ARGAN INC
For the period ended Jul 31, 2024. Filed Sep 5, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2024 · Filed Sep 5, 2024
AGX$277.50+6.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-04-30; filed 2024-06-06.
0001558370-24-008969
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-07-31; filed 2024-09-05.
0001558370-24-012611
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 138 previous paragraphs and 147 current paragraphs.
52 unchanged; 60 reworded; 21 added; 19 removed; 7 previous and 14 current paragraphs rearranged.
Tables are not compared: 2 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Louisiana LNG Facility
Current report
In June 2024, GPS entered into a subcontract and received FNTP with the installation of five 90 MW gas turbines for the dedicated supply of power to a liquified natural gas (“LNG”) facility in Louisiana. This project, led by GPS, will be a collaboration with TRC and APC. Project completion is scheduled for early in the year ending January 31, 2026.
Current report
Beginning in 2021, annual capacity auctions suffered delays that, once held, resulted in lower prices than previous auctions. The results for the most recent auction that was delayed until July 2024 for the 2025/2026 delivery year, represent a reversal of the unfavorable trend. The auction resulted in a price of approximately $269.92/MW-day for most of the PJM region, whereas the previous auction produced a price of $28.92/MW-day. The significant increase in price was mainly driven by planned power generator retirements coupled with forecasted increases in peak power loads, indicating the market’s anticipation of a mismatch between the ability of the current grid to supply the growing demand for power. The next capacity auction, to be held for the 2026/2027 delivery year, is scheduled for December 2024.
Current report
Whereas in the U.K., prior to the elections in July 2024, the government had expressed support for new gas-fired power plants to offset the retirement of coal-fired plants, the retirement of aging gas plants, and the intermittency of renewable energy plants. However, with the general election in July 2024, the Labour Party, led by Prime Minister Keri Starmer, has since shifted focus toward accelerating the transition to renewable energy while still acknowledging the role of gas as a transitional fuel.
Current report
The gross profit percentages of corresponding revenues for the power industry services, industrial construction services and the telecommunications infrastructure services segments were 17.3%, 14.3% and 25.0%, respectively, for the quarter ended July 31, 2023.
Current report
Other income, net, for the three months ended July 31, 2023 was $4.1 million, which reflected primarily income earned during the period on investments in the total amount of approximately $3.3 million.
Current report
Revenues
Current report
Power Industry Services
Current report
The revenues of the power industry services segment, representing the businesses of GPS and APC, increased by 61.8%, or $108.5 million, to $284.0 million for the six months ended July 31, 2024 compared with revenues of $175.5 million for the six months ended July 31, 2023 as the construction activities increased for the Midwest Solar and Battery Projects, the Trumbull Energy Center, 405 MW Midwest Solar Project and the Louisiana LNG Facility. The increase in revenues between quarters was partially offset by decreased construction activities associated with the Guernsey Power Station project, the ESB FlexGen Peaker Plants and the Kilroot Project, as those projects have concluded or are nearly complete. The revenues of this business segment represented approximately 73.8% of consolidated revenues for the six months ended July 31, 2024 and 71.6% of consolidated revenues for the six months ended July 31, 2023.
Current report
Industrial Construction Services
Current report
Telecommunications Infrastructure Services
Current report
Cost of Revenues
Current report
For the six-month period ended July 31, 2024, we reported a consolidated gross profit of approximately $49.0 million, which represented a gross profit percentage of approximately 12.8% of corresponding consolidated revenues. For the six-month period ended July 31, 2023, we reported a consolidated gross profit of approximately $38.0 million, which represented a gross profit percentage of approximately 15.5% of corresponding consolidated revenues. The gross profit percentage decreased between periods primarily due to the changing mix of projects and contract types and the unfavorable profit adjustments on the Kilroot Project recorded during the current year in the amount of $2.8 million. The gross profit percentages of corresponding revenues for the power industry services, industrial construction services and the telecommunications infrastructure services segments were 12.3%, 13.1% and 27.1%, respectively, for the six months ended July 31, 2024.
Current report
The gross profit percentages of corresponding revenues for the power industry services, industrial construction services and the telecommunications infrastructure services segments were 16.0%, 13.4% and 22.5%, respectively, for the six months ended July 31, 2023.
Current report
Selling, General and Administrative Expenses
Current report
These costs were $23.9 million and $21.1 million for the six months ended July 31, 2024 and 2023, respectively, and represented 6.2% and 8.6% of corresponding consolidated revenues, respectively.
Current report
Other Income, Net
Current report
Other income, net, for the six months ended July 31, 2024 was $10.4 million, which reflected income earned during the period on investments in the total amount of approximately $9.3 million, as the weighted average balances of investments are meaningfully higher this year.
Current report
Income Taxes
Current report
Net Income
Current report
At July 31, 2024 and January 31, 2024, we did not have any borrowings outstanding under the New Credit Agreement and Expired Credit Agreement, respectively. At July 31, 2024, there were no outstanding letters of credit issued under the New Credit Agreement.
Removed paragraphs (19)
Previous report
The historic decline in the use of coal as a power source in the U.S. was caused, to a significant extent, by the plentiful supply of domestic and generally inexpensive natural gas which made it the fuel of choice for power plant developers over this period. The pace of the historic increase in the preference for natural gas as an electricity generating fuel source also was energized, in part, by environmental activism and restrictive regulations targeting coal-fired power plants.
Previous report
Accelerating the build-out of renewable energy sources and batteries has become an especially difficult proposition amid supply-chain challenges and inflation. For example, during Fiscal 2023, the highly publicized probe by the U.S. Commerce Department into whether Chinese solar manufacturers were circumventing trade tariffs on solar panels had the effect of halting imports of key components needed to build new solar farms. As a result of this probe, the U.S. determined that certain Chinese solar manufacturers were dodging U.S. tariffs by finishing their products in Cambodia, Malaysia, Thailand and Vietnam, countries that accounted for approximately 80% of solar panel supplies. In August 2023, the U.S. Commerce Department imposed tariffs on solar imports from Southeast Asia. Critics of this action claim that the tariffs will scramble supply chains, delay projects and reduce profits for solar farm developers.
Previous report
U.S. offshore wind projects progress inconsistently, facing challenges in the areas of environmental and fishery impacts, grid connection complexities, transmission planning, federal permitting processes and rising interest rates. Further, U.S. projects are confronted by shipping regulations that may limit the ability of developers to replicate successful European erection models. Commitments to sell power at a fixed price in an environment of rising inflation and interest rates have challenged the finances of many offshore wind projects, and as a result several prominent projects have been delayed or cancelled. Proponents of clean energy also face political challenges from constituencies who oppose the impacts to wildlife and the environment that may be caused by clean energy infrastructure projects.
