What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 152 added, 396 removed, 564 unchanged (49% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

(Unaudited) December 31,

45 unchanged sentences

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

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

2021 2020 2021 2020

Three months ended

Revenues $ 2,592,549 $ 2,304,049

2 unchanged sentences

Selling, general and administrative expenses 252,598 224,069

Restructuring expenses — 536 — 605

Impairment loss on goodwill, identifiable intangible assets,

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

Operating income 99,957 117,004

15 unchanged sentences

(In thousands)(Unaudited)

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

2021 2020 2021 2020

Three months ended

Net income including noncontrolling interests $ 73,386 $ 84,945

3 unchanged sentences

loss included in net income (1)

800 540 2,412 1,636

Other comprehensive (loss) income ( 2,387 ) 1,389

Comprehensive income 70,999 86,334

Comprehensive income attributable to

noncontrolling interests — — 169 —

Comprehensive income attributable to noncontrolling interests — 171

Comprehensive income attributable to EMCOR Group, Inc.

$ 70,999 $ 86,163

(1) Net of tax of $ 0.2 million for each of the three months ended September 30, 2021 and 2020, and net of tax of $ 0.6 million and $ 0.4 million for the nine months ended September 30, 2021 and 2020, respectively.

(1) Net of tax of $ 0.2 million for each of the three months ended March 31, 2022 and 2021.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(In thousands)(Unaudited)

Nine months ended September 30,

Three months ended March 31,

Cash flows - operating activities:

Net income including noncontrolling interests $ 73,386 $ 84,945

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

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

Depreciation and amortization 11,578 12,001

Amortization of identifiable intangible assets 15,551 14,989

Provision for credit losses 5,829 3,409

Deferred income taxes ( 3,650 ) ( 28,104 )

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

and other long-lived assets — 232,750

Non-cash share-based compensation expense 3,438 3,193

1 unchanged sentence

Changes in operating assets and liabilities, excluding the effect of businesses acquired ( 199,541 ) ( 203,899 )

Net cash provided by operating activities 113,941 546,834

Net cash used in operating activities ( 95,814 ) ( 88,989 )

Cash flows - investing activities:

2 unchanged sentences

Purchases of property, plant and equipment ( 11,501 ) ( 8,204 )

Distributions from unconsolidated entities 196 —

Net cash used in investing activities ( 13,953 ) ( 31,764 )

Cash flows - financing activities:

Proceeds from revolving credit facility — 200,000

Repayments of revolving credit facility — ( 250,000 )

Proceeds from long-term debt — 300,000

Repayments of long-term debt and debt issuance costs — ( 280,049 )

Repayments of finance lease liabilities ( 979 ) ( 1,145 )

7 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 3,419 ) 886

(Decrease) increase in cash, cash equivalents, and restricted cash ( 238,542 ) 320,717

Decrease in cash, cash equivalents, and restricted cash ( 306,699 ) ( 143,805 )

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

3 unchanged sentences

(1) Includes $ 1.2 million and $ 0.7 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively.

(2) Includes $ 1.1 million and $ 1.3 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of September 30, 2021 and 2020, respectively.

See Notes to Consolidated Financial Statements.

EMCOR Group, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended September 30, 2020 and 2021

(In thousands)(Unaudited)

EMCOR Group, Inc.

stock Capital

surplus Accumulated other comprehensive loss (1)

earnings Treasury

stock Noncontrolling

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

Net income including noncontrolling interests 61,186 — — — 61,186 — —

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

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

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

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

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

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

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

Net income including noncontrolling interests 99,740 — — — 99,740 — —

Other comprehensive loss ( 887 ) — — ( 887 ) — — —

Tax withholding for common stock issued under share-based compensation plans ( 249 ) — ( 249 ) — — — —

Common stock issued under employee stock purchase plan 1,857 — 1,857 — — — —

Common stock dividends ( 6,988 ) — 44 — ( 7,032 ) — —

Repurchases of common stock ( 45,217 ) — — — — ( 45,217 ) —

Share-based compensation expense 2,617 — 2,617 — — — —

Balance, September 30, 2021 $ 2,142,050 $ 607 $ 57,473 $ ( 107,812 ) $ 2,740,817 $ ( 549,737 ) $ 702

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

(2) Includes $ 1.4 million and $ 0.9 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of March 31, 2022 and 2021, respectively.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the nine months ended September 30, 2020 and 2021

For the three months ended March 31, 2021 and 2022

(In thousands)(Unaudited)

7 unchanged sentences

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

Cumulative-effect adjustment (2)

( 2,307 ) — — — ( 2,307 ) — —

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

6 unchanged sentences

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

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

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

Balance, December 31, 2021 $ 2,253,089 $ 607 $ 61,874 $ ( 83,562 ) $ 2,835,504 $ ( 562,036 ) $ 702

Net income including noncontrolling interests 73,386 — — — 73,386 — —

Other comprehensive income 1,421 — — 1,421 — — —

Other comprehensive loss ( 2,387 ) — — ( 2,387 ) — — —

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

3 unchanged sentences

Repurchases of common stock ( 181,810 ) — — — — ( 181,810 ) —

Distributions to

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

Share-based compensation expense 3,438 — 3,438 — — — —

Balance, September 30, 2021 $ 2,142,050 $ 607 $ 57,473 $ ( 107,812 ) $ 2,740,817 $ ( 549,737 ) $ 702

Balance, March 31, 2022 $ 2,135,798 $ 608 $ 62,374 $ ( 85,949 ) $ 2,901,909 $ ( 743,846 ) $ 702

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

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

See Notes to Consolidated Financial Statements.

10 unchanged sentences

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

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

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

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

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

NOTE 2 - New Accounting Pronouncements

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

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

The 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.

The Company is currently evaluating the impact of an accounting standards update issued by the Financial Accounting Standards Board (“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.

1 unchanged sentence

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, that 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 Accounting Standards Codification Topic 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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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 (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

(2) Identify the performance obligations in the contract

16 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

5 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

12 unchanged sentences

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

For the three and nine months ended September 30, 2020, we recognized revenue of $ 4.4 million and $ 6.1 million, respectively, associated with the final settlement of 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.

There were no significant amounts of revenue recognized during the three and nine months ended September 30, 2021 related to performance obligations satisfied in prior periods.

In addition, for the three and nine months ended September 30, 2021 and 2020, there were no significant reversals of revenue recognized associated with the revision of transaction prices.

For the three months ended March 31, 2022 and 2021, there were no significant amounts of revenue recognized during the period related to performance obligations satisfied in prior periods.

In addition, for the three months ended March 31, 2022 and 2021, there were no significant reversals of revenue recognized associated with the revision of transaction prices.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

11 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

1 unchanged sentence

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.

6 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

1 unchanged sentence

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

For the three and nine months ended September 30, 2021 and 2020, there were no changes in total estimated costs that had a significant impact on our operating results.

In addition, there were no significant losses recognized during the three and nine months ended September 30, 2021 and 2020.

Based on an evaluation of individual projects that had revisions to total estimated costs, which resulted in a reduction of profitability in excess of $ 1.0 million, our operating results were negatively impacted by approximately $ 10.0 million, during the three months ended March 31, 2022.

Of this amount, approximately $ 4.6 million was recorded within our United States electrical construction and facilities services segment and approximately $ 5.4 million was recorded within our United States mechanical construction and facilities services segment.

There were no changes in total estimated costs that had a significant impact on our operating results during the three months ended March 31, 2021.

Disaggregation of Revenues

1 unchanged sentence

Our contracts are with many different customers in numerous industries.

Refer to Note 15 - 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.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three and nine months ended September 30, 2021 and 2020 (in thousands):

For the three months ended September 30,

Refer to Note 14 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment.

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three months ended March 31, 2022 and 2021 (in thousands):

For the three months ended March 31,

Total 2021 % of

1 unchanged sentence

Commercial market sector $ 270,315 52 % $ 245,841 53 %

Institutional market sector 42,002 8 % 36,230 8 %

Hospitality market sector 2,522 1 % 7,028 1 %

Manufacturing market sector 66,465 13 % 48,454 11 %

Healthcare market sector 32,070 6 % 20,151 4 %

Transportation market sector 49,578 9 % 58,765 12 %

Water and wastewater market sector 4,381 1 % 2,351 1 %

Short duration projects (1)

53,881 10 % 31,008 7 %

Service work 10,931 2 % 6,847 1 %

528,591 473,892

Less intersegment revenues ( 656 ) ( 1,808 )

Total segment revenues $ 527,935 $ 472,084

For the three months ended September 30,

Total 2020 % of

United States mechanical construction and facilities services:

Commercial market sector $ 369,654 37 % $ 346,911 39 %

Institutional market sector 31,766 6 % 43,639 9 %

Hospitality market sector 10,806 1 % 12,570 1 %

Manufacturing market sector 142,250 14 % 93,919 11 %

Healthcare market sector 123,071 12 % 78,814 9 %

Transportation market sector 45,082 8 % 42,031 9 %

Water and wastewater market sector 5,312 1 % 3,651 1 %

Short duration projects (1)

82,510 8 % 84,461 9 %

Service work 121,013 12 % 99,649 11 %

1,001,492 893,667

Less intersegment revenues ( 1,908 ) ( 2,158 )

Total segment revenues $ 999,584 $ 891,509

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended September 30,

Total 2020 % of

United States building services:

Commercial site-based services $ 166,375 26 % $ 147,768 27 %

Government site-based services 49,293 8 % 44,664 8 %

Mobile mechanical services 394,559 62 % 341,279 61 %

Energy services 22,228 4 % 22,803 4 %

Total segment revenues $ 632,455 $ 556,514

For the three months ended September 30,

Total 2020 % of

United States industrial services:

Field services $ 196,846 85 % $ 145,165 85 %

Shop services 35,372 15 % 26,367 15 %

Total segment revenues $ 232,218 $ 171,532

Total United States operations $ 2,392,192 $ 2,091,639

For the three months ended September 30,

Total 2020 % of

United Kingdom building services:

Service work $ 65,486 51 % $ 55,594 51 %

Project work 63,994 49 % 54,481 49 %

Total segment revenues $ 129,480 $ 110,075

Total operations $ 2,521,672 $ 2,201,714

For the nine months ended September 30,

Total 2020 % of

United States electrical construction and facilities services:

Commercial market sector $ 773,711 52 % $ 704,361 52 %

Institutional market sector 137,718 9 % 106,314 8 %

Hospitality market sector 2,623 1 % 4,664 1 %

Manufacturing market sector 161,386 11 % 185,290 14 %

Healthcare market sector 74,469 5 % 52,179 4 %

Transportation market sector 144,788 10 % 150,911 11 %

Water and wastewater market sector 9,909 1 % 6,587 1 %

Short duration projects (1)

9 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the nine months ended September 30,

For the three months ended March 31,

Total 2021 % of

1 unchanged sentence

Commercial market sector $ 379,604 38 % $ 366,477 40 %

Institutional market sector 215,635 8 % 289,090 12 %

Hospitality market sector 30,593 1 % 29,382 1 %

Manufacturing market sector 149,571 15 % 121,686 13 %

Healthcare market sector 120,051 12 % 112,656 12 %

Institutional market sector 70,627 7 % 69,304 8 %

Transportation market sector 16,053 2 % 18,417 2 %

Water and wastewater market sector 61,744 6 % 43,848 5 %

Hospitality market sector 8,079 1 % 8,529 1 %

Short duration projects (1)

5 unchanged sentences

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

For the nine months ended September 30,

For the three months ended March 31,

Total 2021 % of

United States building services:

Mobile mechanical services $ 373,571 60 % $ 351,317 62 %

Commercial site-based services 203,550 32 % 175,647 31 %

Government site-based services 50,680 8 % 41,072 7 %

Mobile mechanical services 1,128,322 61 % 943,729 61 %

Energy services 78,603 4 % 70,094 4 %

Total segment revenues $ 627,801 $ 568,036

For the nine months ended September 30,

For the three months ended March 31,

Total 2021 % of

4 unchanged sentences

Total United States operations $ 2,461,052 $ 2,177,314

For the nine months ended September 30,

For the three months ended March 31,

Total 2021 % of

15 unchanged sentences

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

At September 30, 2021 and December 31, 2020, our allowance for credit losses was $ 22.6 million and $ 18.0 million, respectively.

The increase in our allowance for credit losses was predominantly attributable to our evaluation of a specific outstanding receivable within our United States industrial services segment during the second quarter of 2021.

At March 31, 2022 and December 31, 2021, our allowance for credit losses was $ 23.0 million and $ 23.5 million, respectively.

The decrease in our allowance for credit losses was predominantly attributable to the write-off of specific amounts deemed unrecoverable.

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

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

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

The change in the allowance for credit losses for the three months ended March 31, 2022 was as follows (in thousands):

Balance at December 31, 2021 $ 23,534

1 unchanged sentence

Amounts written off against the allowance, net of recoveries ( 593 )

Balance at September 30, 2021 $ 22,627

Balance at March 31, 2022 $ 22,956

Contract Assets and Contract Liabilities

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

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

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

11 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

September 30,

Net contract liabilities in the accompanying Consolidated Balance Sheets consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

2022 December 31, 2021

4 unchanged sentences

Net contract liabilities $ ( 567,252 ) $ ( 560,496 )

Contract assets and contract liabilities increased by approximately $ 8.8 million and $ 24.1 million, respectively, as a result of acquisitions made by us in 2021.

Excluding the impact of acquisitions, net contract liabilities decreased by approximately $ 30.3 million during the nine months ended September 30, 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.

The $ 6.8 million increase in net contract liabilities for the three months ended March 31, 2022 was primarily attributable to an increase in net contract liabilities on our uncompleted construction projects, partially as a result of the timing of invoicing to our customers.

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

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of September 30, 2021 (in thousands, except for percentages):

September 30,

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of March 31, 2022 (in thousands, except for percentages):

2022 % of Total

7 unchanged sentences

Total operations $ 5,952,881 100 %

Our remaining performance obligations at September 30, 2021 were $ 5.38 billion.

Our remaining performance obligations at March 31, 2022 were $ 5.95 billion.

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

25 unchanged sentences

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

During the first nine months of 2021, we acquired five companies for total consideration of $ 125.4 million.

Such companies include:

(a) a company that provides mechanical services within the Southern region of the United States, the results of operations of which have been included in our United States mechanical construction and facilities services segment, (b) 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) two companies, the results of operations of which have been included in our United States building services segment, consisting of:

(i) a company that provides mobile mechanical services across North Texas and (ii) a company that provides building automation and controls solutions in the Southern region of the United States.

During the first quarter of 2022, we acquired a company for an immaterial amount.

This company provides fire protection services in the Northeastern region of the United States.

During calendar year 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.

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 ascribed $ 13.1 million to goodwill and $ 38.1 million to identifiable intangible assets.

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 three of the businesses acquired in 2021 are preliminary and subject to change during their respective measurement periods.

The purchase price allocations for the business acquired in 2022 and one 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 have been finalized during their respective measurement periods with an insignificant impact.

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

EMCOR Group, Inc.

3 unchanged sentences

Calculation of Basic and Diluted Earnings per Common Share

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

The following table summarizes our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three months ended March 31, 2022 and 2021 (in thousands, except share and per share data):

For the three months ended

September 30,

Net income attributable to EMCOR Group, Inc.

5 unchanged sentences

Diluted earnings per common share $ 1.39 $ 1.54

For the nine months ended

September 30,

Net income attributable to EMCOR Group, Inc.

common stockholders $ 281,864 $ 53,162

Weighted average shares outstanding used to compute basic earnings per common share 54,290,002 55,302,385

Effect of dilutive securities—Share-based awards 269,719 207,337

Shares used to compute diluted earnings per common share 54,559,721 55,509,722

Basic earnings per common share $ 5.19 $ 0.96

Diluted earnings per common share $ 5.17 $ 0.96

There were no anti-dilutive share-based awards for the three months ended September 30, 2021.

The number of outstanding share-based awards excluded from the computation of diluted EPS for the nine months ended September 30, 2021 because they would be anti-dilutive were 2,550 .

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

The number of share-based awards excluded from the computation of diluted EPS for the three months ended March 31, 2022 because they would be anti-dilutive were 62,481 .

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

NOTE 6 - Inventories

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

September 30,

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of March 31, 2022 and December 31, 2021 (in thousands):

2022 December 31,

2 unchanged sentences

Inventories $ 71,463 $ 54,098

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Consequently, in the second quarter of 2020, we revised our near-term revenue and operating margin expectations for such segment and concluded that a triggering event had occurred which indicated that it was more likely than not that its fair value was less than its carrying amount.

Accordingly, we performed a quantitative impairment test and determined the fair value of our United States industrial services segment using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital.

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

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

Based on the outcome of our second quarter 2020 interim goodwill impairment test, we concluded that the carrying amount of our United States industrial services segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of $ 225.5 million, which was included within our results of operations for the nine months ended September 30, 2020.

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

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

EMCOR Group, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

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

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

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

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

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

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

Identifiable Intangible Assets and Other Long-Lived Assets

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

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

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

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

This approach involves two steps:

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

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

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

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

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

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

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

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

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

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

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 - Debt

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

September 30,

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of March 31, 2022 and December 31, 2021 (in thousands):

2022 December 31,

6 unchanged sentences

Credit Agreement

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

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

We have a credit agreement dated as of March 2, 2020 , which provides for a $ 1.3 billion revolving credit facility (the “2020 Revolving Credit Facility”) and a $ 300.0 million term loan (the “2020 Term Loan”) (collectively referred to as the “2020 Credit Agreement”) expiring March 2, 2025 .

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

1 unchanged sentence

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

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) United States dollar LIBOR ( 0.08 % at September 30, 2021) plus 1.00 % to 1.75 %, based on certain financial tests.

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) United States dollar LIBOR ( 0.46 % at March 31, 2022) plus 1.00 % to 1.75 %, based on certain financial tests.

The base rate is determined by the greater of:

(a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 3.25 % at September 30, 2021), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00 %, or (d) 0.00 %.

The interest rate in effect at September 30, 2021 was 1.08 %.

(a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 3.50 % at March 31, 2022), (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 March 31, 2022 was 1.46 %.

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

The fee was 0.10 % of the unused amount as of September 30, 2021.

The fee was 0.10 % of the unused amount as of March 31, 2022.

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

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

As of September 30, 2021 and December 31, 2020, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility;

As of March 31, 2022 and December 31, 2021, the balance of the 2020 Term Loan was $ 256.7 million.

As of March 31, 2022 and December 31, 2021, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility;

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

3 unchanged sentences

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

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

We were in compliance with all such covenants as of March 31, 2022 and December 31, 2021.

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

13 unchanged sentences

Recurring Fair Value Measurements

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

Assets at Fair Value as of September 30, 2021

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2022 and December 31, 2021 (in thousands):

Assets at Fair Value as of March 31, 2022

Asset Category Level 1 Level 2 Level 3 Total

11 unchanged sentences

Restricted cash (2)

1,223 — — 1,223

Deferred compensation plan assets (3)

2 unchanged sentences

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

At September 30, 2021 and December 31, 2020, we had $ 365.7 million and $ 482.2 million, respectively, in money market funds.

At March 31, 2022 and December 31, 2021, we had $ 194.6 million and $ 336.0 million, respectively, in money market funds.

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

6 unchanged sentences

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.

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

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

Fair Value of Financial Instruments

5 unchanged sentences

NOTE 9 - Income Taxes

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

The following table presents our income tax provision and our income tax rate for the three months ended March 31, 2022 and 2021 (in thousands, except percentages):

For the three months ended

September 30, For the nine months ended

September 30,

2021 2020 2021 2020

Income tax provision $ 26,451 $ 31,604

1 unchanged sentence

The difference between the U.S.

statutory tax rate of 21 % and our income tax rate for both the three and nine months ended September 30, 2021 and 2020 was primarily a result of state and local income taxes and other permanent book to tax differences, including, in the case of the three and nine months ended September 30, 2020, the tax-effect of the $ 232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the second quarter of 2020, the majority of which were non-deductible for tax purposes.

As of September 30, 2021 and December 31, 2020, we had no unrecognized income tax benefits.

statutory tax rate of 21 % and our income tax rate for both the three months ended March 31, 2022 and 2021 was primarily a result of state and local income taxes and other permanent book to tax differences.

The decrease in our income tax provision for the three months ended March 31, 2022 was a result of a reduction in taxable income as well as a decrease in our income tax rate during the period.

The decrease in our income tax rate for the three months ended March 31, 2022 was attributable to:

(a) a reduction in certain permanent book to tax differences, (b) the favorable impact of certain discrete tax items during the first quarter of 2022, including an increase in the income tax benefit recognized upon the issuance of common stock under our share-based compensation programs, and (c) a reduction in our state income tax rate due to a change in the allocation of earnings among the jurisdictions in which our income is taxed.

As of March 31, 2022 and December 31, 2021, we had no unrecognized income tax benefits.

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

3 unchanged sentences

NOTE 10 - Common Stock

As of September 30, 2021 and December 31, 2020, there were 53,382,560 and 54,755,900 shares of our common stock outstanding, respectively.

During the three months ended September 30, 2021 and 2020, we issued 18,528 and 24,694 shares of common stock, respectively.

During the nine months ended September 30, 2021 and 2020, we issued 145,815 and 186,544 shares of common stock, respectively.

As of March 31, 2022 and December 31, 2021, there were 51,829,923 and 53,299,738 shares of our common stock outstanding, respectively.

During the three months ended March 31, 2022 and 2021, we issued 95,331 and 91,243 shares of common stock, respectively.

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

2 unchanged sentences

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

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

Subsequently, the Board has from time to time increased the amount authorized for repurchases under such program.

Since the inception of the repurchase program, the Board has authorized us to repurchase up to $ 1.45 billion of our outstanding common stock.

During the nine months ended September 30, 2021, we repurchased approximately 1.5 million shares of our common stock for approximately $ 183.2 million.

Since the inception of the repurchase program through September 30, 2021, we have repurchased approximately 19.1 million shares of our common stock for approximately $ 1.09 billion.

As of September 30, 2021, there remained authorization for us to repurchase approximately $ 62.7 million of our shares.

Subsequent to September 30, 2021, the Board authorized us to repurchase up to an additional $ 300.0 million of our outstanding common stock.

During the three months ended March 31, 2022, we repurchased approximately 1.6 million shares of our common stock for approximately $ 181.8 million.

Since the inception of the repurchase program through March 31, 2022, we have repurchased approximately 20.7 million shares of our common stock for approximately $ 1.28 billion.

As of March 31, 2022, there remained authorization for us to repurchase approximately $ 168.6 million of our shares.

Subsequent to March 31, 2022, the Board authorized us to repurchase up to an additional $ 200.0 million of our outstanding common stock.

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

2 unchanged sentences

NOTE 11 - Retirement Plans

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

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

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

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

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 such plan.

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 Statements of Operations.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 11 - Retirement Plans (Continued)

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 such plan.

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

1 unchanged sentence

Components of Net Periodic Pension Cost

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

The components of net periodic pension cost (income) of the UK Plan for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

For the three months ended

September 30, For the nine months ended

September 30,

2021 2020 2021 2020

Interest cost $ 1,529 $ 1,336

3 unchanged sentences

Employer Contributions

For the nine months ended September 30, 2021, our United Kingdom subsidiary contributed approximately $ 3.6 million to the UK Plan and anticipates contributing an additional $ 1.3 million during the remainder of 2021.

For the three months ended March 31, 2022, our United Kingdom subsidiary contributed approximately $ 1.2 million to the UK Plan and anticipates contributing an additional $ 3.2 million during the remainder of 2022.

NOTE 12 - Commitments and Contingencies

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.

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

Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract.

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, 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.

As of March 31, 2022, 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 25 % of our total remaining performance 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 March 31, 2022, 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.

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.

Our practice is to avoid participation in projects principally involving the remediation or removal of such materials.

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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 - Commitments and Contingencies (continued)

Government Contracts

18 unchanged sentences

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

At September 30, 2021 and December 31, 2020, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $ 65.2 million and $ 48.2 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” at September 30, 2021 and December 31, 2020 were $ 241.3 million and $ 192.8 million, respectively.

The current portion of anticipated insurance recoveries of $ 28.9 million and $ 14.4 million at September 30, 2021 and December 31, 2020, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 102.2 million and $ 54.3 million at September 30, 2021 and December 31, 2020, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 13 - Commitments and Contingencies (Continued)

Restructuring expenses

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

As of September 30, 2021, the balance of restructuring obligations yet to be paid was approximately $ 1.0 million.

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

As of March 31, 2022 and December 31, 2021, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $ 55.6 million and $ 61.5 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of March 31, 2022 and December 31, 2021 were $ 216.2 million and $ 242.4 million, respectively.

The current portion of anticipated insurance recoveries of $ 18.4 million and $ 26.4 million as of March 31, 2022 and December 31, 2021, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 66.6 million and $ 99.0 million as of March 31, 2022 and December 31, 2021, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

These balances decreased from December 31, 2021 as a result of the payment, by our insurers, of certain claims for which we previously maintained a reserve and corresponding insurance receivable.

NOTE 13 - Additional Cash Flow Information

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

For the nine months ended

September 30,

The following table presents additional cash flow information for the three months ended March 31, 2022 and 2021 (in thousands):

For the three months ended

Cash paid for:

3 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities $ 552 $ 676

NOTE 15 - Segment Information

We have the following reportable segments:

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

premises electrical and lighting systems;

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

vendor management;

call center services;

installation and support for building systems;

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

technical consulting and diagnostic services;

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

and small modification and retrofit projects, which 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;

instrumentation and electrical services for energy infrastructure;

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

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

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

EMCOR Group, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

NOTE 15 - Segment Information (Continued)

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

For the three months ended

September 30,

Revenues from unrelated entities:

United States electrical construction and facilities services $ 527,935 $ 472,084

United States mechanical construction and facilities services 999,584 891,509

United States building services 632,455 556,514

United States industrial services 232,218 171,532

Total United States operations 2,392,192 2,091,639

United Kingdom building services 129,480 110,075

Total operations $ 2,521,672 $ 2,201,714

Total revenues:

NOTE 14 - Segment Information

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 operating, maintenance, and management of those facilities.

Such operating subsidiaries are organized into the following reportable segments:

• United States electrical construction and facilities services;

2 unchanged sentences

• United States industrial services;

Less intersegment revenues ( 28,733 ) ( 33,112 )

Total United States operations 2,392,192 2,091,639

• United Kingdom building services.

Total operations $ 2,521,672 $ 2,201,714

For the nine months ended

September 30,

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

Business of our Form 10-K for the year ended December 31, 2021.

The following tables present financial information for each of our reportable segments for the three months ended March 31, 2022 and 2021 (in thousands):

For the three months ended

Revenues from unrelated entities:

20 unchanged sentences

For the three months ended

September 30,

Operating income (loss):

6 unchanged sentences

Corporate administration ( 26,478 ) ( 24,512 )

Restructuring expenses — ( 536 )

Total operations 99,957 117,004

2 unchanged sentences

Income before income taxes $ 99,837 $ 116,549

For the nine months ended

September 30,

Operating income (loss):

United States electrical construction and facilities services $ 127,024 $ 117,866

United States mechanical construction and facilities services 226,511 192,156

United States building services 91,233 86,325

United States industrial services ( 5,663 ) 9,800

Total United States operations 439,105 406,147

United Kingdom building services 23,040 16,442

Corporate administration ( 74,362 ) ( 70,022 )

Restructuring expenses — ( 605 )

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

Total operations 387,783 119,212

Net periodic pension (cost) income 2,738 2,211

Interest expense, net ( 3,965 ) ( 6,082 )

Income before income taxes $ 386,556 $ 115,341

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 15 - Segment Information (Continued)

September 30,

2022 December 31,

8 unchanged sentences

Total operations $ 5,231,154 $ 5,441,446

NOTE 15 - Subsequent Events

In April 2022, we acquired a company for an immaterial amount.

This company provides fire protection services in 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 acquisition of this business will be accounted for by the acquisition method, and the amount paid will be allocated to its respective assets and liabilities, based upon the estimated fair value of such assets and liabilities on the date of acquisition by us.

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

What changed 10-Q

Item 1. Financial Statements