committee and the mandate of this committee will be more fully disclosed in our management
information circular. Operationally every company saw improvements in their safety statistics
during 2009. We will be striving to improve upon these strong safety metrics again in 2010.

Churchill continues to strive for excellence in its corporate governance practices. Churchill
recruited Carmen R. Loberg and Wendy L. Hanrahan to our board of directors in 2009. Carmen
serves as President and Chief Executive Officer of the Norterra Group of Companies and
Wendy is the Vice President, Human Resources, Communications and Facilities Management
at TransCanada. Carmen is already proving to be a great contributor to our strategic thinking
and provision of leadership to management, and Wendy is providing support to our Human
Resource and Finance initiatives.

The outlook for 2010 is for a gradual return to economic growth across most regions of Canada
and in particular Western Canada, where we operate. Our focus will be on growth in the years
to come as we execute our strategy of expanding geographically and adding new services to
our business mix. Your management team and board of directors are committed to building
shareholder value.

In closing we would like to thank all of our employees, customers and shareholders for their
commitment and support of the Corporation during the past year and we look forward to
continuing to earn your trust and respect.

Regards,

James C. Houck
President & Chief Executive Officer
March 11, 2010

Churchill 009 Annual Report

our responsibility

Churchill 009 Annual Report

Social Responsibility Report

This year, Churchill’s board of directors approved the adoption of
a Corporate Social Responsibility program to guide employees and
directors in all aspects of their work for the company.

At The Churchill Corporation, we define Corporate Social Responsibility as:

• Conducting business in a socially responsible and ethical manner;

• Protecting the environment, health and safety of people;

• Respecting the individual;

• Engaging, learning from and supporting the communities and cultures with

whom we work; and

• Supporting and encouraging our employees to give back to their communities.

The following are highlights of our achievements in 009.

Conducting business in a socially responsible and ethical manner
Governance begins with a strong board and management and is reflected in the policies of the Corporation. We
have continued to add to our board new members to renew and refresh the board and bring in new thinking over
time. We have codes of conduct for employees and directors, and an anonymous whistleblower hotline. We
respect the law and believe it is important to protect human rights and have appropriate policies to assist in the
recruitment of staff, and the protection of the health and safety of all individuals and the environment.

Environment, health and safety
To complement the sustainable design and construction services we offer our clients, we continually take steps
to ensure that our own operations are environmentally sustainable. Investments in sustainability include:

• The design and materials of our Corporate and Southern Alberta head office have been completed with

environmentally friendly materials;

• Recycle bins under every desk;

• Composting in lunchrooms/kitchens;

• Sulfate free dish soap and detergents;

• Energy-efficient lighting;

• Low VOC paints and glues;

• The purchase of two hybrid vehicles for use by our project managers, coordinators, superintendents and others

visiting our work sites; and

• The printing of our investor relations materials using FSC recycled paper products.

Additionally, we have increased our emphasis on health and safety, experiencing positive
results and feedback from our stretching boot camps. Consequently, we have seen a verifiable
reduction in soft-tissue injuries and fewer sprains, strains, etc.

Other safety accomplishments include:

• Implementing a behaviour – based safety program at Laird Electric; and

• Creating a corporate safety council consisting of safety representatives from all operating

companies to share best practices.

Respecting the individual
The Corporation will ensure that employees are treated fairly, with dignity, respect and
consideration for their goals and aspirations and that diversity in the workplace is embraced.
To this end, we conduct annual employee performance evaluations and in 2010 have
implemented the balance scorecard assessment methodology beyond the management
level and into the operating ranks within the company. This will allow us to identify more high
potential future leaders for whom we can provide development and support to create the best
organization possible. Further highlights of 2009 include:

• Providing professional development programs and funding for our people;

• Providing customized leadership programs for management employees;

• Utilizing salary surveys and the knowledge of our human resources and compensation

consultant (Hay Group) to further refine and improve our compensation practices to achieve
the desired results;

• Continuing to offer competitive wages, benefits and a wide range of career opportunities

which allows Churchill to attract and retain high performers; and

• We expanded our wellness program to include a larger base of employees, effective

January 1, 2010.

Churchill 009 Annual Report

Engaging, learning and supporting the community
Our continued financial and operational success enables us to support our communities by hiring new staff, which contributes
to the strengthening of our economy and the social fabric.

Stuart Olson is at the forefront of the Green Building movement. It has made the corporate commitment to be involved in and
promote the continued growth of sustainable design and construction projects. Stuart Olson has completed over 25 sustainable
design and construction projects in recent years, buildings of enduring quality that will serve our communities for many
decades.

We also direct contributions and donations to community based non-profit organizations in the communities in which we work.
For example, in 2009:

• We donated over $260,000 to numerous charities, educational institutions, health foundations, and youth organizations

throughout Alberta, British Columbia and Saskatchewan;

• We provided 13 scholarships to students attending universities and technical institutes; and

• We made a five-year commitment totalling $1 million dollars to SAIT Polytechnic’s two priority areas; the Trades and

Technology Complex and the SAIT Opportunities Fund.

Encouraging employee giving
Employees are encouraged to be generous with their time and resources where they can make a difference. This can involve
everything from coaching local sports teams, to raising money for cancer, to supporting the local United Way chapter. The
company will support employee giving through use of office space for meetings, office equipment for copying and printing and
matching funds raised with the approval of a senior officer of the Corporation.

Examples of organizations which benefitted from the support of our employees in 2009 were:

• The United Way;

• The Canadian Cancer Society;

• The Juvenile Diabetes Research Foundation; and

• Many other local community organizations.

the market

Churchill 009 Annual Report

Market sectors at a glance

Commercial
Our expertise includes
retail, office and
hospitality buildings.

Infrastructure
Our expertise in this sector
includes airports, buildings,
primary, secondary and
post-secondary educational
facilities, healthcare facilities,
recreation centers, civic and
government buildings.

Agrifood
Our expertise includes food
processing to packaging,
handling, distribution and
storage facilities.

Chemicals and Petroleum
Our expertise includes gas
processing, heavy and
conventional oil production,
refining and upgrading,
bitumen production,
petrochemicals, chemicals
and fertilizer facilities.

Mining and Metallurgy
Our expertise includes
uranium, potash, zinc
and other complex
industrial operations.

Forestry
Our expertise includes
softwood lumber, pulp and
paper production facilities.

Residential
Our expertise includes
multi-unit residential projects.

1,500

1,200

900

600

300

1,500

1,200

900

600

300

1,500

1,200

900

600

300

1,500

1,200

900

600

300

12-Month Construction Employment Trendline

(Employment in thousands)

Trend Charts

5-year construction employment (source Statistics Canada)
• The economic downturn impacted the construction labour force in 2009 as it did many
Dec
Mar
Jun
Nov
08
09
09
09
industries. While total employment numbers were down for the first time since 2002,
employment levels generally were very robust.

May
09

Aug
09

Sep
09

Feb
09

Jan
09

Apr
09

Oct
09

Jul
09

Dec
09

5-Year Construction Employment Trendline
(Employment in thousands)

Jul
2009

Aug
2009

12-Month construction employment (source Statistics Canada)
• Employment numbers started to recover during the third and fourth quarter of 2009.

This trend should hold through 2010 and 2011.

12-Month Construction Employment Trendline
(Employment in thousands)

Dec
08

Jan
09

Feb
09

Mar
09

Apr
09

May
09

Jun
09

Jul
09

Aug
09

Sep
09

Oct
09

Nov
09

Dec
09

5-Year Construction Employment Trendline

(Employment in thousands)

Jul

2009

Aug

2009

Crude Oil

($US WTI Spot Average)

100

Crude Oil
($US WTI Spot Average)

100

Natural Gas

($US per thousand cubic feet)

Henry Hub spot price

Natural Gas

($US per thousand cubic feet)
Henry Hub spot price

Churchill 009 Annual Report

Non-residential building permits by type (source Statistics Canada)
On a current dollar basis non-residential spending in 2009 declined 1.2% versus 2008.

• The decline was mainly a result of a 6.5% decline in spending on commercial projects, combined with a 16.4% pull back in

spending on industrial projects.

• These declines offset a 19.3% rise in institutional construction which was boosted by federal and provincial stimulus spending.
Q2
2011

Q2
2010

Q3
2009

Q2
2011

• Growth in non-residential spending in 2009 was particularly strong in Prince Edward Island (+37.5%) and in Saskatchewan
Q2
Q3
2011

Q4
(+25.8%); while in Alberta and British Columbia it declined by 7.7% and 7.4%, respectively.

Q2
2010

Q3
2009

Q2
2011

• Non-residential construction spending may continue to shrink in the first half of 2010.

• Increasing corporate profits, improving credit conditions, higher commodity prices, low interest rates and a modest economic

recovery should cause non-residential spending to accelerate in the second half of 2010 and strengthen further in 2011.

Non-residential Building Permits by Type
(Value in $ millions)

2.0

Non-residential Building Permits by Type
(Value in $ millions)

2.0

1.5

1.0

0.5

0.0

Dec
08

Jan
09

Feb
09

Mar
09

Apr
09

May
09

Jun
09

Jul
09

Aug
09

Sep
09

Oct
09

Nov
09

Dec
09

Dec
08

Jan
09

Feb
09

Mar
09

Apr
09

May
09

Jun
09

Jul
09

Aug
09

Sep
09

Oct
09

Nov
09

Dec
09

Institutional

Commercial

Institutional
Industrial

Commercial

Industrial

Canadian Building Permits
(Value in $ millions)

4,000

Canadian Building Permits
(Value in $ millions)

3,500

4,000

3,000

3,500

2,500

3,000

2,000

2,500

1,500

2,000

1,500

Dec
08

Jan
09

Feb
09

Mar
09

Apr
09

May
09

Jun
09

Jul
09

Aug
09

Sep
09

Oct
09

Nov
09

Dec
09

Non-residential permits

Residential permits

Non-residential permits

Residential permits

Dec
08

Jan
09

Feb
09

Mar
09

Apr
09

May
09

Jun
09

Jul
09

Aug
09

Sep
09

Oct
09

Nov
09

Dec
09

Oil WTI forecast
(Source: US Energy Information Association – Jan 2010)

Crude Oil
($US WTI Spot Average)

Natural Gas
($US per thousand cubic feet)
Henry Hub spot price

• The EIA expects the crude oil market to strengthen this
spring with WTI rising to an average of about $81.00 per
barrel over the second half of this year and $84 per barrel in
2011. EIA’s forecast assumes that US GDP grows about 2.3%
in 2010 and by 2.5% in 2011, while world oil consumption-
weighted real GDP grows by 2.6 % and 3.7% in 2010 and
2011, respectively.

100

2009

2010

2011

Q3
2009

Q2
2010

Q2
2011

Natural Gas
($US per thousand cubic feet)
Henry Hub spot price

Non-residential Building Permits by Type
(Value in $ millions)

Q3
2009

Q2
2010

Q2
2011

Institutional

Commercial

Industrial

Dec
08

Jan
09

Feb
09

Mar
09

Apr
09

May
09

Jun
09

Jul
09

Aug
09

Sep
09

Oct

Nov

Dec

Canadian Building Permits
(Value in $ millions)

Institutional

Commercial

Industrial

Natural gas forecast
Crude Oil
(Source: US Energy Information Association – Jan 2010)
($US WTI Spot Average)
• EIA expects this year’s annual average natural gas Henry
100
Hub spot price to be $5.37 per million Btu (MMBtu), a
$1.42-per-MMBtu increase over the 2009 average of $3.95.
EIA projects continuing price increases in 2011, averaging
$5.86 per MMBtu for the year. EIA expects working gas
80
inventories to end the first quarter at about 1,644 billion
cubic feet (Bcf) compared with 1,734 Bcf in the previous
Outlook, because of colder-than-normal weather in
60
early January.

2.0

1.5

1.0

Q3
2009

Q2
2010

Q2
2011

Non-residential Building Permits by Type
(Value in $ millions)

0.5

0.0

4,000

3,500

3,000

2,500

2,000

Aug

1,500

Canadian Building Permits

(Value in $ millions)

2.0

1.5

1.0

0.5

0.0

4,000

3,500

3,000

2,500

2,000

1,500

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Sep

Dec

Oct

Jan

Nov

Feb

Dec

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Non-residential permits

Residential permits

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Non-residential permits

Residential permits

Churchill 009 Annual Report

Government of Alberta’s Capital Plan
• The Government of Alberta is forecasting a 3.7% increase in total capital spending to $7.2 billion in 2010 – 2011, which contains
the last year of the two-year federal Economic Action Plan, up from $7.0 billion in 2009 – 2010 (per the government’s Q2 update
last November). Health facilities and equipment lead the growth in 2010 – 2011, and we believe this will provide substantial
opportunities for engineering and construction companies (78% of spending under this category is for new facilities and
expansions or capital maintenance/renewal).

• Depending on the speed and extent of a recovery in the oil and gas industry and the economy in general, we suspect there

could be some upside in the governments’ plans for 2012-2013 by the time that period is reached.

($ millions)

Actual

Q2 Update Target

Target

Year ends are March 31

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

Municipal infrastructure
support

Provincial highway network

Health facilities and
equipment

Schools

Post-secondary facilities

Community facilities and
centennial projects

Water and wastewater
management

Housing

Government facilities,
equipment and other capital

Total

Yr/Yr change

$ 1,526

$ 1,628

$ 1,664

$ 1,776

$ 1,718

$ 1,756

1,388

1,290

620

906

359

158

349

375

2,020

1,905

1,866

2,183

1,644

979

609

880

365

346

413

702

312

716

708

286

405

858

802

516

578

118

167

352

916

185

251

109

290

247

1,033

1,010

769

284

145

104

252

200

804

$ 6,971

$ 7,942

$ 6,951

$ 7,208

$ 6,909

$ 5,958

47.0%

13.9%

(12.5%)

3.7%

(4.1%)

(13.8%)

5 Year

CAGR

2.8%

3.4%

(9.8%)

(14.5%)

(30.7%)

(21.9%)

9.8%

(10.5%)

16.5%

British Columbia Economy
British Columbia’s economic recovery in 2010 is expected to result in a 2.2% increase in real GDP. BC’s economic rebound is being
keyed by a recovery in domestic demand, including a resumption of job creation, gains in retail sales and a stabilization in housing.

After averaging more than 5% in the prior four years, the fiscal plan is based on an average program spending increase of
less than 2% over the coming three years. Health and education remain the key spending priorities for the British Columbia
government. BC anticipates a 2.3% expansion for 2011, with growth accelerating to an average pace of 2.8% over the 2012-2014
timeframe, propelled by stronger US demand.

The BC Major Projects Inventory estimates the available capital cost of proposed projects estimated at about $107.1 billion, up
from $106.7 billion in the previous quarter. Many major project proposals are in very preliminary stages and are not approved for
construction, therefore capital cost estimates should be viewed with caution. Approximately $19.3 billion of projects are judged
to be ‘on hold’ for the time being.

Saskatchewan Economy
Saskatchewan is expected to lead the country in GDP growth in 2010 and battle Alberta for top spot in 2011. A rebound in the
oil, potash, agriculture and uranium sectors will see Saskatchewan reap the benefits of re-invigorated Asia-Pacific growth.
GDP growth in the province is expected to climb 3.0% in 2010 and 4.1% in 2011. Saskatchewan’s December 2009 major projects
inventory identifies $30 billion of construction projects proposed, in planning and design and tendered and in construction.
Of this amount, more than $28 billion is associated with projects in the areas of commercial, retail, industrial, manufacturing,
infrastructure and institutional construction, mining, oil and gas and power construction.

operations

Churchill 009 Annual Report

Stuart Olson and Insulation
Holdings achieved record financial
results in 2009 on an EBITDA basis.
Our restructuring efforts at Laird
Electric were successful, enabling
Laird to remain profitable despite
a 63% decline in revenue due to
reduced capital and maintenance
spending in the oil sands.

Going into 2010, Churchill’s backlog
remains at near-record levels, client
access to capital is improving,
spending by the private sector is
increasing and our substantial cash
position provides us with significant
financial flexibility to evaluate value
creation opportunities.

Work-In-Hand ($millions)

Increase of 39% in 2009

CAGR of 37% over 4 years

Book Value

per Common Share ($)

Growth of 36% in 2009

CAGR of 37% over 4 years

EBITDA ($millions)

Revenue ($millions)

CAGR of 12% over 4 years

Net Earnings ($millions)

CAGR Growth of 80% over 4 years

Earnings per Share ($)

CAGR of 68% over 4 years

$800

$700

$600

$500

$400

$300

$200

$100

$10

$60

$50

$40

$30

$20

$10

$800

$700

$600

$500

$400

$300

$200

$100

$40

$35

$30

$25

$20

$15

$10

$2.00

$1.50

$1.00

$0.50

$0.00

Stuart Olson
Revenue
($millions)

2009

Laird
Revenue
($millions)

2009

Insulation Holdings
Revenue
($millions)

600

500

400

300

200

100

120

100

Churchill 009 Annual Report

Stuart Olson

Services:
Stuart Olson provides: (i) construction management; (ii)
design-build; and (iii) general contracting services in different
market sectors. Stuart Olson specializes in the construction
management form of delivery which involves partnering with
the client and their design team early in the development
process. This is the most common form of contracting
Stuart Olson undertakes, presently generating more than
80% of the company’s revenue. Stuart Olson’s work in this
area has ranged from post - secondary projects to high-rise
buildings and includes both new construction and renovation.
Stuart Olson also offers clients design - build construction
services, whereby Stuart Olson provides both the design
and the construction services for the project. Stuart Olson
also provides general contracting services, which include
the provision of management, estimating, accounting, site
management, staff, field workers and equipment in order
to complete projects. Stuart Olson’s project managers and
superintendents provide the experience and expertise to
manage projects ranging in size from $1 million to more
than $500 million.

Aug 2009

Sep 2009

Jun 2009

Jul 2009

2009

Representative Customers:

• Alberta Health Services

• The City of Red Deer

• Alberta Infrastructure

• The City of Calgary

• British Columbia
Ministry of Health

• Edmonton International

Airport Authority

• The University of Alberta

• The City of Edmonton

• UBC and UBCO

• Vancouver

Community College

• Simon Fraser University

2009

2009
• NAIT

Jun 2009

Jul 2009

Aug 2009

Sep 2009

• University of Victoria

• SAIT Polytechnic

• The University of Calgary

• Vancouver Aquarium

• The Government of Canada,

• The University of Lethbridge

Department of Defense

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Competitive Landscape:
The building construction market is highly competitive, with relatively low barriers to entry in the small-to-medium size project
segment of the market, but with significantly higher barriers to entry in the large, more complicated project segment where
bonding capacity, working capital availability and technical capabilities restrict competitors. Stuart Olson has several capable
and well-established competitors. Competitive factors include: price and approach to project execution; relevant project
experience; client relationships; quality of service; record in completing similar projects on time and on budget; subcontractor
relationships; strength of project team; performance bonding capability and financial strength.

Competitive Advantage:
Our people are our greatest competitive advantage combined with the systems, processes and investment in training and
development we provide.

Management believes that its strong reputation developed from past project successes, positions it favourably to meet current
and future competitive challenges.

Experience – Stuart Olson’s detailed construction management methodology is based on years of successful construction
management experience. The company was one of the first general contractors in Western Canada to introduce construction
management, as far back as 1983.

Teamwork – Stuart Olson focuses on a team approach built around professional engineers and experienced contractors who
understand the full scope of the construction manager’s role. Stuart Olson is a general contractor of choice because of its team
player approach to providing value added services.

Pre-Construction Program – The fundamental difference between Stuart Olson and other construction management firms is its
proactive, accurate, vigorous and exhaustive approach to pre-construction services which deliver a higher value product at a
lower cost.

Value Engineering and Constructability Evaluation – Stuart Olson takes great pride in assisting design consultants with design
co-ordination review. Stuart Olson’s team is very technically proficient and motivated to make a positive impact on the projects
the company undertakes. Working with the project team, Stuart Olson reviews the design with respect to “constructability”
from the earliest phases of design through to completion of working drawings. Stuart Olson’s review extends beyond bricks and
mortar issues, considering elements such as labour and materials, environmental impact and people.