Previous report
Hydrogen Power
Previous report
It is important to note that the plans for certain natural gas-fired power plant projects include the integration of hydrogen-burning capabilities. While the plants will initially burn natural gas alone, it is planned by the respective project owners that the plants will eventually burn a mixture of natural gas and green hydrogen, thereby establishing power-generation flexibility for these plants. Operational testing of gas turbines fueled with renewable hydrogen have been successful. We believe this pairing is a winning combination that provides inexpensive and efficient power, enhances grid reliability and addresses clean-air concerns. The building of state-of-the-art power plants with flex-fuel capability replaces coal-fired power plants in the short term with relatively clean gas-fired electricity generation. Further, such additions to the power generation fleet provide the potential for the plants to burn 100% green hydrogen gas, which would provide both base load power and long duration back-up power, when the sun is not shining or the wind is not blowing, for extended periods of time and without certain harmful air emissions.
Previous report
We believe that significant uncertainty relates to the policies of the current U.S. presidential administration. President Biden proposes to make the electricity production in the U.S. carbon free by 2035 and to put the country on the path to achieve net zero carbon emissions by 2050.
Previous report
Annual capacity auctions since 2021 have suffered delays that, once held, resulted in lower prices than previous auctions. In June 2023, FERC issued an order accepting delays in future capacity auctions so that market design rule changes proposed by stakeholders might be implemented for all future auctions. In January 2024, FERC approved only one component of PJM’s two-part proposal for its capacity auction reform.
Previous report
Uncertainty in this market, including the difficulties experienced by PJM in implementing a capacity auction design that all of its stakeholders consider to be fair, the repeated capacity auction delays, and the shrinking annual capacity auction prices, may discourage potential power plant owners from commencing the development of new power plants in this area thereby reducing potential new business opportunities for us.
Previous report
Notable is Texas’ plan to add more gas-fired power capacity in the state, supported by a newly created energy fund. There was a May 31, 2024 deadline for projects to notify officials of their intent to apply for loans from the fund; filings representing more than 41 GW of new gas-fired generation were recorded.
Previous report
Further, the Irish government recognizes that the successful development of data centers in the country is a key aspect in promoting Ireland as a digital economy hot-spot in Europe. The stewards of the electricity supply in Ireland acknowledge that the large increase in electricity demand presented by the growth of the data center industry represents an evolving, significant risk to the security of the supply. During Fiscal 2023, APC completed a project to install natural gas-fired power generation for a major data center in the Dublin area.
Previous report
Recently, the government of the U.K. expressed support for new gas-fired power plants to offset the remaining coal-fired plant retirement, the retirement of aging gas plants, and the intermittency of renewable energy plants. Prime Minister Rishi Sunak stated that he would not gamble with energy security despite U.K. plans to decarbonize the power system by 2035. His secretary of state for energy security echoed these sentiments with a speech in which she stated that she expected to warn of blackouts unless there is sufficient gas-fired capacity to provide back-up for intermittent renewables. Her comments also expressed hope that new gas plants will be accompanied with the potential ability to burn 100% hydrogen or be fitted with carbon capture and storage technologies. Of course, the recency of these pronouncements means that it is too soon to expect energy policy shifts or the announcement of plans for specific new gas-fired power plants in the U.K. Further, Mr. Sunak’s government is facing a strong challenge from the opposition party that is much more bullish on decarbonization. In fact, the dissolution of Parliament has been requested by the Prime Minister, and a general election has been scheduled for July 2024.
Previous report
TRC was founded in 1977, initially focused on the fabrication of piping systems and pressure vessels. Prior to our acquisition of TRC in 2015, it expanded its business to include industrial field services with a concentration on turnarounds, outage support, renovations, repairs and maintenance projects. Since the acquisition, TRC has narrowed the focus of its field services to emphasize industrial construction projects. During Fiscal 2023, TRC consolidated its metal fabrication plants and support structures into one industrial fabrication and warehouse facility near Greenville, North Carolina, which is centrally located within its primary geographic market. The consolidation reduced fixed costs and notably streamlined the business, which has permitted TRC to primarily focus on its field service construction opportunities.
Previous report
Industrial field services typically represent the majority of TRC’s annual revenues with the remaining revenues contributed by projects consisting solely of metal fabrication. Recent and current major customers of TRC include Nutrien Ltd., the global fertilizer company; Jacobs Solutions Inc., an international engineering and construction firm that is building a significant biotechnology manufacturing facility in the research triangle area of North Carolina; and North America’s largest forest products companies such as Weyerhaeuser Company, International Paper and Domtar Corporation; and various other industrial companies. These relationships demonstrate that TRC is a trusted industrial services provider to blue chip customers from around North America, and from countries like France, Germany, Denmark, Japan, Belgium and Australia, that are expanding or locating new production facilities in TRC’s geographic region.
Previous report
NM – not meaningful
Previous report
The gross profit percentages of corresponding revenues for the power industry services, industrial construction services and the telecommunications infrastructure services segments were 14.0%, 12.4% and 20.0%, respectively, for the quarter ended April 30, 2023.
Previous report
During the three months ended April 30, 2023, our balance of cash and cash equivalents increased by a net amount of $22.0 million.
Previous report
The net amount of cash used in operating activities for the three months ended April 30, 2023 was $1.2 million. Our net income for the three months ended April 30, 2023, adjusted favorably by the net amount of non-cash income and expense items, represented a source of cash in the total amount of $5.4 million. The reduction in the balance of contract assets of $19.9 million, represented a source of cash and was primarily due to project retentions being moved to contract receivables as the Guernsey Power Station reached substantial completion during the period. The increase in contract liabilities of $15.0 million represented a source of cash, primarily due to the net effect of the early phase of construction activities on a GPS project and post peak phase of certain APC projects. The $10.6 million increase in contract receivables during the period represented a use of cash, primarily due to GPS and TRC project billings and the reclassification of project retentions related to the Guernsey Power Station. Reductions in the combined level of accounts payables and accrued expenses in the amount of $26.9 million and the increase of other assets of $4.1 million, represented uses of cash during the period as well.
Previous report
At April 30, 2024 and January 31, 2024, we did not have any borrowings outstanding under the Expired Credit Agreement. However, the Bank had issued a letter of credit, in support of the activities of APC for the Kilroot Project, that was outstanding in the total amount of $9.2 million as of April 30, 2024. Subsequent to April 30, 2024, the project owner made a draw for the full amount of the letter of credit that is subject to the disputes between the parties. We immediately reimbursed the Bank for the amount of the draw from our cash reserves.
Previous report
When sufficient information about claims related to performance on projects would be available and monetary damages or other costs or losses would be determined to be probable, we would record such losses. As our subsidiaries are wholly-owned, any actual liability related to contract performance is ordinarily reflected in the financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. Any amounts that we may be required to pay in excess of the estimated costs to complete contracts in progress as of April 30, 2024 are not estimable.
Reworded paragraphs (60)
Previous wording
The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of April 30, 2024, and the results of their operations for the three month periods ended April 30, 2024 and 2023, and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for Fiscal 2024 that was filed with the SEC on April 11, 2024 (the “Annual Report”).
Current wording
The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of July 31, 2024, and the results of their operations for the three and six month periods ended July 31, 2024 and 2023, and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for Fiscal 2024 that was filed with the SEC on April 11, 2024 (the “Annual Report”).
Previous wording
Our forward-looking statements, financial position and results of operations, are based on our current expectations and beliefs concerning future developments and their potential effects on us. 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 existing operations and do not include the potential impact of any future acquisitions.
Current wording
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 existing operations and do not include the potential impact of any future acquisitions.
Previous wording
suppliers and other commercial firms with significant power requirements in the U.S., Ireland and the U.K. GPS and APC represent our power industry services reportable segment. Through TRC, the industrial construction services reportable segment provides primarily on-site services that support new plant construction and additions, maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the Southeast region of the U.S. and that may include the fabrication, delivery and installation of steel components such as piping systems and pressure vessels. Through SMC, which conducts business as SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the Mid-Atlantic region of the U.S.
Current wording
The Company is primarily a construction firm that conducts operations through its wholly-owned subsidiaries, GPS, APC, TRC and SMC. Through GPS and APC, we provide a full range of engineering, procurement, construction, commissioning, maintenance, project development and technical consulting services to the power generation market for a wide range of customers, including independent power project owners, public utilities, power plant heavy equipment suppliers and other commercial firms with significant power requirements in the U.S., Ireland and the U.K. GPS and APC represent our power industry services reportable segment. Through TRC, the industrial construction services reportable segment provides primarily on-site services that support new plant construction and additions, maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the Southeast region of the U.S. and that may include the fabrication, delivery and installation of steel components such as piping systems and pressure vessels. Through SMC, which conducts business as SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the Mid-Atlantic region of the U.S.
Previous wording
At April 30, 2024, our consolidated project backlog amount of $0.8 billion consisted substantially of the projects of the power industry services reporting segment. The comparable consolidated backlog amount as of January 31, 2024 was $0.8 billion. Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects.
Current wording
At July 31, 2024, our consolidated project backlog amount of $1.0 billion consisted substantially of the projects of the power industry services reporting segment. The comparable consolidated backlog amount as of January 31, 2024 was $0.8 billion. Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects.
Previous wording
We are committed to the construction of state-of-the-art, natural gas-fired power plants, as important elements of our country’s electricity-generation mix now and in the future. This represents our core business. In addition, we have been directing meaningful business development efforts to winning projects for the erection of utility-scale solar fields and wind farms and for the construction of hydrogen-based energy and other industrial projects in order to diversify the sources of revenues. For the quarter ended April 30, 2024, the amount of revenues earned by us and associated with renewable energy projects were 28.0% of corresponding revenues for the power industry services segment. We have successfully completed alternative energy projects in the past and we have renewed efforts to obtain new work in sectors of the power market that will complement our natural gas-fired EPC services projects going forward.
Current wording
We are committed to the construction of state-of-the-art, natural gas-fired power plants, as important elements of our country’s electricity-generation mix now and in the future. This represents our core business. In addition, we have been directing meaningful business development efforts to winning projects primarily for the erection of utility-scale solar fields, but also wind farms, hydrogen-based energy projects, battery energy storage projects, and other industrial projects in order to diversify the sources of revenues. At July 31, 2024, approximately 55.0% of our project backlog related to renewable energy projects. For the three and six months ended July 31, 2024, the amounts of revenues earned by us and associated with renewable energy projects were 40.6% and 35.7%, respectively, of corresponding revenues for the power industry services segment. We have successfully completed alternative energy projects in the past and we have renewed efforts to obtain new work in sectors of the power market that will complement our natural gas-fired EPC services projects going forward.
Previous wording
It is important to note that the start of new projects is primarily controlled by project owners and that delays may occur that are beyond our control. However, we continue to pursue natural gas-fired power plant, renewable energy plant and industrial construction opportunities in the U.S., Ireland and the U.K. Our vision is to safely contribute to the construction of the energy infrastructure and state-of-the-art industrial facilities that are essential to future economic prosperity in the areas where we operate. We intend to realize this vision with motivated, creative, high-energy and customer-driven teams that are committed to delivering the best possible project results each and every time.
Current wording
It is important to note that the start of new projects is primarily controlled by project owners and that delays may occur that are beyond our control. However, we continue to pursue natural gas-fired power plant, renewable energy plant and industrial construction opportunities in the U.S., Ireland and the U.K. Our vision is to safely contribute to the construction
Previous wording
In October 2022, GPS added to project backlog the EPC services contract value of the Trumbull Energy Center, a 950 MW natural gas-fired power plant now under construction in Lordstown, Ohio (the “Trumbull Energy Center”). We received the full notice to proceed from the project owner, Clean Energy Future-Trumbull, LLC, in November 2022. This combined cycle power station will consist of two Siemens Energy SGT6-8000H gas-fired, high efficiency, combustion turbines with two heat recovery steam generators and a single steam turbine. Project completion is scheduled for early in the year ending January 31, 2027.
Current wording
In October 2022, GPS added to project backlog the EPC services contract value of the Trumbull Energy Center, a 950 MW natural gas-fired power plant now under construction in Lordstown, Ohio (the “Trumbull Energy Center”). We received the full notice to proceed (“FNTP”) from the project owner, Clean Energy Future-Trumbull, LLC, in November 2022. This combined cycle power station will consist of two Siemens Energy SGT6-8000H gas-fired, high efficiency, combustion turbines with two heat recovery steam generators and a single steam turbine. Project completion is scheduled for early in the year ending January 31, 2027.
Previous wording
In April 2024, GPS executed a LNTP with a customer to construct a utility-scale solar field in Illinois that will provide 405 MW of electrical power (the “405 MW Midwest Solar Project”) and will use pre-existing transmission and utility infrastructure from a nearby retired coal power plant. The unique, multi-phased project includes solar-tracking panels that can be stowed by remote command for expected adverse weather events. The project is in its early phases.
Current wording
In April 2024, GPS executed a LNTP with a customer to construct a utility-scale solar field in Illinois that will provide 405 MW of electrical power (the “405 MW Midwest Solar Project”). In August 2024, GPS received a full release for the activities on the EPC contract. The unique, multi-phased project includes solar-tracking panels that can be stowed by remote command for expected adverse weather events and will use pre-existing transmission and utility infrastructure from a nearby retired coal power plant. Project completion is scheduled for the first half of the fiscal year ending January 31, 2027.
Previous wording
In August 2023, GPS executed LNTPs with a customer for three solar and battery projects in Illinois (the “Midwest Solar and Battery Projects”). Under the LNTPs, GPS commenced early engineering and design activities as well as procurement of major equipment for construction of state-of-the-art solar energy and battery energy storage facilities. Between January and early May 2024, GPS received full notices to proceed on all three of the solar and battery projects. The three projects will cumulatively represent 160 MW of electrical power and 22 MW of energy storage. For each project, completion is expected in the last quarter of Fiscal 2025 through the first half of the fiscal year ending January 31, 2026.
