What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-08-03 · 217 added, 195 removed, 381 unchanged (52% of the section changed)

49 unchanged sentences

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has spread around the world.

On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide.

On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic.

In response, government authorities in the U.S.

imposed various social distancing, quarantine, and isolation measures on large portions of the population.

As a result of the pandemic, as well as the related containment and mitigation measures, we experienced disruptions that impacted our ability to execute on our remaining performance obligations in many of the markets in which we operate.

Such impacts included, but were not limited to, access restrictions and temporary job site shutdowns, reduced labor efficiency resulting from the adherence to physical distancing protocols mandated at the majority of our worksite locations, and the deferral of maintenance and service projects by our customers.

Although we have not experienced significant project cancellations, and we continue to actively quote new work for our customers as evidenced by the nearly 14% increase in our remaining performance obligations since December 31, 2019, we are experiencing delays in certain projects and a reduction in the number of call-out service and repair opportunities.

Additionally, the demand for oil has significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus, including various local, state, and national jurisdictional “shelter-in-place” orders.

Further, other macroeconomic events, such as geopolitical tensions between the Organization of Petroleum Exporting Countries (“OPEC”) and Russia, resulted in a significant drop in the price of crude oil.

These negative factors have created significant volatility and uncertainty in the markets in which our United States industrial services segment operates.

As a result of the pandemic, as well as the related containment and mitigation measures, we have experienced disruptions that have impacted our ability to execute on our remaining performance obligations in many of the markets in which we operate.

Such impacts include, but are not limited to, access restrictions and temporary job site shutdowns, reduced labor efficiency resulting from the adherence to physical distancing and other enhanced safety protocols mandated at the majority of our worksite locations, and the deferral of maintenance and service projects by our customers.

Although we have not experienced significant project cancellations, and we continue to actively quote new work for our customers, as evidenced by the 12% increase in our remaining performance obligations since December 31, 2019, we are experiencing delays in certain projects and a reduction in the number of call-out service and repair opportunities.

Additionally, the demand for oil has significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus, including travel restrictions imposed by various local, state, and other governmental authorities.

Further, other macroeconomic events, such as geopolitical tensions between the Organization of Petroleum Exporting Countries (“OPEC”) and Russia, have resulted in significant volatility in the price of crude oil.

These factors have created significant uncertainty in the markets in which our United States industrial services segment operates.

As a result, many customers have responded by reducing capital spending, implementing various cost cutting measures, and closing certain of their facilities.

Such customer actions have resulted in a significant decrease in the demand for our service offerings within such segment.

While we have begun to see indications of stabilization within our United States construction segments and our United States and United Kingdom building services segments as many shelter-in-place orders are lifted, various other containment and mitigation measures are eased, and our teams and customers are adapting to this new work environment, this positive trend may not continue.

The extent to which the COVID-19 pandemic will impact our business and results of operations in future

periods remains highly uncertain and will be affected by a number of factors.

These include the duration and extent of the pandemic;

the duration and extent of imposed or recommended quarantines, containment and other mitigation measures, and whether there is a significant resumption of shelter-in-place orders;

While we continued to experience stabilization during the third quarter of 2020 within our United States construction segments and our United States and United Kingdom building services segments as many shelter-in-place orders were lifted, various other containment and mitigation measures were eased, and our teams and customers further adapted to this new work environment, this positive trend may not continue.

The extent to which the COVID-19 pandemic will impact our business and results of operations in future periods remains highly uncertain and will be affected by a number of factors.

These include the

duration and extent of the pandemic;

limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to quarantine;

whether there is a significant resumption of shelter-in-place orders;

the near-term impact of the pandemic on broader economic activity, including on construction projects and the oil and gas and related industrial markets;

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To date, we have been able to source the supplies and materials needed to operate our business with minimal disruptions.

However, the impact of the COVID-19 pandemic on our vendors is evolving and may make it difficult to obtain such materials in future periods.

However, the impact of the COVID-19 pandemic on our vendors continues to evolve and may make it difficult to obtain such materials in future periods.

While we believe our remaining performance obligations are firm, customers may also slow down decision-making, delay planned work or seek to terminate existing agreements.

Any of these events could have a material adverse effect on our business, financial condition, and/or results of operations.

The following table presents selected financial data for the three months ended June 30, 2020 and 2019 (in thousands, except percentages and per share data):

The following table presents selected financial data for the three months ended September 30, 2020 and 2019 (in thousands, except percentages and per share data):

For the three months ended

September 30,

Revenues $ 2,201,714 $ 2,287,741

2 unchanged sentences

Gross profit as a percentage of revenues 16.5 % 14.7 %

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets 232,750 —

Operating (loss) income $ (122,638) $ 119,959

Operating (loss) income as a percentage of revenues (6.1) % 5.2 %

Net (loss) income $ (83,689) $ 83,972

Diluted (loss) earnings per common share $ (1.52) $ 1.49

Revenues for the second quarter of 2020 decreased by 13.3% from $2.32 billion for the three months ended June 30, 2019 to $2.01 billion for the three months ended June 30, 2020.

As discussed in further detail below, such decrease in revenues was attributable to revenue declines within each of our reportable segments, primarily as a result of negative macroeconomic conditions brought upon by the COVID-19 pandemic, which resulted in:

(a) project delays or access restrictions for certain of the construction contracts in process within our United States construction segments, (b) a reduction in the number of call-out service and repair project activities within our United States and United Kingdom building services segments, and (c) a decline in the demand for our service offerings within our United States industrial services segment.

For the three months ended June 30, 2020, we incurred an operating loss of $122.6 million, resulting from $232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the period, as discussed in further detail below and in Note 7 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements included in Item 1.

Financial Statements.

These charges were recognized as a result of interim impairment tests that were triggered by certain indicators of impairment that were present during the quarter, including lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets.

Excluding the impact of such impairments, operating income decreased by $9.8 million for the three months ended June 30, 2020, primarily as a result of a decrease in gross profit from the majority of our reportable segments due to the negative macroeconomic conditions referenced above.

Operating income $ 135,855 $ 115,749

Operating income as a percentage of revenues 6.2 % 5.1 %

Net income $ 61,186 $ 81,834

Diluted earnings per common share $ 1.11 $ 1.45

Revenues for the third quarter of 2020 were $2.20 billion, a decrease of $86.0 million, or 3.8%, compared to revenues of $2.29 billion for the third quarter of 2019.

As discussed in further detail below, such decrease in revenues was primarily attributable to revenue declines within our United States industrial services segment and our United States electrical construction and facilities services segment, largely as a result of a decrease in demand for our service offerings within the oil and gas and related industrial markets given the aforementioned negative macroeconomic conditions impacting these markets.

These revenue declines were partially offset by revenue growth within our United States mechanical construction and facilities services segment and our United States building services segment, inclusive of the impact of businesses acquired, as discussed below, as well as an increase in revenues of our United Kingdom building services segment.

Operating income for the three months ended September 30, 2020 increased by $20.1 million to $135.9 million compared to operating income of $115.7 million for the three months ended September 30, 2019.

Despite the decline in revenues during the third quarter of 2020, our results set new company records in terms of quarterly operating income.

In addition, operating margin of 6.2%, which represents a 110 basis point improvement over operating margin of 5.1% in the prior year period, set a new company record for a third quarter.

This improved year-over-year operating performance was primarily driven by an increase in gross profit and gross profit margin within our United States construction segments.

These improvements were partially offset by a significant reduction in operating income of our United States industrial services segment as a result of the previously referenced market conditions within the oil and gas and related industrial markets.

Net income of $61.2 million, or $1.11 per diluted share, for the quarter ended September 30, 2020 compares unfavorably to net income of $81.8 million, or $1.45 per diluted share, for the quarter ended September 30, 2019.

The decline in both net income and diluted earnings per common share are a result of the tax effects of the $232.8 million non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the second quarter of 2020, the majority of which is non-deductible for tax purposes.

Impact of Acquisitions

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The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period.

In January 2020, we acquired a company for an immaterial amount.

This company provides building automation and controls solutions within the Northeastern region of the United States, and its results of operations have been included within our United States building services segment.

We acquired two companies during the first nine months of 2020.

One company provides building automation and controls solutions within the Northeastern region of the United States, and the other company is a full service provider of mechanical services within the Washington, D.C.

The results of operations for both companies have been included within our United States building services segment.

On November 1, 2019, we completed the acquisition of Batchelor & Kimball, Inc.

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(i) a company which provides mobile mechanical services in the Southern region of the United States and (ii) three companies, the results of operations of which were de minimis, which bolster our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls solutions.

Companies acquired in 2020 and 2019 generated incremental revenues of $50.2 million and incremental operating income of $1.7 million, inclusive of $4.0 million of amortization expense associated with identifiable intangible assets, for the three months ended June 30, 2020.

Companies acquired in 2020 and 2019 generated incremental revenues of $81.4 million and incremental operating income of $5.5 million, inclusive of $4.9 million of amortization expense associated with identifiable intangible assets, for the three months ended September 30, 2020.

Results of Operations

The following tables present our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):

For the three months ended June 30,

For the three months ended September 30,

Total 2019 % of

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Total worldwide operations $ 2,201,714 100 % $ 2,287,741 100 %

For the six months ended June 30,

For the nine months ended September 30,

Total 2019 % of

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Total worldwide operations $ 6,515,567 100 % $ 6,770,671 100 %

As described below in more detail, our revenues for the three months ended June 30, 2020 decreased to $2.01 billion compared to $2.32 billion for the three months ended June 30, 2019, and our revenues for the six months ended June 30, 2020 decreased to $4.31 billion compared to $4.48 billion for the six months ended June 30, 2019.

The decrease in revenues for both the three and six month periods was attributable to decreased revenues from all of our reportable segments except, in the case of the six months ended June 30, 2020, our United States mechanical construction and facilities services segment.

Companies acquired in 2020 and 2019, which are reported in our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment, generated incremental revenues of $50.2 million and $132.7 million for the three and six months ended June 30, 2020, respectively.

Revenues of our United States electrical construction and facilities services segment were $445.9 million and $971.1 million for the three and six months ended June 30, 2020, respectively, compared to revenues of $569.4 million and $1,097.5 million for the three and six months ended June 30, 2019, respectively.

The decrease in revenues for the three and six months ended June 30, 2020 was predominantly attributable to:

(a) a reduction in revenues from construction projects within the commercial market sector, primarily as a result of:

(i) project delays or access restrictions caused by various containment and mitigation measures mandated by certain of our customers and/or governmental authorities in response to the COVID-19 pandemic and (ii) the completion or substantial completion of certain projects within the Northeastern and Western regions of the United States and (b) a reduction in industrial project activities within the manufacturing market sector due to the adverse market conditions within the oil and gas industry.

The results for the six months ended June 30, 2020 included $25.4 million of incremental revenues generated by a company acquired in 2019.

Our United States mechanical construction and facilities services segment revenues for the three months ended June 30, 2020 were $790.4 million, a $32.6 million decrease compared to revenues of $823.1 million for the three months ended June 30, 2019.

Revenues of this segment for the six months ended June 30, 2020 were $1,624.6 million, a $49.1 million increase compared to revenues of $1,575.5 million for the six months ended June 30, 2019.

For the three and six months ended June 30, 2020, the results of this segment included $47.9 million and $103.5 million, respectively, of incremental revenues generated by companies acquired in 2019.

The decrease in revenues for the three months ended June 30, 2020 was primarily attributable to a decline in revenues from:

(a) the manufacturing market sector, inclusive of certain large food processing construction projects, and (b) the commercial market sector, inclusive of certain telecommunication construction projects.

Similar to our United States electrical construction and facilities services segment, revenues of this segment for the three months ended June 30, 2020 were negatively impacted by the effects of the COVID-19 pandemic, which resulted in project delays due to access restrictions and temporary job site shutdowns.

These revenue reductions were partially offset by increased project activities within the institutional and transportation market sectors during the quarter.

For the six months ended June 30, 2020, excluding the impact of acquisitions, our United States mechanical construction and facilities services segment revenues decreased by $54.4 million, primarily as a result of a reduction in project activities within the commercial market sector.

Revenues of our United States building services segment were $472.4 million and $990.5 million for the three and six months ended June 30, 2020, respectively, compared to revenues of $523.7 million and $1,035.8 million for the three and six months ended June 30, 2019, respectively.

The reduction in revenues for both the three and six month periods was primarily a result of:

As described below in more detail, our revenues for the three months ended September 30, 2020 decreased to $2.20 billion compared to $2.29 billion for the three months ended September 30, 2019, and our revenues for the nine months ended September 30, 2020 decreased to $6.52 billion compared to $6.77 billion for the nine months ended September 30, 2019.

The decrease in revenues for the three month period was attributable to decreased revenues from our United States industrial services segment and our United States electrical construction and facilities services segment.

The decrease in revenues for the nine month period was attributable to decreased revenues from all of our reportable segments, except for our United States mechanical construction and facilities services segment.

Companies acquired in 2020 and 2019, which are reported in our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment, generated incremental revenues of $81.4 million and $214.1 million for the three and nine months ended September 30, 2020, respectively.

Revenues of our United States electrical construction and facilities services segment were $508.9 million and $1,480.0 million for the three and nine months ended September 30, 2020, respectively, compared to revenues of $554.6 million and $1,652.1 million for the three and nine months ended September 30, 2019, respectively.

The decrease in revenues for both the three and nine months ended September 30, 2020 was predominantly attributable to:

(a) a reduction in industrial project activities within the manufacturing market sector due to adverse market conditions within the oil and gas industry, as previously referenced, (b) a decline in revenues from construction projects within the commercial and healthcare market sectors, as a result of the completion or substantial completion of certain projects, and (c) the effects of the COVID-19 pandemic on our operations, which resulted in:

(i) a decrease in the number of short duration projects and (ii) project delays or access restrictions resulting from the various containment and mitigation measures mandated by certain of our customers and/or governmental authorities.

The decrease in revenues for the nine months ended September 30, 2020 was also due to reduced project activity within the water and wastewater and transportation market sectors.

These decreases were partially offset by increased revenues from construction projects within the institutional and hospitality market sectors during both the three and nine months ended September 30, 2020 and the transportation market sector during the three months ended September 30, 2020.

The results for the nine months ended September 30, 2020 included $25.4 million of incremental revenues generated by a company acquired in 2019.

Our United States mechanical construction and facilities services segment revenues for the three months ended September 30, 2020 were $891.5 million, a $22.3 million increase compared to revenues of $869.2 million for the three months ended September 30, 2019.

Revenues of this segment for the nine months ended September 30, 2020 were $2,516.1 million, a $71.4 million increase compared to revenues of $2,444.7 million for the nine months ended September 30, 2019.

For the three and nine months ended September 30, 2020, the results of this segment included $61.1 million and $164.6 million, respectively, of incremental revenues generated by companies acquired in 2019.

Excluding the impact of acquisitions, revenues of this segment decreased by $38.8 million and $93.2 million for the three and nine month periods, respectively, primarily as a result of a decline in revenues from:

(a) the manufacturing market sector, inclusive of certain large food processing construction projects, (b) several telecommunications and technology projects within the commercial market sector, and (c) the healthcare market sector, due to the completion or substantial completion of certain projects.

Similar to our United States electrical construction and facilities services segment, revenues of this segment for the three and nine months ended September 30, 2020 were negatively impacted by the effects of the COVID-19 pandemic, which resulted in project delays and temporary job site shutdowns, as well as a decrease in the number of short duration projects.

The revenue reductions for both periods were partially offset by increased revenues from the majority of the remaining market sectors in which we operate.

For the three months ended September 30, 2020, revenues of our United States building services segment were $551.6 million compared to revenues of $532.1 million for the three months ended September 30, 2019.

The increase in revenues for such period was a result of $20.3 million of incremental revenues generated by businesses acquired in 2020.

Excluding such incremental revenues, this segment’s revenues declined marginally during the quarter.

Revenue reductions within our mobile mechanical services operations were largely offset by revenue growth within our commercial site-based services and government services operations.

Revenues of this segment for the nine months ended September 30, 2020 were $1,542.1 million compared to revenues of $1,567.9 million for the nine months ended September 30, 2019.

Excluding acquisition revenues of $24.1 million, this segment’s revenues decreased by approximately $50.0 million during the nine months ended September 30, 2020.

Such reduction in revenues was primarily attributable to:

(a) decreased project and controls activities within our mobile mechanical services operations, largely as a result of the impact of the COVID-19 pandemic, which resulted in fewer project opportunities given the temporary closure of certain customer facilities, (b) decreased large project activity within our energy services operations, primarily as a result of the completion of certain projects which were active in the prior year, and (c) the loss of certain contracts not renewed pursuant to rebid, which resulted in a reduction to both base maintenance and indefinite-delivery, indefinite-quantity project revenues within our government services business.

In addition, the decrease in revenues for the six months ended June 30, 2020 was partially attributable to a decrease in snow removal activities within our commercial site-based services operations during the first quarter of the year.

The results of this segment for the three and six months ended June 30, 2020 included $2.3 million and $3.8 million, respectively, of incremental revenues generated by a company acquired in 2020 within our mobile mechanical services operations.

Revenues of our United States industrial services segment for the three months ended June 30, 2020 were $212.2 million, an $83.3 million decrease compared to revenues of $295.5 million for the three months ended June 30, 2019.

Revenues for the six months ended June 30, 2020 were $522.2 million, a $31.9 million decrease compared to revenues of $554.1 million for the six months ended June 30, 2019.

Revenues of this segment were negatively impacted by adverse market conditions including unprecedented declines in the price of crude oil, initially as a result of a decline in demand caused by the COVID-19 pandemic and further driven by the dislocation between supply and demand resulting from a breakup in dialogue between OPEC and Russia over a proposed curtailment in the production of oil.

These revenue declines were partially offset by increased customer demand for certain services aimed at improving the indoor air quality within their facilities.

Revenues of our United States industrial services segment for the three months ended September 30, 2020 were $139.7 million, a $94.5 million decrease compared to revenues of $234.2 million for the three months ended September 30, 2019.

Revenues for the nine months ended September 30, 2020 were $661.9 million, a $126.4 million decrease compared to revenues of $788.3 million for the nine months ended September 30, 2019.

Revenues of this segment for both the three and nine month periods were negatively impacted by adverse market conditions including unprecedented volatility in the price of crude oil, initially as a result of a decline in demand caused by the COVID-19 pandemic and further driven by the dislocation between supply and demand resulting from a breakup in dialogue between OPEC and Russia over a proposed curtailment in the production of oil.

Such macroeconomic conditions led to a decrease in demand for our services, which resulted in:

(a) a decrease in maintenance and capital project activity within our field services operations and (b) a reduction in new build heat exchanger sales and a decrease in maintenance, repair, and hydro blast cleaning services within our shop services operations.

Revenues of our United Kingdom building services segment were $93.1 million and $205.5 million for the three and six months ended June 30, 2020, respectively, compared to revenues of $112.6 million and $220.1 million for the three and six months ended June 30, 2019, respectively.

The decrease in revenues within this segment for both periods was attributable to:

(a) a decrease in project activity, partially as a result of the COVID-19 pandemic, which resulted in reduced opportunities for project work due to the temporary closure of certain customer facilities, and (b) a reduction in revenue due to the loss of certain maintenance contracts that were not renewed pursuant to rebid.

These revenue declines were partially offset by increased revenues from new maintenance contract awards within the commercial market sector.

Unfavorable exchange rates for the British pound versus the United States dollar negatively impacted this segment’s revenues for the three and six months ended June 30, 2020 by $3.4 million and $5.6 million, respectively.

In addition, revenues for the quarter ended September 30, 2020 were negatively impacted by project stoppages resulting from hurricanes, including certain named storms, within the Gulf Coast region.

Our United Kingdom building services segment revenues were $110.1 million for the three months ended September 30, 2020 compared to revenues of $97.6 million for the three months ended September 30, 2019.

The increase in revenues within this segment for such period was primarily attributable to:

(a) an increase in revenues from new maintenance contract awards within the commercial market sector, and (b) increased project activity with existing customers, primarily within the water and wastewater market sector.

In addition, this segment’s revenues for the quarter ended September 30, 2020 were positively impacted by $5.0 million related to the effect of favorable exchange rates for the British pound versus the United States dollar.

For the nine months ended September 30, 2020, revenues of this segment were $315.6 million compared to revenues of $317.7 million for the nine months ended September 30, 2019.

The slight decrease in revenues within this segment for the nine month period was despite reduced opportunities for project work brought upon by the temporary closure of certain customer facilities and the temporary suspension of capital spending as a result of the COVID-19 pandemic in the first half of 2020.

Unfavorable exchange rates for the British pound versus the United States dollar negatively impacted this segment’s revenues for the nine months ended September 30, 2020 by $0.6 million.

Cost of sales and Gross profit

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For the three months ended

June 30, For the six months ended

September 30, For the nine months ended

September 30,

2020 2019 2020 2019

2 unchanged sentences

Gross profit, as a percentage of revenues 16.5 % 14.7 % 15.5 % 14.6 %

Our gross profit decreased by $31.1 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Gross profit decreased by $6.8 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Our gross profit margin was 15.7% and 15.0% for the three and six months ended June 30, 2020, respectively, compared to gross profit margin of 14.9% and 14.6% for the three and six months ended June 30, 2019, respectively.

The decrease in gross profit for both periods was a result of a decrease in gross profit from all of our reportable segments except, in the case of the three months ended June 30, 2020, our United States mechanical construction and facilities services segment, and in the case of the six months ended June 30, 2020, our United States mechanical construction and facilities services segment and our United Kingdom building services segment.

The increase in gross profit margin for both periods was primarily attributable to improved operating performance within our United States mechanical construction and facilities services segment.

Our gross profit increased by $27.2 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Gross profit increased by $20.4 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Our gross profit margin was 16.5% and 15.5% for the three and nine months ended September 30, 2020, respectively, compared to gross profit margin of 14.7% and 14.6% for the three and nine months ended September 30, 2019, respectively.

The increase in gross profit for the three month period was a result of an increase in gross profit from all of our reportable segments, except for our United States industrial segment, which continues to be impacted by negative macroeconomic conditions and prolonged uncertainty in the markets in which it operates.

The increase in gross profit for the nine month period was a result of an increase in gross profit from our United States mechanical construction and facilities services segment and our United Kingdom building services segment.

The increase in gross profit margin for both periods was primarily attributable to improved operating performance within both of our United States construction segments, as described in further detail below.

Selling, general and administrative expenses

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For the three months ended

June 30, For the six months ended

September 30, For the nine months ended

September 30,

2020 2019 2020 2019

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Selling, general and administrative expenses, as a percentage of revenues 10.3 % 9.6 % 10.1 % 9.6 %

Our selling, general and administrative expenses for the three months ended June 30, 2020 was $205.2 million, representing a decrease of $21.1 million compared to selling, general and administrative expenses of $226.2 million for the three months ended June 30, 2019.

Selling, general and administrative expenses for the six months ended June 30, 2020 of $432.2 million represented a nominal decrease compared to selling general and administrative expenses of $432.4 million for the six months ended June 30, 2019.

The decrease in selling, general and administrative expenses for the three months ended June 30, 2020 was primarily attributable to certain cost reductions resulting from, or actions taken in response to, the COVID-19 pandemic, including:

(a) a decrease in salaries expense due to:

(i) a reduction in headcount, resulting from lower revenues than in the same prior year period, and (ii) certain short-term cost cutting measures, including temporary furloughs and salary reductions, (b) a decrease in incentive compensation expense due to lower projected annual operating results, relative to incentive targets, than in the same prior year period, (c) a decrease in employee benefit costs, partially due to a decline in medical claims, and (d) a reduction in certain discretionary spending, such as travel and entertainment costs.

For the three and six months ended June 30, 2020, selling, general and administrative expenses included $7.2 million and $16.3 million, respectively, of incremental expenses directly related to companies acquired in 2020 and 2019, including amortization expense attributable to identifiable intangible assets of $2.6 million and $5.3 million, respectively.

Selling, general and administrative expenses as a percentage of revenues were 10.2% and 10.0% for the three and six months ended June 30, 2020, respectively, compared to 9.7% and 9.6% for the three and six months ended June 30, 2019, respectively.

The increase in SG&A margin for both the three and six month periods was a result of:

(a) a reduction in revenues without a commensurate decrease in certain of our fixed overhead costs and (b) an increase in the provision for credit losses.

In addition, SG&A margin for the six months ended June 30, 2019 benefited from the favorable impact of a legal settlement within our United States industrial services segment, that resulted in the recovery of $3.6 million, which was recorded as a reduction to selling, general and administrative expenses.

Our selling, general and administrative expenses for the three months ended September 30, 2020 were $226.8 million compared to selling, general and administrative expenses of $220.1 million for the three months ended September 30, 2019.

Selling, general and administrative expenses for the nine months ended September 30, 2020 were $659.0 million compared to selling general and administrative expenses of $652.5 million for the nine months ended September 30, 2019.

For the three and nine months ended September 30, 2020, selling, general and administrative expenses included $8.9 million and $25.2 million, respectively, of incremental expenses directly related to companies acquired in 2020 and 2019, including amortization expense attributable to identifiable intangible assets of $2.8 million and $8.2 million, respectively.

Excluding incremental expenses from businesses acquired, our selling, general and administrative expenses decreased by $2.2 million and $18.7 million for the three and nine month periods, respectively, primarily as a result of certain cost reductions resulting from, or actions taken in response to, the COVID-19 pandemic, including:

(a) a reduction in certain discretionary spending, such as travel and entertainment costs, (b) a decrease in salaries expense due to:

While our incentive compensation expense for the nine months ended September 30, 2020 remains relatively consistent with that of the nine months ended September 30, 2019, we did experience an increase in incentive compensation expense for the three months ended September 30, 2020, primarily within both of our United States construction segments, as a result of the improved operating performance during the period and our revised expectations for annual operating results.

Selling, general and administrative expenses as a percentage of revenues were 10.3% and 9.6% for the three months ended September 30, 2020 and 2019, respectively, compared to 10.1% and 9.6% for the nine months ended September 30, 2020 and 2019, respectively.

The increase in SG&A margin for both the three and nine month periods was a result of a reduction in revenues without a commensurate decrease in certain of our overhead costs, including certain fixed costs within our United States industrial services segment, despite the significant revenue decline within such segment.

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

During the second quarter of 2020, we identified certain indicators of impairment resulting from the aforementioned uncertainties caused by the COVID-19 pandemic and the significant decline in the price of crude oil.

These uncertainties have resulted in lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets, resulting in the recognition of a $232.8 million impairment charge.

Of this amount, $230.3 million related to our United States industrial services segment and was comprised of:

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The remaining $2.5 million represented a subsidiary trade name impairment within our United States electrical construction and facilities services segment.

No impairment was recognized during the three months ended September 30, 2020.

Operating income (loss)

The following tables present our operating income (loss) and operating margin (operating income (loss) as a percentage of segment revenues) from unrelated entities (in thousands, except for percentages):

For the three months ended June 30,

For the three months ended September 30,

Revenues 2019 % of

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Restructuring expenses (536) — (119) —

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets (232,750) — — —

Total worldwide operations 135,855 6.2 % 115,749 5.1 %

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Interest expense, net (1,484) (2,678)

(Loss) income before income taxes $ (124,030) $ 117,128

For the six months ended June 30,

Income before income taxes $ 135,122 $ 113,452

For the nine months ended September 30,

Revenues 2019 % of

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Interest expense, net (6,082) (8,732)

(Loss) income before income taxes $ (19,781) $ 217,021

As described below in more detail, for the three months ended June 30, 2020, we recognized an operating loss of $122.6 million compared to operating income of $120.0 million for the three months ended June 30, 2019.

For the six months ended June 30, 2020, we recognized an operating loss of $16.6 million compared to operating income for the six months ended June 30, 2019 of $222.3 million.

Operating margin was (6.1)% and (0.4)% for the three and six months ended June 30, 2020, respectively, compared to 5.2% and 5.0% for the corresponding 2019 periods.

Our operating results for the second quarter of 2020 included $232.8 million of non-cash impairment charges, which negatively impacted the Company’s operating margin by approximately 1,160 basis points for the three months ended June 30, 2020 and approximately 540 basis points for the six months ended June 30, 2020.

Excluding the impact of such impairments, operating income decreased by $9.8 million and $6.2 million for the three and six months ended June 30, 2020, respectively, as a result of a decrease in gross profit from the majority of our reportable segments.

Operating income of our United States electrical construction and facilities services segment for the three months ended June 30, 2020 was $32.2 million, or 7.2% of revenues, compared to operating income of $43.8 million, or 7.7% of revenues, for the three months ended June 30, 2019.

Operating income of this segment for the six months ended June 30, 2020 was $76.1 million, or 7.8% of revenues, compared to operating income of $86.8 million, or 7.9% of revenues, for the six months ended June 30, 2019.

A company acquired in 2019 contributed incremental operating income of $1.6 million, inclusive of $0.1 million of amortization expense associated with identifiable intangible assets, during the six months ended June 30, 2020.

The decrease in operating income for both periods was due to a decline in gross profit from construction projects, largely attributable to reduced revenues resulting from project delays or access restrictions caused by the previously referenced containment and mitigation measures mandated in response to the COVID-19 pandemic.

For the three months ended June 30, 2020, this segment experienced a decrease in gross profit from project activities within the commercial, institutional, and manufacturing market sectors.

For the six months ended June 30, 2020, gross profit declines within the commercial, hospitality, and water and wastewater market sectors were partially offset by increased gross profit generated from construction projects within the manufacturing and transportation market sectors.

The overall decrease in gross profit of this segment during both the three and six month periods was partially offset by a decrease in selling, general and administrative expenses, primarily as a result of a decrease in incentive compensation and salaries expense, as well as certain employee benefit costs.

The decrease in operating margin for the three months ended June 30, 2020 was attributable to a decrease in gross profit margin as the results for the second quarter of the prior year benefited from favorable project execution.

Our United States mechanical construction and facilities services segment’s operating income for the three and six months ended June 30, 2020 was $66.9 million and $112.1 million, respectively, compared to operating income of $54.0 million and $94.9 million for the three and six months ended June 30, 2019, respectively.

Companies acquired in 2019 contributed incremental operating income of $1.6 million and $3.6 million, inclusive of $3.8 million and $7.8 million of amortization expense associated with identifiable intangible assets, for the three and six months ended June 30, 2020, respectively.

Excluding the impact of acquired businesses, operating income of this segment increased by approximately $11.4 million and $13.6 million for the three and six month periods, respectively.

Despite the disruption caused by the COVID-19 pandemic, our United States mechanical construction and facilities services segment experienced an increase in gross profit for the three and six months ended June 30, 2020 driven by project activities within the institutional, commercial, healthcare, and transportation market sectors.

In addition, operating income of this segment for the six months ended June 30, 2020 benefited from increased gross profit within the manufacturing market sector, resulting from favorable progression on certain large food processing projects.

Operating margin within this segment was 8.5% and 6.9% for the three and six months ended June 30, 2020 compared to operating margin of 6.6% and 6.0% for the three and six months ended June 30, 2019.

The increase in operating margin for both periods was attributable to an increase in gross profit margin, primarily driven by a favorable mix of work within the manufacturing and healthcare market sectors.

Such increase in gross profit margin was partially offset by an increase in the ratio of selling, general and administrative expenses to revenues partially as a result of an increase in amortization expense associated with identifiable intangible assets resulting from companies acquired in 2019 and an increase in the provision for credit losses.

Operating income of our United States building services segment for the three months ended June 30, 2020 was $26.4 million compared to operating income for the three months ended June 30, 2019 of $28.0 million, and operating income for the six months ended June 30, 2020 was $47.2 million compared to operating income of $55.5 million for the six months ended June 30, 2019.

The decrease in operating income for both periods was primarily due to:

(a) our energy services operations, as a result of a decrease in gross profit given a reduction in large project activity, and (b) our mobile mechanical services operations due to:

(i) a decrease in gross profit from project and controls activities, largely as a result of the temporary closure of certain customer facilities resulting from the COVID-19 pandemic, and (ii) an increase in certain expenses such as the provision for credit losses and legal fees.

In addition, the decrease in operating income for the six months ended June 30, 2020 was partially attributable to our commercial site-based services operations due to a reduction in gross profit resulting from a decrease in snow removal activities during the first three months of this year.

Lower gross profit within this segment was partially offset by an overall decrease in selling, general and administrative expenses due to certain cost reduction measures enacted during the quarter.

Operating margin of this segment for the three and six months ended June 30, 2020 was 5.6% and 4.8%, respectively,

compared to operating margin for the three and six months ended June 30, 2019 of 5.3% ad 5.4%, respectively.

The increase in operating margin for the three months ended June 30, 2020 was primarily a result of an increase in gross profit margin within our mobile mechanical services operations.

The decrease in operating margin for the six months ended June 30, 2020 was primarily a result of an increase in the ratio of selling, general and administrative expenses to revenues due to:

(a) the under-absorption of certain overhead costs due to the reduction in revenue previously referenced and (b) an increase in certain expenses, such as the provision for credit losses and legal fees, without a commensurate increase in revenues.

Operating income of our United States industrial services segment for the three months ended June 30, 2020 decreased by approximately $13.1 million to $3.0 million compared to operating income of $16.0 million for the three months ended June 30, 2019.

Operating income for the six months ended June 30, 2020 decreased by approximately $10.4 million to $15.2 million compared to operating income of $25.6 million for the six months ended June 30, 2019.

As previously referenced, this segment’s results were severely impacted by adverse macroeconomic factors impacting the oil and gas industry.

Income before income taxes $ 115,341 $ 330,473

As described below in more detail, operating income was $135.9 million, or 6.2% of revenues, for the three months ended September 30, 2020, compared to operating income of $115.7 million, or 5.1% of revenues, for the three months ended September 30, 2019.

Operating income for the nine months ended September 30, 2020 was $119.2 million, or 1.8% of revenues, compared to $338.0 million, or 5.0% of revenues, for the nine months ended September 30, 2019.

The increase in operating income and operating margin for the three month period was predominately a result of improved gross profit and gross profit margin within both of our United States construction segments.

For the nine months ended September 30, 2020, our operating results included $232.8 million of non-cash impairment charges recorded during the second quarter, which negatively impacted the Company’s operating margin by approximately 360 basis points for the year-to-date period.

Excluding the impact of such impairments, operating income and operating margin for the nine months ended September 30, 2020 increased by $13.9 million and 40 basis points.

Companies acquired in 2020 and 2019, which are reported in our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment, generated incremental operating income of $5.5 million and $10.7 million, inclusive of $4.9 million and $13.0 million of amortization expense associated with identifiable intangible assets, for the three and nine months ended September 30, 2020, respectively.

Operating income of our United States electrical construction and facilities services segment for the three months ended September 30, 2020 was $47.1 million, or 9.2% of revenues, compared to operating income of $33.6 million, or 6.1% of revenues, for the three months ended September 30, 2019.

Operating income of this segment for the nine months ended September 30, 2020 was $123.1 million, or 8.3% of revenues, compared to operating income of $120.4 million, or 7.3% of revenues, for the nine months ended September 30, 2019.

The increase in operating income and operating margin for both 2020 periods was due to an increase in gross profit from construction projects, despite the impact of the COVID-19 pandemic on our operations.

For the three and nine months ended September 30, 2020, this segment experienced an increase in gross profit from project activities within:

(a) the commercial market sector, largely driven by several telecommunication construction projects, (b) the transportation and institutional market sectors, partially as a result of favorable settlement of final contract value on certain projects, which resulted in incremental gross profit of $4.4 million and $6.1 million, and favorably impacted this segment’s operating margin by 0.7% and 0.4%, for the three and nine month periods, respectively, and (c) the manufacturing market sector, inclusive of increased gross profit from various project activities within the Western region of the United States.

For the nine months ended September 30, 2020, the increase in operating income of this segment was additionally a result of a decrease in selling, general and administrative expenses given a reduction in salaries expense as well as certain employee benefit costs.

For both the three and nine months ended September 30, 2020, the gross profit margin improvements referenced above were partially offset by an increase in the ratio of selling, general, and administrative expenses to revenues, as a result of the revenue declines experienced by this segment during the current year.

Our United States mechanical construction and facilities services segment’s operating income for the three and nine months ended September 30, 2020 was $80.0 million and $192.2 million, respectively, compared to operating income of $61.2 million and $156.2 million for the three and nine months ended September 30, 2019, respectively.

Companies acquired in 2019 contributed incremental operating income of $4.0 million and $7.6 million, inclusive of $3.7 million and $11.5 million of amortization expense associated with identifiable intangible assets, for the three and nine months ended September 30, 2020, respectively.

Excluding the impact of businesses acquired, operating income of this segment increased by approximately $14.8 million and $28.4 million for the three and nine month periods, respectively.

Despite the disruption caused by the COVID-19 pandemic during the current year, our United States mechanical construction and facilities services segment experienced an increase in gross profit from construction projects within the majority of the market sectors in which we operate.

Operating margin within this segment was 9.0% and 7.6% for the three and nine months ended September 30, 2020, respectively, compared to operating margin of 7.0% and 6.4% for the three and nine months ended September 30, 2019, respectively.

The increase in operating margin for both periods was attributable to an increase in gross profit margin, primarily driven by a favorable mix of work within:

(a) the manufacturing market sector, driven by certain large food processing construction projects, and (b) the commercial market sector, inclusive of a number of technology projects, which reached substantial completion during the quarter.

The increases in gross profit and gross profit margin were partially offset by an increase in selling, general and administrative expenses, as well as the ratio of selling, general and administrative expenses to revenues, largely as a result of an increase in incentive compensation expense due to the improved year-over-year operating performance and an increase in amortization expense associated with identifiable intangible assets resulting from companies acquired in 2019.

Operating income of our United States building services segment for the three months ended September 30, 2020 was $38.2 million compared to operating income for the three months ended September 30, 2019 of $35.1 million, and operating income for the nine months ended September 30, 2020 was $85.4 million compared to operating income of $90.5 million for the nine months ended September 30, 2019.

Companies acquired in 2020 contributed incremental operating income of $1.5 million for both the three and nine months ended September 30, 2020, inclusive of $1.2 million and $1.5 million of amortization expense associated with identifiable intangible assets, for the three and nine month periods, respectively.

Excluding the impact of businesses acquired, operating income for the three months ended September 30, 2020 increased marginally compared to the prior year, primarily as a result of increased gross profit on new maintenance contract awards within this segment’s commercial site-based services division.

The decrease in operating income for the nine months ended September 30, 2020 was primarily due to:

(a) our energy services operations, as a result of a decline in gross profit given a reduction in large project activity, (b) our mobile mechanical services operations due to a decrease in gross profit from project and controls activities, largely as a result of the temporary closure of certain customer facilities impacted by the COVID-19 pandemic, (c) a reduction in gross profit within our commercial site-based services operations resulting from a decrease in snow removal activities during the first three months of this year, and (d) the loss of certain contracts not renewed pursuant to rebid, which resulted in a reduction in gross profit from both base maintenance and indefinite-delivery, indefinite-quantity projects within our government services business.

These reductions in gross profit were partially offset by an overall decrease in selling, general and administrative expenses due to certain cost reduction measures enacted during the year.

Operating margin of this segment for the three and nine months ended September 30, 2020 was 6.9% and 5.5%, respectively, compared to operating margin for the three and nine months ended September 30, 2019 of 6.6% and 5.8%, respectively.

The increase in operating margin for the three months ended September 30, 2020 was a result of a decrease in the ratio of selling, general and administrative expenses to revenues, partially offset by a reduction in gross profit margin driven by an unfavorable mix of work within our government site-based services division.

The decrease in operating margin for the nine months ended September 30, 2020 was attributable to a decrease in gross profit margin primarily within our energy services operations due to the reduction in large project activity previously referenced.

Our United States industrial services segment reported an operating loss of $9.8 million for the three months ended September 30, 2020, representing a decrease of approximately $15.4 million compared to operating income of $5.6 million for the three months ended September 30, 2019.

Operating income for the nine months ended September 30, 2020 decreased by approximately $25.8 million to $5.4 million compared to operating income of $31.2 million for the nine months ended September 30, 2019.

As previously referenced, this segment’s results for both 2020 periods were severely impacted by adverse macroeconomic factors impacting the oil and gas industry.

As a result of such conditions, this segment experienced a reduction in gross profit from both our field services and shop services operations due to:

(a) a decrease in demand for our service offerings, (b) the deferral or cancellation of previously scheduled projects with certain customers, and (c) an unfavorable mix of work, which included a greater number of projects with lower than typical gross profit margins.

Such decrease in gross profit was partially offset by a reduction in selling, general and administrative expenses, including:

In addition, for the three months ended September 30, 2020, the results of this segment were negatively impacted by project stoppages resulting from hurricanes, including certain named storms, within the Gulf Coast region.

The aforementioned decreases in gross profit were partially offset by a reduction in selling, general and administrative expenses during both the three and nine month periods, including:

(a) incentive compensation and salaries expense, (b) employee benefit costs, and (c) certain discretionary spending, such as travel and entertainment costs.

Operating margin of this segment for the three and six months ended June 30, 2020 was 1.4% and 2.9%, respectively, compared to operating margin of 5.4% and 4.6% for the three and six months ended June 30, 2019, respectively.

Operating margin of this segment for the three and nine months ended September 30,

2020 was (7.0)% and 0.8%, respectively, compared to operating margin of 2.4% and 4.0% for the three and nine months ended September 30, 2019, respectively.

The decrease in operating margin for both periods was attributable to a decrease in gross profit margin resulting from the above noted factors, as well as an increase in the ratio of selling, general and administrative expenses to revenues due to a decrease in revenue without a commensurate decrease in certain of this segment’s fixed overhead costs.

For the three months ended June 30, 2020, our United Kingdom building services segment’s operating income of $5.4 million decreased nominally as compared to operating income of $5.5 million for the three months ended June 30, 2019.

Operating income of this segment was $11.1 million for the six months ended June 30, 2020 compared to operating income of $9.6 million for the six months ended June 30, 2019.

The increase in operating income for the six month period was primarily a result of:

(a) greater project activity with existing customers and (b) incremental gross profit from new maintenance contract awards.

This segment’s operating income for the three and six months ended June 30, 2020 was negatively impacted by approximately $0.2 million and $0.3 million, respectively, related to the effect of unfavorable exchange rates for the British pound versus the United States dollar.

Operating margin for the three and six months ended June 30, 2020 was 5.7% and 5.4%, respectively, compared to 4.9% and 4.4% for the three and six months ended June 30, 2019, respectively.

The increase in operating margin for both periods was attributable to an increase in gross profit margin, primarily as a result of a more favorable mix of work, and a decrease in the ratio of selling, general and administrative expenses to revenues.

Our corporate administration operating loss for the three and six months ended June 30, 2020 was $23.7 million and $45.6 million, respectively, compared to $27.1 million and $49.7 million for the three and six months ended June 30, 2019, respectively.

The decrease in corporate administration expenses for both periods was primarily due to:

(a) a decrease in incentive compensation expense due to lower projected annual operating results, relative to incentive targets, than in the same prior year period, and (b) a decrease in salaries expense due to certain short-term cost cutting measures, including temporary furloughs and salary reductions.

Net interest expense for the three months ended June 30, 2020 and 2019 was $2.1 million and $3.2 million, respectively.

Net interest expense for the six months ended June 30, 2020 and 2019 was $4.6 million and $6.1 million, respectively.

The decrease in net interest expense for the three and six months ended June 30, 2020 resulted from lower interest rates, partially offset by higher average outstanding borrowings.

For the three and six months ended June 30, 2020, our income tax benefit was $40.3 million and $11.8 million, respectively, compared to an income tax provision of $33.2 million and $60.6 million for the three and six months ended June 30, 2019, respectively.

Our effective income tax rate for the three and six months ended June 30, 2020 was (32.5)% and (59.4)% respectively, and our effective income tax rate for the three and six months ended June 30, 2019 was 28.3% and 27.9%, respectively.

Our income tax benefit for the three and six months ended June 30, 2020 was impacted by the tax-effect of the $232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the quarter, the majority of which were non-deductible for tax purposes.

The difference between the U.S.

statutory tax rate of 21% and our effective income tax rates for the three and six months ended June 30, 2020 was primarily related to:

(a) the impact of the non-deductible impairment charges previously referenced, (b) state and local income taxes, and (c) other permanent book to tax differences.

Our United Kingdom building services segment operating income was $5.3 million for the three months ended September 30, 2020 compared to operating income of $4.8 million for the three months ended September 30, 2019.

Operating income was $16.4 million for the nine months ended September 30, 2020 compared to operating income of $14.4 million for the nine months ended September 30, 2019.

The increase in operating income for both periods was primarily a result of incremental gross profit from new maintenance contract awards.

The e xchange rate movements for the British pound versus the United States dollar did not have a significant impact on this segment’s operating income for either the three or nine month periods ended September 30, 2020.

Operating margin of 4.8% for the three months ended September 30, 2020 was relatively consistent with operating margin of 4.9% for the three months ended September 30, 2019.

For the nine months ended September 30, 2020, this segment’s operating margin of 5.2% compares favorably to operating margin of 4.5% for the nine months ended September 30, 2019.

The increase in operating margin for such period was attributable to an increase in gross profit margin, primarily as a result of a more favorable mix of work, and a decrease in the ratio of selling, general and administrative expenses to revenues.

Our corporate administration operating loss for the three and nine months ended September 30, 2020 was $24.5 million and $70.0 million, respectively, compared to $24.3 million and $74.1 million for the three and nine months ended September 30, 2019, respectively.

The decrease in corporate administration expenses for the nine month period was primarily due to:

(a) a decrease in incentive compensation expense, (b) a decrease in salaries expense due to certain short-term cost cutting measures, including temporary furloughs and salary reductions, and (c) a reduction in professional fees.

Net interest expense for the three months ended September 30, 2020 and 2019 was $1.5 million and $2.7 million, respectively.

Net interest expense for the nine months ended September 30, 2020 and 2019 was $6.1 million and $8.7 million, respectively.

The decrease in net interest expense for both the three and nine month periods resulted from lower interest rates, partially offset by higher average outstanding borrowings.

For the three and nine months ended September 30, 2020, our income tax provision was $73.9 million and $62.2 million, respectively, compared to $31.6 million and $92.3 million for the three and nine months ended September 30, 2019, respectively.

Our effective income tax rate for the three and nine months ended September 30, 2020 was 54.7% and 53.9% respectively, compared to an effective income tax rate for both the three and nine months ended September 30, 2019 of 27.9%.

Our income tax rate and income tax provision for the three and nine months ended September 30, 2020 were impacted by the tax-effect of the $232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the second quarter, the majority of which is non-deductible for tax purposes.

Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentage of total remaining performance obligations (in thousands, except for percentages):

June 30, 2020 % of Total December 31, 2019 % of Total June 30, 2019 % of Total

September 30, 2020 % of Total December 31, 2019 % of Total September 30, 2019 % of Total

Remaining performance obligations:

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Such claim and other variable consideration amounts were immaterial for all periods presented.

Our remaining performance obligations at June 30, 2020 were $4.59 billion compared to $4.04 billion at December 31, 2019 and $4.23 billion at June 30, 2019.

The increase in remaining performance obligations at June 30, 2020 compared to December 31, 2019 was attributable to an increase in remaining performance obligations within our United States mechanical construction and facilities services segment and our United Kingdom building services segment.

Our remaining performance obligations at September 30, 2020 were $4.53 billion compared to $4.04 billion at both December 31, 2019 and September 30, 2019.

The increase in remaining performance obligations at September 30, 2020 compared to December 31, 2019 was attributable to an increase in remaining performance obligations within all of our reportable segments, except for our United States industrial services segment.

Computer System Attack

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Our short-term liquidity requirements primarily arise from:

(a) working capital requirements, (b) business acquisitions and joint venture investments, (c) cash dividend payments, (d) interest and principal payments related to our outstanding indebtedness, and (e) payment of income taxes.

(a) working capital requirements, (b) business acquisitions, (c) cash dividend payments, (d) interest and principal payments related to our outstanding indebtedness, and (e) income tax payments.

We can expect to meet those requirements through our cash and cash equivalent balances, cash generated from our operations, and the borrowing capacity available under our revolving credit facility.

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In addition, our ability to perform work is critical to meeting our long-term liquidity requirements.

Despite the economic uncertainty described above, we believe that our current cash and cash equivalents and the borrowing capacity available under our revolving credit facility or other forms of financing available to us through borrowings, combined with cash expected to be generated from our operations, will be sufficient to provide short-term and foreseeable long-term liquidity and meet our expected capital expenditure requirements.

The following table presents our net cash provided by (used in) operating activities, investing activities and financing activities (in thousands):

For the six months ended

Net cash provided by (used in) operating activities $ 276,743 $ (42,198)

For the nine months ended

September 30,

Net cash provided by operating activities $ 546,834 $ 176,921

Net cash used in investing activities $ (77,219) $ (114,957)

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Effect of exchange rate changes on cash, cash equivalents and restricted cash $ (1,304) $ (2,047)

Our consolidated cash balance, including cash equivalents and restricted cash, increased by approximately $122.4 million from $359.9 million at December 31, 2019 to $482.3 million at June 30, 2020.

Net cash provided by operating activities for the six months ended June 30, 2020 was $276.7 million compared to $42.2 million of cash used in operating activities for the six months ended June 30, 2019.

Our consolidated cash balance, including cash equivalents and restricted cash, increased by approximately $320.7 million from $359.9 million at December 31, 2019 to $680.6 million at September 30, 2020.

Net cash provided by operating activities for the nine months ended September 30, 2020 was $546.8 million compared to $176.9 million of cash provided by operating activities for the nine months ended September 30, 2019.

The increase in cash provided by operating activities was primarily attributable to:

(a) a decline in organic revenues during the period, which resulted in a net reduction in outstanding accounts receivables, (b) a reduction in federal, state, and local tax payments of approximately $54.8 million compared to the prior year, primarily due to extended deadlines for making estimated federal tax payments, and (c) a $32.7 million reduction in the payment of certain payroll taxes given the enactment of the Coronavirus Aid, Relief, and Economic Security Act, which provides that employers may defer payment of the employer’s portion of Social Security taxes.

Net cash used in investing activities for the six months ended June 30, 2020 decreased by approximately $57.5 million compared to the six months ended June 30, 2019 due to a decrease in payments for business acquisitions.

Net cash used in financing activities for the six months ended June 30, 2020 was $121.3 million compared to net cash used in financing activities for the six months ended June 30, 2019 of $22.2 million.

(a) a decline in organic revenues during the period, primarily within our United States industrial services segment, which resulted in a net reduction in outstanding accounts receivables, (b) the timing of invoicing to our customers, including advanced billings on our long-term construction contracts, and (c) a $67.3 million reduction in the payment of certain payroll taxes given the enactment of the Coronavirus Aid, Relief, and Economic Security Act, which provides that employers may defer payment of the employer’s portion of Social Security taxes.

Net cash used in investing activities for the nine months ended September 30, 2020 decreased by approximately $37.7 million compared to the nine months ended September 30, 2019 due to a decrease in payments for business acquisitions.

Net cash used in financing activities for the nine months ended September 30, 2020 was $147.6 million compared to net cash used in financing activities for the nine months ended September 30, 2019 of $56.3 million.

The increase in net cash used in financing activities was primarily due to a $99.0 million increase in funds used for the repurchase of our common stock.

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We may allocate up to $400.0 million of available capacity under the 2020 Revolving Credit Facility to letters of credit for our account or for the account of any of our subsidiaries.

Obligations under the 2020 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets.

The 2020 Credit Agreement contains various covenants providing for, among other things, maintenance of certain financial ratios and certain limitations on payment of dividends, common stock repurchases, investments, acquisitions, indebtedness, and capital expenditures.

We were in compliance with all such covenants as of June 30, 2020 with respect to the 2020 Credit Agreement and, as of December 31, 2019, with respect to the 2016 Credit Agreement.

A commitment fee is payable on the average daily unused amount of the 2020 Revolving Credit Facility, which ranges from 0.10% to 0.25%, based on certain financial tests.

The fee was 0.10% of the unused amount as of June 30, 2020.

At the Company’s election, borrowings under the 2020 Credit Agreement bear interest at either:

(1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR (0.18% at June 30, 2020) plus 1.00% to 1.75%, based on certain financial tests.

The base rate is determined by the greater of (a) the prime commercial lending rate announced by Bank of Montreal from time to time (3.25% at June 30, 2020), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00%, or (d) 0.00%.

The interest rate in effect at June 30, 2020 was 1.18%.

(1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR (0.15% at September 30, 2020) plus 1.00% to 1.75%, based on certain financial tests.

The base rate is determined by the greater of (a) the prime commercial lending rate announced by Bank of Montreal from time to time (3.25% at September 30, 2020), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00%, or (d) 0.00%.

The interest rate in effect at September 30, 2020 was 1.15%.

A commitment fee is payable on the average daily unused amount of the 2020 Revolving Credit Facility, which ranges from 0.10% to 0.25%, based on certain financial tests.

The fee was 0.10% of the unused amount as of September 30, 2020.

Fees for letters of credit issued under the 2020 Revolving Credit Facility range from 0.75% to 1.75% of the respective face amounts of outstanding letters of credit, depending on the nature of the letter of credit, and are computed based on certain financial tests.

As of September 30, 2020 and December 31, 2019, the balance of the 2020 Term Loan and the 2016 Term Loan was $277.5 million and $254.4 million, respectively.

As of September 30, 2020, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility;

however, we had $78.8 million of letters of credit outstanding, which reduce the available capacity under such facility.

As of December 31, 2019, we had $50.0 million in direct borrowings outstanding and $109.0 million of letters of credit outstanding under the 2016 Revolving Credit Facility.

We capitalized an additional $3.1 million of debt issuance costs associated with the 2020 Credit Agreement.

Debt issuance costs are amortized over the life of the agreement and are included as part of interest expense.

We are required to make annual installment payments on the 2020 Term Loan, with a principal payment of $7.5 million on December 31, 2020 and principal payments on December 31 of each subsequent year in the amount of $15.0 million.

Obligations under the 2020 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets.

The 2020 Credit Agreement contains various covenants providing for, among other things, the maintenance of certain financial ratios and certain limitations on the payment of dividends, common stock repurchases, investments, acquisitions, indebtedness, and capital expenditures.

We were in compliance with all such covenants as of September 30, 2020 with respect to the 2020 Credit Agreement and, as of December 31, 2019, with respect to the 2016 Credit Agreement.

We are required to make annual principal payments on the 2020 Term Loan.

On September 30, 2020, we made a voluntary prepayment of $22.5 million, which was applied against our scheduled payments on a ratable basis.

A principal payment of $6.9 million is due on December 31, 2020 and principal payments of $13.9 million are due on December 31 of each subsequent year.

All unpaid principal and interest is due on March 2, 2025.

As of June 30, 2020 and December 31, 2019, the balance of the 2020 Term Loan and the 2016 Term Loan was $300.0 million and $254.4 million, respectively.

As of June 30, 2020, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility, however, we had $79.0 million of letters of credit outstanding which reduce the available capacity under such facility.

As of December 31, 2019, we had $50.0 million in direct borrowings outstanding and $109.0 million of letters of credit outstanding under the 2016 Revolving Credit Facility.

Share Repurchase Program and Dividends

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Since the inception of the repurchase program, the Board has authorized us to repurchase up to $1.15 billion of our outstanding common stock.

During the six months ended June 30, 2020, we repurchased approximately 1.5 million shares of our common stock for approximately $99.0 million.

Since the inception of the repurchase program through June 30, 2020, we have repurchased approximately 17.4 million shares of our common stock for approximately $890.5 million.

As of June 30, 2020, there remained authorization for us to repurchase approximately $259.5 million of our shares.

During the nine months ended September 30, 2020, we repurchased approximately 1.5 million shares of our common stock for approximately $99.0 million.

During the second and third quarters of 2020, we did not repurchase any shares of our common stock.

Since the inception of the repurchase program through September 30, 2020, we have repurchased approximately 17.4 million shares of our common stock for approximately $890.5 million.

As of September 30, 2020, there remained authorization for us to repurchase approximately $259.5 million of our shares.

The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice.

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We have agreed to indemnify the Surety Companies for amounts, if any, paid by them in respect of Surety Bonds issued on our behalf.

Public sector contracts require Surety Bonds more frequently

than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases.

Public sector contracts require Surety Bonds more frequently than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases.

In addition, at the request of labor unions representing certain of our employees, Surety Bonds are sometimes provided to secure obligations for wages and benefits payable to or for such employees.

As of June 30, 2020, based on the percentage-of-completion of our projects covered by Surety Bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.4 billion, which represents approximately 30% of our total remaining performance obligations.

As of September 30, 2020, based on the percentage-of-completion of our projects covered by Surety Bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.3 billion, which represents approximately 28% of our total remaining performance obligations.

We are not aware of any losses in connection with Surety Bonds, which have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.

From time to time, we discuss with our current and other Surety Bond providers the amounts of Surety Bonds that may be available to us based on our financial strength and the absence of any default by us on any Surety Bond issued on our behalf and believe those amounts are currently adequate for our needs.

However, if we experience changes in our bonding relationships or if there are adverse changes in the surety industry, we may (a) seek to satisfy certain customer requests for Surety Bonds by posting other forms of collateral in lieu of Surety Bonds, such as letters of credit, parent company guarantees or cash, in order to convince customers to forego the requirement for Surety Bonds, (b) increase our activities in our business segments that rarely require Surety Bonds, such as our building and industrial services segments, and/or (c) refrain from bidding for certain projects that require Surety Bonds.

segments that rarely require Surety Bonds, such as our building and industrial services segments, and/or (c) refrain from bidding for certain projects that require Surety Bonds.

There can be no assurance that we would be able to effectuate alternatives to providing Surety Bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require Surety Bonds.

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Letters of credit $ 78.8 $ 78.8 $ — $ — $ —

(1) As of June 30, 2020, the amount outstanding under the 2020 Term Loan was $300.0 million.

(1) As of September 30, 2020, the amount outstanding under the 2020 Term Loan was $277.5 million.

There were no direct borrowings outstanding under the 2020 Revolving Credit Facility.

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Certain Insurance Matters

As of June 30, 2020 and December 31, 2019, we utilized approximately $78.9 million of letters of credit obtained under our 2020 Revolving Credit Facility and $108.9 million of letters of credit obtained under our 2016 Revolving Credit Facility, respectively, as collateral for our insurance obligations.

As of September 30, 2020 and December 31, 2019, we utilized approximately $78.7 million of letters of credit obtained under our 2020 Revolving Credit Facility and $108.9 million of letters of credit obtained under our 2016 Revolving Credit Facility, respectively, as collateral for our insurance obligations.

New Accounting Pronouncements

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When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

For the three and six months ended June 30, 2020 and 2019, there were no changes in total estimated costs that had a significant impact on our operating results.

In addition, there were no significant losses recognized during the three and six months ended June 30, 2020 and 2019.

For the three and nine months ended September 30, 2020 and 2019, there were no changes in total estimated costs that had a significant impact on our operating results.

In addition, there were no significant losses recognized during the three and nine months ended September 30, 2020 and 2019.

The timing of revenue recognition may differ from the timing of invoicing to customers.

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Management reviews the credit quality of its receivables by, among other things, obtaining credit ratings of significant customers, assessing economic and market conditions, and evaluating material changes to a customer’s business, cash flows, and financial condition.

At June 30, 2020 and December 31, 2019, our accounts receivable of $1,936.4 million and $2,030.8 million, respectively, were recorded net of allowances for credit losses of $21.0 million and $14.5 million, respectively.

At September 30, 2020 and December 31, 2019, our accounts receivable of $1,942.3 million and $2,030.8 million, respectively, were recorded net of allowances for credit losses of $19.3 million and $14.5 million, respectively.

Due to the economic disruption caused by COVID-19, our allowance for credit losses increased based on our evaluation of:

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Allowances for credit losses are based on the best facts available and are reassessed and adjusted on a regular basis as additional information is received.

Should anticipated collections fail to materialize, or if future economic conditions differ from our forecasts, we could experience an increase in our allowances for credit losses.

Should anticipated collections fail to materialize, or if future economic conditions compare unfavorably to our forecasts, we could experience an increase in our allowances for credit losses.

Insurance Liabilities

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Therefore, if our actual experience differs from the assumptions and estimates used for recording the liabilities, adjustments may be required and will be recorded in the period that the experience becomes known.

Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $3.3 million at June 30, 2020 compared to December 31, 2019, partially as a result of greater potential exposures, including the impact of acquired companies.

If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $17.3 million of additional expense for the six months ended June 30, 2020.

Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $4.6 million at September 30, 2020 compared to December 31, 2019, partially as a result of greater potential exposures, including the impact of acquired companies.

If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $17.4 million of additional expense for the nine months ended September 30, 2020.

Deferred income tax assets and liabilities are recognized for temporary differences between the financial statement and income tax bases of assets and liabilities as well as for net operating loss and tax credit carryforwards.

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In making such determination, we consider all available evidence, including projections of future taxable income, tax-planning strategies, and recent results of operations.

At June 30, 2020 and December 31, 2019, we had net deferred income tax liabilities of $51.5 million and $71.7 million, respectively, primarily resulting from differences between the carrying value and income tax basis of certain identifiable intangible assets, goodwill, and depreciable fixed assets.

Included within these net deferred income tax liabilities are $182.8 million and $176.2 million of deferred income tax assets as of June 30, 2020 and December 31, 2019, respectively.

The total valuation allowance on deferred income tax assets, primarily related to state net operating loss carryforwards, was approximately $3.5 million as of both June 30, 2020 and December 31, 2019.

At September 30, 2020 and December 31, 2019, we had net deferred income tax liabilities of $43.4 million and $71.7 million, respectively, primarily resulting from differences between the carrying value and income tax bases of certain identifiable intangible assets, goodwill, and depreciable fixed assets.

Included within these net deferred income tax liabilities are $192.7 million and $176.2 million of deferred income tax assets as of September 30, 2020 and December 31, 2019, respectively.

The total valuation allowance on deferred income tax assets, primarily related to state net operating loss carryforwards, was approximately $3.5 million as of both September 30, 2020 and December 31, 2019.

Based on our taxable income, which has generally exceeded the amount of our net deferred tax asset balance, as well as current projections of future taxable income, we have determined that it is more likely than not that our net deferred income tax assets will be realized.

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Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets

As of June 30, 2020 and December 31, 2019, we had goodwill of $839.8 million and $1,063.9 million, respectively, arising out of the acquisition of businesses.

As of September 30, 2020 and December 31, 2019, we had goodwill of $846.9 million and $1,063.9 million, respectively, arising out of the acquisition of businesses.

Goodwill is not amortized but instead allocated to its respective reporting unit and evaluated for impairment annually, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.

We have determined that our reporting units are consistent with the reportable segments identified in Note 15 - Segment Information of the notes to consolidated financial statements.

As of June 30, 2020, approximately 17.0% of our goodwill related to our United States electrical construction and facilities services segment, approximately 35.7% related to our United States mechanical construction and facilities services segment, approximately 34.5% related to our United States building services segment, and approximately 12.8% related to our United States industrial services segment.

As of September 30, 2020, approximately 16.8% of our goodwill related to our United States electrical construction and facilities services segment, approximately 35.4% related to our United States mechanical construction and facilities services segment, approximately 35.1% related to our United States building services segment, and approximately 12.7% related to our United States industrial services segment.

Absent any earlier identified impairment indicators, we perform our annual goodwill impairment assessment on October 1 each fiscal year.

Qualitative indicators that may trigger the need for interim quantitative impairment testing include, among others, deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of a reporting unit.

Qualitative indicators that may trigger the need for interim quantitative impairment testing include, among others, a deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of a reporting unit.

Additionally, an interim impairment test may be triggered by a significant change in business climate, a loss of a significant customer, increased competition, or a sustained decrease in share price.

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However, if the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is impaired and an impairment loss in the amount of the excess is recognized and charged to operations.

During the second quarter of 2020, our operations were negatively impacted by the COVID-19 pandemic.

In addition, the demand for oil significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus, including various local, state, and national jurisdictional “shelter-in-place” orders.

Further, other macroeconomic events, such as geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia, resulted in a significant drop in the price of crude oil.

Our operations were significantly impacted by the COVID-19 pandemic starting with the second quarter of 2020.

During the same period, the demand for oil significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus, including various local, state, and national jurisdictional “shelter-in-place” orders.

Further, other macroeconomic events, including the escalation of geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia, resulted in a significant drop in the price of crude oil.

These negative factors created significant volatility and uncertainty in the markets in which our United States industrial services segment operates, resulting in a significant decrease in the demand for our service offerings.

Consequently, we revised our near-term revenue and operating margin expectations for our United States industrial services segment.

Consequently, in the second quarter of 2020, we revised our near-term revenue and operating margin expectations for our United States industrial services segment.

As a result of such developments, we concluded that a triggering event had occurred which indicated it was more likely than not that the fair value of our United States industrial services segment was less than its carrying amount.

Accordingly, we performed a quantitative impairment test and determined that the carrying amount of our United States industrial services segment exceeded its fair value, which resulted in the recognition of a non-cash goodwill impairment charge during the quarter ended June 30, 2020 of $225.5 million.

We determined the fair value of our United States industrial services segment using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital of 12.0%.

Accordingly, during the second quarter of 2020, we performed a quantitative impairment test and determined that the carrying amount of our United States industrial services segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of $225.5 million, which is included within our results of operations for the nine months ended September 30, 2020.

We did not identify any impairment indicators or record any additional impairment of goodwill during the three months ended September 30, 2020.

As part of our second quarter impairment test, we determined the fair value of our United States industrial services segment using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital of 12.0%.

Such weighted average cost of capital was developed with the assistance of an independent third-party valuation specialist and reflects the overall level of inherent risk within the business and the rate of return a market participant would expect to earn.

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The perpetual growth rate utilized in the terminal value calculation was 2.0%.

We did not identify any indicators of impairment with respect to our remaining reporting units.

We did not identify any indicators of impairment with respect to our remaining reporting units during the nine months ended September 30, 2020.

As such, for these reporting units, no impairment test was required to be performed subsequent to the date of our latest annual impairment test (October 1, 2019).

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Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, other than our United States industrial services segment, the decreases in estimated fair values described above would not have significantly impacted the results of our impairment tests.

In the case of our United States industrial services segment, however, the carrying value at June 30, 2020 equals its fair value and, therefore, any subsequent declines in fair value would result in a further impairment.

As of June 30, 2020 and December 31, 2019, net identifiable intangible assets (primarily consisting of our contract backlog, developed technology/vendor network, customer relationships, and subsidiary trade names) arising out of the acquisition of businesses were $576.5 million and $611.4 million, respectively.

In the case of our United States industrial services segment, however, upon completion of our second quarter goodwill impairment assessment and the recognition of the aforementioned impairment charge, the carrying value of this reporting unit equals its fair value.

Therefore, any subsequent declines in fair value would result in a further impairment of this reporting unit’s goodwill.

As of September 30, 2020 and December 31, 2019, net identifiable intangible assets (primarily consisting of our contract backlog, developed technology/vendor network, customer relationships, and subsidiary trade names) arising out of the acquisition of businesses were $596.7 million and $611.4 million, respectively.

The determination of related estimated useful lives for identifiable intangible assets and whether those assets are impaired involves significant judgments based upon short and long-term projections of future performance.

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If the assets are impaired, the assets are written down to their fair values, generally determined based on their discounted estimated future cash flows.

In connection with the negative market conditions disclosed above, we also evaluated certain of our identifiable intangible assets and other long-lived assets for impairment.

In connection with the negative market conditions disclosed above, we also evaluated certain of our identifiable intangible assets and other long-lived assets for impairment during the second quarter of 2020.

Such assets included those associated with the businesses in our United States industrial services segment and certain businesses within our United States electrical construction and facilities services segment whose results are also highly dependent on the strength of the oil and gas industry.

As a result of these assessments, during the quarter ended June 30, 2020, we recorded non-cash impairment charges of $7.3 million.

As a result of these assessments, we recorded non-cash impairment charges of $7.3 million, which have been included within our results of operations for the nine months ended September 30, 2020.

Of this amount, $4.8 million related to our United States industrial services segment and was comprised of:

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The remaining $2.5 million represented a subsidiary trade name impairment within our United States electrical construction and facilities services segment.

For the three months ended September 30, 2020, no impairment of our identifiable intangible assets or other long-lived assets was recognized.

As referenced above, impairment testing is based upon assumptions and estimates determined by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis