Financial Reporting & Analysis

THE SHAW GROUP, INC.

This case includes data from The Shaw Group, Inc. annual report for the year end August 31, 2010.

Note 6 - Property and Equipment:

Property and equipment consisted for the following in (thousands):

AUGUST, 31

2010

2009

Transportation equipment

$10,899

$20,977

Furniture, fixtures, and software

162,446

146,905

Machinery and equipment

263,759

219,753

Buildings and improvements

233,353

151,708

Assets acquired under capital leases

3,612

5,561

Land

14,269

12,404

Construction in progress

89,401

79,004

777,739

636,402

Less: accumulated depreciation

-293,098

-250,796

Property and equipment, net

$484,641

$385,606

Assets acquired under capital leases, net of accumulated depreciation, were $1.6 million and $2.0 million

at August 31, 2010, and 2009, respectively. If the assets acquired under capital leases transfer title

at the end of the lease term or contain a bargain purchase option, the assets are amortized over their

estimated useful lives; otherwise, the assets are amortized over the respective lease term.

Depreciation expense of $59.8 million, $52.3 million, and $43.7 million for the fiscal years ended August 31, 2010,

2009, and 2008, respectively, is included in cost of revenues and general and administrative expenses in the

accompanying consolidated statements of operations.

At August 31, 2010, construction in progress consisted primarily of deposits on heavy equipment to be used on

some of our power projects. At August 31, 2009, construction in progress consisted primarily of cost related

to the construction of our module fabrication and assembly facility in Lake Charles, Louisiana.

In fiscal year 2009, we recorded an asset impairment charge of $5.5 million for a consolidated joint venture.

The impairment charge reduced the property, plant and equipment to its salvage value.

Note 9 - Debt and Revolving Lines of Credit (in part)

Our debt (including capital lease obligations) consisted of the following (in thousands):

31-Aug- 10

31-Aug-09

Short term

Long term

Short term

Long term

Notes payable on purchases of equipment; 0% to 1.3% interest;

payments discounted at imputed rate of 5.9% interest; due

September 2010 through April 2011

$4,079

$------

$10,610

$2,146

Notes payable on purchases of equipment; 5.2% to 6.0%

interest; due June 2011 through July 2012, and pad in full October 2009

-----

-----

1,188

1,824

Other notes payable

-----

-----

2,805

2,277

Capital lease obligations

400

979

796

1,380

Subtotal

4,479

979

15,399

7,627

Westinghouse Bonds (see description below)

1,520,674

1,387,954

---

Total

$1,525,153

$979

$1,403,353

$7,627

The notes payable on purchases of equipment are collateralized by the purchased equipment. The carrying amount

of the equipment pledged as collateral was approximately $18.8 million at August 31, 2010.

Annual scheduled maturities of debt and minimum lease payments under capital lease obligations during each

year ending August 31, are as follows (in thousands):

Capital Lease Obligations

Debt

2011

$475

$4,079

2012

399

---

2013

399

1,520,674

2014

266

---

2015

---

---

---

---

Thereafter

_________

__________

Subtotal

1539

1,524,753

Less: amount representing interest

-160

---

Total

$1,379

1,524,753

Note 13 - Operating Leases

We lease certain office buildings, fabrication and warehouse facilities, machinery and equipment under various

lease arrangements. Leases that do not qualify as capital leases are classified as operating leases and the

related lease payments are expensed on a straight-line basis over the lease term, including, as applicable, any

free rent period during which we have the right to use the asset. For leases with renewal options where the renewal

is reasonably assured, the lease term, including the renewal period, is used to determine the appropriate lease

classification and to compute periodic rental expense.

Certain of our operating lease agreements are non-cancelable and expire at various times and require various

minimum rentals. The non-cancelable operating leases with initial non-cancelable periods in excess of twelve

months that were in effect as of August 31, 2010, require us to make the following estimated future payments:

For the year ending August 31 (in thousands)

2011

$72,805

2012

61,677

2013

51,381

2014

45,791

2015

35,883

Thereafter

91,845

Total future minimum lease payments

$359,382

Future minimum lease payments as of August 31, 2010 have not been reduced by minimum non-cancelable

sublease rentals aggregating approximately $0.8 million.

In 2012, we entered into a 10-year non cancelable operating lease for our Corporate Headquarters building in

Baton Rouge, Louisiana. In connection with this lease, we purchased an option for $12.2 million for the right

to acquire additional office space and under developed land for approximately $150 million. The option expires

the earlier of January 2012, or upon renewal of the existing Corporate Headquarters lease. The cost of the option

is included in other assets. The book value of the opinion is assessed for impairment annually based on appraisals

of the additional office space and undeveloped land subject to the option. If we renew the lease rather than

exercise the option, the option value will be expensed over the term of the new Corporate Headquarters building

lease.

We also enter into lease assignments for equipment needed to fulfill the requirements of specific jobs. Any

payments owed or committed under these lease arrangements of August 31, 2010, are not included as part

of total minimum lease payments shown above.

The total rental expense for the fiscal years ended August 31, 2010, 2009, and 2008 was approximately $178.8

million, and $170.6 million, respectively, Deferred rent payable (current and long term) aggregated $32.0 million

and $30.3 million at August 31, 2010 and 2009, respectively.

Required:

a. For August 31, 2010:

1. What was the gross amount for property and equipment?

2. What was the net amount for property and equipment?

3. What was the gross amount for assets acquired under capital leases?

4. What was the net amount for assets acquired under capital leases?

5. How material are assets acquired under capital leases in relation to total property and equipment?

b. How material are capital lease obligations in relation to total debt and revolving lines of credit at August 31, 2010?

c. Operating leases?

1. What was the total future minimum lease payments as of August 31, 2010?

2. Using two-thirds of future minimum lease payments representing principal, what would be the estimate for principal at August 31, 2010?

3. How material are operating leases in relation to capital leases?