Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-6
Stantec Inc.
Notes to the Unaudited Interim Condensed
Consolidated Financial Statements
1.Corporate Information
The interim condensed consolidated financial statements (consolidated financial statements) of Stantec Inc., its subsidiaries, and its structured entities (the Company) for the two quarters ended June 30, 2022, were authorized for issuance in accordance with a resolution of the Company’s Audit and Risk Committee on August 10, 2022. The Company was incorporated under the Canada Business Corporations Act on March 23, 1984. Its shares are traded on the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE) under the symbol STN. The Company’s registered office is located at Suite 400, 10220 - 103 Avenue, Edmonton, Alberta. The Company is domiciled in Canada.
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 engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics, from initial project concept and planning through to design, construction administration, commissioning, maintenance, decommissioning, and remediation.
2.Basis of Preparation
These consolidated financial statements for the two quarters ended June 30, 2022 were prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. These consolidated financial statements do not include all information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Company’s December 31, 2021 annual consolidated financial statements. These consolidated financial statements are presented in Canadian dollars and all values are rounded to the nearest million ($000,000), except where otherwise indicated.
The accounting policies applied when preparing the Company’s consolidated financial statements are consistent with those followed when preparing the annual consolidated financial statements for the year ended December 31, 2021 except as described in note 3.
The preparation of these consolidated financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue, and expenses. The significant judgments made by management when applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Company’s December 31, 2021 annual consolidated financial statements, which included considerations for the impacts of the continuing COVID-19 pandemic and new variants. The COVID-19 pandemic has had adverse financial impacts on the global economy and financial markets. The war in Ukraine has also contributed to increased global economic and financial volatility; however, there has been no significant impact on the Company's results and management continues to monitor for any potential impacts on the operations and financial position of the Company.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-7
Stantec Inc.
3.Recent Accounting Pronouncements and Changes to Accounting Policies
In May 2020, the IASB issued Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37). The
amendments clarify that both incremental costs and an allocation of other costs that relate directly to fulfilling the contract should be included in assessing whether a contract is onerous. The amendments are effective January 1, 2022. The amendment did not have a material impact on the Company's consolidated financial statements.
Future adoptions
The standards, amendments, and interpretations issued before 2022 but not yet adopted by the Company have been disclosed in note 6 of the Company’s December 31, 2021 annual consolidated financial statements. The Company is currently considering the impact of adopting these standards, amendments, and interpretations on its consolidated financial statements.
4. Business Acquisition
On April 1, 2022, the Company purchased the assets of Barton Willmore LLP and all the shares of Barton Willmore
Holdings Limited (collectively Barton Willmore) for cash consideration and notes payable. Barton Willmore is a 300-
person firm based in the United Kingdom. The firm provides planning and design services for both public and private
clients across all development sectors, with specific expertise in the residential space. This addition further
strengthened the Company’s Infrastructure operations in the Global cash-generating unit.
Details of the consideration transferred and the fair value of the identifiable assets and liabilities acquired at the date of acquisition, including measurement period adjustments for prior acquisitions, are as follows:
Notes
Total $
Cash consideration
49.7
Notes payable
7
26.3
Consideration
76.0
Cash consideration
49.7
Cash acquired
2.1
Net cash paid
47.6
Assets and liabilities acquired
Cash
2.1
Non-cash working capital
Trade receivables
11.8
Unbilled receivables
4.2
Trade and other payables
(5.5)
Other non-cash working capital
(3.1)
Intangible assets
12.8
Deferred tax assets (net)
9.8
Provisions
8
(6.3)
Other
1.6
Total identifiable net assets at fair value
27.4
Goodwill arising on acquisitions
48.6
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-8
Stantec Inc.
Trade receivables and unbilled receivables are recognized at fair value at the time of acquisition, and their fair value approximated their net carrying value.
Goodwill consists of the value of expected synergies arising from an acquisition, the expertise and reputation of the assembled workforce acquired, and the geographic location of the acquiree. There were no goodwill and intangible assets deductible for income tax purposes.
