What changed in this filing

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Item 1. Financial Statements

2021-04-29 compared with 2020-10-29 · 193 added, 480 removed, 535 unchanged (56% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

(Unaudited) December 31,

21 unchanged sentences

Total current liabilities 2,093,407 2,163,232

Borrowings under revolving credit facility — 50,000

Long-term debt and finance lease liabilities 259,714 259,619

20 unchanged sentences

(In thousands, except per share data)(Unaudited)

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Three months ended March 31,

Revenues $ 2,304,049 $ 2,299,832

3 unchanged sentences

Restructuring expenses — 69

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

Operating income 117,004 105,995

3 unchanged sentences

Income tax provision 31,604 28,584

Net income $ 61,186 $ 81,834 $ 53,162 $ 238,216

Net income including noncontrolling interests 84,945 75,665

Net income attributable to noncontrolling interests ( 171 ) —

Net income attributable to EMCOR Group, Inc.

$ 84,774 $ 75,665

Basic earnings per common share $ 1.54 $ 1.35

6 unchanged sentences

(In thousands)(Unaudited)

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Net income $ 61,186 $ 81,834 $ 53,162 $ 238,216

Three months ended March 31,

Net income including noncontrolling interests $ 84,945 $ 75,665

Other comprehensive income (loss), net of tax:

1 unchanged sentence

Post retirement plans, amortization of actuarial loss included in net income (1)

540 509 1,636 1,572

Other comprehensive income (loss) 1,389 ( 2,434 )

Comprehensive income 86,334 73,231

(1) Net of tax of $ 0.2 million and $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively, and net of tax of $ 0.4 million for each of the nine months ended September 30, 2020 and 2019.

Comprehensive income attributable to noncontrolling interests ( 171 ) —

Comprehensive income attributable to EMCOR Group, Inc.

$ 86,163 $ 73,231

(1) Net of tax of $ 0.2 million and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(In thousands)(Unaudited)

Nine months ended September 30,

Three months ended March 31,

Cash flows - operating activities:

Net income $ 53,162 $ 238,216

Adjustments to reconcile net income to net cash provided by operating activities:

Net income including noncontrolling interests $ 84,945 $ 75,665

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 12,001 11,767

2 unchanged sentences

Deferred income taxes 14 4,375

Excess tax benefits from share-based compensation ( 192 ) ( 601 )

Non-cash expense for impairment of goodwill, identifiable intangible assets, and other long-lived assets 232,750 —

Non-cash share-based compensation expense 3,193 3,291

1 unchanged sentence

Changes in operating assets and liabilities, excluding the effect of businesses acquired ( 203,899 ) ( 191,314 )

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

Net cash used in operating activities ( 88,989 ) ( 78,813 )

Cash flows - investing activities:

1 unchanged sentence

Proceeds from sale or disposal of property, plant and equipment 766 196

Purchase of property, plant and equipment ( 34,180 ) ( 35,829 )

Investments in and advances to unconsolidated entities — ( 794 )

Distributions from unconsolidated entities — 38

Purchases of property, plant and equipment ( 8,204 ) ( 12,035 )

Net cash used in investing activities ( 31,764 ) ( 14,421 )

6 unchanged sentences

Dividends paid to stockholders ( 7,121 ) ( 4,500 )

Repurchase of common stock ( 99,048 ) —

Repurchases of common stock ( 12,917 ) ( 99,048 )

Taxes paid related to net share settlements of equity awards ( 3,750 ) ( 2,492 )

Issuance of common stock under employee stock purchase plan 4,887 4,501

Issuances of common stock under employee stock purchase plan 1,731 1,638

Payments for contingent consideration arrangements ( 693 ) ( 653 )

Distributions to noncontrolling interests ( 43 ) —

Net cash used in financing activities ( 147,594 ) ( 56,324 )

Net cash (used in) provided by financing activities ( 23,938 ) 86,119

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 886 ( 4,678 )

Increase in cash, cash equivalents, and restricted cash 320,717 3,593

Decrease in cash, cash equivalents, and restricted cash ( 143,805 ) ( 11,793 )

Cash, cash equivalents, and restricted cash at beginning of year (1)

3 unchanged sentences

(1) Includes $ 0.7 million and $ 1.1 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2020 and 2019, respectively.

(2) Includes $ 1.3 million and $ 1.7 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of September 30, 2020 and 2019, respectively.

See Notes to Consolidated Financial Statements.

EMCOR Group, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended September 30, 2019 and 2020

(In thousands)(Unaudited)

EMCOR Group, Inc.

stock Capital

surplus Accumulated other comprehensive loss (1)

earnings Treasury

stock Noncontrolling

Balance, June 30, 2019 $ 1,894,831 $ 603 $ 26,640 $ ( 86,896 ) $ 2,207,775 $ ( 253,937 ) $ 646

Net income 81,834 — — — 81,834 — —

Other comprehensive loss ( 474 ) — — ( 474 ) — — —

Tax withholding for common stock issued under share-based compensation plans ( 36 ) — ( 36 ) — — — —

Common stock issued under employee stock purchase plan 1,532 — 1,532 — — — —

Common stock dividends ( 4,491 ) — 35 — ( 4,526 ) — —

Share-based compensation expense 2,615 — 2,615 — — — —

Balance, September 30, 2019 $ 1,975,811 $ 603 $ 30,786 $ ( 87,370 ) $ 2,285,083 $ ( 253,937 ) $ 646

Balance, June 30, 2020 $ 1,944,198 $ 605 $ 38,975 $ ( 91,172 ) $ 2,348,199 $ ( 352,985 ) $ 576

Net income 61,186 — — — 61,186 — —

Other comprehensive income 2,688 — — 2,688 — — —

Tax withholding for common stock issued under share-based compensation plans ( 24 ) — ( 24 ) — — — —

Common stock issued under employee stock purchase plan 1,659 — 1,659 — — — —

Common stock dividends ( 4,392 ) — 29 — ( 4,421 ) — —

Share-based compensation expense 2,550 — 2,550 — — — —

Balance, September 30, 2020 $ 2,007,865 $ 605 $ 43,189 $ ( 88,484 ) $ 2,404,964 $ ( 352,985 ) $ 576

(1) Represents cumulative foreign currency translation adjustments and post retirement liability adjustments.

(2) Includes $ 0.9 million and $ 1.0 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of March 31, 2021 and 2020, respectively.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the nine months ended September 30, 2019 and 2020

For the three months ended March 31, 2020 and 2021

(In thousands)(Unaudited)

5 unchanged sentences

Balance, December 31, 2019 $ 2,057,780 $ 604 $ 32,274 $ ( 89,288 ) $ 2,367,481 $ ( 253,937 ) $ 646

Net income 238,216 — — — 238,216 — —

Other comprehensive income 292 — — 292 — — —

Net income including noncontrolling interests 75,665 — — — 75,665 — —

Other comprehensive loss ( 2,434 ) — — ( 2,434 ) — — —

Cumulative-effect adjustment (2)

( 2,307 ) — — — ( 2,307 ) — —

Common stock issued under share-based compensation plans 1 1 — — — — —

2 unchanged sentences

Common stock dividends ( 4,500 ) — 34 — ( 4,534 ) — —

Distributions to noncontrolling interests ( 250 ) — — — — — ( 250 )

Repurchases of common stock ( 99,048 ) — — — — ( 99,048 ) —

Share-based compensation expense 3,291 — 3,291 — — — —

Balance, September 30, 2019 $ 1,975,811 $ 603 $ 30,786 $ ( 87,370 ) $ 2,285,083 $ ( 253,937 ) $ 646

Balance, March 31, 2020 $ 2,027,594 $ 605 $ 34,745 $ ( 91,722 ) $ 2,436,305 $ ( 352,985 ) $ 646

Balance, December 31, 2020 $ 2,053,244 $ 606 $ 47,464 $ ( 109,233 ) $ 2,480,321 $ ( 366,490 ) $ 576

Net income 53,162 — — — 53,162 — —

Net income including noncontrolling interests 84,945 — — — 84,774 — 171

Other comprehensive income 1,389 — — 1,389 — — —

Cumulative-effect adjustment (2)

( 2,307 ) — — — ( 2,307 ) — —

Common stock issued under share-based compensation plans 1 1 — — — — —

2 unchanged sentences

Common stock dividends ( 7,121 ) — 55 — ( 7,176 ) — —

Repurchase of common stock ( 99,048 ) — — — — ( 99,048 ) —

Repurchases of common stock ( 12,917 ) — — — — ( 12,917 ) —

Distributions to noncontrolling interests ( 43 ) — — — — — ( 43 )

Share-based compensation expense 3,193 — 3,193 — — — —

Balance, September 30, 2020 $ 2,007,865 $ 605 $ 43,189 $ ( 88,484 ) $ 2,404,964 $ ( 352,985 ) $ 576

Balance, March 31, 2021 $ 2,120,672 $ 607 $ 48,693 $ ( 107,844 ) $ 2,557,919 $ ( 379,407 ) $ 704

(1) Represents cumulative foreign currency translation adjustments and post retirement liability adjustments.

6 unchanged sentences

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) have been condensed or omitted.

References to the “Company,” “EMCOR,” “we,” “us,” “our,” and similar words refer to EMCOR Group, Inc.

2 unchanged sentences

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of those of a normal recurring nature) necessary to present fairly our financial position and the results of our operations.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

Our reportable segments and related disclosures reflect certain reclassifications of prior year amounts from our United States electrical construction and facilities services segment to our United States industrial services and our United States building services segments due to changes in our internal reporting structure aimed at realigning our service offerings.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

NOTE 2 - New Accounting Pronouncements

On January 1, 2020, we adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”), which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable and contract assets.

This pronouncement replaces the previous incurred loss model with an expected credit loss model that requires consideration of a broader range of information when estimating expected credit losses over the contractual life of an asset.

This guidance requires entities to estimate expected credit losses by considering forecasts of future economic conditions in addition to information about past events and current conditions.

The cumulative effect of applying the new guidance was recorded as a reduction to retained earnings in the amount of $ 2.3 million, net of deferred taxes of $ 0.9 million.

Our financial position and results of operations for reporting periods beginning on or after January 1, 2020 reflect the guidance issued under this new accounting pronouncement, while prior periods continue to be reported in accordance with previous guidance and historical accounting policy.

A considerable amount of judgment is required in determining expected credit losses.

Credit losses are recorded when we believe a customer, or group of customers, may not be able to meet their financial obligations due to deterioration in financial condition or credit rating.

Relevant factors include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends in credit quality indicators or past events, and forecasts of future economic conditions.

In addition to monitoring delinquent accounts, 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 September 30, 2020 and December 31, 2019, our allowance for credit losses was $ 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:

(a) specific outstanding balances and (b) forecasts of future economic conditions and the expected impact on customer collections.

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 compare unfavorably to our forecasts, we could experience an increase in our credit losses.

The change in the allowance for credit losses for the nine months ended September 30, 2020 was as follows (in thousands):

Balance at December 31, 2019 $ 14,466

Cumulative-effect adjustment 3,150

Provision for credit losses 3,409

Amounts written off against the allowance, net of recoveries ( 1,681 )

Balance at September 30, 2020 $ 19,344

In December 2019, an accounting pronouncement was issued by the FASB that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to intraperiod tax allocations and the methodology for calculating income taxes in an interim period.

On January 1, 2021, we adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to intraperiod tax allocations and the methodology for calculating income taxes in an interim period.

The guidance also simplifies aspects of the accounting for franchise taxes as well as enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The pronouncement is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted.

Certain aspects of this standard must be applied retrospectively while other aspects are to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the year of

EMCOR Group, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 2 New Accounting Pronouncements - (Continued)

The Company intends to adopt this accounting pronouncement on January 1, 2021, and we are currently evaluating the potential impact on our financial position and/or results of operations.

The adoption of this accounting pronouncement did not have a material impact on our financial position and/or results of operations.

The Company is currently evaluating the impact of an accounting standards update issued by the FASB, which provides temporary optional expedients and exceptions to existing U.S.

This guidance is aimed at easing the financial reporting burdens related to reference rate reform, including the expected market transition from LIBOR, or other interbank offered rates, to alternative reference rates.

Such accounting pronouncement allows entities to account for and present certain contract modifications, which occur before December 31, 2022 and result from the transition to an alternative reference rate, as an event that does not require remeasurement at the modification date or reassessment of a previous accounting determination.

While we are still evaluating the impact of this pronouncement, we do not anticipate that it will have a material impact on our financial position and/or results of operations as we are not exposed to any contracts that reference LIBOR, other than our credit agreement dated as of March 2, 2020, which contains provisions that allow for the amendment of such agreement to use alternative reference rates in the event of the discontinuation of LIBOR.

NOTE 3 - Revenue from Contracts with Customers

2 unchanged sentences

A contract with a customer exists when:

(a) the parties have approved the contract and are committed to perform their respective obligations, (b) the rights of the parties can be identified, (c) payment terms can be identified, (d) the arrangement has commercial substance, and (e) collectibility of consideration is probable.

Judgment is required when determining if the contractual criteria are met, specifically in the earlier stages of a project when a formally executed contract may not yet exist.

In these situations, the Company evaluates all relevant facts and circumstances, including the existence of other forms of documentation or historical experience with our customers that may indicate a contractual agreement is in place and revenue should be recognized.

In determining if the collectibility of consideration is probable, the Company considers the customer’s ability and intention to pay such consideration through an evaluation of several factors, including an assessment of the creditworthiness of the customer and our prior collection history with such customer.

In determining if the collectability of consideration is probable, the Company considers the customer’s ability and intention to pay such consideration through an evaluation of several factors, including an assessment of the creditworthiness of the customer and our prior collection history with such customer.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

(2) Identify the performance obligations in the contract

16 unchanged sentences

The expected value method is typically utilized in situations where a contract contains a large number of possible outcomes while the most likely amount method is typically utilized in situations where a contract has only two possible outcomes.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

5 unchanged sentences

Based upon this assessment, the Company estimates the transaction price, including whether the variable consideration constraint should be applied.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Contract claims are another form of variable consideration which is common within our industry.

12 unchanged sentences

Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate.

For the three and nine months ended September 30, 2020, we recognized revenue of $ 4.4 million and $ 6.1 million, respectively, associated with the final settlement of contract value for two projects within our United States electrical construction and facilities services segment that were completed or substantially completed in prior periods.

There were no significant amounts of revenue recognized during the three and nine months ended September 30, 2019 related to performance obligations satisfied in prior periods.

In addition, for the three and nine months ended September 30, 2020 and 2019, there were no significant reversals of revenue recognized associated with the revision of transaction prices.

For the three months ended March 31, 2021 and 2020, there were no significant amounts of revenue recognized during the period related to performance obligations satisfied in prior periods.

In addition, for the three months ended March 31, 2021 and 2020, there were no significant reversals of revenue recognized associated with the revision of transaction prices.

(4) Allocate the transaction price to performance obligations in the contract

1 unchanged sentence

The Company determines the standalone selling price based on the price at which the performance obligation would have been sold separately in similar circumstances to similar customers.

If the standalone selling price is not observable, the Company estimates the standalone selling price taking into account all

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

available information such as market conditions and internal pricing guidelines.

If the standalone selling price is not observable, the Company estimates the standalone selling price taking into account all available information such as market conditions and internal pricing guidelines.

In certain circumstances, the standalone selling price is determined using an expected profit margin on anticipated costs related to the performance obligation.

7 unchanged sentences

The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For our construction contracts, revenue is generally recognized over time as our performance creates or enhances an asset that the customer controls as it is created or enhanced.

13 unchanged sentences

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 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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

For the three months ended March 31, 2021 and 2020, 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 months ended March 31, 2021 and 2020.

Disaggregation of Revenues

2 unchanged sentences

Refer to Note 14 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment, as well as a more complete description of our business.

The following tables provide further disaggregation of our revenues by categories we use to evaluate our financial performance within each of our reportable segments for the three and nine months ended September 30, 2020 and 2019 (in thousands):

For the three months ended September 30,

Total 2019 % of

United States electrical construction and facilities services:

Commercial market sector $ 253,436 50 % $ 260,871 47 %

Institutional market sector 38,135 7 % 33,702 6 %

Hospitality market sector 7,028 1 % 2,243 1 %

Manufacturing market sector 92,789 18 % 121,488 22 %

Healthcare market sector 18,876 4 % 24,701 4 %

Transportation market sector 58,765 12 % 52,744 9 %

Water and wastewater market sector 2,351 1 % 3,709 1 %

Short duration projects (1)

27,321 5 % 42,296 7 %

Service work 11,978 2 % 14,174 3 %

510,679 555,928

Less intersegment revenues ( 1,816 ) ( 1,291 )

Total segment revenues $ 508,863 $ 554,637

For the three months ended September 30,

Total 2019 % of

United States mechanical construction and facilities services:

Commercial market sector $ 346,911 39 % $ 293,202 33 %

Institutional market sector 112,264 13 % 94,886 11 %

Hospitality market sector 12,570 1 % 6,888 1 %

Manufacturing market sector 93,919 11 % 150,199 17 %

Healthcare market sector 78,814 9 % 84,418 10 %

Transportation market sector 19,824 2 % 7,855 1 %

Water and wastewater market sector 45,255 5 % 42,637 5 %

Short duration projects (1)

84,461 9 % 91,897 10 %

Service work 99,649 11 % 100,196 12 %

893,667 872,178

Less intersegment revenues ( 2,158 ) ( 2,990 )

Total segment revenues $ 891,509 $ 869,188

(1) Represents those projects which generally are completed within three months or less.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended September 30,

Total 2019 % of

United States building services:

Commercial site-based services $ 147,768 27 % $ 133,179 25 %

Government site-based services 44,664 8 % 42,412 8 %

Mobile mechanical services 336,320 61 % 333,696 63 %

Energy services 22,803 4 % 22,835 4 %

Total segment revenues $ 551,555 $ 532,122

For the three months ended September 30,

Total 2019 % of

United States industrial services:

Field services $ 113,345 81 % $ 194,569 83 %

Shop services 26,367 19 % 39,597 17 %

Total segment revenues $ 139,712 $ 234,166

Total United States operations $ 2,091,639 $ 2,190,113

For the three months ended September 30,

Total 2019 % of

United Kingdom building services:

Service work $ 55,594 51 % $ 49,098 50 %

Project work 54,481 49 % 48,530 50 %

Total segment revenues $ 110,075 $ 97,628

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

For the nine months ended September 30,

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three months ended March 31, 2021 and 2020 (in thousands):

For the three months ended March 31,

Total 2020 % of

13 unchanged sentences

Total segment revenues $ 456,168 $ 461,803

(1) Represents those projects which generally are completed within three months or less.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

For the nine months ended September 30,

For the three months ended March 31,

Total 2020 % of

14 unchanged sentences

(1) Represents those projects which generally are completed within three months or less.

For the nine months ended September 30,

For the three months ended March 31,

Total 2020 % of

5 unchanged sentences

Total segment revenues $ 581,839 $ 527,611

For the nine months ended September 30,

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended March 31,

Total 2020 % of

4 unchanged sentences

Total United States operations $ 2,177,314 $ 2,187,455

For the nine months ended September 30,

For the three months ended March 31,

Total 2020 % of

3 unchanged sentences

Total segment revenues $ 126,735 $ 112,377

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

Total operations $ 2,304,049 $ 2,299,832

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recognized in the period we deliver goods and services to our customers or when our right to consideration is unconditional.

The Company maintains an allowance for credit losses to reduce outstanding receivables to their net realizable value.

A considerable amount of judgment is required when determining expected credit losses.

Estimates of such losses are recorded when we believe a customer, or group of customers, may not be able to meet their financial obligations due to deterioration in financial condition or credit rating.

At March 31, 2021 and December 31, 2020, our allowance for credit losses was $ 18.1 million and $ 18.0 million, respectively.

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 compare unfavorably to our forecasts, we could experience an increase in our credit losses.

The change in the allowance for credit losses for the three months ended March 31, 2021 was as follows (in thousands):

Balance at December 31, 2020 $ 18,031

Provision for credit losses 507

Amounts written off against the allowance, net of recoveries ( 475 )

Balance at March 31, 2021 $ 18,063

Contract Assets and Contract Liabilities

Accounts receivable are recognized in the period when our right to consideration is unconditional.

Accounts receivable are recognized net of an allowance for credit losses.

A considerable amount of judgment is required in assessing the likelihood of realization of receivables.

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

Contract assets include unbilled amounts from our long-term construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts cannot be billed under the terms of our contracts.

Contract assets include unbilled amounts from our construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts cannot be billed under the terms of our contracts.

Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract.

In addition, many of our time and materials arrangements, as well as our contracts to perform turnaround services within the United States industrial services segment, are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded as revenue is recognized in advance of billings.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Also included in contract assets are amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to scope and/or price, or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders).

1 unchanged sentence

Contract assets are generally classified as current within the Consolidated Balance Sheets.

Contract liabilities from our long-term construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress.

Contract liabilities from our construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress.

Contract liabilities additionally include advanced payments from our customers on certain contracts.

1 unchanged sentence

The long-term portion of contract liabilities is included in “Other long-term obligations” in the Consolidated Balance Sheets.

Net contract liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020 December 31, 2019

Net contract liabilities consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

Contract assets, current $ 192,369 $ 171,956

3 unchanged sentences

Net contract liabilities $ ( 549,517 ) $ ( 552,579 )

The $ 81.6 million increase in net contract liabilities for the nine months ended September 30, 2020 was primarily attributable to an increase in net contract liabilities on our uncompleted long-term construction contracts, partially as a result of the timing of invoicing to our customers, which included advanced billings on several projects in the earlier stages of completion.

The $ 3.1 million decrease in net contract liabilities for the three months ended March 31, 2021 was primarily attributable to a decrease in the net contract liabilities on our uncompleted construction contracts.

Contract assets and contract liabilities increased by approximately $ 0.9 million and $ 0.1 million, respectively, as a result of acquisitions made by us in 2021.

There was no significant impairment of contract assets recognized during either period presented.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

There was no significant impairment of contract assets recognized during the periods presented.

Transaction Price Allocated to 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 percentages of total remaining performance obligations as of September 30, 2020 (in thousands, except for percentages):

September 30, 2020 % of Total

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 percentages of total remaining performance obligations as of March 31, 2021 (in thousands, except for percentages):

March 31, 2021 % of Total

Remaining performance obligations:

5 unchanged sentences

United Kingdom building services 149,306 3 %

Total worldwide operations $ 4,530,151 100 %

Our remaining performance obligations at September 30, 2020 were $ 4.53 billion.

Total operations $ 4,775,157 100 %

Our remaining performance obligations at March 31, 2021 were $ 4.78 billion.

Remaining performance obligations increase with awards of new contracts and decrease as we perform work and recognize revenue on existing contracts.

1 unchanged sentence

Our remaining performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of the total transaction price can be made.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Remaining performance obligations include unrecognized revenues to be realized from uncompleted construction contracts.

Although many of our construction contracts are subject to cancellation at the election of our customers, in accordance with industry practice, we do not limit the amount of unrecognized revenue included within remaining performance obligations for these contracts due to the inherent substantial economic penalty that would be incurred by our customers upon cancellation.

Although many of our construction contracts are subject to cancellation at the election of our customers, in accordance with industry practice, we do not limit the amount of unrecognized revenue included within remaining performance obligations for these contracts as the risk of cancellation is very low due to the inherent substantial economic penalty that our customers would incur upon cancellation or termination.

We believe our reported remaining performance obligations for our construction contracts are firm and contract cancellations have not had a material adverse effect on us.

Remaining performance obligations also include unrecognized revenues expected to be realized over the remaining term of service contracts.

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

Refer to the table below for additional information regarding our remaining performance obligations, including an estimate of when we expect to recognize such remaining performance obligations as revenue (in thousands):

7 unchanged sentences

United Kingdom building services 117,903 31,403

Total worldwide operations $ 3,609,725 $ 920,426

We believe our reported remaining performance obligations are firm and contract cancellations have not historically had a material adverse effect on us.

However, the extent to which the COVID-19 pandemic may impact our remaining performance obligations remains highly uncertain and will be affected by a number of factors that are difficult to predict.

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;

our customers’ demand for our services;

and any prolonged delays or shutdowns of active projects or closures of our and our customers’ offices and facilities.

Total operations $ 4,055,141 $ 720,016

NOTE 4 - Acquisitions of Businesses

Acquisitions are accounted for utilizing the acquisition method of accounting and the prices paid for them are allocated to their respective assets and liabilities based on the estimated fair value of such assets and liabilities at the dates of their respective acquisition by us.

During the first nine months of 2020, we acquired two companies for total consideration of $ 43.2 million.

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.

In connection with these acquisitions, we acquired working capital of $ 2.4 million and other net liabilities of $ 4.0 million and have preliminarily ascribed $ 8.1 million to goodwill and $ 36.7 million to identifiable intangible assets.

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

(“BKI”), a leading full service provider of mechanical construction and maintenance services.

This acquisition strengthens our position and broadens our capabilities in the Southern and Southeastern regions of the United States, and its results of operations have been included within our United States mechanical construction and facilities services segment.

Under the terms of the transaction, we acquired 100 % of BKI’s outstanding capital stock for total consideration of approximately $ 220.3 million.

In connection with the acquisition of BKI, we acquired working capital of $ 29.8 million and other net assets of $ 4.9 million and have preliminarily ascribed $ 43.9 million to goodwill and $ 141.7 million to identifiable intangible assets.

Goodwill is calculated as the excess of the consideration transferred over the fair value of the net assets acquired and represents the future economic benefits expected from this strategic acquisition.

The weighted average amortization period for the identifiable intangible assets acquired, which consist of a trade name, customer relationships, and contract backlog, is approximately 10.5 years.

In addition to BKI, during 2019, we completed six other acquisitions for total consideration of $ 85.4 million.

Acquisitions are accounted for utilizing the acquisition method of accounting and the prices paid for them are allocated to their respective assets and liabilities based upon the estimated fair value of such assets and liabilities at the dates of their respective acquisition by us.

During the first quarter of 2021, we acquired two companies for total consideration of $ 24.0 million.

One company provides mechanical services within the Southern region of the United States, and the results of its operations have been included in our United States mechanical construction and facilities services segment.

The other company provides electrical construction services for a broad array of customers in the Midwestern region of the United States, and the results of its operations have been included in our United States electrical construction and facilities services segment.

In connection with these acquisitions, we acquired working capital of $ 4.4 million and other net liabilities of $ 3.5 million, including certain deferred tax liabilities, and have preliminarily ascribed $ 10.4 million to goodwill and $ 12.7 million to identifiable intangible assets.

During 2020, we acquired three companies for total consideration of $ 50.3 million.

Such companies include:

(a) a company which provides electrical contracting services in central Iowa, the results of operations of which have been included within our United States electrical construction and facilities services segment, (b) a company which provides mechanical contracting services in south-central and eastern Texas, the results of operations of which have been included within our United States mechanical construction and facilities services segment, and (c) four companies within our United States building services segment which bolster our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls solutions.

In connection with these acquisitions, we acquired working capital of $ 25.3 million and other net assets of $ 1.3 million and have ascribed $ 29.2 million to goodwill and $ 29.6 million to identifiable intangible assets.

(a) a company that provides building automation and controls solutions within the Northeastern region of the United States, (b) a full service provider of mechanical services within the Washington, D.C.

metro area, and (c) a company that provides mobile mechanical services in the Southern region of the United States.

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

In connection with these acquisitions, we acquired working capital of $ 3.0 million and other net liabilities of $ 3.9 million and have preliminarily ascribed $ 13.1 million to goodwill and $ 38.1 million to identifiable intangible assets.

EMCOR Group, Inc.

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NOTE 4 - Acquisitions of Businesses (continued)

We expect that all of the goodwill acquired in connection with these acquisitions will be deductible for tax purposes.

The purchase price allocations for the businesses acquired in 2020 and BKI are preliminary and subject to change during their respective measurement periods.

We expect that the majority of the goodwill acquired in connection with these acquisitions will be deductible for tax purposes.

The purchase price allocations for one of the businesses acquired in 2021 and one of the businesses acquired in 2020 are preliminary and subject to change during their respective measurement periods.

As we finalize such purchase price allocations, adjustments may be recorded relating to finalization of intangible asset valuations, tax matters, or other items.

Although not expected to be significant, such adjustments may result in changes in the valuation of assets and liabilities acquired.

The purchase price allocations for the remaining businesses acquired in 2019 have been finalized with an insignificant impact.

The purchase price allocations for the other businesses acquired in 2021 and 2020 have been finalized during their respective measurement periods with an insignificant impact.

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

The following tables summarize our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three and nine months ended September 30, 2020 and 2019 (in thousands, except share and per share data):

The following table summarizes our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three months ended March 31, 2021 and 2020 (in thousands, except share and per share data):

For the three months ended

September 30,

Net income available to common stockholders $ 61,186 $ 81,834

Weighted average shares outstanding used to compute basic earnings per common share 54,979,310 56,216,840

Effect of dilutive securities—Share-based awards 220,935 341,610

Shares used to compute diluted earnings per common share 55,200,245 56,558,450

Basic earnings per common share $ 1.11 $ 1.46

Diluted earnings per common share $ 1.11 $ 1.45

For the nine months ended

September 30,

Net income available to common stockholders $ 53,162 $ 238,216

Net income attributable to EMCOR Group, Inc.

common stockholders $ 84,774 $ 75,665

Weighted average shares outstanding used to compute basic earnings per common share 54,896,548 56,007,122

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Diluted earnings per common share $ 1.54 $ 1.35

The number of outstanding share-based awards excluded from the computation of diluted EPS for the three and nine months ended September 30, 2020 because they would be anti-dilutive were 19,450 and 94,155 , respectively.

There were no anti-dilutive share-based awards for the three and nine months ended September 30, 2019.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

There were no anti-dilutive share-based awards outstanding for the three months ended March 31, 2021;

however, the number of share-based awards excluded from the computation of diluted EPS for the three months ended March 31, 2020 because they would be anti-dilutive were 95,084 .

NOTE 6 - Inventories

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of September 30, 2020 and December 31, 2019 (in thousands):

September 30,

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of March 31, 2021 and December 31, 2020 (in thousands):

2021 December 31,

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Inventories $ 48,212 $ 53,338

NOTE 7 Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets

In connection with our acquisition of businesses, we have recorded goodwill, which represents the excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets acquired.

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.

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, 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.

In assessing whether our goodwill is impaired, we compare the fair value of the reporting unit to its carrying amount, including goodwill.

If the fair value exceeds the carrying amount, no impairment is recognized.

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.

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, 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, 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.

Cash flow projections were derived from internal forecasts of anticipated revenue growth rates and operating margins, updated for recent events, with cash flows beyond the discrete forecast period estimated using a terminal value calculation which incorporated historical and forecasted trends, an estimate of long-term growth rates, and assumptions about the future demand for our services.

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

EMCOR Group, Inc.

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Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets - (Continued)

Due to the inherent uncertainties involved in making estimates, our assumptions may change in future periods.

Estimates and assumptions made for purposes of our goodwill impairment testing may prove to be inaccurate predictions of the future, and other factors used in assessing fair value, such as the weighted average cost of capital, are outside the control of management.

Unfavorable changes in certain of these key assumptions may affect future testing results.

For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average cost of capital would cause the estimated fair value of our United States industrial services segment to decrease by approximately $ 22.9 million.

In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair value of our United States industrial services segment to decrease by approximately $ 9.0 million.

Upon completion of our second quarter goodwill impairment assessment and the recognition of the aforementioned impairment charge, the carrying value of our United States industrial services segment equals its fair value whereas the fair values of our other reporting units are substantially in excess of their carrying values.

Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future goodwill impairment charges.

It is not possible at this time to determine if any future impairment charge will result or, if it does, whether such a charge would be material to our results of operations.

The changes in the carrying amount of goodwill by reportable segments were as follows during the nine months ended September 30, 2020 (in thousands):

United States

and facilities

services segment United States

and facilities

services segment United States

industrial services segment Total

Balance at December 31, 2019 $ 142,545 $ 299,220 $ 289,158 $ 332,988 $ 1,063,911

Acquisitions and purchase price adjustments — 398 8,099 — 8,497

Impairments — — — ( 225,500 ) ( 225,500 )

Balance at September 30, 2020 $ 142,545 $ 299,618 $ 297,257 $ 107,488 $ 846,908

Identifiable Intangible Assets and Other Long-Lived Assets

Our identifiable intangible assets, arising out of the acquisition of businesses, include contract backlog, developed technology/vendor network, customer relationships, and certain subsidiary trade names, all of which are subject to amortization.

In addition, our identifiable intangible assets include certain other subsidiary trade names, which are not subject to amortization.

Absent earlier indicators of impairment, we test for impairment of subsidiary trade names that are not subject to amortization on an annual basis (October 1).

In performing this test, we calculate the fair value of each trade name using the “relief from royalty payments” methodology.

This approach involves two steps:

(a) estimating reasonable royalty rates for each trade name and (b) applying these royalty rates to a net revenue stream and discounting the resulting cash flows to determine fair value.

This fair value is then compared with the carrying value of each trade name.

If the carrying amount of the trade name is greater than the implied fair value of the trade name, an impairment in the amount of the excess is recognized and charged to operations.

In addition, we review for impairment of identifiable intangible assets that are being amortized as well as other long-lived assets whenever facts and circumstances indicate that their carrying values may not be fully recoverable.

This test compares their carrying values to the undiscounted pre-tax cash flows expected to result from the use of the assets.

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 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, 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:

(a) a $ 4.2 million subsidiary trade name impairment and (b) a $ 0.6 million impairment on certain other long-lived assets.

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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets - (Continued)

Identifiable intangible assets consist of the following as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020

Amount Accumulated

Amortization Accumulated

Contract backlog $ 72,045 $ ( 67,199 ) $ — $ 4,846

Developed technology/Vendor network 95,661 ( 63,784 ) — 31,877

Customer relationships 668,755 ( 312,437 ) ( 4,834 ) 351,484

Trade names (amortized) 31,348 ( 22,583 ) — 8,765

Trade names (unamortized) 258,640 — ( 58,933 ) 199,707

Total $ 1,126,449 $ ( 466,003 ) $ ( 63,767 ) $ 596,679

December 31, 2019

Amount Accumulated

Amortization Accumulated

Contract backlog $ 66,745 $ ( 61,651 ) $ — $ 5,094

Developed technology/Vendor network 95,661 ( 60,156 ) — 35,505

Customer relationships 644,755 ( 277,601 ) ( 4,834 ) 362,320

Trade names (amortized) 31,148 ( 21,830 ) — 9,318

Trade names (unamortized) 251,440 — ( 52,233 ) 199,207

Total $ 1,089,749 $ ( 421,238 ) $ ( 57,067 ) $ 611,444

Identifiable intangible assets are amortized on a straight-line basis, as it best approximates the pattern in which the economic benefits of those assets are consumed.

Amortization expense related to identifiable intangible assets with finite lives was $ 15.4 million and $ 11.3 million for the three months ended September 30, 2020 and 2019, respectively, and $ 44.8 million and $ 34.5 million for the nine months ended September 30, 2020 and 2019, respectively.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of September 30, 2020 and December 31, 2019 (in thousands):

September 30,

NOTE 7 - Debt

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of March 31, 2021 and December 31, 2020 (in thousands):

2021 December 31,

Revolving credit facility $ — $ 50,000

Term loan $ 270,563 $ 270,563

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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 ( 0.15 % 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 %.

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) United States dollar LIBOR ( 0.11 % at March 31, 2021) 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 March 31, 2021), (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 March 31, 2021 was 1.11 %.

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.

The fee was 0.10 % of the unused amount as of March 31, 2021.

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;

As of March 31, 2021 and December 31, 2020, the balance of the 2020 Term Loan was $ 270.6 million.

As of March 31, 2021 and December 31, 2020, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility;

however, we had $ 71.3 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.

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

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 were in compliance with all such covenants as of March 31, 2021 and December 31, 2020.

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.

Any voluntary prepayments are applied against the outstanding balance of the loan and reduce our future scheduled payments on a ratable basis.

Based on our outstanding balance, principal payments of $ 13.9 million are due on December 31 of each year until maturity, with any remaining unpaid principal and interest due on March 2, 2025.

EMCOR Group, Inc.

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Recurring Fair Value Measurements

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2020 and December 31, 2019 (in thousands):

Assets at Fair Value as of September 30, 2020

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2021 and December 31, 2020 (in thousands):

Assets at Fair Value as of March 31, 2021

Asset Category Level 1 Level 2 Level 3 Total

2 unchanged sentences

Restricted cash (2)

1,295 — — 1,295

Deferred compensation plan assets (3)

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Restricted cash (2)

1,102 — — 1,102

Deferred compensation plan assets (3)

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(1) Cash and cash equivalents consist of deposit accounts and money market funds with original maturity dates of three months or less, which are Level 1 assets.

At September 30, 2020 and December 31, 2019, we had $ 294.0 million and $ 164.0 million, respectively, in money market funds.

At March 31, 2021 and December 31, 2020, we had $ 396.5 million and $ 482.2 million, respectively, in money market funds.

(2) Restricted cash is classified as “Prepaid expenses and other” in the Consolidated Balance Sheets.

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NOTE 9 - Income Taxes

The following table presents our income tax provision and our effective income tax rate for the three and nine months ended September 30, 2020 and 2019 (in thousands, except percentages):

The following table presents our income tax provision and our income tax rate for the three months ended March 31, 2021 and 2020 (in thousands, except percentages):

For the three months ended

September 30, For the nine months ended

September 30,

2020 2019 2020 2019

Income tax provision $ 31,604 $ 28,584

Effective income tax rate 54.7 % 27.9 % 53.9 % 27.9 %

Our income tax rate and income tax provision for both 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.

Income tax rate 27.2 % 27.4 %

The difference between the U.S.

statutory tax rate of 21 % and our effective income tax rates for the three and nine months ended September 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.

As of September 30, 2020 and December 31, 2019, we had no unrecognized income tax benefits.

statutory tax rate of 21 % and our income tax rate for both the three months ended March 31, 2021 and 2020 was primarily a result of state and local income taxes and other permanent book to tax differences.

The increase in the 2021 income tax provision was primarily due to increased income before income taxes.

As of March 31, 2021 and December 31, 2020, we had no unrecognized income tax benefits.

We file a consolidated federal income tax return including all of our U.S.

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Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years 2014 through 2019.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act provides for various tax relief and tax incentive measures, which are not expected to have a material impact on our results of operations.

Certain provisions of the CARES Act, however, will favorably impact our liquidity throughout 2020 as they allow for the deferral of the employer’s portion of current year Social Security tax payments until 2021 and 2022.

NOTE 10 - Common Stock

As of September 30, 2020 and December 31, 2019, there were 54,922,620 and 56,219,831 shares of our common stock outstanding, respectively.

During the three months ended September 30, 2020 and 2019, we issued 24,694 and 18,651 shares of common stock, respectively.

During the nine months ended September 30, 2020 and 2019, we issued 186,544 and 164,112 shares of common stock, respectively.

These shares were issued upon the occurrence of one of the following:

(a) the satisfaction of required conditions under certain of our share-based compensation plans, (b) the purchase of common stock pursuant to our employee stock purchase plan, or (c) the exercise of stock options.

As of March 31, 2021 and December 31, 2020, there were 54,729,679 and 54,755,900 shares of our common stock outstanding, respectively.

During the three months ended March 31, 2021 and 2020, we issued 91,243 and 101,695 shares of common stock, respectively.

These shares were issued upon either the satisfaction of required conditions under our share-based compensation plans or the purchase of common stock pursuant to our employee stock purchase plan.

We have paid quarterly dividends since October 25, 2011.

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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 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.

During the three months ended March 31, 2021, we repurchased approximately 0.1 million shares of our common stock for approximately $ 12.9 million.

Since the inception of the repurchase program through March 31, 2021, we have repurchased approximately 17.7 million shares of our common stock for approximately $ 917.0 million.

As of March 31, 2021, there remained authorization for us to repurchase approximately $ 233.0 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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The repurchase program has been and will be funded from our operations.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11 - Retirement Plans

The funded status of our defined benefit plans, which represents the difference between the fair value of plan assets and the projected benefit obligations, is recognized in our balance sheet with a corresponding adjustment to accumulated other comprehensive income (loss).

Gains and losses for the differences between actuarial assumptions and actual results, and unrecognized service costs, are recognized through accumulated other comprehensive income (loss).

These amounts will be subsequently recognized as net periodic pension cost (income) within the statement of operations.

Our United Kingdom subsidiary has a defined benefit pension plan covering all eligible employees (the “UK Plan”);

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We also sponsor three domestic retirement plans in which participation by new individuals is frozen.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11 - Retirement Plans (Continued)

Components of Net Periodic Pension Cost

The components of net periodic pension cost (income) of the UK Plan for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):

The components of net periodic pension cost (income) of the UK Plan for the three months ended March 31, 2021 and 2020 were as follows (in thousands):

For the three months ended

September 30, For the nine months ended

September 30,

2020 2019 2020 2019

Interest cost $ 1,336 $ 1,596

2 unchanged sentences

Net periodic pension cost (income) $ ( 943 ) $ ( 806 )

The net periodic pension cost associated with the domestic plans was approximately $0.1 million for each of the three months ended September 30, 2020 and 2019 and $0.2 million for each of the nine months ended September 30, 2020 and 2019.

The net periodic pension cost associated with the domestic plans was less than $ 0.1 million for each of the three months ended March 31, 2021 and 2020.

Employer Contributions

For the nine months ended September 30, 2020, our United Kingdom subsidiary contributed approximately $ 3.4 million to the UK Plan and anticipates contributing an additional $ 1.3 million during the remainder of 2020.

Contributions to the domestic plans were approximately $ 0.1 million for the nine months ended September 30, 2020.

For the three months ended March 31, 2021, our United Kingdom subsidiary contributed approximately $ 1.2 million to the UK Plan and anticipates contributing an additional $ 3.8 million during the remainder of 2021.

No contributions were made to our domestic plans for the three months ended March 31, 2021.

NOTE 12 - Commitments and Contingencies

1 unchanged sentence

As a government contractor, we are subject to U.S.

government audits and investigations relating to our operations, fines, penalties and compensatory and treble damages, and possible suspension or debarment from doing business with the government.

government audits and investigations relating to our operations, which such audits may result in fines, penalties and compensatory and treble damages, and possible suspension or debarment from doing business with the government.

Based on currently available information, we believe the outcome of ongoing government disputes and investigations will not have a material impact on our financial position, results of operations, or liquidity.

Computer System Attack

On February 15, 2020, we became aware on an infiltration and encryption of portions of our information technology network.

This attack temporarily disrupted our use of the impacted systems.

As part of our investigation into this incident, we engaged outside security experts, who did not identify any exfiltration of customer or employee data or any inappropriate access to our accounting or finance systems.

The Company maintains insurance coverage for these types of incidents;

such policies, however, may not completely provide coverage for, or completely offset the costs of, this infiltration.

Legal Proceedings

9 unchanged sentences

It is possible that a litigation matter for which liabilities have not been recorded could be decided unfavorably to us, and that any such unfavorable decision could have a material adverse effect on our financial position, results of operations, or liquidity.

Restructuring expenses

No material expenses in connection with restructuring were incurred during the three months ended March 31, 2021 and 2020, and no material restructuring expenses are expected to be incurred during the remainder of 2021.

As of March 31, 2021, the balance of restructuring obligations yet to be paid was approximately $ 2.6 million.

Such remaining amounts will be paid pursuant to our contractual obligations through 2022.

EMCOR Group, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

NOTE 13 Commitments and Contingencies - (Continued)

Restructuring expenses

The table below summarizes restructuring activity by reportable segment during the nine months ended September 30, 2020 and 2019 (in thousands):

United States

and facilities

services segment United States

and facilities

services segment United States building services segment Corporate administration Total

Balance at December 31, 2018 $ 30 $ — $ 176 $ 1,424 $ 1,630

Charges — — 567 — 567

Payments ( 30 ) — ( 708 ) ( 723 ) ( 1,461 )

Balance at September 30, 2019 $ — $ — $ 35 $ 701 $ 736

Balance at December 31, 2019 $ 445 $ — $ 412 $ 701 $ 1,558

Charges 268 268 69 — 605

Payments ( 189 ) — ( 481 ) ( 355 ) ( 1,025 )

Balance at September 30, 2020 $ 524 $ 268 $ — $ 346 $ 1,138

As of September 30, 2020, the balance of restructuring obligations yet to be paid was approximately $ 1.1 million.

Such remaining amounts will be paid pursuant to our contractual obligations through 2022.

NOTE 13 - Additional Cash Flow Information

The following table presents additional cash flow information for the nine months ended September 30, 2020 and 2019 (in thousands):

For the nine months ended

September 30,

The following table presents additional cash flow information for the three months ended March 31, 2021 and 2020 (in thousands):

For the three months ended

Cash paid for:

5 unchanged sentences

We have the following reportable segments:

(a) United States electrical construction and facilities services (involving systems for electrical power transmission and distribution;

(a) United States electrical construction and facilities services (involving systems for electrical power transmission, distribution, and generation, including sustainable energy solutions such as solar, photovoltaic, and wind;

premises electrical and lighting systems;

process instrumentation in the refining, chemical processing, food processing, and mining industries;

process instrumentation in the refining, chemical processing, and food processing industries;

low-voltage systems, such as fire alarm, security, and process control;

voice and data communication;

roadway and transit lighting;

voice and data communication, including fiber-optic and low-voltage cabling, distributed antenna systems, and audiovisual systems;

roadway and transit lighting and signaling;

and fiber optic lines);

12 unchanged sentences

The “United States building services” and “United Kingdom building services” segments principally consist of those operations which provide a portfolio of services needed to support the operation and maintenance of customers’ facilities, including commercial and government site-based operations and maintenance;

facility maintenance and services, including reception, security, and catering services;

facility management, maintenance, and services;

outage services to utilities and industrial plants;

1 unchanged sentence

mobile mechanical maintenance and services, including maintenance and service of mechanical, electrical, plumbing, and building automation systems;

indoor air quality improvement services;

floor care and janitorial services;

landscaping, lot sweeping, and snow removal;

facilities management;

other building services, including reception, security, and catering;

vendor management;

1 unchanged sentence

installation and support for building systems;

program development, management and maintenance for energy systems;

program development, management, and maintenance for energy systems, including services aimed at assisting our customers in reducing energy consumption;

technical consulting and diagnostic services;

infrastructure and building projects for federal, state, and local governmental agencies and bodies;

and small modification and retrofit projects, which

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 15 Segment Information - (Continued)

services are not generally related to customers’ construction programs.

and small modification and retrofit projects, which services are not generally related to customers’construction programs.

The “United States industrial services” segment principally consists of those operations which provide industrial maintenance and services for refineries, petrochemical plants, and other customers within the oil and gas industry.

3 unchanged sentences

specialty technical services;

instrumentation and electrical services for energy infrastructure;

on-site repairs, maintenance, and service of heat exchangers, towers, vessels, and piping;

and design, manufacturing, repair, and hydro blast cleaning of shell and tube heat exchangers and related equipment.

The following tables present financial information for each of our reportable segments for the three and nine months ended September 30, 2020 and 2019 (in thousands):

For the three months ended

September 30,

Revenues from unrelated entities:

United States electrical construction and facilities services $ 508,863 $ 554,637

United States mechanical construction and facilities services 891,509 869,188

United States building services 551,555 532,122

United States industrial services 139,712 234,166

Total United States operations 2,091,639 2,190,113

United Kingdom building services 110,075 97,628

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

Total revenues:

United States electrical construction and facilities services $ 511,257 $ 556,088

United States mechanical construction and facilities services 896,551 877,571

United States building services 573,299 550,002

United States industrial services 143,644 247,258

Less intersegment revenues ( 33,112 ) ( 40,806 )

Total United States operations 2,091,639 2,190,113

United Kingdom building services 110,075 97,628

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

and design, manufacturing, repair, and hydroblast cleaning of shell and tube heat exchangers and related equipment.

Our reportable segments reflect certain reclassifications of prior year amounts from our United States electrical construction and facilities services segment to our United States industrial services and our United States building services segments due to changes in our internal reporting structure aimed at realigning our service offerings.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 14 - Segment Information (Continued)

For the nine months ended

September 30,

The following tables present financial information for each of our reportable segments for the three months ended March 31, 2021 and 2020 (in thousands):

For the three months ended

Revenues from unrelated entities:

5 unchanged sentences

United Kingdom building services 126,735 112,377

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

Total operations $ 2,304,049 $ 2,299,832

Total revenues:

6 unchanged sentences

United Kingdom building services 126,735 112,377

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

Total operations $ 2,304,049 $ 2,299,832

For the three months ended

September 30,

Operating income (loss):

7 unchanged sentences

Restructuring expenses — ( 69 )

Total worldwide operations 135,855 115,749

Total operations 117,004 105,995

Other corporate items:

6 unchanged sentences

NOTE 14 - Segment Information (Continued)

For the nine months ended

September 30,

Operating income (loss):

United States electrical construction and facilities services $ 123,146 $ 120,380

United States mechanical construction and facilities services 192,156 156,152

United States building services 85,421 90,535

United States industrial services 5,424 31,209

Total United States operations 406,147 398,276

United Kingdom building services 16,442 14,371

Corporate administration ( 70,022 ) ( 74,062 )

Restructuring expenses ( 605 ) ( 567 )

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

Total worldwide operations 119,212 338,018

Other corporate items:

Net periodic pension (cost) income 2,211 1,187

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

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

September 30,

2021 December 31,

7 unchanged sentences

Corporate administration 840,142 1,030,516

Total worldwide operations $ 4,829,985 $ 4,830,358

Total operations $ 5,061,189 $ 5,063,840

NOTE 15 - Subsequent Events

In April 2021, we acquired a company for an immaterial amount.

This company provides mobile mechanical services across North Texas, and the results of its operations will be included in our United States building services segment.

The acquisition of this business will be accounted for by the acquisition method, and the amount paid will be allocated to its respective assets and liabilities, based upon the estimated fair value of such assets and liabilities on the date of acquisition by us.

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 1. Financial Statements