Exhibit
99.3




Management
Report


The annual report,
including the consolidated financial statements, and Management’s
Discussion and Analysis (MD&A) is the responsibility of the management of
the Company. The consolidated financial statements were prepared by management
in accordance with Canadian generally accepted accounting principles. Where
alternative accounting methods exist, management has chosen those it considers
most appropriate in the circumstances. The significant accounting policies used
are described in note 1 to the consolidated financial statements. Certain
amounts in the financial statements are based on estimates and judgments
relating to matters not concluded by year-end. The integrity of the information
presented in the financial statements is the responsibility of management.
Financial information presented elsewhere in this annual report has been
prepared by management and is consistent with the information in the
consolidated financial statements.
 The Board
of Directors is responsible for ensuring that management fulfills its
responsibilities and for providing final approval of the annual consolidated
financial statements. The board has appointed an Audit Committee comprising
three directors, none of whom is an officer or employee of the Company or its
subsidiaries. The Audit Committee meets at least four times each year to
discharge its responsibilities under a written mandate from the Board of
Directors. The Audit Committee meets with management and with the external
auditors to satisfy itself that they are properly discharging their
responsibilities; reviews the consolidated financial statements, MD&A, and
Independent Auditors’ Report on Financial
Statements; and examines other auditing and accounting matters. The Audit
Committee has reviewed the audited consolidated financial statements with
management and discussed the quality of the accounting principles as applied and
significant judgments affecting the consolidated financial statements. The Audit
Committee has discussed with the external auditors the external auditors’
judgments of the quality of those principles as applied and the judgments noted
above. The consolidated financial statements and MD&A have been reviewed by
the Audit Committee and approved by the Board of Directors of Stantec
Inc.
 The consolidated financial
statements have been examined by the shareholders’ auditors, Ernst &
Young LLP, Chartered Accountants. The Independent Auditors’ Report on Financial
Statements outlines the nature of their examination and their opinion on the
consolidated financial statements of the Company. The external auditors have
full and unrestricted access to the Audit Committee, with or without management
being present.
 Management’s Annual
Report on Internal Control over Financial Reporting
 Management
is responsible for establishing and maintaining an adequate system of internal
control over financial reporting. The Company's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. Management conducted an evaluation of the effectiveness of the
system of internal control over financial reporting based on the framework in
“Internal
Control—Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management
concluded that the Company’s system of internal control over financial reporting
was effective as at December 31, 2009.
 As permitted by published
guidance of the U.S. Securities and Exchange Commission (SEC),
management’s evaluation of and conclusions on the effectiveness of
internal control over financial reporting excluded the internal controls of
Jacques Whitford Group Ltd. and Jacques Whitford Global Group Limited (Jacques
Whitford) acquired on January 2, 2009. The assets and liabilities and results of
operations from Jacques Whitford are included in the Company’s consolidated
financial statements. The total assets of Jacques Whitford, on its acquisition
date, were $162.0 million. These assets as a percentage of the Company's total
assets, as at December 31, 2009, were 14.4%. The gross revenue earned by Jacques
Whitford from its date of acquisition to December 31, 2009, constituted 14.8% of
the Company's gross revenue for the year ended December 31,
2009.
 Ernst
& Young LLP, which has audited the consolidated financial statements of the
Company for the year ended December 31, 2009, has also issued a report on the
effectiveness of the Company’s internal control over
financial reporting.
 
 graphic
              graphicBob
      Gomes, P.Eng.
              Dan
      Lefaivre, CMAPresident
      & CEO
              Senior
      Vice President & CFOFebruary
      25, 2010
              February
      25, 2010
 December
31, 2009
 STANTEC
INC.
 F-1
  Independent
Auditors' Report on Financial Statements
 To
the Board of Directors and Shareholders of Stantec Inc.
 We have audited the
consolidated balance sheets of Stantec Inc. as of December 31, 2009 and 2008 and
the consolidated statements of income, shareholders’ equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2009. These financial statements are the
responsibility of the Company’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 and the standards of the Public Company Accounting Oversight Board
(United States). 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 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. We believe our audits provide a reasonable basis for our
opinion.
  In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2009 and 2008
and the results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 2009 in accordance with Canadian
generally accepted accounting principles.
  We have also audited, in
accordance with the Standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting
as of December 31, 2009 based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 25, 2010, expressed an unqualified
opinion thereon.
  
 Graphic
  Chartered
Accountants
 Edmonton,
Canada
 February
25, 2010
  December
31, 2009
 STANTEC
INC.
  F-2
  Independent
Auditors' Report on Internal Control Over Financial Reporting
 (Under
the standards of the Public Company Accounting Oversight Board (United
States))
 To
the Board of Directors and Shareholders of Stantec Inc.
 We have audited Stantec
Inc.’s internal control over financial reporting as of December 31, 2009,
based on criteria established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Stantec Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the
accompanying Management’s Annual Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
  A company’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
  As indicated in the
accompanying Management’s Annual Report on Internal Control Over
Financial Reporting, management’s assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the
internal controls of Jacques Whitford Group Ltd. and Jacques Whitford Global
Group Limited (Jacques Whitford) which are included in the 2009 consolidated
financial statements of Stantec Inc. The total assets of Jacques Whitford, on
its acquisition date constituted 14.4% of Stantec Inc.'s total assets at
December 31, 2009. The gross revenue earned by Jacques Whitford from its date of
acquisition to December 31, 2009, constitute 14.8% of Stantec Inc.'s gross
revenues for the year then ended. Our audit of internal control over financial
reporting of Stantec Inc. also did not include an evaluation of the internal
control over financial reporting of Jacques Whitford.
  In our
opinion, Stantec Inc. maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on the COSO
criteria.
 We also
have audited, in accordance with Canadian generally accepted auditing standards
and the standards of the Public Company Accounting Oversight Board (United
States) the consolidated balance sheets of Stantec Inc. as at December 31, 2009
and 2008, and the related consolidated statements of income, shareholders’ equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
December 31, 2009 and our report dated February 25, 2010, expressed an
unqualified opinion thereon.
 Graphic
  Chartered
Accountants
 Edmonton,
Canada
 February
25, 2010
 December
31, 2009
 STANTEC
INC.
  F-3
 
 Consolidated
Balance Sheets
  December 31
              
              
              December 312009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $ASSETS(note
      8)CurrentCash
      and cash equivalents
              
              
              14,690
              
              
              
              103,979Cash
      held in escrow (note
      2)
              
              
              -
              
              
              
              7,392Accounts
      receivable, net of allowance for doubtful accounts of $9,395 (2008 –
      $11,597)
              
              
              253,205
              
              
              
              256,243Costs
      and estimated earnings in excess of billings
              
              
              95,794
              
              
              
              75,602Income
      taxes recoverable
              
              
              12,144
              
              
              
              7,647Prepaid
      expenses
              
              
              11,352
              
              
              
              8,094Future
      income tax assets (note
      18)
              
              
              15,518
              
              
              
              15,265Other
      assets (note
      6)
              
              
              6,550
              
              
              
              6,503Total
      current assets
              
              
              409,253
              
              
              
              480,725Property
      and equipment (notes 1b
      and 3)
              
              
              108,256
              
              
              
              107,768Goodwill
      (note
      4)
              
              
              468,814
              
              
              
              446,818Intangible
      assets (notes 1b and
      5)
              
              
              64,155
              
              
              
              52,631Future
      income tax assets (note
      18)
              
              
              23,940
              
              
              
              20,786Other
      assets (note
      6)
              
              
              49,127
              
              
              
              36,1581,123,545
              
              
              
              1,144,886LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrentAccounts
      payable and accrued liabilities (note
      7)
              
              
              167,175
              
              
              
              189,360Billings
      in excess of costs and estimated earnings
              
              
              52,007
              
              
              
              43,845Income
      taxes payable
              
              
              -
              
              
              
              9,920Current
      portion of long-term debt (note
      8)
              
              
              35,428
              
              
              
              34,096Future
      income tax liabilities (note
      18)
              
              
              15,643
              
              
              
              13,920Other
      liabilities (note
      9)
              
              
              13,558
              
              
              
              8,868Total
      current liabilities
              
              
              283,811
              
              
              
              300,009Long-term
      debt (note
      8)
              
              
              198,769
              
              
              
              215,113Future
      income tax liabilities (note
      18)
              
              
              29,536
              
              
              
              26,492Other
      liabilities (note
      9)
              
              
              63,849
              
              
              
              64,297575,965
              
              
              
              605,911Non-controlling interest in
      subsidiaries(note
      10)
              
              
              186
              
              
              
              -Commitments, contingencies, and
      guarantees(notes
      2, 8, and 13)Shareholders'
      equityShare
      capital (note
      14)
              
              
              221,983
              
              
              
              218,757Contributed
      surplus (note
      14)
              
              
              12,606
              
              
              
              10,458Retained
      earnings
              
              
              364,569
              
              
              
              308,629Accumulated other comprehensive income
      (loss) (note
      17)
              
              
              (51,764
              )
              
              
              1,131Total
      shareholders' equity
              
              
              547,394
              
              
              
              538,9751,123,545
              
              
              
              1,144,886
 See
accompanying notes
 On behalf
of the Board of Directors:
  graphic
              graphicDirector
              Director
 December
31, 2009
 STANTEC
INC.
 F-4
 Consolidated
Statements of Income
 
  Years
      ended December 31
              
              2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars, except per share
    amounts)
              
              $
              
              
              $
              
              
              $INCOMEGross
      revenue
              
              
              1,519,865
              
              
              
              1,351,951
              
              
              
              954,619Less
      subconsultant and other direct expenses
              
              
              276,923
              
              
              
              221,827
              
              
              
              123,731Net
      revenue
              
              
              1,242,942
              
              
              
              1,130,124
              
              
              
              830,888Direct
      payroll costs
              
              
              543,640
              
              
              
              500,789
              
              
              
              360,101Gross
      margin
              
              
              699,302
              
              
              
              629,335
              
              
              
              470,787Administrative
      and marketing expenses (notes 14 and
      24)
              
              
              519,147
              
              
              
              466,187
              
              
              
              351,346Depreciation
      of property and equipment (note
      1b)
              
              
              24,547
              
              
              
              21,820
              
              
              
              15,458Amortization
      of intangible assets (note
      1b)
              
              
              19,820
              
              
              
              14,264
              
              
              
              7,282Impairment
      of goodwill and intangible assets (notes 4 and
      5)
              
              
              35,000
              
              
              
              58,369
              
              
              
              -Net
      interest expense (note
      8)
              
              
              11,379
              
              
              
              7,477
              
              
              
              1,594Share
      of income from associated companies
              
              
              (3,690
              )
              
              
              (160
              )
              
              
              (292
              )Foreign
      exchange losses (gains)
              
              
              2,273
              
              
              
              (2,033
              )
              
              
              (2,480
              )Other
      income
              
              
              (840
              )
              
              
              (1,088
              )
              
              
              (1,235
              )Income
      before income taxes
              
              
              91,666
              
              
              
              64,499
              
              
              
              99,114Income taxes(note
      18)Current
              
              
              41,599
              
              
              
              41,213
              
              
              
              34,994Future
              
              
              (5,873
              )
              
              
              (5,731
              )
              
              
              (5,159
              )Total
      income taxes
              
              
              35,726
              
              
              
              35,482
              
              
              
              29,835Net
      income for the year
              
              
              55,940
              
              
              
              29,017
              
              
              
              69,279Earnings per share(note19)Basic
              
              
              1.23
              
              
              
              0.64
              
              
              
              1.52Diluted
              
              
              1.22
              
              
              
              0.63
              
              
              
              1.50
 See
accompanying notes
 December
31, 2009
 STANTEC
INC.
 F-5
 Consolidated
Statements of Shareholders' Equity and Comprehensive Income
 
  Shares
      Outstanding
                  (note
      14)
              
              
              Share
      Capital
                  (note
      14)
              
              
              Contributed Surplus
      (note 14)
              
              
              Deferred
      Stock
      Compensation
              
              
              Retained
      Earnings
              
              
              Accumulated
      Other
      Comprehensive
      Income
      (Loss) (AOCI)
                  (note 17)
              
              
              Total(In
      thousands of Canadian dollars,
                  except
      shares outstanding)
              #
              
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $Balance,
      December 31, 2006
              
              
              45,201,785
              
              
              
              212,781
              
              
              
              5,458
              
              
              
              (250
              )
              
              
              217,750
              
              
              
              (24,844
              )
              
              
              410,895Change
      in accounting policy
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              481
              
              
              
              481Balance,
      January 1, 2007, as adjusted
              
              
              45,201,785
              
              
              
              212,781
              
              
              
              5,458
              
              
              
              (250
              )
              
              
              217,750
              
              
              
              (24,363
              )
              
              
              411,376Comprehensive
      income:Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              69,279
              
              
              
              
              
              
              
              69,279Currency
      translation adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (45,669
              )
              
              
              (45,669
              )Unrealized
      gains on financial assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,249
              
              
              
              1,249Realized
      gains on financial assets transferred to net income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (245
              )
              
              
              (245
              )Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              69,279
              
              
              
              (44,665
              )
              
              
              24,614Share
      options exercised for cash
              
              
              386,598
              
              
              
              1,920
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,920Stock-based
      compensation expense
              
              
              
              
              
              
              
              
              
              
              1,919
              
              
              
              140
              
              
              
              
              
              
              
              
              
              
              
              2,059Shares
      repurchased under normal course issuer bid
              
              
              (9,200
              )
              
              
              (44
              )
              
              
              (1
              )
              
              
              
              
              
              
              (249
              )
              
              
              
              
              
              
              (294
              )Shares
      issued on acquisition
              
              
              96,925
              
              
              
              3,426
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,426Reclassification
      of fair value of share options previously expensed
              
              
              
              
              
              
              443
              
              
              
              (443
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Shares
      issued on vesting of restricted shares
              
              
              22,035
              
              
              
              264
              
              
              
              (667
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (403
              )Balance,
      December 31, 2007
              
              
              45,698,143
              
              
              
              218,790
              
              
              
              6,266
              
              
              
              (110
              )
              
              
              286,780
              
              
              
              (69,028
              )
              
              
              442,698Retained
      earnings and AOCI
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              217,752Balance,
      December 31, 2007
              
              
              45,698,143
              
              
              
              218,790
              
              
              
              6,266
              
              
              
              (110
              )
              
              
              286,780
              
              
              
              (69,028
              )
              
              
              442,698Comprehensive
      income:Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29,017
              
              
              
              
              
              
              
              29,017Currency
      translation adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              76,923
              
              
              
              76,923Unrealized
      losses on cash flow hedge
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,974
              )
              
              
              (2,974
              )Unrealized
      losses on financial assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,641
              )
              
              
              (3,641
              )Realized
      gains on financial assets transferred to net income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (149
              )
              
              
              (149
              )Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29,017
              
              
              
              70,159
              
              
              
              99,176Share
      options exercised for cash
              
              
              97,860
              
              
              
              1,199
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,199Stock-based
      compensation expense
              
              
              
              
              
              
              
              
              
              
              4,887
              
              
              
              110
              
              
              
              
              
              
              
              
              
              
              
              4,997Shares
      repurchased under normal course issuer bid
              
              
              (351,400
              )
              
              
              (1,688
              )
              
              
              (58
              )
              
              
              
              
              
              
              (7,168
              )
              
              
              
              
              
              
              (8,914
              )Reclassification
      of fair value of share options previously expensed
              
              
              
              
              
              
              423
              
              
              
              (423
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Shares
      issued on vesting of restricted shares
              
              
              3,520
              
              
              
              33
              
              
              
              (214
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (181
              )Balance,
      December 31, 2008
              
              
              45,448,123
              
              
              
              218,757
              
              
              
              10,458
              
              
              
              -
              
              
              
              308,629
              
              
              
              1,131
              
              
              
              538,975Retained
      earnings and AOCI
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              309,760Balance,
      December 31, 2008
              
              
              45,448,123
              
              
              
              218,757
              
              
              
              10,458
              
              
              
              -
              
              
              
              308,629
              
              
              
              1,131
              
              
              
              538,975Comprehensive
      income:Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              55,940
              
              
              
              
              
              
              
              55,940Currency
      translation adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (57,248
              )
              
              
              (57,248
              )Unrealized
      gains on cash flow hedge
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,443
              
              
              
              1,443Unrealized
      gains on financial assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,691
              
              
              
              2,691Realized
      losses on financial assets transferred to net income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              219
              
              
              
              219Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              55,940
              
              
              
              (52,895
              )
              
              
              3,045Share
      options exercised for cash
              
              
              268,697
              
              
              
              2,346
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,346Stock-based
      compensation expense
              
              
              
              
              
              
              
              
              
              
              3,028
              
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              3,028Reclassification
      of fair value of share options previously expensed
              
              
              
              
              
              
              880
              
              
              
              (880
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Balance,
      December 31, 2009
              
              
              45,716,820
              
              
              
              221,983
              
              
              
              12,606
              
              
              
              -
              
              
              
              364,569
              
              
              
              (51,764
              )
              
              
              547,394Retained
      earnings and AOCI
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              312,805See
      accompanying notes
   December
31, 2009
 STANTEC
INC.
 F-6
 Consolidated
Statements of Cash Flows
 
  Years
      ended December 31
              
              2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $CASH
      FLOWS FROM (USED IN) OPERATING ACTIVITIESCash
      receipts from clients
              
              
              1,564,415
              
              
              
              1,222,566
              
              
              
              940,085Cash
      paid to suppliers
              
              
              (545,671
              )
              
              
              (276,862
              )
              
              
              (259,493
              )Cash
      paid to employees
              
              
              (852,459
              )
              
              
              (737,931
              )
              
              
              (565,803
              )Dividends
      from equity investments
              
              
              1,283
              
              
              
              150
              
              
              
              450Interest
      received
              
              
              2,192
              
              
              
              1,857
              
              
              
              6,496Interest
      paid
              
              
              (12,383
              )
              
              
              (6,597
              )
              
              
              (4,271
              )Income
      taxes paid
              
              
              (65,731
              )
              
              
              (50,037
              )
              
              
              (33,656
              )Income
      taxes recovered
              
              
              8,331
              
              
              
              6,884
              
              
              
              3,691Cash flows from operating
      activities(note
      20)
              
              
              99,977
              
              
              
              160,030
              
              
              
              87,499CASH
      FLOWS FROM (USED IN) INVESTING ACTIVITIESBusiness
      acquisitions, net of cash acquired (note
      2)
              
              
              (73,078
              )
              
              
              (92,087
              )
              
              
              (105,353
              )Restricted
      cash used for acquisitions
              
              
              -
              
              
              
              -
              
              
              
              1,073Cash
      held in escrow (note
      2)
              
              
              -
              
              
              
              (6,178
              )
              
              
              -Decrease
      (increase) in investments held for self-insured
      liabilities
              
              
              (11,040
              )
              
              
              5,820
              
              
              
              (3,786
              )Proceeds
      on disposition of investments
              
              
              -
              
              
              
              9
              
              
              
              51Purchase
      of intangible assets
              
              
              (3,062
              )
              
              
              (2,846
              )
              
              
              (3,914
              )Purchase
      of property and equipment
              
              
              (17,366
              )
              
              
              (32,791
              )
              
              
              (23,377
              )Proceeds
      on disposition of property and equipment
              
              
              1,331
              
              
              
              410
              
              
              
              134Cash
      flows used in investing activities
              
              
              (103,215
              )
              
              
              (127,663
              )
              
              
              (135,172
              )CASH
      FLOWS FROM (USED IN) FINANCING ACTIVITIESRepayment
      of long-term debt
              
              
              (147,902
              )
              
              
              (164,602
              )
              
              
              (78,514
              )Proceeds
      from long-term borrowings
              
              
              68,771
              
              
              
              228,337
              
              
              
              117,049Repayment
      of acquired bank indebtedness (note
      2)
              
              
              (4,596
              )
              
              
              (1,788
              )
              
              
              (6,282
              )Repayment
      of capital lease obligations
              
              
              (2,759
              )
              
              
              (438
              )
              
              
              -Repurchase
      of shares for cancellation (note
      14)
              
              
              -
              
              
              
              (8,914
              )
              
              
              (294
              )Proceeds
      from issue of share capital (note14)
              
              
              2,346
              
              
              
              1,199
              
              
              
              1,920Cash
      flows from (used in) financing activities
              
              
              (84,140
              )
              
              
              53,794
              
              
              
              33,879Foreign
      exchange gain (loss) on cash held in foreign
currency
              
              
              (1,911
              )
              
              
              3,643
              
              
              
              (394
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              (89,289
              )
              
              
              89,804
              
              
              
              (14,188
              )Cash
      and cash equivalents, beginning of the year
              
              
              103,979
              
              
              
              14,175
              
              
              
              28,363Cash
      and cash equivalents, end of the year
              
              
              14,690
              
              
              
              103,979
              
              
              
              14,175
 See
accompanying notes
 December
31, 2009
 STANTEC
INC.
 F-7
 Notes
to the Consolidated Financial Statements
 1.
                Summary
      of Significant Accounting
Policies
 Stantec
Inc. (the Company) is a provider of comprehensive professional services in the
area of infrastructure and facilities for clients in the public and private
sectors. The Company's services include planning, engineering, architecture,
interior design, landscape architecture, surveying and geomatics, project
management, environmental sciences, and project economics for infrastructure and
facilities projects.
 Generally
accepted accounting principles
 The Company prepares its
consolidated financial statements in accordance with Canadian generally accepted
accounting principles (GAAP). These financial statements have, in
management’s opinion, been properly prepared within reasonable limits of
materiality and within the framework of the significant accounting policies
summarized below. The effects of differences between the application of Canadian
GAAP and US GAAP on the financial statements of the Company are described in
note 25.
 Changes
in accounting policies
 a)      Fair
Value of Financial Assets and Financial Liabilities.Effective January 1, 2009,
the Company adoptedthe new Canadian Institute
of Chartered Accountants (CICA) Emerging Issues Committee (EIC) Abstract
EIC-173,"Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities." EIC-173 provides further
information on the determination of the fair value of financial assets and
financial liabilities under CICA Handbook Section 3855, "Financial
Instruments—Recognition and Measurement." It states that an entity's own
credit and the credit risk of the counterparty should be taken into account in
determining the fair value of financial assets and financial liabilities,
including derivative instruments. EIC-173 should be applied retrospectively,
without restatement of prior periods, to all financial assets and liabilities
measured at fair value. The Company adopted this abstract during the first
quarter of the 2009 fiscal year, and this adoption did not have a significant
effect on its financial position or on the results of its operations. The
Company adopted this new accounting standard retrospectively without restatement
of prior periods.
 b)      Goodwill and Intangible Assets.Effective January 1, 2009, the Company adopted CICA Handbook Section
3064, "Goodwill and Intangible Assets," which replaced Section 3062, "Goodwill
and Other Intangible Assets," and Section 3450, "Research and Development
Costs." This pronouncement further aligns Canadian GAAP with US GAAP and
International Financial Reporting Standards (IFRS). Section 3064 establishes
standards for the recognition, measurement, presentation, and disclosure of
goodwill and intangible assets subsequent to their initial recognition.
Standards concerning goodwill are unchanged from the standards included in the
previous Section 3062. The new standard also provides guidance for the
recognition of internally developed intangible assets, including assets produced
from research and development activities, ensuring the consistent treatment of
all intangible assets, whether separately acquired or internally generated. The
Company was required to adopt the new standard retrospectively with restatement
of prior figures. The adoption of this standard did not have an effect on the
Company’s financial
position or on the results of its operations; however, it resulted in a
retrospective reclassification of intangible assets relating to certain software
with a net book value of $6,642,000 at December 31, 2008, from “Property and
Equipment” to “Intangible Assets.” In addition, the Company retrospectively
reclassified the depreciation of software of $3,585,000 and $3,580,000 for 2008
and 2007, respectively, from “Depreciation of Property and Equipment” to
“Amortization of Intangible Assets.”
 c)      Financial
Instruments—Disclosure.Effective December 31, 2009, the Company adopted amendments to CICA
Handbook Section 3862, “Financial Instruments—Disclosure.” These amendments
require enhanced disclosures of fair value measurements of financial instruments
and liquidity risks. The additional disclosures of fair value measurements
include the categorization of fair value measurements into one of three levels,
ranging from those that are determined through quoted market prices in an active
market to those that are based on inputs that are not derived from observable
market data. The additional disclosures of liquidity risk require greaterclarification of the risk
as well as maturity analysis of derivative financial liabilities. The adoption
of these amendments has not had an effect on the Company’s financial
position or on the results of its operations. The Company applied these
amendments in note 15.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
  F-8
 Use
of estimates
 The
preparation of financial statements in conformity with Canadian GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant
estimates used in the preparation of these consolidated financial statements
include the percentage of completion of fixed-fee and variable-fee-with-ceiling
contracts, provisions for losses on incomplete contracts, allowances for
doubtful accounts receivable, provision for legal claims, provision for
self-insured liabilities, the fair value of stock-based awards, the fair value
of identifiable intangible assets acquired in business acquisitions, liabilities
for lease exit activities, and future cash flows and assumptions used to
estimate the fair value of reporting units for goodwill impairment purposes and
to test for the impairment of long-lived assets. Actual results may differ from
these estimates.
 Principles
of consolidation
 The
consolidated financial statements include the accounts of the Company, its
subsidiary companies, and all variable interest entities for which the Company
is the primary beneficiary. All significant intercompany accounts and
transactions have been eliminated. The results of the operations of subsidiaries
acquired during the year are included from their respective date of
acquisition.
 Joint
ventures and partnerships are accounted for on the proportionate consolidation
basis, which results in the Company recording its pro rata share of the assets,
liabilities, revenues, and expenses of each of these
entities.
 Cash
and cash equivalents
 Cash and
cash equivalents include cash and unrestricted investments with initial
maturities of three months or less. Such investments are carried at fair
value.
 Investments
 Investments
in associated companies over which the Company is able to exercise significant
influence, but not control, are accounted for using the equity method, which
reflects the Company's investment at original cost plus its share of earnings
(losses) net of dividends received.
 Other
investments, including investments held for self-insured liabilities, are
designated as available for sale and are recorded at fair value. When a loss in
the value of such investments occurs that is other than temporary, the
cumulative loss that had been recognized in other comprehensive income is
removed from other comprehensive income and recognized in net
income.
 Property
and equipment
 Property
and equipment are recorded at cost less accumulated depreciation. Depreciation
is calculated at annual rates designed to write off the costs of assets over
their estimated useful lives as follows:
 Engineering
      equipment
              20–30%
              declining
      balanceOffice
      equipment
              20–30%
              declining
      balanceAutomotive
      equipment
              30%
              declining
      balanceLeasehold
      improvements
              
