What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-25 · 409 added, 528 removed, 1155 unchanged (45% of the section changed)

8 unchanged sentences

Accounts receivable, less allowance for credit losses of $ 23,534 and $ 18,031 , respectively

2,204,519 1,922,096

Contract assets 230,143 171,956

17 unchanged sentences

Total current liabilities 2,361,731 2,163,232

Borrowings under revolving credit facility — 50,000

Long-term debt and finance lease liabilities 245,450 259,619

10 unchanged sentences

Treasury stock, at cost 7,437,268 and 5,815,240 shares, respectively

( 562,036 ) ( 366,490 )

Total EMCOR Group, Inc.

15 unchanged sentences

Restructuring expenses — 2,214 1,523

Impairment loss on goodwill, identifiable intangible assets, and

other long-lived assets 232,750 — 907

Impairment loss on goodwill, identifiable intangible assets,

and other long-lived assets — 232,750 —

Operating income 530,800 256,834 460,892

2 unchanged sentences

Interest income 949 1,521 2,265

Income from continuing operations before income taxes 252,326 450,889 395,028

Income before income taxes 529,303 252,326 450,889

Income tax provision 145,602 119,383 125,749

Income from continuing operations 132,943 325,140 285,922

Loss from discontinued operation, net of income taxes — — ( 2,345 )

Net income including noncontrolling interests 383,701 132,943 325,140

2 unchanged sentences

$ 383,532 $ 132,943 $ 325,140

Basic earnings (loss) per common share:

From continuing operations attributable to EMCOR Group, Inc.

common stockholders $ 2.41 $ 5.78 $ 4.92

From discontinued operation — — ( 0.04 )

Net income attributable to EMCOR Group, Inc.

common stockholders $ 2.41 $ 5.78 $ 4.88

Diluted earnings (loss) per common share:

From continuing operations attributable to EMCOR Group, Inc.

common stockholders $ 2.40 $ 5.75 $ 4.89

From discontinued operation — — ( 0.04 )

Net income attributable to EMCOR Group, Inc.

common stockholders $ 2.40 $ 5.75 $ 4.85

Basic earnings per common share $ 7.09 $ 2.41 $ 5.78

Diluted earnings per common share $ 7.06 $ 2.40 $ 5.75

Dividends declared per common share $ 0.52 $ 0.32 $ 0.32

7 unchanged sentences

Net income including noncontrolling interests $ 383,701 $ 132,943 $ 325,140

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments ( 360 ) 2,088 1,689

1 unchanged sentence

26,031 ( 22,033 ) ( 3,315 )

Other comprehensive (loss) income ( 19,945 ) ( 1,626 ) 6,538

Other comprehensive income (loss) 25,671 ( 19,945 ) ( 1,626 )

Comprehensive income 409,372 112,998 323,514

3 unchanged sentences

_________________

(1) Net of tax benefit (provision) of $ 5.1 million, $ 0.7 million, and $( 2.1 ) million for the years ended December 31, 2020, 2019, and 2018, respectively.

(1) Net of tax (provision) benefit of $( 8.7 ) million, $ 5.1 million, and $ 0.7 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The accompanying notes to consolidated financial statements are an integral part of these statements.

14 unchanged sentences

Excess tax benefits from share-based compensation ( 828 ) ( 191 ) ( 984 )

Equity (income) loss from unconsolidated entities ( 14 ) 2,990 ( 347 )

Equity loss (income) from unconsolidated entities 1,170 ( 14 ) 2,990

Non-cash expense for amortization of debt issuance costs 960 998 1,186

Non-cash expense from contingent consideration arrangements 1,810 649 1,373

Non-cash expense for impairment of goodwill, identifiable intangible assets, and other long- lived assets 232,750 — 907

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

and other long- lived assets — 232,750 —

Non-cash share-based compensation expense 11,107 11,151 11,386

Non-cash income from changes in unrecognized tax benefits — — ( 72 )

Distributions from unconsolidated entities 44 — 1,074

Changes in operating assets and liabilities, excluding the effect of businesses acquired:

Decrease (increase) in accounts receivable 139,377 ( 135,954 ) ( 146,101 )

(Increase) decrease in accounts receivable ( 246,856 ) 139,377 ( 135,954 )

(Increase) decrease in inventories ( 116 ) ( 12,709 ) 4,345

Decrease (increase) in contract assets 7,829 ( 10,111 ) ( 30,935 )

(Decrease) increase in accounts payable ( 9,022 ) ( 33,971 ) 78,554

(Increase) decrease in contract assets ( 50,648 ) 7,829 ( 10,111 )

Increase (decrease) in accounts payable 54,849 ( 9,022 ) ( 33,971 )

Increase in contract liabilities 44,713 85,142 51,310

Increase (decrease) in accrued payroll and benefits and other accrued expenses and liabilities 113,835 49,551 ( 24,715 )

Increase in accrued payroll and benefits and other accrued expenses and liabilities 46,573 113,835 49,551

Changes in other assets and liabilities, net ( 56,874 ) 30,164 ( 4,070 )

21 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 1,279 ) 4,046 2,592

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

(Decrease) increase in cash, cash equivalents, and restricted cash ( 80,994 ) 543,642 ( 6,294 )

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

17 unchanged sentences

Net income including noncontrolling interests 325,140 — — — 325,140 — —

Other comprehensive income 6,538 — — 6,538 — — —

Cumulative-effect adjustment (2)

( 854 ) — — — ( 854 ) — —

Other comprehensive loss ( 1,626 ) — — ( 1,626 ) — — —

Common stock issued under share-based compensation plans — 3 ( 3 ) — — — —

2 unchanged sentences

Common stock dividends ( 17,950 ) — 149 — ( 18,099 ) — —

Repurchases of common stock ( 216,244 ) — — — — ( 216,244 ) —

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

Share-based compensation expense 11,386 — 11,386 — — — —

2 unchanged sentences

Other comprehensive loss ( 19,945 ) — — ( 19,945 ) — — —

Cumulative-effect adjustment (2)

( 2,307 ) — — — ( 2,307 ) — —

Common stock issued under share-based compensation plans 2 2 — — — — —

2 unchanged sentences

Common stock dividends ( 17,674 ) — 122 — ( 17,796 ) — —

Repurchases of common stock ( 112,553 ) — — — — ( 112,553 ) —

Distributions to noncontrolling interests ( 70 ) — — — — — ( 70 )

2 unchanged sentences

Net income including noncontrolling interests 383,701 — — — 383,532 — 169

Other comprehensive loss ( 19,945 ) — — ( 19,945 ) — — —

Cumulative-effect adjustment (3)

( 2,307 ) — — — ( 2,307 ) — —

Other comprehensive income 25,671 — — 25,671 — — —

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

9 unchanged sentences

(2) Represents adjustment to retained earnings upon the adoption of Accounting Standards Codification Topic 326.

(3) Represents adjustment to retained earnings upon the adoption of Accounting Standards Codification Topic 326.

The accompanying notes to consolidated financial statements are an integral part of these statements.

5 unchanged sentences

and its consolidated subsidiaries unless the context indicates otherwise.

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 specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance and management of facilities, including refineries and petrochemical plants.

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, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

8 unchanged sentences

Actual results could materially differ from those estimates.

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 as discontinued operations.

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

Revenue Recognition

6 unchanged sentences

Accounts Receivable and Allowance for Credit Losses

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.

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

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

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

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

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.

4 unchanged sentences

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.

3 unchanged sentences

Balance at December 31, 2020 $ 18,031

Cumulative-effect adjustment 3,150

Provision for credit losses 8,041

5 unchanged sentences

Leases are classified as either operating or finance, based on our evaluation of certain criteria.

With the exception of short-term leases (leases with an initial term of 12 months or less), we record right-of-use assets and corresponding lease liabilities on the balance sheet for all leases with contractual fixed payments.

With the exception of short-term leases (leases with an initial term of 12 months or less), we record right-of-use assets and corresponding lease liabilities on the Consolidated Balance Sheets for all leases with contractual fixed payments.

Lease liabilities are measured at the present value of remaining lease payments, while right-of-use assets are initially set equal to the lease liability, as adjusted for any payments made prior to lease commencement, lease incentives, and any initial direct costs incurred by us.

2 unchanged sentences

Expenses for finance leases include the amortization of right-of-use assets, which is recorded as depreciation and amortization expense, and interest expense, which reflects interest accrued on the lease liability.

Short-term leases are not recorded on the Consolidated Balance Sheets but are expensed on a straight-line basis over the lease term.

The majority of the Company’s short-term leases relate to equipment used on construction projects.

Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a period greater than 12 months.

Refer to Note 16 - Leases of the notes to consolidated financial statements for additional information.

6 unchanged sentences

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

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

Goodwill and other identifiable intangible assets with indefinite lives, such as trade names, are tested at least annually for impairment (which we test each October 1, absent any earlier identified impairment indicators) and are written down if impaired.

Identifiable intangible assets with finite lives are amortized over their useful lives and are reviewed for impairment whenever facts and circumstances indicate that their carrying values may not be fully recoverable.

See Note 9 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements for additional information.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Goodwill and indefinite-lived intangible assets, such as trade names, are evaluated at least annually for impairment (each October 1, absent any earlier identified impairment indicators) and are written down if impaired.

See Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements for additional information.

Insurance Liabilities

Insurance liabilities for automobile liability, workers’ compensation and general liability claims are determined based on claims filed and an estimate of claims incurred but not yet reported.

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

At December 31, 2020 and 2019, the estimated current portion of such undiscounted insurance liabilities of $ 48.2 million and $ 48.3 million, respectively, were included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” at December 31, 2020 and 2019 were $ 192.8 million and $ 186.0 million, respectively.

The current portion of anticipated insurance recoveries of $ 14.4 million and $ 13.8 million at December 31, 2020 and 2019, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 54.3 million and $ 50.9 million at December 31, 2020 and 2019, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

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

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

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

As of December 31, 2021 and 2020, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $ 61.5 million and $ 48.2 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of December 31, 2021 and 2020 were $ 242.4 million and $ 192.8 million, respectively.

The current portion of anticipated insurance recoveries of $ 26.4 million and $ 14.4 million as of December 31, 2021 and 2020, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 99.0 million and $ 54.3 million as of December 31, 2021 and 2020, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

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

Foreign Operations

4 unchanged sentences

The Company follows the liability method of accounting for income taxes.

Under this method, deferred income tax assets and liabilities are recognized for the expected future taxable 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.

Under this method, 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.

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

5 unchanged sentences

We had no unrecognized income tax benefits as of December 31, 2021 and 2020.

Valuation of Share-Based Compensation Plans

We have various types of share-based compensation plans and programs, which are administered by our Board of Directors or its Compensation and Personnel Committee.

See Note 14 - Share-Based Compensation Plans of the notes to consolidated financial statements for additional information regarding the share-based compensation plans and programs.

We recognize all share-based payments issued to acquire goods or services in the statement of operations based on the fair value of such payments.

Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.

For shares subject to graded vesting, our policy is to apply the straight-line method in recognizing compensation expense.

The benefits of tax deductions in excess of recognized compensation expense are recognized in the Consolidated Statements of Operations when the underlying awards vest or are settled.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Valuation of Share-Based Compensation Plans

Our share-based compensation plans and programs are administered by our Board of Directors or its Compensation and Personnel Committee.

See Note 13 - Share-Based Compensation Plans of the notes to consolidated financial statements for additional information regarding these share-based compensation plans and programs.

We recognize all share-based payments issued to acquire goods or services in the statement of operations based on the fair value of such payments.

Compensation expense related to share-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period.

The benefits of tax deductions in excess of recognized compensation expense are recognized in the Consolidated Statements of Operations when the underlying awards vest or are settled.

New Accounting Pronouncements

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

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

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

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

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

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

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

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

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

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

The Company intends to adopt this accounting pronouncement on January 1, 2021, and does not anticipate that such adoption will have a material impact on our financial position and/or results of operations.

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

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

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

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

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

In October 2021, an accounting pronouncement was issued by the FASB, which changes how an entity accounts for revenue contracts it acquires in a business combination.

The pronouncement requires entities to apply the revenue recognition guidance within ASC 606 to recognize and measure contract assets and liabilities from contracts with customers in a business combination, creating an exception to the fair value recognition and measurement principle typically utilized when valuing acquired assets.

The guidance is aimed at improving comparability by addressing when an acquirer should recognize a contract asset or contract liability, as well as how such assets and liabilities should be measured, and will generally result in companies recognizing contract assets and contract liabilities at amounts consistent with those recorded by the target entity prior to acquisition.

This guidance is effective for public business entities for fiscal years beginning after December 15, 2022, with early adoption permitted.

We are currently evaluating the potential impact of this accounting pronouncement;

however, we do not believe that its adoption will have a material impact on our financial position and/or results of operations.

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by applying the following five step model:

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services by applying the following five step model:

(1) Identify the contract with a customer

4 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

(2) Identify the performance obligations in the contract

6 unchanged sentences

In determining whether a warranty provides an additional service, the Company considers each warranty provision in comparison to warranty terms which are standard in the industry.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS - (Continued)

Our contracts are often modified through change orders to account for changes in the scope and price of the goods or services we are providing.

15 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

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

4 unchanged sentences

In the event litigation costs are incurred by us in connection with claims, such litigation costs are expensed as incurred, although we may seek to recover these costs.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS - (Continued)

For some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer.

6 unchanged sentences

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

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.

There were no significant amounts of revenue recognized during the year ended December 31, 2019 related to performance obligations satisfied in prior periods.

During the year ended December 31, 2018, we recognized revenue of $ 7.3 million associated with the final settlement of contract value for three projects within our United States mechanical construction and facilities services segment that were completed in prior periods.

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 the 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.

19 unchanged sentences

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.

10 unchanged sentences

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.

In addition, there were no significant losses recognized during each of the years ended December 31, 2021, 2020, and 2019.

Disaggregation of Revenues

1 unchanged sentence

Our contracts are with many different customers in numerous industries.

Refer to Note 19 - Segment Information of the notes to the consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment, as well as a more complete description of our business.

Refer to Note 18 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment, as well as a more complete description of our business.

EMCOR Group, Inc.

7 unchanged sentences

Commercial market sector $ 1,059,908 52 % $ 963,452 53 % $ 1,078,200 55 %

Institutional market sector 149,363 7 % 125,537 6 % 110,046 6 %

Hospitality market sector 23,797 1 % 16,985 1 % 32,338 2 %

Manufacturing market sector 226,644 11 % 241,415 13 % 224,913 11 %

Healthcare market sector 106,412 5 % 72,778 4 % 85,088 4 %

Institutional market sector 177,312 9 % 140,837 8 % 120,991 6 %

Transportation market sector 196,313 10 % 192,656 11 % 209,830 11 %

Water and wastewater market sector 14,962 1 % 6,882 1 % 19,888 1 %

Hospitality market sector 15,342 1 % 23,797 1 % 16,985 1 %

Short duration projects (1)

8 unchanged sentences

Commercial market sector $ 1,525,816 39 % $ 1,316,013 38 % $ 1,185,129 36 %

Institutional market sector 377,780 11 % 313,409 9 % 289,882 10 %

Hospitality market sector 40,079 1 % 35,385 1 % 93,827 3 %

Manufacturing market sector 523,896 13 % 430,365 12 % 533,699 16 %

Healthcare market sector 489,028 12 % 349,235 10 % 304,622 9 %

Institutional market sector 280,463 7 % 377,780 11 % 313,409 9 %

Transportation market sector 84,503 2 % 70,692 2 % 32,686 1 %

Water and wastewater market sector 213,315 6 % 185,996 5 % 202,428 6 %

Hospitality market sector 38,405 1 % 40,079 1 % 35,385 1 %

Short duration projects (1)

4 unchanged sentences

Total segment revenues $ 3,922,864 $ 3,485,495 $ 3,340,337

_________________

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

2 unchanged sentences

United States building services:

Mobile mechanical services $ 1,501,919 61 % $ 1,282,803 60 % $ 1,253,209 59 %

Commercial site-based services 680,351 28 % 587,345 28 % 571,345 27 %

Government site-based services 184,272 7 % 167,990 8 % 176,282 8 %

Mobile mechanical services 1,258,916 60 % 1,238,420 59 % 1,032,082 55 %

Energy services 102,350 4 % 95,878 4 % 120,825 6 %

19 unchanged sentences

Contract Assets and Contract Liabilities

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

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

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

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

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

Contract assets include unbilled amounts from our construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts are not yet billable 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.

4 unchanged sentences

As of December 31, 2021 and 2020, contract assets included unbilled revenues for unapproved change orders of approximately $ 24.1 million and $ 15.3 million, respectively.

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

Contract assets as of December 31, 2021 additionally included $ 2.5 million associated with claims.

There were no claim amounts included within accounts receivable as of December 31, 2021 or within contract assets or accounts receivable as of December 31, 2020.

There were contractually billed amounts and retention related to contracts with unapproved change orders and claims of approximately $ 130.7 million and $ 87.9 million as of December 31, 2021 and 2020, 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 from our construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress.

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

5 unchanged sentences

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

Net contract liabilities consisted of the following (in thousands):

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

December 31, 2021 December 31, 2020

Contract assets, current $ 230,143 $ 171,956

4 unchanged sentences

Included within net contract liabilities were $ 500.3 million and $ 496.8 million of net contract liabilities on uncompleted construction projects as of December 31, 2021 and 2020, respectively, as follows (in thousands):

December 31, 2021 December 31, 2020

Costs incurred on uncompleted construction contracts $ 11,034,038 $ 10,727,358

3 unchanged sentences

$ ( 500,348 ) $ ( 496,796 )

The $ 104.6 million increase in net contract liabilities for the year ended December 31, 2020 was primarily attributable to the $ 90.2 million increase in the net contract liabilities on our uncompleted long-term construction contracts, partially as a result of the timing of billings to our customers as amounts invoiced exceeded the revenue recognized on certain large projects.

Contract assets and contract liabilities increased by approximately $ 8.1 million and $ 23.2 million, respectively, as a result of acquisitions made by us in 2021.

Excluding the impact of acquisitions, net contract liabilities decreased by approximately $ 7.2 million for the year ended December 31, 2021, primarily as a result of the timing of invoicing to customers on our uncompleted construction projects, which, based on the various stages of completion, included a greater percentage of contracts that were recorded in contract asset positions.

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

2 unchanged sentences

These retainage amounts represent amounts which have been contractually invoiced to customers where payments have been partially withheld pending the achievement of certain milestones, satisfaction of other contractual conditions, or completion of the project.

We estimate that approximately 89 % of this retainage will be collected during 2021.

We estimate that approximately 90 % of the retainage outstanding as of December 31, 2021 will be collected during 2022.

As of December 31, 2021 and 2020, accounts payable included $ 71.1 million and $ 59.8 million, respectively, of retainage withheld under terms of our subcontracts.

These retainage amounts represent amounts invoiced to the Company by our subcontractors where payments have been partially withheld pending the achievement of certain milestones, satisfaction of other contractual conditions, or upon completion of the project.

We estimate that approximately 90 % of this retainage will be paid during 2021.

We estimate that approximately 90 % of the retainage outstanding as of December 31, 2021 will be paid during 2022.

EMCOR Group, Inc.

4 unchanged sentences

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

2020 % of Total

December 31, 2021 % of Total

Remaining performance obligations:

9 unchanged sentences

We include a project within our remaining performance obligations at such time the project is awarded and agreement on contract terms has been reached.

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

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

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

22 unchanged sentences

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

During 2021, we acquired eight companies for total consideration of $ 131.2 million.

Such acquisitions include:

(a) two companies, the results of operations of which have been 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, the results of operations of which have been 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 that bolster our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls solutions.

In connection with these acquisitions, we acquired working capital of $ 22.9 million and other net liabilities of $ 0.6 million, including certain deferred tax liabilities, and have preliminarily ascribed $ 38.3 million to goodwill and $ 70.6 million to identifiable intangible assets.

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

Such companies 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.

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 in the Washington, D.C.

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

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

In connection with these acquisitions, we acquired working capital of $ 3.0 million and other net liabilities of $ 3.9 million and have preliminarily ascribed $ 13.0 million to goodwill and $ 38.1 million to identifiable intangible assets.

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

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

5 unchanged sentences

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

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

Such companies include:

(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 within our United States building services segment which bolster our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls solutions.

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

During 2018, we acquired four companies for total consideration of $ 71.6 million.

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 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.

In connection with these acquisitions, we acquired working capital of $ 8.7 million and have ascribed $ 26.3 million to goodwill and $ 36.6 million to identifiable intangible assets.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 4 - ACQUISITIONS OF BUSINESSES (Continued)

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

The purchase price allocation for one of the businesses acquired in 2020 is preliminary and subject to change during its measurement period.

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

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

Such acquisitions include:

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

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

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

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

The purchase price allocations for the other businesses acquired in 2021 and the businesses acquired in 2020 and 2019 have been finalized during their respective measurement periods with an insignificant impact.

NOTE 5 - DISPOSITION OF ASSETS

Due to a historical pattern of losses in the construction operations of our United Kingdom segment and our negative assessment of construction market conditions in the United Kingdom, we ceased construction operations in the United Kingdom during the third quarter of 2014.

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

No income or expense was recognized from discontinued operations for the years ended December 31, 2020 and 2019.

The results of discontinued operations for the year ended December 31, 2018 were as follows (in thousands):

Loss from discontinued operation, net of income taxes $ ( 2,345 )

Diluted loss per share from discontinued operation $ ( 0.04 )

The loss from discontinued operations in 2018 was primarily due to the settlement of a previously outstanding legal matter.

NOTE 5 - EARNINGS PER SHARE

The following tables summarize our calculation of Basic and Diluted Earnings (Loss) per Common Share (“EPS”) for the years ended December 31, 2020, 2019, and 2018 (in thousands, except share and per share data):

The following tables summarize our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the years ended December 31, 2021, 2020, and 2019 (in thousands, except share and per share data):

2021 2020 2019

Income from continuing operations attributable to EMCOR Group, Inc.

common stockholders $ 132,943 $ 325,140 $ 285,876

Loss from discontinued operation, net of income taxes — — ( 2,345 )

Net income attributable to EMCOR Group, Inc.

common stockholders $ 383,532 $ 132,943 $ 325,140

Weighted average shares outstanding used to compute basic earnings (loss) per common share 55,196,173 56,208,280 58,112,838

Weighted average shares outstanding used to compute basic earnings per common share 54,068,982 55,196,173 56,208,280

Effect of dilutive securities—Share-based awards 278,552 225,098 311,001

Shares used to compute diluted earnings (loss) per common share 55,421,271 56,519,281 58,443,467

Basic earnings (loss) per common share:

From continuing operations attributable to EMCOR Group, Inc.

common stockholders $ 2.41 $ 5.78 $ 4.92

From discontinued operation — — ( 0.04 )

Net income attributable to EMCOR Group, Inc.

common stockholders $ 2.41 $ 5.78 $ 4.88

Diluted earnings (loss) per common share:

From continuing operations attributable to EMCOR Group, Inc.

common stockholders $ 2.40 $ 5.75 $ 4.89

From discontinued operation — — ( 0.04 )

Net income attributable to EMCOR Group, Inc.

common stockholders $ 2.40 $ 5.75 $ 4.85

Shares used to compute diluted earnings per common share 54,347,534 55,421,271 56,519,281

Basic earnings per common share $ 7.09 $ 2.41 $ 5.78

Diluted earnings per common share $ 7.06 $ 2.40 $ 5.75

The number of outstanding share-based awards excluded from the computation of diluted EPS for the years ended December 31, 2021, 2020, and 2019 because they would be anti-dilutive were 9,250 , 24,450 , and 4,800 , respectively.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - INVENTORIES

Inventories as of December 31, 2020 and 2019 consisted of the following amounts (in thousands):

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

December 31, 2021 December 31, 2020

Raw materials and construction materials $ 46,186 $ 42,240

1 unchanged sentence

Inventories $ 54,098 $ 53,338

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of December 31, 2020 and 2019 consisted of the following amounts (in thousands):

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

December 31, 2021 December 31, 2020

Machinery and equipment $ 188,022 $ 176,031

18 unchanged sentences

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.

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

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

2 unchanged sentences

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

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

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.

Our cash flow projections were derived from our most recent internal forecasts of anticipated revenue growth rates and operating margins, 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 used for our annual testing was 2.0 % for all of our reporting units.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 8 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS (Continued)

“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.

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.

The perpetual growth rate used for our annual testing was 2.0 % for all of our reporting units.

During the second quarter of 2020, we concluded that the carrying amount of our United States industrial services segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of $ 225.5 million which was included within our results of operations for the year ended December 31, 2020.

An interim impairment assessment was considered necessary as a result of the significant impact the COVID-19 pandemic and concurrent decline in demand for oil and other refined products had on our near term revenue and operating margin expectations for such segment.

The valuation methodology utilized in this prior year interim impairment test was consistent with the approach described above.

We did not identify indicators of impairment related to any other reporting unit that would have required an interim impairment assessment during 2020 and there was no other impairment of goodwill recognized for the years ended December 31, 2020 or 2019.

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

3 unchanged sentences

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.

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

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

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

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS - (Continued)

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 2021 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 2021 impairment tests.

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

The changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2021 and 2020 were as follows (in thousands):

8 unchanged sentences

Acquisitions and purchase price adjustments — 398 12,974 — 13,372

Intersegment transfers — ( 5,800 ) — 5,800 —

Impairment — — — ( 225,500 ) ( 225,500 )

Balance at December 31, 2020 142,545 299,618 302,132 107,488 851,783

Acquisitions and purchase price adjustments 24,467 4,269 9,749 — 38,485

Impairment — — — ( 225,500 ) ( 225,500 )

Intersegment transfers ( 7,500 ) — 900 6,600 —

Balance at December 31, 2021 $ 159,512 $ 303,887 $ 312,781 $ 114,088 $ 890,268

The aggregate goodwill balance as of December 31, 2019 included $ 268.1 million of accumulated impairment charges, which were comprised of $ 139.5 million within the United States building services segment and $ 128.6 million within the United States industrial services segment.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS (Continued)

Identifiable Intangible Assets and Other Long-Lived Assets

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

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

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

8 unchanged sentences

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.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS - (Continued)

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.

For the years ended December 31, 2021 and 2019, no impairment of our indefinite-lived intangible assets, finite-lived intangible assets, or other long-lived assets was recognized.

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

Such assets included those associated with the businesses in our United States industrial services segment.

As a result of these assessments, we recorded non-cash impairment charges of $ 7.3 million, which were included within our results of operations for the year ended December 31, 2020.

Identifiable intangible assets as of December 31, 2021 and 2020 consisted of the following (in thousands):

2 unchanged sentences

Amortization Accumulated

Contract backlog $ 72,045 $ ( 68,766 ) $ — $ 3,279

Developed technology/Vendor network 95,661 ( 64,994 ) — 30,667

Customer relationships $ 717,666 $ ( 374,764 ) $ ( 4,834 ) $ 338,068

Trade names (amortized) 31,516 ( 23,002 ) — 8,514

Trade names (unamortized) 274,721 — ( 58,933 ) 215,788

Developed technology/Vendor network 95,661 ( 69,688 ) — 25,973

Trade names (amortized) 32,366 ( 24,180 ) — 8,186

Contract backlog 77,995 ( 76,645 ) — 1,350

Total $ 1,198,409 $ ( 545,277 ) $ ( 63,767 ) $ 589,365

2 unchanged sentences

Amortization Accumulated

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

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

Customer relationships $ 670,155 $ ( 324,426 ) $ ( 4,834 ) $ 340,895

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

Trade names (unamortized) 258,471 — ( 58,933 ) 199,538

Developed technology/Vendor network 95,661 ( 64,994 ) — 30,667

Trade names (amortized) 31,516 ( 23,002 ) — 8,514

Contract backlog 72,045 ( 68,766 ) — 3,279

Total $ 1,127,848 $ ( 481,188 ) $ ( 63,767 ) $ 582,893

Identifiable intangible assets attributable to businesses acquired in 2020 and 2019 have been valued at $ 38.1 million and $ 171.3 million, respectively, and consist of contract backlog, customer relationships, and trade names.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS (Continued)

Identifiable intangible assets attributable to businesses acquired in 2021 and 2020 have been valued at $ 70.6 million and $ 38.1 million, respectively, and consist of customer relationships, trade names, and contract backlog.

See Note 4 - Acquisitions of Businesses of the notes to consolidated financial statements for additional information with respect to acquisitions.

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

Identifiable intangible assets are amortized in a manner that best approximates the pattern in which the economic benefits of such assets are consumed, which is generally on a straight-line basis.

The weighted average amortization periods for the unamortized balances remaining are, in the aggregate, approximately 7.50 years, which are comprised of the following:

0.75 years for contract backlog, 6.75 years for developed technology/vendor network, 8.00 years for customer relationships and 9.75 years for trade names.

7.50 years for customer relationships, 8.50 years for trade names, 5.75 years for developed technology/vendor network, and 0.25 years for contract backlog.

Amortization expense related to identifiable intangible assets with finite lives was $ 64.1 million, $ 60.0 million, and $ 48.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

2 unchanged sentences

Thereafter 106,585

Other Considerations

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

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 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.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 9 - DEBT

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

December 31, 2021 December 31, 2020

Term loan, interest payable at varying amounts through 2025 $ 256,688 $ 270,563

Unamortized debt issuance costs ( 3,040 ) ( 4,000 )

Finance lease liabilities 8,037 9,966

Total debt 261,685 276,529

current maturities 16,235 16,910

Total long-term debt $ 245,450 $ 259,619

Credit Agreement

5 unchanged sentences

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) United States dollar LIBOR ( 0.10 % at December 31, 2021) plus 1.00 % to 1.75 %, based on certain financial tests.

The base rate is determined by the greater of (a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 3.25 % at 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 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, 2021), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00 %, or (d) 0.00 %.

In the event of the discontinuation of LIBOR, our 2020 Credit Agreement contains provisions which allow for the use of alternate benchmark rates.

The interest rate in effect at December 31, 2021 was 1.10 %.

2 unchanged sentences

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;

As of December 31, 2021 and 2020, the balance of the 2020 Term Loan was $ 256.7 million and $ 270.6 million, respectively.

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

however, we had $ 71.3 million of letters of credit outstanding, which reduce the available capacity under such facility.

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

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

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

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

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

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

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

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

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

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

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.

Long-term debt as of December 31, 2020 and 2019 consisted of the following amounts (in thousands):

Revolving credit facility $ — $ 50,000

Term loan, interest payable at varying amounts through 2025 270,563 254,431

Unamortized debt issuance costs ( 4,000 ) ( 1,879 )

Finance lease liabilities 9,966 9,679

Total debt 276,529 312,231

current maturities 16,910 18,092

Total long-term debt $ 259,619 $ 294,139

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

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

Finance Lease Liabilities

12 unchanged sentences

Recurring Fair Value Measurements

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

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

Assets at Fair Value as of December 31, 2021

3 unchanged sentences

Restricted cash (2)

1,223 — — 1,223

Deferred compensation plan assets (3)

6 unchanged sentences

Restricted cash (2)

1,102 — — 1,102

Deferred compensation plan assets (3)

10 unchanged sentences

Such assets are measured at fair value at the time of acquisition based on valuation techniques that appropriately represent the methods which would be used by other market participants in determining fair value.

Periodically, we engage an independent third-party valuation specialist to assist with the valuation process, including the selection of appropriate methodologies and the development of market-based assumptions.

In addition, goodwill and intangible assets are tested for impairment using similar valuation methodologies to determine the fair value of such assets.

As of December 31, 2020, we had goodwill related to our United States industrial services segment of $107.5 million accounted for at fair value on a nonrecurring basis as a result of the non-cash goodwill impairment charge recorded during the year.

Refer to Note 9 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements for a description of the valuation techniques and inputs used in the fair value measurement.

The inputs used for these nonrecurring fair value measurements represent Level 3 inputs.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - FAIR VALUE MEASUREMENTS - (Continued)

Fair Value of Financial Instruments

1 unchanged sentence

The carrying value of our debt associated with the 2020 Credit Agreement approximates its fair value due to the variable rate on such debt.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - INCOME TAXES

For the years ended December 31, 2020, 2019, and 2018, our income tax provision was calculated based on income from continuing operations before income taxes as follows (in thousands):

For the years ended December 31, 2021, 2020, and 2019, our income tax provision was calculated based on income before income taxes as follows (in thousands):

2021 2020 2019

2 unchanged sentences

$ 529,303 $ 252,326 $ 450,889

Foreign income for each of the years ended December 31, 2021, 2020, and 2019 was predominately earned in the United Kingdom.

The income tax provision for the years ended December 31, 2021, 2020, and 2019 consisted of the following (in thousands):

5 unchanged sentences

136,085 155,737 124,048

Deferred (benefit) provision ( 36,354 ) 1,701 4,249

Deferred provision (benefit) 9,517 ( 36,354 ) 1,701

$ 145,602 $ 119,383 $ 125,749

For the year ended December 31, 2020, our income tax provision from continuing operations was $ 119.4 million compared to $ 125.7 million for the year ended December 31, 2019 and $ 109.1 million for the year ended December 31, 2018.

For the year ended December 31, 2021, our income tax provision was $ 145.6 million compared to $ 119.4 million for the year ended December 31, 2020 and $ 125.7 million for the year ended December 31, 2019.

The increase in the income tax provision for 2021, when compared to 2020, was primarily driven by increased income before income taxes and the effect of certain increases in the deferred state tax provision.

The decrease in the income tax provision for 2020, when compared to 2019, was primarily driven by reduced state income taxes, inclusive of a deferred state benefit, resulting from a change in the mix of earnings.

The increase in the income tax provision for 2019, when compared to 2018, was largely due to increased income from continuing operations before income taxes.

The income tax rates on income from continuing operations before income taxes for the years ended December 31, 2020, 2019, and 2018, were 47.3 %, 27.9 %, and 27.6 %, respectively.

The increase in the 2020 income tax rate, when compared to 2019, was predominantly due to 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.

The slight increase in the 2019 income tax rate, when compared to 2018, was primarily due to:

(a) an increase in our state deferred tax rate, partially as a result of a change in the mix of income during 2019, 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.

The income tax rates on income before income taxes for the years ended December 31, 2021, 2020, and 2019, were 27.5 %, 47.3 %, and 27.9 %, respectively.

The decrease in the 2021 income tax rate, when compared to 2020, and the increase in the 2020 income tax rate, when compared to 2019, was predominantly due to the tax effect, in 2020, of the impairment charges recorded during such year, the majority of which were non-deductible for tax purposes.

Refer to Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements for further discussion regarding such impairment charges.

EMCOR Group, Inc.

7 unchanged sentences

Permanent differences 5,316 5,860 7,149

Excess tax benefit from share-based compensation ( 142 ) ( 733 ) ( 1,227 )

Non-deductible impairment charges — 40,165 —

2 unchanged sentences

$ 145,602 $ 119,383 $ 125,749

The minimum tax on global intangible low-taxed income for certain earnings of our foreign subsidiaries was approximately $ 0.1 million for each of the years ended December 31, 2020 and 2019 and approximately $ 0.6 million for the year ended December 31, 2018.

The minimum tax on global intangible low-taxed income for certain earnings of our foreign subsidiaries was approximately $ 0.1 million for each of the years ended December 31, 2021, 2020, and 2019.

The Company recognizes such tax as an expense in the period incurred.

1 unchanged sentence

Based on our evaluation, and given that a significant portion of such earnings were subject to tax in prior periods, or are indefinitely reinvested, we have concluded that any taxes associated with the repatriation of such foreign earnings would be immaterial.

As of December 31, 2020, the amount of cash held by these foreign subsidiaries was approximately $ 100.8 million which, if repatriated, should not result in any federal or state income taxes.

As of December 31, 2021, the amount of cash held by these foreign subsidiaries was approximately $ 113.5 million which, if repatriated, should not result in any material federal or state income taxes.

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

4 unchanged sentences

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

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

Our first installment of these deferred Social Security taxes, totaling approximately $ 51 million, was repaid 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.

On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law.

This act provides for tax relief, as well as an omnibus appropriations package that extends various expiring tax provisions and allows for a 100% tax deduction for the cost of business meals in 2021 and 2022.

The Consolidated Appropriations Act is not expected to have a material impact on the Company's income tax provision.

The Consolidated Appropriations Act did not have a material impact on our income tax provision for the year ended December 31, 2021 and is not expected to have a material impact on our income tax provision for the year ending December 31, 2022.

On March 11, 2021, the American Rescue Plan Act was signed into law.

Such act includes certain tax provisions that could have an impact on the Company in future periods, including expanded limits on compensation deductions under Section 162(m) of the Internal Revenue Code for tax years beginning after December 31, 2026.

We are currently evaluating the impact that this act may have on our financial position and/or results of operations;

however, we anticipate that the expanded provisions of Section 162(m) will result in an increase in our income tax rate for years beginning after December 31, 2026.

EMCOR Group, Inc.

4 unchanged sentences

The deferred income tax assets and deferred income tax liabilities recorded as of December 31, 2021 and 2020 were as follows (in thousands):

December 31, 2021 December 31, 2020

Deferred income tax assets:

5 unchanged sentences

Accrued federal payroll taxes (1)

14,235 27,428

Other (including liabilities and reserves) 31,252 29,816

7 unchanged sentences

Depreciation of property, plant and equipment ( 25,341 ) ( 23,958 )

Pension asset ( 1,847 ) —

Other ( 7,491 ) ( 7,444 )

3 unchanged sentences

(1) Represents employer Social Security tax payments deferred under the CARES Act.

The components of the net deferred income tax liabilities in the accompanying Consolidated Balance Sheets are included in “Other assets” in the amount of $ 7.4 million and $ 3.4 million and “Other long-term obligations” in the amount of $ 36.8 million and $ 75.2 million, at December 31, 2020 and 2019, respectively.

At December 31, 2021, our net deferred income tax liabilities of $ 51.0 million were included in “Other long-term obligations” in the accompanying Consolidated Balance Sheet.

At December 31, 2020, the components of our net deferred income tax liabilities in the accompanying Consolidated Balance Sheet were included in “Other assets” in the amount of $ 7.4 million and “Other long-term obligations” in the amount of $ 36.8 million.

Valuation allowances are established when necessary to reduce deferred income tax assets when it is more likely than not that a tax benefit will not be realized.

As of December 31, 2020 and 2019, the total valuation allowance on deferred income tax assets was approximately $ 3.9 million and $ 3.5 million, respectively, related to state and local net operating losses.

As of December 31, 2021 and 2020, the total valuation allowance on deferred income tax assets, related to state and local net operating losses and foreign income tax credit carryovers, was approximately $ 2.5 million and $ 3.9 million, respectively.

The reduction in our valuation allowances at December 31, 2021 was a result of our assessment of recent financial performance and updated projections of future earnings for certain of our subsidiaries, which indicated that we would likely be able to utilize all, or a portion of, certain net operating loss carryforwards, for which we had previously established valuation allowances.

Realization of our deferred income tax assets is dependent on our generating sufficient taxable income in the jurisdictions in which such deferred tax assets will reverse.

Although realization is not assured, based on current projections of future taxable income, we believe it is more likely than not that the deferred income tax assets, net of the valuation allowance discussed above, will be realized.

The amount of the deferred income tax assets considered realizable, however, could be reduced if estimates of future income are reduced.

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.

EMCOR Group, Inc.

4 unchanged sentences

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.

We currently pay a regular quarterly dividend of $ 0.13 per share.

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.

2 unchanged sentences

During the year ended December 31, 2021, we repurchased approximately 1.6 million shares of our common stock for approximately $ 195.5 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.

Since the inception of the repurchase program through December 31, 2021, we have repurchased approximately 19.2 million shares of our common stock for approximately $ 1.10 billion.

As of December 31, 2021, there remained authorization for us to repurchase approximately $ 350.4 million of our shares.

5 unchanged sentences

During 2020, we amended and restated our incentive plan, eliminating the ability to grant new stock options, until such time, if any, as the plan is subsequently amended to provide for the ability to make such grants.

Under the terms of this plan, 3,250,000 shares were authorized, and 1,023,299 shares are available for grant or issuance as of December 31, 2020.

Under the terms of this plan, 3,250,000 shares were authorized, and 895,682 shares remain available for grant or issuance as of December 31, 2021.

Any issuances under this plan are valued at the fair market value of our common stock on the grant date.

The vesting schedule of any stock awards or stock units is determined by the Compensation and Personnel Committee of our Board of Directors at the time of the grant.

Forfeitures are recognized as they occur.

The following table summarizes activity regarding our stock options and awards of shares and stock units since December 31, 2017:

The following table summarizes activity regarding stock options and restricted stock units since December 31, 2018:

Stock Options Restricted Stock Units

14 unchanged sentences

Balance, December 31, 2021 — — Balance, December 31, 2021 404,468 $ 79.16

We recognized approximately $ 11.1 million, $ 11.2 million, and $ 11.4 million of compensation expense for stock units awarded to non-employee directors and employees pursuant to incentive plans for the years ended December 31, 2021, 2020, and 2019, respectively.

We have approximately $ 9.3 million of compensation expense, net of income taxes, which will be recognized over the remaining vesting periods of up to 3 years.

In addition, an aggregate of 67,942 restricted stock units granted to current or former non-employee directors vested as of December 31, 2021, but, at the election of such directors, issuance has been deferred for up to 5 years.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 13 - SHARE-BASED COMPENSATION PLANS (Continued)

We recognized approximately $ 11.2 million, $ 11.4 million, and $ 11.0 million of compensation expense for stock units awarded to non-employee directors and employees pursuant to incentive plans for the years ended December 31, 2020, 2019, and 2018, respectively.

We have approximately $ 8.6 million of compensation expense, net of income taxes, which will be recognized over the remaining vesting periods of up to 3 years.

In addition, an aggregate of 63,907 restricted stock units granted to current or former non-employee directors vested as of December 31, 2020, but issuance has been deferred up to 5 years.

The income tax benefit derived in 2020, 2019, and 2018 as a result of stock option exercises and other share-based compensation was approximately $ 1.9 million, $ 2.6 million, and $ 3.6 million, respectively, of which approximately $ 0.2 million, $ 1.0 million, and $ 1.6 million, respectively, represented excess tax benefits.

The total intrinsic value (the amounts by which the stock price exceeded the exercise price on the date of exercise) of options that were exercised during both 2020 and 2019 was approximately $ 1.2 million, and the total intrinsic value of options that were exercised during 2018 was approximately $ 2.7 million.

There were no options outstanding at December 31, 2020, however, the aggregate intrinsic value of options outstanding and exercisable as of December 31, 2019 and 2018 was approximately $ 1.2 million and $ 1.4 million, respectively.

The income tax benefit derived in 2021, 2020, and 2019 as a result of share-based compensation was approximately $ 2.6 million, $ 1.9 million, and $ 2.6 million, respectively, of which approximately $ 0.8 million, $ 0.2 million, and $ 1.0 million, respectively, represented excess tax benefits.

There were no options outstanding at December 31, 2021 and 2020, however, the aggregate intrinsic value of options outstanding and exercisable as of December 31, 2019 was approximately $ 1.2 million.

We have an employee stock purchase plan.

4 unchanged sentences

Defined Benefit Plans

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

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

These amounts will be subsequently recognized as net periodic pension cost.

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

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

These amounts will be subsequently recognized as net periodic pension cost (income) within the Consolidated Statement of Operations, as described further below.

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

however, no individual joining the company after October 31, 2001 may participate in the UK Plan.

On May 31, 2010, we curtailed the future accrual of benefits for active employees under this plan.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - RETIREMENT PLANS - (Continued)

On May 31, 2010, we curtailed the future accrual of benefits for active employees under such plan.

The change in benefit obligations and assets of the UK Plan for the years ended December 31, 2021 and 2020 consisted of the following components (in thousands):

2 unchanged sentences

Interest cost 5,326 6,401

Actuarial loss 50,863 32,866

Actuarial (gain) loss ( 22,071 ) 50,863

Benefits paid ( 13,939 ) ( 10,029 )

8 unchanged sentences

Fair value of plan assets at end of year 356,532 347,411

Funded status at end of year $ ( 35,731 ) $ ( 15,765 )

Amounts not yet reflected in net periodic pension cost and included in accumulated other comprehensive loss were as follows (in thousands):

Unrecognized losses $ 125,020 $ 94,211

The underfunded status of the UK Plan of $ 35.7 million and $ 15.8 million at December 31, 2020 and 2019, respectively, is included in “Other long-term obligations” in the accompanying Consolidated Balance Sheets.

Funded (unfunded) status at end of year $ 7,385 $ ( 35,731 )

The overfunded status of the UK Plan of $ 7.4 million at December 31, 2021 and the underfunded status of the UK Plan of $ 35.7 million at December 31, 2020 are included in “Other Assets” and “Other long-term obligations,” respectively, in the accompanying Consolidated Balance Sheets.

No plan assets are expected to be returned to us during the year ending December 31, 2022.

The weighted average assumptions used to determine benefit obligations as of December 31, 2020 and 2019 were as follows:

Discount rate 1.4 % 2.1 %

The weighted average assumptions used to determine net periodic pension cost for the years ended December 31, 2020, 2019, and 2018 were as follows:

2020 2019 2018

Discount rate 2.1 % 2.9 % 2.5 %

Annual rate of return on plan assets 4.3 % 4.9 % 5.0 %

EMCOR Group, Inc.

2 unchanged sentences

NOTE 14 - RETIREMENT PLANS (Continued)

The annual rate of return on plan assets has been determined by modeling possible returns using the actuary’s portfolio return calculator and the fair value of plan assets.

This models the long term expected returns of the various asset classes held in the portfolio and takes into account the additional benefits of holding a diversified portfolio.

For measurement purposes of the liability, the annual rates of inflation of covered pension benefits assumed for 2020 and 2019 were 2.5 % and 2.0 %, respectively.

The weighted average assumptions used to determine benefit obligations as of December 31, 2021 and 2020 were as follows:

Discount rate 1.8 % 1.4 %

The below table shows certain information for the UK Plan, as of December 31, 2020, when the accumulated benefit obligation was in excess of plan assets (in thousands):

December 31, 2020

Projected benefit obligation $ 383,142

Accumulated benefit obligation $ 383,142

Fair value of plan assets $ 347,411

The components of net periodic pension cost (income) of the UK Plan for the years ended December 31, 2021, 2020, and 2019 were as follows (in thousands):

4 unchanged sentences

Net periodic pension cost (income) $ ( 3,758 ) $ ( 3,233 ) $ ( 1,862 )

The weighted average assumptions used to determine net periodic pension cost for the years ended December 31, 2021, 2020, and 2019 were as follows:

2021 2020 2019

Discount rate 1.4 % 2.1 % 2.9 %

Annual rate of return on plan assets 3.9 % 4.3 % 4.9 %

The annual rate of return on plan assets has been determined by modeling possible returns using the actuary’s portfolio return calculator and the fair value of plan assets.

This approach models the long term expected returns of the various asset classes held in the portfolio and takes into account the additional benefits of holding a diversified portfolio.

For measurement purposes of the liability, the annual rates of inflation of covered pension benefits assumed for 2021 and 2020 were 2.9 % and 2.5 %, respectively.

Amounts not yet reflected in net periodic pension cost and included in accumulated other comprehensive loss were as follows (in thousands):

December 31, 2021 December 31, 2020

Unrecognized actuarial losses $ 89,572 $ 125,020

Actuarial gains and losses are amortized using a corridor approach whereby cumulative gains and losses in excess of the greater of 10% of the pension benefit obligation or the fair value of plan assets are amortized over the average life expectancy of plan participants.

The amortization period for 2021 was 24 years.

The reclassification adjustment, net of income taxes, for the UK Plan from accumulated other comprehensive loss into net periodic pension cost was approximately $ 1.9 million for the years ended December 31, 2020 and 2019, and approximately $ 2.1 million for the year ended December 31, 2018.

The reclassification adjustment, net of income taxes, for the UK Plan from accumulated other comprehensive loss into net periodic pension cost was approximately $ 2.9 million for the year ended December 31, 2021, and approximately $ 1.9 million for the years ended December 31, 2020 and 2019.

The estimated unrecognized loss for the UK Plan that will be amortized from accumulated other comprehensive loss into net periodic pension cost over the next year is approximately $ 1.8 million, net of income taxes.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - RETIREMENT PLANS (Continued)

UK Plan Assets

3 unchanged sentences

The weighted average asset allocations and weighted average target allocations at December 31, 2021 and 2020 were as follows:

Asset Category Target

Allocation December 31,

Asset Category Target Asset

December 31, 2021 Target Asset

December 31, 2020

1 unchanged sentence

Equity — % — % 15.0 % 12.7 %

Cash 10.0 % 17.1 % 10.5 %

Cash and cash equivalents 15.0 % 16.5 % 10.0 % 17.1 %

Real estate 10.0 % 7.5 % 10.0 % 7.2 %

Total 100.0 % 100.0 % 100.0 % 100.0 %

Plan assets of our UK Plan are invested through third-party fund managers in various investments with underlying holdings which consist of:

(a) debt securities, which include United Kingdom government debt and United States, United Kingdom, European and emerging market corporate debt, (b) equity securities, which include marketable equity and equity like instruments across developed global equity markets, and (c) real estate assets, which represent trusts which invest directly or indirectly in various properties throughout the United Kingdom.

Assets of the UK Plan are allocated within the fair value hierarchy discussed in Note 11 - Fair Value Measurements, based on the nature of the investment.

Level 1 assets represent cash.

Level 2 assets consist of corporate debt funds, government bond funds, and equity funds whose underlying investments are valued using observable marketplace inputs.

The fair value of the Level 2 assets are generally determined under a market approach using valuation models that incorporate observable inputs such as interest rates, bond yields, and quoted prices.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - RETIREMENT PLANS - (Continued)

Investments valued using net asset value (“NAV”) as a practical expedient are excluded from the fair value hierarchy.

These investments include:

(a) funds which invest predominantly in senior secured debt instruments, targeting diversity across regions and sectors, as well as funds which invest in diversified credit vehicles that seek higher returns than traditional fixed income, primarily through investments in U.S.

corporate debt, global credit, and structured debt, and (b) funds which aim to provide long-term income through investment in UK property assets.

These investments are redeemable at NAV on a monthly or quarterly basis and have redemption notice periods of up to 90 days.

In addition, certain of these investments are subject to a lockup period of up to 24 months.

The methods described above may produce fair values that may not be indicative of net realizable value or reflective of future fair values.

Furthermore, while the Company believes the valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Plan assets of our UK Plan are invested through third-party fund managers in various investments with underlying holdings which, as of December 31, 2021 and 2020, consisted of:

(a) cash and cash equivalents, primarily held as collateral for other financial instruments, (b) debt securities, which include United Kingdom government debt and United States, United Kingdom, European, and emerging market corporate debt, and (c) real estate assets, which represent trusts which invest directly or indirectly in various properties throughout the United Kingdom.

In addition, investment holdings as of December 31, 2020 contained equity securities, which included marketable equity and equity like instruments across developed global equity markets.

The following tables set forth the fair value of assets of the UK Plan as of December 31, 2021 and 2020 (in thousands):

3 unchanged sentences

Government bond funds — 91,899 — 91,899

Equity funds — 44,132 — 44,132

Cash 59,246 — — 59,246

Cash and cash equivalents 58,772 — — 58,772

Total plan assets in fair value hierarchy $ 58,772 $ 159,125 $ — 217,897

8 unchanged sentences

Equity funds — 44,132 — 44,132

Cash 32,240 — — 32,240

Cash and cash equivalents 59,246 — — 59,246

Total plan assets in fair value hierarchy $ 59,246 $ 166,751 $ — 225,997

4 unchanged sentences

_________________

(1) Certain investments measured using NAV as a practical expedient have not been classified in the fair value hierarchy.

(1) Certain investments measured using net asset value (“NAV”) as a practical expedient have not been classified in the fair value hierarchy.

The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets.

3 unchanged sentences

NOTE 14 - RETIREMENT PLANS (Continued)

Assets of the UK Plan are allocated within the fair value hierarchy discussed in Note 10 - Fair Value Measurements, based on the nature of the investment.

Level 1 assets represent cash and cash equivalents.

Level 2 assets consist of corporate debt funds, government bond funds, and equity funds whose underlying investments are valued using observable marketplace inputs.

The fair value of the Level 2 assets are generally determined under a market approach using valuation models that incorporate observable inputs such as interest rates, bond yields, and quoted prices.

Investments valued using NAV as a practical expedient are excluded from the fair value hierarchy.

These investments include:

corporate debt, global credit, and structured debt, and (b) funds which aim to provide long-term income through investment in UK property assets.

These investments are redeemable at NAV on a monthly or quarterly basis and have redemption notice periods of up to 90 days.

In addition, certain of these investments are subject to a lockup period of up to 24 months.

The methods described above may produce fair values that may not be indicative of net realizable value or reflective of future fair values.

Contributions

9 unchanged sentences

Succeeding five years $ 69,416

The following table shows certain information for the UK Plan where the accumulated benefit obligation is in excess of plan assets as of December 31, 2020 and 2019 (in thousands):

Projected benefit obligation $ 383,142 $ 322,766

Accumulated benefit obligation $ 383,142 $ 322,766

Fair value of plan assets $ 347,411 $ 307,001

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

The benefit obligation associated with these plans as of December 31, 2020 and 2019 was approximately $ 9.2 million.

The benefit obligation associated with these plans as of December 31, 2021 and 2020 was approximately $ 8.5 million and $ 9.2 million, respectively.

The estimated fair value of the plan assets as of December 31, 2021 and 2020 was approximately $ 6.3 million and $ 6.0 million, respectively.

4 unchanged sentences

Also, included was an expected rate of return of 7.00 % for both 2021 and 2020.

The net periodic pension cost associated with the domestic plans was approximately $0.3 million for each of the years ended December 31, 2020, 2019, and 2018.

The reclassification adjustment, net of income taxes, from accumulated other comprehensive loss into net periodic pension cost was approximately $ 0.3 million for the year ended December 31, 2020, and approximately $ 0.2 million for each of the years ended December 31, 2019, and 2018.

The net periodic pension cost associated with the domestic plans was approximately $ 0.1 million for the year ended December 31, 2021 and $ 0.3 million for each of the years ended December 31, 2020 and 2019.

The reclassification adjustment, net of income taxes, from accumulated other comprehensive loss into net periodic pension cost was approximately $ 0.3 million for each of the years ended December 31, 2021 and 2020, and approximately $ 0.2 million for the year ended December 31, 2019.

The estimated loss for these plans that will be amortized from accumulated other comprehensive loss into net periodic pension cost over the next year is approximately $ 0.1 million, net of income taxes.

The future estimated benefit payments expected to be paid from the plans for the next ten years is approximately $ 0.6 million per year.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - RETIREMENT PLANS (Continued)

Defined Contribution Plans

We have defined contribution retirement and savings plans that cover eligible employees in the United States.

Contributions to these plans are based on a percentage of the employee’s base compensation.

The expenses recognized for employer contributions to these plans were approximately $ 33.0 million for the year ended December 31, 2021 and approximately $ 32.4 million for each of the years ended December 31, 2020 and 2019.

At our discretion and subject to applicable plan documents, we may make additional supplemental matching contributions to one of our defined contribution retirement and savings plans.

The expenses recognized related to additional supplemental matching contributions for the years ended December 31, 2021, 2020, and 2019 were approximately $ 7.7 million, $ 9.1 million, and $ 6.8 million, respectively.

Our United Kingdom subsidiary also has defined contribution retirement plans.

The expense recognized related to employer matching contributions for the years ended December 31, 2021, 2020, and 2019 was approximately $ 8.3 million, $ 7.4 million, and $ 6.1 million, respectively.

Multiemployer Plans

We participate in approximately 200 multiemployer pension plans (“MEPPs”) that provide retirement benefits to certain union employees in accordance with various collective bargaining agreements (“CBAs”).

As one of many participating employers in an MEPP, we are potentially liable with the other participating employers for such plan's underfunding either through an increase in our required contributions or, in the case of our withdrawal from the plan, a payment based upon our proportionate share of the plan's unfunded benefits, in each case, as described below.

As one of many participating employers in an MEPP, we are potentially liable with the other participating employers for any plan underfunding, either through an increase in our required contributions or, in the case of our withdrawal from the plan, a payment based upon our proportionate share of the plan's unfunded benefits, in each case, as described below.

Our contributions to a particular MEPP are established by the applicable CBAs;

1 unchanged sentence

Factors that could impact the funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions, and the utilization of extended amortization provisions.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - RETIREMENT PLANS - (Continued)

An FIP or RP requires a particular MEPP to adopt measures to correct its underfunding status.

5 unchanged sentences

We believe that certain of the MEPPs in which we participate may have unfunded vested benefits.

Due to uncertainty regarding future factors that could trigger withdrawal liability, as well as the absence of specific information regarding the MEPP’s current financial situation, we are unable to determine (a) the amount and timing of a future withdrawal liability, if any, and (b) whether our participation in these MEPPs could have a material adverse impact on our financial position, results of operations or liquidity.

(a) the amount and timing of a future withdrawal liability, if any, and (b) whether our participation in these MEPPs could have a material adverse impact on our financial position, results of operations, or liquidity.

We did not record any withdrawal liability for the years ended December 31, 2021, 2020, and 2019.

The following table lists all domestic MEPPs to which our contributions exceeded $ 2.0 million in 2020.

Additionally, this table also lists all domestic MEPPs to which we contributed in 2020 in excess of $ 0.5 million for MEPPs in the critical status, “red zone,” and $ 1.0 million for MEPPs in the endangered status, “orange or yellow zones,” as defined by the PPA (in thousands):

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - RETIREMENT PLANS (Continued)

The following table lists all MEPPs to which our contributions exceeded $ 2.0 million in 2021.

This table also lists all MEPPs to which we contributed in 2021 in excess of $ 0.5 million for MEPPs in the critical status, “red zone,” and $ 1.0 million for MEPPs in the endangered status, “orange or yellow zones,” as defined by the PPA (in thousands):

Pension Fund EIN/Pension Plan Number PPA Zone Status (1)

3 unchanged sentences

2021 2020 2021 2020 2019

National Automatic Sprinkler Industry Pension Fund 52-6054620 001 Red Red Implemented $ 17,504 $ 15,924 $ 14,888 No March 2021 to

Plumbers & Pipefitters National Pension Fund 52-6152779 001 Yellow Yellow Implemented 14,095 13,821 11,868 No February 2021 to

Sheet Metal Workers National Pension Fund 52-6112463 001 Yellow Yellow Implemented 11,621 11,713 10,895 No April 2021 to

National Electrical Benefit Fund 53-0181657 001 Green Green NA 11,573 16,901 10,700 No February 2021 to

September 2024

Pension, Hospitalization & Benefit Plan of the Electrical Industry-Pension Trust Account 13-6123601 001 Green Green NA 11,264 10,075 10,469 No January 2021 to April 2022

National Automatic Sprinkler Industry Pension Fund 52-6054620 001 Green Red NA $ 20,987 $ 17,504 $ 15,924 Yes March 2022 to

United Association National Pension Fund (Formerly Plumbers & Pipefitters National Pension Fund) 52-6152779 001 Green Yellow NA 14,723 14,095 13,821 No February 2022 to

National Electrical Benefit Fund 53-0181657 001 Green Green NA 12,310 11,573 16,901 No April 2022 to

Pension, Hospitalization & Benefit Plan of the Electrical Industry-Pension Trust Account 13-6123601 001 Green Green NA 12,291 11,264 10,075 No April 2022 to June 2024

Sheet Metal Workers National Pension Fund 52-6112463 001 Yellow Yellow Implemented 10,307 11,621 11,713 No May 2022 to

Electrical Workers Local No.

26 Pension Trust Fund 52-6117919 001 Green Green NA 7,086 8,434 5,485 Yes May 2021 to October 2023

26 Pension Trust Fund 52-6117919 001 Green Green NA 9,346 7,086 8,434 Yes May 2022 to July 2024

Sheet Metal Workers Pension Plan of Northern California 51-6115939 001 Red Red Implemented 7,850 6,605 6,233 No June 2022 to June 2026

Central Pension Fund of the IUOE & Participating Employers 36-6052390 001 Green Green NA 6,115 6,253 6,384 No February 2021 to

December 2023

Southern California IBEW-NECA Pension Trust Fund 95-6392774 001 Yellow Yellow Implemented 5,719 6,277 5,754 No May 2021 to

November 2023

Plumbers Pipefitters & Mechanical Equipment Service Local Union 392 Pension Plan 31-0655223 001 Red Red Implemented 7,110 5,667 6,412 Yes June 2022

San Diego Electrical Pension Plan 95-6101801 001 Green Green NA 4,383 3,843 3,008 Yes May 2021 to May 2022

Central Pension Fund of the IUOE & Participating Employers 36-6052390 001 Green Green NA 6,627 6,115 6,253 No March 2022 to

December 2024

Southern California Pipe Trades Retirement Fund 51-6108443 001 Green Green NA 6,272 4,043 3,274 No June 2022 to

Pipefitters Union Local 537 Pension Fund 51-6030859 001 Green Green NA 5,922 4,275 4,754 Yes February 2022 to August 2025

Heating, Piping & Refrigeration Pension Fund 52-1058013 001 Green Green NA 5,591 3,349 4,185 No July 2022

Southern California IBEW-NECA Pension Trust Fund 95-6392774 001 Yellow Yellow Implemented 4,876 5,719 6,277 No June 2022 to

Edison Pension Plan 93-6061681 001 Green Green NA 4,229 3,864 5,361 Yes December 2023

Electrical Contractors Association of the City of Chicago Local Union 134, IBEW Joint Pension Trust of Chicago Pension Plan 2 51-6030753 002 Green Green NA 4,225 3,004 3,204 No May 2022 to June 2022

Arizona Pipe Trades Pension Trust Fund 86-6025734 001 Green Green NA 4,076 4,142 6,071 Yes May 2022 to June 2024

San Diego Electrical Pension Plan 95-6101801 001 Green Green NA 4,068 4,383 3,843 Yes May 2024

Local 393 Pension Trust Fund Defined Benefit 94-6359772 002 Green Green NA 3,507 3,168 3,858 Yes June 2022 to June 2024

Boilermaker-Blacksmith National Pension Trust 48-6168020 001 Yellow Yellow Implemented 3,479 1,574 1,681 No April 2022 to September 2024

Sheet Metal Workers Pension Plan of Southern California, Arizona & Nevada 95-6052257 001 Yellow Yellow Implemented 3,322 2,706 2,423 No June 2022 to June 2026

Eighth District Electrical Pension Fund 84-6100393 001 Green Green NA 3,298 3,242 3,590 Yes May 2023 to August 2024

Northern California Pipe Trades Pension Plan 94-3190386 001 Green Green NA 2,663 2,463 3,077 No June 2022 to June 2024

EMCOR Group, Inc.

3 unchanged sentences

Pension Fund EIN/Pension Plan Number PPA Zone Status (1)

Status Contributions Contributions greater than 5% of total plan contributions (2)

Status Contributions

Contributions greater than 5% of total plan contributions (2)

date or range of expiration dates of CBA(s)

2021 2020 2021 2020 2019

Pipefitters Union Local 537 Pension Fund 51-6030859 001 Green Green NA 4,275 4,754 6,038 Yes February 2021 to September 2021

Arizona Pipe Trades Pension Trust Fund 86-6025734 001 Green Green NA 4,142 6,071 2,640 Yes June 2021

Southern California Pipe Trades Retirement Fund 51-6108443 001 Green Green NA 4,043 3,274 3,095 No June 2021 to June 2026

Edison Pension Plan 93-6061681 001 Green Green NA 3,864 5,361 3,140 Yes December 2021

Heating, Piping & Refrigeration Pension Fund 52-1058013 001 Green Green NA 3,349 4,185 2,619 No July 2022

Eighth District Electrical Pension Fund 84-6100393 001 Green Green NA 3,242 3,590 3,486 Yes February 2021 to May 2023

Local 393 Pension Trust Fund Defined Benefit 94-6359772 002 Green Green NA 3,168 3,858 4,298 Yes June 2021 to July 2021

Electrical Contractors Association of the City of Chicago Local Union 134, IBEW Joint Pension Trust of Chicago Pension Plan 2 51-6030753 002 Green Green NA 3,004 3,204 4,308 No June 2021

Local 38 Defined Benefit Pension Plan 94-1285319 001 Green Green NA 2,874 2,030 1,551 No June 2021 to June 2023

Sheet Metal Workers Pension Plan of Southern California, Arizona & Nevada 95-6052257 001 Yellow Yellow Implemented 2,706 2,423 1,934 No June 2021 to June 2026

Northern California Pipe Trades Pension Plan 94-3190386 001 Green Green NA 2,463 3,077 3,104 No June 2021

Atlanta Plumbers and Steamfitters Pension Fund 58-1233396 001 Green Green NA 2,496 1,576 310 Yes May 2022 to January 2025

NECA-IBEW Pension Trust Fund 51-6029903 001 Green Green NA 2,491 2,369 2,528 No May 2022 to December 2022

IBEW 332 Pension Fund - Part A 94-2688032 004 Green Green NA 2,339 1,211 1,633 No May 2024

Plumbers Local 24 Pension Fund 22-6042823 001 Green Green NA 2,270 2,460 2,460 Yes April 2025

NECA-IBEW Pension Trust Fund 51-6029903 001 Green Green NA 2,369 2,528 2,650 Yes May 2021 to December 2021

Northern California Electrical Workers Pension Plan 94-6062674 001 Green Green NA 2,263 965 1,075 No May 2021 to May 2022

Plumbing & Pipe Fitting Local 219 Pension Fund 34-6682376 001 Red Red Implemented 1,680 1,937 2,197 Yes May 2023

Boilermaker-Blacksmith National Pension Trust 48-6168020 001 Yellow Red Implemented 1,574 1,681 1,446 No September 2021 to

September 2023

Plumbers & Pipefitters Local Union No.

502 & 633 Pension Fund 61-6078145 001 Yellow Yellow Implemented 1,271 1,596 1,167 No May 2021 to July 2022

Local 701 Pension Fund 36-6455509 001 Yellow Yellow Implemented 1,197 915 588 No May 2021 to December 2021

IBEW Local 595 Pension Plan 94-6279541 001 Green Green NA 2,042 569 1,653 No November 2022 to

Plumbing & Pipe Fitting Local 219 Pension Fund 34-6682376 001 Red Red Implemented 1,167 1,680 1,937 Yes May 2022 to May 2025

Plumbers & Pipefitters Local 162 Pension Fund 31-6125999 001 Yellow Yellow Implemented 1,034 969 1,124 Yes May 2022

Steamfitters Local Union No.

420 Pension Plan 23-2004424 001 Red Red Implemented 553 641 706 No May 2023

420 Pension Plan 23-2004424 001 Red Red Implemented 677 553 641 No May 2022 to April 2024

South Florida Electrical Workers Pension Plan and Trust 59-6230530 001 Red Red Implemented 594 261 323 No August 2022

Carpenters Pension Trust Fund for Northern California 94-6050970 001 Red Red Implemented 568 385 435 No June 2023

Other Multiemployer Pension Plans 55,315 54,587 55,070 Various

8 unchanged sentences

Accordingly, if the annual contribution of two or more of our subsidiaries each accounted for less than 5% of such contributions, but in the aggregate accounted for in excess of 5% of such contributions, that greater percentage is not available and accordingly is not disclosed.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - RETIREMENT PLANS - (Continued)

The nature and diversity of our operations may result in volatility in the amount of our contributions to a particular MEPP for any given period.

4 unchanged sentences

Our contributions to these plans were approximately $ 168.4 million, $ 156.1 million, and $ 153.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Acquisitions made by use since 2018 have resulted in incremental contributions to other post retirement benefit plans of approximately $ 15.6 million.

Acquisitions made by use since 2019 have resulted in incremental contributions to such other post retirement benefit plans of approximately $ 2.9 million.

The amount of contributions to these plans is also subject, for the most part, to the factors discussed above in conjunction with the MEPPs.

Defined Contribution Plans

We have defined contribution retirement and savings plans that cover eligible employees in the United States.

Contributions to these plans are based on a percentage of the employee’s base compensation.

The expenses recognized for employer contributions to these plans were approximately $ 32.4 million for each of the years ended December 31, 2020 and 2019 and approximately $ 29.8 million for the year ended December 31, 2018.

At our discretion and subject to applicable plan documents, we may make additional supplemental matching contributions to one of our defined contribution retirement and savings plans.

The expenses recognized related to additional supplemental matching contributions for the years ended December 31, 2020, 2019, and 2018 were approximately $ 9.1 million, $ 6.8 million, and $ 6.1 million, respectively.

Our United Kingdom subsidiary also has defined contribution retirement plans.

The expense recognized related to employer matching contributions for the years ended December 31, 2020, 2019, and 2018 was approximately $ 7.4 million, $ 6.1 million, and $ 4.9 million, respectively.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Contractual Guarantees

Severance Agreements

We have agreements with our executive officers and certain other key management personnel providing for severance benefits for such employees upon termination of their employment under certain circumstances.

2 unchanged sentences

Historically, we have not incurred any substantial liabilities as a consequence of these guarantees.

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.

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.

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 may be issued as collateral for certain insurance obligations.

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

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.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - COMMITMENTS AND CONTINGENCIES - (Continued)

Hazardous Materials

We are subject to regulation with respect to the handling of certain materials used in construction, which are classified as hazardous or toxic by federal, state, and local agencies.

1 unchanged sentence

However, when remediation is required as part of our contract performance, we believe we comply with all applicable regulations governing the discharge of hazardous materials into the environment or otherwise relating to the protection of the environment.

At December 31, 2020, we employed approximately 33,000 people, approximately 59 % of whom are represented by various unions pursuant to approximately 400 collective bargaining agreements between our individual subsidiaries and local unions.

We believe that our employee relations are generally good.

Only two of these collective bargaining agreements are national or regional in scope.

Restructuring expenses, related to employee severance obligations, were $ 2.2 million, $ 1.5 million, and $ 2.3 million for the years ended December 31, 2020, 2019, and 2018, respectively.

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

The balance of such obligations as of December 31, 2019 and 2018 was $ 1.6 million.

The majority of obligations outstanding as of December 31, 2019 and 2018 were paid during 2020 and 2019, 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 changes in restructuring activity by reportable segment during the years ended December 31, 2020 and 2019 were as follows (in thousands):

United States

and facilities

services segment United States

and facilities

services segment United States

services segment Corporate administration Total

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

Charges 445 — 1,078 — 1,523

Payments ( 30 ) — ( 842 ) ( 723 ) ( 1,595 )

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

Charges 1,072 1,073 69 — 2,214

Payments ( 239 ) — ( 481 ) ( 355 ) ( 1,075 )

Balance at December 31, 2020 $ 1,278 $ 1,073 $ — $ 346 $ 2,697

Collective Bargaining Agreements

At December 31, 2021, we employed approximately 34,000 people, approximately 60 % of whom are represented by various unions pursuant to nearly 450 collective bargaining agreements between our individual subsidiaries or trade associations and local unions, as well as two collective bargaining agreements that are national or regional in scope.

We believe that our relations with our labor unions are generally positive.

Government Contracts

2 unchanged sentences

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

Computer System Attack

On February 15, 2020, we became aware 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.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - COMMITMENTS AND CONTINGENCIES - (Continued)

Legal Proceedings

9 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - LEASES

20 unchanged sentences

Amounts probable of being owed under these guarantees are included within the measurement of the right-of-use asset and lease liability.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - LEASES - (Continued)

Lease Position

The following table presents the lease-related assets and liabilities as of December 31, 2020 and 2019 (in thousands):

The following table presents our lease-related assets and liabilities as of December 31, 2021 and 2020 (in thousands):

Classification on the Consolidated Balance Sheet December 31,

8 unchanged sentences

Total lease liabilities $ 286,687 $ 268,960

The following table presents information related to lease expense for the years ended December 31, 2020 and 2019 (in thousands):

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - LEASES (Continued)

The following table presents information related to our lease expense for the years ended December 31, 2021, 2020, and 2019 (in thousands):

2021 2020 2019

Finance lease expense:

3 unchanged sentences

Short-term lease expense (1)

150,500 139,706 149,528

Variable lease expense 5,421 5,441 4,924

Total lease expense $ 231,359 $ 219,272 $ 226,104

Rent expense for operating leases and other rental items, including short-term equipment rentals, for the year ended December 31, 2018 was approximately $ 191.8 million.

For each of the years ended December 31, 2020, 2019, and 2018, sublease rental income was approximately $ 0.5 million.

_________________

(1) Short-term lease expense includes both leases and rentals with initial terms of one year or less and predominantly represents equipment used on construction projects.

Sublease rental income was approximately $ 0.2 million for the year ended December 31, 2021, and $ 0.5 million for each of the years ended December 31, 2020 and 2019.

Lease Term and Discount Rate

The following table presents certain information related to lease terms and discount rates for leases as of December 31, 2020 and 2019:

The following table presents certain information related to the lease terms and discount rates for our leases as of December 31, 2021 and 2020:

2021 December 31,

5 unchanged sentences

Finance leases 2.61 % 3.24 %

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - LEASES - (Continued)

Other Information

The following table presents supplemental cash flow information related to leases for the years ended December 31, 2020 and 2019 (in thousands):

The following table presents supplemental cash flow information related to our leases for the years ended December 31, 2021, 2020, and 2019 (in thousands):

2021 2020 2019

Cash paid for amounts included in the measurement of lease liabilities:

4 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities $ 2,301 $ 4,558 $ 5,311

For the year ended December 31, 2018, assets acquired under capital leases amounted to approximately $ 1.1 million.

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - LEASES (Continued)

Maturity of Lease Liabilities

The following table reconciles future minimum lease payments on an undiscounted cash flow basis to the lease liabilities reported in the Consolidated Balance Sheet as of December 31, 2020 (in thousands):

The following table reconciles our future minimum lease payments on an undiscounted cash flow basis to our lease liabilities reported in the Consolidated Balance Sheet as of December 31, 2021 (in thousands):

Operating Leases Finance Leases

17 unchanged sentences

Income taxes $ 130,811 $ 145,386 $ 126,169

NOTE 18 - SEGMENT INFORMATION

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

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.

EMCOR Group, Inc.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 - SEGMENT INFORMATION

We have the following reportable segments:

(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.

NOTE 18 - SEGMENT INFORMATION (Continued)

The following tables present financial information for each of our reportable segments for the years ended December 31, 2021, 2020, and 2019 (in thousands):

8 unchanged sentences

Total operations $ 9,903,580 $ 8,797,061 $ 9,174,611

2021 2020 2019

Total revenues:

7 unchanged sentences

Total operations $ 9,903,580 $ 8,797,061 $ 9,174,611

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 - SEGMENT INFORMATION - (Continued)

2021 2020 2019

11 unchanged sentences

Total operations 530,800 256,834 460,892

Other corporate items:

Net periodic pension (cost) income 3,625 2,980 1,553

1 unchanged sentence

Interest income 949 1,521 2,265

Income from continuing operations before income taxes $ 252,326 $ 450,889 $ 395,028

Income before income taxes $ 529,303 $ 252,326 $ 450,889

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18 - SEGMENT INFORMATION (Continued)

2021 2020 2019

Capital expenditures:

7 unchanged sentences

Total operations $ 36,192 $ 47,969 $ 48,432

2021 2020 2019

Depreciation and amortization of property, plant and equipment:

7 unchanged sentences

Total operations $ 48,347 $ 46,721 $ 43,945

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 - SEGMENT INFORMATION - (Continued)

2020 2019 2018

December 31, 2021 December 31, 2020 December 31, 2019

Contract assets:

6 unchanged sentences

Total operations $ 230,143 $ 171,956 $ 177,830

December 31, 2021 December 31, 2020 December 31, 2019

Contract liabilities:

6 unchanged sentences

Total operations $ 788,134 $ 722,252 $ 623,642

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18 - SEGMENT INFORMATION (Continued)

December 31, 2021 December 31, 2020 December 31, 2019

Long-lived assets:

7 unchanged sentences

Total operations $ 1,631,699 $ 1,593,103 $ 1,831,542

December 31, 2021 December 31, 2020 December 31, 2019

Total assets:

7 unchanged sentences

Total operations $ 5,441,446 $ 5,063,840 $ 4,830,358

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 - SELECTED UNAUDITED QUARTERLY INFORMATION

(In thousands, except per share data)

Quarterly and year-to-date computations of per share amounts are made independently;

therefore, the sum of per share amounts for the quarters may not equal per share amounts for the year.

March 31 June 30 Sept.

2020 Quarterly Results

Revenues $ 2,299,832 $ 2,014,021 $ 2,201,714 $ 2,281,494

Gross profit $ 333,061 $ 315,286 $ 363,184 $ 383,851

Impairment loss on goodwill, identifiable intangible assets,

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

Net income attributable to EMCOR Group, Inc.

$ 75,665 $ ( 83,689 ) $ 61,186 $ 79,781

Basic EPS from continuing operations $ 1.35 $ ( 1.52 ) $ 1.11 $ 1.45

Diluted EPS from continuing operations $ 1.35 $ ( 1.52 ) $ 1.11 $ 1.45

March 31 June 30 Sept.

2019 Quarterly Results

Revenues $ 2,158,728 $ 2,324,202 $ 2,287,741 $ 2,403,940

Gross profit $ 308,754 $ 346,380 $ 335,987 $ 364,747

Net income attributable to EMCOR Group, Inc.

$ 72,410 $ 83,972 $ 81,834 $ 86,924

Basic EPS from continuing operations $ 1.29 $ 1.49 $ 1.46 $ 1.54

Diluted EPS from continuing operations $ 1.28 $ 1.49 $ 1.45 $ 1.54

NOTE 21 - SUBSEQUENT EVENTS

Subsequent to December 31, 2020, we acquired two companies, each for an immaterial amount.

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

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

The acquisition of these businesses will be accounted for by the acquisition method, and the amounts paid will be allocated to their respective assets and liabilities, based upon the estimated fair value of such assets and liabilities at the respective date of acquisition by us.

Report of Independent Registered Public Accounting Firm

22 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition from Long-term Construction Contracts

Description of the Matter As described in Note 3 to the consolidated financial statements, the Company generally recognizes revenue from long-term construction contracts over time using a cost-to-cost input method in which the extent of progress is measured based on the ratio of costs incurred to date to the total estimated costs at completion.

Revenue Recognition from Construction Contracts

Description of the Matter As described in Note 3 to the consolidated financial statements, the Company generally recognizes revenue from construction contracts over time using a cost-to-cost input method in which the extent of progress is measured based on the ratio of costs incurred to date to the total estimated costs at completion.

In addition, the revenue recognition process requires the Company to determine the transaction price that represents the amount of consideration to which the Company expects to be entitled.

A significant portion of the Company’s revenues for the year ended December 31, 2020 were derived from long-term construction contracts.

The determination of revenue recognized from long-term construction contracts commonly requires the Company to estimate variable consideration that arises from pending change orders, contract claims, contract bonuses, and penalties, as well as to prepare estimates of the costs to complete contracts.

A significant portion of the Company’s revenues for the year ended December 31, 2021 were derived from construction contracts.

The determination of revenue recognized from construction contracts commonly requires the Company to estimate variable consideration that arises from pending change orders, contract claims, contract bonuses, and penalties, as well as to prepare estimates of the costs to complete contracts.

Factors inherent in the estimation processes include, among others, historical experience with customers, the potential long-term nature of dispute resolutions, actions of third parties as well as the Company’s experience with similar types of contracts.

Due to uncertainties attributed to such factors, auditing revenue recognized from long-term construction contracts involved especially challenging, subjective, and complex judgments.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls related to revenue recognition from long-term construction contracts.

Due to uncertainties attributed to such factors, auditing revenue recognized from construction contracts involved especially challenging, subjective, and complex judgments.

For example, we tested controls over the Company’s determination and review of estimates of variable consideration, costs to complete, and the completeness and accuracy of data utilized in conjunction with such estimation processes.

To test the amount of revenue recognized from long-term construction contracts in the current period, we selected a sample of contracts and performed procedures to test the project revenue and cost forecasts.

To test the amount of revenue recognized from construction contracts in the current period, we selected a sample of contracts and performed procedures to test the project revenue and cost forecasts.

For example, we obtained and inspected the related contract agreements, amendments, and change orders to test the existence of customer arrangements and understand the scope and pricing of the related projects;

6 unchanged sentences

Description of the Matter At December 31, 2021, the Company’s goodwill and indefinite-lived trade name intangible assets were approximately $890.3 million and $215.8 million, respectively.

As discussed in Note 9 to the consolidated financial statements, goodwill and trade names with indefinite lives are tested for impairment at least annually and during any interim period(s) in which impairment indicators are identified.

During 2020, the Company recorded a goodwill impairment charge of $225.5 million related to its Industrial Services reporting unit and impairment charges of $6.7 million related to certain of its indefinite-lived trade name intangible assets.

Auditing management’s interim and annual impairment tests was especially complex and subjective due to the significant estimation required in determining the fair value of the reporting units for goodwill and the fair value of trade name intangible assets.

As discussed in Note 8 to the consolidated financial statements, goodwill and trade names with indefinite lives are tested for impairment at least annually.

Auditing management’s annual impairment tests was especially complex and subjective due to the significant estimation required in determining the fair value of the reporting units for goodwill and the fair value of trade name intangible assets.

In particular, the fair value estimates for goodwill were sensitive to significant assumptions inherent in the Company’s discounted estimated future cash flows such as the weighted average cost of capital, revenue growth rates, and operating margins.

7 unchanged sentences

In addition, we reviewed the reconciliation of the aggregate fair value of the Company’s reporting units to the market capitalization of the Company.

/s/ E RNST & Y OUNG LLP

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

26 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ E RNST & Y OUNG LLP

/s/ Ernst & Young LLP

Stamford, Connecticut

3 unchanged sentences

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 8. Financial Statements and Supplementary Data