Management's Discussion and Analysis

Second Quarter 2006 Financial Highlights

•	Gross revenue for the second quarter of 2006 increased 39.1% to $208.8 million compared to $150.2 million for the second quarter of 2005. On a year-to-date basis, gross revenue increased 35.3% to $394.1 million.

•	Net revenue for the second quarter of 2006 increased 42.7% to $182.2 million compared to $127.7 million for the second quarter of 2005, with a year-to-date increase of 39.9% to $345.3 million.

•	Net income for the second quarter of 2006 increased 28.0% to $16.7 million compared to $13.1 million for the second quarter of 2005, with a year-to-date increase of 42.1% to $28.1 million.

Excluding the positive effect of the $4.0 million adjustment to our earnings made in the second quarter of 2005, net income would have increased 59.8% for the second quarter of 2006 compared to the same period in 2005 and 63.6% year to date.

•

Diluted earnings per share for the second quarter of 2006 were 5.9% higher at $0.36 versus $0.34 for the second quarter of 2005, with a year-to-date increase of 19.6% to $0.61. Excluding the positive effect of the $0.07 adjustment to our earnings made in the second quarter of 2005, diluted earnings per share would have increased 33.3% for the second quarter of 2006 compared to the same period in 2005 and 38.6% year to date.

Report to Shareholders

I am very pleased to report excellent performance for our Company during an active second quarter. Once again, our staff delivered strong results. Net income for the quarter was $16.7 million, and diluted earnings per share were $0.36, representing increases of 28.0% and 5.9%, respectively, compared to the second quarter of 2005. Shareholders are reminded that in the second quarter of 2005 we made a $4.0 million, or $0.07 per share, adjustment to our earnings to reflect a change in our method of estimating doubtful accounts receivable. Excluding the positive effect of this adjustment, net income would have increased 59.8% for the second quarter of 2006, and diluted earnings per share would have increased 33.3% quarter to quarter.

Overall, our operations in most of our regions and practice areas performed well during the quarter. Performance was strong in both our Canadian and US West operations and improved in our US East operations. This is particularly rewarding because it reflects the successful integration of The Keith Companies, Inc. and Keen Engineering Co. Ltd., which we completed in the fall of 2005. The quarter also reflected the success of the initial system conversion phase of the Dufresne-Henry, Inc. acquisition in New England, the addition of ACEx Technologies, Inc., which augmented our communications systems engineering services in the Transportation practice area, and the continued streamlining and improvement of our Mid-Atlantic and New York operations.

During the quarter, new project activity was strong throughout the Company in all practice areas. In particular, I would like to highlight some recent new assignments in the Transportation practice area. In the area of pavement engineering, we secured a new five-year extension of our two Long-Term Pavement Performance (LTPP) program contracts with the U.S. Department of Transportation. These

contracts, worth approximately $11 million in total, will help us maintain our position as a leader in pavement engineering across North America. Our work with the LTPP program, which began in 1988, currently involves the monitoring of data collection for a full 60% of the program’s participating transportation agencies, covering a total of 750 pavement sections in 27 states and eight provinces. Our Infrastructure Management & Pavement Engineering team was also awarded an assignment to provide a pavement management software system for the City of Albuquerque, New Mexico, along with conducting a pavement performance survey using Stantec’s advanced pavement monitoring vehicle—the RT-3000 Road Tester. In addition, we will be using our pavement performance expertise to assist the public works department of Jefferson Parish, Louisiana, in its analysis of the impact of Hurricane Katrina on local infrastructure. Our team will be responsible for providing an inventory of the pavement performance and drainage conditions of the parish’s entire street network.

