UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended February 29, 2012
or
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____

Commission File Number: 1-12227

The Shaw Group Inc.

(Exact name of registrant as specified in its charter)

Louisiana	72-1106167
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4171 Essen Lane, Baton Rouge, Louisiana	70809
(Address of principal executive offices)	(Zip Code)

225-932-2500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                             Yes R   No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                Yes R   No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer R	Accelerated filer £
Non-accelerated filer £   (Do not check if a smaller reporting company)	Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).           Yes £   No R

The number of shares of registrant’s common stock outstanding as of March 26, 2012 was 65,918,627 shares.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. — Financial Statements
Unaudited Consolidated Statements of Operations — For the Three and Six Months Ended February 29, 2012 and February 28, 2011	3
Unaudited Consolidated Statements of Comprehensive Income (Loss) - For the Three and Six Months Ended February 29, 2012 and February 28, 2011	4
Consolidated Balance Sheets – February 29, 2012 (Unaudited) and August 31, 2011	5
Unaudited Consolidated Statements of Changes in Shareholders’ Equity – For the Three and Six Months Ended February 29, 2012 and February 28, 2011	6
Unaudited Consolidated Statements of Cash Flows – For the Three and Six Months Ended February 29, 2012 and February 28, 2011	7
Notes to Unaudited Consolidated Financial Statements	8
Cautionary Statement Regarding Forward-Looking Statements	35
Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3. — Quantitative and Qualitative Disclosures About Market Risk	57
Item 4. — Controls and Procedures	57
PART II — OTHER INFORMATION
Item 1. — Legal Proceedings	58
Item 1A. — Risk Factors	58
Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 5.  — Other Information	58
Item 6. — Exhibits	58
SIGNATURES	59
EXHIBIT INDEX

1

GLOSSARY OF TERMS

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:

ABWR	Advanced boiling water reactor
AQC	Air quality control
AP1000®	AP1000 is a registered trademark of Westinghouse Electric Co., LLC
AR	Accounts receivable
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Badger	Badger Technologies Holdings L.L.C.
BNFL	British Nuclear Fuels plc
CAP	Compliance Assurance Process
CCGT	Combined-cycle gas turbine
CIE	Costs and estimated earnings in excess of billings
COL	Combined operating license
Corps	U.S. Army Corps of Engineers
CRA	Commercial relationship agreement
DOE	U.S. Department of Energy
E&C	Our Energy and Chemicals segment
E&I	Our Environmental and Infrastructure segment
EBITDA	Earnings before interest expense, income taxes, depreciation and amortization
EPA	U.S. Environmental Protection Agency
EPC	Engineering, procurement and construction
Exchange Act	Securities Exchange Act of 1934, as amended
F&M	Our Fabrication and Manufacturing segment
Facility	Our unsecured Second Amended and Restated Credit Agreement
FASB	Financial Accounting Standards Board
FCC	Fluid catalytic cracking
FEED	Front-end engineering and design
FEMA	Federal Emergency Management Agency
FIFO	First-in, first-out
GAAP	Accounting principles generally accepted in the United States
Interest LC	The additional letters of credit of $77.9 million at August 31, 2011, for the benefit of NEH related to interest on the Westinghouse Bonds (defined below).
Investment in Westinghouse	Our 20% interest in Toshiba Nuclear Energy Holdings (US), Inc. and Toshiba Nuclear Energy Holdings (UK), Ltd. Acquired in October 2006
IRS	Internal Revenue Service
JPY	Japanese Yen
LIBOR	London Interbank Offered Rate
NEH	Nuclear Energy Holdings LLC, our wholly-owned special purpose acquisition subsidiary
Principal LC	A letter of credit for approximately $55.8 million at August 31, 2011, established by us for the benefit of NEH related to the principal on the Westinghouse Bonds (defined below).
Put Option	Japanese Yen-denominated put option agreements entered into in connection with the acquisition of our Investment in Westinghouse
S&P	Standard & Poor’s
SAR	Stock appreciation rights
SEC	United States Securities and Exchange Commission
Shaw-Nass	Shaw-Nass Middle East, W.L.L.
VIE	Variable interest entity
WEC	BNFL USA Group Inc. (also referred to as Westinghouse Electric Company LLC) and Westinghouse Electric UK Limited and their subsidiaries.
Westinghouse	Our Investment in Westinghouse, along with its subsidiaries
Westinghouse Bonds	The JPY 128.98 billion (equivalent to approximately $1.1 billion) limited recourse bonds issued by NEH on October 13, 2006 and maturing on March 15, 2013 used to partially finance our Investment in Westinghouse.
Westinghouse Equity	Our 20% equity interest in Westinghouse, held by Nuclear Energy Holdings

2

PART I — FINANCIAL INFORMATION

ITEM 1. — FINANCIAL STATEMENTS

THE SHAW GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011

(In thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	2012			2011			2012			2011
Revenues	$	1,474,736		$	1,424,814		$	2,992,339		$	2,968,096
Cost of revenues		1,366,111			1,308,854			2,763,772			2,790,532
Gross profit		108,625			115,960			228,567			177,564
Selling, general, and administrative expenses		61,860			73,056			131,337			143,951
Operating income (loss)		46,765			42,904			97,230			33,613
Interest expense		(1,281	)		(1,215	)		(2,932	)		(2,551	)
Interest expense on Japanese Yen-denominated bonds including accretion and amortization		(10,300	)		(10,380	)		(20,711	)		(20,895	)
Interest income		683			6,181			2,835			8,502
Foreign currency translation gains (losses) on Japanese Yen-denominated bonds, net		51,462			(46,910	)		76,627			(59,320	)
Other foreign currency transaction gains (losses), net		(1,317	)		2,965			877			3,963
Other income (expense), net		2,069			3,917			2,537			4,301
Income (loss) before income taxes and earnings (losses) from unconsolidated entities		88,081			(2,538	)		156,463			(32,387	)
Provision (benefit) for income taxes		33,441			(987	)		58,369			(12,714	)
Income (loss) before earnings (losses) from unconsolidated entities		54,640			(1,551	)		98,094			(19,673	)
Earnings (loss) from 20% Investment in Westinghouse, net of income taxes		(3,577	)		1,801			1,689			4,280
Earnings (losses) from unconsolidated entities, net of income taxes		2,525			1,954			4,212			2,347
Net income (loss)		53,588			2,204			103,995			(13,046	)
Less: Net income (loss) attributable to noncontrolling interests		1,099			1,008			2,262			1,761
Net income (loss) attributable to Shaw	$	52,489		$	1,196		$	101,733		$	(14,807	)
Net income (loss) attributable to Shaw per common share:
Basic	$	0.79		$	0.01		$	1.48		$	(0.17	)
Diluted	$	0.78		$	0.01		$	1.45		$	(0.17	)
Weighted average shares outstanding:
Basic		66,502			85,199			68,921			85,048
Diluted		67,514			86,810			70,000			85,048

See accompanying notes to consolidated financial statements.

3

THE SHAW GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011

(In thousands)

	Three Months Ended						Six Months Ended
	2012			2011			2012			2011
Net income (loss)	$	53,588		$	2,204		$	103,995		$	(13,046	)
Currency translation adjustment, net gain (loss) arising during period		5,617			5,497			(6,119	)		9,557
Equity in unconsolidated entities’ other comprehensive income (loss), net of Shaw’s income tax of $2,496, $3,593, $6,453 and $(7,200), respectively		(3,988	)		(5,644	)		(10,309	)		11,309
Net derivatives gain (loss) on hedge transactions, net of tax of $68, $429, $(2,911) and ($1,653), respectively		(108	)		(673	)		4,650			2,597
Defined benefit plans
Change in unrecognized net actuarial pension gains (losses)		784			919			1,567			1,829
Change in unrecognized net prior service pension costs		11			11			22			22
Income taxes on defined benefit plans		(205	)		(262	)		(401	)		(507	)
Total		590			668			1,188			1,344
Unrealized gain (loss) on available for sale securities, net of tax of $28, $663, $39 and $357, respectively		(46	)		(1,042	)		(63	)		(561	)
Comprehensive income (loss)		55,653			1,010			93,342			11,200
Less: Comprehensive income (loss) attributable to noncontrolling interests		1,099			1,008			2,262			1,761
Comprehensive income (loss) attributable to Shaw	$	54,554		$	2		$	91,080		$	9,439

See accompanying notes to consolidated financial statements.

4

THE SHAW GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	February 29, 2012 (Unaudited)			August 31, 2011
ASSETS
Current assets:
Cash and cash equivalents ($77.6 million and $78.6 million related to variable interest entities (VIEs))	$	537,301		$	674,080
Restricted and escrowed cash and cash equivalents		47,643			38,721
Short-term investments ($5.6 million and $7.8 million related to VIEs)		116,088			226,936
Restricted short-term investments		176,241			277,316
Accounts receivable, including retainage, net ($29.5 million and $7.5 million related to VIEs)		730,872			772,242
Inventories		267,116			245,044
Costs and estimated earnings in excess of billings on uncompleted contracts, including claims		569,196			552,502
Deferred income taxes		323,579			367,045
Investment in Westinghouse		975,411			999,035
Prepaid expenses and other current assets		133,763			138,260
Total current assets		3,877,210			4,291,181
Investments in and advances to unconsolidated entities, joint ventures and limited partnerships		19,378			14,768
Property and equipment, net of accumulated depreciation of $379.9 million and $347.3 million		528,604			515,811
Goodwill		544,468			545,790
Intangible assets		15,410			17,142
Deferred income taxes		9,273			10,484
Other assets		97,679			91,858
Total assets	$	5,092,022		$	5,487,034
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	650,293		$	822,476
Accrued salaries, wages and benefits		141,406			132,857
Other accrued liabilities		199,701			199,947
Advanced billings and billings in excess of costs and estimated earnings on uncompleted contracts		1,423,751			1,535,037
Japanese Yen-denominated bonds secured by Investment in Westinghouse		1,602,834			1,679,836
Interest rate swap contract on Japanese Yen-denominated bonds		19,498			27,059
Short-term debt and current maturities of long-term debt		11,475			349
Total current liabilities		4,048,958			4,397,561
Long-term debt, less current maturities		5,342			630
Deferred income taxes		72,005			70,437
Other liabilities		76,645			81,152
Total liabilities		4,202,950			4,549,780
Contingencies and commitments (Note 12)
Shaw shareholders’ 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; 92,406,666 and 91,711,102 shares issued, respectively; and 65,815,425 and 71,306,382 shares outstanding, respectively		1,331,018			1,321,278
Retained earnings		430,188			328,455
Accumulated other comprehensive loss		(115,575	)		(104,922	)
Treasury stock, 26,591,241 and 20,404,720 shares, respectively		(791,868	)		(639,704	)
Total Shaw shareholders’ equity		853,763			905,107
Noncontrolling interests		35,309			32,147
Total equity		889,072			937,254
Total liabilities and equity	$	5,092,022		$	5,487,034

See accompanying notes to consolidated financial statements.

5

THE SHAW GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share amounts)

	2012						2011
	Shares			Amount			Shares			Amount
Preferred stock		—		$	—			—		$	—
Common stock
Balance September 1		91,711,102		$	1,321,278			90,669,011		$	1,283,890
Exercise of stock options		107,213			2,083			418,654			9,491
Shares exchanged for taxes on stock based compensation		(223,033	)		(5,989	)		(261,313	)		(9,054	)
Tax benefit on stock based compensation		—			309			—			2,772
Stock-based compensation		811,384			13,337			805,697			16,391
Balance February 29, and 28, respectively		92,406,666		$	1,331,018			91,632,049		$	1,303,490
Retained earnings
Balance September 1				$	328,455					$	503,471
Net income (loss) attributable to Shaw					101,733						(14,807	)
Balance February 29, and 28, respectively				$	430,188					$	488,664
Accumulated other comprehensive income (loss)
Currency translation adjustment
Balance September 1				$	(3,652	)				$	(15,532	)
Change during year					(6,119	)					9,557
Balance February 29 and February 28, respectively				$	(9,771	)				$	(5,975	)
Equity in unconsolidated entities’ other comprehensive income (loss), net of Shaw’s tax
Balance September 1				$	(50,724	)				$	(66,297	)
Change during year					(10,309	)					11,309
Balance February 29 and February 28, respectively				$	(61,033	)				$	(54,988	)
Unrealized gain (loss) on hedging activities
Balance September 1				$	(16,558	)				$	(20,361	)
Change during year					4,650						2,597
Balance February 29 and February 28, respectively				$	(11,908	)				$	(17,764	)
Unrealized net holding gain (loss) on securities
Balance September 1				$	(50	)				$	546
Change during year					(63	)					(561	)
Balance February 29 and February 28, respectively				$	(113	)				$	(15	)
Pension and other postretirement benefit plans
Balance September 1				$	(33,938	)				$	(41,001	)
Change during year					1,188						1,344
Balance February 29 and February 28, respectively				$	(32,750	)				$	(39,657	)
Balance February 29, and 28, respectively				$	(115,575	)				$	(118,399	)
Treasury stock at cost
Balance September 1		(20,404,720	)	$	(639,704	)		(5,755,949	)	$	(117,453	)
Purchases under tender offer and repurchase plans		(6,185,567	)		(152,143	)		(1,224,400	)		(47,441	)
Shares exchanged for taxes on stock-based compensation		(954	)		(21	)		(15,075	)		(476	)
Balance February 29, and 28, respectively		(26,591,241	)	$	(791,868	)		(6,995,424	)	$	(165,370	)
Total Shaw shareholders’ equity at February 29, and 28, respectively				$	853,763					$	1,508,385
Noncontrolling interests
Balance September 1				$	32,147					$	47,124
Net income (loss)					2,262						1,761
Distributions to noncontrolling interests					(2,700	)					(2,225	)
Contributions from noncontrolling interests					3,600						872
Adjustment for deconsolidation of VIE(s)					—						(10,662	)
Balance February 29, and 28, respectively				$	35,309					$	36,870
Total equity at February 29, and 28, respectively				$	889,072					$	1,545,255

See accompanying notes to consolidated financial statements.

6

THE SHAW GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011

(In thousands)

	2012			2011
Cash flows from operating activities:
Net income (loss)	$	103,995		$	(13,046	)
Adjustments to reconcile net gain (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		37,031			36,614
(Benefit from) provision for deferred income taxes		52,613			(19,061	)
Stock-based compensation expense		19,482			17,599
(Earnings) losses from unconsolidated entities, net of taxes		(5,901	)		(6,627	)
Distributions from unconsolidated entities		12,785			14,682
Taxes paid upon net-share settlement of equity awards		(5,989	)		(9,054	)
Excess tax benefits from stock based compensation		(1,022	)		(3,321	)
Foreign currency transaction (gains) losses, net		(77,504	)		55,357
Other noncash Items		2,270			10,098
Changes in assets and liabilities, net of effects of acquisitions and consolidation of variable interest entities:
(Increase) decrease in accounts receivables		37,317			(80,755	)
(Increase) decrease in costs and estimated earnings in excess of billings on uncompleted contracts, including claims		(23,150	)		87,706
(Increase) decrease in inventories		(22,266	)		4,330
(Increase) decrease in other current assets		14,121			(742	)
Increase (decrease) in accounts payable		(162,251	)		(133,864	)
Increase (decrease) in accrued liabilities		739			(31,646	)
Increase (decrease) in advanced billings and billings in excess of costs and estimated earnings on uncompleted contracts		(110,381	)		(56,677	)
Net change in other assets and liabilities		(22,313	)		(12,849	)
Net cash provided by (used in) operating activities	$	(150,424	)	$	(141,256	)
Cash flows from investing activities:
Purchases of property and equipment		(39,955	)		(56,785	)
Proceeds from sale of businesses and assets, net of cash surrendered		2,416			1,465
Investment(s) in notes receivable		—			(36,604	)
Investments in, advances to and return on equity from unconsolidated entities and joint ventures		2,323			520
Cash deposited into restricted and escrowed cash		(60,494	)		(880,630	)
Cash withdrawn from restricted and escrowed cash		51,925			842,476
Purchases of short-term investments		(173,054	)		(507,160	)
Proceeds from sale and redemption of short-term investments		247,563			551,377
Purchases of restricted short-term investments		(40,000	)		(166,402	)
Proceeds from sale of restricted short-term investments		178,851			203,650
Purchases of businesses, net of cash acquired		—			(19,632	)
Net cash provided by (used in) investing activities	$	169,575		$	(67,725	)
Cash flows from financing activities:
Purchase of treasury stock		(152,164	)		(47,917	)
Repayment of debt and capital leases		(172	)		(4,350	)
Contingent consideration paid		(3,591	)		—
Payment of deferred financing costs		(16	)		(52	)
Issuance of common stock		2,083			9,491
Excess tax benefits from exercise of stock options and vesting of restricted stock		1,022			3,321
Contributions received from noncontrolling interest		3,600			872
Distributions paid to noncontrolling interest		(2,700	)		(2,225	)
Net cash provided by (used in) financing activities	$	(151,938	)	$	(40,860	)
Net effects on cash of deconsolidation of VIE(s)		—			(12,805	)
Effects of foreign exchange rate changes on cash		(3,992	)		9,426
Net change in cash and cash equivalents	$	(136,779	)	$	(253,220	)
Cash and cash equivalents — beginning of year	$	674,080		$	912,736
Cash and cash equivalents — end of year	$	537,301		$	659,516

See accompanying notes to consolidated financial statements.

7

THE SHAW GROUP INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Description of Business and Summary of Significant Accounting Policies

The Shaw Group Inc. (a Louisiana corporation) and its wholly-owned and majority-owned subsidiaries (collectively referred to herein as Shaw, we, us or our) is a leading global provider of technology, engineering, procurement, construction, maintenance, fabrication, manufacturing, consulting, remediation and facilities management services to a diverse client base that includes multinational and national oil companies and industrial corporations, regulated utilities, merchant power producers, and government agencies. We have developed and acquired significant intellectual property, including downstream petrochemical technologies, induction pipe bending technology and environmental decontamination technologies. Through our investments, we have exclusive opportunities to bid on engineering, procurement and construction (EPC) services on future Westinghouse advanced passive AP1000® nuclear power technology units to be built in the United States (U.S.) and other locations (AP1000 is a registered trademark of Westinghouse Electric Co., LLC.) and certain exclusive opportunities with Toshiba Corporation (Toshiba) for providing EPC services for new Toshiba Advanced Boiling Water Reactor (ABWR) nuclear power plants worldwide, except Japan and Vietnam. Our proprietary olefin and refinery technologies, coupled with ethyl benzene, styrene, cumene and Bisphenol A technologies, allow us to offer clients integrated oil refinery and petrochemicals solutions. We believe our technologies provide an advantage and will help us to compete on a longer-term basis with lower cost competitors from developing countries that are likely to emerge.

Our reportable segments are Power; Plant Services; Environmental & Infrastructure (E&I); Energy and Chemicals (E&C); Fabrication and Manufacturing (F&M); Investment in Westinghouse; and Corporate.  See Note 17 – Business Segments for further discussion.

We have evaluated events and transactions occurring after the balance sheet date but before the financial statements were issued and have included the appropriate disclosures in this Quarterly Report on Form 10-Q (Form 10-Q).

Basis of Presentation and Preparation

The accompanying consolidated financial statements include the accounts of The Shaw Group Inc., its wholly-owned and majority owned subsidiaries, and any variable interest entities (VIEs) of which we are the primary beneficiary (See Note 7 —Equity Method Investments and Variable Interest Entities). When we do not have a controlling interest in an entity but exert a significant influence over the entity, we apply the equity method of accounting. The cost method is used when we do not have the ability to exert significant influence. All significant intercompany balances and transactions have been eliminated in consolidation.

The financial statements as of February 29, 2012, and for the three and six month periods ended February 29, 2012 and February 28, 2011, are unaudited. The consolidated balance sheet as of August 31, 2011, was derived from the audited balance sheet filed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2011 (2011 Form 10-K). In management’s opinion, all adjustments necessary for a fair presentation of the Company’s consolidated financial statements for the current and prior interim period results have been made. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in our 2011 Form 10-K.

The unaudited interim consolidated financial statements were prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The preparation of these Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Areas requiring significant estimates by our management include the following:

• contract revenues, costs and profits, and the application of percentage-of-completion method of accounting;

• provisions for uncollectible receivables and client 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 and tax uncertainties;

8

• recoverability of goodwill;

• recoverability of other intangibles and long-lived assets and related estimated lives;

• recoverability of equity method investments;

• valuation of defined benefit pension plans;

• accruals for estimated liabilities, including litigation, claims and insurance accruals;

• consolidation of variable interest entities; and

• valuation of stock-based compensation.

Actual results could differ materially from those estimates, and the foregoing interim results are not necessarily indicative of results for any other interim period or for the full fiscal year ending August 31, 2012.

The length of our contracts varies but is typically longer than one year in duration. Consistent with industry practice, assets and liabilities are classified as current under the operating cycle concept whereby all contract-related items are regarded as current regardless of whether cash will be received or paid within a 12-month period. Assets and liabilities classified as current that may not be paid or received in cash within the next 12 months include restricted cash, retainage receivable, cost and estimated earnings in excess of billing on uncompleted contracts (including claims receivable), retainage payable and advance billings and billings in excess of costs and estimated earnings on uncompleted contracts.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less to be cash equivalents.

Marketable Securities

We categorize our marketable securities as either trading securities or available-for-sale. These investments are recorded at fair value and are classified as short-term investments in the accompanying consolidated balance sheets. Investments are made based on the Company’s investment policy and restrictions contained in our Facility, which specifies eligible investments and credit quality requirements.

Trading securities consist of investments held in trust to satisfy obligations under our deferred compensation plans and investments in certain equity securities. The changes in fair values on trading securities are recorded as a component of net income (loss) in other income (expense), net.

Available-for-sale securities consist of mutual funds, foreign government and foreign government guaranteed securities, corporate bonds and certificates of deposit at major banks. The changes in fair values, net of applicable taxes, on available-for-sale securities are recorded as unrealized net holding gain (loss) on securities as a component of accumulated other comprehensive income (loss) in shareholders’ equity. When, in the opinion of management, a decline in the fair value of an investment below its cost or amortized cost is considered to be other-than-temporary, the investment’s cost or amortized cost is written-down to its fair value and the amount written-down is recorded in the statement of operations in other income (expense), net. In addition to other relevant factors, management considers the decline in the fair value of an investment to be other-than-temporary if the market value of the investment remains below cost by a significant amount for a period of time, in which case a write-down may be necessary. The amount of any write-down is determined by the difference between cost or amortized cost of the investment and its fair value at the time the other-than-temporary decline is identified.

Recently Adopted Accounting Pronouncement

In January 2010, the FASB issued an Accounting Standards Update (ASU) related to new disclosures about fair value measurements, ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820).  Part of this standard was effective for us in the first quarter of our 2011 fiscal year and did not have a material impact on our consolidated financial statements. We adopted the additional requirement to reconcile recurring Level 3 measurements, including purchases, sales, issuances and settlements on a gross basis effective September 1, 2011. The adoption of the final part of ASU 2010-06 did not have a material impact on our consolidated financial statements.

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In April 2010, the FASB issued ASU 2010-13, Compensation – Stock Compensation (Topic 718) - Effect of Denominating the Exercise Price of a Share-Based Payment Award in the currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 amends FASB Accounting Standards Codification ™ (ASC) 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. We adopted ASU 2010-13 effective September 1, 2011. The adoption of ASU 2010-13 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  ASU 2011-04 primarily changes the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurement and clarifies the FASB’s intent about the application of existing fair value measurement requirements.  ASU 2011-04 is effective for us in the third quarter of fiscal year 2012.  We do not expect the adoption of ASU 2011-04 to have a material impact on our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220) - Presentation of Comprehensive Income. ASU 2011-05 provides an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 is effective for us in fiscal year 2013.  We do not expect the adoption of ASU 2011-05 to have a material impact on our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08—Intangibles—Goodwill and Other (Topic 350) - Testing Goodwill for Impairment. ASU 2011-08 provides an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. ASU 2011-08 is effective for us in fiscal year 2013. Early adoption is permitted, however we have not yet adopted it. We do not expect the adoption of ASU 2011-08 to have a material impact on our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-09 Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80) - Disclosures about an Employer’s Participation in a Multiemployer Plan. ASU 2011-09 require that employers provide additional separate disclosures for multiemployer pension plans and multiemployer other postretirement benefit plans. ASU 2011-09 is effective for us in fiscal year 2012 and must be applied retrospectively for all prior periods presented. We do not expect the adoption of ASU 2011-09 to have a material impact on our consolidated financial statements.

Note 2 — Cash, Cash Equivalents and Short-term Investments

Our major types of investments are as follows:

Money market mutual funds – We invest in money market funds that seek to maintain a stable net asset value of $1 per share, while limiting overall exposure to credit, market and liquidity risks.

Certificates of deposit – Certificates of deposit are short-term interest-bearing debt instruments issued by various financial institutions with which we have an established banking relationship.

Bond mutual funds – We invest in publicly traded and valued bond funds.

Foreign government and foreign government guaranteed securities – We invest in foreign government and foreign government guaranteed securities that are publicly traded and valued.

Corporate bonds – We evaluate our corporate debt securities based on a variety of factors including, but not limited to, the credit rating of the issuer. Our corporate debt securities are publicly traded debt rated at least A/A2 or better by S&P and/or Moody's, respectively, with maturities up to two years at the time of purchase. Losses in this category are due primarily to market liquidity.

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At February 29, 2012, the components of our cash, cash equivalents, and short-term investments were as follows (in thousands):

										Balance Sheet Classifications
	Cost Basis		Unrealized Gain		Unrealized (Loss)			Recorded Basis		Cash and Cash Equivalents		Short-term Investments
Cash	$	530,597	$	—	$	—		$	530,597	$	530,597	$	—
Money market mutual funds		6,704		—		—			6,704		6,704		—
Certificates of deposit		70,828		—		—			70,828		—		70,828
Available-for-sale securities:
Bond mutual funds		20,387		—		(162	)		20,225		—		20,225
Corporate bonds		17,717		22		(38	)		17,701		—		17,701
Trading securities:
Equity investments		7,497		—		(163	)		7,334		—		7,334
Total	$	653,730	$	22	$	(363	)	$	653,389	$	537,301	$	116,088

At August 31, 2011, the components of our cash, cash equivalents, and short-term investments were as follows (in thousands):

										Balance Sheet Classifications
	Cost Basis		Unrealized Gain		Unrealized (Loss)			Recorded Basis		Cash and Cash Equivalents		Short-term Investments
Cash	$	653,979	$	—	$	—		$	653,979	$	653,979	$	—
Money market mutual funds		17,350		—		—			17,350		17,350		—
Certificates of deposit		211,910		—		—			211,910		2,751		209,159
Available-for-sale securities: Corporate bonds		17,853		40		(116	)		17,777		—		17,777
Total	$	901,092	$	40	$	(116	)	$	901,016	$	674,080	$	226,936

Gross realized gains and losses from sales of available-for-sale securities are determined using the specific identification method and are included in other income (expense), net.  During the three and six months ended February 29, 2012 and February 28, 2011, the proceeds and realized gains and losses were as follows (in thousands):

	Three Months Ended				Six Months Ended
	2012		2011		2012		2011
Proceeds	$	1,585	$	114,148	$	7,202	$	139,772
Realized gains	$	—	$	532	$	1	$	605
Realized losses	$	—	$	—	$	—	$	—

There were no transfers of securities between available for sale and trading classifications during the three and six months ending February 29, 2012.

We evaluate whether unrealized losses on investments in securities are other-than-temporary, and if we believe the unrealized losses are other-than-temporary, we record an impairment charge. There were no other-than-temporary impairment losses recognized during the three and six months ended February 29, 2012.

Gross unrealized losses on investment securities and the fair value of those securities that have been in a continuous loss position for which we have not recognized an impairment charge at February 29, 2012, were as follows(in thousands):

	Less than 12 Months
	Fair Value		Unrealized Loss
Available-for-sale:
Corporate bonds	$	1,853	$	(26	)
Total	$	1,853	$	(26	)

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At February 29, 2012, maturities of debt securities classified as available-for-sale were as follows (in thousands):

	Cost Basis		Estimated Fair Value
Due in one year or less	$	10,394	$	10,357
Due in one to two years		7,323		7,344
Total	$	17,717	$	17,701

Note 3 — Restricted and Escrowed Cash and Cash Equivalents and Restricted Short-term Investments

At February 29, 2012, the components of our restricted and escrowed cash and cash equivalents and restricted short-term investments were as follows (in thousands):

						Balance Sheet Classification
	Recorded Basis		Holding Period Gain/(Loss)			Restricted and Escrowed Cash and Cash Equivalents		Restricted Short-term Investments
Cash	$	6,768	$	—		$	6,768	$	—
Money market mutual funds		40,875		—			40,875		—
Certificates of deposit		148,512		—			—		148,512
Trading securities:
Stock and bond mutual funds		9,334		580			—		9,334
U.S. government and agency securities		609		(8	)		—		609
Corporate bonds		17,786		(470	)		—		17,786
Total	$	223,884	$	102		$	47,643	$	176,241

  At August 31, 2011, the components of our restricted and escrowed cash and cash equivalents and restricted short-term investments were as follows (in thousands):

						Balance Sheet Classification
	Recorded Basis		Holding Period Gain/(Loss)			Restricted and Escrowed Cash and Cash Equivalents		Restricted Short-term Investments
Cash	$	16,358	$	—		$	16,358	$	—
Money market mutual funds		22,363		—			22,363		—
Certificates of deposit		252,627		—			—		252,627
Trading securities:
Stock and bond mutual funds		6,473		272			—		6,473
U.S. government and agency securities		1,806		(82	)		—		1,806
Corporate bonds		16,410		(390	)		—		16,410
Total	$	316,037	$	(200	)	$	38,721	$	277,316

Our restricted and escrowed cash and cash equivalents and restricted short-term investments were restricted for the following (in thousands):

	February 29, 2012		August 31, 2011
Contractually required by projects	$	5,166	$	14,696
Voluntarily used to secure letters of credit		148,512		252,628
Secure contingent obligations in lieu of letters of credit		38,704		20,626
Assets held in trust and other		31,502		28,087
Total	$	223,884	$	316,037

We voluntarily cash collateralize certain letters of credit if the bank fees avoided on those letters of credit exceed the return on other investment opportunities. We are able to access cash we have pledged to secure various letters of credit by replacing them with letters of credit issued under our Facility. See Note 9 – Debt and Revolving Lines of Credit for additional information about our Facility.

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Note 4 — Fair Value Measurements

We follow the authoritative guidance set forth in ASC 820, Fair Value Measurements and Disclosures, for fair value measurements relating to financial and nonfinancial assets and liabilities, including presentation of required disclosures in our consolidated financial statements. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value.

The three levels of inputs that may be used are:

       Level 1: Quoted market prices in active markets for identical assets or liabilities.

       Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

       Level 3: Significant unobservable inputs that are not corroborated by market data.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

At February 29, 2012, our financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

			Fair Value Measurements Using
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term and Restricted Short-term Investments
Certificates of deposit	$	219,340	$	—	$	219,340	$	—
Stock and bond mutual funds (a)		29,559		29,559		—		—
U.S. government and agency securities		609		—		609		—
Corporate bonds		35,487		—		35,487		—
Equity investments		7,334		7,334		—		—
Total	$	292,329	$	36,893	$	255,436	$	—
Liabilities:
Interest rate swap contract	$	19,498	$	—	$	19,498	$	—
Derivatives Not Designated as Hedging Instruments:
Other Current Assets
Foreign currency forward assets	$	837	$	—	$	837	$	—
Other Accrued Liabilities
Foreign currency forward liabilities	$	1,046	$	—	$	1,046	$	—

(a) This class includes investments in a mutual fund that invests at least 80% of its assets in short-term bonds issued or guaranteed by U.S. government agencies and instrumentalities.

At August 31, 2011, our financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

			Fair Value Measurements Using
	Fair Value			(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term and Restricted Short-term Investments
Certificates of deposit	$	461,786		$	—	$	461,786	$	—
Stock and bond mutual funds (a)		6,473			6,473		—		—
U.S. government and agency securities		1,806			—		1,806		—
Corporate bonds		34,187			—		34,187		—
Total	$	504,252		$	6,473	$	497,779	$	—
Liabilities:
Interest rate swap contract	$	27,059		$	—	$	27,059	$	—
Derivatives Not Designated as Hedging Instruments:
Other Current Assets
Foreign currency forward assets	$	1,955		$	—	$	1,955	$	—
Other Accrued Liabilities
Foreign currency forward liabilities	$	16		$	—	$	16	$	—

(a) This class includes investments in a mutual fund that invests at least 80% of its assets in short-term bonds issued or guaranteed by U.S. government agencies and instrumentalities.

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The following are the primary valuation methodologies used for valuing our short-term and restricted short-term investments:

· Corporate bonds and U.S. government and agency securities: Valued at quoted prices, in markets that are not active broker dealer quotations or other methods by which all significant inputs are observable, either directly or indirectly.

· Foreign government and foreign government guaranteed securities: Valued at quoted prices, in markets that are not active broker dealer quotations or other methods by which all significant inputs are observable, either directly or indirectly.

· Stock and bond mutual funds: Valued at the net asset value of shares held at period end as quoted in the active market.  These mutual funds contain no unusual terms or trade restrictions.

· Equity investments: Valued at the closing price of the shares held at period end as quoted in active markets.

We value the interest rate swap liability utilizing a discounted cash flow model that takes into consideration forward interest rates observable in the market and the counterparty’s credit risk. Our counterparty to this instrument is a major U.S. bank. As discussed in Note 9 — Debt and Revolving Lines of Credit, we designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate related to our Westinghouse Bonds.

We manage our transaction exchange exposures with foreign currency derivative instruments denominated in our major currencies, which are generally the currencies of the countries in which we conduct the majority of our international business. We utilize derivative instruments such as forward contracts to manage forecasted cash flows denominated in foreign currencies generally related to engineering and construction projects. Our counterparties to these instruments are major U.S. banks. These currency derivative instruments are carried on the consolidated balance sheet at fair value and are based upon market observable forward exchange rates and forward interest rates.

We value derivative assets by discounting future cash flows based on currency forward rates. The discount rate used for valuing derivative assets incorporates counterparty credit risk, as well as our cost of capital. Derivative liabilities are valued using a discount rate that incorporates our credit risk.

See Note 2 – Cash, Cash Equivalents and Short-term Investments and Note 3 – Restricted and Escrowed Cash and Cash Equivalents and Restricted Short-term Investments for additional information regarding our major categories of investments.

Effects of Derivative Instruments on Income and Other Comprehensive Income

Gains and losses related to derivative instruments have been recognized as follows for the three and six months ended February 29, 2012, and February 28, 2011 (in millions):

		Three Months Ended						Six Months Ended
	Location of Gain (Loss) Recognized in Income on Derivatives	2012			2011			2012			2011
Derivatives Designated as Hedging Instruments:
Interest rate swap contract	Other comprehensive income (loss)	$	(0.1	)	$	(0.7	)	$	4.7		$	2.6
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Other foreign currency transactions gains (losses), net	$	(0.1	)	$	1.7		$	(2.8	)	$	2.2

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Note 5 —Accounts Receivable, Concentrations of Credit Risk, and Inventories

Accounts Receivable

Our accounts receivable, including retainage, net, were as follows (in thousands):

	February 29, 2012		August 31, 2011
Trade accounts receivable, net	$	703,721	$	732,134
Unbilled accounts receivable		13,259		23,116
Retainage		13,892		16,992
Total accounts receivable, including retainage, net	$	730,872	$	772,242

Analysis of the change in the allowance for doubtful accounts follows (in thousands):

	2012
Beginning balance, September 1	$	22,350
Increased provision		2,165
Write offs		(1,848	)
Recoveries and settlements		(7,029	)
Ending balance, February 29	$	15,638

Included in our trade accounts receivable, net at February 29, 2012, and August 31, 2011, were approximately $9.0 million of outstanding invoices due from a local government entity resulting from revenues earned in providing disaster relief, emergency response, and recovery services. The local government entity has challenged the appropriateness of our invoiced amounts, and we are currently in litigation with the government entity. The amounts we ultimately collect could differ materially from amounts currently recorded.

At February 29, 2012, and August 31, 2011, we had approximately $159.5 million and $227.1 million, respectively, included in trade receivables, net, for an air quality control (AQC) project, primarily related to periodic costs and milestone reconciliation invoices. On November 1, 2011, the client presented an assessment challenging $169.6 million of our costs and fee. We believe the assessment to be substantially without merit. We received a payment of $68.0 million from the client during the three months ended November 30, 2011 and  have included in our estimates at completion what we believe to be the probable amounts to be ultimately collected. We are involved in litigation with our client related to the amounts collectible under our contract as discussed in legal proceedings section of Note 12 — Contingencies and Commitments.

Concentrations of Credit

Amounts due from U.S. government agencies or entities were $59.9 million and $64.3 million at February 29, 2012, and August 31, 2011, respectively. Costs and estimated earnings in excess of billings on uncompleted contracts include $254.3 million and $278.6 million at February 29, 2012, and August 31, 2011, respectively, related to the U.S. government agencies and related entities.

Additionally, at February 29, 2012, and August 31, 2011, respectively, we had approximately $159.5 million and $227.1 million in trade receivables, net, related to one client.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in-first-out (FIFO) or weighted-average cost methods. Cost includes material, labor, and overhead costs. Inventories are reported net of the allowance for excess or obsolete inventory. Major components of inventories were as follows (in thousands):

	February 29, 2012						August 31, 2011
	Weighted Average		FIFO		Total		Weighted Average		FIFO		Total
Raw materials	$	22,080	$	126,300	$	148,380	$	16,040	$	118,516	$	134,556
Work in process		3,121		35,311		38,432		2,878		25,483		28,361
Finished goods		80,304		—		80,304		82,127		—		82,127
Total	$	105,505	$	161,611	$	267,116	$	101,045	$	143,999	$	245,044

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Note 6 — Investment in Westinghouse and Related Agreements

Investment in Westinghouse

On October 16, 2006, two newly-formed companies, Toshiba Nuclear Energy Holdings (US), Inc. and subsidiaries and Toshiba Nuclear Energy Holdings (UK), Ltd. and subsidiaries (the Acquisition Companies) acquired BNFL USA Group Inc. (also referred to as Westinghouse Electric Company LLC) and Westinghouse Electric UK Limited and their subsidiaries (collectively Westinghouse or WEC) from British Nuclear Fuels plc (BNFL).  Westinghouse was owned and capitalized to a total of $5.4 billion, 77% provided by Toshiba, 20% by us (through our wholly-owned special purpose subsidiary Nuclear Energy Holdings LLC (NEH)), and 3% by Ishikawajima-Harima Heavy Industries Co., Ltd (IHI). In October 2007, Toshiba reduced its ownership to 67% by selling 10% of Westinghouse to National Atomic Company Kazatomprom, a major supplier of uranium based in the Republic of Kazakhstan. Our total cost of the equity investment (Westinghouse Equity) and the related agreements, including related acquisition costs, was approximately $1.1 billion. We obtained financing for our equity investment through the Japanese private placement market by issuing, at a discount, JPY 128.98 billion (equivalent to approximately $1.08 billion) face amount of limited recourse bonds (the Westinghouse Bonds).

Put Option Agreements

In connection and concurrent with the acquisition of our Investment in Westinghouse, we entered into JPY-denominated Put Option Agreements (Put Options) that provide us an option to sell all or part of our 20% equity interest in Westinghouse to Toshiba for approximately 97% of the original JPY-equivalent purchase price, approximately 124.7 billion JPY. Under its terms, the Put Options are exercisable through February 28, 2013, but covenants under the Westinghouse Bonds require us to exercise the Put Option on the date that is 160 days prior to March 15, 2013 (or October 6, 2012)  if, by such date, the Westinghouse Bonds have not been repaid. The Put Options provided financial support to NEH to issue the Westinghouse Bonds on a non-recourse basis to us (except NEH) as the Westinghouse Bonds are collateralized exclusively by the security addressed below in the section “Westinghouse Bonds.” If, due to legal reasons or other regulatory constraints, Toshiba cannot take possession of the shares upon our exercise of the Put Options, Toshiba is required to provide security for the Westinghouse Bonds for a period of time and may delay the transfer of ownership and settlement of the Westinghouse Bonds by NEH. The Put Options may only be exercised once, and any proceeds received from the Put Options must be used to repay the Westinghouse Bonds.

Since the Put Options exercise price is JPY-denominated, we will receive a fixed amount of JPY (approximately 124.7 billion JPY upon the exercise of the Put Options. The Put Options, along with the Principal LC (defined below), substantially mitigate the risk to the holders of the Westinghouse Bonds that the JPY to U.S. dollar exchange rate changes could result in a shortfall of proceeds upon exercise of the Put Options for repayment of the Westinghouse Bonds.

Under GAAP, the Put Options are not considered free-standing financial instruments or derivative instruments, and therefore, have not been separated from our equity investment in Westinghouse. The Put Options are JPY-denominated and do not require or permit net settlement. Therefore, neither the Put Options nor the foreign currency component meet the definition of a derivative instrument under ASC 815 and therefore are not separated from the host contract (the hybrid equity investment in Westinghouse with a JPY-denominated put option).

On September 6, 2011, NEH announced its intent to seek consent of the trustee, acting on behalf of the holders of the Westinghouse Bonds, to exercise the Put Options prior to the automatic put date. On December 8, 2011, we were notified that the trustee decided not to consent to the proposed early exercise of the Put Options. Accordingly, the Put Options will be exercised on or around October 6, 2012, which will require funding by January 4, 2013 for repayment of the Westinghouse Bonds on March 15, 2013.

Commercial Relationship Agreement

In connection and concurrent with the acquisition of our investment in Westinghouse, we executed a commercial relationship agreement (Westinghouse CRA) that provides us with certain exclusive opportunities to bid on projects where we would perform engineering, procurement and construction services on future Westinghouse advanced passive AP 1000 nuclear power plants, along with other commercial opportunities, such as the supply of piping for those units. The term of the Westinghouse CRA is six years and contains renewal provisions. As noted above, when the Put Options are exercised in October 2012, the CRA will terminate. We would continue to retain our rights under the Westinghouse CRA for projects for which Westinghouse and Shaw have submitted a binding offer prior to its termination. We concluded that, for accounting purposes, no value should be allocated to the Westinghouse CRA and that it should not be recognized as a separate asset.

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Shareholder Agreement and Dividend Policy

On October 4, 2006, NEH entered into shareholder agreements with respect to the Acquisition Companies setting forth certain agreements regarding the capitalization, management, control and other matters relating to the Acquisition Companies. Under the shareholder agreements, the Acquisition Companies will distribute agreed percentages, no less than 65%, but not to exceed 100%, of the net income of Westinghouse, to its shareholders as dividends. The shares owned by NEH will be entitled to limited preferences with respect to dividends to the extent that targeted minimum dividends are not distributed. The intent of this policy is that for each year of the first six years we hold our 20% equity investment in Westinghouse we expect to receive a minimum of approximately $24.0 million in dividends. To the extent the targeted dividend amount during this period is not paid or an amount less than the target is paid, we retain the right to receive any annual shortfall to the extent Westinghouse earns net income equal to or exceeding the targeted income in the future. Our right to receive any shortfalls between the targeted dividends to which we are entitled and those actually paid by Westinghouse during the first six years of our investment (or such shorter period in the event of earlier termination) survives the exercise or expiration of the Put Options or the sale of our Westinghouse Investment, although this right is dependent on Westinghouse earning net income equal to or exceeding the target income at some future time. NEH has received dividends totaling approximately $107.4 million to date. Dividends received are accounted for as a reduction of NEH’s Investment in Westinghouse carrying value. Shortfalls in target minimum Westinghouse dividends are not recorded in our financial statements until declared by Westinghouse. At February 29, 2012, the dividend shortfall totaled approximately $12.6 million.

Westinghouse Bonds

The proceeds from the issuance of the Westinghouse Bonds was approximately $1.0 billion, net of original issue discount. The Westinghouse Bonds  are non-recourse to us and our subsidiaries, except NEH, and are secured by the assets of and 100% of our ownership in NEH, its Westinghouse Equity, the Put Options, a letter of credit for approximately $53.4 million at February 29, 2012, established by us for the benefit of NEH related to the principal on the Westinghouse Bonds (the Principal LC) and the additional letters of credit for approximately $56.0 million at February 29, 2012, for the benefit of NEH related to interest on the Westinghouse Bonds (the Interest LC). The Interest LC will automatically renew in declining amounts equal to the interest remaining to be paid over the life of the Westinghouse Bonds, or until we exercise the Put Options, which requires the payment of the Westinghouse Bonds.  As discussed above, the Put Options will be exercised on or around October 6, 2012. The Westinghouse Bonds were issued in two tranches, a floating-rate tranche and a fixed-rate tranche, and will mature March 15, 2013. We entered into contracts to fix the JPY-denominated interest payments on the floating rate tranche. (See Note 9 — Debt and Revolving Lines of Credit for additional discussion of the accounting for these contracts.) Other than the Principal LC and the Interest LC delivered at the closing of the Westinghouse Bonds and an agreement to reimburse Toshiba for amounts related to possible changes in tax treatment, we are not required to provide any additional letters of credit or cash to or for the benefit of NEH.

Note 7 — Equity Method Investments and Variable Interest Entities

Under ASC 810-10, a partnership or joint venture is considered a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

If the entity is determined to be a VIE, we assess whether we are the primary beneficiary and whether we need to consolidate the entity. ASC 810-10, as amended by ASU 2009-17, requires companies to utilize a qualitative approach to determine if it is the primary beneficiary of a VIE. A company is deemed to be the primary beneficiary and must consolidate its partnerships and joint ventures if the company has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The contractual agreements that define the ownership structure and equity investment at risk, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties are used to determine if the entity is a VIE and whether we are the primary beneficiary and must consolidate the entity. Additionally, we consider all parties that have direct or implicit variable interests when determining whether we are the primary beneficiary. Upon the occurrence of certain events outlined in ASC 810-10, we reassess our initial determination of whether the entity is a VIE and whether consolidation is required. If consolidation of the VIE or joint venture is not required, we generally account for these joint ventures using the equity method of accounting with our share of the earnings (losses) from these investments reflected in one line item on the consolidated statement of operations.

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The majority of our partnerships and joint ventures are VIEs because the total equity investment is typically nominal and not sufficient to permit the entity to finance its activities without additional subordinated financial support. However, some of the VIEs do not meet the consolidation requirements of ASC 810-10 because we are not deemed to be the primary beneficiary. Some of our VIEs have debt, but the debt is typically non-recourse in nature. At times, our participation in VIEs requires agreements to provide financial or performance assurances to clients.

ASC 810-10, as amended, requires that we continuously assess whether we are the primary beneficiary of our VIEs. Prior to the amendment, reassessment of whether we were the primary beneficiary was required only upon the occurrence of certain events. Accordingly, we analyzed all of our VIEs at February 29, 2012, and classified them into two groups:

· Joint ventures that should be consolidated because we hold the majority voting interest or because they are VIEs and we are the primary beneficiary; and

· Joint ventures that should not be consolidated because we hold a minority voting interest or because they are VIEs, but we are not the primary beneficiary.

Consolidated Joint Ventures

The following table presents the total assets and liabilities of our consolidated joint ventures (in thousands):

	February 29, 2012		August 31, 2011
Cash and cash equivalents	$	77,552	$	78,577
Net accounts receivable		29,496		7,537
Other current assets		167,410		174,584
Non-current assets		55,949		50,038
Total assets	$	330,407	$	310,736
Accounts and subcontractors payable	$	68,942	$	91,293
Billings in excess of costs and accrued earnings		28,848		27,831
Accrued expenses and other		132,618		97,102
Total liabilities	$	230,408	$	216,226

Total revenues of the consolidated ventures were $202.4 and $408.4 million for the three and six months ended February 29, 2012, respectively, as compared to $150.1 million and $303.3 million for the three and six months ended February 28, 2011, respectively.

For the three and six months ended February 29, 2012, and February 28, 2011, there were no material changes in our ownership interests in our consolidated joint ventures. In addition, we have immaterial amounts of other comprehensive income attributable to the noncontrolling interests.

Generally, the assets of our consolidated joint ventures are restricted for use only in the joint venture and are not available for general corporate purposes.

Unconsolidated Joint Ventures

We use the equity method of accounting for our unconsolidated joint ventures. Under GAAP, use of the equity method is appropriate in circumstances in which an investor has the ability to exercise significant influence over the operating and financial policies of an investee. GAAP presumes significant influence exists as a result of holding an investment of 20% or more in the voting stock of an investee, absent predominant evidence to the contrary. Management must exercise its judgment in determining whether a minority holder has the ability to exercise significant influence over the operating and financial policies of an investee. Under the equity method, we recognize our proportionate share of the net earnings or losses of these joint ventures in two line items, Income from 20% Investment in Westinghouse, net of income taxes and earnings (losses) from other unconsolidated entities, in our consolidated statements of operations.

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Investment in Westinghouse

Our most significant investment accounted for under the equity method is our wholly-owned, special purpose subsidiary Nuclear Energy Holdings’ (NEH) 20% equity interest in Westinghouse. Factors supporting our assessment that we have the ability to exercise significant influence within Westinghouse include: (i) our CEO’s position as one of three Directors on the Boards of Directors of the companies comprising Westinghouse and ongoing participation in these Boards’ deliberations; (ii) NEH’s right to appoint a representative to an advisory committee (the Owner Board), whose functions are to advise as to the administration and supervision of matters regarding the Westinghouse Group and provide advice on other matters, including supervision of the business, and our ongoing exercise of that right; (iii) the material number of consortium agreements we have entered into with Westinghouse over time; (iv) our participation in periodic Westinghouse management reviews; and (v) the requirement that the Owner Board review and approve certain defined business transactions. We review the accounting treatment for this investment on a quarterly basis. Based upon our analysis of these factors and our expectations for the future, we concluded that no change from the equity method of accounting is warranted at February 29, 2012.

In the event we conclude we can no longer account for this investment under the equity method, our Investment in Westinghouse would be treated as a cost method investment with the initial basis being our previous carrying amount of the investment under the equity method of accounting offset by our share of Westinghouse’s accumulated other comprehensive income (loss) then recorded in our accumulated other comprehensive income (loss). Under the cost method of accounting, we would no longer include our proportionate share of Westinghouse’s earnings in our statements of operations. Dividends relating to Westinghouse’s earnings from the date we are under the cost method would be reflected as earnings in our statement of operations. Dividends received in excess of our share of those earnings would result in a reduction of the carrying amount of the investment.

Westinghouse maintains its accounting records for reporting to its majority owner, Toshiba, on a calendar quarter basis with a March 31 fiscal year end. Financial information about Westinghouse’s operations is available to us for Westinghouse’s calendar quarter periods. We record our 20% interest of the equity earnings (loss) and other comprehensive income (loss) reported to us by Westinghouse two months in arrears of our current periods. Under this policy, Westinghouse’s operating results for the three and six months ended December 31, 2011, and December 31, 2010, are included in our financial results for the three and six months ended February 29, 2012, and February 28, 2011, respectively.

Summarized unaudited income statement information for Westinghouse, before applying our Westinghouse Equity Interest and any adjustments for estimated payments by WEC under a consortium agreement for an EPC contract on two Nuclear plant reactors, was as follows (in thousands):

	Three Months Ended					Six Months Ended
Statements of Operations	December 31, 2011			December 31, 2010		December 31, 2011		December 31, 2010
Revenues	$	1,116,451		$	1,001,380	$	2,198,625	$	2,106,437
Gross profit		191,931			203,032		413,205		435,382
Income from continuing operations before income taxes		(2,005	)		27,251		42,621		56,559
Net income (loss) attributable to shareholders		(5,195	)		14,738		37,620		35,023

Our investments in and advances to unconsolidated entities, joint ventures, and limited partnerships and our overall percentage ownership of these ventures that are accounted for under the equity method were as follows (in thousands, except percentages):

	Ownership			February 29,		August 31,
	Percentage			2012			2011
Investment in Westinghouse		20	%	$	975,411		$	999,035
Other		23% - 50	%		19,378			14,768
Total				$	994,789		$	1,013,803

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Earnings (losses) from unconsolidated entities, net of income taxes, for the three and six months ended February 29, 2012, and February 28, 2011, are summarized as follows (in thousands):

	Three Months Ended					Six Months Ended
	2012			2011		2012		2011
Investment in Westinghouse, net of income taxes of $(2,239), $1,147, $1,058 and $2,725, respectively	$	(3,577	)	$	1,801	$	1,689	$	4,280
Other unconsolidated entities, net of income taxes of $1,581, $1,177, $2,637 and $1,375, respectively		2,525			1,954		4,212		2,347
Total	$	(1,052	)	$	3,755	$	5,901	$	6,627

Related Party Transactions

The following table summarizes related party transactions with unconsolidated entities included in our consolidated financial statements for the six months ended February 29, 2012 and February 28, 2011 and at February 29, 2012 and August 31, 2011 (in thousands):

	2012		2011
Revenue from unconsolidated entities	$	47,286	$	8,716

	February 29, 2012		August 31, 2011
Accounts and other receivables from unconsolidated entities	$	6,556	$	5,190
Advances to unconsolidated entities	$	-	$	15

Note 8 — Goodwill and Other Intangibles

Goodwill

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (March 1 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. As previously reported, we are in the process of reviewing strategic alternatives for our E&C segment and have received indications of interest for certain assets and operations of our E&C segment. Based upon the indications of interest received, consummating a transaction under the indicative terms would not result in us recording an impairment charge.

The following table reflects the changes in the carrying value of goodwill by segment from August 31, 2011, to February 29, 2012 (in thousands):

	Power		Plant Services		E&I			E&C			F&M			Total
Balance at August 31, 2011	$	139,177	$	42,027	$	207,862		$	139,099		$	17,625		$	545,790
Acquisitions and related adjustments		—		—		30			—			—			30
Currency translation adjustment		—		—		(302	)		(374	)		(676	)		(1,352	)
Balance at February 29, 2012	$	139,177	$	42,027	$	207,590		$	138,725		$	16,949		$	544,468

The measurement period for purchase price allocations ends as soon as information on the facts and circumstances becomes available but will not exceed 12 months. Adjustments in the purchase price allocation may require a recasting of the amounts allocated to goodwill retroactive to the period in which the acquisition occurred.  We had tax-deductible goodwill of approximately $58.2 million and $65.8 million at February 29, 2012, and August 31, 2011, respectively. The difference between the carrying value of goodwill and the amount deductible for taxes is primarily due to the amortization of goodwill allowable for tax purposes.

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Other Intangible Assets

The gross carrying values and accumulated amortization of amortizable intangible assets are presented below (in thousands):

	Proprietary Technologies, Patents and Tradenames						Client Relationships
	Gross Carrying Amount			Accumulated Amortization			Gross Carrying Amount			Accumulated Amortization
Balance at August 31, 2011	$	41,957		$	(27,735	)	$	5,016		$	(2,096	)
Currency translation adjustments		(20	)		12			(18	)		(311	)
Amortization		—			(1,395	)		—			—
Balance at February 29, 2012	$	41,937		$	(29,118	)	$	4,998		$	(2,407	)

The following table presents the scheduled future annual amortization for our intangible assets not associated with contract adjustments (in thousands):

	Proprietary Technologies, Patents, and Tradenames		Client Relationships
Remainder of fiscal year 2012	$	1,501	$	247
2013		2,800		426
2014		2,719		426
2015		2,633		426
2016		2,593		426
Thereafter		573		640
Total	$	12,819	$	2,591

Note 9 — Debt and Revolving Lines of Credit

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

	February 29, 2012				August 31, 2011
	Short-term		Long-term		Short-term		Long-term
0%-3.7% interest vendor financing contracts, 2.3%-4.2% imputed interest, due July 2012-December 2013	$	7,813	$	4,894	$	—	$	—
Debt of consolidated joint venture: 6% interest, due January 2013		3,302		—		—		—
Capital lease obligations		360		448		349		630
Westinghouse Bonds (see description below)		1,602,834		—		1,679,836		—
Total	$	1,614,309	$	5,342	$	1,680,185	$	630

Westinghouse Bonds

On October 13, 2006, NEH, our wholly-owned, special purpose subsidiary, issued JPY 128.98 billion (equivalent to approximately $1.1 billion) principal amount limited recourse bonds, maturing March 15, 2013, at a discount receiving approximately $1.0 billion in proceeds, excluding offering costs. NEH used the proceeds of these bonds to purchase the Westinghouse Equity for approximately $1.1 billion. The Westinghouse Bonds are limited recourse to us (except to NEH), are governed by the Bond Trust Deed, and are collateralized primarily by the Westinghouse Equity, the JPY-denominated Put Option between NEH and Toshiba and the Principal Letter of credit, which cover interest owed to bond holders and the possible 3.3% principal exposure.

The holders of the Westinghouse Bond may have the ability to cause us to put our Westinghouse Equity back to Toshiba as a result of the occurrence of a “Toshiba Event” (as defined under the Bond Trust Deed) that occurred in May 2009. A Toshiba Event is not an event of default or other violation of the Bond Trust Deed or the Put Option Agreements, but due to the Toshiba Event, the Westinghouse Bond holders have an opportunity to direct us to exercise the Put Options, through which we would receive the pre-determined JPY-denominated put price and use those proceeds to pay off the JPY-denominated Westinghouse Bond debt. To do so, a ‘supermajority’ of the Westinghouse bond holders representing a majority of not less than an aggregate 75% of the principal amount outstanding must pass a resolution instructing the bond trustee to direct us to exercise the Put Options. Specifically, in order for the bond trustee to direct us to exercise the Put Option, the Westinghouse Bond holders must convene a meeting with a quorum of bondholders representing no less than 75% of the Westinghouse Bonds principal amount outstanding during which a 75% majority of the required quorum approves a resolution instructing the bond trustee to direct the exercise.  Alternatively, a written resolution signed by the Westinghouse Bond holders representing no less than 75% of the Westinghouse Bond principal amount outstanding and instructing the bond trustee to direct us to exercise the Put Options shall have the same effect (collectively, an Extraordinary Resolution).

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Because the holders of the bonds may have the ability to require us to exercise the Put Options to retire the bonds, we reclassified the Westinghouse Bonds from long-term debt to short-term debt and our Investment in Westinghouse to current assets in May 2009.

The Put Options, executed as part of the Investment in Westinghouse transaction, provide NEH the option to sell all or part of the Westinghouse Equity to Toshiba for a pre-determined JPY-denominated put price. On September 6, 2011, NEH announced that it intends to exercise its put options to sell the Westinghouse Equity to Toshiba. The exercise of the Japanese yen-denominated Put Options prior to October 2012 requires the consent of the trustee acting on behalf of the Westinghouse Bond holders. Funds received must be applied toward the redemption of the bonds on the next scheduled interest payment date. On December 8, 2011, we were informed that the trustee did not consent to the proposed early exercise of the Put Options. Under the terms of the Put Options, the Put Options will be exercised automatically on or around October 6, 2012, for cash settlement on January 4, 2013. Proceeds from the sale would be used to repay the bonds in full on their scheduled maturity date of March 15, 2013.

The Put Options require Toshiba to purchase the Westinghouse Equity at a price equivalent to not less than 96.7 percent of the principal amount of the bonds. NEH will fund up to the 3.3 percent shortfall of the principal amount of the bonds, which was approximately $52.9 million at February 29, 2012. We may recognize a non-operating gain once the put options are settled resulting principally from foreign exchange movements. If the bonds would have been repaid at February 29, 2012, from an early exercise of the Put Options, the gain would have been approximately $473.4 million pre-tax. The actual gain or loss will be determined at settlement.

In the event we exercise the Put Option at the direction of the Westinghouse Bond holders following a Toshiba Event, Toshiba is required to pay us approximately JPY 128.98 billion (equal to 100% of the face value of the Westinghouse Bonds currently outstanding). Because any proceeds from the repurchase of the Westinghouse Equity must be used to repay the Westinghouse Bonds, the Westinghouse Bond holders’ decision to issue an Extraordinary Resolution may be significantly influenced by Toshiba’s financial condition as well as conditions in the general credit markets.

The exchange rates of the JPY to the USD at February 29, 2012, and August 31, 2011, were 80.5 and 76.8, respectively.

The Westinghouse Bonds consisted of the following (in thousands):

	February 29, 2012		August 31, 2011
Westinghouse Bonds, face value 50.98 billion JPY due March 15, 2013; interest only payments; coupon rate of 2.20%;	$	426,875	$	426,875
Westinghouse Bonds, face value 78 billion JPY due March 15, 2013; interest only payments; coupon rate of 0.70% above the six-month JPY LIBOR rate (0.34% at February 29, 2012)		653,125		653,125
Increase in debt due to foreign currency translation adjustments since date of issuance		522,834		599,836
Total Westinghouse debt	$	1,602,834	$	1,679,836

On October 16, 2006, we entered into an interest rate swap agreement through March 15, 2013, in the aggregate notional amount of JPY 78 billion. We designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate. Under the agreement, we make fixed interest payments at a rate of 2.398%, and we receive a variable interest payment equal to the six-month JPY London Interbank Offered Rate (LIBOR) plus a fixed margin of 0.70%, effectively fixing our interest rate on the floating rate portion of the JPY 78 billion Westinghouse Bonds at 2.398%. At February 29, 2012, and August 31, 2011, the fair value of the swap totaled approximately $19.5 million and $27.1 million, respectively, and is included as a current liability and in accumulated other comprehensive loss, net of deferred taxes, in the accompanying consolidated balance sheets. There was no material ineffectiveness of our interest rate swap for the period ended February 29, 2012.

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Credit Facility

On June 15, 2011, we entered into an unsecured second amended and restated credit agreement (Facility) with a group of lenders that effectively terminated an earlier agreement. The Facility provides lender commitments up to $1,450.0 million, all of which may be available for the issuance of performance letters of credit. The Facility has a sublimit of $1,250.0 million that may be available for the issuance of financial letters of credit and /or borrowings for working capital needs and general corporate purposes.

At February 29, 2012, the amount of the Facility available for financial letters of credit and/or revolving credit loans was limited to the lesser of: (1) $1,220.3 million, representing the total Facility commitment ($1,450.0 million) less outstanding performance letters of credit ($98.0 million) less outstanding financial letters of credit ($131.7 million); (2) $1,118.3 million, representing the Facility sublimit of $1,250.0 million less outstanding financial letters of credit ($131.7 million); or (3) $240.1 million, representing the maximum additional borrowings allowed under the leverage ratio covenant (as defined below) contained in the Facility.

Under the Facility, all collateral securing the previous agreement was released and the expiration of commitments was extended through June 15, 2016. The Facility continues to require guarantees by the Company’s material wholly-owned domestic subsidiaries. The Facility allows the Company to seek new or increased lender commitments under it subject to the consent of the Administrative Agent and/or seek other unsecured supplemental credit facilities of up to an aggregate of $500.0 million, all of which would be available for the issuance of performance and financial letters of credit and/or borrowings for working capital needs and general corporate purposes. Additionally, the Company may pledge up to $300.0 million of its unrestricted cash on hand to secure additional letters of credit incremental to amounts available under the Facility, provided that the Company and its subsidiaries have unrestricted cash and cash equivalents of at least $500.0 million available immediately following the pledge. The Facility contains a revised pricing schedule with respect to letter of credit fees and interest rates payable by the Company.

The Facility contains customary financial covenants and other restrictions including an interest coverage ratio (ratio of Shaw EBITDA to consolidated interest expense) and a leverage ratio (ratio of total debt to Shaw EBITDA) with all terms defined in the Facility, and (i) maintains or resets maximum allowable amounts certain threshold triggers and certain additional exceptions with respect to the dividend, stock repurchases, investment, indebtedness, lien, asset sale, letter of credit and acquisitions and (ii) additional covenants, thus providing the Company with continued financial flexibility in business decisions and strategies. The Facility contains defaulting lender provisions.

The Facility limits our ability to declare or pay dividends or make any distributions of capital stock (other than stock splits or dividends payable in our own capital stock) or redeem, repurchase or otherwise acquire or retire any of our capital stock. The Facility permits us to make stock repurchases or dividend payments of up to $500.0 million so long as, after giving effect to such purchases or payments, our unrestricted cash and cash equivalents is at least $500.0 million. We are limited to aggregate dividend payments and/or stock repurchases during the life of the Facility up to $500.0 million.  In situations where our unrestricted cash and cash equivalents is less than $500.0 million, our ability to pay dividends or repurchase our shares is limited to $50.0 million per fiscal year. The payment of cash dividends is restricted if an event of default has occurred and is continuing under the Facility. The restrictions under our Facility currently do not impair our ability to complete our share repurchase program. For additional information on our share repurchase program, see Note 19 – Share Repurchase Program.

The total amount of fees associated with letters of credit issued under the Facility were approximately $1.9 million and $3.9 million for the three and six months ended February 29, 2012, respectively, as compared to $2.1 million and $4.6 million for the three and six months ended February 28, 2011.  These amounts include commitment fees associated with unused credit line availability of approximately $0.9 million and $1.8 million for the three and six months ended February 29, 2012, respectively, as compared to $0.8 million and $1.7 million for the three and six months ended February 28, 2011, respectively.

For the three and six months ended February 29, 2012, we recognized $0.6 million and $1.2 million, respectively, of interest expense associated with the amortization of financing fees related to our Facility, as compared to $1.2 million and $2.4 million, respectively, for the three and six months ended February 28, 2011.  At February 29, 2012, and August 31, 2011, unamortized deferred financing fees related to our Facility were approximately $10.6 million and $11.8 million, respectively.

At February 29, 2012, we were in compliance with the financial covenants contained in the Facility.

Other Revolving Lines of Credit

Shaw-Nass, a consolidated VIE located in Bahrain, has an available credit facility (Bahrain Facility) with a total capacity of 3.0 million Bahraini Dinars (BHD) or approximately $8.0 million, of which BHD 1.5 million is available for bank guarantees and letters of credit. At February 29, 2012, Shaw-Nass had minimal borrowings under its revolving line of credit and no outstanding bank guarantees under the Bahrain facility. The interest rate applicable to any borrowings is a variable rate (1.28% at February 29, 2012) plus 3.00% per annum. We have provided a 50% guarantee related to the Bahrain facility.

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We have uncommitted, unsecured standby letter of credit facilities with banks outside of our Facility. Fees under these facilities are paid quarterly. At February 29, 2012, and August 31, 2011, there were $1.7 million and $1.9 million of letters of credit outstanding under these facilities, respectively.

Note 10 — Income Taxes

Our consolidated effective tax rate was a provision of 38% and 37% for the second quarter and six months ended February 29, 2012, respectively.  In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate based on forecasted annual pre-tax income and permanent items, statutory tax rates and tax planning opportunities in the various jurisdictions in which we operate.

The impact of significant discrete items is separately recognized in the quarter in which they occur. We recognize foreign currency gains and losses on the Japanese Yen-denominated Westinghouse Bonds as discrete items in each reporting period due to their volatility and the difficulty in estimating such gains and losses reliably.

We expect the fiscal year 2012 annual effective tax rate, excluding discrete items, applicable to forecasted income before income taxes and earnings (losses) from unconsolidated entities to be approximately 36%. Significant factors that could impact the annual effective tax rate include management’s assessment of certain tax matters, the location and amount of our taxable earnings, changes in certain non-deductible expenses and expected credits.

Under ASC 740-10, we provide for uncertain tax positions, and the related interest, and adjust unrecognized tax benefits and accrued interest accordingly. We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense.

During the second quarter of fiscal year 2012, unrecognized tax benefits increased $0.4 million primarily due to a provision for additional interest and penalties. As of February 29, 2012, our unrecognized tax benefits were $36.3 million, of which $29.8 million would, if recognized, affect our effective tax rate.

We file income tax returns in numerous tax jurisdictions, including the U.S., most U.S. states and certain non-U.S. jurisdictions including jurisdictions where our subsidiaries execute project-related work. The statute of limitations varies by the various jurisdictions in which we operate. With few exceptions, we are no longer subject to U.S. state and local or non-U.S. income tax examinations by tax authorities for years before fiscal year 2004 and US Federal examinations for years before fiscal 2009. Although we believe our calculations for our tax returns are correct and the positions taken thereon are reasonable, the final outcome of tax audits could be materially different than the resolution we currently anticipate, and those differences could result in significant costs or benefits to us.

Our U. S. federal tax returns for fiscal years 2009 and 2010 are now being audited by the Internal Revenue Service (IRS).  We anticipate the closure of this audit during the third quarter of fiscal year 2012. The IRS accepted our application for admittance into the Compliance Assurance Process (CAP) at the beginning of fiscal year 2012.  Under CAP, the IRS works with large business taxpayers on a contemporaneous, real-time basis to resolve issues prior to the filing of tax returns which allows participants to remain current with IRS examinations.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits up to $23 million as a result of the expiration of statutes of limitations and settlements with taxing authorities.

Note 11 — Share-Based Compensation

During the six months ended February 29, 2012, and February 28, 2011, restricted stock units (RSUs) totaling 384,828 shares at a weighted-average per share price of $23.64 and 309,820 shares at a weighted-average per share price of $30.82, respectively, were awarded with vesting over three and approximately four years, respectively.

During the six months ended February 29, 2012 and February 28, 2011, cash-settled restricted stock units (CS RSUs) totaling  688,411 shares at a weighted-average per share price of $28.94 and 274,771 shares at a weighted-average per share price of $39.72, respectively, were awarded with vesting over three and approximately four years, respectively.  The CS RSUs are classified as liability awards at February 29, 2012, due to the settlement of these awards in cash.

During the six months ended February 29, 2012, there were no options awarded. During the six months ended February 28, 2011, options for the purchase of 614,493 shares at a weighted-average price of $30.75 per share were awarded, vesting over approximately four years. There were no significant changes in the assumptions or estimates used in the valuation of options subsequent to our year-end, August 31, 2011.

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During the six months ended February 29, 2012, and February 28, 2011, options were exercised for the purchase of 107,213 shares at a weighted-average exercise price of $19.43 per share and 418,654 shares at a weighted-average exercise price of $22.67 per share, respectively.

During the six months ended February 29, 2012, there were no stock appreciation rights (SARs) awarded. During the six months ended February 28, 2011, we awarded 359,364 SARs at a weighted average price of $30.56 per share, vesting over approximately four years. The Binomial valuation model was used to re-measure the fair value of the SARs at February 29, 2012. The SARs are classified as liability awards at February 29, 2012, due to the settlement of these awards in cash.

During the six months ended February 29, 2012, we awarded 11,661,500 performance cash units (PCUs), at a weighted average fair value of $1.18 per unit, vesting over approximately three years. The PCUs represent the right to receive $1 for each earned PCU if specified performance goals are met over the three-year performance period. The PCU recipients may earn between 0% and 200% of their individual target award amount depending on the level of performance achieved. The fair value of PCUs was estimated at the grant date based on the probability of satisfying the performance goals associated with the PCUs using a Monte Carlo simulation model. The PCUs are revalued quarterly and are classified as liability awards at February 29, 2012, due to the settlement of these awards in cash. There were no PCUs awarded during the six months ended February 28, 2011.

Compensation cost for liability-classified awards is re-measured at each reporting period and is recognized as an expense over the requisite service period.

For additional information related to these share-based compensation plans, see Note 13 — Share-Based Compensation of our consolidated financial statements in our 2011 Form 10-K.

Note 12 — Contingencies and Commitments

Legal Proceedings

In the normal course of business, we are involved in a variety of legal proceedings, liability claims or contract disputes in many jurisdictions around the world. Some of these legal proceedings are associated with the performance of our services. At times, the nature of our business leads to disputes with clients, subcontractors and vendors relating to our entitlement to additional revenue and/or reduced costs. Occasionally, these disputes lead to our clients, subcontractors and vendors presenting claims against us for recovery of cost they incurred in excess of what they expected to incur, or for which they believe they are not contractually liable.  In such matters, we evaluate both our claims against the client as well as any disputes and/or counterclaims asserted against us by the client or opposing party pursuant to ASC 450, and we record the probable outcome based upon this analysis. For an additional discussion of our claims on major projects, see Note 16 — Accounting for Claims, Unapproved Change Orders and Incentives on Long-Term Construction Contracts. The actual outcomes may differ materially from our analysis.

On November 12, 2010, the jury returned a split verdict in a dispute between our subsidiary, Stone & Webster, Inc. (S&W), and Xcel Energy (d/b/a Public Service of Colorado) related to Xcel Energy’s coal-fired power plant project in Pueblo, Colorado. While we disagreed with the overall jury verdict and have appealed to the state court of appeals, as a result of this verdict, our Power segment recorded a reduction in gross profit of $63.4 million in the period ended November 30, 2010. During the first quarter of fiscal year 2012, we settled this matter and collected in excess of $40 million in outstanding receivables from Xcel Energy, resulting in the recognition of an immaterial gain in the results of operations.

As previously disclosed, in connection with an EPC contract executed by our Power segment for a 600 MW steam turbine electrical generation plant in the U.S., we commenced an arbitration proceeding against our client for this project seeking the return of and relief from schedule related liquidated damages assessed by the client, a contract price adjustment, and outstanding monies owed under our contract. In addition, we commenced an arbitration proceeding with our equipment and services supplier on this project. During the first quarter of fiscal year 2012, we contemporaneously settled all remaining disputes with our client and the equipment supplier related to this project. These settlements resolve all outstanding issues and thus ends our involvement with this project.

In connection with an approximate $28.1 million contract executed by our F&M segment to supply fabricated pipe spools to a manufacturing facility in the U.S., our client filed a lawsuit in the U.S. District Court for the Eastern District of Washington alleging that shop-welding on the pipe spools we supplied was substantially and unacceptably deficient and that the deliveries for some of the pipe spools were untimely. We reached a settlement with our client on this matter in October 2011 and recorded a $16.8 million charge to cost of revenue in fiscal year 2011 and are currently seeking recovery from our insurers. We paid the amounts due to our client in the first quarter of fiscal year 2012.

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In connection with a cost reimbursable contract executed by our Power segment for the engineering, procurement and construction of flue gas desulfurization systems at three power generating facilities, we have become involved in litigation with the client in the U.S. District Court, District of Maryland and the U.S. District Court, Southern District of New York.  On January 14, 2011, we commenced the Maryland action with the filing of petitions to establish and enforce mechanics liens against the three projects in an amount totaling approximately $143.0 million. On February 24, 2011, the client filed a motion in the Maryland court to stay or sever and transfer the lien actions to the U.S. District Court for the Southern District of New York. At that time, the client also filed a declaratory judgment action in the New York court that seeks to address the same issues raised in the lien actions and specifically requests a finding that the client is not required to pay us amounts claimed by us. On March 7, 2011, we filed an answer and counterclaim to the client’s declaratory judgment action in which we deny the client has any valid basis for refusing payment and demand payment of sums due us of not less than $200.0 million. On June 24, 2011, we filed a motion in the Maryland court to amend our liens to a total amount of approximately $233.0 million, and on August 16, 2011, the court issued orders supplementing the liens to the total amount of approximately $233.0 million. The client subsequently declared that substantial completion has been achieved and paid us approximately $68 million. As a result of that payment, our liens and counterclaim have been reduced respectively to total approximately $165 million. The trial is scheduled to commence in June 2012. We have evaluated our claims and our client’s claims and have recorded revenue based on management’s judgment about the probable outcome of the respective lawsuits. See Note 16 — Accounting for Claims, Unapproved Change Orders and Incentives on Long-Term Construction Contracts for our disclosures associated with our claims and unapproved change orders. While we expect a favorable resolution to these matters, the dispute resolution process could be lengthy, and if our client were to prevail completely or substantially in the respective matters, such an outcome could have a material adverse effect on our consolidated statements of operations. Nevertheless, even if the client were to prevail, we would still be entitled to collect approximately $52 million in receivables currently outstanding.

For additional information related to our claims on major projects, see Note 16 —Accounting for Claims, Unapproved Change Orders and Incentives on Long-Term Construction Contracts.

Liabilities Related to Contracts

Our contracts often contain provisions relating to the following matters:

• Warranties, 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.

We attempt to limit our exposure through the use of the penalty or liquidated damage provisions and attempt to pass certain cost exposure for craft labor and/or commodity-pricing risk to clients. We also have claims and disputes with clients as well as vendors, subcontractors and others that are subject to negotiation or the contractual dispute resolution processes defined in the contracts. See Note 5 – Accounts Receivable, Concentrations of Credit Risk and Inventories, Note 16 — Accounting for Claims, Unapproved Change Orders and Incentives on Long-Term Construction Contracts and Legal Proceedings above for further discussion on these matters.

Other Guarantees

Our Facility lenders issue letters of credit on our behalf to clients or sureties in connection with our contract performance and, in limited circumstances, on certain other obligations of third parties. We are required to reimburse the issuers of these letters of credit for any payments that they make pursuant to these letters of credit. The aggregate amount of outstanding financial and performance letters of credit (including foreign and domestic, secured and unsecured, and cash collateralized) was approximately $379.9 million and $456.1 million at February 29, 2012, and August 31, 2011, respectively. Of the amount of outstanding letters of credit at February 29, 2012, $234.4 million are performance letters of credit issued to our clients. Of the $234.4 million, five clients held $192.8 million or 82.3% of the outstanding letters of credit. The largest letter of credit issued to a single client on a single project is $60.0 million.

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In the ordinary course of business, we enter into various agreements providing financial or performance assurances to clients which may cover certain unconsolidated partnerships, joint ventures or other jointly executed contracts. These agreements are entered into primarily to support the project execution commitments and are generally a guaranty of our own performance. These assurances have various expiration dates ranging from mechanical completion of the facilities being constructed to a period extending beyond contract completion. The maximum potential payment amount of an outstanding performance guarantee is the remaining cost of work to be performed under engineering and construction contracts. Amounts that may be required to be paid in excess of our estimated cost to complete contracts in progress are not estimable. For cost reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For fixed price contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where cost exceeds the remaining amounts payable under the contract, we may have recourse to third parties such as owners, co-venturers, subcontractors or vendors.

Environmental Liabilities

The LandBank Group, Inc. (LandBank), a subsidiary of our Environmental and Infrastructure (E&I) segment, remediates previously acquired environmentally impaired real estate. The real estate was recorded at cost, typically reflecting some degree of discount due to environmental issues related to the real estate. As remediation efforts are expended, the book value of the real estate is increased to reflect improvements made to the asset. Additionally, LandBank records a liability for estimated remediation costs for real estate that is sold, but for which the environmental obligation is retained. We also record an environmental liability for properties held by LandBank if funds are received from transactions separate from the original purchase to pay for environmental remediation costs.  There are no recent additions to the LandBank portfolio of properties, and at this time we are not pursuing additional opportunities. Accordingly, we are not incurring incremental environmental liability beyond the portfolio that currently exists. Existing liabilities are reviewed quarterly, or more frequently as additional information becomes available. We also have insurance coverage that helps mitigate our liability exposure. At February 29, 2012, and August 31, 2011, our E&I segment had approximately $1.6 million and $1.9 million, respectively, of environmental liabilities recorded in other liabilities in the accompanying balance sheets.  LandBank environmental liability exposure beyond that which is recorded is estimated to be immaterial.

Employment Contracts

We have entered into employment agreements with each of our senior corporate executives and certain other key employees. In the event of termination, these individuals may be entitled to receive their base salaries, management incentive payments, and certain other benefits for the remaining term of their agreement and all options and similar awards may become fully vested. Additionally, for certain executives, in the event of death, their estates are entitled to certain payments and benefits.

Note 13 — Supplemental Disclosure to Earnings (Losses) Per Common Share

Weighted average shares outstanding for the three and six months ended February 29, 2012, and February 28, 2011, were as follows (in thousands):

	Three Months Ended				Six Months Ended
	2012		2011		2012		2011
Basic		66,502		85,199		68,921		85,048
Diluted:
Stock options		654		993		555		—
Restricted stock		358		618		524		—
Diluted		67,514		86,810		70,000		85,048

The following table includes weighted-average shares excluded from the calculation of diluted income (loss) per share because they were anti-dilutive (in thousands):

	Three Months Ended				Six Months Ended
	2012		2011		2012		2011
Stock options		1,758		1,460		2,064		4,218
Restricted stock		165		35		404		2,003

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Note 14 — Employee Benefit Plans

The following table sets forth the net periodic pension expense for the three foreign defined benefit plans we sponsor for the three and six months ended February 29, 2012, and February 28, 2011 (in thousands):

	Three Months Ended						Six Months Ended
	2012			2011			2012			2011
Service cost	$	19		$	37		$	38		$	74
Interest cost		2,057			1,938			4,031			3,869
Expected return on plan assets		(2,159	)		(2,063	)		(4,233	)		(4,118	)
Amortization of net loss		807			918			1,581			1,833
Other		11			11			22			22
Total net pension expense	$	735		$	841		$	1,439		$	1,680

We expect to contribute $4.7 million to our pension plans in fiscal year 2012. As of February 29, 2012, we have made $1.8 million in contributions to these plans.

Note 15 — Related Party Transactions

At times, we enter into material contractual arrangements with Westinghouse.  NEH, a wholly-owned special purpose entity, owns a 20% interest in Westinghouse (see Note 6 – Investment in Westinghouse and Related Agreements and Note 7 – Equity Method Investments and Variable Interest Entities).

Note 16 —Accounting for Claims, Unapproved Change Orders, Backcharges and Incentives on Long-Term Construction Contracts

Claims include amounts in excess of the original contract price (as it may be adjusted for approved change orders) that we seek to collect from our clients 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 and are included in estimated revenues when recovery of the amounts is probable and the costs can be reasonably estimated. Similarly, backcharges and claims against vendors, subcontractors and others are included in our cost estimates as a reduction in total estimated costs when recovery of the amounts is probable and the costs can be reasonably estimated.

Claims and backcharges are recorded at the amount deemed probable of recovery up to the amount of estimated costs and profit is not recorded until the claim or backcharge is resolved. The recognition of these items may increase gross profit or reduce gross loss on the related projects as compared to the gross profit/gross loss that would have been recognized had no claim revenue been recorded. Claims receivable are included in costs and estimated earnings in excess of billings on uncompleted contracts on the accompanying consolidated balance sheets

We enter into cost-reimbursable arrangements in which the final outcome or overall estimate at completion may be materially different than the original contract estimated value. While the terms of such contracts indicate costs are to be reimbursed by our clients, we typically process change notice requests to document agreement as to scope and price. Due to the nature of these items, we have not classified and disclosed the amounts as unapproved change orders. While we have no history of significant losses on this type of work, potential exposure exists relative to costs incurred in excess of agreed upon contract value.

Unapproved Change Orders and Claims

The table below (in millions) summarizes information related to our significant unapproved change orders and claims from project owners that we have recorded on a total project basis at February 29, 2012, and February 28, 2011, and excludes all unrecorded amounts and non-significant unapproved change orders and claims.

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	Fiscal Year 2012			Fiscal Year 2011
Amounts included in project estimates-at-completion at September 1	$	448.3		$	111.6
Changes in estimates-at-completion		384.5			296.6
Approved		(488.8	)		(53.8	)
Amounts included in project estimates-at-completion at February 29, and February 28, respectively, for unapproved change orders and claims	$	344.0		$	354.4
Amounts recorded in revenues (or reductions to contract costs) on a percentage-of-completion basis at February 29, and February 28, respectively	$	88.3		$	73.1

In the table above, the difference between the amounts included in project estimates-at-completion and the amounts recorded in revenues (or reductions to contract costs) on a total project basis represents the forecasted costs for work which has not yet been incurred (i.e. the remaining percentage-of-completion revenue to be recognized on the related project). The amounts presented in this table include, but are not limited to, those matters currently in litigation or arbitration for which we have recorded revenue. Additional discussion regarding our legal proceedings relating to unapproved change orders and claims in litigation or arbitration is provided in our Legal Proceedings in Note 12 — Contingencies and Commitments and Note 15 – Related Party Transactions.

The majority of the amounts included in the project estimates-at-completion in the table above relate to engineering, equipment supply, material fabrication, and construction cost estimates and costs from regulatory required design changes and delays in our clients’ obtaining combined operating licenses (COLs) for two nuclear power reactors. During the quarter ended February 29, 2012, one of our clients obtained the COL for two nuclear reactors being constructed in Georgia.

In connection with our consortium agreement for the design and construction of two domestic nuclear power reactors in South Carolina, we have reached a preliminary agreement with the client to settle certain change orders resulting from regulatory required design changes and COL issuance delays on the project. As a result of this preliminary agreement these costs have been excluded from the total of unapproved change orders presented above. We continue to believe the remaining amounts included in the table above related to all of our AP1000 nuclear projects are recoverable from our clients under existing provisions of our contractual arrangements. The nuclear power projects have a long construction duration and the cost estimates cover costs that will not be incurred for several years. It is expected that the cost estimates resulting from the design changes and COL delays will continue to be refined as more information becomes available. It is possible that these commercial matters may not be resolved in the near term. Should these matters proceed to formal dispute resolution, our contracts call for clients to co-fund our costs until the matters are resolved.

Under the terms of two consortium agreements with WEC, which is our EPC partner, to design and construct the four nuclear power reactors, we perform much of the modular fabrication, assembly and construction related activities on the domestic AP1000 nuclear projects, with WEC being responsible for the nuclear island engineering and equipment supply. During the quarter ended February 29, 2012, we signed a memorandum of understanding with WEC (“the WEC MOU”) WEC has the obligation to reimburse us for material and fabrication costs associated with design changes to the extent these costs are not recovered from our clients. Accordingly, amounts which may be recovered under the WEC MOU have been excluded from the unapproved change orders and claims presented in the table above.  These consortium agreements, as supplemented by the WEC MOU, provide a contractual mechanism for cost sharing to the extent project costs exceed certain thresholds and are not recovered from our clients. Our costs resulting from the design changes and delays in issuance of the COLs would be considered within this cost sharing mechanism.  As of February 29, 2012, we estimate that our recovery under these consortium agreements and the related WEC MOU is approximately $246 million, which has been excluded from the presentation of unapproved change orders in the above table.   The amounts recoverable from WEC will decline to the extent we recover the costs from our clients.

In addition to the unapproved change orders and claims discussed above, we record as a reduction to costs expected recoveries for backcharges, liquidated damages and other cost exposures resulting from supplier or subcontractor caused impediments to our work. Such impediments may be caused by the failure of suppliers or subcontractors to provide services, materials, or equipment compliant with provisions of our agreements, resulting in delays to our work or additional costs to remedy.  At February 29, 2012, we did not have any significant recoveries from suppliers or subcontractors recorded.

In the ordinary course of business, the Company enters into various agreements pending assurances and guarantees to clients.  While in most cases these performance risks are offset by similar guarantees by our suppliers, there are instances where the full extent of the exposure is not eliminated.

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In general, if we collect amounts different than the amounts that we have recorded as unapproved change orders/claims receivable on any of our projects, that difference will be reflected in the EAC used in determining contract profit or loss. Timing of claim collections is uncertain and depends on such items as regulatory approvals, negotiated settlements, trial date scheduling and other dispute resolution processes pursuant to the contracts. As a result, we may not collect our unapproved change orders/claims receivable within the next twelve months. Should we not prevail in these matters, the outcome could have an adverse effect on our statements of operations and statement of cash flows.

Project Incentives

Some of our contracts contain performance incentive and award fee arrangements (collectively referred to as incentive fees) that provide for increasing or decreasing our revenue based upon the achievement of some measure of contract performance in relation to agreed upon targets. Incentive fees can occur in all segments, but the majority of contracts containing project incentives are in our Plant Services, Power and E&I segments. Therefore, the gross profit in those segments routinely contain significant amounts of these incentive fees.

We include in our EAC revenue an estimate of the probable amounts of the incentive fees we expect to earn if we achieve the agreed-upon criteria. We bill incentive fees based on the terms and conditions of the individual contracts which may allow billing over the performance period of the contract or only after the target criterion has been achieved. We recognize incentive fee revenue using the percentage-of-completion method of accounting. As the contract progresses and more information becomes available, the estimate of the anticipated incentive fee that will be earned is revised as necessary. Incentive fees which have been recognized but not billed are included in costs and estimated earnings in excess of billings on uncompleted contracts in the accompanying consolidated balance sheets. Incentive fees that have been billed but for which we have not recognized as revenue are included in the advanced billings and billings in excess of costs and estimated earnings on uncompleted contracts in the accompanying consolidated balance sheets.

At February 29, 2012, and August 31, 2011, our project EACs included approximately $106.8 million and $109.0 million, respectively, related to estimates of amounts we expect to earn on incentive fee arrangement. On a percentage-of-completion basis, we have recorded $74.4 million and $64.8 million as of February 29, 2012, and August 31, 2011, respectively, of these estimated amounts in revenues for the related contracts. If we do not achieve the criteria at the amounts we have estimated, project revenues and profit may be materially reduced.

Note 17 — Business Segments

Our reportable segments are Power; Plant Services; Environmental and Infrastructure (E&I); Energy and Chemicals (E&C); Fabrication and Manufacturing (F&M); Investment in Westinghouse; and Corporate.

The Power segment provides a range of project-related services, including design, engineering, construction, procurement, technology and consulting services, primarily to the global fossil and nuclear power generation industries.

The Plant Services segment performs routine and outage/turnaround maintenance, predictive and preventative maintenance, as well as construction and major modification services, to clients’ facilities in the fossil and nuclear power generation industries and industrial markets primarily in North America.

The E&I segment provides integrated engineering, design, construction and program and construction management services and executes environmental remediation solutions primarily to the U.S. government, state/local government agencies and private-sector clients worldwide.

The E&C segment provides a range of project-related services, including design, engineering, construction, procurement, technology and consulting services, primarily to the oil and gas, refinery, petrochemical and chemical industries. We recently announced that we are evaluating the sale of all or part of our E&C business.

The F&M segment provides integrated fabricated piping systems and services for new construction, site expansion and retrofit projects for power generating energy, chemical and petrochemical plants.  We operate several pipe and steel fabrication facilities in the U.S. and abroad.  We also operate two manufacturing facilities that provide pipe fittings for our pipe fabrication services operations, as well as to third parties. In addition, we operate several distribution centers in the U.S., which distribute our products to clients.

The Investment in Westinghouse segment includes NEH’s Westinghouse Equity and the Westinghouse Bonds. Westinghouse serves the domestic and international nuclear electric power industry by supplying advanced nuclear plant designs and equipment, fuel and a wide range of other products and services to the owners and operators of nuclear power plants. Please see Note 6 – Investment in Westinghouse and Related Agreements, Note 7 – Equity Method Investments and Variable Interest Entities and Note 9 – Debt and Revolving Lines of Credit for additional information.

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The Corporate segment includes corporate management and expenses associated with managing the overall company. These expenses include compensation and benefits of corporate management and staff, legal and professional fees and administrative and general expenses that are not directly associated with the other segments. Our Corporate assets primarily include cash, cash equivalents and short-term investments held by the corporate entities, property and equipment related to the corporate facility and certain information technology assets.

The following tables present certain financial information for our segments for the three and six months ended February 29, 2012, and February 28, 2011 (in millions except percentages):

	Three Months Ended						Six Months Ended
	2012			2011			2012			2011
Revenues:
Power	$	450.7		$	558.3		$	945.4		$	1,063.3
Plant Services		323.7			200.0			618.8			457.8
E&I		412.6			390.2			872.0			908.7
E&C		141.1			160.2			304.2			338.6
F&M		146.6			116.1			251.9			199.7
Corporate		—			—			—			—
Total revenues	$	1,474.7		$	1,424.8		$	2,992.3		$	2,968.1
Gross profit:
Power	$	8.1		$	56.7		$	35.1		$	27.1
Plant Services		21.1			15.9			44.1			39.2
E&I		32.9			35.9			70.6			84.3
E&C		12.4			(13.2	)		27.7			(6.8	)
F&M		33.7			19.5			50.2			31.6
Corporate		0.4			1.2			0.9			2.2
Total gross profit	$	108.6		$	116.0		$	228.6		$	177.6
Gross profit percentage:
Power		1.8	%		10.2	%		3.7	%		2.5	%
Plant Services		6.5			8.0			7.1			8.6
E&I		8.0			9.2			8.1			9.3
E&C		8.8			(8.2	)		9.1			(2.0	)
F&M		23.0			16.8			19.9			15.8
Corporate	NM			NM			NM			NM
Total gross profit percentage		7.4	%		8.1	%		7.6	%		6.0	%
Selling, general and administrative expenses:
Power	$	7.7		$	11.0		$	17.4		$	22.6
Plant Services		2.8			2.8			5.4			5.0
E&I		16.7			18.8			35.1			37.0
E&C		9.4			11.3			21.5			24.0
F&M		8.7			8.3			17.9			16.0
Investment in Westinghouse		—			0.9			0.1			0.9
Corporate		16.6			20.0			33.9			38.5
Total selling, general and administrative expense	$	61.9		$	73.1		$	131.3		$	144.0
Income (loss) before income taxes and earnings from unconsolidated entities:
Power	$	0.9		$	49.8		$	18.5		$	8.6
Plant Services		18.3			13.2			38.8			34.4
E&I		17.4			17.6			37.0			48.4
E&C		2.3			(18.9	)		6.9			(24.1	)
F&M		24.5			11.3			33.0			15.5
Investment in Westinghouse		41.2			(58.2	)		55.8			(81.1	)
Corporate		(16.5	)		(17.3	)		(33.5	)		(34.1	)
Total income (loss) before income taxes and earnings from unconsolidated entities	$	88.1		$	(2.5	)	$	156.5		$	(32.4	)

____________

NM — Not Meaningful

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Our segments’ assets were as follows (in millions):

	February 29, 2012			August 31, 2011
Assets:
Power	$	2,066.7		$	2,129.0
Plant Services		339.4			270.2
E&I		1,047.0			1,060.9
E&C		402.3			482.9
F&M		701.9			710.0
Investment in Westinghouse		1,212.0			1,266.4
Corporate		326.5			404.3
Total segment assets		6,095.8			6,323.7
Elimination of investment in consolidated subsidiaries		(470.3	)		(368.3	)
Elimination of intercompany receivables		(533.5	)		(468.4	)
Income taxes not allocated to segments		—			—
Total consolidated assets	$	5,092.0		$	5,487.0

Major Clients

Revenues related to U.S. government agencies or entities owned by the U.S. government were approximately $302.6 million and $623.3 million, respectively for the three and six months ended February 29, 2012, representing approximately 20.5% and 20.8% of our total revenues, respectively.  For the three and six months ended February 28, 2011, we recorded revenues related to the U.S. government of approximately $277.7 million and $590.4 million, respectively, representing approximately 20% of our total revenues for each period.

Note 18 — Supplemental Cash Flow Information

Supplemental cash flow information for the six months ended February 29, 2012, and February 28, 2011, is presented below (in thousands):

	Six Months Ended
	2012			2011
Cash payments for:
Interest (net of capitalized interest)	$	20,323		$	17,772
Income taxes (net refunds)	$	(859	)	$	33,388
Non-cash investing and financing activities:
Additions to property, plant, and equipment	$	10,575		$	—
Interest rate swap contract on JYP-denominated bonds, net of deferred tax of $2,911 and $1,653, respectively	$	(4,650	)	$	(2,597	)
Equity in unconsolidated entities’ other comprehensive income, net of deferred tax of $(6,453) and $7,200, respectively	$	10,309		$	(11,309	)
Financed software maintenance agreements	$	8,116		$	—

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Note 19 —Share Repurchase Program

During fiscal year 2011, our Board of Directors authorized two separate share repurchase programs of our common stock.  Under the first share repurchase program, authorized in December 2010 and completed in May 2011, we expended approximately $500.0 million to repurchase 13,688,354 shares at a weighted average cost of $36.51 per share.  In June 2011, the second share repurchase program authorized the repurchase of up to $500.0 million of our common stock, at times and in such amounts as management deems appropriate.  As of August 31, 2011, we repurchased 945,100 shares under the second repurchase program at a weighted average cost of $23.01 per share and a cost of $21.8 million, including commissions. During the second quarter of fiscal year 2012, we completed a modified Dutch auction tender offer, which resulted in 6,185,567 shares being repurchased at a purchase price of $24.25 per share, for an aggregate cost of $152.1 million, including fees and expenses.  The Company funded the share purchases in the tender offer with available cash.  All repurchased shares are held in treasury and are available for reissuance.

We currently have an open authorization to repurchase up to $326.1 million in shares, subject to limitations contained in the Facility. See Note 9 – Debt and Revolving Lines of Credit for additional information on our Facility.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q (Form 10- Q) may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and from present expectations or projections. Known material factors that could cause actual results to differ from those in the forward-looking statements include, but are not limited to:

• depressed global economic conditions;

• changes in demand for our products and services;

• our ability to obtain new contracts for large-scale domestic and international projects and the timing of the performance of these contracts;

• changes in the nature of the individual markets in which our clients operate;

• project management risks, including additional costs, reductions in revenues, claims, disputes and the payment of liquidated damages;

• the nature of our contracts, particularly fixed-price contracts, and the impact of possible misestimates and/or cost escalations associated with our contracts;

• ability of our clients to unilaterally terminate our contracts;

• our ability to collect funds on work performed for domestic and foreign government agencies and private sector clients that are facing financial challenges;

• delays and/or defaults in client payments;

• unexpected adjustments and cancellations to our backlog as a result of current economic conditions or otherwise;

• the failure to meet schedule or performance requirements of our contracts;

• our dependence on one or a few significant clients, partners, subcontractors and equipment manufacturers;

• potential contractual and operational costs related to our environmental and infrastructure operations;

• results of audits of U.S. government contracts, including audit of our internal control systems, cost reviews and investigations by federal governmental contracting oversight agencies that could result in the disallowance of costs or withholding of payments;

• risks associated with our integrated environmental solutions businesses;

• reputation and financial exposure due to the failure of our partners or subcontractors to perform their contractual obligations;

• the presence of competitors with greater financial resources and the impact of competitive technology, products, services and pricing;

• weakness in our stock price might indicate a decline in our fair value requiring us to further evaluate whether our goodwill has been impaired;

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• the inability to attract and retain qualified personnel, including key members of our management;

• work stoppages and other labor problems including union contracts up for collective bargaining;

• potential professional liability, product liability, warranty and other potential claims, which may not be covered by insurance;

• unavoidable delays in our project execution due to weather conditions, including hurricanes, other natural disasters and man-made disasters;

• negative impacts to the world nuclear power market because of accidents;

• changes in environmental factors and laws and regulations that could increase our costs and liabilities and affect the demand for our services;

• the limitation or modification of the Price-Anderson Act’s indemnification authority;

• our dependence on technology in our operations and the possible impact of system and information technology interruptions;

• difficulties in procuring equipment and supplies due to shortages caused by regulatory timelines and unanticipated events affecting suppliers;

• protection and validity of patents and other intellectual property rights;

• risks related to NEH’s Investment in Westinghouse;

• changes in the estimates and assumptions we use to prepare our financial statements;

• our use of the percentage-of-completion accounting method;

• changes in our liquidity position and/or our ability to maintain or increase our letters of credit and surety bonds or other means of credit support of projects;

• our ability to obtain waivers or amendments with our lenders or sureties or to collateralize letters of credit or surety bonds upon non-compliance with covenants in our Facility or surety indemnity agreements;

• covenants in our Facility that restrict our ability to pursue our business strategies;

• our indebtedness, which could adversely affect our financial condition and impair our ability to fulfill our obligations under our Facility;

• outcomes of pending and future litigation and regulatory actions;

• downgrades of our debt securities by rating agencies;

• foreign currency fluctuations;

• our ability to successfully identify, integrate and complete acquisitions;

• liabilities arising from multi-employer plans entered into by any of our subsidiaries;

• a determination to write-off a significant amount of intangible assets or long-lived assets;

• changes in the political and economic conditions of the foreign countries where we operate;

• significant changes in the market price of our equity securities;

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• provisions in our articles of incorporation and by-laws that could make it more difficult to acquire us and may reduce the market price of our common stock;

• the ability of our clients to obtain financing to fund their projects;

• the ability of our clients to receive or the possibility of our clients being delayed in receiving the applicable regulatory and environmental approvals, particularly with projects in our Power segment; and

• the U.S. administration’s support of the nuclear power option and the Department of Energy (DOE) loan guarantee program.

Other factors that could cause our actual results to differ from our projected results are described in (1) Part II, Item 1A and elsewhere in this Form 10-Q, (2) our 2011 Form 10-K, (3) our reports and registration statements filed and furnished from time to time with the SEC and (4) other announcements we make from time to time.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discusses our financial position at February 29, 2012, and the results of our operations for the three and six months ended February 29, 2012, and February 28, 2011. The following discussion should be read in conjunction with: (1) the unaudited consolidated financial statements and notes contained herein, and (2) the consolidated financial statements and accompanying notes to our 2011 Form 10-K.

General Overview

Our Business Segments

Because of the wide variety of our technical services and our vertical integration, we believe we are uniquely positioned to provide seamless services to our clients through the lifespan of projects, from the concept, design, building, and construction phases to the maintenance, operations, decommissioning and decontamination phases. We believe our direct-hire construction capabilities provide us with a competitive advantage in many of the industries we serve.

Our segments strive to support and complement each other, enabling Shaw to rely on internal resources for much of our work.

Currently, we are organized under the following seven reportable segments:

•      Power,

•      Plant Services,

•      Environmental & Infrastructure (E&I),

•      Energy & Chemicals (E&C),

•      Fabrication & Manufacturing (F&M),

•      Investment in Westinghouse, and

•      Corporate

Power Segment

Our Power segment provides a range of services, including design, EPC, technology and consulting services, primarily to the fossil and nuclear power generation industries.

Nuclear Power Generation.  Approximately 19% of the electric power generated in the U.S. is from nuclear power plants. We provide a wide range of technical services, including engineering, design, procurement, construction, and project management, to the domestic and international nuclear power industry. We have been awarded three EPC contracts to build six AP1000 nuclear power units in the U.S. — two units each for Georgia Power, South Carolina Electric & Gas and Progress Energy. In China, we are providing technical and project management services for four AP1000 nuclear power units at two sites and have an initial contract for an additional two AP1000 nuclear units at a third site.

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Nuclear Services.  In addition to our expertise in new plant construction, we are recognized in the power industry for improving the efficiency, capacity output, and reliability of existing nuclear plants through power uprates and life-cycle management. We perform EPC services to restore, renovate, or modify those plants. The projects represent a competitive cost alternative to new plant construction and are expected to be an important component in the expansion of U.S. power generation and our Power segment.

Gas-Fired Generation. Approximately 25% of electric power generated in the U.S. is from natural gas-fired power plants. We continue to observe increased activity in gas-fired electric generation, as electric utilities and independent power producers look to diversify their assets. In addition, in many states, initiatives to reduce carbon dioxide and other greenhouse gas emissions, as well as anticipated demand for additional electric power generation capacity, have stimulated renewed interest in gas-fired power plants. Gas-fired plants generally are less expensive to construct than coal-fired and nuclear power plants but have comparatively higher operating costs. We expect power producers to increase capital spending in the U.S. on gas-fired power plants to take advantage of relatively inexpensive natural gas prices. We expect gas-fired power plants to continue to be an important component of long-term power generation in the U.S. and internationally. We believe our capabilities and expertise position us well to capitalize on opportunities in this area. We are building two combined-cycle gas turbine (CCGT) gas plants in North Carolina and have received an EPC services award for a nominal 550-megawatt CCGT gas turbine plant for Entergy’s Ninemile Point Steam Electric Station near New Orleans, Louisiana.

Clean Coal-Fired Generation.  Approximately 42% of electric power generated in the U.S. is from coal-fired power plants. Electric power companies in the U.S. historically have pursued construction of new coal-fired power plants because, although coal-fired capacity is capital-intensive to build, it generally has relatively lower operating costs compared to other fossil fuels, and the U.S. has significant coal reserves. However, uncertainty surrounding potential regulations targeting carbon and other emissions, as well as the global economic downturn and low natural gas prices, has caused the development of coal and other solid fuel-fired power plants to slow significantly. Nevertheless, we believe coal will continue to be a component of future U.S. energy generation, and we intend to capture a significant share of any new-build, retrofit or expansion projects.

Air Quality Control (AQC).  We service the domestic and international markets for flue gas desulfurization retrofits, installation of mercury emission controls, fine-particle pollution control, carbon capture systems, and selective catalytic reduction processes for fossil-fueled power plants. AQC activity is heavily dependent on federal and state regulation of air pollution and has declined in recent years as new air regulations are being developed by states and the U.S. Environmental Protection Agency (the EPA).

In July 2011, the EPA finalized the Cross-State Air Pollution Rule (CSAPR), which is designed to reduce sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions. In December 2011, the United States Court of Appeals for the D.C. Circuit issued its ruling to stay the CSAPR pending judicial review. In December 2011, the EPA issued the final Mercury and Air Toxics Standards for power plants, which replaces the court-vacated Clean Air Mercury Rule.  As the first-ever national standard for mercury and other hazardous air pollutants from power plants, Mercury and Air Toxics Standards requires many power plants to install pollution-control technologies to reduce these emissions. In addition, the EPA has adopted regulatory initiatives controlling greenhouse gas emissions under existing provisions of the federal Clean Air Act including rules that require certain construction and operating permit reviews for greenhouse gas emissions from certain large stationary sources and the monitoring and reporting of greenhouse gases from specified industry segments. Owners or operators of regulated facilities that must restrict emissions of greenhouse gases will be required to reduce those emissions through the implementation of best-available control technologies that are determined by state or federal permitting authorities on a case-by-case basis.

We are working with owners of fossil-fueled power plants to evaluate the impact resulting from these regulations and to develop responsive compliance strategies. We anticipate increased opportunities for the installation of various air pollution-control technologies as these regulations are fully implemented.

Plant Services Segment

Our Plant Services segment is an industry leader, providing a full range of integrated asset life-cycle capabilities that complement our power and industrial EPC services. We provide clients with electric power refueling outage maintenance, turnaround maintenance, routine maintenance, offshore maintenance, modifications, capital construction, off-site modularization, fabrication, reliability engineering, plant engineering, plant support, and specialty services. We perform services to restore, rebuild, repair, renovate, and modify industrial facilities, as well as offer predictive and preventive maintenance. Our Plant Services segment operates at client work sites primarily in North America.

Nuclear Plant Maintenance and Modifications. Shaw is the leading provider of nuclear maintenance, providing systemwide maintenance and modification services to 44 of the 104 operating nuclear power reactors, including the country’s two largest fleets.  Those services include engineering, maintenance, and modification services at various times to support daily operations, plant refueling outages, life/license extensions, materials upgrades, capacity uprates, and performance improvements.

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In addition, we provide a continuum of support and planning between refueling outages and maintain an experienced core team of professionals. We concentrate on complicated, noncommodity projects in which our historical expertise and project management skills add value. We can further expand supplemental nuclear plant modifications for existing clients and are capable of providing services to international clients operating nuclear plants.

Fossil Plant Maintenance and Modifications. In addition to nuclear plant maintenance, we provide or offer services to fossil generating facilities including coal and natural gas plants. Our nuclear maintenance expertise and construction planning and execution skills support the services we provide to fossil power clients. In the second quarter of fiscal year 2012, Shaw signed a new contract with Arizona Public Service (APS) Co. to provide maintenance and construction services to eight fossil power plants in Arizona and New Mexico. Shaw also provides maintenance, modifications, construction and radiological protection services to APS’ Palo Verde Nuclear Generating Station.

Industrial Maintenance and Modifications. We have a continuous presence at several U.S. field locations serving alternative energy, petrochemical, specialty chemical, oil and gas, steel, manufacturing, and refining industries. We offer comprehensive services to clients in combinations that increase capacity, reduce expenditures, and optimize costs to enable higher returns on production within their facilities.

Capital Construction. Our capital construction experts bring decades of experience to serve clients in chemical, petrochemical, refining, and power industries throughout the U.S. Our construction scope includes constructability reviews, civil and concrete work, structural steel erection, electrical and instrumentation services, mechanical and piping system erection, and modular construction. We also can successfully mobilize resources under demanding client deadlines to rebuild and restore facilities damaged by natural disasters or catastrophes.

Environmental & Infrastructure (E&I) Segment

Our E&I segment provides full-scale environmental and infrastructure services for government and private-sector clients around the world. These services include program and project management, design-build, engineering and construction, sustainability and energy efficiency, remediation and restoration, science and technology, facilities management, and emergency response and disaster recovery.

Program Management. We manage large federal, state, and local government programs, including capital improvement, emergency response and disaster recovery, and energy efficiency programs, as well as private-sector commercial programs. We provide planning, program management, operations management, and technical services for clients such as FEMA and for public and utility energy efficiency programs in states including Illinois, Louisiana, Missouri, Colorado, North Carolina, South Carolina, Ohio and Wisconsin. We staff projects with experienced professionals and provide clients with a single point of accountability. Our integrated business teams provide expertise and consistency throughout each program.

Design-Build. We use our proficiencies in engineering, design, procurement, operations, construction, and construction management for all design-build phases of large infrastructure projects. We are nearing completion of the $1.2 billion Inner Harbor Navigation Canal Surge Barrier project in New Orleans, Louisiana. Nearly two miles long, it is the largest design-build civil works project ever awarded by the U.S. Army Corps of Engineers (Corps) and part of a system designed to better protect the greater New Orleans area from the storm surge that often accompanies hurricanes and tropical storms. Although construction activities are still under way, the surge barrier’s major components are in place and capable of mitigating the risks associated with a 100-year-level storm. Also, Shaw AREVA MOX Services, LLC is under contract with the U.S. Department of Energy (DOE) to design, license, and construct the approximately $4.6 billion mixed oxide fuel fabrication facility in Aiken, South Carolina – a first-of-its-kind facility in the U.S. to process weapons-grade plutonium into fuel for nuclear power generating plants. Additionally, we provide a range of cost-effective green building solutions, including those that meet requirements for Leadership in Energy and Environmental Design (LEED) certified structures for the federal government, helping our clients achieve sustainability goals and save energy.

Environmental Remediation. As a leading environmental remediation contractor, we provide a full range of engineering, design, construction, and scientific services to clients in the chemical, energy, real estate, manufacturing, and transportation sectors. We execute complex remediation and restoration projects at U.S. government sites contaminated with hazardous wastes. For more than a decade, we have provided remediation services at multiple sites for the Corps’ Formerly Utilized Sites Remedial Action Program. We also possess extensive munitions response experience and have responded to munitions and explosives of concern at Formerly Used Defense Sites, Base Closure and Realignment facilities and Department of Defense bases. Our technological capabilities such as laboratory assessments, field testing, and analytic evaluation support a wide range of client needs, including groundwater modeling, contaminant transport, and soil washing. Additionally, we have one of the largest production capacities of microbial cultures in the industry, allowing for the biological remediation of contaminated groundwater and the sale of cultures to licensees.

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Emergency Response & Recovery. We provide emergency response, relief and recovery services for clients and communities around the world. Our specialized resources and equipment, including real-time professional staffing deployments and technological capabilities, enable quick response to adverse environmental, health, safety, and economic impacts resulting from natural disasters, industrial incidents or acts of terrorism. Following the massive earthquake and tsunami that struck Japan in 2011, we began working with Toshiba Corp. to provide engineering, design, consulting, environmental and remediation services at the Fukushima Daiichi nuclear power plant. In addition, we have responded to numerous emergencies, including hurricanes Katrina, Rita, Ike, and Gustav; the earthquake in Haiti; and the Deepwater Horizon oil spill in the Gulf of Mexico.

Coastal, Maritime and Natural Resource Engineering and Restoration. We provide engineering and design services, including port and waterway navigation feasibility and development, sediment management, coastal engineering, environmental services, levee development and barrier island and shoreline protection and restoration. We also perform wetlands construction, mitigation, and restoration. Many of our projects are generated by the Coastal Wetlands Planning Protection and Restoration Act, which provides federal funds to restore and conserve coastal wetlands and barrier islands.

General Infrastructure and Transportation. We provide construction management and program management for infrastructure projects related to transportation, water, and wastewater systems. We are helping to manage construction of the Croton Water Filtration Plant, a project that will improve water quality for 8 million New Yorkers. In addition, our work for the Federal Transit Administration includes more than 20 years of program management oversight services for complex infrastructure projects. We also offer a full range of technical and management services to design, plan, engineer, construct, and renovate highways, railways, transit systems, waterways, and airports.

Facilities Management. We offer operations, engineering, design, maintenance, construction, consulting and technology-based solutions to help U.S. government clients maintain and operate large mission-critical facilities and functions. We provide services such as logistics and communications support, fuels management, grounds and equipment maintenance, asset management, repairs, and renovations at numerous military installations, including Forts Rucker, Benning, Richardson, Wainwright, and the Naval Submarine Base Kings Bay.

Energy & Chemicals (E&C) Segment

Our E&C segment provides a full range of project services to the oil and gas, refining, petrochemical, and upstream industries globally. Our services include consulting, technology licensing, project management, engineering, procurement, construction, commissioning, and startup. We are differentiated by our process technologies, many of which are proprietary, and our ability to develop, commercialize, and integrate new technologies. We perform projects that range from small consulting studies to large EPC projects within five major industry areas: consulting, ethylene, chemicals/petrochemicals, refining, and upstream.

As previously disclosed, we are in the process of evaluating strategic alternatives for our E&C segment. We have received a number of indications of interest from potential acquirers and are exploring options related to this business. We can provide no assurance whether a transaction with our E&C segment might be consummated or on what terms, and any such transaction may significantly impact our financial position.

Consulting. This business provides independent commercial, financial and technical management advice to operating and financial companies, developers, utilities, and governments. For the short- to mid-term, global uncertainties and risk avoidance by investors likely will lead to slow growth prospects for industries served by our E&C segment. However, we anticipate some increased activity in oil and gas and processing areas, renewable energy supply and power transmission. Services associated with mergers and acquisitions due diligence for clients also are expected to rise.

Ethylene. The process to manufacture ethylene is one of Shaw’s core proprietary technologies. Produced by the cracking of hydrocarbon feedstocks, ethylene and its co-products − propylene, butenes, butadiene, and aromatics such as benzene, toluene and xylene − are key building blocks for other petrochemicals and polymers. We provide a range of project services to support this technology, from conceptual studies through detailed design and EPC. We have designed and/or built more than 120 grassroots units and a similar number of revamps/expansions, which provide a significant portion of the world’s ethylene supply. A key component of our ethylene technology is our advanced furnace technology, which is based on more than 40 years of research, design and operating experience. Since 1996, Shaw has licensed more than 180 furnaces. All were installed in grassroots or revamp projects that, together, produce more than 17 million metric tons of ethylene per year.

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We see activity in the Middle East, where projects are likely to proceed because of the availability of low-cost feedstock, and in China and India, where ethylene markets seem to be affected less by the economic slowdown. In North America, low natural gas prices, through shale gas developments, are making ethylene production more competitive, leading to potential plant and furnace expansions as well as plans for grassroots units. We also believe that as owners seek to increase propylene production and maximize overall productivity, there will be greater opportunities to revamp existing facilities during the next several years.

Petrochemicals. We are a leading provider of proprietary technology, engineering, procurement, construction, commissioning, startup, operations and maintenance services to petrochemical complexes worldwide. Our portfolio, which includes technologies with alliance partners, offers polyethylene and acrylonitrile butadiene styrene polymer. We also provide integration expertise and other services for manufacturing plants that make solar-grade polysilicon. Through our Badger Licensing LLC joint venture with ExxonMobil, we offer ethylbenzene, styrene monomer, cumene and bisphenol A. Badger’s latest addition to its technology portfolio is BenzOUT™, which reduces benzene in gasoline to meet current and future environmental regulations.

Although there has been significant production growth in commodity petrochemicals such as polyethylene and polypropylene during the past several years, mostly in the Middle East and China, the economic downturn has impacted demand and delayed plans for new facilities. As the economy recovers, we believe we will see growth in regions such as China, India and Latin America, where new, integrated complexes are being planned, and the Middle East and Asia, where plans are under way to expand production of commodity petrochemicals.

Oil Refining. We provide technology, engineering, procurement, construction and startup and commissioning services for projects ranging from grassroots designs to revamps of existing units. Services include technology licensing, front-end studies, front-end engineering and design (FEED), licensor integration, project management consultancy, detailed engineering, EPC, startup and commissioning.

Shaw’s Fluid Catalytic Cracking (FCC) technology, jointly licensed with an international partner, remains a key technology, stemming from its flexibility to handle a variety of feedstocks and its ability to significantly increase the production of gasoline and polymer-grade propylene. Whether applied in a grassroots unit or a revamp, our FCC technology can process low-quality feedstocks and add value by improving product yields, quality and energy efficiency. We have completed approximately 50 grassroots licensed FCC units and many revamps that include modifications to our competitors’ technology designs. We also offer enhanced high-severity cracking technologies, including deep catalytic cracking and catalytic pyrolysis process, which maximize the production of propylene and ethylene.

Upstream. Our oil and gas capabilities include conceptual design, feasibility studies, technology development, FEED, detailed engineering and EPC. Project experience includes oil and gas facilities, gas transmission and storage, gas processing and synthesis gas (syngas).

Fabrication & Manufacturing (F&M) Segment

We believe our F&M segment is among the largest worldwide suppliers of fabricated piping systems. Demand for this segment’s products typically is driven by capital projects in industries that process fluids or gases such as the electric power, chemical and refinery industries.

We seek to minimize the net working capital requirements of our F&M segment by contemporaneously invoicing clients when we purchase materials for our pipe, steel, and modular fabrication contracts. Our invoices generally do not include extended payment terms, nor do we offer significant rights of return. These contracts typically represent the majority of the business volume of our F&M segment.

The F&M segment supports both external clients and other Shaw business segments. For example, our F&M segment provides pipe and structural steel fabrication to the E&I segment for certain DOE work and for several Power segment projects. Additionally, the F&M segment’s newest U.S. facility assembles modules for the construction of nuclear power plants and can be used for offshore oil and gas related projects.

Pipe Fabrication. We fabricate fully integrated piping systems for heavy industrial clients around the world. We believe our expertise and proven capabilities in furnishing complete piping systems on a global scale has positioned us among the largest suppliers of fabricated piping systems for industrial facilities worldwide. Piping systems are normally on the critical path schedule for many heavy industrial plants. Large piping systems account for significant components within power generation, chemical, and other processing facilities.

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We fabricate complex piping systems using carbon steel, stainless, nickel, titanium, aluminum, and chrome moly pipe. We fabricate the pipe by cutting it to specified lengths; welding fittings, flanges or other components on the pipe; and/or bending the pipe to precise client specifications using our unique pipe-bending technology. We believe our Shaw Cojafex induction pipe-bending technology is the most advanced, sophisticated, and efficient pipe-bending technology of its kind. Using this technology, we bend carbon steel and alloy pipe for industrial, commercial, and architectural applications. Delivering piping systems that have been pre-fabricated to client specifications to a project site can provide significant savings in labor, time, and material costs as compared to field fabrication. Bent pipe also provides greater strength and production enhancements over piping systems with welding-in fittings and is a preferred method. Additionally, we have implemented a robotics welding program, as well as automated and semi-automated welding processes and production technology, that we believe results in increased productivity and quality.

We operate pipe fabrication facilities in Louisiana, Arkansas, South Carolina, Utah, Mexico, and Venezuela, as well as through a joint venture in Bahrain and a newly constructed facility in Abu Dhabi, United Arab Emirates. Our South Carolina facility is certified to fabricate pipe for nuclear power plants and maintains nuclear pipe American Society of Mechanical Engineers certification.

Through structural steel fabrication, we produce custom fabricated steel components and structures used in the architectural and industrial fields. These steel fabrications are used for supporting piping and equipment in buildings, chemical plants, refineries, and power generation facilities. Our fabrication lines use standard mill-produced steel shapes that are cut, drilled, punched, and welded into the specifications requested by our clients. We have structural steel fabrication operations in Louisiana and Mexico, offering the latest advanced and efficient technology for structural steel fabrication.

Manufacturing and Distribution. We operate pipe-fitting manufacturing facilities in Louisiana and New Jersey. Products from these facilities ultimately are sold to third-party operating plants and engineering and construction firms, as well as other business segments within our company. We maintain an inventory of pipe and pipe fittings, enabling us to realize greater efficiencies in the purchase of raw materials, overall lead times, and costs.

We operate distribution centers in Louisiana, Texas, Georgia, New Jersey, and Oklahoma to distribute our products and products manufactured by third parties.

Module Fabrication and Assembly. We operate a module fabrication and assembly facility in Lake Charles, Louisiana that is believed to be the first of its kind in the U.S. The facility builds modules for the construction of nuclear power plants. The facility uses our industry-leading technologies and our proprietary operations management systems. We have received orders for the first nuclear power plants awarded in the U.S. in more than 30 years, all of which will use AP1000 modular technology. The modules used in these nuclear power plants are being fabricated at the facility.

Investment in Westinghouse Segment

Our Investment in Westinghouse segment includes the 20 percent equity interest (Westinghouse Equity) in Westinghouse, held by Nuclear Energy Holdings (NEH), our wholly-owned special purpose subsidiary.  Westinghouse serves the domestic and international nuclear electric power industry by supplying advanced nuclear power plant designs, licensing, engineering services, equipment, fuel and a wide range of other products and services to owners and operators of nuclear power plants. We believe Westinghouse products and services are being used in approximately half of the world’s operating nuclear power plants, including 60 percent of those in the U.S. Internationally, Westinghouse technology is being used for five reactors under construction in South Korea, four reactors under construction in China and is under consideration for numerous new nuclear reactors in multiple countries.  In the U.S., Westinghouse technology is being used for two reactors under construction in Georgia, two reactors under construction in South Carolina and two more under contract in Florida. Please see our disclosures under Note 6 – Investment in Westinghouse and Related Agreements, Note 7 — Equity Method Investments and Variable Interest Entities and Note 9 — Debt and Revolving Lines of Credit and Liquidity for additional information related to our Investment in Westinghouse segment and circumstances in which NEH’s Westinghouse Equity may be re-purchased by Toshiba.

On September 6, 2011, NEH announced that it intends to exercise its put options to sell the Westinghouse Equity to Toshiba. Under the terms of the put option agreements, the Put Options will be exercised automatically on or around October 6, 2012, for cash settlement on January 4, 2013. Proceeds from the sale would be used to repay the bonds in full on their scheduled maturity date of March 15, 2013.

The put options require Toshiba to purchase the Westinghouse Equity at a price equivalent to not less than 96.7 percent of the principal amount of the bonds. NEH will fund up to the 3.3 percent shortfall of the principal amount of the bonds, which was approximately $52.9 million at February 29, 2012. We may recognize a non-operating gain once the put options are settled resulting principally from foreign exchange movements. If we had exercised the Put Options at February 29, 2012, the gain would have been approximately $473.4 million pre-tax. The actual gain or loss will be determined at settlement.

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If the put options had been exercised on February 29, 2012, the following Consolidated Balance Sheet accounts would have been reduced as follows:

Cash and cash equivalents	$	92,428
Deferred income taxes	$	245,958
Investment in Westinghouse	$	975,411
Other accrued liabilities	$	4,058
Japanese Yen-denominated bonds secured by Investment in Westinghouse	$	1,602,834
Interest rate swap contract on Japanese-Yen denominated bonds	$	19,498

Concurrent and in connection with NEH’s acquisition of the Westinghouse Equity, we executed with Toshiba a Westinghouse commercial relationship agreement, which provides us with certain exclusive opportunities relating to marketing, developing, engineering and constructing Westinghouse AP1000 nuclear power plants. Under the agreement, Shaw has the exclusive right to perform specific services and/or provide equipment for AP1000 units that Shaw and Toshiba mutually agree to pursue.  The specific services and equipment include, among other things, the right to provide:  (i) EPC services on future Westinghouse AP1000 nuclear power plants; (ii) piping for certain units; and (iii) selected modules for those units (Exclusive Services). Pursuant to the terms of the agreement, Toshiba will cause Westinghouse to promote Shaw as its provider of choice for the Exclusive Services. In addition, the agreement acknowledges that the parties intend for Westinghouse to treat us no less favorably than it treats Toshiba when evaluating client needs and/or demands. The exclusive right to provide the Exclusive Services is inapplicable if Westinghouse can demonstrate that Shaw does not meet certain conditions. Additionally, the agreement contemplates that Shaw and Westinghouse will work collaboratively to develop additional initiatives from the core competencies of both companies.

The Westinghouse CRA has a six year term expiring in 2013 and contains renewal provisions. As long as we maintain more than a 15 percent interest in Westinghouse, we maintain our exclusivity rights provided under the terms of the Westinghouse CRA. As noted above, when the Put Options are exercised in October 2012, the CRA will terminate. We would continue to retain our rights under the Westinghouse CRA for projects for which Westinghouse and Shaw have submitted a binding offer prior to its termination. For financial reporting purposes, we concluded at the time of signing the agreement that no value should be allocated to the Westinghouse CRA nor should it be recognized as a separate asset.

For additional information, see Note 7 — Equity Method Investments and Variable Interest Entities and Note 9 — Debt and Revolving Lines of Credit included in our consolidated financial statements.

Corporate Segment

Our Corporate segment includes our corporate management and expenses associated with managing our company as a whole. These expenses include compensation and benefits of corporate management and staff, legal and professional fees and administrative and general expenses that are not allocated to other segments. Our Corporate segment’s assets primarily include cash, cash equivalents and short-term investments held by the corporate entities, property and equipment related to our corporate headquarters and certain information technology assets.

Overview of Results and Outlook

Our financial results for the second quarter of fiscal year 2012 reflected continued strong operational performance for our Plant Services, E&I, and F&M operating segments. Our Power segment reflects mixed results with net increased field construction costs on two new build coal fired power projects and lower than expected revenues on the EPC contracts to design and construct four nuclear power reactors in the United States due to delays in the issuance of combined operating licenses (COL) to our clients by the Nuclear Regulatory Commission. The delays from the original anticipated forecast COL issuance dates extend certain projects’ completion schedules, increase forecast costs thereby increasing the amounts of unapproved change orders due from the clients, and reduce our revenues in the current quarter when calculated under the percentage of completion method which measures cost incurred to date to total forecast costs.  Our Power segment’s gross profit for the second quarter of fiscal year 2012 was approximately $8.3 million less than forecast due to these COL delays.  Additionally, our Power segment’s results reflect decreased activity as compared to the second quarter of fiscal year 2011, as several significant new build coal and gas-fired power projects are nearing completion.

On February 10, 2012, one of our domestic EPC contracts for two AP1000 nuclear power units in Georgia received its COL, which now allows increased amounts of construction activities such as the placement of safety-related rebar and pouring of concrete to commence. Our client for the two AP1000 units in South Carolina has indicated that they believe they will receive their COL during the third quarter of our fiscal year 2012.  In March 2012, subsequent to final regulatory approval, our client provided us full notice to proceed on a previously awarded EPC contract for a natural gas turbine plant

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Our Plant Services segment experienced increased revenues and profits in the second quarter of 2012, as compared to the same period in the prior fiscal year. The segment benefited from an increased volume of work from refueling outages at U.S. nuclear power plants as well as a higher level of maintenance work provided to domestic industrial facilities.

Our E&I segment continued to perform well experiencing a slight increase in revenues while profits remained comparable with the same period in fiscal year 2011. E&I’s quarterly activity was driven primarily by our MOX project for the DOE in South Carolina.

Our E&C segment experienced reduced revenues as compared to the same period in the prior fiscal year resulting from decreased bookings in fiscal years 2010 and 2011. On a comparative basis, gross profits for the second quarter of the prior fiscal year were negatively impacted by $15.5 million of charges incurred in connection with a contract for the construction of an ethylene plant in Asia which is in a loss position  and is currently nearing completion. We continue to evaluate strategic alternatives for our E&C segment and have received offers from potential acquirers. We expect to decide on any divesture during the third quarter of fiscal 2012 but can provide no assurance whether a transaction with our E&C segment might be consummated or on what terms.

Our F&M segment experienced increased revenue and profits for the second quarter of fiscal year 2012, compared to the same period in the prior fiscal year as production continues to increase on work for the nuclear power plants our Power segment is executing in Georgia and South Carolina, and as general market conditions continue to improve.

The Westinghouse segment continued to impact our consolidated financial results by significant non-operating foreign exchange translation gains and losses on NEH’s JPY-denominated Westinghouse Bonds. The translation gains/losses occur when the JPY decreases/increases relative to the USD. During the quarter, the JPY decreased versus the USD resulting in a $51.5 million gain. The exchange rate of the JPY to the USD at February 29, 2012, was 80.5 as compared to 81.6 as of February 28, 2011.

Bookings of new orders during the quarter as reflected in backlog was $1.2 billion.

We used operating cash flow during the quarter as expected, as favorable working capital positions on several projects in our Power and E&C segments began to reverse in the latter phases of the projects’ life cycles.

Consolidated Results of Operations

The information below is an analysis of our consolidated results for the three and six months ended February 29, 2012, and February 28, 2011. See Segment Results of Operations below for additional information describing the performance of each of our reportable segments.

Three Months Ended	2012			2011			$ Change			% Change
(dollars in millions)
Revenues	$	1,474.7		$	1,424.8		$	49.9			3.5	%
Gross profit		108.6			116.0			(7.4	)		(6.4	)
Selling, general and administrative expenses		61.9			73.1			(11.2	)		(15.3	)
Interest expense		11.6			11.6			—			—
Provision (benefit) for income taxes		33.4			(1.0	)		34.4			3,440.0
Earnings from unconsolidated entities, net of taxes		(1.1	)		3.8			(4.9	)		(128.9	)
Net income (loss)		53.6			2.2			51.4			2,336.4

43

Six Months Ended	2012		2011			$ Change			% Change
(dollars in millions)
Revenues	$	2,992.3	$	2,968.1		$	24.2			0.8	%
Gross profit		228.6		177.6			51.0			28.7
Selling, general and administrative expenses		131.3		144.0			(12.7	)		(8.8	)
Interest expense		23.6		23.4			0.2			0.9
Provision (benefit) for income taxes		58.4		(12.7	)		71.1			559.8
Earnings from unconsolidated entities, net of taxes		5.9		6.6			(0.7	)		(10.6	)
Net income (loss)		104.0		(13.0	)		117.0			900.0

Consolidated revenues increased $49.9 million, or 3.5%, to $1,474.7 million for the three months ended February 29, 2012, from $1,424.8 million in the same period in the prior fiscal year. This increase was due primarily to increased volumes in our Plant Services, E&I and F&M segments partially offset by reduced volumes in our Power and E&C segments. Revenues for the six months ended February 29, 2012 increased $24.2 million, or 0.8%, to $2,992.3 million from $2,968.1 million in the same period of the prior fiscal year.

Consolidated gross profit decreased $7.4 million, or 6.4%, to $108.6 million for the three months ended February 29, 2012, from $116.0 million in the same period in the prior fiscal year. This decrease was due primarily to a reduction in gross profit in our Power segment partially offset by increased gross profit in our Plant Services, E&C and F&M segments. The second quarter of fiscal year 2011 benefited from a favorable arbitration award in Taiwan that resulted in an increase in gross profit of $19.8 million for that period. For the six month period, gross profit increased $51.0 million, or 28.7% to $228.6 million from $177.6 million in the same period of the prior fiscal year as our E&C and F&M segments’ gross profit increased significantly from the prior fiscal year. The six month period in the prior fiscal year was negatively impacted by an adverse jury verdict in the first quarter that resulted in a reduction in gross profit of $63.4 million, partially offset by a $19.8 favorable arbitration award in Taiwan in the second quarter.

Consolidated selling, general and administrative expenses (S,G &A) decreased $11.2 million, or 15.3%, to $61.9 million for the three months ended February 29, 2012, from $73.1 million in the same period in the prior fiscal year. The reduction was due to a general reduction in overhead costs such as reduced salaries and taxes, charitable contributions, travel and legal and professional fees. For the six month period, S,G&A decreased $12.7 million, or 8.8%, to $131.3 million from $144.0 million in the prior year due primarily to reductions in salaries and related benefits, travel and legal and professional fees.

Our consolidated effective tax rate, based on income (loss) before income taxes and earnings (losses) from unconsolidated entities, was a provision of 38% and 37% for the three and six months ended February 29, 2012 as compared to a benefit of 39% for the corresponding periods of 2011. The difference in the effective tax rates between the 2012 and 2011periods was due primarily to lower forecasted non-deductible expenses for fiscal year 2012 as compared to fiscal year 2011. We expect the fiscal year 2012 annual effective tax rate, excluding discrete items, applicable to forecasted income before income taxes and earnings (losses) from unconsolidated entities to be approximately 36%, reflecting higher income attributable to noncontrolling interests in the third and fourth quarters.

Earnings (losses) from unconsolidated entities, net of taxes, decreased $4.9 million, to a loss of $1.1 million for the three months ended February 29, 2012, compared to earnings of $3.8 million in the same period in fiscal year 2011. This decrease was due primarily to our equity in the decreased earnings of Westinghouse as compared to the same period in the prior fiscal year.

Consolidated net income increased $51.4 million to $53.6 million for the three months ended February 29, 2012, compared to $2.2 million in the prior fiscal year primarily to the factors discussed above as well as a positive impact of $51.5 million pre-tax foreign exchange translation gain on the JPY-denominated bonds related to our Investment in Westinghouse for the current quarter compared to a pre-tax foreign exchange translation loss of $46.9 million in the prior quarter period.

44

Segment Results of Operations

The following comments and tables compare selected summary financial information related to our segments for the three and six months ended February 29, 2012, and February 28, 2011 (in millions):

Three Months Ended	2012			2011			$ Change			% Change
Revenues:
Power	$	450.7		$	558.3		$	(107.6	)		(19.3	)%
Plant Services		323.7			200.0			123.7			61.8
E&I		412.6			390.2			22.4			5.7
E&C		141.1			160.2			(19.1	)		(11.9	)
F&M		146.6			116.1			30.5			26.3
Corporate		—			—			—		NM
Total revenues	$	1,474.7		$	1,424.8		$	49.9			3.5	%
Gross profit:
Power	$	8.1		$	56.7		$	(48.6	)		(85.7	)%
Plant Services		21.1			15.9			5.2			32.7
E&I		32.9			35.9			(3.0	)		(8.4	)
E&C		12.4			(13.2	)		25.6			193.9
F&M		33.7			19.5			14.2			72.8
Corporate		0.4			1.2			(0.8	)		(66.7	)
Total gross profit	$	108.6		$	116.0		$	(7.4	)		(6.4	)%
Gross profit percentage:
Power		1.8	%		10.2	%
Plant Services		6.5			8.0
E&I		8.0			9.2
E&C		8.8			(8.2	)
F&M		23.0			16.8
Corporate	NM			NM
Total gross profit percentage		7.4	%		8.1	%
Selling, general and administrative expenses:
Power	$	7.7		$	11.0		$	(3.3	)		(30.0	)%
Plant Services		2.8			2.8			—			—
E&I		16.7			18.8			(2.1	)		(11.2	)
E&C		9.4			11.3			(1.9	)		(16.8	)
F&M		8.7			8.3			0.4			4.8
Investment in Westinghouse		—			0.9			(0.9	)		(100.0	)
Corporate		16.6			20.0			(3.4	)		(17.0	)
Total selling, general and administrative expenses	$	61.9		$	73.1		$	(11.2	)		(15.3	)%
Income (loss) before income taxes and earnings from unconsolidated entities:
Power	$	0.9		$	49.8		$	(48.9	)		(98.2	)%
Plant Services		18.3			13.2			5.1			38.6
E&I		17.4			17.6			(0.2	)		(1.1	)
E&C		2.3			(18.9	)		21.2			112.2
F&M		24.5			11.3			13.2			116.8
Investment in Westinghouse		41.2			(58.2	)		99.4			170.8
Corporate		(16.5	)		(17.3	)		0.8			4.6
Total income (loss) before income taxes and earnings from unconsolidated entities	$	88.1		$	(2.5	)	$	90.6			3,624.0	%

____________

NM — Not Meaningful.

45

Six Months Ended	2012			2011			$ Change			% Change
Revenues:
Power	$	945.4		$	1,063.3		$	(117.9	)		(11.1	)%
Plant Services		618.8			457.8			161.0			35.2
E&I		872.0			908.7			(36.7	)		(4.0	)
E&C		304.2			338.6			(34.4	)		(10.2	)
F&M		251.9			199.7			52.2			26.1
Corporate		—			—			—		NM
Total revenues	$	2,992.3		$	2,968.1		$	24.2			0.8	%
Gross profit:
Power	$	35.1		$	27.1		$	8.0			29.5	%
Plant Services		44.1			39.2			4.9			12.5
E&I		70.6			84.3			(13.7	)		(16.3	)
E&C		27.7			(6.8	)		34.5			507.4
F&M		50.2			31.6			18.6			58.9
Corporate		0.9			2.2			(1.3	)		(59.1	)
Total gross profit	$	228.6		$	177.6		$	51.0			28.7	%
Gross profit percentage:
Power		3.7	%		2.5	%
Plant Services		7.1			8.6
E&I		8.1			9.3
E&C		9.1			(2.0	)
F&M		19.9			15.8
Corporate	NM			NM
Total gross profit percentage		7.6	%		6.0	%
Selling, general and administrative expenses:
Power	$	17.4		$	22.6		$	(5.2	)		(23.0	)%
Plant Services		5.4			5.0			0.4			8.0
E&I		35.1			37.0			(1.9	)		(5.1	)
E&C		21.5			24.0			(2.5	)		(10.4	)
F&M		17.9			16.0			1.9			11.9
Investment in Westinghouse		0.1			0.9			(0.8	)		(88.9	)
Corporate		33.9			38.5			(4.6	)		(11.9	)
Total selling, general and administrative expenses	$	131.3		$	144.0		$	(12.7	)		(8.8	)%
Income (loss) before income taxes and earnings from unconsolidated entities:
Power	$	18.5		$	8.6		$	9.9			115.1	%
Plant Services		38.8			34.4			4.4			12.8
E&I		37.0			48.4			(11.4	)		(23.6	)
E&C		6.9			(24.1	)		31.0			128.6
F&M		33.0			15.5			17.5			112.9
Investment in Westinghouse		55.8			(81.1	)		136.9			168.8
Corporate		(33.5	)		(34.1	)		0.6			1.8
Total income (loss) before income taxes and earnings from unconsolidated entities	$	156.5		$	(32.4	)	$	188.9			583.0	%

NM — Not Meaningful.

46

The following table presents our revenues by geographic region generally based on the site location of the project for the three and six months ended February 29, 2012, and February 28, 2011 (in millions, except for percentages):

	Three Months Ended										Six Months Ended
	2012					2011					2012					2011
	Amount		%			Amount		%			Amount		%			Amount		%
United States	$	1,272.0		86	%	$	1,183.0		83	%	$	2,569.1		86	%	$	2,491.3		84	%
Asia/Pacific Rim countries		114.8		8			164.2		12			244.4		8			332.9		11
Middle East		39.2		3			33.0		2			89.6		3			58.7		2
United Kingdom and other European countries		17.4		1			29.5		2			29.7		1			57.6		2
South America and Mexico		22.6		2			12.0		1			45.2		2			16.7		1
Canada		5.5		—			1.9		—			9.7		—			5.1		—
Other		3.2		—			1.2		—			4.6		—			5.8		—
Total revenues	$	1,474.7		100	%	$	1,424.8		100	%	$	2,992.3		100	%	$	2,968.1		100	%

47

Business Segment Analysis

Power Segment

Our Power segment continued executing major electric power generation projects across the globe. The mix of projects being executed varies over time and follows market conditions. Work continues on three EPC coal fired power plants in the U.S. and three gas-fired power plants, but activity on two contracts for four domestic AP1000 nuclear units continues to increase and is expected to generate approximately 15 to 20 percent of our consolidated revenues for fiscal year 2012. The margins on these AP1000 projects are expected to exceed those of the coal- and gas-fired power projects recently completed. Work also continues on our services contract for four new AP1000 nuclear power reactors in China. We expect to continue to see reduced activity for future new build domestic coal-fired power plants as the market interest in these type projects has significantly declined. We believe there are significant opportunities for gas-fired power plants and AQC related projects, but the timing of the AQC projects is dependent on the compliance timeframe for the recently finalized air emission regulations in the U.S.

Revenues (2nd Quarter)

Revenues decreased $107.6 million, or 19.3%, to $450.7 million for the three months ended February 29, 2012, from $558.3 million in the same period in the prior fiscal year. This decrease was primarily due to $102.9 decrease on new build coal-fired power plants due to lower volumes and cost increases, and a $18.8 million decrease on new build gas-fired plants from lower volume as these projects near completion in the current fiscal year. Also, the completion of coal-fired plants, AQC and other projects contributed a decrease of $25.1 million. These decreases were partially offset by volume increases of approximately $72.0 million on domestic AP1000 nuclear reactor projects and nuclear uprate projects. Additionally, a favorable arbitration award in Taiwan in the second quarter of fiscal year 2011 resulted in an increase in revenue of $24.8 million in that period.

Gross profit (loss) and gross profit percentage (2nd Quarter)

Gross profit decreased $48.6 million, or 85.7%, to $8.1 million for the three months ended February 29, 2012, from $56.7 million in the same period in the prior fiscal year. Gross profit percentage decreased to 1.8% for the three months ended February 29, 2012, compared to 10.2% in the same period in the prior fiscal year. The decrease in gross profit and gross profit percentage reflects mixed results, with a net impact of increased construction costs of approximately $19.6 million on two new build coal-fired power projects.  The increased construction costs resulted from higher estimated labor costs as a result of customer driven delays and additional cost estimates for completion and commissioning activities.  Both projects are expected to be completed during calendar year 2012 and one of the projects is in a loss position. This decrease was partially offset by increases in gross profit for the period on our domestic AP1000 nuclear reactor projects in comparison to prior year activity.  The increases in gross profit on the domestic AP1000 nuclear reactor projects were less than forecast due to delays in our clients receiving COLs.  Additionally, the segment’s results reflect decreased activity as compared to the second quarter in fiscal year 2011 as several significant new build fossil-fired power projects are nearing completion, as well as a favorable arbitration award in Taiwan in the second quarter of fiscal year 2011, which resulted in an increase in gross profit of $19.8 million for that period.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (2nd Quarter)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities for the three months ended February 29, 2012, decreased $48.9 million, or 98.2%, to $0.9 million from income of $49.8 million in the same period in the prior fiscal year. This decrease was primarily attributable to the decrease in gross profit described above, partially offset by a $3.3 million reduction of selling, general and administrative expenses.  The reduction in selling, general and administrative expenses was primarily driven by a $2.0 million reduction in incentive compensation accruals resulting from the increases in construction costs described above.

Revenues (Year to Date)

Revenues decreased $117.9 million, or 11.1%, to $945.4 million for the six months ended February 29, 2012, from $1,063.3 million in the same period in the prior fiscal year. This decrease was primarily due lower volumes and costs increases on new build coal-fired power plants of $170.5 million, and lower volume on new-build coal-fired power plants of $30.8 million as these projects near completion in the current fiscal year. Also, the completion of coal-fired plants, AQC and other projects contributed a decrease of $53.6 million. These decreases were offset by volume increases of approximately $110.0 million on domestic AP1000 nuclear reactor projects and nuclear uprate projects. Additionally, an adverse jury verdict and a favorable arbitration award in the half of fiscal year 2011 resulted in a net reduction in revenue of $36.7 million in that period. We expect revenues from domestic coal-fired power plants will continue to decline in the future and will be replaced by the nuclear, gas and AQC.

48

Gross profit (loss) and gross profit percentage (Year to Date)

Gross profit increased $8.0 million, or 29.5%, to $35.1 million for the six months ended February 29, 2012, from $27.1 million in the same period in the prior fiscal year. The segment’s gross profit percentage increased to 3.7% for the six months ended February 29, 2012, compared to 2.5% in the same period in the prior fiscal year. The increase in gross profit and gross profit percentage reflects mixed results, with a net impact of increased construction costs of approximately $19.6 million on two new build coal-fired power projects.  The increased construction costs resulted from higher estimated labor costs as a result of customer driven delays and additional cost estimates for completion and commissioning activities.  This decrease was partially offset by increases in gross profit for the period on our domestic AP1000 nuclear reactor projects in comparison to prior year activity.  The increases in gross profit on the domestic AP1000 nuclear reactor projects were less than forecast due to delays in our clients receiving COLs.  Additionally, the segment’s results reflect decreased activity as compared to fiscal year 2011 as several significant new build coal-fired power projects are nearing completion., as well as an adverse jury verdict and a favorable arbitration award in the first half of fiscal year 2011, which resulted in a net reduction in gross profit of $43.6 million in that period.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (Year to Date)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities for the six months ended February 29, 2012, increased $9.9 million, or 115.1%, to $18.5 million from $8.6 million in the same period in the prior fiscal year. This increase was primarily attributable to the increase in gross profit described above, partially offset by a $5.2 million reduction of selling, general and administrative expenses.  The reduction in selling, general and administrative expenses was primarily driven by a $2.0 million reduction in incentive compensation accruals resulting from the increases in construction costs described above.

Plant Services Segment

Our Plant Services segment continues to execute maintenance work primarily during scheduled outages at nuclear power plants and to a lesser extent at industrial facilities. This segment continues to perform at what we believe is an industry leading level and as a result has been able to win work from new clients for additional nuclear power plant maintenance and outage work as well as fossil power plant maintenance. The maintenance and outage work is normally structured under alliance type agreements that tend to cover periods of three to five years.

Revenues (2nd Quarter)

Revenues increased $123.7 million, or 61.8%, to $323.7 million for the three months ended February 29, 2012, from $200.0 million in the same period in the prior fiscal year. The second quarter of each fiscal year normally has fewer number of power plant outages than the first and third quarters, but during 2012 revenues increased from the prior year’s quarter due primarily to an increase in the number of nuclear refueling outages. In the second quarter of fiscal 2012 the segment performed maintenance work during 7 plant outages as compared to 3 plant outages in the second quarter of fiscal year 2011. The increased number of outages in the second quarter of 2012 was more reflective of timing issues at the respective plants rather than a market shift. However, the Plant Services segment continues to win work from new clients and now is a contractor on 44 out of 104 nuclear power reactors operating in the United States.  In addition, the revenue increased to a lesser extent due to ongoing uprate construction projects at one nuclear site and a higher volume of work related to industrial maintenance projects, including steel plants and oil refineries.

Gross profit and gross profit percentage (2nd Quarter)

Gross profit increased $5.2 million, or 32.7%, to $21.1 million for the three months ended February 29, 2012, from $15.9 million in the same period in the prior fiscal year. Gross profit percentage decreased to 6.5% for the three months ended February 29, 2012, from 8.0% in the same period in the prior fiscal year. The increase in gross profit was due to the mix of clients serviced in our nuclear plant outage work as margins differ among clients as well as certain incentive fees attained on the 2011 calendar year scorecards for nuclear maintenance work completed.  The decrease in gross profit percentage was due to an increase in insurance reserves as well as a reserve taken on a project completed in late calendar year 2011 of $1.1 million.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (2nd Quarter)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities increased $5.1 million, or 38.6%, to $18.3 million for the three months ended February 29, 2012, from $13.2 million in the same period in the prior fiscal year, primarily attributable to the increase in gross profit described above.

49

Revenues (Year to Date)

Revenues increased $161.0 million, or 35.2%, to $618.8 million for the six months ended February 29, 2012, from $457.8 million in the same period in the prior fiscal year. This increase was due primarily to an increase in the number of nuclear refueling outages in which the segment performed maintenance work as we supported 16 plant outages in the first six months of fiscal year 2012 as compared to 10 plant outages in the first half of fiscal year 2011.  In addition, the revenue increased to a lesser extent due to ongoing uprate construction projects at one nuclear site and a higher volume of work related to industrial maintenance projects, including steel plants and oil refineries.

Gross profit and gross profit percentage (Year to Date)

Gross profit increased $4.9 million, or 12.5%, to $44.1 million for the six months ended February 29, 2012, from $39.2 million in the same period in the prior fiscal year. Gross profit percentage decreased to 7.1% for the six months ended February 29, 2012, from 8.6% in the same period in the prior fiscal year. The increase in gross profit was due to the mix of clients serviced in our nuclear plant outage work as margins differ among clients as well as certain incentive fees attained in the second quarter of fiscal year 2012 for nuclear maintenance work completed in the 2011 calendar year.  The decrease in gross profit percentage was due to an increase in insurance reserves recorded in both the first and second quarters of fiscal year 2012 as well as a reserve taken on a project completed in late calendar year 2011 of $1.1 million.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (Year to Date)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities increased $4.4 million, or 12.8%, to $38.8 million for the six months ended February 29, 2012, from $34.4 million in the same period in the prior fiscal year, primarily attributable to the increase in gross profit described above.

E&I Segment

Our E&I segment continues to execute contracts primarily for the U.S. government and its agencies. The second quarter of our fiscal year tends to generate reduced volume of business for the E&I segment as environmental remediation and construction activities are impacted by seasonality and generally slow in the winter months. The MOX project for the DOE in South Carolina continues to drive the quarterly financial results for this segment. However our federal business has been impacted by delays on some of our projects for the U.S. government. We expect the MOX project to continue until 2016 and, with additional options, possibly beyond.

Revenues (2nd Quarter)

E&I’s revenues increased $22.4 million, or 5.7%, to $412.6 million for the three months ended February 29, 2012, from $390.2 million for the same period in the prior fiscal year. This increase in revenues was due primarily to increased activity on our MOX project for the DOE in South Carolina partially offset by our coastal protection project for the State of Louisiana that occurred in the prior year and was not repeated this year.

Gross profit and gross profit percentage (2nd Quarter)

E&I’s gross profit decreased $3.0 million, or 8.4%, to $32.9 million for the three months ended February 29, 2012, from $35.9 million for the same period in the prior fiscal year. Gross profit percentage decreased to 8.0% for the three months ended February 29, 2012, from 9.2% in the same period in the prior fiscal year. The decrease in gross profit and gross profit percentage was impacted by higher volume on our MOX project for the DOE where we earn lower gross profit percentage compared to the balance of the E&I portfolio and to a larger extent the prior year impact from fees earned on one of our program management contracts for the State of Louisiana and the completion of our coastal protection project and related oil spill response efforts.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (2nd Quarter)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities decreased $0.2 million, or 1.1%, to $17.4 million for the three months ended February 29, 2012, from $17.6 million in the same period in the prior fiscal year primarily due to the decreases in gross profit described above, offset by lower general and administrative expenses and higher other income.

50

Revenues (Year to Date)

E&I’s revenues decreased $36.7 million, or 4.0%, to $872.0 million for the six months ended February 29, 2012, from $908.7 million for the same period in the prior fiscal year. This decrease in revenues was due primarily to the completion of our coastal protection project for the State of Louisiana that occurred in the prior year and decreased activity on our hurricane protection project with the USACE in southeast Louisiana.  The decrease was partially offset by increased activity on our MOX project for the DOE in South Carolina and remediation activities relating to the Fukushima, Japan nuclear reactors.

Gross profit and gross profit percentage (Year to Date)

E&I’s gross profit decreased $13.7 million, or 16.3%, to $70.6 million for the six months ended February 29, 2012, from $84.3 million for the same period in the prior fiscal year. Gross profit percentage decreased to 8.1% for the six months ended February 29, 2012, from 9.3% in the same period in the prior fiscal year. The decrease in gross profit was due primarily to the completion in the prior year of our coastal protection project for the State of Louisiana.  The decrease in gross profit percentage was due to increased activity from our MOX project for the DOE where we earn lower gross profit percentage compared to the balance of the E&I portfolio.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (Year to Date)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities decreased $11.4 million, or 23.6%, to $37.0 million for the six months ended February 29, 2012, from $48.4 million in the same period in the prior fiscal year primarily due to the decreases in gross profit described above.

E&C Segment

Our E&C segment experienced reduced revenues as compared to the same period in the prior fiscal year resulting from decreased revenues at a major project in Asia as the project nears completion. We continue to evaluate strategic alternatives for our E&C segment and have received offers from potential acquirers. We expect to decide during the third quarter of our fiscal 2012 whether to divest the majority of this segment but we can provide no assurance whether a transaction with our E&C segment might be consummated or on what terms.

Revenues (2nd Quarter)

E&C’s revenues decreased $19.1 million, or 11.9%, to $141.1 million for the three months ended February 29, 2012, from $160.2 million for the same period in the prior fiscal year. The decrease in revenue was primarily due to decreased volumes on a major project in Asia as well as a reduction of approximately $9.7 million in client furnished and pass through revenue for which we recognized no gross profit or loss.

Gross profit and gross profit percentage (2nd Quarter)

Gross profit increased $25.6 million, or 193.9%, to $12.4 million for the three months ended February 29, 2012, from $(13.2) million in the same period in the prior fiscal year. Gross profit percentage increased to 8.8% for the three months ended February 29, 2012, from (8.2)% in the same period in the prior fiscal year. On a comparative basis, the increase in gross profit and gross profit percentage as compared to the prior year’s quarter was primarily due to the increased cost, foreign exchange loss and the corresponding reduction in the estimated percentage of completion incurred in fiscal year 2011 on an international project of $15.5 million. There were no significant changes to the loss on this project during the second quarter of fiscal 2012.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (2nd Quarter)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities increased $21.2 million, or 112.2%, to $2.3 million for the three months ended February 29, 2012, from $(18.9) million in the same period in the prior fiscal year, primarily as a result of the increase in gross profit and gross profit percentage described above.

 Revenues (Year to Date)

E&C’s revenues decreased $34.4 million, or 10.2%, to $304.2 million for the six months ended February 29, 2012, from $338.6 million for the same period in the prior fiscal year. The decrease in revenue was primarily due to decreased volumes on a major project in Asia as well as a reduction of approximately $16.8 million in client furnished and pass through revenue for which we recognized no gross profit or loss.

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Gross profit and gross profit percentage (Year to Date)

Gross profit increased $34.5 million, or 507.4%, to $27.7 million for the six months ended February 29, 2012, from $(6.8) million in the same period in the prior fiscal year. Gross profit percentage increased to 9.1% for the six months ended February 29, 2012, from (2.0)% in the same period in the prior fiscal year.  On a comparative basis, the increase in gross profit and gross profit percentage as compared to the prior year was primarily due to the increased cost, foreign exchange loss and the corresponding reduction in the estimated percentage of completion incurred in fiscal year 2011 on an international project of $15.5 million.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (Year to Date)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities increased $31.0 million, or 128.6%, to $6.9 million for the six months ended February 29, 2012, from $(24.1) million in the same period in the prior fiscal year, primarily as a result of the increase in gross profit and gross profit percentage described above.

F&M Segment

Our F&M segment experienced an increase in volume of work and corresponding profits for the first half of fiscal year 2012 as work commenced on the AP1000 nuclear power work subcontracted from our Power segment. Production also commenced at our new pipe fabrication joint venture facility in the UAE during the first quarter of fiscal year 2012 and is expected to ramp up during 2012. Additionally, we expect a new pipe fabrication joint venture in Brazil to commence in the third quarter of fiscal year 2012. The new facilities evidence opportunities in growing international markets for pipe and steel fabrication in shops versus traditional field construction fabrication as plant fabrication offers the advantages of consistent quality, permanent local employment, and depending on the location, reduced costs and security concerns when compared to field construction fabrication.

Revenues (2nd Quarter)

Revenues increased $30.5 million, or 26.3%, to $146.6 million for the three months ended February 29, 2012, from $116.1 million in the same period in the prior fiscal year. This increase was due primarily to execution of our AP1000 work for our Power segment and is expected to continue increasing throughout fiscal 2012.

Gross Profit and Gross Profit Percentage (2nd Quarter)

Gross profit increased $14.2 million, or 72.8%, to $33.7 million for the three months ended February 29, 2012, from $19.5 million in the same period in the prior fiscal year. Gross profit percentage increased to 23.0% for the three months ended February 29, 2012, from 16.8% in the same period in the prior fiscal year. The increases in gross profit and gross profit percentage were primarily due to work associated with our AP1000 projects in our Power segment.

Income (loss) before income taxes and earnings (losses) from unconsolidated entities (2nd Quarter)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities increased $13.2 million, or 116.8%, to $24.5 million for the three months ended February 29, 2012, from $11.3 million in the same period in the prior fiscal year, primarily attributable to the increase in gross profit and gross profit percentage described above.

Revenues (Year to Date)

Revenues increased $52.2 million, or 26.1%, to $251.9 million for the six months ended February 29, 2012, from $199.7 million in the same period in the prior fiscal year. This increase was due primarily to execution of our AP1000 work for our Power segment and is expected to continue increasing throughout fiscal 2012.

Gross Profit and Gross Profit Percentage (Year to Date)

Gross profit increased $18.6 million, or 58.9%, to $50.2 million for the six months ended February 29, 2012, from $31.6 million in the same period in the prior fiscal year. Gross profit percentage increased to 19.9% for the six months ended February 29, 2012, from 15.8% in the same period in the prior fiscal year. The increases in gross profit and gross profit percentage were primarily due to work associated with our AP1000 projects in our Power segment.

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Income (loss) before income taxes and earnings (losses) from unconsolidated entities (Year to Date)

Income (loss) before income taxes and earnings (losses) from unconsolidated entities increased $17.5 million, or 112.9%, to $33.0 million for the six months ended February 29, 2012, from $15.5 million in the same period in the prior fiscal year, primarily attributable to the increase in gross profit and gross profit percentage described above.

Investment in Westinghouse Segment

Westinghouse maintains its accounting records for reporting to its majority owner, Toshiba, on a calendar quarter basis. Financial information about Westinghouse’s operations is available to us for Westinghouse’s calendar quarter periods. As a result, we record NEH’s Westinghouse Equity earnings (loss) and other comprehensive income (loss) reported to us by Westinghouse based upon Westinghouse’s calendar quarterly reporting periods, or two months in arrears of our current periods. Under this policy, Westinghouse’s operations for the three and six months ended December 31, 2011, are reflected in our results of operations for the three and six months ended February 29, 2012.

The impact of the Investment in Westinghouse segment on our income (loss) before income taxes, for the three and six months ended February 29, 2012, was $41.2 million and $55.8 million, respectively, compared to $(58.2) million and $(81.1) million, respectively, for the three and six months ended February 28, 2011. Our results for the three and six months ended February 29, 2012, and February 28, 2011, included the following (in millions):

	Three Months Ended						Six Months Ended
	2012			2011			2012			2011
Interest expense on Japanese Yen-denominated bonds including accretion and amortization	$	(10.3	)	$	(10.4	)	$	(20.7	)	$	(20.9	)
Foreign currency translation gains (losses) on Japanese Yen-denominated bonds, net		51.5			(46.9	)		76.6			(59.3	)
General and administrative expenses		—			(0.9	)		(0.1	)		(0.9	)
Income (loss) before income taxes and earnings from unconsolidated subsidiaries	$	41.2		$	(58.2	)	$	55.8		$	(81.1	)

Additionally, our net income (loss) for the three and six months ended February 29, 2012, includes net income (loss) from NEH’s Westinghouse Equity interest of $(3.6) million and $1.7 million, respectively, compared to net income of $1.8 million and $4.3 million, respectively, for the three and six months ended February 28, 2011.

We enter into foreign currency forward contracts from time-to-time to hedge the impact of exchange rate changes on the JPY interest payments on the Westinghouse Bonds. For additional information about circumstances under which NEH may be required to sell its Westinghouse Equity to Toshiba and repay the Westinghouse Bonds, please see our disclosure under “Liquidity” below as well as in Notes 7 – Equity Method Investments and Variable Interest Entities and 9 – Debt and Revolving Lines of Credit in the accompanying financial statements.

Corporate Segment

Selling, General and Administrative Expenses (2nd Quarter)

     Corporate G&A decreased $3.4 million, or 17.0%, to $16.6 million for the three months ended February 29, 2012, from $20.0 million in the same period in the prior fiscal year. This decrease was primarily due to a general reduction in overhead costs such as lower compensation costs, charitable contributions, professional fees and costs associated with our corporate aircraft partially offset by higher costs associated with long-term incentive awards.

Selling, General and Administrative Expenses (Year to Date)

     Corporate G&A decreased $4.6 million, or 11.9%, to $33.9 million for the six months ended February 29, 2012, from $38.5 million in the same period in the prior fiscal year. This decrease was primarily due to lower compensation and executive relocation costs, charitable contributions, travel expenses and costs associated with our corporate aircraft partially offset by higher costs associated with long-term incentive awards.

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Related Party Transactions

From time to time, we perform work for related parties. See Part I, Item 1- Financial Statements, Note 15 – Related Party Transactions for additional details relating to these activities.

Non-GAAP Financial Measure

EBITDA is a supplemental, non-GAAP financial measure and is a measure of operating performance used internally. EBITDA is defined as earnings before interest expense, taxes, depreciation and amortization. We have presented EBITDA because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses. We believe that the line item on our consolidated statements of operations entitled “Income (loss) before income taxes and earnings (losses) from unconsolidated entities” is the most directly comparable GAAP measure to EBITDA. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, income (loss) before income taxes and earnings (losses) from unconsolidated entities as an indicator of operating performance. EBITDA, as we calculate it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure is not necessarily a measure of our ability to fund our cash needs. As EBITDA excludes certain financial information as compared with income (loss) before income taxes and earnings (losses) from unconsolidated entities, the most directly comparable GAAP financial measure, users of this financial information should consider the type of events and transactions which are excluded. Our non-GAAP performance measure, EBITDA, has certain material limitations as follows:

• It does not include interest expense. Because we have borrowed money to finance our operations, pay commitment fees to maintain our credit facility, and incur fees to issue letters of credit under the credit facility, interest expense is a necessary and ongoing part of our costs and has assisted us in generating revenue. Therefore, any measure that excludes interest expense has material limitations.

• It does not include income taxes. Because the payment of income taxes is a necessary and ongoing part of our operations, any measure that excludes income taxes has material limitations.

• It does not include depreciation or amortization expense. Because we use capital and intangible assets to generate revenue, depreciation and amortization expense is a necessary element of our cost structure. Therefore, any measure that excludes depreciation or amortization expense has material limitations.

A reconciliation of EBITDA to income (loss) before income taxes and earnings (losses) from unconsolidated entities for the three and six months ended February 29, 2012, and February 28, 2011, is shown below (in millions):

	Three Months Ended February 29, 2012
	Consolidated			Power		Plant Services		E&I			E&C		F&M			Westinghouse			Corporate
Income (loss) before income taxes and earnings (losses) from unconsolidated entities:	$	88.1		$	0.9	$	18.3	$	17.4		$	2.3	$	24.5		$	41.2		$	(16.5	)
Interest expense		11.6			—		—		—			—		(0.4	)		10.3			1.7
Depreciation and amortization		18.5			6.9		0.5		3.4			2.5		4.7			—			0.5
Earnings (losses) from unconsolidated entities		(1.7	)		—		—		0.5			3.6		—			(5.8	)		—
Income attributable to noncontrolling interests		(1.1	)		—		—		(0.8	)		—		(0.3	)		—			—
EBITDA	$	115.4		$	7.8	$	18.8	$	20.5		$	8.4	$	28.5		$	45.7		$	(14.3	)

	Three Months Ended February 28, 2011
	Consolidated			Power			Plant Services		E&I			E&C			F&M		Westinghouse			Corporate
Income (loss) before income taxes and earnings (losses) from unconsolidated entities:	$	(2.5	)	$	49.8		$	13.2	$	17.6		$	(18.9	)	$	11.3	$	(58.2	)	$	(17.3	)
Interest expense		11.6			(0.1	)		—		—			—			—		10.4			1.3
Depreciation and amortization		19.0			7.6			0.4		3.5			2.5			4.4		—			0.6
Earnings (losses) from unconsolidated entities		6.1			0.4			—		0.2			2.5			—		3.0			—
Income attributable to noncontrolling interests		(1.0	)		—			—		(1.2	)		—			0.2		—			—
EBITDA	$	33.2		$	57.7		$	13.6	$	20.1		$	(13.9	)	$	15.9	$	(44.8	)	$	(15.4	)

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	Six Months Ended February 29, 2012
	Consolidated			Power		Plant Services		E&I			E&C		F&M		Westinghouse		Corporate
Income (loss) before income taxes and earnings (losses) from unconsolidated entities:	$	156.5		$	18.5	$	38.8	$	37.0		$	6.9	$	33.0	$	55.8	$	(33.5	)
Interest expense		23.7			0.1		—		—			—		0.1		20.7		2.8
Depreciation and amortization		37.0			13.8		0.9		6.9			5.0		9.3		—		1.1
Earnings (losses) from unconsolidated entities		9.6		__			—		0.9			5.9		—		2.8		—
Income attributable to noncontrolling interests		(2.3	)		—		—		(2.6	)		—		0.3		—		—
EBITDA	$	224.5		$	32.4	$	39.7	$	42.2		$	17.8	$	42.7	$	79.3	$	(29.6	)

	Six Months Ended February 28, 2011
	Consolidated			Power		Plant Services		E&I			E&C			F&M		Westinghouse			Corporate
Income (loss) before income taxes and earnings (losses) from unconsolidated entities:	$	(32.4	)	$	8.6	$	34.4	$	48.4		$	(24.1	)	$	15.5	$	(81.1	)	$	(34.1	)
Interest expense		23.5			0.2		—		—			—			—		20.9			2.4
Depreciation and amortization		36.6			13.9		0.9		6.7			5.1			8.7		—			1.3
Earnings (losses) from unconsolidated entities		10.7			0.6		—		0.7			2.4			—		7.0			—
Income attributable to noncontrolling interests		(1.8	)		—		—		(2.7	)		—			0.9		—			—
EBITDA	$	36.6		$	23.3	$	35.3	$	53.1		$	(16.6	)	$	25.1	$	(53.2	)	$	(30.4	)

Liquidity and Capital Resources

Liquidity

At February 29, 2012, our restricted and unrestricted cash and cash equivalents, escrowed cash and restricted and unrestricted short-term investments totaled $877.3 million (a decrease of $339.8 million, or 27.9%, from $ 1,217.1 million at August 31, 2011).  In addition to our cash and cash equivalents, the amount available under our Facility for revolving credit at February 29, 2012, was $240.1 million, which is equal to the lesser of: (i) $1,220.3 million, representing the total Facility commitment ($1,450.0 million) less outstanding performance letters of credit ($98.0 million) less outstanding financial letters of credit ($131.7 million); (ii) $1,118.3 million representing the Facility sublimit of $1,250.0 million less outstanding financial letters of credit ($131.7 million); or (iii) $240.1 million, representing the maximum additional borrowings allowed under the leverage ratio covenant contained in the Facility.  See Note 9 — Debt and Revolving Lines of Credit included in our consolidated financial statements for a description of our Facility’s financial covenants.

At February 29, 2012, we had voluntarily pledged approximately $134.7 million of our cash as collateral for performance letters of credit issued outside of our Facility and pledged $13.8 million of our cash as collateral for financial letters of credit as the bank fees avoided exceed the corresponding lost investment income. If we wish to access this pledged cash, we would need to provide new letters of credit from our Facility, which would reduce the calculations of revolving credit availability as determined in calculations (i) and (ii) above. Since the Facility leverage ratio already considers all financial letters of credit as part of leverage, our borrowing availability under the leverage ratio would not change. In addition, we have pledged approximately $38.7 million to secure contingent insurance obligations in lieu of letters of credit. If we wanted to access this pledged cash, we would need to provide financial letters of credit which would reduce the above calculations of revolving credit availability, including our borrowing availability under the leverage ratio, by the same $38.7 million.

The actual amount available to us under the Facility for borrowing or the issuance of financial letters of credit is restricted by covenants within the Facility, the most restrictive being the maximum leverage ratio which is 2.5x our earnings before interest, income taxes, depreciation and amortization (EBITDA) as defined in the Facility.

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At February 29, 2012, our working capital was $(171.7) million compared to $(106.4) million at August 31, 2011. Our negative working capital was due to the inclusion in current liabilities of the Westinghouse Bonds (which mature March 15, 2013) and the JPY interest rate swap. As disclosed previously, we were required to reclassify our Investment in Westinghouse and the related Westinghouse Bonds, the interest rate swap and the associated deferred tax asset from long-term to current as a result of a Toshiba Event that occurred in May 2009. As discussed more fully elsewhere in this Form 10-Q, the Westinghouse Bonds are revalued at each balance sheet date to the current JPY/USD exchange rate while the Put Options included in our Investment in Westinghouse are not. The impact on working capital associated with our Investment in Westinghouse and the related Westinghouse Bonds, the interest rate swap, and deferred taxes, which are impacted by the cumulative foreign exchange loss on the Westinghouse Bonds, was $(419.0) million and $(434.7) million at February 29, 2012, and August 31, 2011, respectively.

Cash Flow

	Six Months Ended
	2012			2011
Cash flows provided by (used in) operating activities	$	(150.4	)	$	(141.3	)
Cash flows provided by (used in) investing activities	$	169.6		$	(67.7	)
Cash flows provided by (used in) financing activities	$	(151.9	)	$	(40.9	)

Operating activities :   We used $150.4 million in operating activities during the first six months of fiscal year 2012 due primarily to the reversal of favorable working capital positions on projects being executed in our Power and E&C segments as well as cash used to fund the interest on our Westinghouse Bonds. Partially offsetting those uses of cash was cash provided by our E&I and F&M segments, as well as $9.6 million in dividends received from our Investment in Westinghouse. During the first six months of fiscal year 2011, the primary cash uses were concentrated in our Power, E&C and Corporate segments. The use of cash was due primarily to the reversal of favorable working capital positions on projects being executed in those segments, partially offset by earnings in our E&I, F&M and Plant Services segments.

Our operating cash flow is generated primarily by earnings and working capital movements of our projects.  Our primary source of operating cash inflows is collections of our accounts receivable (AR), which are generally invoiced based upon achieving performance milestones prescribed in our contracts. Our outstanding AR and costs and estimated earnings in excess of billings (CIE) are reviewed monthly and tend to be due from high quality credit clients such as regulated utilities, U.S. Government agencies, multinational oil companies and industrial corporations and merchant power producers.  Because our clients tend to have the financial resources sufficient to honor their contractual obligations, we believe our AR and CIE are collectible.  The timing of the milestone billings on fixed-priced contracts varies with each milestone within each contract but generally are invoiced within several months of first incurring costs associated with the prescribed work. Working capital movements on fixed-price contracts are based on the timing of our completion of the specified performance milestones. Generally, working capital movements are positive in the early phases of the fixed price contracts and can be negative in the later phases as the cash balances decline to equal earnings. If new fixed-priced projects are not booked with positive working capital terms to replace contracts in the latter phases of execution, our net working capital movement tends to be negative. For cost reimbursable contacts, we generally seek to bill and collect payments in advance of incurring project costs. However, cost-reimbursable contracts with the U.S. government provide for billings in the month subsequent to incurring the costs.

Our AR and CIE were 33.5% and 30.9% of current assets at February 29, 2012, and August 31, 2011, respectively.  At February 29, 2012, approximately 44.7% of our CIE reflects costs from contracts being executed for the U.S. government, which we expect to invoice and collect in the normal course of business.  See Note 5 – Accounts Receivable, Concentrations of Credit Risk, and Inventories and Note 16 –Accounting for Claims, Unapproved Change Orders and Incentives on Long-Term Construction Contracts to our consolidated financial statements for additional information with respect to these working capital items.

 Our cash position has created opportunities for us to obtain market discounts and provide protection from potential future price escalation for our EPC projects by undertaking an early procurement program. Accordingly, we continue to procure certain commodities, subcontracts and construction equipment early in the life cycle of major projects. This strategy was partially implemented in fiscal years 2010 and 2011 and will continue to be utilized in fiscal year 2012. This strategy is intended to provide price and schedule certainty but requires that we expend some of our cash earlier than originally estimated under the contracts. For the first six months of fiscal 2012, we expended approximately $3.3 million under our early procurement program and are currently evaluating early procurement opportunities up to $16.7 million for the remainder of the fiscal year. During the years ended August 31, 2011, and 2010, respectively, we expended approximately $7.9 million and $30.9 million under the early procurement program. It is our intent to balance any potential cancellation exposure associated with early procurements with our termination rights and obligations under the respective prime contracts with our clients and to help protect ourselves from suppliers failing to perform by requiring financial security instruments to support their performance. However, we can provide no assurance that our intent to manage our cancellation exposure will be successful.

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 Investing activities:   Cash provided by investing activities was $169.6 million for the first six months of fiscal year 2012, compared to cash used in investing activities of $67.7 million during the first six months of fiscal year 2011. During the first six months of fiscal year 2012, we continued to invest a portion of our excess cash to support the growth of our business lines.  Investments in property and equipment for the first six months of fiscal year 2012 were $40.0 million compared to $56.8 million for the first six months of fiscal year 2011. In addition, in the first six months of fiscal year 2012, we decreased the cash pledged, at our option, to secure certain outstanding letters of credit issued to support our project execution activities from $273.2 million to $187.2 million.

 In addition, our cash used in investing activities decreased in the first six months of fiscal year 2012 compared to the first six months of fiscal year 2011 due to a $10.0 million advance made during the first three months of fiscal year 2011 under a $100.0 million credit facility for a proposed nuclear power project NINA in connection with a nuclear ABWR global strategic partnership agreement between Shaw and Toshiba Corporation to assist in financing the development of the South Texas Project. At May 31, 2011, we had advanced approximately $48.1 million under this credit facility. During the three months ended May 31, 2011, the project sponsor asked that we cease the majority of the work relating to individual orders issued under our EPC contract jointly obtained with Toshiba. Additionally, the project sponsors’ majority owner announced it was withdrawing from further financial participation in that company, and a major municipal utility announced it would indefinitely suspend all discussions regarding a potential agreement to purchase the power from the proposed facilities. Due to these changes, we reviewed the security supporting the loans outstanding (primarily partially manufactured equipment) and we wrote-off loans granted to the project entities totaling $48.1 million during our fiscal third quarter. We do not plan to make additional investments in ABWR related projects. See Note 7 – Equity Method Investments and Variable Interest Entities for additional information regarding our ABWR agreement with Toshiba.

Financing activities : Cash used in financing activities for the first six months of fiscal year 2012 totaled $151.9 million, compared to $40.9 million during the first six months of fiscal year 2011.  During the second quarter of fiscal year 2012, in December 2011, we funded a modified "Dutch Auction" cash tender offer to purchase 6,185,567 shares of our common stock at a price of $24.25 per share totaling approximately $150.0 million, excluding fees and expenses related to the tender offer.  During the second quarter of fiscal year 2011, we repurchased 1,224,400 shares of our common stock under a repurchase program authorized by our Board in December 2010 at a weighted average of $38.72 per share and an aggregate cost of approximately $47.4 million.

In January 2012, the members of a Middle Eastern joint venture, for which we have a direct interest of 53%, agreed to an $8.0 million loan facility to finance the continued development and working capital needs of the joint venture.  The joint venture is consolidated in our financial statements with the $3.3 million minority interest portion of the loan classified as a short-term note payable on our balance sheet.

Many of our clients require that we issue letters of credit or surety bonds for work we perform. Our growth may be dependent on our ability to increase our letter of credit and surety bonding capacity, our ability to achieve timely release of existing letters of credit and surety bonds and/or our ability to obtain from our clients more favorable terms reducing letter of credit and surety requirements on new work. Our need for letter of credit capacity may increase as we seek additional construction projects. Increases in outstanding performance letters of credit issued under our Facility reduce the available borrowing capacity under our Facility.

Capital Resources

Our excess cash is generally invested in (1) money market funds governed under rule 2a-7 of the U.S. Investment Company Act of 1940 and rated AAA/Aaa by S&P and/or Moody’s, respectively, (2) interest bearing deposit accounts with commercial banks rated at least A/A2 or better by S&P and/or Moody’s, respectively, (3) publicly traded debt rated at least A/A2 or better by S&P and/or Moody’s, respectively, with maturities up to two years at the time of purchase, (4) publicly traded debt funds holding securities rated at least A/A2 or better by S&P and/or Moody’s, respectively, or (5) the dividend paying capital stocks.

At February 29, 2012, the amounts shown as restricted cash and restricted short-term investments in the accompanying balance sheet included approximately $148.5 million used to voluntarily secure letters of credit and approximately $38.7 million to secure insurance related contingent obligations in lieu of a letter of credit. We expect to continue for the short term to voluntarily cash collateralize certain letters of credit during fiscal year 2012 if the bank fees avoided on those letters of credit exceed the return on other investment opportunities.

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Approximately $157.5 million of our cash at February 29, 2012, was held internationally for international operations. We have the ability to return certain amounts of our overseas funds to the U.S. but may incur incremental taxes under certain circumstances.

We expect to fund our operations for the next twelve months through the use of cash generated from operations and existing cash balances. However, there can be no assurance that we will achieve our forecasted cash flow, which could result in new borrowings under existing or future credit facilities.

Credit Facility

On June 15, 2011, we entered into an unsecured second amended and restated credit agreement (Facility) with a group of lenders that provides lender commitments of up to $1,450.0 million under the Facility, all of which may be available for the issuance of performance letters of credit. Of the $1,450.0 million in commitments, a sublimit of $1,250.0 million may be available for the issuance of financial letters of credit and/or borrowings for working capital needs and general corporate purposes. The Facility releases all collateral securing the previous credit agreement and contains an expiration of commitments on June 15, 2016. The Facility continues to require guarantees by the Company’s material domestic subsidiaries.

During the first six months of fiscal 2012, no borrowings were made under the Facility; however, we had outstanding letters of credit of approximately $229.7 million as of February 29, 2012, and those letters of credit reduce what is otherwise available under our Facility.

At February 29, 2012, we were in compliance with the covenants contained in our Facility.

See Note 9 — Debt and Revolving Lines of Credit included in our consolidated financial statements for a description of: (1) the terms and interest rates related to our Facility and revolving lines of credit; (2) amounts available and outstanding for performance letters of credit, financial letters of credit and revolving loans under our Facility; and (3) a description of our Facility’s financial covenants and matters related to our compliance with those covenants during the first three months of fiscal year 2012.

Other Revolving Lines of Credit

Additionally, we have various short-term (committed and uncommitted) revolving credit facilities from several financial institutions which are available for letters of credit and, to a lesser extent, working capital loans. See Note 9 — Debt and Revolving Lines of Credit included in our consolidated financial statements for additional information.

Off Balance Sheet Arrangements

On a limited basis, performance assurances are extended to clients that guarantee certain performance measurements upon completion of a project. If performance assurances are extended to clients, generally our maximum potential exposure is the remaining cost of the work to be performed under engineering and construction contracts with potential recovery from third party vendors and subcontractors for work performed in the ordinary course of contract execution. As a result, the total costs of the project could exceed our original cost estimates and we could experience reduced gross profit or possibly a loss for that project. In some cases, where we fail to meet certain performance standards, we may be subject to contractual liquidated damages.

Commercial Commitments

Our lenders issue letters of credit on our behalf to clients, sureties and to secure other financial obligations in connection with our contract performance and in limited circumstances on certain other obligations to third parties. If drawn, we are required to reimburse our lenders for payments on these letters of credit. At February 29, 2012, we had both letter of credit commitments and surety bonding obligations, which were generally issued to secure performance and financial obligations on certain of our construction contracts, which expire as follows (in millions):

Commercial Commitments (1)	Total		Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years
Letters of Credit — Domestic and Foreign	$	379.9	$	374.8	$	4.7	$	0.4	$	—
Surety bonds		483.1		448.8		21.9		0.1		12.3
Total Commercial Commitments	$	863.0	$	823.6	$	26.6	$	0.5	$	12.3

(1) Commercial Commitments exclude any letters of credit or bonding obligations associated with outstanding bids or proposals or other work not awarded prior to March 1, 2012.

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Of the amount of outstanding letters of credit at February 29, 2012, $234.4 million were issued to clients in connection with contracts (performance letters of credit). Of the $234.4 million, five clients held $192.8 million or 82.3% of the outstanding letters of credit. The largest aggregate amount of letters of credit issued and outstanding at February 29, 2012, to a single client on a single project is $60.0 million. Our ability to borrow under our facility is reduced by the dollar value of the letters of credit we have outstanding.

At February 29, 2012, and August 31, 2011, we had total surety bonds of $483.1 million and $909.5 million, respectively. However, based on our percentage-of-completion on contracts covered by these surety bonds, our estimated potential liability at February 29, 2012, and August 31, 2011 was $168.6 million and $104.7 million, respectively.

Fees related to these commercial commitments were $2.2 million and $5.0 million, for the three and six months ended February 29, 2012, respectively, compared to $2.3 million and $5.4 million for the three and six months ended February 28, 2011, respectively.

See Note 9 — Debt and Revolving Lines of Credit to our consolidated financial statements in Part I, Item 1 of this Form 10-Q for a discussion of long-term debt, and Note 12 - Contingencies and Commitments to our consolidated financial statements in Part I, Item 1 of this report for a discussion of contingencies and commitments.

Critical Accounting Policies

In addition to the discussion below, Item 7 of Part II of our 2011 Form 10-K addresses the accounting policies and related estimates that we believe are the most critical to understanding our consolidated financial statements, financial condition and results of operations and those that require management judgment and assumptions, or involve uncertainties.

Goodwill and Intangible Assets Impairment Review

In accordance with current accounting guidance, Goodwill is not amortized but is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (March 1 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

 To calculate the fair value of a reporting unit in our goodwill impairment review, we utilize the guideline public company method (a market approach) and the discounted cash flow method (an income approach). A reporting unit’s fair value is determined by averaging the resulting fair values calculated under these two methods. When performing our annual impairment analysis, we also reconcile the total of the fair values of our reporting units with our market capitalization to determine if the sum of the individual fair values is reasonable compared to the external market indicators. If our reconciliation indicates a significant difference between our external market capitalization and the fair values of our reporting units, we review and adjust, if appropriate, our weighted-average cost of capital and consider if the implied control premium is reasonable in light of current market conditions.

At the March 1, 2011 testing date, our annual review indicated that, except for our E&C reporting unit, the fair value of our reporting units was substantially in excess of the reporting unit’s carrying value.  Our March 1, 2012 annual test for impairment has not been completed.  With the exception of our E&C reporting unit we had not identified an impairment indicators that would have required an interim impairment evaluation. As we have previously disclosed, we are in the process of reviewing strategic alternatives for our E&C segment. We have received indications of interest for certain assets and operations of our E&C segment. Based upon the indications of interest received, consummating a transaction under the indicative terms would not result in us recording an impairment charge.

Changes in assumptions or estimates used in our goodwill impairment testing could materially affect the determination of the fair value of a reporting unit, and therefore could eliminate the excess of fair value over carrying value of a reporting unit and, in some cases, could result in impairment. Such changes in assumptions could be caused by a loss of one or more significant contracts, reductions in government and/or private industry spending or a decline in the demand for our services due to changing economic conditions. Given the nature of our business, if we are unable to win or renew contracts, unable to estimate and control our contract costs, fail to adequately perform to our clients’ expectations, fail to procure third-party subcontractors, heavy equipment and materials or fail to adequately secure funding for our projects, our profits, revenues and growth over the long-term would decline and such a decline could significantly affect the fair value assessment of our reporting units and cause our goodwill to become impaired.

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See Note 8 – Goodwill and Other Intangibles to our consolidated financial statements for additional information related to our goodwill.

Income Taxes

Deferred income taxes are provided on the asset and liability method whereby deferred tax assets/liabilities are established for the difference between the financial reporting basis and the income tax basis of assets and liabilities, as well as operating loss and tax credit carryforwards and other tax credits. Deferred tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. The forecasts used in projecting future taxable income are consistent with the forecasts used in the testing of goodwill for impairment. We also consider the reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment of such realization. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

At February 29, 2012, we had deferred tax assets of $260.5 million, net of valuation allowance and deferred tax liabilities, including $59.7 million related to net operating losses and tax credit carryforwards. At February 29, 2012, we had a deferred tax asset valuation allowance of $32.2 million. Approximately $246 million of the deferred tax assets will be realized as an ordinary deduction upon the repayment of the Japanese yen-denominated bonds and will offset the gain recognized as a result of the automatic exercise of the Put Option Agreement on the Westinghouse shares during our fiscal year 2013. Our forecast of future taxable income exceeds the amounts needed in the respective jurisdictions for full realization of these deferred tax assets.

See Note 10 – Income Taxes to our consolidated financial statements for additional information related to our income taxes.

Backlog of Unfilled Orders

General. Our backlog represents management’s estimate of potential future revenues we expect may result from contracts awarded to us by clients. Backlog is estimated using legally binding agreements for projects that management believes are likely to proceed. Management evaluates the potential backlog value of each project awarded based upon the nature of the underlying contract, commitment and other factors, including the economic, financial, and regulatory viability of the project and the likelihood of the contract proceeding. Projects in backlog may be altered (increased or decreased) for scope change and/or may be suspended or cancelled at any time by our clients.

New bookings and ultimately the amount of backlog of unfilled orders is largely a reflection of the global economic trends. The volume of backlog and timing of executing the work in our backlog is important to us in anticipating our operational needs. Backlog is not a measure defined in GAAP, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog. We cannot assure you that revenues projected in our backlog will be realized, or if realized, will result in profits.

All contracts contain client termination for convenience clauses, and many of the contracts in backlog provide for cancellation fees in the event clients cancel projects whether for convenience or a stated cause. These cancellation fees usually provide for reimbursement of our out-of-pocket costs, revenues associated with work performed prior to cancellation, and to varying degrees, a percentage of the profits we would have realized had the contract been completed.

The process to add new awards to backlog is generally consistent among our segments and is based on us receiving a legally binding agreement with clients plus management’s assessment that the project will likely proceed. Additional details relating to each segment’s booking process follows:

Power and E&C Segments. We define backlog in our Power and E&C segments to include projects for which we have received legally binding commitments from our clients and projects for which our consolidated joint venture entities have received legally binding commitments. These commitments typically take the form of a written contract for a specific project or a purchase order, and sometimes require that we estimate anticipated future revenues, often based on engineering and design specifications that have not been finalized and may be revised over time. The value of work subcontracted to our F&M segment is removed from the backlog of the Power and E&C segments and is shown in the backlog of our F&M segment.

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Plant Services Segment. We define backlog in the Plant Services segment to include projects which are based on legally binding contracts from our clients. These commitments typically take the form of a written contract or a specific project purchase order and can cover periods ranging from three to five years. Many of these contracts cover reimbursable work to be designated and executed over the term of the agreement. Accordingly, certain of the backlog amounts are based on the underlying contracts/purchase orders, our clients’ historic maintenance requirements, as well as our future cost estimates based on the client’s indications of future plant outages. Our Plant Services segment backlog does not include any awards for work expected to be performed more than five years after the date of our financial statements.

E&I Segment. Our E&I segment’s backlog includes the value of awarded contracts including the estimated value of unfunded work. The unfunded backlog generally represents U.S. government project awards for which the project funding has been partially authorized or awarded by the relevant government authorities (e.g., authorization or an award has been provided for only the initial year of a multi-year project). Because of appropriation limitations in the U.S. government budget processes, confirmed funding is usually appropriated for only one year at a time and, in some cases, for periods less than one year. Some contracts may contain a number of one-year options. Amounts included in backlog are based on the contract’s total awarded value and our estimates regarding the amount of the award that will ultimately result in the recognition of revenues. These estimates may be based on indications provided by our clients of future values, our estimates of the work required to complete the contract, our experience with similar awards and similar clients, and our knowledge and expectations relating to the given award. Generally, the unfunded component of new contract awards is added to backlog at 75% of our contract value or our estimated proportionate share of a contract for which there are multiple award recipients. The programs are monitored, estimates are reviewed periodically, and adjustments are made to the amounts included in backlog and in unexercised contract options to properly reflect our estimate of total contract revenue in the E&I segment backlog. Our E&I segment backlog does not generally include any awards (funded or unfunded) for work expected to be performed more than five years after the date of our financial statements. The executed amendment to the MOX contract signed in the third quarter of fiscal 2008 extended beyond five years but had defined contract values which differed from many other contracts with government agencies. Accordingly, at the time the contract amendment was executed, we included the entire value of the MOX contract not yet executed in our backlog of unfilled orders. The value of work subcontracted to our F&M segment is removed from the backlog of our E&I segment and is shown in the backlog of our F&M segment.  The MOX contract value included in the E&I segment backlog as of February 29, 2012, was $1.4 billion, with $0.6 billion funded and $0.8 billion unfunded.

F&M Segment. We define backlog in the F&M segment to include projects for which we have received a legally binding commitment from our clients. These commitments typically take the form of a written contract for a specific project, a purchase order, or a specific indication of the amount of time or material we need to make available for clients’ anticipated projects under alliance type agreements. A significant amount of our F&M segment’s backlog results from inter-company awards received from our Power, E&I, and E&C segments. In such cases, we include the value of the subcontracted work in our F&M segment’s backlog and exclude it from the corresponding affiliate segment.

At February 29, 2012, and August 31, 2011, our backlog was as follows (in millions except percentages):

	February 29, 2012				August 31, 2011
By Segment	Amount		%		Amount		%
Power	$	10,495.4		53	$	10,776.4		54
Plant Services		3,119.9		16		2,119.7		11
E&I		4,636.5		23		5,189.9		26
E&C		344.1		2		436.4		2
F&M		1,201.0		6		1,495.9		7
Total backlog	$	19,796.9		100	$	20,018.3		100

	February 29, 2012				August 31, 2011
By Industry	Amount		%		Amount		%
E&I	$	4,636.5		23	$	5,189.9		26
Power Generation		14,091.3		71		13,487.9		67
Chemical		553.1		3		700.6		4
Other		516.0		3		639.9		3
Total backlog	$	19,796.9		100	$	20,018.3		100

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	February 29, 2012				August 31, 2011
By Geographic Region	Amount		%		Amount		%
Domestic	$	19,125.0		97	$	19,189.4		96
International		671.9		3		828.9		4
Total backlog	$	19,796.9		100	$	20,018.3		100

The decrease in backlog as compared to August 31, 2011 was driven primarily by progress on current projects. In addition, our F&M segment recorded a reduction in backlog exceeding $100 million during the first quarter relating to the partial cancellation of an existing order on a project for which work continues on other aspects of this project. Our E&I segment’s backlog was also reduced in first quarter by $200 million as a result of a change in the estimated future contract revenue expected under a multi-year contract with the U.S. Government. These decreases were mostly offset by new bookings in first quarter in our Plant Services segment relating to nuclear power plant maintenance agreements. The largest agreement was a multi-year renewal from an existing client and a multi-year agreement with a new client.

A client of our Power segment recently suspended work on a capital improvement project at an existing power plant. The project has not been canceled. We continue to monitor this situation and if the project is canceled or if we believe the project will not proceed, we will remove the project from backlog. The amount of this project still to be executed and included in backlog approximates $500 million.

Included in backlog is our share of the full EPC contracts for two new AP1000 nuclear reactors to be located in Georgia and two new AP1000 nuclear reactors to be located in Florida. Not included in our backlog is the majority of the work to be performed on an EPC contract for two new AP1000 nuclear reactors to be located in South Carolina for which the contract has been awarded, but for which certain client authorizations had not been received at February 29, 2012.  Our client for the AP1000 units in South Carolina has indicated that they believe  they will receive their COL during the third quarter of our fiscal year 2012.

During the fiscal quarter ended May 31, 2009, we received notice from our client of a significant delay in the construction schedule for the aforementioned two new AP1000 nuclear reactors to be located in Florida relating to early construction activities. Our client advised us that these activities would not be performed for these units until the COL is issued by the Nuclear Regulatory Commission (NRC) for the plant, which we understand is expected to occur in late 2012. As a result, the first reactor is now expected to enter service in 2021, with the second 18 months later. In the interim, we continue to perform limited engineering and support services and have not removed or altered the corresponding contract value from our backlog as our contract with the client remains in effect. The amount of revenues and contract profit expected to be generated from this project during fiscal year 2012 is likely to be immaterial when considered in relation to our consolidated operations. We expect to recover any future adverse cost impacts associated with the current schedule delay. If our client were to cancel the project, we would be entitled to retain all proceeds collected to date, collect any receivables that may be outstanding at that time and be entitled to invoice additional amounts as prescribed under our contract.

The majority of our consolidated backlog is comprised of contracts with regulated electric utility companies, national or international oil companies, and the U.S. government (which alone comprises 91.9% of our Environmental & Infrastructure segment’s backlog). We believe these clients provide us with a stable book of business and possess the financial strength to endure the economic challenges that may persist from the recent economic downturn. Cancellation of any significant projects in backlog would result in a significant reduction of our reported backlog as well as on our future earnings.

Recently Adopted Accounting Pronouncements

For a discussion of recently adopted accounting pronouncements, refer to Note 1 — General Information of our consolidated financial statements in Part I, Item 1 — Financial Statements.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements and the effect they could have on our financial statements, refer to

Note 1 — General Information of our consolidated financial statements in Part I, Item 1 — Financial Statements.

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ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not enter into derivative financial instruments for trading, speculation or other purposes that would expose us to market risk. In the normal course of business, we have exposure to both interest rate risk and foreign currency exchange rate risk. For quantitative and qualitative disclosures about our market risk, see Item 7A — Quantitative and Qualitative Disclosures about Market Risk of our 2011 Form 10-K. Our exposures to market risk have not changed materially since August 31, 2011.

ITEM 4. — CONTROLS AND PROCEDURES

Management’s Quarterly Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. This information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures at February 29, 2012. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at February 29, 2012.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended February 29, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. — LEGAL PROCEEDINGS

We have been and may from time to time be named as a defendant in legal actions claiming damages in connection with engineering and construction projects, technology licenses and other matters. These are typically claims that arise in the ordinary course of business, including employment-related claims and contractual disputes or claims for personal injury or property damage that occur in connection with services performed relating to project or construction sites. Contractual disputes normally involve claims relating to the timely completion of projects, performance of equipment or technologies, design or other engineering services or project construction services provided by our subsidiaries. See Note 12 — Contingencies and Commitments of our consolidated financial statements in Part I, Item 1, “Financial Statements” for information about our material pending legal proceedings.

ITEM 1A. — RISK FACTORS

There have been no material changes to the Risk Factors disclosure included in our 2011 Form 10-K, filed with the SEC on October 31, 2011.

Our business, results of operations and financial position are subject to a number of risks. In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2011 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in this Form 10-Q and in our 2011 Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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ITEM 2.  — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) The following table provides information about our purchases during the quarter ended February 29, 2012 of our equity securities that are registered pursuant to Section 12 of the Exchange Act:

Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Repurchase Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(2)
12/1/2011 to 12/31/2011		6,201,581		24.26		6,185,567		326,088
1/1/2012 to 1/31/2012		203,974		26.90		—		326,088
2/1/2012 to 2/29/2012		781		29.16		—		326,088
Total		6,406,336				6,185,567

1	Repurchases during the quarter were for shares purchased as part of the publicly announced repurchase program, for shares purchased as part of a modified “Dutch Auction” cash tender offer and for shares acquired from employees in connection with the settlement of income tax and related benefit withholding obligations arising from vesting in restricted stock units.
2	We currently have an open authorization to repurchase up to $326.1 million in shares, subject to limitations contained in the Facility.

ITEM 5. — OTHER INFORMATION

On March 26, 2012, Gary P. Graphia, executive vice president, announced that he will retire from the Company effective May 1, 2012. Mr. Graphia joined Shaw in August 1999 as chief legal officer and corporate secretary. He later served as executive vice president of Corporate Development and Strategy and as Shaw’s chief operating officer. Most recently, in his role as executive vice president, Mr. Graphia has been responsible for strategic initiatives including corporate development, mergers and acquisitions and client relations.

ITEM 6. — EXHIBITS

All exhibits are set forth on the Exhibit Index, which is incorporated herein by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE SHAW GROUP INC.
Dated: March 29, 2012	/s/ Brian K. Ferraioli
	Brian K. Ferraioli
	Executive Vice President Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

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EXHIBIT INDEX

The exhibits marked with the cross symbol (†) are filed herewith. The exhibits marked with the pound symbol (#) have been redacted and are the subject of an application for confidential treatment filed with the SEC pursuant to rules and regulations promulgated under the Exchange Act. The exhibits marked with the asterisk symbol (*) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

The exhibits marked with the section symbol (§) are interactive data files. Pursuant to Rule 406T of Regulation S-T, these interactive data files (i) are not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, irrespective of any general incorporation language included in any such filings, and otherwise are not subject to liability under these sections; and (ii) are deemed to have complied with Rule 405 of Regulation S-T (“Rule 405”) and are not subject to liability under the anti-fraud provisions of the Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 or under any other liability provision if we have made a good faith attempt to comply with Rule 405 and, after we become aware that the interactive data files fail to comply with Rule 405, we promptly amend the interactive data files.

Exhibit Number	Document Description	Form	Exhibit	Filing Date	Filed Herewith
2.01	Investment Agreement, dated as of October 4, 2006, by and among Toshiba, Toshiba Nuclear Energy Holdings Corporation (US) Inc., a Delaware corporation (the “US Company”), The Shaw Group Inc. (the “Company”) and Nuclear Energy Holdings, L.L.C. (“NEH”)	8-K	2.01	10/18/2006
2.02	Investment Agreement, dated as of October 4, 2006, by and among Toshiba, Toshiba Nuclear Energy Holdings (UK) Limited, a company registered in England with registered number 5929672 (the “UK Company”), the Company and NEH	8-K	2.02	10/18/2006
3.01	Amendment to and Restatement of the Articles of Incorporation of the Company dated February 23, 2007	10-K/A-1	3.1	9/28/2007
3.02	Amended and Restated By-Laws of the Company dated as of January 30, 2007	10-K/A-1	3.2	9/28/2007
4.01	Specimen Common Stock Certificate	10-K	4.1	12/6/2006
*10.01	The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.8	4/8/2009
*10.02	Form of Section 16 Officer Restricted Stock Unit Award Agreement under The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.66	1/6/2010
*10.03	Form of Employee Incentive Stock Option Award under The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.67	1/6/2010
*10.04	Form of Employee Nonqualified Stock Option Award Agreement under The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.68	1/6/2010
*10.05	Form of Employee Restricted Stock Unit Award Agreement under The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.69	1/6/2010
*10.06	Form of Canadian Employee Incentive Stock Option Agreement under The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.70	1/6/2010
*10.07	The Shaw Group Inc. Stone & Webster Acquisition Stock Option Plan	S-8	4.6	6/12/2001
*10.08	The Shaw Group Inc. 1993 Employee Stock Option Plan, amended and restated through October 8, 2001	10-K	10.1	11/29/2001
*10.09	The Shaw Group Inc. 2005 Non-Employee Director  Stock Incentive Plan, amended and restated through  November 2, 2007	10-Q	10.5	1/9/2008
*10.10	Written description of the Company's compensation policies and programs for non-employee directors contained in The Shaw Group, Inc.'s schedule 14A for the 2009 Annual Meeting of Shareholders	14A		12/24/2008
*10.11	Flexible Perquisites Program for certain executive officers as described in Item 1.01 of the referenced 8-K.	8-K		11/1/2004

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EXHIBIT INDEX

*10.12	Written description of the Company's incentive compensation policies programs for executive officers, including performance targets for fiscal year end 2009	14A		12/17/2009
*10.13	Second Amended and Restated Employment Agreement dated as of December 12, 2011, by and between the Company and J.M. Bernhard, Jr.	10-Q	10.1	12/20/2011
*10.14	Amended and Restated Employment Agreement dated as of December 22, 2008 by and between the Company and Gary P. Graphia	8-K	10.1	12/24/2008
*10.15	Employee Indemnity Agreement dated as of July 12, 2007 between the Company and Brian K. Ferraioli	10-K	10.34	12/6/2007
*10.16	Amended and Restated Employment Agreement dated as of December 31, 2008 between the Company and Brian K. Ferraioli	8-K	10.2	1/7/2009
*10.17	Amended and Restated Employment Agreement dated as of December 31, 2008 by and between the Company and George P. Bevan	10-Q	10.13	4/8/2009
*10.18	Amended and Restated Employment Agreement dated as of December 31, 2008 by and between the Company and Lou Pucher	10-Q	10.16	4/8/2009
*10.19	Second Amended and Restated Employment Agreement dated as of July 22, 2010 by and between the Company and John Donofrio	10-K	10.24	10/28/2010
*10.20	Letter Agreement dated as of December 9, 2011,  by and between The Shaw Group Inc. and  Timothy J. Poché	8-K	10.1	1/26/2012
*10.21	The Shaw Group Inc. 401(k) Plan	S-8	4.6	5/4/2004
*10.22	The Shaw Group Inc. 401(k) Plan for Certain Hourly Employees	S-8	4.6	5/4/2004
*10.23	The Shaw Group Deferred Compensation Plan	10-Q	10.10	4/8/2009
*10.24	The Shaw Group Deferred Compensation Plan Form of Adoption	10-Q	10.11	4/8/2009
*10.25	Trust Agreement, dated as of January 2, 2007 by and between the Company and Fidelity Management Trust Company for The Shaw Group Deferred Compensation Plan Trust	10-Q	10.6	9/27/2007
*10.26	Asset Purchase Agreement, dated as of July 14, 2000, among Stone & Webster, Incorporated, certain subsidiaries of Stone & Webster, Incorporated and the Company	8-K	2.1	7/28.2000
*10.27	Composite Asset Purchase Agreement, dated as of January 23, 2002, by and among the Company, 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 Company	8-K	2.1	5/16/2002
*10.28	Amendment No. 3, dated May 2, 2002, to Asset Purchase Agreement by and among the Company, The IT Group, Inc. and certain subsidiaries of The IT Group, Inc.	8-K	2.2	5/16/2002
*10.29	Amendment No. 4, dated May 3, 2002, to Asset Purchase Agreement by and among the Company, The IT Group, Inc. and certain subsidiaries of the IT Group, Inc.	8-K	2.3	5/16/2002
*10.30	Put Option Agreement, dated as of October 13, 2006, between NEH and Toshiba related to shares in the US acquisition company	8-K	10.2	10/18/2006
*10.31	Put Option Agreement, dated as of October 13, 2006, between NEH and Toshiba related to shares in the UK acquisition company	8-K	10.3	10/18/2006
*10.32	Shareholders Agreement, dated as of October 4, 2006, by and among Toshiba, Toshiba Nuclear Energy Holdings (US) Inc. the US Company, NEH, TSB Nuclear Energy Investment US Inc., a Delaware corporation and a wholly owned subsidiary of Toshiba and Ishikawajima-Harima Heavy Industries Co., Ltd., a corporation organized under the laws of Japan ("IHI")	8-K	10.4	10/28/2006

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EXHIBIT INDEX

*10.33	Shareholders Agreement, dated as of October 4, 2006, by and among Toshiba, Toshiba Nuclear Energy Holdings (UK) Inc., the UK Company, NEH, IHI and TSB Nuclear Energy Investment UK Limited, a company registered in England with registered number 5929658	8-K	10.5	10/28/2006
*10.34	Bond Trust Deed, dated October 13, 2006, between NEH and The Bank of New York, as trustee	8-K	10.6	10/28/2006
*10.35	Parent Pledge Agreement, dated October 13, 2006, between the Company and The Bank of New York	8-K	10.7	10/28/2006
*10.36	Issuer Pledge Agreement, dated October 13, 2006, between NEH and The Bank of New York	8-K	10.8	10/28/2006
*10.37	Deed of Charge, dated October 13, 2006, among NEH, The Bank of New York, as trustee, and Morgan Stanley Capital Services Inc., as swap counterparty	8-K	10.9	10/28/2006
*10.38	Transferable Irrevocable Direct Pay Letter of Credit (Principal Letter of Credit) effective October 13, 2006 of Bank of America in favor of NEH	8-K	10.10	10/28/2006
*10.39	Transferable Irrevocable Direct Pay Letter of Credit (Interest Letter of Credit) effective October 13, 2006 of Bank of America in favor of NEH	8-K	10.11	10/28/2006
*10.40	Reimbursement Agreement dated as of October 13, 2006, between the Company and Toshiba	8-K	10.12	10/28/2006
*10.41	Form of Nonemployee Director Nonqualified Stock Option Award Agreement under The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.46	4/7/2010
*10.42	Form of Nonemployee Director Restricted Stock Unit Award Agreement under The Shaw Group Inc. 2008 Omnibus Incentive Plan	10-Q	10.47	4/7/2010
#10.43	Credit Agreement between Nuclear Innovation North America LLC, Nina Investments Holdings LLC, Nuclear Innovation North America Investments LLC, Nina Texas 3 LLC and Nina Texas 4 LLC Dated November 29, 2010	10-Q	10.1	1/6/2011
#10.44	First Lien Intercreditor Agreement Dated As Of November 29, 2010, Among Nuclear Innovation North America LLC, Nina Investments Holdings LLC,  Nuclear Innovation North America Investments LLC, Nina Texas 3 LLC and Nina Texas 4 LLC, The Other Grantors Party Hereto, Toshiba America Nuclear Energy Corporation, as Toshiba Collateral Agent, and The Shaw Group Inc., As Shaw Collateral Agent	10-Q	10.2	1/6/2011
*10.45	Amended and Restated Employment Agreement dated as of April 8, 2011 by and between the Company and David L. Chapman, Sr.	10-Q	10.3	4/11/2011
*10.46	Employment Agreement dated as of February 2, 2011 by and between the Company and Clarence Ray	10-Q	10.4	4/11/2011
*10.47	Form of Performance Cash Unit Award Agreement	10-Q	10.1
#10.48	Second Amended and Restated Credit Agreement, dated as of June 15, 2011, among the Company, as borrower; the Company’s subsidiaries signatories thereto, as guarantors; BNP Paribas, as administrative agent; and the other agents and lenders signatory thereto	8-K	10.1	6/21/2011
31.01	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.02	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.01	Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
§101.INS	XBRL Instance Document.				X
§101.SCH	XBRL Taxonomy Extension Schema Document				X
§101.CAL	XBRL Calculation Linkbase Document				X
§101.LAB	XBRL Taxonomy Extension Label Linkbase Document				X
§101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.				X
§101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				X

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