##### 



Management Report
    Managements Annual Report on Internal Control over Financial Reporting
   -s- Tony Franceschini P.Eng.
    
    -s- Don Wilson CATony Franceschini P.Eng.
    
    Don Wilson CAPresident & CEO
    
    Vice President & CFOFebruary 21, 2007
    
    February 21, 2007
 F-1




---



##### 



Independent Auditors Report on Financial Statements
 To the Shareholders of Stantec Inc.
     
 Chartered Accountants
 
 F-2




---



##### 



Independent Auditors Report on Internal Controls
 (under the standards of the Public Company Accounting Oversight Board (United States))
 To the Shareholders of Stantec Inc.
       
 Chartered Accountants
 F-3




---



##### 



Stantec Inc.
Consolidated Balance Sheets
 As at December 312006
    
    2005$
    
    $(In thousands of
Canadian dollars)ASSETS[ note 8]CurrentCash and cash equivalents
    
    
    28,363
    
    
    
    28,143Restricted cash [ note 2]
    
    
    1,545
    
    
    
    21,312Accounts receivable, net of allowance for doubtful accounts of $7,379 in 2006
($16,053  2005)
    
    
    168,474
    
    
    
    137,928Costs and estimated earnings in excess of billings
    
    
    39,924
    
    
    
    66,172Prepaid expenses
    
    
    6,591
    
    
    
    5,420Future income tax assets [ note 14]
    
    
    9,711
    
    
    
    14,827Other assets [ note 6]
    
    
    8,228
    
    
    
    6,569Total current assets
    
    
    262,836
    
    
    
    280,371Property and equipment [ note 3]
    
    
    65,009
    
    
    
    58,519Goodwill [ note 4]
    
    
    251,491
    
    
    
    242,674Intangible assets [ note 5]
    
    
    22,819
    
    
    
    27,304Future income tax assets [ note 14]
    
    
    9,984
    
    
    
    6,814Other assets [ note 6]
    
    
    18,338
    
    
    
    13,097Total assets
    
    
    630,477
    
    
    
    628,779LIABILITIES AND SHAREHOLDERS EQUITYCurrentAccounts payable and accrued liabilities [ note 7]
    
    
    107,132
    
    
    
    106,757Billings in excess of costs and estimated earnings
    
    
    28,721
    
    
    
    24,251Income taxes payable
    
    
    3,432
    
    
    
    4,441Current portion of long-term debt [ note 8]
    
    
    4,181
    
    
    
    4,813Future income tax liabilities [ note 14]
    
    
    12,236
    
    
    
    17,552Total current liabilities
    
    
    155,702
    
    
    
    157,814Long-term debt [ note 8]
    
    
    12,046
    
    
    
    81,886Other liabilities [ note 9]
    
    
    33,561
    
    
    
    24,764Future income tax liabilities [ note 14]
    
    
    18,273
    
    
    
    16,262Total liabilities
    
    
    219,582
    
    
    
    280,726Commitments,
contingencies, and guarantees [notes 2, 8, 10, and 11]ShareholdersequityShare capital [ note 12]
    
    
    212,781
    
    
    
    210,604Contributed surplus [ note 12]
    
    
    5,458
    
    
    
    5,522Cumulative translation account [ note 13]
    
    
    (24,844
    )
    
    
    (25,575
    )Deferred stock compensation
    
    
    (250
    )
    
    
    (833
    )Retained earnings
    
    
    217,750
    
    
    
    158,335Total shareholdersequity
    
    
    410,895
    
    
    
    348,053Total
liabilities and shareholders equity
    
    
    630,477
    
    
    
    628,779
 See accompanying notes
 On behalf of the Board:(SIGNATURE)
    

-s- Tony FranceschiniDirector
    
    Director
 F-4




---



##### 



Stantec Inc.
Consolidated Statements of Income and Retained Earnings
 Years Ended December 312006
    
    2005
    
    2004$
    
    $
    
    $(In thousands of Canadian dollars,except per share amounts)IncomeGross revenue
    
    
    816,133
    
    
    
    618,020
    
    
    
    520,879Less subconsultant and other direct expenses
    
    
    108,206
    
    
    
    93,468
    
    
    
    71,728Net revenue
    
    
    707,927
    
    
    
    524,552
    
    
    
    449,151Direct payroll costs
    
    
    304,677
    
    
    
    234,553
    
    
    
    205,513Gross margin
    
    
    403,250
    
    
    
    289,999
    
    
    
    243,638Administrative and marketing expenses [notes 12 and 20]
    
    
    292,064
    
    
    
    212,992
    
    
    
    183,894Depreciation of property and equipment
    
    
    15,604
    
    
    
    12,389
    
    
    
    11,986Amortization of intangible assets
    
    
    6,132
    
    
    
    2,542
    
    
    
    927Net interest expense [note 8]
    
    
    1,892
    
    
    
    571
    
    
    
    2,805Share of income from associated companies
    
    
    (285
    )
    
    
    (187
    )
    