Maintain Quality and Cost Controls – Stuart Olson provides guidance on both quality and costs during the design phase. A
quality plan and systematic approach to tracking costs is monitored closely during the construction phase. All of the project
information with regard to cost, schedule and quality management is reviewed on a monthly basis with clients.

Safety – Safety is paramount to the Stuart Olson organization. The well-being of all our stakeholders is the very health of the
company. Safety guides us in all we do and is an integral part of the Stuart Olson blueprint.

Notable
Accomplishments

EBITDA was
a record $51.3
million in 2009
compared to
$42.8 million
in 2008

Awarded first P3
project – Fort St.
John Hospital with
our partners

Churchill 009 Annual Report

Awarded
$699 million
of new awards
during 2009

Opened a new
branch office
in Saskatoon,
Saskatchewan

In May, we began the construction of the $115 million Wal-Mart Perishable Distribution Centre in Balzac,
Alberta, adjacent to Calgary’s northern city limits. This 400,000 square foot distribution centre will be a state of
the art facility utilizing the latest in RFID and logistics technology to receive, store and distribute fresh produce
and frozen products.

In May, we were selected as lead proponent to construct the Central Utilities Plant (“CUP”) Project as part
of the Edmonton International Airport (“EIA”) Expansion Program. Stuart Olson’s scope of work will entail
providing construction management services to ensure the adequate installation of mechanical, electrical,
storm, sanitary and water services to support the increased capacity associated with the terminal expansion
building and new control tower.

In July, we began work on the $298 million Fort St. John Hospital and Residential Care Facility project in
Northeast, British Columbia. This was our first successful P3 bid. Our portion of the construction contract was
$117 million.

In September, we announced that Stuart Olson would build the Genesis Centre of Community Wellness, in
Calgary, Alberta. The Genesis Centre will house branches of the Calgary Public Library and YMCA Calgary, a
human and social services centre, indoor and outdoor sports facilities and community gathering places. The
facility is expected to open its doors in 2011.

We continued to make significant progress on the New Edmonton Remand Centre. This will be largest maximum
security, correctional facility in Western Canada when completed. The facility is comprised of eight buildings,
totalling 610,000 square feet and is expected to qualify for LEED Silver certification when completed. As at
December 31, 2009, tendering activity is 72% complete and construction activity is 35% complete.

Strategies for Value Creation:
Relationship Focused – It is critical that we continue to strive for positive relationships with all owners,
designers and trades with whom we work.

People – Attracting prospective employees to join Stuart Olson because the Blueprint is practiced and
challenging opportunities exist for personal development and career growth.

Backlog Growth – The book to bill ratio is a key metric demonstrating replacement of backlog. Our objective is
to exceed a 1:1 ratio while at the same time, securing projects with the potential to achieve reasonable margins.

Geographic Expansion – Ensuring a successful expansion into the Saskatchewan building market.

Secure More P3 Projects – Stuart Olson will continue to dedicate time, resources and money in the pursuit of
P3 projects in our areas of expertise and geographic scope.

Work-In-Hand ($millions)

Increase of 39% in 2009

CAGR of 37% over 4 years

Book Value

per Common Share ($)

Growth of 36% in 2009

CAGR of 37% over 4 years

EBITDA ($millions)

Revenue ($millions)

CAGR of 12% over 4 years

Net Earnings ($millions)

CAGR Growth of 80% over 4 years

Earnings per Share ($)

CAGR of 68% over 4 years

$800

$700

$600

$500

$400

$300

$200

$100

$10

$60

$50

$40

$30

$20

$10

$800

$700

$600

$500

$400

$300

$200

$100

$40

$35

$30

$25

$20

$15

$10

$2.00

$1.50

$1.00

$0.50

$0.00

Stuart Olson

Revenue

($millions)

Laird

Revenue
($millions)

2009

Insulation Holdings
Revenue
($millions)

2009

600

500

400

300

200

100

120

100

Churchill 009 Annual Report

Insulation Holdings

Jul 2009

Aug 2009

Sep 2009

Jun 2009

2009

Services:
Both Fuller Austin and Northern Industrial provide the
following construction services: mechanical insulation
installation; industrial metal siding and cladding; and asbestos
abatement. Installation of mechanical insulation can involve
a variety of piping systems and sizes, all operating under
differing conditions and in differing environments within
the same facility. Other insulated components often include
vessels, equipment, tanks, boilers, ductwork, precipitators,
stacks, etc. The companies utilize an extensive selection of
insulation products and cladding types designed to service
thermal, cryogenic, acoustical and production purposes.
The siding services provided encompass new and retrofit
siding applications in the industrial sector. The companies
supply and install claddings of all types (insulated, lined or
single skinned construction systems). Asbestos abatement
services include asbestos removal, encapsulation, emergency
response, as well as monitoring and testing.

Aug 2009

Sep 2009

Jun 2009

Jul 2009

2009

Representative Customers:

• TransAlta

• Suncor

• Shell Scotford (Bantrel)

• Syncrude (Jacobs)

• Albian Sands (Horton CBI)

• EPCOR

• Encana (KBR)

• Flint / Transfield

• PCL Industrial

• Potash Corporation of

Saskatchewan
(Cory, Allan, Rocanville)

• Mosaic Potash

• AMEC

• Vale Inco

• Imperial Oil -

Strathcona Refinery

• Sherritt

• Agrium Redwater

• Consumers Cooperative

• Agrium Fort Saskatchewan

Refinery Ltd.

• CNRL Wolf Lake & Horizon

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Competitive Landscape:
Fuller Austin and Northern Industrial have several large and capable competitors in each of
their geographic markets and areas of service. The companies provide a more comprehensive
range of services than most of their competitors, which enables them to deliver a single-source
solution to clients. The competitive factors affecting the businesses include: price and
approach to project execution; relationships with clients and client representatives; scope of
service capabilities; quality of service; record in completing similar projects on time and on
budget; safety programs and record; performance bonding capability and financial strength;
and relevant project experience.

Competitive Advantage:
Size – Management believes that the Insulation Holdings group of companies makes up one of
the largest insulation contracting companies in Canada.

Structure – Insulation Holdings operates via a unionized insulation contractor (Fuller Austin)
and a non-unionized insulation contractor (Northern Industrial), which allows it to effectively
target virtually any insulation contract available in the Alberta marketplace.

Geographic Reach – Insulation Holdings is able to target opportunities and perform work on
opportunities from Northwestern Ontario to British Columbia. This geographic scope makes the
business less sensitive to economic conditions in any one particular province.

Safety – The management team of Insulation Holdings provides oversight and direction to its
subsidiary management and employees who work closely with their clients to ensure a 100%
safe culture is implemented. The organization has demonstrated an exemplary record of safety
which has assisted it in winning various contracts.

Notable
Accomplishments

Record EBITDA for
2009 of $9.1 million
compared to
$7.6 million, the
three year average

Ended 2009
with backlog
of $69.0 million

Churchill 009 Annual Report

Awarded
$75.3 million
of new awards
during 2009

Accumulated 1,906,305
hours of work without
a recordable lost time
incident September
2007 through December
2009 (27 months)

Strong
project
execution

Strategies for Value Creation:
To grow our insulation service line through the pre-fabrication and installation of removable/
re-usable soft cover insulation blankets for flanges, valves, turbines, exchangers and other
equipment.

Expand and grow HVAC service line to include shop pre-fabrication of HVAC components.

Through organic growth, continue to grow current service lines in all business units in Alberta and
Saskatchewan.

Bundling of Services – In 2009, Fuller Austin and Laird Electric partnered to provide electrical heat
tracing and insulation services to a client for their upcoming 2010 turnaround. In 2010, the two
organizations hope to build upon this initial success.

Geographic and Services Growth – The insulation companies are ready and capable of expanding
their operations base. The management team is in place to accomplish this goal. Complimentary lines
of service and geography will be reviewed and evaluated in conjunction with Churchill for acquisition.

Work-In-Hand ($millions)

Increase of 39% in 2009

CAGR of 37% over 4 years

Book Value

per Common Share ($)

Growth of 36% in 2009

CAGR of 37% over 4 years

EBITDA ($millions)

Revenue ($millions)

CAGR of 12% over 4 years

Net Earnings ($millions)

CAGR Growth of 80% over 4 years

Earnings per Share ($)

CAGR of 68% over 4 years

$800

$700

$600

$500

$400

$300

$200

$100

$10

$60

$50

$40

$30

$20

$10

$800

$700

$600

$500

$400

$300

$200

$100

$40

$35

$30

$25

$20

$15

$10

$2.00

$1.50

$1.00

$0.50

$0.00

600

500

400

300

200

100

120

100

Stuart Olson

Revenue

($millions)

2009

Laird
Revenue
($millions)

2009

Insulation Holdings
Revenue
($millions)

Churchill 009 Annual Report

2009

Laird Electric
Aug 2009

Jun 2009

Jul 2009

Sep 2009

Services:
Laird is a full service electrical contractor providing
electrical, instrumentation and power-line construction and
maintenance services. This multi-faceted approach allows
Laird to gain early access to new projects by providing
the initial construction power service; continuing with
the electrical and instrumentation installation during the
construction phase; full project commissioning followed
by the value added services of continued operations and
maintenance support for the operating facility.

Representative Customers:
• Suncor

• Shell Canada

2009

2009
• Nexen

Jun 2009

Jul 2009

Aug 2009

Sep 2009

• Trans Alta

• EpcorAlta Link

• SNC Lavalin

• Fluor Canada

• Siemens

• KBR

2009

Jun 2009

Jul 2009

Aug 2009

Sep 2009

Competitive Landscape:
Laird has several large and capable competitors in the union electrical, instrumentation construction and maintenance industry.
Laird provides a broader range of complementary services than most of its competitors. The competitive factors affecting Laird
include: price and solution driven approach to project execution; management information and cost management systems;
client relationships; scope of service capabilities; quality of service; record in completing similar projects on time and on
budget; safety programs and record; performance bonding capability and financial strength; owner’s preference for union
versus non-union workforce; and relevant project experience.

Competitive Advantage:
Laird is one of the top electrical instrumentation contractors operating in the Canadian oil sands industry. With almost 50 years
of history in the community and industry of Fort McMurray our local approach offers a unique service for oil sands owners.
Experienced industry proven local project management teams are an essential part of our commitment to the oil sands industry
and our service offering. Our expanded presence in the Edmonton market has increased our foot print in the industry and
provided a cost effective central location for our head office. This has also positioned us closer to our client’s corporate centres
and supply chain decision makers.

Focusing on Strong Project Management and Execution – Laird’s proven project management teams have the ability to often
deliver projects ahead of client schedules and continue to earn praise from our clients. This strong execution model and
commitment to quality and safety does not go unnoticed as Laird has won substantial projects where it was not initially the
prime electrical subcontractor. Leveraging our unmatched history in operating plant environments, Laird has successfully
secured our clients trust and respect for executing work in these challenging and potentially dangerous environments. This
allows us to confidently perform not only routine maintenance support services and shutdown/turnaround services but
also be a “go to” contractor for sustainable projects. The sustainable project market, including existing plant optimization
(debottlenecking) and process replacement, is a growth market in which Laird is uniquely qualified. Our commitment to the
safety of our employees, partners and owners has been the key to this success. Bringing our unique suite of services from
construction to maintenance makes Laird a supplier of choice for many major oil sands owners.

Ability to Access Labour – Laird’s strong relationships with the building trades and union-contractor status enable it to access
a reliable and qualified trade labour supply. As such, Laird has been able to access labour successfully in the midst of province
wide labour shortages. This is very beneficial during periods of major plant shutdowns and other unexpected events.

Powerline and Substation Work – Our niche technical expertise in high voltage construction has secured Laird presence early
in the construction phase of projects with early utility work. This service allows Laird early entry to many new major projects.
This enables Laird to establish important working relations with the project owners, construction management teams and
engineering groups and results in Laird being invited to tender additional work packages after they come out of engineering and
design phases. Given these service lines, Laird is often well positioned to participate as a true partner with our key clients in the
early project constructability process.

Safety – At Laird, safety is led by the executive who consistently oversees and invests in safe work practices and operations.
Laird is continuously improving its safety and loss prevention programs as they develop and strengthen a culture where
incidents and injuries are not acceptable and are recognized as preventable by all employees. Safety is not a procedure at
Laird, it’s the way we do business every day and a key competitive advantage in earning business from our clients.

Notable
Accomplishments

$2.8 million
of EBITDA in
a significantly
reduced client
spending year

Secured Suncor 2010
Turnaround Contract
partnering with Fuller
Austin to provide complete
electrical heat trace and
insulation solutions as well
as complete electrical and
instrumentation

Churchill 009 Annual Report

Awarded three
substation
projects with
SNC-Lavalin in the
Edmonton area

Awarded major
scopes of
maintenance and
construction work
at Shell Scotford
Edmonton

Aggressively right sized
organization keeping ahead
of the economic descent
ensuring a profitable year
while maintaining key
personnel and organizational
capability to be properly
positioned for economic and
industry recovery

Working all of
2009 without
a lost time
incident

Laird quickly responded to the challenges faced by the oil and gas industry in early 2009.
This meant right-sizing the organization while maintaining the right organizational capability.
These cost savings initiatives enable Laird to maintain profitability.

Strategies for Value Creation:
Continue to Focus on People and Performance Improvement
Laird’s success has been a result of a continued commitment to safety quality and performance by all
its employees. Ensuring we continue to attract and retain the industry’s leading professionals is a key
strategic initiative in 2010 and beyond.

EBITDA Growth Via Organic Initiatives
• Continue to leverage our industry reputation for performance and experience in operating plant conditions as
well as major green field construction projects. The industry demand requirements for turnaround and plant
maintenance services will be larger than the construction demands in the years to come. This lagging market
will only continue to heat up as more of the mega projects and new plants come on line and begin production.

• Adding significant new Fort McMurray and Edmonton customers to provide client and
marketplace diversification.

• Pursue engineer-procure-construct electrical infrastructure projects by partnering with large reputable
engineering firms. There is a significant requirement for development of Alberta’s electrical distribution
infrastructure. Laird’s unique suite of services positions us well for continued success in this growing market.

• Bundling of services with Fuller Austin providing complete electrical heat trace and insulation solutions

demanded by our industrial clients. This unique relationship with our sister company places us in a
uniquely competitive position as we are 1 of only 2 companies currently providing this service offering.

EBITDA Growth Via Geographic and Market Diversification
With a strong balance sheet we are in a favourable position to be opportunistic in our efforts to
expand our geographic presence and add complimentary service lines. Leveraging the existing owner
relationships of the Churchill insulation companies in Saskatchewan, Laird will aggressively pursue
industrial opportunities in that province in 2010.

Successfully extended
multiyear maintenance
agreements with key
clients including Suncor,
Shell and TransAlta in
extremely competitive
environments

q&a with
management

Churchill 009 Annual Report

Q. How did the collapse in the financial and economic markets impact your business in 2009?
A. Late 2008 was exemplified by the collapse in investor confidence, plunging corporate profits and a sharp tightening of credit
conditions which caused non-residential construction spending to decline by 1.2% in 2009. The decline was the largest year-over-
year drop since 2000, and was mainly the result of a 6.5% decline in spending on commercial projects. Reduced industrial demand,
evidenced by a 16.4% pullback in spending on industrial projects combined with customers demanding 20 – 35% reductions to
their costs made 2009 a very challenging year. Together, these declines more than offset a 19.3% rise in institutional construction,
which was boosted by federal and provincial infrastructure spending. Fortunately, the outlook for 2010 is much better. Given higher
levels of commercial vacancies and low levels of industrial capacity utilization, the commercial and industrial sectors within the
non-residential construction market will start to recover in 2010, with the latter outperforming on a relative basis. Recent increases
in corporate profits, a marked strengthening in commodity prices and the steady strengthening of investor confidence should cause
business non-residential construction spending to accelerate.

Q. Is Infrastructure spending increasing/decreasing/or remaining the same in the future?
A. The Western Canadian provinces (Alberta, British Columbia and Saskatchewan) are expected to lead the recovery in
non-residential construction spending (as measured by square footage) with a CAGR of 24% over the next two years. We
believe that we should experience accelerating revenue growth driven by government infrastructure spending in Western
Canada and the indirect infrastructure spin-off benefits from renewed oil sands investment activity.

Q. Has the infrastructure spending to date closed the so-called “infrastructure gap”?
A. The stimulus spending has been focused on the here and now and smaller sized, “shovel-ready” projects to get as
many people working as quickly as possible. The infrastructure deficit continues to be an issue due to required repair and
replacement of aging infrastructure. The fundamental macro-economic drivers are still there.

Q. What do you believe are the longer-term dynamics (i.e. post stimulus)?
A. Post-stimulus, we believe there will continue to be a significant amount of spending on infrastructure to upgrade
existing roads, bridges, water treatment facilities, educational institutions, hospitals, etc.

Q. Will there be a crash in infrastructure spending once the stimulus ends? Should we expect a
significant pull back in spending given government needs to “balance the books”?
A. We don’t believe there will be a crash, as the need to remediate the infrastructure deficit remains, an odd benefit of
the economic woes we have had over the last year or two is that it has forced the federal government to look at ways to
reduce red tape associated with approving funding requests, they have also introduced a low-interest funding program for
municipalities and doubled the size of the federal gas tax transfer so these will hopefully all become permanent structural
features which facilitate reducing the $123 billion infrastructure deficit.

Q. Does your company participate in P3s?
A. Yes and we are looking to grow this segment of the business.

Q. What has been your experience with them?
A. Currently we are building a $298 million P3 hospital in Fort St. John, BC. The project began construction in July 2009
and is expected to be completed in 2012. In addition, we are responding with our partners to several hospital project
opportunities in British Columbia.

Q. Do you think P3s will remain a staple of Canadian infrastructure going forward?
A. Yes, as an alternative financing mechanism to support the build-out of infrastructure, P3’s may become a preferred
method of procurement while governments strive to maintain balanced budgets. Secondly, in BC and Alberta governments
have had success in achieving on-time and on-budget delivery of projects.

Q. Is financing available? On what terms? How different than pre-crisis?
A. In the case of the Fort St. John project, tightened credit terms led the government to provide government backed debt
finance rather than utilizing private market debt in the P3 structure. Financial markets are improving and we expect that
these projects will revert to their more traditional structure in the future.

Q. What are the pros/cons of P3 work for you?
A. Pros – potential for profits due to higher margins. Cons – guarantees, potential liquidated damages.

Q. What is your view on the opportunity in the oil sands?
A. The oil sands appear to be making a recovery. Recent announcements to proceed with oil sands/bitumen refinery projects
by CNRL and North West Upgrading, Husky and BP, ConocoPhillips and Total, Suncor and Cenovus point to an improving
industrial economic outlook. We have recently signed contracts to provide services to some of these owners at both Laird and
Fuller Austin.

Q. Are there any/many “mega projects” on the horizon?
A. There are numerous mega projects in the oil sands either starting or awaiting corporate decisions to proceed. For example,
CNRL (Kirby, Horizon Phase 2 and 3), Encana (Borealis), Suncor (Fort Hills, Steepbank, Voyageur South Mine) and Imperial Kearl
Lake.

Q. How are margins vs. 2008/09? Was 2009 the peak for margins?
A. Our contract income margins have been approximately 300 basis points higher in 2009 as compared to 2008. 2009 probably is
the short-term peak for margins as new projects we have secured will have a lower go-in fee and profit recognition is always
conservative until risk has been mitigated.

Q. Why will margins not return to the low points reached in 2001 – 2004?
A. We have a disciplined approach to securing projects which emphasizes our value added to a project and tries to steer
owners from selection based on fees alone. Combined with our efforts to ensure cost-effectiveness in all aspects of our
operations, this will prevent the low margins seen in past decades.

