What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-25 · 386 added, 482 removed, 250 unchanged (78% of the section changed)

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Business Description

We are one of the largest electrical and mechanical construction and facilities services firms in the United States.

In addition, we provide a number of building services and industrial services.

We are one of the largest specialty contractors in the United States and a leading provider of electrical and mechanical construction and facilities services, building services, and industrial services.

Our services are provided to a broad range of commercial, industrial, utility, and institutional customers through approximately 90 operating subsidiaries.

Our offices are located in the United States and the United Kingdom.

We have the following reportable segments, which provide services associated with the design, integration, installation, start-up, operation and maintenance of various systems:

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

premises electrical and lighting systems;

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

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

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);

(b) United States mechanical construction and facilities services (involving systems for heating, ventilation, air conditioning, refrigeration, and clean-room process ventilation;

fire protection;

plumbing, process, and high-purity piping;

controls and filtration;

water and wastewater treatment;

central plant heating and cooling;

cranes and rigging;

millwrighting;

and steel fabrication, erection and welding);

(d) United States industrial services;

and (e) United Kingdom building services.

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 management, maintenance, and services;

outage services to utilities and industrial plants;

military base operations support services;

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;

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

vendor management;

call center services;

installation and support for building systems;

program development, management and maintenance for energy systems;

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 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.

Services of this segment include refinery turnaround planning and engineering;

specialty welding;

overhaul and maintenance of critical process units;

specialty technical services;

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.

Such operating subsidiaries are organized into the following reportable segments:

• United States electrical construction and facilities services;

• United States mechanical construction and facilities services;

• United States building services;

• United States industrial services;

• United Kingdom building services.

For a more complete description of our operations, refer to Item 1.

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.

Consequently, we have included and updated the year-over-year discussion and analysis of results of operations for 2020 compared to 2019 to reflect these changes.

COVID-19 and Market Update

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

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

In response, government authorities in the U.S.

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

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

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

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

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

Other macroeconomic events, including geopolitical tensions between the Organization of Petroleum Exporting Countries (“OPEC”) and Russia, resulted in significant volatility in the price of crude oil during the first half of 2020.

Although oil prices have subsequently experienced a partial recovery, the overall uncertainty driven by these events has significantly impacted the markets in which our United States industrial services segment operates.

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

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

During the second half of the year, we experienced stabilization within our United States construction segments and our United States and United Kingdom building services segments as certain shelter-in-place orders were lifted, various other containment and mitigation measures were eased, and/or our teams and customers further adapted to this new work environment;

however, this positive trend may not continue.

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

As a result of the COVID-19 pandemic, we experienced significant disruptions throughout calendar year 2020, which impacted our ability to execute on our remaining performance obligations in many of the markets in which we operate.

The economic and operational impact of the pandemic, which were most acute during the second quarter of 2020, negatively affected our results of operations during such period and continued to impact portions of our business in 2021.

However, our strong balance sheet and operational flexibility have allowed us to manage through the ongoing impacts of the pandemic while protecting our cash flow and liquidity.

Although the majority of our businesses have largely recovered from the financial impacts of the COVID-19 pandemic experienced in 2020, as evidenced by our consolidated performance and the growth in our remaining performance obligations, our United States industrial services segment continues to be negatively impacted by the lingering effects of the pandemic.

The prolonged impacts of lower demand and the overall lagging recovery of the oil and gas market have resulted in customers of this segment canceling or deferring regularly scheduled maintenance projects, reducing capital spending, implementing various cost cutting measures, and closing certain of their facilities.

Such customer actions continue to impact the demand for our service offerings within this segment.

We continue to monitor the short- and long-term impacts of the pandemic.

While our employees and customers have adapted to a new work environment and there continues to be scientific, societal, and economic progress to address the effects of COVID-19, including the widespread availability of effective vaccines in the markets we serve, there remains significant uncertainty about the future impacts of the pandemic, or any resulting market disruption or volatility, including the potential effects on our operations.

We continue to be cautiously optimistic about the markets in which we operate and the customers we serve;

however, should there be a slowdown in economic activity due to surges in the number of cases, or an increase in variants of the virus that are more virulent, contagious, or against which current vaccines are less effective, it is possible that projects could be delayed or canceled or that we could experience access restrictions to our customers’ facilities, preventing us from performing maintenance and service projects.

The extent to which our business and results of operations are impacted in future periods will also depend upon a number of other factors.

These include the duration and extent of the pandemic;

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

the extent, duration, and effective execution of ongoing government stabilization and recovery efforts;

the timing, availability, efficacy, adoption, and distribution of vaccines or other preventative treatments;

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

the cost and/or disruption of testing that may be required of our employees either by customer requirements or government mandates;

the extent, duration, and effective execution of government stabilization and recovery efforts;

the widespread adoption and long-term efficacy of vaccines and the availability and efficacy of other treatments;

our customers’ demand for our services;

our ability to effectively operate in this environment;

the ability of our customers to pay us for services rendered;

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

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

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

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

our ability to continue to safely and effectively operate in this environment;

and the ability of our customers to pay us for services rendered.

While the emergency temporary standard requiring employers with 100 or more employees to ensure their workforce is fully vaccinated or to require unvaccinated workers to produce a negative test result on at least a weekly basis (the “ETS”) has been withdrawn by the Occupational Safety and Health Administration (“OSHA”), and Executive Order 14042 mandating vaccination for all federal contractors and subcontractors is currently stayed by the courts, it is unclear whether OSHA or another federal agency will mandate vaccination and/or testing.

Costs related to any mandatory testing, including both the costs of tests and the costs to compensate employees for the time to undergo such testing, will likely represent a substantial expense to the Company, which could have a material adverse effect on our business, financial condition, and/or results of operations to the extent that a significant portion of our workforce does not choose to become vaccinated.

On January 10, 2022, the Biden Administration announced that it would require insurance companies and group health plans to cover the cost of at-home COVID-19 tests.

As we are self-insured for employee-related healthcare claims, this new requirement could result in an additional expense for the Company.

It is not possible at this time to determine the impact of this new requirement or whether it could have a material adverse effect on our financial condition and/or results of operations.

Supply chain disruptions, material shortages, or escalating commodity prices have and may continue to negatively impact our business.

For example, we have experienced lead times significantly in excess of normal levels and have seen the effects of inflation through increases in commodity and material prices.

Despite these challenges, to date, we have been able to manage our business through enhanced labor planning and project scheduling, increased pricing to the extent contractually permitted, and by leveraging our relationships with our suppliers and customers, resulting in only modest disruptions to our project and service work within the majority of our reportable segments.

However, the impact of the COVID-19 pandemic on our vendors and the pricing and availability of materials or supplies utilized in our operations continues to evolve and may have an adverse impact on our operations in future periods.

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

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

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Revenues $ 9,903,580 $ 8,797,061

Revenues (decrease) increase from prior year (4.1) % 12.8 %

Revenues increase (decrease) from prior year 12.6 % (4.1) %

Gross profit $ 1,501,737 $ 1,395,382

Gross profit as a percentage of revenues 15.2 % 15.9 %

Restructuring expenses $ 2,214 $ 1,523

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

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$ 383,532 $ 132,943

Diluted earnings per common share from continuing operations $ 2.40 $ 5.75

Revenues of $8.80 billion for the year ended December 31, 2020 decreased by 4.1% from revenues of $9.17 billion for the year ended December 31, 2019.

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

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

Diluted earnings per common share $ 7.06 $ 2.40

Revenues of $9.90 billion for the year ended December 31, 2021 set a new annual record for the Company and represent an increase of 12.6% from revenues of $8.80 billion for the year ended December 31, 2020.

As described in further detail below, we experienced revenue growth within all of our reportable segments.

Operating income for 2021 was $530.8 million, or 5.4% of revenues, compared to operating income of $256.8 million, or 2.9% of revenues, in 2020.

Our operating results for the year ended December 31, 2020 included $232.8 million of non-cash impairment charges recorded during the second quarter, primarily within our United States industrial services segment, which negatively impacted the Company’s operating margin for 2020 by approximately 270 basis points.

Excluding the impact of such impairments, operating income and operating margin for the twelve months ended December 31, 2020 increased by $28.7 million and 60 basis points, respectively, primarily as a result of favorable execution within our United States construction segments, as described in further detail below.

Net income of $132.9 million, or $2.40 per diluted share, for the year ended December 31, 2020, compares unfavorably to net income of $325.1 million, or $5.75 per diluted share, for the year ended December 31, 2019.

The decline in both net income and diluted earnings per common share are a result of the aforementioned impairment charges and the related tax effects as the majority of such charges are non-deductible for tax purposes.

Our operating results for the year ended December 31, 2020 included $232.8 million of non-cash impairment charges, which negatively impacted the Company’s operating margin for 2020 by approximately 270 basis points.

Excluding the impact of such impairment charges on our 2020 results, operating income increased by $41.2 million for the year ended December 31, 2021, as a result of increased operating income contribution from all of our reportable segments, except for our United States industrial services segment, which continues to be impacted by the effect of adverse market conditions on the demand for its service offerings, as described in further detail below.

Net income of $383.5 million, or $7.06 per diluted share, for the year ended December 31, 2021, compares favorably to net income of $132.9 million, or $2.40 per diluted share, for the year ended December 31, 2020.

While such increases were largely attributable to the growth in operating income referenced above, net income and diluted earnings per common share for the year ended December 31, 2021 also benefited from a more normalized income tax rate, as our tax rate in the prior year was negatively impacted by the non-cash impairment charges recorded in 2020, the majority of which were non-deductible for tax purposes.

Our diluted earnings per share for 2021 additionally benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2020 and 2021.

Impact of Acquisitions

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

We acquired three companies in 2020, including:

We acquired eight companies in 2021 for total consideration of $131.2 million.

Such acquisitions include:

(a) two companies, the results of operations of which were de minimis, included within our United States mechanical construction and facilities services segment, consisting of:

(i) a company that provides mechanical services within the Southern region of the United States and (ii) a company that provides fire protection services in the Midwestern region of the United States, (b) two companies that provide 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) four companies included within our United States building services segment, consisting of:

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

We acquired three companies in 2020 for total consideration of $50.3 million.

Such acquisitions include:

(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.

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

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 the results of its operations have been included within our United States mechanical construction and facilities services segment.

In addition to BKI, during 2019, we acquired:

(a) a company that 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 that 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 included within our United States building services segment, consisting of:

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

Companies acquired in 2021 and 2020 generated incremental revenues of $196.3 million and incremental operating income of $4.0 million, inclusive of $11.5 million of amortization expense associated with identifiable intangible assets, for the year ended December 31, 2021.

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Total operations $ 9,903,580 100 % $ 8,797,061 100 %

As described in more detail below, revenues for the year ended December 31, 2020 decreased to $8.80 billion compared to $9.17 billion for the year ended December 31, 2019.

Revenue declines within our United States industrial services segment and our United States electrical construction and facilities services segment, largely as a result of a decrease in demand for our service offerings within the oil and gas and related industrial markets, were partially offset by revenue growth within our United States mechanical construction and facilities services segment, our United States building services segment, and our United Kingdom building services segment.

As described in more detail below, revenues for the year ended December 31, 2021 increased to $9.90 billion compared to $8.80 billion for the year ended December 31, 2020.

The increase in revenues for the year ended December 31, 2021 was attributable to revenue growth within all of our reportable segments.

Companies acquired in 2021 and 2020 generated incremental revenues of $196.3 million in 2021.

Revenues of our United States electrical construction and facilities services segment were $2,015.5 million for the year ended December 31, 2021 compared to revenues of $1,806.1 million for the year ended December 31, 2020.

The decrease in revenues was attributable to:

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

The results for the year ended December 31, 2020 included $25.4 million of incremental revenues generated by a company acquired in 2019.

Excluding the impact of acquisitions, the increase in revenues of this segment for the year ended December 31, 2021 was primarily attributable to:

(a) a resumption of project activity within certain major metropolitan areas, where work was previously postponed due to access restrictions caused by the various containment and mitigation measures mandated in the prior year by certain of our customers and/or governmental authorities in response to the COVID-19 pandemic, leading to:

(i) an increase in commercial market sector revenues and (ii) greater short-duration project volumes in the current year, (b) an increase in public works projects in the Western region of the United States, resulting in greater revenue contribution from the institutional market sector, (c) revenue growth within the healthcare market sector, due to greater construction project activity in the Northeastern region of the United

States, and (d) an increase in telecommunication project activity within the commercial market sector.

The results of this segment for the year ended December 31, 2021 included $93.1 million of incremental revenues generated by companies acquired in 2021.

The revenue increases referenced above were partially offset by a reduction in revenues within the manufacturing and transportation market sectors due to the completion or substantial completion of certain projects in the Northeastern and Western regions of the United States.

Our United States mechanical construction and facilities services segment revenues for the year ended December 31, 2021 were $3,922.9 million, a $437.4 million increase compared to revenues of $3,485.5 million for the year ended December 31, 2020.

The results for the year ended December 31, 2020 included $188.8 million of incremental revenues generated by companies acquired in 2019.

Excluding the impact of acquisitions, revenues of this segment decreased by $43.7 million, primarily as a result of a decline in revenues from:

(a) the manufacturing market sector, inclusive of certain large food processing construction projects, and (b) several telecommunications and technology projects.

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

These revenue reductions were partially offset by increased revenues from the majority of the remaining market sectors in which we operate, most notably the institutional, transportation, and commercial market sectors.

The increase in this segment’s revenues for the year ended December 31, 2021 was attributable to revenue growth within the majority of the market sectors in which we operate, including:

(a) the commercial market sector, driven by:

(i) the continued build-out of our customers’ e-commerce supply chains, which has resulted in increased demand for our fire protection services within their warehousing and distribution facilities, (ii) continued growth in digital processing, cloud computing, and data storage, which has resulted in an increase in telecommunication construction project opportunities, and (iii) increased demand for our mechanical construction services by customers within the biotech, life-sciences, and pharmaceutical industries, as well as certain customers engaged in the production and development of electric vehicles and/or lithium batteries, (b) the healthcare market sector, due to increased mechanical system retrofits and installations as our healthcare customers seek to upgrade their existing facilities or build new facilities, (c) the manufacturing market sector, inclusive of certain large food processing projects, which began to accelerate during the second half of 2021, and (d) the water and wastewater market sector, given increased project activity within the Southern region of the United States.

These increases were partially offset by the completion or substantial completion of certain projects within the institutional market sector, which resulted in a reduction of revenues within such sector during 2021.

Revenues of our United States building services segment were $2,468.9 million and $2,134.0 million for the years ended December 31, 2021 and 2020, respectively.

Excluding acquisition revenues of $55.4 million, this segment’s revenues decreased by approximately $52.1 million during the year ended December 31, 2020.

Such reduction in revenues was primarily attributable to:

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

These revenue declines were partially offset by increased customer demand for certain services aimed at improving the indoor air quality within their facilities as well as an increase in revenues within our commercial site-based services operations, as a result of new contract awards and scope expansion on certain contracts with existing customers.

Revenues of our United States industrial services segment for the year ended December 31, 2020 were $797.4 million, a $290.1 million decrease compared to revenues of $1,087.5 million for the year ended December 31, 2019.

Revenues of this segment for the year ended December 31, 2020 were negatively impacted by adverse market conditions including unprecedented volatility in the price of crude oil, largely as a result of a decline in demand caused by the COVID-19 pandemic.

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

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

In addition, revenues for the year ended December 31, 2020 were negatively impacted by project stoppages resulting from hurricanes, including certain named storms, within the Gulf Coast region.

Excluding incremental acquisition revenues within this segment’s mobile mechanical services division of $103.2 million, this segment’s revenue growth for the year ended December 31, 2021 was primarily attributable to:

(a) greater project, service repair and maintenance, and building automation and controls activities within our mobile mechanical services operations, as well as an increase in project volume within our commercial site-based services operations, in both cases, partially as a result of a resumption in demand for certain of our service offerings when compared to the prior year, which was negatively impacted by the COVID-19 pandemic given the temporary closure of certain customer facilities, (b) a net increase in facilities maintenance contract revenues, partially as a result of new contract awards, (c) increased customer demand, stemming in part from the COVID-19 pandemic, for certain services aimed at either:

(i) improving the indoor air quality or (ii) enhancing the cleaning protocols within their facilities, and (d) an increase in snow removal activity year-over-year within our commercial site-based services division.

Revenues of our United States industrial services segment for the year ended December 31, 2021 were $986.4 million, a $45.5 million increase compared to revenues of $940.9 million for the year ended December 31, 2020.

The increase in this segment’s revenues for the year ended December 31, 2021 was attributable to greater revenues from both our field services and shop services operations during the second half of 2021, when compared to the same prior year period.

While this segment’s revenues throughout the majority of both 2021 and 2020 were negatively impacted by the adverse market conditions within the oil and gas and related industrial markets, the impact on the demand for its service offerings was most severe during the second half of 2020, resulting in a favorable comparison in the current year.

Although the demand for oil and other refined products has not returned to pre-pandemic levels, the oil and gas industry continues to recover and we remain cautiously optimistic that the demand for our traditional industrial services will continue to improve in future periods.

Revenues of this segment for the year ended December 31, 2021 additionally benefited from the completion of a 200-megawatt solar project by certain subsidiaries of this segment during 2021.

Our United Kingdom building services segment revenues were $510.0 million in 2021 compared to $430.6 million in 2020.

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

(a) an increase in revenues from new maintenance contract awards within the commercial market sector, and (b) increased project activity with existing customers, primarily within the water and wastewater market sector, despite reduced opportunities for project work brought upon by the temporary closure of certain customer facilities and the temporary suspension of capital spending as a result of the COVID-19 pandemic in the first half of 2020.

This segment’s revenues were positively impacted by $2.3 million related to the effect of favorable exchange rates for the British pound versus the United States dollar.

The increase in this segment’s revenues for the year ended December 31, 2021 was primarily a result of growth in project activities with existing customers, primarily within the commercial and water and wastewater market sectors, partially as a result of a resumption in demand as customers began to release projects which were previously deferred due to the uncertainty created by the COVID-19 pandemic.

Similar to our United States building services segment, this segment additionally experienced increased revenues resulting from greater demand for services aimed at enhancing the cleaning protocols within its customers’ facilities in response to COVID-19.

This segment’s revenues for the year ended December 31, 2021 were positively impacted by $34.6 million related to the effect of favorable exchange rates for the British pound versus the United States dollar.

Cost of sales and gross profit

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Our gross profit for the year ended December 31, 2021 was $1,501.7 million, a $106.4 million increase compared to gross profit of $1,395.4 million for the year ended December 31, 2020.

The increase in gross profit for the year ended December 31, 2021 was predominately a result of increased gross profit contribution from our United States construction segments and our United States building services segment given greater revenue volume during 2021.

In addition, we experienced an increase in gross profit within our United Kingdom building services segment due, in part, to both increased revenue and gross profit margin expansion when compared to 2020.

Our gross profit margin was 15.2% and 15.9% for 2021 and 2020, respectively.

The increase in gross profit for the year ended December 31, 2020 was a result of an increase in gross profit from our United States mechanical construction and facilities services segment and our United Kingdom building services segment.

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

The decrease in gross profit margin for the year ended December 31, 2021 was predominantly attributable to a reduction in gross profit margin within all of our reportable segments, except for our United Kingdom building services segment.

Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments.

Selling, general and administrative expenses

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Selling, general and administrative expenses $ 970,937 $ 903,584

Selling, general and administrative expenses as a percentage of revenues 10.3 % 9.7 %

SG&A margin 9.8 % 10.3 %

Our selling, general and administrative expenses for the year ended December 31, 2021 were $970.9 million compared to selling, general and administrative expenses of $903.6 million for the year ended December 31, 2020.

For the year ended December 31, 2021, selling, general and administrative expenses included $19.2 million of incremental expenses directly related to companies acquired in 2021 and 2020, including amortization expense attributable to identifiable intangible assets of $4.3 million.

Excluding incremental expenses from businesses acquired, our selling, general and administrative expenses decreased by $19.4 million, primarily as a result of certain cost reductions resulting from, or actions taken in response to, the COVID-19 pandemic, including:

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

(i) a reduction in headcount, resulting from lower revenues than in the same prior year period, and (ii) certain short-term cost cutting measures, including temporary furloughs and salary reductions, and (c) a decrease in employee benefit costs, partially due to a decline in medical claims.

These cost reductions were partially offset by an increase in incentive compensation expense, predominantly within our United States mechanical construction and facilities services segment, due to improved operating performance by several of our subsidiaries when compared to the prior year.

Excluding incremental expenses from businesses acquired, our selling, general and administrative expenses increased by $48.2 million for the year ended December 31, 2021.

Such organic increase in selling, general and administrative expenses was primarily attributable to an increase in:

(a) employee benefit costs, driven by greater medical claim activity related in part to the COVID-19 pandemic, (b) incentive compensation expense, predominantly within our United States construction segments and our United States building services segment given greater operating income when compared to the prior year, (c) salaries, as a result of:

(i) an increase in headcount to support our organic revenue growth in the current year and (ii) the favorable impact in the prior year of certain short-term cost cutting measures enacted in response to the COVID-19 pandemic, including temporary furloughs and salary reductions, (d) computer hardware and software costs as a result of various information technology and cybersecurity initiatives currently in process, and (e) the provision for credit losses, within our United States industrial services segment, which included $5.8 million of expense associated with two customer bankruptcies during 2021.

Selling, general and administrative expenses as a percentage of revenues were 9.8% and 10.3% for 2021 and 2020, respectively.

The increase in SG&A margin for the year ended December 31, 2020 was primarily due to a reduction in revenues without a commensurate decrease in certain of our overhead costs, including:

(a) certain fixed costs within our United States industrial services segment, despite the significant revenue decline within such segment, and (b) the above referenced increase in incentive compensation expense.

Restructuring expenses

Restructuring expenses, relating to employee severance obligations, were $2.2 million and $1.5 million for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2020 and 2019, the balance of restructuring related obligations yet to be paid was $2.7 million and $1.6 million, respectively.

The obligations outstanding as of December 31, 2020 will be paid pursuant to our contractual obligations through 2022.

No material expenses in connection with restructuring are expected to be incurred during 2021.

The decrease in SG&A margin for the year ended December 31, 2021 was a result of an increase in revenues without a commensurate increase in overhead costs, as we were able to leverage our existing overhead cost structure.

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

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

These uncertainties have resulted in lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets, resulting in the recognition of impairment charges totaling $232.8 million during the three months ended June 30, 2020.

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

(a) $225.5 million related to goodwill, (b) $4.2 million associated with a subsidiary trade name, and (c) $0.6 million related to certain long-lived assets.

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

No additional impairment charges were recorded during the remainder of 2020 and no impairment of our goodwill, identifiable intangible assets, or other long-lived assets was recognized during the year ended December 31, 2019.

During the second quarter of 2020, we identified certain indicators of impairment resulting from the COVID-19 pandemic and its impact on the oil and gas and related industrial markets.

These adverse conditions resulted in lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of such markets, resulting in the recognition, during 2020, of impairment charges totaling $232.8 million within our United States industrial services segment.

Despite the weaker results of our United States industrial services segment for the year ended December 31, 2021, when compared to historical periods, we did not identify any indicators of impairment in the current year, as the operating performance of this segment remained materially consistent with our near term expectations and forecasts.

Further, we performed our annual impairment assessment as of October 1, 2021 and determined that the fair value of the industrial reporting unit remained in excess of its carrying value.

However, a further deterioration in this segment’s operating performance, significant adverse changes to external market conditions or the assumptions utilized in our impairment tests, such as the weighted average cost of capital and our internal forecasts, if any, could result in the identification of future impairment indicators and potentially 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 charge would be material to our results of operations.

Operating income (loss)

The following table presents by segment our operating income (loss) and each segment’s operating income (loss) as a percentage of such segment’s revenues from unrelated entities for the years ended December 31, 2020 and 2019 (in thousands, except for percentages):

The following table presents by segment our operating income (loss) and each segment’s operating margin (operating income (loss) as a percentage of such segment’s revenues) for the years ended December 31, 2021 and 2020 (in thousands, except for percentages):

Revenues 2020 % of

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Total operations 530,800 5.4 % 256,834 2.9 %

Other corporate items:

Net periodic pension (cost) income 3,625 2,980

1 unchanged sentence

Interest income 949 1,521

Income from continuing operations before income taxes $ 252,326 $ 450,889

Income before income taxes $ 529,303 $ 252,326

As described in more detail below, operating income was $530.8 million, or 5.4% of revenues, for the year ended December 31, 2021, compared to operating income of $256.8 million, or 2.9% of revenues, for the year ended December 31, 2020.

Our operating results for 2020 included $232.8 million of non-cash impairment charges recorded during the second quarter, which negatively impacted the Company’s full year operating margin in 2020 by approximately 270 basis points.

Excluding the impact of such impairments, operating income and operating margin for the twelve months ended December 31, 2020 increased by $28.7 million and 60 basis points, primarily as a result of favorable execution within our United States construction segments.

Companies acquired in 2020 and 2019, which are reported in our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment, generated incremental operating income of $15.4 million, inclusive of $16.0 million of amortization expense associated with identifiable intangible assets, for the year ended December 31, 2020.

Operating income of our United States electrical construction and facilities services segment for the year ended December 31, 2020 was $166.5 million, or 8.4% of revenues, compared to operating income of $161.7 million, or 7.3% of revenues, for the year ended December 31, 2019.

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

The year-over-year increase in operating income was largely attributable to a reduction in selling, general and administrative expenses, including a curtailment in certain discretionary spending, such as travel and entertainment costs, and a decrease in employee benefit costs, resulting from a decline in medical claims.

Despite an increase in gross profit from project activities within the commercial market sector, driven by several telecommunication construction projects, this segment experienced a marginal reduction in annual gross profit given:

(a) a decrease in gross profit within the manufacturing market sector due to a reduction in industrial project activities resulting from the adverse market conditions within the oil and gas industry, (b) a decline in gross profit from short duration project activities, given the effects of the COVID-19 pandemic, which led to fewer short duration project opportunities, and (c) the under absorption of certain indirect costs due to the overall reduction in segment revenues.

The increase in operating margin for the year ended December 31, 2020 was a result of an increase in gross profit margin given favorable project execution and a more profitable mix of work within this segment.

These gross profit margin improvements were partially offset by an increase in the ratio of selling, general and administrative expenses to revenues, as a result of the revenue declines experienced by this segment during 2020.

Our operating results for 2020 included $232.8 million of non-cash impairment charges, which negatively impacted the Company’s operating margin in 2020 by approximately 270 basis points.

Companies acquired in 2021 and 2020, generated incremental operating income of $4.0 million, inclusive of $11.5 million of amortization expense associated with identifiable intangible assets, for the year ended December 31, 2021.

Operating income of our United States electrical construction and facilities services segment for the year ended December 31, 2021 was $168.4 million compared to operating income of $161.8 million for the year ended December 31, 2020.

Companies acquired in 2021 contributed incremental operating income of $3.7 million, inclusive of $4.9 million of amortization expense associated with identifiable intangible assets.

Excluding such acquisition contribution, operating income of this segment increased a modest $2.9 million for the year ended December 31, 2021.

Gross profit gains from construction projects within the institutional and healthcare market sectors, primarily as a result of the revenue growth within these market sectors, as referenced above, were largely offset by gross profit declines within the transportation and manufacturing market sector, given the completion or close-out of certain projects in the prior year.

Operating margins within this segment for the years ended December 31, 2021 and 2020 were 8.4% and 9.0%, respectively.

The decrease in operating margin year-over-year was a result of a decline in this segment’s gross profit margin during 2021, predominantly within:

(a) the commercial market sector,

partially due to a change in the composition of project work performed period-over-period, and (b) the transportation market sector as the results for the prior year benefited from the successful close-out of several large construction projects within the Northeastern region of the United States.

Our United States mechanical construction and facilities services segment’s operating income for the year ended December 31, 2021 was $319.1 million, a $26.6 million increase compared to operating income of $292.5 million for the year ended December 31, 2020.

Companies acquired in 2019 contributed incremental operating income of $9.3 million, inclusive of $12.7 million of amortization expense associated with identifiable intangible assets for the year ended December 31, 2020.

Excluding the impact of businesses acquired, annual operating income of this segment increased by approximately $58.2 million.

Despite the disruption caused by the COVID-19 pandemic during 2020, our United States mechanical construction and facilities services segment experienced an increase in gross profit from construction projects within the majority of the market sectors in which we operate.

The increase in operating income for 2021 was a result of an increase in gross profit from construction projects within the majority of the market sectors in which we operate, driven by increased revenue volume year-over-year.

Operating margins within this segment for the years ended December 31, 2021 and 2020 were 8.1% and 8.4%, respectively.

The year-over-year increase in operating margin for this segment was attributable to an increase in gross profit margin, primarily within:

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

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

Operating income of our United States building services segment was $113.4 million in 2020, compared to $114.8 million in 2019.

Operating margin of this segment was 5.4% in both periods.

Companies acquired in 2020, which are included within this segment’s mobile mechanical services division, contributed incremental operating income of $4.5 million, inclusive of $3.2 million of amortization expense associated with identifiable intangible assets.

The decrease in segment operating income for the year ended December 31, 2020 was primarily due to a decrease in gross profit resulting from:

(a) a reduction in large project activity within our energy services operations, and (b) when excluding the impact of acquired businesses, reduced project and controls activities within our mobile mechanical services operations, largely as a result of the temporary closure of certain customer facilities impacted by the COVID-19 pandemic.

These gross profit reductions were partially offset by increased gross profit from service repair and maintenance activities within our mobile mechanical services operations, partially as a result of increased customer demand for certain services aimed at improving the indoor air quality within their facilities.

Operating income of this segment additionally benefited from an overall decrease in selling, general and administrative expenses due to certain cost reduction measures enacted during the year.

The 30 basis point reduction in this segment’s operating margin in 2021 was primarily a result of a decrease in gross profit margin within the manufacturing market sector as:

(a) the results for the prior year benefited from the favorable close-out of several projects and (b) the results for the current year include increased revenues from certain large food processing projects, for which we are acting as the construction manager and therefore carry lower than average gross profit margins.

This decrease in gross profit margin was partially offset by a reduction in the ratio of selling, general and administrative expenses to revenues given an increase in segment revenues without a commensurate increase in overhead costs.

Operating income of our United States building services segment for the year ended December 31, 2021 was $119.0 million, or 4.8% of revenues, compared to operating income of $114.2 million, or 5.3% of revenues, for the year ended December 31, 2020.

The increase in this segment’s operating income for 2021 was primarily due to the resumption in demand for certain of our service offerings when compared to the prior year, which led to increased gross profit from project, service repair and maintenance, and building automation and controls activities within our mobile mechanical services operations, and project volumes within our commercial site-based services operations.

In addition, gross profit for the year ended December 31, 2021 benefited from greater snow removal activity for our customers with whom we are contracted on a per snow event basis.

Companies acquired in 2021 and 2020, which are included within this segment’s mobile mechanical services division, generated incremental operating income of approximately $0.7 million, inclusive of $6.2 million of amortization expense associated with identifiable intangible assets, during 2021.

The 50 basis point reduction in operating margin for the year ended December 31, 2021 was attributable to a decrease in gross profit margin, partially offset by a reduction in the ratio of selling, general and administrative expenses to revenues as this segment was able to effectively leverage its overhead cost structure during this period of revenue growth.

The decline in gross profit margin resulted from a less favorable mix of work within this segment’s mobile mechanical services division, including a greater number of fixed price capital projects, which traditionally have lower gross profit margins than the other service and repair offerings of this segment.

Gross profit margin of this segment in 2021 was also negatively impacted by:

(a) supply chain disruptions, including longer lead times for certain materials and equipment, which resulted in a greater amount of unabsorbed labor costs in instances where projects were delayed pending the receipt of materials, and (b) an escalation in fuel prices for its fleet of over 4,000 service vans, a portion of which we were unable to pass along to our customers.

Our United States industrial services segment reported an operating loss of $1.7 million for the year ended December 31, 2021 compared to operating income of $1.2 million for the year ended December 31, 2020.

Operating margin of this segment was (0.2)% and 0.1% for 2021 and 2020, respectively.

As previously referenced, this segment’s results for the year ended December 31, 2020 were severely impacted by adverse macroeconomic factors impacting the oil and gas industry.

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

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

The aforementioned decrease in gross profit was partially offset by a reduction in selling, general and administrative expenses during the year, including:

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

The decrease in operating margin for the year ended December 31, 2020 was attributable to a decrease in gross profit margin resulting from the above noted factors, as well as an increase in the ratio of selling, general and administrative expenses to revenues due to a decrease in revenue without a commensurate decrease in certain of this segment’s fixed overhead costs.

Despite the increase in annual revenues compared to full year 2020, this segment’s operating results continue to be negatively impacted by the adverse macroeconomic conditions within the oil and gas industry.

For example, pricing pressure from the customers of this segment has resulted in a lower margin portfolio of work, and therefore a decrease in gross profit when compared to the prior year, within both our field services and shop services operations.

In addition to the effect of lower gross profit, operating income of this segment was negatively impacted by an increase in the provision for credit losses, which included approximately $5.8 million of expense associated with two customer bankruptcies during 2021, which resulted in a 60 basis point reduction to this segment’s operating margin.

Our United Kingdom building services segment operating income for the year ended December 31, 2021 was $28.0 million, or 5.5% of revenues, which compares favorably to operating income of $20.7 million, or 4.8% of revenues, for the year ended December 31, 2020.

The increase in annual operating income of this segment was primarily a result of incremental gross profit from new maintenance contract awards.

Exchange rate movements for the British pound versus the United States dollar did not have a significant impact on this segment’s operating income for the twelve months ended December 31, 2020.

The year-over-year increase in this segment’s operating margin was attributable to an increase in gross profit margin, primarily as a result of a more favorable mix of work, and a decrease in the ratio of selling, general and administrative expenses to revenues.

Our corporate administration operating loss was $98.5 million for 2020 compared to $101.7 million in 2019.

The decrease in corporate administration expenses for the year ended December 31, 2020 was primarily due to:

(a) a decrease in long-term incentive compensation expense, (b) a decrease in salary expense as a result of:

(i) certain short-term cost cutting measures, including temporary furloughs and salary reductions, and (ii) permanent headcount reductions resulting from the realignment of certain of our back office functions, (c) curtailment in certain discretionary spending, such as travel and entertainment costs, and (d) a reduction in professional fees.

Non-operating items

Interest expense was $9.0 million and $13.8 million for 2020 and 2019, respectively.

Interest income was $1.5 million and $2.3 million for 2020 and 2019, respectively.

The decrease in both interest expense and interest income for 2020 resulted from lower interest rates.

The decrease in interest expense was partially offset by the impact of higher average outstanding borrowings.

The increase in this segment’s operating income and operating margin for 2021 was primarily a result of an increase in gross profit and gross profit margin from projects within the commercial market sector, partially offset by an increase in selling, general and administrative expenses to support the segment’s revenue growth.

In addition, this segment’s operating income and operating margin for the year ended December 31, 2021 benefited from successful contract close-outs during 2021.

This segment’s operating income was positively impacted by $2.1 million during 2021 related to the effect of favorable exchange rates for the British pound versus the United States dollar.

Our corporate administration expenses were $102.0 million for 2021 compared to $98.5 million in 2020.

The increase in corporate administration expenses for the year ended December 31, 2021 was primarily due to:

(a) an increase in employment costs, such as:

(i) long-term incentive compensation expense given higher projected future operating results, as our expectations during 2020 were negatively impacted by the uncertainty created by the COVID-19 pandemic, and (ii) salaries, inclusive of certain non-recurring severance expenses associated with the continued realignment of our back office functions, and (b) a net increase in computer hardware, software, and consulting costs, as a result of various information technology and cybersecurity initiatives currently in process.

Interest expense was $6.1 million and $9.0 million for 2021 and 2020, respectively, and interest income was $0.9 million and $1.5 million for 2021 and 2020, respectively.

The decrease in both interest expense and interest income for 2021 resulted from lower interest rates when compared to 2020.

In addition, the decrease in interest expense was partially attributable to reduced average outstanding borrowings year-over-year.

Our income tax provision for the year ended December 31, 2021 was $145.6 million, based on an income tax rate of 27.5%, compared to an income tax provision and an income tax rate of $119.4 million and 47.3%, respectively, for the year ended December 31, 2020.

Our income tax rate and income tax provision for 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.

Our income tax rate, and resulting income tax provision, for the year ended December 31, 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 2020, the majority of which was non-deductible for tax purposes.

Remaining Unsatisfied Performance Obligations

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

2020 % of Total December 31,

2019 % of Total

December 31, 2021 % of Total December 31, 2020 % of Total

Remaining performance obligations:

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Our remaining performance obligations at December 31, 2021 were $5.60 billion compared to $4.59 billion at December 31, 2020.

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

Computer System Attack

On February 15, 2020, we became aware of 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.

The increase in remaining performance obligations year-over-year was primarily attributable to an increase in remaining performance obligations within our United States construction segments, driven by the award of various construction projects within the majority of the market sectors in which we operate, most notably:

(a) the commercial market sector, inclusive of certain semiconductor projects, (b) the manufacturing market sector, inclusive of several food processing projects, and (c) the healthcare, institutional, and water and wastewater market sectors.

In addition, we experienced an increase in remaining performance obligations within our United States building services segment given increased project opportunities within its mobile mechanical services division and the award of several facilities maintenance contracts within its commercial site-based services division.

Remaining performance obligations increased by $162.8 million as a result of acquisitions during 2021.

2020 versus 2019

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Revenues $ 8,797,061 $ 9,174,611

Revenues increase from prior year 12.8 % 5.8 %

Revenues (decrease) increase from prior year (4.1) % 12.8 %

Gross profit $ 1,395,382 $ 1,355,868

Gross profit as a percentage of revenues 15.9 % 14.8 %

Restructuring expenses $ 1,523 $ 2,306

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

3 unchanged sentences

$ 132,943 $ 325,140

Diluted earnings per common share from continuing operations $ 5.75 $ 4.89

The results of our operations for 2019 set new company records in terms of revenues, operating income, net income attributable to EMCOR Group, Inc., and diluted earnings per share from continuing operations.

Operating margin (operating income as a percentage of revenues) for 2019 remained consistent with our previously established annual record of 5.0%.

Revenues increased by 12.8% from $8.13 billion for the year ended December 31, 2018 to $9.17 billion for the year ended December 31, 2019.

Operating income for 2019 of $460.9 million, or 5.0% of revenues, increased by $57.8 million compared to operating income of $403.1 million, or 5.0% of revenues, in 2018.

The strong operating results in 2019 were due to revenue growth and an increase in operating income within all of our reportable segments, as well as operating margin expansion across all such segments, except for our United States mechanical construction and facilities services segment due to a change in revenue mix when compared to 2018.

Diluted earnings per common share $ 2.40 $ 5.75

Revenues of $8.80 billion for the year ended December 31, 2020 decreased by 4.1% from revenues of $9.17 billion for the year ended December 31, 2019.

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

In addition, we experienced a decrease in revenues within our United States electrical construction and facilities services segment, due to:

(a) the effects of the COVID-19 pandemic on our operations during 2020, which resulted in:

(i) a decrease in the number of short duration projects and (ii) project delays or access restrictions resulting from the various containment and mitigation measures mandated by certain of our customers and/or governmental authorities, and (b) a reduction in commercial market sector activities given the completion or substantial completion of several projects.

Operating income for 2020 was $256.8 million, or 2.9% of revenues, compared to operating income of $460.9 million, or 5.0% of revenues, in 2019.

Our operating results for the year ended December 31, 2020 included $232.8 million of non-cash impairment charges within our United States industrial services segment, which negatively impacted the Company’s operating margin for 2020 by approximately 270 basis points.

Impact of Acquisitions

We acquired three companies in 2020 for total consideration of $50.3 million.

Such acquisitions include:

metro area, and (c) a company, the results of operations of which were de minimis, 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.

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

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

(“BKI”), a leading full service provider of mechanical construction and maintenance services, for total consideration of $220.3 million.

In addition to BKI, during 2019, we acquired:

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

Such acquisitions include:

We acquired four companies in 2018.

Two companies provide mobile mechanical services, one within the Eastern region and the other within the Western region of the United States.

The third company is a full service provider of mechanical services within the Southern region of the United States.

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

The fourth company provides electrical construction and maintenance services for industrial and commercial buildings in North Texas, and the results of its operations have been included in our United States electrical construction and facilities services segment.

Companies acquired in 2020 and 2019 generated incremental revenues of $269.6 million and incremental operating income of $15.4 million, inclusive of $16.0 million of amortization expense associated with identifiable intangible assets, for the year ended December 31, 2020.

9 unchanged sentences

Total operations $ 8,797,061 100 % $ 9,174,611 100 %

As described in more detail below, revenues for the year ended December 31, 2019 increased to $9.17 billion compared to $8.13 billion for the year ended December 31, 2018, with all reportable segments experiencing revenue growth year-over-year.

As described in more detail below, revenues for the year ended December 31, 2020 decreased to $8.80 billion compared to $9.17 billion for the year ended December 31, 2019.

Revenue declines within our United States industrial services segment, as a result of a decrease in demand for our service offerings within the oil and gas and related industrial markets, and our United States electrical construction and facilities services segment, as described in further detail below, were partially offset by revenue growth within our United States mechanical construction and facilities services segment, our United States building services segment, and our United Kingdom building services segment.

Revenues of our United States electrical construction and facilities services segment were $1,806.1 million for the year ended December 31, 2020 compared to revenues of $1,961.8 million for the year ended December 31, 2019.

The increase in revenues was attributable to:

(a) an increase in revenues from the commercial market sector, primarily as a result of several large telecommunication construction projects, and (b) an increase in project activities within the manufacturing and institutional market sectors.

In addition, the results for the year ended December 31, 2019 included $134.5 million of incremental revenues generated by companies acquired in 2019 and 2018.

These increases were partially offset by a decrease in revenues due to the completion or substantial completion of certain large construction projects within the transportation, healthcare, and hospitality market sectors.

The decrease in revenues was attributable to:

(a) the effects of the COVID-19 pandemic on our operations during 2020, which resulted in:

construction projects within the commercial market sector, as a result of the completion or substantial completion of several projects.

The results for the year ended December 31, 2020 included $25.4 million of incremental revenues generated by a company acquired in 2019.

Our United States mechanical construction and facilities services segment revenues for the year ended December 31, 2020 were $3,485.5 million, a $145.2 million increase compared to revenues of $3,340.3 million for the year ended December 31, 2019.

The increase in revenues was primarily attributable to an increase in revenues from the majority of the market sectors in which we operate, including:

(a) the manufacturing market sector, due to several food processing construction projects, (b) the commercial market sector, primarily as a result of certain telecommunication and technology construction projects in process during 2019, and (c) the healthcare, water and wastewater, and institutional market sectors due to increased project activity.

In addition, the results for the year ended December 31, 2019 included $49.1 million of incremental revenues generated by companies acquired in 2019.

These increases were partially offset by decreased revenues within the hospitality market sector as a result of the completion of certain large projects.

The results for the year ended December 31, 2020 included $188.8 million of incremental revenues generated by companies acquired in 2019.

Excluding the impact of acquisitions, revenues of this segment decreased by $43.7 million, primarily as a result of a decline in revenues from:

(a) the manufacturing market sector, inclusive of certain large food processing construction projects, and (b) several telecommunications and technology projects.

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

Revenues of our United States building services segment were $2,134.0 million and $2,121.7 million for the years ended December 31, 2020 and 2019, respectively.

The $231.4 million increase in this segment’s revenues was due to:

(a) incremental revenues of $106.7 million generated by companies acquired in 2019 and 2018 within our mobile mechanical services operations, (b) greater project, controls, and service repair and maintenance activities within our mobile mechanical services operations, (c) an increase in revenues within our commercial site-based services operations, partially as a result of:

(i) scope expansion on certain contracts with existing customers and (ii) new contract awards, and (d) increased large project activity within our energy services operations.

These increases were partially offset by revenue declines within our government site-based services operations due to the loss of certain contracts not renewed pursuant to rebid, which resulted in a reduction in both base maintenance and indefinite-delivery, indefinite-quantity project revenues.

Revenues of our United States industrial services segment for the year ended December 31, 2019 were $1,087.5 million, a $164.4 million increase compared to revenues of $923.1 million for the year ended December 31, 2018.

The increase in revenues was primarily due to increased maintenance and capital project activity within our field services operations.

In addition, the results for the year ended December 31, 2019 benefited from a more normalized demand pattern for our turnaround services as compared to 2018, which was negatively impacted by the lingering effects of Hurricane Harvey, which led to the cancellation or deferral of certain previously scheduled maintenance activities with our customers.

The increased revenues for the year ended December 31, 2019 were partially offset by a decrease in revenues from our shop services operations, primarily as a result of a reduction in new build heat exchanger sales.

Excluding acquisition revenues of $55.4 million, this segment’s revenues decreased by approximately $43.0 million during the year ended December 31, 2020.

Such reduction in revenues was primarily attributable to:

(a) decreased project and controls activities within our mobile mechanical services operations, largely as a result of the impact of the COVID-19 pandemic during 2020, which resulted in fewer project opportunities given the temporary closure of certain customer facilities, (b) decreased large project activity within our energy services operations, primarily as a result of the completion of certain projects which were active in 2019, and (c) the loss of certain contracts not renewed pursuant to rebid within our government services business.

Revenues of our United States industrial services segment for the year ended December 31, 2020 were $940.9 million, a $386.7 million decrease compared to revenues of $1,327.6 million for the year ended December 31, 2019.

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

In addition, revenues for the year ended December 31, 2020 were negatively impacted by project stoppages resulting from hurricanes, including certain named storms, within the Gulf Coast region.

Our United Kingdom building services segment revenues were $430.6 million in 2020 compared to $423.3 million in 2019.

The increase in revenues within this segment was primarily the result of:

(a) new contract awards within the commercial and institutional market sectors and (b) increased project activity with existing customers.

Unfavorable exchange rates for the British pound versus the United States dollar negatively impacted this segment’s revenues for the year ended December 31, 2019 by $19.5 million.

The year-over-year increase in revenues within this segment was primarily attributable to:

This segment’s revenues during 2020 were positively impacted by $2.3 million related to the effect of favorable exchange rates for the British pound versus the United States dollar.

Cost of sales and gross profit

4 unchanged sentences

Our gross profit for the year ended December 31, 2020 was $1,395.4 million, a $39.5 million increase compared to gross profit of $1,355.9 million for the year ended December 31, 2019.

Our gross profit margin was 14.8% for 2019 and 2018.

The increase in consolidated gross profit was due to an increase in gross profit from all of our reportable segments, partially as a result of an increase in revenues within each segment during 2019.

Additionally, gross profit within our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment was favorably impacted by incremental gross profit generated by companies acquired.

Our gross profit margin was 15.9% and 14.8% for 2020 and 2019, respectively.

The increase in gross profit and gross profit margin for the year ended December 31, 2020 was predominantly a result of improved operating performance within both of our United States construction segments, as described in further detail below, despite the challenges brought on by the COVID-19 pandemic.

Selling, general and administrative expenses

1 unchanged sentence

Selling, general and administrative expenses $ 903,584 $ 893,453

Selling, general and administrative expenses as a percentage of revenues 9.7 % 9.8 %

Our selling, general and administrative expenses for the year ended December 31, 2019 were $893.5 million, a $94.3 million increase compared to selling, general and administrative expenses of $799.2 million for the year ended December 31, 2018.

SG&A margin 10.3 % 9.7 %

Our selling, general and administrative expenses for the year ended December 31, 2020 were $903.6 million compared to selling, general and administrative expenses of $893.5 million for the year ended December 31, 2019.

For the year ended December 31, 2020, selling, general and administrative expenses included $29.6 million of incremental expenses directly related to companies acquired in 2020 and 2019, including amortization expense attributable to identifiable intangible assets of $9.5 million.

Excluding incremental expenses from businesses acquired, our selling, general and administrative expenses for 2020 decreased by $19.4 million, primarily as a result of certain cost reductions resulting from, or actions taken in response to, the COVID-19 pandemic, including:

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

(i) a reduction in headcount, resulting from lower revenues than in the same 2019 period, and (ii) certain short-term cost cutting measures, including temporary furloughs and salary reductions, and (c) a decrease in employee benefit costs, partially due to a decline in medical claims.

Selling, general and administrative expenses as a percentage of revenues were 10.3% and 9.7% for 2020 and 2019, respectively.

The increase in selling, general and administrative expenses for the year ended December 31, 2019 included $35.1 million of incremental expenses directly related to companies acquired in 2019 and 2018, including amortization expense attributable to identifiable intangible assets of $4.5 million.

In addition to the impact of acquisitions, selling, general and administrative expenses increased due to:

(a) an increase in salaries and related employee benefit costs, partially as a result of an increase in headcount to support our revenue growth, (b) an increase in incentive compensation expense, due to higher annual operating results than in 2018, (c) an increase in information technology costs related to various initiatives in process during 2019, and (d) an increase in certain non-income based taxes.

The decrease in SG&A margin for the year ended December 31, 2019 was primarily due to an increase in revenues without commensurate increases in our overhead cost structure.

Restructuring expenses

Restructuring expenses, primarily relating to employee severance obligations, were $1.5 million and $2.3 million for the years ended December 31, 2019 and 2018, respectively.

As of December 31, 2019 and 2018, the balance of restructuring related obligations yet to be paid was $1.6 million.

The increase in SG&A margin for the year ended December 31, 2020 was primarily due to a reduction in revenues without a commensurate decrease in certain of our overhead costs, including:

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

No impairment of our identifiable intangible assets was recognized for the year ended December 31, 2019.

During 2018, we recorded a $0.9 million non-cash impairment charge associated with a finite-lived subsidiary trade name within our United States industrial services segment.

No impairment of our goodwill was recognized for the years ended December 31, 2019 and 2018.

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

These uncertainties resulted in lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets, resulting in the recognition, during 2020, of impairment charges totaling $232.8 million within our United States industrial services segment.

Operating income (loss)

The following table presents by segment our operating income (loss) and each segment’s operating income (loss) as a percentage of such segment’s revenues from unrelated entities for the years ended December 31, 2019 and 2018 (in thousands, except for percentages):

The following table presents by segment our operating income (loss) and each segment’s operating margin for the years ended December 31, 2020 and 2019 (in thousands, except for percentages):

Revenues 2019 % of

11 unchanged sentences

Total operations 256,834 2.9 % 460,892 5.0 %

Other corporate items:

Net periodic pension (cost) income 2,980 1,553

1 unchanged sentence

Interest income 1,521 2,265

Income from continuing operations before income taxes $ 450,889 $ 395,028

As described in more detail below, we had operating income of $460.9 million for the year ended December 31, 2019 compared to operating income of $403.1 million for the year ended December 31, 2018.

Operating margin was 5.0% for both periods.

Operating income and operating margin increased within all of our reportable segments except, in the case of operating margin, our United States mechanical construction and facilities services segment, which experienced a 0.7% decline in operating margin as a result of a change in revenue mix compared to 2018.

Income before income taxes $ 252,326 $ 450,889

As described in more detail below, operating income was $256.8 million, or 2.9% of revenues, for the year ended December 31, 2020, compared to operating income of $460.9 million, or 5.0% of revenues, for the year ended December 31, 2019.

Our operating results for 2020 included $232.8 million of non-cash impairment charges, which negatively impacted the Company’s operating margin in 2020 by approximately 270 basis points.

Excluding the impact of such impairment charges on our 2020 results, operating income and operating margin for the year ended December 31, 2020 increased by $28.7 million and 60 basis points, primarily as a result of favorable execution within our United States construction segments.

Operating income of our United States electrical construction and facilities services segment for the year ended December 31, 2020 was $161.8 million, or 9.0% of revenues, compared to operating income of $147.8 million, or 7.5% of revenues, for the year ended December 31, 2019.

The $22.3 million increase in operating income year-over-year was primarily attributable to an increase in gross profit within the commercial market sector, inclusive of certain telecommunication construction projects, partially offset by a decrease in gross profit within the transportation market sector as a result of the completion or substantial completion of certain multi-year construction projects.

Additionally, companies acquired in 2019 and 2018 contributed incremental operating income of $6.1 million, inclusive of $1.7 million of amortization expense associated with identifiable intangible assets.

The increase in operating margin for 2019 was attributable to an increase in gross profit margin, partially as a result of improved project execution.

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

The year-over-year increase in operating income and operating margin was largely attributable to an increase in gross profit and gross profit margin given favorable project execution and a more profitable mix of work within this segment during 2020.

Improved profitability was experienced within:

(a) the commercial market sector, inclusive of several telecommunication construction projects, despite the decrease in revenues within such market sector, (b) the manufacturing market sector, and (c) the transportation market sector, due to the successful completion or close-out of certain projects.

These gross profit gains were partially offset by a reduction in gross profit from short duration project activities, given the effects of the COVID-19 pandemic, which led to fewer short duration project opportunities.

Operating income of this segment for the year ended December 31, 2020 additionally benefited from a reduction in selling, general and administrative expenses, including a curtailment in certain discretionary spending, such as travel and entertainment costs, and a decrease in employee benefit costs, resulting from a decline in medical claims.

Our United States mechanical construction and facilities services segment’s operating income for the year ended December 31, 2020 was $292.5 million, a $67.5 million increase compared to operating income of $225.0 million for the year ended December 31, 2019.

Companies acquired in 2019 contributed incremental operating income of $0.1 million, inclusive of $2.8 million of amortization expense associated with identifiable intangible assets.

The increase in operating income for 2019 was primarily attributable to an increase in gross profit from activities within the commercial and institutional market sectors, partially offset by a decrease in gross profit from construction projects within the manufacturing and hospitality market sectors.

Excluding the impact of businesses acquired, annual operating income of this segment increased by approximately $58.2 million.

Operating margins within this segment for the years ended December 31, 2020 and 2019 were 8.4% and 6.7%, respectively.

The decrease in annual operating margin was attributable to a decrease in gross profit margin, primarily within the manufacturing market sector as a result of a change in the mix of work year-over-year, including several large food processing projects that had not achieved key milestones and were therefore being recognized at lower gross profit margins.

This segment’s operating margin for 2018 was favorably impacted by the successful close-out of certain large manufacturing and hospitality construction projects.

Operating income of our United States building services segment was $114.8 million, or 5.4% of revenues, and $93.8 million, or 5.0% of revenues, in 2019 and 2018, respectively.

The increase in operating income for the year ended December 31, 2019 was primarily attributable to our mobile mechanical services operations, as a result of increased gross profit from project, controls, and service repair and maintenance activities.

In addition, operating income benefited from increased gross profit within our commercial site-based services operations, as a result of scope expansion on certain existing contracts, and our energy services operations, due to an increase in large project activity.

Companies acquired in 2019 and 2018 contributed incremental operating income of $10.4 million, inclusive of $4.8 million of amortization expense associated with identifiable intangible assets.

These increases were partially offset by a reduction in operating income from our government site-based services operations as a result of a decrease in gross profit due to the loss of certain contracts within their portfolio, which were not renewed pursuant to rebid.

The increase in operating margin of this segment for the year ended December 31, 2019 was attributable to an increase in gross profit margin, primarily from building automation and controls and repair project activities within our mobile mechanical services operations.

Our United States industrial services segment operating income for the year ended December 31, 2019 was $44.3 million, a $16.7 million increase compared to operating income of $27.7 million for the year ended December 31, 2018.

The year-over-year increase in operating margin for this segment was attributable to an increase in gross profit margin, primarily within:

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

Operating income of our United States building services segment was $114.2 million in 2020, compared to $115.4 million in 2019.

Operating margin of this segment was 5.3% and 5.4% for 2020 and 2019, respectively.

The increase in operating income for the year ended December 31, 2019 was primarily due to an increase in demand for our service offerings during the year as we experienced a more normalized demand pattern within our field services operations as compared to 2018.

The increase in operating margin for the year ended December 31, 2019 was primarily attributable to a decrease in the ratio of selling, general and administrative expenses to revenues, partially as a result of an increase in revenues without commensurate increases in this segment’s overhead cost structure.

Our United Kingdom building services segment operating income for the year ended December 31, 2019 was $18.3 million, or 4.3% of revenues, compared to operating income of $15.9 million, or 3.8% of revenues, for the year ended December 31, 2018.

Operating income increased primarily as a result of increased gross profit within the commercial market sector due to:

(a) an increase in project activity with existing customers and (b) new contract awards.

This segment’s operating income was negatively impacted by $0.9 million for the year ended December 31, 2019 related to the effect of unfavorable exchange rates for the British pound versus the United States dollar.

The increase in operating margin for the year ended December 31, 2019 was attributable to an increase in gross profit margin, partially as a result of a favorable project mix during the year.

Our corporate administration operating loss was $101.7 million for 2019 compared to $90.4 million in 2018.

The increase in corporate administration expenses for the year ended December 31, 2019 was primarily due to:

(a) an increase in employment costs, such as incentive compensation and salaries, (b) an increase in professional fees as a result of various information technology initiatives in process during 2019, and (c) an increase in certain non-income based taxes.

Non-operating items

The decrease in segment operating income for the year ended December 31, 2020 was primarily due to a decrease in gross profit resulting from:

Operating income of this segment additionally benefited from an overall decrease in selling, general and administrative expenses due to certain cost reduction measures enacted during 2020.

Our United States industrial services segment’s operating income for the year ended December 31, 2020 was $1.2 million, or 0.1% of revenues, compared to $57.5 million, or 4.3% of revenues, for the year ended December 31, 2019.

As previously referenced, this segment’s results for the year ended December 31, 2020 were severely impacted by adverse macroeconomic factors impacting the oil and gas industry.

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

The aforementioned decrease in gross profit was partially offset by a reduction in selling, general and administrative expenses during the year, including:

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

Our United Kingdom building services segment’s operating income for the year ended December 31, 2020 was $20.7 million, or 4.8% of revenues, which compares favorably to operating income of $18.3 million, or 4.3% of revenues, for the year ended December 31, 2019.

The increase in annual operating income of this segment was primarily a result of incremental gross profit from new maintenance contract awards.

Exchange rate movements for the British pound versus the United States dollar did not have a significant impact on this segment’s operating income for the twelve months ended December 31, 2020.

Our corporate administration expenses were $98.5 million for 2020 compared to $101.7 million in 2019.

The decrease in corporate administration expenses for the year ended December 31, 2020 was primarily due to:

(a) a decrease in long-term incentive compensation expense, (b) a decrease in salary expense as a result of:

Interest expense was $9.0 million and $13.8 million for 2020 and 2019, respectively.

Interest income was $1.5 million and $2.3 million for 2020 and 2019, respectively.

The increase in interest expense for 2019 was due to higher average interest rates, partially offset by the impact of reduced average outstanding borrowings.

The decrease in interest income was a result of lower average daily cash balances during the first half of 2019.

Our 2019 income tax provision was $125.7 million compared to $109.1 million for 2018.

Our income tax rate was 27.9% and 27.6% for 2019 and 2018, respectively.

The increase in the 2019 income tax provision was primarily driven by increased income from continuing operations before income taxes while the increase in the income tax rate was a result of:

(a) an increase in our state deferred tax rate, partially as a result of a change in the mix of income, and (b) the continued impact of the Tax Cuts and Jobs Act, including the application of guidance regarding certain permanent differences and other nondeductible expenses.

Discontinued operations

During the third quarter of 2014, we ceased construction operations in the United Kingdom.

The results of the construction operations of our United Kingdom segment for all periods are presented in the Consolidated Financial Statements as discontinued operations.

The decrease in both interest expense and interest income for 2020 resulted from lower interest rates.

The decrease in interest expense was partially offset by the impact of higher average outstanding borrowings during 2020.

Our income tax provision for the year ended December 31, 2020 was $119.4 million based on an income tax rate of 47.3%, compared to an income tax provision and an income tax rate of $125.7 million and 27.9%, respectively, for the year ended December 31, 2019.

Our income tax rate and income tax provision for 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 2020, the majority of which was non-deductible for tax purposes.

Liquidity and Capital Resources

The following section discusses our principal liquidity and capital resources, as well as our primary liquidity requirements and sources and uses of cash.

Our cash and cash equivalents are maintained in highly liquid investments with original maturity dates of three months or less.

Our short-term liquidity requirements primarily arise from:

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

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

However, negative macroeconomic trends, including prolonged impacts from the COVID-19 pandemic, could have an adverse effect on future liquidity if we experience delays in the payment of outstanding receivables beyond normal payment terms or an increase in credit losses.

We are focused on the efficient conversion of operating income into cash to provide for the Company’s material cash requirements, including working capital needs, investment in our growth strategies through business acquisitions and capital expenditures, satisfaction of contractual commitments, including principal and interest payments on our outstanding indebtedness, and shareholder return through dividend payments and share repurchases.

We strive to maintain a balanced approach to capital allocation in order to achieve growth, deliver value, and minimize risk.

Management monitors financial markets and overall economic conditions for factors that may affect our liquidity and capital resources and adjusts our capital allocation strategy as necessary.

For example, the uncertainty brought on by the COVID-19 pandemic in 2020 resulted in the temporary suspension of acquisition and share repurchase activity, during portions of such year, while we focused on maintaining operational flexibility.

Negative macroeconomic trends could have an adverse effect on future liquidity if we experience delays in the payment of outstanding receivables beyond normal payment terms, an increase in credit losses, or significant increases in the price of commodities or the materials and equipment utilized for our project and service work.

In addition, during economic downturns, there have typically been fewer small discretionary projects from the private sector and our competitors have aggressively bid larger long-term infrastructure and public sector contracts.

Our short-term liquidity is also impacted by:

Our liquidity is also impacted by:

(a) the type and length of construction contracts in place, as performance of long duration contracts typically requires greater amounts of working capital, (b) the level of turnaround activities within our United States industrial services segment, as such projects are billed in arrears pursuant to contractual terms that are standard within the industry, and (c) the billing terms of our maintenance contracts, including those within our United States and United Kingdom building services segments.

While we strive to negotiate favorable billing terms, which allow us to invoice in advance of costs incurred on certain of our contracts, there can be no assurance that such terms will be agreed to by our customers.

Our long-term liquidity requirements can be expected to be met initially through cash generated from operating activities and, if necessary, the borrowing capacity available under our revolving credit facility.

Based upon our current credit ratings and financial position, we can also reasonably expect to be able to secure long-term debt financing if required to achieve our strategic objectives.

Over the long term, our primary revenue risk factor continues to be the level of demand for non-residential construction as well as building and industrial services, all of which are influenced by macroeconomic trends including interest rates and governmental economic policy.

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

Despite the economic uncertainty described above, we believe that we have sufficient financial resources available to meet our short-term and foreseeable long-term liquidity requirements.

As of December 31, 2021, we had cash and cash equivalents, excluding restricted cash, of $821.3 million, which are maintained in highly liquid investments with original maturity dates of three months or less.

Both our short-term and long-term liquidity requirements are expected to be met through our cash and cash equivalent balances, cash generated from our operations, and, if necessary, the borrowing capacity under our revolving credit facility.

Our credit agreement provides for a $1.30 billion revolving credit facility, for which there is $1.23 billion of available capacity as of December 31, 2021.

Refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data for further information regarding our credit agreement.

Based upon our current credit rating and financial position, we can also reasonably expect to be able to secure long-term debt financing if required to achieve our strategic objectives;

however, no assurances can be made that such debt financing will be available on favorable terms.

We believe that we have sufficient financial resources available to meet our short-term and foreseeable long-term liquidity requirements.

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

2020 2019 2018

Net cash provided by operating activities $ 318,817 $ 806,366

1 unchanged sentence

Net cash used in financing activities $ (245,456) $ (171,907)

Increase (decrease) in cash, cash equivalents, and restricted cash $ 543,642 $ (6,294) $ (103,174)

For the year ended December 31, 2020, our cash balance, including cash equivalents and restricted cash, increased by approximately $543.6 million from $359.9 million at December 31, 2019 to $903.6 million at December 31, 2020.

For the year ended December 31, 2019, our cash balance, including cash equivalents and restricted cash decreased by approximately $6.3 million from $366.2 million at December 31, 2018.

Changes in our cash position can be characterized as follows:

(Decrease) increase in cash, cash equivalents, and restricted cash $ (80,994) $ 543,642

For the year ended December 31, 2021, our cash balance, including cash equivalents and restricted cash, decreased by approximately $81.0 million from $903.6 million as of December 31, 2020 to $822.6 million as of December 31, 2021.

Changes in our cash position from December 31, 2020 to December 31, 2021 are described in further detail below.

For a discussion of the changes in our cash position from December 31, 2019 to December 31, 2020, refer to the Liquidity and Capital Resources section included in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2020.

Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities.

For 2020, net cash provided by operating activities was $806.4 million compared to net cash provided by operating activities of $355.7 million in 2019 and $271.0 million in 2018.

The $450.7 million increase in net cash provided by operating activities during 2020, when compared to 2019, was primarily attributable to:

(a) a decline in organic revenues within all our United States reportable segments, which resulted in a net reduction in outstanding accounts receivable, primarily within our United States industrial services segment and our United States electrical construction and facilities services segment, (b) a reduction in the payment of certain non-income based taxes resulting from various government measures enacted in response to the COVID-19 pandemic, including:

(i) a $102.5 million reduction in the payment of certain payroll taxes given the enactment of the Coronavirus Aid, Relief, and Economic Security Act, which provided that employers may defer payment of the employer’s portion of Social Security taxes throughout 2020, with payment of such deferred amounts due in two equal installments in December of 2021 and December of 2022, and (ii) the deferral of nearly $15.0 million in value-added tax within our United Kingdom building services segment, payment of which is substantially due in 2021, and (c) the timing of invoicing to our customers, including advanced billings on our long-term construction contracts.

For 2019 compared to 2018, the $84.7 million increase in cash provided by operating activities was primarily due to:

(a) a $41.6 million increase in net income and (b) the timing of cash receipts from our customers.

For 2021, net cash provided by operating activities was approximately $318.8 million compared to approximately $806.4 million of net cash provided by operating activities in 2020.

The $487.5 million decrease in operating cash flows during 2021, when compared to 2020, was primarily attributable to strong organic revenue growth in the current year, which resulted in an increase in working capital balances, most notably accounts receivable and contract assets.

In addition, operating cash flow in 2020 benefited from the deferral of approximately

$117.5 million of certain non-income based taxes resulting from various government measures enacted in response to the COVID-19 pandemic, of which approximately $66 million was repaid in 2021.

Investing Activities – Investing cash flows consist primarily of payments for the acquisition of businesses, capital expenditures, and proceeds from the sale or disposal of property, plant, and equipment.

For 2020, we utilized approximately $94.9 million of cash for investing activities compared to $345.3 million in 2019 and $117.7 million in 2018.

Year-over-year fluctuations in investing cash flows were primarily driven by increases or decreases in payments for acquisitions within the respective year.

For 2021, we utilized approximately $153.1 million of cash for investing activities compared to $94.9 million in 2020.

The increase in investing cash flows year-over-year was primarily driven by a $67.9 million increase in payments for acquisitions, partially offset by a $11.8 million reduction in capital expenditures.

Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, payment of dividends to stockholders, and the issuance of common stock through certain employee equity plans.

Net cash used in financing activities for 2020 was $171.9 million compared to $19.2 million in 2019 and $253.0 million in 2018.

The increase in cash used in financing activities in 2020, when compared to 2019, was primarily due to a $112.6 million increase in funds used for the repurchase of common stock and a net increase in repayments made on our revolving credit facility and term loan during 2020.

The decrease in cash used for financing activities in 2019, when compared to 2018, was primarily a result of a $216.2 million decrease in funds used for the repurchase of our common stock and $25.0 million in net borrowings made under our revolving credit facility during 2019.

Until March 2, 2020, we had a credit agreement dated as of August 3, 2016, which provided for a $900.0 million revolving credit facility (the “2016 Revolving Credit Facility”) and a $400.0 million term loan (the “2016 Term Loan”) (collectively referred to as the “2016 Credit Agreement”).

On March 2, 2020, we amended and restated the 2016 Credit Agreement to provide for a $1.3 billion revolving credit facility (the “2020 Revolving Credit Facility”) and a $300.0 million term loan (the “2020 Term Loan”) (collectively referred to as the “2020 Credit Agreement”) expiring March 2, 2025.

We may increase the 2020 Revolving Credit Facility to $1.9 billion if additional lenders are identified and/or existing lenders are willing to increase their current commitments.

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

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 December 31, 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 December 31, 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 December 31, 2020 was 1.15%.

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

The fee was 0.10% of the unused amount as of December 31, 2020.

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

As of December 31, 2020 and 2019, the balance of the 2020 Term Loan and the 2016 Term Loan was $270.6 million and $254.4 million, respectively.

As of 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.

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 December 31, 2020 with respect to the 2020 Credit Agreement and, as of December 31, 2019, with respect to the 2016 Credit Agreement.

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

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

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.

Share Repurchase Program and Dividends

In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock.

Subsequently, the Board has from time to time increased the amount of our common stock that we may repurchase under such program.

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 year ended December 31, 2020, we repurchased approximately 1.7 million shares of our common stock for approximately $112.6 million.

Since the inception of the repurchase program through December 31, 2020, we have repurchased approximately 17.5 million shares of our common stock for approximately $904.0 million.

As of December 31, 2020, there remained authorization for us to repurchase approximately $246.0 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.

We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements, including provisions in our 2020 Credit Agreement placing limitations on such repurchases.

Net cash used in financing activities for 2021 was $245.5 million compared to $171.9 million in 2020.

The increase in cash used in financing activities in 2021, when compared to 2020, was primarily due to an $83.0 million increase in funds used for the repurchase of our common stock.

During the year ended December 31, 2021, cash payments related to share repurchases were $195.5 million compared to $112.6 million for the year ended December 31, 2020.

The timing of repurchases is at management’s discretion subject to securities laws and other legal requirements and will depend upon several factors, including market and business conditions, future liquidity, share price, and share availability, among others.

The repurchase program has been and will be funded from our operations.

We have paid quarterly dividends since October 25, 2011.

We paid a regular quarterly dividend of $0.08 per share throughout 2020.

In December 2020, our Board of Directors announced its intention to increase the regular quarterly dividend to $0.13 per share commencing with the dividend to be paid in the first quarter of 2021.

For additional detail regarding our share repurchase program, refer to Note 12 - Common Stock of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data.

Throughout 2021, we paid a quarterly dividend of $0.13 per share compared to a quarterly dividend of $0.08 per share during 2020.

For the years ended December 31, 2021 and 2020, cash payments related to dividends were $28.2 million and $17.7 million, respectively.

Our credit agreement places limitations on the payment of dividends on our common stock.

However, we do not believe that the terms of such agreement currently materially limit our ability to pay a quarterly dividend of $0.13 per share for the foreseeable future.

The payment of dividends has been and will be funded from our operations.

Off Balance Sheet Arrangements and Other Commitments

The terms of our construction contracts frequently require that we obtain from surety companies (“Surety Companies”), and provide to our customers, payment and performance bonds (“Surety Bonds”) as a condition to the award of such contracts.

Surety Bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts.

Material Cash Requirements from Contractual and Other Obligations

As of December 31, 2021, our short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments – As of December 31, 2021, the amount outstanding under our term loan was $256.7 million.

Based on our outstanding balance, we are required to make annual principal payments of $13.9 million on December 31 of each year until maturity.

Any remaining unpaid principal is due on March 2, 2025, when the credit agreement governing our term loan expires.

We have no direct borrowings outstanding under our revolving credit facility.

In addition to annual principal payments, we are required to make quarterly interest payments on our outstanding indebtedness.

Future interest payments will be determined based on prevailing interest rates during that time.

Refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data for further detail of our debt obligations, including our term loan and revolving credit facility.

Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases.

Future payments for such leases, excluding leases with initial terms of one year or less, were $317.8 million at December 31, 2021, with $69.0 million payable within the next 12 months.

Refer to Note 16 - Leases of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data for further detail surrounding our lease obligations and the timing of expected future payments.

Open Purchase Obligations – As of December 31, 2021, we had $1.73 billion of open purchase obligations, of which payments totaling approximately $1.50 billion are expected to become due within the next 12 months.

These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts.

These purchase orders are not reflected in the Consolidated Balance Sheets and are not expected to impact future liquidity as amounts should be recovered through customer billings.

Insurance Obligations – As described in further detail in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, we have loss payment deductibles and/or self-insured retentions for certain insurance matters.

As of December 31, 2021, our insurance liabilities, net of estimated recoveries, were $178.6 million.

Of this net amount, approximately $35.2 million is estimated to be payable within the next 12 months.

Due to many uncertainties inherent in resolving these matters, it is not practical to estimate these payments beyond such period.

Retirement Plan Obligations – As of December 31, 2021, expected future payments relating to our defined benefit post retirement plans were approximately $4.6 million per year.

We provide funding to our post retirement plans based on at least the minimum funding required by applicable regulations.

In determining the minimum funding required, we utilize current actuarial assumptions and exchange rates to forecast amounts that may be payable.

In our judgment, minimum funding estimates cannot be reliably estimated beyond a five-year time horizon.

Refer to Note 14 - Retirement Plans of the notes to consolidated financial statements in Item 8.

Financial Statements and Supplementary Data for further information about our post retirement plans.

Deferred Payroll Taxes – The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) allowed U.S.

companies to defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020.

Our first installment of these deferred social security taxes, totaling approximately $51 million, was paid in the fourth quarter of 2021 and our second installment of approximately $51 million is expected to be paid in the fourth quarter of 2022.

Contingent Consideration Liabilities – We have incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods.

The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value.

As of December 31, 2021, the present value of expected future payments relating to these contingent consideration arrangements was $11.8 million.

Of this amount, $5.6 million is estimated as being payable during 2022, with the remainder due substantially during 2023.

In addition, material cash requirements for other potential obligations, for which we cannot reasonably estimate future payments, include the following:

Legal Proceedings – We are involved in several legal proceedings in which damages and claims have been asserted against us.

While litigation is subject to many uncertainties and the outcome of litigation is not predictable with assurance, we do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity.

Refer to Note 15 - Commitments and Contingencies of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data for more information regarding legal proceedings.

Multiemployer Benefit Plans – In addition to our Company sponsored benefit plans, we participate in certain multiemployer pension and other post retirement plans.

The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining agreements.

During 2021, 2020, and 2019, contributions made to these plans were $396.5 million, $360.2 million, and $369.0 million, respectively;

however, our future contributions to the multiemployer plans are dependent upon a number of factors.

Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated.

Refer to Note 14 - Retirement Plans of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data for more information regarding these multiemployer benefit plans.

Off-Balance Sheet Arrangements and Other Commercial Commitments

The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts.

These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts.

We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf.

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

As of December 31, 2021, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.5 billion, which represents approximately 26% of our total remaining performance obligations.

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

As of December 31, 2020, we satisfied approximately $37.5 million of the collateral requirements of our insurance programs by utilizing Surety Bonds.

Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances.

Such amounts can also fluctuate from period to period based upon the mix and level of our bonded operating activity.

For example, public sector contracts require surety bonds more frequently than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases.

Our estimated maximum exposure as it relates to the value of the surety bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a surety bond generally extinguishes concurrently with the expiration of its related contractual obligation.

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

In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations.

As of December 31, 2021, we satisfied approximately $48.1 million and $71.2 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively.

All such letters of credit were issued under our revolving credit facility, therefore reducing the available capacity under such facility.

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

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

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

However, if we experience changes in our bonding relationships or if there are adverse changes in the surety industry, we may:

(a) seek to satisfy certain customer requests for surety bonds by posting other forms of collateral in lieu of surety bonds, such as letters of credit, parent company guarantees, or cash, in order to convince customers to forego the requirement for surety bonds, (b) increase our activities in our businesses that rarely require surety bonds, and/or (c) refrain from bidding for certain projects that require surety bonds.

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

Accordingly, if we were to experience a reduction in the availability of Surety Bonds, we could experience a material adverse effect on our financial position, results of operations and/or cash flows.

Accordingly, a reduction in the availability of surety bonds could have a material adverse effect on our financial position, results of operations, and/or cash flows.

In the ordinary course of business, we, at times, guarantee obligations of our subsidiaries under certain contracts.

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We do not have any other material financial guarantees or off-balance sheet arrangements other than those disclosed herein.

Contractual Obligations

The following is a summary of material contractual obligations and other commercial commitments (in millions):

Payments Due by Period

Contractual Obligations

Term Loan (including interest at 1.15%) (1)

$ 282.6 $ 17.0 $ 33.6 $ 232.0 $ —

Finance leases 10.4 4.2 4.6 1.5 0.1

Operating leases 291.2 61.8 93.7 58.8 76.9

Open purchase obligations (2)

1,304.6 1,117.1 186.7 0.8 —

Other long-term obligations, including current portion (3)

486.1 124.5 351.4 10.2 —

Total Contractual Obligations $ 2,374.9 $ 1,324.6 $ 670.0 $ 303.3 $ 77.0

Amount of Commitment Expirations by Period

Other Commercial Commitments Total

Committed Less

Letters of credit $ 71.3 $ 71.3 $ — $ — $ —

_________________

(1) As of December 31, 2020, the amount outstanding under the 2020 Term Loan was $270.6 million.

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

(2) Represents open purchase orders for material and subcontracting costs related to construction and services contracts.

These purchase orders are not reflected in the Consolidated Balance Sheets and should not impact future cash flows as amounts should be recovered through customer billings.

(3) Primarily represents insurance related liabilities, and liabilities for deferred income taxes, incentive compensation and deferred compensation, classified as other long-term obligations in the Consolidated Balance Sheets.

Cash payments for insurance and deferred compensation related liabilities may be payable beyond three years, however it is not practical to estimate these payments;

therefore, these liabilities are reflected in the 1-3 years payment period.

Amounts also include the employer portion of Social Security taxes, which have been deferred pursuant to the Coronavirus Aid, Relief, and Economic Security Act, and are payable in two equal installments in December of 2021 and December of 2022.

Such deferred payroll taxes are classified as either accrued payroll and benefits or other long-term obligations in the Consolidated Balance Sheet as of December 31, 2020.

We provide funding to our post retirement plans based on at least the minimum funding required by applicable regulations.

In determining the minimum required funding, we utilize current actuarial assumptions and exchange rates to forecast amounts that may be payable for up to five years in the future.

In our judgment, minimum funding estimates beyond a five year time horizon cannot be reliably estimated and, therefore, have not been included in the table.

Legal Proceedings

We are involved in several legal proceedings in which damages and claims have been asserted against us.

Certain Insurance Matters

As of December 31, 2020 and 2019, we utilized approximately $71.2 million of letters of credit obtained under our 2020 Revolving Credit Facility and $108.9 million of letters of credit obtained under our 2016 Revolving Credit Facility, respectively, as collateral for insurance obligations.

As of December 31, 2020, we satisfied an additional $37.5 million of these collateral requirements by utilizing Surety Bonds.

To help mitigate the impacts of greenhouse gas emissions on climate change, EMCOR has established initial carbon-based fuel consumption and greenhouse gas emission reduction targets, and will continue to refine such targets as necessary.

Although to date we have not incurred any material costs or capital expenditures associated with achieving our targets, we could be required to expend amounts in future periods as we continue to work towards our goals.

During 2021, EMCOR purchased carbon credits totaling nearly 25,000 metric tonnes, for approximately $0.3 million.

It is not possible, at this time, to estimate the impact that future costs and/or capital expenditures may have on our business, financial condition, results of operations, or liquidity.

New Accounting Pronouncements

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Financial Statements and Supplementary Data for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations, or liquidity.

Application of Critical Accounting Policies

Our consolidated financial statements are based on the application of significant accounting policies, which require management to make estimates and assumptions.

Our significant accounting policies are described in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of this Form 10-K.

We believe that some of the more subjective areas in the application of accounting policies that affect our financial condition and results of operations are the impact of changes in the estimates and judgments pertaining to:

(a) revenue recognition from contracts with customers;

(b) collectability or valuation of accounts receivable and the associated allowance for credit losses;

(d) income taxes;

and (e) goodwill, identifiable intangible assets, and other long-lived assets.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements is based on the application of significant accounting policies, which require management to make estimates and assumptions.

Our significant accounting policies are described further in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data.

We base our estimates on historical experience, known or expected trends, third-party valuations, and various other assumptions that we believe to be reasonable under the circumstances.

As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

There have been no significant changes to our critical accounting policies or methods for the year ended December 31, 2021.

We believe the following critical accounting policies govern the more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition from Contracts with Customers

We believe our most critical accounting policy is revenue recognition.

The Company recognizes revenue by applying the following five step model:

(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue as performance obligations are satisfied.

The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to its customers.

A good or service is considered to be transferred when the customer obtains control.

The Company can transfer control of a good or service and satisfy its performance obligations either over time or at a point in time.

The Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following three criteria are met:

(a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as we perform, (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the Company’s performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date.

For our performance obligations satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of that performance obligation.

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.

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.

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Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the amount of units produced or delivered, when our performance does not produce significant amounts of work in process or finished goods prior to complete satisfaction of such performance obligations.

For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the number of units produced or delivered, when our performance does not produce significant amounts of work in process or finished goods prior to complete satisfaction of such performance obligations.

For our services contracts, revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service.

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For certain of our revenue streams, such as call-out repair and service work, outage services, refinery turnarounds, and specialty welding services that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an output method as the customer receives and consumes the benefits of our performance completed to date.

Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term.

For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made.

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.

The nature of our contracts gives rise to several types of variable consideration, including pending change orders and claims;

contract bonuses and incentive fees;

and liquidated damages and penalties.

We recognize revenue for such variable consideration when it is probable, in our 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.

The Company estimates the amount of variable consideration to be included in the transaction price utilizing one of two prescribed methods, depending on which method better predicts the amount of consideration to which the entity will be entitled.

Due to uncertainties inherent in the estimation process, as well as the significant judgment involved in determining variable consideration, it is possible that estimates of costs to complete a performance obligation, and/or our estimates of transaction prices, will be revised in the near-term.

For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, or changes in the estimate of transaction prices, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made.

During each of the years ended December 31, 2021, 2020, and 2019, there were no changes in total estimated costs that had a significant impact on our operating results.

For the year ended December 31, 2018, we recognized losses of $10.0 million related to a change in total estimated costs on a transportation project within our United States electrical construction and facilities services segment, resulting in part from contract scope issues.

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.

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.

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).

Our contract assets do not include capitalized costs to obtain and fulfill a contract.

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

As of December 31, 2020 and 2019, contract assets included unbilled revenues for unapproved change orders of approximately $15.3 million and $33.1 million, respectively.

As of December 31, 2020 and 2019, there were no claim amounts included within contract assets or accounts receivable.

There were contractually billed amounts and retention related to contracts with unapproved change orders and claims of approximately $87.9 million and $89.0 million as of December 31, 2020 and 2019, respectively.

For contracts in claim status, contractually billed amounts will generally not be paid by the customer to us until final resolution of the related claims.

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 additionally include advanced payments from our customers on certain contracts.

Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when we expect to recognize such revenue.

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

Additionally, there were no significant amounts of revenue recognized during the years ended December 31, 2021 or 2019 related to performance obligations satisfied in prior periods.

During the year ended December 31, 2020, we recognized revenue of $6.1 million 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.

For each of the years ended December 31, 2021, 2020, and 2019, there were no significant reversals of revenue recognized associated with the revision of transaction prices.

Due to the significant judgments utilized in the estimation process described above, if subsequent actual results and/or updated assumptions, estimates, or projections related to our underlying project positions were to change from those utilized at December 31, 2021, it could result in a material impact to our results of operations.

For example, a 50 basis point increase or decrease in the estimated gross profit margin on our uncompleted construction projects, in the aggregate, as a result of a revision in estimated costs to complete a performance obligation or a revision in estimated transaction price, would have resulted in an increase or decrease to operating income of approximately $60 million for the year ended December 31, 2021.

See Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements included in Item 8.

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

The Company maintains an allowance for credit losses.

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.

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 December 31, 2021 and 2020, our accounts receivable of $2,204.5 million and $1,922.1 million, respectively, were recorded net of allowances for credit losses of $23.5 million and $18.0 million, respectively.

Due to the economic disruption caused by the COVID-19 pandemic, 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.

The increase in our allowance for credit losses was predominantly attributable to our evaluation of specific outstanding receivables 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.

The provision for credit losses during 2021, 2020, and 2019 amounted to approximately $8.0 million, $3.3 million, and $2.6 million, respectively.

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

The provision for our credit losses during 2020, 2019, and 2018 amounted to approximately $3.3 million, $2.6 million, and $2.1 million, respectively.

For example, if economic conditions were to significantly deteriorate, such as to those experienced during the last global financial crisis, the portion of our allowance for credit losses, which is estimated based on our historical credit loss experience, could increase by up to approximately $13.0 million.

Insurance Liabilities

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If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $17.9 million of additional expense for the year ended December 31, 2021.

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

Deferred income taxes are valued using enacted tax rates expected to be in effect when income taxes are paid or recovered, with the effect of a change in tax laws or rates recognized in the statement of operations in the period in which such change is enacted.

The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Deferred income taxes are recorded net of a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

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

At December 31, 2020 and 2019, we had net deferred income tax liabilities of $29.4 million and $71.7 million, respectively, primarily resulting from differences between the carrying value and income tax bases of certain identifiable intangible assets, goodwill, and depreciable fixed assets.

As of December 31, 2021 and 2020, we had net deferred income tax liabilities of $51.0 million and $29.4 million, respectively, primarily resulting from differences between the carrying value and income tax bases of certain identifiable intangible assets, goodwill, and depreciable fixed assets.

Included within these net deferred income tax liabilities are $212.3 million and $217.1 million of deferred income tax assets as of December 31, 2021 and 2020, respectively.

The total valuation allowance on deferred income tax assets, primarily related to state net operating loss carryforwards, was approximately $3.9 million and $3.5 million as of December 31, 2020 and 2019, respectively.

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

However, revisions to our forecasts or declining macroeconomic conditions could result in changes to our assessment of the realization of these deferred tax assets.

The total valuation allowance on deferred income tax assets was approximately $2.5 million and $3.9 million as of December 31, 2021 and 2020, respectively.

The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

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

However, revisions to our forecasts or declining macroeconomic conditions could result in changes to our assessment of the realization of these deferred income tax assets.

Refer to Note 11 - Income Taxes of the notes to consolidated financial statements in Item 8.

Financial Statements and Supplementary Data for further detail regarding our deferred income taxes.

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

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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 19 - Segment Information included in Item 8.

We have determined that our reporting units are consistent with the reportable segments identified in Note 18 - Segment Information of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data.

As of December 31, 2021, approximately 17.9% of our goodwill related to our United States electrical construction and facilities services segment, approximately 34.2% related to our United States mechanical construction and facilities services segment, approximately 35.1% related to our United States building services segment, and approximately 12.8% related to our United States industrial services segment.

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

Qualitative indicators that may trigger the need for interim quantitative impairment testing include, among others, 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 and concluded that a triggering event had occurred which indicated it was more likely than not that the fair value of our United States industrial services segment was less than its carrying amount.

Accordingly, we performed a quantitative goodwill 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 of 12.0%.

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 the interim 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.

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

Based on the outcome of our 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 is included within our results of operations for the year ended December 31, 2020.

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

As of October 1, 2020, we performed our annual impairment assessment of all reporting units and determined there was no incremental impairment of goodwill.

Based on these latest impairment assessments, the fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment exceeded their carrying values by approximately $946.5 million, $1,682.2 million, $715.8 million, and $18.9 million, respectively.

Consistent with the methodology applied in our interim impairment test, we determined the fair value of each of our reporting units 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.

The weighted average cost of capital used in our annual impairment testing was 10.6%, 10.4%, and 11.6% for our United States construction segments, our United States building services segment, and our United States industrial services segment, respectively.

We performed our annual impairment assessment of all reporting units as of October 1, 2021 and determined there was no impairment of goodwill.

Based on these impairment assessments, the fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment exceeded their carrying values by approximately $1,516.1 million, $2,772.7 million, $784.2 million, and $40.6 million, respectively.

In completing our annual impairment assessment, we determined the fair value of each of our reporting units 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.

The weighted average cost of capital used in our annual impairment testing was 10.4% for our United States construction segments and our United States building services segment, and 11.3% for our United States industrial services segment.

These weighted average cost of capital estimates were developed with the assistance of an independent third-party valuation specialist and reflect the overall level of inherent risk within the respective reporting unit and the rate of return a market participant would expect to earn.

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In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $52.4 million, $95.9 million, $35.8 million, and $9.5 million, respectively.

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

In the case of our United States industrial services segment, however, such decreases would cause the estimated fair value of such reporting unit to approximate its carrying value.

For the years ended December 31, 2019 and 2018, no impairment of our goodwill was recognized.

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

Further, for each of our reporting units, other than our United States industrial services segment, a 10% decline in the estimated fair value of such reporting unit, due to other changes in our assumptions, including forecasted future cash flows, would not have significantly impacted the results of our impairment tests.

In the case of our United States industrial services segment, however, such a 10% decrease would cause the estimated fair value of this reporting unit to approximate its carrying value.

Identifiable Intangible Assets and Other Long-Lived Assets

As of December 31, 2020 and 2019, net identifiable intangible assets (primarily consisting of our contract backlog, developed technology/vendor network, customer relationships, and subsidiary trade names) arising out of the acquisition of businesses were $582.9 million and $611.4 million, respectively.

As of December 31, 2021 and 2020, net identifiable intangible assets (primarily consisting of our customer relationships, subsidiary trade names, developed technology/vendor network, and contract backlog) arising out of the acquisition of businesses were $589.4 million and $582.9 million, respectively.

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

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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 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 year ended December 31, 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.

As of October 1, 2020, we performed our annual impairment testing of all subsidiary trade names that are not subject to amortization and determined that there was no incremental impairment of these assets.

For the years ended December 31, 2019 and 2018, no impairment of our indefinite-lived trade names was recognized.

With respect to identifiable intangible assets that are being amortized as well as other long-lived assets, we did not identify any further circumstances indicating that their carrying values may not be fully recoverable and, therefore, no additional impairment testing was required for these assets during the year ended December 31, 2020.

For the year ended December 31, 2019, no impairment of our finite-lived intangible assets or other long-lived assets was recognized.

We recorded a $0.9 million non-cash impairment charge associated with a finite-lived trade name within our United States industrial services segment during the year ended December 31, 2018.

As of October 1, 2021, we performed our annual impairment testing of all subsidiary trade names that are not subject to amortization and determined that there was no impairment of these assets.

In performing this impairment assessment, we considered the sensitivity of the reported amounts to the methods, assumptions, and estimates underlying our testing.

For example, we performed sensitivity analyses and concluded that, individually, none of the following changes in estimates or assumptions would have significantly impacted the results of our testing or resulted in an impairment of our subsidiary trade names:

(a) a 50 basis point increase in the discount rate utilized in our testing, (b) a 50 basis point decline in the perpetual growth rate utilized in our testing, or (c) a 10% decrease in the estimated fair value of each trade name.

With respect to identifiable intangible assets that are being amortized as well as other long-lived assets, we did not identify any circumstances indicating that their carrying values may not be fully recoverable and, therefore, no impairment testing was required for these assets during the year ended December 31, 2021.

Other Considerations

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In addition, estimates of weighted average costs of capital are developed with the assistance of an independent third-party valuation specialist.

These assumptions and estimates may change in future periods, especially in consideration of the uncertainty created by the COVID-19 pandemic and its continued impact on the broader economy and our results of operations.

These assumptions and estimates may change in future periods, especially in consideration of the uncertainty created by the COVID-19 pandemic and its potential impact on the broader economy and our results of operations in future periods, particularly with respect to our United States industrial services segment.

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

Refer to Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data for further information about our goodwill and identifiable intangible assets as well as our impairment testing, including the $232.8 million of impairment charges recorded during the year ended December 31, 2020.

For the year ended December 31, 2019, no impairment of our goodwill or identifiable intangible assets was recognized.

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-K

Item 7. Management’s Discussion and Analysis