    
    (385
    )Foreign exchange gains
    
    
    (74
    )
    
    
    (449
    )
    
    
    (94
    )Other income
    
    
    (1,507
    )
    
    
    (359
    )
    
    
    (155
    )Income before income taxes
    
    
    89,424
    
    
    
    62,500
    
    
    
    44,660Income taxes[note 14]Current
    
    
    31,484
    
    
    
    21,735
    
    
    
    18,065Future
    
    
    (2,242
    )
    
    
    143
    
    
    
    (3,595
    )Total income taxes
    
    
    29,242
    
    
    
    21,878
    
    
    
    14,470Net income for the year
    
    
    60,182
    
    
    
    40,622
    
    
    
    30,190Retained earnings, beginning of the year
    
    
    158,335
    
    
    
    117,874
    
    
    
    88,266Shares repurchased [note 12]
    
    
    (767
    )
    
    
    (161
    )
    
    
    (582
    )Retained earnings, end of the year
    
    
    217,750
    
    
    
    158,335
    
    
    
    117,874Earnings per share [notes 12 and 15]Basic
    
    
    1.34
    
    
    
    1.02
    
    
    
    0.82Diluted
    
    
    1.31
    
    
    
    0.99
    
    
    
    0.79
 See accompanying notes
 F-5




---



##### 



Stantec Inc.
Consolidated Statements of Cash Flows
 Years Ended December 312006
    
    2005
    
    2004$
    
    $
    
    $(In thousands of Canadian dollars)CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESCash receipts from clients
    
    
    816,846
    
    
    
    637,391
    
    
    
    568,897Cash paid to suppliers
    
    
    (221,056
    )
    
    
    (200,445
    )
    
    
    (169,573
    )Cash paid to employees
    
    
    (467,766
    )
    
    
    (355,621
    )
    
    
    (313,321
    )Dividends from equity investments
    
    
    450
    
    
    
    550
    
    
    
    300Interest received
    
    
    6,292
    
    
    
    6,531
    
    
    
    6,426Interest paid
    
    
    (7,665
    )
    
    
    (6,551
    )
    
    
    (8,639
    )Income taxes paid
    
    
    (37,588
    )
    
    
    (28,882
    )
    
    
    (10,530
    )Income taxes recovered
    
    
    3,876
    
    
    
    4,341
    
    
    
    3,791Cash
flows from operating activities [note 16]
    
    
    93,389
    
    
    
    57,314
    
    
    
    77,351CASH FLOWS FROM (USED IN) INVESTING ACTIVITIESBusiness acquisitions, net of cash acquired [note 2]
    
    
    (12,181
    )
    
    
    (100,383
    )
    
    
    (18,845
    )Restricted cash used for acquisitions [note 2]
    
    
    19,793
    
    
    
    9,000
    
    
    
    Increase in investments held for self-insured liabilities
    
    
    (4,355
    )
    
    
    (7,295
    )
    
    
    (9,562
    )Proceeds on disposition of investments
    
    
    9
    
    
    
    522
    
    
    
    55Collection of notes receivable from disposition of Technology and Design Build segments
    
    
    
    
    
    
    406
    
    
    
    1,014Purchase of property and equipment
    
    
    (18,920
    )
    
    
    (17,005
    )
    
    
    (17,488
    )Proceeds on disposition of property and equipment
    
    
    104
    
    
    
    155
    
    
    
    34,672Cash flows used in investing activities
    
    
    (15,550
    )
    
    
    (114,600
    )
    
    
    (10,154
    )CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESRepayment of long-term debt
    
    
    (85,612
    )
    
    
    (46,875
    )
    
    
    (35,546
    )Proceeds from long-term borrowings
    
    
    9,142
    
    
    
    95,929
    
    
    
    13,960Repayment of acquired bank indebtedness [note 2]
    
    
    (1,787
    )
    
    
    
    
    
    
    Net change in bank indebtedness financing
    
    
    
    
    
    
    
    
    
    
    (17,151
    )Repurchase of shares for cancellation [note 12]
    
    
    (1,016
    )
    
    
    (195
    )
    
    
    (720
    )Share issue costs [note 12]
    
    
    
    
    
    
    (1,969
    )
    
    
    Proceeds from issue of share capital [note 12]
    
    
    1,865
    
    
    
    961
    
    
    
    3,490Cash flows from (used in) financing activities
    
    
    (77,408
    )
    
    
    47,851
    
    
    
    (35,967
    )Foreign exchange loss on cash held in foreign currency
    
    
    (211
    )
    
    
    (312
    )
    
    
    (683
    )Net increase (decrease) in cash and cash equivalents
    
    
    220
    
    
    
    (9,747
    )
    
    
    30,547Cash and cash equivalents, beginning of the year
    
    
    28,143
    
    
    
    37,890
    
    
    
    7,343Cash and cash equivalents, end of the year
    
    
    28,363
    
    
    
    28,143
    
    
    
    37,890
 See accompanying notes
 F-6




---



##### 



Stantec Inc.
Notes to the Consolidated Financial Statements
 1. Summary of Significant Accounting Policies
  Generally accepted accounting principles
  Use of estimates
 Principles of consolidation
  F-7




---



##### 



Cash and cash equivalents
 Investments
  Property and equipment
 Engineering equipment
    
    
    2030
    %
    
    declining balanceBusiness information systems
    
    
    
    
    
    straight-line over 35 yearsOffice 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
 Leases
  Goodwill and intangible assets
 F-8




---



##### 



Long-lived assets
 Accrual and investments held for self-insured liabilities
  Forward contracts
 Non-interest-bearing debt
 Fair value of financial instruments
 Credit risk
 F-9




---



##### 



Interest rate risk
 Revenue recognition
  Employee benefit plans
 Foreign currency translation
  F-10




---



##### 



Stock-based compensation and other stock-based payments
 Income taxes
 Earnings per share
 Allowance for doubtful accounts
 Recent accounting pronouncements  a) Financial instruments, equity, and comprehensive income
 
    
    Financial assets will be classified as either loans and receivables, held to maturity,
held for trading, or available for sale. Held-to-maturity classification will be
restricted to fixed maturity instruments that the Company intends and is able to hold to
maturity and will be accounted for at amortized cost. Held-for-trading instruments will be
recorded at fair value, with realized and unrealized gains and losses reported in net
income. The remaining financial assets will be classified as available for sale. These
assets will be recorded at fair value, with unrealized gains and losses reported in a new
category of the consolidated balance sheets under shareholdersequity called Other
Comprehensive Income until the financial asset is disposed, at which time the realized
gains or losses will be
 F-11




---



##### 



recognized in net income. Upon the initial adoption of these recommendations in fiscal 2007,
the Companys investments held for self-insured liabilities will be reflected as investments
available for sale.
    
    Financial liabilities will be classified as either held for trading or other.
Held-for-trading instruments will be recorded at fair value, with realized and unrealized
gains and losses reported in net income. Other instruments will be accounted for at
amortized cost, with realized gains and losses reported in net income.
    
    Derivatives will be classified as held for trading unless designated as
hedging instruments. All derivatives will be recorded at fair value on the
consolidated balance sheets.
   b) Accounting changes
 c) Financial instrumentsdisclosure and presentation
 F-12




---



##### 



d) Capital disclosures
 e) International financial reporting standards
 2. Business Acquisitions
    Acquisitions in fiscal 2006
  F-13




---



##### 



Acquisitions in fiscal 2005
    F-14




---



##### 



Aggregate consideration paid
 Total
    
    Keith
    
    Other
    
    Total2006
    
    2005
    
    2005
    
    2005$000s
    
    $000s
    
    $000s
    
    $000sCash consideration
    
    
    13,321
    
    
    
    107,062
    
    
    
    11,200
    
    
    
    118,262Share consideration
    
    
    
    
    
    
    125,540
    
    
    
    
    
    
    
    125,540Promissory notes
    
    
    6,308
    
    
    
    
    
    
    
    2,753
    
    
    
    2,753Purchase price
    
    
    19,629
    
    
    
    232,602
    
    
    
    13,953
    
    
    
    246,555Assets and liabilities acquired at fair valuesCash acquired
    
    
    1,140
    
    
    
    22,075
    
    
    
    
    
    
    
    22,075Restricted cash acquired
    
    
    
    
    
    
    30,882
    
    
    
    
    
    
    
    30,882Bank indebtedness assumed
    
    
    (1,787
    )
    
    
    
    
    
    
    (4,196
    )
    
    
    (4,196
    )Non-cash working capital
    
    
    12,294
    
    
    
    9,747
    
    
    
    3,929
    
    
    
    13,676Property and equipment
    
    
    3,078
    
    
    
    5,751
    
    
    
    991
    
    
    
    6,742Investments
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    32Goodwill
    
    
    8,306
    
    
    
    149,844
    
    
    
    12,218
    
    
    
    162,062Other long-term assets
    
    
    
    
    
    
    554
    
    
    
    
    
    
    
    554Intangible assetsClient relationships
    
    
    1,219
    
    
    
    17,476
    
    
    
    947
    
    
    
    18,423Contract backlog
    
    
    388
    
    
    
    3,995
    
    
    
    1,053
    
    
    
    5,048Other
    
    
    101
    
    
    
    669
    
    
    
    (139
    )
    
    
    530Other long-term liabilities
    
    
    (2,146
    )
    
    
    (1,380
    )
    
    
    243
    
    
    
    (1,137
    )Long-term debt
    
    
    (551
    )
    
    
    
    
    
    
    (745
    )
    
    
    (745
    )Future income taxes
    
    
    (2,413
    )
    
    
    (8,226
    )
    
    
    (348
    )
    
    
    (8,574
    )Deferred stock compensation
    
    
    
    
    
    
    1,183
    
    
    
    
    
    
    
    1,183Net assets acquired
    
    
    19,629
    
    
    