During the second quarter, we also saw positive results of the implementation of the new Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, which is providing stable federal funding for transportation projects in the US. For example, in the US East, we were awarded a contract to work as part of a team in designing the upgrading of 4 miles (6.44 kilometres) of U.S. Route 15 from a two-lane roadway to a full, limited-access freeway in Steuben County, New York, for the New York State Department of Transportation. The project will also involve the design of drainage improvements. And we were contracted to provide transportation engineering services—including streetscape, pedestrian/bicycle trail, and right-of-way design—for the development of a new connector street linking the campus of St. Michael’s College in Colchester, Vermont. Scheduled for completion in 2007, the project will create a pedestrian friendly environment through the college’s residential area and a new gateway to the campus.

New transportation project awards in other regions included a contract with the Colorado Department of Transportation to design a new four-lane bridge over Interstate 25 at 128 Avenue in Denver, Colorado. The bridge design will include “signature” aesthetic features determined through public consultation with the City of Westminster, Colorado, the City of Thornton, Colorado, and the Adam County School District. In Canada, our Transportation team procured a contract to design the widening of Highway 402 from two to four lanes for 3.5 kilometres (2.2 miles) from Sarnia, Ontario, to the US border crossing for the Ontario Ministry of Transportation. One of the technical challenges of the project will be to develop a unique highway cross-section that includes dedicated lanes for local traffic, US-bound trucks, and US-bound cars.

In summary, the second quarter of 2006 was productive for our Company as demonstrated by our strong results and project activity. Such performance continues to support our confidence in our ability to pursue orderly and focused growth.

Tony Franceschini, P.Eng.

President & CEO

August 3, 2006

STANTEC INC.
Consolidated Balance Sheets
	June 30		December 31
	2006		2005
(Columnar figures in thousands of Canadian dollars) (Unaudited)	$		$

ASSETS [note 4]
Current
Cash and cash equivalents		10,688		28,143
Restricted cash		4,083		21,312
Accounts receivable, net of allowance for doubtful accounts of
$13,267 in 2006 ($16,053 - 2005)		161,088		137,928
Costs and estimated earnings in excess of billings		54,944		66,172
Prepaid expenses		5,389		5,420
Future income tax assets		8,916		14,827
Other assets [note 3]		8,662		6,569
Total current assets		253,770		280,371
Property and equipment		64,131		58,519
Goodwill		241,800		242,674
Intangible assets		25,246		27,304
Future income tax assets		9,404		6,814
Other assets [note 3]		13,806		13,097
Total assets		608,157		628,779

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities	89,022		106,757
Billings in excess of costs and estimated earnings	26,300		24,251
Income taxes payable	4,373		4,441
Current portion of long-term debt [note 4]	3,114		4,813
Future income tax liabilities	14,708		17,552

Total current liabilities	137,517		157,814
Long-term debt [note 4]	59,547		81,886
Other liabilities [note 5]	26,086		24,764
Future income tax liabilities	18,059		16,262

Total liabilities	241,209		280,726

Shareholders' equity
Share capital [note 6]	212,475		210,604
Contributed surplus [note 6]	4,931		5,522
Cumulative translation account	(36,474	)	(25,575	)
Deferred stock compensation	(456	)	(833	)
Retained earnings	186,472		158,335

Total shareholders' equity	366,948		348,053

Total liabilities and shareholders' equity	608,157		628,779
See accompanying notes

STANTEC INC.

Consolidated Statements of Income and Retained Earnings

	For the quarter ended						For the two quarters ended
	June 30						June 30
	2006			2005			2006			2005
(Columnar figures in thousands of Canadian dollars,
except share and per share amounts) (Unaudited)	$			$			$			$

INCOME
Gross revenue		208,841			150,164			394,111			291,308
Less subconsultant and other direct
expenses		26,686			22,507			48,818			44,518

Net revenue		182,155			127,657			345,293			246,790
Direct payroll costs		78,826			54,952			151,035			109,391

