shaw_10q-113012.htm

10-Q 1 shaw_10q-113012.htm FORM 10-Q shaw_10q-113012.htm

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 November 30, 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 December 19, 2012 was 66,663,781 shares.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
Item 1. — Financial Statements
Unaudited Consolidated Statements of Operations — For the Three Months Ended November 30, 2012 and 2011	4
Unaudited Consolidated Statements of Comprehensive Income (Loss) - For the Three Months Ended November 30, 2012 and 2011	5
Consolidated Balance Sheets - November 30, 2012 (Unaudited) and August 31, 2012	6
Unaudited Consolidated Statements of Changes in Shareholders’ Equity – For the Three Months Ended November 30, 2012 and 2011	7
Unaudited Consolidated Statements of Cash Flows – For the Three Months Ended November 30, 2012 and 2011	8
Notes to Unaudited Consolidated Financial Statements	9
Cautionary Statement Regarding Forward-Looking Statements	36
Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. — Quantitative and Qualitative Disclosures About Market Risk	59
Item 4. — Controls and Procedures	59
PART II — OTHER INFORMATION
Item 1. — Legal Proceedings	59
Item 1A. — Risk Factors	60
Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 6. — Exhibits	60
SIGNATURES	61
EXHIBIT INDEX

GLOSSARY OF TERMS

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

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
BNFL	British Nuclear Fuels plc
CAIR	Clean Air Interstate Rule
CAP	Compliance Assurance Process
CCGT	Combined-cycle gas turbine
CIE	Costs and estimated earnings in excess of billings
COL	Combined operating license
CRA	Commercial relationship agreement
CSAPR	Cross-State Air Pollution Rule
DOE	U.S. Department of Energy
E&C	Our Energy & Chemicals segment
E&C Sale	Our divestiture of substantially all of the business of the E&C segment to Technip S.A. effective August 31, 2012
E&I	Our Environmental & Infrastructure segment
EAC	Estimate at completion
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 & Manufacturing segment
Facility	Our unsecured Second Amended and Restated Credit Agreement
FASB	Financial Accounting Standards Board
FEMA	Federal Emergency Management Agency
FIFO	First-in, first-out
GAAP	Accounting principles generally accepted in the United States
IHI	Ishikawajima-Harima Heavy Industries Co., Ltd.
Interest LC	The additional letters of credit 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
LEED	Leadership in Energy and Environmental Design
LIBOR	London Interbank Offered Rate
NEH	Nuclear Energy Holdings LLC, our wholly-owned special purpose acquisition subsidiary
NOx	Nitrogen oxides
Principal LC	A letter of credit established by us for the benefit for NEH related to the principal on the Westinghouse Bonds (defined below).
Put Options	Japanese yen-denominated put option agreements entered into in connection with the acquisition of our Investment in Westinghouse and exercised by NEH on October 6, 2012 to sell the Westinghouse Equity to Toshiba
S&P	Standard & Poor’s
SAR	Stock appreciation rights
Sarbanes-Oxley	Sarbanes-Oxley Act of 2002, as amended
SEC	United States Securities and Exchange Commission
Securities Act	The Securities Act of 1933, as amended
S,G&A	Selling, general and administrative
Shaw-Nass	Shaw-Nass Middle East, W.L.L.
SO2	Sulfur dioxide
Stone & Webster	Stone & Webster, Inc.
Toshiba	Toshiba Nuclear Energy Holdings (US), Inc. and Toshiba Nuclear Energy Holdings (UK), Ltd.
Transaction Agreement	Transaction Agreement by and among Chicago Bridge & Iron Company N.V., Crystal Acquisition Subsidiary Inc and The Shaw Group Inc dated as of July 30, 2012

USACE	U.S. Army Corps of Engineers
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 $1.6 billion as of November 30, 2012) 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

PART I — FINANCIAL INFORMATION

ITEM 1. — FINANCIAL STATEMENTS

THE SHAW GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED NOVEMBER 30, 2012 AND 2011

(In thousands, except per share amounts)

	Three Months Ended
	2012			2011
Revenues	$	1,369,204		$	1,517,603
Cost of revenues		1,254,338			1,397,661
Gross profit		114,866			119,942
Selling, general and administrative expenses		63,699			69,477
Operating income		51,167			50,465
Interest expense		(1,731	)		(1,652	)
Interest expense on Japanese Yen-denominated bonds including accretion and amortization		(9,891	)		(10,410	)
Interest income		1,634			2,152
Foreign currency transaction gains (losses) on Japanese Yen-denominated bonds, net		67,828			25,165
Other foreign currency transaction gains (losses), net		(341	)		2,194
Other income (expense), net		1,048			468
Income (loss) before income taxes and earnings (losses) from unconsolidated entities		109,714			68,382
Provision (benefit) for income taxes		41,795			24,928
Income (loss) before earnings (losses) from unconsolidated entities		67,919			43,454
Income from 20% Investment in Westinghouse, net of income taxes		4,245			5,266
Earnings (losses) from unconsolidated entities, net of income taxes		(1,252	)		1,687
Net income (loss)		70,912			50,407
Less: Net income (loss) attributable to noncontrolling interests		1,143			1,163
Net income (loss) attributable to Shaw	$	69,769		$	49,244

Net income (loss) attributable to Shaw per common share:
Basic	$	1.05		$	0.69
Diluted	$	1.03		$	0.68

Weighted average shares outstanding:
Basic		66,504			71,341
Diluted		67,932			72,485

See accompanying notes to consolidated financial statements.

THE SHAW GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED NOVEMBER 30, 2012 AND 2011

(In thousands)

	Three Months Ended
	2012			2011
Net income (loss)	$	70,912		$	50,407
Currency translation adjustment, net gain (loss) arising during period		(1,205	)		(11,736	)
Equity in unconsolidated entities’ other comprehensive income (loss), net of Shaw’s tax of $(8,124) and $3,957		12,868			(6,321	)
Net derivatives gain (loss) on hedge transactions, net of tax of (2,707) and ($2,979)		4,288			4,758
Defined benefit plans
Change in unrecognized net actuarial pension gains (losses)		370			783
Change in unrecognized net prior service pension costs		—			11
Income taxes on unrecognized defined benefit plans		(85	)		(196	)
Total		285			598
Unrealized gain (loss) on available for sale securities, net of tax of $46 and $11		(73	)		(17	)
Comprehensive income (loss)		87,075			37,689
Less: Comprehensive income (loss) attributable to noncontrolling interests		1,143			1,163
Comprehensive income (loss) attributable to Shaw	$	85,932		$	36,526

See accompanying notes to consolidated financial statements.

THE SHAW GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	November 30, 2012 (Unaudited)			August 31, 2012
ASSETS
Current assets:
Cash and cash equivalents ($74.6 million and $92.2 million related to variable interest entities (VIEs))	$	941,431		$	1,091,883
Restricted and escrowed cash and cash equivalents		12,985			9,187
Short-term investments ($3.0 million and $3.0 million related to VIEs)		255,591			296,732
Restricted short-term investments		19,882			24,161
Accounts receivable, including retainage, net ($45.9 million and $22.7 million related to VIEs)		473,372			416,489
Inventories		277,618			273,784
Costs and estimated earnings in excess of billings on uncompleted contracts, including claims		446,154			492,563
Deferred income taxes		296,447			351,494
Investment in Westinghouse		996,211			968,296
Prepaid expenses and other current assets		69,379			55,837
Total current assets		3,789,070			3,980,426

Investments in and advances to unconsolidated entities, joint ventures and limited partnerships		4,861			6,160
Property and equipment, net of accumulated depreciation of $390.3 million and $376.3 million		504,803			511,677
Goodwill		404,659			404,456
Intangible assets		2,770			2,939
Deferred income taxes		5,153			5,308
Other assets		81,264			96,487
Total assets	$	4,792,580		$	5,007,453

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	592,856		$	683,645
Accrued salaries, wages and benefits		115,038			127,960
Other accrued liabilities		173,021			205,279
Advanced billings and billings in excess of costs and estimated earnings on uncompleted contracts		1,125,461			1,223,991
Japanese Yen-denominated bonds secured by Investment in Westinghouse		1,570,976			1,640,497
Interest rate swap contract on Japanese Yen-denominated bonds		6,375			13,370
Short-term debt and current maturities of long-term debt		10,140			10,416
Total current liabilities		3,593,867			3,905,158
Long-term debt, less current maturities		5,189			5,271
Deferred income taxes		58,444			49,887
Other liabilities		52,565			54,656
Total liabilities		3,710,065			4,014,972

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; 93,227,119 and 93,016,409 shares issued, respectively; and 66,635,878 and 66,425,168 shares outstanding, respectively		1,362,464			1,355,235
Retained earnings		597,140			527,371
Accumulated other comprehensive loss		(123,198	)		(139,361	)
Treasury stock, 26,591,241 and 26,591,241 shares, respectively		(791,868	)		(791,868	)
Total Shaw shareholders’ equity		1,044,538			951,377
Noncontrolling interests		37,977			41,104
Total equity		1,082,515			992,481
Total liabilities and equity	$	4,792,580		$	5,007,453

See accompanying notes to consolidated financial statements.

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		93,016,409		$	1,355,235			91,711,102		$	1,321,278
Exercise of stock options		127,768			2,983			30,040			519
Shares exchanged for taxes on stock based compensation		(44,206	)		(1,945	)		(2,264	)		(50	)
Tax benefit on stock based compensation					1,427			—			37
Stock-based compensation		127,148			4,764			7,390			8,157
Balance November 30		93,227,119		$	1,362,464			91,746,268		$	1,329,941

Retained earnings
Balance September 1				$	527,371					$	328,455
Net income (loss) attributable to Shaw					69,769						49,244
Balance November 30				$	597,140					$	377,699

Accumulated other comprehensive income (loss)
Currency translation adjustment
Balance September 1				$	(26,159	)				$	(3,652	)
Change during year					(1,205	)					(11,736	)
Balance November 30				$	(27,364	)				$	(15,388	)
Equity in unconsolidated entities' pre-tax and other comprehensive income (loss), net of Shaw’s tax
Balance September 1				$	(68,777	)				$	(50,724	)
Change during year					12,868						(6,321	)
Balance November 30				$	(55,909	)				$	(57,045	)
Unrealized gain (loss) on hedging activities
Balance September 1				$	(8,167	)				$	(16,558	)
Change during year					4,288						4,758
Balance November 30				$	(3,879	)				$	(11,800	)
Unrealized net holding gain (loss) on securities
Balance September 1				$	(24	)				$	(50	)
Change during year					(73	)					(17	)
Balance November 30				$	(97	)				$	(67	)
Pension and other postretirement benefit plans
Balance September 1				$	(36,234	)				$	(33,938	)
Change during year					285						598
Balance November 30				$	(35,949	)				$	(33,340	)
Balance November 30				$	(123,198	)				$	(117,640	)

Treasury stock at cost
Balance September 1		(26,591,241	)	$	(791,868	)		(20,404,720	)	$	(639,704	)
Purchases under repurchase plans		—			—			—			—
Shares exchanged for taxes on stock-based compensation		—			—			(954	)		(21	)
Balance November 30		(26,591,241	)	$	(791,868	)		(20,405,674	)	$	(639,725	)

Total Shaw shareholders’ equity at November 30				$	1,044,538					$	950,275

Noncontrolling interests
Balance September 1				$	41,104					$	32,147
Net income (loss)					1,143						1,163
Distributions to noncontrolling interests					(4,270	)					(900	)
Contributions from noncontrolling interests					—						3,075
Adjustment for deconsolidation of VIE(s)					—						—
Balance November 30				$	37,977					$	35,485

Total equity at November 30				$	1,082,515					$	985,760

See accompanying notes to consolidated financial statements.

THE SHAW GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED NOVEMBER 30, 2012 AND 2011

(In thousands)

	2012			2011
Cash flows from operating activities:
Net income (loss)	$	70,912		$	50,407
Adjustments to reconcile net gain (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		16,859			18,501
(Benefit from) provision for deferred income taxes		49,505			17,009
Stock-based compensation expense		11,653			9,870
(Earnings) losses from unconsolidated entities, net of taxes		(2,993	)		(6,953	)
Distributions from unconsolidated entities		832			2,128
Taxes paid upon net-share settlement of equity awards		(1,945	)		(50	)
Excess tax benefits from stock based compensation		(1,423	)		(112	)
Foreign currency transaction (gains) losses, net		(67,487	)		(27,359	)
Other noncash Items		281			995
Changes in assets and liabilities, net of effects of acquisitions and consolidation of variable interest entities:
(Increase) decrease in accounts receivables		(59,182	)		36,658
(Increase) decrease in costs and estimated earnings in excess of billings on uncompleted contracts, including claims		45,260			12,501
(Increase) decrease in inventories		(3,931	)		(18,912	)
(Increase) decrease in other current assets		(1,110	)		25,972
Increase(decrease) in accounts payable		(93,075	)		(78,155	)
Increase (decrease) in accrued liabilities		(52,357	)		(44,724	)
Increase (decrease) in advanced billings and billings in excess of costs and estimated earnings on uncompleted contracts		(98,589	)		(128,628	)
Net change in other assets and liabilities		3,079			(10,044	)
Net cash provided by (used in) operating activities	$	(183,711	)	$	(140,896	)

Cash flows from investing activities:
Purchases of property and equipment		(10,062	)		(24,307	)
Proceeds from sale of businesses and assets, net of cash surrendered		772			1,599
Investment(s) in unconsolidated subs		(1,529	)		—
Cash deposited into restricted and escrowed cash		(8,556	)		(10,010	)
Cash withdrawn from restricted and escrowed cash		9,188			17,608
Purchases of short-term investments		(129	)		(75,104	)
Proceeds from sale and redemption of short-term investments		41,010			58,003
Purchases from sale of restricted short term investments		(19	)		—
Proceeds from sale of restricted short term investments		—			138,851
Net cash provided by (used in) investing activities	$	30,675		$	106,640

Cash flows from financing activities:
Purchase of treasury stock		—			(21	)
Repayment of debt and capital leases		(104	)		(85	)
Payment of deferred financing costs		—			(16	)
Issuance of common stock		2,983			519
Excess tax benefits from exercise of stock options and vesting of restricted stock		1,423			112
Contributions received from noncontrolling interest		—			3,075
Distributions paid to noncontrolling interest		(4,270	)		(900	)
Net cash provided by (used in) financing activities	$	32		$	2,684

Effects of foreign exchange rate changes on cash		2,552			(5,462	)
Net change in cash and cash equivalents	$	(150,452	)	$	(37,034	)

Cash and cash equivalents — beginning of period	$	1,091,883		$	674,080
Cash and cash equivalents — end of period	$	941,431		$	637,046

See accompanying notes to consolidated financial statements

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, the Company, 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, and U.S. Government agencies. We have developed and acquired significant intellectual property, including induction pipe bending technology and environmental decontamination technologies. 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 November 30, 2012 and for the three month periods ended November 30, 2012 and 2011, are unaudited. The consolidated balance sheet as of August 31, 2012, was derived from the audited balance sheet filed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2012 (2012 Form 10-K). In management’s opinion, all adjustments necessary for a fair presentation of the Company’s consolidated financial statements for the interim and prior 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 2012 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;

•	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 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, 2013.

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.

On August 31, 2012, we completed our divestiture of substantially all of the business of the E&C segment to Technip S.A. (the “E&C Sale”). The financial statements for the three month period ended November 30, 2011 include operations that were sold in the E&C Sale, whereas the financial statements as of and for the three month period ended November 30, 2012 and the consolidated balance sheet as of August 31, 2012 do not include these sold operations.

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 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 also required an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. However, in December 2011, the FASB issued ASU 2011-12 – Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which effectively deferred the ASU 2011-05 requirements related to the presentation of reclassification adjustments. We adopted ASU 2011-05 and ASU 2011-12 effective September 1, 2012. The adoption of ASU 2011-05 and ASU 2011-12 did not have an 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. We adopted ASU 2011-08 effective September 1, 2012. The adoption of ASU 2011-08 did not have an impact on our consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02 – Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 provides an entity the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. If an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. We adopted ASU 2012-02 effective September 1, 2012. The adoption of ASU 2012-02 did not have a material impact on our consolidated financial statements.

Proposed Transaction Agreement

We currently expect to complete the Transaction during the first quarter of calendar 2013. The CB&I shareholders approved the Transaction on December 18, 2012 and our shareholders approved the Transaction on December 21, 2012. The Transaction is also subject to a pending regulatory approval.

The Transaction is also subject to a number of additional conditions, including, but not limited to, the consummation of the sale to Technip S.A. of substantially all of the E&C business, which was completed on August 31, 2012; the valid exercise of the Westinghouse Put Options, which were exercised on October 6, 2012; our possession of at least $800 million of unrestricted cash (as “Unrestricted Cash” is defined in the Transaction Agreement), as of the closing date; EBITDA ( “Company EBITDA” as defined in the Transaction Agreement) for the period of four consecutive fiscal quarters ending prior to the closing date of the Transaction of not less than $200 million; and net indebtedness for borrowed money (“Net Indebtedness for Borrowed Money” as defined in the Transaction Agreement) not exceeding $100 million as of the closing date of the Transaction.

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

All short-term investments consist of highly liquid investments which can be promptly converted to cash or cash equivalents, without restriction. 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.

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. Any losses in this category are primarily due to market liquidity.

At November 30, 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	$	799,108	$	—	$	—		$	799,108	$	799,107	$	—
Money market mutual funds		63,327		—		—			63,327		63,327		—
Certificates of deposit		293,200		—		(690	)		292,510		78,997		213,514
Available-for-sale securities:
Bond mutual funds		20,863		—		(237	)		20,626		—		20,626
Corporate bonds		21,366		86		(1	)		21,451		—		21,451
Total	$	1,197,864	$	86	$	(928	)	$	1,197,022	$	941,431	$	255,591

At August 31, 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	$	932,628	$	—	$	—		$	932,628	$	932,628	$	—
Money market mutual funds		154,982		—		—			154,982		154,982		—
Certificates of deposit		257,766		—		—			257,766		4,273		253,493
Available-for-sale securities:
Bond mutual funds		20,734		—		(69	)		20,665		—		20,665
Corporate bonds		22,537		46		(9	)		22,574		—		22,574
Total	$	1,388,647	$	46	$	(78	)	$	1,388,615	$	1,091,883	$	296,732

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 months ended November 30, 2012 and 2011, the proceeds and realized gains and losses were as follows (in thousands):

	2012		2011
Proceeds	$	1,010	$	5,617
Realized gains	$	10	$	1
Realized losses	$	—	$	—

There were no transfers of securities between available-for-sale and trading classifications during the three months ending November 30, 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 months ended November 30, 2012 or 2011.

At November 30, 2012, maturities of corporate bonds classified as available-for-sale were as follows (in thousands):

	Cost Basis		Estimated Fair Value
Due in one year or less	$	12,144	$	12,161
Due in one to two years		9,222		9,290
Total	$	21,366	$	21,451

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

At November 30, 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 (Loss)			Restricted and Escrowed Cash and Cash Equivalents		Restricted Short-term Investments
Cash	$	2,573	$	—		$	2,573	$	—
Money market mutual funds		10,412		—			10,412		—
Trading securities:
Stock and bond mutual funds		8,582		607			—		8,582
U.S. government and agency securities		600		(17	)		—		600
Corporate bonds		10,700		(453	)		—		10,700
Total	$	32,867	$	137		$	12,985	$	19,882

At August 31, 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 (Loss)			Restricted and Escrowed Cash and Cash Equivalents		Restricted Short-term Investments
Cash	$	3,259	$	—		$	3,259	$	—
Money market mutual funds		5,928		—			5,928		—
Certificates of deposit		—		—			—		—
Trading securities:
Stock and bond mutual funds		9,506		692			—		9,506
U.S. government and agency securities		603		(14	)		—		603
Corporate bonds		14,052		(529	)		—		14,052
Total	$	33,348	$	149		$	9,187	$	24,161

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

	November 30, 2012		August 31, 2012
Contractually required by projects	$	996	$	1,628
Voluntarily used to secure letters of credit		—		—
Secure contingent obligations in lieu of letters of credit		—		—
Assets held in trust and other		31,871		31,720
Total	$	32,867	$	33,348

We may voluntarily cash collateralize certain letters of credit if the bank fees avoided on those letters of credit exceed the return on other investment opportunities, as we have done so in prior years. However, we had no such collateralization as of November 30, 2012 and August 31, 2012.

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 November 30, 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	$	213,514		$	—	$	213,514	$	—
Stock and bond mutual funds (a)		29,208			29,208		—		—
U.S. government and agency securities		600			—		600		—
Corporate bonds		32,151			—		32,151		—
Total	$	275,473		$	29,208	$	246,265	$	—

Liabilities:
Interest rate swap contract	$	6,375		$	—	$	6,375	$	—
Derivatives Not Designated as Hedging Instruments:
Other Current Assets
Foreign currency forward assets	$	401		$	—	$	401	$	—
Other Accrued Liabilities
Foreign currency forward liabilities	$	1		$	—	$	1	$	—

(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, 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	$	253,493		$	—	$	253,493	$	—
Stock and bond mutual funds (a)		30,171			30,171		—		—
U.S. government and agency securities		603			—		603		—
Corporate bonds		36,626			—		36,626		—
Total	$	320,893		$	30,171	$	290,722	$	—

Liabilities:
Interest rate swap contract	$	13,370		$	—	$	13,370	$	—
Derivatives Not Designated as Hedging Instruments:
Other Current Assets
Foreign currency forward assets	$	1,482		$	—	$	1,482	$	—
Other Accrued Liabilities
Foreign currency forward liabilities	$	158		$	—	$	158	$	—

(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.

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.

·	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.

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.

See Note 8 – Goodwill and Other Intangibles for information regarding assets measured at fair value on a non-recurring basis.

Effects of Derivative Instruments on Income and Other Comprehensive Income

Gains and losses related to derivative instruments have been recognized as follows (in millions):

		November 30,
	Location of Gain (Loss) Recognized in Income on Derivatives	2012			2011
Derivatives Designated as Hedging Instruments:
Interest rate swap contract	Other comprehensive income (loss)	$	4.3		$	4.8
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Other foreign currency transactions gains (losses), net	$	(0.4	)	$	(2.7	)

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

Accounts Receivable

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

	November 30, 2012		August 31, 2012
Trade accounts receivable, net	$	458,432	$	405,061
Unbilled accounts receivable		7,701		821
Retainage		7,239		10,607
Total accounts receivable, including retainage, net	$	473,372	$	416,489

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

	2012
Beginning balance, September 1	$	16,804
Increased provision		2,560
Write offs		(1,652	)
Recovery		(204	)
Other		(109	)
Ending balance, November 30	$	17,399

Included in our trade accounts receivable, net at November 30, 2012 and August 31, 2012, 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 challenged the appropriateness of our invoiced amounts, but recently we reached an agreement with the entity that, if the terms are met, will resolve the collection of outstanding invoices and the litigation. Pursuant to this agreement, the local government entity has submitted a request for federal funding necessary to satisfy the net outstanding accounts receivable amount. While the terms of the agreement are in place, the litigation with the government entity has been stayed for up to nine months. The amounts we ultimately collect could differ materially from amounts currently recorded.

Concentrations of Credit

Amounts due from U.S. government agencies or entities were $41.0 million and $51.0 million at November 30, 2012, and August 31, 2012, respectively. Costs and estimated earnings in excess of billings on uncompleted contracts include $218.5 million and $242.8 million at November 30, 2012, and August 31, 2012, respectively, related to the U.S. government agencies and related entities.

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):

	November 30, 2012						August 31, 2012
	Weighted Average		FIFO		Total		Weighted Average		FIFO		Total
Raw materials	$	14,742	$	145,094	$	159,836	$	19,355	$	139,178	$	158,533
Work in process		2,952		34,776		37,728		3,679		30,278		33,957
Finished goods		80,054		—		80,054		81,294		—		81,294
Total	$	97,748	$	179,870	$	277,618	$	104,328	$	169,456	$	273,784

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 its subsidiaries and Toshiba Nuclear Energy Holdings (UK), Ltd. and its 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 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, 128.98 billion JPY (equivalent to approximately $1.08 billion at the time of issuance) 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 required us to exercise the Put Option on the date that is 160 days prior to March 15, 2013, (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.

On October 6, 2012, NEH exercised its Put Options to sell the Westinghouse Equity to Toshiba. Under the terms of the put option agreements, the Put Options will be cash settled 90 days thereafter, on January 4, 2013, with the proceeds deposited in trust to fund retirement of the Westinghouse Bonds on March 15, 2013.

The Put Options exercise price is JPY-denominated, so the trust will receive approximately 124.7 billion JPY. 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 U.S. 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).

Commercial Relationship Agreement

In connection and concurrent with the acquisition of our investment in Westinghouse, we executed a commercial relationship agreement (Westinghouse CRA) that provided 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. 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. The Westinghouse CRA terminated upon exercise of the Put Options on October 6, 2012.

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 $119.4 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. We will be entitled to receive dividends associated with our Westinghouse investment until the settlement of the Put Option, January 4, 2013. However, any dividend shortfall will continue to be payable to us. At November 30, 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 $52.4 million at November 30, 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 $18.2 million at November 30, 2012, for the benefit of NEH related to interest on the Westinghouse Bonds (the Interest LC). The Interest LC automatically renewed in declining amounts equal to the interest remaining to be paid over the life of the Westinghouse Bonds, until we exercised the Put Options on October 6, 2012, which requires the payment of the Westinghouse Bonds. 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.

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. Accordingly, we analyzed all of our VIEs at November 30, 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):

	November 30, 2012		August 31, 2012
Cash and cash equivalents	$	74,569	$	92,176
Net accounts receivable		45,894		22,664
Other current assets		154,246		185,124
Non-current assets		47,845		57,277
Total assets	$	322,554	$	357,241

Accounts and subcontractors payable	$	64,629	$	69,619
Billings in excess of costs and accrued earnings		23,747		24,315
Accrued expenses and other		108,159		101,826
Total liabilities	$	196,535	$	195,760

Total revenues of the consolidated ventures were $195.3 and $206.0 million for the three months ended November 30, 2012 and 2011, respectively.

For the three months ended November 30, 2012 and 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 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, net of income taxes, in our consolidated statements of operations.

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 November 30, 2012. We expect to continue accounting for this investment under the equity method until the put is settled and our investment is sold on or before January 4, 2013.

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 months ended September 30, 2012, and September 30, 2011, are included in our financial results for the three months ended November 30, 2012 and 2011, respectively.

Summarized unaudited income statement information for Westinghouse, before applying our Westinghouse Equity Interest, was as follows (in thousands):

	Three Months Ended
Statements of Operations	September 30, 2012 (unaudited)		September 30, 2011 (unaudited)
Revenues	$	1,183,516	$	1,082,174
Gross profit		223,690		221,274
Income from continuing operations before income taxes		37,608		44,626
Net income attributable to shareholders		38,292		42,814

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 Percentage			November 30, 2012		August 31, 2012
Investment in Westinghouse		20%		$	996,211	$	968,296
Other	5%	-	50%		4,861		6,160
Total investments in and advances to unconsolidated entities, joint ventures and limited partnerships				$	1,001,072	$	974,456

Earnings (losses) from unconsolidated entities, net of income taxes, are summarized as follows (in thousands):

	Three Months Ended
	2012			2011
Investment in Westinghouse, net of income taxes of $2,680 and $3,297, respectively	$	4,245		$	5,266
Other unconsolidated entities, net of income taxes of $(750) and $1,057, respectively		(1,252	)		1,687
Total earnings (losses) from unconsolidated entities, net income of taxes	$	2,993		$	6,953

In fiscal year 2012, the Company teamed with NET Power, Exelon and Toshiba to begin development of a new gas-fired power generation technology called NET Power that will produce cost-effective power with little to no air emissions. The new technology is based on a high-pressure supercritical carbon dioxide oxyfuel power cycle. The primary byproduct is pipeline quality, high-pressure carbon dioxide, which can be used for enhanced oil recovery. We will acquire up to 50 percent of the NET Power LLC through a commitment to invest up to $50.4 million, contingent upon demonstration of technological feasibility, and will have exclusive rights to engineer, procure and construct NET Power plants. During fiscal year 2012, we invested $2.5 million pre-tax, including $2.3 million in cash and $0.2 million in in-kind engineering services. In the first quarter of fiscal year 2013, we invested an additional $1.5 million pre-tax for a 9.1% interest in NET Power LLC, including $1.2 million in cash and $0.3 million in in-kind engineering services. These cash and in-kind contributions were impaired and recorded as a component of loss from unconsolidated subsidiaries in the period invested, as technological feasibility associated with the development project has not been established.

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. During the three months ended November 30, 2012, no events occurred that indicated our goodwill might be impaired.

The following table reflects the changes in the carrying value of goodwill by segment from August 31, 2012 to November 30, 2012 (in thousands):

	Power		Plant Services		E&I			F&M		Total
Balance at August 31, 2012	$	139,177	$	42,027	$	206,888		$	16,364	$	404,456
Acquisitions and related adjustments		—		—		—			—		—
Currency translation adjustment		—		—		(80	)		283		203
Balance at November 30, 2012	$	139,177	$	42,027	$	206,808		$	16,647	$	404,659

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 $43.3 million and $46.5 million at November 30, 2012 and August 31, 2012, 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.

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, 2012	$	2,658		$	(2,028	)	$	4,954		$	(2,645	)
Currency translation adjustments		(1	)		(2	)		(5	)		(104	)
Amortization		—			(57	)		—			—
Balance at November 30, 2012	$	2,657		$	(2,087	)	$	4,949		$	(2,749	)

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 2013	$	272	$	314
2014		163		419
2015		90		419
2016		45		419
2017		—		419
Thereafter		—		210
Total	$	570	$	2,200

Note 9 — Debt and Revolving Lines of Credit

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

	November 30, 2012				August 31, 2012
	Short-term		Long-term		Short-term		Long-term
0%-3.7% interest vendor financing contracts, 2.3%-3.7% imputed interest, due December 2012-December 2013	$	6,253	$	5,010	$	6,586	$	4,982
Debt of consolidated joint venture: 6% interest, due January 2013		3,450		—		3,400		—
Capital lease obligations		437		179		430		289
Subtotal	$	10,140	$	5,189	$	10,416	$	5,271
Westinghouse Bonds (see description below)		1,570,976		—		1,640,497		—
Total	$	1,581,116	$	5,189	$	1,650,913	$	5,271

Westinghouse Bonds

On October 13, 2006, NEH, our wholly owned, special purpose subsidiary, issued JPY 128.98 billion (equivalent to approximately $1.1 billion at the time of issuance) 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 Options between NEH and Toshiba and the Principal LC and Interest LC, which cover interest owed to bond holders and the 3.3% principal exposure.

The holders of the Westinghouse Bond had 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 had an opportunity to direct us to exercise the Put Options, through which we would have received the pre-determined JPY-denominated put price whose proceeds must be used 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 have passed a resolution instructing the bond trustee to direct us to exercise the Put Options.

Because the holders of the bonds had 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 October 6, 2012, NEH exercised its Put Options to sell the Westinghouse Equity to Toshiba. Under the terms of the put option agreements, the Put Options will be cash settled on or before January 4, 2013 with the proceeds deposited in trust to fund retirement of the Westinghouse Bonds on 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 for JPY 124.7 billion, which was approximately $1,519.1 million at November 30, 2012. NEH will fund the 3.3 percent shortfall of the principal amount of the bonds of JPY 4.3 billion, which was approximately $51.9 million at November 30, 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 November 30, 2012, from an early exercise of the Put Options, the gain would have been approximately $430.1 million pre-tax. The actual gain or loss will be determined at settlement.

Because any proceeds from the repurchase of the Westinghouse Equity (including funds received in connection with settlement of the Put Options) must be used to repay the Westinghouse Bonds, ultimate settlement of the Westinghouse Bonds 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 November 30, 2012, and August 31, 2012 were 82.1 and 78.6.

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

	November 30, 2012		August 31, 2012
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 (0.30% at November 30, 2012)		653,125		653,125
Increase in debt due to foreign currency transaction adjustments since date of issuance		490,976		560,497
Total Westinghouse debt	$	1,570,976	$	1,640,497

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 November 30, 2012 and August 31, 2012, the fair value of the swap totaled approximately $6.4 million and $13.4 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 three months ended November 30, 2012.

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 November 30, 2012 the amount of the Facility available for financial letters of credit and/or revolving credit loans was $888.5 million, which is equal to the lesser of: (i) $1,218.0 million, representing the total Facility commitment ($1,450.0 million) less outstanding performance letters of credit ($150.8 million) less outstanding financial letters of credit ($81.2 million); (ii) $1,168.8 million, representing the Facility sublimit of $1,250.0 million less outstanding financial letters of credit ($81.2 million); or (iii) $888.5 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 Facility also contains certain restrictions regarding share repurchases. While we continue to have an open authorization from our Board to repurchase up to $326.1 million in shares, subject to Facility limitations, the Transaction Agreement contains covenants that further restrict our ability to repurchase shares.

The total amount of fees associated with letters of credit issued under the Facility were approximately $1.8 million and $2.0 million for the three months ended November 30, 2012 and 2011, respectively, which includes commitment fees associated with unused credit line availability of approximately $0.9 million and $0.9 million, respectively.

For the three months ended November 30, 2012 and 2011, we recognized $0.6 million and $0.6 million, respectively, of interest expense associated with the amortization of financing fees related to our Facility. At November 30, 2012 and August 31, 2012, unamortized deferred financing fees related to our Facility were approximately $8.7 million and $9.4 million, respectively.

At November 30, 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 November 30, 2012, Shaw-Nass had no borrowings under its revolving line of credit and approximately $0.7 million in outstanding bank guarantees under the Bahrain facility. The interest rate applicable to any borrowings is a variable rate (1.25% at November 30, 2012) plus 3.00% per annum. We have provided a 50% guarantee related to the Bahrain facility.

We have uncommitted, unsecured standby letter of credit facilities with banks outside of our Facility. Fees under these facilities are paid quarterly. At November 30, 2012 and August 31, 2012, there were $82.5 million of letters of credit outstanding under these facilities.

Note 10 — Income Taxes

Our consolidated effective tax rate was 38% and 36% as applied to income (loss) before income taxes and earnings (losses) from unconsolidated entities for the first quarter of fiscal years 2013 and 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 2013 annual effective tax rate, excluding discrete items, applicable to forecasted income before income taxes and earnings (losses) from unconsolidated entities to be approximately 37%. 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.

As of November 30, 2012, our unrecognized tax benefits were $6.5 million, of which $6.5 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.

The IRS is now in the process of conducting audits of fiscal year 2011 under a limited focused examination and fiscal year 2012 under its Compliance Assurance Process (CAP). 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.

We do not believe there will be significant changes in our unrecognized tax benefits within the next 12 months.

Note 11 — Share-Based Compensation

During the three months ended November 30, 2012 and 2011, we granted 179,068 and 355,325 restricted stock units (RSUs), respectively, at a weighted-average grant date fair value of $43.50 and $23.25 per RSU, respectively, with vesting over three years. Compensation expense for RSUs is based on the closing price of our stock at the grant date.

During the three months ended November 30, 2012 and 2011, we granted 338,649 and 688,411 cash-settled restricted stock units (CS RSUs), respectively, at a weighted-average grant date fair value of $43.49 and $23.25 per CS RSU, respectively, with vesting over three years. The CS RSUs are classified as liability awards due to the settlement of these awards in cash. The CS RSUs are re-measured using the closing price of our stock on the last business day of each reporting period.

We did not award any options during the three months ended November 30, 2012 and 2011; however, previously awarded options were exercised for the purchase of 127,768 shares and 30,040 shares, respectively, at a weighted-average exercise price of $23.35 per share and $17.28 per share, respectively.

We did not award any cash-settled stock appreciation rights (SARs) during the three months ended November 30, 2012 and 2011; however, previously awarded SARs totaling 15,389 were exercised during the three months ended November 30, 2012 at a weighted-average exercise price of $30.56 per share. We did not have any SAR exercises during the three months ended November 30, 2011. The SARs are classified as liability awards due to the settlement of these awards in cash. The Binomial valuation model is used to re-measure the fair value of the SARs at the end of each reporting period.

During the three months ended November 30, 2012 and 2011, we awarded 5,377,146 and 11,661,500 performance cash units (PCUs), respectively, at a weighted average grant date fair value of $1.07 and $1.10 per PCU, respectively. The PCUs granted in fiscal year 2013 vest at the end of the three year performance period. The PCUs granted in fiscal year 2012 vest at different intervals during the three year performance period, with 25% vesting at the end of the first and second years/performance periods and 50% vesting at the end of the third year/performance period. 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 depending on the level of performance achieved. The PCUs are classified as liability awards due to the settlement of these awards in cash. The fair value of the 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 Monte Carlo simulation model is also used to re-measure the fair value of the PCUs at the end of each reporting period. For the performance period ended August 31, 2012, PCU recipients earned 200% of their target award amounts. $5.2 million was paid out in October 2012 related to the fiscal year 2012 performance cycle.

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 awards, see Note 13 — Share-Based Compensation of our consolidated financial statements in our 2012 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 20 – 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. 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 collected in excess of $40 million in outstanding receivables from Xcel Energy, which effectively closed this matter.

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 were 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, which effectively closed this matter with our client. However, we continue to seek partial recovery from our insurers.

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.

Following our announcement of the signed Transaction Agreement, several shareholders filed purported class action lawsuits against Shaw, its directors, CB&I, and in some cases, against CB&I’s acquisition subsidiary. On October 17, 2012, the actions were consolidated and on November 3, 2012, plaintiffs filed their Consolidated Amended Class Action Complaint. The plaintiffs generally allege breach of fiduciary duties to Shaw shareholders because of, among other claims, inadequate consideration to be paid by CB&I for Shaw common stock and an allegedly flawed negotiation process. On November 27, 2012, Shaw and its directors filed peremptory exceptions seeking dismissal of the action and on November 30, 2012 CB&I likewise filed peremptory exceptions seeking dismissal. Also on November 27, 2012, the plaintiffs filed a motion for temporary injunction to enjoin the shareholder vote on the transaction. The court set both the exceptions and the motion for temporary injunction for hearing on December 19, 2012. On December 13, 2012, the parties entered into a Memorandum of Understanding (MOU) reflecting an agreement in principle to settle all claims against all defendants in the lawsuit. Under the terms of the MOU, the plaintiff class will release all claims against all defendants. In exchange, Shaw will make certain additional disclosures in a supplement to its definitive proxy statement filed with the Securities and Exchange Commission and voluntarily waive or modify certain requirements under Louisiana law with respect to shareholders’ dissenting rights, including waiving the requirement that dissenters rights are only available if the transaction is approved by less than eighty percent of Shaw’s total voting power. The defendants have also agreed to pay plaintiffs’ attorneys’ fees and costs associated with pursuing their claims. The settlement is subject to submission of final settlement documents and court approval.

On August 31, 2012, Shaw Canada L.P., Stone & Webster Canada Holdings One Inc., and Stone & Webster Canada Holdings Two (N.S.) ULC (“Toronto Operations”) filed for bankruptcy, and Shaw ceased financial support of the Toronto Operations. On December 20, 2012, lawyers acting on behalf of a group of former employees apparently filed a lawsuit in Ontario Superior Court against Shaw. We have not been served and have not had the opportunity to fully evaluate the merit of the claims. As such, we have not been able to reasonably estimate the possible loss or range of loss, if any, arising from this lawsuit.

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 $314.6 million and $329.6 million at November 30, 2012 and August 31, 2012, respectively. Of the amount of outstanding letters of credit at November 30, 2012, $180.9 million are performance letters of credit issued to our clients. Of the $180.9 million, five clients held $166.0 million or 91.8% of the outstanding letters of credit. The largest letter of credit issued to a single client on a single project is $49.7 million.

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.

At November 30, 2012 and August 31, 2012, we maintained a liability of $8.9 million associated with certain lease obligations in connection with the deconsolidation of our Toronto-based operations.

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 November 30, 2012 and August 31, 2012, our E&I segment had approximately $1.1 million and $1.2 million, respectively, of environmental liabilities recorded in other liabilities in the accompanying balance sheets. LandBank environmental liability exposure beyond that which is recorded and covered by insurance, if any, 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 months ended November 30, 2012 and 2011, were as follows (in thousands):

	Three Months Ended
	2012		2011

Basic		66,504		71,341
Diluted:
Stock options		1,023		456
Restricted stock		405		688
Diluted		67,932		72,485

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
	2012		2011

Stock options		406		2,371
Restricted stock		—		643

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 months ended November 30, 2012 and November 30, 2011(in thousands):

	Three Months Ended
	2012			2011
Service cost	$	—		$	19
Interest cost		1,628			1,974
Expected return on plan assets		(1,994	)		(2,074	)
Amortization of net loss		370			774
Other		—			11
Total net pension expense	$	4		$	704

We expect to contribute $2.5 million to our pension plans in fiscal year 2013. As of November 30, 2012, we have made $0.8 million in contributions to these plans.

Note 15 — Related Party Transactions

The following tables summarize the related party transactions with unconsolidated entities included in our consolidated financial statements for the three months ended November 30, 2012 and 2011 and at November 30, 2012 and August 31, 2012 (in thousands):

	Three Months Ended
	2012		2011
Westinghouse related	$	9,761	$	1,731
Other		4,961		3,856
Total revenue from unconsolidated entities	$	14,722	$	5,587


	November 30, 2012		August 31, 2012
Westinghouse related	$	169	$	266
Other		2,961		3,994
Total accounts and other receivables from unconsolidated entities	$	3,130	$	4,260

	November 30, 2012		August 31, 2012
Westinghouse related	$	66,051	$	57,982
Other		1,739		1,322
Total costs and estimated earnings in excess of billings on uncompleted contracts from unconsolidated entities	$	67,790	$	59,304

	November 30, 2012		August 31, 2012
Westinghouse related	$	—	$	19
Other		—		—
Total advances to unconsolidated entities	$	—	$	19

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 7 – Equity Method Investments and Variable Interest Entities).

Note 16 —Accounting for Claims, Unapproved Change Orders 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. We believe the terms of such contracts indicate costs are to be reimbursed by our clients. However, we typically process change notice requests to document agreement as to scope and price and thereby mitigate potential exposure relative to costs incurred in excess of agreed upon contract value. Due to the nature of these items, we have not classified and disclosed costs incurred in excess of agreed upon contract value as unapproved change orders.

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 November 30, 2012, and November 30, 2011, and excludes all unrecorded amounts and non-significant unapproved change orders and claims.

	Fiscal Year 2013			Fiscal Year 2012
Amounts included in project estimates-at-completion at September 1	$	381.4		$	448.3
Changes in estimates-at-completion		3.1			9.6
Approved by clients		(1.0	)		(8.7	)
Amounts included in project estimates-at-completion at November 30 for unapproved change orders and claims	$	383.5		$	449.2
Amounts recorded in revenues (or reductions to contract costs) on a percentage-of-completion basis at November 30	$	95.3		$	116.6

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.

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 in Georgia. Under the provisions of this contract, we have entered into a formal dispute resolution process on certain claims associated with backfill activities, shield building, large structural modules and COL issuance delays included within construction costs at the site. As provided in the contract, as of November 30, 2012, we have received a partial funding payment from our customer of $29.0 million related to the backfill costs and $96 million related to the COL issuance delays while the dispute resolution process continues. These amounts are included in billings in excess of costs and estimated earnings on uncompleted contracts. Should we not prevail in these disputes, we may be required to repay a portion or all of these amounts. We continue to discuss with our client the impact of other elements of unapproved change orders associated with this project. Should those matters in Georgia proceed to formal dispute resolution, our contract calls for the clients to co-fund our costs until the matters are resolved.

In connection with our consortium agreement for the design and construction of two domestic nuclear power reactors in South Carolina, we reached an 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 agreement, these costs have been excluded from the total of unapproved change orders presented above.

We believe the amounts included in the table above related to all of our AP1000 nuclear and other 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.

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 pipe, steel and modular fabrication and assembly and certain engineering 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”) wherein WEC has the obligation, in addition to obligations under the original consortium agreement, 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, even when we are seeking recovery from the client. 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, including construction related expenses, resulting from the design changes and delays in issuance of the COLs would be considered within this cost sharing mechanism. As of November 30, 2012, we estimate that our recovery under these consortium agreements and the related WEC MOU is approximately $293.0 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 the ordinary course of business, the Company enters into various agreements 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.

In general, if we collect amounts differing from the amounts that we have recorded as unapproved change orders/claims receivable on any of our projects, that difference will be reflected in the estimate at completion (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 and E&I segments. Therefore, the gross profit in those segments may be significantly influenced by these project incentives.

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 have been achieved. We generally 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 November 30, 2012, and August 31, 2012, our project EACs included approximately $67.7 million and $78.2 million, respectively, related to estimates of amounts we expect to earn on incentive fee arrangement. We have recorded $40.7 million and $48.0 million as of November 30, 2012, and August 31, 2012, 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); Fabrication and Manufacturing (F&M); Energy and Chemicals (E&C); 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. During the fourth quarter of fiscal year 2012, the consulting business that previously resided in our E&C segment, was incorporated into our E&I segment. The move of this business did not change the overall composition of the E&I segment, as it is not dissimilar to other consulting business already in the E&I segment. The transfer was also not material in relation to any previously filed segment reporting financial information. Therefore, the prior periods were not recasted to reflect this change.

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.

On August 31, 2012, we completed the E&C Sale. Remaining in the E&C segment as of November 30, 2012, are our obligations under an engineering, procurement and construction contract associated with a large ethylene plant in southeast Asia that is in a loss position and nearing completion. The total loss associated with this project estimated at completion was $189.6 million as of November 30, 2012. Also retained was the consulting business, which was incorporated into our E&I segment as discussed above.

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.

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 months ended November 30, 2012 and November 30, 2011 (in millions except percentages):

	Three Months Ended
	2012			2011
Revenues:
Power	$	383.8		$	494.7
Plant Services		350.1			295.1
E&I		404.1			459.4
F&M		145.2			105.3
E&C		86.0			163.1
Corporate		—			—
Total revenues	$	1,369.2		$	1,517.6
Gross profit:
Power	$	24.9		$	27.0
Plant Services		30.9			23.0
E&I		33.6			37.7
F&M		25.8			16.5
E&C		(0.4	)		15.3
Corporate		0.1			0.4
Total gross profit	$	114.9		$	119.9

Gross profit percentage:
Power		6.5	%		5.5	%
Plant Services		8.8			7.8
E&I		8.3			8.2
F&M		17.8			15.7
E&C		(0.5	)		9.4
Corporate	NM			NM
Total gross profit percentage		8.4	%		7.9	%

Selling, general and administrative expenses:
Power	$	10.4		$	9.7
Plant Services		2.8			2.5
E&I		17.5			18.4
F&M		9.9			9.2
E&C		3.8			12.1
Investment in Westinghouse		0.1			0.2
Corporate		19.2			17.4
Total selling, general and administrative expense	$	63.7		$	69.5

Income (loss) before income taxes and earnings from unconsolidated entities:
Power	$	14.6		$	17.6
Plant Services		28.2			20.5
E&I		16.3			19.6
F&M		15.8			8.5
E&C		(4.8	)		4.6
Investment in Westinghouse		57.8			14.6
Corporate		(18.2	)		(17.0	)
Total income (loss) before income taxes and earnings from unconsolidated entities	$	109.7		$	68.4

NM — Not Meaningful

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

	November 30, 2012			August 31, 2012
Assets
Power	$	1,920.5		$	2,009.0
Plant Services		379.8			346.5
E&I		1,145.6			1,129.6
F&M		684.5			695.4
E&C		565.4			586.7
Investment in Westinghouse		1,187.4			1,216.9
Corporate		213.6			245.9
Total segment assets		6,096.8			6,230.0
Elimination of investment in consolidated subsidiaries		(587.2	)		(587.3	)
Elimination of intercompany receivables		(717.0	)		(635.2	)
Income taxes not allocated to segments		—			—
Total consolidated assets	$	4,792.6		$	5,007.5

Major Clients

Revenues related to U.S. government agencies or entities owned by the U.S. government were approximately $279.9 million and $320.7 for the three months ended November 30, 2012 and 2011, respectively, representing approximately 20% and 21% of our total revenues, respectively.

Note 18 — Supplemental Cash Flow Information

Supplemental cash flow information for the three months ended November 30, 2012 and 2011 is presented below (in thousands):

	Three Months Ended
	2012			2011
Cash payments for:
Interest (net of capitalized interest)	$	19,476		$	20,100
Income taxes (net refunds)	$	1,752		$	(20,754	)
Non-cash investing and financing activities:
Additions to property, plant, and equipment	$	392		$	2,135
Interest rate swap contract on JYP-denominated bonds, net of deferred tax of $2,707 and $2,979, respectively	$	(4,288	)	$	(4,758	)
Equity in unconsolidated entities’ other comprehensive income, net of deferred tax of $8,124 and $(3,957), respectively	$	(12,868	)	$	6,321

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;

•

the 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 audits of our internal controls 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;

•

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;

•

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 2012 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 November 30, 2012, and the results of our operations for the three months ended November 30, 2012 and 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 2012 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),

• Fabrication & Manufacturing (F&M),

• Energy & Chemicals (E&C),

• 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 limited technical and project management services for an additional two AP1000 nuclear units at a third site.

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. During fiscal year 2012, we successfully completed a 178-megawatt uprate of the Grand Gulf Nuclear Station.

Gas-Fired Generation. Approximately 32% 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. In the last 18 months, we have completed three combined-cycle gas turbine (CCGT) gas plants with a combined capacity of 1,740 megawatts. We are currently building a 550-megawatt CCGT plant for Entergy’s Ninemile Point Steam Electric Station near New Orleans, Louisiana.

In June 2012, Shaw announced it will team with NET Power, Exelon and Toshiba to develop a new gas-fired power generation technology called NET Power that, if successful, will produce cost-effective electric power with little to no air emissions. The new technology is based on a high-pressure, supercritical carbon dioxide oxyfuel power cycle. The primary byproduct is pipeline quality, high-pressure carbon dioxide, which can be used for enhanced oil recovery. Shaw will acquire up to 50 percent of the NET Power LLC and will have exclusive rights to engineer, procure and construct NET Power plants through a commitment to invest up to $50.4 million in a series of milestone share purchases. Shaw’s continued investment is contingent upon demonstration of technological feasibility, and demonstration of economic viability at the end of each development phase, as well as NET Power providing any additional funding necessary for the program.

Clean Coal-Fired Generation. Approximately 37% 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, emissions regulations and uncertainty surrounding potential regulations targeting carbon and other emissions, as well as the global economic downturn and low natural gas prices, have 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. We have completed two major coal projects and one major mixed fuel project in the last six months with the combined capacity of 1,985 megawatts.

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 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 standards for mercury and other hazardous air pollutants from power plants, the Mercury and Air Toxics Standards require many power plants to install pollution-control technologies to reduce these emissions. The EPA also 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. Additionally, the Clean Air Interstate Rule (CAIR), designed to reduce sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions, remains in place since the August 21, 2012 decision from the United States Court of Appeals for the District of Columbia circuit voided the EPA’s Cross-State Air Pollution Rule (CSAPR). On October 5, 2012, the EPA petitioned the Court of Appeals for the full court review of the August 2012 decision rendered by the three-judge panel. The EPA continues to await a decision from the appellate court and, in the meantime, issued guidance dated November 19, 2012 to its regional offices regarding continued administration of CAIR requirements pending a decision by the reviewing court on the agency’s petition.

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 were recently awarded the front-end engineering for a fleet of AQC projects for 22 coal-fired units at eight sites in Ohio, Pennsylvania and West Virginia. We also have experienced increased opportunities for the installation of various air pollution-control technologies as these regulations are fully implemented or new regulations are developed and implemented in response to court-rendered decisions.

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 and electric power generation 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 system-wide maintenance and modification services to 45 of the 104 operating nuclear power reactors in the U.S., including two of the country’s 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.

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-fired electric power generation 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. We also provide 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 and Construction 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 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 near completion of the $1.2 billion Inner Harbor Navigation Canal (IHNC) Surge Barrier in New Orleans, Louisiana. Nearly two miles long, the IHNC surge barrier is the largest design-build civil works project ever awarded by the U.S. Army Corps of Engineers (USACE) and is part of a system designed to better protect the greater New Orleans area from the storm surge that often accompanies hurricanes and tropical storms. The surge barrier’s major components are in place, and current activities are addressing final inspection requirements. The surge barrier is 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 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, 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 USACE’s 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 U.S. 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.

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 worked 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, Gustav and Isaac; super storm Sandy; the earthquake in Haiti; and the Deepwater Horizon oil spill in the Gulf of Mexico.

Coastal, Ports, Marine and Natural Resources. With approximately 250 employees worldwide, our Coastal, Ports & Marine team ranks among the largest science and engineering groups dedicated to supporting clients in the coastal, marine, mining and energy exploration industries. We provide strategic planning, project and construction management, and engineering and design services for ports, harbors, waterways, coastal restoration, flood protection and natural resource projects. These services include hydrographic surveys, permitting and feasibility studies, sediment management, environmental, levee development and beach nourishment. 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. We also provide domestic and international project management and support services for clients’ onshore mining and natural resource projects and operations.

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 millions of 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. We also manage and conduct development work at four U.S. EPA facilities in Nevada, Ohio and Oklahoma.

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.

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 in Lake Charles, Louisiana, 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.

We fabricate complex piping systems using carbon steel, stainless, nickel, titanium, aluminum and chrome moly pipe purchased from third parties or Shaw Alloy Piping Products, a manufacturing and distribution division of the F&M segment. 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, stainless 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 is a preferred method and provides greater strength and production enhancements over piping systems with welded fittings. 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 joint ventures in Bahrain, United Arab Emirates, and a new joint venture in Brazil. Our South Carolina facility is certified to fabricate pipe for nuclear power plants and maintains American Society of Mechanical Engineers nuclear component 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 currently produces structural, piping and equipment modules for nuclear power plants, but also could produce products for other industries, such as offshore oil and gas extraction facilities. The facility uses our industry-leading technologies and our proprietary operations management systems. We currently are producing modules for the first nuclear power plants awarded in the U.S. in more than 30 years, all of which will use AP1000 modular technology.

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.

Energy & Chemicals (E&C) Segment

Effective August 31, 2012, we completed our previously announced divestiture of substantially all of the business of the E&C segment to Technip S.A. Remaining within the E&C segment as of August 31, 2012 are our obligations under an engineering, procurement and construction contract associated with a large ethylene plant in southeast Asia that is in a loss position and nearing completion. The total loss associated with this project estimated at completion was $189.6 million as of November 30, 2012.

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, and the Westinghouse Bonds. 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 three 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 selected for two more under contract in Florida.

On October 6, 2012, NEH exercised its Put Options to sell its Westinghouse Equity to Toshiba. Under the terms of the put option agreements, the Put Options will be cash settled 90 days thereafter, on January 4, 2013. Toshiba will purchase the shares at a price of approximately 124.7 billion JPY by immediately available cash and/or loans. The cash proceeds will be deposited in trust to fund retirement of the Westinghouse Bonds on 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 JPY-denominated bonds. NEH will fund the 3.3 percent shortfall of the principal amount of the bonds, which was equal to approximately $51.9 million at November 30, 2012. We may recognize a non-operating gain once the Put Options are settled, resulting principally from foreign exchange movements. If the cash settlement of the Put Options had occurred on November 30, 2012, the gain would have been approximately $430.1 million pre-tax. The actual gain or loss will be determined at settlement.

If the Put Options had been settled and the JPY denomination bonds repaid on November 30, 2012, the following consolidated balance sheet accounts would have increased or (decreased) as follows (in thousands):

Cash and cash equivalents	$	(66,365	)
Restricted and escrowed cash	$	(1,212	)
Deferred income taxes	$	(217,387	)
Investment in Westinghouse	$	(996,211	)
Prepaid and other current assets	$	1,885
Other accrued liabilities	$	(22,669	)
Japanese Yen-denominated bonds secured by Investment in Westinghouse	$	(1,570,976	)
Interest rate swap contract on Japanese-Yen denominated bond	$	(6,375	)
Accumulated other comprehensive income	$	59,796
Retained earnings	$	260,933

Concurrent and in connection with NEH’s acquisition of the Westinghouse Equity, we executed with Toshiba a Westinghouse commercial relationship agreement (CRA), which provided us with certain exclusive opportunities relating to marketing, developing, engineering and constructing Westinghouse AP1000 nuclear power plants. We are working with Westinghouse on the AP1000 projects in the U.S. and China, and will continue this work through completion. However, the Westinghouse CRA was terminated upon the exercise of the Put Options on October 6, 2012, and Toshiba has announced that it intends to select engineering partners on a project-by-project basis in the future.

For additional information, 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 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.

Proposed Transaction Agreement

On July 30, 2012, we announced that we signed a Transaction Agreement with Chicago Bridge & Iron Company N.V. (CB&I) under which CB&I will acquire us in a cash and stock transaction valued at approximately $3.3 billion based on the trading price of CB&I common stock as of December 20, 2012 (Transaction Agreement). Under the terms of the Transaction Agreement, CB&I will acquire Shaw for $41.00 in cash and 0.12883 shares of CB&I common stock for each common share of Shaw stock owned. The proposed combination of CB&I and Shaw will create one of the world’s largest engineering and construction companies focused on the global energy industry. Both companies believe this agreement will create value through a combined company with broader participation in a robust energy market.

Overview of Results and Outlook

Our financial results for the first quarter of fiscal year 2013 reflected strong operational performance. Our financial results were also significantly impacted by a non-cash foreign exchange gain associated with our JPY-denominated Westinghouse bonds. Additionally, the quarterly results include $3.8 million in pre-tax costs related to the Transaction Agreement.

Our Power segment continues to execute major electric power generation projects, with the mix of fuel sources for the projects varying as market conditions change. Work continues on two gas-fired power plants and has reached substantial completion for two EPC coal-fired power plants. Activity on two contracts for four domestic AP1000 nuclear units continued to increase in the first quarter of fiscal year 2013. Work also continues on our services contract for four new AP1000 nuclear power reactors in China. In the fossil fuel markets, 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 air emission regulations in the U.S. We have seen increased activity in this area as evidenced by the award of the front-end engineering for a fleet of AQC projects for FirstEnergy Corp. in Ohio, Pennsylvania and West Virginia in the first quarter of this year.

Our Plant Services segment experienced increased revenues in the three months ended November 30, 2012, as compared to the same period in the prior fiscal year. The segment benefited from an increased number of refueling outages at U.S. nuclear power plants. Further, the segment has added additional nuclear power plant and industrial maintenance contracts since the prior fiscal year.

Our E&I segment continues to generate positive earnings from its solid operating performance. While the decrease in the volume of revenues has been impacted by the near completion of our hurricane protection project for the USACE, our MOX project in South Carolina for the DOE continues to be a significant driver of our first quarter activity.

Our F&M segment experienced increased revenue and profits for the three months ended November 30, 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 as compared to the prior fiscal year. Our newer joint venture pipe fabrication facilities in the United Arab Emirates and Brazil evidence the opportunities in growing international markets for pipe and steel fabrication in facility shops versus traditional field construction fabrication. We believe that our plant fabrication offers the advantage of consistent quality, permanent local employment and depending on the location, reduced costs and security concerns when compared to field construction fabrication.

The Westinghouse segment continued to impact our consolidated financial results with significant non-operating gains on NEH’s JPY-denominated Westinghouse Bonds. The gains or losses occur when the JPY decreases or increases relative to the USD. During the quarter, the JPY decreased in value relative to the USD resulting in a $67.8 million gain. The exchange rate of the JPY to the USD at November 30, 2012, was 82.1 as compared to 77.9 as of November 30, 2011 and 78.6 as of August 31, 2012.

On October 6, 2012, subsequent to our 2012 fiscal year-end, NEH exercised its Put Options to sell the Westinghouse Equity to Toshiba. Under the terms of the put option agreements, the Put Options will be cash settled 90 days thereafter, on January 4, 2013, with the proceeds deposited in trust to fund retirement of the Westinghouse Bonds on March 15, 2013. Prior to bond retirement, our financial statements will continue to be impacted by non-cash foreign currency gains and losses resulting from revaluing the JPY-denominated Westinghouse Bonds to the USD equivalent at the end of the period.

We used $183.7 million in operating activities during the first three months of fiscal year 2013 and $140.9 million during the first three months of fiscal year 2012. The use of cash for both periods was primarily due to the reversal of working capital positions on projects nearing completion in our Power and E&C segments, as well as cash used in our F&M segment and interest on our Westinghouse Bonds. Partially offsetting those uses of cash was cash provided by our E&I and Plant Services segments.

Consolidated Results of Operations

The information below is an analysis of our consolidated results for the three months ended November 30, 2012 and 2011. See Segment Results of Operations below for additional information describing the performance of each of our reportable segments.

Three Months Ended November 30 (dollars in millions)	2012		2011		$ Change			% Change

Revenues	$	1,369.2	$	1,517.6	$	(148.4	)		(9.8	)%
Gross profit		114.9		119.9		(5.0	)		(4.2	)
Selling, general and administrative expenses		63.7		69.5		(5.8	)		(8.3	)
Interest expense		11.6		12.1		(0.5	)		(4.1	)
Provision (benefit) for income taxes		41.8		24.9		16.9			67.9
Earnings (losses) from unconsolidated entities, net of taxes		3.0		7.0		(4.0	)		(57.1	)
Net income (loss) attributable to Shaw		69.8		49.2		20.6			41.9

Consolidated revenues decreased $148.4 million, or 9.8%, to $1,369.2 million for the three months ended November 30, 2012, from $1,517.6 million in the same period in the prior fiscal year. The decrease in revenue was primarily related to decreased fossil plant construction activity in our Power segment driven by coal and gas-fired power plants recently completed or nearing completion. In addition, revenues declined by $76.4 million reflecting operations sold in the E&C Sale.

Consolidated gross profit decreased $5.0 million, or 4.2%, to $114.9 million for the three months ended November 30, 2012, from $119.9 million in the same period in the prior fiscal year. The decrease in our consolidated gross profit was due primarily to the operations sold in the E&C Sale, partially offset by increased volumes in our F&M segment in both domestic and international markets.

Consolidated selling, general and administrative expenses (S,G&A) decreased $5.8 million, or 8.3%, to $63.7 million for the three months ended November 30, 2012, from $69.5 million in the same period in the prior fiscal year. The decrease in consolidated S,G&A was due primarily to reductions in compensation and related benefits related to the operations sold in the E&C Sale, partially offset by higher pre-tax costs related to the Transaction Agreement.

Our consolidated effective tax rate, based on income (loss) before income taxes and earnings (losses) from unconsolidated entities, was 38% and 36% for the first quarter of fiscal years 2013 and 2012, respectively. The difference in the effective tax rate between the two periods was due primarily to lower income in international jurisdictions in fiscal year 2013 partially offset by lower forecasted non-deductible expenses for fiscal year 2013. In addition, the fiscal year 2012 rate was reduced by 1% due to adjustments recorded for items agreed to and refunds received from various tax authorities. We expect the fiscal year 2013 annual effective tax rate, excluding discrete items, applicable to forecasted income (loss) before income taxes and earnings (losses) from unconsolidated entities to be approximately 37%, reflecting higher income attributable to noncontrolling interests during the remainder of fiscal year 2013.

Consolidated earnings from unconsolidated entities, net of taxes, decreased $4.0 million, to $3.0 million for the three months ended November 30, 2012, compared to $7.0 million in the same period in fiscal year 2012. This decrease was due primarily to the prior year including operations sold in the E&C Sale, as well as by our equity in the decreased earnings of Westinghouse as compared to the same period in the prior fiscal year.

Consolidated net income (loss) attributable to Shaw increased $20.6 million to $69.8 million for the three months ended November 30, 2012, compared to $49.2 million in the same period in the prior fiscal year. The increase is primarily driven by a positive impact of $67.8 million pre-tax foreign exchange gain on the JPY-denominated bonds related to our Investment in Westinghouse for the current quarter compared to a pre-tax foreign exchange transaction gain of $25.2 million in the prior quarter period, partially offset by the factors discussed above.

Segment Results of Operations

The following comments and tables compare selected summary financial information related to our segments for the three months ended November 30, 2012 and 2011 (in millions).

	Three Months Ended
	2012			2011		$ Change			% Change
Revenues:
Power	$	383.8		$	494.7	$	(110.9	)		(22.4	)%
Plant Services		350.1			295.1		55.0			18.6
E&I		404.1			459.4		(55.3	)		(12.0	)
F&M		145.2			105.3		39.9			37.9
E&C		86.0			163.1		(77.1	)		(47.3	)
Corporate		—			—		—		NM
Total revenues	$	1,369.2		$	1,517.6	$	(148.4	)		(9.8	)%

Gross profit:
Power	$	24.9		$	27.0	$	(2.1	)		(7.8	)%
Plant Services		30.9			23.0		7.9			34.3
E&I		33.6			37.7		(4.1	)		(10.9	)
F&M		25.8			16.5		9.3			56.4
E&C		(0.4	)		15.3		(15.7	)		(102.6	)
Corporate		0.1			0.4		(0.3	)		(75.0	)
Total gross profit	$	114.9		$	119.9	$	(5.0	)		(4.2	)%

Gross profit percentage:
Power	6.5	%	5.5	%
Plant Services	8.8		7.8
E&I	8.3		8.2
F&M	17.8		15.7
E&C	(0.5	)	9.4
Corporate	NM		NM
Total gross profit percentage	8.4	%	7.9	%


Selling, general and administrative expenses:
Power	$	10.4	$	9.7	$	0.7		7.2	%
Plant Services		2.8		2.5		0.3		12.0
E&I		17.5		18.4		(0.9	)	(4.9	)
F&M		9.9		9.2		0.7		7.6
E&C		3.8		12.1		(8.3	)	(68.6	)
Investment in Westinghouse		0.1		0.2		(0.1	)	(50.0	)
Corporate		19.2		17.4		1.8		10.3
Total selling, general and administrative expenses	$	63.7	$	69.5	$	(5.8	)	(8.3	)%

Income (loss) before income taxes and earnings (losses) from unconsolidated entities:
Power	$	14.6	$	17.6	$	(3.0	)	(17.0	)%
Plant Services		28.2		20.5		7.7		37.6
E&I		16.3		19.6		(3.3	)	(16.8	)
F&M		15.8		8.5		7.3		85.9

E&C		(4.8	)		4.6			(9.4	)	(204.3	)
Investment in Westinghouse		57.8			14.6			43.2		295.9
Corporate		(18.2	)		(17.0	)		(1.2	)	(7.1	)
Total income (loss) before income taxes and earnings (losses) from unconsolidated entities	$	109.7		$	68.4		$	41.3		60.4	%

NM — Not Meaningful.

The following table presents our revenues by geographic region generally based on the site location of the project for the three months ended November 30, 2012 and 2011 (in millions, except for percentages):

	Three Months Ended
	2012				2011
	Amount		%		Amount		%
United States	$	1,215.7		89	$	1,297.1		85
Asia/Pacific Rim countries		110.4		8		129.6		9
Middle East		13.8		1		50.4		3
United Kingdom and other European countries		5.3		—		12.3		1
South America and Mexico		22.4		2		22.7		2
Canada		1.2		—		4.2		—
Other		0.4		—		1.3		—
Total revenues	$	1,369.2		100	$	1,517.6		100

Business Segment Analysis

Power Segment

Our Power segment continues to execute major electric power generation projects, with the mix of fuel sources for the projects varying as market conditions change. During the first quarter of fiscal year 2012, we reached substantial completion on two EPC new build coal-fired power plants, while work continues on two EPC gas-fired power plants in the U.S. Activity on two contracts for four domestic AP1000 nuclear units continues to increase as progress is made towards the next major milestone, nuclear concrete placement. These two projects are expected to generate approximately 23 percent of our consolidated revenues for fiscal year 2013, with margins exceeding those historically associated with our coal and gas-fired EPC portfolio. Work also continues on our services contract for four new AP1000 nuclear power reactors in China. In the fossil fuel markets, we believe there are significant opportunities for gas-fired power plants and we have experienced increased opportunities for AQC related projects.

Revenues

Revenues decreased $110.9 million, or 22.4%, to $383.8 million for the three months ended November 30, 2012 from $494.7 million in the same period in the prior fiscal year. The decrease was primarily due to a $141.8 million decrease in fossil plant construction activity primarily driven by coal and gas-fired power plants recently completed or nearing completion. This decrease is reflective of the current power market in the U.S., where few new coal-fired power projects are being considered by utilities because of environmental regulations and the abundant supply of relatively inexpensive natural gas. There was also a decrease of $24.7 million related to the completion of a nuclear uprate project completed in fiscal year 2012. However, revenue associated with domestic nuclear projects increased by $57.5 million due to continued increases in construction activity. The domestic nuclear new build volume increase is expected to continue through the achievement of the next major milestone associated with the placement of first nuclear concrete.

Gross profit and gross profit percentage

Gross profit decreased $2.1 million, or 7.8%, to $24.9 million for the three months ended November 30, 2012 from $27.0 million in the same period in the prior fiscal year. The segment’s gross profit percentage increased to 6.5% for the three months ended November 30, 2012 compared to 5.5% in the same period in the prior fiscal year. The decrease in gross profit was primarily driven by the decline in revenues from the completion of several major coal, gas and mixed fuel projects over the last eighteen months. The increase in the gross profit percentage is due to increased revenue from domestic AP1000 nuclear projects with higher margins relative to revenue from the fossil coal and gas projects in the prior year period.

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

Income (loss) before income taxes and earnings (losses) from unconsolidated entities for the three months ended November 30, 2012, decreased $3.0 million, or 17.0%, to $14.6 million from $17.6 million in the same period in the prior fiscal year. This decrease was primarily attributable to the decrease in gross profit 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 and fossil power facilities. We currently have agreements to provide nuclear maintenance services to 45 of the 104 operating nuclear power reactors, including two of the country’s largest nuclear fleets. Our maintenance and outage work is normally structured under cost reimbursable agreements that tend to cover periods of three to five years.

Revenues

Revenues increased $55.0 million, or 18.6%, to $350.1 million for the three months ended November 30, 2012, from $295.1 million in the same period in the prior fiscal year. This increase was due primarily to an increase in volume of our nuclear plant maintenance work as we supported fifteen plant outages in the first quarter of 2013 as compared to eleven in the first quarter of fiscal 2012. In addition, we experienced a slight increase in the volume of work relating to our industrial maintenance projects including oil refineries and chemical facilities.

Gross profit and gross profit percentage

Gross profit increased $7.9 million, or 34.3%, to $30.9 million for the three months ended November 30, 2012, from $23.0 million in the same period in the prior fiscal year. Gross profit percentage increased to 8.8% for the three months ended November 30, 2012, compared to 7.8% in the same period in the prior fiscal year. These increases were due to higher revenue earned in fiscal year 2013, as well as the mix of clients serviced in our nuclear plant outage work as margins differ from project to project.

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

Income (loss) before income taxes and earnings (losses) from unconsolidated entities increased $7.7 million, or 37.6%, to $28.2 million for the three months ended November 30, 2012, from $20.5 million in the same period in the prior fiscal year, primarily attributable to the increase in revenues as described above.

E&I Segment

Our E&I segment continues to generate positive earnings from its solid operating performance. We expect the MOX project for the DOE in South Carolina will continue to contribute to business segment earnings, as will existing projects and new project awards from the U.S. government and private-sector customers to provide emergency response and recovery, environmental remediation, program management and facility management and infrastructure services.

Revenues

E&I’s revenues decreased $55.3 million, or 12.0%, to $404.1 million for the three months ended November 30, 2012, from $459.4 million for the same period in the prior fiscal year. This decrease was primarily due to decreased activity on our hurricane protection project for the USACE, which is substantially complete and lower volume this period on our MOX project for the DOE in South Carolina.

Gross profit and gross profit percentage

E&I’s gross profit decreased $4.1 million, or 10.9%, to $33.6 million for the three months ended November 30, 2012, from $37.7 million for the same period in the prior fiscal year. Gross profit percentage increased to 8.3% for the three months ended November 30, 2012, from 8.2% in the same period in the prior fiscal year. The decrease in gross profit was primarily due to decreased activity on our hurricane protection project for the USACE. The increase in gross profit percentage was primarily due to the lower volume on lower margin work including our MOX project for the DOE, which is a large construction project where we earn a lower gross profit percentage compared to the balance of the E&I portfolio.

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

Income (loss) before income taxes and earnings (losses) from unconsolidated entities decreased $3.3 million, or 16.8%, to $16.3 million for the three months ended November 30, 2012, from $19.6 million in the same period in the prior fiscal year primarily due to the decreases in gross profit described above.

F&M Segment

Our F&M segment continues to experience an increase in volume of work and corresponding profits related to work on the AP1000 nuclear power projects subcontracted from our Power segment. We are also beginning to experience increases in demand for our pipe fabrication services within the domestic energy market. Our joint venture pipe fabrication facilities in the UAE and Brazil position us to participate in these international growth areas.

Revenues

Revenues increased $39.9 million, or 37.9%, to $145.2 million for the three months ended November 30, 2012 from $105.3 million in the same period in the prior fiscal year. This increase was primarily due to increases in our volumes in both the domestic and international markets. Our AP1000 projects from our Power segment, increased production in the Middle East coupled with increased sales from our pipe distribution facility contributed to the increase.

Gross profit and gross profit percentage

Gross profit increased $9.3 million, or 56.4%, to $25.8 million for the three months ended November 30, 2012 from $16.5 million in the same period in the prior fiscal year. The segment’s gross profit percentage increased to 17.8% for the three months ended November 30, 2012 compared to 15.7% in the same period in the prior fiscal year. The increase in gross profit was primarily due to the volume increases described above.

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

Income (loss) before income taxes and earnings (losses) from unconsolidated entities for the three months ended November 30, 2012, increased $7.3 million, or 85.9%, to $15.8 million from $8.5 million in the same period in the prior fiscal year. This increase was primarily attributable to the increase in gross profit described above.

E&C Segment

On August 31, 2012, the last day of our 2012 fiscal year, we completed the E&C Sale. We retained our obligations under an engineering, procurement and construction contract associated with a large ethylene plant in southeast Asia that is in a loss position and nearing completion. The total loss associated with this project estimated at completion was $189.6 million as of November 30, 2012. The E&C segment’s operations will cease upon completion of this project, which is expected to occur in early calendar year 2013.

Revenues

E&C’s revenues were $86.0 million for the three months ended November 30, 2012, and $163.1 million for the same period in the prior fiscal year. Prior year’s quarter includes operations sold in the E&C Sale.

Gross profit (loss) and gross profit (loss) percentage

Gross profit (loss) was $(0.4) million for the three months ended November 30, 2012, and $15.3 million in the same period in the prior fiscal year. Prior year’s quarter includes operations sold in the E&C Sale.

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

Income (loss) before income taxes and earnings (losses) from unconsolidated entities decreased $9.4 million, or 204.3%, to $(4.8) million for the three months ended November 30, 2012, from $4.6 million in the same period in the prior fiscal year, primarily as a result of the E&C Sale 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 months ended September 30, 2012, are reflected in our results of operations for the three months ended November 30, 2012.

The impact of the Investment in Westinghouse segment on our Income (loss) before income taxes, for the three months ended November 30, 2012, was $57.8 million, compared to $14.6 million in the three months ended November 30, 2011. Our results for the three months ended November 30, 2012 and 2011 included the following (in millions):

	Three Months Ended
	2012			2011
Interest expense on Japanese Yen-denominated bonds including accretion and amortization	$	(9.9	)	$	(10.4	)
Foreign currency gains on Japanese Yen-denominated bonds, net		67.8			25.2
General and administrative expenses		(0.1	)		(0.2	)
Income (loss) before income taxes	$	57.8		$	14.6

Additionally, our net income (loss) for the three months ended November 30, 2012, includes net income from NEH’s Westinghouse Equity interest of $4.2 million, compared to $5.3 million for the three months ended November 30, 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 included in our consolidated financial statements.

Corporate Segment

Selling, General and Administrative Expenses

Corporate S,G&A increased $1.8 million, or 10.3%, to $19.2 million for the three months ended November 30, 2012, from $17.4 million in the same period in the prior fiscal year. This increase was primarily due to higher legal and professional fees of $2.1 million and employee retention costs of $1.2 million related to the Transaction Agreement as well as higher costs associated with long-term incentive awards, which are tied to our share price. The increase was partially offset by lower depreciation expense resulting from fixed assets that are now fully depreciated as well as an overall decrease in Corporate overhead costs.

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 months ended November 30, 2012 and 2011, is shown below (in millions). To supplement this disclosure, a reconciliation on a consolidated basis of Net income (loss) to Income (loss) before income taxes and earnings (losses) from unconsolidated entities is also shown (in millions):

Three Months Ended November 30, 2012:

	Consolidated
Net income (loss)	$	70.9
Earnings from unconsolidated entities, net of income taxes		(3.0	)
Provision for income taxes		41.8
Income (loss) before income taxes and earnings (losses) from unconsolidated entities	$	109.7

	Consolidated			Power			Plant Services		E&I			F&M			E&C			Westinghouse		Corporate
Income (loss) before income taxes and earnings (losses) from unconsolidated entities	$	109.7		$	14.6		$	28.2	$	16.3		$	15.8		$	(4.8	)	$	57.8	$	(18.2	)
Interest expense		11.6			—			—		—			0.1			—			9.9		1.6
Depreciation and amortization		16.9			8.4			0.4		3.4			4.7			—			—		—
Earnings (losses) from unconsolidated entities		4.9			(1.5	)		—		0.4			(0.9	)		—			6.9		—
Income attributable to noncontrolling interests		(1.1	)		—			—		(1.1	)		—			—			—		—
EBITDA	$	142.0		$	21.5		$	28.6	$	19.0		$	19.7		$	(4.8	)	$	74.6	$	(16.6	)

Three Months Ended November 30, 2011:

	Consolidated
Net income (loss)	$	50.4
Earnings from unconsolidated entities, net of income taxes		(6.9	)
Provision for income taxes		24.9
Income (loss) before income taxes and earnings (losses) from unconsolidated entities	$	68.4

	Consolidated			Power		Plant Services		E&I			F&M		E&C		Westinghouse		Corporate
Income (loss) before income taxes and earnings (losses) from unconsolidated entities	$	68.4		$	17.6	$	20.5	$	19.6		$	8.5	$	4.6	$	14.6	$	(17.0	)
Interest expense		12.1			0.1		—		—			0.5		—		10.4		1.1
Depreciation and amortization		18.5			6.9		0.4		3.5			4.6		2.5		—		0.6
Earnings (losses) from unconsolidated entities		11.3			—		—		0.4			—		2.3		8.6		—
Income attributable to noncontrolling interests		(1.2	)		—		—		(1.8	)		0.6		—		—		—
EBITDA	$	109.1		$	24.6	$	20.9	$	21.7		$	14.2	$	9.4	$	33.6	$	(15.3	)

Liquidity and Capital Resources

Liquidity

At November 30, 2012, our restricted and unrestricted cash and cash equivalents, escrowed cash and restricted and unrestricted short-term investments totaled $1,229.9 million (a decrease of $192.1 million, or 13.5%, from $ 1,422.0 million at August 31, 2012). In addition to our cash and cash equivalents, the amount available under our Facility for revolving credit at November 30, 2012, was $888.5 million, which is equal to the lesser of: (i) $1,218.0 million, representing the total Facility commitment ($1,450.0 million) less outstanding performance letters of credit ($150.8 million) less outstanding financial letters of credit ($81.2 million); (ii) $1,168.8 million representing the Facility sublimit of $1,250.0 million less outstanding financial letters of credit ($81.2 million); or (iii) $888.5 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.

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.

At November 30, 2012, our working capital was $195.2 million compared to $75.3 million at August 31, 2012. Our working capital is reduced due to the inclusion in current liabilities of the Westinghouse Bonds (which mature March 15, 2013) and the JPY interest rate swap. 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 $(329.1) million and $(442.9) million at November 30, 2012 and August 31, 2012, respectively.

Cash Flow

	For the three months ended November 30,
	2012			2011
Cash flows provided by (used in) operating activities	$	(183.7	)	$	(140.9	)
Cash flows provided by (used in) investing activities	$	30.7		$	106.6
Cash flows provided by (used in) financing activities	$	—		$	2.7

Operating activities: We used $183.7 million in operating activities during the first three months of fiscal year 2013 and $140.9 million during the first three months of fiscal year 2012. The use of cash for both periods was primarily due to the reversal of working capital positions on projects nearing completion in our Power and E&C segments, as well as cash used in our F&M segment and interest on our Westinghouse Bonds. Partially offsetting those uses of cash was cash provided by our E&I 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. 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 24.3% and 22.8% of current assets at November 30, 2012 and August 31, 2012, respectively. At November 30, 2012, approximately 49.0% 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.

Investing activities: Cash provided by investing activities was $30.7 million for the first three months of fiscal year 2013, compared to $106.6 million during the first three months of fiscal year 2012. During the first three months of fiscal year 2013, 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 three months of fiscal year 2013 were $10.1 million compared to $24.3 million for the first three months of fiscal year 2012.

Financing activities: There was minimal cash provided by financing activities for the first three months of fiscal year 2013, compared to cash provided by financing activities of $2.7 million during the first three months of fiscal year 2012.

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

Over the past three years, we have generated significant operating cash flow. 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 November 30, 2012, the amounts shown as restricted cash and restricted short-term investments in the accompanying balance sheet did not include any amounts used to voluntarily secure letters of credit or to secure insurance related contingent obligations in lieu of a letter of credit.

Approximately $287.4 million of our cash at November 30, 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.

As discussed in Note 1 — Description of Business and Summary of Significant Accounting Policies, the Transaction is subject to a number of conditions, including, but not limited to, our possession of at least $800 million of unrestricted cash ( “Unrestricted Cash” as defined in the Transaction Agreement), as of the closing date; EBITDA ( “Company EBITDA” as defined in the Transaction Agreement) for the period of four consecutive fiscal quarters ending prior to the closing date of the Transaction of not less than $200 million; and net indebtedness for borrowed money ( “Net Indebtedness for Borrowed Money” as defined in the Transaction Agreement) not exceeding $100 million as of the closing date of the Transaction. The Transaction Agreement also restricts, among other items, our ability to increase borrowings, repurchase shares, and pay dividends. We expect to meet these conditions of the Transaction Agreement.

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 three months of fiscal 2013, no borrowings were made under the Facility; however, we had outstanding letters of credit of approximately $232.0 million as of November 30, 2012, and those letters of credit reduce what is otherwise available under our Facility.

At November 30, 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 November 30, 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	$	314.6	$	298.5	$	16.1	$	—	$	—
Surety bonds		374.0		345.7		18.3	$	0.1	$	9.9
Total Commercial Commitments	$	688.6	$	644.2	$	34.4	$	0.1	$	9.9

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

Of the amount of outstanding letters of credit at November 30, 2012, $180.9 million were issued to clients in connection with contracts (performance letters of credit). Of the $180.9 million, five clients held $166.0 million or 91.8% of the outstanding letters of credit. The largest aggregate amount of letters of credit issued and outstanding at November 30, 2012 to a single client on a single project is $49.7 million. Our ability to borrow under our facility is reduced by the dollar value of the letters of credit we have outstanding.

At November 30, 2012 and August 31, 2012, we had total surety bonds of $374.0 million and $467.6 million, respectively. However, based on our percentage-of-completion on contracts covered by these surety bonds, our estimated potential liability at November 30, 2012 and August 31, 2012 was $77.9 million and $74.4 million, respectively.

Fees related to these commercial commitments were $2.2 million and $2.8 million, for the three months ended November 30, 2012 and 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 2012 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.

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 November 30, 2012, we had deferred tax assets of $242.9 million, net of valuation allowance and deferred tax liabilities, including $59.1 million related to net operating losses and tax credit carryforwards. At November 30, 2012, we had a deferred tax asset valuation allowance of $32.7 million.

Approximately $217 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 Segment. We define backlog in our Power segment 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. Backlog excludes amounts expected to be performed subsequent final approval from the customer when we do not expect to receive such authorization within the next five years. The value of work subcontracted to our F&M segment is removed from the backlog of the Power segment and is shown in the backlog of our F&M segment.

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 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.

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 and E&I 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 November 30, 2012 and August 31, 2012, our backlog was as follows (in millions except percentages):

	November 30, 2012				August 31, 2012
By Segment	Amount		%		Amount		%
Power	$	8,547.2		52	$	8,890.9		52
Plant Services		3,130.6		19		3,081.1		18
E&I		3,668.5		22		4,012.9		23
F&M		969.3		6		999.5		6
E&C		65.1		1		102.6		1
Total backlog	$	16,380.7		100	$	17,087.0		100

	November 30, 2012				August 31, 2012
By Industry	Amount		%		Amount		%
E&I	$	3,668.5		22	$	4,012.9		23
Power Generation		11,800.3		72		12,112.9		71
Chemical		230.9		2		323.4		2
Other		681.0		4		637.8		4
Total backlog	$	16,380.7		100	$	17,087.0		100

	November 30, 2012				August 31, 2012
By Geographic Region	Amount		%		Amount		%
Domestic	$	16,045.5		98	$	16,691.1		98
International		335.2		2		395.9		2
Total backlog	$	16,380.7		100	$	17,087.0		100

The decrease in total backlog as compared to August 31, 2012 was primarily driven by reduced bookings. The reduction in our E&I segment backlog in the first quarter of fiscal year 2013 includes a $200 million change in the estimated future contract revenue expected under a multi-year contract with the U.S. government.

In fiscal year 2012, a client of our Power segment suspended work on a capital improvement project at a currently-operating nuclear 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.

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 90.7% of our E&I 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 of our significant projects in backlog would result in a significant reduction of our reported backlog as well as 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.

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 2012 Form 10-K. Our exposures to market risk have not changed materially since August 31, 2012.

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 November 30, 2012. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at November 30, 2012.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended November 30, 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 2012 Form 10-K, filed with the SEC on October 19, 2012.

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 2012 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 2012 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.

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

(c)	The following table provides information about our purchases during the quarter ended November 30, 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) (in millions)
9/1/2012 to 9/30/2012		—	$	0.00		—		326.1
10/1/2012 to 10/31/2012		6,866	$	43.54		—		326.1
11/1/2012 to 11/30/2012		37,340	$	44.08		—		326.1
Total		44,206				—

1.	Repurchases during the quarter were related to restricted stock units withheld from employees in connection with the settlement of income tax withholding obligations arising from the vesting of 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 and the Transaction Agreement.

ITEM 6. — EXHIBITS

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

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: December 21, 2012	/s/ Brian K. Ferraioli
	Brian K. Ferraioli
	Executive Vice President Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX

The exhibits marked with the cross symbol (†) are filed herewith. The exhibits marked with two cross symbols (††) are furnished 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	Report or Registration Statement	SEC Filing Registration #	Exhibit or Other Reference
3.01	Composite Articles of Incorporation of The Shaw Group Inc. . as of January 5, 2011	Form 10-Q for the quarter ended May 31, 2012	1-2227	3.01
3.02	Amended and Restated By-Laws of The Shaw Group Inc. dated as of January 30, 2007	10-K/A (Amendment No.1) for the fiscal year ended August 31, 2006	1-2227	3.2

*10.01	Letter Agreement, dated November 19, 2012, by and between The Shaw Group Inc. and James C. Wilems	Form 8-K filed on November 19, 2012	1-2227	10.1
*10.02	Retention Bonus dated October 16, 2012 by and between the Company and Timothy Poché	Form 10-K for the fiscal year ended August 31, 2012	1-2227	10.37
†31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
†31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
††32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
††32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
§101.INS	XBRL Instance Document
§101.SCH	XBRL Taxonomy Extension Schema Document
§101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
§101.LAB	XBRL Taxonomy Extension Label Linkbase Document
§101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
§101.DEF	XBRL Taxonomy Extension Definition Linkbase Document