    232,602
    
    
    
    13,953
    
    
    
    246,555
   Pro forma data
 F-15




---



##### 



2006
    
    2005(In thousands of Canadian dollars,except per share amounts)(Unaudited)Pro forma gross revenue
    
    
    830,356
    
    
    
    799,545Pro forma net revenue
    
    
    719,371
    
    
    
    684,215Pro forma net income
    
    
    59,987
    
    
    
    49,289Basic pro forma earnings per share
    
    
    1.33
    
    
    
    1.11Diluted pro forma earnings per share
    
    
    1.31
    
    
    
    1.08
 3. Property and Equipment
 2006
    
    2005Accumulated
    
    
    
    
    
    AccumulatedCost
    
    Depreciation
    
    Cost
    
    Depreciation$000s
    
    $000s
    
    $000s
    
    $000sEngineering equipment
    
    
    48,783
    
    
    
    27,454
    
    
    
    42,560
    
    
    
    22,736Business information systems
    
    
    13,755
    
    
    
    7,097
    
    
    
    11,475
    
    
    
    4,237Office equipment
    
    
    25,315
    
    
    
    12,760
    
    
    
    23,030
    
    
    
    10,071Automotive equipment
    
    
    6,765
    
    
    
    3,850
    
    
    
    5,263
    
    
    
    2,867Leasehold improvements
    
    
    20,240
    
    
    
    4,244
    
    
    
    14,226
    
    
    
    2,053Buildings
    
    
    5,574
    
    
    
    913
    
    
    
    4,204
    
    
    
    704Land
    
    
    895
    
    
    
    
    
    
    
    429
    
    
    
    121,327
    
    
    
    56,318
    
    
    
    101,187
    
    
    
    42,668Net book value
    
    
    
    65,009
    
    
    
    
    
    58,519
  4. Goodwill
 2006
    
    2005$000s
    
    $000sGoodwill, beginning of the year
    
    
    242,674
    
    
    
    84,694Current year acquisitions
    
    
    6,618
    
    
    
    160,840Additional purchase price payments
    
    
    
    
    
    
    700Other purchase price adjustments
    
    
    1,688
    
    
    
    522Impact of foreign exchange
    
    
    511
    
    
    
    (4,082
    )Goodwill, end of the year
    
    
    251,491
    
    
    
    242,674
 F-16




---



##### 



5. Intangible Assets
 2006
    
    2005Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    Amortization$000s
    
    $000s
    
    $000s
    
    $000sClient relationships
    
    
    26,140
    
    
    
    4,692
    
    
    
    24,914
    
    
    
    2,232Contract backlog
    
    
    4,316
    
    
    
    3,587
    
    
    
    4,900
    
    
    
    1,219Other
    
    
    948
    
    
    
    306
    
    
    
    1,218
    
    
    
    27731,404
    
    
    
    8,585
    
    
    
    31,032
    
    
    
    3,728Carrying amount
    
    
    
    22,819
    
    
    
    
    
    27,304
  $000s2007
    
    
    3,4352008
    
    
    2,7062009
    
    
    2,6422010
    
    
    2,4832011
    
    
    2,470Thereafter
    
    
    9,08322,819
 6.
Other Assets
 2006
    
    2005$000s
    
    $000sInvestments held for self-insured liabilities
    
    
    22,720
    
    
    
    16,857Investments in associated companies
    
    
    1,347
    
    
    
    1,545Investments  other
    
    
    823
    
    
    
    710Other
    
    
    1,676
    
    
    
    55426,566
    
    
    
    19,666Less current portion of investments held for self-insured liabilities
    
    
    8,228
    
    
    
    6,56918,338
    
    
    
    13,097
  F-17




---



##### 



7. Accounts Payable and Accrued Liabilities
 2006
    
    2005$000s
    
    $000sTrade accounts payable
    
    
    26,188
    
    
    
    26,784Employee and payroll liabilities
    
    
    63,771
    
    
    
    52,314Accrued liabilities
    
    
    17,173
    
    
    
    27,659107,132
    
    
    
    106,757
 8. Long-Term Debt
 2006
    
    2005$000s
    
    $000sNon-interest-bearing note payable
    
    
    134
    
    
    
    122Other notes payable
    
    
    7,935
    
    
    
    5,643Bank loan
    
    
    8,158
    
    
    
    79,035Mortgages payable
    
    
    
    
    
    
    1,706Other
    
    
    
    
    
    
    19316,227
    
    
    
    86,699Less current portion
    
    
    4,181
    
    
    
    4,81312,046
    
    
    
    81,886
    F-18




---



##### 



$000s2007
    
    
    4,1812008
    
    
    3,0322009
    
    
    8,8802010
    
    
    2011
    
    
    Thereafter
    
    
    13416,227
  9. Other Liabilities
 2006
    
    2005$000s
    
    $000sProvision for self-insured liabilities
    
    
    16,041
    
    
    
    11,346Deferred gain on sale leaseback
    
    
    6,187
    
    
    