Gross margin		103,329			72,705			194,258			137,399
Administrative and marketing expenses
[note 9]		72,447			49,450			140,824			100,712
Depreciation of property and equipment		3,633			2,920			7,104			5,684
Amortization of intangible assets		1,706			188			3,234			426
Net interest expense [note 4]		655			180			1,382			330
Share of income from associated
companies		(126	)		(40	)		(164	)		(108	)
Foreign exchange (gains) losses		(71	)		(7	)		(119	)		54
Other income		(1,032	)		(86	)		(1,161	)		(161	)

Income before income taxes		26,117			20,100			43,158			30,462

Income taxes
Current		8,123			5,069			15,621			8,897
Future		1,274			1,965			(600	)		1,764

Total income taxes		9,397			7,034			15,021			10,661
Net income for the period		16,720			13,066			28,137			19,801
Retained earnings, beginning of the period		169,752			124,542			158,335			117,874
Shares repurchased [note 6]		-			(94	)		-			(161	)

Retained earnings, end of the period		186,472			137,514			186,472			137,514
Weighted average number of shares
outstanding - basic [note 6]		45,081,646			37,883,954			45,020,210			37,873,076
Weighted average number of shares
outstanding - diluted [note 6]		46,005,960			38,912,666			45,937,272			38,869,688
Shares outstanding, end of the period
[note 6]		45,120,666			37,898,572			45,120,666			37,898,572

Earnings per share [note 6]
Basic		0.37			0.34			0.63			0.52

Diluted		0.36			0.34			0.61			0.51
See accompanying notes

STANTEC INC.
Consolidated Statements of Cash Flows
	For the quarter ended						For the two quarters ended
	June 30						June 30
	2006			2005			2006			2005
(Columnar figures in thousands of Canadian dollars)
(Unaudited)	$			$			$			$

CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES
Cash receipts from clients		214,589			148,988			398,752			300,122
Cash paid to suppliers		(53,025	)		(40,999	)		(121,111	)		(94,262	)
Cash paid to employees		(114,767	)		(83,953	)		(242,734	)		(176,077	)
Dividends from equity investments		-			-			150			250
Interest received		1,984			1,452			3,555			2,716
Interest paid		(2,138	)		(1,457	)		(4,204	)		(2,778	)
Income taxes paid		(5,592	)		(5,349	)		(17,409	)		(18,842	)
Income taxes recovered		1,077			1,386			1,167			1,404

Cash flows from operating activities [note 10]		42,128			20,068			18,166			12,533
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES
Business acquisitions, net of cash acquired		(9,911	)		8			(12,079	)		(692	)
Restricted cash used for acquisitions		14,506			-			16,706			-
Increase in investments held for self-insured
liabilities		(1,171	)		(1,650	)		(2,053	)		(3,376	)
Proceeds on disposition of investments		3			81			5			513
Collection of notes receivable from disposition of
Technology and Design Build segments		-			250			-			250
Purchase of property and equipment		(5,173	)		(3,954	)		(10,819	)		(8,105	)
Proceeds on disposition of property and
equipment		1			128			12			130

Cash flows used in investing activities		(1,745	)		(5,137	)		(8,228	)		(11,280	)
CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES
Repayment of long-term debt		(33,915	)		(2,119	)		(36,170	)		(8,001	)
Repayment of acquired bank indebtedness [note 2]		(1,787	)		-			(1,787	)		-
Proceeds from long-term borrowings		-			-			9,142			-
Repurchase of shares for cancellation [note 6]		-			(112	)		-			(195	)
Proceeds from issue of share capital [note 6]		200			95			1,449			535
Cash flows used in financing activities		(35,502	)		(2,136	)		(27,366	)		(7,661	)
Foreign exchange loss (gain) on cash held in
foreign currency		66			39			(27	)		202

Net increase (decrease) in cash and cash
equivalents		4,947			12,834			(17,455	)		(6,206	)
Cash and cash equivalents, beginning of the
period		5,741			18,850			28,143			37,890

Cash and cash equivalents, end of the period		10,688			31,684			10,688			31,684
See accompanying notes

STANTEC INC.

Notes to the Unaudited Interim Consolidated Financial Statements

1.	General Accounting Policies

These unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a basis consistent with those used in the preparation of the annual December 31, 2005, consolidated financial statements. Because the disclosures included in these interim consolidated financial statements do not conform in all respects to the requirements of generally accepted accounting principles for annual financial statements, these interim consolidated financial statements should be read in conjunction with the December 31, 2005, annual consolidated financial statements. In management's opinion, these interim consolidated financial statements include all the adjustments necessary to present fairly such interim consolidated financial statements. The consolidated statements of income and retained earnings and cash flows for interim periods are not necessarily indicative of results on an annual basis due to short-term variations as well as the timing of acquisitions, if any, during interim periods.

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 value of the acquired assets and liabilities. Upon finalization, adjustments to the initial estimates may be required, and these adjustments may be material. The purchase prices of acquisitions are generally subject to price adjustment clauses included in the purchase agreements. Such purchase price adjustments generally result in an increase or reduction to the promissory note consideration recorded at acquisition to reflect either more or less non-cash working capital realized than was originally expected. These purchase price adjustments, therefore, have no net effect on the original purchase price allocations. In the case of some acquisitions, additional consideration may be payable based on future performance parameters. As at June 30, 2006, the Company does not anticipate any additional consideration to be payable in the future based on future performance parameters.

On March 6, 2006, the Company acquired the shares and business of Carinci Burt Rogers Engineering, Inc. for cash consideration and promissory notes. This acquisition supplements the Company’s buildings engineering capabilities and presence in the Greater Toronto Area.

On April 14, 2006, the Company acquired the shares and business of Dufresne-Henry, Inc. for cash consideration and promissory notes. Along with complementing the Company's New York operations, this acquisition expands its services into four new states in New England and creates an initial platform for growth in Florida. Dufresne- Henry, Inc.’s staff offer professional services in engineering, planning, environmental sciences, and landscape architecture.

On May 12, 2006, the Company acquired the shares and business of ACEx Technologies, Inc. for cash consideration and promissory notes. This acquisition complements the Company’s services in transit, rail and power communications, and control systems engineering and adds new locations in Oakland, California, and Irving, Texas.

During the first two quarters of 2006, the Company adjusted the purchase price on the Dunlop Architects Inc.

(2004), CPV Group Architects & Engineering Co. Ltd. (2005), and Keen Engineering Co. Ltd. (2005) acquisitions pursuant to price adjustment clauses included in the purchase agreements.

STANTEC INC.

Notes to the Unaudited Interim Consolidated Financial Statements

During the first two quarters of 2006, the purchase price allocations for the CPV Group Architects & Engineers Co. Ltd. and The Keith Companies, Inc. acquisitions were finalized. The purchase price allocations for the Keen Engineering Co. Ltd., Carinci Burt Rogers Engineering, Inc., Dufresne-Henry, Inc., and ACEx Technologies, Inc. acquisitions have not yet been finalized. The Company expects to finalize the purchase price allocations for the Keen Engineering Co. Ltd. acquisition during the third quarter of 2006, for the Carinci Burt Rogers Engineering, Inc. acquisition during the fourth quarter of 2006, and for the Dufresne-Henry, Inc. and ACEx Technologies, Inc. acquisitions during the first quarter of 2007.

During the first two quarters of 2005, the Company paid additional contingent consideration in connection with the Cosburn Patterson Mather Limited (2002) acquisition and adjusted the purchase price on the Ecological Services Group Inc. (2003), GBR Architects Limited (2004), and Dunlop Architects Inc. (2004) acquisitions pursuant to price adjustment clauses included in the purchase agreements.

Aggregate consideration paid

Details of the aggregate consideration given and of the fair values of net assets acquired or adjusted for in the first two

quarters of each year are as follows:

	2006			2005
(In thousands of Canadian dollars)	$			$

Cash consideration		13,221			700
Promissory notes, due 2007 through 2009		4,118			421
Purchase price		17,339			1,121
Assets and liabilities acquired at fair values
Cash acquired		1,142			8
Bank indebtedness assumed		(1,787	)		-
Non-cash working capital		9,832			591
Property and equipment		3,173			(9	)
Goodwill		6,790			586
Intangible assets
Client relationships		1,400			-
Contract backlog		475			-
Other		151			-
Long-term debt		(595	)		-
Future income tax liabilities		(3,242	)		(55	)
Net assets acquired		17,339			1,121

All of the goodwill is non-deductible for income tax purposes. As a result of the acquisitions completed in 2006, the

Company assumed commitments for operating leases of approximately $1.2 million annually.

STANTEC INC.

Notes to the Unaudited Interim Consolidated Financial Statements

3.	Other Assets

	June 30		December 31
	2006		2005
(In thousands of Canadian dollars)			$$

Investments held for self-insured liabilities		19,707		16,857
Investments in associated companies		1,522		1,545
Investments - other		708		710
Other		531		554
		22,468		19,666
Less current portion of investments held for self-insured liabilities		8,662		6,569
		13,806		13,097

4.	Long-Term Debt

	June 30		December 31
	2006		2005
(In thousands of Canadian dollars)			$$

Non-interest-bearing note payable		128		122
Other notes payable		8,516		5,643
Bank loan		53,382		79,035
Mortgages payable		362		1,706
Other		273		193
		62,661		86,699
Less current portion		3,114		4,813
		59,547		81,886

The Company has a revolving credit facility in the amount of $160 million due on August 31, 2008. Subsequent to the quarter-end, this facility was extended by one year until August 31, 2009. 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 rate or bankers acceptance rates plus 65 or 85 basis points. At June 30, 2006, $22,882,000 of the bank loan was payable in US funds (US$20,500,000). Loans may be repaid under the credit facility from time to time at the option of the Company. The credit facility agreement contains restrictive covenants, including, but not limited to, debt to earnings ratio and earnings to debt service ratio. The Company was in compliance with all the covenants under this agreement as at June 30, 2006. All the assets of the Company are held as collateral under a general security agreement for the bank loan.

The interest incurred on long-term debt in Q2 06 was $795,000 (Q2 05 - $364,000), with a year-to-date expense of $1,797,000 (2005 - $718,000).

STANTEC INC.

Notes to the Unaudited Interim Consolidated Financial Statements

5.	Other Liabilities

	June 30		December 31
	2006		2005
(In thousands of Canadian dollars)	$		$

Provision for self-insured liabilities		12,181		11,346
Deferred gain on sale leaseback		6,405		6,624
Lease inducements		10,077		7,997
Liabilities on lease exit activities		1,338		2,251
Other		-		1,021
		30,001		29,239
Less current portion included in accounts payable and accrued liabilities		3,915		4,475
		26,086		24,764

Provision for self-insured liabilities
	June 30		December 31
	2006		2005
(In thousands of Canadian dollars)	$		$
Provision, beginning of the period	11,346		5,236
Addition to provision	1,253		8,244
Payment for claims settlement	(418	)	(2,134	)

Provision, end of the period	12,181		11,346
A midyear actuarial review was performed, resulting in a $994,000 reduction of the provision for self-insured liabilities in
second quarter.

Liabilities on lease exit activities
	June 30			December 31
	2006			2005
(In thousands of Canadian dollars)			$	$
Liability, beginning of the period	2,251			2,817
Current year provision:
Established for existing operations	-			609
Resulting from acquisitions	-			276
Amounts paid and charged against the liability:
Impacting administrative and marketing expenses	(876	)		(1,103	)
Impacting the purchase price allocation	-			(325	)
Impact of foreign exchange	(37	)		(23	)

Liability, end of the period	1,338			2,251
A reduction of $421,000 in liabilities on lease exit activities impacted administrative and marketing expenses in Q2 06.

STANTEC INC.

Notes to the Unaudited Interim Consolidated Financial Statements

6.	Share Capital

							Contributed
		Capital Stock					Surplus
	2006		2005				2006		2005
	Shares		Shares
(In thousands of Canadian dollars)	#	$	#		$		$		$

Balance, beginning of the year	44,626,262	210,604	37,742,170		87,656		5,522		2,544
Share options exercised for cash	437,806	1,249	129,668		440
Stock-based compensation expense							186		254
Shares repurchased under normal
course issuer bid	-	-	(5,800	)	(15	)	-		(1	)
Reclassification of fair value of stock
options previously expensed		136			57		(136	)	(57	)
Shares issued on vesting of
restricted shares	6,278	81	-		-		(499	)	-
Balance, as at March 31	45,070,346	212,070	37,866,038		88,138		5,073		2,740
Share options exercised for cash	40,604	200	40,334		95
Stock-based compensation expense							180		251
Shares repurchased under normal
course issuer bid	-	-	(7,800	)	(18	)	-		-
Reclassification of fair value of stock
options previously expensed		42			3		(42	)	(3	)
Shares issued on vesting of
restricted shares	9,716	163	-		-		(280	)	-
Balance, as at June 30	45,120,666	212,475	37,898,572		88,218		4,931		2,988

During Q2 06, the Company did not repurchase any common shares for cancellation pursuant to an ongoing normal course issuer bid. In Q2 05, 7,800 common shares were repurchased at a cost of $112,000. Of this amount, $18,000 and $0 reduced the share capital and contributed surplus accounts, respectively, with $94,000 being charged to retained earnings.

During the first two quarters of 2006, the Company did not repurchase any common shares for cancellation pursuant to an ongoing normal course issuer bid. During the first two quarters of 2005, 13,600 common shares were repurchased for cancellation at a cost of $195,000. Of this amount, $33,000 and $1,000 reduced the share capital and contributed surplus accounts, respectively, with $161,000 being charged to retained earnings.

During Q2 06, the Company renewed its normal course issuer bid with the Toronto Stock Exchange, which enables the Company to purchase up to 2,258,754 common shares during the period June 1, 2006, to May 31, 2007.

During Q2 06, the Company recognized a stock-based compensation expense of $377,000 (Q2 05 - $334,000) in administrative and marketing expenses. Of the amount expensed, $180,000 related to the fair value of options granted (Q2

05 - $251,000); $67,000 related to deferred share unit compensation (Q2 05 - $83,000); and $130,000 related to the restricted shares issued on The Keith Companies, Inc. acquisition.

STANTEC INC.

Notes to the Unaudited Interim Consolidated Financial Statements

During the first two quarters of 2006, the Company recognized a stock-based compensation expense of $925,000 (2005 -$683,000) in administrative and marketing expenses. Of the amount expensed, $366,000 related to the fair value of options granted (2005 - $505,000); $208,000 related to deferred share unit compensation (2005 - $178,000); and $351,000 related to the restricted shares issued on The Keith Companies, Inc. acquisition. 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.

On May 4, 2006, the shareholders of the Company approved the subdivision of its issued common shares on a two-for-one basis, effective for registered common shares at the close of business on May 19, 2006. The shareholders of the Company also approved an amendment to its employee stock option plan, which had the effect of increasing the number of common shares reserved for issuance to 4,514,126 on a postsplit basis, of which 3,104,334 were available for issue at June 30, 2006. All references to common shares, per share amounts, and stock-based compensation plans in these consolidated financial statements have been restated to reflect the stock split on a retroactive basis.

7.	Segmented Information

The Company provides comprehensive professional services in the area of infrastructure and facilities throughout North America and internationally. The Company 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 that 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.

