What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-24 · 191 added, 198 removed, 1366 unchanged (22% of the section changed)

81 unchanged sentences

Net income including noncontrolling interests $ 406,122 $ 383,701 $ 132,943

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 10,786 ) ( 360 ) 2,088

1 unchanged sentence

897 26,031 ( 22,033 )

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

Other comprehensive (loss) income ( 9,889 ) 25,671 ( 19,945 )

Comprehensive income 396,233 409,372 112,998

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Excess tax benefits from share-based compensation ( 1,654 ) ( 828 ) ( 191 )

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

Equity (income) loss from unconsolidated entities ( 391 ) 1,170 ( 14 )

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

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(Increase) decrease in accounts receivable ( 340,091 ) ( 246,856 ) 139,377

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

Increase in inventories ( 31,541 ) ( 116 ) ( 12,709 )

(Increase) decrease in contract assets ( 44,725 ) ( 50,648 ) 7,829

1 unchanged sentence

Increase in contract liabilities 299,897 44,713 85,142

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

(Decrease) increase in accrued payroll and benefits and other accrued expenses and liabilities ( 30,025 ) 46,573 113,835

Changes in other assets and liabilities, net ( 4,109 ) ( 56,874 ) 30,164

42 unchanged sentences

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

Cumulative-effect adjustment (2)

( 2,307 ) — — — ( 2,307 ) — —

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

2 unchanged sentences

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

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

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

2 unchanged sentences

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

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

Cumulative-effect adjustment (2)

( 2,307 ) — — — ( 2,307 ) — —

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

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

7 unchanged sentences

Net income including noncontrolling interests 406,122 — — — 406,122 — —

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

Other comprehensive loss ( 9,889 ) — — ( 9,889 ) — — —

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

3 unchanged sentences

Repurchases of common stock ( 660,609 ) — — — — ( 660,609 ) —

Distributions to noncontrolling interests ( 43 ) — — — — — ( 43 )

Share-based compensation expense 12,125 — 12,125 — — — —

11 unchanged sentences

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

Our services are provided to a broad range of commercial, industrial, utility, and institutional customers through approximately 90 operating subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities.

Our services are provided to a broad range of commercial, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and joint ventures.

Significant intercompany accounts and transactions have been eliminated.

All investments over which we exercise significant influence, but do not control (a 20% to 50% ownership interest), are accounted for using the equity method of accounting.

For joint ventures that have been accounted for using the consolidation method of accounting, noncontrolling interests represent the allocation of earnings to our joint venture partners who either have a minority-ownership interest in the joint venture or are not at risk for the majority of losses of the joint venture.

The consolidated financial statements include the accounts of the Company and the subsidiaries and joint ventures it controls.

All intercompany accounts and transactions have been eliminated.

Investments over which we exercise significant influence, but do not control, are accounted for using the equity method of accounting.

The results of operations of companies acquired have been included in the results of operations from the date of the respective acquisition.

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Actual results could materially differ from those estimates.

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

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.

Revenue Recognition

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At December 31, 2022 and 2021, our accounts receivable of $ 2,567.4 million and $ 2,204.5 million, respectively, were recorded net of allowances for credit losses of $ 22.4 million and $ 23.5 million, respectively.

The increase in our allowance for credit losses was predominantly attributable to our evaluation of specific outstanding receivables within our United States industrial services segment.

The decrease in our allowance for credit losses was attributable to the write-off of specific amounts deemed uncollectible, partially offset by the provision for credit losses recorded during 2022.

We have adjusted our allowance for credit losses during 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.

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For operating leases, rent expense is recognized on a straight-line basis over the term of the lease, and right-of-use assets are subsequently re-measured to reflect the effect of uneven lease payments.

For finance leases, right-of-use assets are amortized on a straight-line basis over the lease term.

For finance leases, right-of-use assets are amortized on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset.

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

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The carrying values of property, plant and equipment are reviewed for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable.