At June 30, 2022, provisions for claims outstanding relating to all prior acquisitions were $11.8, based on their
expected probable outcome (note 8). Certain of these claims are indemnified by the acquiree (note 6).
Gross revenue earned from Barton Willmore since the acquisition date is $7.8.
Fair value of net assets for current and prior year acquisitions
The preliminary fair values of the net assets recognized in the Company’s consolidated financial statements were based on management’s best estimates of the acquired identifiable assets and liabilities at the acquisition dates. Management finalized the fair value assessments of assets and liabilities purchased from Engenium and Cox McLean during the quarter. For Driven by Values, Cardno Limited, and Barton Willmore, management is waiting for vendor's closing financial statements, agreement of purchase adjustments, or other outstanding information. Once the outstanding information is received, reviews are completed, and approvals are obtained, the valuation of acquired assets and liabilities will be finalized.
Measurement period adjustments related to prior acquisitions decreased goodwill by $3.5, including an increase of $12.9 in deferred tax assets and a decrease of $9.4 in other net assets.
5.Trade and Other Receivables
June 30, 2022
December 31, 2021
Note
$
$
Trade receivables, net of expected credit losses of $2.0
(2021 – $2.0)
830.7
787.9
Holdbacks, current
28.9
28.6
Other
8
40.6
7.2
Trade and other receivables
900.2
823.7
The aging analysis of gross trade receivables is as follows:
Total
1–30
31–60
61–90
91–120
121+
$
$
$
$
$
$
June 30, 2022
832.7
496.4
176.5
61.3
37.5
61.0
December 31, 2021
789.9
467.8
181.1
56.3
30.6
54.1
Information about the Company’s exposure to credit risks for trade and other receivables is included in note 12.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-9
Stantec Inc.
6.Other Assets
June 30, 2022
December 31, 2021
Note
$
$
Financial assets
Investments held for self-insured liabilities
11,14
129.6
198.3
Holdbacks on long-term contracts
28.4
23.6
Other
15.7
15.5
Non-financial assets
Investments in joint ventures and associates
6.8
7.4
Other
7.4
7.6
187.9
252.4
Less current portion - financial
19.2
21.4
Less current portion - non-financial
2.1
2.1
Long-term portion
166.6
228.9
Financial assets — other primarily includes indemnifications, sublease receivables, deposits, and the interest rate swap (note 12). Non-financial assets - other primarily includes transactions costs on long-term debt, and investment tax credits.
Investments held for self-insured liabilities include government and corporate bonds that are classified as fair value through other comprehensive income (FVOCI) with unrealized gains (losses) recorded in other comprehensive income (loss). Investments also include equity securities that are classified as fair value through profit and loss with gains (losses) recorded in net income. During the first two quarters of 2022, the Company recorded a net loss on equity securities of $4.0 (June 30, 2021 – net gain of $10.4) (note 14) and an unrealized loss on bonds of $5.0 (June 30, 2021 – unrealized loss of $1.3).
7. Long-Term Debt
June 30, 2022
December 31, 2021
$
$
Senior unsecured notes
298.4
298.2
Revolving credit facility
699.0
543.3
Term loan
308.5
307.9
Notes payable
56.1
64.7
Software financing obligations
27.3
31.0
1,389.3
1,245.1
Less current portion
40.9
51.0
Long-term portion
1,348.4
1,194.1
Interest expense on the Company’s long-term debt for the first two quarters of 2022 was $18.5 (June 30, 2021 – $9.2).
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-10
Stantec Inc.
Senior unsecured notes
The Company has $300.0 of senior unsecured notes (the notes) that mature on October 8, 2027. The notes bear interest at a fixed rate of 2.048% per annum. The notes rank pari passu with all other debt and future indebtedness of the Company.