              straight-line
      over term of lease to a maximum of 15 years or the improvement's economic
      lifeBuildings
              4–5%
              declining
      balance
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-9
 Leases
 Leases
that transfer substantially all the risks and benefits of ownership of assets to
the Company are accounted for as capital leases. Assets under capital leases are
recorded at the inception of the lease together with the related long-term
obligation to reflect the purchase and financing thereof. Assets under capital
leases are for certain office and automotive equipment and are depreciated on a
20 to 30% declining balance basis. Rental payments under operating leases are
expensed evenly over the lease term.
 From time
to time, the Company enters into or renegotiates premises operating leases that
result in the receipt of lease inducement benefits. These benefits are accounted
for as a reduction of rental expense over the terms of the associated leases. As
well, from time to time, the Company enters into or renegotiates premises
operating leases that include escalation clauses. The scheduled rent increases
pursuant to lease escalation clauses are recognized on a straight-line basis
over the lease term.
 Goodwill
 Goodwill
is not amortized but is evaluated for impairment annually or when events or
circumstances occur that are more likely than not to reduce the fair value of a
reporting unit below its carrying value. Goodwill impairment testing is a
two-step process. In the first step, the Company compares the fair values of its
reporting units to their respective carrying values, which are determined using
market information and discounted after-tax cash flow projections. If the
carrying value of a reporting unit is higher than its fair value, goodwill is
potentially impaired and step two of the impairment test is performed. In step
two, the amount of the impairment is calculated by comparing the implied fair
value of the reporting unit’s goodwill to the
carrying value of the goodwill. If the implied fair value ofthe goodwill is less than
its carrying value, an impairment charge is recorded in income for the
difference.
 Intangible
assets
 The cost of intangible
assets with determinable lives is amortized over the period in which the
benefits of such assets are expected to be realized, principally on a
straight-line basis. The Company’s policy is to amortize client
relationships with determinable lives over periods ranging from 10 to 15 years.
Contract backlog is amortized over estimated contractual lives of generally 1 to
3 years, and software is amortized over periods ranging from 3 to 7 years. Other
intangible assets include technology, non-compete agreements, and advantageous
leasehold commitments, which are amortized over estimated lives of 3 to 11
years. The Company assigns value to acquired contract backlog and customer lists
using the income approach, which involves quantifying the present value of net
cash flows attributed to the subject asset. This, in turn, involves estimating
the revenues and earnings expected from the asset. Recognition of the
contributory assets, such as working capital and property and equipment required
and used to generate the expected after-tax earnings, is included since these
assets also require a return based on their fair values. Expected earnings after
contributory charges and income taxes are discounted by the appropriate
after-tax discount rate to arrive at the fair value.
 Long-lived
assets
 The
Company tests long-lived assets, including property and equipment and intangible
assets, for recoverability when events or a change in circumstances indicate
that their carrying amount may not be recoverable. The determination of
recoverability is based on an estimate of undiscounted cash flow expected to
result from the use of the related asset and factors such as expected future
asset utilization and business climate. Based on this review, if it is
determined that the long-lived asset is not fully recoverable, an impairment
loss is recognized in income. The impairment loss is measured based on the
amount that the carrying value of the long-lived asset exceeds its fair
value.
 Provision
and investments held for self-insured liabilities
 The
Company self-insures certain risks related to professional liability and
automobile physical damages. The provision for self-insured liabilities includes
estimates of the costs of reported claims (including potential claims that are
probable of being asserted) and is based on estimates of loss using assumptions
made by management, including consideration of actuarial projections. The
provision for self-insured liabilities does not include unasserted claims where
assertion by a third party is not probable.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-10
 The
Company invests funds to support the provision for self-insured liabilities.
These investments are recorded at fair value in other assets as investments held
for self-insured liabilities.
 Derivative
financial instruments and hedging
 From time to time, the
Company enters into foreign currency forward contracts to manage risk associated
with net operating assets denominated in US dollars. As well, it enters into
interest rate swap agreements to manage the risk associated with interest rate
cash flow to the extent that its credit facilities are based on floating rates
of interest. The Company’s policy is not to use these derivative
financial instruments for trading or speculative purposes. These derivative
financial instruments are recognized at fair value. The fair value of these
instruments is recorded in the balance sheet as other assets or other
liabilities. Any changes in the fair value of the foreign currency forward
contracts are recorded in income when the changes occur. Since interest rate
swap agreements are recorded as cash flow hedges, any unrealized gains or losses
are recorded in other comprehensive income.
 Interest
rate swap agreements that are designated as cash flow hedges are reviewed on a
regular basis to ensure that the hedge continues to be effective. If the hedge
ceases to meet the criteria for effectiveness, the cumulative gain or loss in
accumulated other comprehensive income is immediately reclassified to
income.
 Non-interest-bearing
debt
 Non-interest-bearing
debt is carried at its amortized cost using the effective interest rate
method.
 Revenue
recognition
 In the
course of providing its services, the Company incurs certain direct costs for
subconsultants and other expenditures that are recoverable directly from
clients. These direct costs are included in the Company's gross revenue. Since
such direct costs can vary significantly from contract to contract, changes in
gross revenue may not be indicative of the Company's revenue trends.
Accordingly, the Company also reports net revenue, which is gross revenue less
subconsultant and other direct expenses.
 Revenue
from fixed-fee and variable-fee-with-ceiling contracts is recognized using the
percentage of completion method. Contract revenue is recognized on the ratio of
contract costs incurred to total estimated costs. Provisions for estimated
losses on incomplete contracts are made in the period in which the losses are
determined. Revenue from time-and-material contracts without stated ceilings and
from short-term projects is recognized as costs are incurred. Revenue is
calculated based on billing rates for the services performed. Costs and
estimated earnings in excess of billings represent work in progress that has
been recognized as revenue but not yet invoiced to clients. Billings in excess
of costs and estimated earnings represent amounts that have been invoiced to
clients but not yet recognized as revenue. Revenue does not include taxes
collected from clients that are reimbursable to government
authorities.
 Employee
benefit plans
 The
Company contributes to group retirement savings plans and an employee share
purchase plan based on the amount of employee contributions subject to maximum
limits per employee. The Company accounts for defined contributions as an
expense in the period in which the contributions are made. The Company does not
provide postemployment or postretirement benefits.
 Foreign
currency translation
 Transactions
denominated in a foreign currency and the financial statements of foreign
subsidiaries (excluding US-based subsidiaries) included in the consolidated
financial statements are translated as follows: monetary items at the rate of
exchange in effect at the balance sheet date; non-monetary items at historical
exchange rates; and revenue and expense items (except depreciation and
amortization, which are translated at historical exchange rates) at the average
exchange rate for the year. Any resulting realized and unrealized gains or
losses are included in income in the year incurred, except for unrealized
foreign exchange gains and losses on investments held for self-insured
liabilities, which are included in other comprehensive income since they are
classified as available for sale.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-11
 The
Company's US-based subsidiaries are designated as self-sustaining operations.
The financial statements of these subsidiaries are translated using the current
rate method. Under this method, assets and liabilities are translated at the
rate of exchange in effect at the balance sheet date, and revenue and expense
items (including depreciation and amortization) are translated at the average
rate of exchange for the month. The resulting unrealized exchange gains and
losses on US-based subsidiaries are included as a separate component of
shareholders' equity in accumulated other comprehensive
income.
 Stock-based
compensation and other stock-based payments
 The
Company has one share option plan (described in note 14) and accounts for grants
under this plan in accordance with the fair value-based method of accounting for
stock-based compensation. Compensation expense for stock options awarded under
the plan is measured at the fair value at the grant date using the Black-Scholes
valuation model and is recognized over the vesting period of the options
granted. The Company estimates its forfeiture rate in order to determine the
compensation expense arising from stock-based awards.
 Income
taxes
 The
Company uses the liability method to account for income taxes. Under this
method, future income tax assets and liabilities are determined based on
differences between financial reporting and the tax bases of assets and
liabilities and measured using the substantively enacted tax rates and laws that
will be in effect when these differences are expected to
reverse.
 Earnings
per share
 Basic
earnings per share are computed based on the weighted average number of common
shares outstanding during the year. Diluted earnings per share are computed
using the treasury stock method, which assumes that the cash that would be
received on the exercise of options is applied to purchase shares at the average
price during the year and that the difference between the number of shares
issued on the exercise of options and the number of shares obtainable under this
computation, on a weighted average basis, is added to the number of shares
outstanding. The impact of outstanding restricted shares, on a weighted average
basis, is also added to the number of shares outstanding. Antidilutive options
are not considered in computing diluted earnings per share.
 Allowance
for doubtful accounts
 The
Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability to collect on its accounts receivable. It uses
estimates in arriving at its allowance for doubtful accounts that are based on
the age of the outstanding accounts receivable and on its historical collection
and loss experience.
 Recent
accounting pronouncements
 International Financial Reporting
Standards.In February 2008, the CICA confirmed that Canadian reporting
issuers will need to begin reporting under IFRS for fiscal years beginning on or
after January 1, 2011, including comparative figures for the prior year. IFRS
uses a conceptual framework similar to that used by Canadian GAAP, but there are
differences in recognition, measurement, and disclosure.
 The
Company started its IFRS conversion project in 2008. This project consists of
five phases: 1) preliminary planning and scoping, 2) detailed assessment, 3)
solution development, 4) implementation, and 5) post-implementation review. The
Company has now completed the preliminary planning and scoping, detailed
assessment, and solution development phases and has commenced the implementation
phase. To date, it is on target with the original timeline in its detailed work
plan.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
  F-12
 In the
planning and scoping phase, the Company established a dedicated team to work on
the IFRS transition and an IFRS Advisory Committee consisting of representatives
from its Financial Services, Treasury, Internal Audit, Investor Relations,
Information Technology, and Operations groups. The IFRS team provides updates to
the IFRS Advisory Committee and the Audit Committee, including reports on the
progress made on the detailed work plan. Also during this phase, the Company
completed a high-level diagnostic that identified the major differences between
Canadian GAAP and IFRS and prioritized the IFRS requirements based on their
financial reporting impact, business impact, and complexity.
  In the detailed assessment
phase, the Company established issue-specific workgroups to perform a detailed
diagnostic and select accounting policies when alternatives are available. IFRS
1,“First-Time Adoption of International Financial Reporting Standards,”
provides entities that are adopting IFRS for the first time with a number of
optional exemptions and mandatory exceptions, in certain areas, to the general
requirements for full retrospective application of IFRS. The solution
development phase involved the formulation, documentation, and approval of
solutions for the implementation of IFRS. During this phase, the Company also
established and implemented a communication and training plan and provided
training to the Board of Directors, Audit Committee, key employees, and
stakeholders. Considering the impacts of IFRS on the Company's financial
disclosure, business processes, information technology, and internal control
over financial reporting was integral to the detailed assessment and solution
development phases. During these phases, the Audit Committee reviewed the
Company’s potential policy choices, optional exemptions, and financial statement
presentation under IFRS. These phases also provided insight into the most
significant areas of difference applicable to the Company, including business
combinations and impairment of assets as well as more extensive presentation
requirements under IFRS. The areas of significance identified are based on
available information and the Company’s expectations as of the date of this
report and are subject to change with new facts and circumstances.
  The
Company continues to monitor the development of standards and regulations issued
by the International Accounting Standards Board and Canadian Securities
Administrators that may affect the timing, nature, or disclosure of its adoption
of IFRS. At this phase of the project, the Company has not quantified the
financial reporting impact of the differences between Canadian GAAP and IFRS on
its operations.
  Business Combinations.In
January 2009, the CICA issued the new handbook Section 1582, "Business
Combinations," effective for fiscal years beginning on or after January 1, 2011.
Earlier adoption of Section 1582 is permitted. This pronouncement further aligns
Canadian GAAP with US GAAP and IFRS and changes the accounting for business
combinations in a number of areas. It establishes principles and requirements
governing how an acquiring company recognizes and measures, in its financial
statements, identifiable assets acquired, liabilities assumed, any
non-controlling interest in the acquiree, and goodwill acquired. The section
also establishes disclosure requirements that will enable users of the acquiring
company's financial statements to evaluate the nature and financial effects of
its business combinations. Although the Company is considering the impact of
adopting this pronouncement on its consolidated financial statements in
connection with its conversion to IFRS, the impact will be limited to any future
acquisitions beginning in fiscal 2011.
 Consolidation and Non-Controlling
Interests.In January 2009, the CICA issued the new handbook Section
1601, "Consolidated Financial Statements," and Section 1602, "Non-Controlling
Interests," effective for fiscal years beginning on or after January 1, 2011.
Earlier adoption of these recommendations is permitted. These pronouncements
further align Canadian GAAP with US GAAP and IFRS. Sections 1601 and 1602 change
the accounting and reporting of ownership interests in subsidiaries held by
parties other than the parent. Non-controlling interests are to be presented in
the consolidated statements of financial position within equity but separate
from the parent’s
equity. The amount of consolidated net income attributable to the parent and to
the non-controlling interest is to be clearly identified and presented on the
face of the consolidated statements of income. In addition, these pronouncements
establish standards for a change in a parent’s ownership interest in a
subsidiary and the valuation of retained non-controlling equity investments when
a subsidiary is deconsolidated. They also establish reporting
requirements for providing sufficient disclosures that clearly identify and
distinguish between the interests of the parent and the interests of the
non-controlling owners. The Company is currently considering the impact of
adopting these pronouncements on its consolidated financial statements in fiscal
2011 in connection with its conversion to IFRS.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-13
 2.
                Business
      Acquisitions
 Acquisitions
are accounted for under the purchase method of accounting, and the results of
operations since the respective dates of acquisition are included in the
consolidated statements of income. From time to time, as a result of the timing
of acquisitions in relation to the Company's reporting schedule, certain of the
purchase price allocations may not be finalized at the initial time of
reporting. Purchase price allocations are completed after the vendors' final
financial statements and income tax returns have been prepared and accepted by
the Company. Such preliminary purchase price allocations are based on
management's best estimates of the fair values of the acquired assets and
liabilities as at the acquisition date. Upon finalization, adjustments to the
initial estimates may be required, and these adjustments may be
material.
 The
purchase prices of acquisitions may be subject to price adjustment clauses
included in the purchase agreements. At each consolidated balance sheet date,
these purchase price adjustment clauses are reviewed, which may result in an
increase or reduction to the note payable consideration recorded at acquisition
to reflect either more or less non-cash working capital than was originally
recorded.
  As at
December 31, 2009, additional consideration, specified in certain purchase
agreements, may be payable based on future performance parameters. This
contingent consideration is not determinable and will be recognized as an
adjustment to goodwill in the period in which the contingency is resolved.
During 2009, $1.8 million (December 31, 2008 – none) in contingent
consideration of this nature was recorded.
  In the
case of some acquisitions, additional payments may be made to the employees of
an acquired company that are based on their continued service over an agreed
period of time. These additional payments are not included in the purchase
price. They are expensed as compensation as services are provided by the
employees.
 Acquisitions
in 2009
 On
January 2, 2009, the Company acquired the shares and businesses of Jacques
Whitford Group Ltd. and Jacques Whitford Global Group Limited (Jacques Whitford)
for cash consideration of $64.0 million and notes payable of $79.0 million.
These firms are leading providers of environmental management and remediation
and geotechnical engineering services. This acquisition also increased the
Company’s presence
in Canada and the eastern United States and expanded its ability to provide
environmental assessments and permitting services, especially for the energy
sector.
 On
November 6, 2009, the Company acquired the net assets and business of Granary
Associates, Inc. (Granary) for cash consideration and notes payable. The
acquisition of this firm, with office locations in Philadelphia, Pennsylvania,
and New York, New York, strengthened the Company’s expertise in project
management, planning,architecture, and interior
design, especially in the health care industry.
 During
2009, the Company adjusted the purchase prices on the Dunlop Architects Inc.;
Vollmer Associates LLP; Neill and Gunter Limited; Neill and Gunter (Nova Scotia)
Limited; Fuller, Mossbarger, Scott & May Engineers, Inc.; The Zande
Companies, Inc.; RHL Design Group, Inc.; McIntosh Engineering Holdings
Corporation; and Murphy Hilgers Architects Inc. acquisitions pursuant to
purchase price adjustment clauses included in the purchase agreements. These
adjustments impacted non-cash working capital and notes
payable.
 During
2009, the purchase price allocations for the RHL Design Group, Inc., McIntosh
Engineering Holdings Corporation, and Jacques Whitford acquisitions were
finalized. The Company expects to finalize the purchase price allocation for the
Granary acquisition during the third quarter of 2010.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
  F-14
  Acquisitions
in 2008
 On
January 2, 2008, the Company acquired the shares and business of The Zande
Companies, Inc. for cash consideration and notes payable. In addition, at
acquisition, US$1.56 million was placed in an escrow account, pending the
outcome of purchase price adjustment clauses included in the purchase agreement,
and a corresponding US$1.56 million obligation was recorded. Any increase or
reduction to this obligation is recorded as an adjustment to the net assets
acquired. During 2008, due to purchase price adjustments, US$491,000 was
returned to the Company, and the obligation was reduced accordingly. On January
2, 2009, the funds remaining in escrow were paid to the representative of the
former shareholders of The Zande Companies, Inc. The acquisition of this firm
strengthened the Company's operations in the midwestern United States and
increased the depth of its service offerings to public sector clients in the
environment sector. The Zande Companies, Inc. provides services mainly in water
and wastewater treatment facility design, environmental management, and
transportation, as well as complementary services in planning, landscape
architecture, surveying, and land development.
 On
January 2, 2008, the Company acquired the net assets and business of Rochester
Signal, Inc. for cash consideration and notes payable. The addition of this firm
supplemented the existing transit-related services offered by the Company.
Rochester Signal, Inc. provides signal design and related construction
management, installation, and testing services, along with engineering support
for the development of all types of rail systems, from main and commuter lines
to rapid transit and light rail.
  On
February 1, 2008, the Company acquired the shares and business of SII Holdings,
Inc. (Secor) for cash consideration. In addition, at acquisition, US$5.0 million
was placed in an escrow account to be settled on February 1, 2009, pending the
outcome of purchase price adjustment clauses included in the purchase agreement.
A corresponding US$5.0 million obligation was also recorded at acquisition.
During the first quarter of 2009, US$4.9 million of the escrow funds was paid to
the former shareholders of Secor, and the remainder was paid back to the Company
and recorded as a reduction of the liability and an adjustment to non-cash
working capital. The acquisition of this firm significantly increased the
Company’s service
offerings in the environmentsector. Secor provides
expertise in downstream marketing remedial services to the US energy industry,
as well ascomprehensive
environmental remediation services to the manufacturing, chemical, pulp and
paper, and transportation industries.
  On March
14, 2008, the Company acquired the shares and business of RHL Design Group, Inc.
for cash consideration and promissory notes. The acquisition of this firm,
headquartered in Petaluma, California, with several offices in the western
United States, significantly increased the Company's commercial development
services. RHL Design Group, Inc. provides full program implementation and
comprehensive design services to commercial clients with facilities in multiple
locations.
  On July
2, 2008, the Company acquired the shares and business of McIntosh Engineering
Holdings Corporation for cash consideration and notes payable. The addition of
this firm provided the Company with a more visible presence in the mining sector
and expanded its operations in Tempe, Arizona, and Sudbury and North Bay,
Ontario. McIntosh Engineering Holdings Corporation provides expertise in
underground mining engineering.
  During
2008, the Company adjusted the purchase price on the Vollmer Associates LLP;
Trico Engineering Consultants, Inc.; Chong Partners Architecture, Inc.; Woodlot
Alternatives, Inc.; Neill and Gunter companies; Murphy Hilgers Architects Inc.;
Fuller, Mossbarger, Scott & May Engineers, Inc.; Secor; RHL Design Group,
Inc.; and McIntosh Engineering Holdings Corporation acquisitions pursuant to
purchase price adjustment clauses included in the purchase agreements. These
adjustments impacted non-cash working capital and notes payable. Also during
2008, the Company adjusted the purchase price on the CPV Group Architects &
Engineering Ltd. acquisition due to the payment of contingent consideration.
This adjustment impacted goodwill (note 4).
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-15
 Aggregate
consideration paid
 Details
of the aggregate consideration given and of the fair values of net assets
acquired or adjusted for are as follows:
  Total
              
              
              Total2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Cash
      consideration
              
              
              73,078
              
              
              
              97,887Notes
      payable
              
              
              71,701
              
              
              
              30,767Purchase
      price
              
              
              144,779
              
              
              
              128,654Assets
      and liabilities acquired at fair valuesCash
      acquired
              
              
              -
              
              
              
              5,800Bank
      indebtedness assumed
              
              
              (4,596
              )
              
              
              (1,788
              )Non-cash
      working capital
              
              
              25,917
              
              
              
              13,308Property
      and equipment
              
              
              16,606
              
              
              
              10,717Investments
              
              
              3,431
              
              
              
              -Goodwill
              
              
              104,702
              
              
              
              99,959Intangible
      assetsClient
      relationships
              
              
              12,997
              
              
              
              19,589Contract
      backlog
              
              
              10,756
              
              
              
              4,542Other
              
              
              3,553
              
              
              
              (1,805
              )Other
      long-term liabilities
              
              
              (2,706
              )
              
              
              (482
              )Non-controlling
      interest in subsidiaries
              
              
              (186
              )
              
              
              -Long-term
      debt
              
              
              (15,218
              )
              
              
              (16,105
              )Future
      income taxes
              
              
              (6,036
              )
              
              
              (4,214
              )Capital
      lease obligations
              
              
              (4,441
              )
              
              
              (867
              )Net
      assets acquired
              
              
              144,779
              
              
              
              128,654
 Of the
goodwill and intangible assets resulting from acquisitions completed in 2009,
$11,643,000 (2008 –
$12,416,000) is deductible for income tax purposes.
 At the
time of acquisition, management estimates the exit costs of consolidating or
closing offices occupied by the acquired entity. These costs are accrued in
other long-term liabilities or non-cash working capital as part of the purchase
price allocation (note 9). Adjustments to the exit liabilities may impact
goodwill. In 2009, the Company adjusted the exit liability and impacted goodwill
for the RHL Design Group, Inc. and Jacques Whitford.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-16
 3.
                Property
      and Equipment
  2009
              
              
              2008Accumulated
              
              
              
              
              
              AccumulatedCost
              
              
              Depreciation
              
              
              Cost
              
              
              Depreciation(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $
              
              
              $Engineering
      equipment
              
              
              75,541
              
              
              
              44,307
              
              
              
              75,111
              
              
              
              41,338Office
      equipment
              
              
              42,270
              
              
              
              22,861
              
              
              
              39,616
              
              
              
              20,098Automotive
      equipment
              
              
              7,123
              
              
              
              4,850
              
              
              
              9,697
              
              
              
              6,384Leasehold
      improvements
              
              
              58,856
              
              
              
              16,277
              
              
              
              52,074
              
              
              
              12,648Assets
      under capital leases
              
              
              2,295
              
              
              
              935
              
              
              
              1,361
              
              
              
              304Buildings
              
              
              11,046
              
              
              
              1,754
              
              
              
              10,050
              
              
              
              1,391Land
              
              
              2,109
              
              
              
              -
              
              
              
              2,022
              
              
              
              -199,240
              
              
              
              90,984
              
              
              
              189,931
              
              
              
              82,163Net
      book value
              
              
              108,256
              
              
              
              107,768
 Included in leasehold
improvements is construction work in progress in the amount of $1,646,000 (2008– $292,000), on which depreciation has not started. The Company entered
into capital leases for certain office and automotive equipment. The
depreciation on assets under capital leases was $688,000 for 2009 (2008 –
$304,000).
 4.
                Goodwill
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Goodwill,
      beginning of the year
              
              
              446,818
              
              
              
              332,922Current
      year acquisitions
              
              
              108,713
              
              
              
              99,606Impairment
              
              
              (35,000
              )
              
              
              (53,000
              )Contingent
      consideration payments
              
              
              2,324
              
              
              
              1,419Purchase
      price adjustments
              
              
              (6,335
              )
              
