What changed in this filing

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Item 1. Financial Statements

2022-10-27 compared with 2022-07-28 · 167 added, 131 removed, 732 unchanged (29% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

(Unaudited) December 31,

22 unchanged sentences

Total current liabilities 2,638,796 2,361,731

Borrowings under revolving credit facility 170,000 —

Long-term debt and finance lease liabilities 245,101 245,450

22 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

9 unchanged sentences

Net income including noncontrolling interests 105,772 99,740 279,822 282,033

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

Net income attributable to noncontrolling interests — — — 169

Net income attributable to EMCOR Group, Inc.

9 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

7 unchanged sentences

Comprehensive income 97,464 98,853 261,853 283,454

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

Comprehensive income attributable to noncontrolling interests — — — 169

Comprehensive income attributable to EMCOR Group, Inc.

$ 97,464 $ 98,853 $ 261,853 $ 283,285

(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.

(1) Net of tax of $ 0.1 million and $ 0.2 million for the three months ended September 30, 2022 and 2021, respectively, and net of tax of $ 0.4 million and $ 0.6 million for the nine months ended September 30, 2022 and 2021, respectively.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(In thousands)(Unaudited)

Six months ended

Nine months ended

September 30,

Cash flows - operating activities:

Net income including noncontrolling interests $ 279,822 $ 282,033

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

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

Depreciation and amortization 35,168 36,088

3 unchanged sentences

Changes in operating assets and liabilities, excluding the effect of businesses acquired ( 130,741 ) ( 263,609 )

Net cash used in operating activities ( 18,851 ) ( 6,972 )

Net cash provided by operating activities 238,354 113,941

Cash flows - investing activities:

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(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 $ 1.2 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.

(2) Includes $ 1.1 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of September 30, 2022 and 2021.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended June 30, 2021 and 2022

For the three months ended September 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 — — —

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 ) — — — —

3 unchanged sentences

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

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

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

Net income including noncontrolling interests 105,772 — — — 105,772 — —

Other comprehensive loss ( 8,308 ) — — ( 8,308 ) — — —

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

Tax withholding for common stock issued under share-based compensation plans ( 56 ) — ( 56 ) — — — —

3 unchanged sentences

Share-based compensation expense 2,859 — 2,859 — — — —

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

Balance, September 30, 2022 $ 1,842,422 $ 609 $ 70,121 $ ( 101,531 ) $ 3,095,166 $ ( 1,222,645 ) $ 702

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

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the six months ended June 30, 2021 and 2022

For the nine months ended September 30, 2021 and 2022

(In thousands)(Unaudited)

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Share-based compensation expense 8,467 — 8,467 — — — —

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

Balance, September 30, 2021 $ 2,142,050 $ 607 $ 57,473 $ ( 107,812 ) $ 2,740,817 $ ( 549,737 ) $ 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 9,322 — 9,322 — — — —

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

Balance, September 30, 2022 $ 1,842,422 $ 609 $ 70,121 $ ( 101,531 ) $ 3,095,166 $ ( 1,222,645 ) $ 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 and six months ended June 30, 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 nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

NOTE 2 - New Accounting Pronouncements

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.

The Company is currently evaluating the impact of an accounting standards update issued by the Financial Accounting Standards Board (the “FASB”), which provides temporary optional expedients and exceptions to existing U.S.

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

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

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

Although not yet reflected within such accounting pronouncement, the FASB has announced its intention to extend the period of time that entities can utilize this guidance from December 31, 2022 to December 31, 2024.

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.

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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 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.

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

EMCOR Group, Inc.

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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.

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 $ 10.5 million and $ 34.9 million during the three and nine months ended September 30, 2022, respectively.

The entire amount recorded during the three months ended September 30, 2022, was reported within our United States electrical construction and facilities services segment.

However, of the amount recorded during the nine months ended September 30, 2022, approximately $ 26.5 million was reported within our United States electrical construction and facilities services segment and approximately $ 8.4 million was reported 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 nine months ended September 30, 2021.

Disaggregation of Revenues

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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 and six months ended June 30, 2022 and 2021 (in thousands):

For the three months ended June 30,

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, 2022 and 2021 (in thousands):

For the three months ended September 30,

Total 2021 % of

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NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended June 30,

For the three months ended September 30,

Total 2021 % of

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

For the three months ended June 30,

For the three months ended September 30,

Total 2021 % of

4 unchanged sentences

Total segment revenues $ 710,650 $ 624,617

For the three months ended June 30,

For the three months ended September 30,

Total 2021 % of

4 unchanged sentences

Total United States operations $ 2,708,660 $ 2,392,192

For the three months ended June 30,

For the three months ended September 30,

Total 2021 % of

8 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the six months ended June 30,

For the nine months ended September 30,

Total 2021 % of

13 unchanged sentences

Total segment revenues $ 1,719,525 $ 1,482,475

For the six months ended June 30,

For the nine months ended September 30,

Total 2021 % of

14 unchanged sentences

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

For the six months ended June 30,

For the nine months ended September 30,

Total 2021 % of

8 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the six months ended June 30,

For the nine months ended September 30,

Total 2021 % of

4 unchanged sentences

Total United States operations $ 7,762,552 $ 6,877,298

For the six months ended June 30,

For the nine months ended September 30,

Total 2021 % of

11 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 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.

At September 30, 2022 and December 31, 2021, our allowance for credit losses was $ 25.3 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, partially offset by the write-off of specific amounts deemed unrecoverable.

We have adjusted our allowance for credit losses during the first nine 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 six months ended June 30, 2022 was as follows (in thousands):

The change in the allowance for credit losses for the nine months ended September 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 ( 1,475 )

Balance at June 30, 2022 $ 23,869

Balance at September 30, 2022 $ 25,270

Contract Assets and Contract Liabilities

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

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

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

EMCOR Group, Inc.

2 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded as revenue is recognized in advance of billings.

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

5 unchanged sentences

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

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

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

September 30,

2022 December 31, 2021

4 unchanged sentences

Net contract liabilities $ ( 748,948 ) $ ( 560,496 )

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.

Contract assets and contract liabilities increased by approximately $ 1.9 million and $ 13.6 million, respectively, as a result of acquisitions made by us in 2022.

Excluding the impact of acquisitions, net contract liabilities increased by approximately $ 176.8 million during the nine months ended September 30, 2022, 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 June 30, 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 September 30, 2022 (in thousands, except for percentages):

September 30,

2022 % of Total

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Total operations $ 7,101,461 100 %

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

Our remaining performance obligations at September 30, 2022 were $ 7.10 billion.

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

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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 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 the first nine months of 2022, we acquired four companies for total consideration of $ 93.2 million.

Such acquisitions include:

(a) a company that provides electrical construction services in the Greater Boston area, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (b) three companies that enhance our presence in geographies where we have existing operations, the results of operations of which were de minimis, consisting of:

(i) two companies that provide fire protection services in the Northeastern and Southern regions of the United States, respectively, and that have been included within our United States mechanical construction and facilities services segment, and (ii) a company that specializes in building automation and controls in the Southwestern region of the United States and that has been included within our United States building services segment.

In connection with these acquisitions, we acquired working capital of $ 7.6 million and other net liabilities of $ 3.0 million, and have preliminarily ascribed $ 26.5 million to goodwill and $ 62.1 million to identifiable intangible assets.

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

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(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.

EMCOR Group, Inc.

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NOTE 4 - Acquisitions of Businesses (Continued)

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 enhance 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 ascribed $ 38.3 million to goodwill and $ 70.6 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 the businesses 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 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 have been finalized during their respective measurement periods with an insignificant impact.

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

NOTE 5 - Earnings Per Share

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 six months ended June 30, 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 nine months ended September 30, 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 $ 2.16 $ 1.85

For the six months ended

For the nine months ended

September 30,

Net income attributable to EMCOR Group, Inc.

5 unchanged sentences

Diluted earnings per common share $ 5.50 $ 5.17

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.

The number of share-based awards excluded from the computation of diluted EPS for the three and nine months ended September 30, 2022 because they would be anti-dilutive were 850 and 1,350 , respectively.

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

The number of 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 .

EMCOR Group, Inc.

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NOTE 6 - Inventories

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

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

September 30,

2022 December 31,

2 unchanged sentences

Inventories $ 101,874 $ 54,098

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.

The increase in inventories as of September 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 June 30, 2022 and December 31, 2021 (in thousands):

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

September 30,

2022 December 31,

Revolving credit facility $ 170,000 $ —

Term loan 256,688 256,688

8 unchanged sentences

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

As of September 30, 2022 and December 31, 2021, the balance of the 2020 Term Loan was $ 256.7 million and as of September 30, 2022, we had $ 170.0 million in direct borrowings outstanding under the 2020 Revolving Credit Facility.

There were no direct borrowings outstanding under the 2020 Revolving Credit Facility as of December 31, 2021.

Outstanding letters of credit reduce the available capacity under such facility, and as of September 30, 2022 and December 31, 2021, we had $ 71.4 million and $ 71.3 million, respectively, of letters of credit outstanding.

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 ( 1.67 % at June 30, 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 ( 3.67 % at September 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 ( 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 rates in effect at June 30, 2022 and December 31, 2021 were 2.67 % and 1.10 %, respectively.

(a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 6.25 % at September 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 %.

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

The weighted average interest rates in effect at September 30, 2022 were 4.67 % for the 2020 Term Loan and 4.20 % for the 2020 Revolving Credit Facility.

The interest rate in effect at December 31, 2021 for the 2020 Term Loan was 1.10 %.

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

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

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

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

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

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

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

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

EMCOR Group, Inc.

2 unchanged sentences

NOTE 7 - Debt (Continued)

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

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

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

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and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Unobservable inputs that reflect the reporting entity’s own assumptions.

Level 3 – Significant unobservable inputs that reflect the reporting entity’s own assumptions.

Recurring Fair Value Measurements

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

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

Assets at Fair Value as of September 30, 2022

Asset Category Level 1 Level 2 Level 3 Total

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(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 June 30, 2022 and December 31, 2021, we had $ 48.7 million and $ 336.0 million, respectively, in money market funds.

At September 30, 2022 and December 31, 2021, we had $ 114.8 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.

1 unchanged sentence

(3) Deferred compensation plan assets are classified as “Other assets” in the Consolidated Balance Sheets.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 - Fair Value Measurements (Continued)

Nonrecurring Fair Value Measurements

4 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 - Fair Value Measurements (Continued)

Fair Value of Financial Instruments

2 unchanged sentences

NOTE 9 - Income Taxes

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):

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

For the three months ended

June 30, For the six months ended

September 30, For the nine months ended

September 30,

2022 2021 2022 2021

2 unchanged sentences

The difference between the U.S.

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.

statutory tax rate of 21 % and our income tax rate for both the three and nine months ended September 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 and nine months ended September 30, 2022 was due to an increase in our income tax rate.

The increase in our income tax provision for the three months ended September 30, 2022 was additionally a result of an increase in income before income taxes.

The increase in our income tax rate for the three and nine months ended September 30, 2022 was attributable to an increase in certain permanent book-to-tax differences and the unfavorable impact of certain discrete tax items during the third quarter of 2022.

As of September 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.

2 unchanged sentences

Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years 2017 through 2020.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) was signed into law on August 16, 2022.

Among other provisions, such act creates an excise tax of 1% on the fair value of net stock repurchases in excess of share issuances made by publicly traded U.S.

corporations, effective for repurchases after December 31, 2022.

The impact of this excise tax on our financial position, and/or liquidity, in future periods, will vary based on the level of repurchases made by us in a given year.

While we are still evaluating the potential impact of this excise tax on our results of operations, interpretive accounting guidance indicates that this tax likely can be recorded as a component of treasury stock, as opposed to an expense within the statement of operations, given that it is a direct cost associated with the repurchase of our common stock.

For tax years beginning after December 31, 2022, the Inflation Reduction Act additionally creates a 15% corporate alternative minimum tax on profits of corporations whose average annual adjusted financial statement income exceeds $1.0 billion for any consecutive three-tax-year period preceding the then current tax year.

Based on our average annual income for the preceding three years, which has remained below the aforementioned $1.0 billion threshold, as well as the fact that our effective federal income tax rate has historically been in excess of the 15% alternative minimum tax rate, we do not anticipate that this alternative minimum tax will have an impact on our financial position and/or results of operations.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 10 - Common Stock

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.

As of September 30, 2022 and December 31, 2021, there were 47,647,114 and 53,299,738 shares of our common stock outstanding, respectively.

During the three months ended September 30, 2022 and 2021, we issued 19,573 and 18,528 shares of common stock, respectively.

During the nine months ended September 30, 2022 and 2021, we issued 191,330 and 145,815 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.

We have paid quarterly dividends since October 25, 2011.

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

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.

Commencing with the dividend to be paid on October 31, 2022, our dividend will increase from $ 0.13 per share to $ 0.15 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.

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 $ 2.15 billion 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.

During the nine months ended September 30, 2022, we repurchased approximately 5.8 million shares of our common stock for approximately $ 660.6 million.

Since the inception of the repurchase program through September 30, 2022, we have repurchased approximately 25.0 million shares of our common stock for approximately $ 1.76 billion.

As of September 30, 2022, there remained authorization for us to repurchase approximately $ 389.8 million of our shares.

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

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11 - Retirement Plans

8 unchanged sentences

Components of Net Periodic Pension Cost

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):

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

For the three months ended

June 30, For the six months ended

September 30, For the nine months ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

Employer Contributions

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.

For the nine months ended September 30, 2022, our United Kingdom subsidiary contributed approximately $ 3.2 million to the UK Plan and anticipates contributing an additional $ 0.5 million during the remainder of 2022.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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 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.

As of September 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 $ 1.5 billion, which represents approximately 21 % 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 June 30, 2022, we satisfied approximately $ 48.1 million of the collateral requirements of our insurance programs by utilizing surety bonds.

As of September 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.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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.

We are subject to regulation with respect to the handling or disposal of certain materials used in the performance of our services, 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.

15 unchanged sentences

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 - Commitments and Contingencies (continued)

Insurance Liabilities

3 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.

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)

As of September 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 $ 52.8 million and $ 61.5 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of September 30, 2022 and December 31, 2021 were $ 216.0 million and $ 242.4 million, respectively.

The current portion of anticipated insurance recoveries of $ 16.1 million and $ 26.4 million as of September 30, 2022 and December 31, 2021, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 59.5 million and $ 99.0 million as of September 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 primarily 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 six months ended June 30, 2022 and 2021 (in thousands):

For the six months ended

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

For the nine months ended

September 30,

Cash paid for:

14 unchanged sentences

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

EMCOR Group, Inc.

2 unchanged sentences

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):

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

For the three months ended

September 30,

Revenues from unrelated entities:

15 unchanged sentences

Total operations $ 2,826,361 $ 2,521,672

For the six months ended

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (continued)

For the nine months ended

September 30,

Revenues from unrelated entities:

15 unchanged sentences

Total operations $ 8,126,298 $ 7,263,387

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (continued)

For the three months ended

September 30,

Operating income (loss):

10 unchanged sentences

Income before income taxes $ 147,925 $ 137,043

For the six months ended

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (continued)

For the nine months ended

September 30,

Operating income (loss):

10 unchanged sentences

Income before income taxes $ 384,749 $ 386,556

September 30,

2022 December 31,

9 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements