PETER F. ADAMS – THE CHURCHILL CORPORATION (CUQ:TSX)
CEO Interview - published 09/15/2008

PETER F. ADAMS, President and CEO of the Churchill Corporation since January 21, 
2007. He has been Chairman of the Board from May 2002 to August 2008, and a 
Director since May 20, 1993. Prior to his appointment at the Churchill 
Corporation, Dr. Adams was the President and CEO of the Canadian Petroleum 
Institute from 1993 to 2002; having previously served as the Dean of Engineering 
at the University of Alberta and as President of the Centre for Frontier 
Engineering. 

SECTOR –  ENGINEERING & CONSTRUCTION

TWST: May we start with a brief history of your company and would you slice your 
business segments on a reporting basis?

Dr. Adams: The Churchill Corporation has been in existence since the early 
1980s, starting out as a diversified investment and holding company. Its 
principal business activities were corporate investment, real estate development 
and financial advisory services. In the late 1980s, it began to focus on its 
construction companies and at that time it owned Stuart Olson, which is a 
commercial and institutional general contractor; Triton Projects, a general 
mechanical contractor; and Insulation Holdings, the parent company of Fuller 
Austin Insulation (unionized) and Northern Industrial Insulation (non-union). 
Over the course of the 1990s and early 2000s, Churchill divested itself of all 
but its construction companies and in 2003 added Laird Electric to its suite of 
companies. 
Stuart Olson generates approximately 80% of its business in Alberta and 20% of 
its business in British Columbia. It specializes in social infrastructure; 
building facilities such as hospitals, schools, recreation centers, food 
processing and distribution centers. These types of projects are more 
challenging than your traditional retail center or office tower, as they involve 
complex heating, ventilation and mechanical systems to handle various medical 
gases, water and humidity variations and freezing facilities. The three 
industrial businesses — the mechanical, electrical and insulation companies — 
operate almost entirely in the in-situ (heavy oil) and oil sands mining 
operations of Northern Alberta. They also provide services to the mining sector, 
the power generation sector and a tiny bit in the forestry sector every year, 
but basically we are focused in the oil sands and heavy oil area. Right now, 
that's our strength; if that market were to slow down, it could be our weakness 
too.

TWST: Would you comment on the ownership and the business prospects for Stuart 
Olson? Is government your major customer?

Dr. Adams: All of our companies are 100% wholly owned subsidiaries. For Stuart 
Olson, government and quasi-government institutions are our major clients, 
providing 70% of revenue while the remaining 30% is split among various private 
sector organizations. Going forward, as long as the oil sands and conventional 
energy sector continue to drive this province, there will be continued 
investment in the infrastructure by the government. Oil and gas extraction and 
related activities accounted for 25% of Alberta's GDP in 2006. The government 
utilizes the resource royalties collected from the energy sector and uses them 
to fund social infrastructure projects in health care, education and 
transportation. So we believe the prospects for Stuart Olson are excellent going 
forward. 

TWST: How do you see the overall outlook for infrastructure spending in the 
areas that you operate?

Dr. Adams: The forecast for infrastructure spending in Alberta is approximately 
$22 billion during the years of 2008 to 2011, British Columbia is forecast to 
spend $17 billion and the federal government has committed to invest $33 billion 
from 2007 through to 2014. In total, funding for infrastructure projects across 
Canada is expected to reach over $80 billion per year to 2014. Oil sands capital 
expenditures are expected to contribute an additional $15 to $20 billion 
annually over the same time period. As a result, we think the construction 
market is going to be healthy for quite some time.

TWST: In terms of credit availability, is Canada impacted as much as the United 
States?

Dr. Adams: Our financial institutions, while participants in the global credit 
market, have been reasonably unscathed. Our lending practices in Canada are much 
stricter than in the US. Combined, our national banks have written off about $11 
billion dollars due to the credit crisis, which is only a fraction of the global 
or US write-offs. From a Western Canada perspective, our economy continues to be 
robust as we supply energy to the world and our governments run budget 
surpluses.

TWST: Would you comment on who some of your key customers are, some of your key 
projects?

Dr. Adams: At Stuart Olson, we are currently working on a large project for 
Alberta Infrastructure to build a $600 million jail (remand center) in northwest 
Edmonton. Also, we just completed a parkade expansion project for the Edmonton 
Airport Authority, I am proud to say ahead of schedule and under budget. 
Additionally, in Calgary we recently turned over a new student residence 
building to the Southern Alberta Institute of Technology and we are building a 
veterinary school for the University of Calgary and expanding facilities at the 
Peter Lougheed Hospital. We have a high profile job for the Vancouver 2010 
Winter Olympic Games, constructing the Hillcrest Curling venue, plus numerous 
other projects in cities like Red Deer, Lethbridge and Fort McMurray. 
In our industrial businesses, it's primarily in the in-situ and oil sands mining 
areas that we are active, sites like Syncrude and Suncor Opti-Nexen, Albian 
Sands and CNRL's Horizon project. In addition, we work for petrochemical and 
pipeline companies such as Petro-Canada, Imperial Oil, Enbridge, and TransCanada 
Pipelines. Almost every major player in the business has made use of our 
services at one time or another.

TWST: Would the fact that your company specializes in projects that are more 
complex be a differentiating factor as far as your competition is concerned? 
What is the competitive environment?

Dr. Adams: Yes, I think that having those kinds of projects makes it more 
interesting for our people, challenging them and enabling them to develop new 
skills. When I am speaking of those kinds of projects, I am speaking primarily 
of Stuart Olson and this would be the commercial, institutional projects. In 
terms of competition, Stuart Olson ranks among the top 10 general contractors in 
Canada based on revenue. However there are several large and very capable 
national competitors in this area. We differentiate ourselves in terms of 
process, methodology, client and subcontractor management. Our objective is to 
deliver value-added construction services by having everyone aligned and focused 
on delivering more than the client expects, under budget and on time. Stuart 
Olson seldom bids for a project — they are often invited to propose their fee to 
complete a project — so they are very fortunate in that regard.

TWST: What element in your company would make you so adept for these complex 
projects?

Dr. Adams: I think it's primarily the fact that Stuart Olson has a track record 
of previous success on these types of projects, very strong systems, has a great 
management team in place, and excellent relationships with capable 
subcontractors. Our industrial companies are able to succeed on the complex oil 
sands projects for the same reasons, except in these businesses we either self-
perform the work with our own staff or utilize skilled trades people from the 
union hall. 

TWST: How would you break down the revenue from the segments of your company 
that you have mentioned?

Dr. Adams: Stuart Olson contributes about 70% of our revenue and 80% of our 
earnings. The industrial businesses contribute 30% and 20% respectively. The 
industrial percentage will be growing as we have turned the corner in a 
revitalization plan at Triton and it is now growing its volume and contributing 
earnings to the bottom line.
Of our total revenue, 80% comes through the province of Alberta, 17% from 
British Columbia and the remainder from Saskatchewan and Northern Ontario. 

TWST: Has the development of the oil sands lived up to expectations?

Dr. Adams: In terms of producing work for our companies, it absolutely has. We 
don't see an end to the projects in the oil sands. We certainly are aware of the 
challenges involved in their development including the carbon sequestration, 
water usage and ensuring that Albertans receive a fair share, but none of these 
should derail the projects. We believe the overwhelming need in North America 
for petroleum products during our lifetimes will be high and that the oil sands 
provide a tremendous resource to satisfy those needs. The industry from the 
owners down to the contractors and suppliers are trying to find ways to manage 
these mega-projects more effectively with reduced impact on our environment. 
It's a challenge but one that the industry is doing its best to overcome.

TWST: Would you comment on the opportunities that lie ahead for you and your 
strategy for success?

Dr. Adams: Frankly, the oil sands and in situ projects provide a huge oil 
reserve and an opportunity for the development of a secure North American energy 
supply. Our legal and political frameworks are congruent, we sit in close 
proximity to your country. Large capacity pipelines are being developed to 
deliver the petroleum products to the United States, some of it to be refined 
there and some as finished products. We believe that Canada and Alberta can 
provide the US with a pretty stable supply of oil for a long time to come. 
So given that, we expect the kind of activity we see now to continue and in fact 
probably ramp up and so we think our companies are extremely well positioned 
both in terms of the industrial markets and then through the royalty revenues 
received by the governments that will be spent on our infrastructure market.

TWST: Do you expect your business mix to pretty much remain the same?

Dr. Adams: No, we have put in place a strategy now that will substantially 
increase our revenues to $1.6 billion in three to four years time from $736 
million in 2007, achieve $90 million in earnings before tax, improve our pre-tax 
profit margins and grow shareholder value. While this will mainly by achieved by 
internal growth, we also have in mind some acquisitions to strengthen the 
industrial side of our operation and growth in the Stuart Olson side of the 
business to provide some geographic and/or industry diversity.

TWST: What business challenges are you looking out for?

Dr. Adams: The ongoing challenge in our market is to recruit and retain good 
people. We are very fortunate in our company with the large number of mature 
workers we have and the people who have been with us for a long time. However, 
we have to retain those people, we have to treat them well and one of our 
strategic thrusts going forward is to improve our human resources activities and 
programs and to enhance our reputation as a preferred place to work for the 
people in this industry. 
Our primary need is for competent project managers and site superintendents, so 
we are always on the lookout for good people at that level in the company. We 
are aware of the fact that as we grow, we need to have the systems and processes 
in place that will enable us to achieve our targets.

TWST: Would you be more specific as to how you intend to draw new talent?

Dr. Adams: We are doing everything we can. We participate in programs to hire 
bright, young people from the technical institutes and universities. We recruit 
for key people who might be available in less active regions of Canada and try 
to bring them out here, and we have been successful in recruiting people from 
offshore who have the competencies that we need. I don't think there is any one 
silver bullet but we are trying everything we can to retain and attract the best 
people.

TWST: What about the key members of your management team? Would you comment on 
their expertise, including your own?

Dr. Adams: We have four operating companies that operate to a large extent, 
independently. In Stuart Olson, we have the President of that company and three 
Vice Presidents. The President has been with us for more than 20 years. He has 
grown up in the company, runs a tight ship, is very competent and a leader in 
the industry. His three Vice Presidents also have substantial experience. We've 
just promoted an internal candidate in British Columbia to replace a man who had 
retired after more than 30 years' experience with us. So as you can see we have 
a pretty stable environment. 
The leader of our insulation companies has been with us for 37 years. He has 
three Vice Presidents who have also been with us for more than 10 years — again, 
large numbers of long-term, stable employees in those companies. At Laird 
Electric, which has been in the Fort McMurray market for over 40 years, our 
President recently retired and we've appointed a seasoned executive there to 
carry forward our growth plans. Again, many of our people have been in the Fort 
McMurray area for a long time, enjoy living in the community and working for 
Laird. 
We had some difficult years at Triton three or four years ago and decided to 
make a management change there in August 2006. Since then, internally they have 
changed the project management personnel two or three levels down. The company 
broke even in their first year together and this year they are well in the 
black. We are looking forward to continued growth and profitability. So we think 
we've got great teams in place in the four operating companies. 
Churchill serves as a management company. We provide strategic leadership, the 
public company face and shared services such as information technology, treasury 
etc. I have been associated with Churchill since 1993 as a Director. I served as 
Chairman of the company from 2003 to until just recently and Interim CEO for the 
past 18 months. To facilitate the process of making that latter appointment more 
permanent and to separate the Chairman and the CEO's role, another member of our 
Board has taken over as the Chairman of the company and that's just occurred in 
the last several weeks.

TWST: How does the balance sheet look to you?

Dr. Adams: Our balance sheet is very strong. We have virtually no long-term 
debt. We have $60 million of working capital and a cash position of $75 million 
dollars. We have not raised equity since 2005. We need a strong balance sheet 
because we require bonding capacity for Stuart Olson and to fund the working 
capital needs of our industrial businesses. While some of this cash is surplus 
from an operational perspective, we must maintain it to support our backlog of 
$1.3 billion.

TWST: Do you believe your company is as well understood as you would like it to 
be in the financial markets and the investor community?

Dr. Adams: Not as well as we would like. I think that the four operating 
companies are well known among customers in their respective market segments, 
but that Churchill itself as a public company that holds these growing and 
successful businesses is not as well known. We are trying to rectify that in the 
investment community.

TWST: What programs are you going to institute to improve that aspect of your 
communications?

Dr. Adams: Most recently in the last year or so we have expanded our investor 
relations program. We have been able to increase our following among the 
investment dealers to the point that we have six analysts who cover us with 
another two in the pipeline. We have adopted a pretty rigorous schedule of road 
trips to meet one-on-one with institutional investors and participate in 
conferences where appropriate. In addition, we have committed to providing more 
regular business updates to the investment community so we remain top of mind. 
Those are the kinds of programs we're actively engaged in for now.

TWST: What are the key milestones that investors should use to judge you?

Dr. Adams: Our focus is on profitable execution of projects and correspondingly 
this translates into greater EBITDA and earnings per share. Our strong backlog 
of work provides excellent visibility as to the sustainability of performance 
and potential for further revenue growth. I think those are some of the key 
areas that people might want to keep an eye on. Over the last two and a half 
years we have had record quarters on a year-over-year basis. So I hope our 
record, which has been very good, will motivate investors to take a closer look 
at our company.

TWST: Is there anything you would like to add?

Dr. Adams: I believe that we have the right companies in the right places at the 
right time. We are on the verge of some pretty exciting years.

TWST: Thank you. (WT)

PETER F. ADAMS
President & CEO
The Churchill Corporation
11825-149 Street
Edmonton, Alberta T5L 2J1
Canada
(780) 454-3667
(780) 488-0194 - FAX
www.churchillcorporation.com
e-mail:inquiries@churchill-cuq.com

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