Welcome to Stantec Inc.'s Fourth Quarter and Year End 2013 Earnings Results Conference Call. With us today from Stantec management are Bob Gomes, President and Chief Executive Officer; and Dan Lefaivre, Chief Financial Officer. [Operator Instructions] As a reminder, today is February 27, 2014, and this conference call is being recorded, as well as broadcast live over the Internet. It will be archived for future reference at stantec.com under the Investors section. Therefore, any members of the media, who are joining the call today in a listen-only mode and will wish to quote anyone other than Mr. Gomes or Mr. Lefaivre, are asked to please request permission to do so from the individual concerned. Before the call begins, there are a few words from Investor Relations. Please go ahead.

Thank you, Solange. Stantec management would like to make you aware of its Safe Harbor statement and to caution you that it will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 in the United States and applicable securities legislation in Canada. By their very nature, forward-looking statements require Stantec management to make assumptions and are subject to inherent risks and uncertainties. In addition, Stantec management will be mentioning additional non-IFRS measures. You will find descriptions of these IFRS measures and their use and underlying assumptions in the management's discussion and analysis included in Stantec's 2013 annual report. I would now like to introduce your host, Bob Gomes. Please go ahead.

Thank you, Crystal. Good afternoon, everyone, and welcome to our 2013 Fourth Quarter and Annual Results Conference Call. Dan will provide the brief summary of our financial results for the quarter and year and I will follow with an outline of our market outlook. We will then address individual questions. Today, we released the results of Stantec's operations for the fourth quarter and full year 2013. As you know, our business objective is to be a top 10 global design firm. We do this by focusing on what we do best, providing services to make our community stronger. In 2013, we brought to life Stantec's 4 values and focus our efforts to live our promise designed with community in mind. I'm pleased to say the result is what -- is that we exceeded our expectations for Stantec in 2013 with strong growth, growth that demonstrates the company's ability to capitalize on market opportunities and position itself for growth. Dan will now provide a review of our year-end and fourth quarter financial results. Dan?

Thank you, Bob. Good afternoon, everyone. Overall, Q4 '13 was a strong quarter and capping a very strong year for Stantec. Our gross revenue increased $93.9 million in Q4 '13 or 19.5% compared to the same period in 2012 as a result of the impact of acquisitions completed in 2012 and '13 and our organic revenue growth. Our organic revenue growth for Q4 '13 was very strong at 12%, or $58 million, over Q4 '12. On a full year basis, gross revenue increased 19.6% year-over-year to over $2.2 billion compared to $1.9 billion in 2012. Our full-year organic revenue growth was strong at 8.8%, slightly ahead of our Q3 estimates with growth occurring in every quarter. Organic revenue growth occurred in 4 out of 5 of our practice areas. Not only did 2 of those practice areas have extraordinary growth, we also saw growth across all of our geographic regions. On a full year basis, gross margin remained within our targeted range of 54.7% in 2013, a slight decline from the 55% we achieved in 2012. Gross margin was impacted by growth in the revenue base of our lower-margin businesses such as oil and gas and transportation in the United States. Our administrative and marketing expenses year-over-year, as a percentage of net revenue, remained stable at 40.7%. Administrative and marketing expenses were higher in Q4 '13 at 43.7%, compared to 41.6% in Q4 '12, primarily due to seasonal holiday charges and an increase in the value of share-based compensation compared to Q4 '12. Year-over-year, we achieved an 18.1% increase in EBITDA to $261 million from $221 million in 2012. Our annual effective income tax rate for 2013 was consistent with that in 2012. We had a reduction in our annual effective tax rate in Q3 -- or from Q3 to Q4 of 2013, mainly due to our ability to access certain U.S. tax credits. Our net income for 2013 increased 20.8% year-over-year to $146 million, and our diluted earnings per share increased 18.9% to $3.14 from $2.64 in 2012. Our cash flow from operating activities was also very strong, increasing to $272 million in 2013. This strong cash flow supported acquisition growth, a $61 million reduction in long-term debt and continued dividends. Our strong performance in 2013 also resulted in a return on equity of 18.2%. And lastly today, we are pleased to report our Board of Directors declared a dividend of $0.185 per share payable on April 17, 2014, to shareholders of record on March 28, 2014, which is an increase of 12% from last quarter, reflecting both management and the board's confidence in our ability to grow the business and execute on our long-term strategies. Back to you, Bob.

Thanks, Dan. As a result of strategic initiatives implemented over the past few years, 2013 results are demonstrating our ability to capitalize on market opportunities and adapt to an ever-changing market. We are pleased with our organic growth, as Dan mentioned, over 8%, and the momentum we saw throughout the year. With that, I'd like to take a few minutes to highlight some of the progress we've made this past year. First, we continued Stantec's history of growth and profitability. It was the busy year for us. Organic growth occurred in all geographic regions and in all practice area units, except buildings, which was impacted by the soft buildings market and intensified competition. Organic growth was especially strong as a result of increased project activity in the oil and gas and transportation sectors. Resource-related projects are an area where Stantec was well positioned to capitalize on market opportunities. Secondly, we continued with our strategic acquisition growth of 5 new companies in 2013. I would like to welcome IBE Consulting Engineers, Ashley-Pryce Interior Designers, Roth Hill, JDA Architects and Cambria Gordon into the Stantec's community. This builds on the 7 firms we brought onboard in 2012, adding to our depth and breadth of expertise, while strengthening Stantec's position in those markets where we've identified opportunities for growth. In addition, I'm pleased to note that on subsequent to the year end, on January 24, 2014, we acquired Williamsburg Environmental Group, Inc. and Cultural Resources, Inc., adding approximately 115 staff to our company. This acquisition will expand Stantec's environmental services practice in the U.S. mid-Atlantic and will position the company to capture projects relating to the National Environmental Protection Act, wetland services and environmental assessment and permitting. To complete the conversation on acquisitions to date, I'm also very pleased to say that subsequent…

[Operator Instructions] The first question comes from Saagar Parikh of KeyBanc.

So first question. This related to year organizational structure change, I know in the -- in your filings, you guys went through, how you're changing -- how you're creating new executive leadership teams, you guys have been doing really well over the last couple of years -- few years, going at a good pace. What was the reason behind it? Why shake things up to some degree when things have been going so well?

Yes, it's a good question. Why change when things are going well? I think that's actually the time you should change. That's all this look to future and say, how can improve the company? How can we better leverage the services we have? And this wasn't an overnight decision. We've been working towards this structure for probably the last 18 months and really getting leadership into positions and really understanding how we can better leverage and cross-sell our services. And it really is going in to focus more on the sectors of our business and where our clients are positioned and how can we then cross-sell and leverage services better to our clients. And the better way to do that then is be organized around your clients and structurally be organized in your company that way. Like I said, it wasn't something we did overnight. It was a process we went through in the last 18 months. And we've seen the success of that already. So it is really part of the evolution of Stantec. It is sort of the next step of that, is to mature and get your position in the company really focused around your clients and what businesses they're in. So the right time for a change is when you're doing well. The last thing we want to do is change when you're doing poorly and react. We want to be proactive.

Okay. And then a quick question for Dan related to the guidance ranges. It seems like your gross margin guidance range has been lowered a bit in terms of the midpoint, while your A&M expenses, as a percentage of revenue, guidance range has been lowered a bit. Could you just give us a little bit of color on why you guys felt comfortable making these changes at this point?

Sure. Thanks, Saagar. The gross margin change, I think, is really as a result of the increase in our Transportation and our oil and gas businesses, which are certainly lower-margin businesses and what would see in the front-end environmental side of things. So given the mix of business and when we pooled all of our budgets together for 2014, that's basically the range that we came in for gross margin. And similarly with administrative and marketing expenses, we were running at the low end of that range. Our SG&A picked up a little bit in Q4, but we're still comfortable with reducing that to the 40% to 42% range.

Perfect. And then one final question, and I apologize if I missed this in the queue -- or in the report. But your 4Q gross margin was pretty high versus what was trending in the first 9 months of 2013. Can you just give us color on what happened there?

Sure. A little bit of color on the impact of our fringe benefits, we used the standard fringe benefit rate in both our Canadian and U.S. and, for that matter, international operations. And we have to adjust that as we go through the year. And when we get to the year end, we look at what that -- the actual costs are relative to the standard rates that we're using and we make a onetime adjustment at year end. We do monitor it through the year and try to keep it pretty tight, that we have a bit of a recovery in Q4 on that.

The next question is from Mona Nazir of Laurentian Bank Securities.

So looking at the quarter, there was some margin compression and lower profitability on a sequential basis, primarily due to an increase in SG&A. Just wondering if you could speak to the increase in labor and what changed from last year? And does this tie into the labor constraints that you mentioned and perhaps utilization?

No, it doesn't tie into labor constraints at all. I think what happens in -- and we talked about it in the third quarter, we talk about the seasonality of our business where utilization is certainly lower in the fourth quarter and the first quarter of every year, given the weather. Many of our field people can't be out in the field during the winter. So that does -- people can only charge a time to 3 places to direct client projects or into indirect labor, an indirect is either marketing or administrative. And that's what drives up some of the SG&A in the fourth quarter.

Okay. So I noted also that the backlog is down a little bit from Q3. Is there any reasoning or that's just kind of normal?

That's pretty normal. If you go back in history, our fourth quarter backlog always tends to decrease. It's, again, a seasonality thing. Clients start replenishing that backlog with awarded contracts in the first quarter. So Q4, we always see a little bit of tailing, but we're certainly not concerned about that as a trend. We're pretty comfortable with our backlog going up and it's, I think, it's up about 11% year-over-year.

Okay. And you guys have faired extremely well despite more muted spending on the nonresidential construction side in 2013. With the U.S. set for recovery, I'm thinking that you could keep some of that momentum as you cited. Just wondering if you experienced any, so to speak, growing pains or challenges handling the growth in 2013 that could limit our cap growth going forward?

Well, if you're referencing the growing pains specific to the residential market or the community development market, not really. That's a market that does have a fair amount of capability out there in the market to find people, and you can deal usually with growing pains associated with increased revenue in those sectors very easily. I would say, that certainly, the growing pains in reacting to the increase revenue in the energy and resources sector and specifically the oil and gas business, was certainly a challenge in 2014. That will always be a challenge going forward in a very busy sector. But we have some very good clients, very good projects, and that tends to attract people. So you always got to worry about it. It's always growing pains in reacting to an increased market, but we're faring pretty well.

Okay, perfect. And just lastly here, your organic growth target for 2014 of 4%. I know you touched on it, it's less than half of what you actually did in 2013. Wondering if you're seeing a potential contraction in your end markets or it's just more caution with providing guidance?

No, it's certainly just the latter. It's more caution. As we said in the formal comments, we're coming off 2 very, very strong years of organic growth revenue. We don’t think it's reasonable to expect to maintain that current pace of growth if you looked at our fourth quarter or even the third quarter in our oil and gas business, it's 20%, 25% growth. So that's -- we anticipate those sectors to continue being strong, but certainly not at those levels. So we're certainly not negative. We are not suggesting any retraction in any way. In fact, we think a 4% organic growth is still pretty good in the economy that we're in. And it's hard to compare what we've done in the last 2 years going forward. So it's a bit cautiousness but also a bit of reality that we are -- we had came off a couple of very strong years, and 4% in this market is still pretty good.

The next question is from Sara O'Brien of RBC Capital Markets.

You guys have shown some pretty consistently EBITDA margin for the last 3 years, and now you're putting at a range of 13% to 15%. I'm just wondering, is that just related to acquisition opportunities and how that might skew it up or down? Was there anything that fundamentally we should think of as different impacting margins going forward?

No, I don't think there's anything fundamentally different, Sara. I think we've just added it decided that this year, because often when we talk about EBITDA or the analyst -- the investment community talk about EBITDA, we never really put in a target there or a range. So we thought it would be effective to do that. It's a new target this year. The 14% or thereabouts is fairly consistent, so we're expecting to be right in the middle of that range again.

It's also, as a result, when we've been tracking and moving further into the industrial market with the lower gross margins, we really wanted to point out that fact that even with the lower gross margins in those businesses, they also have associated lower SG&A costs, which then really doesn't affect the EBITDA line. That stays relatively stable. So that's why we figured we'd add that as well, because it provides that color that even though your gross margins maybe retracting slightly because of the business, your EBITDA margin really isn't impacted to any great extent.

Okay, great. And then just wondered on the new reporting structure, I may have missed this, but have you recruited senior managers for each of those 3 divisions? Or how does it -- is it internal promotions that you've made? Just wondering how you look at the management structure any differently now.

There is no changes to our senior management and the senior leadership team. This has really given an opportunity for bridging the leadership from within the corporation up to different levels. It's really tasking a layer of leadership that we've had in place for many years to be more involved in the business, more responsible for the business. Giving some of our existing senior leaders the capability and time to be able to focus more on emerging markets and emerging opportunities. As we said before, this is really an evolution that we knew was coming and really does allow some great succession planning that's been going on in the company to actually be realized. So every single individual is from within, and we're very proud of that fact.

Okay. So I assume at your Investor Day, this is the way the presentations will go. You'll have each of the divisional heads presenting?

We'll have fun there. I think we want to ensure that we're putting the -- probably the individuals in front of you that have the most to say where the impact to the business. But yes, you will see a much larger cross-section of our leadership.

Okay. And then just maybe on the acquisition pipeline, because we now have the segmentation different, we see energy and resources at 43% of your business. How comfortable are you growing that portion to 50% plus, or do you look to maintain kind of an equal balance with these 3 segments now?

You'll always want that balance. I mean that's been our history through the company is you never want to be weighted too much in any one division or practice area or sector. We love that diversity and balance. At the same time, a lot of our acquisitions are somewhat opportunistic. We can't force them to happen. But certainly, we want to be able to adapt to opportunities that are out there. And we had this conversation probably 8 years ago where the land business was at 37% to 40% of our business. We have the ability, I think, of balancing that off and certainly are looking for opportunities in infrastructure and buildings at this point.

Okay, great. And then just maybe on -- a very small point, but on consulting subcontractors in Q4 was quite high. I just wondered if there was anything to read into that or any reason why the quarter would be higher?

That would just be a mix of business, Sara. There's really nothing to add in. But with respect to the difference between gross and net revenue, we're going to see those kind of fluctuations depending on the time of year and the mix of projects.

The next question is from Bert Powell of BMO Capital Markets.

Bob, I know fits always front and center for you guys on the acquisition front, but price does matter. And I'm just wondering if you could just give us a sense in terms of what the market looks like today now that the world's starting to get better, have prices gone up or have prices stayed flat, but the underlying fundamentals got better, making the business more attractive. I'm wondering if you could just give us a little bit of sense in terms of how the acquisition environment looks to you guys today.

It's -- not to give you a vague answer, but it is a very -- it is different from company to company, sector to sector. There are still some sectors in our Buildings business, for example, that the companies are coming to us with probably not a strong a structure as they had few years ago and that's going to affect valuations. Their growth potential is not maybe as strong as it was 5 years ago, that's going to affect valuations. Then you move to something like the energy and resources sector, where the fundamentals are strong. The growth potential is strong. That's going to affect valuations at the higher end. But in our fundamentals and our strategy for valuating companies hasn't changed from whether it's a strong economy or a weaker economy. it really comes down to the point of what is -- how is that company going to fit into your firm? How can you then leverage their capabilities, their client relationships? And really, if you look at the history, our multiples of EBITDA and our multiples of revenue are very consistent for the approximately 100 acquisitions we've come in a relatively tight range. Really the variability is from sector to sector and how the growth opportunities for those sectors look. Can we leverage capabilities and grow that business faster, that will probably have more of an impact on the valuation in some of the multiple ranges.

How -- can you just give us a sense in terms of how many guys you'd be talking to today versus last year? How good the pipeline looks? 2013 was kind of a light year on the acquisition front, just to give us a sense of what '14 to look like, whether you've built that pipeline and '14 is the year where you can execute on closing some of these.

Sure. No, I -- actually, when you say 2013 was light, it was actually probably one of the busiest and stressful times because of the number that we looked at and the work we put into it. Unfortunately, a lot of those didn't close. But that's key to this, as you can't force those. You can't just close an acquisition for the sake of closing it. It's got to work. It's got to fit the cultural. It's got to be there. So 2013 is really busy, it just didn't result in a lot of companies' close. From a point a view, the pipeline, it's as strong as it's ever been. We -- I'd say, I think we've said this before at any one point in time, we're talking to anywhere from 20 to 50 different companies, I'd say. At this range, we're in the 30 range. Now that's at different stages. We may be close to signing an LOI with a handful. We may be discussing some details with another handful and then we're setting up meetings with a bunch of others. So it's certainly a process that takes a long time. And our concern is getting in front of companies that we really want to be added to our firm and focused areas for growth. Because we're acquisitive and because everybody knows we're acquisitive, we get just about everybody that's contemplating selling their company phone us up. So it becomes a very busy period and you need to sort of filter through what makes sense, what doesn't, and you have to do that quickly. But it is -- I have to say we're very comfortable with the depth of pipeline. You always want more because we understand how difficult it is to get to close. But we're pretty comfortable where we are.

Okay. And a question for Dan. Dan, what -- can you just explain to us, what's this derecognition of note payable in the quarter?

Sure. That was -- when we do acquisitions, you have certain liabilities that you accrue for. We resolved that liability. It ended up in a -- basically, you have to bring it back into income. You can't put it back with respect to the accounting rules, you can't put it back against goodwill, which is really where it belongs. You have to bring it back into income. We've resolved that liability. It wasn't required, and therefore that's the appropriate accounting treatment for it.

Okay. And then just lastly, Dan, on the WIP in the quarter on the balance sheet came down quite a bit, resulting in pretty good cash flow generation, more so than I think past years when you look Q3 to Q4. Anything particular going on there?

I think there's only 2 things there, Bert. And the first one has to do with the, again, some of the seasonality with the office shutdown during the seasonal Christmas break. The -- you're not generating work in progress and you're not doing invoices, so that naturally will bring down your day sales outstanding. But at the same time, it's one of those areas that we continually focus on and we had very good billings in Q4 and cash collections. So that really -- those 2 factors really drove down the DSOs.

And the next question is from Michael Tupholme of TD Securities.

I think it's sort of asked earlier, but just want to clarify. The admin and marketing expenses as a percent of net revenue rising a couple of 100 basis points year-over-year, in the MD&A, you talked about additional charges from seasonal holidays. Can you just expand on that a little bit?

Sure, it happened primarily in the United States, where we have -- we basically closed our office between Christmas and New Year, and it resulted in about 4 or 5 extra days of administrative costs in December, which we didn't have. And it's probably about 3 extra days compared to 2012. So that's what increased a good portion of the SG&A. As well as the change in value of our DSUs and RSUs as a result of the share price, those 2 things are the primary factors that impacted SG&A in Q4.

So the office was closed more for a longer period this year than it was last year?

Yes, but we gave the staff off at -- in the United States off between Christmas Day and New Year's Day.

Got it, okay. And then just on the regional outlook, so you've described the outlook for both Canada and the U.S. as moderate growth. The organic growth in Canada' has been tracking well ahead of the U.S,. even though we saw some nice improvement in the U.S. organic growth in the fourth quarter. But for them to be both described as moderate, should we be assuming, I guess, a further pickup in the U.S. and then deceleration in the growth in Canada? Or are these kind of just sort of broad comments and we'd still be expecting Canada to be ahead of the U.S.?

Well, Canada, I think, will still be ahead of U.S -- the U.S. But I think your comment was correct, that we'll probably see a little bit of moderation of that growth in Canada and a little bit of acceleration of that growth in the United States through 2014. When you think of the United States' -- sorry, Canada's growth predominantly last year was in the oil and gas sector. We feel that's going to moderate and not be quite as strong, which will then have an impact on the overall growth rate in Canada. In the United States, we see the economy continuing to get strong, albeit slowly. So I think that water -- our range for moderate in the past has been from 2% to 5%. So both of them will probably fall within that 2% to 5%, but I would expect Canada to be little bit larger.

And then lastly, the low tax rate this quarter, I'm not clear if that was sort of a unique situation, but maybe you can clarify that as well as tax rate guidance for 2014?

Sure. The -- you have to look at the tax rate on an annual basis, and we tried to predict what that annual tax rate is as we go through each quarter. The reduction in the tax rate in the fourth quarter was as a result of recognizing really R&D credit from prior years that we actually worked through those. And so we got a bit of a benefit from the R&D credits from prior years and then recognizing the current year of research and development credits. We still expect our tax rate to come in around the 28.5% or below 28.5% for 2014.

The next question is from Pierre Lacroix of Desjardins Capital Market.

Basically all my questions got answered. But in terms of growth by acquisition, Bob, what is the message going forward again in term of your target was in the past something like between 10% and 15% per year of growth there? Are you sticking to that number more, closer to 10% or where do you stand on this?

Overall growth target, we say, is 15%. And that will be a combination of organic growth and acquisition growth. So we're projecting around 4% organic growth. Our target would be nice to get the 11% to 12% in acquisition growth. We've always been cautious of that, because, again, you never want to force that issue and you never want to push an acquisition to close just to achieve a target. But certainly,in over a 5-year period, that 15% is reasonable. And organic is also -- for today, it's going to be around 1/3 of it, and the acquisition is going to be around 2/3 of it. So yes, we're continuing to go forward with that 10% to 12% acquisition growth in our mind as we go forward.

Understood. One last on the biggest projects you have in the portfolio at this point, with the oil and gas now being kind of less momentum you have in the business, do you see the projects or the biggest projects in your portfolio getting bigger in terms of total size -- total share of your revenues?

Yes. I mean, we certainly are now becoming the size and the expertise and being able to leverage that and winning some much bigger projects. And certainly a lot of those are in the oil and gas, a lot of those are in mining, which are typically larger projects. But that being said, we're also winning very large projects in Buildings. The [indiscernible] Hospital we -- the airport we referenced is a very large project. The PCCP project in Orleans was the world's largest drainage pumping station and is one of our largest projects and it's in our water group. So we are well positioned to work on very, very large projects in all of our business operating units. The same point in time, we want to send the message that, that's not our only business. It is really a small part of what we do. We love the projects that are midsized. We love smaller projects for good clients that maintains relationship and builds that relationship to allow us to work on their big jobs when they get them. So it's the size that we -- that matters to us is all size of projects are important for a really good client, because we can leverage that into bigger projects and a longer relationship. But yes, big projects are nice to talk about as a big company. But for us, it's part of the plan and part of the strategy in all size of the projects are important.

Well, would you be ready to give me something like an example, in the $1.4 billion backlog, why is the biggest ticket in there?

We don't disclose detailed information of our backlog, but we can tell you projects that we've been awarded. And I think we do provide a lot of that through our MD&A quarter by quarter. We usually like to reference some of our largest projects or projects that have significance to us or are part of a strategy we have that shows how we're executing that strategy. But certainly, I think in the Investor Day, that's one of the things we will show is some of those projects and some of the strategies we're developing.

The next question is from Ben Cherniavsky of Raymond James.

You just had 20% earnings growth last year and you raised your dividend 12%, and you're still sitting on almost no debt, Are we to read into that, that you're trying to position yourself for some kind of monster acquisition? Because unless you do something of a very significant size, it's hard to see how you would get a more efficient capital structure unless you're contemplating other strategies, like a share buyback or another dividend increase or special, I mean can you just talk a little bit about your leverage in those different options?

Well, certainly, our focus is still to deploy our capital in our acquisition strategy. That certainly hasn't changed. As we said a few times in the call and we've talked about many times, there is -- you can't force that, you can't overpay for companies, you can't buy companies that don't fit. You got to continue to work at it. And I think it's more of that 2013 was a year where we didn't close as many as we would have liked to. But we see the pipeline very strong. You've also know, Ben, we talked a number of times, big acquisitions is really not our style. It hasn't been ourselves through our history, the sizes we do are actually relatively small. That being said, going forward, we like to do bigger ones. But the monster acquisition, the big risky acquisition, really -- we're not saying we'd never do it. But really, that's just not our priority and not something we're focused on. That would probably be way more opportunistic type of thing. And we always look -- I'll ask Dan to add some more color to how we deploy our capital the best way. From my perspective, buying companies that fit into our strategy is the best way of deploying that capital today.

Yes. And then I think that we definitely want to continue to reinvest in the business. At the same time, I've been all over Bob and others to make sure we try to get those acquisitions closed. But as you say, you can't push it. Our optimal capital structure is not 1x to 2x. And yes, we're a little below that and we're well...

We are way below that, Dan.

We're just tying to be nice.

No, I mean let's be realistic about it. Like, I mean, [indiscernible] begging us on that. I mean, I understand, I agree and understand your strategy and your history. And in all the years I've covered you, you'd never -- maybe there's been 1 or 2 acquisitions you might call a monster, but it's not your style. So if you're not contemplating that, why would you be sitting on a capital structure like this? Why wouldn't you at least had a more aggressive dividend increase?

Okay. So the -- we had one year of relatively slow acquisition growth. As you know, with our strategy, that's going to -- it takes time. This is the first time in 5 years that our capital structure is about as low as it is. We expect that to improve with the acquisitions that we're going to complete in 2014. At the same time, we want to make sure that we have a consistent growing dividend and the payout ratio is kept fairly conservative so that we can continue to reinvest in the business. That's our strategy. That's the targets that we've set, and I mean...

And that's the point. Consistency has been our strength and it's consistency regardless of what's going sometimes around us. And this is -- we have what we feel is a very strong acquisition pipeline. We see lots of companies there that we will able to deploy capital and will be able to spend that money on the investments we want. So if that strategy is strong, if that strategy you feel is going to be executed, why change it just because you've got a little higher target than you like. So I think...

No, I'm not suggesting that you should go and buy more companies just to get your leverage up. But you shouldn't be sitting on idle cash, I mean you...

In my model if I -- even if I assume acquisitions like you've done in some of your busier years, you still end up with below your target capital structure. So like I just -- again, the only thing that we can criticize you guys about is being too conservative. So let me check -- I was an advocate on that.

All the bad things [indiscernible]

I mean it's a good problem to have, guys, but I think it's still something you guys need to think about. You just actually lowered your payout ratio at the time when your balance sheet is as strong as it's ever been.

Like I said, I think we have a pretty strong plan going forward for deploying that capital, and we're pretty confident it's the right thing to do.

So that's the way to read into this, is that you're ready to pull the trigger on this?

We're always willing to close acquisitions if they fit into what we're doing and if it's for the right price, and we feel we've got a lot of those opportunities in front of us.

And I think the other thing you need to remember, at the first quarter of the year, we do have additional cash, it gets paid out. We accrue our merit, for example, through the year, that gets paid out in the first quarter. So the cash position, you're going to see change.

Okay. One second one, just on the P3s, which has been a bigger part of your story. We're starting to see it emerge in the U.S. I remember when this market emerged in Canada, and you guys started to sort of dip your toe into it, you said it tends to be a market where you sort of lead with expenses and you're not going to win all the bids, and the success of the strategy really depends on sort of getting us sufficient batting average, winning enough to cover the cost of those that you lose. So my question is, what has been your batting average with the P3s over the last couple of years would you say?

We don't keep an official record specific on P3s or APD, which is a design build as well. It's, I would say, lower than we'd like it to be and that is focusing enough to ensure that going forward, we're a little bit more selective on the P3s. But I would say that winning a P3 so you can pay for the ones you lose is probably much more of a constructer-contactor issue than us. We get paid for our P3s, albeit not full value. We still get paid for them. So the risk for us is lower. But that still being said, I think we can do a better job, and I think we are going forward in putting a little bit more discipline in front of the projects we want, the partners we want and the projects we feel that we can make a good profit on. And so we're going to be a little more selective in the Canadian market. And certainly, the selectivity in the U.S. market is even more important because the P3s there drag on for years. And we've -- but we've got a track record that I think is at an industry high and we're still proud of it. We just always like it to be better.

The next question is from Anthony Zicha of Scotiabank.

Bob, with reference to the transportation segment, we've seen 4 consecutive quarters of declining organic growth rate. Could you please talk about prospects and what states are likely to lead a turnaround? Stantec, of course, has good exposure in California. It seems that the Los Angeles and San Francisco markets are picking up. So is Stantec benefiting from this trend?

So, yes. I think your reference was that the transportation practice area in 2013 was retracting. And in fact the Transportation practice area had a very good year. It had organic growth in every quarter, in most of the year having organic growth of close to 7% or so. So we've actually been very happy of our Transportation sector growth and quite specifically, happy with that growth in the United States. In the U.S. West most of our transportation efforts are more along the construction management, program management side, a little lighter on the design. Our strength in the U.S. East is much more on the design side. And we have become, I think, a very strong player in the design build market in the United States Transportation sector, where we have a lot of strong partners and a lot strong clients. So we're pretty happy with our transportation growth, and we see that continuing next year. We see the U.S. East having -- with the acquisitions we've done in the last 3, 4 years as having a very strong position. But that being said, the transportation market in the United States really isn't growing. The transportation market for us is, when we've been -- by our growth has been essentially stealing work from others. And the transportation growth in the United States is still really waiting for a transportation bill that has some significance and longevity to it. And today, that's still not there and you're probably not going to see significant growth in the United States transportation sector until they fix that bill, which is still, in my opinion, sometime in the future.

And what about the California market? Do you see a pickup in those major cities?

Yes, we're -- I mean, we're sitting here right now in Irvine, California, and we drove the 405. We're doing all the construction management work on that project, which is probably the busiest road in the United States. Huge amount of work going on in California funded mainly through special funding bonds by the actual municipalities and not the states. And that's again, the issue here in California is the state has very little money to invest, and that's created some desperation in the transportation sector here. And they're coming up with some pretty innovative ways of providing funding for a very large project. So we are playing a part of that. We see opportunities for further growth in that market here in California..

We have provided a good reference to the type of project in the conference call script and in our...

In the MD&A also, yes..

Great. And one last question, when we're looking at Urban Land, the segment, it's showing a good positive momentum. So could you give us some ideas here on prospects and what do you expect the drivers will be? And could we see organic growth rate above the 9%? We've gone from negative 2.4% to 3.8% to 8.3%, so the momentum clearly is up there.

Yes, the momentum is good. We're pretty happy with what we see, which is an improving market. At the same point, that community development is really reliant upon that residential market. The residential market is reliant upon a strong economy, and that strong economy then gives some confidence to people to go and buy houses and get mortgage. And until you see that strong confidence in the United States, I don't think you're going to see that 9%, 10% organic growth. But the fact is, it will happen. The U.S. economy is continuously improving, continuously getting more optimistic on opportunities. And there's going to be that tipping point at some point where people then feel comfortable enough to say I'm going to go get a mortgage and buy a house. And we see that approaching soon. I don't know how to define soon. It's really reliant upon the overall strength of the economy and the confidence in the overall consumer. And that's a very tenuous situation here in the U.S, but much more positive than last year and continuing to get better.

And, Bob, how quickly can you scale up when you see this recovery?

Very quickly. Not to make light of it, but the community development isn't technically a very difficult business. How you put the projects together, how you react, having that local strength and the local context of knowing the local communities, rules, laws, regulations for development. Knowing the developers that own the land and property. All that is where the secret to that success is. Once you have the project, finding the people is much actually in this sector a little bit easier than the other. So we can ramp up very quickly.

We'll take our next question from John Rogers of DA Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: Couple of clarifications. First of all, in terms of the acquisitions that you've kind of built into the growth assumptions for 2014, I mean back of the envelope, and I may be off, but it looks like somewhere $150 million to $180 million in revenue, how much of that is already in place?

How many of that is already in place from a perspective of...? John B. Rogers - D.A. Davidson & Co., Research Division: Of previously closed deals, some of them that closed out during the -- halfway through 2013 and then your most recent acquisition in 2014? In other words, I'm just trying right to get a sense, I mean are -- have you got half of that done, 1/3 of it, none of it?

Yes, Dan and I are trying to -- we do the mental math, maybe 10% or 15% of that is in acquisitions we did in 2013 and a few that we've done in the first quarter or the first few months here of 2014.

We haven't closed ProU yet, and so that will be coming in, in March and that'll add perhaps around $40 million of revenues, something like that. But...

Yes, so we still got lots of opportunity for filling that projection of the $180 million you said. But maybe 10% or 15% of that sort of in place or will be in place soon. John B. Rogers - D.A. Davidson & Co., Research Division: Okay. And then secondly, Bob, you've indicated that the Buildings market is a little -- isn't growing, I want to make sure I characterize it right, isn't may be growing as quickly as we thought a couple of quarters ago in terms of the pace of the recovery.

That's correct, I mean, yes. That we -- that it has not grown as well as we thought it would in 2013, and in fact, we're retracting. And that retraction continued throughout the year. John B. Rogers - D.A. Davidson & Co., Research Division: And I'm just curious, as your sense of that and also what your exposure private versus public or quasi-public projects? I mean, how should we think about that, those markets?

Yes, I would say that the quasi-public is a good way of putting it, because in this group, I would say that's one group where we have much more P3s and design builds than in the other sectors. Still those P3s are, of course, dependent upon public funding that are waiting for private clients. So I would say that, that is a sector today for us that probably was viewed more towards the public side than the private side. It's been the public side that has retracted. And the private side has actually grown, doing more retail work for targets and goals and McDonald's restaurants, rollout retail. That has grown for us in the private side. And it's the public side, the healthcare and educational ones that has retracted. And it's sort of an evolution for Stantec. We're a very large group now, and what we found is a lot of the companies we acquired over the years were buildings, engineering firms that were reliant upon our architectural companies. That work was drifting off and now much more of our work is integrated. So it certainly is an area that we almost have had to retool who we are and what we do and how we do it. And that was really being done throughout 2013. We feel that's now in place with the realignment of the leadership and the BOUs, we have a much different style there and we really do believe we can now leverage that strength in a different way. So it's been an interesting year, an interesting transition. And -- but we feel that, that end is near, and we certainly see us starting to win some bigger projects and getting back some of the work we lost. John B. Rogers - D.A. Davidson & Co., Research Division: Okay. And then lastly and a little bit longer term, you're now ranked, what was it, #9 -- or #10 in professional or engineering services in North America. But most of the companies that are ahead of you also have much larger construction elements to them. Is it still of your mind that you don't need to go to there?

That's still on our mind, we don’t need to go to there. And actually, we're quite proud of that fact, and thanks for bringing it up, John. Because it is what differentiates us maybe from those is that we still are that pure design firm and are still focused on, we know, our business still has that clarity to it, where when you get to construction and you try to blend that construction in, it's a much different business and it affects what you do, how you do it , when you do it. So for us, having that clarity of design, focusing to what we know is important to us. And again, becoming a differentiator, because in the P3 alternative project delivery design build world, we're a great partner. And we can choose, contractors all over North America in multiple sectors, and we can then leverage our design expertise with many different partners where some of our competitors have to sort of take care of the construction arm and sort of then forced to use A-team that may not be the best positioned team to win the project. So for us, we feel that design focus is not only part of our culture, but it's also becoming a bit of a differentiator for us. And we feel the market is still really strong for us to continue to find firms, grow and expand our services within that design focus culture. So, yes, we're still pretty confident that that's a great strategy for us.

Thank you. There are no further questions at this time. Please continue.

Thank you. If there is no further questions, I'd like to thank you all for joining us today. And as a reminder, I'd hope you can all join us on April 1, in Toronto for our Investors Day. I'd like to close our call by saying that we are confident in our business strategy and the ability to adapt to the evolving needs of the marketplace. Our focus will continue to allow us to achieve profitable growth and provide sustainable returns to our shareholders. I look forward to speaking to you all again in the future. Thank you.

Thank you, ladies and gentlemen. This concludes the conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.