All the operations of the Company are included in one reportable segment as Consulting Services, which provides services throughout North America and internationally.

Geographic information	Property and Equipment,
	Goodwill, Intangible Assets
	June 30, 2006		December 31, 2005
(In thousands of Canadian dollars)	$		$

Canada		107,509		104,463
United States		223,216		223,593
International		452		441
		331,177		328,497

STANTEC INC.

Notes to the Unaudited Interim Consolidated Financial Statements

Geographic information			Gross Revenue
	For the quarter ended				For the two quarters ended
	June 30				June 30
	2006		2005		2006		2005
(In thousands of Canadian dollars)	$		$		$		$

Canada		117,650		96,406		223,013		183,322
United States		90,156		52,948		169,285		106,104
International		1,035		810		1,813		1,882
		208,841		150,164		394,111		291,308

Gross revenue is attributed to countries based on the location of the work performed.

Practice area information			Gross Revenue
	For the quarter ended				For the two quarters ended
	June 30						June 30
	2006		2005		2006		2005
(In thousands of Canadian dollars)	$		$		$		$

Consulting Services
Buildings		45,764		36,855		91,033		72,060
Environment		36,942		24,901		68,340		49,588
Industrial & Project Management		22,851		17,677		42,434		33,564
Transportation		28,433		22,883		52,019		44,772
Urban Land		74,851		47,848		140,285		91,324
		208,841		150,164		394,111		291,308

8.	Employee Future Benefits

The Company contributes to group retirement savings plans and an employee share purchase plan based on the amount of employee contributions made subject to maximum limits per employee. The Company accounts for such defined contributions as an expense in the period in which the contributions are made. The expense recorded in Q2 06 was $2,653,000 (Q2 05 - $2,067,000), with a year-to-date expense of $5,966,000 (2005 - $4,071,000).

9.	Investment Tax Credits

Investment tax credits arising from expenditures that qualify as 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. During Q2 06, investment tax credits of $500,000 were recorded as a reduction of administrative and marketing expenses. No investment tax credits were recorded in the first two quarters of 2005.

STANTEC INC.

to the Unaudited Interim Consolidated Financial Statements

10.

Cash Flows From Operating Activities

Cash flows from operating activities determined by the indirect method are as follows:

	For the quarter ended						For the two quarters ended
	June 30						June 30
	2006			2005			2006			2005
(in thousands of Canadian dollars)	$			$			$			$

Net income for the period		16,720			13,066			28,137			19,801
Add (deduct) items not affecting cash:
Depreciation of property and equipment		3,633			2,920			7,104			5,684
Amortization of intangible assets		1,706			188			3,234			426
Future income tax		1,274			1,965			(600	)		1,764
Loss (gain) on dispositions of investments and
property and equipment		(793	)		439			(470	)		338
Stock-based compensation expense		377			334			925			683
Provision for self-insured liability		(994	)		1,429			1,253			3,449
Other non-cash items		1,732			78			555			255
Share of income from associated companies		(126	)		(40	)		(164	)		(108	)
Dividends from equity investments		-			-			150			250
		23,529			20,379			40,124			32,542
Change in non-cash working capital accounts:
Accounts receivable		9,488			(9,655	)		(11,500	)		(1,553	)
Costs and estimated earnings in excess of
billings		(10,262	)		2,150			8,513			(924	)
Prepaid expenses		(733	)		35			134			748
Accounts payable and accrued liabilities		14,714			8,307			(21,673	)		(8,022	)
Billings in excess of costs and estimated
earnings		968			(2,248	)		2,787			(1,705	)
Income taxes payable/recoverable		4,424			1,100			(219	)		(8,553	)
		18,599			(311	)		(21,958	)		(20,009	)
Cash flows from operating activities		42,128			20,068			18,166			12,533

11.

Comparative Figures

Certain comparative figures have been reclassified to conform to the presentation adopted for the current period.