Financial Reporting & Analysis Unit 4 Assignment

1 answer below

THE SHAW GROUP, INC.
This case includes data from The Shaw Group, Inc. annual report for the year end August 31, 2010.
Note 6 - Property and Equipment:
Property and equipment consisted for the following in (thousands):
					AUGUST, 31
				2010		2009
Transportation equipment				$10,899		$20,977
Furniture, fixtures, and software				162,446		146,905
Machinery and equipment				263,759		219,753
Buildings and improvements				233,353		151,708
Assets acquired under capital leases				3,612		5,561
Land				14,269		12,404
Construction in progress				89,401		79,004
				777,739		636,402
Less: accumulated depreciation				-293,098		-250,796
Property and equipment, net				$484,641		$385,606
Assets acquired under capital leases, net of accumulated depreciation, were $1.6 million and $2.0 million
at August 31, 2010, and 2009, respectively. If the assets acquired under capital leases transfer title
at the end of the lease term or contain a bargain purchase option, the assets are amortized over their
estimated useful lives; otherwise, the assets are amortized over the respective lease term.
Depreciation expense of $59.8 million, $52.3 million, and $43.7 million for the fiscal years ended August 31, 2010,
2009, and 2008, respectively, is included in cost of revenues and general and administrative expenses in the
accompanying consolidated statements of operations.
At August 31, 2010, construction in progress consisted primarily of deposits on heavy equipment to be used on
some of our power projects. At August 31, 2009, construction in progress consisted primarily of cost related
to the construction of our module fabrication and assembly facility in Lake Charles, Louisiana.
In fiscal year 2009, we recorded an asset impairment charge of $5.5 million for a consolidated joint venture.
The impairment charge reduced the property, plant and equipment to its salvage value.
Note 9 - Debt and Revolving Lines of Credit (in part)
Our debt (including capital lease obligations) consisted of the following (in thousands):
								31-Aug- 10				31-Aug-09
							Short term		Long term		Short term		Long term
Notes payable on purchases of equipment; 0% to 1.3% interest;
payments discounted at imputed rate of 5.9% interest; due
September 2010 through April 2011							$4,079		$------		$10,610		$2,146
Notes payable on purchases of equipment; 5.2% to 6.0%
interest; due June 2011 through July 2012, and pad in full October 2009							-----		-----		1,188		1,824
Other notes payable							-----		-----		2,805		2,277
Capital lease obligations							400		979		796		1,380
Subtotal							4,479		979		15,399		7,627
Westinghouse Bonds (see description below)							1,520,674				1,387,954		---
Total							$1,525,153		$979		$1,403,353		$7,627
The notes payable on purchases of equipment are collateralized by the purchased equipment. The carrying amount
of the equipment pledged as collateral was approximately $18.8 million at August 31, 2010.
Annual scheduled maturities of debt and minimum lease payments under capital lease obligations during each
year ending August 31, are as follows (in thousands):
				Capital Lease Obligations			Debt
2011				$475			$4,079
2012				399			---
2013				399			1,520,674
2014				266			---
2015				---			---
				---			---
Thereafter				_________			__________
Subtotal				1539			1,524,753
Less: amount representing interest				-160			---
Total				$1,379			1,524,753
			Note 13 - Operating Leases
We lease certain office buildings, fabrication and warehouse facilities, machinery and equipment under various
lease arrangements. Leases that do not qualify as capital leases are classified as operating leases and the
related lease payments are expensed on a straight-line basis over the lease term, including, as applicable, any
free rent period during which we have the right to use the asset. For leases with renewal options where the renewal
is reasonably assured, the lease term, including the renewal period, is used to determine the appropriate lease
classification and to compute periodic rental expense.
Certain of our operating lease agreements are non-cancelable and expire at various times and require various
minimum rentals. The non-cancelable operating leases with initial non-cancelable periods in excess of twelve
months that were in effect as of August 31, 2010, require us to make the following estimated future payments:
For the year ending August 31 (in thousands)
2011					$72,805
2012					61,677
2013					51,381
2014					45,791
2015					35,883
Thereafter					91,845
Total future minimum lease payments					$359,382
Future minimum lease payments as of August 31, 2010 have not been reduced by minimum non-cancelable
sublease rentals aggregating approximately $0.8 million.
In 2012, we entered into a 10-year non cancelable operating lease for our Corporate Headquarters building in
Baton Rouge, Louisiana. In connection with this lease, we purchased an option for $12.2 million for the right
to acquire additional office space and under developed land for approximately $150 million. The option expires
the earlier of January 2012, or upon renewal of the existing Corporate Headquarters lease. The cost of the option
is included in other assets. The book value of the opinion is assessed for impairment annually based on appraisals
of the additional office space and undeveloped land subject to the option. If we renew the lease rather than
exercise the option, the option value will be expensed over the term of the new Corporate Headquarters building
lease.
We also enter into lease assignments for equipment needed to fulfill the requirements of specific jobs. Any
payments owed or committed under these lease arrangements of August 31, 2010, are not included as part
of total minimum lease payments shown above.
The total rental expense for the fiscal years ended August 31, 2010, 2009, and 2008 was approximately $178.8
million, and $170.6 million, respectively, Deferred rent payable (current and long term) aggregated $32.0 million
and $30.3 million at August 31, 2010 and 2009, respectively.
Required:
a. For August 31, 2010:
1. What was the gross amount for property and equipment?
2. What was the net amount for property and equipment?
3. What was the gross amount for assets acquired under capital leases?
4. What was the net amount for assets acquired under capital leases?
5. How material are assets acquired under capital leases in relation to total property and equipment?
b. How material are capital lease obligations in relation to total debt and revolving lines of credit at August 31, 2010?
c. Operating leases?
1. What was the total future minimum lease payments as of August 31, 2010?
2. Using two-thirds of future minimum lease payments representing principal, what would be the estimate for principal at August 31, 2010?
3. How material are operating leases in relation to capital leases?