    6,624Lease inducement benefits
    
    
    10,499
    
    
    
    7,997Liabilities on lease exit activities
    
    
    2,833
    
    
    
    2,251Other
    
    
    2,333
    
    
    
    1,02137,893
    
    
    
    29,239Less current portion included in accrued liabilities
    
    
    4,332
    
    
    
    4,47533,561
    
    
    
    24,764
 Provision for self-insured liabilities
 2006
    
    2005$000s
    
    $000sProvision, beginning of the year
    
    
    11,346
    
    
    
    5,236Current year provision
    
    
    6,329
    
    
    
    8,244Payment for claims settlement
    
    
    (2,087
    )
    
    
    (2,134
    )Impact of foreign exchange
    
    
    453
    
    
    
    Provision, end of the year
    
    
    16,041
    
    
    
    11,346
 F-19




---



##### 



Deferred gain on sale leaseback
 Liabilities on lease exit activities
 2006
    
    2005$000s
    
    $000sLiability, beginning of the year
    
    
    2,251
    
    
    
    2,817Current year provision:Established for existing operations
    
    
    96
    
    
    
    609Resulting from acquisitions
    
    
    2,146
    
    
    
    276Payment or reductions:Impacting administrative and marketing expenses
    
    
    (1,649
    )
    
    
    (1,103
    )Impacting the purchase price allocation
    
    
    
    
    
    
    (325
    )Impact of foreign exchange
    
    
    (11
    )
    
    
    (23
    )Liability, end of the year
    
    
    2,833
    
    
    
    2,251
 10. Commitments
  $000s2007
    
    
    35,7482008
    
    
    30,3652009
    
    
    27,1362010
    
    
    23,7392011
    
    
    19,294Thereafter
    
    
    74,678210,960
   F-20




---



##### 



11. Contingencies and Guarantees
   F-21




---



##### 



12. Share Capital
 AuthorizedUnlimited
    
    Common shares, with no par valueUnlimited
    
    Preferred shares issuable in series with attributes designated by the Board of Directors
 Common shares issued and outstanding
 Capital Stock
    
    Contributed Surplus2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Shares
    
    
    
    
    
    Shares
    
    
    
    
    
    Shares#
    
    $000s
    
    #
    
    $000s
    
    #
    
    $000s
    
    $000s
    
    $000s
    
    $000sBalance, beginning of the year
    
    
    44,626,262
    
    
    
    210,604
    
    
    
    37,742,170
    
    
    
    87,656
    
    
    
    36,654,568
    
    
    
    84,281
    
    
    
    5,522
    
    
    
    2,544
    
    
    
    1,842Share options exercised for cash
    
    
    607,080
    
    
    
    1,865
    
    
    
    240,140
    
    
    
    961
    
    
    
    1,146,202
    
    
    
    3,490Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,078
    
    
    
    963
    
    
    
    725Shares repurchased under Normal
Course Issuer Bid
    
    
    (51,600
    )
    
    
    (243
    )
    
    
    (13,600
    )
    
    
    (33
    )
    
    
    (58,600
    )
    
    
    (134
    )
    
    
    (6
    )
    
    
    (1
    )
    
    
    (4
    )Reclassification of fair value of stock
options previously
expensed
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    159
    
    
    
    
    
    
    
    19
    
    
    
    (239
    )
    
    
    (159
    )
    
    
    (19
    )Shares issued on acquisition
    
    
    
    
    
    
    
    
    
    
    6,657,552
    
    
    
    123,365
    
    
    
    
    
    
    
    Shares issued on vesting of
restricted shares
    
    
    20,043
    
    
    
    316
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (897
    )
    
    
    
    
    
    
    Restricted shares issued on
acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,175
    
    
    
    Share issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,504
    )
    
    
    
    
    
    
    Balance, end of the year
    
    
    45,201,785
    
    
    
    212,781
    
    
    
    44,626,262
    
    
    
    210,604
    
    
    
    37,742,170
    
    
    
    87,656
    
    
    
    5,458
    
    
    
    5,522
    
    
    
    2,544
   F-22




---



##### 



Share options
  2006
    
    2005
    
    2004Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    Price#
    
    $
    
    #
    
    $
    
    #
    
    $Share
options, beginning of the year
    
    
    1,876,528
    
    
    
    6.94
    
    
    
    2,142,666
    
    
    
    6.67
    
    
    
    2,958,200
    
    
    
    4.64Granted
    
    
    471,000
    
    
    
    20.40
    
    
    
    
    
    
    
    
    
    
    
    334,000
    
    
    
    12.25Exercised
    
    
    (607,080
    )
    
    
    3.07
    
    
    
    (240,140
    )
    
    
    4.00
    
    
    
    (1,146,202
    )
    
    
    3.05Cancelled
    
    
    (37,664
    )
    
    
    12.48
    
    
    
    (25,998
    )
    
    
    11.85
    
    
    
    (3,332
    )
    
    
    9.20Share options, end of the year
    
    
    1,702,784
    
    
    
    11.92
    
    
    
    1,876,528
    
    
    
    6.94
    
    
    
    2,142,666
    
    
    
    6.67
 F-23




---



##### 



Options Outstanding
    
    Options ExercisableWeighted
    
    Weighted
    
    
    
    
    
    Weighted
    
    WeightedRange of
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    Average
    
    AverageExercise
    
    
    
    
    
    Remaining
    
    Exercise
    
    Shares
    
    Remaining
    
    ExercisePrices
    
    Outstanding
    
    Contractual
    
    Price
    
    Exercisable
    
    Contractual
    
    Price$
    
    #
    
    Life in Years
    
    $
    
    #
    
    Life in Years
    
    $1.80
    
    
    238,000
    
    
    
    0.10
    
    
    
    1.80
    
    
    
    238,000
    
    
    
    0.10
    
    
    
    1.803.50
    
    
    21,000
    
    
    
    0.29
    
    
    
    3.50
    
    
    
    21,000
    
    
    
    0.29
    
    
    
    3.507.25    9.42
    
    
    283,800
    
    
    
    3.09
    
    
    
    7.88
    
    
    
    283,800
    
    
    
    3.09
    
    
    
    7.8810.50  13.55
    
    
    693,984
    
    
    
    4.80
    
    
    
    11.61
    
    
    
    479,320
    
    
    
    4.46
    
    
    
    11.1720.37  20.42
    
    
    466,000
    
    
    
    6.65
    
    
    
    20.40
    
    
    
    
    
    
    
    
    
    
    
    1.80  20.42
    
    
    1,702,784
    
    
    
    4.31
    
    
    
    11.92
    
    
    
    1,022,120
    
    
    
    2.98
    
    
    
    7.92
   2006
    
    2004Granted
    
    Grantedat Market
    
    at MarketRisk-free interest rate (%)
    
    
    4.05
    
    
    
    4.07Expected hold period to exercise (years)
    
    
    6.0
    
    
    
    6.0Volatility in the price of the Companys shares (%)
    
    
    29.4
    
    
    
    26.1Weighted average fair value per option ($)
    
    
    7.59
    
    
    
    4.23
  F-24




---



##### 



Number of Shares
    
    Weighted AverageSubject to Option
    
    Grant Date Fair Value#
    
    $Non-vested share options, beginning of the year
    
    
    488,259
    
    
    
    3.67Granted
    
    
    471,000
    
    
    
    7.59Vested
    
    
    (243,931
    )
    
    
    3.78Cancelled
    
    
    (34,664
    )
    
    
    4.59Non-vested share options, end of the year
    
    
    680,664
    
    
    
    6.29
   Deferred share units
 Restricted shares
 13. Cumulative Translation Account
  2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sCumulative translation account, beginning of the year
    
    
    (25,575
    )
    
    
    (19,018
    )
    
    
    (13,861
    )Current year deferred translation adjustment
    
    
    731
    
    
    
    (6,557
    )
    
    
    (5,157
    )Cumulative translation account, end of the year
    
    
    (24,844
    )
    
    
    (25,575
    )
    
    
    (19,018
    )
 F-25




---



##### 



14. Income Taxes
  2006
    
    2005
    
    2004%
    
    %
    
    %Income tax expense at statutory Canadian rates
    
    
    34.1
    
    
    
    34.8
    
    
    
    34.7Increase (decrease) resulting from:Income from associated companies
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.3
    )Rate differential on foreign income
    
    
    1.1
    
    
    
    0.7
    
    
    
    (2.0
    )Non-deductible expenses:Meals and entertainment
    
    
    0.9
    
    
    
    1.1
    
    
    
    1.4Stock compensation
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.6Non-taxable foreign income net of non-creditable withholding taxes
    
    
    (2.9
    )
    
    
    (1.6
    )
    
    
    (1.3
    )Other
    
    
    (0.7
    )
    
    
    (0.4
    )
    
    
    (0.7
    )32.7
    
    
    
    35.0
    
    
    
    32.4
  2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sDomestic
    
    
    79,109
    
    
    
    61,323
    
    
    
    48,111Foreign
    
    
    10,315
    
    
    
    1,177
    
    
    
    (3,451
    )Total income before income taxes
    
    
    89,424
    
    
    
    62,500
    
    
    
    44,660
  2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sCurrent:
    
    Domestic
    
    
    25,766
    
    
    
    21,172
    
    
    
    17,724Foreign
    
    
    5,718
    
    
    
    563
    
    
    
    341Total current expense
    
    
    31,484
    
    
    
    21,735
    
    
    
    18,065Future:
    
    Domestic
    
    
    725
    
    
    
    5
    
    
    
    (566
    )Foreign
    
    
    (2,967
    )
    
    
    138
    
    
    
    (3,029
    )Total future expense
    
    
    (2,242
    )
    
    
    143
    
    
    
    (3,595
    )Total:
    
    Domestic
    
    
    26,491
    
    
    
