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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 254 added, 107 removed, 609 unchanged (37% of the section changed)

52 unchanged sentences

Three months ended

June 30, Six months ended

2022 2021 2022 2021

Revenues $ 2,707,388 $ 2,437,666 $ 5,299,937 $ 4,741,715

8 unchanged sentences

Net income including noncontrolling interests 100,664 97,348 174,050 182,293

Net income attributable to noncontrolling interests — 171

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

Net income attributable to EMCOR Group, Inc.

9 unchanged sentences

Three months ended

June 30, Six months ended

2022 2021 2022 2021

Net income including noncontrolling interests $ 100,664 $ 97,348 $ 174,050 $ 182,293

3 unchanged sentences

loss included in net income (1)

429 808 884 1,612

Other comprehensive (loss) income ( 7,274 ) 919 ( 9,661 ) 2,308

Comprehensive income 93,390 98,267 164,389 184,601

Comprehensive income attributable to noncontrolling interests — 171

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

Comprehensive income attributable to EMCOR Group, Inc.

$ 93,390 $ 98,269 $ 164,389 $ 184,432

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

(1) Net of tax of $ 0.1 million and $ 0.2 million for the three months ended June 30, 2022 and 2021, respectively, and net of tax of $ 0.3 million and $ 0.4 million for the six months ended June 30, 2022 and 2021, respectively.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(In thousands)(Unaudited)

Three months ended March 31,

Six months ended

Cash flows - operating activities:

11 unchanged sentences

Purchases of property, plant and equipment ( 27,747 ) ( 16,734 )

Distributions from unconsolidated entities — 196

Net cash used in investing activities ( 53,328 ) ( 70,939 )

Cash flows - financing activities:

Proceeds from revolving credit facility 100,000 —

Repayments of revolving credit facility ( 100,000 ) —

Repayments of finance lease liabilities ( 1,889 ) ( 2,228 )

13 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 $ 1.4 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.

(2) Includes $ 1.2 million and $ 0.9 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of June 30, 2022 and 2021, respectively.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended March 31, 2021 and 2022

For the three months ended June 30, 2021 and 2022

(In thousands)(Unaudited)

4 unchanged sentences

stock Noncontrolling

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

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

Other comprehensive income 919 — — 919 — — —

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

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

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

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

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

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

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

Net income including noncontrolling interests 100,664 — — — 100,664 — —

Other comprehensive loss ( 7,274 ) — — ( 7,274 ) — — —

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

Tax withholding for common stock issued under share-based compensation plans ( 2,295 ) — ( 2,295 ) — — — —

Common stock issued under employee stock purchase plan 2,068 — 2,068 — — — —

Common stock dividends ( 6,689 ) — 40 — ( 6,729 ) — —

Repurchases of common stock ( 272,507 ) — — — — ( 272,507 ) —

Share-based compensation expense 3,025 — 3,025 — — — —

Balance, June 30, 2022 $ 1,952,791 $ 609 $ 65,212 $ ( 93,223 ) $ 2,995,844 $ ( 1,016,353 ) $ 702

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

See Notes to Consolidated Financial Statements.

EMCOR Group, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the six months ended June 30, 2021 and 2022

(In thousands)(Unaudited)

EMCOR Group, Inc.

stock Capital

surplus Accumulated other comprehensive loss (1)

earnings Treasury

stock Noncontrolling

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

9 unchanged sentences

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

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

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

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

7 unchanged sentences

Share-based compensation expense 6,463 — 6,463 — — — —

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

Balance, June 30, 2022 $ 1,952,791 $ 609 $ 65,212 $ ( 93,223 ) $ 2,995,844 $ ( 1,016,353 ) $ 702

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

12 unchanged sentences

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.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

NOTE 2 - New Accounting Pronouncements

63 unchanged sentences

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

For the three months ended March 31, 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.

For the three and six months ended June 30, 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 and six months ended June 30, 2022 and 2021, there were no significant reversals of revenue recognized associated with the revision of transaction prices.

EMCOR Group, Inc.

33 unchanged sentences

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

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

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.

When the current estimate of total costs for a performance obligation indicates 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.

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 $ 11.8 million and $ 23.8 million, during the three and six months ended June 30, 2022, respectively.

Of the amount recorded during the three months ended June 30, 2022, approximately $ 7.7 million was recorded within our United States electrical construction and facilities services segment and approximately $ 4.1 million was recorded within our United States mechanical construction and facilities services segment.

Of the amount recorded during the six months ended June 30, 2022, approximately $ 14.3 million was recorded within our United States electrical construction and facilities services segment and approximately $ 9.5 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 and six months ended June 30, 2021.

Disaggregation of Revenues

2 unchanged sentences

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

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,

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three and six months ended June 30, 2022 and 2021 (in thousands):

For the three months ended June 30,

Total 2021 % of

18 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended March 31,

For the three months ended June 30,

Total 2021 % of

14 unchanged sentences

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

For the three months ended March 31,

For the three months ended June 30,

Total 2021 % of

4 unchanged sentences

Total segment revenues $ 677,847 $ 611,835

For the three months ended March 31,

For the three months ended June 30,

Total 2021 % of

4 unchanged sentences

Total United States operations $ 2,592,840 $ 2,307,792

For the three months ended March 31,

For the three months ended June 30,

Total 2021 % of

8 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the six months ended June 30,

Total 2021 % of

United States electrical construction and facilities services:

Commercial market sector $ 569,521 52 % $ 500,297 52 %

Manufacturing market sector 131,769 12 % 100,568 10 %

Healthcare market sector 75,348 7 % 45,998 5 %

Institutional market sector 69,455 6 % 96,820 10 %

Transportation market sector 87,522 8 % 95,210 10 %

Water and wastewater market sector 10,496 1 % 5,528 1 %

Hospitality market sector 5,312 1 % 8,764 1 %

Short duration projects (1)

108,916 10 % 82,582 9 %

Service work 30,424 3 % 17,575 2 %

1,088,763 953,342

Less intersegment revenues ( 2,621 ) ( 1,817 )

Total segment revenues $ 1,086,142 $ 951,525

For the six months ended June 30,

Total 2021 % of

United States mechanical construction and facilities services:

Commercial market sector $ 781,382 38 % $ 763,301 41 %

Manufacturing market sector 304,861 15 % 239,795 13 %

Healthcare market sector 247,304 12 % 234,068 12 %

Institutional market sector 163,067 8 % 140,768 7 %

Transportation market sector 32,299 1 % 39,121 2 %

Water and wastewater market sector 129,490 6 % 88,550 5 %

Hospitality market sector 16,379 1 % 19,787 1 %

Short duration projects (1)

180,310 9 % 168,594 9 %

Service work 216,622 10 % 192,047 10 %

2,071,714 1,886,031

Less intersegment revenues ( 4,897 ) ( 2,866 )

Total segment revenues $ 2,066,817 $ 1,883,165

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

For the six months ended June 30,

Total 2021 % of

United States building services:

Mobile mechanical services $ 812,897 62 % $ 763,714 65 %

Commercial site-based services 396,632 31 % 328,498 28 %

Government site-based services 96,119 7 % 87,659 7 %

Total segment revenues $ 1,305,648 $ 1,179,871

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the six months ended June 30,

Total 2021 % of

United States industrial services:

Field services $ 518,960 87 % $ 416,351 88 %

Shop services 76,325 13 % 54,194 12 %

Total segment revenues $ 595,285 $ 470,545

Total United States operations $ 5,053,892 $ 4,485,106

For the six months ended June 30,

Total 2021 % of

United Kingdom building services:

Service work $ 119,078 48 % $ 128,563 50 %

Project work 126,967 52 % 128,046 50 %

Total segment revenues $ 246,045 $ 256,609

Total operations $ 5,299,937 $ 4,741,715

Accounts Receivable and Allowance for Credit Losses

5 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 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.

At June 30, 2022 and December 31, 2021, our allowance for credit losses was $ 23.9 million and $ 23.5 million, respectively.

The increase in our allowance for credit losses was attributable to an increase in the provision for credit losses, largely offset by the write-off of specific amounts deemed unrecoverable.

We have adjusted our allowance for credit losses during the first six months of 2022 to account for the impact of changing economic conditions, including rising interest rates.

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

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

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

The change in the allowance for credit losses for the six months ended June 30, 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 ( 1,226 )

Balance at March 31, 2022 $ 22,956

Balance at June 30, 2022 $ 23,869

Contract Assets and Contract Liabilities

3 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

5 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

Net contract liabilities in the accompanying Consolidated Balance Sheets consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

2022 December 31, 2021

4 unchanged sentences

Net contract liabilities $ ( 662,578 ) $ ( 560,496 )

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.

The $ 102.1 million increase in net contract liabilities for the six months ended June 30, 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, which included advanced billings on several large projects in the earlier stages of completion, resulting in amounts invoiced exceeding the revenue recognized for such projects.

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 March 31, 2022 (in thousands, except for percentages):

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of June 30, 2022 (in thousands, except for percentages):

2022 % of Total

7 unchanged sentences

Total operations $ 6,461,132 100 %

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

Our remaining performance obligations at June 30, 2022 were $ 6.46 billion.

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

1 unchanged sentence

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

3 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Our remaining performance obligations are comprised of:

13 unchanged sentences

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

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

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

During the first half of 2022, we acquired three companies, each for an immaterial amount.

Two companies, the results of operations of which have been included within our United States mechanical construction and facilities services segment, provide fire protection services in the Northeastern and Southern regions of the United States, respectively.

The third company, the results of operations of which have been included within our United States building services segment, specializes in building automation and controls in the Southwestern region of the United States.

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

4 unchanged sentences

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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 - Acquisitions of Businesses (Continued)

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

The purchase price allocations for the business acquired in 2022 and one of the businesses acquired in 2021 are preliminary and subject to change during their respective measurement periods.

The purchase price allocations for the businesses 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.

1 unchanged sentence

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.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

The following table summarizes our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three months ended March 31, 2022 and 2021 (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 three and six months ended June 30, 2022 and 2021 (in thousands, except share and per share data):

For the three months ended

6 unchanged sentences

Diluted earnings per common share $ 1.99 $ 1.78

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.

For the six months ended

Net income attributable to EMCOR Group, Inc.

common stockholders $ 174,050 $ 182,124

Weighted average shares outstanding used to compute basic earnings per common share 51,610,014 54,594,208

Effect of dilutive securities—Share-based awards 204,150 262,551

Shares used to compute diluted earnings per common share 51,814,164 54,856,759

Basic earnings per common share $ 3.37 $ 3.34

Diluted earnings per common share $ 3.36 $ 3.32

The number of share-based awards excluded from the computation of diluted EPS for the three and six months ended June 30, 2022 because they would be anti-dilutive were 57,949 and 57,899 , respectively.

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 6 - Inventories

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

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2022 and December 31, 2021 (in thousands):

2022 December 31,

2 unchanged sentences

Inventories $ 93,464 $ 54,098

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

The increase in inventories as of June 30, 2022, compared to December 31, 2021, was primarily a result of advanced purchases of materials and equipment for use on specific construction projects, in an effort to mitigate the impact of increased lead times, which have resulted from supply chain disruptions.

NOTE 7 - Debt

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

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2022 and December 31, 2021 (in thousands):

2022 December 31,

10 unchanged sentences

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

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) United States dollar LIBOR ( 0.46 % at March 31, 2022) 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 ( 1.67 % at June 30, 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 ( 3.50 % 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 %.

(a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 4.75 % at June 30, 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 %.

The interest rates in effect at June 30, 2022 and December 31, 2021 were 2.67 % and 1.10 %, respectively.

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

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

The fee was 0.10 % of the unused amount as of June 30, 2022 and December 31, 2021.

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

As of 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;

As of June 30, 2022 and December 31, 2021, the balance of the 2020 Term Loan was $ 256.7 million.

As of June 30, 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 March 31, 2022 and December 31, 2021.

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

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.

We were in compliance with all such covenants as of June 30, 2022 and December 31, 2021.

EMCOR Group, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 - Debt (Continued)

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

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.

NOTE 8 - Fair Value Measurements

7 unchanged sentences

Recurring Fair Value Measurements

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

Assets at Fair Value as of March 31, 2022

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2022 and December 31, 2021 (in thousands):

Assets at Fair Value as of June 30, 2022

Asset Category Level 1 Level 2 Level 3 Total

16 unchanged sentences

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

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

At June 30, 2022 and December 31, 2021, we had $ 48.7 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.

7 unchanged sentences

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

Fair Value of Financial Instruments

We believe that the carrying values of our financial instruments, which include accounts receivable and other financing commitments, approximate their fair values due primarily to their short-term maturities and low risk of counterparty default.

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.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 - Fair Value Measurements (Continued)

Fair Value of Financial Instruments

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

NOTE 9 - Income Taxes

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):

The following table presents our income tax provision and our income tax rate for the three and six months ended June 30, 2022 and 2021 (in thousands, except percentages):

For the three months ended

June 30, For the six months ended

2022 2021 2022 2021

Income tax provision $ 36,323 $ 35,616 $ 62,774 $ 67,220

1 unchanged sentence

The difference between the U.S.

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.

statutory tax rate of 21 % and our income tax rate for both the three and six months ended June 30, 2022 and 2021 was primarily a result of state and local income taxes and other permanent book-to-tax differences.

The increase in our income tax provision for the three months ended June 30, 2022 was due to an increase in income before income taxes, while the decrease in our income tax provision for the six months ended June 30, 2022 was a result of a reduction in income before income taxes as well as a decrease in our income tax rate during the period.

The decrease in our income tax rate for the three and six months ended June 30, 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 half 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 June 30, 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 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.

As of June 30, 2022 and December 31, 2021, there were 49,364,981 and 53,299,738 shares of our common stock outstanding, respectively.

During the three months ended June 30, 2022 and 2021, we issued 76,426 and 36,044 shares of common stock, respectively.

During the six months ended June 30, 2022 and 2021, we issued 171,757 and 127,287 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.

1 unchanged sentence

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.

Subsequent to June 30, 2022, our Board of Directors (the “Board”) announced its intention to increase the regular quarterly divided to $ 0.15 per share commencing with the dividend to be paid in October 2022.

In September 2011, 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 authorized for repurchases under such program.

Since the inception of the repurchase program, the Board has authorized us to repurchase up to $ 1.65 billion 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.

During the six months ended June 30, 2022, we repurchased approximately 4.1 million shares of our common stock for approximately $ 454.3 million.

Since the inception of the repurchase program through June 30, 2022, we have repurchased approximately 23.3 million shares of our common stock for approximately $ 1.55 billion.

As of June 30, 2022, there remained authorization for us to repurchase approximately $ 96.1 million of our shares.

Subsequent to June 30, 2022, the Board authorized us to repurchase up to an additional $ 500.0 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.

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

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11 - Retirement Plans

2 unchanged sentences

These amounts will be subsequently recognized as net periodic pension cost (income) within the Consolidated Statements of Operations.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11 - Retirement Plans (Continued)

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

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Components of Net Periodic Pension Cost

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

The components of net periodic pension cost (income) of the UK Plan for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):

For the three months ended

June 30, For the six months ended

2022 2021 2022 2021

Interest cost $ 1,452 $ 1,350 $ 2,981 $ 2,686

3 unchanged sentences

Employer Contributions

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.

For the six months ended June 30, 2022, our United Kingdom subsidiary contributed approximately $ 2.3 million to the UK Plan and anticipates contributing an additional $ 1.8 million during the remainder of 2022.

NOTE 12 - Commitments and Contingencies

7 unchanged sentences

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.

As of June 30, 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 $ 1.6 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.

As of June 30, 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.

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NOTE 12 - 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.

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

Government Contracts

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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.

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.

As of June 30, 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 $ 53.2 million and $ 61.5 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of June 30, 2022 and December 31, 2021 were $ 213.0 million and $ 242.4 million, respectively.

The current portion of anticipated insurance recoveries of $ 15.8 million and $ 26.4 million as of June 30, 2022 and December 31, 2021, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 57.6 million and $ 99.0 million as of June 30, 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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 13 - Additional Cash Flow Information

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

The following table presents additional cash flow information for the six months ended June 30, 2022 and 2021 (in thousands):

For the six months ended

Cash paid for:

3 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities $ 576 $ 1,321

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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.

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.

Such operating subsidiaries are organized into the following reportable segments:

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (continued)

The following tables present financial information for each of our reportable segments for the three and six months ended June 30, 2022 and 2021 (in thousands):

For the three months ended

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Total operations $ 2,707,388 $ 2,437,666

For the six months ended

Revenues from unrelated entities:

United States electrical construction and facilities services $ 1,086,142 $ 951,525

United States mechanical construction and facilities services 2,066,817 1,883,165

United States building services 1,305,648 1,179,871

United States industrial services 595,285 470,545

Total United States operations 5,053,892 4,485,106

United Kingdom building services 246,045 256,609

Total operations $ 5,299,937 $ 4,741,715

Total revenues:

United States electrical construction and facilities services 1,089,443 953,589

United States mechanical construction and facilities services 2,078,479 1,887,937

United States building services 1,355,060 1,227,423

United States industrial services 611,941 498,372

Less intersegment revenues ( 81,031 ) ( 82,215 )

Total United States operations 5,053,892 4,485,106

United Kingdom building services 246,045 256,609

Total operations $ 5,299,937 $ 4,741,715

EMCOR Group, Inc.

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Income before income taxes $ 136,987 $ 132,964

For the six months ended

Operating income (loss):

United States electrical construction and facilities services $ 55,088 $ 83,264

United States mechanical construction and facilities services 135,619 139,900

United States building services 62,083 63,658

United States industrial services 19,716 ( 2,651 )

Total United States operations 272,506 284,171

United Kingdom building services 17,003 16,458

Corporate administration ( 51,908 ) ( 50,267 )

Total operations 237,601 250,362

Net periodic pension (cost) income 2,263 1,830

Interest expense, net ( 3,040 ) ( 2,679 )

Income before income taxes $ 236,824 $ 249,513

2022 December 31,

8 unchanged sentences

Total operations $ 5,146,444 $ 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