              
              (1,066
              )Impact
      of foreign exchange
              
              
              (47,706
              )
              
              
              66,937Goodwill,
      end of the year
              
              
              468,814
              
              
              
              446,818
 Goodwill
recognized from acquisitions includes factors such as the expertise and
reputation of the assembled workforce acquired, the geographic location of the
acquiree, and the expected synergies. In accordance with its accounting
policies, the Company conducts an annual goodwill impairment test as of July 1
or more frequently if circumstances indicate that an impairment may occur. The
Company allocates goodwill to its reporting units. In 2008 and the first quarter
of 2009, these reporting units were defined as Canada, US West, and US East.
Effective April 1, 2009, the reporting units are defined as Canada West, Canada
East, US West, and US East. Reporting units are determined based on the way
management organizes the Company for making operating decisions and assessing
performance. The Company does not monitor goodwill at or allocate goodwill to
its practice areas.
 Management
believes that the methodology used to test impairment of goodwill, which
involves a significant number of judgments and estimates, provides a reasonable
basis for determining whether an impairment has occurred. Many of the factors
used in determining whether or not goodwill is impaired are outside
management’s control
and involve inherent uncertainty. Therefore, actual results could differ from
those estimated. As well, it is reasonably likely that assumptions and estimates
will change in future periods and could have a significant impact on the fair
value of a reporting unit, resulting in future
impairments.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-17
 Goodwill impairment
testing is a two-step process. In the first step, the Company compares the fair
values of itsreporting units to their
respective carrying values. The Company estimates fair value using market
information anddiscounted after-tax cash
flow projections, which is known as the income approach. The income approach
uses a reporting unit’s projection of estimated operating results and
discounted cash flows based on a discount rate that reflects current market
conditions. For its 2009 impairment test, the Company discounted its reporting
units' cash flows using discount rates ranging from 10.5% to 12.0% (2008 – 10.0%
to 12.0%). To arrive at cash flow projections, the Company used estimates of
economic and market information over the projection period, including growth
rates in revenues, costs, estimates of future expected changes in operating
margins, and cash expenditures. Other significant estimates and assumptions
included terminal value growth rates, future estimates of capital expenditures,
and changes in future working capital requirements.
 The
Company validates its estimate of the fair value of each reporting unit under
the income approach by comparing the resulting multiples to multiples derived
from comparable public company transactions or acquisition multiples on its
private company transactions. The Company reconciles the total of the fair
values of its reporting units with its market capitalization to determine if the
sum of the individual fair values is reasonable compared to the external market
indicators. If the reconciliation indicates a significant difference between the
external market capitalization and the fair values of the reporting units, the
Company reviews and adjusts, if appropriate, the discount rates by reporting
units and considers if the implied control premium is reasonable in light of
current market conditions.
 If the carrying value of a
reporting unit is higher than its fair value, goodwill is potentially impaired
and step two of the impairment test must be performed. In step two, the amount
of the impairment is calculated by comparing the implied fair value of the
reporting unit’s goodwill to the carrying value of the goodwill. The
implied fair value of the goodwill is calculated in the same manner as if the
reporting unit were being acquired in a business combination. If the implied
fair value of the goodwill is less than its carrying value, an impairment charge
is recorded for the difference. The impairment charge is recorded as a reduction
in the carrying value of the goodwill on the consolidated balance sheet and
recognized as a non-cash impairment charge in income.
 During
the third quarter of 2009, the Company completed step one of the impairment test
and determined that the US West reporting unit was impaired. The impairment was
due to fluctuations in the market and uncertainties arising from overall
economic conditions primarily relating to the Urban Land practice area, which
comprised approximately 19% of the reporting unit's year-to-date gross revenue
as at September 30, 2009, compared to approximately 60% for the same period in
2006 when economic conditions were favorable for the practice. Upon completion
of step two of the impairment test, the Company determined that the goodwill of
this reporting unit was impaired. A $35.0 million impairment charge was
attributed to the US West reporting unit and reflected as a non-cash charge to
income. As at September 30, 2009, after the impairment charge, the aggregate
carrying value of the US West goodwill was $157.2 million, or 33.8% of the
consolidated goodwill balance.
 Although
the Company has reduced the carrying amount of its goodwill, if market and
economic conditions deteriorate further or if continued volatility in the
financial markets causes declines in its stock price, increases the weighted
average cost of capital, or changes cash flow multiples or other inputs to its
goodwill assessment, it may need to test its goodwill for impairment between its
annual testing periods. In addition, it is possible that changes in the numerous
variables associated with the judgments, assumptions, and estimates made by
management in assessing the fair value of the Company's goodwill could cause its
reporting units to be further impaired. Goodwill impairment charges are non-cash
charges that could have a material adverse effect on the Company’s consolidated financial
statements but do not have any adverse effect on its liquidity, cash flows from
operating activities, or debt covenants and will not have an impact on its
future operations.
 During
the third quarter of 2008, after completing step one of the impairment test, the
Company determined that its goodwill was potentially impaired since the
estimated fair value of its US West and US East reporting units was less than
their carrying value. As at September 30, 2008, the second step of the goodwill
impairment test was not complete, and management recorded its best estimate of
the goodwill impairment as $53.0 million. This charge was allocated to the US
West and US East reporting units and reflected as a non-cash charge to income.
During the fourth quarter of 2008, the Company completed step two of the
goodwill impairment test and concluded that no further adjustment to this
estimate was required.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-18
 5.
                  Intangible
      Assets
 2009
              
              
              2008Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              Impairment
      of Asset(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $Client
      relationships
              
              
              61,391
              
              
              
              15,676
              
              
              
              58,683
              
              
              
              11,200
              
              
              
              5,369Contract
      backlog
              
              
              11,048
              
              
              
              5,349
              
              
              
              7,643
              
              
              
              4,989
              
              
              
              -Software
              
              
              13,774
              
              
              
              4,389
              
              
              
              20,289
              
              
              
              13,647
              
              
              
              -Other
              
              
              4,764
              
              
              
              1,408
              
              
              
              2,163
              
              
              
              942
              
              
              
              -90,977
              
              
              
              26,822
              
              
              
              88,778
              
              
              
              30,778
              
              
              
              5,369Carrying
      amount
              
              
              64,155
              
              
              
              
              
              
              
              52,631
 Once an
intangible asset is fully amortized, the gross carrying amount and related
accumulated amortization are removed from the accounts. Other than goodwill, the
Company has not recorded any intangible assets with indefinite lives. Included
in software are capital leases with a net book value of $5,228,000. For
intangible assets held as of December 31, 2009, the estimated aggregate
amortization expense for each of the next five years and thereafter is as
follows:
  (In
      thousands of Canadian dollars)
              
              
              $2010
              
              
              13,7212011
              
              
              8,6422012
              
              
              6,4282013
              
              
              5,8292014
              
              
              5,489Thereafter
              
              
              24,04664,155
 In
accordance with its accounting policies, the Company tests intangible assets for
recoverability when events or a change in circumstances indicate that their
carrying amount may not be recoverable. The determination of recoverability is
based on an estimate of undiscounted cash flow, and the measurement of
impairment loss is based on the amount that the carrying value of an intangible
asset exceeds its fair value. As part of the impairment test, the Company
updates its future cash flow assumptions and estimates, including factors such
as current and future contracts with clients, margins, market conditions, and
the useful lives of the assets. Based on the results of this review in 2009, the
Company concluded that there was no impairment to intangible
assets.
 During
2008, the Company concluded that intangible assets relating to certain client
relationships were not fully recoverable and therefore recorded a non-cash $5.4
million impairment charge to income. The impairment primarily reflected the
financial distress experienced by specific clients in relation to The Keith
Companies, Inc. acquisition. The remaining carrying value of these client
relationships after this impairment charge was $6.0 million at December 31,
2008.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-19
 6.
                Other
      Assets
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Investments
      held for self-insured liabilities
              
              
              38,418
              
              
              
              26,540Investments
      in associated companies
              
              
              6,631
              
              
              
              1,226Investments
      - other
              
              
              713
              
              
              
              774Holdbacks
      on long-term contracts
              
              
              3,411
              
              
              
              3,933Assets
      held for sale
              
              
              845
              
              
              
              621Other
              
              
              5,659
              
              
              
              9,56755,677
              
              
              
              42,661Less
      current portion
              
              
              6,550
              
              
              
              6,50349,127
              
              
              
              36,158
 Investments
held for self-insured liabilities consist of government and corporate bonds and
equity securities. These investments are classified as available for sale and
are stated at fair value.
 The fair value of the
bonds at December 31, 2009, was $26,748,000 (2008– $18,657,000), and the
fair value of the equities was $11,670,000 (2008 – $7,883,000). The amortized
cost of the bonds at December 31, 2009, was $26,250,000 (2008 – $17,960,000),
and the cost of the equities was $11,556,000 (2008 – $10,924,000). The bonds
bear interest at rates ranging from 2.625% to 7.0% per annum (2008 – 3.25% to
7.0%). The term to maturity of the bond portfolio, stated at fair value, is
$3,780,000 (2008 – $3,144,000) due within one year, $22,968,000 (2008 –
$13,533,000) due within two to five years, and nil (2008 – $1,980,000) due
within five to seven years. The Company does not intend, nor is required, to
sell these investments before the recovery of their cost or amortized cost
basis.
 Investments
in associated companies are accounted for using the equity method and include
Teshmont Consultants (50%), SSBV Consultants Inc. (33.3%), and Planning &
Stantec Limited (50%). In addition, on January 2, 2009, as part of the Jacques
Whitford acquisition, the Company acquired CLFN-AXYS Limited Partnership (49%),
Kavik-AXYS Inc. (24.5%), Fort Mckay-Jacques Whitford AXYS Evergreen Inc. (49%),
Nunami Stantec Limited (49%), ADC-Stantec Inc. (49%), Neegan Naynowan Stantec LP
(49%), AIVEK Stantec Limited Partnership (49%), Tlego'hti Jacques Whitford
Limited (49%), Sungai Bera Remediation J.V. Canada Limited (25%), Fugro Jacques
GeoSurveys Inc. (30%) and Fugro Jacques N.V. (30%).
  The
Company is in the process of selling certain land and equipment. These assets
meet the criteria for assets held for sale. Therefore, they are measured at the
lower of their carrying amount and fair value less costs to dispose and are no
longer depreciated.
 7.
                Accounts
      Payable and Accrued
Liabilities
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Trade
      accounts payable
              
              
              63,204
              
              
              
              49,774Employee
      and payroll liabilities
              
              
              77,582
              
              
              
              113,934Accrued
      liabilities
              
              
              26,389
              
              
              
              25,652167,175
              
              
              
              189,360
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-20
 8.
                Long-Term
      Debt
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Non-interest-bearing
      note payable
              
              
              177
              
              
              
              162Other
      notes payable
              
              
              91,830
              
              
              
              55,940Bank
      loan
              
              
              134,600
              
              
              
              192,544Capital
      lease obligations
              
              
              7,590
              
              
              
              563234,197
              
              
              
              249,209Less
      current portion
              
              
              35,428
              
              
              
              34,096198,769
              
              
              
              215,113
 The
non-interest-bearing note payable is due November 1, 2027, in the amount of
$933,000. The note's carrying value of $177,000 is determined using a discount
rate of 9.75%. If the non-interest-bearing note payable were discounted at
interest rates in effect at December 31, 2009, the fair value of the note would
be $318,000 (2008 –
$277,000).
 The weighted average rate
of interest on the other notes payable is 4.98% (2008– 5.14%). The notes
may be supported by promissory notes and are due at various times from 2010 to
2013. The aggregate maturity value of the notes is $91,895,000 (2008 –
$56,062,000). As at December 31, 2009, $25,684,000 (2008 – $48,343,000) of the
notes' carrying value was payable in US funds (2009 – US$24,438,000; 2008 –
US$39,690,000). The carrying value of the other notes payable approximates their
fair value based on interest rates in effect at December 31,
2009.
 The
Company has a $300 million revolving credit facility that matures on August 31,
2011. The facility is available for acquisitions, working capital needs, capital
expenditures, and general corporate purposes. Depending on the form under which
the credit facility is accessed, rates of interest will vary between Canadian
prime, US base rate, or LIBOR or bankers' acceptance rates plus 65, 85, or 125
basis points. As at December 31, 2009, $105,100,000 of the bank loan was payable
in US funds (US$100,000,000), and $29,500,000 was payable in Canadian funds. As
at December 31, 2008, $131,544,000 of the bank loan was payable in US funds
(US$108,000,000), and $61,000,000 was payable in Canadian funds. Loans may be
repaid under the credit facility from time to time at the option of the
Company.
 During
2008, the Company entered into an interest rate swap agreement that has the
effect of converting the variable interest obligation associated with US$100
million of the credit facility, based on a LIBOR rate, into a fixed interest
rate of 3.43%, plus an applicable basis points spread, until September 3, 2010
(note 12).
  Taking the effect of the
interest rate swap into consideration, the average interest rate applicable at
December 31,2009, was 3.42% (2008– 3.36%). The credit facility contains restrictive covenants (note 16).
All the assets of the Company are held as collateral under a general security
agreement for the bank loan.
  The funds available under
the revolving credit facility are reduced by any outstanding letters of credit.
At December 31, 2009, the Company had issued and outstanding letters of credit
totaling $141,000 (2008– $139,000) payable in Canadian funds and
$1,882,000 (US$1,791,000) (2008 – $2,426,000, US$1,992,000) payable in US funds
that expire at various dates before January 2011. These letters of credit were
issued in the normal course of operations, including the guarantee of certain
office rental obligations. At December 31, 2009, $163,377,000 (2008 –
$104,891,000) was available in the revolving credit facility for future
activities.
 As at
December 31, 2009, there were $518,000 (US$493,000) additional letters of credit
outstanding payable in US funds and $114,000 payable in Canadian funds that were
assumed from acquisitions (2008 – nil). The Company has a
surety facility to facilitate, as part of the normal course of operations, the
issuance of bonds for certain types of project work. As at December 31,
2009, $11,470,000 (US$10,913,000) (2008 – $243,000,US$199,000) in bonds had
been issued under this credit facility.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
  F-21
 As at
December 31, 2009, the Company's capital lease obligations included capital
leases bearing interest at rates ranging from 2.30% to 14.71%. These capital
leases expire at various dates before April 2013. The interest incurred on
capital lease obligations in 2009 was $220,000 (2008 –
$27,000).
 The
principal repayments required on long-term debt in each of the next five years
and thereafter are as follows:
  (In
      thousands of Canadian dollars)
              
              
              $2010
              
              
              35,4282011
              
              
              169,3872012
              
              
              29,0102013
              
              
              1952014
              
              
              -Thereafter
              
              
              177234,197
 The
interest incurred on long-term debt in 2009 was $11,290,000 (2008 – $7,784,000; 2007 –
$2,444,000).
 9.
                Other
      Liabilities
 2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Provision
      for self-insured liabilities
              
              
              31,284
              
              
              
              30,265Deferred
      gain on sale leaseback
              
              
              4,877
              
              
              
              5,314Lease
      inducement benefits
              
              
              23,236
              
              
              
              22,866Liabilities
      on lease exit activities
              
              
              6,171
              
              
              
              4,081Liability
      for uncertain tax positions
              
              
              1,529
              
              
              
              1,725Derivative
      financial instruments (note
      12)
              
              
              2,427
              
              
              
              4,218Other
              
              
              7,883
              
              
              
              4,69677,407
              
              
              
              73,165Less
      current portion
              
              
              13,558
              
              
              
              8,86863,849
              
              
              
              64,297
 
 Provision
for self-insured liabilities
 The
Company self-insures a portion of its estimated liabilities that may arise in
connection with reported legal claims (note 13). This provision for self-insured
liabilities is based on the results of an actuarial review performed in 2009 and
2008, with the current and long-term portion determined based on the actuarial
estimate. At December 31, 2009, the long-term portion was $29,424,000 (2008
–
$28,577,000).
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Provision,
      beginning of the year
              
              
              30,265
              
              
              
              17,659Current
      year provision
              
              
              9,443
              
              
              
              12,470Payment
      for claims settlement
              
              
              (4,761
              )
              
              
              (3,034
              )Impact
      of foreign exchange
              
              
              (3,663
              )
              
              
              3,170Provision,
      end of the year
              
              
              31,284
              
              
              
              30,265
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-22
 The
self-insured liability increased during 2009 primarily due to new claims
incurred and reported since the end of 2008, offset
by the impact of foreign exchange. The timing of claim settlement payments is
dependent upon the resolution
of case-specific matters and may extend over several months or
years.
 Deferred
gain on sale leaseback
 In 2004,
the Company completed the sale of its office building in Edmonton, Alberta, for
cash proceeds of $34,500,000. Concurrent with the sale, the Company leased the
property back for a period of 15 years. The lease is accounted for as an
operating lease. The resulting gain of $7,103,000 was deferred and is being
amortized over the lease term.
 Liabilities
on lease exit activities
 Charges
are accrued when management closes offices in existing operations or finalizes
plans to downsize offices in locations assumed from an acquiree upon a business
acquisition. Included in the liability is the present value of the remaining
lease payments, reduced by estimated sublease rentals that can reasonably be
obtained.
 2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Liability,
      beginning of the year
              
