A n n u A l R e p o R t 2 0 1 1 – pA R t o n e
the road to
higher value
L
A
R
E
N
E
G
G
N
I
T
C
A
R
T
N
O
C
Churchill creates value from providing
construction and industrial services
in Western Canada.
I
N
D
U
S
T
R
A
L
I
S
E
R
V
C
E
S
I
COMMERCIAL
SYSTEMS
The thriving economy of Western Canada and our strong relationship-driven business
development activities in 2011 drove Churchill’s backlog to a record at year-end. Our General
Contracting segment’s results were dampened by low margin projects secured during the
more competitive markets of late 2008, 2009 and early 2010 and unprofitable fixed price
projects carried over from the acquisition of Dominion in 2010. Churchill’s two other operating
segments, Commercial Systems and Industrial Services, produced record results in 2011.
Having broadened our geographic base and product offering, and worked through almost
all of the less profitable legacy backlog, we are well-positioned for a return to higher margins
and greater profitability in 2012 and beyond. This is Churchill’s road to higher value.
Forward-Looking Information
This annual report contains certain information that may constitute forward-looking information within the meaning of applicable securities laws. Often, but not always, forward-looking
information can be identified by the use of such words as “may”, “expect”, “believe”, “intend”, “outlook”, “forecast”, “should”, “anticipate” and other similar terminology, including
statements concerning possible or assumed future results. The forward-looking information in this annual report includes, without limitation, statements pertaining to: (a) general
economic conditions and the impact those conditions may have on The Churchill Corporation (“Churchill”); (b) the expectation that any of the Churchill’s operating companies will
improve their business prospects; (c) the growth of Churchill being supported by a combination of cash flow from operations, its credit facility and access to equity markets; (d) backlog
additions reflecting resiliency of growth in Churchill’s businesses; (e) Churchill having sufficient capital resources and liquidity to meet its commitments, support its operations, finance
capital expenditures, support growth strategies and fund dividends; and (f) the ability of Churchill’s operating companies to execute upon their strategic plans to expand market
share and increase operational scope and customer bases. Forward-looking information is based on management’s reasonable assumptions, analysis and estimates as well as other
material factors that it considers to be relevant at the time of making such statements. The forward-looking information in this annual report is included for the purpose of assisting
investors in understanding Churchill’s business as at the date hereof. Forward-looking information involves known and unknown risks and uncertainties, which give rise to the possibility
that management’s assumptions, analysis and estimates will be incorrect and that Churchill’s anticipated results will not be achieved. Such statements should not be interpreted as a
guarantee of future performance or results. Forward-looking information is necessarily subject to a number of factors that may cause actual results to differ materially from those results
implied by the expectations suggested by such information. Those factors include, without limitation, the risks and uncertainties described in Churchill’s Annual Information Form with the
securities regulatory authorities in Canada under Churchill’s profile at www.sedar.com. The forward-looking information in this annual report is current to the date hereof, and is subject
to change following such date. While Churchill may elect to do so, unless required by applicable law, it undertakes no obligation to update this information to reflect new information
or circumstances at any particular time.
Non-IFRS Measures
Throughout this annual report certain measures are used that, while common in the construction industry, are not recognized measures under IFRS. The measures used are “contract
income margin percentage”, “work-in-hand”, “backlog”, “working capital”, “EBITDA”, “EBT”, “funds from operations”, “funds from operations per share” and “book value per share”.
These measures are used by management of Churchill to assist in making operating decisions and assessing performance. They are presented in this annual report to assist readers
to assess the performance of Churchill and its operating companies. While Churchill calculates these measures consistently from period to period, they likely will not be directly
comparable to similar measures used by other companies because they do not have standardized meanings prescribed by IFRS. Please review the discussion of these measures in
the “Terminology” section of the Management’s Discussion and Analysis which can be found under Churchill’s profile at www.sedar.com.
Our
gOal
Profitable
Growth
QuarTErlY
DIVIDEND
$0.12
Concentrating on continued profitable organic
growth across all business segments through:
• Rigorous project selection;
• Profitable execution of backlog;
•
•
Making safety, health and the environment a key
priority; and
Unwavering commitment to exceeding our
customers’ expectations.
When conditions are right, we will acquire companies that enhance our strategic goals
and fit our entrepreneurial culture. For example, we acquired McCaine Electric in April 2011,
expanding Canem’s footprint into Manitoba.
Growth of our business is supported by our robust cash flow from operations, our $200 million
credit facility and our access to the public equity and debt markets, which is sustained by an
active investor outreach program and broad analyst coverage.
1
The ChurChill CorporaTion Size. Scope. Scale.
We’re building value across
Western Canada – and beyond.
$1.41
billion contract
revenue in 2011
$1.84 3,928
billion backlog
at year-end 2011
employees at
year-end 2011
Revenue increased by 19% in 2011.
Stuart Olson Dominion grew its top
line by 11%. Canem’s revenue grew
by 132% including a full year of
Canem’s results (compared to
5 ½ months in 2010) and the
McCaine acquisition. Our Industrial
Services segment grew its top line
by 22% as Broda almost tripled
its revenue, and Laird and IHI
contributed 9% revenue growth.
Churchill’s successful business
development efforts grew
backlog by 19% to a record
$1.84 billion in 2011. This
backlog provides visibility
of future revenue and profit
sources, particularly for Stuart
Olson Dominion, our General
Contracting segment, which
contributed $1.44 billion (78%) of
our year-end 2011 backlog.
Our 773 salaried employees
(444 in Stuart Olson Dominion,
126 in Canem, 157 in the Industrial
Services segment, and 46 in
the corporate centre) form
the core of our operations. In
addition, our hourly
field personnel (3,155 at 2011
year-end) allow us to
right-size our organization
to our workload.
Size, scope and scale matter. These traits enable our operating
companies to target larger, more profitable projects. In 2011 we
bolstered our presence throughout Western Canada and beyond
with several major new projects including:
Stuart Olson Dominion
Broda
Canem
• Three Alberta hospital projects valued
at $315 million, located at Medicine Hat,
Lethbridge and Edson, Alberta
• 745 Thurlow, a 25 storey, 400,000 square
foot office tower, valued at $98 million
and located at 745 Thurlow Street,
Vancouver, British Columbia
• The $60 million renovation and
construction of the Taché Hall Music, Art
and Theatre Complex for the University
of Manitoba
• Earth-moving contracts for the
• The Shaw Data Centre, an energy
efficient, high-technology structure
with a $30 million electrical and
data systems budget
• The 443 Maritime Helicopter
Squadron facility, a $104 million
($11 million electrical and data
systems budget), 20,000 square
metre hangar being constructed
at Victoria International airport
Calgary Airport Authority’s New
Runway Development Program and
the City of Calgary’s Airport Runway
Tunnel project ($40+ million)
Laird Electric / Insulation Holdings
• 2-year, $80 million turnaround
maintenance contract for an oil
sands client in the Fort McMurray,
alberta area
laird Constructors
• A $50+ million contract for electrical
and mechanical work at a mine in
northern Ontario
2
The ChurChill CorporaTion Three operating
segments
Our three operating segments –
General Contracting, Commercial
Systems, Industrial Services –
allow us to benefit from
institutional (hospitals, schools,
recreation centres, prisons),
commercial (office, wholesale,
retail) and industrial (oil and
gas, mining, utilities) growth
throughout our service area.
Diverse markets with
huge opportunities
The growing economy in
Western Canada provides
a wealth of opportunity for
Churchill. Capital construction
expenditures in Western
Canada were $126 billion in
2011, and are expected to be
$140 billion in 2012.
(Source: Statistics Canada)
Bow Valley College, Calgary, Alberta.
An expanding
geographical footprint
Last year saw the expansion of
Canem into Manitoba with the
McCaine Electric acquisition,
Broda into Alberta with the
Calgary Airport Runway and
Runway Tunnel projects, and
laird into northern Ontario
with the establishment of
Terwillegar Community Recreation Centre,
Laird Constructors.
Edmonton, Alberta.
Broda equipment at a northern
Saskatchewan mine site.
We remain focused primarily
The oil sands are the largest
on the rapidly growing
driver of the economy in
resource extraction economy
Alberta, the most prosperous
of Western Canada, and we will
province in Western Canada.
be opportunistic in adjoining
They contain an estimated
regions where our core
170 billion barrels of recoverable
strengths are a competitive
oil and produced approximately
advantage.
1.6 million barrels per day in
2011. By 2020, this output is
expected to exceed 5 million
barrels per day.
(Source: CAPP)
3
The ChurChill CorporaTion Margins
Profit margins are a key indicator of the risk/reward profile of our project portfolio. Contract
types that place cost and schedule risk on the contractor, such as lump sum/fixed price, tend
to be bid at higher margins to compensate for the additional risk. Lower-risk contract types,
such as construction management and cost plus, tend to be bid at lower margins but often
with bonus incentives to motivate optimal performance.
Margins are...
... important measures of our profitability.
There are several different types. All are
calculated as the percentage of revenue that
the particular type of profit comprises.
• Contract income margin = Contract income
divided by revenue times 100
• EBITDA margin = EBITDA divided by
revenue times 100
• Net income margin = Net income divided
by revenue times 100
Margins can be volatile...
…if the project portfolio contains a large
proportion of higher-risk contracts. This was
the case with the legacy project portfolio of
Dominion, which we acquired in 2010. It was
comprised primarily of lump-sum/fixed-bid
contracts, which encountered execution issues
and were largely bid at insufficient margins
during the very competitive markets of the
recent downturn from late 2008 to early 2010.
EBITDA and net income
are also important
The margin isn’t the only thing that matters.
The dollar amount of EBITDA is an indicator
of Churchill’s ability to cover its cash operating
costs and net income is an indicator of overall
profitability. Large projects with low margins
can still deliver large profits.
And cash is king
Cash flow measurements such as “funds from
operations” demonstrate Churchill’s ability to
generate sufficient cash inflows (collections)
to cover its cash outflows. Debt may be used
as the buffer that covers timing differences between
outflows and collections.
4
Contract Types
Construction
Management (CM)
The contractor is paid a fee
to manage the project for
the owner. Sub-contracts
are held by the owner.
Cost Plus
Sometimes referred to as
“time and materials”. The
contractor is reimbursed for
all costs and also receives a
fixed fee that may be
a certain dollar amount
or a percentage of costs.
Sub-contracts are held by
the contractor.
Guaranteed Maximum
Price (GMP)
Cost plus with a price cap.
The owner and contractor
share profits if the contract
is delivered below the GMP.
The contractor covers costs
above the GMP.
Lump Sum/
Fixed Price
The contractor performs
the required work for a
pre-determined fixed price,
regardless of actual costs.
Sub-contracts are held by
the contractor.
2,000
1,500
1,000
500
0
Backlog by Contract Type
($ million)
Fixed price/GMP
CM/Cost Plus
17%
83%
10%
90%
34%
66%
industrial
Services
59%
41%
Commercial
Systems
total
Churchill
General
Contracting
Contract Risk and Margin
Fixed
Price
GMP
k
s
i
R
CM
Cost
Plus
Margins = Reward
Why Earnings Lag Backlog
As backlog is executed, revenues and
costs are recognized – but not in a
linear fashion. The outcome of many
contracts cannot be estimated reliably
in their early stages. So, while contract
costs are fully recognized as they are
incurred, contract revenue is recognized
only to the extent that the costs are
reasonably expected to be recoverable,
until the contract’s overall outcome can
be reliably estimated. Thus, earnings
(revenue less costs) tend to be lower in
the early stages of contracts, and higher
as contracts mature, especially for GMP
and fixed price contracts.
The ChurChill CorporaTion Growing shareholder value
Churchill is focused on maximizing total shareholder return through profitable growth in all its
business segments – General Contracting, Commercial Systems and Industrial Services. Each
segment is focused on improving profitability through rigorous project selection, profitable
execution of backlog, putting safety first and focusing on meeting customers’ needs and
exceeding their expectations.
Unwavering commitment
to exceeding our
customers’ expectations
Our companies use a holistic,
team-based approach that brings
clients, contractors and consultants
together as equals. We work
to understand our customers’
businesses and requirements, to
ensure that we know their wants
and needs and are able to exceed
their expectations. For example,
our preferred construction
management (CM) methodology
allows the owners to collaborate
with us (the contractor) and project
consultants to optimize project
parameters. CM projects may later
be negotiated to fixed price if the
owners wish to transfer price and
schedule risk to the contractor.
Putting safety first
Churchill’s customers
and employees have the
inherent right to a safe
construction job site and
workplace. Every one of
our business units has an
excellent safety record. Our
Board of Directors Health,
Safety and Environment
Committee monitors
our health, safety and
environmental practices. We
also have an operationally
integrated health, safety
and environment council
consisting of senior
management and safety
representatives to share best
practices. In addition, we are
working to standardize the
safety reporting across all of
our business units.
Rigorous project
selection
Churchill’s operating
companies seek out
projects that capitalize
on their core strengths,
allowing them to perform
well for the customer and
our shareholders. All of our
operating companies have
been in existence for 50+
years. All have a significant
base of repeat clients
and are supported by a
strong reputation for a safe,
cooperative and efficient
work environment. This
allows them to narrow
their focus to
high-quality
projects with
appropriate risk/
reward parameters.
Our
DESTINaTION
greater shareholder
value driven by
Profitable project execution
profitable growth.
Stuart Olson Dominion focuses on relationship-based construction management projects that contain
opportunities for innovations to add value and the ability to self-perform sub-contracts, such as concrete
work, in order to improve project timing and economics for customers.
Canem uses its proprietary production management module, stand-alone pre-fabrication facilities, in-house
technical expertise and integrated technology systems to optimize productivity and procurement.
Laird maximizes earnings per jobsite through a full lifecycle approach. Laird initially provides the temporary
power, continues with the permanent electrical installation, follows up with ongoing instrumentation and
control calibration, and performs long-term maintenance and upgrades. Laird Constructors also provides
mechanical installation and service.
IHI uses leading-edge technology and equipment to conform to any project specification, maintains full
fabrication facilities served by experienced technical professionals, and uses systems and programs to
ensure that all projects are completed safely, on-budget, and in conformance with regulatory requirements.
Broda uses its in-house repair shop to ensure high-quality equipment maintenance and to drive high
reliability and availability of equipment. It has a large major components and parts inventory to improve
service turnarounds. And it uses mobile-maintenance and repair vehicles to support onsite maintenance.
5
The ChurChill CorporaTion Five 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 Churchill’s 2011 Management’s
Discussion & Analysis, and Consolidated Financial Statements and Notes.
($ thousands, except share and
per share data and percentages)
INCOME STATEMENT DATA
Contract revenue
Contract income
Contract income margin (%)
Earnings before interest, tax
depreciation and amortization (EBITDA)
Interest expense
Depreciation and amortization expense
Earnings before taxes
Net earnings from continuing operations
Net earnings
BALANCE SHEET DATA
Working capital
Shareholders’ equity
Convertible debentures (excluding equity portion)
Long-term debt (excluding current portion)
$
PER COMMON SHARE DATA
Net earnings per common share:
Basic from continuing operations
Diluted from continuing operations
Basic
Diluted
Dividends declared
Book value per share
OTHER DATA
Price to earnings multiple (12 month trailing)
Return on average shareholders’ equity (ROE)
Total shareholder return
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
Years ended December 31
2011
2010
2009 (1)
2008 (1)
2007
(1)
$
1,409,159
157,940
11.2%
$ 1,183,876 $
144,360
12.2%
760,953
93,879
12.3%
$ 694,021
63,218
9.1%
72,044
12,493
26,924
32,627
24,109
24,942
86,020
309,141
76,691
60,433
0.99
0.91
1.02
0.94
0.36
12.70
$
$
71,812
7,498
15,111
49,203
33,125
34,234
97,801
289,348
74,454
74,112
1.60
1.50
1.66
1.55
–
11.99
$
$
$
601,241 $
91,951
15.3%
51,322
240
4,435
46,647
33,479
34,817
56,186
491
4,089
51,606
35,591
36,443
$
$
105,202 $
140,870
–
641
61,995
105,573
–
6,787
1.90 $
1.87
1.98
1.94
–
8.00
1.98
1.96
2.03
2.01
–
5.92
33,883
665
2,808
30,410
20,682
21,126
35,180
69,678
–
8,755
1.17
1.15
1.19
1.17
–
3.90
11.2
8%
(36%)
1,842,580
12.9
16%
(5%)
$ 1,555,034
9.8
28%
168%
3.5
42%
(68%)
$ 1,388,624 $ 1,390,273
19.1
36%
275%
$ 1,333,655
$
24,245,025
32,445,550
20,643,343
23,839,350
17,620,454
17,935,551
17,928,037
18,109,979
17,730,644
17,995,235
24,348,919
32,500,544
24,133,727
28,395,427
17,619,259
18,832,502
17,822,091
18,099,626
17,886,991
18,204,491
14,177,929
19,809,454
15,729,284
20,315,900
19,195,481
$
$
20.79
10.01
11.43
$
22.00
16.32
18.29
$
20.94
6.33
19.27
$
24.49
4.45
7.19
29.90
5.11
22.50
(1) Amounts for years prior to 2010, except 2009 balance sheet data, are presented as per previous Canadian GAAP prior to the adoption of IFRS. They
may not be directly comparable to the amounts reported under IFRS in 2010 and later. Amounts for years prior to 2010 are also reported on a continuing
operations basis.
6
The ChurChill CorporaTion
Measuring our performance
Key performance indicators
Revenue provides an indication of Churchill’s ability to grow its overall
business. Backlog is an indicator of future revenue and earnings sources.
EBITDA and EBITDA margin measure profitability of operations. Earnings
and earnings per share (EPS) measure the bottom-line profit. Churchill is
positioned for gradual improvement in 2012 as the factors that caused
EBITDA margin and net earnings declines in 2011 have been dealt with.
1. REVENUE
19% rEvENuE growTh IN 2011
24% fIvE-yEAr CompouND AvErAgE growTh
2. BACKLOG
$ millions
694.0
761.0
601.2
1,183.9
1,409.2
$ millions
1,333.7
1,390.3
1,388.6
1,555.0
1,842.6
Growth
45%
10%
-21%
97%
19%
Growth
23%
4%
0%
12%
18%
In 2011 the general Contracting segment increased
Churchill’s five-year revenue growth was primarily
revenue by $89.8 million or 11%, the Commercial
attributable to the acquisition of Dominion, Canem and
Systems segment increased revenue by $109.5
Broda in July 2010, to organic growth at Stuart olson
million or 132%, and the Industrial Services segment
Dominion, Laird and Insulation holdings, and to the
increased revenue by $65.8 million or 22%.
acquisition of mcCaine Electric in April 2011.
18% BACkLog growTh IN 2011
Low ovErALL CoNTrACT rISk wITh upSIDE
The General Contracting segment increased its
The 2011 year-end backlog consists of 83%
year-end 2011 backlog by $193.7 million or 15% over
construction management, cost-plus and other
year-end 2010, the Commercial Systems segment
relatively low-risk contracts, and 17% fixed-price,
increased its backlog by $5.9 million or 5%, and the
guaranteed maximum price or other contracts that
Industrial Services segment increased its backlog by
carry price and schedule risk. Self-performed work
$88.0 million or 50%.
provides upside to margins and opportunities to
further reduce project risk.
3. EBITDA
EBITDA rEmAINS fLAT IN 2011
grADuAL ImprovEmENT forESEEN IN 2012
$ millions
33.9
Margin
4.9%
56.2
51.3
71.8
72.0
7.4%
8.5%
6.1%
5.1%
EBITDA increases in 2011 from the Commercial
general Contracting (Stuart olson Dominion) expects
Systems and Industrial Services segments were
to gradually improve its margins in 2012 as lower-
driven by organic growth, the inclusion of Canem and
margin Dominion backlog and projects secured in the
Broda for a full year in 2011 versus 5½ months in
more competitive late 2008 through early 2010 period
2010, and the addition of mcCaine Electric to Canem’s
are replaced by higher-margin projects procured in
operations in May 2011. These were largely offset by
late 2010 and 2011.
a decline in general Contracting’s EBITDA.
4. NET EARNINGS
2011 NET EArNINgS DECLINE
BASIC EArNINgS pEr ShArE
$ millions
21.1
Basic EPS
$1.19
36.4
34.8
34.2
24.9
$2.03
$1.98
$1.66
$1.02
Net earnings declined in 2011 as increases in interest,
The reduction in basic earnings per share in 2011 was
depreciation and amortization, associated mainly
driven by reduced earnings and a higher weighted-
with the acquisitions of Dominion, Canem, Broda and
average number of shares outstanding, associated
McCaine in 2010 and 2011, exceeded the benefit of
with the equity raised to finance the 2010 acquisitions.
lower taxes.
07
08
09
10
11
07
08
09
10
11
07
08
09
10
11
07
08
09
10
11
7
The ChurChill CorporaTion
O P E R A T I O N S R E V I E W
Expanding our footprint
(Above) Artist’s rendering of Investors Group Field
in Winnipeg, Manitoba. (L to R) British Columbia
Institute of Technology and two IHI projects in
northern Alberta.
At a glance
In 2011 our Commercial Systems segment, Canem, expanded its footprint into Manitoba
with the purchase of McCaine Electric. In our Industrial Services segment, Broda expanded
its earth-moving business into Alberta with the Calgary Airport Authority’s New Runway
Development Program and the construction of the City of Calgary’s tunnel under the
new runway, and Laird established Laird Constructors in Sudbury, Ontario. As well, Stuart
Olson Dominion, our General Contracting segment, gained a foothold in the industrial
construction market through its new industrial division.
Overview
Churchill is well-positioned in Western Canada. Stuart Olson Dominion announced backlog
additions of nearly $1 billion in 2011. Its margins are expected to gradually improve in the
second half of 2012 as it transitions from lower-margin legacy Dominion backlog and projects
procured in the more competitive environment of late 2008 to early 2010, to higher-margin
projects recently added to backlog. Canem maintained strong margins throughout 2011 and
is expected to continue to do so in 2012. Its April 2011 acquisition of McCaine was immediately
accretive. In the Industrial Services segment, Laird and IHI had another strong year as
turnaround and maintenance work, largely in Alberta’s oil sands, replaced the construction
and commissioning work of 2010. Recent backlog additions, including bundled service
offerings, signal a strong start to 2012. Broda, after a slow first half due to wet weather, had
a strong finish in 2011 and its two Calgary Airport projects provide revenue and earnings
visibility into 2012.
8
The ChurChill CorporaTion Major contracts across
Western Canada
Ongoing
Projects
New
Projects
General Contracting
Commercial Systems
Industrial Services
Fort St. John
Whitecourt
Fort McMurray
McArthur River
Prince George
St. Albert
Edson
Edmonton
Prince Albert
Nanaimo
Vancouver
Kamloops
Canmore
Red Deer
Victoria
Langley
Kelowna
Cranbrook
Calgary
Lethbridge
Vanscoy
Swift Current
Medicine
Hat
Warman
Saskatoon
Regina Rocanville
Estevan
Brandon Winnipeg
Sudbury
2011 Contract awards announced
Segment
Company
General
Contracting
Stuart
Olson
Dominion
Approx.
Value
($ millions)
$
Description
Location
145
98
85
85
60
45
35
30
26
21
17
13
10
162
30
18
11
80
67
50
40
12
Medicine Hat hospital
745 Thurlow office tower
Edson hospital
Lethbridge hospital
Taché Hall Music, Art and Theatre Complex
Emerald Hills shopping development
Investors Group Field scope increase
Westmount 4 office building
Assiniboine Zoo Exhibit
Warman Middle School & Recreation Centre
Oil sands industrial building
Oil sands industrial building
Potash mine building
Other
Shaw Data Centre
Investors Group Field electrical
443 Maritime Helicopter Squadron facility
Oil sands facility turnaround maintenance
Other
Mine construction
Calgary Airport new runway projects
Other
Medicine Hat, Alberta
Vancouver, British Columbia
Edson, Alberta
Lethbridge, Alberta
Winnipeg, Manitoba
Sherwood Park, Alberta
Winnipeg, Manitoba
Calgary, Alberta
Winnipeg, Manitoba
Warman, Saskatchewan
Ft. McMurray, Alberta
Ft. McMurray, Alberta
Rocanville, Saskatchewan
Calgary, Alberta
Winnipeg, Manitoba
Victoria, British Columbia
Ft. McMurray, Alberta
Sudbury, Ontario
Calgary, Alberta
9
Commercial
Systems
Industrial
Services
Canem
$
Laird Electric & IHI
$
Laird Constructors
Broda
$ 1,140
The ChurChill CorporaTion
O P E R A T I N G S E G M E N T S
General Contracting
(Above) Artist’s rendering of new Jasper Place Library,
Edmonton, Alberta. (L to R) Terwillegar Community
Recreation Centre, Edmonton, Alberta and The
Fenlands Banff Recreation Centre, Banff, Alberta.
At a glance
Stuart Olson Dominion is Churchill’s General Contracting segment. Following the acquisition of The
Dominion Company Inc. in July 2010, Stuart Olson Constructors Inc. and Dominion were operationally
combined. Stuart Olson and Dominion had been general contractors since 1939 and 1911, respectively,
and during the last several years both became key players in Western Canada’s building markets.
Headquartered in Calgary, Alberta, the combined Stuart Olson Dominion constructs commercial,
institutional and industrial buildings.
Business drivers
Stuart Olson Dominion has a solid market presence
across the four provinces of Western Canada with strong
customer relationships in the institutional and commercial
construction sectors. Stuart Olson Dominion’s $1.4
billion year-end 2011 backlog consists largely of low-risk
construction management projects. Two-thirds of the
backlog is institutional contracts, with the balance being
primarily commercial buildings. For 2012, the institutional
spending outlook in Western Canada remains healthy,
partly due to expected provincial and municipal
government spending on institutional projects such as
Building momentum
Stuart Olson Dominion focuses
its marketing activities on large
relationship-based construction
management projects that meet
acceptable return thresholds
and offer higher margin, fee-
enhancing opportunities. It has
also established an industrial
hospitals, schools and community centres. For example,
sector presence for building
the Alberta government’s fiscal 2013 budget includes
$5.7 billion for infrastructure-related projects. The
municipal, transportation, education, and healthcare
sectors continue to dominate provincial infrastructure
spending, accounting for 84% of spending in this
category, compared to 89% in 2010.
construction. Stuart Olson
Dominion’s contract income is
expected to grow modestly in the
second half of 2012 as projects
in backlog procured during
2010 and 2011 are expected to
generate higher margins.
10
The ChurChill CorporaTion O P E R A T I N G S E G M E N T S
Commercial Systems
Port Nanaimo Centre, Nanaimo, BC.
At a glance
Canem forms our Commercial Systems segment. It
designs, builds, maintains and services electrical and data
communication systems for commercial, institutional, light
industrial and multi-family residential customers. Canem’s
Building momentum
Canem has developed considerable
services include the design of internal electrical distribution
expertise in sustainable buildings and
systems, procurement and installation of electrical
energy efficiency and in 2010 launched its
equipment and materials, on-call service for electrical
maintenance and troubleshooting, preventative and
scheduled maintenance for critical component installations,
budgeting and pre-construction services, and management
of regional and national contracts for multi-site installations.
Business drivers
Canem, like Stuart Olson Dominion, competes
for business in the institutional and commercial
construction sectors, so business drivers for the two
companies are similar. The primary difference is that,
while Stuart Olson Dominion works principally for
Smart Connected Real Estate Program.
One product of this program is the
Canem Centre for Building Performance
in Richmond, British Columbia. It
opened in the summer of 2011 as a
permanent training and testing facility
for integrated building systems, with the
goal of encouraging building owners and
developers to adopt new efficiencies and
performance in building systems. As well,
Canem’s Rollout Services strategy is gaining
project owners, Canem’s clients are mainly general
traction, providing clients with rapid service
contractors, including Stuart Olson Dominion and
delivery in multiple locations with a similar
many of its competitors. Thus, an important factor in
Canem’s success is its positive reputation with the
general contracting community. Canem keeps its
contract income margins strong by gaining efficiency
from prefabricating work offsite, employing the best
people with the best tools, and differentiating itself
from competitors with building systems integration
solutions to support its core operations. This has
allowed Canem to consistently generate double-digit
EBITDA margins year after year.
scope. With multiple installations going
on in different regions at any one time,
Canem’s rollout team serves to ensure that
solutions are communicated seamlessly and
delivered with maximum efficiency. In turn,
clients attain the best possible consistency
in their product delivery.
11
The ChurChill CorporaTion O P E R A T I N G S E G M E N T S
Industrial Services
(Above) Calgary Airport New Runway, Calgary, Alberta.
(L to R) Northern Industrial Insulation workers installing a pre-insulated
tank panel system in northern Alberta and Laird Electric workers installing
an electrical distribution line in northern Alberta.
At a glance
Laird Electric, Laird Constructors, Insulation Holdings and Broda make up Churchill’s Industrial Services
segment. Together they provide electrical construction, mechanical construction, insulation services, siding
application, HVAC services, plant maintenance services,
aggregate processing, earthworks, civil construction,
concrete production and related services. They serve oil
sands companies, the oil and natural gas industry, mining
and infrastructure organizations, the petrochemical, forest
products, power utilities and mining industries, and
Canada’s two major railways.
Business drivers
Our Industrial Services companies performed well
throughout 2011. Their success is largely driven by their
reputation for safety, efficiency and quality, which makes
them the preferred suppliers on many projects. Going
Building Momentum
On January 1, 2012, The Churchill
Services Group (CSG) began
operating under the leadership of
David LeMay, the former President
and COO of Laird Electric Inc. CSG
combines the services of Churchill’s
Industrial Services segment and
Stuart Olson Dominion’s industrial
forward, they are expecting continued modest revenue
building activities into one powerful
and earnings growth in 2012 with large, sustainable
industrial project spending and increased major
project activity. Numerous construction project restarts,
sanctioning announcements and planned maintenance
projects make this segment’s outlook positive. While
Broda’s first quarter will likely show some seasonal
weakness, Broda expects to sustain its strong performance
service offering. The effectiveness
of this approach was recently
demonstrated with an $80 million
two-year turnaround maintenance
contract with a large oil sands
client jointly awarded to Laird and
through numerous project opportunities in Saskatchewan’s
Insulation Holdings.
industrial and mining markets, plus continuing work on the
Calgary airport runway and tunnel projects.
12
The ChurChill CorporaTion Corporate & Shareholder Information
Officers
Directors
Executive Offices
James Houck, B.Sc., MBA
President and Chief Executive Officer
Albrecht W.A. Bellstedt, B.A., J.D., Q.C.
Chair
Daryl Sands, B.Comm., CA
Executive Vice President, Finance and
Chief Financial Officer
Don Pearson, B.Sc., P.Eng.
President and Chief Operating Officer
Stuart Olson Dominion Construction Ltd.
Gord Broda
President and Chief Operating Officer
Broda Construction Inc.
David LeMay, MBA
President
Churchill Services Group
Al Miller
President
Canem Systems Ltd.
Andrew Apedoe, B.Comm.
Vice President, Investor Relations and
Corporate Secretary
Joette Decore, BSc., MBA
Vice President, Corporate Development
Amy Gaucher, B.Comm., CA
Vice President, Finance and
Administration
Jack Jenkins, B.Sc., MBA
Vice President, Human Resources and
Strategic Planning
Evan Johnston, L.L.B., CFA
Vice President and General Counsel
Barrie Stanton, B.A.
Vice President, Business Applications and
Information Technology
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
Principal Bank
HSBC Bank Canada
Bonding and Insurance
Aon Reed Stenhouse Inc.
CNA Financial Corporation
Travelers Guarantee Company
Wendy L. Hanrahan, CA (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
Registrars and Transfer Agents
Inquiries regarding change of address, registered holdings, transfers, duplicate
mailings and lost certificates should be directed to:
Common Shares:
Convertible Debentures:
CIBC Mellon Trust Company
600 The Dome Tower
333 – 7th Avenue SW
Calgary, Alberta T2P 2Z1
Phone: 403 232-2400
403 264-2100
Fax:
Email: inquiries@cibcmellon.ca
Website: www.cibcmellon.ca
Answerline: 1-800-387-0825
Notice of Annual Meeting
Valiant Trust Company
Suite 310, 606 – 4th Street SW
Calgary, Alberta T2P 1T1
Phone: 403 233-2801
Fax:
403 233-2857
Email: inquiries@valianttrust.com
Website: www.valianttrust.com
Toll-free: 1-866-313-1872
The Annual General Meeting will be held on May 24 at 2:00 p.m. MDT
at the Edmonton Petroleum Club, 11110 – 108 Street, Edmonton, Alberta.
Fort St. John Hospital
Fort St. John, British Columbia
Edmonton Remand Centre
Edmonton, Alberta
Key Projects
Calgary Airport New Runway
Calgary, Alberta
400, 4954 Richard Road SW
Calgary, AB T3E 6L1
Phone: 403 685-7777
Fax: 403 685-7770
www.churchillcorporation.com
Investors Group Field Football Stadium
Winnipeg, Manitoba