##### Table of Contents



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, 2005
  o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 1-12227
 THE SHAW GROUP INC.
  LOUISIANA
    
    72-1106167(State or other jurisdiction of incorporation or
    
    (I.R.S. Employerorganization)
    
    Identification Number)4171 Essen Lane
    
    70809Baton Rouge, Louisiana
    
    (zip code)(Address of principal executive offices)
 (225) 932-2500
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DOCUMENTS INCORPORATED BY REFERENCE
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TABLE OF CONTENTS
 PageExplanatory StatementPART IItem 1. Business
    
    3Item 2. Properties
    
    22Item 3. Legal Proceedings
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    23PART IIItem 5.
Market for the Registrants Common Equity and Related Stockholder Matters
    
    23Item 6. Selected Consolidated Financial Data
    
    23Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    24Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    62Item 8. Financial Statements and Supplementary Data
    
    64Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    123Item 9A. Controls and Procedures
    
    123PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    123Item 11. Executive Compensation
    
    124Item 12. Security Ownership of Certain Beneficial Owners and Management
    
    124Item 13. Certain Relationships and Related Transactions
    
    124Item 14. Principal Accountant Fees and Services
    
    124PART IVItem 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
    
    124Signatures
    
    128Code of Corporate Counduct & Insidet Trading & Disclosure PolicySubsidiariesConsent of Ernst & Young L.L.P.Certification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350
      
 PART I
 
 Item 1. Business
 General
 Engineering News-Records th th
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E&I segment
  E&C segment
  Maintenance segment
  F&M segment
  CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  
    
    cyclical changes in demand for our products and services;
    
    cyclical nature of the individual markets in which our customers operate;
    
    the dollar amount of our backlog, as stated at any given time, is not indicative of our future earnings;
    
    delays or difficulties related to our projects including additional costs,
reductions in revenues or the payment of liquidated damages;
    
    the effect of our percentage-of-completion accounting policies;
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
    
    changes in the estimates and assumptions we use to prepare our financial statements;
    
    any non-compliance with the covenants in our Credit Facility, indenture relating
to our Senior Notes and indemnity agreements with our sureties and our ability to obtain
waivers and/or amendments;
    
    our ability to obtain surety bonds or other means of credit support for
projects;
    
    our ability to collateralize letters of credit or surety bonds upon
non-compliance with covenants in our Credit Facility or indemnity agreements;
    
    covenants in our Credit Facility and surety bond indemnity agreements that
restrict our ability to pursue our business strategies;
    
    our indebtedness could adversely affect our financial condition and impair our
ability to fulfill our obligations under our Credit Facility and Senior Notes;
    
    various legal, regulatory and litigation risk including, but not limited to,
class action lawsuits, the outcome of a pending informal inquiry by the Securities and
Exchange Commission (the SEC) and regulatory activities and associated periodic reviews of
the SEC and Public Company Accounting Oversight Board;
    
    the possibility of a downgrade of our debt securities by rating agencies;
    
    the nature of our contracts, particularly fixed-price contracts;
    
    risks associated with being a government contractor;
    
    the failure to meet schedule or performance requirements of our contracts;
    
    our dependence on subcontractors and equipment manufacturers;
    
    possible cost escalations associated with our fixed-price contracts;
    
    our ability to obtain new contracts for large-scale domestic and international
projects and the timing of the performance of these contracts;
    
    potential contractual and operational costs related to our environmental and infrastructure operations;
    
    risks associated with our integrated environmental solutions businesses;
    
    reputation and financial exposure due to the failure of our partners to perform their contractual obligations;
    
    our dependence on one or a few significant customers;
    
    delays and/or defaults in customer payments;
    
    potential professional liability, product liability, warranty and other
potential claims, which may not be covered by insurance;
    
    the presence of competitors with greater financial resources and the impact of competitive products, services and pricing;
    
    changes in the political and economic conditions of the countries in which we operate;
    
    work stoppages and other labor problems;
    
    our liquidity position;
    
    currency fluctuations;
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
    
    liabilities associated with various acquisitions, including the Stone & Webster and IT Group acquisitions;
    
    a determination to write-off a significant amount of intangible assets or long-lived assets;
    
    our ability to successfully identify, integrate and complete acquisitions;
    
    our failure to attract and retain qualified personnel;
    
    our ability to retain key members of our management;
    
    our competitors ability to develop or otherwise acquire equivalent or superior technology;
    
    general economic conditions;
    
    future changes in accounting standards or interpretations;
    
    inability to maintain an effective system of internal control, which could
result in inaccurate reporting of our financial results or an inability to prevent fraud;
    
    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;
    
    changes in the U.S. economy and global markets as a result of terrorists actions;
    
    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 expense including healthcare and other
employee benefits such as unemployment insurance and workers compensation; and
    
    closing of any U.S. military bases related to our privatization interests.
  www.shawgrp.com www.shawgrp.com
 Corporate Information
 shawgrp.com
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sec.gov
 Business Strategy
   Leverage Our Core Areas of Expertise to Pursue Growth Opportunities in Our Primary End Markets
 Energy and Chemical Markets
 
    
    EPC Services.With our vertically integrated portfolio of services, we are well
positioned to offer cost effective solutions allowing us to capitalize on opportunities
across the energy market including environmental retrofits, nuclear plant restarts and new
construction, coal-fired construction and expansion of gas-fired plants. Environmental
regulations and rising natural gas prices are driving opportunities throughout the
coal-fired energy industry in the growing $10 billion Flue Gas Desulphurization (FGD) market
and the construction of new build coal plants where we have extensive experience and
capabilities. Our integrated capabilities position us to take advantage of nuclear and
gas-fired generation capacity expansion in both the U.S. and international markets.In the chemicals and refining markets, we are a leading provider of proprietary technologies
and equipment. We intend to leverage our global EPC experience and technological leadership
to take advantage of increasing global demand for downstream petrochemical products,
including ethylene, where we estimate we have supplied chemical technology for 36% of the
worlds ethylene capacity construction since 1990. Opportunities include increased projects
in the petrochemical industry driven by strong Gross Domestic Product (GDP) growth in China,
India and the Former Soviet Union and the availability of lower-priced feedstocks in the
Middle East. In the international market, our global footprint positions us to capitalize on
the accelerating development of natural gas supplies and increasing demand for the
construction of petrochemical processing facilities in close proximity to these source
supplies. Additionally, we are capitalizing on requirements under clean fuels and clean air
legislation that are driving increased emissions reduction opportunities throughout the
refining and petrochemical industries. We are also well positioned to capitalize on any
growth that might occur in the liquefied natural gas (LNG) market in North America.
    
    Maintenance Services.We will continue to focus on providing maintenance
services, including production improvement enhancements and federal environmental regulation
compliance services, which complement the EPC services we provide to the energy and chemical
industries. Our diverse capabilities include reliability services, turnarounds and outages,
small project capital construction services, tank design construction and maintenance,
insulation, painting, and scaffolding services. Our Shaw Stone & Webster business unit has
performed nuclear plant maintenance and modification services for over 25 years and enjoys a
leading market share in the U.S., serving 34 of the 103 operating nuclear plants in the U.S.
during fiscal year 2005.
    
    Fabrication, Manufacturing & Distribution Services.Significant opportunities
exist for pipe fabrication projects within the energy and chemical industries, driven by the
growing number of FGD and clean fuels projects, new coal plants and retrofitting work, new
gas plants, increased demand for ethylene and petrochemical products, as well as ongoing
general plant maintenance. We believe our expertise and proven capabilities to furnish
complete piping systems on-budget and on-time in this global market have established us as
among the largest suppliers of fabricated piping systems for energy generation facilities in
the U.S. and also as a leading supplier worldwide, serving both Shaw business units and
third parties. We believe
significant growth opportunities exist abroad in the petrochemical and gas industries,
particularly in the Asian and Middle Eastern markets.
 Environmental & Infrastructure Markets
 
    
    Emergency Response Services.We have performed disaster relief and construction
services in the Southeast region of the United States during fiscal 2005, and we continue to
maintain the expertise and resources needed in the wake of recent
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disaster relief needs of
the Gulf Coast region of the United States during fiscal 2006. As such disasters occur, we
feel that our E&I segment will be the selected choice by the federal government for such
work to be performed. Customers include the Federal Emergency Management Agency (FEMA), the
Army Corp of Engineers, various other state and local governments and some private sector
companies.
    
    Department of Energy (DOE).Significant opportunities exist in the DOE market
with its budget at approximately $23 billion in fiscal 2006. Our revenues in this market
remained generally consistent with $94.6 million in fiscal 2004 compared to $93.1 million in
fiscal 2005. Our general approach to bidding future DOE work is to selectively target sites
that offer us a favorable bidding environment, and to leverage our nuclear engineering,
construction and maintenance expertise to support the evolving nuclear energy and
non-proliferation missions of the DOE.
    
    Privatization.Privatization of infrastructure assets continues to occur at all
levels of Government. The Federal Government has led this trend by divesting itself of
assets held by the Department of Defense (DOD) while state and local governments have focused on
utility and transportation asset privatization. The DOD continues to move towards
completing privatization of military family housing and utility systems, while beginning the
process to privatize other housing and commercial space and non-core mission critical
assets. We expect to continue to build upon our significant position in this market. We
believe the DOD plans to privatize a total of 185,000 family housing units by the end of
2007, or 84% of its U.S. based inventory. Since fiscal 2003, through joint ventures
established to pursue these projects, we have been awarded seven contracts by the DOD to
privatize approximately 8,600 housing units. Under the terms of these contracts, the joint
venture enters into a long-term lease (generally 50 years with potential extensions) with
the DOD, during which the joint venture is required to make improvements, including, in some
cases, complete renovations or replacement of the facilities, and to provide ongoing
management and maintenance services. Initial funding for these projects is typically
provided through the contribution of equity from the joint ventures and the issuance of
long-term bonds, backed by project revenues which are non-recourse to us. For its services,
the joint venture is paid a development and construction management fee. Additionally, the
joint venture receives regular rental income for DOD-occupied facilities under the long-term
lease and associated fees for managing the asset. Upon expiration of the lease, the
military retains ownership of the site and the housing. Over the next several years we
anticipate that the trend to privatize non-core mission critical assets will continue,
providing the business line additional significant opportunities.
    
    Environmental Liability Solutions.Traditionally, owners of contaminated
properties have been liable for the clean up of the properties and other damages under
environmental and tort laws. Recently, innovative contracting practices and environmental
insurance products have allowed property owners to outsource environmental management and
mitigate associated liabilities. These clients can reduce administrative expense and time
through such outsourcing, and can obtain cost certainty through guaranteed fixed-price
contracts. We believe our experience in managing environmental liabilities and
environmental-related insurance products will improve our win-rates in our core
environmental contracting business for both the federal and commercial sectors and allow us
to enter these outsourcing markets.
    
    Homeland Security.Federal, state and local homeland security needs continue to
provide value-added opportunities for our E&I segment to capitalize on the need for
disaster-related preparedness, incident response, mitigation design and installation, and
chemical and biological weapons demilitarization. We provide our customers valuable
security-related products and services in threat, vulnerability and risk assessment;
electronic security design and installation; force protection design and construction;
security program development and integration; and technology assessment. Our expanding
capability to assess the security and reliability of critical energy infrastructure and to
develop mitigation designs makes us a leader in the industry.
    
    Transportation.We are pursuing strong growth opportunities created by the Safe,
Accountable, Flexible and Efficient Transportation Equity Act  A Legacy for Users
(SAFETEA-LU), which is guaranteed to provide over $286 billion in
authorized funding for federal highway, transit and safety programs through 2009. We are well
positioned with a presence in transportation markets and regions that will receive this funding. As
a result, we expect to realize an increase in contracts from government agencies for transportation
related services.
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Capitalize on Opportunities for Cross-Selling
  Utilize Technology and Intellectual Property
     Pursue Selective Acquisitions
  Maintain a Diversified Revenue Base
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Maintain Focus on Cost-Reimbursable and Negotiated Fixed-Price Contract Structures
   Maintain Significant Liquidity and a Flexible Capital Structure
  Business Segments
 E&I Segment
  Federal
 Core Services.
 Emergency Response Services.
 Department of Energy or DOE.
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Homeland Security.
 Unexploded
Ordnance and Explosives (UXO).
 Fixed-Price
Remediation with Insurance (FPRI).
 Coastal and Natural Resource Restoration.
 Facilities Management  Mission Support Services.
  Nuclear Services.
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Commercial, State and Local
   tm
  Housing Privatization
   E&C Segment
  Industry Overview
 Energy.
 Flue Gas Desulphurization (FGD).
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2
 Coal.
 Gas-Fired Generating Capacity.
 Chemical.
  Services Offered
 Engineering and Design.
 Construction and Procurement.
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Consulting.
 Technology.
 Clean Fuels.
 Ethylene.
 Petrochemical Refinery.
 Maintenance Segment
  Nuclear Plant Maintenance and Modifications
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Fossil Plant Maintenance and Modifications.
 Chemical.
 F&M Segment
      Segment Financial Data and Export Sale Information
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Revenues by Industry and Geographic Region
   Year Ended August 31,2005
    
    
    2004
    
    
    2003Industry Sector
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %Environment and Infrastructure
    
    $
    1,120.1
    
    
    
    34
    %
    
    $
    1,268.3
    
    
    
    42
    %
    
    $
    1,149.0
    
    
    
    35
    %EnergyE&C
    
    
    784.3
    
    
    
    24
    
    
    
    628.7
    
    
    
    21
    
    
    
    (a
    )
    
    
    Maintenance
    
    
    529.4
    
    
    
    16
    
    
    
    426.1
    
    
    
    14
    
    
    
    (a
    )
    
    
    ECM
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    1,446.8
    
    
    
    45F&M
    
    
    79.4
    
    
    
    3
    
    
    
    60.7
    
    
    
    2
    
    
    
    89.4
    
    
    
    3ChemicalE&C
    
    
    367.4
    
    
    
    11
    
    
    
    310.6
    
    
    
    10
    
    
    
    (a
    )
    
    
    Maintenance
    
    
    241.1
    
    
    
    7
    
    
    
    160.3
    
    
    
    5
    
    
    
    (a
    )
    
    
    ECM
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    322.7
    
    
    
    10F&M
    
    
    85.4
    
    
    
    3
    
    
    
    73.3
    
    
    
    3
    
    
    
    117.8
    
    
    
    4Other IndustriesE&C
    
    
    18.7
    
    
    
    1
    
    
    
    41.3
    
    
    
    1
    
    
    
    (a
    )
    
    
    Maintenance
    
    
    3.9
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    (a
    )
    
    
    ECM
    
    
    
    
    

    
    
    
    
    
    
    
    

    
    
    
    
    
    70.8
    
    
    
    2F&M
    
    
    36.2
    
    
    
    1
    
    
    
    46.3
    
    
    
    2
    
    
    
    41.5
    
    
    
    1Total revenues
    
    $
    3,265.9
    
    
    
    100
    %
    
    $
    3,015.8
    
    
    
    100
    %
    
    $
    3,238.0
    
    
    
    100
    %
 (a)
    
    Due to the impracticality of restating this line item, we have presented the
combined results, as previously reported for the former ECM segment.
    Year Ended August 31,2005
    
    
    2004
    
    
    2003Geographic Region
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %United States
    
    $
    2,845.9
    
    
    
    87
    %
    
    $
    2,511.6
    
    
    
    83
    %
    
    $
    2,800.9
    
    
    
    87
    %Asia/Pacific Rim countries
    
    
    227.5
    
    
    
    7
    
    
    
    223.4
    
    
    
    8
    
    
    
    219.9
    
    
    
    7Canada
    
    
    13.7
    
    
    
    
    
    
    
    13.4
    
    
    
    1
    
    
    
    72.9
    
    
    
    2United Kingdom and other European countries
    
    
    59.1
    
    
    
    2
    
    
    
    96.3
    
    
    
    3
    
    
    
    101.8
    
    
    
    3South America and Mexico
    
    
    20.3
    
    
    
    1
    
    
    
    7.2
    
    
    
    
    
    
    
    14.7
    
    
    
    Middle East
    
    
    87.4
    
    
    
    3
    
    
    
    151.3
    
    
    
    5
    
    
    
    12.0
    
    
    
    Other
    
    
    12.0
    
    
    
    
    
    
    
    12.6
    
    
    
    
    
    
    
    15.8
    
    
    
    1Total revenues
    
    $
    3,265.9
    
    
    
    100
    %
    
    $
    3,015.8
    
    
    
    100
    %
    
    $
    3,238.0
    
    
    
    100
    %
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Backlog
  Business Segments
  August 31,2005
    
    
    2004Industry Sector
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %Environmental and Infrastructure
    
    $
    2,244.6
    
    
    
    33
    %
    
    $
    2,856.4
    
    
    
    50
    %EnergyE&C
    
    
    1,970.1
    
    
    
    29
    
    
    
    964.8
    
    
    
    17Maintenance
    
    
    973.6
    
    
    
    15
    
    
    
    1,140.3
    
    
    
    20F&M
    
    
    55.5
    
    
    
    1
    
    
    
    71.6
    
    
    
    1ChemicalE&C
    
    
    1,126.2
    
    
    
    17
    
    
    
    373.0
    
    
    
    6Maintenance
    
    
    257.8
    
    
    
    4
    
    
    
    313.3
    
    
    
    5F&M
    
    
    40.4
    
    
    
    1
    
    
    
    36.9
    
    
    
    1Other IndustriesE&C
    
    
    
