##### 



Exhibit 3
 STANTEC INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS
  CONSOLIDATED FINANCIAL STATEMENTS




---



##### 



STANTEC INC.
Table of Contents
 MANAGEMENTS DISCUSSION AND ANALYSIS
    
    PageCaution Regarding Forward-Looking Statements
    
    M-3Vision, Core Business, and Strategy
    
    M-4Key Performance Drivers and Capabilities
    
    M-6Results
    
    M-8Overall performance
    
    M-8Acquisitions
    
    M-10Selected annual information
    
    M-10Results of operations
    
    M-11Quarterly trends and fourth quarter results
    
    M-17Liquidity and capital resources
    
    M-18Other
    
    M-22Outlook
    
    M-23Critical Accounting Estimates, Developments, and Measures
    
    M-25Risk Factors
    
    M-29Corporate Governance
    
    M-38CONSOLIDATED FINANCIAL STATEMENTSManagement Report
    
    F-1Auditors Report
    
    F-2Consolidated Balance Sheets
    
    F-3Consolidated Statements of Income and Retained Earnings
    
    F-4Consolidated Statements of Cash Flows
    
    F-5Notes to the Consolidated Financial Statements
    
    F-6
 M-2




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
  CAUTION REGARDING FORWARD-LOOKING STATEMENTS
     M-3




---



##### 



VISION, CORE BUSINESS, AND STRATEGY
      Geographic Diversification
  M-4




---



##### 



Practice Area Specialization
  Buildings.
 Environment
 Industrial & Project Management.
 Transportation.
 M-5




---



##### 



Urban Land.
  Life Cycle Solutions
  KEY PERFORMANCE DRIVERS AND CAPABILITIES
  People
  M-6




---



##### 



Market Opportunities/Acquisition and Integration
 Engineering News Record
  M-7




---



##### 



Financing
  Market Penetration
  RESULTS
 Overall Performance
 Highlights for 2005
  2005
    
    
    2004
    
    
    $ Change
    
    
    % Change(In millions of Canadian dollars,except per share amounts)Gross revenue
    
    
    618.0
    
    
    
    520.9
    
    
    
    97.1
    
    
    
    18.6
    %Net income
    
    
    40.6
    
    
    
    30.2
    
    
    
    10.4
    
    
    
    34.6
    %Earnings per
share  basic
    
    
    2.04
    
    
    
    1.63
    
    
    
    0.41
    
    
    
    25.2
    %Earnings per
share  diluted
    
    
    1.98
    
    
    
    1.59
    
    
    
    0.39
    
    
    
    24.5
    %Cash flows from operating activities
    
    
    57.3
    
    
    
    77.4
    
    
    
    (20.1
    )
    
    
    n/aCash flows used in investing activities
    
    
    (114.6
    )
    
    
    (10.2
    )
    
    
    (104.4
    )
    
    
    n/aCash flows from (used in) financing
activities
    
    
    47.9
    
    
    
    (36.0
    )
    
    
    83.9
    
    
    
    n/a
 M-8




---



##### 



Measure
    

Expected Range
    
    Result AchievedDebt to equity ratio [note 1]
    
    At or below 0.5 to 1
    
    
    0.17
    
    
    *Return on equity [note 2]
    
    At or above 14%
    
    
    16.0
    %
    
    *Net income as % of net revenue
    
    At or above 5%
    
    
    7.7
    %
    
    *Gross margin as % of net revenue
    
    Between 53 and 55%
    
    
    55.3
    %
    

üAdministrative and marketing expensesas % of net revenue
    
    Between 40 and 42%
    
    
    40.5
    %
    
    *Effective income tax rate
    
    Between 33 and 35%
    
    
    35.0
    %
    
    *
 
 note 1: Debt to equity ratio is calculated as the sum of (1) long-term debt, including current
portion, plus bank indebtedness, minus cash divided by (2) shareholders equity.note 2: Return on equity is calculated as net income for the year divided by average shareholders equity over each
of the last four quarters.ü
    
    Exceeded target*
    
    Met targetx
    
    Did not meet target  
    
    Growth by acquisition.In 2005 the acquisition and integration of CPV Group
Architects & Engineers Ltd. (CPV), The Keith Companies, Inc. (Keith), and Keen Engineering
Co. Ltd. (Keen) contributed to our growth by adding 1,160 employees and increasing the
depth and breadth of our services in both Canada and the United States. Our cash used in
investing activities increased in 2005 due to the consideration paid for these three
acquisitions. The integration of these businesses in 2006 will further strengthen our
existing complement of professional staff and client base.
    
    Internal growth.In addition to acquisition activities, internal growth contributed
to the above increase in gross revenue and net income. Of the $97.1 million increase in
gross revenue during 2005, $22.8 million was attributable to organic internal growth.
    
    New York Stock Exchange listing.During the third quarter, we began trading our
common shares on the New York Stock Exchange (NYSE) under the symbol SXC in addition to
trading through our existing TSX listing of STN. We believe our new listing gives us
exposure to a larger capital base and the opportunity to increase our revenue by
strengthening our brand recognition in the United States and enhances our ability to
attract acquisition opportunities.
    
    Credit facility.During the third quarter of 2005, we replaced our existing credit
facility with a $160 million, three-year revolving credit facility to be available for
future acquisitions, working capital needs, capital expenditures, and general corporate
purposes. During the third quarter, we borrowed $95.9 million under the credit facility to
complete the Keith acquisition and repaid $16.9 million in the fourth quarter, leaving
$81.0 million available at December 31, 2005, for future activities.
    
    Flat rate disbursements.During 2005, we implemented a flat rate disbursement
practice as a means of simplifying the recovery of administrative disbursements related to
billable projects. The impact of this change contributed 1.2% to our 55.3% gross margin,
which exceeded our expected range of performance for 2005 and surpassed our 2004 gross
margin of 54.2%.
 M-9




---



##### 




    
    Tax initiatives.Through the continual upgrading of our enterprise management system
in 2005, we were able to improve the identification of billable projects that meet the
criteria for Scientific Research and Experimental Development (SR&ED) tax credits in
Canada. These SR&ED credits reduced our income taxes payable as well as our administrative
and marketing expenditures by $1.2 million in 2005. In addition, 2005 saw the introduction
of the American Jobs Creation Act, which provides a tax deduction for income from
qualified production activity in the United States, to be phased in from 2005 to 2010. We
have identified a portion of our activities in the United States that meet the definition
of qualified activities for this deduction.
 Acquisitions
  Selected Annual Information
  Selected Annual Information2005
    
    
    2004
    
    
    2003(In millions of Canadian dollars,except per share amounts)Gross revenue [note]
    
    
    618.0
    
    
    
    520.9
    
    
    
    459.9Net income
    
    
    40.6
    
    
    
    30.2
    
    
    
    25.1Earnings per share  basic
    
    
    2.04
    
    
    
    1.63
    
    
    
    1.37Earnings per share  diluted
    
    
    1.98
    
    
    
    1.59
    
    
    
    1.31Cash dividends declared per common share
    
    nil
    
    
    nil
    
    
    nilTotal assets
    
    
    628.8
    
    
    
    362.1
    
    
    
    326.6Total long-term debt
    
    
    86.7
    
    
    
    34.0
    
    
    
    44.6Outstanding common shares  as at December 31
    
    
    22,313,131
    
    
    
    18,871,085
    
    
    
    18,327,284Outstanding common shares  as at February 10, 2006
    
    
    22,509,948Outstanding share options  as at December 31
    
    
    938,264
    
    
    
    1,071,333
    
    
    
    1,479,100Outstanding share options  as at February 10, 2006
    
    
    749,611
 
 note:The term gross revenue is defined in the Critical Accounting Estimates, Developments,
and Measures section of this Managements Discussion and Analysis. M-10




---



##### 



Results of Operations
   Percentage of Net Revenue
    
    
    Percentage Increase *2005
    
    
    2004
    
    
    2003
    
    
    2005 vs. 2004
    
    
    2004 vs. 2003Gross revenue
    
    
    117.8
    %
    
    
    116.0
    %
    
    
    117.5
    %
    
    
    18.6
    %
    
    
    13.2
    %Net revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    16.8
    %
    
    
    14.8
    %Direct payroll costs
    
    
    44.7
    %
    
    
    45.8
    %
    
    
    46.9
    %
    
    
    14.1
    %
    
    
    12.0
    %Gross margin
    
    
    55.3
    %
    
    
    54.2
    %
    
    
    53.1
    %
    
    
    19.0
    %
    
    
    17.2
    %Administrative and marketing
expenses
    
    
    40.5
    %
    
    
    40.9
    %
    
    
    39.5
    %
    
    
    15.7
    %
    
    
    18.7
    %Depreciation of property and
equipment
    
    
    2.4
    %
    
    
    2.7
    %
    
    
    2.5
    %
    
    
    3.4
    %
    
    
    20.9
    %Amortization of intangible assets
    
    
    0.5
    %
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    174.2
    %
    
    
    0.2
    %Net interest expense
    
    
    0.1
    %
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    (79.6
    %)
    
    
    6.4
    %Share of income from
associated companies
    
    
    0.0
    %
    
    
    (0.1
    %)
    
    
    (0.1
    %)
    
    
    (51.4
    %)
    
    
    (33.6
    %)Foreign exchange (gains) losses
    
    
    (0.1
    %)
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    
    
    
    
    (115.3
    %)Income before income taxes
    
    
    11.9
    %
    
    
    9.9
    %
    
    
    10.1
    %
    
    
    39.9
    %
    
    
    12.7
    %Income taxes
    
    
    4.2
    %
    
    
    3.2
    %
    
    
    3.7
    %
    
    
    51.2
    %
    
    
    (0.6
    %)Net income
    
    
    7.7
    %
    
    
    6.7
    %
    
    
    6.4
    %
    
    
    34.6
    %
    
    
    20.4
    %
 
 *
    
    % Increase calculated based on the dollar change from the comparable period. M-11




---



##### 



Gross and Net Revenue
  Gross Revenue
    
    2005 vs. 2004
    
    
    2004 vs. 2003(In millions of Canadian dollars)Increase (decrease) due to:Acquisitions completed in current and prior two years
    
    
    88.1
    
    
    
    42.3Net internal growth
    
    
    22.8
    
    
    
    30.0Impact of foreign exchange rates on
revenue earned by foreign subsidiaries
    
    
    (13.8
    )
    
    
    (11.3
    )Total increase over prior year
    
    
    97.1
    
    
    
    61.0
 Net Revenue
    
    2005 vs. 2004
    
    
    2004 vs. 2003(In millions of Canadian dollars)Increase (decrease) due to:Acquisitions completed in current and prior two years
    
    
    65.2
    
    
    
    36.4Net internal growth
    
    
    22.1
    
    
    
    31.3Impact of foreign exchange rates on
revenue earned by foreign subsidiaries
    
    
    (11.9
    )
    
    
    (9.9
    )Total increase over prior year
    
    
    75.4
    
    
    
    57.8
  M-12




---



##### 



% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    % ofConsulting
    
    
    
    
    
    
    
    
    
    
    Consulting
    
    
    
    
    
    
    
    
    
    
    ConsultingServices
    
    
    % Change
    
    
    
    
    
    
    Services
    
    
    % Change
    
    
    
    
    
    
    ServicesPractice Area
    
    
    
    
    
    Gross
    
    
    2005 vs.
    
    
    
    
    
    
    Gross
    
    
    2004 vs.
    
    
    
    
    
    
    GrossGross Revenue
    
    2005
    
    
    Revenue
    
    
    2004
    
    
    2004
    
    
    Revenue
    
    
    2003
    
    
    2003
    
    
    Revenue(millions of C$)
    
    
    
    
    
    
    
    
    
    
    (millions of C$)
    
    
    
    
    
    
    
    
    
    
    (millions of C$)Environment
    
    
    104.5
    
    
    
    16.9
    %
    
    
    (0.9
    %)
    
    
    105.5
    
    
    
    20.3
    %
    
    
    14.9
    %
    
    
    91.8
    
    
    
    20.1
    %Buildings
    
    
    159.2
    
    
    
    25.8
    %
    
    
    48.1
    %
    
    
    107.5
    
    
    
    20.7
    %
    
    
    19.5
    %
    
    
    89.9
    
    
    
    19.7
    %Transportation
    
    
    92.1
    
    
    
    14.9
    %
    
    
    (0.5
    %)
    
    
    92.6
    
    
    
    17.8
    %
    
    
    15.0
    %
    
    
    80.5
    
    
    
    17.7
    %Urban Land
    
    
    208.9
    
    
    
    33.8
    %
    
    
    23.7
    %
    
    
    168.9
    
    
    
    32.5
    %
    
    
    5.6
    %
    
    
    159.9
    
    
    
    35.1
    %Industrial & Project
Management
    
    
    53.3
    
    
    
    8.6
    %
    
    
    17.4
    %
    
    
    45.4
    
    
    
    8.7
    %
    
    
    36.2
    %
    
    
    33.3
    
    
    
    7.4
    %Total Consulting Services
    
    
    618.0
    
    
    
    100.0
    %
    
    
    18.9
    %
    
    
    519.9
    
    
    
    100.0
    %
    
    
    14.1
    %
    
    
    455.4
    
    
    
    100.0
    %
  2005 Compared to 2004
    
    
    2004 Compared to 2003Change Due to
    
    
    
    
    
    
    
    
    
    
    Change Due toNet Internal
    
    
    
    
    
    
    
    
    
    
    Net InternalChange
    
    
    Growth
    
    
    
    
    
    
    Change
    
    
    Growth andPractice Area
    
    Total
    
    
    Due to
    
    
    and Foreign
    
    
    Total
    
    
    Due to
    
    
    ForeignGross Revenue
    
    Change
    
    
    Acquisitions
    
    
    Exchange
    
    
    Change
    
    
    Acquisitions
    
    
    Exchange(In millions of Canadian dollars)
    
    
    (In millions of Canadian dollars)Environment
    
    
    (1.0
    )
    
    
    8.1
    
    
    
    (9.1
    )
    
    
    13.7
    
    
    
    (0.1
    )
    
    
    13.8Buildings
    
    
    51.7
    
    
    
    43.6
    
    
    
    8.1
    
    
    
    17.6
    
    
    
    11.7
    
    
    
    5.9Transportation
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    (0.2
    )
    
    
    12.1
    
    
    
    11.4
    
    
    
    0.7Urban Land
    
    
    40.0
    
    
    
    29.2
    
    
    
    10.8
    
    
    
    9.0
    
    
    
    6.3
    
    
    
    2.7Industrial & Project
Management
    
    
    7.9
    
    
    
    7.5
    
    
    
    0.4
    
    
    
    12.1
    
    
    
    13.0
    
    
    
    (0.9
    )Total Consulting Services
    
    
    98.1
    
    
    
    88.1
    
    
    
    10.0
    
    
    
    64.5
    
    
    
    42.3
    
    
    
    22.2
  
    
    Environment: The Keith Companies, Inc. (September 2005); The Sear-Brown Group Inc.
(April 2004); and Ecological Services Group Inc. (May 2003).
    
    Buildings: Keen Engineering Co. Ltd. (October 2005); The Keith Companies, Inc.
(September 2005); CPV Group Architects & Engineers Ltd. (August 2005); GBR Architects
Limited (May 2004); Dunlop Architects Inc. (October 2004); The Sear-Brown Group, Inc.
(April 2004); and APAI Architecture Inc. and Mandalian Enterprises Limited (January 2003).
    
    Transportation: The Sear-Brown Group, Inc. (April 2004).
 M-13




---



##### 




    
    Urban Land: The Keith Companies, Inc. (September 2005) and The Sear-Brown Group, Inc.
(April 2004).
    
    Industrial & Project Management: The Keith Companies, Inc. (September 2005) and The
Sear-Brown Group, Inc. (April 2004).
       M-14
       Gross Margin
   Practice Area Gross Margin
    
    2005
    
    
    2004
    
    
    2003Environment
    
    
    56.5
    %
    
    
    55.2
    %
    
    
    53.4
    %Buildings
    
    
    55.7
    %
    
    
    53.1
    %
    
    
    53.0
    %Transportation
    
    
    56.0
    %
    
    
    56.0
    %
    
    
    52.4
    %Urban Land
    
    
    56.1
    %
    
    
    55.6
    %
    
    
    54.4
    %Industrial & Project Management
    
    
    47.6
    %
    
    
    46.4
    %
    
    
    46.7
    %
  Administrative and Marketing Expenses
   M-15
        Depreciation of Property and Equipment
  Amortization of Intangible Assets
  2005
    
    
    2004
    
    
    2003(In thousands of Canadian dollars)Amortization of client relationships
    
    
    1,050
    
    
    
    579
    
    
    
    406Amortization of backlog
    
    
    1,349
    
    
    
    239
    
    
    
    438Other
    
    
    143
    
    
    
    109
    
    
    
    81Total amortization of intangible assets
    
    
    2,542
    
    
    
    927
    
    
    
    925
  Net Interest Expense
  M-16
       Foreign Exchange Gains (Losses)
   Income Taxes
  Quarterly Trends and Fourth Quarter Results
  Quarterly Operating Results(In millions of Canadian dollars, except per share amounts)2005
    
    
    2004Dec 31
    
    
    Sep 30
    
    
    Jun 30
    
    
    Mar 31
    
    
    Dec 31
    
    
    Sep 30
    
    
    Jun 30
    
    
    Mar 31Gross revenue
    
    
    180.6
    
    
    
    146.1
    
    
    
    150.2
    
    
    
    141.1
    
    
    
    127.0
    
    
    
    139.8
    
    
    
    136.8
    
    
    
    117.3Net revenue
    
    
    151.9
    
    
    
    125.9
    
    
    
    127.7
    
    
    
    119.1
    
    
    
    107.1
    
    
    
    119.8
    
    
    
    118.7
    
    
    
    103.6Net income
    
    
    8.0
    
    
    
    12.8
    
    
    
    13.1
    
    
    
    6.7
    
    
    
    9.6
    
    
    
    8.5
    
    
    
    6.4
    
    
    
    5.7EPS  basic
    
    
    0.36
    
    
    
    0.66
    
    
    
    0.69
    
    
    
    0.36
    
    
    
    0.52
    
    
    
    0.46
    
    
    
    0.35
    
    
    
    0.31EPS  diluted
    
    
    0.35
    
    
    
    0.64
    
    
    
    0.67
    
    
    
    0.35
    
    
    
    0.50
    
    
    
    0.44
    
    
    
    0.33
    
    
    
    0.30
 The quarterly earnings per share on a basic and diluted basis are not additive and may not
equal the annual earnings per share reported. This is due to the effect of shares issued or
repurchased during the year on the weighted average number of shares. Diluted earnings per share
on a quarterly and annual basis are also affected by the change in the market price of our shares,
since we do not include in dilution options whose exercise price is not in the money.
 M-17




---



##### 



Q4 05 vs.
    
    
    Q3 05 vs.
    
    
    Q2 05 vs.
    
    
    Q1 05 vs.Q4 04
    
    
    Q3 04
    
    
    Q2 04
    
    
    Q1 04(In millions of Canadian dollars)Increase (decrease) in gross revenue due to:Acquisitions completed in
current and prior two years
    
    
    40.8
    
    
    
    9.9
    
    
    
    14.2
    
    
    
    23.2Net internal growth
    
    
    14.4
    
    
    
    0.8
    
    
    
    4.3
    
    
    
    3.3Impact of foreign exchange
rates on
revenue earned by foreign
subsidiaries
    
    
    (1.6
    )
    
    
    (4.4
    )
    
    
    (5.1
    )
    
    
    (2.7
    )Total increase in gross revenue
    
    
    53.6
    
    
    
    6.3
    
    
    
    13.4
    
    
    
    23.8
    Liquidity and Capital Resources
  Dec 31, 2005
    
    Dec 31, 2004
    
    % Change(In millions of Canadian dollars,except ratios)Current assets
    
    
    280.4
    
    
    
    208.8
    
    
    
    34.3
    %Current liabilities
    
    
    (157.8
    )
    
    
    (126.8
    )
    
    
    24.4
    %Working capital
    
    
    122.6
    
    
    
    82.0
    
    
    
    49.5
    %Current ratio
    
    
    1.78
    
    
    
    1.65
    
    
    
    n/a
 note: Working capital is calculated by subtracting current liabilities from current assets. The
current ratio is calculated by dividing current assets by current liabilities.
 M-18




---



##### 



$ Change
    
    $ Change2005 vs.
    
    2004 vs.2005
    
    2004
    
    2003
    
    2004
    
    2003(In millions of Canadian dollars)Cash flows from operating activities
    
    
    57.3
    
    
    
    77.4
    
    
    
    16.9
    
    
    
    (20.1
    )
    
    
    60.5Cash flows used in investing
activities
    
    
    (114.6
    )
    
    
    (10.2
    )
    
    
    (33.5
    )
    
    
    (104.4
    )
    
    
    23.3Cash flows from (used in) financing
activities
    
    
    47.9
    
    
    
    (36.0
    )
    
    
    (4.2
    )
    
    
    83.9
    
    
    
    (31.8
    )
  Working Capital
  Cash Flows From Operating Activities
   M-19




---



##### 



Cash Flows From Investing Activities
   Cash Flows From Financing Activities
  M-20




---



##### 



Shareholders Equity
    M-21




---



##### 



Other
 Outstanding Share Data
  Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    45
    
    
    After 5Contractual Obligations
    
    Total
    
    
    1 year
    
    
    23 years
    
    
    years
    
    
    years(In millions of Canadian dollars)Long-term debt
    
    
    86.7
    
    
    
    4.8
    
    
    
    81.8
    
    
    
    0.0
    
    
    
    0.1Interest on debt
    
    
    9.5
    
    
    
    3.7
    
    
    
    5.8
    
    
    
    0.0
    
    
    
    0.0Other liabilities
    
    
    30.8
    
    
    
    6.0
    
    
    
    8.0
    
    
    
    7.1
    
    
    
    9.7Operating lease commitments
    
    
    211.7
    
    
    
    34.8
    
    
    
    56.5
    
    
    
    40.8
    
    
    
    79.6Total contractual obligations
    
    
    338.7
    
    
    
    49.3
    
    
    
    152.1
    
    
    
    47.9
    
    
    
    89.4
  Off-Balance Sheet Arrangements
  Market Risk
  Currency.
 M-22




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Interest Rate.
 Related Party Transactions
  OUTLOOK
  Measure
    
    Expected RangeDebt to equity ratio [note 1]
    
    At or below 0.5 to 1Return on equity [note 2]
    
    At or above 14%Net income as % of net revenue
    
    At or above 5%Gross margin as % of net revenue
    
    Between 54 and 56%Administrative and marketing expensesas % of net revenue
    
    Between 40 and 42%Effective income tax rate
    
    Between 32 and 34%
 
 note 1: Debt to equity ratio is calculated as the sum of (1) long-term debt, including current
portion, plus bank indebtedness, less cash divided by (2) shareholders equity. note 2: Return on
equity is calculated as net income for the year divided by average shareholders equity over each
of the last four quarters.note 2: Return on
equity is calculated as net income for the year divided by average shareholders equity over each
of the last four quarters.  
    
    The need for investment in upgrading public infrastructure in response to the condition
of aging facilities and increased demands presented by the growth of North American cities
    
    The implementation of the new six-year, US$286.4 billion Safe, Accountable, Flexible,
Efficient Transportation Equity: A Legacy for Users program in the United States, which
promises increased funding for highway projects
    
    An increasing awareness of and focus on sustainable design and development
 M-23




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
    
    The revitalization and reintroduction of residential and mixed-use projects in the downtown
core of North American cities
    
    Strong commodity prices prompting the planning of pipeline, power plant, and other
private infrastructure projects
    
    Growth in the cash reserves of private corporations, which will likely be reinvested, in
part, in the construction of new facilities
    
    Anticipated strength, by historical standards, in the single-family housing sector in 2006
(despite a slight decrease in the housing market), fueled by continued affordability, high
employment, positive economic conditions, and buoyant consumer confidence.
 Toward a New Metropolis: The Opportunity to Rebuild America
     M-24




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CRITICAL ACCOUNTING ESTIMATES, DEVELOPMENTS, AND MEASURES
 Critical Accounting Estimates
   Revenue and Cost Recognition Estimates on Contracts.
 Goodwill.
 Provision for Doubtful Accounts.
 M-25




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Self-Insured Liabilities.
 Income Taxes.
 Long-Lived Assets and Intangibles.
 Liabilities for Lease Exit Activities.
 M-26




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Business CombinationsPurchase Price Allocation.
 Accounting Developments
 Variable Interest Entities.
 GAAP Hierarchy.
 Financial InstrumentsRecognition and Measurement.
 Comprehensive Income and Equity.
 M-27




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Materiality
  Definition of Non-GAAP Measures
  Gross Revenue and Net Revenue.
 Gross Margin.
 Debt to Equity Ratio.
 Return on Equity Ratio.
 Working Capital.
 M-28




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Current Ratio.
 EBITDA.
 EBITDAR.
 EBITDAR to Debt Service Ratio.
 RISK FACTORS
  
    
    Global capital market activities
    
    Fluctuations in interest rates and currency values
    
    The effects of war or terrorist activities
    
    The effects of disease or illness on local, national, or international economies
    
    The effects of disruptions to public infrastructure, such as transportation or
communications
    
    Disruptions in power or water supply
    
    Industry and worldwide economic and political conditions
    
    Regulatory and statutory developments
    
    The effects of competition in the geographic and business areas in which we operate
    
    The actions of management
    
    Technological changes.
  M-29




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Operating Risks
  If we are unable to engage qualified subconsultants, we may lose projects, revenue, and clients.
  We may have difficulty in attracting and retaining qualified staff, which may affect our reputation
in the marketplace and restrict our ability to implement our business strategy.
  Adverse weather conditions and natural or other disasters may cause a delay or eliminate net
revenue which otherwise would have been realized and thus adversely affect our profitability.
  M-30




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Our backlog is subject to unexpected adjustments and cancellations and is, therefore, an
uncertain indicator of our future earnings.
  We bear the risk of cost overruns in a significant number of our contracts. We may experience
reduced profits or, in some cases, losses under these contracts if costs increase above our
estimates.
  One of our primary competitive advantages is our reputation and experience. If our reputation is
damaged due to client dissatisfaction, our ability to win additional business may be materially
damaged.
  The nature of our business exposes us to potential liability claims and contract disputes,
which may reduce our profits.
  M-31