In performing this review for recoverability, property, plant and equipment is assessed for possible impairment by comparing their carrying values to their undiscounted net pre-tax cash flows expected to result from the use of the asset.

In performing this review for recoverability, property, plant and equipment is assessed for possible impairment by comparing their carrying values to the undiscounted net pre-tax cash flows expected to result from the use of the asset.

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

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The current portion of anticipated insurance recoveries of $ 16.0 million and $ 26.4 million as of December 31, 2022 and 2021, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 59.0 million and $ 99.0 million as of December 31, 2022 and 2021, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

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

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.

Foreign Operations

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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Valuation of Share-Based Compensation Plans

Valuation of Share-Based Compensation

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

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New Accounting Pronouncements

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

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

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

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

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

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

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

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

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

The 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, as amended, allows entities to account for and present certain contract modifications, which occur before December 31, 2024 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.

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

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

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

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

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

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

We do not believe that the adoption of this accounting pronouncement will have a material impact on our financial position and/or results of operations.

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS

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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.

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

During the year ended December 31, 2020, we recognized revenue of $ 6.1 million associated with the final settlement of the contract value for two projects within our United States electrical construction and facilities services segment that were completed or substantially completed in prior periods.

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

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

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

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price.

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

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

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

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

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

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

Disaggregation of Revenues

Our revenues are principally derived from contracts to provide construction services relating to electrical and mechanical systems, as well as to provide a number of building services and industrial services to our customers.

Our contracts are with many different customers in numerous industries.

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

Changes in Estimates

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

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

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, or anticipated contract value, which resulted in a reduction of profitability in excess of $ 1.0 million, our operating results were negatively impacted by approximately $ 48.5 million during the year ended December 31, 2022.

Of this amount, approximately $ 33.5 million was reported within our United States electrical construction and facilities services segment, approximately $ 13.7 million was reported within our United States mechanical construction and facilities services segment, and approximately $ 1.3 million was reported within our United States building services segment.

There were no increases in total estimated costs or reductions to anticipated contract value that had a significant impact on our operating results during each of the years ended December 31, 2021 and 2020.

Additionally, there were no significant amounts of revenue recognized during the years ended December 31, 2022 or 2021 related to performance obligations satisfied in prior periods.

EMCOR Group, Inc.

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NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

Disaggregation of Revenues

Our contracts are with many different customers in numerous industries.

Refer to Note 18 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment.

The following tables provide further disaggregation of our revenues by categories we use to evaluate our financial performance within each of our reportable segments (in thousands):

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Government site-based services 196,288 7 % 184,272 8 % 167,990 8 %

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

Total segment revenues $ 2,720,487 $ 2,424,743 $ 2,078,835

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As of December 31, 2022 and 2021, contract assets included unbilled revenues for unapproved change orders of approximately $ 36.0 million and $ 24.1 million, respectively.

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

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

Contract assets as of December 31, 2022 and 2021 additionally included $ 3.8 million and $ 2.5 million, respectively, associated with claims.

There were no claim amounts included within accounts receivable as of December 31, 2022 or 2021.

There were contractually billed amounts and retention related to contracts with unapproved change orders and claims of approximately $ 131.4 million and $ 130.7 million as of December 31, 2022 and 2021, respectively.

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Contract assets and contract liabilities increased by approximately $ 2.1 million and $ 14.1 million, respectively, as a result of acquisitions made by us in 2022.

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

Excluding the impact of acquisitions, net contract liabilities increased by approximately $ 254.9 million for the year ended December 31, 2022, due 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.

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As of December 31, 2022 and 2021, accounts payable included $ 82.4 million and $ 71.1 million, respectively, of retainage withheld under terms of our subcontracts.

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

We estimate that approximately 90 % of the retainage outstanding as of December 31, 2022 will be paid during 2023.

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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 2022, we acquired six companies for total consideration of $ 100.8 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) five 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, (ii) two companies that specialize in either building automation and controls or mechanical services in the Southwestern and Southern regions of the United States, respectively, and that have been included within our United States building services segment, and (iii) a company that provides electrical construction services in the Midwestern region of the United States and that has been included within our United States electrical construction and facilities services segment.

In connection with these acquisitions, we acquired working capital of $ 7.1 million and other net liabilities of $ 1.1 million, and have preliminarily ascribed $ 28.9 million to goodwill and $ 65.9 million to identifiable intangible assets.

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

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(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.

(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.

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

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

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

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

This acquisition strengthens our position and broadens our capabilities in the Southern and Southeastern regions of the United States, and the results of its operations have been included within our United States mechanical construction and facilities services segment.

Under the terms of the transaction, we acquired 100 % of BKI’s outstanding capital stock for total consideration of approximately $ 220.3 million.

In connection with the acquisition of BKI, we acquired working capital of $ 29.8 million and other net assets of $ 4.9 million and have ascribed $ 43.9 million to goodwill and $ 141.7 million to identifiable intangible assets.

Goodwill is calculated as the excess of the consideration transferred over the fair value of the net assets acquired and represents the future economic benefits expected from this strategic acquisition.

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

EMCOR Group, Inc.

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NOTE 4 - ACQUISITIONS OF BUSINESSES (Continued)

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

Such acquisitions include:

(a) a company that provides electrical contracting services in central Iowa, the results of operations of which have been included within our United States electrical construction and facilities services segment, (b) a company that provides mechanical contracting services in south-central and eastern Texas, the results of operations of which have been included within our United States mechanical construction and facilities services segment, and (c) four companies within our United States building services segment which bolster our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls solutions.

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

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

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

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 and the businesses acquired in 2020 and 2019 have been finalized during their respective measurement periods with an insignificant impact.

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

NOTE 5 - EARNINGS PER SHARE

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

The following table summarizes our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the years ended December 31, 2022, 2021, and 2020 (in thousands, except share and per share data):

2022 2021 2020

Net income attributable to EMCOR Group, Inc.

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

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

$ 406,122 $ 383,532 $ 132,943

Weighted average shares outstanding used to compute basic earnings

per common share 49,931,940 54,068,982 55,196,173

Effect of dilutive securities—Share-based awards 204,322 278,552 225,098

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Inventories $ 85,641 $ 54,098

The increase in inventories as of December 31, 2022, compared to December 31, 2021, was a result of:

(a) advanced purchases of materials and equipment for use on specific construction projects, in an effort to mitigate the impact of extended lead times, which have resulted from supply chain disruptions, and (b) an increase in raw materials on hand to support our fabrication facilities given the growth in demand for our fire protection services.

EMCOR Group, Inc.

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In completing our annual impairment assessment, we determined the fair value of each of our reporting units using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital.

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

The weighted average cost of capital used in our annual impairment testing was 10.3 % for our United States construction segments, 10.2 % for our United States building services segment, and 11.2 % for our United States industrial services segment.

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

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

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

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

For the year ended December 31, 2021, no impairment of our goodwill was recognized.

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

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

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

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

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

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

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

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

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

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Identifiable Intangible Assets and Other Long-Lived Assets

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

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

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

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For the years ended December 31, 2022 and 2021, no impairment of our indefinite-lived intangible assets, finite-lived intangible assets, or other long-lived assets was recognized.

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

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

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

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Customer relationships $ 762,516 $ ( 427,211 ) $ ( 4,834 ) $ 330,471

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

Trade names (indefinite-lived) 289,121 — ( 58,933 ) 230,188

Developed technology/Vendor network 95,661 ( 74,238 ) — 21,423

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

Trade names (finite-lived) 33,791 ( 25,690 ) — 8,101

Contract backlog 83,245 ( 79,453 ) — 3,792

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

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

Trade names (indefinite-lived) 274,721 — ( 58,933 ) 215,788

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

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

Trade names (finite-lived) 32,366 ( 24,180 ) — 8,186

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

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The weighted average amortization periods for the unamortized balances remaining are, in the aggregate, approximately 7.00 years, which are comprised of the following:

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

7.25 years for customer relationships, 7.00 years for trade names, 4.75 years for developed technology/vendor network, and 1.00 year for contract backlog.

Amortization expense related to identifiable intangible assets with finite lives was $ 61.3 million, $ 64.1 million, and $ 60.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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

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

These assumptions and estimates may change in future periods, especially in times of uncertain economic conditions and rising interest rates.

Such assumptions and estimates may also be impacted by supply chain, production, and other logistical issues currently impacting our business.

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

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Credit Agreement

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

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

Until March 2, 2020, we had a credit agreement dated August 3, 2016 , which provided for a $ 900.0 million revolving credit facility and a $ 400.0 million term loan.

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

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

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

As of December 31, 2022 and 2021, the balance of the 2020 Term Loan was $ 242.8 million and $ 256.7 million, respectively.

There were no direct borrowings outstanding under the 2020 Revolving Credit Facility as of December 31, 2022 and 2021.

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

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

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(a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 7.50 % at December 31, 2022), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00 %, or (d) 0.00 %.

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

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

Upon 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 December 31, 2022 and 2021 were 5.73 % 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 December 31, 2021.

The fee was 0.10 % of the unused amount as of December 31, 2022 and 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 December 31, 2021 and 2020, the balance of the 2020 Term Loan was $ 256.7 million and $ 270.6 million, respectively.

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

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

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

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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

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Restricted cash (2)

1,223 — — 1,223

Deferred compensation plan assets (3)

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Restricted cash (2)

1,223 — — 1,223

Deferred compensation plan assets (3)

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$ 558,750 $ 529,303 $ 252,326

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

Foreign income for each of the years ended December 31, 2022, 2021, and 2020 was predominantly earned in the United Kingdom.

The income tax provision for the years ended December 31, 2022, 2021, and 2020 consisted of the following (in thousands):

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For the year ended December 31, 2022, our income tax provision was $ 152.6 million compared to $ 145.6 million for the year ended December 31, 2021 and $ 119.4 million for the year ended December 31, 2020.

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

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

The increase in the income tax provision year-over-year was primarily due to increased income before income taxes.

Additionally, the increase in the income tax provision for 2021, when compared to 2020, was partially attributable to the effect of certain increases in the deferred state tax provision.

The income tax rates on income before income taxes for the years ended December 31, 2022, 2021, and 2020, were 27.3 %, 27.5 %, and 47.3 %, respectively.

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

The slight decrease in the 2022 effective income tax rate, when compared to 2021, was attributable to the favorable impact of certain discrete tax items.

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

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

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - INCOME TAXES (Continued)

Items accounting for the differences between income taxes computed at the federal statutory rate and the income tax provision for the years ended December 31, 2022, 2021, and 2020 were as follows (in thousands):

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$ 152,628 $ 145,602 $ 119,383

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

EMCOR Group, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - INCOME TAXES (Continued)

The net minimum tax on global intangible low-taxed income for certain earnings of our foreign subsidiaries was approximately $ 0.1 million for each of the years ended December 31, 2022, 2021, and 2020.

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

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

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

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

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

Amounts previously deferred were repaid in two installments of approximately $ 51 million during each of the fourth quarters of 2022 and 2021.

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

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

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

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

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

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

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

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

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

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 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.

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Insurance liabilities $ 57,278 $ 50,316

Pension liability — 6,789

Operating lease liabilities 78,391 76,451

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Accrued federal payroll taxes (1)

14,235 27,428

Other (including liabilities and reserves) 35,584 31,252

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_________________

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

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

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

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

At December 31, 2022 and 2021, our net deferred income tax liabilities of $ 61.6 million and $ 51.0 million, respectively, were included in “Other long-term obligations” in the accompanying Consolidated Balance Sheet.

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

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

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

As of December 31, 2022 and 2021, the total valuation allowance on deferred income tax assets, related to state and local net operating losses, foreign net operating losses, and foreign income tax credit carryovers, was approximately $ 3.6 million and $ 2.5 million, respectively.

The increase in our valuation allowances at December 31, 2022 was primarily a result of the recognition of additional deferred tax assets related to net operating loss carryovers that we determined we would likely not be able to utilize.

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

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

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

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We currently pay a regular quarterly dividend of $ 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 of our common stock that we may repurchase under such program.

Subsequent to December 31, 2022, our Board of Directors (the “Board”) announced its intention to increase the regular quarterly dividend to $ 0.18 per share commencing with the dividend to be paid in April 2023.

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 $ 2.15 billion of our outstanding common stock.

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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.

NOTE 13 - SHARE-BASED COMPENSATION PLANS

We have an incentive plan under which stock awards, stock units, and other share-based compensation may be granted to officers, non-employee directors, and key employees of the Company.

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

Such plan, as amended, no longer allows for the grant of stock options.

Under the terms of this plan, 3,250,000 shares were authorized, and 792,726 shares remain available for grant or issuance as of December 31, 2022.

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Forfeitures are recognized as they occur.

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

Stock Options Restricted Stock Units

The following table summarizes activity regarding restricted stock units since December 31, 2019:

Shares Weighted

Price Shares Weighted

Balance, December 31, 2018 40,000 $ 24.48 Balance, December 31, 2018 476,586 $ 63.52

Granted — — Granted 169,766 $ 64.34

Expired — — Forfeited ( 2,545 ) $ 71.88

Exercised ( 20,000 ) $ 24.48 Vested ( 226,229 ) $ 51.64

Balance, December 31, 2019 20,000 $ 24.48 Balance, December 31, 2019 417,578 $ 70.24

Granted — — Granted 137,771 $ 81.56

Expired — — Forfeited ( 984 ) $ 79.17

Exercised ( 20,000 ) $ 24.48 Vested ( 156,447 ) $ 72.72

Balance, December 31, 2020 — — Balance, December 31, 2020 397,918 $ 73.16

Granted — — Granted 129,859 $ 96.32

Expired — — Forfeited ( 2,242 ) $ 78.86

Exercised — — Vested ( 121,067 ) $ 77.86

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

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

Balance, December 31, 2019 417,578 $ 70.24

Granted 137,771 $ 81.56

Forfeited ( 984 ) $ 79.17

Vested ( 156,447 ) $ 72.72

Balance, December 31, 2020 397,918 $ 73.16

Granted 129,859 $ 96.32

Forfeited ( 2,242 ) $ 78.86

Vested ( 121,067 ) $ 77.86

Balance, December 31, 2021 404,468 $ 79.16

Granted 107,621 $ 123.52

Forfeited ( 4,665 ) $ 105.88

Vested ( 189,830 ) $ 67.40

Balance, December 31, 2022 317,594 $ 100.83

We recognized approximately $ 12.1 million, $ 11.1 million, and $ 11.2 million of compensation expense for stock units awarded to non-employee directors and employees pursuant to our incentive plans for the years ended December 31, 2022, 2021, and 2020, respectively.

We have approximately $ 9.8 million of compensation expense, net of income taxes, which will be recognized over the remaining vesting periods of up to 3 years.

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NOTE 13 - SHARE-BASED COMPENSATION PLANS (Continued)

There were 20,000 stock options outstanding at December 31, 2019.

Such stock options were exercised during 2020 at a weighted average price of $ 24.48 .

The total intrinsic value (the amounts by which the stock price exceeded the exercise price on the date of exercise) for these options was approximately $ 1.2 million.

There has been no other activity with respect to stock options since December 31, 2020, and there were no options outstanding at December 31, 2022 and 2021.

The income tax benefit derived in 2022, 2021, and 2020 as a result of share-based compensation was approximately $ 3.9 million, $ 2.6 million, and $ 1.9 million, respectively, of which approximately $ 1.7 million, $ 0.8 million, and $ 0.2 million, respectively, represented excess tax benefits.

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

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

We have an employee stock purchase plan.

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Interest cost 5,693 5,326

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

Actuarial gain ( 116,372 ) ( 22,071 )

Benefits paid ( 11,095 ) ( 13,939 )

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

Actual return on plan assets 21,809 34,380

Actual (loss) return on plan assets ( 105,544 ) 21,809

Employer contributions 4,875 4,956

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Fair value of plan assets at end of year 210,284 356,532

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

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

Funded status at end of year $ 16,328 $ 7,385

The funded status of the UK Plan of $ 16.3 million and $ 7.4 million at December 31, 2022 and 2021, respectively, is included in “Other Assets” in the accompanying Consolidated Balance Sheets.

No plan assets are expected to be returned to us during the year ending December 31, 2023.

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NOTE 14 - RETIREMENT PLANS (Continued)

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

The weighted average assumptions used to determine benefit obligations of the UK Plan as of December 31, 2022 and 2021 were as follows:

Discount rate 5.0 % 1.8 %

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

December 31, 2020

Projected benefit obligation $ 383,142

Accumulated benefit obligation $ 383,142

Fair value of plan assets $ 347,411

The components of net periodic pension cost (income) of the UK Plan for the years ended December 31, 2022, 2021, and 2020 were as follows (in thousands):

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Net periodic pension cost (income) $ ( 4,322 ) $ ( 3,758 ) $ ( 3,233 )

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

The weighted average assumptions used to determine net periodic pension cost of the UK Plan for the years ended December 31, 2022, 2021, and 2020 were as follows:

2022 2021 2020

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For measurement purposes of the liability, the annual rates of inflation of covered pension benefits assumed for 2022 and 2021 were 2.8 % and 2.9 %, respectively.

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

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

December 31, 2022 December 31, 2021

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The amortization period for 2022 was 24 years.

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

The reclassification adjustment, net of income taxes, for the UK Plan from accumulated other comprehensive loss into net periodic pension cost was approximately $ 1.6 million for the year ended December 31, 2022, approximately $ 2.9 million for the year ended December 31, 2021, and approximately $ 1.9 million for the year ended December 31, 2020.

The estimated unrecognized loss for the UK Plan that will be amortized from accumulated other comprehensive loss into net periodic pension cost over the next year is approximately $ 1.9 million, net of income taxes.

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The weighted average asset allocations and weighted average target allocations at December 31, 2022 and 2021 were as follows:

Asset Category Target Asset

December 31, 2021 Target Asset

Asset Category Target

Allocation Actual

December 31, 2022 Actual

December 31, 2021

Debt 75.0 % 80.7 % 76.0 %

Equity — % — % 15.0 % 12.7 %

Cash and cash equivalents 15.0 % 9.4 % 16.5 %

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

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

The following tables set forth the fair value of assets of the UK Plan as of December 31, 2022 and 2021 (in thousands):

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Government bond funds — 91,899 — 91,899

Equity funds — 44,132 — 44,132

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

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Level 1 assets represent cash and cash equivalents.

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

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

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

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These investments include:

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

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

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

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

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Estimated Future Benefit Payments

The following estimated benefit payments are expected to be paid in the following years (in thousands):

The following estimated benefit payments are expected to be made from the UK Plan in the following years (in thousands):

Benefit Payments

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2027 $ 11,476

2026 $ 12,545

Succeeding five years $ 63,182

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

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

The aggregate benefit obligation associated with these plans as of December 31, 2022 and 2021 was approximately $ 6.7 million and $ 8.5 million, respectively.

The estimated fair value of the plan assets as of December 31, 2022 and 2021 was approximately $ 4.9 million and $ 6.3 million, respectively.

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The measurement date for these plans is December 31 of each year.

The major assumptions used in the actuarial valuations to determine benefit obligations as of December 31, 2021 and 2020 included discount rates of 2.40 % to 2.50 % for 2021 and 2.00 % to 2.25 % for 2020.

The major assumptions used in the actuarial valuations to determine benefit obligations as of December 31, 2022 and 2021 included discount rates of approximately 4.80 % for 2022 and 2.40 % to 2.50 % for 2021.

Also included was an expected rate of return of 7.00 % for both 2022 and 2021.

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

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

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

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

The net periodic pension cost associated with the domestic plans, as well as the reclassification adjustment from accumulated other comprehensive loss to net periodic pension cost, were insignificant for all periods presented.

The future estimated benefit payments expected to be made from the plans for the next ten years is approximately $ 0.5 million per year.

EMCOR Group, Inc.

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

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

The expenses recognized for employer contributions to these plans were approximately $ 35.0 million for the year ended December 31, 2022, $ 33.0 million for the year ended December 31, 2021, and $ 32.4 million for the year ended December 31, 2020.

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

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Our United Kingdom subsidiary also has defined contribution retirement plans.

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

The expenses recognized related to employer matching contributions for the years ended December 31, 2022, 2021, and 2020 were approximately $ 7.3 million, $ 8.3 million, and $ 7.4 million, respectively.

Multiemployer Plans

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

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

We did not record any material withdrawal liabilities for the years ended December 31, 2022, 2021, and 2020.

EMCOR Group, Inc.

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2022 2021 2022 2021 2020

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

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

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

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

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

National Automatic Sprinkler Industry Pension Fund 52-6054620 001 Green Green NA $ 21,583 $ 20,987 $ 17,504 Yes May 2023 to

United Association National Pension Fund (Formerly Plumbers & Pipefitters National Pension Fund) 52-6152779 001 Green Green NA 15,288 14,723 14,095 No February 2023 to

National Electrical Benefit Fund 53-0181657 001 Green Green NA 15,192 12,310 11,573 No May 2023 to

Sheet Metal Workers National Pension Fund 52-6112463 001 Green Yellow NA 9,505 10,307 11,621 No May 2023 to

Pension, Hospitalization & Benefit Plan of the Electrical Industry-Pension Trust Account 13-6123601 001 Green Green NA 8,122 7,355 6,750 No April 2023 to

Electrical Workers Local No.

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

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

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

26 Pension Trust Fund 52-6117919 001 Green Green NA 7,844 9,346 7,086 Yes May 2023 to August 2024

Plumbers Pipefitters & Mechanical Equipment Service Local Union 392 Pension Plan 31-0655223 001 Red Red Implemented 7,674 7,110 5,667 Yes May 2025

Central Pension Fund of the IUOE & Participating Employers 36-6052390 001 Green Green NA 7,651 6,627 6,115 No March 2023 to

December 2026

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

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

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

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

Boilermaker-Blacksmith National Pension Trust 48-6168020 001 Green Yellow NA 6,434 3,479 1,574 No September 2023 to

Sheet Metal Workers Pension Plan of Northern California 51-6115939 001 Red Red Implemented 6,074 7,850 6,605 No June 2023 to June 2026

Edison Pension Plan 93-6061681 001 Green Green NA 5,325 4,229 3,864 Yes December 2023

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

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

Pipefitters Union Local 537 Pension Fund 51-6030859 001 Green Green NA 5,039 5,922 4,275 Yes August 2025

Southern California Pipe Trades Retirement Fund 51-6108443 001 Green Green NA 4,650 6,272 4,043 No August 2023 to August 2026

Heating, Piping & Refrigeration Pension Fund 52-1058013 001 Green Green NA 4,625 5,591 3,349 Yes July 2023 to July 2025

Southern California IBEW-NECA Pension Trust Fund 95-6392774 001 Yellow Yellow Implemented 4,287 4,876 5,719 No June 2023 to

San Diego Electrical Pension Plan 95-6101801 001 Green Green NA 4,258 4,068 4,383 Yes May 2024

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

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

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

IBEW 332 Pension Fund - Part A 94-2688032 004 Green Green NA 4,177 2,339 1,211 No May 2023 to May 2024

Local 393 Pension Trust Fund Defined Benefit 94-6359772 002 Green Green NA 3,517 3,507 3,168 Yes June 2023 to July 2027

Electrical Contractors Association of the City of Chicago Local Union 134, IBEW Joint Pension Trust of Chicago Pension Plan 2 51-6030753 002 Green Green NA 3,516 4,225 3,004 No June 2023

Eighth District Electrical Pension Fund 84-6100393 001 Green Green NA 3,339 3,298 3,242 Yes May 2023 to August 2024

9 unchanged sentences

2022 2021 2022 2021 2020

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

NECA-IBEW Pension Trust Fund 51-6029903 001 Green Green NA 3,034 2,491 2,369 No May 2023 to December 2023

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

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

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

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

Arizona Pipe Trades Pension Trust Fund 86-6025734 001 Green Green NA 2,940 2,020 2,301 Yes June 2023 to June 2024

Sheet Metal Workers Pension Plan of Southern California, Arizona & Nevada 95-6052257 001 Green Yellow NA 2,921 3,322 2,706 No June 2023 to June 2026

Electrical Workers Pension Plan Local 103 IBEW 04-6063734 001 Green Green NA 2,900 — — Yes August 2023

IBEW Local 701 Pension Fund 36-6455509 001 Green Green NA 2,625 1,276 1,197 Yes May 2023 to September 2023

IBEW Local No.

82 Pension Plan 31-6127268 001 Green Green NA 2,549 956 18 Yes December 2023 to October 2025

697 IBEW and Electrical Industry Pension Fund 51-6133048 001 Green Green NA 2,287 1,753 1,583 Yes May 2023

Local 38 Defined Benefit Pension Fund 94-1285319 001 Green Green NA 2,010 1,903 2,874 No June 2023

Plumbing & Pipe Fitting Local 219 Pension Fund 34-6682376 001 Red Red Implemented 1,172 1,167 1,680 Yes May 2023

Plumbers & Pipefitters Local 162 Pension Fund 31-6125999 001 Yellow Yellow Implemented 1,132 1,034 969 Yes May 2023

1 unchanged sentence

420 Pension Plan 23-2004424 001 Red Red Implemented 1,018 677 553 No May 2023 to April 2024

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

Carpenters Pension Trust Fund for Northern California 94-6050970 001 Red Red Implemented 532 568 385 No June 2023

8 unchanged sentences

Those Forms, among other things, disclose the names of individual participating employers whose annual contributions account for more than 5% of the aggregate annual amount contributed by all participating employers for a plan year.

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

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

24 unchanged sentences

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.

1 unchanged sentence

Collective Bargaining Agreements

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

At December 31, 2022, we employed approximately 35,500 people, approximately 60 % of whom are represented by various unions pursuant to approximately 450 collective bargaining agreements between our individual subsidiaries or trade associations and local unions, as well as two collective bargaining agreements that are national or regional in scope.

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

67 unchanged sentences

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

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

Sublease rental income was approximately $ 3.8 million, $ 0.2 million, and $ 0.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Lease Term and Discount Rate

43 unchanged sentences

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

Our services are provided to a broad range of commercial, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries.

Such operating subsidiaries are organized into the following reportable segments:

4 unchanged sentences

• United Kingdom building services.

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

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

We refer to our United States electrical construction and facilities services segment and our United States mechanical construction and facilities services segment together as our United States construction segments.

EMCOR Group, Inc.

151 unchanged sentences

The fair value estimates for trade name intangible assets were sensitive to significant assumptions inherent in the Company’s discounted estimated future cash flows such as the royalty rate, discount rate, and revenue growth rates.

The fair value estimates for goodwill and trade name intangible assets are affected by expectations about future market or economic conditions, including the effects of the COVID-19 pandemic and other macroeconomic events relevant to certain markets in which the Company operates.

The fair value estimates for goodwill and trade name intangible assets are affected by expectations about future market or economic conditions relevant to each of the markets in which the Company operates.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s impairment review processes for goodwill and trade name intangible assets.

39 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data