    21,177
    
    
    
    17,158Foreign
    
    
    2,751
    
    
    
    701
    
    
    
    (2,688
    )Total income tax expense
    
    
    29,242
    
    
    
    21,878
    
    
    
    14,470
 F-26




---



##### 



2006
    
    2005$000s
    
    $000sFuture income tax assetsDifferences in timing of deductibility of expenses
    
    
    12,599
    
    
    
    13,470Loss carryforwards
    
    
    4,199
    
    
    
    4,670Share issue and other financing costs
    
    
    347
    
    
    
    519Tax cost of property and equipment in excess of carrying value
    
    
    332
    
    
    
    357Deferred gain on sale of building
    
    
    1,359
    
    
    
    1,513Other
    
    
    859
    
    
    
    1,11219,695
    
    
    
    21,641Less current portion
    
    
    9,711
    
    
    
    14,8279,984
    
    
    
    6,814
 2006
    
    2005$000s
    
    $000sFuture income tax liabilitiesCash to accrual adjustments on acquisitions of US subsidiaries
    
    
    2,512
    
    
    
    Differences in timing of taxability of revenues
    
    
    10,463
    
    
    
    15,287Carrying value of property and equipment in excess of tax cost
    
    
    7,970
    
    
    
    7,304Carrying value of intangible assets in excess of tax cost
    
    
    8,822
    
    
    
    10,625Other
    
    
    742
    
    
    
    59830,509
    
    
    
    33,814Less current portion
    
    
    12,236
    
    
    
    17,55218,273
    
    
    
    16,262
  $000s2007
    
    
    2008
    
    
    5412009
    
    
    662010
    
    
    9772014
    
    
    6632015
    
    
    182026
    
    
     1,2763,541
   F-27




---



##### 



15. Earnings Per Share
  2006
    
    2005
    
    2004#
    
    #
    
    #Basic shares outstanding
    
    
    45,068,266
    
    
    
    39,840,234
    
    
    
    36,999,196Share options (dilutive effect of 1,702,784 options;
2005  1,876,528; 2004  2,082,666)
    
    
    648,430
    
    
    
    1,067,584
    
    
    
    1,015,382Restricted shares (dilutive effect of 55,666 restricted shares;
2005  117,392)
    
    
    74,813
    
    
    
    34,414
    
    
    
    Diluted shares outstanding
    
    
    45,791,509
    
    
    
    40,942,232
    
    
    
    38,014,578
  16. Cash Flows From (Used In) Operating Activities
  2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sCASH FLOWS FROM OPERATING ACTIVITIESNet income for the year
    
    
    60,182
    
    
    
    40,622
    
    
    
    30,190Add (deduct) items not affecting cash:Depreciation of property and equipment
    
    
    15,604
    
    
    
    12,389
    
    
    
    11,986Amortization of intangible assets
    
    
    6,132
    
    
    
    2,542
    
    
    
    927Future income tax
    
    
    (2,242
    )
    
    
    143
    
    
    
    (3,595
    )Loss (gain) on dispositions of investments and property and equipment
    
    
    (1,238
    )
    
    
    562
    
    
    
    (504
    )Stock-based compensation expense
    
    
    2,224
    
    
    
    1,814
    
    
    
    1,014Provision for self-insured liability
    
    
    6,329
    
    
    
    8,244
    
    
    
    2,826Other non-cash items
    
    
    (994
    )
    
    
    (1,332
    )
    
    
    (1,065
    )Share of income from equity investments
    
    
    (285
    )
    
    
    (187
    )
    
    
    (385
    )Dividends from equity investments
    
    
    450
    
    
    
    550
    
    
    
    30086,162
    
    
    
    65,347
    
    
    
    41,694Change in non-cash working capital accounts:Accounts receivable
    
    
    (15,345
    )
    
    
    15,748
    
    
    
    (1,542
    )Costs and estimated earnings in excess of billings
    
    
    24,257
    
    
    
    (19,572
    )
    
    
    30,218Prepaid expenses
    
    
    (269
    )
    
    
    487
    
    
    
    496Accounts payable and accrued liabilities
    
    
    (3,958
    )
    
    
    (1,177
    )
    
    
    (6,470
    )Billings in excess of costs and estimated earnings
    
    
    4,590
    
    
    
    1,664
    
    
    
    1,600Income taxes payable/recoverable
    
    
    (2,048
    )
    
    
    (5,183
    )
    
    
    11,3557,227
    
    
    
    (8,033
    )
    
    
    35,657Cash flows from operating activities
    
    
    93,389
    
    
    
    57,314
    
    
    
    77,351
 F-28




---



##### 



17. Joint Ventures
  Percentage Owned2006
    
    2005
    
    2004%
    
    %
    
    %yyC.T. Joint Venture
    
    
    17
    
    
    
    20
    
    
    
    20Stantec
 S&L Partnership
    
    
    50
    
    
    
    50
    
    
    
    50Colt Stantec Joint Venture
    
    
    n/a
    
    
    
    n/a
    
    
    
    50Edmonton International Airports Joint Venture
    
    
    33
    
    
    
    33
    
    
    
    33Pine Creek Consultants Joint Venture
    
    
    33
    
    
    
    33
    
    
    
    33Dunlop Joint Ventures
    
    
    3380
    
    
    
    3380
    
    
    
    3380Stantec Architecture Ltd./J.L. Richards & Associates Joint Venture
    
    
    50
    
    
    
    50
    
    
    
    n/a
   2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sStatements of incomeGross revenue
    
    
    4,451
    
    
    
    5,941
    
    
    
    1,186Subconsultant and other direct expenses
    
    
    4,612
    
    
    
    5,072
    
    
    
    894Administrative and marketing expenses
    
    
    75
    
    
    
    147
    
    
    
    217Net (loss) income for the year
    
    
    (236
    )
    
    
    722
    
    
    
    75Balance sheetsCurrent assets
    
    
    2,086
    
    
    
    3,743
    
    
    
    3,445Current liabilities
    
    
    1,800
    
    
    
    2,842
    
    
    
    2,822Statements of cash flowsCash flows from (used in) operating activities
    
    
    173
    
    
    
    (488
    )
    
    
    (274
    )
 18. Segmented Information
   F-29




---



##### 



Geographic information
 Property and Equipment,Goodwill, Intangible Assets2006
    
    2005$000s
    
    $000sCanada
    
    
    106,497
    
    
    
    104,463United States
    
    
    232,387
    
    
    
    223,593International
    
    
    435
    
    
    
    441339,319
    
    
    
    328,497
 Geographic information
 Gross Revenue2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sCanada
    
    
    461,281
    
    
    
    380,471
    
    
    
    325,844United States
    
    
    348,055
    
    
    
    233,428
    
    
    
    190,362International
    
    
    6,797
    
    
    
    4,121
    
    
    
    4,673816,133
    
    
    
    618,020
    
    
    
    520,879
  Practice area information
 Gross Revenue2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sConsulting ServicesBuildings
    
    
    184,254
    
    
    
    147,432
    
    
    
    98,020Environment
    
    
    149,376
    
    
    
    103,353
    
    
    
    104,630Industrial & Project Management
    
    
    94,806
    
    
    
    67,834
    
    
    
    56,929Transportation
    
    
    106,026
    
    
    
    90,559
    
    
    
    91,389Urban Land
    
    
    281,671
    
    
    
    208,842
    
    
    
    168,846816,133
    
    
    
    618,020
    
    
    
    519,814Other
    
    
    
    
    
    
    
    
    
    
    1,065816,133
    
    
    
    618,020
    
    
    
    520,879
  Customers
 F-30




---



##### 



19. Forward Contract
  20. Investment Tax Credits
  21. United States Generally Accepted Accounting Principles
  a) Net income and comprehensive income
  F-31




---



##### 



Statement of Comprehensive Income
 2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sNet income under Canadian and US GAAP
    
    
    60,182
    
    
    
    40,622
    
    
    
    30,190Other comprehensive income, net of tax:Unrealized foreign exchange gains (losses) on translation of
self-sustaining foreign operations
    
    
    731
    
    
    
    (6,557
    )
    
    
    (5,157
    )Unrealized gains on financial assets
    
    
    217
    
    
    
    227
    
    
    
    37Comprehensive Income
    
    
    61,130
    
    
    
    34,292
    
    
    
    25,070Accumulated other comprehensive income, beginning of the year
    
    
    (25,311
    )
    
    
    (18,981
    )
    
    
    (13,861
    )Unrealized foreign exchange gains (losses) on translation of
self-sustaining foreign operations
    
    
    731
    
    
    
    (6,557
    )
    
    
    (5,157
    )Unrealized gains on financial assets
    
    
    217
    
    
    
    227
    
    
    
    37Accumulated other comprehensive income, end of the year
    
    
    (24,363
    )
    
    
    (25,311
    )
    
    
    (18,981
    )
 b) Other disclosure requirements
 i) Allowance for doubtful accounts
 2006
    
    2005
    
    2004$000s
    
    $000s
    
    $000sBalance, beginning of the year
    
    
    16,053
    
    
    
    21,095
    
    
    
    16,952Acquired balances
    
    
    2,069
    
    
    
    7,298
    
    
    
    5,294Provision for doubtful accounts
    
    
    2,182
    
    
    
    73
    
    
    
    6,632Deductions
    
    
    (13,118
    )
    
    
    (12,164
    )
    
    
    (7,152
    )Impact on foreign exchange
    
    
    193
    
    
    
    (249
    )
    
    
    (631
    )Balance, end of the year
    
    
    7,379
    
    
    
    16,053
    
    
    
    21,095
 ii) Long-term contracts
 F-32




---



##### 



c) Recent accounting pronouncements
 Stock-based compensation
 Uncertainty in income taxes
 Fair value measurements
 22. Comparative Figures
  F-33