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Our insurance may not cover all claims for which we may be liable, and expenses related to
insurance coverage may adversely impact our profitability.
   We may not be able to adequately protect our intellectual property, which could force us to take
costly protective measures such as litigation.
  If we experience delays and/or defaults in customer payments, we could suffer liquidity
problems or be unable to recover our expenditures.
  M-32




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Market Risks
  The professional consulting services industry is highly competitive, which could have a negative
impact on our profit margins and market share.
  Economic downturns could have a negative impact on our businesses since our clients may
curtail investment in infrastructure projects.
  A significant portion of our revenue is derived from clients in the real estate industry.
Consequently, our business could suffer materially if there were a downturn in the real estate
market.
  
    
    Changes in employment levels and other general economic conditions
    
    Changes in interest rates and in the availability, cost, and terms of
financing
    
    The impact of present or future environmental, zoning, or other laws
and regulations
    
    Changes in real estate tax rates and assessments and other operating
expenses
 M-33




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
    
    Changes in levels of government infrastructure spending and fiscal
policies
    
    Natural or human-made disasters and other factors that are beyond our
control.
  We derive significant revenue from contracts with government agencies. Any disruption in
government funding or in our relationship with those agencies could adversely affect our
business.
   Our share price has historically been subject to volatility. As a result, the price of our
common shares may decrease in the future due to a number of Company- and industry-specific or
general economic factors.
   M-34




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Our share price could be adversely affected if a large number of our common shares are offered for
sale or sold.
  If we need to sell or issue additional common shares and/or incur additional debt to finance
future acquisitions, our share ownership could be diluted and the results of our operations could
be adversely affected.
   Because we report our results in Canadian dollars and a substantial portion of our revenue
and expenses is recorded in US dollars, our results are subject to currency exchange risk.
    M-35




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Growth and Acquisition Integration Risks
  If we are unable to manage our growth effectively, we may experience a decline in our revenue
and profitability.
   From time to time we have pursued and may continue to pursue and invest in business opportunities
that are not directly within our core competencies. These new business opportunities may require
a disproportionate amount of managements time to develop profitably and may not perform as
expected.
  We may be unsuccessful in our goal to increase the size and profitability of our operations, which
could lead to a reduction in our market share and our competitiveness as our industry
consolidates.
  M-36




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Stantec and an acquired entity may experience difficulties in integrating the acquired entitys
business with the existing operations of Stantec and so may not realize the anticipated benefits
of the acquisition.
  Uncertainties associated with the merger or Stantec as a new owner may cause an acquired entity to
lose customers.
  Uncertainties associated with the merger may cause a loss of employees.
  Goodwill and other intangible assets acquired as a result of our acquisitions represent substantial
portions of our total assets. If our acquired businesses do not perform as expected, we may be
required to write down the value of our goodwill and other intangible assets, which could have a
material adverse effect on our earnings.
  M-37




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Managing Our Risks
    CORPORATE GOVERNANCE
 Disclosure and Control Procedures
  Disclosure Committee
  M-38




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##### 



Board of Directors
   
    
    Overseeing the Companys strategic planning process
    
    Satisfying itself as to the integrity of the CEO and other executive officers
    
    Ensuring that the Company has a policy in place for communicating effectively with
shareholders, other stakeholders, and the public
    
    Reviewing and monitoring the Companys principal business risks as identified by
management, along with the systems for managing such risks
    
    Overseeing senior management succession planning, including the appointment,
development, and monitoring of senior management
    
    Ensuring that management maintains the integrity of the Companys internal
controls and management information systems.
  Audit Committee
  Corporate Governance and Compensation Committee
  M-39




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##### 




    
    Code of Ethics
    
    Corporate Governance Guidelines
    
    Audit Committee Terms of Reference
    
    Corporate Governance and Compensation Committee Terms of Reference.
  M-40