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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended August 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission
File Number 1-12227
 THE SHAW GROUP INC.
  LOUISIANA
    
    72-1106167(State or other jurisdiction of incorporation or
    
    (I.R.S. Employerorganization)
    
    Identification Number)4171 Essen LaneBaton Rouge, Louisiana
    
    70809(Address of principal executive offices)
    
    (zip code)
 (225) 932-2500
     þ o
 o þ
 þ o
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DOCUMENTS INCORPORATED BY REFERENCE
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##### 



TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    18Item 1B. Unresolved Staff Comments
    
    
    34Item 2. Properties
    
    
    34Item 3. Legal Proceedings
    
    
    35Item 4. Submission of Matters to Vote of Security Holders
    
    
    35PART IIItem 5.
Market for Registrants Common Equity, Related Stockholder
Matters, and Issuer Purchaser of Equity Securities
    
    
    36Item 6. Selected Financial Data
    
    
    36Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    37Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    63Item 8. Financial Statements and Supplementary Data
    
    
    65Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    128Item 9A. Controls and Procedures
    
    
    128Item 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    128Item 11. Executive Compensation
    
    
    129Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    129Item 13. Certain Relationships and Related Transactions
    
    
    129Item 14. Principal Accountant Fees and Services
    
    
    129PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    129Composite of Amended By-LawsAmendment No. 3 to Credit AgreementCode of Corporate ConductCode of Ethics for Chief Executive Officer & Senior Financial OfficersSubsidiaries of the CompanyConsent of Ernst & Young LLPCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 1350Certification Pursuant to Section 1350
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PART I
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 www.shawgrp.com
 
 Item 1. Business
 General
   Recent Developments
  4




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Operating Segments
   E&I Segment
  Federal
 Core Services.
 5




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Unexploded Ordnance and Explosives (UXO).
 Performance Based Contracting (PBC).
 Base Realignment and Closure (BRAC)
 Facilities Management Services.
 Nuclear Services.
 Commercial, State and Local
  6




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Solid Waste Service.
 Coastal and Natural Resource Restoration.
 Water Quality.
 Housing Privatization
  Infrastructure
 Transportation
 7




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Ports and Marine Facilities.
 Other Markets. tm
  E&C Segment
  Energy
  Nuclear.
 Air Quality Control (AQC).
 8




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Clean Coal-Fired Generation.
 Gas-Fired Generation.
 Chemical
   Ethylene.
 9




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Refining.
 Services Offered
 Engineering and Design.
 Construction and Procurement.
 Consulting.
 Technology.
 Maintenance Segment
  Nuclear Plant Maintenance and Modifications
 10




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Fossil Plant Maintenance and Modifications.
 Chemical.
 F&M Segment
     11




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Discontinued Operations
   Financial Information about Segments and Geographic Areas
   Backlog
  Business Segments
  August 31,2006
    
    
    2005Industry Sector
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %Environmental and Infrastructure
    
    $
    2,765.1
    
    
    
    30
    %
    
    $
    2,244.6
    
    
    
    33
    %EnergyE&C
    
    
    3,166.4
    
    
    
    35
    
    
    
    1,970.1
    
    
    
    29Maintenance
    
    
    963.0
    
    
    
    11
    
    
    
    973.6
    
    
    
    15F&M
    
    
    230.4
    
    
    
    3
    
    
    
    55.5
    
    
    
    1ChemicalE&C
    
    
    1,483.5
    
    
    
    16
    
    
    
    1,126.2
    
    
    
    17Maintenance
    
    
    287.9
    
    
    
    3
    
    
    
    257.8
    
    
    
    4F&M
    
    
    86.4
    
    
    
    1
    
    
    
    40.4
    
    
    
    1Other IndustriesE&C
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    Maintenance
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    F&M
    
    
    92.1
    
    
    
    1
    
    
    
    34.1
    
    
    
    Total backlog
    
    $
    9,075.6
    
    
    
    100
    %
    
    $
    6,702.4
    
    
    
    100
    %
 August 31,2006
    
    
    2005
    
    
    2004Geographic Region
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %Domestic
    
    $
    7,330.5
    
    
    
    81
    %
    
    $
    5,206.5
    
    
    
    78
    %
    
    $
    4,906.6
    
    
    
    85
    %International
    
    
    1,745.1
    
    
    
    19
    
    
    
    1,495.9
    
    
    
    22
    
    
    
    859.4
    
    
    
    15Total backlog
    
    $
    9,075.6
    
    
    
    100
    %
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
 August 31,2006
    
    
    2005
    
    
    2004Status of contracts
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Signed contracts and commitments
    
    $
    7,285.2
    
    
    
    80
    %
    
    $
    5,194.3
    
    
    
    77
    %
    
    $
    5,766.0
    
    
    
    100
    %Letters of intent
    
    
    1,790.4
    
    
    
    20
    %
    
    
    1,508.1
    
    
    
    23
    
    
    
    
    
    
    
    Total backlog
    
    $
    9,075.6
    
    
    
    100
    %
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
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E&I Segment
 E&C Segment 
 Maintenance Segment 
 F&M Segment
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Types of Contracts
    
    
    Firm fixed-price contract  A contract in which the price is not subject to any
adjustment by reason of our cost experience or our performance under the contract. As a
result, we benefit from costs savings while generally being unable to recover any cost
overruns on these contracts. However, these contract prices may be adjusted for changes in
scope of work, new or changing laws and regulations and other events negotiated.
    
    Maximum price contract  A contract which provides at the outset for an initial target
cost, an initial target profit, and a price ceiling. The price is subject to adjustment by
reason of our cost experience, but the adjustment would generally not exceed the price
ceiling established in the contract. In addition, these contracts usually include provisions
whereby we share cost savings with our clients. As a result, we partially benefit from cost
savings while we generally are unable to recover cost overruns in excess of the ceiling
price.
    
    Unit-price contract  A contract under which we are paid a specified amount for every
unit of work performed. A unit-price contract is essentially a firm fixed-price contract
with the only variable being units of work performed. Variations in unit-price contracts
include the same type of variations as firm fixed-price contracts. We are normally awarded
these contracts on the basis of a total price that is the sum of the product of the
specified units and unit prices.
  
    
    Cost-plus contract  A contract under which we are reimbursed for allowable or otherwise
defined costs incurred plus a fee or mark-up. The contracts may also include incentives for
various performance criteria including areas as quality, timeliness, ingenuity, safety and
cost-effectiveness. In addition, our costs are generally subject to review by our customers
and regulatory audit agencies and such reviews could result in costs being disputed as
non-reimbursable under the terms of the contract.
    
    Target-price contract  A contract under which we are reimbursed for costs plus a fee
consisting of two parts: (i) a fixed amount, which does not vary with performance and (ii)
an award amount based on the performance and cost-effectiveness of the project. As a result,
we are generally able to recover cost overruns on these contracts from actual damages for
late delivery or the failure to meet certain performance criteria. Target-price contracts
also generally provide for sharing of costs in excess of or below the target. In some
contracts, we may agree to share cost overruns in excess of our fee, which could result in a
loss on the project.
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Customers and Marketing
      Raw Materials and Suppliers
  15




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Industry Certifications
     Patents, Trademarks and Licenses and Other Intellectual Property
   ®
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Competition
   Employees
   Environmental Laws and Regulations
   Available Information
 Form 10-K,
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Certifications
  
 Item 1A.
Risk Factors
 Risks
related to our investment in Westinghouse
Electric Company could have an adverse effect on us.
     18




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Demand for our products and services is cyclical and vulnerable to downturns in the industries to
which we market our products and services.
  The dollar amount of our backlog, as stated at any given time, is not necessarily indicative of our
future earnings.
     Our projects may encounter difficulties that may result in additional costs to us, reductions in
revenues, claims, disputes or the payment of damages.
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Our use of the percentage-of-completion accounting method could result in a reduction or
elimination of previously reported profits.
   Actual results could differ from the estimates and assumptions that we use to prepare our financial
statements.
  
    
    contract costs and profits and application of the POC method
of accounting;
    
    revenues recognized, and reduction of costs recognized, as a
result of contract claim;
    
    recoverability of inventory and application of lower of cost or market accounting;
    
    provisions for uncollectible receivables and customer claims and recoveries of costs from
subcontractors, vendors and others;
    
    provisions for income taxes and related valuation allowances;
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
    
    recoverability of goodwill;
    
    recoverability of other intangibles and related estimated lives;
    
    valuation of assets acquired and liabilities assumed in connection with business combinations;
    
    valuation of defined benefit pension plans; and
    
    accruals for estimated liabilities, including litigation and insurance reserves.
  Non-compliance with covenants in our Credit Facility, without waiver or amendment from the lenders
of the Credit Facility, could adversely affect our ability to borrow under the Credit Facility.
    Restrictive covenants in our Credit Facility may restrict our ability to pursue our business
strategies.
  
    
    incur additional indebtedness or contingent obligations or issue preferred stock;
    
    pay dividends or make distributions to our shareholders;
    
    repurchase or redeem our capital stock or subordinated indebtedness;
    
    make investments;
    
    create liens;
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
    
    enter into sale/leaseback transactions;
    
    incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us;
    
    make capital expenditures;
    
    enter into transactions with our shareholders and affiliates;
    
    sell and pledge assets; and
    
    acquire the assets of, or merge or consolidate with, other companies or transfer all or
substantially all of our assets.
   Our borrowing levels and debt service obligations could adversely affect our financial condition
and impair our ability to fulfill our obligations under our Senior Notes and our Credit Facility.
  
    
    it will require us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, which reduces the cash available for other business purposes;
    
    it will limit our ability to obtain additional financing and create additional liens on our assets;
    
    it will limit our flexibility in planning for, and reacting to, changes in our business;
    
    it may place us at a competitive disadvantage if we are more leveraged than our competitors;
    
    it may make us more vulnerable to adverse economic and industry conditions; and
    
    it may restrict us from making additional investments or acquisitions.
  We are currently the subject of an informal inquiry by the SEC.
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Lawsuits and regulatory proceedings could adversely affect our business.
   Downgrades by rating agencies may require us to modify existing bonding facilities or obtain new
bonding facilities.
  The nature of our contracts could adversely affect us.
  23




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We are subject to the risks associated with being a government contractor.
     Our failure to meet schedule or performance requirements of our contracts could adversely affect
us.
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Our dependence on subcontractors and equipment manufacturers could expose us to the risk of loss.
  Possible cost escalation associated with our fixed-price contracts could negatively affect our
profitability.
  Our results of operations depend on new contract awards and the timing for performing these
contracts.
  Our ability to obtain adequate bonding and, as a result, to bid on new work could have a material
adverse effect on our future revenues and business prospects.
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Our environmental and infrastructure operations may subject us to potential contractual and
operational costs and liabilities.
   We are exposed to certain risks associated with our integrated environmental solutions businesses.
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The limitation or the modification of the Price-Anderson Acts indemnification authority could
adversely affect our business.
  Environmental factors and changes in laws and regulations could increase our costs and liabilities
and affect the demand for our services.
  
    
    emissions into the air;
    
    discharges into waterways;
    
    generation, storage, handling, treatment and disposal of hazardous materials and wastes; and
    
    health and safety.
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Development and construction risks and other risks associated with our military family housing
privatization contracts could impact our profitability and a loss of our investment.
  
    
    our ability to obtain necessary permitting, land-use, building, occupancy and other
required governmental permits and authorizations on a timely basis, which could result in
increased development costs;
    
    the incurrence of construction costs related to new construction or renovations that
exceed original estimates due to increased materials, labor or other costs, which costs
could contribute to a lower than expected return;
    
    our ability to complete construction of a property on schedule and meet financial goals
for development; and
    
    the incurrence of higher construction costs or experience in project delays if we are not
successful in forming strategic alliances with key material suppliers and vendors.
  
    
    our ability to obtain the necessary levels of occupancy and rents, which could result in
lower than expected returns and in some cases losses. Rents are determined by Congress
annually through appropriations for Basic Allowance for Housing (BAH) for all of the
branches of the U.S. military. We cannot be assured that the appropriations each year will
occur on a timely basis, or that the amount of BAH appropriations will be sufficient to keep
up with escalations in the cost of living expenses. Congress may change the law and the DOD
can revise its procedures at any time. We cannot be assured that such changes will not be
made and, if changes are made, such changes may have a material adverse effect on the level
of our income generated by our privatization projects, if rental income is not sufficient to
cover project debt service requirements the joint venture may need to supplement income from
fees or other sources.
    
    our ability to guarantee the military bases where we have military family housing
projects will remain active or that their functions and/or staffing levels will not be
materially reduced such that we will be unable to lease military family housing units to
members of the U.S. military. The DOD has, from time to time, closed military bases and
realigned and/or reduced the functions and staffing levels at certain bases under the Base
Realignment and Closure (BRAC) initiative.
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Our working capital requirements may increase as a result of our work associated with the military
family housing privatization market.
  If our partners fail to perform their contractual obligations on a project, we could be exposed to
loss of reputation and additional financial performance obligations that could result in reduced
profits or, in some cases, significant losses.
  Our dependence on one or a few customers could adversely affect us.
    If we experience delays and/or defaults in customer payments, we could be unable to recover all
expenditures.
  Our projects expose us to potential professional liability, product liability, warranty and other
claims.
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We face substantial competition in each of our business segments.
     Political and economic conditions in foreign countries in which we operate could adversely affect
us.
   
    
    uncertain economic conditions in the foreign countries in which we make capital
investments, operate and sell products and services;
    
    the lack of well-developed legal systems and less established
or traditional business practices in some countries in which we operate and sell
products and services, which could make it difficult for us to enforce our contractual
rights;
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
    
    security and safety of employees;
    
    expropriation of property;
    
    restrictions on the right to convert or repatriate currency;
    
    political risks, including risks of loss due to civil strife, acts of war, guerrilla activities and insurrection;
    
    greater risk of uncollectible accounts and longer collection cycles;
    
    currency fluctuations;
    
    logistical and communications challenges;
    
    potential adverse changes in laws and regulatory practices, including export license
requirements, trade barriers, tariffs and tax laws;
    
    changes in labor conditions;
    
    exposure to liability under the Foreign Corrupt Practices Act; and
    
    general economic and political conditions in foreign markets.
 Work stoppages and other labor problems could adversely affect us.
  Because of the capital-intensive nature of our business, we are vulnerable to reductions in our
liquidity.
   
    
    have less operating flexibility due to restrictions which could be imposed by our
creditors, including restrictions on incurring additional debt, creating liens on our
properties and paying dividends;
    
    have less success in obtaining new work if our sureties or our lenders were to limit our
ability to provide new performance bonds or letters of credit for our projects;
    
    be required to dedicate a substantial portion of cash flows from operations to the
repayment of debt and the interest associated with that debt;
    
    fail to comply with the terms of our credit facility;
    
    incur increased lending fees, costs and interest rates; and
    
    experience difficulty in financing future acquisitions and/or continuing operations.
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Foreign exchange risks may affect our ability to realize a profit from certain projects or to
obtain projects.
   We may incur unexpected liabilities associated with the Stone & Webster and IT Group acquisitions,
as well as other acquisitions.
    If we write off a significant amount of intangible assets or long-lived assets, our earnings will
be negatively impacted.
  Difficulties integrating our acquisitions could adversely affect us.
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Our failure to attract and retain qualified personnel, including key officers, could have an
adverse effect on us.
   Changes in technology could adversely affect us, and our competitors may develop or otherwise
acquire equivalent or superior technology.
    If we fail to maintain an effective system of internal controls, we may not be able to accurately
report our financial results or prevent fraud. As a result, investors could lose confidence in our
financial reporting, which would harm our business and the trading price of our stock.
  Terrorists actions have and could continue to negatively impact the U.S. economy and the markets
in which we operate.
  Other risks may negatively affect our business.
 
    
    Our ability to obtain surety bonds or other means of credit support for our projects;
    
    Our ability to collateralize letters of credit or surety bonds upon non-compliance with
covenants in our Credit Facility or indemnity agreements;
    
    General economic conditions;
    
    Future changes in accounting standards or interpretations;
    
    Provisions in articles of incorporation and by-laws and rights agreement could make it
more difficult to acquire us and may reduce the market price of our common stock;
    
    Market prices of our equity securities have changed significantly and could change
further;
 
    
    Recent changes in accounting for equity-related compensation could impact our financial
statements and our ability to attract and retain key employees;
    
    Increases in employee-related costs and expenses, including healthcare and other
employee benefits such as unemployment insurance and workers compensation;
    
    Unavoidable delays due to weather conditions;
    
    Closing of any U.S. military bases related to our privatization interests; and
    
    Our dependency on technology in our operations and the possible impact of system and
information technology interruptions.
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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  Segment Using
    
    Owned /Location
    
    Description
    
    Property
    
    LeasedBaton Rouge, LA
    
    Corporate Headquarters
    
    Corporate
    
    LeasedLaurens, SC
    
    Pipe Fabrication Facility
    
    F&M
    
    OwnedPrairieville, LA
    
    Pipe Fabrication Facility
    
    E&C
    
    OwnedShreveport, LA
    
    Manufacturing Facility
    
    F&M
    
    OwnedWest Monroe, LA
    
    Pipe Manufacturing Facility
    
    F&M
    
    OwnedWalker, LA
    
    Pipe Manufacturing Facility
    
    F&M
    
    OwnedMaracaibo, Venezuela
    
    Pipe Fabrication Facility
    
    Maintenance
    
    OwnedTulsa, OK
    
    Pipe Fabrication Facility
    
    F&M
    
    OwnedClearfield, UT
    
    Fabrication and Manufacturing
    
    F&M
    
    LeasedDerby, U.K.
    
    Pipe Fabrication Facility
    
    E&C
    
    OwnedShreveport, LA
    
    Piping Components & Manufacturing Facility
    
    F&M
    
    OwnedHouston, TX
    
    Pipe Fittings Distribution Facility
    
    F&M
    
    LeasedDelcambre, LA
    
    Manufacturing Facility
    
    Maintenance
    
    OwnedAddis, LA
    
    Fabrication Facility
    
    F&M
    
    OwnedStoughton, MA
    
    Office Building & Shared Facility
    
    E&C/E&I
    
    LeasedCambridge, MA
    
    Office Building
    
    E&C
    
    LeasedHouston, TX
    
    Office Building
    
    E&C
    
    LeasedCentennial, CO
    
    Office Building
    
    E&C/E&I
    
    LeasedToronto, Canada
    
    Office Building
    
    E&C
    
    LeasedMonroeville, PA
    
    Office Building & Storage
    
    E&I
    
    LeasedFindlay, OH
    
    Office Building & Storage
    
    E&I
    
    LeasedKnoxville, TN
    
    Office Building & Laboratory
    
    E&I
    
    LeasedWalker, LA
    
    Office Building & Warehouse
    
    F&M
    
    LeasedAskar (Middle East)
    
    Office Building
    
    F&M
    
    LeasedConcord, CA
    
    Office Building
    
    E&I
    
    LeasedDecatur, GA
    
    Warehouse
    
    F&M
    
    LeasedCharlotte, NC
    
    Office Building
    
    E&C
    
    LeasedIrvine, CA
    
    Office Building
    
    E&I
    
    LeasedNew York, NY
    
    Office Building
    
    E&I
    
    LeasedTrenton, NJ
    
    Office Building
    
    E&C/E&I
    
    LeasedNorwood, OH
    
    Office Building
    
    E&I
    
    OwnedLaPorte, TX
    
    Manufacturing Facility
    
    Maintenance
    
    OwnedMilton Keynes, U.K.
    
    Office Building
    
    E&C
    
    Leased
 34




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to Vote of Security Holders
  35




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
  HIGH
    
    
    LOWFiscal year ending August 31, 2005First quarter
    
    $
    14.90
    
    
    $
    10.29Second quarter
    
    
    20.90
    
    
    
    14.73Third quarter
    
    
    23.30
    
    
    
    17.60Fourth quarter
    
    
    22.72
    
    
    
    16.14Fiscal year ending August 31, 2006First quarter
    
    $
    29.09
    
    
    $
    20.43Second quarter
    
    
    35.81
    
    
    
    29.09Third quarter
    
    
    35.27
    
    
    
    26.38Fourth quarter
    
    
    28.30
    
    
    
    19.73Fiscal year ending August 31, 2007First quarter (through October 26, 2006)
    
    $
    28.00
    
    
    $
    23.64
    
 Item 6.
Selected Financial Data
  Year Ended August 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(5)
    
    
    (5)(6)(7)
    
    
    (1)(5)(6)(7)
    
    
    (2)(6)(7)
    
    
    (3)(6)(In Millions, Except Per Share Amounts)Consolidated Statements of OperationsRevenues
    
    $
    4,775.6
    
    
    $
    3,262.3
    
    
    $
    3,014.7
    
    
    $
    3,238.0
    
    
    $
    3,131.4Income (loss) from continuing operations
    
    $
    53.0
    
    
    $
    17.6
    
    
    $
    (27.5
    )
    
    $
    16.5
    
    
    $
    92.3Diluted income (loss) per common share
from continuing operations
    
    $
    0.66
    
    
    $
    0.25
    
    
    $
    (0.47
    )
    
    $
    0.43
    
    
    $
    2.13Consolidated Balance SheetsTotal assets
    
    $
    2,529.1
    
    
    $
    2,088.9
    
    
    $
    2,054.7
    
    
    $
    2,006.9
    
    
    $
    2,310.8Long-term debt and capital lease
obligations, net of current maturities
(4)
    
    $
    173.5
    
    
    $
    65.5
    
    
    $
    261.2
    
    
    $
    251.7
    
    
    $
    522.1Cash dividends declared per common share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Includes the acquisition of certain assets of Energy Delivery Services, Inc., Coastal
Engineering and Environmental Consultants Inc. and LFG&E International, Inc. in fiscal 2004
(see Note 4 of our consolidated financial statements).(2)
    
    Includes the acquisition of certain assets of Badger Technologies, Envirogen, Inc., and LFG&E
International, Inc. in fiscal 2003.(3)
    
    Includes the acquisition of certain assets of the IT Group and PsyCor Inc. in fiscal 2002.(4)
    
    Fiscal 2003 excludes $260.0 million of current maturities of long-term debt consisting
primarily of the LYONs convertible debt of $251.5 million.(5)
    
    Restated to reflect discontinued operations (see Note 21 of our consolidated financial
statements).(6)
    
    Restated to correct an error in the accounting for stock-based compensation expense (see Note
25 of our consolidated financial statements).(7)
    
    Restated to correct for errors in accounting for periodic pension service cost (See Note 25
of our consolidated financial statements). 36




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 Results of Operations
  
    
    Fiscal 2006 versus fiscal 2005, and
    
    Fiscal 2005 versus fiscal 2004
 37




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##### Table of Contents



Year Ended August 31,2006
    
    
    2005
    
    
    2004Revenues:E&I
    
    $
    2,119.3
    
    
    $
    1,120.1
    
    
    $
    1,268.3E&C
    
    
    1,456.9
    
    
    
    1,208.0
    
    
    
    1,048.8Maintenance
    
    
    898.6
    
    
    
    733.2
    
    
    
    517.3F&M
    
    
    300.8
    
    
    
    201.0
    
    
    
    180.3Corporate
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    4,775.6
    
    
    $
    3,262.3
    
    
    $
    3,014.7
 Year Ended August 31,2006
    
    
    2005
    
    
    2004Gross profit:E&I
    
    
    199.2
    
    
    $
    116.9
    
    
    $
    158.0E&C
    
    
    30.2
    
    
    
    107.0
    
    
    
    0.8Maintenance
    
    
    32.8
    
    
    
    27.4
    
    
    
    31.3F&M
    
    
    67.3
    
    
    
    41.3
    
    
    
    30.6Corporate
    
    
    
    
    
    
    0.1
    
    
    
    Total gross profit
    
    $
    329.5
    
    
    $
    292.7
    
    
    $
    220.7Gross profit percentage:E&I
    
    
    9.4
    %
    
    
    10.4
    %
    
    
    12.5
    %E&C
    
    
    2.1
    
    
    
    8.9
    
    
    
    0.1Maintenance
    
    
    3.6
    
    
    
    3.7
    
    
    
    6.1F&M
    
    
    22.4
    
    
    
    20.5
    
    
    
    17.0Corporate
    
    
    
    
    
    
    
    
    
    
    Total gross profit percentage
    
    
    6.9
    %
    
    
    9.0
    %
    
    
    7.3
    %
  Year Ended August 31,2006
    
    
    2005
    
    
    2004Industry Sector
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Environmental and Infrastructure Energy
    
    
    2,119.3
    
    
    
    44
    
    
    $
    1,120.1
    
    
    
    34
    
    
    $
    1,268.3
    
    
    
    42E&C
    
    
    830.3
    
    
    
    17
    
    
    
    801.0
    
    
    
    24
    
    
    
    685.0
    
    
    
    21Maintenance
    
    
    522.0
    
    
    
    11
    
    
    
    512.7
    
    
    
    16
    
    
    
    369.8
    
    
    
    14F&M
    
    
    72.7
    
    
    
    2
    
    
    
    79.4
    
    
    
    3
    
    
    
    60.7
    
    
    
    2ChemicalE&C
    
    
    596.0
    
    
    
    12
    
    
    
    388.2
    
    
    
    11
    
    
    
    322.5
    
    
    
    10Maintenance
    
    
    376.0
    
    
    
    8
    
    
    
    219.3
    
    
    
    7
    
    
    
    147.3
    
    
    
    5F&M
    
    
    130.6
    
    
    
    3
    
    
    
    85.4
    
    
    
    3
    
    
    
    73.3
    
    
    
    3Other IndustriesE&C
    
    
    30.6
    
    
    
    1
    
    
    
    18.8
    
    
    
    1
    
    
    
    41.3
    
    
    
    1Maintenance
    
    
    0.6
    
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    0.2
    
    
    
    F&M
    
    
    97.5
    
    
    
    2
    
    
    
    36.2
    
    
    
    1
    
    
    
    46.3
    
    
    
    2Total revenues
    
    $
    4,775.6
    
    
    
    100
    
    
    $
    3,262.3
    
    
    
    100
    
    
    $
    3,014.7
    
    
    
    100
  Year Ended August 31,2006
    
    
    2005
    
    
    2004Geographic Region
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %United States
    
    $
    4,196.8
    
    
    
    88
    
    
    $
    2,842.5
    
    
    
    87
    
    
    $
    2,510.5
    
    
    
    83Asia/Pacific Rim countries
    
    
    161.7
    
    
    
    3
    
    
    
    227.5
    
    
    
    7
    
    
    
    223.4
    
    
    
    8Middle East
    
    
    294.0
    
    
    
    6
    
    
    
    87.4
    
    
    
    3
    
    
    
    151.3
    
    
    
    5United Kingdom and other European
Countries
    
    
    73.7
    
    
    
    2
    
    
    
    59.1
    
    
    
    2
    
    
    
    96.3
    
    
    
    3South America and Mexico
    
    
    25.0
    
    
    
    1
    
    
    
    20.3
    
    
    
    1
    
    
    
    7.2
    
    
    
    Canada
    
    
    13.3
    
    
    
    
    
    
    
    13.7
    
    
    
    
    
    
    
    13.4
    
    
    
    1Other
    
    
    11.1
    
    
    
    
    
    
    
    11.8
    
    
    
    
    
    
    
    12.6
    
    
    
    Total revenues
    
    $
    4,775.6
    
    
    
    100
    
    
    $
    3,262.3
    
    
    
    100
    
    
    $
    3,014.7
    
    
    
    100
 38




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##### Table of Contents



At August 31,2006
    
    
    2005Industry Sector
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Environmental and Infrastructure
    
    $
    2,765.1
    
    
    
    30
    %
    
    $
    2,244.6
    
    
    
    33
    %EnergyE&C
    
    
    3,166.4
    
    
    
    35
    
    
    
    1,970.1
    
    
    
    29Maintenance
    
    
    963.0
    
    
    
    11
    
    
    
    973.6
    
    
    
    15F&M
    
    
    230.4
    
    
    
    3
    
    
    
    55.5
    
    
    
    1ChemicalE&C
    
    
    1,483.5
    
    
    
    16
    
    
    
    1,126.2
    
    
    
    17Maintenance
    
    
    287.9
    
    
    
    3
    
    
    
    257.8
    
    
    
    4F&M
    
    
    86.4
    
    
    
    1
    
    
    
    40.4
    
    
    
    1Other IndustriesE&C
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    Maintenance
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    F&M
    
    
    92.1
    
    
    
    1
    
    
    
    34.1
    
    
    
    Total backlog
    
    $
    9,075.6
    
    
    
    100
    %
    
    $
    6,702.4
    
    
    
    100
    %
  At August 31,2006
    
    
    2005
    
    
    2004Status of contracts
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Signed contracts and commitments
    
    $
    7,285.2
    
    
    
    80
    
    
    $
    5,194.3
    
    
    
    77
    %
    
    $
    5,766.0
    
    
    
    100
    %Letters of intent
    
    
    1,790.4
    
    
    
    20
    
    
    
    1,508.1
    
    
    
    23
    
    
    
    
    
    
    
    Total backlog
    
    $
    9,075.6
    
    
    
    100
    %
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
  Fiscal
2006 Compared to Fiscal 2005 (Restated)
  Executive Summary
    39




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Industry Trends
      40




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##### Table of Contents



Segment Analysis
 E&I Segment
  Revenues
  
    
    increases in project revenues of $974.9 million associated with providing hurricane
recovery and restoration work during fiscal 2006;
    
    revenues of $109.7 million from two recently consolidated joint ventures providing
services to the U.S. Department of Energy; and
    
    increases in environmental and logistic support services for the U.S. government
customers of $18.1 million.
  
    
    domestic federal environmental remediation due to a reallocation of federal
environmental funding to disaster relief funding, less work being awarded under existing
contracts and/or delays in funding under existing contracts and property management
services;
    
    the substantial completion of a major fixed price contract in fiscal 2005; and
    
    project services provided to U.S. government customers in Iraq due to a competitive bid
environment arising from changes in government contracting vehicles to more fixed price
opportunities.
 Gross Profit and Gross Profit Percentage
  
    
    increased gross profit of $84.4 million associated with providing hurricane recovery and
restoration work which was performed at a lower gross profit percentage
than our historical services;
    
    increased gross profit from two recently consolidated joint ventures providing services
to the U.S. Department of Energy; and
    
    increased gross profit and related percentage on non-hurricane related work resulting
from indirect cost absorption arising from our overall increase in sales volumes.
  
    
    the positive impact in fiscal 2005 of an adjustment to the estimated costs to complete a
major fixed price contract, which resulted from cessation of certain operations on the
project;
    
    The application of revised estimated governmental indirect rates to contract direct
costs for fiscal 2006 offset by the fiscal 2005 positive impact of gross profit from the
submission of fiscal year indirect rates, negotiation of restructuring cost proposals and
other indirect rates to contract direct costs;
    
    lower gross profit and gross profit percentage from domestic federal environmental
remediation work being awarded and executed this fiscal year as compared to last fiscal
year, together with lower gross profit percentage earned on our consolidated joint ventures
for the U.S. Department of Energy and a higher volume of mission support services work compared to the lower volume of federal remediation
work earning a higher gross profit percentage; and
    
    decreased project services supporting the U.S. government customers in Iraq.
 41




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##### Table of Contents



Backlog
     E&C Segment
 Revenues
  
    
    increased activity on Flue Gas Desulphurization (FGD) projects;
    
    increased activity relating to major coal power projects;
    
    the commencement of a major international petrochemical project, including $67.0 million
of customer furnished materials;
    
    the progress on a refinery project; and
    
    increase in proprietary technology sales and related services.
 42




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##### Table of Contents




    
    the Wolf Hollow litigation ruling resulting in $48.2 million reduction of revenue for 2006;
    
    decreased activities due to substantial completion of two power projects and a chemical project
 Gross Profit and Gross Profit Percentage
  
    
    the Wolf Hollow litigation ruling reducing gross profit by $48.2 million during 2006;
    
    loss provisions on certain refinery projects, gross profit reduction on a power project,
and completion of a chemical project
  
    
    increased gross profits related to the commencement of a major international
petrochemical plant projects;
    
    higher gross profit due to increased activities on power projects; and
    
    increased volume of proprietary technology sales and related engineering and a change in
fiscal 2006 of our estimates for liability provisions related to contractual performance
guarantees on sales of technology license agreements (see Performance Guarantees in Note
20 of the accompanying consolidated financial statements).
  Backlog
   Maintenance Segment
 Revenues
  
    
    revenues related to capital construction services for three customers in the chemical industry;
    
    increased activity and increased scope for one major nuclear project in the U.S.; and
    
    increase in maintenance services for several new clients in the energy and chemical industries.
 43




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##### Table of Contents



Gross Profit and Gross Profit Percentage
   Backlog
    F&M Segment
 Revenues
   Gross Profit and Gross Profit Percentage
  Backlog
  44




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General
and Administrative Expenses, Interest Expense, and Other Income (Expense)
      Unconsolidated Entities, Income Taxes and Discontinued Operations
   45




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##### Table of Contents



Fiscal
2005 Compared to Fiscal 2004 (Restated)
  Executive Summary
       Segment Analysis
 E&I Segment
 Revenues
  
    
    a decrease in commercial services due to a significant project completed in 2004, which
was not replaced in 2005 and a significant project provided significantly more volume in
2004 as compared to 2005, fewer Federal Government-based opportunities leading to a more
competitive market for these opportunities, and our national commercial customers trending
toward requesting bids on opportunities as opposed to issuing new awards under master
service agreements;
    
    a decrease in federal environmental remediation and property management services due to
federal budget restrictions impacting environmental opportunities, less work being awarded
under existing contracts and/or delays in funding under existing contracts; and
    
    a decrease in our project services supporting the U.S. government customers in Iraq due
to delays in government funding combined with a competitive bid environment arising from
changes in contracting vehicles to more fixed-price opportunities.
 46




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##### Table of Contents



Gross Profit and Gross Profit Percentage
   
    
    a decrease in commercial services, resulting from lower volume of work and recognition
of contract losses on certain commercial construction projects of approximately $14.7
million in fiscal 2005, arising from project execution issues in the current fiscal year;
    
    a decrease in project services supporting the U.S. government customers in Iraq; and
    
    a decrease in federal environmental remediation services due to less work being awarded
under existing contracts and delays in funding; which were
    
    offset by increased gross profit and gross profit percentage due to negotiation of
restructuring costs proposed, finalization of sale/lease-back costs and their associated
treatment, and other indirect rate negotiations, resulting in the application of revised
government indirect rates to contract direct costs (discussed further below);
    
    offset by increased gross profit and gross profit percentage due to a reduction in
estimated costs to complete a major fixed price contract as a result of cessation of
certain operations at the request of the customer which decreased our estimated project
expenses as compared to the prior year for this project (discussed further below); and
    
    offset by increased gross profit and gross profit percentage due to providing disaster
relief and construction services to federal customers in hurricane damaged areas.
    47




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Backlog
   E&C Segment
 Revenues
  
    
    increased activity on major energy projects;
    
    clean fuels projects and projects related to Clean Air Act regulations;
    
    the inclusion of a full year of results of Shaw EDS operations, which was acquired in January 2004;
    
    the fiscal 2004 charge on the Covert and Harquahala projects, which lowered revenues
and gross profit; which was
    
    partially offset by the scheduled completion of the ethylene plant in China and the
sale of PTI in December 2004.
 Gross Profit and Gross Profit Percentages
    Backlog
  48




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##### Table of Contents



Maintenance Segment
 Revenues
  
    
    increase in activity and additional scope associated with a
major domestic energy projects;
    
    increase in maintenance services for several clients in the energy and chemical industries; and
    
    the award of a new nuclear decommissioning project;
    
    offset by decreasing activity at our U.K. subsidiary.
 Gross Profit and Gross Profit Percentage
  
    
    increase in maintenance services discussed above; and
    
    a decrease in losses in our U.K. operations resulting from efforts to make those
operations smaller, more productive and efficient.
   Backlog
  49




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##### Table of Contents



F&M Segment
 Revenues
  
    
    increase in fabrication revenues for the chemical industry, including chemical,
petrochemical, and refinery;
    
    increase in demand for our manufactured products as a result of world wide shortages of
such products; and
    
    increase in price of steel, which we are able to pass along to our customers.
  Gross Profit and Gross Profit Percentage
  
    
    increased gross profit being realized on the segments manufacturing and distribution
products in late fiscal 2004 and during fiscal 2005; and
    
    intersegment revenues as they are eliminated from the F&M segment consolidation while
the related gross profit recognized remains with the F&M segment. The increase in gross
profit percentage for fiscal 2005 includes 2.4% related to these intersegment gross profit.
 Backlog
  General and Administrative Expenses, Interest Income, Interest Expense and Other Income (Expense)
     50




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Unconsolidated Entities, Discontinued Operations, Change in Exchange Rates, Other Comprehensive
Income and Income Taxes
       Liquidity and Capital Resources
 Cash Flow for Fiscal 2006, 2005 and 2004
    51




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Year Ended August 31,2006
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)Cash flow provided by (used in) operations
    
    $
    (75,080
    )
    
    $
    67,228
    
    
    $
    (14,836
    )Cash flow provided by (used in) investing
    
    
    67,271
    
    
    
    (126,462
    )
    
    
    (32,434
    )Cash flow provided by (used in) financing
    
    
    101,306
    
    
    
    13,513
    
    
    
    (39,448
    )Cash from consolidation of variable interest
entities
    
    
    2,290
    
    
    
    1,343
    
    
    
    879Effect of foreign exchange rate changes on cash
    
    
    2,271
    
    
    
    (1,194
    )
    
    
    (1,519
    )
 Operating Cash Flow
    Investing Cash Flow
  52




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Financing Cash Flow
   Credit Facilities and Revolving Lines of Credit
   August 31,2006
    
    
    2005Credit facility
    
    $
    145.5
    
    
    $
    40.9Foreign subsidiaries revolving lines of credit
    
    
    
    
    
    
    0.1Credit facilities of consolidated VIEs
    
    
    5.5
    
    
    
    6.3Total outstanding
    
    
    151.0
    
    
    
    47.3Less: current maturities
    
    
    (5.5
    )
    
    
    (6.4
    )Total long-term revolving lines of credit
    
    $
    145.5
    
    
    $
    40.9
     53




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##### Table of Contents



CreditFacilityTotal Credit Facility
    
    $
    750.0Less: outstanding performance letters of credit
    
    
    276.0Less: outstanding financial letters of credit
    
    
    43.1Less: outstanding revolving credit loans
    
    
    145.5Remaining availability for performance letters of credit
    
    $
    285.4Portion of Credit Facility available for financial letters of credit and revolving credit loans
    
    $
    425.0Less: outstanding financial letters of credit
    
    
    43.1Less: outstanding revolving credit loans
    
    
    145.5Remaining availability for financial letters of credit and revolving credit loans
    
    $
    236.4
    Foreign Revolving Lines of Credit
  August 31,
    
    
    August 31,2006
    
    
    2005Capacity of foreign letters of credit and short-term revolving lines of credit
    
    $
    6,654
    
    
    $
    6,253Outstanding:Letters of credit
    
    
    4,072
    
    
    
    4,072Short-term revolving lines of credit
    
    
    17
    
    
    
    574,089
    
    
    
    4,129Remaining availability for foreign letters of credit and short-term revolving
lines of credit
    
    $
    2,565
    
    
    $
    2,124Weighted-average interest rate
    
    
    6.75
    %
    
    
    6.75
    %
    54




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Westinghouse Acquisition
     Off Balance Sheet Arrangements
  55




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##### Table of Contents



Commercial Commitments
  Amounts of Commitment Expiration by PeriodLess ThanCommercial Commitments (1)
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 YearsLetters of Credit Domestic and Foreign
    
    $
    323.2
    
    
    $
    24.2
    
    
    $
    253.6
    
    
    $
    42.4
    
    
    $
    3.0Surety bonds
    
    
    438.2
    
    
    
    209.4
    
    
    
    206.2
    
    
    
    
    
    
    
    22.6Total Commercial Commitments
    
    $
    761.4
    
    
    $
    233.6
    
    
    $
    459.8
    
    
    $
    42.4
    
    
    $
    25.6
 (1)
    
    Commercial Commitments exclude any letters of credit or bonding obligations associated with
outstanding bids or proposals or other work not awarded prior to August 31, 2006.
     56




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Aggregate Contractual Obligations
  Payments Due by PeriodLess ThanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 YearsLong-term debt
    
    $
    28.9
    
    
    $
    4.4
    
    
    $
    6.8
    
    
    $
    17.7
    
    
    $
    Capital lease obligations
    
    
    5.2
    
    
    
    1.8
    
    
    
    3.1
    
    
    
    0.3
    
    
    
    Operating leases
    
    
    241.4
    
    
    
    55.7
    
    
    
    134.9
    
    
    
    22.0
    
    
    
    28.8Unconditional purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    275.5
    
    
    $
    61.9
    
    
    $
    144.8
    
    
    $
    40.0
    
    
    $
    28.8
   Critical Accounting Policies and Related Estimates That Have a Material Effect on Our Consolidated
Financial Statements
  Engineering, Procurement and Construction Contract and Environmental and Infrastructure Revenue
Recognition and Profit and Loss Estimates Including Claims
 Nature of Estimates Required
   
    
    Revenues and gross profit from cost-reimbursable, long-term contracts can be
significantly affected by contract incentives/penalties that may not be known or finalized
until the later stages of the contracts. Substantially all of our revenues from
cost-reimbursable contracts are based on costs incurred plus mark-up and/or fees where
applicable. Applying our revenue recognition practices to these types of contracts usually
results in revenues being recognized as work is performed and costs are incurred and
generally results in a reasonably consistent gross profit during most of the contract term.
 57




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Our cost-reimbursable contracts are sometimes structured as target-price contracts.
Target-price contracts contain an incentive/penalty arrangement which results in our fee
being adjusted, within certain limits, for cost under runs/overruns to an established
target-price, representing our estimated cost and fee for the project. In addition, certain
target-price contracts require that we share in cost overruns in excess of our fee which
could result in a loss on the contract should such a level of cost overruns occur.
Cost-reimbursable contracts generally provide for reimbursement of our direct costs, but
generally limit our fee to an agreed upon percentage of costs or to a certain specified
amount and often specify costs that are not reimbursable. Usually, target-price contracts are
priced with higher fees than cost-reimbursable contracts because of the uncertainties
relating to an adjustable fee arrangement or for the sharing of potential cost overruns in
excess of the fee. Additionally, both the target cost and cost-reimbursable contracts
frequently have other incentive and penalty provisions for such matters as schedule and
performance results.Generally, the penalty provisions for our cost-reimbursable contracts are capped to limit
our monetary exposure. Although we believe it is unlikely that we could incur losses or lose
all of our gross profit on our cost-reimbursable contracts, it is possible for penalties to
reduce or eliminate previously recorded profits. The incentive/penalty provisions are usually
finalized as contract change orders either subsequent to negotiation with, or verification
by, our customers. Therefore, while cost-reimbursable contracts generally limit our risks on
the related projects, we can and do incur losses on these contracts.In most situations, the amount and impact of incentives/penalties are not, or cannot be,
finalized until the completion stages of the contract, at which time we record adjustments to
the amounts of project revenues and cost on a cumulative catch-up basis.
    
    We have fixed-price contracts, for which the accuracy of gross profit is dependent on
the accuracy of cost estimates and other factors.The accuracy of the gross profit we report for fixed-price contracts is dependent upon the
judgments we make in estimating our contract performance, contract revenues and cost, and our
ability to recover additional contract costs through change orders, claims or backcharges to
the customer, subcontractors and vendors. Many of these contracts also have incentive/penalty
provisions. Increases in cost estimates and decreases in revenue estimates, unless
recoverable from claims or change orders, will result in a reduction in profit.Disputes with other parties involved in the contract can and often do occur. These disputes
are generally the result of one party incurring costs or damages caused by another party
during execution of a project. We may incur additional costs or be damaged and we may cause
additional costs or damage other parties. The other parties include our customer on the
contract, subcontractors and vendors we have contracted with to execute portions of the
project and others. We may claim damages against others and others may claim damages against
us. Collectively, we refer to disputes related to collection of these damages as claims.
Claims include amounts in excess of the agreed contract price (or amounts not included in the
original contract price) that we seek to collect from our customers for delays, errors in
specifications and designs, contract terminations, change orders in dispute or unapproved as
to both scope and price, or other causes of unanticipated additional costs. These claims
against customers are included in our revenue estimates as additional contract revenues up to
the amount of contract costs incurred when the recovery of such amounts is probable.
Backcharges and claims against and from our vendors, subcontractors and others are included
in our cost estimates as a reduction or increase in total estimated costs when recovery or
payment of the amounts is probable and the costs can be reasonably estimated.
    
    Revenues and gross profit on contracts can be significantly affected by change orders
and claims that may not be ultimately negotiated until the later stages of a contract or
after a contract is completed. When estimating the amount of total gross profit or loss on
a contract, we include claims related to our customers as adjustments to revenues and
claims related to vendors, subcontractors and others as adjustments to cost of revenues
when the recovery of such amounts is probable and the amounts can be reasonably estimated.
Recording claims ultimately increases the gross profit (or reduces the loss) that would
otherwise be recorded without consideration of the claims. Our claims against others are
recorded up to the amount of costs incurred and include no gross profit until such time as
they are finalized and approved. In most cases, the claims included in determining contract gross profit are less than the actual claim that will
be or has been presented.
 58




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Assumptions and Approach Used
   Other Revenue Recognition and Profit and Loss Estimates
 Nature of Estimates Required
  Assumptions and Approach Used
  Nature of Estimates Required
  Assumptions and Approach Used
  59




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Litigation, Commitments and Contingencies
 Nature of Estimates Required
  Assumptions and Approach Used
  Income Taxes
 Nature of Estimates Required, Assumptions and Approach Used
  Acquisitions  Fair Value Accounting and Goodwill Impairment
 Nature of Estimates Required
  Assumptions and Approach Used
  60




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Retirement Benefits
 Nature of Estimates Required, Assumptions and Approach Used
  Recent Accounting Pronouncements
     61




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62




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(SFAS 123(R))
   
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Expected Maturity Dates
    
    
    Fair2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total
    
    
    ValueLong-term debtFixed rate
    
    $
    6.1
    
    
    $
    3.2
    
    
    $
    3.1
    
    
    $
    16.0
    
    
    $
    2.0
    
    
    $
    
    
    
    $
    30.4
    
    
    $
    31.2Average interest rate
    
    
    6.45
    %
    
    
    7.87
    %
    
    
    5.63
    %
    
    
    10.61
    %
    
    
    8.27
    %
    
    
    
    
    
    
    Variable rate
    
    $
    0.1
    
    
    $
    3.7
    
    
    $
    
    
    
    
    
    
    
    $
    145.5
    
    
    
    
    
    
    $
    149.3
    
    
    $
    149.3Average interest rate
    
    
    6.8
    %
    
    
    6.80
    %
    
    
    
    
    
    
    
    

    
    
    7.43
    %
    
    

    Short-term line of credit
    
    
    
    
    
    
    
    
    
    
    Variable rate
    
    $
    5.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5.5
    
    
    $
    5.5Average interest rate
    
    
    7.70
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  63




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Foreign Currency Risks
  64




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReports of Independent Registered Public Accounting Firm: Report on Internal Control over Financial Reporting
    
    
    66 Report on the Consolidated Financial Statements
    
    
    67Consolidated Balance Sheets as of August 31, 2006 and 2005 (Restated)
    
    
    68Consolidated Statements of Operations for the Years Ended August 31, 2006, 2005 (Restated) and 2004 (Restated)
    
    
    69Consolidated Statement of Shareholders Equity for the Years Ended August 31, 2006, 2005 (Restated) and 2004 (Restated)
    
    
    70Consolidated Statements of Cash Flows for the Years Ended August 31, 2006, 2005 (Restated) and 2004 (Restated)
    
    
    71Notes to Consolidated Financial Statements
    
    
    72
 65




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
         
 66




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 67




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THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of August 31, 2006 and 2005
(Dollars in thousands)
 (Restated)2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    154,837
    
    
    $
    56,779Restricted and escrowed cash
    
    
    43,409
    
    
    
    171,900Accounts receivable, including retainage, net
    
    
    740,920
    
    
    
    418,035Inventories
    
    
    101,337
    
    
    
    97,684Costs and estimated earnings in excess of billings on uncompleted contracts, including claims
    
    
    455,819
    
    
    
    395,124Deferred income taxes
    
    
    83,085
    
    
    
    90,600Prepaid expenses
    
    
    8,407
    
    
    
    6,280Assets held for sale
    
    
    5,230
    
    
    
    9,520Other current assets
    
    
    85,616
    
    
    
    27,131Total current assets
    
    
    1,678,660
    
    
    
    1,273,053Investment in and advances to unconsolidated entities, joint ventures and limited partnerships
    
    
    52,048
    
    
    
    34,871Property and equipment:Transportation equipment
    
    
    15,882
    
    
    
    11,351Furniture, fixtures and software
    
    
    99,945
    
    
    
    89,771Machinery and equipment
    
    
    138,468
    
    
    
    125,790Buildings and improvements
    
    
    63,456
    
    
    
    51,542Assets acquired under capital leases
    
    
    8,382
    
    
    
    5,731Land
    
    
    6,612
    
    
    
    5,779Construction in progress
    
    
    8,906
    
    
    
    9,623Total property, plant, and equipment
    
    
    341,651
    
    
    
    299,587Less: accumulated depreciation
    
    
    (166,220
    )
    
    
    (142,051
    )Net property, plant, and equipment
    
    
    175,431
    
    
    
    157,536Goodwill
    
    
    506,592
    
    
    
    506,453Other assets
    
    
    116,403
    
    
    
    116,975$
    2,529,134
    
    
    $
    2,088,888LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    483,002
    
    
    $
    326,976Accrued liabilities
    
    
    211,162
    
    
    
    163,651Advanced billings and billings in excess of costs and estimated earnings on uncompleted
contracts
    
    
    316,674
    
    
    
    274,198Contract liability adjustments
    
    
    3,361
    
    
    
    6,936Deferred revenue  prebilled
    
    
    14,772
    
    
    
    8,357Current maturities of long-term debt
    
    
    4,351
    
    
    
    4,135Short-term revolving lines of credit
    
    
    5,526
    
    
    
    6,367Current portion of obligations under capital leases
    
    
    1,811
    
    
    
    1,854Total current liabilities
    
    
    1,040,659
    
    
    
    792,474Long-term revolving line of credit
    
    
    145,517
    
    
    
    40,850Long-term debt, less current maturities
    
    
    24,584
    
    
    
    21,718Obligations under capital leases, less current portion
    
    
    3,433
    
    
    
    2,973Deferred income taxes
    
    
    18,664
    
    
    
    21,518Other liabilities
    
    
    39,662
    
    
    
    46,962Minority interest
    
    
    13,408
    
    
    
    15,240Shareholders equity:Preferred stock, no par value, 20,000,000 shares authorized; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, no par value, 200,000,000 shares authorized; 85,866,727 and 84,289,004 shares
issued, respectively; and 80,475,928 and 78,957,349 shares outstanding, respectively
    
    
    1,074,106
    
    
    
    1,044,903Retained earnings
    
    
    295,962
    
    
    
    245,112Accumulated other comprehensive loss
    
    
    (25,363
    )
    
    
    (31,752
    )Unearned stock-based compensation
    
    
    
    
    
    
    (11,197
    )Treasury stock 5,390,799 and 5,331,655 shares, respectively
    
    
    (101,498
    )
    
    
    (99,913
    )Total shareholders equity
    
    
    1,243,207
    
    
    
    1,147,153$
    2,529,134
    
    
    $
    2,088,888
  68




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THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended August 31, 2006, 2005 and 2004
(In thousands, except per share amounts)
 2006
    
    
    2005 (Restated)
    
    
    2004 (Restated)Revenues
    
    $
    4,775,615
    
    
    $
    3,262,328
    
    
    $
    3,014,709Cost of revenues
    
    
    4,446,143
    
    
    
    2,969,658
    
    
    
    2,794,021Gross profit
    
    
    329,472
    
    
    
    292,670
    
    
    
    220,688General and administrative expenses
    
    
    226,244
    
    
    
    190,252
    
    
    
    217,214Operating income
    
    
    103,228
    
    
    
    102,418
    
    
    
    3,474Interest expense
    
    
    (19,059
    )
    
    
    (29,225
    )
    
    
    (38,190
    )Interest income
    
    
    5,877
    
    
    
    5,571
    
    
    
    1,718Loss on retirement of debt
    
    
    
    
    
    
    (47,772
    )
    
    
    (1,325
    )Foreign currency transaction gains (losses), net
    
    
    (961
    )
    
    
    919
    
    
    
    (2,702
    )Other income (expense), net
    
    
    (1,380
    )
    
    
    6,870
    
    
    
    1,523(15,523
    )
    
    
    (63,637
    )
    
    
    (38,976
    )Income (loss) before income taxes, minority interest, earnings
(losses) from unconsolidated entities and income (loss) from
discontinued operations
    
    
    87,705
    
    
    
    38,781
    
    
    
    (35,502
    )Provision (benefit) for income taxes
    
    
    20,540
    
    
    
    17,784
    
    
    
    (14,599
    )Income (loss) before minority interest, earnings (losses) from
unconsolidated entities and income (loss) from discontinued
operations
    
    
    67,165
    
    
    
    20,997
    
    
    
    (20,903
    )Minority interest
    
    
    (15,680
    )
    
    
    (7,243
    )
    
    
    (9,162
    )Earnings (losses) from unconsolidated entities, net of taxes
    
    
    1,513
    
    
    
    3,809
    
    
    
    2,578Income (loss) from continuing operations
    
    
    52,998
    
    
    
    17,563
    
    
    
    (27,487
    )Income (loss) from discontinued operations, net of taxes:Income
(loss) from discontinued operations
    
    
    (1,144
    )
    
    
    (1,943
    )
    
    
    (2,593
    )Gain (impairment) of discontinued operations
    
    
    (1,004
    )
    
    
    356
    
    
    
    (2,995
    )Income (loss) from discontinued operations, net of taxes
    
    
    (2,148
    )
    
    
    (1,587
    )
    
    
    (5,588
    )Net income (loss)
    
    $
    50,850
    
    
    $
    15,976
    
    
    $
    (33,075
    )Net income (loss) per common share:Basic:Income (loss) from continuing operations
    
    $
    0.68
    
    
    $
    0.25
    
    
    $
    (0.47
    )Income (loss) from discontinued operations, net of taxes
    
    
    (0.03
    )
    
    
    (0.02
    )
    
    
    (0.10
    )Net income (loss)
    
    $
    0.65
    
    
    $
    0.23
    
    
    $
    (0.57
    )Diluted:Income (loss) from continuing operations
    
    $
    0.66
    
    
    $
    0.25
    
    
    $
    (0.47
    )Income (loss) from discontinued operations, net of taxes
    
    
    (0.03
    )
    
    
    (0.02
    )
    
    
    (0.10
    )Net income (loss)
    
    $
    0.63
    
    
    $
    0.23
    
    
    $
    (0.57
    )Weighted average shares outstanding:Basic
    
    
    78,791
    
    
    
    68,673
    
    
    
    58,005Diluted:Stock options
    
    
    1,168
    
    
    
    921
    
    
    
    LYONs Convertible Debt
    
    
    10
    
    
    
    
    
    
    
    Restricted stock
    
    
    320
    
    
    
    198
    
    
    
    Total
    
    
    80,289
    
    
    
    69,792
    
    
    
    58,005
  69




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THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Dollars in thousands, except share amounts)
 AccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    Treasury
    
    
    Unearned
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    Treasury
    
    
    Common
    
    
    Stock
    
    
    Stock-Based
    
    
    Comprehensive
    
    
    Retained
    
    
    Shareholders'Shares
    
    
    Stock Shares
    
    
    Stock Amount
    
    
    Amount
    
    
    Compensation
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance, August 31,
2003 (Restated)
    
    
    43,121,871
    
    
    
    (5,331,655
    )
    
    $
    514,348
    
    
    $
    (99,913
    )
    
    $
    (216
    )
    
    $
    (20,540
    )
    
    $
    262,211
    
    
    $
    655,890Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,075
    )
    
    
    (33,075
    )Other
comprehensive
income:Foreign
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,938
    
    
    
    
    
    
    
    2,938Change in
unrealized net
gain (losses)
on hedging
activities,
net of tax
expense of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    222Reduction in
pension
liability, not
yet recognized
in net
periodic
pension
expense, net
of tax of $936
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,223
    
    
    
    
    
    
    
    2,223Comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,692
    )Shares issued in
public equity
offerings
    
    
    25,346,000
    
    
    
    
    
    
    
    245,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245,966Exercise of options
    
    
    38,750
    
    
    
    
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    191Tax benefit on
exercise of options
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49Stock-based
compensation
    
    
    594,872
    
    
    
    
    
    
    
    7,723
    
    
    
    
    
    
    
    (7,723
    )
    
    
    
    
    
    
    
    
    
    
    Stock option
compensation (1)
    
    
    
    
    
    
    
    
    
    
    3,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,800Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,867
    
    
    
    
    
    
    
    
    
    
    
    1,867Balance, August 31,
2004 (Restated)
    
    
    69,101,493
    
    
    
    (5,331,655
    )
    
    $
    772,077
    
    
    $
    (99,913
    )
    
    $
    (6,072
    )
    
    $
    (15,157
    )
    
    $
    229,136
    
    
    $
    880,071Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,976
    
    
    
    15,976Other comprehensive
income:Foreign
currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,872
    )
    
    
    
    
    
    
    (3,872
    )Change in
unrealized net
gains (losses)
on hedging
activities,
net of tax
expense of $5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210
    )
    
    
    
    
    
    
    (210
    )Additional
pension
liability, not
yet recognized
in net
periodic
pension
expense, net
of tax of
$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,513
    )
    
    
    
    
    
    
    (12,513
    )Comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (619
    )Shares issued in
public equity
offerings
    
    
    14,067,500
    
    
    
    
    
    
    
    260,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260,270Exercise of options
    
    
    378,715
    
    
    
    
    
    
    
    3,248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,248Tax benefit on
exercise of options
    
    
    
    
    
    
    
    
    
    
    563
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    563Stock-based
compensation
    
    
    741,296
    
    
    
    
    
    
    
    9,445
    
    
    
    
    
    
    
    (9,134
    )
    
    
    
    
    
    
    
    
    
    
    311Stock option
compensation (1)
    
    
    
    
    
    
    
    
    
    
    (700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700
    )Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,009
    
    
    
    
    
    
    
    
    
    
    
    4,009Balance, August 31,
2005 (Restated)
    
    
    84,289,004
    
    
    
    (5,331,655
    )
    
    $
    1,044,903
    
    
    $
    (99,913
    )
    
    $
    (11,197
    )
    
    $
    (31,752
    )
    
    $
    245,112
    
    
    $
    1,147,153Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,850
    
    
    
    50,850Other comprehensive
income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (495
    )
    
    
    
    
    
    
    (495
    )Change in
unrealized net
gains (losses) on
hedging activities,
net of tax expense
of $5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Decrease in pension
liability, not yet
recognized in net
periodic pension
expense, net of tax
of $5,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,891
    
    
    
    
    
    
    
    6,891Comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,239Exercise of options
    
    
    1,168,023
    
    
    
    
    
    
    
    18,675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,675Tax benefit on
exercise of options
    
    
    
    
    
    
    
    
    
    
    4,583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,583Stock-based
compensation
    
    
    409,700
    
    
    
    (59,144
    )
    
    
    24,463
    
    
    
    (1,585
    )
    
    
    (7,321
    )
    
    
    
    
    
    
    
    
    
    
    15,557Reclassification of unearned
compensation due to
the adoption of FAS
123R
    
    
    
    
    
    
    
    
    
    
    (18,518
    )
    
    
    
    
    
    
    18,518
    
    
    
    
    
    
    
    
    
    
    
    Balance, August 31,
2006
    
    
    85,866,727
    
    
    
    (5,390,799
    )
    
    $
    1,074,106
    
    
    $
    (101,498
    )
    
    $
    
    
    
    $
    (25,363
    )
    
    $
    295,962
    
    
    $
    1,243,207
 
 (1)
    
    Effect of re-measuring a stock option grant, see Note 25 of our consolidated financial
statements.  70




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THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended August 31, 2006, 2005 and 2004
(Dollars in thousands)
 2006
    
    
    2005 (Restated)
    
    
    2004 (Restated)Cash flows from operating activities:Net income (loss)
    
    $
    50,850
    
    
    $
    15,976
    
    
    $
    (33,075
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    33,397
    
    
    
    31,183
    
    
    
    60,002Impairment of discontinued operations
    
    
    1,004
    
    
    
    
    
    
    
    2,995Provision (benefit) for deferred income taxes
    
    
    3,610
    
    
    
    11,573
    
    
    
    (12,969
    )Stock-based compensation expense
    
    
    18,277
    
    
    
    4,321
    
    
    
    5,938Accretion of interest on discounted long-term debt
    
    
    40
    
    
    
    264
    
    
    
    2,136Amortization of deferred debt issue costs
    
    
    1,084
    
    
    
    3,448
    
    
    
    4,509Amortization of contract adjustments
    
    
    (3,575
    )
    
    
    (11,098
    )
    
    
    (15,204
    )Provision for uncollectible accounts receivable
    
    
    10,285
    
    
    
    2,655
    
    
    
    8,368(Earnings) losses from unconsolidated entities, net of taxes
    
    
    (1,513
    )
    
    
    (3,809
    )
    
    
    (2,578
    )Impairment of assets
    
    
    5,130
    
    
    
    
    
    
    
    Distributions from unconsolidated entities
    
    
    1,956
    
    
    
    
    
    
    
    Foreign currency transaction (gains) losses, net
    
    
    961
    
    
    
    (919
    )
    
    
    2,702Loss on retirement of debt
    
    
    
    
    
    
    47,772
    
    
    
    1,325Write-off of claims receivable
    
    
    48,155
    
    
    
    
    
    
    
    Minority interest
    
    
    14,901
    
    
    
    3,915
    
    
    
    5,455Other
    
    
    (779
    )
    
    
    (2,555
    )
    
    
    (1,490
    )Changes in assets and liabilities, net of effects of acquisitions and
consolidation of variable interest entities:(Increase) decrease in receivables
    
    
    (318,063
    )
    
    
    30,067
    
    
    
    (9,007
    )(Increase) decrease in costs and estimated earnings in excess of
billings on uncompleted contracts, including claims
    
    
    (96,425
    )
    
    
    (20,523
    )
    
    
    (147,555
    )(Increase) decrease in inventories
    
    
    (4,036
    )
    
    
    (17,616
    )
    
    
    12,480(Increase) decrease in other current assets
    
    
    (40,172
    )
    
    
    11,697
    
    
    
    3,965(Increase) decrease in prepaid expenses
    
    
    (2,452
    )
    
    
    4,292
    
    
    
    14,781(Increase) decrease in other assets
    
    
    (18,913
    )
    
    
    (8,509
    )
    
    
    (14,019
    )Increase (decrease) in accounts payable
    
    
    129,064
    
    
    
    4,206
    
    
    
    (5,600
    )Increase (decrease) in accrued liabilities
    
    
    46,925
    
    
    
    3,842
    
    
    
    6,890Increase (decrease) in advanced billings and billings in excess of
costs and estimated earnings on uncompleted contracts
    
    
    39,742
    
    
    
    (82,049
    )
    
    
    96,019Increase
(decrease) in deferred revenue-prebilled
    
    
    5,293
    
    
    
    2,359
    
    
    
    (5,332
    )Increase (decrease) in other long-term liabilities
    
    
    174
    
    
    
    36,736
    
    
    
    4,428Net cash provided by (used in) operating activities
    
    
    (75,080
    )
    
    
    67,228
    
    
    
    (14,836
    )Cash flows from investing activities:Proceeds from sale of businesses, net of cash surrendered
    
    
    1,242
    
    
    
    14,108
    
    
    
    Purchases of businesses, net of cash received
    
    
    (720
    )
    
    
    
    
    
    
    (23,847
    )Purchase of property and equipment
    
    
    (48,887
    )
    
    
    (30,201
    )
    
    
    (31,507
    )Investment in and advances to unconsolidated entities and joint
ventures
    
    
    (19,244
    )
    
    
    (13,335
    )
    
    
    (8,426
    )Distributions from unconsolidated entities
    
    
    3,785
    
    
    
    14,930
    
    
    
    7,538Acquisition costs
    
    
    (2,188
    )
    
    
    
    
    
    
    Deposits in escrowed cash for repurchase of LYONs
    
    
    
    
    
    
    
    
    
    
    (23,229
    )Withdrawal
from escrowed cash for repurchase of LYONs
    
    
    
    
    
    
    
    
    
    
    23,229Cash received from restricted and escrowed cash
    
    
    193,722
    
    
    
    212,474
    
    
    
    168,196Cash deposited into restricted and escrowed cash
    
    
    (65,230
    )
    
    
    (327,800
    )
    
    
    (166,734
    )Proceeds from sale of property and equipment
    
    
    4,791
    
    
    
    3,362
    
    
    
    2,588Proceeds from sale of assets held for sale
    
    
    
    
    
    
    
    
    
    
    5,662Proceeds from the sale of investment in an unconsolidated entity
    
    
    
    
    
    
    
    
    
    
    9,000Maturities of marketable securities, held to maturity
    
    
    
    
    
    
    
    
    
    
    5,096Net cash provided by (used in) investing activities
    
    
    67,271
    
    
    
    (126,462
    )
    
    
    (32,434
    )Cash flows from financing activities:Repayment of debt and capital leases
    
    
    (4,878
    )
    
    
    (279,828
    )
    
    
    (276,904
    )Payments for financed insurance premiums
    
    
    (9,765
    )
    
    
    (10,582
    )
    
    
    (8,892
    )Return of capital to investment partner
    
    
    (12,210
    )
    
    
    
    
    
    
    Proceeds from issuance of debt
    
    
    5,305
    
    
    
    3,726
    
    
    
    1,724Deferred credit costs
    
    
    (2,072
    )
    
    
    (4,886
    )
    
    
    (2,551
    )Issuance of common stock
    
    
    18,664
    
    
    
    263,849
    
    
    
    246,157Tax benefits from stock based compensation
    
    
    2,433
    
    
    
    
    
    
    
    Proceeds from revolving credit agreements
    
    
    1,361,055
    
    
    
    463,551
    
    
    
    1,018Repayments of revolving credit agreements
    
    
    (1,257,226
    )
    
    
    (422,317
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    101,306
    
    
    
    13,513
    
    
    
    (39,448
    )Cash from variable interest entities
    
    
    2,290
    
    
    
    1,343
    
    
    
    879Effects of foreign exchange rate changes on cash
    
    
    2,271
    
    
    
    (1,194
    )
    
    
    (1,519
    )Net increase (decrease) in cash and cash equivalents
    
    
    98,058
    
    
    
    (45,572
    )
    
    
    (87,358
    )Cash and
cash equivalents  beginning of year
    
    
    56,779
    
    
    
    102,351
    
    
    
    189,709Cash and
cash equivalents  end of year
    
    $
    154,837
    
    
    $
    56,779
    
    
    $
    102,351Supplemental disclosures:Cash payments for:Interest (net of capitalized interest)
    
    $
    19,404
    
    
    $
    40,206
    
    
    $
    31,325Income taxes
    
    $
    4,035
    
    
    $
    5,133
    
    
    $
    1,220Noncash investing and financing activities:Issuance of restricted stock
    
    $
    15,908
    
    
    $
    9,445
    
    
    $
    7,723Financed insurance premiums
    
    $
    10,068
    
    
    $
    11,034
    
    
    $
    6,266Transfer of acquired accounts receivables to seller  EDS acquisition
    
    $
    
    
    
    $
    
    
    
    $
    4,000Receivable for working capital adjustment  Badger Acquisition
    
    $
    
    
    
    $
    
    
    
    $
    1,800Property and equipment acquired through issuance of debt
    
    $
    2,716
    
    
    $
    
    
    
    $
    603
  71




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##### Table of Contents



THE SHAW GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Principles of Consolidation
    
    
    as a result of the correction of an error in the accounting for share-based
compensation expense relating to certain stock options awarded in 2000, that resulted in
additional net aggregate share-based compensation expense for fiscal years from 2001
through 2005 of approximately $21.3 million ($16.2 million net of tax); and
    
    as a result of the correction of an error in the accounting for periodic pension
service cost in relation to the minimum liability for the unfunded accumulated benefit
obligation of one of our defined benefit plans, that resulted in an aggregate amount of
periodic pension service cost and net income for fiscal years from 2003 through 2005 is
approximately $2.5 million.
   
    
    the August 31, 2005 balance sheet reflects an increase of $13.1 million in cash and cash
equivalents, $9.5 million in accrued liabilities and $3.6 million in accounts payable to
reflect outstanding checks on certain bank accounts in a manner consistent with the August
31, 2006 balance sheet presentation; and
    
    the consolidated statements of operations for the years ended August 31, 2005 and 2004
reflect a $3.3 million and
$3.6 million, respectively, reduction in the provision (benefit)
for income tax expenses and an increase in minority interest of partnership, L.L.C.s and
other non-taxable entities and reflecting minority interest of those non-taxable entities
net of taxes. This presentation change did not have any net impact on our previously
reported net income.
 72




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##### Table of Contents



THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended August 31, 2006, 2005 and 2004
(Dollars in thousands)
 Fiscal Year-End
  Use of Estimates
  
    
    contract revenues, costs and profits and the application of percentage-of-completion
(POC) method of accounting;
    
    provisions for uncollectible receivables and customer claims and recoveries of costs from
subcontractors, vendors and others;
    
    recoverability of inventories and application of lower of cost or market accounting;
    
    provisions for income taxes and related valuation allowances;
    
    recoverability of goodwill;
    
    recoverability of other intangibles and long-lived assets and related estimated lives;
    
    valuation of assets acquired and liabilities assumed in connection with business combinations;
    
    valuation of defined benefit pension plans;
    
    accruals for estimated liabilities, including litigation and insurance accruals;
    
    consolidation of variable interest entities; and
    
    valuation of stock-based compensation.
  73




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##### Table of Contents



Nature of Operations, Operating Cycle and Types of Contracts
     
    
    Firm fixed-price contract  A contract in which the price is not subject to adjustment
by reason of our cost experience or our performance under the contract. However, the price
may be adjusted for changes in scope of work, new or changing laws, regulations or other
items.
    
    Maximum price contract  A contract which provides at the outset for an initial target
cost, an initial target profit, and a price ceiling. The price is subject to adjustment by
reason of our cost experiences but generally, the adjustment would not exceed the price
ceiling established in the contract. In addition, these contracts usually include
provisions whereby we share costs savings with our clients.
    
    Unit-price contract  A contract under which we are paid a specified amount for every
unit of work performed.
  
    
    Cost-plus contract  A contract under which we are reimbursed for allowable or otherwise
defined costs incurred plus a fee or mark-up. In addition, our costs are generally subject
to review by our customers and such reviews could result in costs being disputed as not
reimbursable under the terms of the contract.
 74




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##### Table of Contents




    
    Target-price contract  A contract under which we are reimbursed for costs plus a fee
consisting of two parts: (i) a fixed amount which does not vary with performance and (ii) an
award amount based on the cost-effectiveness of the project. Target-price contracts also
generally provide for sharing of costs in excess of or below the target. In some contracts,
we may agree to share cost overruns in excess of our fee which could result in a loss on the
project.
  Cash and Cash Equivalents
  Property and Equipment
   Transportation equipment
    
    5-15 YearsFurniture, fixtures and software
    
    3-15 YearsMachinery and equipment
    
    3-18 YearsBuildings and improvements
    
    8-40 Years
   Engineering,
Procurement and Construction (EPC) Contract and Environmental and Infrastructure Revenue
Recognition and Profit and Loss Estimates Including Claims
   75




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##### Table of Contents



Other Revenue Recognition and Profit and Loss Estimates
    76




---



##### Table of Contents



Cost Estimates
  General and Administrative Expenses
  Financial Instruments, Forward Contracts  Non-Trading Activities
   Other Comprehensive Income
   77




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##### Table of Contents



Self Insurance
  Debt Issuance Costs
  Stock Based Compensation
  Note 2  Public Capital Stock Transactions
  Date of Common Stock Issuance
    
    April 2005Number of shares issued
    
    
    14,068Price per share
    
    $
    19.50Net proceeds
    
    $
    260,270Transaction costs
    
    $
    14,063
  78




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##### Table of Contents



Note 3  Restricted and Escrowed Cash
  
    
    $40.2 million and $170.8 million, as of August 31, 2006 and 2005, respectively, in
connection with the EPC project to build a combined-cycle energy plant in Astoria, New
York, which we have joint authority with another party to the contract. All payments
received from the project owner are deposited directly into a separate account (the Project
Account) to be used for certain permitted withdrawals. Permitted withdrawals, as defined by
the contract, include the payment of third-party vendor costs, the guaranty fee, labor
costs and out-of-pocket expenses incurred by us on a monthly basis, as well as a percentage
of the expected total gross profit on the EPC project to be determined on a monthly basis
subject to limitations under the contract. The Project Account is subject to a first lien
security agreement between a third-party, who has guaranteed our performance on the project
(the Guarantor), and us where the Guarantor has upon certain triggering events, sole
control over the Project Account. Any withdrawals from this Project Account, excluding
permitted withdrawals, require the approval of both the Guarantor and us. The project was
completed in calendar 2006. We are involved in a number of claims and disputes related to
this project which has delayed release of amounts from this account. It is uncertain when
these disputes will be resolved.
    
    $1.1 million as of August 31, 2006 and 2005, related to deposits designated to fund
remediation costs associated with a sold property; and restricted cash is invested in
short-term, low-risk investments and investment income is remitted to us on a periodic
basis.
 Note 4  Acquisitions
     Energy Delivery Services, Inc.
  79




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##### Table of Contents



Note 5  Inventories, Accounts Receivable and Concentration of Credit Risk
 Inventories
   August 31,2006
    
    
    2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    FIFO
    
    
    Total
    
    
    Average
    
    
    FIFO
    
    
    TotalFinished goods
    
    $
    49,152
    
    
    $
    
    
    
    $
    49,152
    
    
    $
    33,553
    
    
    $
    
    
    
    $
    33,553Raw materials
    
    
    891
    
    
    
    42,830
    
    
    
    43,721
    
    
    
    2,431
    
    
    
    49,490
    
    
    
    51,921Work in process
    
    
    328
    
    
    
    8,136
    
    
    
    8,464
    
    
    
    1,579
    
    
    
    10,631
    
    
    
    12,210$
    50,371
    
    
    $
    50,966
    
    
    $
    101,337
    
    
    $
    37,563
    
    
    $
    60,121
    
    
    $
    97,684
 Accounts Receivable and Credit Risk
   August 31,2006
    
    
    2005Trade accounts receivable, net
    
    $
    596,930
    
    
    $
    303,412Unbilled accounts receivable
    
    
    28,990
    
    
    
    26,793Retainage
    
    
    115,000
    
    
    
    87,830Total accounts receivable, including retainage, net
    
    $
    740,920
    
    
    $
    418,035
 Concentration of Credit  Government Contracting
  At August 31,2006
    
    
    2005Amounts due from U.S. Government
    
    $
    252.4
    
    
    $
    70.1
 For the Year EndedAugust 31,2006
    
    
    2005
    
    
    2004Revenues
    
    $
    1,931.8
    
    
    $
    1,014.8
    
    
    $
    1,170.0
  80




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##### Table of Contents



Allowance for Doubtful Accounts
   2006
    
    
    2005Beginning balance, September 1
    
    $
    17,900
    
    
    $
    29,511Provision
    
    
    10,285
    
    
    
    2,655Write offs
    
    
    (7,023
    )
    
    
    (11,123
    )Fair value adjustments and reclassifications related to acquisitions and dispositions
    
    
    
    
    
    
    (3,365
    )Other
    
    
    (683
    )
    
    
    222Ending balance, August 31
    
    $
    20,479
    
    
    $
    17,900
 Unbilled Receivables, Retainage Receivables, Advance Billings and Disputed Accounts Receivable
   81




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Note 6  Other Assets and Other Liabilities
 Other Assets
  At August 31,2006
    
    
    2005Power generation plant equipment and materials
    
    $
    10,746
    
    
    $
    15,303LandBank assets
    
    
    32,880
    
    
    
    33,111Intangible assets, other than contract (asset) adjustments, net
    
    
    31,108
    
    
    
    34,023Employee receivables
    
    
    102
    
    
    
    144Notes receivable
    
    
    9,109
    
    
    
    12,792Deposits
    
    
    2,902
    
    
    
    2,642Real estate option
    
    
    12,183
    
    
    
    12,183Deferred acquisition costs
    
    
    2,553
    
    
    
    3,706Deferred financing fees
    
    
    4,693
    
    
    
    Prepaid Bond
    
    
    6,833
    
    
    
    Other
    
    
    3,294
    
    
    
    3,071Total other assets
    
    $
    116,403
    
    
    $
    116,975
       82




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##### Table of Contents



August 31,2006
    
    
    2005Accounts receivable from unconsolidated entities
    
    $
    1,230
    
    
    $
    Other receivables
    
    
    15,999
    
    
    
    5,025Notes receivable
    
    
    45,177
    
    
    
    363Other
    
    
    23,210
    
    
    
    21,743$
    85,616
    
    
    $
    27,131
  Other Liabilities
  At August 31,2006
    
    
    2005 (Restated)Accumulated benefit obligations
    
    $
    22,586
    
    
    $
    29,963Deferred rental expense and lease obligations
    
    
    3,839
    
    
    
    3,237LandBank environmental remediation liabilities
    
    
    8,752
    
    
    
    9,738Other
    
    
    4,485
    
    
    
    4,024Total other liabilities
    
    $
    39,662
    
    
    $
    46,962
    Note 7  Variable Interest Entities, Unconsolidated Entities, Joint Ventures and Limited
Partnerships
  83




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Joint Ventures
  Variable Interest Entities
  At August 31,2006
    
    
    2005Primary Beneficiary:Total assets
    
    $
    109,719
    
    
    $
    96,150Total liabilities
    
    
    101,952
    
    
    
    48,591Not-primary Beneficiary:Total assets
    
    $
    1,016,283
    
    
    $
    897,380Total liabilities
    
    
    862,184
    
    
    
    814,023
  At August 31,2006
    
    
    2005Assets:Cash
    
    $
    16,997
    
    
    $
    20,413Accounts receivable
    
    
    36,645
    
    
    
    14,407Cost and estimated earnings in excess of billings on uncompleted contracts
    
    
    20,122
    
    
    
    7,329Inventories
    
    
    4,714
    
    
    
    4,787Property and equipment
    
    
    24,106
    
    
    
    24,567Other assets
    
    
    4,256
    
    
    
    22,736Total assets
    
    $
    106,840
    
    
    $
    94,239Liabilities:Accounts payables and accrued liabilities
    
    $
    45,588
    
    
    $
    21,432Billings in excess of cost and estimated earnings
    
    
    6,055
    
    
    
    6,088Short-term line of credit
    
    
    6,770
    
    
    
    7,602Long-term debt
    
    
    10,975
    
    
    
    6,672Other liabilities
    
    
    4,520
    
    
    
    2,071Total liabilities
    
    $
    73,908
    
    
    $
    43,865Minority interest
    
    $
    10,504
    
    
    $
    15,242
 For the Year Ended August 31,2006
    
    
    2005Revenues
    
    $
    149,806
    
    
    $
    24,510Expenses
    
    
    143,840
    
    
    
    19,441Net income
    
    $
    5,966
    
    
    $
    5,069
 84




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##### Table of Contents



Consolidated VIEs
 
    
    In November 1993, Shaw-Nass Middle East, W.L.L. (Shaw-Nass) was created to support the
fabrication and distribution of pipe in the Middle East and is located in Bahrain. We
acquired a 49% equity interest in the joint venture, and have made advances to the entity
and have issued interest bearing loans to fund working capital and to finance certain
equipment purchases. This entity which is included in our Fabrication & Manufacturing
(F&M) segment had total assets of approximately $28.7 million and total liabilities of
$20.0 million as of August 31, 2006. The creditors of Shaw-Nass, which are currently
limited to vendors and suppliers, do not have recourse to our general credit. Our maximum
exposure to loss is limited to our equity interest and outstanding advances and loans to
Shaw-Nass, which totaled $7.1 million as of August 31, 2006.
    
    In April 2003, our subsidiary, Badger Technologies Holdings L.L.C. contributed the
right to license certain technology to acquire a 50% equity interest in a joint venture,
Badger Licensing LLC. This entity had total assets and liabilities of $21.7 million and
$13.5 million as of August 31, 2006, respectively and is included in our E&C segment. The
creditors of the entity, which are currently limited to vendors and suppliers, do not have
recourse to our general credit. Our exposure to losses is limited to our equity interest of
$4.1 million as of August 31, 2006 and certain costs incurred on behalf of the joint
ventures operations we have agreed to absorb, estimated to be approximately $4 million
annually.
    
    In August 2004, Liquid Solutions LLC was formed to provide solutions for the management
and treatment of wastewater. We have a 50% equity interest in this entity. This entity had
total assets and liabilities of $9.4 million and $18.9 million, respectively as of August
31, 2006 reflected in our E&I segment. Our exposure to losses consists of our equity
interest and note receivable with accrued interest totaling $18.4 million as of August 31,
2006.
 Unconsolidated VIEs (Equity Method Accounting)
 
    
    In February 2005, we contributed cash of $2.8 million to American Eagle Northwest, LLC
for a 50% equity interest. This entity was established to undertake the privatization of
military family housing for U.S. Navy personnel and their families under a design, build
and rental housing contract in the State of Washington. American Eagle Northwest, LLC has a
minority interest in Pacific Northwest Communities, LLC (PNC) of which the United States
Navy has a majority interest. Under the arrangement, American Eagle Northwest, LLC is
obligated to absorb the majority of the expected losses from PNCs contract with the United
States Navy; however, we are not the primary beneficiary of American Eagle Northwest, LLC.
We also, along with our American Eagle Northwest, LLC equity partner, have guaranteed
certain items of the performance of the entity under the contract with the United States
Navy. As of August 31, 2006, our maximum exposure to loss consisted of our equity
investment of $4.5 million and the exposure related to the guarantee (see Note 14 of our
consolidated financial statements). In February 2005, American Eagle Northwest, LLC
successfully obtained financing of approximately $226.0 million through a private placement
bond offering from third-party lenders. The bonds are secured by first liens on the rental
properties without recourse to the general credit of the equity partners. As of August 31,
2006, this entity had total assets and liabilities of approximately $278.7 million and
approximately $238.1 million, respectively.
    
    In March 2005, we issued a guarantee to provide an equity contribution of $4.0 million
to American Eagle Communities Midwest, LLC for a 50% equity interest. No liability was
recorded related to this guarantee as of August 31, 2006. This entity was established to
undertake the privatization of military family housing for United States Army personnel and
their families under a design, build and rental housing contract in the State of Missouri.
American Eagle Communities Midwest, LLC has a minority equity interest in Leonard Wood
Family Communities, LLC (LWFC) of which the United States Army has a majority equity
interest. Under the arrangement, American Eagle Communities Midwest, LLC is obligated to
absorb the majority of the expected losses from LWFCs contract with the United States
Army; however, we are not the primary beneficiary of American Eagle Communities Midwest,
LLC. As of August 31, 2006, our maximum exposure to loss consisted of our guarantee of our
equity contribution to be made at a future date. In May 2005, American Eagle Communities
Midwest, LLC successfully obtained financing of approximately $212.9 million through a
private placement bond offering from third-party lenders. The bonds are secured by first
liens on the rental properties without recourse to the general credit of the equity
partners. As of August 31,
2006, this entity had total assets and liabilities of approximately $258.9 million and
approximately $218.8 million, respectively.
 85




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##### Table of Contents




    
    In June 2003, we contributed $3.2 million of cash to PFH Management, LLC for a 30%
equity interest. This entity was established to undertake the privatization of military
family housing for Air Force personnel and their families under a design, build, and rental
housing contract at Patrick Air Force Base, Florida. PFH Management, LLC has an 80% equity
interest in Patrick Family Housing, LLC and is the general managing member for Patrick
Family Housing, LLC. In April 2005, Patrick Family Housing, LLC, successfully obtained
financing of approximately $75.4 million through a private placement bond offering from
third-party lenders. The bonds are secured by first liens on the rental properties without
recourse to the general credit of the equity partners. As of August 31, 2006, our maximum
exposure to loss consisted of our equity interest of approximately $4.8 million. As of
August 31, 2006, this entity had total assets and liabilities of approximately $109.3
million and approximately $84.1 million, respectively.
    
    In October 2004, we contributed cash of $5.0 million to Hanscom Family Housing, LLC for
a 50% equity interest. This entity was established to undertake the privatization of
military family housing for Air Force personnel and their families under a design, build
and rental housing contract twenty miles northwest of Boston, Massachusetts. Under the
arrangement, Hanscom Family Housing, LLC is obligated to absorb the majority of the
expected losses from the project; however, we are not the primary beneficiary. As of August
31, 2006, our maximum exposure to loss consisted of our equity
investment of $6.9 million.
In October 2004, Hanscom Family Housing, LLC successfully obtained financing of
approximately $168.2 million through a private placement bond offering from third-party
lenders. The bonds are secured by first liens on the rental properties without recourse to
the general credit of the partners. As of August 31, 2006, this entity had total assets and
liabilities of $194.3 million and $174.5 million, respectively.
    
    In August 2004, we contributed cash of $3.8 million to Little Rock Family Housing, LLC
for a 50% equity interest. This entity was established to undertake the privatization of
military family housing for Air Force personnel and their families under a design, build
and rental housing contract in Little Rock, Arkansas. Under the arrangement, Little Rock
Family Housing, L.L.C. is obligated to absorb the majority of the expected losses from the
project; however, we are not the primary beneficiary. As of August 31, 2006, our maximum
exposure to loss consisted of our equity interest of $4.7 million. In October 2004, Little
Rock Family Housing, L.L.C. successfully obtained financing of approximately $65.3 million
through a private placement bond offering from third-party lenders. The bonds are secured
by first liens on the rental properties without recourse to the general credit of the
partners. As of August 31, 2006, this entity had total assets and liabilities of
approximately $84.4 million and $70.8 million, respectively.
    
    In May 2006 we invested $2.0 million for a one-third equity interest in TerraVista
Lakes, LLC, an entity formed to own, develop and sell real estate. As of August 31, 2006,
this entity had total assets and liabilities of approximately $29.0 million and $23.0
million, respectively.
    
    During December 2005, the KB Home/Shaw Louisiana, LLC joint venture was formed and is
owned 50% by Shaw and 50% by KB Home to acquire, develop and sell residential real estate.
As of August 31, 2006, this entity had total assets and liabilities of approximately $19.4
million and $2.0 million, respectively.
   86




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Unconsolidated Entities (including VIEs), Joint Ventures and Limited Partnerships
  At August 31,2006
    
    
    2005Current assets
    
    $
    149,175
    
    
    $
    304,151Current liabilities
    
    
    110,649
    
    
    
    83,028Working capital
    
    $
    38,526
    
    
    $
    221,123Noncurrent assets
    
    $
    926,735
    
    
    $
    703,199Noncurrent liabilities
    
    $
    777,073
    
    
    $
    830,873
 For the Year EndedAugust 31,2006
    
    
    2005
    
    
    2004Revenues
    
    $
    392,913
    
    
    $
    360,495
    
    
    $
    297,399Gross profit
    
    $
    55,089
    
    
    $
    50,279
    
    
    $
    16,148Net income
    
    $
    28,435
    
    
    $
    30,843
    
    
    $
    3,503
    At August 31,2006
    
    
    2005Privatization entities
    
    $
    23,290
    
    
    $
    19,441Other
entitiesMississippi
Space Services LLC
    
    
    6,006
    
    
    
    4,584Space Coast Launch Services
    
    
    1,414
    
    
    
    735KB Home/Shaw Louisiana, LLC
    
    
    8,708
    
    
    
    S&W Fluor Daniels
    
    
    2,562
    
    
    
    2,388Newberg Perini
    
    
    1,899
    
    
    
    1,219Terra Vista Lakes, LLC
    
    
    2,000
    
    
    
    Infrastructure Services Los Alamos
    
    
    1,765
    
    
    
    1,105Other
    
    
    1,323
    
    
    
    2,251Total
    
    
    48,967
    
    
    
    31,723Long-term advances to and receivables from unconsolidated entities (in thousands):Shaw YPC Piping (Nanjing) Co. LTD
    
    
    3,081
    
    
    
    3,081Other
    
    
    
    
    
    
    673,081
    
    
    
    3,148Total investments in and advances to unconsolidated entities, joint ventures and
limited partnerships
    
    $
    52,048
    
    
    $
    34,871
 87




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##### Table of Contents



For the Year EndedAugust 31,2006
    
    
    2005
    
    
    2004Privatization entities
    
    $
    2,284
    
    
    $
    (343
    )
    
    $
    1,789Other entities:Shaw-YPC Piping (Nanjing) Co., Ltd
    
    
    (1,714
    )
    
    
    (626
    )
    
    
    (737
    )Missisippi Space Services LLC
    
    
    853
    
    
    
    664
    
    
    
    1,178Shaw Areva Mox Services, LLC
    
    
    382
    
    
    
    2,786
    
    
    
    Other
    
    
    (292
    )
    
    
    1,328
    
    
    
    348Total earnings (losses) from unconsolidated entities, net of taxes
    
    $
    1,513
    
    
    $
    3,809
    
    
    $
    2,578
  Shaw YPCDuke
    
    
    
    
    
    
    PipingPrivatization
    
    
    Cogema
    
    
    Entergy/
    
    
    (Nanjing)Entities
    
    
    S&W
    
    
    Shaw
    
    
    Co. LTD
    
    
    OtherRevenue from
unconsolidated
entities for years
ended2006
    
    $
    482
    
    
    $
    18,760
    
    
    $
    
    
    
    $
    
    
    
    $
    5,4612005
    
    
    519
    
    
    
    36,806
    
    
    
    
    
    
    
    
    
    
    
    4892004
    
    
    388
    
    
    
    34,018
    
    
    
    1,154
    
    
    
    
    
    
    
    Accounts receivable
from unconsolidated
entities as of
August 31,2006
    
    
    773
    
    
    
    
    
    
    
    
    
    
    
    594
    
    
    
    1,8642005
    
    
    475
    
    
    
    3,155
    
    
    
    
    
    
    
    3,202
    
    
    
    2,214Advances to
unconsolidated
entities as of
August 31,2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,081
    
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,081
    
    
    
    67
  Note 8  Goodwill, Other Intangibles and Contract Adjustments and Accrued Contract Losses
   88




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##### Table of Contents



Goodwill
  ECM
    
    
    E&C
    
    
    Maintenance
    
    
    E&I
    
    
    F&M
    
    
    TotalBalance at September 1, 2004
    
    $
    318,745
    
    
    $
    
    
    
    $
    
    
    
    $
    189,058
    
    
    $
    14,980
    
    
    $
    522,783Allocation of ECM goodwill
    
    
    (318,745
    )
    
    
    276,089
    
    
    
    42,656
    
    
    
    
    
    
    
    
    
    
    
    Currency translation adjustment
    
    
    
    
    
    
    (1,056
    )
    
    
    (19
    )
    
    
    (612
    )
    
    
    82
    
    
    
    (1,605
    )Stone & Webster tax refund
    
    
    
    
    
    
    (4,776
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,776
    )Allocation period adjustments:Coastal acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    338
    
    
    
    
    
    
    
    338LFG&E acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    702
    
    
    
    
    
    
    
    702EDS acquisition
    
    
    
    
    
    
    (824
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (824
    )Sale of Shaw Power Technologies,
Inc.
    
    
    
    
    
    
    (7,291
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,291
    )Sale of Shaw Aiton Australia Pty
Limited
    
    
    
    
    
    
    
    
    
    
    (266
    )
    
    
    
    
    
    
    
    
    
    
    (266
    )Sale of Roche Limited,
Consulting Group
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,608
    )
    
    
    
    
    
    
    (2,608
    )Balance at August 31, 2005
    
    $
    
    
    
    $
    262,142
    
    
    $
    42,371
    
    
    $
    186,878
    
    
    $
    15,062
    
    
    $
    506,453Currency translation adjustment
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    395
    
    
    
    483Sale of Shaw Field Services
    
    
    
    
    
    
    
    
    
    
    (344
    )
    
    
    
    
    
    
    
    
    
    
    (344
    )Balance at August 31, 2006
    
    $
    
    
    
    $
    262,230
    
    
    $
    42,027
    
    
    $
    186,878
    
    
    $
    15,457
    
    
    $
    506,592
    89




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##### Table of Contents



Other Intangible Assets
     Proprietary Technologies,Patents and Tradenames
    
    
    Customer RelationshipsGross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationSeptember 1, 2004 balance
    
    $
    42,548
    
    
    $
    (8,941
    )
    
    $
    2,016
    
    
    $
    (470
    )Allocation period adjustments, EDS
    
    
    172
    
    
    
    
    
    
    
    736
    
    
    
    Additions
    
    
    1,541
    
    
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    
    
    
    
    (3,181
    )
    
    
    
    
    
    
    (398
    )August 31, 2005 balance
    
    $
    44,261
    
    
    $
    (12,122
    )
    
    $
    2,752
    
    
    $
    (868
    )Adjustment
    
    
    449
    
    
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    
    
    
    
    (3,078
    )
    
    
    
    
    
    
    (286
    )August 31, 2006 balance
    
    $
    44,710
    
    
    $
    (15,200
    )
    
    $
    2,752
    
    
    $
    (1,154
    )
  Total2007
    
    $
    3,1262008
    
    
    3,0582009
    
    
    2,9542010
    
    
    2,7962011
    
    
    2,780Thereafter
    
    
    14,796Total
    
    $
    29,510
 90




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##### Table of Contents



Total2007
    
    $
    3072008
    
    
    3072009
    
    
    3072010
    
    
    3072011
    
    
    238Thereafter
    
    
    132Total
    
    $
    1,598
 Contract Adjustments and Accrued Contract Losses
   Cost ofSeptember 1,
    
    
    Revenues
    
    
    August 31,2005
    
    
    Increase/
    
    
    2006Year Ended August 31, 2006
    
    Balance
    
    
    (Decrease)
    
    
    BalanceContract (asset) adjustments
    
    $
    (519
    )
    
    $
    441
    
    
    $
    (78
    )Contract liability adjustments
    
    
    6,936
    
    
    
    (3,575
    )
    
    
    3,361Accrued contract losses
    
    
    2,965
    
    
    
    (2,864
    )
    
    
    101Total
    
    $
    9,382
    
    
    $
    (5,998
    )
    
    $
    3,384
 Cost ofSeptember 1,
    
    
    Revenues
    
    
    August 31,2004
    
    
    Increase/
    
    
    2005Year Ended August 31, 2005
    
    Balance
    
    
    (Decrease)
    
    
    BalanceContract (asset) adjustments
    
    $
    (1,415
    )
    
    $
    896
    
    
    $
    (519
    )Contract liability adjustments
    
    
    17,347
    
    
    
    (10,411
    )
    
    
    6,936Accrued contract losses
    
    
    5,878
    
    
    
    (2,913
    )
    
    
    2,965Total
    
    $
    21,810
    
    
    $
    (12,428
    )
    
    $
    9,382
 Cost ofSeptember 1,
    
    
    Revenues
    
    
    August 31,2003
    
    
    Increase/
    
    
    2004Year Ended August 31, 2004
    
    Balance
    
    
    (Decrease)
    
    
    BalanceContract (asset) adjustments
    
    $
    (3,210
    )
    
    $
    1,795
    
    
    $
    (1,415
    )Contract liability adjustments
    
    
    32,551
    
    
    
    (15,204
    )
    
    
    17,347Accrued contract losses
    
    
    9,858
    
    
    
    (3,980
    )
    
    
    5,878Total
    
    $
    39,199
    
    
    $
    (17,389
    )
    
    $
    21,810
   91




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##### Table of Contents



Other Long Lived Assets
  Note 9  Long-Term
Debt and Revolving Line of Credit
  At August 31,2006
    
    
    2005Senior Notes, unsecured, 10.75%
interest, due March 15, 2010, issued at
98.803% of face value, with an early
repurchase option for us
    
    $
    15,066
    
    
    $
    15,041Notes payable for Insurance Premiums
    
    
    1,895
    
    
    
    1,591Note payable of a VIE secured by real estate
with a book value of $5.0 million as of
August 31, 2006; interest payable monthly at
LIBOR plus 3% (8.3% at August 31, 2006)
monthly payments of $0.01 million, through
November 2007
    
    
    3,828
    
    
    
    3,952Notes payable of a VIE; interest payable at
BIBOR plus 2.5%, monthly payment of $0.1
million, through January 2009,
    
    
    2,761
    
    
    
    4,074Notes payable of a VIE; interest payable
monthly at an average interest rate of 8.3%
and monthly payment of $0.1 million, through
June 2011
    
    
    5,085
    
    
    
    Other notes payable
    
    
    300
    
    
    
    1,195Total debt
    
    
    28,935
    
    
    
    25,853Less: current maturities
    
    
    (4,351
    )
    
    
    (4,135
    )Total long-term portion of debt
    
    $
    24,584
    
    
    $
    21,718
  2007
    
    $
    4,3512008
    
    
    5,1332009
    
    
    1,7042010
    
    
    15,8652011
    
    
    1,882Thereafter
    
    
    Total
    
    $
    28,935
  For the Year EndedAugust 31,2006
    
    
    2005
    
    
    2004Loss on repurchase of Senior Notes, including fees
    
    $
    
    
    
    $
    (38,489
    )
    
    $
    Loss on write off of unamortized debt issuance costs related to Senior Notes
    
    
    
    
    
    
    (5,883
    )
    
    
    Loss on write off of deferred financing fees of Old Credit Facility
    
    
    
    
    
    
    (3,400
    )
    
    
    Loss on repurchase of LYONs
    
    
    
    
    
    
    
    
    
    
    (1,325
    )$
    
    
    
    $
    (47,772
    )
    
    $
    (1,325
    )
 92




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##### Table of Contents



Credit Facilities and Revolving Lines of Credit
   August 31,2006
    
    
    2005Credit facility
    
    $
    145.5
    
    
    $
    40.9Foreign subsidiaries revolving lines of credit
    
    
    
    
    
    
    0.1Credit facilities of consolidated VIEs
    
    
    5.5
    
    
    
    6.3Total outstanding
    
    
    151.0
    
    
    
    47.3Less: current maturities
    
    
    (5.5
    )
    
    
    (6.4
    )Total long-term revolving lines of credit
    
    $
    145.5
    
    
    $
    40.9
       93




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##### Table of Contents



Total Credit Facility
    
    $
    750.0Less: outstanding performance letters of credit
    
    
    276.0Less: outstanding financial letters of credit
    
    
    43.1Less: outstanding revolving credit loans
    
    
    145.5Remaining availability for performance letters of credit
    
    $
    285.4Portion of Credit Facility available for financial letters of credit and revolving credit loans
    
    $
    425.0Less: outstanding financial letters of credit
    
    
    43.1Less: outstanding revolving credit loans
    
    
    145.5Remaining availability for financial letters of credit and revolving credit loans
    
    $
    236.4
      
    
    a maximum leverage ratio of 2.5x our earnings before interest, income taxes, depreciation
and amortization (EBITDA) as defined in the Credit Facility, is adjusted for certain
non-cash items and for the pro forma impact of acquisitions and dispositions of operations
and assets; (Subsequent to August 31, 2006 the we entered into Amendment IV to the Credit
Facility which increases the maximum leverage ratio to 2.75x our EBITDA for quarters ending
prior to August 31, 2007 and 2.5x on or thereafter.)
    
    a minimum fixed charge coverage ratio of 2.5x EBITDA; and (Subsequent to August 31, 2006
we entered into Amendment IV to the Credit Facility which decreased the minimum fixed charge
coverage ratio to 2.25x our EBITDA for quarters ending on or prior to February 29, 2008 and
2.5x thereafter.)
    
    a minimum net worth as defined by the Credit Facility.
 94




---



##### Table of Contents



August 31,
    
    
    August 31,2006
    
    
    2005Capacity of foreign letters of credit and short-term revolving lines of credit
    
    $
    6,654
    
    
    $
    6,253Outstanding
Letters of credit
    
    
    4,072
    
    
    
    4,072Short-term revolving lines of credit
    
    
    17
    
    
    
    574,089
    
    
    
    4,129Remaining availability for foreign letters of credit and short-term revolving lines of credit
    
    $
    2,565
    
    
    $
    2,124Weighted-average interest rate
    
    
    6.75
    %
    
    
    6.75
    %
     Senior Notes
   95




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##### Table of Contents



Note 10  Income Taxes
   At August 31,2006
    
    
    2005 (Restated)Assets:Contract adjustments and accrued contract losses
    
    $
    1,333
    
    
    $
    3,697Deferred revenues
    
    
    217
    
    
    
    681Receivables
    
    
    5,734
    
    
    
    5,806Net operating loss and tax credit carryforwards
    
    
    96,877
    
    
    
    99,580Other expenses not currently deductible
    
    
    8,014
    
    
    
    6,848Compensation related expenses
    
    
    38,993
    
    
    
    37,413Tax basis of inventory in excess of book basis
    
    
    425
    
    
    
    438Less: valuation allowance
    
    
    (13,170
    )
    
    
    (25,712
    )Total assets
    
    
    138,423
    
    
    
    128,751Liabilities:Goodwill
    
    
    (33,370
    )
    
    
    (26,601
    )Property, plant and equipment
    
    
    (25,669
    )
    
    
    (20,878
    )Employee benefits and other expenses
    
    
    (14,963
    )
    
    
    (12,190
    )Total liabilities
    
    
    (74,002
    )
    
    
    (59,669
    )Net deferred tax assets
    
    $
    64,421
    
    
    $
    69,082
  For the Year Ended August 31,2006
    
    
    2005 (Restated)
    
    
    2004 (Restated)Domestic
    
    $
    50,554
    
    
    $
    32,466
    
    
    $
    (48,132
    )Foreign
    
    
    37,151
    
    
    
    6,315
    
    
    
    12,630Total
    
    $
    87,705
    
    
    $
    38,781
    
    
    $
    35,502
  For the Year Ended August 31,2006
    
    
    2005 (Restated)
    
    
    2004 (Restated)Current  foreign
    
    $
    2,221
    
    
    $
    536
    
    
    $
    220Deferred
    
    
    12,070
    
    
    
    13,704
    
    
    
    (15,844
    )Current  domestic
    
    
    6,249
    
    
    
    3,544
    
    
    
    1,025Total
    
    $
    20,540
    
    
    $
    17,784
    
    
    $
    (14,599
    )
  For the Year Ended August 31,2006
    
    
    2005 (Restated)
    
    
    2004 (Restated)Provision (benefit) for income taxes
    
    $
    20,540
    
    
    $
    17,784
    
    
    $
    (14,599
    )Earnings from unconsolidated subsidiaries
    
    
    1,529
    
    
    
    2,709
    
    
    
    2,880Loss from discontinued operations
    
    
    (716
    )
    
    
    (517
    )
    
    
    (3,736
    )Impairment from discontinued operation
    
    
    (449
    )
    
    
    
    
    
    
    Total provision (benefit) for income taxes
    
    $
    20,904
    
    
    $
    19,976
    
    
    $
    (15,455
    )
 96




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##### Table of Contents



2006
    
    
    2005 (Restated)
    
    
    2004 (Restated)Statutory rate
    
    
    35
    %
    
    
    35
    %
    
    
    (35
    )%State taxes provided
    
    
    3
    
    
    
    3
    
    
    
    (4
    )Foreign income taxed at different rates
    
    
    (5
    )
    
    
    (10
    )
    
    
    (13
    )Work Opportunity Tax Credit and foreign tax credits
    
    
    (6
    )
    
    
    (7
    )
    
    
    (1
    )Valuation allowance
    
    
    (9
    )
    
    
    30
    
    
    
    18Minority interest
    
    
    (5
    )
    
    
    (7
    )
    
    
    (9
    )Compensation and stock options
    
    
    5
    
    
    
    3
    
    
    
    Meals, entertainment and other
    
    
    5
    
    
    
    (1
    )
    
    
    223
    %
    
    
    46
    %
    
    
    (42
    )%
     Note 11  Common Stock
  97




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##### Table of Contents



Note 12  Share-Based Compensation
 Stock Compensation Plans
  98




---



##### Table of Contents



Plan
    
    Authorized Shares
    
    Types of Equity Instrument1993 Employee Stock Option Plan (1993 Plan)
    
    
    3,844,000
    
    
    Qualified and non-qualified stock
options and restricted stockStone & Webster Acquisition Stock Option Plan
(Stone & Webster Plan)
    
    
    1,071,000
    
    
    Non-qualified stock options2001 Employee Incentive Compensation Plan (2001
Plan)
    
    
    9,500,000
    
    
    Qualified and non-qualified stock
options, stock appreciation
rights, performance shares and
restricted stockNon-Employee Director Stock Option Plan
(Directors Plan)
    
    
    300,000
    
    
    Non-qualified stock options
       For the Year EndedAugust
31, (Restated)2005
    
    
    2004Net Income (loss):As reported
    
    $
    15,976
    
    
    $
    (33,075
    )Add: Share-based employee compensation reported in net income (loss), net of taxes
    
    
    3,065
    
    
    
    4,139Deduct: Share-based employee compensation under the fair value method for all
awards, net of taxes
    
    
    (11,099
    )
    
    
    (10,290
    )Pro forma
    
    $
    7,942
    
    
    $
    (39,226
    )Basic net income (loss) per share:As reported
    
    $
    0.23
    
    
    $
    (0.57
    )Add: Share-based employee compensation reported in net income (loss), net of taxes
    
    
    0.04
    
    
    
    0.07Deduct: Share-based employee compensation under the fair value method for all
awards, net of taxes
    
    
    (0.16
    )
    
    
    (0.18
    )Pro forma
    
    $
    0.11
    
    
    $
    (0.68
    )Diluted net income (loss) per share:As reported
    
    
    0.23
    
    
    
    (0.57
    )Add: Share-based employee compensation reported in net income (loss), net of taxes
    
    
    0.04
    
    
    
    0.07Deduct: Share-based employee compensation under the fair value method for all
awards, net of taxes
    
    
    (0.16
    )
    
    
    (0.18
    )Pro forma
    
    $
    0.11
    
    
    $
    (0.68
    )
 99




---



##### Table of Contents



Stock Options
  For The Year Ended August 31,2006
    
    
    2005
    
    
    2004Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    47
    %
    
    
    65
    %
    
    
    66
    %Risk-free interest rate
    
    
    4.5
    %
    
    
    3.6
    %
    
    
    3.4
    %Expected life of options (in years)
    
    
    6.6
    
    
    
    5.0
    
    
    
    5.0Weighted average grant-date fair value
    
    $
    15.31
    
    
    $
    8.01
    
    
    $
    6.45
    WeightedAverage
    
    
    Weighted-AverageShares
    
    
    Exercise Price
    
    
    Contract LifeOutstanding at August 31, 2005
    
    
    5,761,162
    
    
    $
    16.11Granted
    
    
    810,694
    
    
    
    21.55Exercised
    
    
    (1,173,734
    )
    
    
    16.00Canceled
    
    
    (160,242
    )
    
    
    28.21Outstanding at August 31, 2006
    
    
    5,237,880
    
    
    $
    16.80
    
    
    
    6.19Exercisable at August 31, 2006
    
    
    3,096,734
    
    
    
    17.39
    
    
    
    4.76
   Grant-Date FairShares
    
    
    ValueNonvested stock options at the beginning of the period
    
    
    2,372,626
    
    
    $
    8.17Granted
    
    
    810,694
    
    
    
    15.31Vested
    
    
    (900,863
    )
    
    
    9.21Forfeited
    
    
    (141,311
    )
    
    
    10.23Nonvested stock options at the end of the period
    
    
    2,141,146
    
    
    $
    10.42
 100




---



##### Table of Contents



Restricted Stock
   For The Year Ended August 31,2006
    
    
    2005
    
    
    2004Restricted Stock Compensation Expense
    
    $
    7.8
    
    
    $
    4.0
    
    
    $
    1.7
  August 31,2006
    
    
    2005Restricted stock:Granted, during and as of the period ended
    
    
    476,954
    
    
    
    454,152Outstanding, as of
    
    
    1,238,048
    
    
    
    1,152,608Future restricted stock awards:Granted, during and as of the period ended
    
    
    
    
    
    
    211,800Outstanding, as of
    
    
    
    
    
    
    21,000
 Note 13  Leases
 Capital Leases
  For the year ending August 31:2007
    
    $
    2,2002008
    
    
    1,9422009
    
    
    1,4342010
    
    
    2142011
    
    
    79Total payments
    
    
    5,869Less: amount representing interest
    
    
    (625
    )Total capital lease obligation
    
    
    5,244Less: current portion
    
    
    (1,811
    )Total long-term portion of capital lease obligation
    
    $
    3,433
  101




---



##### Table of Contents



Operating Leases
  For the year ending August 31 (in thousands):2007
    
    $
    55,7312008
    
    
    50,0862009
    
    
    45,5152010
    
    
    39,3132011
    
    
    22,012Thereafter
    
    
    28,720Total future minimum lease payments
    
    $
    241,377
   102




---



##### Table of Contents



Note 14  Contingencies and Commitments
 Liabilities Related to Contracts
  
    
    warranty, requiring achievement of acceptance and performance testing levels;
    
    liquidated damages, if the project does not meet predetermined completion dates; and
    
    penalties or liquidated damages for failure to meet other cost or project performance measures.
  Guarantees
     103




---



##### Table of Contents



SEC Inquiry
   Securities Litigation
 Earl Thompson v. The Shaw Group Inc. et al Thompson Thompson Thompson th
 Jonathan Nelson v. J.M. Bernhard,
Jr., et al. and Larry F. Reusche v. Tim Barfield, Jr., et al.
 104




---



##### Table of Contents



City of Brockton Retirement System
v. The Shaw Group Inc, et al
  Other Litigation
   Environmental Liabilities
    Employment Contracts
  105




---



##### Table of Contents



Note 15  Business Segments, Operations by Geographic Region and Major Customers
 Business Segments
     106




---



##### Table of Contents



Business Segment Data
  E&C
    
    
    Maintenance
    
    
    E&I
    
    
    F&M
    
    
    Corporate
    
    
    TotalFiscal 2006Revenues from external
customers
    
    $
    1,456.9
    
    
    $
    898.6
    
    
    $
    2,119.3
    
    
    $
    300.8
    
    
    $
    
    
    
    $
    4,775.6Intersegment revenues
    
    
    25.3
    
    
    
    5.9
    
    
    
    2.5
    
    
    
    18.3
    
    
    
    
    
    
    
    52.0Interest income
    
    
    4.6
    
    
    
    
    
    
    
    1.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    5.9Interest expense
    
    
    1.1
    
    
    
    
    
    
    
    0.2
    
    
    
    0.8
    
    
    
    16.9
    
    
    
    19.0Depreciation and amortization
    
    
    7.0
    
    
    
    1.3
    
    
    
    9.3
    
    
    
    5.1
    
    
    
    10.6
    
    
    
    33.3Income (loss) before income
taxes
    
    
    (8.3
    )
    
    
    21.7
    
    
    
    126.8
    
    
    
    48.5
    
    
    
    (101.0
    )
    
    
    87.7Earnings (losses) from
unconsolidated entities
    
    
    0.9
    
    
    
    
    
    
    
    2.3
    
    
    
    (1.7
    )
    
    
    
    
    
    
    1.5Goodwill
    
    
    262.2
    
    
    
    42.0
    
    
    
    186.9
    
    
    
    15.5
    
    
    
    
    
    
    
    506.6Total assets
    
    
    717.2
    
    
    
    111.0
    
    
    
    894.2
    
    
    
    359.7
    
    
    
    1,086.7
    
    
    
    3,168.8Investment in and advances
to equity method investees
    
    
    0.8
    
    
    
    
    
    
    
    40.5
    
    
    
    
    
    
    
    
    
    
    
    41.3Purchases of property and
equipment
    
    
    18.2
    
    
    
    2.8
    
    
    
    15.6
    
    
    
    5.7
    
    
    
    6.3
    
    
    
    48.6Increases (decreases) in
other assets, long-term, net
    
    
    (3.9
    )
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    
    
    
    3.0
    
    
    
    (0.6
    )
 E&C
    
    
    Maintenance
    
    
    E&I
    
    
    F&M
    
    
    Corporate
    
    
    TotalFiscal 2005 (Restated)Revenues from external customers
    
    $
    1,208.0
    
    
    $
    733.2
    
    
    $
    1,120.1
    
    
    $
    201.0
    
    
    $
    
    
    
    $
    3,262.3Intersegment revenues
    
    
    0.9
    
    
    
    4.0
    
    
    
    1.4
    
    
    
    27.4
    
    
    
    
    
    
    
    33.7Interest income
    
    
    4.6
    
    
    
    
    
    
    
    0.7
    
    
    
    0.3
    
    
    
    
    
    
    
    5.6Interest expense
    
    
    2.6
    
    
    
    0.6
    
    
    
    0.9
    
    
    
    0.5
    
    
    
    24.6
    
    
    
    29.2Depreciation and amortization
    
    
    5.7
    
    
    
    2.3
    
    
    
    8.8
    
    
    
    4.7
    
    
    
    9.7
    
    
    
    31.2Income (loss) before income taxes
    
    
    70.2
    
    
    
    18.4
    
    
    
    54.6
    
    
    
    21.8
    
    
    
    (126.2
    )
    
    
    38.8Earnings (losses) from
unconsolidated entities
    
    
    0.2
    
    
    
    
    
    
    
    3.9
    
    
    
    (0.7
    )
    
    
    0.4
    
    
    
    3.8Goodwill
    
    
    262.1
    
    
    
    42.4
    
    
    
    186.9
    
    
    
    15.1
    
    
    
    
    
    
    
    506.5Total assets
    
    
    690.4
    
    
    
    53.3
    
    
    
    402.7
    
    
    
    241.6
    
    
    
    1,326.0
    
    
    
    2,714.0Investment in and advances to
equity method investees
    
    
    0.3
    
    
    
    
    
    
    
    23.3
    
    
    
    0.8
    
    
    
    
    
    
    
    24.4Purchases of property and equipment
    
    
    5.0
    
    
    
    0.4
    
    
    
    16.4
    
    
    
    4.3
    
    
    
    4.1
    
    
    
    30.2Increases (decreases) in other
assets, long-term, net
    
    
    (6.9
    )
    
    
    0.2
    
    
    
    (5.3
    )
    
    
    (1.5
    )
    
    
    (7.3
    )
    
    
    (20.8
    )Fiscal 2004 (Restated)Revenues from external customers
    
    $
    1,048.8
    
    
    $
    517.3
    
    
    $
    1,268.3
    
    
    $
    180.3
    
    
    $
    
    
    
    $
    3,014.7Intersegment revenues
    
    
    5.5
    
    
    
    0.7
    
    
    
    0.9
    
    
    
    10.9
    
    
    
    
    
    
    
    18.0Interest income
    
    
    0.8
    
    
    
    
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    1.7Interest expense
    
    
    1.8
    
    
    
    0.6
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    35.4
    
    
    
    38.2Depreciation and amortization
    
    
    6.7
    
    
    
    2.3
    
    
    
    11.8
    
    
    
    5.0
    
    
    
    34.2
    
    
    
    60.0Income (loss) before income taxes
    
    
    (55.4
    )
    
    
    19.1
    
    
    
    86.9
    
    
    
    10.2
    
    
    
    (96.3
    )
    
    
    (35.5
    )Earnings (losses) from
unconsolidated entities
    
    
    
    
    
    
    
    
    
    
    4.1
    
    
    
    (1.4
    )
    
    
    (0.1
    )
    
    
    2.6Goodwill
    
    
    276.1
    
    
    
    42.7
    
    
    
    189.1
    
    
    
    14.9
    
    
    
    
    
    
    
    522.8Total assets
    
    
    730.1
    
    
    
    42.0
    
    
    
    582.9
    
    
    
    276.8
    
    
    
    461.5
    
    
    
    2,093.3Investment in and advances to
equity method investees
    
    
    
    
    
    
    
    
    
    
    16.5
    
    
    
    4.9
    
    
    
    (2.3
    )
    
    
    19.1Purchases of property and equipment
    
    
    7.5
    
    
    
    0.4
    
    
    
    13.7
    
    
    
    1.9
    
    
    
    8.0
    
    
    
    31.5Increases (decreases) in other
assets, long-term, net
    
    
    (0.3
    )
    
    
    
    
    
    
    14.8
    
    
    
    (0.2
    )
    
    
    (3.6
    )
    
    
    10.7
  107




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##### Table of Contents



At August 31,2006
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)Total segment assets
    
    $
    3,168.8
    
    
    $
    2,714.0
    
    
    $
    2,093.3Elimination of intercompany receivables
    
    
    (285.5
    )
    
    
    (283.4
    )
    
    
    (10.4
    )Elimination of investments in subsidiaries
    
    
    (320.5
    )
    
    
    (304.5
    )
    
    
    Income tax entries not allocated to segments
    
    
    (33.7
    )
    
    
    (37.1
    )
    
    
    (41.9
    )Other consolidation adjustments and eliminations
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Total consolidated assets
    
    $
    2,529.1
    
    
    $
    2,089.0
    
    
    $
    2,040.9
 Operations by Geographic Region
  For The Year Ended August 31,2006
    
    
    2005
    
    
    2004Revenues:United States
    
    $
    4,196.8
    
    
    $
    2,842.5
    
    
    $
    2,510.5Asia/Pacific Rim countries
    
    
    161.7
    
    
    
    227.5
    
    
    
    223.4Canada
    
    
    13.3
    
    
    
    13.7
    
    
    
    13.4United Kingdom and other European countries
    
    
    73.7
    
    
    
    59.1
    
    
    
    96.3South America and Mexico
    
    
    25.0
    
    
    
    20.3
    
    
    
    7.2Middle East
    
    
    294.0
    
    
    
    87.4
    
    
    
    151.3Other
    
    
    11.1
    
    
    
    11.8
    
    
    
    12.6$
    4,775.6
    
    
    $
    3,262.3
    
    
    $
    3,014.7
 At August 31,2006
    
    
    2005
    
    
    2004Long-Lived Assets:United States
    
    $
    303.5
    
    
    $
    275.3
    
    
    $
    320.3United Kingdom
    
    
    7.8
    
    
    
    1.3
    
    
    
    7.0Other foreign countries
    
    
    32.6
    
    
    
    48.5
    
    
    
    21.5$
    343.9
    
    
    $
    325.1
    
    
    $
    348.8
  Information about Major Customers
   Export Revenues
  Note 16  Supplemental Disclosure to Earnings (Loss) Per Common Share
  For The Year Ended August 31,2006
    
    
    2005
    
    
    2004Weighted-average incremental shares:Stock options
    
    
    407
    
    
    
    2,950
    
    
    
    5,148Restricted stock
    
    
    
    
    
    
    66
    
    
    
    467LYONs convertible debt
    
    
    
    
    
    
    10
    
    
    
    994
 108




---



##### Table of Contents



Note 17  Employee Benefit Plans
 Defined Contribution Plans
  Defined Benefit Plans
   109




---



##### Table of Contents



For The Year Ended August 31,2006
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)Change in Projected Benefit ObligationProjected benefit obligation at the start of the year
    
    $
    144,240
    
    
    $
    116,712
    
    
    $
    99,609Service cost
    
    
    2,884
    
    
    
    2,664
    
    
    
    2,499Interest cost
    
    
    7,011
    
    
    
    6,738
    
    
    
    6,099Members contributions
    
    
    863
    
    
    
    910
    
    
    
    1,013Actuarial loss (gain)
    
    
    (1,210
    )
    
    
    22,301
    
    
    
    (1,228
    )Benefits paid
    
    
    (6,253
    )
    
    
    (6,110
    )
    
    
    (5,241
    )Foreign currency exchange rate changes
    
    
    6,877
    
    
    
    375
    
    
    
    13,961Projected benefit obligation at the end of the year
    
    
    154,412
    
    
    
    143,590
    
    
    
    116,712Change in Plan AssetsFair value of the assets at the start of the year
    
    $
    101,335
    
    
    $
    87,274
    
    
    $
    73,977Actual return on plan assets
    
    
    7,537
    
    
    
    14,755
    
    
    
    4,793Employer contributions
    
    
    5,704
    
    
    
    3,944
    
    
    
    3,469Employee contributions
    
    
    863
    
    
    
    910
    
    
    
    1,013Benefits paid
    
    
    (6,253
    )
    
    
    (6,110
    )
    
    
    (5,241
    )Foreign currency exchange rate changes
    
    
    5,215
    
    
    
    150
    
    
    
    9,262Fair value of the assets at the end of the year
    
    
    114,401
    
    
    
    100,923
    
    
    
    87,273Funded status
    
    
    (40,011
    )
    
    
    (42,667
    )
    
    
    (29,439
    )Unrecognized net loss
    
    
    42,362
    
    
    
    45,122
    
    
    
    34,198Adjustment to recognize minimum liability
    
    
    (27,986
    )
    
    
    (33,153
    )
    
    
    (20,517
    )Accrued benefit cost
    
    $
    (25,635
    )
    
    $
    (30,698
    )
    
    $
    (15,758
    )Components of Net Periodic Benefit Cost and Increase
in Minimum Pension LiabilityService cost
    
    $
    2,884
    
    
    $
    2,664
    
    
    $
    2,499Interest cost
    
    
    7,011
    
    
    
    6,738
    
    
    
    6,099Expected return on plan assets
    
    
    (6,863
    )
    
    
    (6,422
    )
    
    
    (5,956
    )Amortization of net loss
    
    
    2,403
    
    
    
    1,912
    
    
    
    2,124Other
    
    
    872
    
    
    
    1,065
    
    
    
    1,553Total net periodic benefit cost
    
    $
    6,307
    
    
    $
    5,957
    
    
    $
    6,319
 For The Year Ended August 31,2006
    
    
    2005
    
    
    2004Increase (decrease)
in minimum pension
liability included in
other comprehensive
income
    
    $
    (6,891
    )
    
    $
    12,513
    
    
    $
    (2,223
    )
 Assumptions
 For The Year Ended August 31,2006
    
    
    2005
    
    
    2004Weighted  Average Assumptions Used to
Determine Benefit Obligations at August 31:Discount rate
    
    
    5.00-5.25
    %
    
    
    4.75-5.00
    %
    
    
    5.60-6.00
    %Rate of compensation increase
    
    
    4.00-4.75
    %
    
    
    4.00-4.70
    %
    
    
    4.00-4.90
    %Weighted  Average Assumptions Used to
Determine Net Periodic Benefit Cost for Years
Ended August 31:Discount rate at end of the year
    
    
    4.75-5.10
    %
    
    
    5.00-6.00
    %
    
    
    5.50-6.00
    %Expected return on plan assets for the year
    
    
    6.30-8.00
    %
    
    
    6.30-8.00
    %
    
    
    7.00-7.75
    %Rate of compensation increase at end of the year
    
    
    4.00-4.70
    %
    
    
    4.00-4.90
    %
    
    
    4.25-5.00
    %
  110




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##### Table of Contents



Plan Assets, Investment Policies and Strategies and Expected Long-Term Rate of Return on Plan
Assets
  At August 31,Asset Category
    
    2006
    
    
    2005Equity securities
    
    
    64.0
    %
    
    
    62.5
    %Debt securities
    
    
    31.4
    %
    
    
    30.3
    %Other
    
    
    4.6
    %
    
    
    7.2
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    Contributions and Benefit Payments
   Fiscal Year
    
    Pension Benefits
    
    
    Other Benefits2007
    
    $
    6,531
    
    
    $
    2008
    
    
    6,695
    
    
    
    42009
    
    
    6,894
    
    
    
    72010
    
    
    7,183
    
    
    
    92011
    
    
    7,415
    
    
    
    112012  2016
    
    
    40,365
    
    
    
    69
  Note 18  Related Party Transactions
  111




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##### Table of Contents



Note 19  Foreign Currency Translation and Transactions
  Note 20 
    
    Percentage-of-Completion Contracts  Claims, Unapproved Change Orders, Performance
Guarantees and Project Incentives
   112




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##### Table of Contents



Covert, Harquahala, Wolf Hollow and Marcus Hook Claims
  Gain/(Loss)August 31,
    
    
    Awards /
    
    
    On
    
    
    August 31,2005
    
    
    Settlements
    
    

Settlements
    
    
    2006Receivables from owners under contract terms
    
    $
    112.9
    
    
    $
    99.9
    
    
    $
    (13.0
    )
    
    $
    Reimbursement of letter of credit draws by owners
    
    
    46.9
    
    
    
    18.8
    
    
    
    (28.1
    )
    
    
    Claims receivable from owners, equipment vendors,
subcontractors and others for costs incurred
    
    
    28.2
    
    
    
    12.5
    
    
    
    (4.7
    )
    
    
    11.0Less: Liquidated damages recorded in contract costs
    
    
    (17.1
    )
    
    
    (10.1
    )
    
    
    7.0
    
    
    
    Less: Amounts we collected by drawing letters of
credit
    
    
    (17.5
    )
    
    
    (1.5
    )
    
    
    
    
    
    
    (16.0
    )Net claims receivable (payable)
    
    $
    153.4
    
    
    $
    119.6
    
    
    $
    (38.8
    )
    
    $
    (5.0
    )
    Unapproved Change Orders and Claims
  As ofAugust 31, 2006Amounts included in project estimates-at-completion
    
    $
    89.3Amounts accrued in revenues (or reductions to contract costs)
    
    $
    69.4
 113




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##### Table of Contents



Performance Guarantees
   Project Incentives
  Note 21  Assets Held for Sale, Discontinued Operations and Costs Associated with Exit and
Disposal Activities
 Assets Held For Sale
  At August 31,2006
    
    
    2005Fabrication facilities in the U.S.(F&M segment)
    
    $
    2,964
    
    
    $
    4,514Facilities
in the United Kingdom (Maintenance segment)
    
    
    
    
    
    
    5,006Equipment and inventory in the U.S. (Maintenance segment)
    
    
    2,266
    
    
    
    Total assets held for sale
    
    $
    5,230
    
    
    $
    9,520
 114




---



##### Table of Contents



Discontinued Operations
  For The Year Ended August 31,2006
    
    
    2005
    
    
    2004Revenues reclassified to discontinued operations:Hanger engineering and pipe support businesses (F&M segment)
    
    $
    
    
    
    $
    2,746
    
    
    $
    7,934Roche Limited, Consulting Group (E&I segment)
    
    
    
    
    
    
    58,525
    
    
    
    61,132Shaw-Robotic Environmental Services, LLC (Maintenance segment)
    
    
    5,753
    
    
    
    3,588
    
    
    
    1,104Total
revenues reclassified to discontinued operation
    
    $
    5,753
    
    
    $
    64,859
    
    
    $
    70,170Income (loss) from discontinued operationsHanger engineering and pipe support businesses (F&M segment)
    
    $
    (144
    )
    
    $
    (776
    )
    
    $
    (1,674
    )Roche Limited, Consulting Group (E&I segment)
    
    
    
    
    
    
    (1,019
    )
    
    
    (764
    )Shaw-Robotic Environmental Services, LLC
    
    
    (1,000
    )
    
    
    (148
    )
    
    
    (155
    )Total income (loss) from discontinued operations
    
    
    (1,144
    )
    
    
    (1,943
    )
    
    
    (2,593
    )Gain (impairment) of discontinued operations:(Impairment) of hanger engineering and pipe support
businesses (F&M segment)
    
    $
    
    
    
    $
    
    
    
    $
    (2,995
    )Gain on sale of Roche Limited, Consulting Group (E&I segment)
    
    
    
    
    
    
    356
    
    
    
    Impairment of Shaw-Robotic Environmental Services, LLC
(Maintenance segment)
    
    
    (1,004
    )
    
    
    
    
    
    
    Total gain (impairment) of discontinued operations
    
    
    (1,004
    )
    
    
    356
    
    
    
    (2,995
    )Total income (loss) from discontinued operations, net of taxes
    
    $
    (2,148
    )
    
    $
    (1,587
    )
    
    $
    (5,588
    )
    Exit and Disposal Activities
  115




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##### Table of Contents



Note 22  Quarterly Financial Data (Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterFiscal 2006Revenues
    
    $
    1,135,461
    
    
    $
    1,238,832
    
    
    $
    1,226,784
    
    
    $
    1,174,538Gross profit
    
    $
    108,018
    
    
    $
    97,979
    
    
    $
    33,915
    
    
    $
    89,560Income (loss) from discontinued operations
    
    $
    (439
    )
    
    $
    (56
    )
    
    $
    (659
    )
    
    $
    10Net income (loss)
    
    $
    32,713
    
    
    $
    21,838
    
    
    $
    (16,673
    )
    
    $
    12,972Basic earnings (loss) per share:Income (loss) from continuing operations
    
    $
    0.42
    
    
    $
    0.28
    
    
    $
    (0.20
    )
    
    $
    0.18Income (loss) from discontinued operations
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )Net income loss
    
    $
    0.41
    
    
    $
    0.28
    
    
    $
    (0.21
    )
    
    
    0.17Diluted earnings (loss) per share:Income (loss) from continuing operations
    
    $
    0.42
    
    
    $
    0.27
    
    
    $
    (0.20
    )
    
    $
    0.17Income (loss) from discontinued operations
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )Net Income (loss)
    
    $
    0.41
    
    
    $
    0.27
    
    
    $
    (0.21
    )
    
    $
    0.16Fiscal 2005 (Restated)Revenues
    
    $
    807,494
    
    
    $
    747,498
    
    
    $
    890,551
    
    
    $
    816,785Gross profit
    
    $
    74,088
    
    
    $
    67,042
    
    
    $
    78,920
    
    
    $
    72,620Income (loss) from discontinued operations
    
    $
    (453
    )
    
    $
    (627
    )
    
    $
    (592
    )
    
    $
    (271
    )Net income (loss)
    
    $
    11,113
    
    
    $
    9,348
    
    
    $
    (21,649
    )
    
    $
    17,164Basic earnings (loss) per share:Income (loss) from continuing operations
    
    $
    0.18
    
    
    $
    0.16
    
    
    $
    (0.30
    )
    
    $
    0.22Income (loss) from discontinued operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    Net Income (loss)
    
    $
    0.18
    
    
    $
    0.15
    
    
    $
    (0.31
    )
    
    $
    0.22Diluted net income (loss) per share:Income (loss) from continuing operations
    
    $
    0.18
    
    
    $
    0.15
    
    
    $
    (0.30
    )
    
    $
    0.22Income (loss) from discontinued operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    Net Income (loss)
    
    $
    0.18
    
    
    $
    0.14
    
    
    $
    (0.31
    )
    
    $
    0.22
   116




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##### Table of Contents



Note
23  New Accounting Pronouncements
 Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)
      117




---



##### Table of Contents



Note 24  Subsequent Events
 Westinghouse Acquisition
  118




---



##### Table of Contents



Note 25  Prior Year Restatement of Consolidated Financial Statements
 Stock Options
    119




---



##### Table of Contents



For the fiscal
    
    
    For the fiscal
    
    
    For the fiscal
    
    
    For the fiscal
    
    
    For the fiscalyear ended
    
    
    year ended
    
    
    year ended
    
    
    year ended
    
    
    year endedIncrease/(Decrease)
    
    August 31, 2005
    
    
    August 31, 2004
    
    
    August 31, 2003
    
    
    August 31, 2002
    
    
    August 31, 2001General and
administrative
expenses
    
    $
    (700
    )
    
    $
    3,800
    
    
    $
    4,200
    
    
    $
    5,300
    
    
    $
    8,700Provision (benefit)
for income taxes
    
    $
    300
    
    
    $
    (1,200
    )
    
    $
    (1,200
    )
    
    $
    (1,400
    )
    
    $
    (1,600
    )Income (loss) from
continuing
operations
    
    $
    400
    
    
    $
    (2,600
    )
    
    $
    (3,000
    )
    
    $
    (3,900
    )
    
    $
    (7,100
    )Net income (loss)
    
    $
    400
    
    
    $
    (2,600
    )
    
    $
    (3,000
    )
    
    $
    (3,900
    )
    
    $
    (7,100
    )
  As of
    
    
    As of
    
    
    As of
    
    
    As of
    
    
    As ofIncrease/(Decrease)
    
    August 31, 2005
    
    
    August 31, 2004
    
    
    August 31, 2003
    
    
    August 31, 2002
    
    
    August 31, 2001Deferred income taxes
    
    $
    5,100
    
    
    $
    5,400
    
    
    $
    4,200
    
    
    $
    3,000
    
    
    $
    1,600Common stock
    
    $
    21,300
    
    
    $
    22,000
    
    
    $
    18,200
    
    
    $
    14,000
    
    
    $
    8,700Retained earnings
    
    $
    (16,200
    )
    
    $
    (16,600
    )
    
    $
    (14,000
    )
    
    $
    (11,000
    )
    
    $
    (7,100
    )
 Periodic Pension Service Costs
  For the fiscal
    
    
    For the fiscal
    
    
    For the fiscalyear ended
    
    
    year ended
    
    
    year endedIncrease/(Decrease)
    
    August 31, 2005
    
    
    August 31, 2004
    
    
    August 31, 2003General and administrative expenses
    
    $
    800
    
    
    $
    1,500
    
    
    $
    200Income (loss) from continuing
operations
    
    $
    (800
    )
    
    $
    (1,500
    )
    
    $
    (200
    )Provision (benefit) for income taxes
    
    $
    
    
    
    $
    
    
    
    $
    Net income (loss)
    
    $
    (800
    )
    
    $
    (1,500
    )
    
    $
    (200
    )
  As of
    
    
    As of
    
    
    As ofIncrease/(Decrease)
    
    August 31, 2005
    
    
    August 31, 2004
    
    
    August 31, 2003Other liabilities
    
    $
    2,500
    
    
    $
    1,700
    
    
    $
    200Retained Earnings
    
    $
    (2,500
    )
    
    $
    (1,700
    )
    
    $
    (200
    )
 120




---



##### Table of Contents



Conclusions
  For the fiscal
    
    
    For the fiscal
    
    
    For the fiscal
    
    
    For the fiscal
    
    
    For the fiscalyear ended
    
    
    year ended
    
    
    year ended
    
    
    year ended
    
    
    year endedAugust 31, 2005
    
    
    August 31, 2004
    
    
    August 31, 2003
    
    
    August 31, 2002
    
    
    August 31, 2001As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    AsRestated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    ReportedGeneral and
administrative
expenses
    
    $
    190,348
    
    
    $
    190,248
    
    
    $
    217,214
    
    
    $
    211,914
    
    
    
    191,818
    
    
    $
    187,418
    
    
    $
    162,550
    
    
    $
    157,250
    
    
    $
    162,134
    
    
    $
    153,434Provision (benefit)
for income taxes
    
    $
    20,910
    
    
    $
    20,610
    
    
    $
    (11,101
    )
    
    $
    (9,901
    )
    
    
    9,864
    
    
    $
    11,064
    
    
    $
    51,476
    
    
    $
    52,876
    
    
    $
    29,560
    
    
    $
    31,160Income (loss) from
continuing operations
    
    $
    17,415
    
    
    $
    17,815
    
    
    $
    (27,642
    )
    
    $
    (23,542
    )
    
    
    16,469
    
    
    $
    19,669
    
    
    $
    92,259
    
    
    $
    96,159
    
    
    $
    42,737
    
    
    $
    49,837Net income (loss)
    
    $
    15,976
    
    
    $
    16,376
    
    
    $
    (33,075
    )
    
    $
    (28,975
    )
    
    
    17,666
    
    
    $
    20,866
    
    
    $
    94,467
    
    
    $
    98,367
    
    
    $
    43,497
    
    
    $
    50,597Net income (loss) per
common share:Basic:Income (loss)
from continuing
operations
    
    $
    0.25
    
    
    $
    0.26
    
    
    $
    (0.48
    )
    
    $
    (0.41
    )
    
    
    0.44
    
    
    $
    0.52
    
    
    $
    2.25
    
    
    $
    2.35
    
    
    $
    1.06
    
    
    $
    1.24Net income (loss)
    
    $
    0.23
    
    
    $
    0.24
    
    
    $
    (0.57
    )
    
    $
    (0.50
    )
    
    
    0.47
    
    
    $
    0.55
    
    
    $
    2.31
    
    
    $
    2.41
    
    
    $
    1.08
    
    
    $
    1.26Diluted:Income (loss)
from continuing
operations
    
    $
    0.25
    
    
    $
    0.25
    
    
    $
    (0.48
    )
    
    $
    (0.41
    )
    
    
    0.43
    
    
    $
    0.51
    
    
    $
    2.14
    
    
    $
    2.22
    
    
    $
    1.02
    
    
    $
    1.19Net income (loss)
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    (0.57
    )
    
    $
    (0.50
    )
    
    $
    0.46
    
    
    $
    0.54
    
    
    $
    2.18
    
    
    $
    2.26
    
    
    $
    1.04
    
    
    $
    1.21
  As of
    
    
    As of
    
    
    As of
    
    
    As of
    
    
    As ofAugust 31, 2005
    
    
    August 31, 2004
    
    
    August 31, 2003
    
    
    August 31, 2002
    
    
    August 31, 2001As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    AsRestated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    ReportedDeferred income taxes
    
    $
    90,600
    
    
    $
    85,500
    (1)
    
    $
    25,997
    
    
    $
    20,597
    (2)
    
    $
    21,785
    
    
    $
    25,985
    (3)
    
    $
    9,398
    
    
    $
    12,398
    (3)
    
    $
    6,647
    
    
    $
    8,247
    (3)Other liabilities
    
    $
    46,962
    
    
    $
    44,462
    
    
    $
    21,341
    
    
    $
    19,641
    
    
    $
    18,180
    
    
    $
    17,980
    
    
    $
    12,054
    
    
    $
    12,054
    
    
    $
    7,350
    
    
    $
    7,350Common stock
    
    $
    1,044,903
    
    
    $
    1,023,603
    
    
    $
    772,077
    
    
    $
    750,077
    
    
    $
    514,348
    
    
    $
    496,148
    
    
    $
    508,581
    
    
    $
    494,581
    
    
    $
    445,715
    
    
    $
    437,015Retained earnings
    
    $
    245,112
    
    
    $
    263,812
    
    
    $
    229,136
    
    
    $
    247,436
    
    
    $
    262,211
    
    
    $
    276,411
    
    
    $
    244,545
    
    
    $
    255,545
    
    
    $
    150,078
    
    
    $
    157,178
 
 (1)
    
    As of August 31, 2005, the impact of the stock options restatement increases current
deferred income taxes, which were net assets.(2)
    
    As of August 31, 2004, the impact of the stock options restatement increases non-current
deferred income taxes, which were net assets.(3)
    
    As of August 31, 2003, 2002 and 2001 the impact of the stock options restatement reduces
non-current deferred income taxes, which were net liabilities.  For the fiscal
    
    
    For the fiscalyear ended
    
    
    year endedAugust 31, 2005
    
    
    August 31, 2004As
    
    
    As
    
    
    As
    
    
    AsReflectedInForm
10-K
    
    
ReflectedInForm
8-K

    
    
ReflectedInForm
10-K

    
    
ReflectedInForm
8-KGeneral and
administrative
expenses
    
    $
    190,252
    
    
    $
    190,348
    
    
    $
    217,214
    
    
    $
    217,214Provision (benefit)
for income taxes
    
    $
    17,784
    
    
    $
    20,910
    
    
    $
    (14,599
    )
    
    $
    (11,101
    )Income (loss) from
continuing operations
    
    $
    17,563
    
    
    $
    17,415
    
    
    $
    (27,487
    )
    
    $
    (27,642
    )Net income (loss)
    
    $
    15,976
    
    
    $
    15,976
    
    
    $
    (33,075
    )
    
    $
    (33,075
    )Net income (loss) per
common share:Basic:Income (loss)
from continuing
operations
    
    $
    0.25
    
    
    $
    0.25
    
    
    $
    (0.47
    )
    
    $
    (0.48
    )Net income (loss)
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    (0.57
    )
    
    $
    (0.57
    )Diluted:Income (loss)
from continuing
operations
    
    $
    0.25
    
    
    $
    0.25
    
    
    $
    (0.47
    )
    
    $
    (0.48
    )Net income (loss)
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    (0.57
    )
    
    $
    (0.57
    )
  121




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##### Table of Contents



Note 26  Condensed Consolidating Financial Information
    122




---



##### Table of Contents



EliminationNon-
    
    
    AndParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedAs of August 31, 2006Current assets
    
    $
    607,978
    
    
    $
    829,683
    
    
    $
    275,250
    
    
    $
    (34,251
    )
    
    $
    1,678,660Intercompany long-term receivables
    
    
    240
    
    
    
    4,115
    
    
    
    871
    
    
    
    (5,226
    )
    
    
    Investments in subsidiaries and
joint ventures
    
    
    810,482
    
    
    
    153,500
    
    
    
    5,597
    
    
    
    (917,531
    )
    
    
    52,048Property and equipment, net
    
    
    29,809
    
    
    
    114,180
    
    
    
    31,442
    
    
    
    
    
    
    
    175,431Other assets
    
    
    26,753
    
    
    
    568,500
    
    
    
    36,257
    
    
    
    (8,515
    )
    
    
    622,995Total Assets
    
    $
    1,475,262
    
    
    $
    1,669,978
    
    
    $
    349,417
    
    
    $
    (965,523
    )
    
    $
    2,529,134Current liabilities
    
    $
    64,926
    
    
    $
    792,929
    
    
    $
    217,055
    
    
    $
    (34,251
    )
    
    $
    1,040,659Intercompany long-term debt
    
    
    
    
    
    
    872
    
    
    
    4,354
    
    
    
    (5,226
    )
    
    
    Long-term revolving line of credit
    
    
    145,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,517Long-term debt and capital leases
    
    
    16,521
    
    
    
    1,977
    
    
    
    9,519
    
    
    
    
    
    
    
    28,017Other non-current liabilities
    
    
    5,091
    
    
    
    39,130
    
    
    
    22,620
    
    
    
    (8,515
    )
    
    
    58,326Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,408
    
    
    
    13,408Shareholders Equity
    
    
    1,243,207
    
    
    
    835,070
    
    
    
    95,869
    
    
    
    (930,939
    )
    
    
    1,243,207Total Liabilities &
Shareholders Equity
    
    $
    1,475,262
    
    
    $
    1,669,978
    
    
    $
    349,417
    
    
    $
    (965,523
    )
    
    $
    2,529,134
 EliminationNon-
    
    
    andParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedAs of August 31, 2005
(Restated)Current assets
    
    $
    953,196
    
    
    $
    221,955
    
    
    $
    131,150
    
    
    $
    (33,248
    )
    
    $
    1,273,053Intercompany long-term receivables
    
    
    240
    
    
    
    484,291
    
    
    
    9,708
    
    
    
    (494,239
    )
    
    
    Investments in subsidiaries and
joint ventures
    
    
    737,237
    
    
    
    132,114
    
    
    
    6,251
    
    
    
    (840,731
    )
    
    
    34,871Property and equipment, net
    
    
    30,805
    
    
    
    98,756
    
    
    
    27,975
    
    
    
    
    
    
    
    157,536Other assets
    
    
    18,375
    
    
    
    560,281
    
    
    
    44,772
    
    
    
    
    
    
    
    623,428Total Assets
    
    $
    1,739,853
    
    
    $
    1,497,397
    
    
    $
    219,856
    
    
    $
    (1,368,218
    )
    
    $
    2,088,888Current liabilities
    
    $
    50,482
    
    
    $
    703,944
    
    
    $
    71,828
    
    
    $
    (33,780
    )
    
    $
    792,474Intercompany long-term debt
    
    
    476,429
    
    
    
    9,708
    
    
    
    8,102
    
    
    
    (494,239
    )
    
    
    Long-term revolving line of credit
    
    
    40,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,850Long-term debt and capital leases
    
    
    15,040
    
    
    
    2,977
    
    
    
    6,674
    
    
    
    
    
    
    
    24,691Other non-current liabilities
    
    
    9,899
    
    
    
    28,620
    
    
    
    29,961
    
    
    
    
    
    
    
    68,480Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,240
    
    
    
    15,240Shareholders Equity
    
    
    1,147,153
    
    
    
    752,148
    
    
    
    103,291
    
    
    
    (855,439
    )
    
    
    1,147,153Total Liabilities &
Shareholders Equity
    
    $
    1,739,853
    
    
    $
    1,497,397
    
    
    $
    219,856
    
    
    $
    (1,368,218
    )
    
    $
    2,088,888
 123




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##### Table of Contents



EliminationNon-
    
    
    AndParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedFor the Year Ended August 31, 2006Revenues
    
    $
    
    
    
    $
    4,306,789
    
    
    $
    531,561
    
    
    $
    (62,735
    )
    
    $
    4,775,615Cost of revenues
    
    
    
    
    
    
    4,043,547
    
    
    
    464,627
    
    
    
    (62,031
    )
    
    
    4,446,143Gross profit
    
    
    
    
    
    
    263,242
    
    
    
    66,934
    
    
    
    (704
    )
    
    
    329,472General and administrative expenses
    
    
    81,748
    
    
    
    132,710
    
    
    
    12,678
    
    
    
    (892
    )
    
    
    226,244Operating income (loss)
    
    
    (81,748
    )
    
    
    130,532
    
    
    
    54,256
    
    
    
    188
    
    
    
    103,228Other income (expense)
    
    
    81,748
    
    
    
    (92,984
    )
    
    
    (4,099
    )
    
    
    (188
    )
    
    
    (15,523
    )Equity in earnings (losses) of subsidiaries
    
    
    50,850
    
    
    
    27,821
    
    
    
    
    
    
    
    (78,671
    )
    
    
    Income before income taxes, minority
interest, earnings (losses) from
unconsolidated entities and loss from
discontinued operations
    
    
    50,850
    
    
    
    65,369
    
    
    
    50,157
    
    
    
    (78,671
    )
    
    
    87,705Provision for income taxes
    
    
    
    
    
    
    11,718
    
    
    
    8,822
    
    
    
    
    
    
    
    20,540Income before minority interest, earnings
(losses) from unconsolidated entities and
loss from discontinued operations
    
    
    50,850
    
    
    
    53,651
    
    
    
    41,335
    
    
    
    (78,671
    )
    
    
    67,165Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,680
    )
    
    
    (15,680
    )Earnings (losses) from unconsolidated
entities, net of taxes
    
    
    
    
    
    
    3,227
    
    
    
    (1,714
    )
    
    
    
    
    
    
    1,513Income from continuing operations
    
    
    50,850
    
    
    
    56,878
    
    
    
    39,621
    
    
    
    (94,351
    )
    
    
    52,998Loss from discontinued operations, net of
taxes
    
    
    
    
    
    
    (143
    )
    
    
    (1,779
    )
    
    
    778
    
    
    
    (1,144
    )Gain (Impairment) of discontinued
Operations
    
    
    
    
    
    
    
    
    
    
    (1,180
    )
    
    
    176
    
    
    
    (1,004
    )Net income
    
    $
    50,850
    
    
    $
    56,735
    
    
    $
    36,662
    
    
    $
    (93,397
    )
    
    $
    50,850
 EliminationNon-
    
    
    andParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedFor the Year Ended August
31, 2005 (Restated)Revenues
    
    $
    
    
    
    $
    3,086,005
    
    
    $
    215,074
    
    
    $
    (38,751
    )
    
    $
    3,262,328Cost of revenues
    
    
    
    
    
    
    2,834,656
    
    
    
    174,328
    
    
    
    (39,326
    )
    
    
    2,969,658Gross profit
    
    
    
    
    
    
    251,349
    
    
    
    40,746
    
    
    
    575
    
    
    
    292,670General and administrative expenses
    
    
    55,495
    
    
    
    120,772
    
    
    
    14,037
    
    
    
    (52
    )
    
    
    190,252Operating income
    
    
    (55,495
    )
    
    
    130,577
    
    
    
    26,709
    
    
    
    627
    
    
    
    102,418Other income (expense)
    
    
    55,329
    
    
    
    (118,119
    )
    
    
    (220
    )
    
    
    (627
    )
    
    
    (63,637
    )Equity in earnings (losses) of subsidiaries
    
    
    15,976
    
    
    
    23,218
    
    
    
    
    
    
    
    (39,194
    )
    
    
    Income (loss) before income taxes,
minority interest, earnings (losses) from
unconsolidated entities and loss from
discontinued operations
    
    
    15,810
    
    
    
    35,676
    
    
    
    26,489
    
    
    
    (39,194
    )
    
    
    38,781Provision for income taxes
    
    
    214
    
    
    
    15,415
    
    
    
    2,155
    
    
    
    
    
    
    
    17,784Income before minority interest, earnings
(losses) from unconsolidated entities and
loss from discontinued operations
    
    
    15,596
    
    
    
    20,261
    
    
    
    24,334
    
    
    
    (39,194
    )
    
    
    20,997Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,243
    )
    
    
    (7,243
    )Earnings (losses) from unconsolidated
entities, net of taxes
    
    
    380
    
    
    
    4,144
    
    
    
    (715
    )
    
    
    
    
    
    
    3,809Income from continuing operations
    
    
    15,976
    
    
    
    24,405
    
    
    
    23,619
    
    
    
    (46,437
    )
    
    
    17,563Loss from discontinued operations, net of
taxes
    
    
    
    
    
    
    (776
    )
    
    
    (875
    )
    
    
    64
    
    
    
    (1,587
    )Net income
    
    $
    15,976
    
    
    $
    23,629
    
    
    $
    22,744
    
    
    $
    (46,373
    )
    
    $
    15,976
 124




---



##### Table of Contents



EliminationNon-
    
    
    andParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedFor the Year Ended August
31, 2004 (Restated)Revenues
    
    $
    
    
    
    $
    2,775,156
    
    
    $
    269,884
    
    
    $
    (30,331
    )
    
    $
    3,014,709Cost of revenues
    
    
    
    
    
    
    2,598,027
    
    
    
    226,120
    
    
    
    (30,126
    )
    
    
    2,794,021Gross profit
    
    
    
    
    
    
    177,129
    
    
    
    43,764
    
    
    
    (205
    )
    
    
    220,688General and administrative expenses
    
    
    59,656
    
    
    
    141,043
    
    
    
    16,720
    
    
    
    (205
    )
    
    
    217,214Operating income (loss)
    
    
    (59,656
    )
    
    
    36,086
    
    
    
    27,044
    
    
    
    
    
    
    
    3,474Other income (expense)
    
    
    59,679
    
    
    
    (93,160
    )
    
    
    (3,010
    )
    
    
    (2,485
    )
    
    
    (38,976
    )Equity in earnings (losses) of subsidiaries
    
    
    (33,075
    )
    
    
    25,545
    
    
    
    
    
    
    
    7,530
    
    
    
    Income (loss) before income taxes,
minority interest, earnings (losses) from
unconsolidated entities and income (loss)
from discontinued operations
    
    
    (33,052
    )
    
    
    (31,529
    )
    
    
    24,034
    
    
    
    5,045
    
    
    
    (35,502
    )Provision (benefit) for income taxes
    
    
    (28
    )
    
    
    (14,339
    )
    
    
    (232
    )
    
    
    
    
    
    
    (14,599
    )Income (loss) before minority interest,
earnings (losses) from unconsolidated
entities and income (loss) from
discontinued operations
    
    
    (33,024
    )
    
    
    (17,190
    )
    
    
    24,266
    
    
    
    5,045
    
    
    
    (20,903
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (171
    )
    
    
    (8,991
    )
    
    
    (9,162
    )Earnings (losses) from unconsolidated
entities, net of taxes
    
    
    (51
    )
    
    
    4,054
    
    
    
    (1,425
    )
    
    
    
    
    
    
    2,578Income (loss) from continuing operations
    
    
    (33,075
    )
    
    
    (13,136
    )
    
    
    22,670
    
    
    
    (3,946
    )
    
    
    (27,487
    )Income (loss) from discontinued
operations, net of taxes
    
    
    
    
    
    
    (4,669
    )
    
    
    (985
    )
    
    
    66
    
    
    
    (5,588
    )Net income (loss)
    
    $
    (33,075
    )
    
    $
    (17,805
    )
    
    $
    21,685
    
    
    $
    (3,880
    )
    
    $
    (33,075
    )
 125




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##### Table of Contents



Non-Parent
    
    
    Guarantor
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the Year Ended August 31, 2006Net cash provided by (used in)
operating activities
    
    $
    47,695
    
    
    $
    (154,394
    )
    
    $
    31,619
    
    
    $
    
    
    
    $
    (75,080
    )Net cash provided by (used in) investing
activities
    
    
    (7,966
    )
    
    
    84,650
    
    
    
    (9,413
    )
    
    
    
    
    
    
    67,271Net cash provided by (used in) financing
activities
    
    
    (19,757
    )
    
    
    73,929
    
    
    
    47,134
    
    
    
    
    
    
    
    101,306Cash from consolidation of variable
interest entities previously
unconsolidated
    
    
    
    
    
    
    
    
    
    
    2,290
    
    
    
    
    
    
    
    2,290Effects of foreign exchange rate changes
on cash
    
    
    
    
    
    
    
    
    
    
    2,271
    
    
    
    
    
    
    
    2,271Net increase (decrease) in cash and cash
equivalents
    
    
    19,972
    
    
    
    4,185
    
    
    
    73,901
    
    
    
    
    
    
    
    98,058Cash and cash equivalents  beginning of
the year
    
    
    870
    
    
    
    22,970
    
    
    
    32,939
    
    
    
    
    
    
    
    56,779Cash and cash equivalents  end of the year
    
    $
    20,842
    
    
    $
    27,155
    
    
    $
    106,840
    
    
    $
    
    
    
    $
    154,837
 Non-Parent
    
    
    Guarantor
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the Year Ended August
31, 2005 (Restated)Net cash provided by (used in)
operating activities
    
    $
    74,655
    
    
    $
    (38,986
    )
    
    $
    31,559
    
    
    $
    
    
    
    $
    67,228Net cash provided by (used in) investing
activities
    
    
    (5,771
    )
    
    
    (112,040
    )
    
    
    (8,651
    )
    
    
    
    
    
    
    (126,462
    )Net cash provided by (used in) financing
activities
    
    
    (115,499
    )
    
    
    133,108
    
    
    
    (4,096
    )
    
    
    
    
    
    
    13,513Cash from consolidation of variable
interest entities previously unconsolidated
    
    
    
    
    
    
    
    
    
    
    1,343
    
    
    
    
    
    
    
    1,343Effects of foreign exchange rate changes on
cash
    
    
    
    
    
    
    
    
    
    
    (1,194
    )
    
    
    
    
    
    
    (1,194
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (46,615
    )
    
    
    (17,918
    )
    
    
    18,961
    
    
    
    
    
    
    
    (45,572
    )Cash and cash equivalents  beginning of
the year
    
    
    47,485
    
    
    
    40,888
    
    
    
    13,978
    
    
    
    
    
    
    
    102,351Cash and cash equivalents  end of the year
    
    $
    870
    
    
    $
    22,970
    
    
    $
    32,939
    
    
    $
    
    
    
    $
    56,779
 126




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##### Table of Contents



Non-Parent
    
    
    Guarantor
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the Year Ended August
31, 2004 (Restated)Net cash
provided by (used
in) operating
activities
    
    $
    65,843
    
    
    $
    (97,623
    )
    
    $
    16,944
    
    
    $
    
    
    
    $
    (14,836
    )Net cash provided
by (used in)
investing
activities
    
    
    (3,294
    )
    
    
    (20,507
    )
    
    
    (8,633
    )
    
    
    
    
    
    
    (32,434
    )Net cash provided
by (used in)
financing
activities
    
    
    (113,917
    )
    
    
    116,266
    
    
    
    (41,797
    )
    
    
    
    
    
    
    (39,448
    )Cash from
consolidation of
variable interest
entities previously
unconsolidated
    
    
    
    
    
    
    
    
    
    
    879
    
    
    
    
    
    
    
    879Effects of foreign
exchange rate
changes on cash
    
    
    
    
    
    
    
    
    
    
    (1,519
    )
    
    
    
    
    
    
    (1,519
    )Net increase
(decrease) in cash
and cash
equivalents
    
    
    (51,368
    )
    
    
    (1,864
    )
    
    
    (34,126
    )
    
    
    
    
    
    
    (87,358
    )Cash and cash
equivalents 
beginning of the
year
    
    
    98,853
    
    
    
    42,752
    
    
    
    48,104
    
    
    
    
    
    
    
    189,709Cash and cash
equivalents  end
of the year
    
    $
    47,485
    
    
    $
    40,888
    
    
    $
    13,978
    
    
    $
    
    
    
    $
    102,351
 127




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##### Table of Contents



Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
  
 Item
9A. Controls and Procedures.
 Managements Quarterly Evaluation of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
    Managements Consideration of the Restatements
  
    
    During the third quarter, we discovered that the recognition of revenue on one contract
accounted for under the percentage-of-completion method was overstated due to a clerical
error in the computation. The error occurred because a key control, the review of the
calculation, which would have detected the overstatement, did not operate correctly. Our
condensed consolidated financial statements for the three-month and six-month periods
ended February 28, 2006 were restated to correct this error.
    
    Also during the third quarter, we misapplied GAAP related to consolidation accounting
under FIN 46(R) for a minority interest in one variable interest entity for which we are
the primary beneficiary. The appropriate accounting personnel did not identify the
misapplication of the accounting guidance in FIN 46(R), which led to a misallocation of
minority interest losses on the income statement, resulting in an overstatement of net
income. Our condensed consolidated financial statements for the three-month and six-month
periods ended February 28, 2006 were restated to correct this error.
    
    We misapplied GAAP related to recording compensation expense in accordance with APB 25.
We discovered that the accounting measurement dates for certain stock option awards during
Fiscal 2000 were determined in error. The correct measurement date should have been the
date upon which the list of the recipients and specific allocations was finalized, rather
than the date that the Compensation Committee initially approved the award. We restated
our consolidated financial statements for the years ended August 31, 2001 through 2005 to
record non-cash, stock-based compensation expense related to this stock option grant.
 Remediation of Material Weaknesses
  
    
    As a part of its planned remedial measures related to the clerical errors in accounting
for contracts under the percentage of completion method, our management sponsored a plan
to standardize the policy for revenue recognition for contracts accounted for under the
percentage of completion method and enhance training for the personnel which performs and
reviews the percent complete calculations.
    
    As a part of its planned remedial measures related to the misapplication of GAAP related to
consolidation accounting under FIN 46(R) for a minority interest in one variable interest
entity for which we are the primary beneficiary, our management initiated additional
controls which include formally communicating the results of operations and financial
positions of entities less than 100 percent owned to personnel with an in-depth knowledge
of the operations of the entity, senior executives, as well as financial accounting
personnel and appointed and trained an internal subject matter expert who is responsible
for assessing the accounting treatment of current and future investments in entities that
are less than 100 percent owned.
    
    As a part of its planned remedial measures related to the misapplication of GAAP
related to recording compensation expense in accordance with APB 25, our management
sponsored a plan to train the personnel which performs and reviews the measurement
of share-based compensation expense.
  Attestation Report of the Independent Registered Public Accounting Firm
  Changes in Internal Control over Financial Reporting
  
 Item 9B.
Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers of The Registrant
    
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##### Table of Contents



Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15.
Exhibits, Financial Statement Schedules
  See Item 8 of Part II of this report.2. Financial Statement Schedules.All schedules have been omitted since the required information is not present or not present in
amounts sufficient to require submission of the schedule, or because the information required is
included in the consolidated financial statements and notes thereto.3. Exhibits.
 3.1.
    
    Composite of the Restatement of the Articles of Incorporation of The Shaw Group Inc. (the
Company), as amended by (i) Articles of Amendment dated January 22, 2001 and (ii) Articles
of Amendment dated July 31, 2001 (incorporated by reference to the designated Exhibit to the
Companys Annual Report on Form 10-K for the fiscal year
ended August 31, 2001) (SEC File No. 1-12227).3.2
    
    Articles of Amendment of the Restatement of the Articles of Incorporation of the Company
dated January 22, 2001 (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended February 28, 2001) (SEC File No. 1-12227).3.3
    
    Articles of Amendment to Restatement of the Articles of Incorporation of the Company dated
July 31, 2001 (incorporated by reference to the designated Exhibit to the Companys
Registration Statement on Form 8-A filed on July 30, 2001) (SEC File No. 1-12227).3.4
    
    Composite of the Amended and Restated By-Laws of the Company dated December 8, 1993 as
supplemented by Supplement to Amended and Restated By-Laws of the Company dated October 16,
2003 (filed herewith).
 129




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##### Table of Contents



3.5
    
    Supplement to Amended and Restated By-laws of the Company dated October 17, 2003
(incorporated by reference to the designated Exhibit to the Companys Annual Report on Form
10-K for the fiscal year ended August 31, 2003, as amended) (SEC File No. 1-12227).4.1
    
    Specimen Common Stock Certificate (incorporated by reference to the designated Exhibit to the
Companys Registration Statement on Form S-1 filed on
October 22, 1993, as amended (Registration No. 33-70722)).4.2
    
    Indenture dated as of May 1, 2001, between the Company and United States Trust Company of New
York including Form of Liquid Yield Option Note due 2021 (Zero Coupon-Senior) (Exhibits A-1
and A-2) (incorporated by reference to the designated Exhibit to the Companys Current Report
on Form 8-K filed on May 11, 2001) (SEC File No. 1-12227).4.3
    
    Rights Agreement, dated as of July 9, 2001, between the Company and First Union National
Bank, as Rights Agent, including the Form of Articles of Amendment to the Restatement of the
Articles of Incorporation of the Company as Exhibit A, the form of Rights Certificate as
Exhibit B and the form of the Summary of Rights to Purchase Preferred Shares as Exhibit C
(incorporated by reference to the designated Exhibit to the Companys Registration Statement
on Form 8-A filed on July 30, 2001) (SEC File No. 1-12227).4.4
    
    Indenture dated as of March 17, 2003 by and among the Company, the Subsidiary Guarantors
party thereto, and The Bank of New York, as trustee, including form of 10 3/4% Senior Note due
2010 (exhibits thereto) (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended February 28, 2003) (SEC File No. 1-12227).4.5
    
    Third Supplemental Indenture dated as of April 25, 2005, by and among The Shaw Group Inc., a
Louisiana corporation, as issuer, its subsidiaries signatories thereto, as subsidiary
guarantors, and The Bank of New York, a New York banking corporation, as trustee, with respect
to the 10 3/4% Senior Notes Due 2010 (incorporated by reference to the designated Exhibit to the
Companys Current Report on Form 8-K filed on May 2, 2005) (SEC File No. 1-12227).4.6
    
    Registration Rights Agreement dated as of March 17, 2003 by and among the Company and Credit
Suisse First Boston LLC, UBS Warburg LLC, BMO Nesbitt Burns Corp., Credit Lyonnais Securities
(USA) Inc., BNP Paribas Securities Corp. and U.S. Bancorp Piper Jaffray Inc. (incorporated by
reference to the designated Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarter ended February 28, 2003) (SEC File No. 1-12227).4.7
    
    Form of 10 3/4% Senior Note Due 2010 (Included as Exhibit I to the Indenture incorporated by
reference as Exhibit 4.4 hereto).4.8
    
    Registration Rights Agreement dated as of May 1, 2001, among the Company, Merrill Lynch & Co.
and Merrill Lynch, Pierce, Fenner & Smith, Incorporated (incorporated by reference to the
designated exhibit to the Companys Current Report on Form 8-K filed on May 11, 2001) (SEC File No. 1-12227).10.1*
    
    The Shaw Group Inc. 2001 Employee Incentive Compensation Plan, amended and restated through
April 6, 2006 (incorporated by reference to the designated Exhibit to the Companys Quarterly
Report on Form 10-Q for the quarter ended May 31, 2006) (SEC File No. 1-12227).10.2*
    
    Form of Incentive Stock Option Agreement (as amended and restated) under The Shaw Group Inc.
2001 Employee Incentive Compensation Plan (incorporated by reference to the designated Exhibit
to the Companys Quarterly Report on Form 10-Q for the quarter ended May 31, 2006) (SEC File No. 1-12227).10.3*
    
    Form of Non-Qualified Stock Option Agreement (as amended and restated) under The Shaw Group
Inc. 2001 Employee Incentive Compensation Plan (incorporated by reference to the designated
Exhibit to the Companys Quarterly Report on Form 10-Q for the quarter ended May 31, 2006) (SEC File No. 1-12227).10.4*
    
    Form of Restricted Stock Agreement under The Shaw Group Inc. 2001 Employee Incentive
Compensation
 130




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##### Table of Contents



Plan (incorporated by reference to the designated Exhibit to the Companys Current Report on
Form 8-K filed on October 12, 2004) (SEC File No. 1-12227).10.5*
    
    Informal agreements to award shares of restricted stock under The Shaw Group Inc. 2001
Employee Incentive Compensation Plan (incorporated by reference to the designated Exhibit to
the Companys Current Report on Form 8-K filed in October 18, 2004) (SEC File No. 1-12227).10.6*
    
    The Shaw Group Inc. Stone & Webster Acquisition Stock Option Plan (incorporated by reference
to the designated Exhibit to the Companys Registration Statement on Form S-8 filed on June
12, 2001 (Registration No. 333-62856)).10.7*
    
    The Shaw Group Inc. 1993 Employee Stock Incentive Plan, amended and restated through October
8, 2001 (incorporated by reference to the designated Exhibit to the Companys Annual Report on
Form 10-K for the fiscal year ended August 31, 2001) (SEC File No. 1-12227).10.8*
    
    The Shaw Group Inc. 2005 Non-Employee Director Stock Incentive Plan, amended and restated
through April 6, 2006 (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended May 31, 2006).10.9*
    
    Form of Nonqualified Stock Option Agreement under the 2005 Non-Employee Director Stock
Incentive Plan (incorporated by reference to the designated Exhibit to the Companys Current
Report on Form 8-K filed on January 31, 2006) (SEC File No. 1-12227).10.10*
    
    Form of Phantom Stock Agreement under the 2005 Non-Employee Director Stock Incentive Plan
(incorporated by reference to the designated Exhibit to the Companys Quarterly Report on Form
10-Q for the quarter ended May 31, 2006).10.11*
    
    The Shaw Group Inc. Non-Employee Director Compensation Summary (incorporated by reference to
the disclosures set forth under Item 1.01 of the Companys Current Report on Form 8-K filed on
January 12, 2005) (SEC File No. 1-12227).10.12*
    
    Flexible Perquisites Program for certain executive officers (the description of the Flexible
Perquisites Program is incorporated by reference to the disclosures set forth under Item 1.01
of the Companys Current Report on Form 8-K filed on November 1, 2004) (SEC File No. 1-12227).10.13*
    
    The Shaw Group Inc. 2005 Management Incentive Plan (incorporated by reference to the
designated Exhibit to the Companys Current Report on Form 8-K filed on March 3, 2006) (SEC File No. 1-12227).10.14*
    
    Fiscal year 2006 target incentive awards established for executive officers of the Company
under the 2005 Management Incentive Plan (incorporated by reference to the disclosures set
forth under Item 1.01 of the Companys Current Report on Form 8-K filed on March 3, 2006) (SEC File No. 1-12227).10.15*
    
    Summary of informal agreement to provide health insurance benefits to Albert McAlister and
his family members (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended February 28, 2005) (SEC File No. 1-12227).10.16*
    
    Employment Agreement dated as of April 10, 2001, by and between the Company and J.M.
Bernhard, Jr. (incorporated by reference to the designated Exhibit to the Companys Annual
Report on Form 10-K for the fiscal year ended August 31, 2001) (SEC File No. 1-12227).10.17*
    
    Employment Agreement dated as of July 10, 2002, by and between the Company and T. A.
Barfield, Jr. (incorporated by reference to the designated Exhibit to the Companys Annual
Report on Form 10-K for the fiscal year ended August 31, 2002) (SEC File No. 1-12227).10.18*
    
    Employment Agreement dated as of May 1, 2000, by and between the Company and Robert L. Belk
(incorporated by reference to the designated Exhibit to the Companys Annual Report on Form
10-K for
the fiscal year ended August 31, 2000) (SEC File No. 1-12227).
 131




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##### Table of Contents



10.19*
    
    Amendment to Employment Agreement of Robert L. Belk dated December 1, 2004 (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on
December 3, 2004) (SEC File No. 1-12227).10.20*
    
    Employment Agreement dated as of May 5, 2000, by and between the Company and Richard F. Gill
and amended January 10, 2001(incorporated by reference to the designated Exhibit to the
Companys Annual Report on Form 10-K for the fiscal year ended August 31, 2001) (SEC File No. 1-12227).10.21*
    
    Employment Agreement of David L. Chapman, Sr. Dated April 6, 2002 (incorporated by reference
to the designated Exhibit to the Companys Current Report on Form 8-K filed on December 24,
2003) (SEC File No. 1-12227).10.22*
    
    Amendment to Employment Agreement of David L. Chapman, Sr., dated November 29, 2004 (with an
effective date of April 1, 2005) (incorporated by reference to the designated Exhibit to the
Companys Current Report on Form 8-K filed on January 12, 2005) (SEC File No. 1-12227).10.23*
    
    Employment Agreement of Nicholas C. Gallinaro dated April 13, 2002, as amended (incorporated
by reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on
December 24, 2003) (SEC File No. 1-12227).10.24*
    
    Employment Agreement of Dorsey Ron McCall dated July 29, 2002 (incorporated by reference to
the designated Exhibit to the Companys Current Report on Form 8-K filed on December 24,
2003).10.25*
    
    Employment Agreement of Ebrahim Fatemizabdeh dated July 7, 2005 (with an effective date of
(July 7, 2005) incorporated by reference to the designated Exhibit to the Companys Quarterly
Report on Form 10-Q for the quarter ended May 31, 2005) (SEC File No. 1-12227).10.26*
    
    Summary of oral severance agreement with Dirk J. Wild dated October 13, 2004 (incorporated
by reference to the disclosures set forth under Item 5.02 of the Companys Current Report on
Form 8-K filed on October 18, 2004) (SEC File No. 1-12227).10.27*
    
    Employment Agreement of Gary P. Graphia dated October 14, 2005 (incorporated by reference to
the designated Exhibit to the Companys Current Report on Form 8-K filed on October 14, 2005) (SEC File No. 1-12227).10.28*
    
    Employment Agreement of David P. Barry effective as of March 13, 2006 (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on March
14, 2006).10.29*
    
    Employment Agreement of G. Patrick Thompson effective as of July 6, 2006 (incorporated by
reference to the designated Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarter ended May 31, 2006) (SEC File No. 1-12227).10.30*
    
    Employment Agreement of Ronald W. Oakley dated effective as of August 3, 2006 (incorporated
by reference to the designated Exhibit to the Companys Current Report in Form 8-K filed on
August 4, 2006) (SEC File No. 1-12227).10.31
    
    Asset Purchase Agreement, dated as of July 14, 2000, among Stone & Webster, Incorporated,
certain subsidiaries of Stone & Webster, Incorporated and The Shaw Group Inc. (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on July
28, 2000) (SEC File No. 1-12227).10.32
    
    Composite Asset Purchase Agreement, dated as of January 23, 2002, by and among The Shaw
Group Inc., The IT Group, Inc. and certain subsidiaries of The IT Group, Inc., including the
following amendments: (i) Amendment No. 1, dated January 24, 2002, to Asset Purchase
Agreement, (ii) Amendment No. 2, dated January 29, 2002, to Asset Purchase Agreement, and
(iii) a letter agreement amending Section 8.04(a)(ii) of the Asset Purchase Agreement, dated
as of April 30, 2002, between The IT Group, Inc. and The Shaw Group Inc. (incorporated by
reference to designated Exhibit to the Companys Current Report on Form 8-K filed on May 16,
2002) (SEC File No. 1-12227). Pursuant to Item 601(b) (2) of Regulation S-K, the exhibits and schedules referred
 132




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##### Table of Contents



to in the Asset Purchase Agreement are omitted. The Registrant hereby undertakes to furnish
a supplemental copy of any omitted schedule or exhibit to the Commission upon request.10.33
    
    Amendment No. 3, dated May 2, 2002, to Asset Purchase Agreement by and among The Shaw Group
Inc., The IT Group, Inc. and certain subsidiaries of The IT Group, Inc. (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on May
16, 2002) (SEC File No. 1-12227). Pursuant to Item 601(b) (2) of Regulation S-K, the exhibits and schedules referred
to in Amendment No. 3 are omitted. The Registrant hereby undertakes to furnish a supplemental
copy of any omitted schedule or exhibit to the Commission upon request.10.34
    
    Amendment No. 4, dated May 3, 2002, to Asset Purchase Agreement by and among The Shaw Group
Inc., The IT Group, Inc. and certain subsidiaries of the IT Group, Inc. (incorporated herein
by reference to the designated Exhibit to the Companys Current Report on Form 8-K filed with
the Securities and Exchange Commission on May 16, 2002) (SEC File No. 1-12227).10.35
    
    $450,000,000 Credit Agreement dated April 25, 2005, by and among The Shaw Group Inc., BNP
Paribas and The Other Lenders Signatory Thereto, BNP Paribas Securities Corp., Bank of
Montreal, Credit Suisse First Boston, UBS Securities LLC, Regions Bank and Merrill Lynch
Pierce, Fenner & Smith, Incorporated (incorporated by reference to the designated Exhibit to
the Companys Current Report on Form 8-K filed on April 28, 2005) (SEC File No. 1-12227).10.36
    
    Amendment No. 1 dated October 3, 2005, to that certain $450,000,000 Credit Agreement dated
April 25, 2005, by and among The Shaw Group Inc., BNP Paribas and The Other Lenders Signatory
Thereto, BNP Paribas Securities Corp., Bank of Montreal, Credit Suisse First Boston, UBS
Securities LLC, Regions Bank and Merrill Lynch Pierce, Fenner & Smith, Incorporated
(incorporated by reference to the designated Exhibit to the Companys Current Report on Form
8-K filed on October 4, 2005) (SEC File No. 1-12227).10.37
    
    Amendment No. 2 dated February 27, 2006, to that certain $450,000,000 Credit Agreement dated
April 25, 2005, by and among The Shaw Group Inc., BNP Paribas and The Other Lenders Signatory
Thereto, BNP Paribas Securities Corp., Bank of Montreal, Credit Suisse First Boston, UBS
Securities LLC, Regions Bank and Merrill Lynch Pierce, Fenner & Smith, Incorporated
(incorporated by reference to the designated Exhibit to the Companys Current Report on Form
8-K filed on February 28, 2006) (SEC File No. 1-12227).10.38
    
    Amendment No. 3 dated June 20, 2006, to that certain $450,000,000 Credit Agreement dated
April 25, 2005, by and among The Shaw Group Inc., BNP Paribas and The Other Lenders Signatory
Thereto, BNP Paribas Securities Corp., Bank of Montreal, Credit Suisse First Boston, UBS
Securities LLC, Regions Bank and Merrill Lynch Pierce, Fenner & Smith, Incorporated (filed
herewith).10.39
    
    The Shaw Group Inc. 401(k) Plan (incorporated by reference to the designated Exhibit to the
Companys Registration Statement on Form S-8 filed on
May 4, 2004) (Registration No. 333 - 115 155).10.40
    
    The Shaw Group Inc. 401(k) Plan for Certain Hourly Employees (incorporated by reference to
the designated Exhibit to the Companys Registration Statement on Form S-8 filed on May 4,
2004) (Registration No. 333 - 115 155).14.1
    
    The Shaw Group Inc. Code of Corporate Conduct and Insider Trading and Disclosure Policy dated
June 2006 (filed herewith).14.2
    
    The Shaw Group Inc. Code of Ethics
for Chief Executive Officer and Senior Financial Officers (adopted as
of December 16, 2003) (filed herewith).21.1
    
    Subsidiaries of The Shaw Group Inc. (filed herewith).23.1
    
    Consent of Ernst & Young LLP (filed herewith).31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith).32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith).
 
  133




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##### Table of Contents



SIGNATURES AND CERTIFICATIONS
 
   THE SHAW GROUP INC./s/ J. M. Bernhard, Jr.By: J. M. Bernhard, Jr.Chief Executive OfficerDate: October 31, 2006
  Signature
    
    Title
    
    Date/s/ J. M. Bernhard, Jr.

(J. M. Bernhard, Jr.)
    
    Chairman of the Board and Chief
Executive Officer, and Director
    
    October 31, 2006/s/ Robert L. Belk

(Robert L. Belk)
    
    Executive Vice President and Chief
Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
    
    October 31, 2006/s/ Albert D. McAlister

(Albert D. McAlister)
    
    Director
    
    October 31, 2006/s/ L. Lane Grigsby

(L. Lane Grigsby)
    
    Director
    
    October 31, 2006/s/ David W. Hoyle

(David W. Hoyle)
    
    Director
    
    October 31, 2006/s/ John W. Sinders, Jr.

(John W. Sinders, Jr.)
    
    Director
    
    October 31, 2006/s/ James F. Barker

(James F. Barker)
    
    Director
    
    October 31, 2006/s/ Charles E. Roemer, III

(Charles E. Roemer, III)
    
    Director
    
    October 31, 2006/s/ Daniel A. Hoffler

(Daniel A. Hoffler)
    
    Director
    
    October 31, 2006/s/ Michael J. Mancuso

(Michael J. Mancuso)
    
    Director
    
    October 31, 2006
 134




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##### Table of Contents



3.1.
    
    Composite of the Restatement of the Articles of Incorporation of The Shaw Group Inc. (the
Company), as amended by (i) Articles of Amendment dated January 22, 2001 and (ii) Articles
of Amendment dated July 31, 2001 (incorporated by reference to the designated Exhibit to the
Companys Annual Report on Form 10-K for the fiscal year ended
August 31, 2001) (SEC File No. 1-12227).3.2
    
    Articles of Amendment of the Restatement of the Articles of Incorporation of the Company
dated January 22, 2001 (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended February 28,
2001) (SEC File No. 1-12227).3.3
    
    Articles of Amendment to Restatement of the Articles of Incorporation of the Company dated
July 31, 2001 (incorporated by reference to the designated Exhibit to the Companys
Registration Statement on Form 8-A filed on July 30, 2001) (SEC File No. 1-12227).3.4
    
    Composite of the Amended and Restated By-Laws of the Company dated December 8, 1993 as
supplemented by Supplement to Amended and Restated By-Laws of the Company dated October 16,
2003 (filed herewith).3.5
    
    Supplement to Amended and Restated By-laws of the Company dated October 17, 2003
(incorporated by reference to the designated Exhibit to the Companys Annual Report on Form
10-K for the fiscal year ended August 31, 2003, as amended) (SEC File No. 1-12227).4.1
    
    Specimen Common Stock Certificate (incorporated by reference to the designated Exhibit to the
Companys Registration Statement on Form S-1 filed on
October 22, 1993, as amended (Registration No.
33-70722)).4.2
    
    Indenture dated as of May 1, 2001, between the Company and United States Trust Company of New
York including Form of Liquid Yield Option Note due 2021 (Zero Coupon-Senior) (Exhibits A-1
and A-2) (incorporated by reference to the designated Exhibit to the Companys Current Report
on Form 8-K filed on May 11, 2001) (SEC File No. 1-12227).4.3
    
    Rights Agreement, dated as of July 9, 2001, between the Company and First Union National
Bank, as Rights Agent, including the Form of Articles of Amendment to the Restatement of the
Articles of Incorporation of the Company as Exhibit A, the form of Rights Certificate as
Exhibit B and the form of the Summary of Rights to Purchase Preferred Shares as Exhibit C
(incorporated by reference to the designated Exhibit to the Companys Registration Statement
on Form 8-A filed on July 30, 2001) (SEC File No. 1-12227).4.4
    
    Indenture dated as of March 17, 2003 by and among the Company, the Subsidiary Guarantors
party thereto, and The Bank of New York, as trustee, including form of 10 3/4% Senior Note due
2010 (exhibits thereto) (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended February 28,
2003) (SEC File No. 1-12227).4.5
    
    Third Supplemental Indenture dated as of April 25, 2005, by and among The Shaw Group Inc., a
Louisiana corporation, as issuer, its subsidiaries signatories thereto, as subsidiary
guarantors, and The Bank of New York, a New York banking corporation, as trustee, with respect
to the 10 3/4% Senior Notes Due 2010 (incorporated by reference to the designated Exhibit to the
Companys Current Report on Form 8-K filed on May 2, 2005) (SEC File No. 1-12227).4.6
    
    Registration Rights Agreement dated as of March 17, 2003 by and among the Company and Credit
Suisse First Boston LLC, UBS Warburg LLC, BMO Nesbitt Burns Corp., Credit Lyonnais Securities
(USA) Inc., BNP Paribas Securities Corp. and U.S. Bancorp Piper Jaffray Inc. (incorporated by
reference to the designated Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarter ended February 28, 2003) (SEC File No. 1-12227).4.7
    
    Form of 10 3/4% Senior Note Due 2010 (Included as Exhibit I to the Indenture incorporated by
reference as Exhibit 4.4 hereto).
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4.8
    
    Registration Rights Agreement dated as of May 1, 2001, among the Company, Merrill Lynch & Co.
and Merrill Lynch, Pierce, Fenner & Smith, Incorporated (incorporated by reference to the
designated exhibit to the Companys Current Report on Form 8-K
filed on May 11, 2001) (SEC File No. 1-12227).10.1*
    
    The Shaw Group Inc. 2001 Employee Incentive Compensation Plan, amended and restated through
April 6, 2006 (incorporated by reference to the designated Exhibit to the Companys Quarterly
Report on Form 10-Q for the quarter ended May 31, 2006) (SEC File No. 1-12227).10.2*
    
    Form of Incentive Stock Option Agreement (as amended and restated) under The Shaw Group Inc.
2001 Employee Incentive Compensation Plan (incorporated by reference to the designated Exhibit
to the Companys Quarterly Report on Form 10-Q for the quarter
ended May 31, 2006) (SEC File No. 1-12227).10.3*
    
    Form of Non-Qualified Stock Option Agreement (as amended and restated) under The Shaw Group
Inc. 2001 Employee Incentive Compensation Plan (incorporated by reference to the designated
Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarter ended May 31, 2006) (SEC File No. 1-12227).10.4*
    
    Form of Restricted Stock Agreement under The Shaw Group Inc. 2001 Employee Incentive
Compensation Plan (incorporated by reference to the designated Exhibit to the Companys
Current Report on Form 8-K filed on October 12, 2004) (SEC File No. 1-12227).10.5*
    
    Informal agreements to award shares of restricted stock under The Shaw Group Inc. 2001
Employee Incentive Compensation Plan (incorporated by reference to the designated Exhibit to
the Companys Current Report on Form 8-K filed in
October 18, 2004) (SEC File No. 1-12227).10.6*
    
    The Shaw Group Inc. Stone & Webster Acquisition Stock Option Plan (incorporated by reference
to the designated Exhibit to the Companys Registration Statement on Form S-8 filed on June
12, 2001 (Registration No. 333-62856)).10.7*
    
    The Shaw Group Inc. 1993 Employee Stock Incentive Plan, amended and restated through October
8, 2001 (incorporated by reference to the designated Exhibit to the Companys Annual Report on
Form 10-K for the fiscal year ended August 31, 2001) (SEC File No. 1-12227).10.8*
    
    The Shaw Group Inc. 2005 Non-Employee Director Stock Incentive Plan, amended and restated
through April 6, 2006 (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended May 31,
2006).10.9*
    
    Form of Nonqualified Stock Option Agreement under the 2005 Non-Employee Director Stock
Incentive Plan (incorporated by reference to the designated Exhibit to the Companys Current
Report on Form 8-K filed on January 31, 2006) (SEC File No. 1-12227).10.10*
    
    Form of Phantom Stock Agreement under the 2005 Non-Employee Director Stock Incentive Plan
(incorporated by reference to the designated Exhibit to the Companys Quarterly Report on Form
10-Q for the quarter ended May 31, 2006).10.11*
    
    The Shaw Group Inc. Non-Employee Director Compensation Summary (incorporated by reference to
the disclosures set forth under Item 1.01 of the Companys Current Report on Form 8-K filed on
January 12, 2005) (SEC File No. 1-12227).10.12*
    
    Flexible Perquisites Program for certain executive officers (the description of the Flexible
Perquisites Program is incorporated by reference to the disclosures set forth under Item 1.01
of the Companys Current Report on Form 8-K filed on
November 1, 2004) (SEC File No. 1-12227).10.13*
    
    The Shaw Group Inc. 2005 Management Incentive Plan (incorporated by reference to the
designated Exhibit to the Companys Current Report on Form 8-K
filed on March 3, 2006) (SEC File No. 1-12227).
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10.14*
    
    Fiscal year 2006 target incentive awards established for executive officers of the Company
under the 2005 Management Incentive Plan (incorporated by reference to the disclosures set
forth under Item 1.01 of the Companys Current Report on
Form 8-K filed on March 3, 2006) (SEC File No. 1-12227).10.15*
    
    Summary of informal agreement to provide health insurance benefits to Albert McAlister and
his family members (incorporated by reference to the designated Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarter ended February 28,
2005) (SEC File No. 1-12227).10.16*
    
    Employment Agreement dated as of April 10, 2001, by and between the Company and J.M.
Bernhard, Jr. (incorporated by reference to the designated Exhibit to the Companys Annual
Report on Form 10-K for the fiscal year ended August 31, 2001) (SEC File No. 1-12227).10.17*
    
    Employment Agreement dated as of July 10, 2002, by and between the Company and T. A.
Barfield, Jr. (incorporated by reference to the designated Exhibit to the Companys Annual
Report on Form 10-K for the fiscal year ended August 31, 2002) (SEC File No. 1-12227).10.18*
    
    Employment Agreement dated as of May 1, 2000, by and between the Company and Robert L. Belk
(incorporated by reference to the designated Exhibit to the Companys Annual Report on Form
10-K for the fiscal year ended August 31, 2000) (SEC File No. 1-12227).10.19*
    
    Amendment to Employment Agreement of Robert L. Belk dated December 1, 2004 (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on
December 3, 2004) (SEC File No. 1-12227).10.20*
    
    Employment Agreement dated as of May 5, 2000, by and between the Company and Richard F. Gill
and amended January 10, 2001(incorporated by reference to the designated Exhibit to the
Companys Annual Report on Form 10-K for the fiscal year ended
August 31, 2001) (SEC File No. 1-12227).10.21*
    
    Employment Agreement of David L. Chapman, Sr. Dated April 6, 2002 (incorporated by reference
to the designated Exhibit to the Companys Current Report on Form 8-K filed on December 24,
2003) (SEC File No. 1-12227).10.22*
    
    Amendment to Employment Agreement of David L. Chapman, Sr., dated November 29, 2004 (with an
effective date of April 1, 2005) (incorporated by reference to the designated Exhibit to the
Companys Current Report on Form 8-K filed on January 12,
2005) (SEC File No. 1-12227).10.23*
    
    Employment Agreement of Nicholas C. Gallinaro dated April 13, 2002, as amended (incorporated
by reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on
December 24, 2003) (SEC File No. 1-12227).10.24*
    
    Employment Agreement of Dorsey Ron McCall dated July 29, 2002 (incorporated by reference to
the designated Exhibit to the Companys Current Report on Form 8-K filed on December 24,
2003).10.25*
    
    Employment Agreement of Ebrahim Fatemizabdeh dated July 7, 2005 (with an effective date of
(July 7, 2005) incorporated by reference to the designated Exhibit to the Companys Quarterly
Report on Form 10-Q for the quarter ended May 31, 2005) (SEC File No. 1-12227).10.26*
    
    Summary of oral severance agreement with Dirk J. Wild dated October 13, 2004 (incorporated
by reference to the disclosures set forth under Item 5.02 of the Companys Current Report on
Form 8-K filed on October 18, 2004) (SEC File No. 1-12227).10.27*
    
    Employment Agreement of Gary P. Graphia dated October 14, 2005 (incorporated by reference to
the designated Exhibit to the Companys Current Report on Form
8-K filed on October 14, 2005) (SEC File No. 1-12227).10.28*
    
    Employment Agreement of David P. Barry effective as of March 13, 2006 (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on March
14, 2006).
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10.29*
    
    Employment Agreement of G. Patrick Thompson effective as of July 6, 2006 (incorporated by
reference to the designated Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarter ended May 31, 2006) (SEC File No. 1-12227).10.30*
    
    Employment Agreement of Ronald W. Oakley dated effective as of August 3, 2006 (incorporated
by reference to the designated Exhibit to the Companys Current Report in Form 8-K filed on
August 4, 2006) (SEC File No. 1-12227).10.31
    
    Asset Purchase Agreement, dated as of July 14, 2000, among Stone & Webster, Incorporated,
certain subsidiaries of Stone & Webster, Incorporated and The Shaw Group Inc. (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on July
28, 2000) (SEC File No. 1-12227).10.32
    
    Composite Asset Purchase Agreement, dated as of January 23, 2002, by and among The Shaw
Group Inc., The IT Group, Inc. and certain subsidiaries of The IT Group, Inc., including the
following amendments: (i) Amendment No. 1, dated January 24, 2002, to Asset Purchase
Agreement, (ii) Amendment No. 2, dated January 29, 2002, to Asset Purchase Agreement, and
(iii) a letter agreement amending Section 8.04(a)(ii) of the Asset Purchase Agreement, dated
as of April 30, 2002, between The IT Group, Inc. and The Shaw Group Inc. (incorporated by
reference to designated Exhibit to the Companys Current Report on Form 8-K filed on May 16,
2002) (SEC File No. 1-12227). Pursuant to Item 601(b) (2) of Regulation S-K, the exhibits and schedules referred to
in the Asset Purchase Agreement are omitted. The Registrant hereby undertakes to furnish a
supplemental copy of any omitted schedule or exhibit to the
Commission upon request.10.33
    
    Amendment No. 3, dated May 2, 2002, to Asset Purchase Agreement by and among The Shaw Group
Inc., The IT Group, Inc. and certain subsidiaries of The IT Group, Inc. (incorporated by
reference to the designated Exhibit to the Companys Current Report on Form 8-K filed on May
16, 2002) (SEC File No. 1-12227). Pursuant to Item 601(b) (2) of Regulation S-K, the exhibits and schedules referred
to in Amendment No. 3 are omitted. The Registrant hereby undertakes to furnish a supplemental
copy of any omitted schedule or exhibit to the Commission upon
request.10.34
    
    Amendment No. 4, dated May 3, 2002, to Asset Purchase Agreement by and among The Shaw Group
Inc., The IT Group, Inc. and certain subsidiaries of the IT Group, Inc. (incorporated herein
by reference to the designated Exhibit to the Companys Current Report on Form 8-K filed with
the Securities and Exchange Commission on May 16, 2002) (SEC File No. 1-12227).10.35
    
    $450,000,000 Credit Agreement dated April 25, 2005, by and among The Shaw Group Inc., BNP
Paribas and The Other Lenders Signatory Thereto, BNP Paribas Securities Corp., Bank of
Montreal, Credit Suisse First Boston, UBS Securities LLC, Regions Bank and Merrill Lynch
Pierce, Fenner & Smith, Incorporated (incorporated by reference to the designated Exhibit to
the Companys Current Report on Form 8-K filed on April 28,
2005) (SEC File No. 1-12227).10.36
    
    Amendment No. 1 dated October 3, 2005, to that certain $450,000,000 Credit Agreement dated
April 25, 2005, by and among The Shaw Group Inc., BNP Paribas and The Other Lenders Signatory
Thereto, BNP Paribas Securities Corp., Bank of Montreal, Credit Suisse First Boston, UBS
Securities LLC, Regions Bank and Merrill Lynch Pierce, Fenner & Smith, Incorporated
(incorporated by reference to the designated Exhibit to the Companys Current Report on Form
8-K filed on October 4, 2005) (SEC File No. 1-12227).10.37
    
    Amendment No. 2 dated February 27, 2006, to that certain $450,000,000 Credit Agreement dated
April 25, 2005, by and among The Shaw Group Inc., BNP Paribas and The Other Lenders Signatory
Thereto, BNP Paribas Securities Corp., Bank of Montreal, Credit Suisse First Boston, UBS
Securities LLC, Regions Bank and Merrill Lynch Pierce, Fenner & Smith, Incorporated
(incorporated by reference to the designated Exhibit to the Companys Current Report on Form
8-K filed on February 28, 2006) (SEC File No. 1-12227).10.38
    
    Amendment No. 3 dated June 20, 2006, to that certain $450,000,000 Credit Agreement dated
April 25, 2005, by and among The Shaw Group Inc., BNP Paribas and The Other Lenders Signatory
Thereto, BNP Paribas Securities Corp., Bank of Montreal, Credit Suisse First Boston, UBS
Securities LLC, Regions Bank and Merrill Lynch Pierce, Fenner & Smith, Incorporated (filed
herewith).
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10.39
    
    The Shaw Group Inc. 401(k) Plan (incorporated by reference to the designated Exhibit to the
Companys Registration Statement on Form S-8 filed on
May 4, 2004) (Registration No. 333 - 115 155).10.40
    
    The Shaw Group Inc. 401(k) Plan for Certain Hourly Employees (incorporated by reference to
the designated Exhibit to the Companys Registration Statement on Form S-8 filed on May 4,
2004) (Registration No. 333 - 115 155).14.1
    
    The Shaw Group Inc. Code of Corporate Conduct and Insider Trading and Disclosure Policy dated
June 2006 (filed herewith).14.2
    
    The Shaw Group Inc. Code of Ethics
for Chief Executive Officer and Senior Financial Officers (adopted as
of December 16, 2003) (filed herewith).21.1
    
    Subsidiaries of The Shaw Group Inc. (filed herewith).23.1
    
    Consent of Ernst & Young LLP (filed herewith).31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith).32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith).
 
  139