Revolving credit facilities and term loan
The Company has syndicated credit facilities, structured as a sustainability-linked loan, consisting of a senior revolving credit facility in the maximum amount of $800.0 and senior term loan of $310.0 in two tranches. Additional funds of $600.0 can be accessed subject to approval and under the same terms and conditions. The revolving credit facility and the term loan are unsecured, may be repaid from time to time at the option of the Company, and maturing at various dates before October 29, 2026. The average interest rate for the credit facilities at June 30, 2022, was 3.96% (December 31, 2021 – 2.15%).
The Company is subject to restrictive covenants related to its credit facilities and senior unsecured notes, which are measured quarterly. These covenants are consistent with those disclosed in the Company’s annual consolidated financial statements for the year ended December 31, 2021. The Company was in compliance with these covenants as at and throughout the two quarters ended June 30, 2022.
Notes payable
Notes payable consists primarily of notes payable for acquisitions and mature at various dates from 2022 to 2025. The weighted average interest rate on the notes payable at June 30, 2022, was 1.22% (December 31, 2021 – 1.46%).
Software financing obligations
The Company has financing obligations for software, included in intangible assets, bearing interest at rates up to 3.39% (December 31, 2021 - up to 4.69%) and mature at various dates before October 2027. Software additions acquired through software financing obligations in the first two quarters of 2022, were $8.8 (December 31, 2021 - $44.4) and have been excluded from the consolidated statement of cash flows (note 15).
Surety facilities
The Company has surety facilities related to Construction Services (which was sold in 2018), to accommodate the issuance of bonds for certain types of project work. At June 30, 2022, the Company had retained bonds of $36.1 (US$28.0) (December 31, 2021 – $65.5 (US$51.8)) in US funds under these surety facilities that will expire on completion of the associated projects. The estimated completion dates of these projects are before December 2023. Although the Company remains obligated for these instruments, the purchaser of the Construction Services business has indemnified the Company for any obligations that may arise from these bonds.
The Company also has $22.3 (December 31, 2021 - $10.1) in bonds for Consulting Services that will expire on completion of the associated projects. The estimated completion dates of these projects are before October 2028.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-11
Stantec Inc.
8.Provisions
Self- insured liabilities
Claims
Lease restoration
Onerous contracts
Total
$
$
$
$
$
January 1, 2022
109.5
20.4
12.7
16.7
159.3
Current period provisions
16.2
44.9
0.7
0.9
62.7
Acquisitions
—
—
0.5
5.8
6.3
Paid or otherwise settled
(14.0)
(5.2)
(0.6)
(5.2)
(25.0)
Impact of foreign exchange
1.5
0.2
(0.3)
0.1
1.5
113.2
60.3
13.0
18.3
204.8
Less current portion
11.6
57.5
2.9
9.1
81.1
Long-term portion
101.6
2.8
10.1
9.2
123.7
Increases in provisions for claims were made during the first two quarters of 2022. The Company is in the process of finalizing settlement agreements for certain claims and insurance coverages were confirmed by the Company's third-party insurers. Corresponding insurance recoveries have been recorded in trade and other receivables.
9.Other Liabilities
June 30, 2022
December 31, 2021
Note
$
$
Cash-settled share-based compensation
10
39.6
62.0
Total return swaps
12
5.7
2.3
Other
7.1
8.2
52.4
72.5
Less current portion
27.5
34.5
Long-term portion
24.9
38.0
10.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
The Company has approval to repurchase up to 5,559,312 common shares and an Automatic Share Purchase Plan (ASPP) which allows a broker, in its sole discretion and based on the parameters established by the Company, to purchase common shares for cancellation under the Normal Course Issuer Bid (NCIB) at any time during predetermined trading blackout periods. During the first two quarters of 2022, 1,085,676 common shares were repurchased for cancellation pursuant to the NCIB at a cost of $65.3 (June 30, 2021 - 939,482 shares were repurchased at a cost of $50.7). As at June 30, 2022 and December 31, 2021, no liability was recorded in the Company’s consolidated statements of financial position in connection with the ASPP.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-12
Stantec Inc.
Dividends
Holders of common shares are entitled to receive dividends when declared by the Company’s board of directors. The table below describes the dividends paid in 2022.
Dividend per Share
Paid
Date Declared
Record Date
Payment Date
$
$
November 3, 2021
December 31, 2021
January 18, 2022
0.165
18.3
February 23, 2022
March 31, 2022
April 18, 2022
0.180
20.0
May 11, 2022
June 30, 2022
July 15, 2022
0.180
—
At June 30, 2022, trade and other payables included $19.9 related to the dividends declared on May 11, 2022.
Share-based payment transactions
During the second quarter of 2022, the Company recognized a net share-based compensation expense of $4.4 (June 30, 2021 - $5.0) in administrative and marketing expenses in the consolidated statements of income, comprised of share-based compensation expense of $1.2 (June 30, 2021 - $5.0) and hedge impact of $3.2 (June 30, 2021 - nil) (note 12).
During the first two quarters of 2022, the Company recognized a net share-based compensation expense of $7.6 (June 30, 2021 - $17.4), in administrative and marketing expenses in the consolidated statements of income, comprised of share-based compensation expense of $0.9 (June 30, 2021 - $17.4) and hedge impact of $6.7 (June 30, 2021 - nil) (note 12). Also, an adjustment of $1.2 (June 30, 2021 - $3.0) was included in contributed surplus for deferred tax impacts on share-based compensation.
During the first two quarters of 2022, the Company granted 253,938 Preferred Share Units (PSUs) at a fair value of $14.5 (June 30, 2021 - 242,701 units for $14.0) and 145,884 Restricted Share Units (RSUs) at a fair value of $8.0 (June 30, 2021 - 124,599 units for $6.7), under the same terms, conditions, and vesting requirements as the units issued in 2021. Also, during the first two quarters of 2022, 318,058 PSUs were paid at a value of $15.2 (June 30, 2021 - 253,373 PSUs were paid at a value of $9.0) and 147,811 RSUs were paid at a value of $8.0 (June 30, 2021 - no payments were made for RSUs).
At June 30, 2022, the accrued obligations for PSUs of $20.0 (December 31, 2021 - $32.5) and for RSUs of $7.7 (December 31, 2021 - $15.4), and the fair value of outstanding and vested Deferred Share Units (DSUs) of $11.9 (December 31, 2021 - $14.1) were recorded in other liabilities (note 9).
11.Fair Value Measurements
All financial instruments carried at fair value are categorized into one of the following:
When 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.
When determining fair value, the Company considers the principal or most advantageous market in which it would transact and the assumptions that market participants would use when pricing the asset or liability. The Company measures certain financial assets and liabilities at fair value on a recurring basis.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-13
Stantec Inc.
For financial instruments recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorizations at the end of each reporting period.
In the first two quarters of 2022, no changes were made to the method of determining fair value and no transfers were made between levels of the hierarchy.
The following table summarizes the Company’s fair value hierarchy for those assets and liabilities measured and adjusted to fair value on a recurring basis at June 30, 2022:
Carrying Amount
Level 1
Level 2
Level 3
Notes
$
$
$
$
Assets
Investments held for self-insured liabilities
6
129.6
—
129.6
—
Interest rate swap
12
1.7
—
1.7
—
Liabilities
Total return swaps
9,12
5.7
—
5.7
—
Investments held for self-insured liabilities consist of government and corporate bonds and equity securities. Fair value of bonds is determined using observable prices of debt with characteristics and maturities that are similar to the bonds being valued. Fair value of equities is determined using the reported net asset value per share of the investment funds. The funds derive their value from observable quoted prices of the equities owned that are traded in an active market.
The following table summarizes the Company’s fair value hierarchy for those liabilities that were not measured at fair value but are required to be disclosed at fair value on a recurring basis as at June 30, 2022:
Carrying Amount
Level 1
Level 2
Level 3
Note
$
$
$
$
Senior unsecured notes
7
298.4
—
259.6
—
Notes payable
7
56.1
—
56.0
—
The fair value of senior unsecured notes and notes payable is determined by calculating the present value of future payments using observable benchmark interest rates and credit spreads for debt with similar characteristics and maturities.
12.Financial Instruments
a)Derivative financial instruments
Interest rate swap
The Company has an interest rate swap agreement to hedge the interest rate variability on Tranche C of the term loan with a notional amount of $160.0, maturing on June 27, 2023. For the first two quarters of 2022, the change in fair value of the interest rate swap, estimated using market rates at June 30, 2022, is an unrealized gain of $4.0 ($3.1 net of tax) (June 30, 2021 – unrealized gain of $2.0 ($1.5 net of tax)) recorded in other comprehensive income (loss) and in the statement of financial position as other assets or other liabilities.
Total return swaps on share-based compensation units
The Company has total return swap (TRS) agreements to manage its exposure to changes in the fair value of the Company's shares for certain cash-settled share-based payment obligations. The notional amount of TRSs
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-14
Stantec Inc.
designated as a cash flow hedge against the Company's RSUs is $22.4, maturing between 2023 and 2025. During the first two quarters of 2022, the change in the fair value of the TRSs is an unrealized loss of $1.5 ($1.2 net of tax) recognized in other comprehensive income (loss) and an unrealized loss of $6.7 ($5.1 net of tax) recognized in the consolidated statements of income, in administrative and marketing expenses.
Nature and extent of risks
The COVID-19 pandemic and the conflict in Ukraine, as described in note 2, have had adverse financial impacts on the global economy, but the Company has not seen a significant increase to its risk exposure. Management continues to closely monitor the impacts on the Company’s risk exposure and will adjust its risk management approach as necessary.
Credit risk
Assets that subject the Company to credit risk consist primarily of cash and deposits, trade and other receivables, unbilled receivables, contract assets, investments held for self-insured liabilities, holdbacks on long-term contracts, and other financial assets. The Company’s maximum amount of credit risk exposure is limited to the carrying amount of these assets, which at June 30, 2022, was $1,849.1 (December 31, 2021 – $1,746.9).
The Company limits its exposure to credit risk by placing its cash and cash equivalents in high-quality credit institutions. Investments held for self-insured liabilities include corporate bonds and equity securities. The Company believes the risk associated with corporate bonds and equity securities is mitigated by the overall quality and mix of the Company’s investment portfolio. Substantially all bonds held by the Company are investment grade, and none are past due. The Company monitors changes in credit risk by tracking published external credit ratings.
The Company mitigates the risk associated with trade and other receivables, unbilled receivables, contract assets, and holdbacks on long-term contracts by providing services to diverse clients in various industries and sectors of the economy. In addition, management reviews trade and other receivables past due on an ongoing basis to identify matters that could potentially delay the collection of funds at an early stage. The Company does not concentrate its credit risk in any particular client, industry, or economic or geographic sector.
The Company monitors trade receivables to an internal target of days of revenue in trade receivables. At June 30, 2022, the days of revenue in trade receivables were 57 days (December 31, 2021 – 59 days).
Price risk
The Company’s investments held for self-insured liabilities are exposed to price risk arising from changes in the market values of the equity securities. This risk is mitigated because the portfolio of equity funds is monitored regularly and appropriately diversified. For the Company's investments held for self-insured liabilities, a 1% increase
or decrease in equity prices at June 30, 2022, would increase or decrease the Company’s net income by $1.0,
respectively.
The Company is also exposed to changes in its share price arising from its cash-settled share-based payments as the Company's obligation under these arrangements are based on the price of the Company's shares. The Company mitigates a portion of its exposure to this risk for its RSUs and DSUs by entering into TRSs. For PSUs, a 10% increase or decrease in the price of the Company's shares at June 30, 2022, would decrease or increase the Company’s net income by $0.8, respectively.
Liquidity risk
The Company meets its liquidity needs through various sources, including cash generated from operations, issuing senior unsecured notes, borrowings from its $800.0 revolving credit facility, term loans, and the issuance of common shares. The unused capacity of the revolving credit facility at June 30, 2022, was $53.4 (December 31, 2021 – $243.7) and the Company also has access to additional funds of $600.0 under its credit facilities (note 7). The Company believes that it has sufficient resources to meet obligations associated with its financial liabilities.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-15
Stantec Inc.
Interest rate risk
The Company is subject to interest rate cash flow risk to the extent that its revolving credit facility and term loan are
based on floating interest rates. However, this risk has been partially mitigated by the interest rate swap on tranche C
of the term loan. The Company is also subject to interest rate pricing risk to the extent that its investments held for self-insured liabilities include fixed-rate government and corporate bonds. A reasonably possible change in interest rates assumption was increased from 0.5% to 1% to reflect recent market interest rate increases. If the interest rate on the Company’s revolving credit facility and term loan balances at June 30, 2022, was 1% higher or lower, with all other variables held constant, net income would decrease or increase by $3.2, respectively.
Foreign exchange risk
Foreign exchange risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Foreign exchange gains or losses in net income arise on the translation of foreign currency-denominated assets and liabilities (such as trade and other receivables, trade and other payables, and long-term debt) held in the Company's Canadian operations and foreign subsidiaries. The Company manages its exposure to foreign exchange fluctuations on these items by matching foreign currency assets with foreign currency liabilities and from time to time, through the use of foreign currency forward contracts.
Foreign exchange fluctuations may also arise on the translation of the Company's US-based subsidiaries or other foreign subsidiaries, where the functional currency is different from the Canadian dollar, and are recorded in other comprehensive income.
13.Employee Costs
For the quarter ended June 30,
For the two quarters ended June 30,
2022
2021
2022
2021
Note
$
$
$
$
Wages, salaries, and benefits
815.5
661.6
1,591.7
1,321.0
Pension costs
24.1
20.6
44.6
39.1
Net share-based compensation
10,12
4.4
5.0
7.6
17.4
Total employee costs
844.0
687.2
1,643.9
1,377.5
Direct labor
514.0
425.0
997.0
837.3
Indirect labor
330.0
262.2
646.9
540.2
Total employee costs
844.0
687.2
1,643.9
1,377.5
Direct labor costs include salaries, wages, and related fringe benefits (including pension costs) for labor hours directly associated with the completion of projects. Bonuses, share-based compensation, termination payments, and salaries, wages, and related fringe benefits (including pension costs) for labor hours not directly associated with the completion of projects are included in indirect labor costs. Indirect labor costs are included in administrative and marketing expenses in the consolidated statements of income. Included in pension costs for the first two quarters of 2022 is $43.9 (June 30, 2021 – $38.3) related to defined contribution plans.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-16
Stantec Inc.
14.Other Expense (Income)
For the quarter ended June 30,
For the two quarters ended June 30,
2022
2021
2022
2021
$
$
$
$
Realized gain on equity securities
(6.8)
(0.5)
(14.5)
(1.0)
Unrealized loss (gain) on equity securities
12.5
(4.3)
18.5
(9.4)
Share of loss (income) from joint ventures and
associates and other
0.6
(0.4)
—
(1.5)
Total other expense (income)
6.3
(5.2)
4.0
(11.9)
15.Cash Flow Information
A reconciliation of liabilities arising from financing activities for the two quarters ended June 30, 2022, is as follows:
Senior Unsecured Notes
Revolving Credit Facility and Term Loan
Notes Payable
Software Financing Obligations
Lease Liabilities
Total
$
$
$
$
$
$
January 1, 2022
298.2
851.2
64.7
31.0
668.9
1,914.0
Statement of cash flows
Proceeds
—
4,354.5
—
—
1.3
4,355.8
Repayments or payments
—
(4,201.2)
(32.5)
(14.0)
(73.1)
(4,320.8)
Non-cash changes
Foreign exchange
—
2.4
(2.3)
—
(3.2)
(3.1)
Additions and modifications
—
—
26.1
8.8
21.3
56.2
Other
0.2
0.6
0.1
1.5
—
2.4
June 30, 2022
298.4
1,007.5
56.1
27.3
615.2
2,004.5
A reconciliation of liabilities arising from financing activities for the two quarters ended June 30, 2021, is as follows:
Senior Unsecured Notes
Revolving Credit Facility and Term Loan
Notes Payable
Software Financing Obligations
Lease Liabilities
Total
$
$
$
$
$
$
January 1, 2021
299.5
309.1
68.8
3.4
629.8
1,310.6
Statement of cash flows
Proceeds
—
27.0
—
—
1.9
28.9
Repayments or payments
—
(17.0)
(25.5)
(13.7)
(66.4)
(122.6)
Non-cash changes
Foreign exchange
—
—
(2.7)
(0.8)
(12.4)
(15.9)
Additions and modifications
—
—
34.7
37.8
52.9
125.4
Other
(1.4)
0.3
(1.4)
0.1
0.1
(2.3)
June 30, 2021
298.1
319.4
73.9
26.8
605.9
1,324.1
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-17
Stantec Inc.
For the quarter ended June 30,
For the two quarters ended June 30,
2022
2021
2022
2021
$
$
$
$
Supplemental disclosure
Income taxes paid
42.5
36.2
55.0
51.3
Net interest paid
15.6
10.7
25.6
17.6
Interest on lease liabilities during the second quarter of 2022 was $5.5 (June 30, 2021 - $5.9). Interest on lease liabilities during the first two quarters of 2022 was $11.3 (June 30, 2021 - $12.3).
16.Segmented Information
The Company provides comprehensive professional services in the area of infrastructure and facilities throughout North America and globally. It considers the basis on which it is organized, including geographic areas, to identify its reportable segments. Operating segments of the Company are defined as components of the Company for which separate financial information is available and are evaluated regularly by the chief operating decision maker when allocating resources and assessing performance. The chief operating decision maker is the CEO of the Company, and the Company’s operating segments are based on its regional geographic areas.
The Company’s reportable segments are Canada, United States, and Global. These reportable segments provide professional consulting in engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics services in the area of infrastructure and facilities.
Segment performance is evaluated by the CEO based on project margin and is measured consistently with project margin in the consolidated financial statements. Inter-segment revenues are eliminated on consolidation and reflected in the Adjustments and Eliminations column. Reconciliations of project margin to net income before taxes is included in the consolidated statements of income.
Reportable segments
For the quarter ended June 30, 2022
Canada
United States
Global
Total Segments
Adjustments and Eliminations
Consolidated
$
$
$
$
$
$
Total gross revenue
339.4
748.3
325.2
1,412.9
(36.3)
1,376.6
Less inter-segment revenue
9.2
11.5
15.6
36.3
(36.3)
—
Gross revenue from external
customers
330.2
736.8
309.6
1,376.6
—
1,376.6
Less subconsultants and other direct
expenses
38.6
170.9
50.4
259.9
—
259.9
Total net revenue
291.6
565.9
259.2
1,116.7
—
1,116.7
Project margin
154.6
310.9
137.2
602.7
—
602.7
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-18
Stantec Inc.
For the quarter ended June 30, 2021
Canada
United States
Global
Total Segments
Adjustments and Eliminations
Consolidated
$
$
$
$
$
$
Total gross revenue
321.4
599.4
240.6
1,161.4
(27.4)
1,134.0
Less inter-segment revenue
8.5
8.0
10.9
27.4
(27.4)
—
Gross revenue from external
customers
312.9
591.4
229.7
1,134.0
—
1,134.0
Less subconsultants and other direct
expenses
34.9
146.4
44.4
225.7
—
225.7
Total net revenue
278.0
445.0
185.3
908.3
—
908.3
Project margin
149.3
236.5
97.5
483.3
—
483.3
For the two quarters ended June 30, 2022
Canada
United States
Global
Total Segments
Adjustments and Eliminations
Consolidated
$
$
$
$
$
$
Total gross revenue
657.8
1,460.5
641.2
2,759.5
(69.0)
2,690.5
Less inter-segment revenue
18.3
21.5
29.2
69.0
(69.0)
—
Gross revenue from external
customers
639.5
1,439.0
612.0
2,690.5
—
2,690.5
Less subconsultants and other direct
expenses
73.9
342.1
107.7
523.7
—
523.7
Total net revenue
565.6
1,096.9
504.3
2,166.8
—
2,166.8
Project margin
299.7
601.4
268.7
1,169.8
—
1,169.8
For the two quarters ended June 30, 2021
Canada
United States
Global
Total Segments
Adjustments and Eliminations
Consolidated
$
$
$
$
$
$
Total gross revenue
621.3
1,194.7
462.0
2,278.0
(54.8)
2,223.2
Less inter-segment revenue
15.9
14.6
24.3
54.8
(54.8)
—
Gross revenue from external
customers
605.4
1,180.1
437.7
2,223.2
—
2,223.2
Less subconsultants and other direct
expenses
71.3
280.4
84.5
436.2
—
436.2
Total net revenue
534.1
899.7
353.2
1,787.0
—
1,787.0
Project margin
285.9
479.0
184.8
949.7
—
949.7
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-19
Stantec Inc.
The following tables disclose the disaggregation of non-current assets by geographic area and revenue by geographic area and services:
Geographic information
Non-Current Assets
Gross Revenue
June 30, 2022
December 31, 2021
For the quarter ended June 30,
For the two quarters ended June 30,
2022
2021
2022
2021
$
$
$
$
$
$
Canada
630.7
644.6
330.2
312.9
639.5
605.4
United States
1,866.2
1,880.0
736.8
591.4
1,439.0
1,180.1
United Kingdom
195.5
144.5
100.0
81.8
193.0
165.5
Australia
406.5
441.9
112.8
56.8
226.3
94.3
Other global geographies
146.0
156.8
96.8
91.1
192.7
177.9
3,244.9
3,267.8
1,376.6
1,134.0
2,690.5
2,223.2
Non-current assets consist of property and equipment, lease assets, goodwill, and intangible assets. Geographic information is attributed to countries based on the location of the assets. Non-current assets at December 31, 2021 for Australia was restated from $325.6 to $441.9 and other global geographies from $273.1 to $156.8. An adjustment of $116.3 was made for certain assets in Australia that were previously grouped in other global geographies.
Gross revenue is attributed to countries based on the location of the project.
Gross revenue by services
For the quarter ended June 30,
For the two quarters ended June 30,
2022
2021
2022
2021
$
$
$
$
Infrastructure
387.0
321.5
756.6
625.5
Water
283.2
246.2
549.4
491.8
Buildings
245.6
225.5
488.0
448.9
Environmental Services
301.0
193.8
585.3
373.6
Energy & Resources
159.8
147.0
311.2
283.4
Total gross revenue from external customers
1,376.6
1,134.0
2,690.5
2,223.2
Performance will fluctuate quarter to quarter. The first and fourth quarters historically have lower revenue generation and project activity because of holidays and weather conditions in the northern hemisphere. Despite this quarterly fluctuation, the Company has concluded that it is not highly seasonal in accordance with IAS 34. The uncertain impacts of the COVID-19 pandemic also may result in changes to this pattern.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
June 30, 2022
F-20
Stantec Inc.
Customers
The Company has a large number of clients in various industries and sectors of the economy. No particular customer exceeds 10% of the Company’s gross revenue.
17.Event after the Reporting Period
Dividend
On August 10, 2022, the Company declared a dividend of $0.18 per share, payable on October 17, 2022, to shareholders of record on September 29, 2022.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
In millions of Canadian dollars except number of shares and per share data