Current wording
In August 2023, GPS executed LNTPs with a customer for three solar and battery projects in Illinois (the “Midwest Solar and Battery Projects”). Under the LNTPs, GPS commenced early engineering and design activities as well as procurement of major equipment for construction of state-of-the-art solar energy and battery energy storage facilities. Between January and early May 2024, GPS received FNTPs on all three of the solar and battery projects. The three projects will cumulatively represent 160 MW of electrical power and 22 MW of energy storage. For these projects, completion is expected in the last quarter of Fiscal 2025 through the first half of the fiscal year ending January 31, 2026.
Previous wording
APC entered into an EPC services contract with GE Vernova for the construction and commissioning of an open-cycle thermal power facility in County Offaly, Ireland, that will have the capacity to generate approximately 264 MW of temporary emergency electrical power (the “Shannonbridge Power Project”). The Shannonbridge Power Project, an initiative of EirGrid and the Electricity Supply Board of Ireland (the “ESB”), aims to enhance the region’s power infrastructure and to ensure a reliable electricity supply during critical situations and emergencies. GPS is teaming with APC in performance of this contract. Work on this project commenced early in Fiscal 2024 pursuant to the receipt of a series of LNTPs. In August 2023, APC received the full notice to proceed on this project. Substantial completion of this project, that is defined in the corresponding contract as system turnover for commissioning, occurred in March 2024.
Current wording
APC entered into an EPC services contract with GE Vernova for the construction and commissioning of an open-cycle thermal power facility in County Offaly, Ireland, that has the capacity to generate approximately 264 MW of temporary emergency electrical power (the “Shannonbridge Power Project”). In August 2023, APC received the FNTP on this project. Substantial completion of this project, that is defined in the corresponding contract as system turnover for commissioning, occurred in March 2024.
Previous wording
In May 2022, APC entered into engineering and construction services contracts with the ESB to construct three 65 MW aero-derivative gas turbine flexible generation power plants in and around the city of Dublin, Ireland (“ESB FlexGen Peaker Plants”). Two of the power plants, the Poolbeg and Ringsend FlexGen Power Plants, are located on the Poolbeg Peninsula, and the Corduff FlexGen Power Plant is located in nearby Goddamendy. All three projects cleared the applicable capacity auction in Fiscal 2023 and are expected to operate intermittently during peak periods of electricity demand and as back-up supply options when renewable electricity generation is limited. The completion of each power facility is expected to occur in the first half of Fiscal 2025.
Current wording
In May 2022, APC entered into engineering and construction services contracts with the ESB to construct three 65 MW aero-derivative gas turbine flexible generation power plants in and around the city of Dublin, Ireland (“ESB FlexGen Peaker Plants”). Two of the power plants, the Poolbeg and Ringsend FlexGen Power Plants, are located on the Poolbeg Peninsula, and the Corduff FlexGen Power Plant is located in nearby Goddamendy. All three projects cleared the applicable capacity auction in Fiscal 2023 and are expected to operate intermittently during peak periods of electricity demand and as back-up supply options when renewable electricity generation is limited. The completion of each power facility is expected to occur in the second half of Fiscal 2025.
Previous wording
As previously disclosed, there have been a number of challenges related to the Kilroot Project that have adversely impacted our ability to execute as expected, including supply chain delays, material changes to the project, the COVID-19 omicron outbreak, the war in Ukraine and extreme weather. In addition, unresolved variations and claims disrupted the execution of the project and harmed the cash flow of this project. On May 3, 2024, the project owner revoked the passes of our project and construction teams to the construction site. APC had delivered a notice of contract breach with a 14-day resolution period. The issues were not resolved and APC terminated the contract (see Note 7). We have recognized the estimated contract loss related to the Kilroot Project in the amount of approximately $12.7 million, of which $2.6 million was recorded during the three-month period ended April 30, 2024 and the remainder recorded in the prior fiscal year.
Current wording
As previously disclosed, there have been a number of challenges related to the Kilroot Project that adversely impacted our ability to execute as expected, including supply chain delays, material changes to the project, the COVID-19 omicron outbreak, the war in Ukraine and extreme weather. In addition, unresolved variations and claims disrupted the execution of the project and harmed the cash flow of this project.
Previous wording
Subsequent to April 30, 2024, the letter of credit related to the Kilroot Project was drawn upon by the project owner for the full amount of $9.2 million (see Note 7 to the accompanying condensed consolidated financial statements). APC has significant unresolved contract variations and extension-of-time claims, among others, related to this project, and the project owner has asserted counterclaims that we dispute. APC will continue to pursue all of its rights under the contract, and will do so through legal means if necessary.
Current wording
APC provided 14 days’ notice to terminate as a result of project owner breaches of the contract. Those breaches were not resolved during that 14-day period, as a result of which the contract terminated on May 3, 2024. Subsequently, the project owner made a draw for the full amount of a $9.2 million irrevocable letter of credit, or on-demand performance bond, issued by the Company’s bank. This amount is now part of the open and disputed claims related to this project because APC and the Company believe the project owner initiated the draw without cause and, therefore, the amount should be refunded. The amount is included in accounts receivable as of July 31, 2024. We have recognized the estimated contract loss related to the Kilroot Project in the amount of approximately $12.8 million, of which $2.8 million was recorded during the six-month period ended July 31, 2024 and the remainder recorded in the prior fiscal year. APC has significant unresolved contract variations and claims for extensions of time, among other issues, related to the Kilroot Project. The project owner has asserted counterclaims that APC disputes. APC will continue to pursue all of its rights under the contract, and will do so through legal means if necessary.
Previous wording
As of April 30, 2024, TRC’s project backlog was approximately $120 million as compared to $128 million on January 31, 2024. Despite generating $43.7 million in revenues during the quarter, the backlog moderately decreased by $7.9 million, demonstrating our successful business development efforts focused on securing larger industrial field service construction projects from both new and recurring clients.
Current wording
As of July 31, 2024, TRC’s project backlog was approximately $92 million as compared to $128 million on January 31, 2024. For the six months ended July 31, 2024 and 2023, TRC generated $93.3 million and $63.1 million in revenues, respectively. The increase in revenues for the current year from the comparative period highlights the results of our successful business development efforts with both new and recurring clients during Fiscal 2023 and Fiscal 2022, particularly in securing larger industrial field service construction projects. Despite the decrease in the amount of TRC’s project backlog during the current year, we are encouraged by the number and size of opportunities in our project pipeline, and we expect the TRC project backlog will increase next year.
Previous wording
In the reference case of its most recently published Annual Energy Outlook released in March 2023 (as would be customary, EIA did not publish a report in early 2024), the EIA projects that economic growth paired with increasing electrification in end-user sectors will result in notable growth of electricity demand in the U.S. through 2050. Declining capital costs for solar panels, wind turbines and battery storage, as well as government subsidies like those included in the Inflation Reduction Act of 2022 (the “IRA”), will result in renewables becoming increasingly cost effective compared with the alternatives when the costs of building new power capacity are considered. Renewables are increasingly meeting power demand through 2050 as they become more competitive with natural gas, coal and nuclear power.
Current wording
In the reference case of its most recently published Annual Energy Outlook released in March 2023 (as would be customary, the U.S. Energy Information Administration (the “EIA”) did not publish a report in early 2024), the EIA projects that economic growth paired with increasing electrification in end-user sectors will result in notable growth of electricity demand in the U.S. through 2050. Declining capital costs for solar panels, wind turbines and battery storage, as well as government subsidies like those included in the Inflation Reduction Act of 2022 (the “IRA”), will result in renewables becoming increasingly cost effective compared with the alternatives when the costs of building new power capacity are considered. Renewables are increasingly meeting power demand through 2050 as they become more competitive with natural gas, coal and nuclear power.
Previous wording
However, the headwinds confronting a significant resurgence in the pace of planning new developments of gas-fired power plants are strong. Various cities, counties and states have adopted clean energy and carbon-free goals or objectives with achievement expected by a certain future date, typically 10 to 30 years out. These aspirational goals may increase the risk of a new power plant becoming a stranded asset before the end of its useful economic life, a risk that potential equity capital providers may be unwilling to take. Lenders, who have become more wary of funding fossil-fuel ventures as environmental, social and governance ideals influence financing decisions, may be generally unwilling to provide capital for energy projects to increase the domestic production and transmission of oil and natural gas. In addition, insurance underwriters may require oil and gas industry clients to implement plans to reduce methane emissions, and will not provide insurance coverage for oil and gas projects in government-protected conservation areas that do not allow for sustainable use.
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expected by a certain future date, typically 10 to 30 years out. These aspirational goals may increase the risk of a new power plant becoming a stranded asset before the end of its useful economic life, a risk that potential equity capital providers may be unwilling to take. Lenders, who have become more wary of funding fossil-fuel ventures as environmental, social and governance ideals influence financing decisions, may be generally unwilling to provide capital for energy projects to increase the domestic production and transmission of oil and natural gas. In addition, insurance underwriters may require oil and gas industry clients to implement plans to reduce methane emissions, and will not provide insurance coverage for oil and gas projects in government-protected conservation areas that do not allow for sustainable use.
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transition from conventional power plants fueled by coal and natural gas to renewable forms of energy. Electric-grid operators are warning that power-generating capacity is struggling to keep up with demand. The challenge is that solar and wind farms do not produce electricity at all times, and they need large batteries to store their output for later use.
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Throughout the U.S., the risk of electricity shortages grows as the retirement of traditional power plants outpaces their replacement by renewable energy and battery storage. Electric-grid operators are warning that power-generating capacity is struggling to keep up with demand. The challenge is that solar and wind farms do not produce electricity at all times, and they need large batteries to store their output for later use.
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PJM published a study in February 2023 that supported the growing concern that the reliability of power grids is being eroded by the rush to renewable power. Its research highlighted three trends that present increasing reliability risks due to a potential timing mismatch between load growth, resource retirements and the pace of new electricity generating plant additions. The study indicates that the growth rate of electricity demand in the PJM footprint is likely to increase from electrification (i.e., shifts to electric-powered automobiles, electric appliances, etc.) coupled with the proliferation of high-demand data centers in the region. Coal-fired and old gas-fired power generation facilities are being retired at a rapid pace, possibly creating the risk that such retirements may outpace the construction of new power-generating facilities as PJM’s interconnection queue includes primarily intermittent and limited-duration renewable energy resources. Given the operating characteristics of these types of facilities and the weather, PJM will need multiple megawatts of renewable power and accompanying battery storage, and improvements in the transmission network, to replace a single megawatt of thermal generation.
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PJM Interconnection LLC (“PJM”) published a study in February 2023 that supported the growing concern that the reliability of power grids is being eroded by the rush to renewable power. The study indicates that the growth rate of electricity demand in the PJM footprint is likely to increase from electrification (i.e., shifts to electric-powered automobiles, electric appliances, etc.) coupled with the proliferation of high-demand data centers in the region. Coal-fired and old gas-fired power generation facilities are being retired at a rapid pace, possibly creating the risk that such retirements may outpace the construction of new power-generating facilities as PJM’s interconnection queue includes primarily intermittent and limited-duration renewable energy resources (see the discussion in the Capacity Auctions section below). Given the operating characteristics of these types of facilities and the weather, PJM will need multiple megawatts of renewable power and accompanying battery storage, and improvements in the transmission network, to replace a single megawatt of thermal generation.
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Over the last several decades, the number of operating nuclear reactors has declined. At the end of April 2024, the U.S. had 94 operating commercial nuclear reactors at 54 nuclear power plants in 28 states. The average age of these nuclear reactors is approximately 42 years old with most plants authorized to operate for another 20 years. Only four nuclear reactors have entered into commercial operation in the last thirty years. In July 2023 and April 2024, the Vogtle Units 3 and 4, respectively, entered into commercial operations. Suffering significant cost overruns—more than twice the initial estimates—and substantial delays, these units have caused the industry to shift focus to smaller, more economical designs.
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Over the last several decades, the number of operating nuclear reactors has declined. At the end of April 2024, the U.S. had 94 operating commercial nuclear reactors at 54 nuclear power plants in 28 states. The average age of these nuclear reactors is approximately 42 years old with most plants authorized to operate for another 20 years. Only four nuclear reactors have entered into commercial operation in the last thirty years, the most recent being the Vogtle Units 3 and 4, which entered into commercial operations in July 2023 and April 2024, respectively. Suffering significant cost overruns—more than twice the initial estimates—and substantial delays, the Vogtle units have caused the industry to shift focus to smaller, more economical designs.
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The deployment of small modular reactors could mean lower construction and electricity costs through the use of simpler power plant designs, standardized components and passive safety measures. Such plants could be built in less time than larger plants, utilize less space and represent a viable choice for reliable power to offset the intermittencies of renewable power sources. The increase by the U.S. in its use of nuclear power for electricity generation could have unfavorable effects on the demand for new natural gas-fired and additional renewable energy facilities in the future, but could provide balance-of-plant construction opportunities for GPS.
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In July 2024, President Biden signed legislation that attempts to streamline the permitting process for new reactor designs and reduce fees for companies seeking to license advanced reactor technologies. The deployment of small modular reactors could mean lower construction and electricity costs through the use of simpler power plant designs, standardized components and passive safety measures. Such plants could be built in less time than larger plants, utilize less space and represent a viable choice for reliable power to offset the intermittencies of renewable power sources. The increase by the U.S. in its use of nuclear power for electricity generation could have unfavorable effects on the demand for new natural gas-fired and additional renewable energy facilities in the future, but the increase could provide balance-of-plant construction opportunities for GPS.
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In August 2022, President Biden signed the IRA, a climate and healthcare bill that funds hundreds of billions of dollars in tax subsidies intended to combat climate change among other measures. According to certain commentary, the legislation will cause investment in technologies needed for leaner production and the use of fuel types, including hydrogen, nuclear, renewables and fossil fuels. However, it appears that receipt of the majority of the tax subsidies will be conditioned on the extent that taxpayers “buy American” and/or pay prevailing wages, among other requirements. Existing supply chains and skilled labor pools may lack the capacity to meet the demand that the incentives are intended to create. Therefore, the subsidies may not provide the intended economic incentives to renewable and other energy project owners.
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In August 2022, President Biden signed the IRA, a climate and healthcare bill that funds hundreds of billions of dollars in tax subsidies intended to combat climate change among other measures. However, it appears that receipt of the majority of the tax subsidies will be conditioned on the extent that taxpayers “buy American” and/or pay prevailing wages, among other requirements. Existing supply chains and skilled labor pools may lack the capacity to meet the demand that the incentives are intended to create. Therefore, the subsidies may not provide the intended economic incentives to renewable and other energy project owners.
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Many of our recently completed and awarded EPC service contracts relate to the construction of natural gas-fired power plants located within the Mid-Atlantic geographic footprint of PJM, which operates a capacity market to ensure long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted future energy demands in its region. Capacity payments represent meaningful portions of the revenue streams of qualifying power plants.
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Many of our recently completed and awarded EPC service contracts relate to the construction of natural gas-fired power plants located within the Mid-Atlantic geographic footprint of PJM, which operates a capacity market to ensure long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted future energy demands in its region. Capacity payments by PJM represent meaningful portions of the revenue streams of qualifying power plants.
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We believe that the benefits of natural gas as a source of power are compelling, especially as a complement to the deployment of solar and wind powered energy sources, and that the future long-term prospects for natural gas-fired power plant construction remain generally favorable as natural gas continues to be the primary source for power generation in our country. The future availability of less carbon-intense, higher efficiency and inexpensive natural gas in the U.S. should be a significant factor in the economic assessment of future power generation capacity additions, although the pace of new opportunities emerging may be restrained and the starts of awarded EPC projects may be delayed or cancelled due to the challenges described above.
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Despite the headwinds, we believe that the lower operating costs of natural gas-fired power plants, the higher energy generating efficiencies of modern gas turbines, and the requirements for grid resiliency should sustain the demand for modern combined cycle and simple cycle gas-fired power plants in the future. We believe that the benefits of natural gas as a source of power are compelling, especially as a complement to the deployment of solar and wind powered energy sources, and that the future long-term prospects for natural gas-fired power plant construction remain generally favorable as natural gas continues to be the primary source for power generation in our country. The future availability of less carbon-intense, higher efficiency and inexpensive natural gas in the U.S. should be a significant factor in the economic assessment of future power generation capacity additions, although the pace of new opportunities emerging may be restrained and the starts of awarded EPC projects may be delayed or cancelled due to the challenges described above.
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The scramble for electricity, regardless of source, caused by the Russian invasion of Ukraine may have clarified that the 100% transition to renewable energy is in the distant future and has prompted, in part, renewed interest in not only carbon capture techniques, but carbon removal technologies as well. Carbon capture processes grab carbon from smokestacks and other sources of dense greenhouse gases, thereby reducing harmful emissions. Carbon-removal technologies are more demanding as they remove carbon out of the more diffuse open air in order to store it for centuries. Governments, including the U.S., are taking initial steps to boost this industry. The success of this industry could reduce the climate-change fear associated with natural gas-fired power plants. We intend to execute an “all-of-the-above” approach in pursuing the construction of future facilities that support the energy transition, which we see as a continuation of our historical commitment to building cleaner energy plants.
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The scramble for electricity, regardless of source, caused by the Russian invasion of Ukraine may have clarified that the 100% transition to renewable energy is in the distant future and has prompted, in part, renewed interest in not only carbon capture techniques, but carbon removal technologies as well. Governments, including the U.S., are taking initial steps to boost this industry. The success of this industry could reduce the climate-change fear associated with natural gas-fired power plants. We intend to execute an “all-of-the-above” approach in pursuing the construction of future facilities that support the energy transition, which we see as a continuation of our historical commitment to building cleaner energy plants.
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The foregoing discussion in this “Market Outlook” has focused on the state of the domestic power market as the EPC services business of GPS historically provides the predominant portion of our revenues. However, overseas power markets may provide important new power construction opportunities for APC especially across Ireland and the U.K. For 2023, the percentage of net electricity generation fueled by natural gas in the islands of Ireland and Great Britain were approximately 45% and 32%, respectively.
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The foregoing discussion in this “Market Outlook” has focused on the state of the domestic power market as the EPC services business of GPS historically provides the predominant portion of our revenues. However, overseas power markets may provide important new power construction opportunities for APC, especially across Ireland and the U.K.
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The Irish government has issued a policy statement on the security of the electricity supply in Ireland which confirms the requirement for the development of new support technologies to deliver on its commitment to have 80% of the country’s electricity generated from renewables by 2030. The report emphasizes that this will require a combination of conventional generation (typically powered by natural gas), interconnection to other jurisdictions, demand flexibility and other technologies such as battery storage and generation from renewable gases. The Irish government has approved that the development of new conventional generation (including gas-fired and gasoil distillate-fired generation) is a national priority and should be permitted and supported in order to ensure the security of electricity supply while supporting the growth of renewable electricity generation.
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The Irish government has issued a policy statement on the security of the electricity supply in Ireland which confirms the requirement for the development of new support technologies to deliver on its commitment to have 80% of the country’s electricity generated from renewables by 2030. The report emphasizes that this will require a combination of conventional generation (typically powered by natural gas), interconnection to other jurisdictions, demand flexibility and other technologies such as battery storage and generation from renewable gases.
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Nonetheless, APC is actively pursuing other new business opportunities in both the renewable and support sectors of power generation with its existing and new clients in both countries. Over the last three years, APC has increased its activities and currently has multiple projects under execution. GPS has been providing top management guidance and project management expertise to APC on its Shannonbridge Power Project and the ESB FlexGen Peaker Plants during this period. APC has also provided experienced resources to GPS on several of its EPC services contracts in the U.S.
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APC is actively pursuing business opportunities in both the renewable and support sectors of power generation with its existing and new clients. In addition, GPS has been providing top management guidance and project management expertise to APC. APC has also provided experienced resources to GPS on several of its EPC services contracts in the U.S. More recently, APC has begun a comprehensive operational review, in collaboration with GPS, to enhance project management processes.
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As stated above, the business footprint for TRC encompasses the Southeast region of the U.S. where there are many local and state governments that welcome industrial production facilities with ideal locations and with serious economic development programs and incentives. The national focus on infrastructure improvements, biotechnology advancements, energy storage and clean water have resulted in firms that are focused on these trends recently choosing TRC to participate in major construction projects in the region. Other important factors and trends include low corporate state tax rates, favorable labor migration patterns, the surface transportation infrastructure and the ready access to modern seaports.
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Industrial field services typically represent the majority of TRC’s annual revenues with the remaining revenues contributed by projects consisting solely of metal fabrication. The business footprint for TRC encompasses the Southeast region of the U.S. where there are many local and state governments that welcome industrial production facilities with ideal locations and with serious economic development programs and incentives. The national focus on infrastructure improvements, biotechnology advancements, energy storage and clean water have resulted in firms that are focused on these trends recently choosing TRC to participate in major construction projects in the region. Other important factors and trends include low corporate state tax rates, favorable labor migration patterns, the surface transportation infrastructure and the ready access to modern seaports.
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Economic data supports our belief that TRC is ideally located in a leading manufacturing growth area of the U.S., which should continue to provide it with project opportunities going forward that will expand its business and industrial construction capabilities. The Dodge Construction Starts report for 2024 forecasts that total construction in the U.S. will increase by 7% in 2024, with a 16% increase in the manufacturing category. The FMI Construction Put-in-Place Forecast for 2024 predicts that construction activity in the manufacturing sector will increase by over 15% in 2024. Despite headwinds such as material price volatility and rising labor costs, skilled labor shortages, high interest rates and tighter
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Economic data supports our belief that TRC is ideally located in a leading manufacturing growth area of the U.S., which should continue to provide it with project opportunities going forward that will expand its business and industrial
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lending standards, it is likely that 2024 will see a boost to construction associated with manufacturing, as well as the transportation and clean energy infrastructures, as funds from three key pieces of national legislation passed in 2021 and 2022 are expected to flow into the industry. These bills include the Infrastructure and Jobs Act, the IRA and the Creating Helpful Incentives to Produce Semiconductors Act, and they appear to be sustaining high construction industry confidence for 2024 and the future beyond.
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construction capabilities. The Dodge Construction Starts report for 2024 forecasts that total construction in the U.S. will increase by 7% in 2024, with a 16% increase in the manufacturing category. Released in July 2024, the FMI Construction Put-in-Place Forecast for 2024 predicts that construction activity in the manufacturing sector will increase by over 21% in 2024. Despite headwinds such as material price volatility and rising labor costs, skilled labor shortages, high interest rates and tighter lending standards, it is likely that 2024 will see a boost to construction associated with manufacturing, as well as the transportation and clean energy infrastructures, as funds from three key pieces of national legislation passed in 2021 and 2022 are expected to flow into the industry. These bills include the Infrastructure and Jobs Act, the IRA and the Creating Helpful Incentives to Produce Semiconductors Act, and they appear to be sustaining high construction industry confidence for 2024 and the future beyond.
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Consolidated revenues for the three months ended April 30, 2024 were $157.7 million, which represented an increase of $54.0 million, or 52.1%, from consolidated revenues of $103.7 million reported for the three months ended April 30, 2023. The overall improvement in revenues was due to increases in revenues between quarters for all three of our reportable segments, as presented in the table above.
Current wording
Consolidated revenues for the three months ended July 31, 2024 were $227.0 million, which represented an increase of $85.7 million, or 60.6%, from consolidated revenues of $141.3 million reported for the three months ended July 31, 2023. The overall improvement in revenues was due to increases in revenues between quarters for all three of our reportable segments, as presented in the table above.
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The revenues of the power industry services segment, representing the businesses of GPS and APC, increased by 57.1%, or $40.1 million, to $110.3 million for the three months ended April 30, 2024 compared with revenues of $70.2 million for the three months ended April 30, 2023 as the quarterly construction activities increased for the Midwest Solar and Battery Projects, the Trumbull Energy Center and the Shannonbridge Power Project. The increase in revenues between quarters was partially offset by decreased construction activities associated with the Guernsey Power Station project and the Kilroot Project, as those projects have concluded and have been exited, respectively. The revenues of this business segment represented approximately 69.9% of consolidated revenues for the quarter ended April 30, 2024 and 67.7% of consolidated revenues for the corresponding prior year quarter.
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The revenues of the power industry services segment, representing the businesses of GPS and APC, increased by 64.9%, or $68.4 million, to $173.8 million for the three months ended July 31, 2024 compared with revenues of $105.3 million for the three months ended July 31, 2023 as the quarterly construction activities increased for the Midwest Solar and Battery Projects, the Trumbull Energy Center, the 405 MW Midwest Solar Project and the Louisiana LNG Facility. The increase in revenues between quarters was partially offset by decreased construction activities associated with the Guernsey Power Station project, the Shannonbridge Power Project, the ESB FlexGen Peaker Plants and the Kilroot Project, as those projects have concluded or are nearly complete. These projects were the primary drivers of the revenues for this segment for the three-month period ended July 31, 2023. The revenues of this business segment represented approximately 76.5% of consolidated revenues for the quarter ended July 31, 2024 and 74.5% of consolidated revenues for the corresponding prior year quarter.
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The primary driver for this segment’s revenues for the three months ended April 30, 2023, were the construction of the Trumbull Energy Center, the Guernsey Power Station, the ESB FlexGen peaker plants and the Kilroot Project power facility.
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The primary driver for this segment’s revenues for the three months ended July 31, 2023, were the construction of the Trumbull Energy Center, Shannonbridge Power Project, the ESB FlexGen Peaker plants and the Kilroot Project.
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The revenues of our industrial construction services segment, representing the business of TRC, increased by $13.4 million, or 44.2%, to $43.7 million for the three months ended April 30, 2024 compared to revenues of $30.3 million for the three months ended April 30, 2023 as the amounts of field services increased meaningfully between periods, partially offset by decreased supporting vessel fabrication work between periods. For the three months ended April 30, 2024 and 2023, the revenues of this segment represented 27.7% and 29.2% of consolidated revenues for the corresponding periods.
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The revenues of our industrial construction services segment, representing the business of TRC, increased by $16.9 million, or 51.6%, to $49.6 million for the three months ended July 31, 2024 compared to revenues of $32.8 million for the three months ended July 31, 2023 as the amounts of field services increased meaningfully between periods, partially offset by decreased supporting vessel fabrication work between periods. For the three months ended July 31, 2024 and 2023, the revenues of this segment represented 21.9% and 23.2% of consolidated revenues for the corresponding periods.
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The revenue results of this business segment, which represent the business of SMC, were $3.7 million for the three-month period ended April 30, 2024, an increase of $0.5 million, or 16.4%, from the amount of revenues earned during the three months ended April 30, 2023.
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The revenue results of this business segment, which represent the business of SMC, were $3.6 million for the three-month period ended July 31, 2024, an increase of $0.4 million, or 11.2%, from the amount of revenues earned during the three months ended July 31, 2023.
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With the increase in consolidated revenues for the three months ended April 30, 2024 compared with last year’s first quarter ended April 30, 2023, the consolidated cost of revenues also increased between the quarters. These costs were $139.7 million and $89.5 million for the three-month periods ended April 30, 2024 and 2023, respectively, representing an increase of approximately 56.2%.
Current wording
With the increase in consolidated revenues for the three months ended July 31, 2024 compared with last year’s second quarter ended July 31, 2023, the consolidated cost of revenues also increased between the quarters. These costs were $195.9 million and $117.6 million for the three-month periods ended July 31, 2024 and 2023, respectively, representing an increase of approximately 66.6%.
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For the three-month period ended April 30, 2024, we reported a consolidated gross profit of approximately $17.9 million, which represented an increase from the gross profit reported for the three-month period ended April 30, 2023 in the amount of $14.2 million.
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For the three-month period ended July 31, 2024, we reported a consolidated gross profit of approximately $31.1 million, which represented an increase from the gross profit reported for the three-month period ended July 31, 2023 in the amount of $23.7 million.
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Although, the gross profit percentage of corresponding consolidated revenues declined to 11.4% for the three-month ended April 30, 2024, from 13.7% of corresponding consolidated revenues in the comparable prior year period, the gross profit percentages increased at our industrial construction services segment and telecommunications segment. The decline in the gross profit percentage at our power industry services segment during the current period was primarily due to the unfavorable gross profit adjustment on the Kilroot Project in the amount of $2.6 million and also reflects the changing mix of projects and contract types. The effect of the contract loss was meaningfully offset for the current quarter by the profits earned on the performance of other projects by each of our four operating companies, including APC. The gross profit percentages of corresponding revenues for the power industry services, industrial construction services and the telecommunications infrastructure services segments were 10.2%, 13.3% and 22.9%, respectively, for the quarter ended April 30, 2024.
Current wording
The gross profit percentage of corresponding consolidated revenues declined to 13.7% for the three-month ended July 31, 2024, from 16.8% of corresponding consolidated revenues in the comparable prior year period. The decline in the gross profit percentage during the current period was primarily due to the changing mix of projects and contract types. The gross profit percentages of corresponding revenues for the power industry services, industrial construction services and the telecommunications infrastructure services segments were 13.5%, 13.0% and 31.4%, respectively, for the quarter ended July 31, 2024.
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These costs were $11.4 million and $10.6 million for the three months ended April 30, 2024 and 2023, respectively, and represented 7.2% and 10.2% of corresponding consolidated revenues, respectively.
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These costs were $12.4 million and $10.5 million for the three months ended July 31, 2024 and 2023, respectively, and represented 5.5% and 7.4% of corresponding consolidated revenues, respectively.
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Other income, net, for the three months ended April 30, 2024 was $4.8 million, which reflected income earned during the period on funds invested in a money market account, CDs, U.S. Treasury notes and a U.S. corporate debt security in the total amount of approximately $4.5 million, as investment yields and average balances of invested funds are meaningfully higher this year.
Current wording
Other income, net, for the three months ended July 31, 2024 was $5.6 million, which reflected income earned during the period on investments in the total amount of approximately $4.8 million, as the weighted average balances of investments are meaningfully higher this year.
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Our forward-looking statements, financial position and results of operations, are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future
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of the energy infrastructure and state-of-the-art industrial facilities that are essential to future economic prosperity in the areas where we operate. We intend to realize this vision with motivated, creative, high-energy and customer-driven teams that are committed to delivering the best possible project results each and every time.
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There exist headwinds confronting a significant resurgence in the pace of planning new developments of gas-fired power plants. Various cities, counties and states have adopted clean energy and carbon-free goals or objectives with achievement
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The following schedule compares our operating results for the three months ended July 31, 2024 and 2023 (dollars in thousands):
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We incurred income tax expense for the three months ended July 31, 2024 in the amount of approximately $6.1 million, which represents an effective income tax rate of 25.1%. This effective tax rate differs from the statutory federal tax rate of 21% due primarily to the typically unfavorable estimated effects of state income taxes and permanent differences. For the
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three months ended July 31, 2023, we reported income tax expense in the amount of approximately $4.6 million, which represented an effective tax rate of 26.5% for the period.
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Comparison of the Results of Operations for the Six Months Ended July 31, 2024 and 2023
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The following schedule compares our operating results for the six months ended July 31, 2024 and 2023 (dollars in thousands):
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Consolidated revenues for the six months ended July 31, 2024 were $384.7 million, which represented an increase of $139.7 million, or 57.0%, from consolidated revenues of $245.0 million reported for the six months ended July 31, 2023. The overall improvement in revenues was due to increases in revenues for all three of our reportable segments, as presented in the table above.
Current report — wording carried from elsewhere
The primary driver for this segment’s revenues for the six months ended July 31, 2023, were the construction activities of the Trumbull Energy Center, the ESB FlexGen Peaker Plants and the Kilroot Project.
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The revenues of our industrial construction services segment, representing the business of TRC, increased by $30.3 million, or 48.0%, to $93.3 million for the six months ended July 31, 2024 compared to revenues of $63.1 million for the six months ended July 31, 2023 as the amounts of field services increased meaningfully between periods, partially offset by decreased supporting vessel fabrication work between periods. For the six months ended July 31, 2024 and 2023, the revenues of this segment represented 24.3% and 25.7% of consolidated revenues for the corresponding periods.
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The revenue results of this business segment, which represent the business of SMC, were $7.3 million for the six-month period ended July 31, 2024, an increase of $0.9 million, or 13.8%, from the amount of revenues earned during the six months ended July 31, 2023.
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With the increase in consolidated revenues for the six months ended July 31, 2024 compared with the six months ended July 31, 2023, the consolidated cost of revenues also increased between the quarters. These costs were $335.6 million and $207.1 million for the six-month periods ended July 31, 2024 and 2023, respectively, representing an increase of approximately 62.1%.
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European entity to issue letters of credit on its behalf (the “Master Issuance and Indemnity Agreement”) that will be secured by a blanket parent company guarantee issued by the Company to the Bank.
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The Company is primarily a construction firm that conducts operations through its wholly-owned subsidiaries, GPS, APC, TRC and SMC. Through GPS and APC, we provide a full range of engineering, procurement, construction, commissioning, maintenance, project development and technical consulting services to the power generation market for a wide range of customers, including independent power project owners, public utilities, power plant heavy equipment
Previous report — wording carried elsewhere
Throughout the U.S., the risk of electricity shortages grows as the retirement of traditional power plants outpaces their replacement by renewable energy and battery storage. The strain on power grids mounts as the U.S. makes the historic
Previous report — wording carried elsewhere
Despite the headwinds, we believe that the lower operating costs of natural gas-fired power plants, the higher energy generating efficiencies of modern gas turbines, and the requirements for grid resiliency should sustain the demand for modern combined cycle and simple cycle gas-fired power plants in the future. Natural gas is relatively clean burning, generally cost-effective, dependable and abundant. New gas-fired power plants incorporate major advances in gas-fired turbine technologies that have provided increased power plant efficiencies while providing the quick starting capabilities and the reliability that are necessary to balance the inherent intermittencies of solar and wind power plants.
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During the three months ended April 30, 2023, our primary source of cash from investing activities was the net maturities of our short-term investments, which consist entirely of CDs issued by the Bank, in the amount of $59.8 million. We used $30.4 million of these proceeds to invest in available-for-sale securities of U.S. Treasury notes. We also used $0.6 million to make capital expenditures.
Previous report — wording carried elsewhere
For the three months ended April 30, 2023, we used $6.5 million cash in financing activities, including $3.7 million used to repurchase shares of common stock and $3.4 million used for the payment of regular cash dividends. We received proceeds from the exercise of stock options in the amount of $0.5 million, which represented a source of cash.
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made thereunder. The commitments under performance bonds generally end concurrently with the expiration of the related contractual obligation. Not all of our projects require bonding.
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EBITDA does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs.