What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-29 compared with 2021-04-29 · 330 added, 113 removed, 615 unchanged (42% of the section changed)

49 unchanged sentences

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

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Revenues $ 2,437,666 $ 2,014,021 $ 4,741,715 $ 4,313,853

3 unchanged sentences

Restructuring expenses — — — 69

Operating income 117,004 105,995

Impairment loss on goodwill, identifiable intangible assets,

and other long-lived assets — 232,750 — 232,750

Operating income (loss) 133,358 ( 122,638 ) 250,362 ( 16,643 )

Net periodic pension (cost) income 922 718 1,830 1,460

Interest expense, net ( 1,316 ) ( 2,110 ) ( 2,679 ) ( 4,598 )

Income before income taxes 116,549 104,249

Income tax provision 31,604 28,584

Net income including noncontrolling interests 84,945 75,665

Net income attributable to noncontrolling interests ( 171 ) —

Net income attributable to EMCOR Group, Inc.

Income (loss) before income taxes 132,964 ( 124,030 ) 249,513 ( 19,781 )

Income tax provision (benefit) 35,616 ( 40,341 ) 67,220 ( 11,757 )

Net income (loss) including noncontrolling interests 97,348 ( 83,689 ) 182,293 ( 8,024 )

Net (loss) income attributable to noncontrolling interests ( 2 ) — 169 —

Net income (loss) attributable to EMCOR Group, Inc.

$ 97,350 $ ( 83,689 ) $ 182,124 $ ( 8,024 )

Basic earnings per common share $ 1.54 $ 1.35

Diluted earnings per common share $ 1.54 $ 1.35

Basic earnings (loss) per common share $ 1.79 $ ( 1.52 ) $ 3.34 $ ( 0.14 )

Diluted earnings (loss) per common share $ 1.78 $ ( 1.52 ) $ 3.32 $ ( 0.14 )

Dividends declared per common share $ 0.13 $ 0.08 $ 0.26 $ 0.16

2 unchanged sentences

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)(Unaudited)

Three months ended March 31,

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

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Net income (loss) including noncontrolling interests $ 97,348 $ ( 83,689 ) $ 182,293 $ ( 8,024 )

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 111 4 696 ( 2,980 )

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

Post retirement plans, amortization of actuarial

loss included in net income (loss) (1)

808 546 1,612 1,096

Other comprehensive income (loss) 919 550 2,308 ( 1,884 )

Comprehensive income 86,334 73,231

Comprehensive income attributable to noncontrolling interests ( 171 ) —

Comprehensive income attributable to EMCOR Group, Inc.

Comprehensive income (loss) 98,267 ( 83,139 ) 184,601 ( 9,908 )

Comprehensive (loss) income attributable to

noncontrolling interests ( 2 ) — 169 —

Comprehensive income (loss) attributable to EMCOR Group, Inc.

$ 98,269 $ ( 83,139 ) $ 184,432 $ ( 9,908 )

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

(1) Net of tax of $ 0.2 million and $ 0.1 million for the three months ended June 30, 2021 and 2020, respectively, and net of tax of $ 0.4 million and $ 0.3 million for the six months ended June 30, 2021 and 2020, respectively.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(In thousands)(Unaudited)

Three months ended March 31,

Six months ended June 30,

Cash flows - operating activities:

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

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

Net income (loss) including noncontrolling interests $ 182,293 $ ( 8,024 )

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Depreciation and amortization 24,110 23,220

2 unchanged sentences

Deferred income taxes ( 1,355 ) ( 19,942 )

Non-cash expense for impairment of goodwill, identifiable intangible assets,

and other long-lived assets — 232,750

Non-cash share-based compensation expense 5,850 5,960

1 unchanged sentence

Changes in operating assets and liabilities, excluding the effect of businesses acquired ( 254,005 ) 7,550

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

Net cash (used in) provided by operating activities ( 6,972 ) 276,743

Cash flows - investing activities:

2 unchanged sentences

Purchases of property, plant and equipment ( 16,734 ) ( 25,951 )

Distributions from unconsolidated entities 196 —

Net cash used in investing activities ( 70,939 ) ( 28,321 )

11 unchanged sentences

Distributions to noncontrolling interests ( 43 ) ( 70 )

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

Net cash used in financing activities ( 157,085 ) ( 121,301 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 1,222 ( 4,701 )

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

(Decrease) increase in cash, cash equivalents, and restricted cash ( 233,774 ) 122,420

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 $ 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.

(2) Includes $ 0.9 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of June 30, 2021 and 2020.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended March 31, 2020 and 2021

For the three months ended June 30, 2020 and 2021

(In thousands)(Unaudited)

4 unchanged sentences

stock Noncontrolling

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

Net loss including noncontrolling interests ( 83,689 ) — — — ( 83,689 ) — —

Other comprehensive income 550 — — 550 — — —

Tax withholding for common stock issued under share-based compensation plans ( 58 ) — ( 58 ) — — — —

Common stock issued under employee stock purchase plan 1,590 — 1,590 — — — —

Common stock dividends ( 4,388 ) — 29 — ( 4,417 ) — —

Distributions to

noncontrolling interests ( 70 ) — — — — — ( 70 )

Share-based compensation expense 2,669 — 2,669 — — — —

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

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

Net income (loss) including noncontrolling interests 97,348 — — — 97,350 — ( 2 )

Other comprehensive income 919 — — 919 — — —

Tax withholding for common stock issued under share-based compensation plans ( 21 ) — ( 21 ) — — — —

Common stock issued under employee stock purchase plan 1,830 — 1,830 — — — —

Common stock dividends ( 7,115 ) — 45 — ( 7,160 ) — —

Repurchases of common stock ( 125,113 ) — — — — ( 125,113 ) —

Share-based compensation expense 2,657 — 2,657 — — — —

Balance, June 30, 2021 $ 2,091,177 $ 607 $ 53,204 $ ( 106,925 ) $ 2,648,109 $ ( 504,520 ) $ 702

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

See Notes to Consolidated Financial Statements.

EMCOR Group, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the six months ended June 30, 2020 and 2021

(In thousands)(Unaudited)

EMCOR Group, Inc.

stock Capital

surplus Accumulated other comprehensive loss (1)

earnings Treasury

stock Noncontrolling

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

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

Net loss including noncontrolling interests ( 8,024 ) — — — ( 8,024 ) — —

Other comprehensive loss ( 1,884 ) — — ( 1,884 ) — — —

6 unchanged sentences

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

Distributions to

noncontrolling interests ( 70 ) — — — — — ( 70 )

Share-based compensation expense 5,960 — 5,960 — — — —

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

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

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

6 unchanged sentences

Repurchases of common stock ( 138,030 ) — — — — ( 138,030 ) —

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

Distributions to

noncontrolling interests ( 43 ) — — — — — ( 43 )

Share-based compensation expense 5,850 — 5,850 — — — —

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

Balance, June 30, 2021 $ 2,091,177 $ 607 $ 53,204 $ ( 106,925 ) $ 2,648,109 $ ( 504,520 ) $ 702

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

13 unchanged sentences

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.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

NOTE 2 - New Accounting Pronouncements

61 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 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.

For the three and six months ended June 30, 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 and six months ended June 30, 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

30 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 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.

For the three and six months ended June 30, 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 and six months ended June 30, 2021 and 2020.

Disaggregation of Revenues

6 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

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,

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 six months ended June 30, 2021 and 2020 (in thousands):

For the three months ended June 30,

Total 2020 % of

13 unchanged sentences

Total segment revenues $ 489,487 $ 410,388

For the three months ended March 31,

For the three months ended June 30,

Total 2020 % of

14 unchanged sentences

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

For the three months ended March 31,

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended June 30,

Total 2020 % of

5 unchanged sentences

Total segment revenues $ 624,456 $ 478,982

For the three months ended June 30,

Total 2020 % of

United States industrial services:

Field services $ 208,797 89 % $ 206,288 86 %

Shop services 26,366 11 % 34,805 14 %

Total segment revenues $ 235,163 $ 241,093

Total United States operations $ 2,307,792 $ 1,920,904

For the three months ended June 30,

Total 2020 % of

United Kingdom building services:

Service work $ 66,572 51 % $ 51,139 55 %

Project work 63,302 49 % 41,978 45 %

Total segment revenues $ 129,874 $ 93,117

Total operations $ 2,437,666 $ 2,014,021

For the six months ended June 30,

Total 2020 % of

United States electrical construction and facilities services:

Commercial market sector $ 498,757 53 % $ 452,164 52 %

Institutional market sector 95,716 10 % 70,084 8 %

Hospitality market sector 8,764 1 % 9,981 1 %

Manufacturing market sector 100,421 10 % 122,753 14 %

Healthcare market sector 45,092 5 % 35,250 4 %

Transportation market sector 95,210 10 % 92,146 10 %

Water and wastewater market sector 5,528 1 % 4,236 1 %

Short duration projects (1)

81,284 8 % 73,777 8 %

Service work 16,671 2 % 13,446 2 %

947,443 873,837

Less intersegment revenues ( 1,788 ) ( 1,646 )

Total segment revenues $ 945,655 $ 872,191

(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 March 31,

For the six months ended June 30,

Total 2020 % of

United States mechanical construction and facilities services:

Commercial market sector $ 764,157 41 % $ 578,124 36 %

Institutional market sector 140,768 7 % 176,826 11 %

Hospitality market sector 19,787 1 % 16,812 1 %

Manufacturing market sector 207,651 11 % 216,190 13 %

Healthcare market sector 234,530 13 % 168,587 10 %

Transportation market sector 39,121 2 % 34,015 2 %

Water and wastewater market sector 88,550 5 % 86,119 5 %

Short duration projects (1)

172,387 9 % 171,157 11 %

Service work 199,018 11 % 179,577 11 %

1,865,969 1,627,407

Less intersegment revenues ( 3,358 ) ( 2,854 )

Total segment revenues $ 1,862,611 $ 1,624,553

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

For the six months ended June 30,

Total 2020 % of

United States building services:

Commercial site-based services $ 328,498 27 % $ 275,516 27 %

Government site-based services 87,659 7 % 81,336 8 %

Mobile mechanical services 733,763 61 % 602,450 60 %

Energy services 56,375 5 % 47,291 5 %

Total segment revenues $ 1,206,295 $ 1,006,593

For the six months ended June 30,

Total 2020 % of

United States industrial services:

3 unchanged sentences

Total United States operations $ 4,485,106 $ 4,108,359

For the three months ended March 31,

For the six months ended June 30,

Total 2020 % of

4 unchanged sentences

Total operations $ 4,741,715 $ 4,313,853

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Accounts Receivable and Allowance for Credit Losses

3 unchanged sentences

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.

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.

Factors relevant to our assessment 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 March 31, 2021 and December 31, 2020, our allowance for credit losses was $ 18.1 million and $ 18.0 million, respectively.

At June 30, 2021 and December 31, 2020, our allowance for credit losses was $ 22.5 million and $ 18.0 million, respectively.

The increase in our allowance for credit losses was predominantly attributable to our evaluation of a specific outstanding receivable within our United States industrial services segment.

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):

The change in the allowance for credit losses for the six months ended June 30, 2021 was as follows (in thousands):

Balance at December 31, 2020 $ 18,031

1 unchanged sentence

Amounts written off against the allowance, net of recoveries ( 1,050 )

Balance at March 31, 2021 $ 18,063

Balance at June 30, 2021 $ 22,517

Contract Assets and Contract Liabilities

3 unchanged sentences

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).

5 unchanged sentences

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 March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Net contract liabilities consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

2021 December 31, 2020

Contract assets, current $ 203,353 $ 171,956

3 unchanged sentences

Net contract liabilities $ ( 569,141 ) $ ( 552,579 )

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.

The $ 16.6 million increase in net contract liabilities for the six months ended June 30, 2021 was primarily attributable to an increase in the net contract liabilities on our uncompleted construction contracts.

Contract assets and contract liabilities increased by approximately $ 2.2 million and $ 5.8 million, respectively, as a result of acquisitions made by us in 2021.

1 unchanged sentence

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 March 31, 2021 (in thousands, except for percentages):

March 31, 2021 % 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 June 30, 2021 (in thousands, except for percentages):

2021 % of Total

Remaining performance obligations:

6 unchanged sentences

Total operations $ 5,106,728 100 %

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

Our remaining performance obligations at June 30, 2021 were $ 5.11 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.

3 unchanged sentences

However, to the extent a service contract includes a cancellation clause which allows for the termination of such contract by either party without a substantive penalty, the remaining contract term, and therefore, the amount of unrecognized revenues included within remaining performance obligations, is limited to the notice period required for the termination.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Our remaining performance obligations are comprised of:

13 unchanged sentences

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.

During the first half of 2021, we acquired three companies for total consideration of $ 57.0 million.

Such companies include:

(a) a company that provides mechanical services within the Southern region of the United States, the results of operations of which have been included in our United States mechanical construction and facilities services segment, (b) a company that provides electrical construction services for a broad array of customers in the Midwestern region of the United States, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (c) a company that provides mobile mechanical services across North Texas, the results of operations of which have been included in our United States building services segment.

In connection with these acquisitions, we acquired working capital of $ 7.7 million and other net liabilities of $ 3.0 million, including certain deferred tax liabilities, and have preliminarily ascribed $ 16.9 million to goodwill and $ 35.4 million to identifiable intangible assets.

5 unchanged sentences

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.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 - Acquisitions of Businesses (continued)

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.

The purchase price allocations for two 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.

1 unchanged sentence

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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

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):

Calculation of Basic and Diluted Earnings (Loss) per Common Share

The following tables summarize our calculation of Basic and Diluted Earnings (Loss) per Common Share (“EPS”) for the three and six months ended June 30, 2021 and 2020 (in thousands, except share and per share data):

For the three months ended

Net income attributable to EMCOR Group, Inc.

Net income (loss) attributable to EMCOR Group, Inc.

common stockholders $ 97,350 $ ( 83,689 )

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

Weighted average shares outstanding used to compute basic earnings (loss) per common share 54,301,466 54,937,038

Effect of dilutive securities—Share-based awards 286,347 —

Shares used to compute diluted earnings per common share 55,135,304 56,210,728

Basic earnings per common share $ 1.54 $ 1.35

Diluted earnings per common share $ 1.54 $ 1.35

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 .

Shares used to compute diluted earnings (loss) per common share 54,587,813 54,937,038

Basic earnings (loss) per common share $ 1.79 $ ( 1.52 )

Diluted earnings (loss) per common share $ 1.78 $ ( 1.52 )

For the six months ended

Net income (loss) attributable to EMCOR Group, Inc.

common stockholders $ 182,124 $ ( 8,024 )

Weighted average shares outstanding used to compute basic earnings (loss) per common share 54,594,208 55,467,799

Effect of dilutive securities—Share-based awards 262,551 —

Shares used to compute diluted earnings (loss) per common share 54,856,759 55,467,799

Basic earnings (loss) per common share $ 3.34 $ ( 0.14 )

Diluted earnings (loss) per common share $ 3.32 $ ( 0.14 )

The number of outstanding share-based awards excluded from the computation of diluted EPS for the three and six months ended June 30, 2021 because they would be anti-dilutive were 1,500 and 14,136 , respectively.

The effect of 197,470 and 200,538 share-based awards has been excluded from the calculation of diluted EPS for the three and six months ended June 30, 2020, respectively, due to the net loss recognized for each period.

Assuming dilution, the number of outstanding share-based awards excluded from the computation of diluted EPS for both the three and six months ended June 30, 2020 because they would be anti-dilutive were 94,355 .

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 6 - Inventories

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

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2021 and December 31, 2020 (in thousands):

2021 December 31,

2 unchanged sentences

Inventories $ 64,713 $ 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, 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.

We did not identify any impairment indicators during the three and six months ended June 30, 2021 that would necessitate an interim impairment assessment of our goodwill.

However, 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 and other refined products 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 during such period, including 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 such segment and concluded that a triggering event had occurred which indicated that it was more likely than not that its fair value was less than its carrying amount.

Accordingly, we performed a quantitative impairment test and 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.

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

Cash flow projections were derived from internal forecasts of anticipated revenue growth rates and operating margins, updated for the events discussed above, 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.

Based on the outcome of our second quarter 2020 interim goodwill impairment test, we concluded 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 was included within our results of operations for the three and six months ended June 30, 2020.

We did not identify impairment indicators related to any other reporting unit that would have required an interim impairment assessment.

Additionally, we subsequently (as of October 1, 2020) performed our annual impairment assessment of all reporting units and determined there was no incremental impairment of goodwill.

EMCOR Group, Inc.

1 unchanged sentence

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 key assumptions may affect future testing results.

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.

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 indefinite-lived and therefore 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.

Given the negative market conditions disclosed above, we 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.

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

We subsequently (as of October 1, 2020) performed our annual impairment assessment of all subsidiary trade names that are not subject to amortization and determined there was no incremental impairment of these assets.

Additionally, we have not identified any impairment indicators during the three and six months ended June 30, 2021 that would necessitate an interim impairment assessment of either our identifiable intangible assets or other long-lived assets.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 - Debt

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

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2021 and December 31, 2020 (in thousands):

2021 December 31,

11 unchanged sentences

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 ( 0.11 % at March 31, 2021) plus 1.00 % to 1.75 %, based on certain financial tests.

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) United States dollar LIBOR ( 0.10 % at June 30, 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) the prime commercial lending rate announced by Bank of Montreal from time to time ( 3.25 % at June 30, 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 June 30, 2021 was 1.10 %.

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 March 31, 2021.

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

As of June 30, 2021 and December 31, 2020, the balance of the 2020 Term Loan was $ 270.6 million.

As of June 30, 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.

3 unchanged sentences

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 March 31, 2021 and December 31, 2020.

We were in compliance with all such covenants as of June 30, 2021 and December 31, 2020.

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

13 unchanged sentences

Recurring Fair Value Measurements

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

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2021 and December 31, 2020 (in thousands):

Assets at Fair Value as of June 30, 2021

Asset Category Level 1 Level 2 Level 3 Total

14 unchanged sentences

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

At June 30, 2021 and December 31, 2020, we had $ 366.9 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.

14 unchanged sentences

NOTE 10 - Income Taxes

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):

The following table presents our income tax provision (benefit) and our income tax rate for the three and six months ended June 30, 2021 and 2020 (in thousands, except percentages):

For the three months ended

Income tax provision $ 31,604 $ 28,584

June 30, For the six months ended

2021 2020 2021 2020

Income tax provision (benefit) $ 35,616 $ ( 40,341 ) $ 67,220 $ ( 11,757 )

Income tax rate 26.8 % ( 32.5 ) % 27.0 % ( 59.4 ) %

The difference between the U.S.

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.

statutory tax rate of 21 % and our income tax rate for both the three and six months ended June 30, 2021 and 2020 was primarily a result of state and local income taxes and other permanent book to tax differences, including, in the case of the three and six months ended June 30, 2020, 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 of 2020, the majority of which were non-deductible for tax purposes.

As of June 30, 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.

3 unchanged sentences

NOTE 11 - Common Stock

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.

As of June 30, 2021 and December 31, 2020, there were 53,747,352 and 54,755,900 shares of our common stock outstanding, respectively.

During the three months ended June 30, 2021 and 2020, we issued 36,044 and 60,155 shares of common stock, respectively.

During the six months ended June 30, 2021 and 2020, we issued 127,287 and 161,850 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.

4 unchanged sentences

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 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.

During the six months ended June 30, 2021, we repurchased approximately 1.1 million shares of our common stock for approximately $ 138.0 million.

Since the inception of the repurchase program through June 30, 2021, we have repurchased approximately 18.7 million shares of our common stock for approximately $ 1,042.1 million.

As of June 30, 2021, there remained authorization for us to repurchase approximately $ 107.9 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.

14 unchanged sentences

Components of Net Periodic Pension Cost

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):

The components of net periodic pension cost (income) of the UK Plan for the three and six months ended June 30, 2021 and 2020 were as follows (in thousands):

For the three months ended

June 30, For the six months ended

2021 2020 2021 2020

Interest cost $ 1,350 $ 1,556 $ 2,686 $ 3,152

2 unchanged sentences

Net periodic pension cost (income) $ ( 951 ) $ ( 785 ) $ ( 1,894 ) $ ( 1,591 )

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.

The net periodic pension cost associated with the domestic plans was approximately $ 0.1 million for each of the three and six months ended June 30, 2021 and 2020.

Employer Contributions

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.

For the six months ended June 30, 2021, our United Kingdom subsidiary contributed approximately $ 2.5 million to the UK Plan and anticipates contributing an additional $ 2.5 million during the remainder of 2021.

NOTE 13 - Commitments and Contingencies

14 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.

Insurance Liabilities

We have loss payment deductibles for certain workers’ compensation, automobile liability, general liability, and property claims, have self-insured retentions for certain other casualty claims, and are self-insured for employee-related healthcare claims.

In addition, we maintain a wholly-owned captive insurance subsidiary to manage certain of our insurance liabilities.

Losses are recorded based upon estimates of our liability for claims incurred and for claims incurred but not reported.

The liabilities are derived from known facts, historical trends, and industry averages, utilizing the assistance of an independent third-party actuary to determine the best estimate for the majority of these obligations.

At June 30, 2021 and December 31, 2020, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $ 63.7 million and $ 48.2 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” at June 30, 2021 and December 31, 2020 were $ 242.6 million and $ 192.8 million, respectively.

The current portion of anticipated insurance recoveries of $ 28.1 million and $ 14.4 million at June 30, 2021 and December 31, 2020, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 102.0 million and $ 54.3 million at June 30, 2021 and December 31, 2020, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

These balances increased from December 31, 2020 as a result of revised estimates for claims on which we expect substantial coverage by insurance.

EMCOR Group, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

NOTE 13 - Commitments and Contingencies (Continued)

Restructuring expenses

No material expenses in connection with restructuring were incurred during the three and six months ended June 30, 2021 and 2020, and no material restructuring expenses are expected to be incurred during the remainder of 2021.

As of June 30, 2021, the balance of restructuring obligations yet to be paid was approximately $ 2.3 million.

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

NOTE 14 - Additional Cash Flow Information

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

The following table presents additional cash flow information for the six months ended June 30, 2021 and 2020 (in thousands):

For the six months ended

Cash paid for:

53 unchanged sentences

NOTE 15 - Segment Information (Continued)

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

The following tables present financial information for each of our reportable segments for the three and six months ended June 30, 2021 and 2020 (in thousands):

For the three months ended

16 unchanged sentences

Total operations $ 2,437,666 $ 2,014,021

For the six months ended

Revenues from unrelated entities:

United States electrical construction and facilities services $ 945,655 $ 872,191

United States mechanical construction and facilities services 1,862,611 1,624,553

United States building services 1,206,295 1,006,593

United States industrial services 470,545 605,022

Total United States operations 4,485,106 4,108,359

United Kingdom building services 256,609 205,494

Total operations $ 4,741,715 $ 4,313,853

Total revenues:

United States electrical construction and facilities services $ 947,690 $ 874,208

United States mechanical construction and facilities services 1,870,012 1,631,844

United States building services 1,251,247 1,042,036

United States industrial services 498,372 612,938

Less intersegment revenues ( 82,215 ) ( 52,667 )

Total United States operations 4,485,106 4,108,359

United Kingdom building services 256,609 205,494

Total operations $ 4,741,715 $ 4,313,853

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 15 - Segment Information (Continued)

For the three months ended

7 unchanged sentences

Corporate administration ( 25,755 ) ( 23,699 )

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

Total operations 133,358 ( 122,638 )

Net periodic pension (cost) income 922 718

Interest expense, net ( 1,316 ) ( 2,110 )

Income (loss) before income taxes $ 132,964 $ ( 124,030 )

For the six months ended

Operating income (loss):

United States electrical construction and facilities services $ 82,969 $ 71,938

United States mechanical construction and facilities services 144,209 112,108

United States building services 59,644 47,876

United States industrial services ( 2,651 ) 18,707

Total United States operations 284,171 250,629

United Kingdom building services 16,458 11,115

Corporate administration ( 50,267 ) ( 45,568 )

Restructuring expenses — ( 69 )

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

Total operations 250,362 ( 16,643 )

Other corporate items:

Net periodic pension (cost) income 1,830 1,460

Interest expense, net ( 2,679 ) ( 4,598 )

Income before income taxes $ 116,549 $ 104,249

Income (loss) before income taxes $ 249,513 $ ( 19,781 )

EMCOR Group, Inc.

13 unchanged sentences

NOTE 16 - 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.

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

This company provides mobile mechanical services in the Southern region of the United States, 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 values 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