Q. Are acquisitions a part of your growth strategy?
A. We look to make the best use of our cash to maximize shareholder value and have added organizational capability to help us
evaluate the competitive landscape and opportunities available in the marketplace.

Q. How are acquisition opportunities right now?
A. There are many acquisition opportunities available. We are methodolically evaluating these opportunities and have
dedicated resources to evaluate these within the corporate centre. We are seeking selective strategic acquisitions that
complement our existing strengths and broaden our served markets.

Views from the Street
“The Company has seen an acceleration in new orders drive work-in-hand to record levels, surpassing previous 2007 highs,
with expectation of strong signings in Q4 as well as a restart of previously delayed projects. As such, we expect a reversal
of 2009’s revenue declines in 2010, and even with a projected softening in profitability in 2010, we expect earnings to grow
modestly vs. 2009.” – Paul Lechem, CIBC World Markets, November 5, 2009.

“Right at the onset of the recession, the Street anticipated a collapse in backlog during 2009, which would entail a dramatic
decline in revenues and EPS in 2010 and beyond. The stock fell into the abyss, dropping from over $29.00 to under $5, and it
even traded below net cash value for a little while. As it turns out, the Street’s biggest fears never materialized. Backlog is still
climbing despite a difficult non-residential construction environment, propelled by Churchill’s ability to secure large publicly
funded contracts. At this juncture, the stock remains largely undervalued, trading at 8.4 times our 2010 EPS estimate. Still a
table-pounding buy.” – Benoit Caron, National Bank Financial, November 5, 2009.

“We urge investors to buy Churchill today because it currently boasts the best backlog-to-revenue ratio, highest projected
EBITDA margin for 2010 and most attractive valuation among the construction stocks we track.” – Frederic Bastien,
Raymond James, November 5, 2009.

Churchill 009 Annual Report

md&a

The following Management’s Discussion and Analysis (“MD&A”) of the operating performance and financial condition of
The Churchill Corporation (“Churchill” or the “Corporation”), is dated March 11, 2010 and should be read in conjunction with the
December 31, 2009, audited Consolidated Financial Statements and related notes thereto. Unless otherwise specified
all amounts are expressed in Canadian dollars.

Forward-Looking Statements
This MD&A contains forward-looking statements. Forward-looking statements are often, but not always, identified by the
use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”,
“propose”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements
involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements. The Corporation believes that the expectations reflected in these
forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and
such forward-looking statements included in this MD&A should not be unduly relied upon by investors as actual results may
vary. See “Forward-Looking Statements” at the end of this MD&A.

Throughout this MD&A, certain measures are used that while common in the construction industry are not recognized
measures under Canadian generally accepted accounting principles (“GAAP”). The measures used are “Contract income
margin percentage”, “Work-in-hand”, “Backlog”, “Delayed backlog”, “Working capital”, “EBITDA” and “Book value per
share”. Please review the discussion of these measures in the “Terminology” section of this MD&A.

Overview of Our Business and Strategy
The Churchill Corporation constructs buildings and provides industrial construction and maintenance services. In July 2009, the
Corporation held its annual strategic planning work session and during these meetings arrived at a consensus in respect of its
vision, mission and core values, which are as follows:

Vision
To be the most admired construction and industrial services company in Canada.

Core Values
• Acting with integrity by respecting and trusting people.

• Striving for excellence in an exciting team environment.

• Demonstrating innovation and entrepreneurial spirit.

• Being conscious of safety, health and the environment in all we do.

Mission
• Creating value for our clients, employees, partners and ultimately, our shareholders.

• Attracting, retaining and developing the best people.

• Exceeding customer expectations by being results driven.

• Achieving sustainable growth through continuous improvement.

• Delivering consistently superior operating and financial results.

• Contributing positively to the community in which we work, live and play.

The Corporation’s strategy is as follows:
• Emphasizing value added construction and other partnering methods of project delivery.

• Securing contracts for larger projects.

• Targeted geographic expansion.

• Industry sector diversification.

• Product and service line diversification.

• Ensuring the Corporation has a strong balance sheet to support its growth objectives.

Reporting by Segment
The Corporation segments its operations into four business segments and reports its results under the categories of: Buildings,
Industrial Insulation Contracting, Industrial Electrical Contracting and Corporate and Other. The Corporation regularly analyzes
the results of these categories independently as they generate different gross margin yields and have different risk profiles.
The evaluation of results by segment is consistent with the way in which management performance is assessed.

• Buildings (Stuart Olson, includes collectively, Stuart Olson Construction Ltd. and Stuart Olson Constructors Inc.) – constructs

commercial, institutional, light-industrial buildings and multi-unit residential buildings.

• Industrial Insulation Contracting (Insulation Holdings Inc. (“IHI”), includes collectively, Fuller Austin Inc. (“Fuller Austin”),
Northern Industrial Insulation Contractors Inc. (“Northern Industrial Insulation”) and Lakehead Insulation (“Lakehead”))
– provides industrial insulation, asbestos abatement, siding application, HVAC, plant maintenance and related services.

• Industrial Electrical Contracting (Laird Electric Inc. (“Laird”)) – provides industrial electrical, instrumentation and power-line

construction and maintenance services.

• Corporate and Other – includes corporate costs not allocated directly to another business segment as well as any

miscellaneous investments.

The Corporation has historically generated virtually all of its revenues from Western Canada.

In this MD&A, the Corporation is reporting on the performance of its Industrial General Contracting (“Triton”) segment and
certain assets and liabilities of the Corporate and Other segment collectively as discontinued operations of the Corporation.
Agricultural land adjacent to the Lamont, Alberta fabrication facility, the Bonnyville, Alberta maintenance and fabrication
facility, equipment located at Bonnyville and the Triton office building located in Edmonton, Alberta are included in the assets
held for sale on the balance sheet as is required under GAAP.

Churchill 009 Annual Report

Stuart Olson has been a general contractor since 1939 and during the last several years has become a key player in Western
Canada’s building markets. In 2009, Stuart Olson has grown to comprise approximately 80% of Churchill’s consolidated revenues
and earnings from continuing operations before income taxes (excluding the expenses of the Corporate and Other segment) and
92% of total backlog.

The Corporation’s two industrial business segments (“IHI and Laird”) are also located in Western Canada, and are
headquartered in Edmonton, servicing clients in the oil sands, oil and gas, power, refinery, petrochemical, mining and
agricultural sectors.

The Industrial Insulation Contracting segment operated via three business units during 2009 (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. Subsequent to fiscal 2009, the Corporation has decided to
consolidate its Lakehead, Ontario operations into its Regina, Saskatchewan office to lower costs for maintaining a market
presence in that geographic region.

The Corporate and Other business segment provides strategic direction, operating advice, financing, infrastructure services
and management of public company requirements to each of its business segments. In order to understand more clearly the
operating results for the Corporation, the discussion within this MD&A will be focused at the business segment level.

Fourth Quarter Overview
In the fourth quarter of 2009, consolidated contract revenue was $173.9 million, slightly lower than the $185.0 million generated
in the same period in 2008. This year-over-year decline was due to lower levels of industrial contracting activity on a year-over-
year basis in our industrial electrical segment.

Contract income decreased from $27.7 million in the fourth quarter of 2008 to $24.7 million in Q4 2009, as greater contract
income margin derived from our building construction segment was offset by lower contract income in the industrial
electrical segment.

Indirect and administrative expenses amounted to $12.4 million in the quarter, compared to $10.6 million in the comparable
period of 2008. In early November, the board of directors approved the implementation of a deferred share unit (“DSU”) plan
for all employees and directors. Indirect and administrative costs increased as a result of DSU grants, additional stock option
grants during the fourth quarter and increased compensation expenses as a result of the significant appreciation in the
Corporation’s stock price during 2009. These new incentive programs are more closely aligned with shareholder interests.
Additionally, costs increased due to personnel and professional fees associated with the Corporation’s conversion to
International Financial Reporting Standards and the implementation of a new enterprise resource planning system (“SAP”).

Earnings from continuing operations before interest, taxes, depreciation and amortization in the quarter were $12.5 million,
compared to $17.7 million in Q4 2008.

Earnings from continuing operations before income taxes in Q4 2009 decreased to $11.3 million as compared to $16.4 million
reported in Q4 2008. The decrease in earnings from continuing operations before tax was primarily due to the lower profitability
derived from our industrial electrical segment ($2.3 million), increased expenses within the corporate and other segment ($1.6
million) and reduced earnings from our building segment ($0.9 million). Net earnings from continuing operations were $8.1
million in Q4 2009 compared to $11.2 million in Q4 2008.

New contract awards of $188.1 million were added to work-in-hand in the fourth quarter compared to $194.7 million in Q4 2008.
Work-in-hand at December 31, 2009, was $784.2 million, compared to $565.3 million at December 31, 2008. The Corporation’s
backlog totalled $1.4 billion, in line with the fourth quarter of 2008.

At the end of December 2009, the Corporation’s cash and cash equivalents increased to $184.4 million from $100.8 million at
December 31, 2008; primarily reflecting the after-tax cash flows generated from operating activities, cash received from the
divestiture of Triton and related assets, partially offset by cash used to repay long-term debt and finance the purchase of
project equipment. After conducting a full review of the Corporation’s bonding, credit facilities and working capital needs,
management is of the view that approximately $100.0 to $120.0 million of its cash balance is surplus to its operational needs, and
thus available to create incremental shareholder value.

Results of Operations

Buildings
For the three month period ended December 31, 2009, Stuart Olson’s revenue was $137.5 million, compared to $134.2 million in
the prior year. Increased activity from projects in construction, such as the Ft. St. John Hospital, Wal-Mart distribution centre
and the new Edmonton Remand Centre contributed to this revenue increase.

Contract income in the fourth quarter of 2009 increased 3% to $19.5 million, from $19.0 million for the same period in 2008.
The Q4 2009 contract income margin percentage remained constant at 14.2% compared to 14.1% in Q4 2008.

Earnings before tax from the buildings segment were $12.9 million in Q4 2009, compared to $13.9 million in Q4 2008. This
decrease in pre-tax earnings was a result of the increased indirect and administrative expense of $1.0 million year-over-year.

Stuart Olson had work-in-hand of $653.6 million and a backlog of $1.4 billion as at September 30, 2009. In the three months ended
December 31, 2009, Stuart Olson secured $172.0 million of new contracts and executed $137.5 million of work. As at December
31, 2009, Stuart Olson’s work-in-hand was $688.0 million, of which $204.0 million is expected to carry over into 2011. As a result
of Stuart Olson’s commitment to deliver value to its clients through regular review of project cost plans and changes associated
with reduced labour and material costs resulting from the economic contraction; Stuart Olson’s clients will benefit from savings
amounting to $133.2 million in the future. This resulted in Stuart Olson reducing its active backlog by an equivalent amount during
Q4 2009. As at December 31, 2009, Stuart Olson’s backlog was $1.3 billion, comparable to its backlog at the conclusion of 2008.

Industrial Insulation Contracting

Revenue for the three months ended December 31, 2009, was $20.6 million, compared to $20.7 million generated in the same
period of 2008.

Contract income in the fourth quarter of 2009 was $3.5 million compared to $3.6 million in the comparable period of 2008.
The contract income margin percentage in Q4 2009 was 17.0%, in line with the 17.4% achieved in Q4 2008, demonstrating the
consistency of IHI’s project execution.

Earnings before tax were $1.8 million during the period ending December 31, 2009, compared to $2.1 million in the fourth quarter
of 2008. Earnings before tax were reduced slightly by the lower contract income margin and a $0.1 million increase in indirect
and administrative expenses year-over-year.

Industrial Insulation Contracting had work-in-hand of $71.5 million and a backlog of $75.8 million as at September 30, 2009. During
Q4 2009, IHI secured new awards totalling $14.4 million and executed $20.6 million of contractual work. The insulation segment
concluded the quarter with $65.3 million of work-in-hand, of which $5.8 million is expected to carry over into 2011. At December 31,
2009, IHI’s backlog amounted to $69.0 million compared to $78.3 million at the end of the prior year.

Industrial Electrical Contracting
For the three months ended December 31, 2009, Laird’s contract revenue was $15.9 million compared to $30.5 million reported in
Q4 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.

Churchill 009 Annual Report

Contract income was $1.8 million in Q4 2009 compared to $5.4 million during the prior year. This decrease was due to lower activity
levels. The contract income margin percentage was lower at 11.3% during the fourth quarter of 2009 compared to 17.6% in Q4 2008
mainly due to a more competitive bidding environment and the mix between maintenance and construction contracts under execution.

Laird reported earnings before tax of $0.6 million for the quarter, compared to earnings before tax of $2.9 million in Q4 2008. The
impact of lower revenues in the period was partially mitigated through close monitoring and control over Laird’s indirect and
administrative expenses, which decreased to $1.0 million compared to $2.2 million in Q4 2008.

Laird’s reported Q3 2009 work-in-hand and backlog was $45.1 million. New contract awards of $1.8 million were secured in the
fourth quarter of 2009 and $15.9 million of contract work was executed. Laird concluded the fourth quarter with $31.0 million of
work-in-hand and $46.8 million of backlog. This compares to a backlog of $30.7 million at the end of 2008.

Selected Annual Financial Information
Set out below is selected annual financial information for each of the last three years, which have been prepared in accordance
with Canadian GAAP.

Years ended December 31

($ millions, except per share amounts)

Contract Revenue

Net earnings from continuing operations

Net earnings from discontinued operations

Net earnings

Earnings per share from continuing operations ($)

Basic

Fully diluted

Earnings per common share ($)

Basic

Fully diluted

Work-in-hand

Total assets

Long-term debt

2009

601.2

33.5

1.3

34.8

1.90

1.87

1.98

1.94

2008

761.0

35.6

0.8

36.4

1.98

1.96

2.03

2.01

2007

694.0

20.7

0.4

21.1

1.17

1.15

1.19

1.17

784.2

565.3

668.8

367.4

0.8

302.8

7.9

290.3

9.5

Annual Overview
The effects of the economic downturn which began in 2008 continued throughout 2009 resulting in significant pressures in all
areas of the economy.

For the year ended December 31, 2009 ,consolidated contract revenue was $601.2 million, compared to $761.0 million 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 electrical operations.

Contract income was $92.0 million in 2009 compared to $93.9 million in 2008. Increases in contract income from our building
construction segment and industrial insulation segments driven by higher operating margins, were offset by lower contract
income in the industrial electrical segment resulting from lower volumes and operating margin. The consolidated contract
income margin percentage during 2009 was 15.3% compared to 12.3% realized in 2008.

Indirect and administrative expenses amounted to $41.7 million in 2009, compared to $40.6 million in 2008. Managing our
indirect and administrative costs was a key objective during 2009, and costs at every operating company were lower in 2009
than in 2008. Total indirect and administrative expenses rose due to increased costs within the Corporate and Other segment
associated with compensation programs for executives and directors, increased administrative expenses and professional fees
related to IFRS conversion and SAP implementation, one-time relocation costs and other expenses.

Earnings from continuing operations before interest, taxes, depreciation and amortization in 2009 were $51.3 million, compared
to $56.2 million in 2008.

Earnings from continuing operations before tax in 2009 decreased to $46.6 million as compared to $51.6 million reported in 2008.
Net earnings from continuing operations, were $33.5 million in 2009 compared to $35.6 million in 2008. Net earnings during 2009,
inclusive of gains from discontinued operations were $34.8 million as compared to $36.4 million in 2008. The 2009 results are
largely in line with the prior year, despite lower revenue, due to the greater profitability derived from our buildings and industrial
insulation segments. The increase in earnings from Stuart Olson and Insulation Holdings were offset by a reduction in earnings
from Laird and increased indirect and administrative expenses within the Corporate and Other segment.

New contract awards of $820.1 million were secured during 2009 compared to $657.4 million in 2008. Work-in-hand at December
31, 2009, was $784.2 million, compared to $565.3 million at December 31, 2008, setting the foundation for an increase in revenues
in 2010. On a segmented basis, year-over-year work-in-hand increased $215.2 million in the buildings segment, $2.2 million in the
insulation contracting segment and $1.7 million in the electrical contracting segment.

Churchill’s total backlog as at December 31, 2009, including work-in-hand, was consistent at $1.4 billion comparable to the value
at the end of 2008. Year-over-year backlog in our buildings segment remained level at $1.3 billion, the insulation contracting
segment backlog decreased by $9.3 million and the industrial electrical contracting backlog increased by $16.1 million. The
Corporation’s backlog consists of work-in-hand of $784.2 million, active backlog of $504.4 million and delayed backlog of $100.0
million. Delayed backlog decreased as a result of the Shaw Building beginning construction and is now composed exclusively
of the Lethbridge Hospital project. The Lethbridge hospital project was re-evaluated during the fourth quarter and the expected
construction cost has escalated by $8.0 million. The project has been delayed as a result of funding and approval process
challenges on a related parking structure being constructed by another general contractor. The City of Lethbridge and the
Province of Alberta must resolve the parkade funding issue before construction of the hospital can proceed.

Discontinued Operations
In August 2009, the Corporation completed the sale of Triton and certain assets and liabilities of the Corporate and Other
segment to an arm’s length third party. Triton 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 were $19.0 million for Triton and certain assets and liabilities
of the Corporate and Other segment sold to the purchaser. 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 $5.0 million was realized. The Corporation
anticipates generating additional cash proceeds of $5.0 to $6.0 million (an estimated gain of $0.15 to $0.20 per share) from the
sale of the remaining latent assets of Triton, which could be completed during 2010.

The following tables reflect our net earnings (loss) from discontinued operations relating to Triton and the assets held-for-sale
for the periods ended December 31, 2009 and 2008. The 2009 figures reflect operations from January 1 to August 12, 2009, the
completion date of the transaction.

Statements of Earnings

($ thousands)

Revenue

Contract income

Gain on sale of discontinued operations

Net earnings (loss) from discontinued operations (1)

Total net earnings

Churchill 009 Annual Report

December 31, 2009

December 31, 2008

27,954

85,864

1,308

4,965

(3,627)

1,338

6,273

852

(1) Net loss from continuing operations for the year ended December 31, 2009 includes income tax recovery of $1,517 (2008 – $187).

Results of Operations in the Year

Buildings
For the year ended December 31, 2009, Stuart Olson’s revenue was $483.8 million, compared to $569.0 million in the prior year.
This decrease in revenue was a result of the cumulative impact of delayed project starts and tendering referred to in the
Corporation’s first quarter MD&A.

Contract income in 2009 increased 16% to $70.3 million, from $60.7 million for the same period in 2008. The 2009 contract income
margin percentage was 14.5% compared to 10.7% 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 $49.0 million in 2009, compared to $40.8 million in 2008. This 20%
improvement in pre-tax earnings was a result of increased profit margins across all branches, particularly in Northern Alberta.

Stuart Olson began the year with work-in-hand of $472.8 million and a backlog of $1.3 billion. During 2009, Stuart Olson secured
$699.0 million of new contracts and executed $483.8 million of work. The company concluded the year with $688.0 million of
work-in-hand and backlog amounted to $1.3 billion.

Stuart Olson continues to pursue 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”) projects
to finance their infrastructure spending until economic growth and budget surpluses resume. During 2009, Stuart Olson was
selected as the preferred proponent and closed its first P3, the Fort St. John Hospital and Residential Care Facility. Stuart Olson
has intentions to pursue additional P3 projects in the future. Additionally, during Q4 2009, Stuart Olson opened a new branch in
Saskatoon, Saskatchewan to take advantage of construction market opportunities.

Industrial Insulation Contracting
Revenue for the year ended December 31, 2009 was $73.1 million and was in line with revenue of $73.7 million for the same
period of 2008.

Contract income in 2009 was $14.6 million compared to $14.1 million for the comparable period in 2008. The contract income
margin percentage increased in 2009 to 20.0% versus 19.1% in 2008 due to strong project execution.

Earnings before tax were a record $8.7 million for the year ended December 31, 2009, compared to $8.5 million in 2008. Strong
project execution by the insulation companies on a variety of maintenance and shutdown contracts allowed Insulation Holdings
to deliver record earnings during a period of reduced industrial activity.

Industrial Insulation Contracting began 2009 with work-in-hand of $63.1 million and a backlog of $78.3 million. During 2009,
Insulation Holdings secured new awards totalling $75.3 million and executed $73.1 million of contractual work. The insulation
segment ended the year with $65.3 million of work-in-hand, and backlog of $69.0 million.

With a strong backlog of projects, Insulation Holdings is positioned to perform favourably during 2010. However, owner requests for
rate resets and increased competition for new work continue to apply downward pressure on contract income margins.

Industrial Electrical Contracting
For the year ended December 31, 2009, Laird’s contract revenue was $44.3 million compared to $118.2 million reported in 2008. This
decrease in revenue was due to a reduction in activity levels associated with several oil sands projects in the Fort McMurray area
in 2009 and a reduction in plant turnaround activity in the year. Management believes that future activity levels should exceed the
low revenues delivered in 2009. The increase in the year-end backlog from $30.7 million in 2008 to $46.8 million in 2009, reflects an
improvement in commodity prices and the economic environment associated with Laird’s oil and gas clients.

Contract income was $7.1 million in 2009 compared to $19.0 million during the prior year. This decrease was due to lower activity
levels. Contract income margin percentage was 16.0% during 2009 compared to 16.1% in 2008 mainly due to consistent project
execution, operational improvements and favourable resolution of project contingencies.

Laird reported earnings before tax of $1.7 million for the period, compared to earnings before tax of $10.5 million in 2008.
Laird’s initiatives to “right size” the organization for the anticipated reduced activity levels enabled the company to withstand
a significant decrease in revenue. Laird was able to offset partially the impact of lower revenues during the year with strong
project execution and control of its indirect and administrative expenses.

Laird began 2009 with work-in-hand and backlog of $29.3 and $30.7 million, respectively. New contract awards of $46.0 million
were secured during 2009 and $44.3 million of contracts were executed. Laird concluded the year with $31.0 million of
work-in-hand and $46.8 million of backlog.

Laird increased its focus on business development activities during 2009 which has resulted in the company securing new
major turnaround and maintenance projects on its own, successfully partnering with Fuller Austin on projects and further
establishing its presence in the Edmonton market place by securing maintenance and project work. Laird continues to target its
strategic goal of geographic diversification by pursuing industrial opportunities in Saskatchewan and other areas.

Corporate and Other
During the third quarter of 2009, management received board approval to implement a new enterprise resource planning
system. The SAP implementation has been budgeted at $9.5 million. The capital cost and the expenses associated with this
implementation will be depreciated over subsequent reporting periods once the system is ready for use, expected to be late 2010.

In 2009, the Corporate and Other segment incurred a loss before tax of $12.8 million compared to a loss before tax of
$8.1 million in 2008. 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
one-time office relocation costs. In addition, the increase in the year-over-year loss is partially attributable to significantly lower
other income from a decline in interest income corresponding with the decline in prime rates.

Capital Resources and Liquidity
Cash and cash equivalents at December 31, 2009 totalled $184.4 million, which compares to $100.8 million at the end of 2008.
Included in the cash and cash equivalents balance is $17.0 million which is held as security for the payment of direct costs
related to specific construction projects in British Columbia, compared to $17.5 million at December 31, 2008.

Typically, maintenance activities on industrial projects ramp up during the spring and summer seasons, and the number of hourly
workers utilized by the Corporation for construction and maintenance projects increases, and as a result, the Corporation’s liquidity
typically decreases. This usually occurs in the second and third quarters of a fiscal year. During the fourth quarter of a fiscal year,
liquidity usually increases as a result of lower industrial activity levels and fewer working days during this time frame.

Cash flow provided from operating activities was $78.5 million, compared to $7.1 million of cash generated from operations
during 2008. The change in cash provided from operations was primarily due to the changes in the working capital accounts

Churchill 009 Annual Report

year-over-year. The Corporation expects that its cash and cash equivalents balance will continue to grow during 2010 from the
proceeds associated with the sale of its discontinued operations and earnings from its operations.

Investing activities resulted in a use of cash of $8.3 million during 2009, which compares with $7.1 million in 2008. The cash was
invested in the acquisition of construction equipment for long term projects under contract ($5.1 million) and the design and
implementation work associated with the SAP implementation ($3.4 million) which is anticipated to be ready for use in late 2010.

During 2009, cash used in financing activities amounted to $7.9 million compared to cash used in financing of $3.4 million in 2008.
Financing activities in 2009 included $7.1 million in net repayments of long term debt, $1.0 million used to support acquisitions
under the share repurchase program, offset by $0.2 million in proceeds from stock option exercises.

As at December 31, 2009, Churchill had working capital of $107.3 million, compared to working capital of $78.3 million at
December 31, 2008.

Contractual Obligations (1)

($ millions)

Finance contracts and
capital lease obligations

Total contractual obligations

Total

Current Year

2-3 Years

4-5 Years

After 5 Years

0.8

0.6

0.2

0.0

0.00

(1) The above table represents scheduled debt repayments.

Scheduled debt repayments for 2010 are $0.6 million. The finance contracts and capital lease obligations are secured
by construction and automotive equipment and are more fully described in Note 11 of the Notes to the Consolidated
Financial Statements.

During 2010, the Corporation anticipates that it will require approximately $14.1 million to fund its capital expenditure plans.
The capital budget consists of $9.0 million of replacement expenditures and $5.1 million of expansion related costs. These
expenditures will largely be made in the areas of IT infrastructure ($6.9 million), construction equipment ($3.0 million), tenant
improvements ($1.9 million) and vehicles ($1.8 million). This significant increase in capital expenditures year-over-year is
associated with the Corporation’s need to support the growth in size and scope of its operations and with the implementation
of SAP as an enterprise resource planning system. All capital spending is being closely monitored by management.

Management believes that the Corporation has the capital resources and liquidity necessary to meet its commitments,
support its operations, finance its capital expenditures and 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 believes that it has
access to further debt and/or equity 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 Partnerships infrastructure projects may expose the Corporation to financial penalties and/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 $141.5 million at December 31, 2009, as compared to $105.6 million at December 31, 2008. Retained earnings
increased from $83.1 million at December 31, 2008 to $116.3 million at the conclusion of 2009, reflecting the addition of $34.8 million in net
earnings from operations, less $1.7 million for shares repurchased under the Normal Course Issuer Bid (“NCIB”). Contributed surplus
increased by $1.8 million year-over-year, due to the exercise of stock options and share capital increased by $0.1 million during 2010.

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 2009, the Corporation repurchased and cancelled 127,600 common
shares at an average cost of $7.59. per share, and additionally cancelled 145,000 common shares repurchased in December
2008. The NCIB expired on October 14, 2009.

The Corporation has an Employee Share Purchase Plan (the “ESPP”) available to all full-time employees. At December 31, 2009,
80% of eligible employees were participants in the ESPP. At December 31, 2009, the ESPP held 692,910 common shares for
employees. Under the ESPP, common shares are acquired in the open market.

To further encourage director and employee share ownership, on November 3, 2009, the Corporation implemented a Deferred
Share Unit plan available to directors and employees. The plan was implemented to move away from compensating directors
in the form of options, however employees are also able to voluntarily participate in the DSU plan by allocating a percentage of
their compensation to the purchase of DSUs.

As at March 11, 2010, the Corporation had 17,619,259 common shares issued and outstanding and 1,213,243 options convertible
into common shares upon exercise (December 31, 2008 – 17,822,091 common shares and 519,660 options).

Stock-based Compensation
Stock-based compensation is a non-cash expense driven in part by the number, fair value and vesting rights of options granted.
The stock-based compensation expense totalled $1.9 million and $1.1 million for the twelve months ended December 31, 2009
and 2008, respectively.

Other Compensation Expenses
The Corporation granted 32,934 DSUs to directors resulting in $0.7 million of stock-based compensation expenses recorded
in the fourth quarter of 2009 (2008 – nil). The DSUs are structured under the current plan to be settled in cash, upon ceasing
service with the Corporation.

During the year, the Corporation booked a compensation expense of $1.0 million compared to $0.1 million in 2008, for performance
share units (“PSUs”) granted to employees. The PSUs are structured under the current plan to be settled in cash, upon vesting.

Supplemental Disclosures

Off-Balance Sheet Arrangements
The Corporation has no off-balance sheet arrangements in place at December 31, 2009.

Related Party Transactions
The Corporation incurred legal fees during the year ended December 31, 2009, with a law firm of which a director of the Corporation is
also a partner. The fees were for services rendered in the ordinary course of business and the sale of Triton. The amount incurred during
the fourth quarter of 2009 was $88 thousand (Q4 2008 – $62 thousand). Legal fees of $610 thousand (December 31, 2008 – $130 thousand)
were incurred with this law firm during the full year. The fees increased as a result of the provision of services associated with the Triton
disposition, a non-recurring item. At December 31, 2009, $29 thousand was included in accounts payable (2008 – $37 thousand).

During the fourth quarter of 2009, the Corporation incurred facility costs of $36 thousand (Q4 2008 – $35 thousand) relating to the
rental of a building to Laird Electric which is owned by a director of the Corporation. The rented building is Laird’s operations
base in Fort McMurray and the rental charge is comparable to the market rate of similar properties. The current lease
arrangement expires on December 31, 2012. Facility costs of $146 thousand were incurred during 2009 (2008 – $157 thousand) for
this building. At December 31, 2009, there are no amounts included in accounts payable (2008 – $nil).

Outlook
In the industrial market, with a resurgence in commodity prices, and numerous project restarts and sanctioning announcements
(e.g. Kearl, Firebag, Sunrise, Surmont, Jackfish 2, Christina Lake Phase 2), the outlook has brightened considerably for our
industrial operations. However, we expect operators to take a balanced and measured approach to their development activities,
to avoid acceleration in inflation and costs as experienced in prior years. In addition, 2010 is expected to have several major
planned turnarounds which should provide opportunities for additional revenue. The expected increase in industrial activity in
Alberta from oil sands projects and in Saskatchewan from mining, agriculture/fertilizer, chemical and refinery projects should
bode well for strong results from Laird Electric and Insulation Holdings in 2010 and beyond.

Churchill 009 Annual Report

In the non-residential building sector, macro-economic conditions are improving private sector opportunities and at the same
time government infrastructure commitments continue unabated. While 2010-2011 will represent the peak spending period
for federal stimulus funds, we believe that governments remain keenly aware of the need to remain focused on addressing
infrastructure needs. We believe this will result in continued funding for healthcare, educational and municipal facilities over
the longer-term. These are areas of strength for our Stuart Olson business and we believe that we can grow this business in a
meaningful way over the next several years.

Overall, Churchill’s backlog remains at near-record levels, client access to capital is improving, spending by the private sector
is increasing and our substantial cash position provides us with significant flexibility to examine value creation opportunities.
As a result, we are more encouraged by the possibilities than at anytime in the past year.

In 2010, the Corporation expects revenues to increase within all operating segments, while its contract margins are expected to
decrease from the record levels achieved in 2008 and 2009. Nonetheless, profitability is expected to remain robust and close to
recently attained levels.

Critical Accounting Estimates
The Corporation’s summary of significant accounting policies are contained in Note 1 to the Consolidated Financial Statements.

Churchill’s financial statements include estimates and assumptions made by management in respect of operating results, financial
conditions, contingencies, commitments, and related disclosures. Actual results may vary from these estimates. The following are, in
the opinion of management, the Corporation’s most critical accounting estimates, being those that involve the most difficult, subjective
and complex judgements, requiring estimates that are inherently uncertain and which may change in subsequent reporting periods.

Contract Revenue and Contract Costs
Revenue for cost-plus contracts are recorded as the service is performed and the related expenses are incurred. Under this
method, the costs incurred and the related revenue are included in the consolidated statement of earnings, comprehensive
earnings and retained earnings as the work progresses. Contract revenue from fixed-price and unit price contracts are
recognized as revenue on a percentage-of-completion basis, measured by the ratio of either the actual cost of work or the
actual hours performed to date, to the estimated total cost or estimated total hours. In making such estimates, judgments
are required to evaluate contingencies such as variances in scheduling, material costs, labour costs, labour productivity,
subcontractor costs, change orders and liability claims. Revenue recognition estimates may be required in each of Churchill’s
operating business segments, but would normally be most prevalent in Stuart Olson where a significant portion of their contract
revenue and contract income for the period is estimated. Changes in estimated costs to complete on fixed-price contracts may
have a material impact on the realization of net earnings.

Goodwill impairment incorporates, at a minimum, an annual assessment of the value of Churchill’s goodwill by applying a fair
value based test to each segment of goodwill. Each fair value test may incorporate estimates such as normalized earnings, future
earnings, price earnings multiples, future cash flows, discount rate, and terminal values. The goodwill amount on the balance sheet
arose from the acquisition of Laird Electric in February, 2003. A significant portion of the valuation of goodwill for Laird is related to
future earnings which are estimated and uncertain. Any reduction in these estimates could result in an impairment of goodwill.

Income tax provisions, including current and future income tax assets and liabilities, may require estimates and interpretations
of federal and provincial tax rules and regulations, and judgments as to their interpretation and application to Churchill’s
specific situation. Income tax provisions are estimated each quarter, updated each year-end to reflect actual differences and
the impact of revenue recognition estimates, and then finalized during the preparation of the tax returns. Any changes between
the quarterly estimates, the year-end provision, and the final filing position, may impact the income tax expense category, as
well as the current and future income tax asset and liability categories.

Accounts receivable collectability may require an assessment and estimation of the creditworthiness of the client, the
interpretation of specific contract terms, the strength of Churchill’s security, and the timing of collection. An allowance would
be provided against any amount estimated to be uncollectible, and reflected as a bad debt expense.

All estimates are updated each reporting period to reflect actual activity as well as incorporate all relevant information that has
come to the attention of management. Given the nature of construction, with numerous contracts in progress at any given time,
the impact of these critical accounting estimates on the results of operations is significant. Activities or information received
subsequent to the date of this MD&A may cause actual results to vary, which will be reflected in the results of subsequent
reporting periods.

Changes in Accounting Policies
Effective January 1, 2009, Churchill adopted the following new Canadian Institute of Chartered Accountants (“CICA”)
Handbook sections:

• 3064, Goodwill and Intangible Assets, replacing Section 3062, Goodwill and Other Intangible Assets. This new Section

established standards for the recognition, measurement and disclosure of goodwill and intangible assets. The provisions of
this Section, relating to the definition and initial recognition of intangible assets, are equivalent to the corresponding provisions
under International Financial Reporting Standards (“IFRS”). CICA Handbook Section 1000, Financial Statement Concepts, was
also amended to provide consistency with this new Section. The adoption of this standard has resulted in reallocating additions
in the year of $3,395 related to the new ERP system from property and equipment to intangible assets.

• Emerging Issues Committee’s Abstract 173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities

(“EIC-173”). This standard clarifies that an entity’s own credit risk and the credit risk of its counterparties should be taken into
account in determining the fair value of financial assets and liabilities. The adoption of this standard did not have a material impact on
the Corporation’s consolidated financial statements or on the fair value determination of its financial assets and liabilities.

• 3475, Disposal of Long-Lived Assets and Discontinued Operations. Long-lived assets are classified as held for sale once certain
criteria are met. Such criteria include a firm commitment by management and the board of directors to dispose of a business or
group of selected assets and the expectation that such disposal will be completed within a twelve month period. Assets held for
sale are measured at the lower of their carrying amounts or fair values less costs to sell, and are no longer depreciated.

Operating results of a company’s components disposed of by sale or being classified as held-for-sale are reported as
discontinued operations if the operations and cash flows of those components have been, or will be, eliminated from the
Corporation’s current operations pursuant to the disposal and if the Corporation does not have significant continuing
involvement in the operations of the component after the disposal transaction. A component of an enterprise includes
operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the
rest of the Corporation’s operations and cash flows. All information contained in the consolidated financial statements and
accompanying notes is presented on a continuing operations basis unless otherwise noted.

Recent Accounting Pronouncements
In January 2009, the CICA issued the new following Handbook sections:

• 1582, “Business Combinations”;

• 1601, “Consolidated Financial Statements”; and

• 1602, “Non-Controlling Interests”.

Section 1582, which replaces the former Section 1581, requires all business combinations to be accounted for by applying
the acquisition method. Under this method, assets acquired and liabilities assumed are measured at their full fair value at
the date of acquisition unless another standard requires otherwise. Section 1582 provides the option of accounting for non-
controlling interest at either fair value, or at the non-controlling interest’s proportionate share of the identifiable net assets
acquired. Section 1601 carries forward the standards for the preparation of consolidated financial statements of former
Section 1600, while Section 1602 requires non-controlling interests to be reported as a separate component of equity, with net
income calculated without deduction for non-controlling interests. Rather, consolidated net income is to be allocated between
controlling and non-controlling interest.

Churchill 009 Annual Report

These three new sections constitute the Canadian GAAP equivalent to the corresponding provision under IFRS. These sections
are to be implemented concurrently and apply prospectively to all business combinations for which the acquisition date is on or
after January 1, 2011, with earlier application permitted. The Corporation is currently evaluating the impact of adoption of these
sections to its consolidated financial statements.

International Financial Reporting Standards (“IFRS”)
The Canadian Accounting Standards Board has confirmed January 1, 2011 as the changeover date for Canadian publicly
accountable enterprises to start using International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board. IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant
differences in recognition, measurement and disclosures.

IFRS Conversion Plan
The Corporation has developed a plan to convert its consolidated financial statements to IFRS. The Corporation has established
a cross-functional IFRS team sponsored by the Chief Financial Officer and managed by a project team represented by
senior financial personnel in Churchill and all business units, representatives from Information Technology, Special Projects
and Internal Audit. External contracting resources are being utilized to provide technical accounting advice and project
management guidance in the conversion to IFRS. Updates regarding the progress of the conversion plan are provided to the
Corporation’s Audit Committee on a quarterly basis.

Churchill’s implementation project consists of three principal phases:

Phase 1: Preliminary Scope and Diagnostic
This phase included performing a high-level impact assessment to identify key areas that may be impacted by the adoption of
IFRS. This analysis resulted in the prioritization of areas to be evaluated in the next phase of the project plan. The information
obtained from the assessment was also used to develop a detailed plan for convergence and implementation. This phase was
completed in the first quarter of 2009.

Phase 2: Detailed Design and Evaluation
In this phase, further evaluation of the financial statement areas impacted by IFRS will be completed. This involves a more
detailed, systematic gap analysis of accounting and disclosure differences between Canadian GAAP and IFRS. This detailed
assessment will facilitate final decisions around accounting policies and overall conversion strategy. This phase also involves
specification of changes required to existing business processes. During this phase, an analysis will also be performed to
assess information technology systems used to collect and report financial data and determine what modifications will be
required in order to meet new reporting requirements under IFRS.

• This phase is substantially complete.

• A complete analysis of financial statement areas impacted by IFRS along with a systematic gap analysis has been completed

with the main impact areas described in more detail below.

• The Corporation has evaluated accounting policy options and has developed IFRS accounting policy documents.

• The Corporation is quantifying differences and will prepare an opening IFRS balance sheet during 2010.

• Comprehensive training programs are being designed for staff prior to full transition.

• Information technology impacts are being analyzed on an on-going basis throughout 2010 and is described in more

detail below.

Phase 3: Implementation and Embedding
This phase includes execution of changes to business processes impacted by Churchill’s transition to IFRS and formal approval
of recommended accounting policy changes. Also included in this phase is the delivery of necessary IFRS training to Churchill’s
audit committee of the board, board of directors and staff. This phase will culminate with the collection of financial information
necessary to compile IFRS compliant financial statements and audit committee approval of IFRS financial statements
commencing in 2011. This phase is currently underway.

Based on the analysis performed, the major differences between Canadian GAAP and IFRS that are likely to impact Churchill
include, but are not limited to:

• IFRS 1 First-Time Adoption of International Financial Accounting Standards – provides entities with a number of optional
and mandatory exemptions upon initial adoption of the standards. The Corporation has thoroughly analyzed the optional
exemptions available but any decisions about the optional exemptions available under IFRS 1 are preliminary at this time.
The decisions about accounting policy choices available under IFRS 1 and other individual IFRS standards will be disclosed
throughout 2010 as they are reviewed by the Audit Committee and finalized. Senior executive and the Audit Committee will
consider the appropriateness of the accounting policies applied under IFRS both at the time of transition and following
transition.

• Presentation of Financial Statements International Accounting Standards (“IAS”) 1 – requires significantly more disclosures

than existing Canadian GAAP. In addition, classification and presentation may be different for some balance sheet and income
statement items. The Corporation has planned for the continual development of additional disclosures and is analyzing the
impact of the classification and presentation changes on its financial statements.

• Contract Revenue – IAS 11 requires construction contracts to be accounted for on a percentage of completion basis or

when the outcome of a contract cannot be estimated reliably, contract costs are recognized as an expense and revenue is
recognized to the extent that costs incurred are recoverable (cost recovery or zero margin approach). IAS 11 also contains
requirements for separating projects under one overall contract or combining different projects into one overall contract.

• Property, Plant and Equipment – IAS 16 requires componentization of assets where each part of an item of property, plant and
equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. Componentization
of assets will impact the depreciation recognized and the carrying value of an asset. IAS 16 also provides an accounting
policy choice, subsequent to the initial recognition of the asset, using either a cost model or a revaluation model. After initial
recognition of assets, the use of the revaluation model will result in increases and decreases in the asset being revalued and
corresponding increases and decreases in the revaluation surplus account (component of equity).

• Impairment of Assets – IAS 36 uses a one step approach for both testing and measurement of impairment, with assets’
carrying values compared directly with the higher of fair value less costs to sell or value in use (which uses discounted
cash flows). The Corporation will be required to assess impairment indicators at the end of each reporting period. Where
an impairment indicator is present management must determine the recoverable amount of the individual asset or cash-
generating unit. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. Intangibles with indefinite lives, intangibles assets
not yet available for use and goodwill acquired in a business combination must be tested for impairment annually. This could
result in the impairment of intangible assets or goodwill on transition to IFRS.

Churchill 009 Annual Report

• Recognition of Leases – IAS 17 provides guidance on assessing the classification of leases as either finance leases
or operating leases. Unlike Canadian GAAP, IAS does not provide prescriptive measurements on lease contracts and
consequently there is more emphasis on the actual substance of the transaction rather than assessing based on a definitive
threshold level. Lease contracts will need to be reviewed to determine if they are operating or capital leases based on whether
or not management assesses that substantially all of the risks and rewards incidental to ownership have been transferred.

Information Systems and Business Processes
The Corporation launched a project in 2009 to implement SAP as its new ERP system. The Corporation is targeting the end of
2010 to complete the transition and achieve full utilization of the system. The IFRS project team is analyzing all areas of IFRS
change that will impact the ERP system to ensure that the structure is adequate for IFRS reporting needs.

The Corporation has developed detailed processes to derive the 2010 opening balance sheet under IFRS and is building
processes and systems solutions to create 2010 IFRS compliant quarterly financial information for comparative purposes.

Process changes needed to sustain IFRS conversion starting in 2011 have been identified and during 2010, process design and
training is expected to be completed. Related impacts to internal controls over financial reporting and disclosure controls and
procedures are expected to be identified during 2010.

Training and Communication
A professional services firm has been engaged since the outset of the project and is providing technical accounting advice
and project management guidance. Key members of the project team have completed, and will continue to complete, IFRS
specific training courses to maintain up to date knowledge of best practices and changes in standards. The Corporation
has a comprehensive plan to train internal personnel who will be impacted by the conversion to IFRS in their daily activities
throughout implementation. Training will begin in early 2010 and is expected to continue throughout the year. Communication
to external stakeholders will be ongoing through MD&A disclosures quarterly and will vary depending on the nature and
magnitude of changes to the financial statements expected under IFRS.

Financial Statement Preparation and Internal Controls
Churchill is currently assessing the impact of the adoption of IFRS on our results of operations, financial position and financial
statement disclosures. In addition, Churchill continues to assess the impact of the conversion on internal controls over financial
reporting and disclosure controls and procedures. Churchill has and will continue to invest in training and resources throughout
the transition period.

Business Activities
The effects of IFRS conversion on the Corporations activities have been reviewed. It is not expected that the conversion to IFRS
will significantly impact these activities or requirements.

The expected timing of key activities identified above may change prior to the IFRS conversion date due to changes in
regulation, economic conditions or other factors and the issuance of new accounting standards or amendments to existing
accounting standards including, and in addition to, those noted above.

Risks and Uncertainties
The Corporation is exposed to various risks and uncertainties in the normal course of business that can cause variations
in results from operations and affect our financial condition. In addition to the risks described elsewhere in this MD&A, the
Corporation is exposed to the following business risks which include but are not limited to:

Volatile Market Conditions
The volatility created by the global financial crisis damaged investor confidence in global equity markets and negatively
impacted the value of publicly-traded securities of many companies. This global financial crisis also resulted in a significant
decline in commodity prices including oil and natural gas. Additionally, changing fiscal, taxation and royalty policies of various
levels of government can impact the decisions of oil and gas companies to conduct business in Western Canada. These
macro-economic conditions did have a significant and adverse affect on the operating conditions of the clients and industries
in which the Corporation provides services, resulting in significant declines in capital expenditures by oil and gas companies
in 2009. Fortunately, the outlook has improved; investor confidence, while still fragile, is stronger, commodity prices are higher,
the banking and financial sectors have been stabilized and a global depression has been averted due to the coordinated actions
of central bankers from around the world. While the current crisis has been dealt with, it remains that a future crisis, outside of
management’s control, may yet cause instability in the financial system. These potential volatile market conditions could in the
future impact the outlook, financial performance and the common share price of the Corporation.

Limited Geographic Scope of Operations
Churchill’s operations are centered in, and primarily focused on, Western Canada. The majority of construction in Western
Canada, particularly industrial construction, is either directly or indirectly connected to oil and gas. Oil and gas pricing and
activity levels are directly impacted by worldwide events including fundamental changes in economic activity impacting the
demand and prices for petroleum products. The Corporation monitors this information to assist in managing various mid-term
aspects of its business. Significant downward movement in oil or gas commodity prices could lead clients to slow down,
delay or cancel current projects or planned expansions, while significant upward movement could lead to clients seeking to
accelerate their project schedule. Either movement could put pressure on the Corporation’s organizational infrastructure in
the short-term. Such slow downs, delays or cancellations could have a material adverse impact on the Corporation’s
financial condition.

Unexpected Adjustments and Cancellations in Backlog
Churchill may not be able to convert its entire backlog into revenue and cannot guarantee that the revenues projected in its
backlog will be realized or, if realized, will result in profits. Projects may remain in its backlog for an extended period of time.
Churchill includes in its backlog binding and non-binding letters of intent, work orders and cost reimbursable contracts, which
may be different than the items other issuers include or exclude in their respective backlog. Project cancellations or scope
adjustments may occur, from time to time, with respect to contracts reflected in backlog. In respect of backlog evidenced by a
non-binding letter of intent, the formal contract respecting the same may never be finalized, resulting in such engagement being
terminated. backlog reductions can adversely affect the revenue and profit Churchill actually receives from projects reflected
in its backlog. Especially in light of the current economic environment for our industrial businesses, Churchill is providing
additional disclosure in regards to backlog by refining our backlog disclosure into active and delayed backlog. This disclosure
can be found in the terminology section of this MD&A.

Weather
The climate in Western Canada can generate severe weather, including heavy rain and snow, which could slow down
or delay construction for short periods of time, impacting costs and delivery schedules. This could adversely impact results
of operations.

Churchill 009 Annual Report

Competition
There is strong competition relating to all aspects of the construction industry. The Corporation competes with a broad range of
companies in each market, some of which are substantially larger than the Corporation. This competition may adversely affect
the Corporation’s ability to be awarded new business. Competitors that have greater financial and other resources can better
bear the risk of under-pricing projects, whereas smaller competitors may have lower overhead cost structures and therefore
may be able to provide their services at lower rates. The business may be adversely impacted to the extent that the Corporation
is unable to successfully bid against these companies. The loss of existing clients to competitors or the failure to win new
projects could materially and adversely affect the Corporation’s business and results of operations.

Performance Bonds
Churchill’s operating companies are often required to provide performance and labour and material payment bonds as
assurance against contract completion. The Corporation entered into a co-surety arrangement with Travelers Guarantee
Company and Aviva Insurance Company of Canada during 2008, which significantly increased bonding capacity. This may
be a competitive advantage to the Corporation. If for any reason participants in the surety market are unable to satisfy the
Corporation’s future bonding requirements, this could limit growth and potentially adversely affect on-going operations.
Alternatively, if there were a significant failure in the construction industry such that owners started demanding surety bonds
for all contracts, Churchill’s bonding capacity may be insufficient to meet its business needs.

Corporate Guarantees and Letters of Credit
In the course of business operations, the Corporation may be required to guarantee the performance pursuant to a contract
of one or more of its operating divisions by way of providing guarantees or letters of credit. Letters of credit are issued mainly
to provide security to third parties in the case of non-performance under a contract. Significant claims under letters of
credit and/or corporate guarantees could materially and adversely affect the Corporation’s business, financial stability and
operating capacity.

Dependence on the Public Sector
A significant portion of the Corporation’s revenue is derived from contracts with various governments or their agencies.
Consequently, any reduction in demand for the Corporation’s services by the public sector, whether from funding constraints or
changing capital spending plans, would likely have an adverse effect on the Corporation if that business could not be replaced
from within the private sector.

Unanticipated Shutdowns
A portion of Churchill’s work is generated from the development, expansion and ongoing maintenance of oil sands mining,
extraction and upgrading facilities. Shutdowns of these facilities due to events outside the Corporation’s control or the control
of the Corporation’s clients, such as the cancellation of projects due to a downturn in oil and gas prices, fires, mechanical
breakdowns and technology failures and pressure from environmental activists, could lead to the temporary shutdown
or complete cessation of projects on which Churchill is working. These events could materially and adversely affect the
Corporation’s business and results of operations.

Failure of Clients to Obtain Required Permits and Licenses
The development of construction projects requires Churchill’s clients to obtain regulatory and other permits and licenses from
various governmental licensing bodies. Churchill’s clients may not be able to obtain all necessary permits and licenses required
for the development of their projects, in a timely manner or at all. These delays are generally outside the Corporation’s control.
The major cost associated with these delays is personnel and associated overhead that is designated for the project and that
cannot be reallocated effectively to other work. If the client’s project is unable to proceed, it may adversely impact the demand
for the Corporation’s services.

Labour Shortages and Material Prices
Periods of high construction activity can create shortages of labour and material. In the past, the rapidly expanding market
in Alberta, B.C. and other jurisdictions, has created general shortages of tradesmen and management personnel. In 2008,
the labour market softened as a result of a weaker demand for commodities, amid a global economic slowdown. Churchill’s
operating companies attempt to mitigate labour shortages through competitive remuneration, enhanced in-house training
programs and expanded recruiting, both within Canada and internationally. Any future labour and material shortages may lead
to construction cost escalation which could decrease contract margins should clients not agree to absorb these additional
costs. Any increase in the price of building and construction materials could have a material adverse effect on market demand
and on the Corporation’s growth and profitability.

Shortage of Client Design Capabilities
Churchill’s clients may face shortages of internal and contracted engineering capability resulting in delays in project start-ups.
This may adversely impact the Corporation’s business and operating results.

Design-Build Risk
Stuart Olson occasionally participates in design-build projects whereby they assume the additional risk of design-related
flaws or failures. This risk is reduced by utilizing external consultants for the design component as well as by the purchase of
appropriate insurance protection. Design remediation work could result in additional contract costs that may not be reimbursed
by the client.

Public-Private Partnerships
Stuart Olson may participate in public-private-partnership work (P3s) which contracts may require letters of credit, equity
participation or contain liquidated damages clauses. Liquidated damage clauses impose a penalty for failure to meet project
completion schedules, which can be impacted by many factors outside of the direct control of the general contractor.

Joint Venture Partners
Churchill undertakes certain contracts with joint venture partners. The success of its joint ventures relies on the satisfactory
performance of Churchill’s joint venture partners in their joint venture obligations. The Corporation may provide joint and several
guarantees in connection with these joint ventures. The failure of the joint venture partners to perform their obligations could
impose additional financial and performance obligations on Churchill that could result in increased costs.

Estimating Costs, Assessing Contract Risk
The contract price for all the projects performed by Churchill is based in part on cost estimates that are subject to a number
of assumptions. If, as a result of faulty estimates or unforeseen circumstances, the Corporation’s assumptions are erroneous,
or if the Corporation inaccurately assesses the risks associated with a contract, or if its estimates of the project costs are
inaccurate, project profitability may be lower than anticipated, or a loss may be incurred.

Accuracy of Cost to Complete Estimates
Once a project has begun, the project management team monitors costs and project execution against the original cost
estimates and contract terms. On at least a monthly basis, detailed estimates of the costs to complete a contract are compiled
by the Corporation. These estimates form an integral part of Churchill’s process for determining construction profits. To the
extent that the costs to complete estimates are based on inaccurate or incomplete information, or on faulty judgments,
the accuracy of reported construction profits can be compromised. The Corporation assesses its project controls on an
ongoing basis.

Churchill 009 Annual Report

Reliance on Suppliers and Subcontractors
The Corporation relies on third party suppliers and subcontractors. The profitable completion of some contracts depends
to a large degree on the satisfactory performance of the subcontractors who complete different elements of work. If these
subcontractors do not perform to accepted standards, the Corporation may be required to hire different subcontractors to
complete the tasks, which may add additional costs to a contract, may impact profitability on a specific job and in certain
circumstances lead to significant losses. The failure of such third party suppliers and subcontractors to execute or effectively
manage their own business plans and deliver on their contractual commitments, can have a material adverse effect on the
Corporation’s business, operating results and financial condition. This risk is managed by evaluating third party subcontractors
and suppliers, by proactively monitoring project schedules and budgets and by obtaining bonds or other guarantees.

Contractor Default Insurance
Stuart Olson has entered into an innovative, yet well-tested sub-contractor risk management strategy provided by Zurich
Canada, a leading commercial property-casualty insurance provider serving the global corporate market. Under this strategy,
a portion of sub-contractor performance risk is retained by Stuart Olson, with the balance being transferred to the insurance
provider. This risk management program provides more control over the subcontractor pre-qualification process, an ability to
manage project risk more effectively and cost efficiencies for Stuart Olson. Because this is an insurance product, Stuart Olson
pays a premium to the insurer for coverage, however without a loss-run history to consider, it is difficult to predict whether this
program will result in savings or incremental expenses to Stuart Olson.

Work Stoppages
Certain of the Corporation’s businesses are subject to collective bargaining agreements with their hourly employees. Any
work stoppage resulting from a strike or lockout could have a material adverse effect on the Corporation’s business, financial
condition and results of operations, including increased labour costs and service disruptions. In addition, Churchill’s clients
employ workers under collective agreements. Any work stoppage or labour disruption experienced by Churchill’s clients could
significantly reduce the amount of its services they require. In 2007, new collective bargaining agreements were ratified by the
building trades in Alberta and Saskatchewan. These collective bargaining arrangements will expire in 2011.

Financial Resources
Churchill’s operations require a significant amount of working capital due to a large manpower workforce on projects. The
Corporation’s ability to obtain additional capital is a significant factor in achieving its strategy of expansion in the construction
industry. There can be no assurance that the current working capital of Churchill will be sufficient to enable it to implement all
of its objectives. There can be no assurance that if, and when, Churchill seeks equity or debt financing, it will be able to obtain
the required funding on favourable commercial terms, or at all. Any such future financing may also result in additional dilution to
existing shareholders.

Potential for Non-Payment
Before signing any construction contract, the Corporation satisfies itself that the potential client has adequate resources to
pay as construction work is completed. During the term of the contract, Churchill may be required to utilize its working capital
to fund construction costs until payments are collected from clients. If a client defaults in making its payments on a project,
Churchill would generally have a right to register a lien against the project. If the client were ultimately unable or unwilling to
pay the amounts owing to the Corporation, a lien against the property would normally provide some security that Churchill could
ultimately realize what is owed. However in these situations, the Corporation’s ability to ultimately collect what it is owed is
never assured. Payment default by a client could result in a financial loss to the Corporation that could have a material adverse
effect on its operating results and financial position. The Corporation’s objective is to reduce credit risk by ensuring the timely
collection of its trade and other receivables on a timely basis. Furthermore, the concentration of credit risk is limited due to the
large number of clients comprising Churchill’s revenue base.

Acquisition and Integration Risk
In the past Churchill has grown partly by acquisition. The Corporation’s growth strategy contemplates more acquisitions;
however, future acquisition opportunities may not be identified and obtainable on suitable terms. The ability to undertake future
acquisitions is limited, in part, by the Corporation’s ability to access financing. If integration of new businesses does not occur
as expected, their performance is less than expected, or an unknown liability is acquired, the Corporation’s revenues may be
lower and operational costs higher than anticipated.

Loss of Key Management, Inability to Attract and Retain Management
The Corporation’s future prospects depend to a significant extent on the continued service of its key executives. Furthermore,
the Corporation’s continued growth and future success depends on its ability to identify, recruit and retain key management
personnel. The competition for such employees is intense and there can be no assurance that the Corporation will be
successful in identifying, recruiting or retaining such personnel.

Maintaining Safe Worksites
Churchill’s success as a contractor is highly dependent on its ability to keep its construction worksites safe. Failure to do so can
have serious impacts beyond the threat to personal safety of its employees and others. It can expose the Corporation to fines,
regulatory sanction and even criminal prosecution. The Corporation’s safety record and worksite safety practices have a direct
bearing on its ability to secure work. Management is not aware of any pending health and safety legislation or prior incidents
which would be likely to have a material impact on any of the Corporation’s operations, capital expenditure requirements or
competitive position. Nevertheless, there can be no guarantee with respect to the impact of future legislation or accidents.

Litigation Risk
In the normal course of business, the Corporation is involved in various legal actions and proceedings which arise from time to
time, some of which may be substantial. In view of the quantum of the amounts claimed and the insurance coverage maintained
by the Corporation in respect of these matters, management of the Corporation does not believe any of the legal actions or
proceedings that are presently known or anticipated by the Corporation are likely to have a material adverse effect on the
Corporation’s financial position. However, there can be no assurance that the Corporation’s insurance arrangements will be
sufficient to cover any particular claim or claims that may arise in the future. Furthermore, the Corporation is subject to the risk
of claims and legal actions for various commercial and contractual matters primarily arising from construction disputes,
in respect of which insurance is not available.

Compliance with Environmental Laws
The Corporation is subject to numerous federal, provincial and municipal environmental laws and judicial, legislative and
regulatory developments relating to environmental protection on an ongoing basis. While the Corporation strives to keep
informed of and comply with all applicable environmental laws, circumstances may arise and incidents may occur that are
beyond the Corporation’s control that could adversely affect it. Management is not aware of any pending environmental
legislation that would be likely to have a material adverse impact on any of the Corporation’s operations, capital expenditure
requirements or competitive position, although there can be no assurance that future legislation will not be proposed, and if
implemented, may have a material adverse impact on the Corporation’s operations.

Regulations
The operations of Churchill’s clients are subject to or impacted by a wide array of regulations in the jurisdictions in which
they operate, such as applicable environmental laws. As a result of changes in regulations and laws relating to these
industries, clients’ operations could be disrupted or curtailed by governmental authorities. The high cost of compliance with
applicable regulations may cause clients to discontinue or limit their operations or may discourage companies from continuing
development activities. As a result, demand for the Corporation’s services could be substantially affected by regulations
adversely impacting these industries.

Churchill 009 Annual Report

Volatility of Market Trading
The market price of the Corporation’s common shares may be volatile and could be subject to fluctuations in response to quarterly
variations in operating results, changes in financial estimates by securities analysts, or other events or factors. In addition, the
financial markets have experienced significant price and volume fluctuations that have particularly affected the market prices of
equity securities of many companies providing services to the commodity industry. Often, these fluctuations have been unrelated to
the operating performance of such companies, or have resulted from the failure of the operating result of such companies to meet
market expectations in a particular quarter. Broad market fluctuations, or any failure of the Corporation’s operating results in a
particular quarter to meet market expectations, may adversely affect the market price of the Corporation’s common shares.

Quarterly Financial Information
The following table sets forth selected quarterly financial information of the Corporation for the last eight quarters based
on continuing operations and therefore excludes the assets held for sale as discontinued operations (i.e. Industrial General
Contracting segment):

($ millions, except per share data
and percentages)

Contract revenue

Contract income

Contract income margin – %

EBITDA from continuing operations

Earnings from continuing operations
before income taxes

Net earnings from continuing
operations

Earnings per share from continuing
operations - basic

Earnings per share from continuing
operations – fully diluted

Net earnings and comprehensive
income

Earnings per share – basic

Earnings per share – fully diluted

2009 (2,3)

2008 (1)

Dec. 31

Sept. 30

June 30

Mar. 31

Dec. 31

Sept. 30

June 30

Mar. 31

$173.9

24.7

14.2%

$161.5

27.1

16.8%

$136.7

21.6

15.8%

$129.1

18.6

14.4%

$185.5

27.9

15.0%

$216.2

28.1

13.0%

$202.0

23.1

11.4%

$157.8

15.0

9.5%

12.5

11.3

8.1

0.46

0.44

7.7

0.44

0.42

17.3

16.2

11.7

0.66

0.65

15.2

0.86

0.85

12.3

11.0

8.0

0.45

0.44

7.4

0.42

0.41

9.3

8.1

5.7

0.32

4.6

0.26

17.7

16.4

11.2

0.63

0.62

11.2

0.63

0.62

18.2

17.1

11.9

0.66

0.62

11.2

0.62

0.63

13.8

12.7

8.9

0.50

9.5

0.53

6.5

5.4

3.6

0.20

4.5

0.25

Work-in-hand

Backlog

Working capital

Shareholders’ equity

Book value ($ per basic share)

784.2

1,388.6

107.0

141.5

8.03

767.2

600.6

528.4

565.3

556.0

560.5

598.9

1,514.5

1,344.2

1,327.5

1,390.3

1,422.1

1,235.8

1,385.3

103.9

133.0

7.56

84.4

117.3

6.67

77.5

109.8

6.23

78.3

105.6

5.92

69.9

95.9

5.33

60.1

84.4

4.70

51.4

74.3

4.15

(1) During 2008, the Corporation repurchased and cancelled 159,900 common shares at an average price of $6.18 per share.
(2) During 2009, the Corporation cancelled 145,000 common shares acquired in December 2008 at an average price of $6.58 per share.
(3) During the remainder of 2009, the Corporation repurchased and cancelled 127,600 common shares at an average price of $7.59 per share.

The Corporation’s contract income margin percentage has increased during the last eight quarters as a result of improved
project execution, favourable contract terms and solid cost management practices. The combined effect of this has been a
record year of performance in 2008, followed by a consistent performance in 2009.

A comprehensive analysis of the operating results for each of the first three quarters of 2009 was included in the Management’s
Discussion and Analysis incorporated into the interim report to shareholders for each quarter. The reader is referred to the
Corporation’s 2008 Annual Report for a discussion and analysis of the results of the quarters proceeding January 1, 2009.

Controls and Procedures

Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered
and reported to senior management, including the CEO and CFO, on a timely basis, so that appropriate decisions can be made
regarding public disclosure. The CEO and CFO together are responsible for establishing and maintaining the Corporation’s
disclosure controls and procedures. They are assisted in this responsibility by the Disclosure Committee which is composed of
senior management of the Corporation.

An evaluation of the design and testing of the effectiveness of the Corporation’s disclosure controls and procedures was
carried out under the supervision of Churchill’s management, including the CEO and CFO, with oversight by the Audit Committee
and the Board of Directors as of December 31, 2009. Based on this evaluation, the CEO and CFO have concluded that the design
and operation of the Corporation’s disclosure controls and procedures as defined in National Instrument 52-109 (“NI 52-109”),
Certification of Disclosure in Issuers Annual and Interim Filings, was effective as at December 31, 2009.

Internal Controls over Financial Reporting
Internal controls over financial reporting (“ICFR”) are designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP.
Because of inherent limitations in all control systems, absolute assurance cannot be provided that all misstatements have been
detected. Management is responsible for establishing and maintaining adequate internal controls appropriate to the nature and
size of the business, to provide reasonable assurance regarding the reliability of financial reporting for the Corporation.

Under the oversight of the Audit Committee and Board of Directors, management with the participation of the Corporation’s
CEO and CFO, evaluated the design of the Corporation’s internal controls over financial reporting using the control framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework
(“COSO”). The evaluation included documentation review, enquiries, testing and other procedures considered by management
to be appropriate in the circumstances. As at the end of the period covered by this management discussion and analysis,
management has concluded that the design and operation of the internal controls over financial reporting were effective.

Material Changes to the Internal Controls over Financial Reporting
There were no changes to the Corporation’s internal controls over financial reporting during 2009 that have materially affected
or are reasonably likely to materially affect the Corporation’s internal controls over financial reporting.

Terminology
Throughout this 2009 Management’s Discussion and Analysis, 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”, “delayed 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

Churchill 009 Annual Report

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 December 31, 2009
($ millions)

As at December 31, 2008
($ millions)

Work-in-Hand

Active Backlog

Delayed Backlog

Total Backlog

784.2

504.4

100.0

1,388.6

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

Work-in-hand

Active Backlog

Delayed Backlog

Total Backlog

565.3

794.7

30.3

1,390.3

As at
($ millions)
Current assets

Less:

Current liabilities

Working capital

December 31,
2009
330.3

December 31,
2008
268.5

223.0

107.3

190.2

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.

($ millions)

Three months ended December 31,
2008

2009

Twelve months ended December 31,
2008

2009

Net earnings from continuing operations

Add:

Income taxes

Depreciation & amortization

Interest expense

8.1

3.2

1.1

0.1

11.2

33.5

35.6

5.2

1.1

0.2

13.2

4.4

0.2

51.3

16.0

4.1

0.5

56.2

EBITDA from continuing operations

12.5

17.7

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 contained in this MD&A may constitute forward-looking statements. These statements relate to future
events or the Corporation’s future performance. All statements, other than statements of historical fact, may be forward-
looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”,
“anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “propose”, “potential”, “targeting”,

“intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such
forward-looking statements. The Corporation believes that the expectations reflected in those forward-looking statements
are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking
statements included in this MD&A should not be unduly relied upon by investors as actual results may vary. These statements
speak only as of the date of this MD&A and are expressly qualified, in their entirety, by this cautionary statement.

In particular, this MD&A contains forward-looking statements, pertaining to the following:

• disclosures made under the heading “Outlook”;

• 2010 growth of business and operations;

• business strategies and plans for implementing them;

• future cash flow, cash requirements and long-term obligations; and

• the demand for the Corporation’s services.

With respect to forward-looking statements listed above and contained in this MD&A, the Corporation has made assumptions
regarding, among other things:

• the expected performance of the Canadian economy and the effect on the Corporation’s businesses;

• the impact of increasing competition;

• the global demand for oil and the effect on oil and gas projects in Western Canada; and

• government policies to stimulate the economy.

The Corporation’s actual results could differ materially from those anticipated in these forward-looking statements as a
result of the risk factors set forth below and elsewhere in this MD&A:

• general global economic and business conditions including the effect, if any, of a economic slowdown in the U.S.

and/or Canada;

• weak capital and/or credit markets;

• fluctuations in currency and interest rates;

• changes in laws and regulations;

• timing of completion of capital or maintenance projects;

• competition and pricing pressures; and

• unpredictable weather conditions.

The forward-looking statements contained in this MD&A are made as of the date hereof and the Corporation undertakes
no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise, unless required by applicable securities laws.

Additional information regarding Churchill, including the Corporation’s 2009 Annual Information Form and other required
securities filings, are available on our website at www.churchillcorporation.com and on the Canadian Securities Administrators’
website at www.sedar.com; the System for Electronic Document Analysis and Retrieval (“SEDAR”).

Churchill 009 Annual Report

Management’s Report
The accompanying financial statements and all information in this Annual Report are the responsibility of management.
The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and
include certain estimates that reflect management’s best judgment. Financial information contained throughout this Annual Report
is consistent with the financial statements.

Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable
assurance that transactions are properly authorized, assets are safeguarded and financial records are properly maintained to
provide reliable information for the preparation of financial statements.

The Board of Directors has approved the information contained in the consolidated financial statements. The Board fulfills its
responsibility in this regard mainly through its Audit Committee which has thoroughly reviewed the financial statements, including
the notes thereto, with management and the external auditors.

James C. Houck
President and Chief Executive Officer
March 5, 2010

Daryl E. Sands, CA
Executive Vice President Finance & Chief Financial Officer

Auditors’ Report
TO THE SHAREHOLDERS OF THE CHURCHILL CORPORATION

We have audited the consolidated balance sheets of The Churchill Corporation (the “Corporation”) as at December
31, 2009 and December 31, 2008 and the consolidated statements of earnings, comprehensive income, retained
earnings and cash flow for the years then ended. These consolidated financial statements are the responsibility of
the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of
the Corporation as at December 31, 2009 and December 31, 2008 and the results of its operations and its cash flow for
the years then ended in accordance with Canadian generally accepted accounting principles.

Chartered Accountants
Edmonton, Alberta
March 5, 2010

Consolidated Statements of Earnings,
Comprehensive Income and Retained Earnings

($ thousands, except share and per share amounts)

Contract revenue

Contract costs

Contract income

Interest income

Sundry income

Indirect and administrative expenses

Depreciation and amortization

Interest expense

Earnings from continuing operations before income taxes

Income tax (expense) recovery

Current income tax

Future income tax

Net earnings from continuing operations and comprehensive income

Net earnings from discontinued operations (Note 4)

Net earnings and comprehensive income

Retained earnings, beginning of period

Adjustment arising from shares purchased under a normal course issuer bid (Note 13)

Churchill 009 Annual Report

Year ended December 31,
2008
2009
601,241
760,953

509,290

91,951

643

464

(41,736)

(4,435)

(240)

46,647

(22,758)

9,590

(13,168)

33,479

1,338

34,817

83,132

(1,670)

667,074

93,879

2,602

297

(40,592)

(4,089)

(491)

51,606

(14,095)

(1,920)

(16,015)

35,591

852

36,443

47,528

(839)

Retained earnings, end of period

116,279

83,132

Net earnings per common share:

Basic from continuing operations

Basic from discontinued operations

Basic net earnings per share

Diluted from continuing operations

Diluted from discontinued operations

Diluted net earnings per share

Weighted average common shares:

Basic

Diluted

The accompanying notes are an integral part of these consolidated financial statements.

1.90

0.08

1.98

1.87

0.07

1.94

1.98

0.05

2.03

1.96

0.05

2.01

17,620,454

17,935,551

17,928,037

18,109,979

Consolidated Balance Sheets

($ thousands)
ASSETS

Current Assets

Cash and cash equivalents (Note 6)

Accounts receivable (Note 8)

Inventories and prepaid expenses

Costs in excess of billings

Income taxes recoverable

Future income tax assets (Note 12)

Current portion of long-term receivable (Note 4)

Assets held-for-sale (Note 4)

Restricted cash (Note 7)

Long-term receivable (Note 4)

Future income tax assets (Note 12)

Property and equipment (Note 9)

Assets held-for-sale (Note 4)

Goodwill and intangible assets (Note 10)

LIABILITIES

Current Liabilities

Accounts payable and accrued liabilities

Contract advances and unearned income

Income taxes payable

Future income tax liabilities (Note 12)

Current portion of long-term debt (Note 11)

Liabilities related to assets held-for-sale (Note 4)

Long-term deferred warranty claims (Note 7)

Long-term debt (Note 11)

Liabilities related to assets held for sale (Note 4)

Future income tax liabilities (Note 12)

SHAREHOLDERS’ EQUITY

Share capital (Note 13)

Shares repurchased under a normal course issuer bid, not cancelled (Note 13)

Contributed surplus (Note 14)

Retained earnings

Commitments and contingencies, and guarantees (Notes 18 and 19)

The accompanying notes are an integral part of these consolidated financial statements.

On behalf of the Board of Directors:

Albrecht W.A. Bellstedt, QC
Chairperson

Allister J. McPherson
Director

December 31,
2009

December 31,
2008

184,402

100,768

116,592

949

19,013

7,813

1,500

330,325

2,642

1,500

399

17,063

4,778

10,710

119,248

1,285

17,692

3,615

1,390

24,528

268,526

568

16,547

9,844

7,336

367,417

302,821

138,976

134,194

71,897

11,528

559

222,960

2,642

229

41,088

2,462

3,177

1,082

8,220

190,223

6,787

204

225,910

197,248

16,732

8,496

116,279
141,507

16,663

(956)

6,734

83,132
105,573

367,417

302,821

Consolidated Statements of Cash Flow

($ thousands)
OPERATING ACTIVITIES

Churchill 009 Annual Report

Year ended December 31,
2008

2009

Net earnings from continuing operations and comprehensive income

33,479

35,591

Depreciation and amortization

Gain on disposal of equipment

Stock-based compensation (Note 13)

Future income taxes

Change in non-cash balances relating to operations (Note 21)

INVESTING ACTIVITIES

Proceeds on disposal of equipment

Additions to intangible assets

Additions to property and equipment

FINANCING ACTIVITIES

Proceeds under operating line of credit

Repayments under operating line of credit

Repayment of long-term debt

Share purchase under a normal course issuer bid (Note 13)

Issuance of common shares

Cash provided by (used in) continuing operations

Cash provided by (used in) discontinued operations (Note 4)

Increase (decrease) in cash and cash equivalents during the year

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

SUPPLEMENTAL CASH FLOW INFORMATION

Cash received (paid) during the year for:

Interest

Income taxes

The accompanying notes are an integral part of these consolidated financial statements.

4,435

(11)

1,929

(9,590)

30,242

48,222

78,464

259

(3,395)

(5,131)

(8,267)

(7,129)

(970)

158

(7,941)

62,256

21,378

83,634

100,768

4,089

(34)

1,109

1,920

42,675

(35,546)

7,129

117

(7,246)

(7,129)

9,000

(9,000)

(1,722)

(1,944)

287

(3,379)

(3,958)

(7,337)

108,105

184,402

100,768

384

(10,023)

1,773

(25,432)

Notes to the Consolidated Financial Statements
The Churchill Corporation (the “Corporation”) was incorporated in Canada under the Business Corporations Act (Alberta) and
commenced operations on July 30, 1985. The Corporation provides building construction, industrial insulation contracting,
industrial electrical and instrumentation contracting and related services within Canada. The Corporation’s common stock is
traded on the Toronto Stock Exchange under the symbol “CUQ”.

1. Summary of Significant Accounting Policies
These consolidated financial statements are presented in Canadian dollars rounded to the nearest thousand ($000), except
where otherwise indicated, and have been prepared in accordance with Canadian generally accepted accounting principles
(“GAAP”) and reflect the following principles:

(i) Principles of Consolidation
The consolidated financial statements include the accounts of The Churchill Corporation and all subsidiary companies.
All subsidiary companies are wholly owned and intercompany balances have been eliminated on consolidation. The Corporation
proportionately consolidates its interests in joint ventures.

(ii) Measurement Uncertainty
Consolidated financial statements prepared in accordance with GAAP require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results could differ from these estimates. Uncertainty is
inherent in estimating the cost of completing construction projects, the estimated useful life of property and equipment and
corresponding depreciation rates, the useful life of intangible assets and corresponding amortization rates, allowances for
doubtful accounts receivable, future income taxes, provision for legal contingencies, valuation of stock options and the fair
value of goodwill and other financial instruments. The impact on the consolidated financial statements of future changes in
such estimates could be material.

(iii) Contract Revenue and Contract Costs
Revenue for cost-plus contracts is recorded as the service is performed and the related expenses are incurred. Under this
method, the costs incurred and the related revenue are included in the consolidated statement of earnings as the work
progresses. Contract revenue from fixed-price and unit-price contracts is recognized on the percentage-of-completion basis
measured by the ratio of either the actual cost of work or the actual hours performed to date, to the estimated total cost or
estimated total hours.

Contract costs include all direct material, labour and equipment costs and indirect costs related to contract performance such
as indirect labour, supplies, and tool costs. Changes in job performance, job conditions and estimated profitability, including
those arising from final contract settlements, may result in revisions to costs and revenue and are recognized in the period in
which such adjustments are determined.

On all contracts where current estimates indicate an ultimate loss, the full amount of the projected loss is recognized
immediately. Construction claims are included in revenue when realization is probable and can be reliably estimated.

(iv) Cash and Cash Equivalents
Cash and cash equivalents are comprised of bank balances and short-term investments with original terms to maturity of three
months or less.

(v) Inventories
Inventories are recorded at the lower of cost and net realizable value.

Churchill 009 Annual Report

(vi) Property and Equipment
Property and equipment are recorded at original cost and depreciated using either the declining balance or the straight-
line methods over their estimated useful lives or at the rates as described below. Depreciation is not taken on assets under
construction until the asset is placed into use.

Asset

Land improvements

Buildings and improvements

Leasehold improvements

Basis

Straight-line

Rate

30 years

20 – 40 years

Lesser of estimated useful life or lease term

Construction and automotive equipment

Straight-line or declining balance

3 – 5 years, 15% – 30%

Office furniture and equipment

Straight-line or declining balance

1 – 10 years, 30%

Computer hardware

Computer software

Straight-line

3 years

12 months

(vii) Accounting for Impairment of Long-Lived Assets
The Corporation tests for the impairment of long-lived assets held for use through a two-step process, with the first step
determining when an impairment is recognized and the second step measuring the amount of the impairment. An impairment
loss is recognized when the carrying amount of a long-lived asset exceeds the fair value. The amount of the impairment is
measured as the excess of the carrying amount of the long-lived asset over the fair value.

(viii) Goodwill and Intangible Assets
Goodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of the amounts
allocated to the identifiable assets acquired, less liabilities assumed, based on their fair values. Goodwill is allocated as of the
date of the business combination. Goodwill is not amortized and is tested for impairment annually in the fourth quarter, or more
frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is carried out
in two steps. In the first step, the carrying amount of the reporting unit is compared with its fair value. When the fair value of a
reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and the second step
of the impairment test is unnecessary. The second step is carried out when the carrying amount of a reporting unit exceeds its
fair value, in which case the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure
the amount of the impairment loss, if any. When the carrying amount of goodwill exceeds the implied fair value, an impairment
loss is recognized in an amount equal to the excess.

Intangible assets consist of Enterprise Resource Planning (“ERP”) assets that are expected to be ready for use in late 2010.
These will be amortized on a straight-line basis over the estimated useful life.

(ix) Income Taxes
The Corporation uses the asset and liability method of accounting for future income taxes. Under this method, future income tax
assets and future income tax liabilities are recorded based on temporary differences between the carrying amount of balance
sheet items and their corresponding tax bases. In addition, the future benefits of income tax assets, including unused tax losses,
are recognized, subject to a valuation allowance, to the extent it is more likely than not such future benefits will ultimately be
realized. Future income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to
apply when the tax liabilities or assets are to be either settled or realized.

(x) Share-Based Compensation Plan
The Corporation utilizes a fair value based method of accounting for stock options. Under this method, the estimated fair value
of the stock options granted is recognized over the applicable vesting period as a charge to stock compensation expense and a
credit to contributed surplus. When these options are exercised, the proceeds received and the related amounts of contributed
surplus are credited to share capital.

(xi) Earnings Per Share
Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares
outstanding during each reporting period. Shares issued during the year and shares reacquired during the year are weighted
for the portion of the year that they were outstanding. Diluted earnings per share are computed similar to basic earnings per
share except that the weighted average number of shares outstanding is increased to include additional shares from the
assumed exercise of stock options, if dilutive. The number of additional shares is calculated by assuming that outstanding stock
options were exercised and that the proceeds obtained from such exercise was used to acquire common shares at the average
market price during the reporting period.

(xii) Employee Future Benefits
The Corporation and its subsidiaries have a Registered Retirement Savings Plan and an Employee Share Purchase Plan.
The Corporation contributes to the plans based on the amount of employee contributions. The Corporation accounts for
contributions as an expense in the year that they are made. The Corporation does not provide post employment or post-
retirement benefits.

(xiii) Financial Instruments
Financial assets and financial liabilities are initially recognized at fair value and are subsequently accounted for based on
their classification as described below. The classification depends on the purpose for which the financial instruments were
acquired and their characteristics. Except in very limited circumstances, the classification is not changed subsequent to initial
recognition. Transaction costs are recognized immediately in income or are capitalized, depending upon the nature of the
transaction and the associated product.

Held-for-trading
Financial assets and financial liabilities that are purchased and incurred with the intention of generating profits in the near term
are classified as held-for-trading. These instruments are accounted for at fair value with the change in the fair value recognized
in investment income.

Available-for-sale
Financial assets classified as available-for-sale are carried at fair value with the changes in fair value recorded in other
comprehensive income. The fair value of a financial instrument on initial recognition is normally the transaction price.
Subsequent to initial recognition, fair values for financial assets are determined by bid prices quoted in active markets.
Securities that are classified as available-for-sale and do not have a readily available market value are recorded at cost.
Available-for-sale securities are written down to fair value through income whenever it is necessary to reflect other-than-
temporary impairment. Gains and losses realized on disposal of available-for-sale securities, which are calculated on an
average cost basis, are recognized in other income.

Held-to-maturity
Securities that have a fixed maturity date, where the Corporation intends and has the ability to hold to maturity, are classified
as held-to-maturity and accounted for at amortized cost using the effective interest rate method.

Loans, receivables and other liabilities
Loans, receivables and other liabilities are accounted for at amortized cost using the effective interest rate method.

Churchill 009 Annual Report

The Corporation has the following financial assets and liabilities:

Financial assets

Cash and cash equivalents

Available for sale

Classification

Accounts receivable

Restricted cash

Long-term receivable

Financial liabilities

Loans and receivables

Available for sale

Loans and receivables

Revolving line of credit

Other liabilities

Accounts payable and accrued liabilities

Other liabilities

Long-term deferred warranty claims

Other liabilities

Long-term debt

Other liabilities

Measurement

Fair value

Amortized cost

Fair value

Amortized cost

(xiv) Accumulated Other Comprehensive Income and Retained Earnings
The Corporation applies the standards for reporting and displaying other comprehensive income, defined as revenue, expenses, and
gains and losses which, in accordance with primary sources of GAAP, are recognized in comprehensive income but excluded from
net earnings. The application of these standards did not have any impact on the Corporation’s financial statement presentation during
the years ended December 31, 2009 or 2008 as the Corporation has no other comprehensive income components.

The Corporation has also applied the standards for the presentation of equity and changes in equity during the reporting
period. The requirements in this section are in addition to those of comprehensive income and recommend that an enterprise
present separately the following components of equity: retained earnings, accumulated other comprehensive income, the total
of retained earnings and accumulated other comprehensive income, contributed surplus, share capital, and reserves. The
Corporation has elected to present a combined Consolidated Statement of Earnings, Comprehensive Income and
Retained Earnings.

2. Accounting Policy Adoption and Changes
(i) Goodwill and Intangible Assets
Effective January 1, 2009, the Corporation adopted Canadian Institute of Chartered Accountants (“CICA”) Handbook Section
3064, Goodwill and Intangible Assets, replacing Section 3062, Goodwill and Other Intangible Assets. This new Section established
standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The provisions of
this Section, relating to the definition and initial recognition of intangible assets, are equivalent to the corresponding provisions
under International Financial Reporting Standards (“IFRS”). CICA Handbook Section 1000, Financial Statement Concepts, was also
amended to provide consistency with this new Section. The adoption of this standard has resulted in reallocating additions in the
year of $3,395 related to the new ERP system from property and equipment to intangible assets.

(ii) Credit Risk and the Fair Value of Financial Assets and Financial Liabilities
Effective January 1, 2009, the Corporation adopted Emerging Issues Committee’s (“EIC”) Abstract 173, Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities. This standard clarifies that an entity’s own credit risk and the credit risk of its
counterparties should be taken into account in determining the fair value of financial assets and liabilities, including derivatives.
The adoption of this standard did not have a material impact on the Corporation’s consolidated financial statements or on the
fair value determination of its financial assets and liabilities.

(iii) Disposal of Long-Lived Assets and Discontinued Operations
In accordance with CICA Handbook Section 3475, long-lived assets are classified as held for sale once certain criteria are
met. Such criteria include a firm commitment by management and the board of directors to dispose of a business or group of
selected assets and the expectation that such disposal will be completed within a twelve month period. Assets held for sale are
measured at the lower of their carrying amounts or fair values less costs to sell, and are no longer depreciated.

Operating results of a corporation’s components disposed of by sale or being classified as held-for-sale are reported
as discontinued operations if the operations and cash flows of those components have been, or will be, eliminated from
the Corporation’s current operations pursuant to the disposal and if the Corporation does not have significant continuing
involvement in the operations of the component after the disposal transaction. A component of an enterprise includes
operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the
rest of the Corporation’s operations and cash flows. All information contained in the consolidated financial statements and
accompanying notes is presented on a continuing operations basis unless otherwise noted.

3. Recent Accounting Pronouncements
(i) Business Combinations
CICA Handbook Section 1582, Business Combinations replaces Section 1581, Business Combinations and establishes new
standards for the accounting of a business combination. This Section constitutes the Canadian GAAP equivalent to the
corresponding provision under IFRS. This Section shall be applied prospectively to business combinations for which the
acquisition date is on or after the commencing of the first annual reporting period beginning on or after January 1, 2011 and the
Corporation will adopt this new Section as of such date upon its conversion to IFRS. The Corporation is currently evaluating the
impact of the adoption of this new Section on the consolidated financial statements and on future business combinations.

(ii) Consolidated Financial Statements
CICA Handbook Section 1601, Consolidated Financial Statements and Section 1602, Non-Controlling Interests replace Section
1600, Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial
statements while Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in the
consolidated financial statements subsequent to a business combination. These Sections constitute the Canadian GAAP
equivalent to the corresponding provision under IFRS. These Sections apply to interim and annual consolidated financial
statements relating to fiscal years beginning on or after January 1, 2011 and the Corporation will adopt these new Sections as of
such date upon its conversion to IFRS. The Corporation is currently evaluating the impact of the adoption of these new Sections
on the consolidated financial statements.

4. Assets Held-for-Sale and Discontinued Operations
On August 12, 2009, the Corporation entered into a share purchase agreement with an undisclosed company (the “Purchaser”),
pursuant to which the Corporation sold 100% of its interests in Triton Industrial Group (“TIG” previously known as Churchill Industrial
Group) which held certain assets of the Corporate and Other segment, and a wholly owned Triton subsidiary (Triton Construction Inc.
Subsidiary “TCIS”) which held the majority of the assets and liabilities of the Industrial General Contracting (Triton) segment. Included
as part of the share purchase agreement was the working capital, active construction projects and certain real property held by TIG
and TCIS. The Corporation has classified the remaining assets of Triton as held-for-sale in the balance sheets of the Corporation.
Assets held-for-sale include certain industrial and agricultural lands, and buildings and equipment.

The Corporation received cash proceeds of $18,487, including $3,000 in escrow, for the outstanding common shares of TIG and
TCIS for an after-tax gain of $4,965 net of transaction costs. As part of the agreement, two escrow accounts were established in
response to certain terms and conditions of the share purchase agreement.

An escrow account of $3,000 has been recognized as part of the gain on sale and allocated equally between current and
long-term receivable. These funds are held in escrow as security for the indemnification provided to the Purchaser by the
Corporation as part of the share sale. This escrow account is receivable in two equal installments, net of any claims, on August
11, 2010 and 2011. The funds are presently invested in guaranteed investment certificates bearing interest at 0.9%.

A second escrow account of $6,000 was established as part of a purchase price adjustment pending the finalization of the
closing net assets of TIG and TCIS.

Churchill 009 Annual Report

The results of operations attributable to these assets and liabilities have been retrospectively reported as discontinued
operations for the years ended December 31, 2009 and 2008. Previously, these amounts were included in continuing operations
in the Corporate and Other, and the Industrial General Contracting (Triton) segments. Commencing on the date of disposition,
the operations and cash flows of this segment have been eliminated from the ongoing operations of the Corporation.

The following table presents summary balance sheets, statements of earnings and statements of cash flows of the discontinued
operations included in the consolidated financial statements:

Balance Sheets

Accounts receivable

Inventories and prepaid expenses

Costs in excess of billings

Income taxes recoverable

Future income taxes assets

Property and equipment

Future income tax assets

Accounts payable and accrued liabilities

Contract advances and unearned income

Future income tax liabilities

Current portion of long-term debt

Long-term debt

Future income tax liabilities

Net assets held for sale

Statements of Earnings

Revenue

Contract income

Gain on sale of discontinued operations

Net earnings (loss) from discontinued operations (1)

Total net earnings (2)

December 31, 2009

December 31, 2008

2,691

2,087

4,778

20,259

208

3,546

460

24,528

9,507

337

9,844

6,612

437

1,169

8,220

4,778

26,118

December 31, 2009

December 31, 2008

27,954

85,864

1,308

4,965

(3,627)

1,338

6,273

852

(1) Net loss from discontinued operations for the year ended December 31, 2009 includes income tax recovery of $1,517 (2008 – $187).

Statements of Cash Flows

Operating activities

Financing activities

Investing activities

Cash provided by (used in) discontinued operations (2)

(2) Includes Triton’s operations for the period from January 1 to August 12, 2009.

December 31, 2009

December 31, 2008

6,897

1,235

13,246

21,378

(3,247)

(272)

(439)

(3,958)

5. Joint Ventures
The Corporation and its subsidiaries are partners in incorporated and unincorporated joint ventures. These consolidated
financial statements include the proportionate share of assets, liabilities, revenue, expenses, net income and cash flow of these
joint ventures as follows:

Current and total assets

Current and total liabilities

Contract revenue

Contract costs and expenses

Net earnings

Cash flow provided by operating activities

2009

18,363

17,836

10,609

9,189

1,419

15,154

2008

533

1,164

400

309

740

6. Cash and Cash Equivalents
Included in the cash and cash equivalents balance is $16,961 (2008 – $17,466) held as security for the payment of direct costs
related to specific construction projects and cash balances of $15,502 (2008 – $309) held in joint venture accounts. Cash and
cash equivalents are comprised of:

Cash

Short-term investments

2009

153,317

31,085

2008

80,733

20,035

184,402

100,768

7. Restricted Cash
Restricted cash relates to the Building segment’s Subguard Program representing an agreement with Zurich Insurance Company
(“Zurich”) that establishes a pre-funded deductible/co-pay insurance program. The funds provided to Zurich as at December 31, 2009
amounted to $2,642 (2008 – nil) and are presented as Restricted Cash on the consolidated balance sheets with a corresponding offset
to Long-Term Deferred Warranty Claims.

8. Accounts Receivable
Accounts receivable are comprised of:

Trade receivables

Construction holdbacks, due within one year

Other receivables

2009

53,440

57,270

5,882

2008

56,970

61,572

706

116,592

119,248

9. Property and Equipment

December 31, 2009
Land

Land improvements

Buildings and improvements

Leasehold improvements

Construction and automotive equipment

Office furniture and equipment

Computer hardware and software

Assets under construction

December 31, 2008
Land

Land improvements

Buildings and improvements

Leasehold improvements

Construction and automotive equipment

Office furniture and equipment

Computer hardware and software

Assets under construction

Churchill 009 Annual Report

Cost
685

1,921

5,655

16,123

1,737

5,734

413

Accumulated
Depreciation
-

Net Book
Value
685

1,475

1,249

7,228

837

4,416

446

4,406

8,895

900

1,318

413

32,292

15,229

17,063

Cost
685

2,630

2,674

19,047

2,873

7,341

1,530

Accumulated
Depreciation
-
$

Net Book
Value
685

1,726

938

10,381

1,802

5,386

904

1,736

8,666

1,071

1,955

1,530

36,804

20,257

16,547

Included in construction and automotive equipment is $87 (2008 – $1,656) of assets relating to capital leases and $32
(2008 – $1,150) of accumulated depreciation for a net book value of $55 (2008 – $506).

10. Goodwill and Intangible Assets

December 31, 2009
Intangible assets

Enterprise resource planning assets

Goodwill

December 31, 2008
Intangible assets

Enterprise resource planning assets

Goodwill

Cost
252

3,395

7,315

Accumulated
Depreciation
252
$

Net Book
Value
-

3,395

7,315

10,962

252

10,710

Cost
252

7,315

7,567

Accumulated
Depreciation
231
$

Net Book
Value
21

231

7,315

7,336

The intangible assets relate to the design and implementation of the Corporation’s computer systems. Enterprise Resource
Planning (“ERP”) assets relate to the design and implementation of the Corporation’s new ERP software (SAP), which is
anticipated to be ready for use in late 2010. Once ready for use the Corporation will begin depreciating the assets.

Goodwill is associated with prior acquisitions and is tested each accounting period for impairment. The Corporation performed
an impairment test related to the goodwill at December 31, 2009, and based on this analysis concluded that the fair value of the
goodwill exceeded the carrying amount.

11. Long-Term Debt

Revolving line of credit, interest at prime to prime plus 0.5% depending on certain financial
ratios, secured by land and buildings with an aggregate carrying value of $2,194, as well as
various security agreements and unlimited guarantees.

2009

2008

5,265

Finance contracts, secured by construction and automotive equipment with an aggregate
carrying value of $994, interest varying from 0.0% to 5.0%, blended monthly repayments of $58,
maturing between February 2010 and September 2013.

752

1,566

Capital leases, secured by construction and automotive equipment with an aggregate carrying
value of $55, interest of 8.0% and 10.0%, blended monthly repayments of $3, maturing between
September 2010 and 2011.

Less current portion

788

(559)

229

1,038

7,869

(1,082)

6,787

(i) Terms and Security
The Corporation has in place a $60,000 revolving line of credit that bears interest at rates varying between prime and prime
plus 0.5% based on certain financial ratios. The Corporation has provided a first charge over all assets under a General
Security Agreement as security for the revolving line of credit. The Corporation has also provided a site specific General
Security Agreement as security for the mortgage. These credit facilities require the Corporation to meet certain covenants.
The Corporation was in compliance with these covenants at December 31, 2009 and 2008. At year-end $21.8 million of the
Corporation’s line of credit was reserved as support for letters of credit for various joint ventures and construction projects.

For the year ended December 31, 2009, $48 (2008 – $314) in asset additions were acquired through capital leases and finance
contracts and accounted for as non-cash transactions in the Consolidated Statements of Cash Flow.

(ii) Principal Payments are Due as Follows:

2010

2011

2012

2013

2014

Thereafter

559

172

788

Churchill 009 Annual Report

12. Income Taxes
The Corporation’s tax expense differs from the provision computed at statutory rates as follows:

Earnings from continuing operations before income taxes

Non-deductible expenses

Income subject to tax

2009

2008

46,647

51,606

303

1,502

46,950

53,108

Income tax at statutory rate of 29.0% (2008 – 29.5%) of taxable income

13,616

15,667

Valuation allowance on non-capital loss carryforwards

Effect of change in tax rates for future income tax and tax recovery

Utilization of net capital loss carryforward

Rate difference in other provinces

Other

Income tax expense

The components of the future income tax assets and liabilities are as follows:

Tax loss carryforwards

Equipment and other assets

Valuation allowance on non-capital loss carryforwards

Unbilled work-in-progress and holdback receivable

Other

Classified as:

Current asset

Long-term asset

Current liability

Long-term liability

(50)

(580)

187

(23)

(125)

379

13,168

16,015

2009

286

113

(79)

7,813

2008

261

(3)

(94)

(1,861)

274

8,133

(1,423)

7,813

1,390

399

(79)

568

(3,177)

(204)

8,133

(1,423)

The Corporation has accumulated net capital losses for income tax purposes of $3,172 (2008 – $7,172) which may be carried
forward indefinitely to reduce future capital gains. The value of these losses has not been recognized in these consolidated
financial statements.

The Corporation has accumulated non-capital losses for income tax purposes of $1,022 related to continuing operations, which
expire as follows:

Loss Carryforwards

2010

2014

2015

2026

2027

2028

2029

238

294

147

160

1,022

13. Shareholders’ Equity
(i) Share Capital
Authorized
Unlimited Preferred Shares issuable in series with rights set by the directors
Unlimited Common Shares

Issued
Common shares:

Issued, beginning of year

Shares repurchased

Stock options exercised

Issued, end of year

(ii) Share-Based Compensation Plan

2009
Share Capital

2008
Share Capital

17,822,091

16,663

17,886,991

16,414

(272,600)

69,768

(257)

326

(159,900)

95,000

(149)

398

17,619,259

16,732

17,822,091

16,663

Stock options:
The Corporation has an incentive stock option plan for certain employees and directors. Options issued under the plan for
employees vest one third each on the anniversary of the award date in each of the subsequent three years. Options granted to
Directors vest one year after award date. There were no options awarded to Directors in 2009 as a decision was made by the
Board of Directors to implement a Deferred Share Unit (“DSU”) plan. All stock options must be exercised over specified periods
not to exceed five years from the date granted.

At December 31, 2009, the Corporation had 1,213,243 options outstanding (December 31, 2008 – 519,660) of which 262,074 are
currently exercisable (December 31, 2008 – 277,535).

The following table summarizes information about stock options outstanding under the Plan at December 31, 2009:

Exercise
Price

Expiry
Date

Options
Outstanding
Dec. 31, 2009

Options
Exercisable
Dec. 31, 2009

2.55

3.15

3.05

18.26

16.05

16.50

6.43

7.29

8.08

10.83

10.68

13.15

20.04

Jun. 14, 2010

Nov. 30, 2010

Jan. 4, 2011

Oct. 3, 2012

Mar. 17, 2013

Aug. 14, 2013

Nov. 19, 2013

Jan. 4, 2014

Mar. 24, 2014

May 14, 2014

Jul. 9, 2014

Mar. 24, 2014

Nov. 16, 2014

5,000

64,500

15,000

37,000

85,828

56,845

89,496

350,000

99,702

1,716

1,978

395,196

10,982

1,213,243

5,000

64,500

15,000

37,000

85,828

18,948

35,798

262,074

Churchill 009 Annual Report

For the year, the Corporation recognized stock-based compensation expense of $1,929 (2008 – $1,109) related to the estimated
fair value of options granted.

The fair value of each common share option granted by the Corporation was estimated using the Black-Scholes option-pricing
model at the grant date, with the following weighted average assumptions:

Risk-free interest rate

Expected life

Expected volatility

Expected dividends

2009

1.92%

4.0 years

62.12%

2008

2.75%

3.9 years

50.01%

During the year ended December 31, 2009, 859,574 options were granted with a weighted average fair value of $4.99. The
amounts computed, according to the Black-Scholes pricing model, may not be indicative of the actual values realized upon the
exercise of these options by the holders.

A summary of the Corporation’s outstanding share options under the plan at December 31, 2009 and 2008, indicating changes
during the years ended is presented below:

Number of Share
Options

Weighted Average
Exercise Price

Number of Share
Options

Weighted Average
Exercise Price

2009

2008

Outstanding, beginning of year

Granted

Forfeited

Exercised

519,660

859,574

(96,223)

(69,768)

11.13

4.99

5.71

1.55

Outstanding, end of year

1,213,243

13.04

317,500

320,798

(23,638)

(95,000)

519,660

7.00

13.26

17.08

3.02

11.13

Performance share units:
The Corporation has a Performance Share Unit (“PSU”) plan. Under the PSU plan, participants are eligible to receive an
equivalent cash value of the common shares, at a future date, subject to certain performance vesting conditions. The original
cost of the PSU is equal to the fair market value at the date of grant. Compensation expense is recognized in earnings on a
straight line basis over a vesting period of three years adjusted for the performance based vesting conditions. Changes in the
amount of the liability due to stock price changes after the initial grant date are recognized as compensation expense of the
period in which the changes occur.

A summary of the Corporation’s outstanding PSUs at December 31, 2009 and 2008, indicating changes during the year is
presented below:

Outstanding, beginning of year

Granted

Forfeited

Vested and paid

Outstanding, end of year

2009
Number of
PSUs
85,195

205,849

(47,310)

243,734

2008
Number of
PSUs
-

85,195

As at December 31, 2009, the PSUs issued during the year had a fair value of $1,958 (2008 – $1,269). During the year, the
Corporation booked a compensation expense of $1,009 (2008 – $77). As at December 31, 2009, none of the PSUs were vested.

Deferred share units:
The Corporation has a Deferred Share Unit (“DSU”) plan which received board approval on November 3, 2009. On November 16,
2009, the Corporation granted a total of 32,934 DSUs to Directors resulting in additional stock-based compensation expense of
$660 (2008 – nil) recorded in the fourth quarter of 2009.

(iii) Normal Course Issuer Bid
On October 9, 2008, the Corporation received regulatory approval under Canadian securities laws to purchase Common Shares
under a Normal Course Issuer Bid (“NCIB”). The Corporation was entitled to purchase, for cancellation, up to approximately
1,391,090 Common Shares under the NCIB which commenced on October 15, 2008 and expired on October 14, 2009.

During the year ended December 31, 2009, 127,600 common shares were purchased under the Corporation’s NCIB
(2008 – 304,900) for a total of $970 or $7.59 per share (2008 – $1,944 or $6.38 per share).

Of the shares repurchased, all common shares were cancelled resulting in the average carrying value of $257 (2008 – $149)
being allocated as a reduction in share capital; and $1,670 (2008 – $839) representing the consideration in excess of the assigned
value being charged to retained earnings during the period. In addition, 145,000 common shares repurchased in 2008 for a total
expenditure of $956 or $6.58 were not cancelled prior to December 31, 2008. These were subsequently cancelled in 2009.

(iv) Shareholder Rights Plan
The Corporation has an Amended and Restated Shareholder Rights Plan (the “Plan”) which grants the Right to issue additional
shares at a 50% discount to the current market price. Such Rights can only be exercised on the occurrence of a triggering
event, which is defined as a person (an “Acquiring Person”) acquiring, or publicly announcing its intention to acquire, 20% or
more of the common shares, other than by an acquisition pursuant to a takeover bid permitted by the Plan. The Rights expire on
September 30, 2010 unless exchanged or redeemed on an earlier date.

14. Contributed Surplus
For stock options granted to employees and directors the Corporation records compensation expense using the fair value
method as outlined in Note 13 (ii). Compensation costs are recognized over the vesting period as stock-based compensation
expense and an increase to contributed surplus. When options are exercised, the fair-value amount in contributed surplus is
credited to share capital. During the years ended December 31, 2009 and 2008, contributed surplus has changed as follows:

Balance, beginning of year

Stock-based compensation expense

Stock options exercised

Balance, end of year

2009

6,734

1,929

(167)

8,496

2008

5,736

1,109

(111)

6,734

Churchill 009 Annual Report

15. Management of Capital
The Corporation’s objective in managing capital is to ensure sufficient liquidity to pursue its growth and expansion strategy,
while taking a conservative approach towards financial leverage and management of financial risk.

The Corporation’s capital is composed of shareholders’ equity and long-term debt. The Corporation’s primary uses of capital
are to finance its growth strategies and capital expenditure programs. The Corporation currently funds these requirements from
internally-generated cash flows and interest bearing debt.

The Corporation did not pay a dividend in 2009 so that it maintained maximum flexibility to finance growth and expansion and
is able to take advantage of acquisition opportunities. The merits of introducing a dividend are evaluated by the Corporation’s
Board of Directors from time to time.

The Corporation intends to maintain a flexible capital structure consistent with the objectives stated above and to respond to changes
in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust its capital structure, the
Corporation may issue new shares, raise debt (secured or unsecured) or refinance existing debt with different characteristics.

The primary non-GAAP measures used by the Corporation to monitor its financial leverage are its ratios of Debt to Capitalization and Net
Debt to Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). EBITDA is not a measure that has any standardized
meaning prescribed by Canadian GAAP and is considered to be a non-GAAP measure. Therefore, this measure may not be comparable
to similar measures presented by other companies. This measure has been described and presented in the manner in which the chief
operating decision maker assesses performance. These metrics are indicative of the Corporation’s overall financial strength.

The Corporation targets a Debt to Capitalization ratio less than 30 percent that is calculated as follows:

Long-term debt, excluding current portion

Total shareholders’ equity

Total capitalization

Debt to capitalization ratio

2009

229

141,507

2008

6,787

105,573

141,736

112,360

The Corporation targets a Debt to EBITDA ratio less than 0.8 times. At December 31, 2009, the Debt to EBITDA was 0.0x
(December 31, 2008 – 0.1x) calculated on a trailing twelve-month basis as follows:

Long-term debt, excluding current portion

Net earnings and comprehensive income

Add:

Interest expense

Income tax expense

Depreciation and amortization

EBITDA

Debt to EBITDA

2009

229

34,817

240

13,168

4,435

2008

6,787

36,443

491

16,015

4,089

52,660

57,038

0.0x

0.1x

The Corporation also manages its capital through a rolling forecast of financial position and expected operating results. In
addition, the Corporation establishes and reviews operating and capital budgets and cash flow forecasts in order to manage
overall capital with respect to financial covenants. The Corporation’s credit facility is subject to the following covenants to
which it was in full compliance at December 31, 2009.

- Current Service Ratio
- Debt to Tangible Net Worth

- Tangible Net Worth
- Funded Debt to EBITDA

The Corporation’s capital management objectives, evaluation measures and definitions have remained unchanged over the
periods presented.

16. Earnings Per Share
Basic earnings per share is computed on the basis of the weighted average number of Common Shares outstanding. Fully
diluted earnings per share is computed on the basis of the weighted average number of Common Shares outstanding plus the
effect of outstanding stock options using the treasury stock method.

17. Financial Instruments
Financial instruments consist of recorded amounts of receivables and other like amounts that will result in future cash receipts,
as well as accounts payable, short-term borrowings, and any other amounts that will result in future cash outlays.

The Corporation has determined that the fair value of its financial assets, including cash and cash equivalents, accounts
receivable, and financial liabilities, including the accounts payable and accrued liabilities, approximates their respective
carrying amounts as at the balance sheet dates because of the short-term maturity of those instruments. The fair values of the
Corporation’s interest-bearing financial liabilities, including the revolving line of credit, capital leases and financed contracts,
also approximates their respective carrying amounts due to the floating rate nature of the debt.

(i) Financial Instruments – Carrying Values

2009

2008

184,402

100,768

116,592

2,642

3,000

119,248

138,976

134,194

2,642

788

2009

643

(26)

(214)

(73)

330

7,869

2008

2,602

(26)

(465)

(569)

1,542

Financial assets:

Cash and cash equivalents

Accounts receivable

Restricted cash

Long-term receivable

Financial liabilities:

Accounts payable and accrued liabilities

Long-term deferred warranty claims

Long-term debt, including current portion

(ii) Financial Income and Expense

Interest income – cash and cash equivalents

Interest expense – operating line of credit

Interest expense – long-term debt

Bad debt expense, net

Churchill 009 Annual Report

(iii) Financial Risk Management
The Corporation has exposure to credit, interest rate and liquidity risks. The Corporation is not exposed to any direct foreign
currency risk. The Corporation’s Board of Directors has overall responsibility for the establishment and oversight of the
Corporation’s risk management framework and reviews the corporate policies on an ongoing basis.

The Corporation is exposed to credit risk through accounts receivable. This risk is minimized by the number of customers
in diverse industries and geographic centers. The Corporation performs an assessment of its customers as part of its work
procurement process, including an evaluation of financial capacity.

Allowances are provided for potential losses that have been incurred at the balance sheet date. Accounts receivable are
considered for impairment on a case-by-case basis when they are past due or when objective evidence is received that a
customer will default. The Corporation takes into consideration the customer’s payment history, credit worthiness and the
current economic environment in which the customer operates to assess impairment. The Corporation accounts for a specific
bad debt provision when management considers that the expected recovery is less than the actual account receivable.

The provision for doubtful accounts has been included in operating expenses in the consolidated statements of earnings,
comprehensive income and retained earnings and is net of any recoveries that were provided for in a prior period. Allowance
for doubtful accounts as at December 31, 2009 is $1,117 (2008 – $2,782).

The Corporation had $2,534 trade receivables which were greater than 90 days past due as at the end of the year
(December 31, 2008 – $5,210). There are no concentrations of credit risk in geographical area, customer markets or
other areas as at December 31, 2009.

The financial risk is the risk to the Corporation’s earnings that arises from fluctuations in the interest rates and the degree of
volatility of these rates. The Corporation is exposed to interest rate risk on its revolving line of credit with payment terms as
disclosed in Note 11. The Corporation does not use derivative instruments to reduce its exposure to this risk. At December 31, 2009,
the increase or decrease in annual net earnings for each 1.0% change in interest rates on floating rate debt would be negligible.

The Corporation invests its cash with the objective of maintaining safety of principal and providing adequate liquidity to meet
all current payment obligations. The Corporation invests its cash and cash equivalents with counterparties that are of high
credit quality as assessed by reputable rating agencies. Given these high credit ratings, the Corporation does not expect any
counterparties to these cash equivalents to fail to meet their obligations.

There have not been any changes in the type of risks arising from financial instruments during the period.

18. Commitments and Contingencies
The Corporation leases certain construction equipment, vehicles, office premises and equipment under operating leases,
and is committed to future annual payments in respect of a service agreement. Future minimum lease payments over the
next five years and thereafter are as follows:

2010

2011

2012

2013

2014

Thereafter

1,994

1,664

1,508

1,361

1,360

1,002

8,889

At December 31, 2009, the Corporation was involved in various legal claims arising in the normal course of operations.
Management believes that it has adequately provided for these legal claims and that the results of these actions will not have
any material effect on the financial position of the Corporation.

Subsidiaries of the Corporation are contingently liable for normal contractor obligations relating to performance and completion
of construction contracts as well as obligations of associates in certain joint ventures.

19. Guarantees
The Corporation is a participant in joint ventures (Note 5) for which it has provided a joint and several guarantee, increasing
the maximum potential payment to the full value of the work remaining under the contract. The Corporation has issued several
parental guarantees in support of significant projects being undertaken by the buildings, industrial insulation and industrial
electric segments. The cost of completing the contracts cannot reasonably be determined, and may be greater or less than the
unbilled portion of the contracts.

20. Related Party Transactions
The Corporation incurred legal fees of $610 (2008 – $130) for services related to various legal matters with a law firm of which
a director of the Corporation is also a partner. At December 31, 2009, $29 (2008 – $37) is included in accounts payable.

The Corporation incurred facility costs of $146 (2008 – $157) related to rental of a building which is owned by a director of the
Corporation. At December 31, 2009 (2008 – nil) there are no amounts included in accounts payable.

Related party transaction costs were incurred in the ordinary course of business where normal trade terms apply and are
measured at the exchange amount.

21. Change in Non-Cash Balances Relating to Operations

Accounts receivable

Inventories and prepaid expenses

Costs in excess of billings

Income taxes recoverable

Accounts payable and accrued liabilities

Contract advances and unearned income

Income taxes payable

2009

2,656

336

(1,321)

3,559

3,082

30,809

9,101

2008

(7,497)

(578)

(969)

(3,615)

(9,856)

(5,400)

(7,631)

48,222

(35,546)

Certain balances have been reclassified from continuing operations as cash provided by (used in) discontinued operations in
the Consolidated Statements of Cash Flow (Note 4).

Churchill 009 Annual Report

22. Segmented Information
The Corporation operates as a construction and maintenance services provider, primarily in western Canada. The Corporation
is managed using four business segments: Buildings, Industrial Insulation Contracting, Industrial Electrical Contracting, and
Corporate and Other.

Buildings (Stuart Olson) – constructs commercial, institutional, and light-industrial buildings.

Industrial Insulation Contracting (Fuller Austin, Northern Industrial) – provides insulation, maintenance and related services.

Industrial Electrical Contracting (Laird) – provides industrial electrical, instrumentation and power-line construction and
maintenance services.

Corporate and Other – includes corporate costs not allocated directly to another business segment as well as any
miscellaneous investments.

The accounting policies and practices of the reportable segments are the same as those described in Note 1.
The segmented information provided is after the elimination of inter-segment management fees and loan balances and
any related interest charges.

December 31, 2009
Revenues

EBITDA (1)

Depreciation and
amortization

Interest expense

Buildings
483,837

51,289

2,229

Industrial
Insulation
73,100

9,082

352

Industrial
Electric
44,304

2,777

1,076

Corporate
and Other
-

(11,826)

778

169

Total
601,241

51,322

4,435

240

Earnings (loss) before tax

49,022

8,730

1,668

(12,773)

46,647

Income taxes

Net earnings from
continuing operations

Goodwill and intangible
assets

Total assets

Capital expenditures

December 31, 2008
Revenues

EBITDA (1)

Depreciation and
amortization

Interest expense

(13,168)

33,479

268,778

3,120

Buildings
568,958

42,827

1,998

26,876

927

Industrial
Insulation
73,748

8,711

231

7,315

23,578

619

3,395

10,710

48,185

3,860

367,417

8,526

Industrial
Electric
118,247

Corporate
and Other
-

11,595

1,044

(6,947)

816

359

Total
760,953

56,186

4,089

491

Earnings (loss) before tax

40,764

8,478

10,487

(8,123)

51,606

Income taxes

Net earnings from
continuing operations

Goodwill and intangible
assets

Total assets

Capital expenditures

183,539

3,301

26,707

376

7,315

36,348

2,535

56,227

1,034

(16,015)

35,591

7,336

302,821

7,246

(1) EBITDA represents earnings or loss before interest, income taxes, depreciation and amortization. EBITDA is not a measure that has any standardized meaning prescribed by

Canadian GAAP and is considered to be a non-GAAP measure. Therefore, this measure may not be comparable to similar measures presented by other companies.
This measure has been described and presented in the manner in which the chief operating decision maker makes operating decisions and assesses performance.

For the purposes of presentation, capital expenditures of $48 (2008 – $314) relating to capital leases have been treated as
non-cash transactions and as such have not been reflected on the Consolidated Statements of Cash Flow (Note 11).

In 2009, revenue from a significant customer was $110,338, which represented greater than 10% of contract revenue earned.
This revenue was earned in the Buildings segment. In 2008, no individual customer was responsible for greater than 10% of
contract revenue.

23. Employee Contribution Plans
The Corporation has a registered retirement savings plan which permits employees to voluntarily contribute up to 5% of their
gross base salary. The Corporation matches all contributions made by the employees. The combined contributions are invested
by the individual employees, at their discretion, in any of several mutual funds offered by the plan. Contributions made by the
Corporation during the year to the registered retirement savings plan was $1,293 (2008 – $1,579).

The Corporation has an employee share purchase plan which permits employees to voluntarily contribute up to 10% of their
gross base salary. The Corporation matches all contributions by the employees up to a maximum of 5% of the gross base salary.
The combined contributions are invested by the plan in common shares of the Corporation purchased on the retail market.
Contributions made by the Corporation during the year to the employee share purchase plan was $1,185 (2008 – $1,392).

The Corporation also has a DSU plan that provides an opportunity for employees and Directors to invest a percentage of the
pre-tax salary or bonus in DSUs. Employees can contribute between 1% to 25% of their regular pre-tax salary or bonus to the
plan and Directors can contribute up to 100% of their retainer and meeting fees. The amount of salary and/or bonus contributed
to the plan determines the number of DSUs at the time of contribution with the value of the DSUs floating with the market value
of the Corporation’s share price. Cash payout for the equivalent value of DSUs is only made when an employee/Director ceases
to be an employee/Director. From time to time, in the sole discretion of the Board, each Non-Employee Director may be awarded
discretionary grants of DSUs as part of their remuneration package. During the fourth quarter, the Corporate granted a total of
32,934 DSUs to Directors resulting in additional stock-based compensation expense of $660 (2008 – nil).

24. Comparative Figures
Certain of the comparative figures have been adjusted to be consistent with the current period presentation.

Churchill 009 Annual Report

corporate &
shareholder
information

Officers
James C. Houck, B.Sc., MBA,
President and Chief Executive Officer

Daryl E. Sands, B.Comm., CA.
Executive Vice President Finance and
Chief Financial Officer

Greg G. Phaneuf, B.Comm., CA, CFA
Vice President, Corporate Development

Andrew Y. L. Apedoe, B.Comm.
Vice President, Investor Relations and
Corporate Secretary

Don P. Pearson B.Sc., P.Eng.
President and Chief Operating Officer,
Stuart Olson Construction Ltd.

Ronald L. Martineau
President and Chief Operating Officer,
Insulation Holdings Inc.

David J. LeMay
President and Chief Operating Officer,
Laird Electric Inc.

Directors
Albrecht W.A. Bellstedt, B.A., J.D., Q.C.
Chairman

Wendy L. Hanrahan (1) (2)

James C. Houck, B.Sc., MBA

Harry A. King, B.A., CA (1)

Carmen R. Loberg (2) (4)

Allister J. McPherson, B.Sc., M.Sc. (1) (3)

Henry R. Reid, B.ASc., MBA, P.Eng. (4)

Ian M. Reid, B.Comm. (1) (3)

George M. Schneider (2) (4)

Brian W. L. Tod, B.A., LL.B., Q.C. (2) (3)

(1) Member of the Audit Committee

(2) Member of the Human Resources &

Compensation Committee

(3) Member of the Corporate Governance &

Nominating Committee

(4) Member of the Health, Safety and

Environment Committee

Registrar and Transfer Agents
Inquiries regarding change of address,
registered shareholdings, share transfers,
duplicate mailings and lost certificates should
be directed to:

CIBC Mellon Trust Company
600 The Dome Tower
333 Seventh Avenue SW
Calgary, Alberta T2P 2Z1
Phone: (403) 232-2400
Fax: (403) 264-2100
Email: inquiries@cibcmellon.ca
Website: www.cibcmellon.ca
Answerline: 1-800-387-0825

Notice of Annual Meeting:
The Annual General Meeting will be held on
May 20, 2010 at 2:00 pm at the Metropolitan
Centre located at 333 - 4 Avenue SW,
Calgary, Alberta.

Executive Offices
400, 4954 Richard Road SW

Calgary, AB T3E 6L1

Phone: (403) 685-7777

Fax: (403) 685-7770

Email: inquiries@churchill-cuq.com

Website: www.churchillcorporation.com

Auditors
Deloitte & Touche LLP
Edmonton, Alberta

Legal Counsel
Miller Thomson LLP

Macleod Dixon LLP

Principal Bank
HSBC Bank Canada

Bonding and Insurance
Aviva Insurance Company of Canada

AXA Pacific Insurance Company

Aon Reed Stenhouse Inc.

Travelers Guarantee Company

00, 9 Richard Road SW
Calgary, AB TE L
Phone: 0..
Fax: 0..0