              
              4,081
              
              
              
              4,112Current
      year provision:Established
      for existing operations
              
              
              3,728
              
              
              
              1,488Resulting
      from acquisitions
              
              
              1,677
              
              
              
              1,663Costs
      paid or otherwise settled
              
              
              (3,755
              )
              
              
              (2,475
              )Adjustments
      to purchase price allocation
              
              
              1,029
              
              
              
              (1,181
              )Impact
      of foreign exchange
              
              
              (589
              )
              
              
              474Liability,
      end of the year
              
              
              6,171
              
              
              
              4,081
 10.
                Non-controlling
      interest
 The
Company has a 75% interest in The National Testing Laboratories Limited (NTLL)
and an 80% interest in I.R. Wilson Consultants Ltd. A non-controlling interest
in these subsidiaries represents the minority interest’s share of the
subsidiary’s equity. Income earned by the non-controlling interest in these
subsidiaries was nil during 2009. In 2009, the
Company entered into an agreement whereby it commits to purchase in the future
the non-controlling interests
of NTLL over a period ending in 2014.
 11.
                Commitments
 The
Company has entered into various commitments including commitments for annual
basic premises rent under long-term leases, software support, and equipment and
vehicle operating leases. The commitments for the next five years and thereafter
are as follows:
  (In
      thousands of Canadian dollars)
              
              
              $2010
              
              
              77,7932011
              
              
              67,6942012
              
              
              60,0052013
              
              
              45,6312014
              
              
              34,848Thereafter
              
              
              97,416383,387
 The
premises rental expense for the year ended December 31, 2009, was $64,301,000
(2008 – $48,602,000;2007 –
$41,113,000).
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-23
 12.
                Derivative
      Financial Instruments
 As at
December 31, 2009, the Company had entered into foreign currency forward
contract arrangements that provided for the purchase of US$75,000,000 at rates
ranging from 1.05310 to 1.05485 per US dollar maturing over the next month. As
at December 31, 2008, the Company had entered into foreign currency forward
contract arrangements that provided for the purchase of US$74,000,000 at rates
ranging from 1.1932 to 1.2198 per US dollar maturing over the next month. These
derivative financial instruments were entered into to mitigate the risk of
foreign currency fluctuations on net operating assets denominated in US dollars.
The fair value of these contracts, estimated using third-party market
indications and forecasts as at December 31, 2009, is an unrealized loss of
$270,000 (December 31, 2008 – unrealized gain of
$1,597,000). The unrealized gains or losses relating to these derivative
financial instruments were recorded in income as foreign exchange gains or
losses and in the consolidated balance sheet as other assets or other
liabilities.
 During 2008, the Company
entered into a US$100 million interest rate swap agreement maturing on September
3,2010. This
swap agreement has the effect of converting the variable interest rate on US$100
million of the Company's revolving credit facility, based on a LIBOR rate, into
a fixed interest rate of 3.43%, plus an applicable basis points spread. The fair
value of the interest rate swap, estimated using market rates at December 31,
2009, is an unrealized loss of $2,157,000 ($1,531,000 net of tax) (December 31,
2008– unrealized loss of $4,218,000 [$2,974,000 net of tax]). The
Company has designated the swap as a cash flow hedge against its revolving
credit facility; therefore, the unrealized gains or losses relating to this
derivative financial instrument are recorded in other comprehensive income and
in the consolidated balance sheet as other assets or other liabilities. In the
event that the hedging relationship is no longer effective or ceases to exist,
the gains or losses will be recorded in income. The hedging relationship was
effective from the date of entering into the swap to December 31,
2009.
 13.
                Contingencies
      and Guarantees
 In the
normal conduct of operations, various legal claims are pending against the
Company alleging, among other things, breaches of contract or negligence in
connection with the performance of consulting services. The Company carries
professional liability insurance, subject to certain deductibles and policy
limits, and has a captive insurance company that provides insurance protection
against such claims. In some cases, parties are seeking damages that
substantially exceed the Company's insurance coverage. Based on advice and
information provided by legal counsel, the Company's previous experience with
the settlement of similar claims, and the results of the annual actuarial
review, management believes that the Company has recognized adequate provision
for probable and reasonably estimable liabilities associated with these claims
and that their ultimate resolution will not materially exceed insurance
coverages or have a material adverse effect on the Company's consolidated
financial position or annual results of operations. Management cannot estimate
the extent to which losses exceeding those already recorded in the financial
statements may be incurred.
 During
2009, the Company issued a guarantee, up to a maximum of US$60 million, for
project work with the US federal government. If the guarantee is exercised, the
Company has recourse to its insurers, subject to certain deductibles, policy
terms, and limits, to recover claims costs and damages arising from errors or
omissions in professional services. The Company has not made any payments under
this guarantee, and no amounts have been accrued in the consolidated financial
statements with respect to the guarantee.
 In the
normal course of business, the Company provides indemnifications and, in very
limited circumstances, surety bonds. These are often standard contractual terms
and are provided to counterparties in transactions such as purchase and sale
contracts for assets or shares, service agreements, and leasing transactions.
The Company also indemnifies its directors and officers against any and all
claims or losses reasonably incurred in the performance of their service to the
Company to the extent permitted by law. These indemnifications may require the
Company to compensate the counterparty for costs incurred as a result of various
events, including changes in or in the interpretation of laws and regulations,
or as a result of legal claims or statutory sanctions that may be suffered by
the counterparty as a consequence of the transaction. The terms of these
indemnifications will vary based upon the contract, the nature of which prevents
the Company from making a reasonable estimate of the maximum potential amount
that it could be required to pay to counterparties. The Company carries
liability insurance, subject to certain deductibles and policy limits, that
provides protection against certain insurable indemnifications. Historically,
the Company has not made any significant payments under such indemnifications,
and no amounts have been accrued in the accompanying consolidated financial
statements with respect to these indemnifications.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-24
 14.
                Share
      Capital
  Authorized
 Unlimited
                Common
      shares, with no par value
 Unlimited
                Preferred
      shares issuable in series, with attributes designated by the Board of
      Directors
 Common
shares
 During 2009, no common
shares were repurchased for cancellation pursuant to an ongoing normal course
issuer bid. In 2008, 351,400 (2007– 9,200) shares were repurchased for
cancellation at a cost of $8,914,000; (2007 – $294,000). Of this amount,
$1,688,000 and $58,000 (2007 – $44,000 and $1,000) reduced the share capital and
contributed surplus accounts, respectively, with $7,168,000 (2007 – $249,000)
being charged to retained earnings.
 During 2009, the Company
recognized a stock-based compensation expense of $3,985,000 (2008–
$5,118,000; 2007 – $3,452,000) in administrative and marketing expenses. Of the
amount expensed, $3,028,000 related to the fair value of options granted (2008 –
$4,887,000; 2007 – $1,919,000), $957,000 related to deferred share unit
compensation (2008 – $120,000; 2007 – $1,416,000), and nil related to the
restricted shares issued on the Keith acquisition (2008 – $111,000; 2007 –
$117,000). The fair value of options granted was reflected through contributed
surplus; the deferred share unit compensation was reflected through accrued
liabilities; and the restricted shares were reflected through deferred stock
compensation. Upon the exercise of share options for which a stock-based
compensation expense has been recognized, the cash paid together with the
related portion of contributed surplus is credited to share capital. Upon the
vesting of restricted shares for which a stock-based compensation expense has
been recognized, the related portion of contributed surplus is credited to share
capital.
 Share
options
 Under the
Company's share option plan, options to purchase common shares may be granted by
the Board of Directors to officers and employees. Options are granted at
exercise prices equal to or greater than fair market value at the issue date,
generally vest evenly over a three-year period, and have contractual lives that
range from 7 to 10 years. The aggregate number of common shares reserved for
issuance that may be purchased upon the exercise of options granted pursuant to
the plan shall not exceed 4,487,026 common shares. At December 31, 2009,
1,813,899 options were available for issue.
 The
Company has granted share options to officers and employees to purchase
1,752,298 shares at prices between $9.42 and $30.61 per share. These options
expire on dates between December 19, 2010, and August 18,
2015.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-25
 
 2009
              
              
              2008
              
              
              2007Shares
              
              
              Weighted
                  Average
                  Exercise
                  Price
              
              
              Shares
              
              
              Weighted
                  Average
                  Exercise
                  Price
              
              
              Shares
              
              
              Weighted
                  Average
                  Exercise
                  Price#
              
              
              
              $
              
              
              
              #
              
              
              $
              
              
              
              #
              
              
              $Share
      options, beginning of the year
              
              
              2,061,828
              
              
              
              20.97
              
              
              
              1,751,022
              
              
              
              18.32
              
              
              
              1,702,784
              
              
              
              11.92Granted
              
              
              -
              
              
              
              -
              
              
              
              480,000
              
              
              
              29.40
              
              
              
              467,500
              
              
              
              30.61Exercised
              
              
              (268,697
              )
              
              
              8.73
              
              
              
              (97,860
              )
              
              
              12.25
              
              
              
              (386,598
              )
              
              
              4.97Forfeited
              
              
              (30,837
              )
              
              
              29.34
              
              
              
              (58,502
              )
              
              
              24.86
              
              
              
              (31,664
              )
              
              
              18.69Cancelled
              
              
              (9,996
              )
              
              
              30.21
              
              
              
              (12,832
              )
              
              
              22.87
              
              
              
              (1,000
              )
              
              
              20.42Share
      options, end of the year
              
              
              1,752,298
              
              
              
              22.65
              
              
              
              2,061,828
              
              
              
              20.97
              
              
              
              1,751,022
              
              
              
              18.32
 The
options held by officers and employees at December 31, 2009, were as
follows:
  Options
      Outstanding
              
              
              Options
      ExercisableRange
      of Exercise
      Prices
      $
              
              
              Outstanding
      #
              
              
              Weighted
      Average
      Remaining
      Contractual
      Life in
      Years
              
              
              Weighted
      Average
      Exercise
      Price
      $
              
              
              Shares
      Exercisable
      #
              
              
              Weighted
      Average
      Remaining
      Contractual
      Life in
      Years
              
              
              Weighted
      Average
      Exercise
      Price
      $9.42–
      13.55
              
              
              
              511,631
              
              
              
              1.91
              
              
              
              11.66
              
              
              
              511,631
              
              
              
              1.91
              
              
              
              11.6620.37–
      20.42
              
              
              
              362,334
              
              
              
              3.65
              
              
              
              20.39
              
              
              
              362,334
              
              
              
              3.65
              
              
              
              20.3929.40–
      30.61
              
              
              
              878,333
              
              
              
              5.15
              
              
              
              29.98
              
              
              
              434,017
              
              
              
              4.98
              
              
              
              30.189.42–
      30.61
              
              
              
              1,752,298
              
              
              
              3.89
              
              
              
              22.65
              
              
              
              1,307,982
              
              
              
              3.41
              
              
              
              20.23
 The fair
value of options granted subsequent to January 1, 2002, is determined at the
date of grant using the Black-Scholes option-pricing model. The Black-Scholes
option valuation model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including expected share price volatility.
 The
estimated fair value of options granted at the share market price on the grant
date was determined using the weighted average assumptions indicated below. No
options were granted in 2009.
  2008
              
              
              2007Risk-free
      interest rate (%)
              
              
              3.09
              
              
              
              4.31Expected
      hold period to exercise (years)
              
              
              5.5
              
              
              
              5.5Volatility
      in the price of the Company's shares (%)
              
              
              29.6
              
              
              
              27.5Weighted
      average fair value per option ($)
              
              
              9.82
              
              
              
              10.65
 The expected volatility
was based on the historical volatility of the Company’s shares over a
period commensurate with the expected term of the share option. The risk-free
interest rate for the expected life of the options was based on the yield
available on government bonds, with an approximate equivalent remaining term at
the time of the grant. Historical data was used to estimate the expected life of
the option.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-26
 A summary of the status of
the Company’s non-vested options as of December 31, 2009, and of changes
in the year are as follows:
 Number
      of Shares Subject to Option
              
              
              Weighted
      Average Grant Date Fair Value#
              
              
              $Non-vested,
      beginning of the year
              
              
              898,854
              
              
              
              9.77Vested
              
              
              (423,701
              )
              
              
              9.43Forfeited
              
              
              (30,837
              )
              
              
              9.99Non-vested
      share options, end of the year
              
              
              444,316
              
              
              
              10.08
 As of
December 31, 2009, 444,316 options remained unvested, and there was a total
unrecognized compensation cost of $1,486,000 related to the Company’s share option plans.
This cost is expected to be recognized over a weighted average period of 1.31
years.
 For all
outstanding options at December 31, 2009, the aggregate intrinsic value was
$13,581,000. For fully vested share options and share options outstanding at
December 31, 2009, that are expected to vest in the future, the aggregate
intrinsic value was $13,541,000. For options exercisable at December 31, 2009,
the intrinsic value at December 31, 2009, was $13,307,000. The total intrinsic
value of options exercised during the years ended December 31, 2009, 2008, and
2007, was $5,181,000, $1,910,000, and $8,186,000,
respectively.
 Deferred
share units
 Under the Company’s
deferred share unit plan, the chief executive officer (CEO) and directors of the
board of the Company may receive deferred share units equal to one common share.
These units are paid out to the CEO and directors upon their death or
retirement, or in the case of the CEO, on termination, in the form of cash and
are valued at the weighted-by-volume average of the closing market price of the
Company’s common shares for the last 10 trading days of the month of death,
retirement, or termination. Deferred share units cannot be paid in the form of
Company shares. In 2009, $428,000 deferred share units were paid (2008 –
$464,000; 2007 – $450,000). These units are recorded at market value based on
the weighted by volume average market price of the Company’s common shares for
the last 10 trading days of the period end date. As at December 31, 2009, 78,472
units were outstanding (2008 – 60,800; 2007 – 56,000) with a market value of
$2,361,000 (2008 – $1,833,000; 2007 – $2,178,000).
 Restricted
shares
 In 2005,
the former shareholders of Keith received restricted shares in connection with
its acquisition. These restricted shares vested over a period ending April 1,
2008. Upon the vesting of the restricted shares, common shares were issued. As
at December 31, 2009, no restricted shares were outstanding (2008 – nil; 2007 –
5,792).
 15.
                Financial
      Instruments
 The
Company classifies its financial instruments as follows:
 ●
                Cash
      and cash equivalents and cash held in escrow are classified as financial
      assets held for trading and are recorded at fair value, with realized and
      unrealized gains and losses reported in
income.
 ●
                Accounts
      receivable are classified as receivables and are initially accounted for
      at fair value and subsequently adjusted for any allowance for doubtful
      accounts, with realized gains and losses reported in
    income.
 ●
                Investments
      held for self-insured liabilities are classified as financial assets
      available for sale and are recorded at fair value, with accumulated
      unrealized gains and losses reported in other comprehensive income until
      disposed of, at which time the realized gains and losses are recognized in
      income.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-27
 ●
                Accounts
      payable and accrued liabilities and long-term debt are classified as other
      financial liabilities and are initially recorded at fair value and
      subsequently recorded at amortized cost using the effective interest rate
      method, with realized gains and losses reported in
  income.
 ●
                Derivative
      other assets and liabilities are classified as held for trading and are
      accounted for at fair value, with realized and unrealized gains and losses
      reported in income unless the derivative qualifies and is designated as an
      effective cash flow hedge, in which case, unrealized gains and losses are
      recorded in other comprehensive
income.
 Fair
Value
 The fair
value of a financial instrument on initial recognition is normally the
transaction price, which is the value of the consideration given or received.
Transaction costs on financial instruments are expensed when incurred. Purchases
and sales of financial assets are accounted for at trade dates. Subsequent to
initial recognition, the fair values of financial instruments are based on the
bid prices in quoted active markets for financial assets and on the ask prices
for financial liabilities. The fair values of derivatives are based on
third-party indicators and forecasts. The fair values of cash and cash
equivalents, cash held in escrow, accounts receivable, and accounts payable and
accrued liabilities approximate their carrying values because of the short-term
maturity of these instruments. The carrying value of bank loans approximates
their fair value because the applicable interest rate is based on variable
reference rates. The carrying values of other financial assets and financial
liabilities approximate their fair values except as otherwise disclosed in the
consolidated financial statements.
 CICA
Handbook Section 3862 establishes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value. The three levels of
the fair value hierarchy are described below:
 ●
                Level
      1 inputs are quoted prices in active markets for identical assets or
      liabilities at the measurement
date.
 ●
                Level
      2 inputs are observable inputs other than quoted prices included within
      level 1, such as quoted prices for similar assets or liabilities in active
      markets, quoted prices for identical assets or liabilities in markets that
      are not active, or other inputs that are observable directly or
      indirectly.
 ●
                Level
      3 inputs are unobservable inputs for the asset or liability that reflect
      the reporting entity’s own assumptions and are not based on observable
      market data.
 In
forming estimates, the Company uses the most observable inputs available for
valuation purposes. If a fair value measurement reflects inputs of different
levels within the hierarchy, the financial instrument is categorized based on
the lowest level of significant input.
 The following table
presents the Company’s fair value hierarchy for those assets and
liabilities measured at fair value on a recurring basis as of December 31,
2009.
  Carrying
                  Amount
      of
                  Asset/Liability
      at
                  December
      31,
              
              
              Quoted Prices
      in
                  Active
      Markets
                  for
      Identical
                  Items
              
              
              Significant
                  Other
                  Observable
                  Inputs
              
              
              Significant
                  Unobservable
                  Inputs2009
              
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $
              
              
              $Assets:Investments
      held for self-insured liabilities
              
              
              38,418
              
              
              
              38,418
              
              
              
              -
              
              
              
              -Liabilities:Foreign
      currency forward contracts
              
              
              270
              
              
              
              -
              
              
              
              270
              
              
              
              -Interest
      rate swap
              
              
              2,157
              
              
              
              -
              
              
              
              2,157
              
              
              
              -2,427
              
              
              
              -
              
              
              
              2,427
              
              
              
              -
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-28
 
 Carrying
      Amount of Asset/Liability at December 31,
              
              
              Quoted Prices in
                  Active Markets
                  for Identical
      Items
              
              
              Significant Other
                  Observable Inputs
              
              
              Significant
                  Unobservable
                  Inputs2008
              
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $
              
              
              $Assets:Investments
      held for self-insured liabilities
              
              
              26,540
              
              
              
              26,540
              
              
              
              -
              
              
              
              -Foreign
      currency forward contracts
              
              
              1,597
              
              
              
              -
              
              
              
              1,597
              
              
              
              -28,137
              
              
              
              26,540
              
              
              
              1,597
              
              
              
              -Liabilities:Interest
      rate swap
              
              
              4,218
              
              
              
              -
              
              
              
              4,218
              
              
              
              -
 Investments
held for self-insured liabilities are measured based on active market prices for
identical bonds and equity securities. Forward contracts are determined based on
the estimated cash payment or receipt necessary to settle the contract. Cash
payments or receipts are based on discounted cash flow analysis using current
market rates and prices. The valuation of interest rate swap is based on similar
transactions observable in active markets or industry standard models that
primarily rely on market observable inputs.
 Credit
Risk
 Credit
risk is the risk of financial loss to the Company if a counterparty to a
financial instrument fails to meet its contractual obligation. Financial
instruments that subject the Company to credit risk consist primarily of cash
and cash equivalents, derivative financial instruments, investments held for
self-insured liabilities, and accounts receivable. The Company's maximum amount
of credit risk exposure is limited to the carrying amount of these financial
instruments, which is $306,313,000 as at December 31, 2009 (2008 –
$395,751,000).
 The
Company limits its exposure to credit risk by placing its cash and cash
equivalents in and entering into derivative agreements with high-quality credit
institutions. Investments held for self-insured liabilities include bonds and
equities. The risk associated with bonds and equities is mitigated by the
overall quality and mix of the Company's investment
portfolio.
 The
Company maintains an allowance for estimated losses on accounts receivable. The
estimate is based on the best assessment of the collectibility of the related
receivable balance based, in part, on the age of the outstanding accounts
receivable and on the Company's historical collection and loss experience. The
following table provides a reconciliation of changes to the Company's allowance
for doubtful accounts:
 Allowance
for doubtful accounts
 2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $Balance,
      beginning of the year
              
              
              11,597
              
              
              
              10,508
              
              
              
              6,303Provision
      for doubtful accounts
              
              
              17,151
              
              
              
              22,508
              
              
              
              17,221Deductions
              
              
              (17,734
              )
              
              
              (23,702
              )
              
              
              (11,275
              )Impact
      of foreign exchange
              
              
              (1,619
              )
              
              
              2,283
              
              
              
              (1,741
              )Balance,
      end of the year
              
              
              9,395
              
              
              
              11,597
              
              
              
              10,508
 Accounts
receivable assumed from acquired companies are recognized at their fair value at
the time of acquisition.
 The
Company mitigates the risk associated with accounts receivable by providing
services to diverse clients in various industries and sectors of the economy. It
does not concentrate its credit risk in any particular client, industry,
economic, or geographic sector. In addition, management reviews accounts
receivable past due on an ongoing basis with the objective of identifying
matters that could potentially delay the collection of funds at an early stage.
The Company monitors accounts receivable to an internal target of days of
revenue in accounts receivable (a non-GAAP measure). At December 31, 2009, there
were 59 days of revenue in accounts receivable (2008 – 64
days).
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-29
  Liquidity
Risk
 Liquidity risk is the risk
that the Company will not be able to meet obligations associated with its
financial liabilitiesas they fall due. The
Company’s liquidity needs can be met through a variety of sources,
including cash generated from operations, long- and short-term borrowings from
the $300 million credit facility, and the issuance of common shares. The unused
capacity of the credit facility at December 31, 2009, was $163,377,000. The
Company believes that internally generated cash flows, supplemented by
borrowings and additional equity issues, if necessary, will be sufficient to
cover its normal operating and capital expenditures as well as currently
anticipated acquisition activity in 2010. Liquidity risk is managed according to
the Company’s internal guideline of maintaining a net debt to equity ratio of
less than 0.5 to 1 (note 16).
 The
timing of undiscounted cash outflows relating to financial liabilities as at
December 31, 2009, is outlined in the table below:
  Total
              Less
      than 1Year
              
              
              1–3
      Years
              
              
              After
      3 Years(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $
              
              
              $Accounts
      payable and accrued liabilities
              
              
              167,175
              
              
              
              167,175
              
              
              
              -
              
              
              
              -Long-term
      debt
              
              
              234,953
              
              
              
              35,428
              
              
              
              198,592
              
              
              
              933Interest
      rate swap
              
              
              2,157
              
              
              
              2,157
              
              
              
              -
              
              
              
              -Foreign
      currency forward contract
              
              
              270
              
              
              
              270
              
              
              
              -
              
              
              
              -Other
      long-term liabilities
              
              
              7,884
              
              
              
              2,041
              
              
              
              2,978
              
              
              
              2,865Total
      contractual obligations
              
              
              412,439
              
              
              
              207,071
              
              
              
              201,570
              
              
              
              3,798
 In
addition to the financial liabilities listed in the table above, the Company
will pay interest on the bank loan outstanding in future periods. Further
information on long-term debt is included in note 8.
 Interest
Rate Risk
 Interest
rate risk is the risk that the fair value of the future cash flows of a
financial instrument will fluctuate because of changes in market rates of
interest. The Company is subject to interest rate cash flow risk to the extent
that its credit facilities are based on floating rates of interest. In addition,
the Company is subject to interest rate pricing risk to the extent that its
investments held for self-insured liabilities include fixed-rate government and
corporate bonds. The Company minimizes its exposure to floating rates of
interest, when appropriate, by entering into interest rate swap agreements (note
12).
 If the
interest rate on the Company's loan balance at December 31, 2009, had been 0.5%
higher, with all other variables held constant, net income would have decreased
by $106,000 in the year. If the interest rate had been 0.5% lower, there would
have been an equal and opposite impact on net income. This analysis excludes
US$100 million of the revolving credit facility due to the interest rate swap
agreement entered into during the year.
 Foreign
Exchange Risk
 Foreign exchange risk is
the risk that the fair value of the future cash flows of a financial instrument
will fluctuatebecause of changes in
foreign exchange rates. Foreign exchange gains or losses in the Company’s
net income arise on the translation of foreign-denominated assets and
liabilities (such as accounts receivable, accountspayable and accrued
liabilities, and long-term debt) held in the Company’s Canadian
operations and non-US-based foreign subsidiaries. The Company minimizes its
exposure to foreign exchange fluctuations on these items by matching US-dollar
liabilities and, when appropriate, by entering into forward contracts to buy or
sell US dollars in exchange for Canadian dollars (note 12).
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-30
 If the
exchange rates had been $0.01 higher or lower at December 31, 2009, with all
other variables held constant, net income would have increased or decreased by
$16,000.
 Foreign exchange
fluctuations may also arise on the translation of the Company’s US-based
subsidiaries and are recorded as cumulative translation adjustments in other
comprehensive income. The Company does not hedge for this foreign exchange
risk.
 16.
                Capital
      Management
 The Company’s
objective when managing capital is to provide sufficient capacity to cover
normal operating and capital expenditures as well as acquisition growth while
maintaining an adequate return for shareholders. The Company defines its capital
as the aggregate of long-term debt (including the current portion) and
shareholders' equity.
 The
Company manages its capital structure to maintain the flexibility to adjust to
changes in economic conditions and acquisition growth and to respond to interest
rate, foreign exchange, credit, and other risks. In order to maintain or adjust
its capital structure, the Company may purchase shares for cancellation pursuant
to normal course issuer bids, issue new shares, or raise or retire
debt.
 The
Company periodically monitors capital by maintaining the following ratio
targets:
 ●
                Net
      debt to equity ratio below 0.5 to
1
 ●
                Return
      on equity (ROE) at or above
14%
 These
objectives are established on an annual basis and are monitored on a quarterly
basis. The targets for 2009 remained unchanged from 2008.
 Net debt to equity ratio,
a non-GAAP measure, is calculated as the sum of (1) long-term debt, including
current portion, plus bank indebtedness, less cash and cash held in escrow,
divided by (2) shareholders’ equity. The Company's net debt to equity
ratio was 0.40 to 1 at December 31, 2009 (December 31, 2008 – 0.26 to 1). Going
forward, there may be occasions when the Company exceeds its target by
completing acquisitions that increase its debt level above the target for a
period of time.
  ROE, a
non-GAAP measure, is calculated as net income for the last four quarters,
divided by average shareholders' equity over each of these quarters. The
Company's ROE was 10.1% for the year ended December 31, 2009 (December 31, 2008
– 6.1%). The
Company's ROE was below target because of the goodwill impairmentcharges recorded in the
third quarter of 2009 and 2008 and the intangible assets impairment charge
recorded in the third quarter of 2008.
  The
Company is subject to restrictive covenants related to its $300 million
revolving credit facility that are measured on a quarterly basis. These
covenants include, but are not limited to, debt to earnings ratio and earnings
to debt service ratio. Failure to meet the terms of one or more of these
covenants may constitute a default, potentially resulting in accelerating the
repayment of the debt obligation. The Company was in compliance with all the
covenants under this agreement as at and throughout the year ended December 31,
2009.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-31
 17.
                Accumulated
      Other Comprehensive Income
(Loss)
  Cumulative
      Translation
      Adjustments
              
              
              Unrealized
      Gains
      (Losses) on Cash
      Flow Hedge
              
              
              Unrealized
      Gains
      (Losses) on
      Financial Assets
              
              
              Realized
      Gains on
      Financial Assets
      Transferred
      to Net
      Income
              
              
              Total(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $Balance,
      December 31, 2006
              
              
              (24,844
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (24,844
              )Change
      in accounting policy
              
              
              -
              
              
              
              -
              
              
              
              481
              
              
              
              -
              
              
              
              481Balance,
      January 1, 2007, as adjusted
              
              
              (24,844
              )
              
              
              -
              
              
              
              481
              
              
              
              -
              
              
              
              (24,363
              )Current
      period activity
              
              
              (45,669
              )
              
              
              -
              
              
              
              1,280
              
              
              
              (249
              )
              
              
              (44,638
              )Income
      tax effect
              
              
              -
              
              
              
              -
              
              
              
              (31
              )
              
              
              4
              
              
              
              (27
              )Balance,
      December 31, 2007
              
              
              (70,513
              )
              
              
              -
              
              
              
              1,730
              
              
              
              (245
              )
              
              
              (69,028
              )Current
      period activity
              
              
              76,923
              
              
              
              (4,218
              )
              
              
              (3,706
              )
              
              
              (152
              )
              
              
              68,847Income
      tax effect
              
              
              -
              
              
              
              1,244
              
              
              
              65
              
              
              
              3
              
              
              
              1,312Balance,
      December 31, 2008
              
              
              6,410
              
              
              
              (2,974
              )
              
              
              (1,911
              )
              
              
              (394
              )
              
              
              1,131Current
      period activity
              
              
              (57,248
              )
              
              
              2,061
              
              
              
              2,739
              
              
              
              223
              
              
              
              (52,225
              )Income
      tax effect
              
              
              -
              
              
              
              (618
              )
              
              
              (48
              )
              
              
              (4
              )
              
              
              (670
              )Balance,
      December 31, 2009
              
              
              (50,838
              )
              
              
              (1,531
              )
              
              
              780
              
              
              
              (175
              )
              
              
              (51,764
              )
 Effective January 1, 2007,
the Company adopted CICA Handbook Section 3855,“Financial
Instruments—Recognition and Measurement”; Section 1530, “Comprehensive Income”;
and Section 3251, “Equity.” By adopting these standards, the Company recorded
investments held for self-insured liabilities at fair value on January 1, 2007.
In accordance with transitional provisions, other assets increased by
approximately $493,000, opening accumulated other comprehensive income increased
by approximately $481,000 (after-tax), and future income tax liabilities
increased by $12,000.
 The
foreign currency cumulative translation adjustments represent the unrealized
gain or loss on the Company's net investment in self-sustaining US-based
operations. The change in the cumulative translation adjustments during the year
relates to the fluctuation in the value of the Canadian dollar relative to the
US dollar. Balance sheet accounts denominated in US dollars have been translated
to Canadian dollars at the rate of 1.0510 (December 31, 2008 – 1.2180; 2007 –
0.9913).
  The
unrealized gains (losses) on cash flow hedge represent the unrealized gain or
loss on the Company's interest rate swap agreement (note 12). The length of time
over which the Company is hedging its exposure to the variability in future cash
flows from the interest on its revolving credit facility is eight
months.
 The
unrealized gains (losses) on financial assets represent the change in fair value
on investments held for self-insured liabilities (note 6).
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-32
 18.
                Income
      Taxes
 The
effective income tax rate in the consolidated statements of income differs from
statutory Canadian tax rates as a result of the following:
  2009
              
              
              2008
              
              
              2007%
              
              
              %
              
              
              %Income
      tax expense at statutory Canadian rates
              
              
              30.4
              
              
              
              31.2
              
              
              
              33.6Increase
      (decrease) resulting from:Impairment
      of goodwill
              
              
              10.8
              
              
              
              24.8
              
              
              
              -Income
      from associated companies
              
              
              (0.5
              )
              
              
              -
              
              
              
              (0.1
              )Rate
      differential on foreign income
              
              
              (1.0
              )
              
              
              (0.1
              )
              
              
              (0.9
              )Non-deductible
      expenses:Meals
      and entertainment
              
              
              1.0
              
              
              
              1.1
              
              
              
              0.9Stock-based
      compensation
              
              
              0.7
              
              
              
              1.0
              
              
              
              0.1Non-taxable
      foreign income net of non-creditable withholding
    taxes
              
              
              (3.0
              )
              
              
              (2.9
              )
              
              
              (3.2
              )Other
              
              
              0.6
              
              
              
              (0.1
              )
              
              
              (0.3
              )39.0
              
              
              
              55.0
              
              
              
              30.1
 Since the
Company operates in several tax jurisdictions, its income is subject to various
rates of taxation. The details of income before income taxes are as
follows:
  2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $Domestic
              
              
              131,503
              
              
              
              128,225
              
              
              
              101,433Foreign
              
              
              (39,837
              )
              
              
              (63,726
              )
              
              
              (2,319
              )Total
      income before income taxes
              
              
              91,666
              
              
              
              64,499
              
              
              
              99,114
 ccvvvvff
    2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $Current:
      Domestic
              
              
              40,425
              
              
              
              41,329
              
              
              
              34,179Foreign
              
              
              1,174
              
              
              
              (116
              )
              
              
              815Total
      current expense
              
              
              41,599
              
              
              
              41,213
              
              
              
              34,994Future:
      Domestic
              
              
              (3,267
              )
              
              
              (133
              )
              
              
              (1,598
              )Foreign
              
              
              (2,606
              )
              
              
              (5,598
              )
              
              
              (3,561
              )Total
      future recovery
              
              
              (5,873
              )
              
              
              (5,731
              )
              
              
              (5,159
              )Total:
      Domestic
              
              
              37,158
              
              
              
              41,196
              
              
              
              32,581Foreign
              
              
              (1,432
              )
              
              
              (5,714
              )
              
              
              (2,746
              )Total
      income tax expense
              
              
              35,726
              
              
              
              35,482
              
              
              
              29,835
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-33
 Significant
components of the Company's future income tax assets and liabilities are as
follows:
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Future
      income tax assetsDifferences
      in timing of deductibility of expenses
              
              
              21,043
              
              
              
              23,120Loss
      carryforwards
              
              
              13,680
              
              
              
              8,328Share
      issue and other financing costs
              
              
              47
              
              
              
              133Tax
      cost of property and equipment in excess of carrying
      value
              
              
              1,049
              
              
              
              2,114Deferred
      gain on sale of building
              
              
              1,067
              
              
              
              1,124Other
              
              
              2,572
              
              
              
              1,23239,458
              
              
              
              36,051Less
      current portion
              
              
              15,518
              
              
              
              15,26523,940
              
              
              
              20,7862009
              
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Future
      income tax liabilitiesCash
      to accrual adjustments on acquisitions of US
      subsidiaries
              
              
              2,266
              
              
              
              5,025Differences
      in timing of taxability of revenues
              
              
              9,202
              
              
              
              7,492Carrying
      value of property and equipment in excess of tax
cost
              
              
              6,668
              
              
              
              6,283Carrying
      value of intangible assets in excess of tax cost
              
              
              23,262
              
              
              
              20,743Other
              
              
              3,781
              
              
              
              86945,179
              
              
              
              40,412Less
      current portion
              
              
              15,643
              
              
              
              13,92029,536
              
              
              
              26,492
 At
December 31, 2009, loss carryforwards of approximately $6,323,000 are available
to reduce the taxable income of certain Canadian subsidiaries. These losses
expire as set out below:
  (In
      thousands of Canadian dollars)
              
              
              
              
              $2029
              
              
              4,0422028
              
              
              342027
              
              
              7192026
              
              
              1,184pre
              2016
              
              
              3446,323
 In
addition, the Company has federal loss carryforwards of approximately
$30,977,000 (US$29,474,000) that are available to reduce the taxable income of
certain US subsidiaries and that expire at varying times over the next 20
years.
 The
potential income tax benefits that will result from the application of Canadian
and US tax losses have been recognized in these consolidated financial
statements.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-34
 19.
                Earnings
      Per Share
 The
number of basic and diluted common shares outstanding, as calculated on a
weighted average basis, is as follows:
 2009
              
              
              2008
              
              
              2007#
              
              
              
              #
              
              
              
              #Basic
      shares outstanding
              
              
              45,544,688
              
              
              
              45,584,612
              
              
              
              45,577,261Share
      options (dilutive effect of 1,329,798 options; 2008 – 1,621,828; 2007 –
      1,751,022)
              
              
              276,927
              
              
              
              472,107
              
              
              
              630,280Restricted
      shares (dilutive effect of nil restricted shares; 2008 – nil; 2007 –
      5,792)
              
              
              -
              
              
              
              562
              
              
              
              19,156Diluted
      shares outstanding
              
              
              45,821,615
              
              
              
              46,057,281
              
              
              
              46,226,697
 At
December 31, 2009, 422,500 options were antidilutive and therefore were not
considered in computing diluted earnings per share.
 20.
                Cash
      Flows From Operating
Activities
 Cash
flows from operating activities determined by the indirect method are as
follows:
  2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income for the year
              
              
              55,940
              
              
              
              29,017
              
              
              
              69,279Add
      (deduct) items not affecting cash:Depreciation
      of property and equipment (note
      1b)
              
              
              24,547
              
              
              
              21,820
              
              
              
              15,458Amortization
      of intangible assets (note
      1b)
              
              
              19,820
              
              
              
              14,264
              
              
              
              7,282Impairment
      of goodwill and intangible assets
              
              
              35,000
              
              
              
              58,369
              
              
              
              -Future
      income tax
              
              
              (5,873
              )
              
              
              (5,731
              )
              
              
              (5,159
              )Loss
      (gain) on dispositions of investments and property and
      equipment
              
              
              2,520
              
              
              
              (520
              )
              
              
              (1,085
              )Stock-based
      compensation expense (note
      14)
              
              
              3,985
              
              
              
              5,118
              
              
              
              3,452Provision
      for self-insured liability (note
      9)
              
              
              9,443
              
              
              
              12,470
              
              
              
              6,153Other
      non-cash items
              
              
              (9,446
              )
              
              
              (3,445
              )
              
              
              (2,135
              )Share
      of income from equity investments
              
              
              (3,690
              )
              
              
              (160
              )
              
              
              (292
              )Dividends
      from equity investments
              
              
              1,283
              
              
              
              150
              
              
              
              450133,529
              
              
              
              131,352
              
              
              
              93,403Change
      in non-cash working capital accounts:Accounts
      receivable
              
              
              37,298
              
              
              
              23,987
              
              
              
              20,848Costs
      and estimated earnings in excess of billings
              
              
              (8,486
              )
              
              
              21,305
              
              
              
              (25,067
              )Prepaid
      expenses
              
              
              (1,953
              )
              
              
              2,499
              
              
              
              1,715Accounts
      payable and accrued liabilities
              
              
              (49,800
              )
              
              
              (20,088
              )
              
              
              (11,106
              )Billings
      in excess of costs and estimated earnings
              
              
              6,522
              
              
              
              2,728
              
              
              
              3,485Income
      taxes payable/recoverable
              
              
              (17,133
              )
              
              
              (1,753
              )
              
              
              4,221(33,552
              )
              
              
              28,678
              
              
              
              (5,904
              )Cash
      flows from operating activities
              
              
              99,977
              
              
              
              160,030
              
              
              
              87,499
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-35
 21.
                Joint
      Ventures
 The
Company participates in joint ventures with other parties as
follows:
  Percentage
      Owned2009
              
              
              2008
              
              
              2007%
              
              
              %
              
              
              %yyC.T.
      Joint Venture
              
              
              17
              
              
              
              17
              
              
              
              17Stantec–
      S&L Partnership
              
              
              n/a
              
              
              
              50
              
              
              
              50Edmonton
      International Airports Joint Venture
              
              
              n/a
              
              
              
              33
              
              
              
              33Dunlop
      Joint Ventures
              
              
              50–53
              
              
              
              33–68
              
              
              
              33–68Stantec
      Architecture Ltd./J.L. Richards & Associates Joint
      Venture
              
              
              50
              
              
              
              50
              
              
              
              50Stantec/Parkin
      Joint Venture
              
              
              n/a
              
              
              
              67
              
              
              
              67Smith/Chong
      Joint Venture
              
              
              50
              
              
              
              50
              
              
              
              50Coleson
      Power Group Inc.
              
              
              50
              
              
              
              50
              
              
              
              50ACCENT
      Engineering Consultants Incorporated
              
              
              40
              
              
              
              40
              
              
              
              40FFEB
      JV, L.L.C.
              
              
              30
              
              
              
              30
              
              
              
              30Hatch
      McIntosh Alliance Joint Venture
              
              
              50
              
              
              
              50
              
              
              
              n/aKuwabara
      Payne McKenna Blumberg (KPMB)
              
              
              50
              
              
              
              50
              
              
              
              n/aHNTB
      Joint Venture
              
              
              50
              
              
              
              n/a
              
              
              
              n/aSTARR
              
              
              15
              
              
              
              n/a
              
              
              
              n/aEM&I
      Stantec Ltd.
              
              
              50
              
              
              
              n/a
              
              
              
              n/aStassinu
      Stantec Limited Partnership
              
              
              49
              
              
              
              n/a
              
              
              
              n/aGranary/Driscoll
      Joint Venture
              
              
              50
              
              
              
              n/a
              
              
              
              n/a
 In 2004,
as part of the acquisition of Dunlop Architects Inc. (Dunlop), the Company
acquired the interest of 13 joint ventures entered into by Dunlop with 2
remaining active at December 31, 2009 (2008 – 5 were active; 2007 – 7
were active). These joint ventures are included in the above table under Dunlop
Joint Ventures.
 A summary
of the assets, liabilities, revenues, expenses, and cash flows included in the
consolidated financial statements related to joint ventures (before intercompany
eliminations) is as follows:
  2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $Statements
      of incomeGross
      revenue
              
              
              32,757
              
              
              
              25,827
              
              
              
              4,464Subcontractor
      costs and other direct expenses
              
              
              27,753
              
              
              
              24,524
              
              
              
              3,912Administrative
      and marketing expenses
              
              
              2,533
              
              
              
              911
              
              
              
              129Net
      income for the year
              
              
              2,471
              
              
              
              392
              
              
              
              423Balance
      sheetsCurrent
      assets
              
              
              9,458
              
              
              
              12,649
              
              
              
              5,536Current
      liabilities
              
              
              7,753
              
              
              
              12,120
              
              
              
              4,867Statements
      of cash flowsCash
      flows from (used in) operating activities
              
              
              1,707
              
              
              
              (547
              )
              
              
              (493
              )
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-36
  22.
              Segmented
      Information
  The
Company provides comprehensive professional services in the area of
infrastructure and facilities throughout North America and internationally. It
considers the basis on which it is organized, including geographic areas and
service offerings, in identifying its reportable segments. Operating segments of
the Company are defined as components of the Company for which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in allocating resources and assessing performance. The
chief operating decision maker is the chief executive officer of the Company,
and the Company's operating segments are based on its regional geographic
areas.
 The
Company has four operating segments, consisting of Canada West, Canada East, US
East, and US West, which are aggregated into the Consulting Services reportable
segment.
  Geographic
      information
              
              
              
              
              Property
      and Equipment, Goodwill, Intangible Assets2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              
              
              
              $
              
              
              $Canada
              
              
              
              
              
              306,718
              
              
              
              183,828United
      States
              
              
              
              
              
              334,031
              
              
              
              422,881International
              
              
              
              
              
              476
              
              
              
              508641,225
              
              
              
              607,217Geographic
      information
              Gross
      Revenue2009
              
              
              
              2008
              
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $Canada
              
              
              861,905
              
              
              
              649,465
              
              
              
              539,349United
      States
              
              
              631,091
              
              
              
              677,545
              
              
              
              405,195International
              
              
              26,869
              
              
              
              24,941
              
              
              
              10,0751,519,865
              
              
              
              1,351,951
              
              
              
              954,619
 Gross
revenue is attributed to countries based on the location of the
project.
  Practice
      area information
              
              Gross
      Revenue2009
              
              
              2008
              
              
              2007(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $Consulting
      ServicesBuildings
              
              
              281,437
              
              
              
              282,516
              
              
              
              211,801Environment
              
              
              642,367
              
              
              
              390,016
              
              
              
              175,936Industrial
              
              
              245,289
              
              
              
              241,142
              
              
              
              138,977Transportation
              
              
              181,989
              
              
              
              172,313
              
              
              
              143,140Urban
      Land
              
              
              168,783
              
              
              
              265,964
              
              
              
              284,7651,519,865
              
              
              
              1,351,951
              
              
              
              954,619
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-37
  Customers
  The
Company has a large number of clients in various industries and sectors of the
economy. Gross revenue is not concentrated in any particular
client.
 23.
                Employee
      Future Benefits
 In 2009, the Company
recorded an expense of $23,548,000 (2008– $19,034,000; 2007 –
$13,863,000) for contributions made to defined contribution plans in the
year.
 24.
                Investment
      Tax Credits
 Investment
tax credits arising from qualifying scientific research and experimental
development efforts pursuant to existing tax legislation are recorded as a
reduction of the applicable administrative and marketing expenses when there is
reasonable assurance of their ultimate realization. In 2009, investment tax
credits of $1,555,000 (2008 – $1,260,000; 2007 –
$1,662,000) were recorded and reduced administrative and marketing
expenses.
 25.
                US
      GAAP
 The
consolidated financial statements of the Company are prepared in Canadian
dollars in accordance with accounting principles generally accepted in Canada.
The following adjustments and disclosures would be required in order to present
these consolidated financial statements in accordance with US GAAP. Investments
in joint ventures are accounted for using the equity method under US GAAP,
whereas Canadian GAAP requires the proportionate consolidation method. As
permitted by the SEC, disclosure of the effect of this difference is not
required.
 a)
                Reconciliation
      to US GAAP
 i)
                Business
      combinations
 There
were no identifiable material items that resulted in a change in net income
presented under Canadian GAAP and US GAAP except for transactions accounted for
as business combinations in 2009. This difference arose on the adoption of the
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 141R "Business Combinations" (Accounting Standards
Codification [ASC] 805-10/SFAS 141R), which impacted the accounting for the
Jacques Whitford and Granary Associates, Inc. acquisitions (note 2). The Company
integrates the operations and systems of acquired entities shortly after the
acquisition date; therefore, it is impracticable to disclose the amount of
revenue and earnings of the acquired entity in the consolidated financial
statements of the Company since the acquisition date.
 Condensed
consolidated statement of income using US GAAP
 
 2009(In thousands of Canadian dollars)
              
              $Net
      income, as reported under Canadian GAAP
              
              
              55,940Add
      (deduct) adjustments to arrive at US GAAP:Lease
      exit costs (1)
              
              
              (3,220
              )Acquistion-related
      costs (3)
              
              
              (2,167
              )Income
      taxes (6)
              
              
              1,829Net
      income, based on US GAAP
              
              
              52,382Earnings
      per share: basic
              – Canadian GAAP net
      income
              
              
              1.23–
      US GAAP net income
              
              
              1.15Earnings
      per share: diluted
              – Canadian GAAP net
      income
              
              
              1.22–
      US GAAP net income
              
              
              1.14
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-38
 
 Consolidated
balance sheet items using US GAAP
 
 2009(In
      thousands of Canadian dollars)
              
              $Add
      (deduct) adjustments to arrive at US GAAP balance
    sheet:Goodwill
      (1, 2, 3, and 5)
              
              
              (3,301
              )Future
      income tax assets (short term) (6)
              
              
              (217
              )Other
      assets (4)
              
              
              1,623Accounts
      payable and accrued liabilities (3 and 4)
              
              
              (29
              )Other
      liabilities (current) (1)
              
              
              (829
              )Long-term
      debt (long term) (2)
              
              
              134Other
      liabilities (long term) (4)
              
              
              1,623Non-controlling
      interest (5)
              
              
              (186
              )Shareholders'
      equity using US GAAP2009(In
      thousands of Canadian dollars)
              
              $Shareholders'
      equity under Canadian GAAP
              
              
              547,394Retained
      earnings (1, 3, and 6)
              
              
              (3,558
              )Non-controlling
      interest (5)
              
              
              950Shareholders'
      equity under US GAAP
              
              
              544,786
 (1)
                Lease exit costs.Per
      ASC 805-10/SFAS 141R, the postacquisition exit/restructuring plans of the
      acquiring company are expensed in the income statement as incurred. Under
      Canadian GAAP, many of these costs are recognized as liabilities in the
      purchase price allocation and impact
goodwill.
 (2)
                Contingent consideration.Per ASC 805-10/SFAS 141R, the Company is required to recognize
      contingent consideration at the date of acquisition, based on the fair
      value at that date, as a liability or equity depending on its nature. The
      remeasurement of the liability each quarter-end impacts earnings until the
      liability is settled. Under Canadian GAAP, a liability for contingent
      consideration is only recognized at the date of acquisition when the
      amount is determinable; therefore, contingent consideration is generally
      recognized when the contingency is resolved and the consideration becomes
      payable.
  (3)
                Acquisition-related costs.Per ASC 805-10/SFAS 141R, the acquirer accounts for
      acquisition-related costs as expenses in the period in which the costs are
      incurred. Under Canadian GAAP, incremental costs incurred as a result of a
      business combination are recognized as costs of the business combination
      and impact goodwill.
  (4)
                Indemnifications.Per
      ASC 805-10/SFAS 141R, if a seller contractually indemnifies the acquirer
      for the outcome of a contingency, the acquirer must recognize an
      indemnification asset at the same time and on the same basis that it
      recognizes the indemnified item, subject to the need for a valuation
      allowance for uncollectible amounts. Therefore, if the indemnified item is
      recognized at the acquisition date at its acquisition-date fair value, the
      acquirer must also recognize the indemnification asset at its
      acquisition-date fair value. There is no similar requirement under
      Canadian GAAP. Pursuant to the Jacques Whitford acquisition, the acquiree
      indemnified the Company up to a maximum of $1,623,000 for certain legal
      claims. The full $1,623,000 was recorded as an asset and liability in the
      above table since this was management's best estimate of the potential
      future payment.
  (5)
                Non-controlling interest.ASC 805-10/SFAS 141R requires the non-controlling interest in an
      acquiree to be measured at fair value. Under Canadian GAAP, the
      non-controlling interest's percentage of net assets acquired is recorded
      at its existing carrying value. ASC 805-10/SFAS 141R records
      non-controlling interests in shareholders’ equity on the
      balance sheet, whereas Canadian GAAP records non-controlling interest
      between liabilities and shareholder’s
  equity.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-39
  (6)
              Income taxes.Income
      taxes reflect the tax effect of the differences identified
      above.
  ii)
Business acquisitions—pro forma data(unaudited)
 The
following unaudited pro forma data presents information as if the acquisitions
of The Zande Companies Inc.; Rochester Signal, Inc.; Secor; RHL Design Group,
Inc.; McIntosh Engineering Holding Corporation; Jacques Whitford; and Granary
Associates, Inc. occurred on January 1, 2008. This unuadited pro forma data is
provided for information purposes only and is based on historical information.
This data does not necessarily reflect the actual results of operations that
would have occurred if these acquired entities and Stantec Inc. had comprised a
single entity during the periods since January 1, 2008, nor is it necessarily
indicative of the future results of the operations of the combined
entities.
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $(Unaudited)Pro
      forma gross revenue
              
              
              1,545,384
              
              
              
              1,681,030Pro
      forma net revenue
              
              
              1,257,945
              
              
              
              1,225,401Pro
      forma net income
              
              
              65,651
              
              
              
              34,442Basic
      pro forma earnings per share
              
              
              1.44
              
              
              
              0.76Diluted
      pro forma earnings per share
              
              
              1.43
              
              
              
              0.75
 iii)
Liabilities for uncertain tax positions
 On
January 1, 2007, the Company implemented FASB Interpretation No. 48, "Accounting
for Uncertain Income Taxes" (ASC 740-10/FIN 48). The Company files income tax
returns in the Canadian federal jurisdiction, US federal jurisdiction, and
various provinces, states, and foreign jurisdictions. With few exceptions, it is
no longer subject to Canadian and US corporate income taxes or income tax
examinations by the tax authorities of other foreign jurisdictions for years
before 2004.
  2009
              
              
              2008(In
      thousands of Canadian dollars)
              
              $
              
              
              $Balance,
      beginning of the year
              
              
              1,725
              
              
              
              1,412Additions
      based on tax positions related to the current year
              
              
              159
              
              
              
              322Additions
      based on tax positions related to the prior year
              
              
              -
              
              
              
              -Reductions
      for tax positions of prior years
              
              
              (181
              )
              
              
              (218
              )Impact
      of foreign exchange
              
              
              (174
              )
              
              
              209Balance,
      end of the year
              
              
              1,529
              
              
              
              1,725
 The
Company's policy is to recognize interest and penalties relating to liabilities
for unrecognized tax benefits in interest expense. The liability for interest
and penalties relating to unrecognized tax benefits is recorded in accrued
liabilities. During the year ended December 31, 2009, the Company recognized
approximately $103,000 (2008 – $111,000) [$82,000 (2008
– $87,000) net of tax] in interest and penalties. The Company had approximately
$515,000 (2008 – $446,000) [$409,000 (2008 – $348,000) net of tax] for the
payment of interest and penalties accrued at December 31,
2009.
 Approximately $1,529,000
(2008– $1,543,000) of unrecognized tax benefits, if recognized, would
impact the Company's effective tax rate.
 The
Company does not anticipate that the total unrecognized tax benefit will
significantly change within the next 12 months.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-40
 
 iv)
Fair value of non-financial assets and liabilities
 
 The
requirements for fair value disclosures for financial assets and liabilities are
the same under Canadian and US GAAP. These disclosures are discussed in note
15.
 For
fiscal 2009, the Company was no longer subject to previously existing deferral
provisions and applied the framework for measuring fair value to all
non-financial assets and liabilities, including those that are recognized or
disclosed at fair value in the financial statements on a non-recurring basis,
and had expanded disclosures to meet these requirements.
 The following table
presents the Company’s fair value hierarchy for those non-financial
assets and liabilities measured at fair value on a non-recurring basis as of
December 31, 2009.
  Carrying
      Amount of Asset/Liability
      at December 31,
              
              
              Quoted Prices
      in Active Markets
      for Identical
      Items
              
              
              Significant
      Other
                  Observable
      Inputs
              
              
              Significant
                  Unobservable
      Inputs2009
              
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)(In
      thousands of Canadian dollars)
              
              $
              
              
              $
              
              
              $
              
              
              $Assets:Goodwill
              
              
              468,814
              
              
              
              -
              
              
              
              -
              
              
              
              468,814
 Goodwill
is evaluated for impairment annually or when events or circumstances occur that
are more likely than not to reduce the fair value of a reporting unit below its
carrying value. An impairment charge of $35.0 million was recorded in the third
quarter of 2009. See note 4 for further details on goodwill.
 v)
Derivative financial instruments
 The
following table presents the fair values of derivative instruments in the
Company's consolidated balance sheet as at December 31, 2009:
  (In
      thousands of Canadian dollars)
              
              Fair
      Values of Liability Derivative Instruments as at December 31,
      2009Balance
                  Sheet
      Location
              
              FairValue
                  $Derivative
      designated as cash flow hedgeInterest
      rate swap
              
              Other
      liabilities
              
              
              2,157Derivatives
      not designated as hedging instrumentsForeign
      currency forward contracts
              
              Other
      liabilities
              
              
              270
 The
following table presents the effect of derivative instruments on comprehensive
income for the year ended December 31, 2009. No amount of gains or losses
relating to derivative instruments were reclassified from accumulated other
comprehensive income (OCI) to income in the year.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-41
  (In thousands of Canadian
      dollars)Gain
      (Loss) Recognized in OCI on Derivative (Effective Portion)
      $Derivative
      designated as cash flow hedgeInterest
      rate swap (net of tax)
              
              
              
              1,443Gain
      (Loss) Recognized in Income on DerivativesLocation
              
              $Derivatives
      not designated as hedging instrumentsForeign
      currency forward contracts
              Foreign
      exchange gains (losses)
              
              
              (10,206
              )
 b)
Recently adopted accounting pronouncements
 Fair
value measurements
 Effective January 1, 2009,
the Company adopted FASB SFAS No. 157,“Fair Value Measurements” (ASC
820-10/SFAS 157), for non-financial assets and liabilities measured at fair
value on a non-recurring basis. ASC 820-10/SFAS 157 establishes a framework for
measuring fair value under US GAAP and requires additional disclosure. The
standard defines a fair value hierarchy, with the highest priority being quoted
prices in active markets. Under this standard, fair value measurements are
disclosed by level within the hierarchy. This standard does not require any new
fair value measurements. The prospective adoption of this standard for
non-financial assets and liabilities measured at fair value on a non-recurring
basis had no effect on the Company's financial position or results of operations
except for additional disclosures presented in note 25 (a)
(iv).
 Effective January 1, 2009,
the Company adopted FASB Staff Position (FSP) Financial Accounting Standard
(FAS)157-4,“Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly” (ASC 820-10-65-4/FSP 157-4). Based on this guidance, if an
entity determines that the level of activity for an asset or liability has
significantly decreased and that a transaction is not orderly, further analysis
of transactions or quoted prices is needed, and a significant adjustment to the
transaction or quoted prices may be necessary to estimate fair value in
accordance with ASC 820-10/SFAS 157. The prospective adoption of this standard
had no material effect on the Company's financial position or results of
operations.
 Business
combinations
 Effective January 1, 2009,
the Company adopted SFAS 141R,“Business Combinations” (ASC 805-10/SFAS
141R). This standard establishes principles and requirements governing how an
acquiring company recognizes and measures in its financial statements
identifiable assets acquired, liabilities assumed, any non-controlling interest
in the acquiree, and goodwill acquired. The standard also establishes disclosure
requirements that will enable users of the acquiring company's financial
statements to evaluate the nature and financial effects of its business
combinations. The Company was required to adopt this standard prospectively. The
adoption of this standard had a material impact on the Company’s financial
position and results of operations as disclosed in note 25 (a) (i).
 Effective
January 1, 2009, the Company adopted FASB FSP FAS 141R-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies” (ASC 805-20/SFAS 141R-1),which amends the
provisions in ASC 805-10/SFAS 141R for the initial recognition and measurement,
subsequentmeasurement and
accounting, and disclosure for assets and liabilities arising from contingencies
in business combinations. The amendment eliminates the distinction
between contractual and non-contractual contingencies, including the initial
recognition and measurement criteria in ASC 805-10/SFAS 141R, and instead
carries forward most of the provisions in ASC 805-10/SFAS 141R for acquired
contingencies. The Company was required to adopt this standard for business
combinations completed on or after January 1, 2009. The adoption of this
standard had no material effect on the Company's financial position or results
of operations.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-42
 
 Effective January 1, 2009,
the Company adopted FASB SFAS No. 160,“Non-Controlling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51” (ASC
810-10-65/SFAS 160). This standard requires all entities to report
non-controlling interests as equity in their consolidated financial statements.
The amount of consolidated net income attributable to the parent and to the
non-controlling interest is to be clearly identified and presented on the face
of the consolidated statement of income. The standard also requires that the
transactions between an entity and non-controlling interest be treated as equity
transactions. The standard is to be applied prospectively except for the
presentation and disclosure requirements; however, the Company did not have
non-controlling interests prior to 2009. The adoption of this standard had an
impact on the presentation of the Company’s consolidated financial statements as
disclosed in note 25 (a) (i) but had no effect on the Company's financial
position or results of operations.
  Other
 Effective January 1, 2009,
the Company adopted FASB SFAS No. 161,“Disclosures about Derivative
Instruments and Hedging Activities—An Amendment of FASB Statement No. 133” (ASC
815-10-65/SFAS 161). This standard applies to all derivative instruments and
related hedged items accounted for under SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities” (ASC 815-10/SFAS 133). ASC
815-10-65/SFAS 161 requires entities to provide greater transparency about how
and why they use derivative instruments, how they account for derivative
instruments and related hedged items under ASC 815-10/SFAS 133, and how
derivative instruments and related hedged items affect their financial position,
results of operations, and cash flows. The prospective adoption of this standard
had no impact on the Company’s financial position or results of operations but
required additional disclosure as presented in note 25 (a)
(v).
 Effective January 1, 2009,
the Company adopted EITF Issue No. 08-6,“Equity Method Investment
Considerations” (ASC 323-10/EITF 08-6), which clarifies the accounting for
certain transactions and impairment considerations involving equity method
investments. The statement addresses issues such as how to determine the initial
carrying value of an equity method investment, how to account for any subsequent
purchases and sales of additional ownership interests, and whether the investor
must separately assess its underlying share of the investee‘s indefinite-lived
intangible assets for impairment. The prospective adoption of this standard had
no effect on the Company's financial position or results of
operations.
  Effective January 1, 2009,
the Company adopted EITF Issue No. 08-7,“Accounting for Defensive
Intangible Assets” (ASC 350-30/EITF 08-7). ASC 350-30/EITF 08-7 applies to
defensive intangible assets, which are acquired intangible assets that the
acquirer does not intend to actively use but to hold to prevent its competitors
from obtaining access to them. Because these assets are identifiable separately,
ASC 350-30/EITF 08-7 requires an acquiring entity to account for them as
separate units of accounting. Defensive intangible assets must be recognized at
fair value. The prospective adoption of this standard had no material effect on
the Company's financial position or results of operations.
 Effective January 1, 2009,
the Company adopted FASB FSP SFAS No. 115-2 and FAS 124-2,“Recognition
and Presentation of Other than Temporary Impairments” (ASC 320-10-65/FSP 115-2
and 124-2). This standard changes existing guidance for determining whether an
impairment of debt securities is other than temporary. The standard requires
that an entity record an other than temporary impairment when it is more likely
than not that the entity will sell or be required to sell a debt security before
anticipated recovery of the cost basis. The other than temporary impairment must
be separated into the amount that represents the decrease in cash flow expected
to be collected from a security (referred to as a credit loss) and the amount
related to other factors (referred to as non-credit losses). The entity will
recognize only the credit loss of an other than temporary impairment of a
debtsecurity in
earnings and the non-credit portion in other comprehensive income. When adopting
this standard, an entity is required to record a cumulative effect adjustment as
of the beginning of the period of adoption to reclassify the non-credit loss
component of a previously recognized other than temporary impairment from
retained earnings to accumulated other comprehensive income. The prospective
adoption of this standard had no material effect on the Company's financial
position or results of operations.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-43
 
 Effective January 1, 2009,
the Company adopted SFAS No. 165,“Subsequent Events” (ASC 855-10/SFAS
165). ASC 855-10/SFAS 165 provides rules on the recognition and disclosure for
events and transactions occurring after the balance sheet date but before the
financial statements are issued or available to be issued. The prospective
adoption of this standard had no effect on the Company’s financial position or
results of operations other than disclosure of the date through which subsequent
events have been evaluated.
  Effective September 30,
2009, the Company adopted FASB SFAS No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles—A Replacement of FASB Statement No. 162" (ASC 105-10/SFAS
168). The FASB Accounting Standards Codification is the source of authoritative
GAAP that is recognized by the FASB to be applied by non-governmental entities.
The rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants.
Although it is not intended to change GAAP, the codification significantly
changes the way in which the accounting literature is organized. The adoption of
the codification did not have an effect on the Company’s financial position or
results of operations. However, because the codification completely replaced
existing standards, its adoption affected the way GAAP is referenced by the
Company in its consolidated financial statements and accounting
policies.
  Effective September 30,
2009, the Company adopted FASB Accounting Standards Update (ASU) No. 2009-06,“Implementation Guidance on Accounting for Uncertainty in Income Taxes
and Disclosure Amendments for Nonpublic Entities” (ASU 2009-06). This ASU
provides additional implementation guidance on accounting for uncertainty in
income taxes. The adoption of ASU 2009-06 did not have a material impact on the
Company's financial position or results of operations.
  Effective December 31,
2009, the Company adopted FASB ASU No. 2010-02,“Consolidation (Topic
810): Accounting and Reporting for Decreases in Ownership of a Subsidiary—A
Scope Clarification” (ASU 2010-02). This ASU addresses implementation issues
related to the changes in ownership provisions outlined in
"Consolidation—Overall Subtopic" (Subtopic 810-10), which was originally issued
as FASB Statement No. 160, “Non-controlling Interests in Consolidated Financial
Statements.” ASU 2010-02 also improves the disclosures for fair value
measurements relating to retained investments in a deconsolidated subsidiary or
a preexisting interest held by an acquirer in a business combination. The
Company adopted ASU 2010-02 effective January 1, 2009, and this adoption did not
have an impact on its financial position or results of
operations.
 c)
Recent accounting pronouncements
 In June 2009, the FASB
issued SFAS No. 167,“Amendments to FASB Interpretation No. 46(R)” (ASC
810-10/SFAS 167), which changes how to determine when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. Under ASC 810-10/SFAS 167, determining whether a
company is required to consolidate an entity will be based on, among other
things, the entity’s purpose and design and the company’s ability to direct
those activities of the entity that most significantly impact the entity’s
economic performance. ASC 810-10/SFAS No. 167 is effective for fiscal years, and
interim reporting periods within those fiscal years, beginning after November
15, 2009, and will be adopted by the Company in fiscal 2010. The Company is
currently considering the impact of adopting ASC 810-10/SFAS 167 on its
consolidated financial statements and cannot reasonably estimate the effect at
this time.
 In December 2009, the FASB
issued ASU No. 2009-17,“Consolidations (Topic 810)—Improvements to
Financial Reporting by Enterprises Involved with Variable Interest Entities”
(ASU 2009-17), which codifies FASB Statement No. 167, “Amendments to FASB
Interpretation No. 46(R).” This ASU represents a revision to former FASBInterpretation No. 46
(Revised December 2003),“Consolidation of Variable Interest Entities,”
and changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. The determination of whether a reporting entity
is required to consolidate another entity is based on the other entity’s purpose
and design and the reporting entity’s ability to direct those activities of the
other entity that most significantly impact the other entity’s economic
performance. ASU 2009-17 also requires additional disclosures about a reporting
entity’s involvement in variable interest entities. This guidance is effective
for the Company's consolidated financial statements beginning January 1, 2010.
Early application is not permitted. The Company is currently considering the
impact of adopting ASU 2009-17 on its consolidated financial statements and
cannot reasonably estimate the effect at this time.
 
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-44
 
 In January 2010, the FASB
issued ASU No. 2010-05,“Compensation—Stock Compensation (Topic 718):
Escrowed Share Arrangements and the Presumption of Compensation” (ASU 2010-05).
This ASU codifies EITF Topic D-110, “Escrowed Share Arrangements and the
Presumption of Compensation.” ASU 2010-05 states that when evaluating whether a
presumption of compensation has been overcome, an entity should consider the
substance of the arrangement, including whether it was entered into for purposes
unrelated to, and not contingent upon, continued employment. The ASU is
effective immediately upon being issued. The Company is currently considering
the impact of adopting ASU 2010-05 on its consolidated financial statements and
cannot reasonably estimate the effect at this time.
  In
January 2010, the FASB issued ASU No. 2010-06, "Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements"
(ASU 2010-06). This ASU requires new disclosures for transfers in and out of
levels 1 and 2 of fair value measurement categories and a description of the
reasons for the transfers. This requirement is effective for the Company in the
2010 fiscal year. ASU 2010-06 also requires a separate presentation of
information about purchases, sales, issuances, and settlements in the
reconciliation for fair value measurements using significant unobservable inputs
(level 3). This requirement is effective for the Company in the 2011 fiscal
year. The adoption of ASU 2010-06 is not expected to have a material impact on
the Company's consolidated financial statements with the exception of additional
disclosures.
 26.
                Subsequent
      Event
 Subsequent
events have been evaluated through to February 25, 2010, which is the date the
consolidated financial statements were issued.
 27.
                Comparative
      Figures
 Certain
comparative figures have been reclassified to conform to the presentation
adopted for the current year.
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
 F-45
 
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  NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009
 STANTEC
INC.
   F-46