    
    
    
    
    
    
    
    2.4
    
    
    
    Maintenance
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    F&M
    
    
    34.1
    
    
    
    
    
    
    
    7.3
    
    
    
    Total backlog
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
  August 31,2005
    
    
    2004
    
    
    2003Industry Sector
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %Environment and Infrastructure
    
    $
    2,244.6
    
    
    
    33
    %
    
    $
    2,856.4
    
    
    
    50
    %
    
    $
    2,783.9
    
    
    
    59
    %EnergyECM
    
    
    2,943.7
    
    
    
    44
    
    
    
    2,105.1
    
    
    
    37
    
    
    
    1,352.2
    
    
    
    28F&M
    
    
    55.5
    
    
    
    1
    
    
    
    71.6
    
    
    
    1
    
    
    
    47.5
    
    
    
    1ChemicalECM
    
    
    1,384.0
    
    
    
    21
    
    
    
    686.3
    
    
    
    11
    
    
    
    504.3
    
    
    
    11F&M
    
    
    40.4
    
    
    
    1
    
    
    
    36.9
    
    
    
    1
    
    
    
    24.8
    
    
    
    Other IndustriesECM
    
    
    0.1
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    11.8
    
    
    
    F&M
    
    
    34.1
    
    
    
    
    
    
    
    7.3
    
    
    
    
    
    
    
    26.8
    
    
    
    1Total backlog
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
    
    $
    4,751.3
    
    
    
    100
    %
 August 31,2005
    
    
    2004
    
    
    2003Geographic Region
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %
    
    
    In Millions
    
    
    %Domestic
    
    $
    5,206.5
    
    
    
    78
    %
    
    $
    4,906.6
    
    
    
    85
    %
    
    $
    4,310.7
    
    
    
    91
    %International
    
    
    1,495.9
    
    
    
    22
    
    
    
    859.4
    
    
    
    15
    
    
    
    440.6
    
    
    
    9Total backlog
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
    
    $
    4,751.3
    
    
    
    100
    %
 August 31,2005
    
    
    2004
    
    
    2003Status of contracts
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Signed contracts and commitments
    
    $
    5,194.3
    
    
    
    77
    %
    
    $
    5,766.0
    
    
    
    100
    %
    
    $
    4,751.3
    
    
    
    100
    %Letters of intent
    
    
    1,508.1
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total backlog
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
    
    $
    4,751.3
    
    
    
    100
    %
   17




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E&I
Segment
 E&C
Segment
 Maintenance
Segment
 F&M
Segment
  Types of Contracts
   18




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##### Table of Contents




    
    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 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.
     19




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##### Table of Contents



Customers and Marketing
      Raw Materials and Suppliers
    Industry Certifications
    20




---



##### Table of Contents



Patents, Trademarks and Licenses and Other Intellectual Property
     Competition
   Employees
   Environmental Laws and Regulations
  21




---



##### Table of Contents



Item 2. Properties
  Division
    
    Owned vs.Location
    
    Description
    
    Responsible
    
    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
    
    Manufacturing Facility
    
    F&M
    
    OwnedWalker, LA
    
    Manufacturing Facility
    
    F&M
    
    OwnedMaracaibo, Venezuela
    
    Pipe Fabrication Facility
    
    Main
    
    OwnedTulsa, OK
    
    Pipe Fabrication Facility
    
    F&M
    
    OwnedClearfield, UT
    
    Fabrication and Manufacturing
    
    F&M
    
    LeasedTroutville, VA
    
    Manufacturing Facility
    
    F&M
    
    OwnedDerby, U.K.
    
    Pipe Fabrication Facility
    
    Main
    
    Owned
    
    (1)Shreveport, LA
    
    Piping Components & Manufacturing
    
    F&M
    
    OwnedHouston, TX
    
    Pipe Fittings Distribution Facility
    
    F&M
    
    LeasedDelcambre, LA
    
    Manufacturing Facility
    
    Main
    
    OwnedAddis, LA
    
    Fabrication Facility
    
    F&M
    
    OwnedVacaville, CA
    
    Fabrication Facility
    
    F&M
    
    LeasedStoughton, 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&I
    
    LeasedToronto, Canada
    
    Office Building
    
    E&C
    
    LeasedSchnectady, NY
    
    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)
    
    Land with 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
    
    LeasedPasco, WA
    
    Office Building & Warehouse
    
    E&C
    
    LeasedTrenton, NJ
    
    Office Building
    
    E&I
    
    LeasedNorwood, OH
    
    Office Building
    
    E&I
    
    OwnedLaPorte, TX
    
    Manufacturing Facility
    
    Main
    
    OwnedMilton Keynes, U.K.
    
    Office Building
    
    E&C
    
    LeasedHouston, TX
    
    Office Building
    
    E&I
    
    Owned
 
 (1)
    
    This property is currently owned; however, it is available for sale and we intend to
lease it back, subsequent to sale.  22




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##### Table of Contents



Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for the Registrants Common Equity and Related Stockholder Matters
  HIGH
    
    LOWFiscal year ending August 31, 2004First quarter
    
    $
    13.96
    
    
    $
    8.50Second quarter
    
    
    14.45
    
    
    
    11.09Third quarter
    
    
    13.33
    
    
    
    10.33Fourth quarter
    
    
    12.46
    
    
    
    8.89Fiscal 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 (through October 27, 2005)
    
    
    26.95
    
    
    
    19.88
    
 Item 6. Selected Consolidated Financial Data
  23




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##### Table of Contents



Year Ended August 31,2001Restated2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    

(Unaudited)(1)(6)
    
    
    (2)(6)
    
    
    (3)(6)
    
    

(4)(7)(In Millions, Except Per Share Amounts)Consolidated Statements of OperationsRevenues
    
    $
    3,265.9
    
    
    $
    3,015.8
    
    
    $
    3,238.0
    
    
    $
    3,131.4
    
    
    $
    1,521.2Income (loss) from continuing operations
    
    $
    17.8
    
    
    $
    (23.5
    )
    
    $
    19.7
    
    
    $
    96.2
    
    
    $
    43.1Basic income (loss) per common share before discontinued operations
    
    $
    0.26
    
    
    $
    (0.41
    )
    
    $
    0.52
    
    
    $
    2.36
    
    
    $
    1.07Diluted income (loss) per common share before discontinued operations
    
    $
    0.25
    
    
    $
    (0.41
    )
    
    $
    0.51
    
    
    $
    2.22
    
    
    $
    1.03Consolidated Balance SheetsTotal
assets (7)
    
    $
    2,070.7
    
    
    $
    2,035.5
    
    
    $
    1,992.8
    
    
    $
    2,307.8
    
    
    $
    1,708.6Longterm debt and capital lease obligations, net of current
maturities (5)
    
    $
    24.7
    
    
    $
    261.2
    
    
    $
    251.7
    
    
    $
    522.1
    
    
    $
    512.9Cash 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 (see Note 4 of our consolidated financial statements).(3)
    
    Includes the acquisition of certain assets of the IT Group and PsyCor Inc. in fiscal 2002.(4)
    
    Includes the acquisition of certain assets of Scott, Sevin & Schaffer, Inc. and Technicomp,
Inc. in fiscal 2001 and amortization of goodwill, net of tax, of $13.3 million ($0.33 per
basic share and $0.32 per diluted share).(5)
    
    Fiscal 2003 excludes $260.0 million of current maturities of long-term debt consisting
primarily of the LYONs convertible debt of $251.5 million.(6)
    
    Restated to reflect discontinued operations (see Note 19 of our consolidated financial
statements).(7)
    
    Restated to reflect correction of expensing of non-compete
clause of employment agreement (see Note 21 of our consolidated
financial statements). 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  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
   24




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##### Table of Contents




    
    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.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 would result in a loss on the contract should such a level of cost overruns
occur. Cost-reimbursable contracts generally provide for reimbursement of all of our
costs, but generally limit our fee to a fixed 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, testing 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 will record
the adjustment amounts on a cumulative, catch-up basis.
    
    We have a number of 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 with respect to our contract performance, our cost estimates,
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, unless recoverable from
claims or change orders, will result in a reduction in profit equivalent to the cost
increase.Disputes with other parties involved in the contract can and often do occur, which we refer
to as claims. These disputes are generally the result of one party incurring costs or damages
caused by another party during execution of the 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 to the extent that contract costs have been 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.
 25




---



##### Table of Contents




    
    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 subsequent to the date 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 collection is deemed probable and the amounts can
be reasonably estimated. Including claims in this calculation 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 to the extent of costs incurred and include
no 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.Claims are included in costs and estimated earnings in excess of billings on the balance
sheet (see Note 18 of our consolidated financial statements for further discussion of
our significant claims).
 Other Revenue Recognition and Profit and Loss Estimates
     Allowance for Doubtful Accounts
  26




---



##### Table of Contents



Income Taxes
  Acquisitions  Fair Value Accounting and Goodwill Impairment
    Long-Lived Assets
  27




---



##### Table of Contents



Litigation, Commitments and Contingencies
  Retirement Benefits
  General
  Environmental & Infrastructure
  Energy & Chemicals
  Maintenance
  Fabrication, Manufacturing and Distribution
  28




---



##### Table of Contents



Our Business
  Comments Regarding Future Operations
  Results of Operations
  
    
    Fiscal 2005 versus fiscal 2004 based on new operating segments and on former ECM
operating segment (excluding revenues)
    
    Fiscal 2004 versus fiscal 2003, based on new operating segments (except E&C &
Maintenance, which revenues only is presented) and on former ECM operating segment
(excluding revenues)
   Year Ended August 31,2005
    
    
    2004
    
    
    2003Revenues (new operating segments):E&I
    
    $
    1,120.1
    
    
    $
    1,268.3
    
    
    $
    1,149.0E&C
    
    
    1,170.4
    
    
    
    980.6
    
    
    
    1,382.9Maintenance
    
    
    774.4
    
    
    
    586.6
    
    
    
    457.4F&M
    
    
    201.0
    
    
    
    180.3
    
    
    
    248.7Corporate
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    3,265.9
    
    
    $
    3,015.8
    
    
    $
    3,238.0
 Year Ended August 31,2005
    
    
    2004Gross profit (new operating segments):E&I
    
    $
    116.9
    
    
    $
    158.0E&C
    
    
    108.8
    
    
    
    7.9Maintenance
    
    
    25.3
    
    
    
    23.8F&M
    
    
    41.3
    
    
    
    30.6Corporate
    
    
    0.1
    
    
    
    Total gross profit
    
    $
    292.4
    
    
    $
    220.3Gross profit percentage (new operating segments):E&I
    
    
    10.4
    %
    
    
    12.5
    %E&C
    
    
    9.3
    
    
    
    0.8Maintenance
    
    
    3.3
    
    
    
    4.1F&M
    
    
    20.5
    
    
    
    17.0Corporate
    
    
    
    
    
    
    Total gross profit percentage
    
    
    9.0
    
    
    
    7.3
 29




---



##### Table of Contents



Year Ended August 31,2005
    
    
    2004
    
    
    2003Gross profit (including former ECM segment):E&I
    
    $
    116.9
    
    
    $
    158.0
    
    
    $
    121.4ECM
    
    
    134.1
    
    
    
    31.7
    
    
    
    95.5F&M
    
    
    41.3
    
    
    
    30.6
    
    
    
    40.9Corporate
    
    
    0.1
    
    
    
    
    
    
    
    Total gross profit
    
    $
    292.4
    
    
    $
    220.3
    
    
    $
    257.8Gross profit percentage (including former ECM segment):E&I
    
    
    10.4
    %
    
    
    12.5
    %
    
    
    10.6
    %ECM
    
    
    6.9
    
    
    
    2.0
    
    
    
    5.2F&M
    
    
    20.5
    
    
    
    17.0
    
    
    
    16.4Corporate
    
    
    
    
    
    
    
    
    
    
    Total gross profit percentage
    
    
    9.0
    
    
    
    7.3
    
    
    
    8.0
  Year Ended August 31,2005
    
    

2004
    
    

2003Industry Sector
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Environmental and Infrastructure
    
    $
    1,120.1
    
    
    
    34
    %
    
    $
    1,268.3
    
    
    
    42
    %
    
    $
    1,149.0
    
    
    
    35
    %EnergyE&C
    
    
    784.3
    
    
    
    24
    
    
    
    628.7
    
    
    
    21
    
    
    
    (a
    )
    
    
    Maintenance
    
    
    529.4
    
    
    
    16
    
    
    
    426.1
    
    
    
    14
    
    
    
    (a
    )
    
    
    ECM
    
    
    
    
    

    
    
    
    
    
    
    
    
    

    
    
    
    
    1,446.8
    
    
    
    45F&M
    
    
    79.4
    
    
    
    3
    
    
    
    60.7
    
    
    
    2
    
    
    
    89.4
    
    
    
    3ChemicalE&C
    
    
    367.4
    
    
    
    11
    
    
    
    310.6
    
    
    
    10
    
    
    
    (a
    )
    
    
    Maintenance
    
    
    241.1
    
    
    
    7
    
    
    
    160.3
    
    
    
    5
    
    
    
    (a
    )
    
    
    ECM
    
    
    
    
    
    

    
    
    
    
    
    
    
    

    
    
    
    
    322.7
    
    
    
    10F&M
    
    
    85.4
    
    
    
    3
    
    
    
    73.3
    
    
    
    3
    
    
    
    117.8
    
    
    
    4Other IndustriesE&C
    
    
    18.7
    
    
    
    1
    
    
    
    41.3
    
    
    
    1
    
    
    
    (a
    )
    
    
    Maintenance
    
    
    3.9
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    (a
    )
    
    
    ECM
    
    
    
    
    
    

    
    
    
    
    
    
    
    

    
    
    
    
    70.8
    
    
    
    2F&M
    
    
    36.2
    
    
    
    1
    
    
    
    46.3
    
    
    
    2
    
    
    
    41.5
    
    
    
    1Total revenues
    
    $
    3,265.9
    
    
    
    100
    %
    
    $
    3,015.8
    
    
    
    100
    %
    
    $
    3,238.0
    
    
    
    100
    %
 (a)
    
    Due to the impracticality of restating this line item, we have presented the
combined results, as previously reported for the former ECM segment.
  Year Ended August 31,2005
    
    
    2004
    
    
    2003Geographic Region
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %United States
    
    $
    2,845.9
    
    
    
    87
    %
    
    $
    2,511.6
    
    
    
    83
    %
    
    $
    2,800.9
    
    
    
    87
    %Asia/Pacific Rim countries
    
    
    227.5
    
    
    
    7
    
    
    
    223.4
    
    
    
    8
    
    
    
    219.9
    
    
    
    7Canada
    
    
    13.7
    
    
    
    
    
    
    
    13.4
    
    
    
    1
    
    
    
    72.9
    
    
    
    2United Kingdom and other European Countries
    
    
    59.1
    
    
    
    2
    
    
    
    96.3
    
    
    
    3
    
    
    
    101.8
    
    
    
    3South America and Mexico
    
    
    20.3
    
    
    
    1
    
    
    
    7.2
    
    
    
    
    
    
    
    14.7
    
    
    
    Middle East
    
    
    87.4
    
    
    
    3
    
    
    
    151.3
    
    
    
    5
    
    
    
    12.0
    
    
    
    Other
    
    
    12.0
    
    
    
    
    
    
    
    12.6
    
    
    
    
    
    
    
    15.8
    
    
    
    1Total revenues
    
    $
    3,265.9
    
    
    
    100
    %
    
    $
    3,015.8
    
    
    
    100
    %
    
    $
    3,238.0
    
    
    
    100
    %
 30




---



##### Table of Contents



At August 31,2005
    
    

2004Industry Sector
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Environmental and Infrastructure
    
    $
    2,244.6
    
    
    
    33
    %
    
    $
    2,856.4
    
    
    
    50
    %EnergyE&C
    
    
    1,970.1
    
    
    
    29
    
    
    
    964.8
    
    
    
    17Maintenance
    
    
    973.6
    
    
    
    15
    
    
    
    1,140.3
    
    
    
    20F&M
    
    
    55.5
    
    
    
    1
    
    
    
    71.6
    
    
    
    1ChemicalE&C
    
    
    1,126.2
    
    
    
    17
    
    
    
    373.0
    
    
    
    6Maintenance
    
    
    257.8
    
    
    
    4
    
    
    
    313.3
    
    
    
    5F&M
    
    
    40.4
    
    
    
    1
    
    
    
    36.9
    
    
    
    1Other IndustriesE&C
    
    
    
    
    
    
    
    
    
    
    2.4
    
    
    
    Maintenance
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    F&M
    
    
    34.1
    
    
    
    
    
    
    
    7.3
    
    
    
    Total backlog
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
  At August 31,2005
    
    

2004
    
    

2003Industry Sector
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Environmental and Infrastructure
    
    $
    2,244.6
    
    
    
    33
    %
    
    $
    2,856.4
    
    
    
    50
    %
    
    $
    2,783.9
    
    
    
    59
    %EnergyECM
    
    
    2,943.7
    
    
    
    44
    
    
    
    2,105.1
    
    
    
    37
    
    
    
    1,352.2
    
    
    
    28F&M
    
    
    55.5
    
    
    
    1
    
    
    
    71.6
    
    
    
    1
    
    
    
    47.5
    
    
    
    1ChemicalECM
    
    
    1,384.0
    
    
    
    21
    
    
    
    686.3
    
    
    
    11
    
    
    
    504.3
    
    
    
    11F&M
    
    
    40.4
    
    
    
    1
    
    
    
    36.9
    
    
    
    1
    
    
    
    24.8
    
    
    
    Other IndustriesECM
    
    
    0.1
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    11.8
    
    
    
    F&M
    
    
    34.1
    
    
    
    
    
    
    
    7.3
    
    
    
    
    
    
    
    26.8
    
    
    
    1Total backlog
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
    
    $
    4,751.3
    
    
    
    100
    %
  At August 31,2005
    
    
    2004
    
    
    2003Status of contracts
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %
    
    
    (In Millions)
    
    
    %Signed contracts and commitments
    
    $
    5,194.3
    
    
    
    77
    %
    
    $
    5,766.0
    
    
    
    100
    %
    
    $
    4,751.3
    
    
    
    100
    %Letters of intent
    
    
    1,508.1
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total backlog
    
    $
    6,702.4
    
    
    
    100
    %
    
    $
    5,766.0
    
    
    
    100
    %
    
    $
    4,751.3
    
    
    
    100
    %
  Fiscal 2005 Compared to Fiscal 2004
 Executive Summary
   31




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Segment Analysis
 New Operating Segments Presentation
 E&I Segment
   
    
    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.
    32




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
    
    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.
        33




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E&C Segment
   
    
    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.
         34




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Maintenance Segment
   
    
    increase in activity and additional scope associated with the TVA nuclear restart project;
    
    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 UK subsidiary.
   
    
    increase in maintenance services discussed above; and
    
    a decrease in losses in our UK operations resulting from efforts to make those
operations smaller, more productive and efficient.
     35




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F&M Segment
   
    
    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.
    
    
    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.
   General and Administrative Expenses, Interest Income, Interest Expense and Other Income (Expense)
  36




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Unconsolidated Entities, Discontinued Operations, Change in Exchange Rates, Other Comprehensive
Income and Income Taxes
         Former ECM Segment Presentation
  37




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ECM Segment
   
    
    increased profitability on energy projects;
    
    settlement of a dispute with our customer on a major EPC project, which resulted in the release of accruals;
    
    increase in maintenance services; and
    
    a decrease in losses in our UK operations resulting from efforts to make those operations more productive and efficient.
    Fiscal 2004 Compared to Fiscal 2003
 Executive Summary
      38




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Segment Analysis
 New Operating Segment Presentation
 E&I Segment
   
    
    an increase in project services supporting the U.S. Government customers in Iraq;
    
    an increase in public works and logistic support services for the U.S. Army; and
    
    an offset by a decrease in domestic federal remediation work.
    
    
    a reduction in the estimated cost to complete a major fixed-price contract impacting gross profit in 2004;
    
    a favorable contract settlement on a completed project in 2004;
    
    favorable completion activities on a major time and materials project and
revisions to cost estimates based on revised scope activities yielded additional gross
profit in 2004;
    
    a reduction in a warranty liability in 2004; and
    
    an increase for a one-time reduction in an employee benefits accrual relating to
a change in an employee benefits policy in 2004.
    E&C Segment
   
    
    the completion and winding-down of several domestic new construction energy
plants that commenced prior to fiscal 2003, specifically the completion of gas-fired energy
generation projects during fiscal 2003 and early fiscal 2004; and
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
    
    an offset by an increase in revenues from engineering and procurement activities
on the combined-cycle energy plants in Queens, New York and Mona, Utah and services to other
customers related to the chemical industries and engineering services related to our
proprietary technologies; and an increase in revenues for fiscal 2004 generated by our EDS
operations acquired in the second quarter of fiscal 2004.
 Maintenance Segment
   Former ECM Segment Presentation
  ECM Segment
   
    
    a charge related to the Covert and Harquahala projects (the NEG projects) in
fiscal 2004, a reduction in our estimated claims recovery, and an increase in estimated cost
at completion related to the Harquahala project for costs related primarily to the duration
of our involvement in start-up and on warranty related activities;
    
    a negative impact related to a reduction of our incentive fee on a target-price
contract to build a combined-cycle cogeneration facility near Philadelphia, Pennsylvania;
    
    a reduction in our estimated claims recovery in the fourth quarter of fiscal
2004 on a UK construction project that was substantially complete in 2003;
    
    pass-through equipment and other costs primarily on the energy plant project in Queens, New York; and
    
    a decrease in activity in our UK construction operations.
   
    
    an increase in gross profit due to the increase in activity as we ramp up
progress on two combined-cycle energy plants in Queens, New York and Mona, Utah;
    
    an increase in profit related to sales of our proprietary technology from our
Badger joint venture which we acquired in the third quarter of fiscal 2003;
    
    an increase in activity on the TVA nuclear restart project beginning in the first quarter of fiscal 2004; and
    
    the positive impact on gross profit from the acquisition of EDS which occurred in the second quarter of fiscal 2004.
  40




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F&M Segment
       Unconsolidated Entities
  General and Administrative Expenses, Interest Income, Interest Expense, Other Income (Expense),
Income Taxes, and Other Comprehensive Income
   41




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Liquidity and Capital Resources
 Executive Summary
  Credit Facilities and Revolving Lines of Credit
  August 31,2005
    
    
    2004New Credit facility
    
    $
    40.9
    
    
    $
    Foreign subsidiaries revolving lines of credit
    
    
    0.1
    
    
    
    2.5Credit facilities of consolidated VIEs
    
    
    6.3
    
    
    
    3.5Total outstanding
    
    
    47.3
    
    
    
    6.0Less: current maturities
    
    
    (6.4
    )
    
    
    (6.0
    )Total long-term revolving lines of credit
    
    $
    40.9
    
    
    $
    
   42




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New CreditFacilityTotal Credit Facility
    
    $
    450.0Less: outstanding performance letters of credit
    
    
    197.6Less:
outstanding financial letters of credit
    
    
    46.0Less:
outstanding revolving credit loans
    
    
    40.9Remaining availability for performance letters of credit
    
    $
    165.5Portion of Credit Facility available for financial letters of
credit and revolving credit loans
    
    $
    200.0Less: outstanding financial letters of credit
    
    
    46.0Less: outstanding revolving credit loans
    
    
    40.9Remaining availability for financial letters of credit and revolving credit loans
    
    $
    113.1
   August 31,
    
    
    August 31,2005
    
    
    2004Capacity of foreign letters of credit
and short-term revolving lines of credit
    
    $
    6,253
    
    
    $
    16,078Outstanding:Letters of credit
    
    
    4,072
    
    
    
    3,545Short-term revolving lines of credit
    
    
    57
    
    
    
    2,4744,129
    
    
    
    6,019Remaining availability for foreign letters of credit
and short-term revolving lines of credit
    
    $
    2,124
    
    
    $
    10,059Weighted-average interest rate
    
    
    6.75
    %
    
    
    4.25
    %
   Liquidity
  43




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Cash Flow for Fiscal 2005, 2004 and 2003
  For the Year Ended August 31,2005
    
    
    2004
    
    
    2003Cash flow provided by (used in) operations
    
    $
    67,889
    
    
    $
    (18,773
    )
    
    $
    (198,236
    )Cash flow provided by (used in) investing
    
    
    (126,462
    )
    
    
    (32,434
    )
    
    
    40,854Cash flow provided by (used in) financing
    
    
    13,513
    
    
    
    (39,448
    )
    
    
    (65,021
    )Cash from consolidation of variable interest entities previously unconsolidated
    
    
    1,343
    
    
    
    879
    
    
    
    Effect of foreign exchange rate changes on cash
    
    
    (1,194
    )
    
    
    (1,519
    )
    
    
    491
 Operating Cash Flow
   Investing Cash Flow
  Financing Cash Flow
  Off Balance Sheet Arrangements
  44




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Commercial Commitments
  Amounts of Commitment Expiration by PeriodLess ThanCommercial Commitments
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 YearsLetters of Credit  Domestic and Foreign
    
    $
    247.7
    
    
    $
    113.3
    
    
    $
    90.7
    
    
    $
    7.2
    
    
    $
    36.5Surety bonds
    
    
    420.8
    
    
    
    403.8
    
    
    
    3.4
    
    
    
    
    
    
    
    13.6Total Commercial Commitments
    
    $
    668.5
    
    
    $
    517.1
    
    
    $
    94.1
    
    
    $
    7.2
    
    
    $
    50.1
 Note:
    
    Commercial Commitments above exclude any letters of credit or surety bonding obligations
associated with outstanding bids or proposals or other work not awarded
prior to August 31, 2005.
  Amounts of Commitment Expiration by PeriodLess ThanCommercial Commitments
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 YearsLetters of Credit  Domestic and Foreign
    
    $
    219.0
    
    
    $
    13.2
    
    
    $
    172.3
    
    
    $
    10.8
    
    
    $
    22.7Surety bonds
    
    
    438.3
    
    
    
    362.9
    
    
    
    53.8
    
    
    
    0.1
    
    
    
    21.5Total Commercial Commitments
    
    $
    657.3
    
    
    $
    376.1
    
    
    $
    226.1
    
    
    $
    10.9
    
    
    $
    44.2
 Note:
    
    Commercial Commitments above exclude any letters of credit or surety bonding obligations
associated with outstanding bids or proposals or other work not awarded prior to August 31, 2004.
 45




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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
    
    $
    25.9
    
    
    $
    4.1
    
    
    $
    6.8
    
    
    $
    15.0
    
    
    $
    Capital lease obligations
    
    
    4.8
    
    
    
    1.9
    
    
    
    2.2
    
    
    
    0.7
    
    
    
    Operating leases
    
    
    256.3
    
    
    
    52.9
    
    
    
    84.9
    
    
    
    65.2
    
    
    
    53.3Unconditional purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    287.0
    
    
    $
    58.9
    
    
    $
    93.9
    
    
    $
    80.9
    
    
    $
    53.3
  Payments Due by PeriodLess ThanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 YearsLong-term debt
    
    $
    261.1
    
    
    $
    4.6
    
    
    $
    1.3
    
    
    $
    3.8
    
    
    $
    251.4Capital lease obligations
    
    
    6.8
    
    
    
    2.1
    
    
    
    3.0
    
    
    
    1.7
    
    
    
    Operating leases
    
    
    283.1
    
    
    
    58.9
    
    
    
    88.3
    
    
    
    61.8
    
    
    
    74.1Unconditional purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    551.0
    
    
    $
    65.6
    
    
    $
    92.6
    
    
    $
    67.3
    
    
    $
    325.5
    Recent Accounting Pronouncements
   46




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Effects of Inflation
  Risk Factors
   Demand for our products and services are 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.
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Our projects may encounter difficulties that may result in additional costs to us, reductions in
revenues, claims, disputes or the payment of actual and/or liquidated damages.
    Our use of percentage-of-completion accounting could result in a reduction or elimination of
previously reported profits.
  49




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Actual results could differ from the estimates and assumptions that we use to prepare our financial
statements.
  
    
    contract costs and profits and application of percentage-of-completion
accounting and revenue recognition of contract claims;
    
    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;
    
    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.
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Restrictive covenants in our Credit Facility and the indenture relating to the Senior Notes 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;
    
    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 stockholders 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 indebtedness 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, reducing the availability of cash flow to fund
acquisitions, working capital, capital expenditures and other general corporate purposes;
    
    it will limit our ability to borrow money or sell stock for working capital,
capital expenditures, debt service requirements and other purposes;
    
    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 highly leveraged than some of our competitors;
    
    it may make us more vulnerable to a further downturn in the economy of our business; and
    
    it may restrict us from making additional acquisitions or exploiting other business opportunities.
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We are currently the subject of an informal inquiry by the SEC.
  We have been named in various purported class action shareholder lawsuits and shareholder
derivative lawsuits.
  We are and will continue to be involved in litigation.
  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.
  52




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We are subject to the risks associated with being a government contractor.
     53




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Our failure to meet schedule or performance requirements of our contracts could adversely affect
us.
  Our dependence on subcontractors and equipment manufacturers could adversely affect us.
  Possible cost escalation associated with our fixed-price contracts could negatively affect our
profitability.
  Our results of operations depend on the award of new contracts and the timing of the performance of
these contracts.
    54




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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.
   55




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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.
  
    
    we may be unable to obtain, or may be subject to delays in obtaining necessary
permitting, land-use, building, occupancy and other required governmental permits and
authorizations, which could result in increased development costs;
    
    we may incur construction costs related to new construction or renovations that
exceed original estimates due to increased materials, labor or other costs. These increased
costs could contribute to a lower than expected return and we may not be able to increase
rents to compensate for the increase in construction costs annually;
    
    we may be unable to complete construction of a property on schedule and meet
financial goals for development; and
    
    we may incur construction costs that are higher or have project delays if we are
not successful in forming strategic alliances with key material suppliers and vendors.
  
    
    we may be unable 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 assure you 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 assure you 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;
    
    we cannot assure you that 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. These military family housing projects are
supported by military residents based on current military needs and geographic deployment of
the residents; and
    
    we may not be able to close on our five remaining military family housing
privatization projects as we have only been selected to receive the right to enter into
exclusive negotiations and the award is subject to final approval from the U.S. military
branch and Congress. Until final approval is obtained, which generally can last between six
months to one year, we will incur costs associated with the development plan and design that
may be significant. We cannot assure you that we will receive final approval and failure to
recover these development costs may result in losses.
  Our working capital requirements may increase as a result of our work associated with the military
family housing privatization market.
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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 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 in some countries in which we operate
and sell products and services, which could make it difficult for us to enforce our
contractual rights;
    
    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 these foreign markets.
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Work stoppages and other labor problems could adversely affect us.
  Adverse events could negatively affect our liquidity position.
   
    
    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.
  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.
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If we must 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.
  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.
    61




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##### Table of Contents



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, current and potential stockholders
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.
  
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Risk
  Expected Maturity Dates
    
    
    Fair2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    ValueLong-term debtFixed rate
    
    $
    5.9
    
    
    $
    2.6
    
    
    $
    2.5
    
    
    $
    0.7
    
    
    $
    15.0
    
    
    $
    
    
    
    $
    26.7
    
    
    $
    28.8Average interest rate
    
    
    5.2
    %
    
    
    7.3
    %
    
    
    4.8
    %
    
    
    8.2
    %
    
    
    10.8
    %
    
    
    
    
    
    
    Variable rate
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    3.7
    
    
    
    
    
    
    $
    40.9
    
    
    
    
    
    
    $
    44.8
    
    
    $
    44.8Average interest rate
    
    
    6.8
    %
    
    
    6.8
    %
    
    
    6.8
    %
    
    
    
    
    
    
    6.8
    %
    
    
    Short-term line of creditVariable rate
    
    $
    6.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6.4
    
    
    $
    6.4Average interest rate
    
    
    6.3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   62




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##### Table of Contents



Foreign Currency Risks
  63




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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
    
    
    65- Report on the Consolidated Financial Statements
    
    
    66Consolidated
Balance Sheets as of August 31, 2005 and 2004 (Restated)
    
    
    67-68Consolidated Statements of Operations for the years ended August 31, 2005, 2004 and 2003
    
    
    69Consolidated
Statement of Shareholders Equity for the years ended August 31, 2005, 2004 (Restated) and 2003 (Restated)
    
    
    70-71Consolidated Statements of Cash Flows for the years ended August 31, 2005, 2004 and 2003
    
    
    72-73Notes to Consolidated Financial Statements
    
    
    74-122
 64




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       /s/ ERNST & YOUNG LLPNew Orleans, Louisiana
November 1,
2005
 65




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      /s/ Ernst & Young LLPNew Orleans, Louisiana
November 1, 2005
 66




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##### Table of Contents



THE SHAW GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 As of August 31, 2005 and 2004
 (Dollars in thousands)
 ASSETS
 2005
    
    

2004RestatedCurrent assets:Cash and cash equivalents
    
    $
    43,646
    
    
    $
    88,557Restricted and escrowed cash
    
    
    171,900
    
    
    
    56,574Accounts receivable, including retainage, net
    
    
    418,035
    
    
    
    451,393Accounts receivable from unconsolidated entities
    
    
    
    
    
    
    7,450Inventories
    
    
    97,684
    
    
    
    80,073Costs and estimated earnings in excess of billings on uncompleted contracts, including claims
    
    
    395,124
    
    
    
    384,011Deferred income taxes
    
    
    85,500
    
    
    
    54,526Prepaid expenses
    
    
    6,280
    
    
    
    10,755Assets held for sale
    
    
    9,520
    
    
    
    1,784Other current assets
    
    
    27,131
    
    
    
    23,683Total current assets
    
    
    1,254,820
    
    
    
    1,158,806Investment in and advances to unconsolidated entities, joint ventures and limited partnerships
    
    
    34,871
    
    
    
    25,689Property and equipment:Transportation equipment
    
    
    11,351
    
    
    
    5,249Furniture, fixtures and software
    
    
    89,771
    
    
    
    86,386Machinery and equipment
    
    
    125,790
    
    
    
    122,262Buildings and improvements
    
    
    51,542
    
    
    
    56,415Assets acquired under capital leases
    
    
    5,731
    
    
    
    5,756Land
    
    
    5,779
    
    
    
    7,596Construction in progress
    
    
    9,623
    
    
    
    8,045299,587
    
    
    
    291,709Less: accumulated depreciation
    
    
    (142,051
    )
    
    
    (122,221
    )157,536
    
    
    
    169,488Goodwill
    
    
    506,453
    
    
    
    522,783Deferred income taxes
    
    
    
    
    
    
    20,597Other assets
    
    
    116,975
    
    
    
    138,173$
    2,070,655
    
    
    $
    2,035,536
   67




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##### Table of Contents



THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of August 31, 2005 and 2004
(Dollars in thousands)
 LIABILITIES AND SHAREHOLDERS EQUITY
 2005
    
    

2004RestatedCurrent liabilities:Accounts payable
    
    $
    323,403
    
    
    $
    316,022Accrued liabilities
    
    
    155,911
    
    
    
    157,930Advanced billings and billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    274,198
    
    
    
    357,472Contract liability adjustments
    
    
    6,936
    
    
    
    17,347Deferred revenue  prebilled
    
    
    8,357
    
    
    
    6,233Current maturities of long-term debt
    
    
    4,135
    
    
    
    4,637Short-term revolving lines of credit
    
    
    6,367
    
    
    
    5,983Current portion of obligations under capital leases
    
    
    1,854
    
    
    
    2,113Total current liabilities
    
    
    781,161
    
    
    
    867,737Long-term revolving line of credit
    
    
    40,850
    
    
    
    Long-term debt, less current maturities
    
    
    21,718
    
    
    
    256,437Obligations under capital leases, less current portion
    
    
    2,973
    
    
    
    4,736Deferred income taxes
    
    
    21,518
    
    
    
    Other liabilities
    
    
    42,642
    
    
    
    19,641Minority interest
    
    
    15,240
    
    
    
    10,614Shareholders 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; 84,289,004 and 69,101,493 shares
issued, respectively; and 78,957,349 and 63,769,838 shares outstanding, respectively
    
    
    1,023,603
    
    
    
    750,077Retained earnings
    
    
    263,812
    
    
    
    247,436Accumulated other comprehensive loss
    
    
    (31,752
    )
    
    
    (15,157
    )Unearned stock-based compensation
    
    
    (11,197
    )
    
    
    (6,072
    )Treasury stock, 5,331,655 shares
    
    
    (99,913
    )
    
    
    (99,913
    )Total shareholders equity
    
    
    1,144,553
    
    
    
    876,371$
    2,070,655
    
    
    $
    2,035,536
  68




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THE SHAW GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended August 31, 2005, 2004 and 2003
 (In thousands, except per share amounts)
 2005
    
    
    2004
    
    
    2003Revenues
    
    $
    3,265,916
    
    
    $
    3,015,813
    
    
    $
    3,237,977Cost of revenues
    
    
    2,973,500
    
    
    
    2,795,489
    
    
    
    2,980,153Gross profit
    
    
    292,416
    
    
    
    220,324
    
    
    
    257,824General and administrative expenses
    
    
    190,248
    
    
    
    211,914
    
    
    
    187,418Operating income
    
    
    102,168
    
    
    
    8,410
    
    
    
    70,406Interest expense
    
    
    (29,225
    )
    
    
    (38,190
    )
    
    
    (31,884
    )Interest income
    
    
    5,571
    
    
    
    1,718
    
    
    
    5,406Gain (loss) gain on retirement of debt
    
    
    (47,772
    )
    
    
    (1,325
    )
    
    
    2,723Foreign currency transaction gains (losses), net
    
    
    919
    
    
    
    (2,702
    )
    
    
    135Other income (expense), net
    
    
    6,870
    
    
    
    1,523
    
    
    
    (12,905
    )(63,637
    )
    
    
    (38,976
    )
    
    
    (36,525
    )Income (loss) before income taxes, minority interest, earnings
(losses) from unconsolidated entities and income (loss) from
discontinued operations
    
    
    38,531
    
    
    
    (30,566
    )
    
    
    33,881Provision (benefit) for income taxes
    
    
    20,610
    
    
    
    (9,901
    )
    
    
    11,064Income (loss) before minority interest, earnings (losses) from
unconsolidated entities and income (loss) from discontinued
operations
    
    
    17,921
    
    
    
    (20,665
    )
    
    
    22,817Minority interest, net of taxes
    
    
    (3,915
    )
    
    
    (5,455
    )
    
    
    (169
    )Earnings (losses) from unconsolidated entities, net of taxes
    
    
    3,809
    
    
    
    2,578
    
    
    
    (2,979
    )Income (loss) from continuing operations
    
    
    17,815
    
    
    
    (23,542
    )
    
    
    19,669Income (loss) from discontinued operations, net of taxes:Income (loss) from operations
    
    
    (1,795
    )
    
    
    (2,438
    )
    
    
    1,197Gain (impairment) of discontinued operations
    
    
    356
    
    
    
    (2,995
    )
    
    
    Income (loss) from discontinued operations, net of taxes
    
    
    (1,439
    )
    
    
    (5,433
    )
    
    
    1,197Net income (loss)
    
    $
    16,376
    
    
    $
    (28,975
    )
    
    $
    20,866Net income (loss) per common share:Basic:Income (loss) from continuing operations
    
    $
    0.26
    
    
    $
    (0.41
    )
    
    $
    0.52Income (loss) from discontinued operations, net of taxes
    
    
    (0.02
    )
    
    
    (0.09
    )
    
    
    0.03Net income (loss)
    
    $
    0.24
    
    
    $
    (0.50
    )
    
    $
    0.55Diluted:Income (loss) from continuing operations
    
    $
    0.25
    
    
    $
    (0.41
    )
    
    $
    0.51Income (loss) from discontinued operations, net of taxes
    
    
    (0.02
    )
    
    
    (0.09
    )
    
    
    0.03Net income (loss)
    
    $
    0.23
    
    
    $
    (0.50
    )
    
    $
    0.54Weighted average shares outstanding:Basic
    
    
    68,673
    
    
    
    58,005
    
    
    
    37,914Diluted:Stock options
    
    
    921
    
    
    
    
    
    
    
    441Restricted stock
    
    
    198
    
    
    
    
    
    
    
    Total
    
    
    69,792
    
    
    
    58,005
    
    
    
    38,355
  69




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THE SHAW GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITY
Restated
(Dollars in thousands, except share amounts)
 Unearned
    
    
    AccumulatedCommon
    
    
    Treasury
    
    
    Common
    
    
    Treasury
    
    
    Stock-
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Based
    
    
    Comprehensive
    
    
    Retained
    
    
    ShareholdersShares
    
    
    Shares
    
    
    Amount
    
    
    Amount
    
    
    Compensation
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance,
September 1, 2002, as previously reported
    
    
    43,002,677
    
    
    
    (2,161,050
    )
    
    $
    494,581
    
    
    $
    (52,076
    )
    
    $
    
    
    
    $
    (16,193
    )
    
    $
    265,945
    
    
    $
    692,257Adjusted for
employment agreement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,400
    )
    
    
    (10,400
    )Balance, September 1, 2002, as restated
    
    
    43,002,677
    
    
    
    (2,161,050
    )
    
    
    494,581
    
    
    
    (52,076
    )
    
    
    
    
    
    
    (16,193
    )
    
    
    255,545
    
    
    
    681,857Comprehensive income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,866
    
    
    
    20,866Other comprehensive
income:Foreign translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,546
    
    
    
    
    
    
    
    2,546Change in unrealized
net gain (losses) on
hedging activities, net
of tax expense of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Unrealized net gains on
securities available
for sale, net of tax
expense of $241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    385
    
    
    
    
    
    
    
    385Less: Reclassification
adjustments for losses
included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259
    )
    
    
    
    
    
    
    (259
    )Additional pension
liability not yet
recognized in net
periodic pension
expense, net of tax
benefit of $3,728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,014
    )
    
    
    
    
    
    
    (7,014
    )Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,519Exercise of options
    
    
    119,194
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500Tax benefit on exercise of
options
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51Stockbased compensation
    
    
    
    
    
    
    
    
    
    
    1,016
    
    
    
    
    
    
    
    (216
    )
    
    
    
    
    
    
    
    
    
    
    800Purchases and retirement of
treasury stock
    
    
    
    
    
    
    (3,170,605
    )
    
    
    
    
    
    
    (47,837
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,837
    )Balance, August 31, 2003
    
    
    43,121,871
    
    
    
    (5,331,655
    )
    
    $
    496,148
    
    
    $
    (99,913
    )
    
    $
    (216
    )
    
    $
    (20,540
    )
    
    $
    276,411
    
    
    $
    651,890Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,975
    )
    
    
    (28,975
    )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)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,592
    )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
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,867
    
    
    
    
    
    
    
    
    
    
    
    1,867Balance, August 31, 2004
    
    
    69,101,493
    
    
    
    (5,331,655
    )
    
    $
    750,077
    
    
    $
    (99,913
    )
    
    $
    (6,072
    )
    
    $
    (15,157
    )
    
    $
    247,436
    
    
    $
    876,371
 
 70




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##### Table of Contents



THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Restated(Dollars in thousands, except share amounts)
 Unearned
    
    
    AccumulatedCommon
    
    
    Treasury
    
    
    Common
    
    
    Treasury
    
    
    Stock-
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Based
    
    
    Comprehensive
    
    
    Retained
    
    
    ShareholdersShares
    
    
    Shares
    
    
    Amount
    
    
    Amount
    
    
    Compensation
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityNet income (loss)
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    16,376
    
    
    $
    16,376Other comprehensive
income:Foreign 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)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (219
    )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
    )
    
    
    
    
    
    
    
    
    
    
    311Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,009
    
    
    
    
    
    
    
    
    
    
    
    4,009Balance, August 31, 2005
    
    
    84,289,004
    
    
    
    (5,331,655
    )
    
    $
    1,023,603
    
    
    $
    (99,913
    )
    
    $
    (11,197
    )
    
    $
    (31,752
    )
    
    $
    263,812
    
    
    $
    1,144,553
  71




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##### Table of Contents



THE SHAW GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended August 31, 2005, 2004 and 2003
(Dollars in thousands)
 2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income (loss)
    
    $
    16,376
    
    
    $
    (28,975
    )
    
    $
    20,866Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    31,183
    
    
    
    60,002
    
    
    
    44,022(Income) loss from and (gain) impairment of discontinued operations, net of taxes
    
    
    1,439
    
    
    
    5,433
    
    
    
    (1,197
    )Provision (benefit) for deferred income taxes
    
    
    11,273
    
    
    
    (11,769
    )
    
    
    8,951Stock-based compensation expense
    
    
    5,021
    
    
    
    2,138
    
    
    
    553Accretion of interest on discounted long-term debt
    
    
    264
    
    
    
    2,136
    
    
    
    9,508Amortization of deferred debt issue costs
    
    
    3,448
    
    
    
    4,509
    
    
    
    7,522Amortization of contract adjustments
    
    
    (11,098
    )
    
    
    (13,409
    )
    
    
    (26,823
    )Provision for uncollectible accounts receivable
    
    
    2,655
    
    
    
    8,368
    
    
    
    16,093(Earnings) losses from unconsolidated entities, net of taxes
    
    
    (3,809
    )
    
    
    (2,578
    )
    
    
    2,979Foreign currency transaction (gains) losses, net
    
    
    (919
    )
    
    
    2,702
    
    
    
    (135
    )(Gain) loss on retirement of debt
    
    
    47,772
    
    
    
    1,325
    
    
    
    (2,723
    )Write-off of investments in securities available for sale and accounts and
claims receivable from Orion, and other accounts receivable
    
    
    
    
    
    
    
    
    
    
    12,395Minority interest, net of taxes
    
    
    3,915
    
    
    
    5,455
    
    
    
    169Other
    
    
    (2,555
    )
    
    
    (1,490
    )
    
    
    193Changes in assets and liabilities, net of effects of acquisitions and consolidation
of variable interest entities:(Increase) decrease in receivables
    
    
    30,067
    
    
    
    (9,007
    )
    
    
    9,697(Increase) decrease in costs and estimated earnings in excess of billings on
uncompleted contracts, including claims
    
    
    (20,523
    )
    
    
    (147,555
    )
    
    
    17,647(Increase) decrease in inventories
    
    
    (17,616
    )
    
    
    12,480
    
    
    
    13,519(Increase) decrease in other current assets
    
    
    11,697
    
    
    
    2,170
    
    
    
    (25,558
    )(Increase) decrease in prepaid expenses
    
    
    4,292
    
    
    
    14,781
    
    
    
    38(Increase) decrease in other assets
    
    
    (9,948
    )
    
    
    (16,457
    )
    
    
    (35
    )Increase (decrease) in accounts payable
    
    
    10,908
    
    
    
    (6,232
    )
    
    
    (88,164
    )Increase (decrease) in accrued liabilities
    
    
    (2,199
    )
    
    
    3,585
    
    
    
    (26,413
    )Increase (decrease) in advanced billings and billings in excess of costs and
estimated earnings on uncompleted contracts
    
    
    (82,049
    )
    
    
    96,019
    
    
    
    (193,960
    )Increase (decrease) in deferred revenue-prebilled
    
    
    2,359
    
    
    
    (5,332
    )
    
    
    (718
    )Increase (decrease) in other long-term liabilities
    
    
    35,936
    
    
    
    2,928
    
    
    
    3,338Net cash provided by (used in) operating activities
    
    
    67,889
    
    
    
    (18,773
    )
    
    
    (198,236
    )Cash flows from investing activities:Proceeds from sale of businesses, net of cash surrendered
    
    
    14,108
    
    
    
    
    
    
    
    Purchases of businesses, net of cash received
    
    
    
    
    
    
    (23,847
    )
    
    
    (22,512
    )Purchase of property and equipment
    
    
    (30,201
    )
    
    
    (31,507
    )
    
    
    (26,221
    )Investment in and advances to unconsolidated entities and joint ventures
    
    
    (13,335
    )
    
    
    (8,426
    )
    
    
    (3,328
    )Distributions from unconsolidated entities
    
    
    14,930
    
    
    
    7,538
    
    
    
    485Deposits in escrowed cash for repurchase of LYONs
    
    
    
    
    
    
    (23,229
    )
    
    
    Withdrawal from escrow cash for repurchase of LYONs
    
    
    
    
    
    
    23,229
    
    
    
    Cash received from restricted and escrowed cash
    
    
    212,474
    
    
    
    168,196
    
    
    
    38,465Cash deposited into restricted and escrowed cash
    
    
    (327,800
    )
    
    
    (166,734
    )
    
    
    Proceeds from sale of property and equipment
    
    
    3,362
    
    
    
    2,588
    
    
    
    3,135Proceeds from sale of assets held for sale
    
    
    
    
    
    
    5,662
    
    
    
    Proceeds from the sale of investment in an unconsolidated entity
    
    
    
    
    
    
    9,000
    
    
    
    Purchases of marketable securities, held to maturity
    
    
    
    
    
    
    
    
    
    
    (107,270
    )Maturities of marketable securities, held to maturity
    
    
    
    
    
    
    5,096
    
    
    
    157,126Other
    
    
    
    
    
    
    
    
    
    
    974Net cash provided by (used in) investing activities
    
    $
    (126,462
    )
    
    $
    (32,434
    )
    
    $
    40,854
   72




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##### Table of Contents



THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS  (Continued)
 2005
    
    
    2004
    
    
    2003Cash flows from financing activities:Purchase of treasury stock
    
    $
    
    
    
    $
    
    
    
    $
    (47,837
    )Repayment of debt and capital leases
    
    
    (279,828
    )
    
    
    (276,904
    )
    
    
    (256,573
    )Payments for financed insurance premiums
    
    
    (10,582
    )
    
    
    (8,892
    )
    
    
    Proceeds from issuance of debt
    
    
    3,726
    
    
    
    1,724
    
    
    
    251,020Deferred credit costs
    
    
    (4,886
    )
    
    
    (2,551
    )
    
    
    (12,241
    )Issuance of common stock
    
    
    263,849
    
    
    
    246,157
    
    
    
    500Proceeds from revolving credit agreements, net
    
    
    41,234
    
    
    
    1,018
    
    
    
    110Net cash provided by (used in) financing activities
    
    
    13,513
    
    
    
    (39,448
    )
    
    
    (65,021
    )Cash from consolidation of variable interest entities previously unconsolidated
    
    
    1,343
    
    
    
    879
    
    
    
    Effects of foreign exchange rate changes on cash
    
    
    (1,194
    )
    
    
    (1,519
    )
    
    
    491Net increase (decrease) in cash and cash equivalents
    
    
    (44,911
    )
    
    
    (91,295
    )
    
    
    (221,912
    )Cash and cash equivalents-beginning of year
    
    
    88,557
    
    
    
    179,852
    
    
    
    401,764Cash and cash equivalents-end of year
    
    $
    43,646
    
    
    $
    88,557
    
    
    $
    179,852Supplemental disclosures:Cash payments for:Interest (net of capitalized interest)
    
    $
    40,206
    
    
    $
    31,325
    
    
    $
    2,577Income taxes
    
    $
    5,133
    
    
    $
    1,220
    
    
    $
    11,743Noncash investing and financing activities:Issuance of restricted stock
    
    $
    9,445
    
    
    $
    7,723
    
    
    $
    Financed insurance premiums
    
    $
    11,034
    
    
    $
    6,266
    
    
    $
    Transfer of acquired accounts receivables to seller  EDS acquisition
    
    $
    
    
    
    $
    4,000
    
    
    $
    Receivable for working capital adjustment  Badger Acquisition
    
    $
    
    
    
    $
    1,800
    
    
    $
    Property and equipment acquired through issuance of debt
    
    $
    
    
    
    $
    603
    
    
    $
    1,706Repurchase of debt funded subsequent to balance sheet date
    
    $
    
    
    
    $
    
    
    
    $
    20,648
  73




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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 our accounting treatment of
our non-compete clause of an employment agreement
with our Chief Executive Officer, which reduced retained earnings
and other long-term assets and increased accrued liabilities, other
current assets and current deferred income taxes; and
    
    as a result of an accounting error, which was an overstatement of operating expenses
related to employee benefit costs for Shaw Energy Delivery Services (EDS), a subsidiary
acquired by Shaw in December of 2003, which effected fiscal 2004.
  Fiscal Year-End
  Use of Estimates
  
    
    contract revenues, costs and profits and the application of
percentage-of-completion 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;
 74




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##### Table of Contents




    
    consolidation of variable interest entities; and
    
    valuation of stock-based compensation.
 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.
    
    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
  75




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##### Table of Contents



Accounts Receivable and Credit Risk
  Allowance for Doubtful Accounts
   2005
    
    
    2004Beginning balance, September 1
    
    $
    29,511
    
    
    $
    32,661Provision
    
    
    2,655
    
    
    
    8,368Write offs
    
    
    (11,123
    )
    
    
    (13,119
    )Fair value adjustments and reclassifications related to acquisitions and dispositions
    
    
    (3,365
    )
    
    
    2,276Other
    
    
    222
    
    
    
    (675
    )Ending balance, August 31
    
    $
    17,900
    
    
    $
    29,511
 Inventories
  Property and Equipment
   Transportation equipment
    
    5-15 YearsFurniture, fixtures and software
    
    3-15 YearsMachinery and equipment
    
    3-18 YearsBuildings and improvements
    
    8-40 Years
   76




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Joint Ventures
  Income Taxes
  Goodwill, Other Intangibles and Contract Adjustments and Accrued Contract Losses
     77




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##### Table of Contents



Engineering, Procurement and Construction Contract and Environmental and Infrastructure Revenue
Recognition and Profit and Loss Estimates Including Claims
    
    
    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.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 underruns/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 would result in a loss on the contract should such a level of cost overruns
occur. Cost-reimbursable contracts generally provide for reimbursement of all of our
costs, but generally limit our fee to a fixed 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, testing 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.
 78




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##### Table of Contents



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 will record
the adjustment amounts on a cumulative, catch-up basis.
    
    We have a number of 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 with respect to our contract performance, our cost estimates, 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, unless recoverable from claims or change orders,
will result in a reduction in profit equivalent to the cost increase.
    
    Disputes with other parties involved in the contract can and often do occur, which we refer
to as claims. These disputes are generally the result of one party incurring costs or damages
caused by another party during execution of the project. We may incur additional costs or be
damaged and we may cause additional costs or damages 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 to the extent that contract costs have been 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 are 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 subsequent to the date 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 collection is deemed probable and the amounts can
be reasonably estimated. Including claims in this calculation 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 to the extent of costs incurred and include
no 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.Claims are included in costs and estimated earnings in excess of billings on the consolidated
balance sheets (see Note 18 of our consolidated financial statements for further
discussion of our significant claims).
 Other Revenue Recognition and Profit and Loss Estimates
    79




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Cost Estimates
  General and Administrative Expenses
  Financial Instruments, Forward Contracts  Non-Trading Activities
   Other Comprehensive Income
    80




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##### Table of Contents



Self Insurance
  Debt Issuance Costs
  Reclassifications
  Stock Based Compensation
   For the Year Ended August 31,2005
    
    
    2004
    
    
    2003Net income (loss):As reported
    
    $
    16,376
    
    
    $
    (28,975
    )
    
    $
    20,866Add: Stock-based employee compensation reported in net income (loss), net of taxes
    
    
    3,465
    
    
    
    1,539
    
    
    
    359Deduct: Stock-based employee compensation under the fair value method for all
awards, net of taxes
    
    
    (11,099
    )
    
    
    (10,290
    )
    
    
    (8,565
    )Pro forma
    
    $
    8,742
    
    
    $
    (37,726
    )
    
    $
    12,660Basic net income (loss) per share:As reported
    
    $
    0.24
    
    
    $
    (0.50
    )
    
    $
    0.55Add: Stock-based employee compensation reported in net income (loss), net of taxes
    
    
    0.05
    
    
    
    0.03
    
    
    
    0.01Deduct: Stock-based employee compensation under the fair value method for all
awards, net of taxes
    
    
    (0.16
    )
    
    
    (0.18
    )
    
    
    (0.23
    )Pro forma
    
    $
    0.13
    
    
    $
    (0.65
    )
    
    $
    0.33Diluted net income (loss) per share:As reported
    
    $
    0.23
    
    
    $
    (0.50
    )
    
    $
    0.54Add: Stock-based employee compensation reported in net income (loss), net of taxes
    
    
    0.05
    
    
    
    0.03
    
    
    
    0.01Deduct: Stock-based employee compensation under the fair value method for all
awards, net of taxes
    
    
    (0.16
    )
    
    
    (0.18
    )
    
    
    (0.22
    )Pro forma
    
    $
    0.12
    
    
    $
    (0.65
    )
    
    $
    0.33
 81




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##### Table of Contents



For the Year Ended August 31,2005
    
    2004
    
    2003Weighted average fair value at grant date for options granted during indicated period
    
    $
    8.01
    
    
    $
    6.45
    
    
    $
    8.30Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    65
    %
    
    
    66
    %
    
    
    67
    %Risk-free interest rate
    
    
    3.6
    %
    
    
    3.4
    %
    
    
    2.9
    %Expected life of options (in years)
    
    
    5
    
    
    
    5
    
    
    
    5
   Restricted Stock
  Note 2  Public Capital Stock Transactions
  Date of Common Stock Issuance
    
    April 2005
    
    April 20, 2004
    
    October 29, 2003Number of shares issued
    
    
    14,068
    
    
    
    2,346
    
    
    
    23,000Price per share
    
    $
    19.50
    
    
    $
    12.35
    
    
    $
    10.00Net proceeds
    
    $
    260,270
    
    
    $
    28,492
    
    
    $
    217,474Transaction costs
    
    $
    14,063
    
    
    $
    391
    
    
    $
    12,526
    82




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##### Table of Contents



Note 3  Restricted and Escrowed Cash
  
    
    $170.8 million and $55.4 million, as of August 31, 2005 and 2004, 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 is scheduled to be completed in calendar 2006;
    
    $1.1 million as of August 31, 2005, related to deposits designated to fund
remediation costs associated with a sold property; and
    
    $1.2 million as of August 31, 2004, related to a foreign project which required
the deposit of advance payments by the customer into an escrowed cash account.
  Note 4  Acquisitions
     Energy Delivery Services, Inc.
  83




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##### Table of Contents



Coastal Engineering and Environmental Consultants, Inc.
  Badger Technologies
  Envirogen, Inc.
  LFG&E Acquisition
  Note 5  Inventories, Other Assets and Other Liabilities
 Inventories
  August 31,2005
    
    
    2004Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    FIFO
    
    
    Total
    
    
    Average
    
    
    FIFO
    
    
    TotalFinished goods
    
    $
    33,553
    
    
    $
    
    
    
    $
    33,553
    
    
    $
    25,670
    
    
    $
    
    
    
    $
    25,670Raw materials
    
    
    2,431
    
    
    
    49,490
    
    
    
    51,921
    
    
    
    3,974
    
    
    
    45,861
    
    
    
    49,835Work in process
    
    
    1,579
    
    
    
    10,631
    
    
    
    12,210
    
    
    
    722
    
    
    
    3,846
    
    
    
    4,568$
    37,563
    
    
    $
    60,121
    
    
    $
    97,684
    
    
    $
    30,366
    
    
    $
    49,707
    
    
    $
    80,073
 84




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##### Table of Contents



Other Assets
  August 31,2005
    
    
    2004Power generation plant equipment and materials
    
    $
    15,303
    
    
    $
    23,854LandBank assets
    
    
    33,111
    
    
    
    40,990Intangible assets, other than contract
(asset) adjustments, net
    
    
    34,023
    
    
    
    35,153Employee receivables (See Note 16)
    
    
    144
    
    
    
    1,170Notes receivable
    
    
    12,792
    
    
    
    6,936Deposits
    
    
    2,642
    
    
    
    3,016Real estate option
    
    
    12,183
    
    
    
    12,183Deferred financing fees
    
    
    3,706
    
    
    
    11,306Other
    
    
    3,071
    
    
    
    3,565Total other assets
    
    $
    116,975
    
    
    $
    138,173
      85




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##### Table of Contents



Other liabilities
  August 31,2005
    
    
    2004Accumulated benefit obligations
    
    $
    27,463
    
    
    $
    13,567Deferred rental expense and lease obligations
    
    
    3,237
    
    
    
    2,285LandBank environmental remediation liabilities
    
    
    9,738
    
    
    
    2,326Other
    
    
    2,204
    
    
    
    1,463Total other liabilities
    
    $
    42,642
    
    
    $
    19,641
    Note 6 Variable Interest Entities, Unconsolidated Entities, Joint Ventures and Limited
Partnerships
  Variable Interest Entities
  As of August 31,2005
    
    
    2004Primary Beneficiary:Total assets
    
    $
    96,150
    
    
    $
    47,590Total liabilities
    
    
    48,591
    
    
    
    35,165Not-primary Beneficiary:Total assets
    
    $
    897,380
    
    
    $
    37,171Total liabilities
    
    
    814,023
    
    
    
    13,670
 86




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As of August 31,2005
    
    
    2004Assets:Cash
    
    $
    20,413
    
    
    $
    4,854Accounts receivable
    
    
    14,407
    
    
    
    22,681Cost and estimated earnings in excess of billings on uncompleted contracts
    
    
    7,329
    
    
    
    500Inventories
    
    
    4,787
    
    
    
    6,119Property and equipment
    
    
    24,567
    
    
    
    12,076Other assets
    
    
    22,736
    
    
    
    6Total assets
    
    $
    94,239
    
    
    $
    46,236Liabilities:Accounts payables and accrued liabilities
    
    $
    21,432
    
    
    $
    8,041Billings in excess of cost and estimated earnings
    
    
    6,088
    
    
    
    12,513Short-term line of credit
    
    
    7,602
    
    
    
    3,487Long-term debt
    
    
    6,672
    
    
    
    4,970Other liabilities
    
    
    2,071
    
    
    
    Total liabilities
    
    $
    43,865
    
    
    $
    29,011Minority interest
    
    $
    15,242
    
    
    $
    8,497
 For the Year EndedAugust 31,2005
    
    
    2004Revenues
    
    $
    24,510
    
    
    $
    23,498Expenses
    
    
    19,441
    
    
    
    17,928Net income (loss)
    
    $
    5,069
    
    
    $
    5,570
  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 initially invested $0.3 million to acquire a 49% equity interest in the joint
venture. Since November 1993, we have made advances to the entity and have issued interest
bearing loans to fund working capital and to finance certain equipment purchases. We have
concluded that this entity does not have sufficient equity, and we are the primary
beneficiary of this VIE as we are obligated to absorb the majority of the expected losses,
if any, and have the right to the majority of the residual returns. We consolidated this
entity and it is included in our F&M segment. This entity had total assets of approximately
$23.1 million and total liabilities of $22.4 million as of August 31, 2005. 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 $3.5 million as of August 31,
2005.
    
    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. We concluded that this entity was a VIE and that we were the primary
beneficiary as we are obligated to absorb the majority of the expected losses, if any. This
entity had total assets and liabilities of $45.9 million and $4.5 million as of August 31,
2005, 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 $20.7 million as of August 31,
2005 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 $8.2 million and $12.1 million, respectively as
of August 31, 2005 reflected in our E&I segment. Our exposure to losses consists of our
equity interest and note receivable with accrued interest totaling $14.1 million as of
August 31, 2005.
    
    In June 2003, we entered into a mentor-protégé relationship with Native American
Services Corporation. The NASCENT joint ventures were collectively formed through this
relationship for the purpose of competitive pursuit of project-specific
 87




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property management job-order contract work. We have a 49% interest in each of the joint
ventures. We have determined in
the third quarter of fiscal 2005 that the NASCENT Group JVs are variable interest entities,
and that Shaw is the primary beneficiary. The NASCENT Group JVs have total assets of $1.3
million and total liabilities of $1.0 million as of August 31, 2005, and these are reflected
in the E&I segment. Our exposure to loss is limited to our equity interest of $0.1 million
as of August 31, 2005.
 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 United States 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. We account for American Eagle Northwest, LLC under the equity
method. As of August 31, 2005, our maximum exposure to loss consisted of our equity
investment of $3.6 million and the exposure related to the guarantee (see Note 12 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,
2005, this entity had total assets and liabilities of approximately $260.4 million and
approximately $234.3 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, 2005. 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. We
account for American Eagle Communities Midwest, LLC under the equity method. As of August
31, 2005, 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,
2005, this entity had total assets and liabilities of approximately $225.0 million and
approximately $221.3 million, respectively.
    
    In March 2005, we entered into an agreement with a third party to guarantee a
revolving line of credit of one of our unconsolidated entities, Shaw YPC Piping (Nanjing)
Co. LTD, for its working capital needs. Our maximum exposure under this agreement at the
time we entered into this guarantee was estimated at $1.8 million, and the guarantee expires
in March of 2006. As of August 31, 2005, we have recorded an immaterial liability and
corresponding asset related to this guarantee. Further, we concluded that this new
guarantee did not make us the primary beneficiary, thus we continue to account for it as an
equity investment. As of August 31, 2005, this entity had total assets and liabilities of
approximately $11.9 million and approximately $10.3 million, respectively.
    
    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. We account for PFH Management under the equity method. 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, 2005, our maximum exposure to loss consisted of our equity
interest of approximately $3.2 million. As of August 31, 2005, this entity had total assets
and liabilities of approximately $107.4 million and approximately $81.2 million,
respectively.
 88




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
    
    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. We account
for Hanscom Family Housing, LLC under the equity method. As of August 31, 2005, our
maximum exposure to loss consisted of our equity investment of $6.7 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, 2005, this entity had total assets and liabilities of $189.3
million and $173.6 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. We account for Little
Rock Family Housing, L.L.C. under the equity method. As of August 31, 2005, our maximum
exposure to loss consisted of our equity interest of $4.6 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, 2005, this entity had total assets and liabilities of
approximately $79.9 million and $68.7 million, respectively.
   Unconsolidated Entities (including VIEs), Joint Ventures and Limited Partnerships
  As of August 31,2005
    
    
    2004Current assets
    
    $
    304,151
    
    
    $
    76,872Current liabilities
    
    
    83,028
    
    
    
    59,159Working capital
    
    $
    221,123
    
    
    $
    17,713Noncurrent assets
    
    $
    703,199
    
    
    $
    88,838Noncurrent liabilities
    
    $
    830,873
    
    
    $
    74,331
 For the Year EndedAugust 31,2005
    
    
    2004
    
    
    2003Revenues
    
    $
    360,495
    
    
    $
    297,399
    
    
    $
    525,974Gross profit (loss)
    
    $
    50,279
    
    
    $
    16,148
    
    
    $
    67,246Net income (loss)
    
    $
    30,843
    
    
    $
    3,503
    
    
    $
    5,950
  89




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August 31,2005
    
    
    2004Privatization entities
    
    $
    19,441
    
    
    $
    8,787Other entitiesShaw-YPC Piping (Nanjing) Co., Ltd.
    
    
    844
    
    
    
    1,447Stennis joint venture
    
    
    4,584
    
    
    
    3,928Nordic
    
    
    1,930
    
    
    
    1,930Duke Cogema S&W
    
    
    383
    
    
    
    839Other
    
    
    4,541
    
    
    
    5,646Total
    
    
    31,723
    
    
    
    22,577Long-term advances to and receivables from unconsolidated entities (in thousands):Shaw YPC Piping (Nanjing) Co. LTD
    
    
    3,081
    
    
    
    3,081Other
    
    
    67
    
    
    
    313,148
    
    
    
    3,112Total investments in and advances to unconsolidated entities, joint ventures and limited partnerships
    
    $
    34,871
    
    
    $
    25,689
  For the Year EndedAugust 31,2005
    
    
    2004
    
    
    2003Privatization entities
    
    $
    (343
    )
    
    $
    1,789
    
    
    $
    Other entities:Shaw-YPC Piping (Nanjing) Co., Ltd
    
    
    (626
    )
    
    
    (737
    )
    
    
    (250
    )Stennis joint venture
    
    
    664
    
    
    
    1,178
    
    
    
    1,180Duke Cogema S&W
    
    
    2,786
    
    
    
    
    
    
    
    Other
    
    
    1,328
    
    
    
    348
    
    
    
    (3,909
    )Total earnings (losses) from unconsolidated entities, net of taxes
    
    $
    3,809
    
    
    $
    2,578
    
    
    $
    (2,979
    )
 90




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##### Table of Contents



Shaw YPCDuke
    
    
    
    
    
    
    
    
    
    PipingPrivatization
    
    Cogena
    
    
    
    
    
    Entergy/
    
    (Nanjing)Entities
    
    S&W
    
    Shaw-Nass
    
    Shaw
    
    Co. LTD
    
    OtherRevenue from unconsolidated entities2005
    
    $
    519
    
    
    $
    36,806
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4892004
    
    
    388
    
    
    
    34,018
    
    
    
    
    
    
    
    1,154
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    23,126
    
    
    
    632
    
    
    
    43,000
    
    
    
    
    
    
    
    8Accounts
receivable from unconsolidated

entities as of August 31,2005
    
    
    475
    
    
    
    3,155
    
    
    
    
    
    
    
    
    
    
    
    3,202
    
    
    
    2,2142004
    
    
    
    
    
    
    3,110
    
    
    
    
    
    
    
    7,048
    
    
    
    397
    
    
    
    5Advances to unconsolidated entities as
of August 31,2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,081
    
    
    
    672004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,081
    
    
    
    31
  Note 7
 Goodwill and Other Intangibles
 Goodwill
  ECM
    
    
    E&C
    
    
    Maintenance
    
    
    E&I
    
    
    F&M
    
    
    TotalBalance at September 1, 2003
    
    $
    298,486
    
    
    $
    
    
    
    $
    
    
    
    $
    188,431
    
    
    $
    24,459
    
    
    $
    511,376Transfer of Shaw Global Energy
Services, Inc.
    
    
    10,089
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,089
    )
    
    
    Currency translation adjustment
    
    
    1,905
    
    
    
    
    
    
    
    
    
    
    
    198
    
    
    
    638
    
    
    
    2,741EDS acquisition
    
    
    12,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,595Coastal acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,094
    
    
    
    
    
    
    
    1,094LFG&E acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,493
    
    
    
    
    
    
    
    2,493Allocation period adjustments:Badger Technologies acquisition
    
    
    (4,330
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,330
    )Envirogen, Inc. acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,583
    )
    
    
    
    
    
    
    (2,583
    )Impairment
 discontinued operations
(see Note 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28
    )
    
    
    (28
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (575
    )
    
    
    
    
    
    
    (575
    )Balance at August 31, 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
    
    
    $
    506,453
 91




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Other Intangible Assets
   92




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##### Table of Contents



Proprietary Technologies,Patents and Tradenames
    
    
    Customer RelationshipsGross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationSeptember 1, 2003 balance
    
    $
    36,161
    
    
    $
    (5,718
    )
    
    $
    2,016
    
    
    $
    (202
    )Allocation period adjustments, net
    
    
    6,387
    
    
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    
    
    
    
    (3,223
    )
    
    
    
    
    
    
    (268
    )August 31, 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
    )
  Contract Adjustments and Accrued Contract Losses
   Cost OfSeptember 1,
    
    
    (Asset) Or
    
    
    Revenues
    
    
    August 31,2004
    
    
    Liability
    
    
    Increase/
    
    
    2005Year Ended August 31, 2005
    
    Balance
    
    
    Increase
    
    
    (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,
    
    
    (Asset) Or
    
    
    Revenues
    
    
    August 31,2003
    
    
    Liability
    
    
    Increase/
    
    
    2004Year Ended August 31, 2004
    
    Balance
    
    
    Increase
    
    
    (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
 Cost OfSeptember 1,
    
    
    (Asset) Or
    
    
    Revenues
    
    
    August 31,2002
    
    
    Liability
    
    
    Increase/
    
    
    2003Year Ended August 31, 2003
    
    Balance
    
    
    Increase
    
    
    (Decrease)
    
    
    BalanceContract (asset) adjustments
    
    $
    (12,150
    )
    
    $
    4,426
    
    
    $
    4,514
    
    
    $
    (3,210
    )Contract liability adjustments
    
    
    69,140
    
    
    
    (5,252
    )
    
    
    (31,337
    )
    
    
    32,551Accrued contract losses
    
    
    11,402
    
    
    
    13,790
    
    
    
    (15,334
    )
    
    
    9,858Total
    
    $
    68,392
    
    
    $
    12,964
    
    
    $
    (42,157
    )
    
    $
    39,199
   93




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##### Table of Contents



Other Long Lived Assets
  Note 8
 Long-Term Debt and Revolving Line of Credit
  August 31,2005
    
    
    2004Senior Notes, unsecured, 10.75%
interest, due March 15, 2010, issued at
98.803% of face value, with an early
repurchase options for us
    
    $
    15,041
    
    
    $
    250,459Note payable of a VIE secured by real
estate with a book value of $5.0 million as
of August 31, 2005; interest payable
monthly at LIBOR plus 3% (6.8% at August
31, 2005) monthly payments of $0.1 million,
through November 2007
    
    
    3,952
    
    
    
    4,067Other notes payable; various interest rates
ranging from 0.0% to 8.2%; various payment
terms; maturing through 2010
    
    
    6,860
    
    
    
    6,548Total debt
    
    
    25,853
    
    
    
    261,074Less: current maturities
    
    
    (4,135
    )
    
    
    (4,637
    )Total long-term portion of debt
    
    $
    21,718
    
    
    $
    256,437
  TOTAL2006
    
    $
    4,1352007
    
    
    1,4352008
    
    
    5,2432009
    
    
    2010
    
    
    15,040Thereafter
    
    
    Total
    
    $
    25,853
  For the Year EndedAugust 31,2005
    
    
    2004
    
    
    2003(Loss) 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
    )
    
    
    
    
    
    
    Gain (loss) on repurchase of LYONs
    
    
    
    
    
    
    (1,325
    )
    
    
    2,723$
    (47,772
    )
    
    $
    (1,325
    )
    
    $
    2,723
 94




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##### Table of Contents



Senior Notes
   Credit Facilities and Revolving Lines of Credit
  August 31,2005
    
    
    2004New Credit facility
    
    $
    40.9
    
    
    $
    Foreign subsidiaries revolving lines of credit
    
    
    0.1
    
    
    
    2.5Credit facilities of consolidated VIEs
    
    
    6.3
    
    
    
    3.5Total outstanding
    
    
    47.3
    
    
    
    6.0Less: current maturities
    
    
    (6.4
    )
    
    
    (6.0
    )Total long-term revolving lines of credit
    
    $
    40.9
    
    
    $
    
     Total New Credit Facility
    
    $
    450.0Less: outstanding performance letters of credit
    
    
    197.6Less:
outstanding financial letters of credit
    
    
    46.0Less:
outstanding revolving credit loans
    
    
    40.9Remaining availability for performance letters of credit
    
    $
    165.5Portion of New Credit Facility available for financial letters of
credit and revolving credit loans
    
    $
    200.0Less: outstanding financial letters of credit
    
    
    46.0Less: outstanding revolving credit loans
    
    
    40.9Remaining availability for financial letters of credit and
revolving credit loans
    
    $
    113.1
  95




---



##### Table of Contents




    
    a maximum leverage ratio of 2.5x our earnings before interest, income taxes,
depreciation and amortization (EBITDA) EBITDA, as defined in the New Credit Facility, is
adjusted for certain non-cash items and for the pro forma impact of acquisitions and
dispositions of operations and assets;
    
    a maximum fixed charge coverage ratio of 2.5x EBITDA; and
    
    a minimum net worth as defined by the New Credit Facility.
    August 31,
    
    
    August 31,2005
    
    
    2004Capacity of foreign letters of credit
and short-term revolving lines of credit
    
    $
    6,253
    
    
    $
    16,078OutstandingLetters of credit
    
    
    4,072
    
    
    
    3,545Short-term revolving lines of credit
    
    
    57
    
    
    
    2,4744,129
    
    
    
    6,019Remaining availability for foreign letters of credit
and short-term revolving lines of credit
    
    $
    2,124
    
    
    $
    10,059Weighted-average interest rate
    
    
    6.75
    %
    
    
    4.25
    %
 96




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##### Table of Contents



Note 9
 Income Taxes
  As of August 31,2005
    
    
    2004Assets:Contract adjustments and accrued contract losses
    
    $
    3,697
    
    
    $
    9,742Deferred revenues
    
    
    681
    
    
    
    5,397Receivables
    
    
    5,806
    
    
    
    8,201Net operating loss and tax credit carryforwards
    
    
    99,580
    
    
    
    85,848Other expenses not currently deductible
    
    
    38,906
    
    
    
    22,721Accrued severance
    
    
    255
    
    
    
    179Tax basis of inventory in excess of book basis
    
    
    438
    
    
    
    485Less: valuation allowance
    
    
    (25,712
    )
    
    
    (9,813
    )Total assets
    
    
    123,651
    
    
    
    122,760Liabilities:Goodwill
    
    
    (26,601
    )
    
    
    (22,988
    )Property, plant and equipment
    
    
    (20,878
    )
    
    
    (12,310
    )Employee benefits and other expenses
    
    
    (12,190
    )
    
    
    (12,339
    )Total liabilities
    
    
    (59,669
    )
    
    
    (47,637
    )Net deferred tax assets
    
    $
    63,982
    
    
    $
    75,123
  For the Year Ended August 31,2005
    
    
    2004
    
    
    2003Domestic
    
    $
    31,416
    
    
    $
    (44,696
    )
    
    $
    15,972Foreign
    
    
    7,115
    
    
    
    14,130
    
    
    
    17,909Total
    
    $
    38,531
    
    
    $
    (30,566
    )
    
    $
    33,881
  For the Year Ended August 31,2005
    
    
    2004
    
    
    2003Current  foreign
    
    $
    536
    
    
    $
    220
    
    
    $
    1,195Deferred
    
    
    16,530
    
    
    
    (11,146
    )
    
    
    8,290Current
 domestic
    
    
    3,544
    
    
    
    1,025
    
    
    
    1,579Total
    
    $
    20,610
    
    
    $
    (9,901
    )
    
    $
    11,064
 97




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##### Table of Contents



For the Year Ended August 31,2005
    
    
    2004
    
    
    2003Provision (benefit) for income taxes
    
    $
    20,610
    
    
    $
    (9,901
    )
    
    $
    11,064Minority interest
    
    
    (3,354
    )
    
    
    (3,599
    )
    
    
    (113
    )Earnings (losses) from unconsolidated subsidiaries
    
    
    2,709
    
    
    
    2,880
    
    
    
    (732
    )(Loss) income from discontinued operations
    
    
    (517
    )
    
    
    (3,736
    )
    
    
    681Total provision (benefit) for income taxes
    
    $
    19,448
    
    
    $
    (14,356
    )
    
    $
    10,900
   2005
    
    
    2004
    
    
    2003Statutory rate
    
    
    35
    %
    
    
    (35
    )%
    
    
    35
    %State taxes provided
    
    
    4
    
    
    
    (4
    )
    
    
    Foreign income taxed at different rates
    
    
    (10
    )
    
    
    (13
    )
    
    
    (7
    )R&D and foreign tax credits
    
    
    (7
    )
    
    
    (1
    )
    
    
    (5
    )Valuation allowance
    
    
    30
    
    
    
    18
    
    
    
    7Other
    
    
    1
    
    
    
    3
    
    
    
    353
    %
    
    
    (32
    )%
    
    
    33
    %
     Note 10  Common Stock
  98




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##### Table of Contents



Note 11  Leases
 Capital leases
  For the year ending August 31:2006
    
    $
    2,1542007
    
    
    1,4332008
    
    
    1,0982009
    
    
    7692010
    
    
    Thereafter
    
    
    Total payments
    
    
    5,454Less: amount representing interest
    
    
    (627
    )Total capital lease obligation
    
    
    4,827Less: current portion
    
    
    (1,854
    )Total long-term portion of capital lease obligation
    
    $
    2,973
  99




---



##### Table of Contents



Operating Leases
  For the year ending August 31 (in thousands):2006
    
    $
    52,9102007
    
    
    45,2832008
    
    
    39,5892009
    
    
    34,7582010
    
    
    30,412Thereafter
    
    
    53,353Total future minimum lease payments
    
    $
    256,305
   Note 12  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.
  Contingencies Related to the Stone & Webster Acquisition
   Guarantees
  100




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##### Table of Contents



SEC Inquiry
  Securities Litigation
 Earl Thompson v. The Shaw Group Inc. et al Thompson
 101




---



##### Table of Contents



Thompson Thompson
 Jonathan Nelson v. J.M. Bernhard,
Jr., et al. and Larry F. Reusche v. Tim Barfield, Jr., et al.
  Other Litigation
    Environmental Liabilities
   102




---



##### Table of Contents



Note 13  Business Segments, Operations by Geographic Region and Major Customers
 Business Segments
      103




---



##### Table of Contents



Business Segment Data
  E&C
    
    Maintenance
    
    E&I
    
    F&M
    
    Corporate
    
    TotalFiscal 2005Revenues from external customers
    
    $
    1,170.4
    
    
    $
    774.4
    
    
    $
    1,120.1
    
    
    $
    201.0
    
    
    $
    
    
    
    $
    3,265.9Intersegment 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
    
    
    77.0
    
    
    
    12.0
    
    
    
    54.6
    
    
    
    21.8
    
    
    
    (126.9
    )
    
    
    38.5Earnings (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
    
    
    665.9
    
    
    
    94.0
    
    
    
    650.4
    
    
    
    304.8
    
    
    
    409.5
    
    
    
    2,124.6Investment in and advances to
equity method investees (excluding
EPC joint ventures)
    
    
    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 2004Revenues from external customers
    
    $
    980.6
    
    
    $
    586.6
    
    
    $
    1,268.3
    
    
    $
    180.3
    
    
    $
    
    
    
    $
    3,015.8Intersegment 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
    
    
    (42.9
    )
    
    
    7.7
    
    
    
    86.9
    
    
    
    10.2
    
    
    
    (92.5
    )
    
    
    (30.6
    )Earnings (losses) from
unconsolidated entities
    
    
    
    
    
    
    
    
    
    
    4.1
    
    
    
    (1.4
    )
    
    
    (0.1
    )
    
    
    2.6Goodwill
    
    
    276.1
    
    
    
    42.7
    
    
    
    189.1
    
    
    
    14.9
    
    
    
    
    
    
    
    522.8Total assets
    
    
    701.9
    
    
    
    70.2
    
    
    
    582.9
    
    
    
    276.8
    
    
    
    461.5
    
    
    
    2,093.3Investment in and advances to
equity method investees (excluding
EPC joint ventures)
    
    
    
    
    
    
    
    
    
    
    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
 ECM
    
    E&C
    
    Maintenance
    
    E&I
    
    F&M
    
    Corporate
    
    TotalFiscal 2003Revenues from external customers
    
    
    (a
    )
    
    $
    1,382.9
    
    
    $
    457.4
    
    
    $
    1,149.0
    
    
    $
    248.7
    
    
    $
    
    
    
    $
    3,238.0Intersegment revenues
    
    
    31.6
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    4.0
    
    
    
    7.3
    
    
    
    
    
    
    
    42.9Interest income
    
    
    2.5
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    0.3
    
    
    
    0.1
    
    
    
    2.5
    
    
    
    5.4Interest expense
    
    
    1.2
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    0.1
    
    
    
    
    
    
    
    30.6
    
    
    
    31.9Depreciation and amortization
    
    
    22.4
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    5.7
    
    
    
    6.6
    
    
    
    9.3
    
    
    
    44.0Income (loss) before income taxes
    
    
    (1.8
    )
    
    
    (a
    )
    
    
    (a
    )
    
    
    86.8
    
    
    
    16.1
    
    
    
    (67.2
    )
    
    
    33.9Earnings (losses) from
unconsolidated entities
    
    
    
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    1.7
    
    
    
    (1.2
    )
    
    
    (3.5
    )
    
    
    (3.0
    )Goodwill
    
    
    298.5
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    188.4
    
    
    
    24.5
    
    
    
    
    
    
    
    511.4Total assets
    
    
    739.9
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    550.8
    
    
    
    274.5
    
    
    
    472.3
    
    
    
    2,037.5Investment in and advances to
equity method investees (excluding
EPC joint ventures)
    
    
    
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    1.6
    
    
    
    14.5
    
    
    
    (2.2
    )
    
    
    13.9Purchases of property and equipment
    
    
    4.3
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    8.1
    
    
    
    4.9
    
    
    
    8.9
    
    
    
    26.2Increases (decreases) in other
assets, long-term, net
    
    
    27.4
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    (1.0
    )
    
    
    1.1
    
    
    
    4.5
    
    
    
    32.0
 
 (a)
    
    Due to the impracticality of restating these individual line items, we have presented the
combined results, as reported under the former ECM segments. 104




---



##### Table of Contents



As of August 31,2005
    
    
    2004
    
    
    2003Total segment assets
    
    $
    2,124.6
    
    
    $
    2,093.3
    
    
    $
    2,037.5Elimination of intercompany receivables
    
    
    (11.7
    )
    
    
    (10.4
    )
    
    
    (13.4
    )Income tax entries not allocated to segments
    
    
    (42.2
    )
    
    
    (47.3
    )
    
    
    (33.3
    )Other consolidation adjustments and eliminations
    
    
    
    
    
    
    (0.1
    )
    
    
    2.0Total consolidated assets
    
    $
    2,070.7
    
    
    $
    2,035.5
    
    
    $
    1,992.8
 Operations by Geographic Region
  For The Year Ended August 31,2005
    
    
    2004
    
    
    2003Revenues:United States
    
    $
    2,845.9
    
    
    $
    2,511.6
    
    
    $
    2,800.9Asia/Pacific Rim countries
    
    
    227.5
    
    
    
    223.4
    
    
    
    219.9Canada
    
    
    13.7
    
    
    
    13.4
    
    
    
    72.9United Kingdom and other European countries
    
    
    59.1
    
    
    
    96.3
    
    
    
    101.8South America and Mexico
    
    
    20.3
    
    
    
    7.2
    
    
    
    14.7Middle East
    
    
    87.4
    
    
    
    151.3
    
    
    
    12.0Other
    
    
    12.0
    
    
    
    12.6
    
    
    
    15.8$
    3,265.9
    
    
    $
    3,015.8
    
    
    $
    3,238.0
 As of August 31,2005
    
    
    2004
    
    
    2003Long-Lived Assets:United States
    
    $
    275.3
    
    
    $
    320.3
    
    
    $
    324.6United Kingdom
    
    
    1.3
    
    
    
    7.0
    
    
    
    6.9Other foreign countries
    
    
    48.5
    
    
    
    21.5
    
    
    
    28.9$
    325.1
    
    
    $
    348.8
    
    
    $
    360.4
  Information about Major Customers
  Export Revenues
  105




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##### Table of Contents



Note 14  Supplemental Disclosure to Earnings (Loss) Per Common Share
  For The Year Ended August 31,2005
    
    2004
    
    2003Weighted-average incremental shares:Stock options
    
    
    2,950
    
    
    
    5,148
    
    
    
    1,706Restricted stock
    
    
    66
    
    
    
    467
    
    
    
    LYONs convertible debt
    
    
    10
    
    
    
    994
    
    
    
    5,154
 Note 15  Employee Benefit Plans
  
    
    Stock compensation plans
    
    Defined contribution plans
    
    Defined benefit plans
 Stock Compensation Plans
  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)
    
    
    5,500,000
    
    
    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
   106




---



##### Table of Contents



For The Year Ended August 31,2005
    
    2004
    
    2003Stock-based compensation expense
    
    $
    4.0
    
    
    $
    1.7
    
    
    $
    
  August 31,2005
    
    2004Restricted stock:Granted, during and as of the period ended
    
    
    454,152
    
    
    
    624,872Outstanding, as of
    
    
    1,152,608
    
    
    
    619,872Future restricted stock awards:Granted, during and as of the period ended
    
    
    211,800
    
    
    
    98,000Outstanding, as of
    
    
    21,000
    
    
    
    98,000
  WeightedAverageShares
    
    
    Exercise PriceOutstanding at September 1, 2002
    
    
    3,799,433
    
    
    $
    18.21Granted
    
    
    1,298,100
    
    
    
    14.38Exercised
    
    
    (119,194
    )
    
    
    4.20Canceled
    
    
    (309,500
    )
    
    
    24.72Outstanding at August 31, 2003
    
    
    4,668,839
    
    
    
    17.30Granted
    
    
    1,070,311
    
    
    
    11.19Exercised
    
    
    (38,750
    )
    
    
    4.92Canceled
    
    
    (258,250
    )
    
    
    20.27Outstanding at August 31, 2004
    
    
    5,442,150
    
    
    
    16.05Granted
    
    
    1,763,206
    
    
    
    13.93Exercised
    
    
    (1,119,579
    )
    
    
    12.02Canceled
    
    
    (324,615
    )
    
    
    17.33Outstanding at August 31, 2005
    
    
    5,761,162
    
    
    
    16.11Exercisable at August 31, 2005
    
    
    3,388,536
    
    
    $
    17.53
 107




---



##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AverageRange Of
    
    Number
    
    
    Remaining
    
    
    Exercise
    
    
    Number
    
    
    ExerciseExercise Price
    
    Outstanding
    
    
    Contract Life
    
    
    Price
    
    
    Exercisable
    
    
    Price$4.19 $8.25
    
    
    626,566
    
    
    3.17 Yrs
    
    $
    4.40
    
    
    
    626,566
    
    
    $
    4.40$8.71$12.94
    
    
    1,645,019
    
    
    8.47 Yrs
    
    
    11.61
    
    
    
    275,633
    
    
    
    11.10$13.62$16.98
    
    
    1,272,652
    
    
    7.78 Yrs
    
    
    15.40
    
    
    
    435,462
    
    
    
    15.07$18.38$21.00
    
    
    1,498,550
    
    
    4.93 Yrs
    
    
    20.97
    
    
    
    1,490,500
    
    
    
    20.98$23.84$27.00
    
    
    570,875
    
    
    6.28 Yrs
    
    
    25.91
    
    
    
    432,250
    
    
    
    25.90$28.46$31.75
    
    
    72,500
    
    
    6.70 Yrs
    
    
    30.14
    
    
    
    54,375
    
    
    
    30.14$33.75$34.35
    
    
    25,000
    
    
    5.29 Yrs
    
    
    33.87
    
    
    
    23,750
    
    
    
    33.84$41.50$41.50
    
    
    42,500
    
    
    5.37 Yrs
    
    
    41.50
    
    
    
    42,500
    
    
    
    41.50$44.29 $44.29
    
    
    2,500
    
    
    5.41 Yrs
    
    
    44.29
    
    
    
    2,500
    
    
    
    44.29$51.51$51.51
    
    
    5,000
    
    
    5.54 Yrs
    
    
    51.51
    
    
    
    5,000
    
    
    
    51.515,761,162
    
    
    6.54 Yrs
    
    $
    16.11
    
    
    
    3,388,536
    
    
    $
    17.53
 Defined Contribution Plans
  Defined Benefit Plans
   108




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##### Table of Contents



For The Year Ended August 31,2005
    
    
    2004
    
    
    2003Change in Projected Benefit ObligationProjected benefit obligation at the start of the year
    
    $
    115,126
    
    
    $
    99,890
    
    
    $
    90,123Service cost
    
    
    2,664
    
    
    
    2,499
    
    
    
    2,248Interest cost
    
    
    6,614
    
    
    
    6,048
    
    
    
    5,186Members contributions
    
    
    910
    
    
    
    1,013
    
    
    
    811Actuarial loss (gain)
    
    
    22,305
    
    
    
    (1,222
    )
    
    
    3,337Benefits paid
    
    
    (5,923
    )
    
    
    (5,241
    )
    
    
    (4,584
    )Foreign currency exchange rate changes
    
    
    109
    
    
    
    12,139
    
    
    
    2,769Projected benefit obligation at the end of the year
    
    
    141,805
    
    
    
    115,126
    
    
    
    99,890Change in Plan AssetsFair value of the assets at the start of the year
    
    $
    87,274
    
    
    $
    73,977
    
    
    $
    68,764Actual return on plan assets
    
    
    14,755
    
    
    
    4,794
    
    
    
    4,357Employer contributions
    
    
    3,944
    
    
    
    3,469
    
    
    
    2,366Employee contributions
    
    
    910
    
    
    
    1,013
    
    
    
    811Benefits paid
    
    
    (5,923
    )
    
    
    (5,241
    )
    
    
    (4,584
    )Foreign currency exchange rate changes
    
    
    375
    
    
    
    9,262
    
    
    
    2,263Fair value of the assets at the end of the year
    
    
    101,335
    
    
    
    87,274
    
    
    
    73,977Funded status
    
    
    (40,470
    )
    
    
    (27,852
    )
    
    
    (25,913
    )Unrecognized net loss (gain)
    
    
    45,461
    
    
    
    33,687
    
    
    
    31,934Adjustment to recognize minimum liability
    
    
    (33,578
    )
    
    
    (20,887
    )
    
    
    (20,922
    )Prepaid (accrued) benefit cost
    
    $
    (28,587
    )
    
    $
    (15,052
    )
    
    $
    (14,901
    )Components of Net Periodic Benefit Cost and Increase in Minimum Pension LiabilityService cost
    
    $
    2,664
    
    
    $
    2,499
    
    
    $
    2,248Interest cost
    
    
    6,614
    
    
    
    6,048
    
    
    
    5,186Expected return on plan assets
    
    
    (3,719
    )
    
    
    (5,956
    )
    
    
    (5,349
    )Amortization of net (gain) loss
    
    
    1,936
    
    
    
    1,998
    
    
    
    1,492Other
    
    
    296
    
    
    
    227
    
    
    
    344Total net periodic benefit cost
    
    $
    7,791
    
    
    $
    4,816
    
    
    $
    3,921
 For The Year Ended August 31,2005
    
    
    2004
    
    
    2003Increase (decrease) in minimum pension liability included in other comprehensive income
    
    $
    12,513
    
    
    $
    (2,223
    )
    
    $
    7,014
 Assumptions
 For The Year Ended August 31,2005
    
    
    2004
    
    
    2003Weighted 
Average Assumptions Used to Determine Benefit Obligations at
August 31:Discount rate
    
    
    4.75-5.00
    %
    
    
    5.60-6.00
    %
    
    
    5.50-6.00
    %Rate of compensation increase
    
    
    4.00-4.70
    %
    
    
    4.00-4.90
    %
    
    
    4.00-5.00
    %Weighted
 Average Assumptions Used to Determine Net Periodic Benefit Cost
for Years Ended August 31:Discount rate at end of the year
    
    
    5.00-6.00
    %
    
    
    5.50-6.00
    %
    
    
    5.50-6.50
    %Expected return on plan assets for the year
    
    
    6.30-8.00
    %
    
    
    7.00-7.75
    %
    
    
    7.00-8.25
    %Rate of compensation increase at end of the year
    
    
    4.00-4.90
    %
    
    
    4.25-5.00
    %
    
    
    4.00-5.00
    %
 109




---



##### Table of Contents



Plan Assets, Investment Policies and Strategies and Expected Long-Term Rate of Return on Plan Assets
  At August 31,Asset Category
    
    2005
    
    2004Equity securities
    
    
    62.5
    %
    
    
    64.6
    %Debt securities
    
    
    30.3
    %
    
    
    30.9
    %Other
    
    
    7.2
    %
    
    
    4.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    Contributions and Benefit Payments
   Fiscal Year
    
    Pension Benefits
    
    Other Benefits2006
    
    $
    5,505
    
    
    $
    2007
    
    
    5,662
    
    
    
    22008
    
    
    5,820
    
    
    
    42009
    
    
    5,993
    
    
    
    62010
    
    
    6,248
    
    
    
    82011  2015
    
    
    33,151
    
    
    
    61
  Note 16  Related Party Transactions
  110




---



##### Table of Contents



Note 17  Foreign Currency Translation and Transactions
  Note 18  Claims on Major Contracts
  111




---



##### Table of Contents



As of August 31,2005
    
    
    2004Receivables from owners under contract terms
    
    $
    112.9
    
    
    $
    114.0Reimbursement of letter of credit draws by owners
    
    
    46.9
    
    
    
    46.8Claims receivable from owners, equipment vendors, subcontractors and others for costs incurred
    
    
    28.2
    
    
    
    77.4Less: Liquidated damages recorded in contract costs
    
    
    (17.1
    )
    
    
    (16.7
    )Less: Amounts we collected by drawing letters of credit
    
    
    (17.5
    )
    
    
    (42.1
    )Net claims receivable
    
    $
    153.4
    
    
    $
    179.4
 Covert & Harquahala Projects
      112




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##### Table of Contents



Wolf Hollow Project
      113




---



##### Table of Contents



Marcus Hook Project
    Other
  Note 19  Assets Held for Sale, Discontinued Operations and Costs Associated with Exit and Disposal Activities
 Assets Held For Sale
  As of August 31,2005
    
    
    2004Fabrication facilities in Louisiana and Texas (F&M segment)
    
    $
    2,996
    
    
    $
    Fabrication facilities in North Carolina (F&M segment)
    
    
    1,518
    
    
    
    1,784Facilities in the United Kingdom (Maintenance segment)
    
    
    5,006
    
    
    
    Total assets held for sale
    
    $
    9,520
    
    
    $
    1,784
  114




---



##### Table of Contents



Discontinued Operations
  For The Year Ended August 31,2005
    
    
    2004
    
    
    2003Revenues reclassified to discontinued operations:Hanger engineering and pipe support businesses (F&M segment)
    
    $
    2,746
    
    
    $
    7,934
    
    
    $
    15,663Roche Limited, Consulting Group (E&I segment)
    
    $
    58,525
    
    
    $
    61,132
    
    
    $
    54,827Income (loss) from discontinued operationsHanger engineering and pipe support businesses (F&M segment)
    
    $
    (776
    )
    
    $
    (1,674
    )
    
    $
    247Roche Limited, Consulting Group (E&I segment)
    
    
    (1,019
    )
    
    
    (764
    )
    
    
    950Total income (loss) from discontinued operations
    
    
    (1,795
    )
    
    
    (2,438
    )
    
    
    1,197Gain (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
    
    
    
    
    
    
    
    Total gain (impairment) of discontinued operations
    
    
    356
    
    
    
    (2,995
    )
    
    
    Total income (loss) from discontinued operations, net of taxes
    
    $
    (1,439
    )
    
    $
    (5,433
    )
    
    $
    1,197
   Exit and Disposal Activities
    115




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##### Table of Contents



Note 20  Quarterly Financial Data (Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterFiscal 2005Revenues
    
    $
    808,526
    
    
    $
    747,631
    
    
    $
    891,017
    
    
    $
    818,742Gross profit
    
    $
    74,110
    
    
    $
    66,578
    
    
    $
    78,867
    
    
    $
    72,861Net income (loss)
    
    $
    11,013
    
    
    $
    9,248
    
    
    $
    (21,749
    )
    
    $
    17,864Basic net income (loss) per common share
    
    $
    0.18
    
    
    $
    0.15
    
    
    $
    (0.31
    )
    
    $
    0.23Diluted net income (loss) per common share
    
    $
    0.17
    
    
    $
    0.14
    
    
    $
    (0.31
    )
    
    $
    0.23Fiscal 2004Revenues
    
    $
    632,319
    
    
    $
    675,651
    
    
    $
    901,655
    
    
    $
    806,188Gross profit
    
    $
    10,331
    
    
    $
    60,357
    
    
    $
    72,626
    
    
    $
    77,010Net income (loss)
    
    $
    (49,592
    )
    
    $
    2,497
    
    
    $
    7,199
    
    
    $
    10,921Basic net income (loss) per common share
    
    $
    (1.07
    )
    
    $
    0.05
    
    
    $
    0.12
    
    
    $
    0.17Diluted net income (loss) per common share
    
    $
    (1.07
    )
    
    $
    0.05
    
    
    $
    0.11
    
    
    $
    0.17
    Note 21  Prior Year Restatement of Consolidated Financial Statements
     116




---



##### Table of Contents



Note 22
 Unbilled Receivables, Retainage Receivables, Advance Billings, Disputed Accounts
Receivable, Accounts Receivable and Concentration of Credit Risk
 Unbilled Receivables, Retainage Receivables, Advance Billings and Disputed Accounts Receivable
   Accounts Receivable
  August 31,2005
    
    
    2004Trade accounts receivable, net
    
    $
    303,412
    
    
    $
    381,781Unbilled accounts receivable
    
    
    26,793
    
    
    
    10,532Retainage
    
    
    87,830
    
    
    
    59,080Total accounts receivable, including retainage, net
    
    $
    418,035
    
    
    $
    451,393
 Concentration
of Credit  Government Contracting
  August 31,2005
    
    
    2004Amounts due from U.S. Government
    
    $
    70.1
    
    
    $
    71.8
 For the Year EndedAugust 31,2005
    
    
    2004
    
    
    2003Revenues
    
    $
    1,014.8
    
    
    $
    1,170.0
    
    
    $
    948.9
 Note 23  New Accounting Pronouncements
  117




---



##### Table of Contents



118




---



##### Table of Contents



Note
24  Subsequent Events
      Note 25  Condensed Consolidating Financial Information
    119




---



##### Table of Contents



EliminationNon-
    
    
    AndParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedAs of August 31, 2005Current assets
    
    $
    951,140
    
    
    $
    205,778
    
    
    $
    131,150
    
    
    $
    (33,248
    )
    
    $
    1,254,820Intercompany long-term receivables
    
    
    240
    
    
    
    484,291
    
    
    
    9,708
    
    
    
    (494,239
    )
    
    
    Investments in subsidiaries and joint ventures
    
    
    739,737
    
    
    
    167,614
    
    
    
    6,251
    
    
    
    (878,731
    )
    
    
    34,871Property and equipment, net
    
    
    30,805
    
    
    
    98,756
    
    
    
    27,975
    
    
    
    
    
    
    
    157,536Other assets
    
    
    18,375
    
    
    
    560,281
    
    
    
    44,772
    
    
    
    
    
    
    
    623,428Total Assets
    
    $
    1,740,297
    
    
    $
    1,516,720
    
    
    $
    219,856
    
    
    $
    (1,406,218
    )
    
    $
    2,070,655Current liabilities
    
    $
    55,346
    
    
    $
    687,767
    
    
    $
    71,828
    
    
    $
    (33,780
    )
    
    $
    781,161Intercompany 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
    
    
    8,079
    
    
    
    28,620
    
    
    
    27,461
    
    
    
    
    
    
    
    64,160Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,240
    
    
    
    15,240Shareholders Equity
    
    
    1,144,553
    
    
    
    787,648
    
    
    
    105,791
    
    
    
    (893,439
    )
    
    
    1,144,553Total Liabilities & Shareholders Equity
    
    $
    1,740,297
    
    
    $
    1,516,720
    
    
    $
    219,856
    
    
    $
    (1,406,218
    )
    
    $
    2,070,655
 EliminationNon-
    
    
    andParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedAs of August 31, 2004Current assets
    
    $
    449,981
    
    
    $
    597,859
    
    
    $
    169,299
    
    
    $
    (58,333
    )
    
    $
    1,158,806Intercompany long-term receivables
    
    
    2,300
    
    
    
    42,173
    
    
    
    
    
    
    
    (44,473
    )
    
    
    Investments in subsidiaries and joint ventures
    
    
    715,737
    
    
    
    125,136
    
    
    
    8,855
    
    
    
    (824,039
    )
    
    
    25,689Property and equipment, net
    
    
    34,776
    
    
    
    109,491
    
    
    
    25,221
    
    
    
    
    
    
    
    169,488Other assets
    
    
    26,050
    
    
    
    609,220
    
    
    
    48,752
    
    
    
    (2,469
    )
    
    
    681,553Total Assets
    
    $
    1,228,844
    
    
    $
    1,483,879
    
    
    $
    252,127
    
    
    $
    (929,314
    )
    
    $
    2,035,536Current liabilities
    
    $
    57,729
    
    
    $
    731,641
    
    
    $
    136,700
    
    
    $
    (58,333
    )
    
    $
    867,737Intercompany long-term debt
    
    
    38,277
    
    
    
    
    
    
    
    6,196
    
    
    
    (44,473
    )
    
    
    Long-term revolving line of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt and capital leases
    
    
    251,865
    
    
    
    3,512
    
    
    
    5,796
    
    
    
    
    
    
    
    261,173Other non-current liabilities
    
    
    4,602
    
    
    
    4,205
    
    
    
    13,303
    
    
    
    (2,469
    )
    
    
    19,641Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,614
    
    
    
    10,614Shareholders Equity
    
    
    876,371
    
    
    
    744,521
    
    
    
    90,132
    
    
    
    (834,653
    )
    
    
    876,371Total Liabilities & Shareholders Equity
    
    $
    1,228,844
    
    
    $
    1,483,879
    
    
    $
    252,127
    
    
    $
    (929,314
    )
    
    $
    2,035,536
 120




---



##### Table of Contents



EliminationNon-
    
    
    AndParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedFor the Year Ended August 31, 2005Revenues
    
    $
    
    
    
    $
    3,086,005
    
    
    $
    218,662
    
    
    $
    (38,751
    )
    
    $
    3,265,916Cost of revenues
    
    
    
    
    
    
    2,834,656
    
    
    
    178,170
    
    
    
    (39,326
    )
    
    
    2,973,500Gross profit
    
    
    
    
    
    
    251,349
    
    
    
    40,492
    
    
    
    575
    
    
    
    292,416General and administrative expenses
    
    
    56,195
    
    
    
    120,772
    
    
    
    13,333
    
    
    
    (52
    )
    
    
    190,248Operating income (loss)
    
    
    (56,195
    )
    
    
    130,577
    
    
    
    27,159
    
    
    
    627
    
    
    
    102,168Other income (expense)
    
    
    56,029
    
    
    
    (118,819
    )
    
    
    (220
    )
    
    
    (627
    )
    
    
    (63,637
    )Equity in earnings (losses) of subsidiaries
    
    
    16,376
    
    
    
    23,218
    
    
    
    
    
    
    
    (39,594
    )
    
    
    Income (loss) before income taxes, minority interest,
earnings (losses) from unconsolidated entities and loss
from discontinued operations
    
    
    16,210
    
    
    
    34,976
    
    
    
    26,939
    
    
    
    (39,594
    )
    
    
    38,531Provision for income taxes
    
    
    214
    
    
    
    18,379
    
    
    
    2,017
    
    
    
    
    
    
    
    20,610Income (loss) before minority interest, earnings (losses)
from 
unconsolidated entities and loss from discontinued
operations
    
    
    15,996
    
    
    
    16,597
    
    
    
    24,922
    
    
    
    (39,594
    )
    
    
    17,921Minority interest, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,915
    )
    
    
    (3,915
    )Earnings (losses) from unconsolidated entities, net of taxes
    
    
    380
    
    
    
    4,144
    
    
    
    (715
    )
    
    
    
    
    
    
    3,809Income (loss) from continuing operations
    
    
    16,376
    
    
    
    20,741
    
    
    
    24,207
    
    
    
    (43,509
    )
    
    
    17,815Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    (776
    )
    
    
    (663
    )
    
    
    
    
    
    
    (1,439
    )Net income (loss)
    
    $
    16,376
    
    
    $
    19,965
    
    
    $
    23,544
    
    
    $
    (43,509
    )
    
    $
    16,376
 EliminationNon-
    
    
    andParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedFor the Year Ended August 31, 2004Revenues
    
    $
    
    
    
    $
    2,775,156
    
    
    $
    270,988
    
    
    $
    (30,331
    )
    
    $
    3,015,813Cost of revenues
    
    
    
    
    
    
    2,598,027
    
    
    
    227,588
    
    
    
    (30,126
    )
    
    
    2,795,489Gross profit
    
    
    
    
    
    
    177,129
    
    
    
    43,400
    
    
    
    (205
    )
    
    
    220,324General and administrative expenses
    
    
    55,856
    
    
    
    141,043
    
    
    
    15,220
    
    
    
    (205
    )
    
    
    211,914Operating income (loss)
    
    
    (55,856
    )
    
    
    36,086
    
    
    
    28,180
    
    
    
    
    
    
    
    8,410Other income (expense)
    
    
    55,879
    
    
    
    (89,360
    )
    
    
    (3,010
    )
    
    
    (2,485
    )
    
    
    (38,976
    )Equity in earnings (losses) of subsidiaries
    
    
    (28,975
    )
    
    
    25,545
    
    
    
    
    
    
    
    3,430
    
    
    
    Income (loss) before income taxes, minority interest,
earnings (losses) from unconsolidated entities and loss
from discontinued operations
    
    
    (28,952
    )
    
    
    (27,729
    )
    
    
    25,170
    
    
    
    945
    
    
    
    (30,566
    )Provision (benefit) for income taxes
    
    
    (28
    )
    
    
    (9,498
    )
    
    
    (375
    )
    
    
    
    
    
    
    (9,901
    )Income (loss) before minority interest, earnings (losses)
from 
unconsolidated entities and loss from discontinued
operations
    
    
    (28,924
    )
    
    
    (18,231
    )
    
    
    25,545
    
    
    
    945
    
    
    
    (20,665
    )Minority interest, net of taxes
    
    
    
    
    
    
    
    
    
    
    (171
    )
    
    
    (5,284
    )
    
    
    (5,455
    )Earnings (losses) from unconsolidated entities, net of taxes
    
    
    (51
    )
    
    
    4,054
    
    
    
    (1,425
    )
    
    
    
    
    
    
    2,578Income (loss) from continuing operations
    
    
    (28,975
    )
    
    
    (14,177
    )
    
    
    23,949
    
    
    
    (4,339
    )
    
    
    (23,542
    )Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    (4,669
    )
    
    
    (764
    )
    
    
    
    
    
    
    (5,433
    )Net income (loss)
    
    $
    (28,975
    )
    
    $
    (18,846
    )
    
    $
    23,185
    
    
    $
    (4,339
    )
    
    $
    (28,975
    )
 EliminationNon-
    
    
    AndParent
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidationOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedFor the Year Ended August 31, 2003Revenues
    
    $
    
    
    
    $
    2,954,606
    
    
    $
    286,895
    
    
    $
    (3,524
    )
    
    $
    3,237,977Cost of revenues
    
    
    
    
    
    
    2,748,657
    
    
    
    235,020
    
    
    
    (3,524
    )
    
    
    2,980,153Gross profit
    
    
    
    
    
    
    205,949
    
    
    
    51,875
    
    
    
    
    
    
    
    257,824General and administrative expenses
    
    
    41,200
    
    
    
    118,208
    
    
    
    28,010
    
    
    
    
    
    
    
    187,418Operating income (loss)
    
    
    (41,200
    )
    
    
    87,741
    
    
    
    23,865
    
    
    
    
    
    
    
    70,406Other income (expense)
    
    
    46,481
    
    
    
    (83,656
    )
    
    
    650
    
    
    
    
    
    
    
    (36,525
    )Equity in earnings (losses) of subsidiaries
    
    
    20,866
    
    
    
    19,494
    
    
    
    
    
    
    
    (40,360
    )
    
    
    Income before income taxes, minority interest, earnings
(losses) from unconsolidated entities and income (loss)
from discontinued operations
    
    
    26,147
    
    
    
    23,579
    
    
    
    24,515
    
    
    
    (40,360
    )
    
    
    33,881Provision (benefit) for income taxes
    
    
    1,850
    
    
    
    1,892
    
    
    
    7,322
    
    
    
    
    
    
    
    11,064Income (loss) before minority interest, earnings (losses)
from
 unconsolidated entities and income from discontinued
operations
    
    
    24,297
    
    
    
    21,687
    
    
    
    17,193
    
    
    
    (40,360
    )
    
    
    22,817Minority interest, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169
    )
    
    
    (169
    )Earnings (losses) from unconsolidated entities, net of taxes
    
    
    (3,431
    )
    
    
    3,286
    
    
    
    (2,834
    )
    
    
    
    
    
    
    (2,979
    )Income from continuing operations
    
    
    20,866
    
    
    
    24,973
    
    
    
    14,359
    
    
    
    (40,529
    )
    
    
    19,669Income from discontinued operations, net of taxes
    
    
    
    
    
    
    247
    
    
    
    950
    
    
    
    
    
    
    
    1,197Net income (loss)
    
    $
    20,866
    
    
    $
    25,220
    
    
    $
    15,309
    
    
    $
    (40,529
    )
    
    $
    20,866
 121




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##### Table of Contents



Non-Parent
    
    
    Guarantor
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the Year Ended August 31, 2005Net cash provided by (used in) operating activities
    
    $
    69,214
    
    
    $
    (32,884
    )
    
    $
    31,559
    
    
    $
    
    
    
    $
    67,889Net 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
    
    
    (52,056
    )
    
    
    (11,816
    )
    
    
    18,961
    
    
    
    
    
    
    
    (44,911
    )Cash and cash equivalents  beginning of the year
    
    
    55,970
    
    
    
    18,609
    
    
    
    13,978
    
    
    
    
    
    
    
    88,557Cash and cash equivalents  end of the year
    
    $
    3,914
    
    
    $
    6,793
    
    
    $
    32,939
    
    
    $
    
    
    
    $
    43,646
 Non-Parent
    
    
    Guarantor
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the Year Ended August 31, 2004Net cash provided by (used in) operating activities
    
    $
    76,036
    
    
    $
    (111,753
    )
    
    $
    16,944
    
    
    $
    
    
    
    $
    (18,773
    )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
    
    
    (41,175
    )
    
    
    (15,994
    )
    
    
    (34,126
    )
    
    
    
    
    
    
    (91,295
    )Cash and cash equivalents  beginning of the year
    
    
    97,145
    
    
    
    34,603
    
    
    
    48,104
    
    
    
    
    
    
    
    179,852Cash and cash equivalents  end of the year
    
    $
    55,970
    
    
    $
    18,609
    
    
    $
    13,978
    
    
    $
    
    
    
    $
    88,557
 Non-Parent
    
    
    Guarantor
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the Year Ended August 31, 2003Net cash provided by (used in) operating activities
    
    $
    12,453
    
    
    $
    (309,386
    )
    
    $
    98,697
    
    
    $
    
    
    
    $
    (198,236
    )Net cash provided by (used in) investing activities
    
    
    42,859
    
    
    
    (37,535
    )
    
    
    35,530
    
    
    
    
    
    
    
    40,854Net cash provided by (used in) financing activities
    
    
    (319,380
    )
    
    
    360,385
    
    
    
    (106,026
    )
    
    
    
    
    
    
    (65,021
    )Cash from consolidation of variable interest
entities previously unconsolidated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Effects of foreign exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    491
    
    
    
    
    
    
    
    491Net increase (decrease) in cash and cash equivalents
    
    
    (264,068
    )
    
    
    13,464
    
    
    
    28,692
    
    
    
    
    
    
    
    (221,912
    )Cash and cash equivalents  beginning of the year
    
    
    361,213
    
    
    
    21,139
    
    
    
    19,412
    
    
    
    
    
    
    
    401,764Cash and cash equivalents  end of the year
    
    $
    97,145
    
    
    $
    34,603
    
    
    $
    48,104
    
    
    $
    
    
    
    $
    179,852
 122




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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
   Attestation Report of the Independent Registered Public Accounting Firm
  Changes in Internal Control over Financial Reporting
  
 PART III
 
 Item 10. Directors and Executive Officers of The Registrant
    
 123




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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 and Reports on Form 8-K
      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).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).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).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 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).
 124




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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).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 (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).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).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 103/4% 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).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 103/4% 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).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).4.7
    
    Form of 103/4% 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).10.1
    
    The Shaw Group Inc. 1993 Employee Stock Option 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).10.2
    
    The Shaw Group Inc. 1996 Non-Employee Director Stock Option Plan, amended and restated through
January 30, 2004 (incorporated by reference to the designated Exhibit to the Companys Quarterly Report on Form
10-Q for the quarter ended February 29, 2004).10.3
    
    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).10.4
    
    The Shaw Group Inc. 2001 Employee Incentive Compensation Plan, amended and restated through
January 24, 2005 (incorporated by reference to the designated Exhibit to the Companys Current Report on Form 8-K
filed on January 26, 2005).10.5
    
    Form of Incentive Stock Option 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).10.6
    
    Form of Non-Qualified Stock Option 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).
 125




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##### Table of Contents



10.7
    
    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).10.8
    
    Informal Agreements to award shares of restricted stock (incorporated by reference to the
designated Exhibit to the Companys Current Report on Form 8-K filed in October 18, 2004).10.9
    
    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 (No.
333-62856)).10.10
    
    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).10.11
    
    The Shaw Group Inc. Fiscal 2005 Management Incentive Program 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).10.12
    
    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).10.13
    
    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 From 10-K for the
fiscal year ended August 31, 2001).10.14
    
    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).10.15
    
    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).10.16
    
    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).10.17
    
    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).10.18
    
    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).10.19
    
    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).10.20
    
    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).10.21
    
    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).10.22
    
    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).10.23
    
    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).
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10.24
    
    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). 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.10.25
    
    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). 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.10.26
    
    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).10.27
    
    $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).10.28
    
    The Shaw Group Inc. 401(k) Plan (incorporated by reference to the designated Exhibit to the
Companys Annual Report on Form 11-K filed on June 24, 2004).14.1
    
    The Shaw Group Inc. Code of Corporate Conduct and Insider Trading and Disclosure Policy dated
September 2005 (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).
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SIGNATURES AND CERTIFICATIONS
 
   THE SHAW GROUP INC./s/ J. M. Bernhard, Jr.By: J. M. Bernhard, Jr.Chief Executive OfficerDate: November 1, 2005
  Signature
    
    Title
    
    Date/s/ J.M. Bernhard, Jr.
(J. M. Bernhard, Jr.)
    
    Chairman of the Board and
Chief Executive Officer,
(Principal Executive Officer
and Director)
    
    November 1, 2005/s/ Robert L. Belk
(Robert L. Belk)
    
    Executive Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer and Director)
    
    November 1, 2005/s/ T.A. Barfield, Jr.
(T.A. Barfield, Jr.)
    
    President and Chief Operating
Officer (Principal Operating
Officer and Director)
    
    November 1, 2005/s/ Albert McAlister
(Albert McAlister)
    
    Director
    
    November 1, 2005/s/ L. Lane Grigsby
(L. Lane Grigsby)
    
    Director
    
    November 1, 2005/s/ David W. Hoyle
(David W. Hoyle)
    
    Director
    
    November 1, 2005/s/ John W. Sinders, Jr.
(John W. Sinders, Jr.)
    
    Director
    
    November 1, 2005/s/ James F. Barker
(James F. Barker)
    
    Director
    
    November 1, 2005/s/ Charles E. Roemer, III
(Charles E. Roemer, III)
    
    Director
    
    November 1, 2005
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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).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).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).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 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).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).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 (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).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).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 103/4% 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).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 103/4% 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).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).4.7
    
    Form of 103/4% 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).10.1
    
    The Shaw Group Inc. 1993 Employee Stock Option 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).10.2
    
    The Shaw Group Inc. 1996 Non-Employee Director Stock Option Plan, amended and restated through
January 30, 2004
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##### Table of Contents



(incorporated by reference to the designated Exhibit to the Companys Quarterly Report on Form
10-Q for the quarter ended February 29, 2004).10.3
    
    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).10.4
    
    The Shaw Group Inc. 2001 Employee Incentive Compensation Plan, amended and restated through
January 24, 2005 (incorporated by reference to the designated Exhibit to the Companys Current Report on Form 8-K
filed on January 26, 2005).10.5
    
    Form of Incentive Stock Option 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).10.6
    
    Form of Non-Qualified Stock Option 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).10.7
    
    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).10.8
    
    Informal Agreements to award shares of restricted stock (incorporated by reference to the
designated Exhibit to the Companys Current Report on Form 8-K filed in October 18, 2004).10.9
    
    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 (No.
333-62856)).10.10
    
    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).10.11
    
    The Shaw Group Inc. Fiscal 2005 Management Incentive Program 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).10.12
    
    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).10.13
    
    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 From 10-K for the
fiscal year ended August 31, 2001).10.14
    
    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).10.15
    
    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).10.16
    
    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).10.17
    
    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).10.18
    
    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).
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##### Table of Contents



10.19
    
    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).10.20
    
    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).10.21
    
    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).10.22
    
    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).10.23
    
    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).10.24
    
    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). 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.10.25
    
    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). 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.10.26
    
    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).10.27
    
    $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).10.28
    
    The Shaw Group Inc. 401(k) Plan (incorporated by reference to the designated Exhibit to the
Companys Annual Report on Form 11-K filed on June 24, 2004).14.1
    
    The Shaw Group Inc. Code of Corporate Conduct and Insider Trading and Disclosure Policy dated
September  2005 (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).
 131