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Item 2. Management’s Discussion and Analysis

2023-04-27 compared with 2022-10-27 · 143 added, 331 removed, 150 unchanged (76% of the section changed)

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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.

Such operating subsidiaries are organized into the following reportable segments:

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• United Kingdom building services.

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.

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

Business of our Form 10-K for the year ended December 31, 2022.

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.

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 due to changes in our internal reporting structure aimed at realigning our service offerings.

Market Update

Although our business continues to recover from the financial impacts of the COVID-19 pandemic and related government orders implemented to mitigate it, the effect of the COVID-19 pandemic may continue to disrupt our customers’ operations and our job sites, and may continue to impact supply chains.

Economic disruptions, including supply chain, production, and other logistical issues, as well as wage and general inflation, together with escalating commodity prices, have and may continue to negatively impact our business.

For example, we are experiencing lead times significantly in excess of normal levels while also experiencing the effects of inflation through increases in fuel, material, and other commodity prices.

These disruptions have manifested themselves through project delays or scheduling impacts and reduced labor productivity and efficiency, particularly within our United States construction segments and our United States building services segment.

In addition, the market for trade labor remains tight in many of the regions in which we operate and the conflict in Ukraine has added another layer of uncertainty, especially with respect to energy costs.

In response to these challenges, we continue to strive to more effectively manage our business through enhanced labor planning and project scheduling, increased pricing to the extent contractually permitted, and by leveraging our relationships with our suppliers and customers.

While we believe the actions we have taken continue to be effective, as evidenced in part by the sequential improvement in our operating performance throughout each quarter of 2022, the impact of these disruptions continues to evolve and there can be no assurance that our actions will serve to mitigate such impacts in future periods.

Further, while we believe our remaining performance obligations are firm, and we have not experienced any material project cancellations to date, prolonged delays in the receipt of critical equipment could impact our ability to convert such remaining performance obligations to revenues in the near term, or result in our customers seeking to terminate existing or pending agreements.

Lastly, rising interest rates may cause a decline in our customers’ capital spending and, therefore, the demand for our services.

Any of these events could have a material adverse effect on our business, financial condition, and/or results of operations.

The following table presents selected financial data for the three months ended September 30, 2022 and 2021 (in thousands, except percentages and per share data):

Our business and end markets remain resilient despite the impact of uncertain global economic conditions, including supply chain, production, and other logistical issues, an inflationary cost environment, rising interest rates, and skilled labor shortages in certain regions.

The continued strength in demand for our services is reflected in our results of operations for the first quarter of 2023, during which we experienced an increase in both revenue and operating income when compared to the first quarter of 2022.

As evidenced by the growth in our remaining performance obligations, which increased to $7.87 billion at March 31, 2023, from $7.46 billion at December 31, 2022, we anticipate the demand for our services to continue throughout the year.

Although improved from the year ago period, we continue to experience pressures in our supply chain, which are resulting in material and equipment lead times significantly in excess of normal levels.

Delays in critical material and equipment deliveries have additionally resulted in us funding purchases at earlier stages of project progression, or in advance of project commencement, which has and will continue to apply pressure on working capital requirements.

Although we experienced a reduction in commodity prices when compared to the prior year period, and current economic indicators suggest that inflation is slowing, there continues to be volatility in the price of fuel, certain materials, and other commodities used in our operations.

Further, in an effort to mitigate inflation, the Federal Reserve Board increased the federal funds rate throughout 2022 and into the first quarter of 2023.

While there remains uncertainty around further increases, interest rates, even at their current levels, will likely result in an increase in our annual interest expense.

Our management teams continue to adapt to the challenges of the current operating environment in order to manage our business more effectively through diligent contract negotiations, enhanced labor planning and project scheduling, and increased supplier engagement.

As contractually permitted, and in order to combat inflationary pressures, we have and will continue to seek increases in pricing to the extent we experience increases in our costs.

While we believe the actions we have taken continue to be effective, as evidenced in part by our operating performance to date, the impact of these disruptions continues to evolve and there can be no assurance that our actions will serve to mitigate such impacts in future periods.

Further, while we believe our remaining performance obligations are firm, and we have not experienced any material project cancellations to date, prolonged delays in the receipt of critical equipment could impact our ability to convert such remaining performance obligations to revenues in the near term or result in our customers seeking to delay or terminate existing or pending agreements.

Lastly, the current interest rate environment may cause a decline in capital or maintenance spending of our customers or prospective customers, particularly as it pertains to short duration project work.

Any of these events could result in reduced demand for our services and have a material adverse effect on our business, financial condition, and/or results of operations.

The following table presents selected financial data for the three months ended March 31, 2023 and 2022 (in thousands, except percentages and per share data):

For the three months ended

September 30,

Revenues $ 2,890,432 $ 2,592,549

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Operating income as a percentage of revenues 5.4 % 3.9 %

Net income attributable to EMCOR Group, Inc.

$ 105,772 $ 99,740

Net income $ 111,473 $ 73,386

Diluted earnings per common share $ 2.32 $ 1.39

Revenues of $2.83 billion for the quarter ended September 30, 2022 set a new quarterly record for the Company and represent an increase of 12.1% from revenues of $2.52 billion for the quarter ended September 30, 2021.

Demand for our services continues to be strong and, as described in further detail below, we experienced revenue growth within all of our reportable segments except for our United Kingdom building services segment, the reduction in revenues of which was entirely due to unfavorable exchange rate movements during 2022, which more than offset revenue growth experienced on a local currency basis.

Companies acquired in 2022 and 2021, the results of operations of which are included within our United States electrical construction and facilities services segment, generated incremental revenues of approximately $32.8 million during the three months ended September 30, 2022.

Operating income for the quarter ended September 30, 2022 was $150.1 million, a $12.7 million increase compared to operating income of $137.4 million for the quarter ended September 30, 2021.

Contributing to this increase in operating income was improved operating results from each of our reportable segments, other than our United States electrical construction and facilities services segment.

Operating margin was 5.3% and 5.4% for the quarters ended September 30, 2022 and 2021, respectively.

The slight decrease in operating margin period over period was driven by a reduction in gross profit margin, predominantly within our United States electrical construction and facilities services segment, which was almost entirely offset by a reduction in the ratio of selling, general and administrative expenses to revenues as we continue to leverage our overhead cost structure during periods of revenue growth.

Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments.

Net income of $105.8 million, or $2.16 per diluted share, for the quarter ended September 30, 2022, compares favorably to net income of $99.7 million, or $1.85 per diluted share, for the quarter ended September 30, 2021.

In addition to the increase in operating income referenced above, our diluted earnings per share for the third quarter of 2022 benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2021 and 2022.

Revenues of $2.89 billion for the quarter ended March 31, 2023 set a new first quarter record for the Company and represent an increase of 11.5% from revenues of $2.59 billion for the quarter ended March 31, 2022.

Demand for our services continues to be strong and, as described in further detail below, we experienced revenue growth within all of our reportable segments, except for our United Kingdom building services segment.

Revenues for the first quarter of 2023 were positively impacted by incremental contribution from acquired companies of approximately $35.2 million.

Operating income for the quarter ended March 31, 2023 was $154.9 million, or 5.4% of revenues, establishing new first quarter records for the Company.

This compares to operating income of $100.0 million, or 3.9% of revenues, for the quarter ended March 31, 2022.

The $55.0 million increase in operating income, and corresponding 150 basis point improvement in operating margin, were a result of improved operating performance within each of our reportable segments, other than our United Kingdom building services segment.

These improvements in profitability were a result of:

(a) better project execution during 2023, (b) a more favorable mix of work when compared to the 2022 period, which included a number of projects with lower than average gross profit margins, and (c) the impact in the first quarter of 2022 of certain supply chain disruptions and delays, which were greater than those experienced during the first quarter of 2023.

Net income of $111.5 million, or $2.32 per diluted share, for the quarter ended March 31, 2023, compares favorably to net income of $73.4 million, or $1.39 per diluted share, for the quarter ended March 31, 2022.

In addition to the increase in operating income referenced above, our diluted earnings per share for the first quarter of 2023 benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2022.

Impact of Acquisitions

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The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period.

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:

We acquired eight companies during calendar year 2021 for total consideration of $131.2 million.

During the first quarter of 2023, we acquired two companies, each for an immaterial amount.

One company has been included within our Unites States mechanical construction and facilities services segment and provides mechanical and pipe fabrication services in the Midwestern region of the United States.

The other company has been included within our United States building services segment and provides mechanical services in the Western region of the United States.

The results of operations for both such companies were de minimis.

We acquired six companies during calendar year 2022 for total consideration of $100.8 million.

Such acquisitions include:

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

(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.

Results of Operations

The following tables present our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):

For the three months ended September 30,

Total 2021 % of

United States electrical construction and facilities services $ 633,383 22 % $ 530,950 21 %

United States mechanical construction and facilities services 1,117,388 40 % 1,004,407 40 %

United States building services 710,650 25 % 624,617 25 %

United States industrial services 247,239 9 % 232,218 9 %

Total United States operations 2,708,660 96 % 2,392,192 95 %

United Kingdom building services 117,701 4 % 129,480 5 %

Total operations $ 2,826,361 100 % $ 2,521,672 100 %

For the nine months ended September 30,

The following table presents our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):

For the three months ended March 31,

Total 2022 % of

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Total operations $ 2,890,432 100 % $ 2,592,549 100 %

As described below in more detail, our revenues for the third quarter of 2022 increased to $2.83 billion compared to $2.52 billion for the third quarter of 2021, and our revenues for the nine months ended September 30, 2022 increased to $8.13 billion compared to $7.26 billion for the nine months ended September 30, 2021.

For both 2022 periods presented, we experienced increases in revenues from all of our reportable segments, except for our United Kingdom building services segment, the reduction in revenues of which was entirely due to unfavorable exchange rate movements during 2022, which more than offset revenue growth experienced on a local currency basis.

Companies acquired in 2022 and 2021 generated incremental revenues of approximately $32.8 million for the three months ended September 30, 2022, and incremental revenues of approximately $116.0 million for the nine months ended September 30, 2022.

Revenues of our United States electrical construction and facilities services segment were $633.4 million and $1,719.5 million for the three and nine months ended September 30, 2022, respectively, compared to revenues of $531.0 million and $1,482.5 million for the three and nine months ended September 30, 2021, respectively.

This segment’s results for the three and nine months ended September 30, 2022 included $32.8 million and $101.4 million, respectively, of incremental revenues from acquired companies.

Excluding the impact of acquisitions, revenues of this segment increased by $69.6 million and $135.6 million, respectively, primarily as a result of an increase in revenues from:

(a) the commercial market sector, predominantly within the telecommunications sub-market sector, inclusive of our data center projects, and the technology sub-market sector,

(b) the manufacturing market sector, driven by an increase in:

(i) transmission and distribution projects, including those to support sustainable energy solutions such as solar and wind, (ii) revenues from contracts with certain of our other energy sector customers, and (iii) food processing construction projects within the Midwestern region of the United States, and (c) the healthcare market sector due to large project activity.

Revenues of this segment for the nine months ended September 30, 2022 additionally benefited from an increase in traditional commercial construction projects.

For the three and nine months ended September 30, 2022, the aforementioned revenue increases were partially offset by a decrease in revenues from the transportation market sector, and for the nine months ended September 30, 2022, such revenue increase was also partially offset by a reduction in institutional market sector activity, in each case, due to the completion or substantial completion of various projects.

Our United States mechanical construction and facilities services segment revenues for the three months ended September 30, 2022 were $1,117.4 million, a $113.0 million increase compared to revenues of $1,004.4 million for the three months ended September 30, 2021.

Revenues of this segment for the nine months ended September 30, 2022 were $3,184.2 million, a $296.6 million increase compared to revenues of $2,887.6 million for the nine months ended September 30, 2021.

The increase in this segment’s revenues for both periods was primarily attributable to revenue growth within:

(a) the commercial market sector, as a result of increased demand for:

(i) our mechanical construction and/or fire protection services by certain customers engaged in the design and manufacturing of semiconductors as well as customers within the biotech, life-sciences, and pharmaceutical industries, and (ii) our fire protection services within various warehousing and distribution facilities to support the build-out of our customers’ e-commerce supply chains, (b) the institutional market sector, due to project activity throughout several of the regions in which we operate, and (c) the water and wastewater market sector, given greater project activity within the Southern region of the United States.

While commercial market sector revenues of this segment for the nine months ended September 30, 2022 reflected a slight decrease within the telecommunications sub-market sector, we experienced notable growth in telecommunications revenues during the three months ended September 30, 2022 due to an increase in construction activity on several data center projects.

The results of this segment for the nine months ended September 30, 2022 additionally included incremental revenues from the manufacturing market sector, driven by certain large food processing projects.

Revenues of our United States building services segment were $710.7 million and $2,016.3 million for the three and nine months ended September 30, 2022, respectively, compared to revenues of $624.6 million and $1,804.5 million for the three and nine months ended September 30, 2021, respectively.

Excluding incremental acquisition revenues within this segment’s mobile mechanical services division of $14.6 million during the nine months ended September 30, 2022, this segment’s revenue growth for both periods was primarily attributable to:

(a) its mobile mechanical services division, due to:

(i) increased project work, including incremental demand for HVAC system retrofits and building automation and controls services, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, and (ii) greater service repair and maintenance volumes, partially as a result of incremental repair opportunities driven by supply chain delays, which have created a need to extend the life of existing equipment in instances when replacement equipment is not readily available, and (b) its commercial site-based services division, due to the award of facilities maintenance contracts with new customers, as well as scope or site expansion and increased project work with existing customers.

In addition, for the three months ended September 30, 2022, revenues of this segment’s mobile mechanical services division were positively impacted by increased demand for HVAC repair and maintenance services during the peak cooling season, when compared to the prior year period.

Revenues of our United States industrial services segment for the three months ended September 30, 2022 were $247.2 million, compared to revenues of $232.2 million for the three months ended September 30, 2021.

Revenues of this segment for the nine months ended September 30, 2022 were $842.5 million, compared to revenues of $702.8 million for the nine months ended September 30, 2021.

While there remains significant disruption and uncertainty within the broader oil and gas industry, most notably within the upstream and midstream energy sectors, we began to experience a resumption in downstream energy demand within this segment during the second half of 2021.

Such increased demand continued into the first nine months of 2022, resulting in revenue growth within this segment.

Specifically, more normalized turnaround project demand and an increase in maintenance and capital project activity, when compared to the prior year, has resulted in increased revenues from this segment’s field services operations during the three and nine months ended September 30, 2022.

In addition, although reduced slightly during the third quarter of 2022, revenues of this segment’s shop services operations have increased for the first nine months of 2022, as a result of greater new build heat exchanger sales and an increase in maintenance, repair, and hydro blast cleaning services.

Our United Kingdom building services segment revenues were $117.7 million and $363.7 million for the three and nine months ended September 30, 2022, respectively, compared to revenues of $129.5 million and $386.1 million for the three and nine months ended September 30, 2021, respectively.

The decrease in this segment’s revenues for both periods was entirely a result of unfavorable exchange rate movements for the British pound versus the United States dollar, which negatively impacted this segment’s revenues by $20.2 million and $36.6 million for the three and nine months ended September 30, 2022, respectively.

Excluding the impact of foreign exchange rate movements, this segment’s revenues for each 2022 period increased as a result of growth in project activities with existing customers, primarily within the commercial market sector, including certain telecommunication projects.

As described below in more detail, as a result of revenue growth within the majority of our reportable segments, our consolidated revenues for the first quarter of 2023 increased to $2.89 billion compared to $2.59 billion for the first quarter of 2022.

Revenues of our United States electrical construction and facilities services segment were $644.7 million for the three months ended March 31, 2023 compared to revenues of $522.0 million for the three months ended March 31, 2022.

This segment’s results for the 2023 period included $35.2 million of incremental acquisition revenues.

Excluding the impact of acquisitions, revenues of this segment grew by $87.5 million, primarily as a result of an increase in revenues from:

(a) the network and communications market sector, predominantly due to our data center projects, (b) the healthcare market sector, as a result of greater project activity throughout several of the regions in which we operate, (c) the manufacturing and industrial market sector, inclusive of revenues from contracts with certain of our energy sector customers, and (d) the hospitality and entertainment market sector, given an increase in projects within the Northeastern and Western regions of the United States.

These revenue increases were partially offset by a reduction in revenues from the transportation and commercial market sectors given the completion or substantial completion of certain projects which were active in the year ago period.

Our United States mechanical construction and facilities services segment revenues for the three months ended March 31, 2023 were $1,078.6 million, an $85.9 million increase compared to revenues of $992.6 million for the three months ended March 31, 2022.

The increase in this segment’s revenues was primarily attributable to revenue growth within:

(a) the high-tech manufacturing market sector, as a result of increased demand for our mechanical construction and/or fire protection services by certain customers engaged in either:

(i) the design and manufacturing of semiconductors or (ii) the production and development of electric vehicles and/or lithium batteries, and (b) the network and communications market sector, due to increased data center project activity.

Revenues of our United States building services segment were $725.4 million for the three months ended March 31, 2023, compared to revenues of $635.6 million for the three months ended March 31, 2022.

The $89.7 million increase in this segment’s revenues period-over-period was primarily attributable to its mechanical services division, due to increased:

(a) HVAC project and retrofit work, as a result of greater:

(i) project execution stemming from increased availability of materials and equipment when compared to the prior year period, which experienced significant supply chain disruptions and delays, and (ii) demand for system upgrades and replacements, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, (b) service repair and maintenance volumes, given growth in our service contract base, and (c) building automation and controls projects, as we continue to expand our service offerings.

Revenues of our United States industrial services segment for the three months ended March 31, 2023 were $330.9 million, compared to revenues of $310.8 million for the three months ended March 31, 2022.

While there remains significant disruption and uncertainty within the broader oil and gas industry, the results of operations of this segment continue to improve at a modest pace.

A steady resumption in demand for our field services, including an increase in turnaround projects as well as maintenance and capital project activity, has resulted in increased revenues from this segment during the three months ended March 31, 2023 when compared to the three months ended March 31, 2022.

In addition, revenues of this segment for the 2023 period were positively impacted by greater new build heat exchanger sales and services within its shop services division.

Our United Kingdom building services segment revenues were $110.9 million for the three months ended March 31, 2023 compared to revenues of $131.5 million for the three months ended March 31, 2022.

Unfavorable exchange rate movements for the British pound versus the United States dollar negatively impacted this segment’s revenues by $10.8 million for the quarter ended March 31, 2023.

Excluding the impact of foreign exchange rate movements, this segment’s revenue decreased by $9.8 million as a result of:

(a) the loss of certain facilities maintenance contracts not renewed pursuant to rebid, and (b) a reduction in project activity, notably within the water and wastewater market sector.

Cost of sales and gross profit

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For the three months ended

September 30, For the nine months ended

September 30,

2022 2021 2022 2021

Cost of sales $ 2,454,370 $ 2,239,994

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Gross profit margin 15.1 % 13.6 %

Our gross profit for the three months ended September 30, 2022 was $413.2 million, or 14.6% of revenues, compared to gross profit of $381.3 million, or 15.1% of revenues, for the three months ended September 30, 2021.

Gross profit for the nine months ended September 30, 2022 was $1,148.8 million, or 14.1% of revenues, compared to gross profit of $1,098.7 million, or 15.1% of revenues, for the nine months ended September 30, 2021.

Companies acquired in 2022 and 2021 generated incremental gross profit of approximately $4.4 million and $16.0 million for the three and nine months ended September 30, 2022, respectively.

Excluding the impact of acquisitions, the increase in gross profit for both 2022 periods was a result of increased revenue volume, which despite the decrease in gross profit margin discussed below, resulted in an increase in consolidated gross profit.

The decrease in gross profit margin for both 2022 periods was primarily attributable to a reduction in gross profit margin within each of our United States construction segments, partially as a result of a less favorable project mix.

The decrease in gross profit margin for the three months ended September 30, 2022 was additionally attributable to the impact of certain discrete project losses within our United States electrical construction and facilities services segment, which negatively impacted our consolidated gross profit margin during such period by 40 basis points.

For the nine months ended September 30, 2022, discrete project losses within both our United States electrical construction and facilities services segment and our United States mechanical construction and facilities services segment negatively impacted our consolidated gross profit margin by 50 basis points.

Our gross profit for the three months ended March 31, 2023 was $436.1 million, or 15.1% of revenues, compared to gross profit of $352.6 million, or 13.6% of revenues, for the three months ended March 31, 2022.

While the increase in gross profit can be partially attributed to the increased revenue contribution described above, such increase, as well as the increase in gross profit margin, were additionally a result of increased operating performance within each of our reportable segments, other than our United Kingdom building services segment.

For the three months ended March 31, 2023, acquisitions contributed incremental gross profit of $4.9 million, inclusive of amortization expense attributable to identifiable intangible assets of $0.9 million.

Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments.

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For the three months ended

September 30, For the nine months ended

September 30,

2022 2021 2022 2021

Selling, general and administrative expenses $ 281,152 $ 252,598

SG&A margin 9.7 % 9.7 %

Our selling, general and administrative expenses for the three months ended September 30, 2022 were $263.1 million compared to selling, general and administrative expenses of $243.9 million for the three months ended September 30, 2021.

Selling, general and administrative expenses for the nine months ended September 30, 2022 were $761.1 million compared to selling, general and administrative expenses of $710.9 million for the nine months ended September 30, 2021.

For the three and nine months ended September 30, 2022, selling, general and administrative expenses included $3.7 million and $12.1 million, respectively, of incremental expenses directly related to companies acquired in 2022 and 2021, including amortization expense attributable to identifiable intangible assets of $1.2 million and $3.3 million, respectively.

Excluding incremental expenses from businesses acquired, our selling, general and administrative expenses increased by $15.5 million and $38.1 million for the three and nine months ended September 30, 2022, respectively.

The organic increase in selling, general and administrative expenses for both periods was primarily attributable to an increase in:

(a) salaries and related employment expenses, largely as a result of an increase in headcount to support our organic revenue growth, (b) incentive compensation expense, predominantly within our United States mechanical construction and facilities services segment and our United States building services segment, due to higher projected annual operating results than those of the prior year, (c) travel and entertainment expenses, given a resumption in travel and business meals as COVID-19 related restrictions have eased, (d) rent and other occupancy costs, partially driven by the expansion or addition of certain fabrication facilities, which support our operations, and (e) computer hardware and software costs, as a result of various information technology and cybersecurity initiatives currently in process.

Selling, general and administrative expenses as a percentage of revenues were 9.3% and 9.7% for the three months ended September 30, 2022 and 2021, respectively, and 9.4% and 9.8% for the nine months ended September 30, 2022 and 2021, respectively.

The decrease in SG&A margin for both 2022 periods was largely a result of an increase in revenues without a commensurate increase in overhead costs, as we were able to leverage our existing overhead cost structure.

Operating income (loss)

The following tables present our operating income (loss) and operating margin (operating income (loss) as a percentage of segment revenues) (in thousands, except for percentages):

For the three months ended September 30,

Revenues 2021 % of

Our selling, general and administrative expenses for the three months ended March 31, 2023 were $281.2 million compared to selling, general and administrative expenses of $252.6 million for the three months ended March 31, 2022.

Selling, general and administrative expenses for the three months ended March 31, 2023 included $5.2 million of incremental expenses directly related to companies acquired in 2023 and 2022, including amortization expense attributable to identifiable intangible assets of $1.2 million.

Excluding incremental expenses from businesses acquired, our selling, general and administrative expenses increased by $23.3 million period-over-period.

This organic increase in selling, general and administrative expenses was primarily attributable to an increase in:

(a) salaries and related employment expenses, largely as a result of additional headcount to support our organic revenue growth as well as annual cost of living increases, and (b) incentive compensation expense across the majority of our reportable segments, due to higher projected annual operating results compared to those which were anticipated during the same prior year period.

Selling, general and administrative expenses as a percentage of revenues was 9.7% for the each of the three months ended March 31, 2023 and 2022.

Operating income (loss)

United States electrical construction and facilities services $ 35,558 5.6 % $ 44,284 8.3 %

United States mechanical construction and facilities services 90,952 8.1 % 80,797 8.0 %

United States building services 45,589 6.4 % 32,865 5.3 %

United States industrial services (1,392) (0.6) % (3,012) (1.3) %

Total United States operations 170,707 6.3 % 154,934 6.5 %

United Kingdom building services 8,369 7.1 % 6,582 5.1 %

Corporate administration (28,982) — (24,095) —

Total operations 150,094 5.3 % 137,421 5.4 %

Net periodic pension (cost) income 1,025 908

Interest expense, net (3,194) (1,286)

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

For the nine months ended September 30,

The following table presents our operating income (loss) and operating margin (operating income (loss) as a percentage of segment revenues) (in thousands, except for percentages):

For the three months ended March 31,

Revenues 2022 % of

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Income before income taxes $ 152,804 $ 99,837

Operating income for the three months ended September 30, 2022 was $150.1 million, a $12.7 million increase compared to operating income of $137.4 million for the three months ended September 30, 2021.

Contributing to this increase in operating income was improved operating results from each of our reportable segments other than our United States electrical construction and facilities services segment.

Operating margin was 5.3% and 5.4% for the three months ended September 30, 2022 and 2021, respectively.

Operating income for the nine months ended September 30, 2022 was $387.7 million, which was essentially consistent with operating income for the nine months ended September 30, 2021 of $387.8 million.

We experienced increased year-to-date operating results from each of our reportable segments other than our United States electrical construction and facilities services segment.

Operating margin for the nine months ended September 30, 2022 and 2021 was 4.8% and 5.3%, respectively.

The reduction in year-to-date operating margin was driven by a reduction in gross profit margin, predominantly within our United States construction segments, due to a change in project mix, as well as the impact of certain discrete project losses, described in further detail below.

These declines in gross profit margin were once again partially offset by a reduction in the ratio of selling, general and administrative expenses to revenues.

Operating income of our United States electrical construction and facilities services segment was $35.6 million, or 5.6% of revenues, for the three months ended September 30, 2022, compared to $44.3 million, or 8.3% of revenues, for the three months ended September 30, 2021.

Operating income of this segment for the nine months ended September 30, 2022 was $90.6 million, or 5.3% of revenues, compared to operating income of $127.5 million, or 8.6% of revenues, for the nine months ended September 30, 2021.

This segment’s results included incremental operating income from acquired companies of $1.4 million and $5.6 million, inclusive of $1.0 million and $3.3 million of amortization expense associated with identifiable intangible assets, for the three and nine months ended September 30, 2022, respectively.

Excluding the contribution from acquisitions, operating income of this segment decreased by $10.2 million and $42.5 million during the three and nine months ended September 30, 2022, respectively.

A less favorable project mix within the commercial, institutional, and transportation market sectors, coupled with certain discrete project losses recognized during the first nine months of 2022, due, in part, to supply chain disruptions and delays, resulted in a decrease in gross profit and gross profit margin for both the three and nine months ended September 30, 2022.

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, the operating results of our United States electrical construction and facilities services segment were negatively impacted by approximately $10.5 million and $26.5 million during the three and nine months ended September 30, 2022, respectively.

These reductions in estimated project profitability negatively affected the operating margin of this segment by 170 basis points and 150 basis points for the quarter and year-to-date 2022 periods, respectively.

In addition to the impact of supply chain disruptions, a portion of these losses were attributable to project completion delays and time extensions, beyond our control, on certain projects which were bid a number of years ago, under different economic conditions.

We continue to evaluate our contractual rights and are pursuing recovery for such impacts to the extent permitted.

The aforementioned reductions in gross profit margin were partially offset by a reduction in the ratio of selling, general, and administrative expense to revenues as:

(a) this segment was able to successfully leverage its overhead cost structure during this period of revenue growth and (b) the reduced profitability has resulted in a decrease in incentive compensation expense.

Our United States mechanical construction and facilities services segment’s operating income for the three months ended September 30, 2022 was $91.0 million, or 8.1% of revenues, compared to operating income of $80.8 million, or 8.0% of revenues, for the three months ended September 30, 2021.

Operating income of this segment for the nine months ended September 30, 2022 was $226.6 million, or 7.1% of revenues, compared to operating income of $220.7 million, or 7.6% of revenues, for the nine months ended September 30, 2021.

The increase in operating income for both the three and nine months ended September 30, 2022, as well as the increase in operating margin for the three months ended September 30, 2022, was primarily a result of increased gross profit contribution from the commercial market sector, including profit recognized on:

(a) several fire protection projects and (b) certain construction projects for customers engaged in the manufacturing of semiconductors.

Partially offsetting the growth in operating income for the first nine months of 2022, and the primary factor resulting in the decline in operating margin for such nine month period, were certain project write-downs, in the first half of 2022, which were partially a result of supply chain disruptions and/or material price escalations, a portion of which we are seeking recovery from our customers.

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, the operating results of our United States mechanical construction and facilities services segment were negatively impacted by approximately $8.4 million during the nine months ended September 30, 2022.

These reductions in estimated project profitability negatively affected the year-to-date operating margin of this segment by 30 basis points.

Similar to our United States electrical construction and facilities services segment, operating margin of this segment for the quarter and year-to-date 2022 periods has benefited from reductions in the ratio of selling, general, and administrative expenses to revenues, given an increase in revenues without a commensurate increase in certain overhead costs.

Operating income of our United States building services segment was $45.6 million, or 6.4% of revenues, for the three months ended September 30, 2022 compared to $32.9 million, or 5.3% of revenues, for the three months ended September 30, 2021.

Operating income of this segment for the nine months ended September 30, 2022 was $107.7 million, or 5.3% of revenues, compared to operating income of $96.5 million, or 5.3% of revenues, for the nine months ended September 30, 2021.

The increase in operating income for both 2022 periods, as well as the increase in operating margin for the year-to-date period, was largely due to greater gross profit contribution from this segment’s mobile mechanical services division resulting from improved profitability across the majority of its service lines, including projects, service repair and maintenance, and building automation and controls.

These improvements were due to favorable project execution as well as certain price adjustments enacted, to the extent contractually permitted, in response to inflationary pressures such as increased material prices.

Despite the increase in revenues from this segment’s commercial site-based services division, operating income of such division was relatively consistent with that of the prior year period given:

(a) an increase in more traditional facilities maintenance revenues, which carry lower gross profit margins, and (b) the continued effects of certain economic disruptions, including:

(i) inflation, which has negatively impacted the profitability of a portion of this division’s fixed price projects, and (ii) labor shortages, which resulted in a greater use of subcontractors, thereby reducing gross profit.

On a year-to-date basis, operating margin of this segment is consistent with that of the prior year as gross profit improvements in both the second and third quarters of 2022 offset the negative impacts experienced in the first quarter of 2022, such as supply chain disruptions and escalating fuel prices.

Our United States industrial services segment reported an operating loss of $1.4 million, or (0.6)% of revenues, for the three months ended September 30, 2022, a slight improvement compared to an operating loss of $3.0 million, or (1.3)% of revenues, for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, this segment reported operating income of $18.3 million, or 2.2% of revenues, compared to an operating loss of $5.7 million, or (0.8)% of revenues, for the nine months ended September 30, 2021.

The improved performance for the nine months ended September 30, 2022 was primarily due to increased gross profit, resulting from the growth in this segment’s revenues referenced above.

Operating margin of this segment during the year-to-date 2022 period benefited from a reduction in the ratio of selling, general and administrative expenses to revenues, when compared to the prior year period, given:

(a) this segment was able to leverage its overhead cost structure during a period of revenue growth and (b) the effect, in the prior year, of a $4.1 million provision for credit losses taken in connection with a specific customer bankruptcy, which negatively impacted this segment’s operating margin by 60 basis points for the nine months ended September 30, 2021.

This segment’s operating margin for the first nine months of 2022 additionally benefited from an increase in gross profit margin driven by greater absorption of certain indirect cost of sales given the increase in year-to-date revenues.

Operating income of our United Kingdom building services segment was $8.4 million, or 7.1% of revenues, for the three months ended September 30, 2022 compared to $6.6 million, or 5.1% of revenues, for the three months ended September 30, 2021.

Operating income for the nine months ended September 30, 2022 was $25.4 million, or 7.0% of revenues, compared to $23.0 million, or 6.0% of revenues, for the nine months ended September 30, 2021.

This segment’s operating income for the three and nine months ended September 30, 2022 was negatively impacted by $1.4 million and $2.4 million, respectively, related to the effect of unfavorable exchange rates for the British pound versus the United States dollar.

Excluding the impact of foreign exchange rate movements, operating income of this segment represented a $3.2 million and $4.7 million increase for the three and nine months ended September 30, 2022, respectively, when compared to operating income for the three and nine months ended September 30, 2021.

The improvement in this segment’s operating income and operating margin for both 2022 periods was primarily a result of:

(a) an increase in gross profit, primarily as a result of a change in the mix of work, which included a greater amount of revenue generated from project activity as opposed to traditional facilities maintenance services, including an increased number of telecommunication projects as referenced in the revenue commentary for this segment, and (b) the favorable close-out of certain other contracts throughout the year-to-date period.

Our corporate administration expenses for the three months ended September 30, 2022 were $29.0 million, compared to $24.1 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, our corporate administrative expenses were $80.9 million, compared to $74.4 million for the nine months ended September 30, 2021.

The increase in corporate administration expenses for both 2022 periods was primarily due to greater:

(a) incentive compensation expense, partially as a result of incremental expense taken during the third quarter of 2022, necessitated by revised estimates of our annual operating performance, and (b) employment costs, given an increase in headcount to support the revenue growth within our business as well as annual cost of living wage increases.

Net interest expense for the three months ended September 30, 2022 and 2021 was $3.2 million and $1.3 million, respectively.

Net interest expense for the nine months ended September 30, 2022 and 2021 was $6.2 million and $4.0 million, respectively.

The increase in net interest expense for both 2022 periods was a result of both an increase in interest rates and greater average outstanding borrowings.

For the three and nine months ended September 30, 2022, our income tax provision was $42.2 million and $104.9 million, respectively, compared to an income tax provision of $37.3 million and $104.5 million for the three and nine months ended September 30, 2021, respectively.

The increase in our income tax provision for both 2022 periods 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.

Our income tax rate for the three and nine months ended September 30, 2022 was 28.5% and 27.3%, respectively, compared to an income tax rate for the three and nine months ended September 30, 2021 of 27.2% and 27.1%, respectively.

The increase in our income tax rate for both 2022 periods 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.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law.

Such act implements various new tax provisions, some of which may have an impact on our financial position and/or liquidity in future periods.

For further discussion regarding the potential impact of these provisions, refer to Note 9 - Income Taxes of the notes to consolidated financial statements.

Operating income for the quarter ended March 31, 2023 was $154.9 million, or 5.4% of revenues, compared to operating income of $100.0 million, or 3.9% of revenues, for the quarter ended March 31, 2022.

As described in more detail below, these improvements in profitability were a result of:

(i) reduced labor productivity and efficiency, (ii) the under-absorption of labor costs in instances where projects were delayed pending the receipt of materials, or (iii) material and commodity price escalations.

Operating income of our United States electrical construction and facilities services segment was $40.5 million, or 6.3% of revenues, for the three months ended March 31, 2023, compared to $20.0 million, or 3.8% of revenues, for the three months ended March 31, 2022.

The period-over-period increase in both operating income and operating margin of this segment was largely a result of a more favorable mix of work, which resulted in increased gross profit, and gross profit margin, recognized from construction projects within the:

(a) network and communications market sector, (b) commercial market sector, and (c) healthcare market sector.

In addition to the aforementioned impact of project mix, operating income of this segment for the three months ended March 31, 2023 benefited from improved project execution when compared to the year ago period.

Although we continue to experience supply chain disruptions and delays, which are impacting project delivery in various ways, market conditions surrounding equipment availability have steadily improved over the last twelve months and our management teams continue to adapt to this environment.

Such developments have resulted in improved job-site and labor productivity as well as more normalized project sequencing.

Our United States mechanical construction and facilities services segment’s operating income for the three months ended March 31, 2023 was $86.2 million, or 8.0% of revenues, compared to operating income of $58.4 million, or 5.9% of revenues, for the three months ended March 31, 2022.

The increase in operating income, and operating margin, for the three months ended March 31, 2023, was primarily a result of increased gross profit, and gross profit margin, from projects within the commercial market sector, including several fire protection projects.

In addition, operating income of this segment benefited from incremental gross profit contribution from the high-tech manufacturing market sector due to greater project activity, including certain construction projects for customers engaged in the manufacturing of semiconductors.

Similar to our United States electrical construction and facilities services segment, the results for this segment in the prior year period were negatively impacted by external market conditions, which manifested themselves through price escalations, particularly for materials and commodities, such as copper and steel, that are used in our mechanical and fire protection operations.

Although there remains volatility in the pricing of these commodities, more favorable pricing year-over-year has resulted in improved profitability of this segment during the first quarter of 2023, as evidenced in part by the increased gross profit margin within the commercial market sector referenced above.

Operating income of our United States building services segment was $37.7 million, or 5.2% of revenues, for the three months ended March 31, 2023 compared to $24.2 million, or 3.8% of revenues, for the three months ended March 31, 2022.

The period-over-period increase in operating income and operating margin was largely due to greater gross profit and gross profit margin within this segment’s mechanical services division resulting from improved profitability across the majority of its service lines, including projects, service repair and maintenance, and building automation and controls.

These improvements were due to favorable project execution as well as negotiated price adjustments made to customer contracts in response to inflationary pressures, such as increased material and fuel prices.

Operating margin of this segment additionally benefited from a reduction in the ratio of selling, general and administrative expenses to revenues given an increase in revenues without a commensurate increase in certain overhead costs.

Our United States industrial services segment reported operating income of $15.0 million, or 4.5% of revenues, for the three months ended March 31, 2023, compared to operating income of $13.3 million, or 4.3% of revenues, for the three months ended March 31, 2022.

In addition to the growth in this segment’s revenues referenced above, which resulted in greater gross profit contribution, the improved quarterly performance was attributable to better pricing within both this segment’s field services and shop services divisions, resulting in improved gross profit margin period-over-period.

Operating income of our United Kingdom building services segment was $5.4 million, or 4.9% of revenues, for the three months ended March 31, 2023 compared to $10.6 million, or 8.1% of revenues, for the three months ended March 31, 2022.

This segment’s operating income for the first quarter of 2023 was negatively impacted by $0.5 million related to the effect of unfavorable exchange rate movements for the British pound versus the United States dollar.

Excluding the impact of foreign exchange, the decrease in this segment’s operating income and operating margin period-over-period was primarily a result of a reduction in gross profit and gross profit margin due to a shift in the mix and size of project work.

In addition, operating income and operating margin of this segment were negatively impacted by growth in selling, general and administrative expenses, such as:

(a) employment related costs, given an increase in office headcount to support the business, and (b) information technology expenses, resulting from certain initiatives currently in process.

Our corporate administration expenses for the three months ended March 31, 2023 were $29.9 million compared to $26.5 million for the three months ended March 31, 2022.

This increase in corporate expenses was primarily due to greater incentive compensation expense as a result of higher projected annual and long-term operating results, when compared to those which were anticipated during the same prior year period.

Net interest expense for the three months ended March 31, 2023 and 2022 was $1.8 million and $1.3 million, respectively.

The increase in net interest expense was a result of both an increase in interest rates and greater average outstanding borrowings.

For the three months ended March 31, 2023, our income tax provision was $41.3 million compared to an income tax provision of $26.5 million for the three months ended March 31, 2022.

The increase in our income tax provision for the three months ended March 31, 2023 was due to:

(a) greater income before income taxes, and (b) an increase in our effective income tax rate.

Our effective income tax rate for the three months ended March 31, 2023 was 27.0% compared to an effective income tax rate for the three months ended March 31, 2022 of 26.5%.

The change in our effective income tax rate period-over-period was attributable to an increase in certain permanent book-to-tax differences.

Refer to Note 9 - Income Taxes of the notes to consolidated financial statements for further discussion regarding our income tax provision and effective income tax rate.

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 percentage of total remaining performance obligations (in thousands, except for percentages):

September 30,

2022 % of Total December 31, 2021 % of Total September 30,

2023 % of Total December 31, 2022 % of Total March 31,

2022 % of Total

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Total operations $ 7,873,143 100 % $ 7,459,299 100 % $ 5,952,881 100 %

Our remaining performance obligations at September 30, 2022 were $7.10 billion compared to $5.60 billion at December 31, 2021 and $5.38 billion at September 30, 2021.

The increase in remaining performance obligations at September 30, 2022, when compared to December 31, 2021, was attributable to an increase in remaining performance obligations within all of our reportable segments.

Most notably, we experienced an increase in remaining performance obligations within:

(a) our United States construction segments, driven by the award of various construction projects within the commercial market sector, inclusive of:

(i) data center projects, (ii) semiconductor projects, and (iii) other projects for customers within the biotech, life-sciences, and pharmaceutical industries, and (b) our United States building services segment given increased project opportunities within its mobile mechanical services division and the award or renewal of several facilities maintenance contracts within its site-based services division.

Remaining performance obligations of our United Kingdom building services segment increased by $25.6 million since December 31, 2021, despite unfavorable exchange rates for the British pound versus the United States dollar, which negatively impacted this segment’s remaining performance obligations by $30.4 million.

While the continued growth in our remaining performance obligations is largely due to the strength in demand for our services, a portion of this increase can likely be attributed to external market factors such as material and labor inflation, which has increased the price of certain of our project work, as well as supply chain delays, which has impacted the timing of conversion of our remaining performance obligations to revenue, in certain instances.

Our remaining performance obligations at March 31, 2023 were $7.87 billion compared to $7.46 billion at December 31, 2022 and $5.95 billion at March 31, 2022.

The increase in remaining performance obligations at March 31, 2023, when compared to December 31, 2022, was attributable to an increase in remaining performance obligations within all of our reportable segments, except for our United Kingdom building services segment.

Most notably, we experienced an increase in remaining performance obligations from:

(a) our United States mechanical construction and facilities services segment, driven by the award of various construction projects within the majority of the market sectors in which we operate, and (b) our United States building services segment, given increased project opportunities within its mechanical services division.

From a market sector perspective, we experienced the largest growth in remaining performance obligations within:

(a) the high-tech manufacturing market sector, inclusive of projects for customers engaged in:

(i) the design and manufacturing of semiconductors, and (ii) the production and development of electric vehicles and/or lithium batteries, (b) the network and communications market sector, largely driven by data center construction projects, (c) the healthcare market sector, given demand for mechanical construction services at existing and new customer facilities, and (d) the manufacturing and industrial market sector, partially due to the continued re-shoring of supply chain by certain of our customers.

See Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements for further disclosure regarding our remaining performance obligations.

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While we strive to negotiate favorable billing terms, which allow us to invoice in advance of costs incurred on certain of our contracts, there can be no assurance that such terms will be agreed to by our customers.

As of September 30, 2022, we had cash and cash equivalents, excluding restricted cash, of $403.8 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less.

As of March 31, 2023, we had cash and cash equivalents, excluding restricted cash, of $420.1 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less.

Both our short-term and long-term liquidity requirements are expected to be met through our cash and cash equivalent balances, cash generated from our operations, and, as necessary, the borrowing capacity under our revolving credit facility.

Our credit agreement provides for a $1.30 billion revolving credit facility, for which there is $1.06 billion of available capacity as of September 30, 2022.

Our credit agreement provides for a $1.30 billion revolving credit facility, for which there is $1.13 billion of available capacity as of March 31, 2023.

Refer to Note 7 - Debt of the notes to consolidated financial statements for further information regarding our credit agreement.

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The following table presents a summary of our operating, investing, and financing cash flows (in thousands):

For the nine months ended

September 30,

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

For the three months ended

Net cash used in operating activities $ (84,583) $ (95,814)

Net cash used in investing activities $ (25,405) $ (13,953)

Net cash used in financing activities $ (512,598) $ (213,127)

Net cash provided by (used in) financing activities $ 71,506 $ (193,513)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ 2,239 $ (3,419)

Decrease in cash, cash equivalents, and restricted cash $ (36,243) $ (306,699)

During the nine months ended September 30, 2022, our cash balance, including cash equivalents and restricted cash, decreased by approximately $417.7 million from $822.6 million at December 31, 2021 to $404.9 million at September 30, 2022.

Changes in our cash position from December 31, 2021 to September 30, 2022 are described in further detail below.

During the three months ended March 31, 2023, our cash balance, including cash equivalents and restricted cash, decreased by approximately $36.2 million from $457.1 million at December 31, 2022 to $420.8 million at March 31, 2023.

Changes in our cash position from December 31, 2022 to March 31, 2023 are described in further detail below.

Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities.

Net cash provided by operating activities for the nine months ended September 30, 2022 was approximately $238.4 million compared to approximately $113.9 million of net cash provided by operating activities for the nine months ended September 30, 2021.

The increase in net cash provided by operating activities for the first nine months of 2022, compared to the first nine months of 2021, was primary a result of the collection of advanced billings on certain of our uncompleted construction projects, as evidenced in part by the growth in our contract liabilities.

Net cash used in operating activities for the three months ended March 31, 2023 was approximately $84.6 million compared to approximately $95.8 million of net cash used in operating activities for the three months ended March 31, 2022.

Historically, our working capital needs are greater in the first quarter of each year, resulting in a use of cash to fund our operations during such period, as evidenced by the fairly consistent use of cash during each of the three months ended March 31, 2023 and 2022.

As the year progresses, we anticipate the generation of positive operating cash flow.

Investing Activities – Investing cash flows consist primarily of payments for the acquisition of businesses, capital expenditures, and proceeds from the sale or disposal of property, plant, and equipment.

Net cash used in investing activities for the nine months ended September 30, 2022 decreased by approximately $14.6 million compared to the nine months ended September 30, 2021 due to a decrease in payments for business acquisitions, partially offset by higher capital expenditures used to invest in organic growth.

Net cash used in investing activities for the three months ended March 31, 2023 increased by approximately $11.5 million compared to the three months ended March 31, 2022 due to an increase in capital expenditures and payments for business acquisitions, partially offset by an increase in proceeds from the sale or disposal of property, plant and equipment.

Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, payments of dividends to stockholders, and the issuance of common stock through certain equity plans.

Net cash used in financing activities for the nine months ended September 30, 2022 was $512.6 million compared to net cash used in financing activities for the nine months ended September 30, 2021 of $213.1 million.

The $299.5 million increase in cash used in financing activities was primarily due to a $473.3 million increase in funds used for the repurchase of our common stock, partially offset by $170.0 million in net borrowings made under our revolving credit facility during 2022.

Net cash provided by financing activities for the three months ended March 31, 2023 was $71.5 million compared to net cash used in financing activities for the three months ended March 31, 2022 of $193.5 million.

The $265.0 million change in financing cash flows was primarily due to borrowings of $100.0 million under our revolving credit facility and a decrease in funds used for the repurchase of our common stock during 2023.

The timing of common stock repurchases is at management’s discretion subject to securities laws and other legal requirements and depends upon several factors, including market and business conditions, current and anticipated future liquidity, share price, and share availability, among others.

For additional detail regarding our share repurchase program, refer to Note 10 - Common Stock of the notes to consolidated financial statements.

We currently pay a regular quarterly dividend, which commencing with the dividend to be paid on October 31, 2022, will increase from $0.13 per share to $0.15 per share.

For the nine months ended September 30, 2022 and 2021, cash payments related to dividends were $20.0 million and $21.2 million, respectively.

We currently pay a regular quarterly dividend, which, commencing with the dividend to be paid on April 28, 2023, will increase from $0.15 per share to $0.18 per share.

For the three months ended March 31, 2023 and 2022, cash payments related to dividends were $7.2 million and $6.9 million, respectively.

Our credit agreement places limitations on the payment of dividends on our common stock.

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Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash – We are exposed to fluctuations in foreign currency exchange rates, almost entirely with respect to the British pound.

Therefore, the $18.7 million variance between the nine months ended September 30, 2022 and 2021 was a direct result of unfavorable exchange rate movements for the British pound versus the United States dollar.

Therefore, the $5.7 million variance between the three months ended March 31, 2023 and 2022 was a direct result of favorable exchange rate movements for the British pound versus the United States dollar.

Material Cash Requirements from Contractual and Other Obligations

As of September 30, 2022, our short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments – As of September 30, 2022, the amount outstanding under our term loan was $256.7 million, and we had $170.0 million in direct borrowings outstanding under our revolving credit facility.

As of March 31, 2023, our short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments – As of March 31, 2023, the amount outstanding under our term loan was $242.8 million, and we had $100.0 million in direct borrowings outstanding under our revolving credit facility.

We are required to make annual principal payments on our term loan of $13.9 million on December 31 of each year until maturity.

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Until such time, we are required to make periodic interest payments on our outstanding indebtedness.

Future interest payments will be determined based on prevailing interest rates during that time, which are anticipated to increase in the near term.

Future interest payments will be determined based on prevailing interest rates during that time, which may increase in the near term.

Refer to Note 7 - Debt of the notes to consolidated financial statements for further detail of our debt obligations, including our term loan and revolving credit facility.

Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases.

Future payments for such leases, excluding leases with initial terms of one year or less, were $318.7 million at September 30, 2022, with $73.7 million payable within the next 12 months.

Open Purchase Obligations – As of September 30, 2022, we had $2.16 billion of open purchase obligations, of which payments totaling approximately $1.84 billion are expected to become due within the next 12 months.

Future payments for such leases, excluding leases with initial terms of one year or less, were $344.0 million at March 31, 2023, with $80.7 million payable within the next 12 months.

Open Purchase Obligations – As of March 31, 2023, we had $2.43 billion of open purchase obligations, of which payments totaling approximately $2.11 billion are expected to become due within the next 12 months.

These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts.

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Insurance Obligations – As described in further detail in Note 12 - Commitments and Contingencies of the notes to consolidated financial statements, we have loss payment deductibles and/or self-insured retentions for certain insurance matters.

As of September 30, 2022, our insurance liabilities, net of estimated recoveries, were $193.3 million.

As of March 31, 2023, our insurance liabilities, net of estimated recoveries, were $207.1 million.

Of this net amount, approximately $38.0 million is estimated to be payable within the next 12 months.

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To the extent that the amount required to settle claims covered by insurance continues to increase, the cost of our insurance coverage, including premiums and deductibles, is likely to increase.

Retirement Plan Obligations – As of September 30, 2022, expected future payments relating to our defined benefit post retirement plans were approximately $3.8 million per year.

We provide funding to our post retirement plans based on at least the minimum funding required by applicable regulations.

In determining the minimum funding required, we utilize current actuarial assumptions and exchange rates to forecast amounts that may be payable.

In our judgment, minimum funding estimates cannot be reliably estimated beyond a five-year time horizon.

Refer to Note 11 - Retirement Plans of the notes to consolidated financial statements for further information about our post retirement plans.

Deferred Payroll Taxes – The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) allowed U.S.

companies to defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020.

Our first installment of these deferred social security taxes, totaling approximately $51 million, was paid 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.

Contingent Consideration Liabilities – We have incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods.

The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value.

As of September 30, 2022, the present value of expected future payments relating to these contingent consideration arrangements was $20.2 million.

As of March 31, 2023, the present value of expected future payments relating to these contingent consideration arrangements was $15.0 million.

Of this amount, $8.8 million is estimated as being payable within the next 12 months, with the remainder due pursuant to the terms of our contractual agreements some of which extend through 2025.

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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 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.

As of March 31, 2023, 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 19% of our total remaining performance obligations.

Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances.

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In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations.

As of September 30, 2022, we satisfied approximately $48.1 million and $71.2 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively.

As of March 31, 2023, we satisfied approximately $48.1 million and $71.1 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively.

All such letters of credit were issued under our revolving credit facility, therefore reducing the available capacity of such facility.

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As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

There have been no significant changes to our critical accounting policies or methods for the nine months ended September 30, 2022.

We believe the following critical accounting policies govern the more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition from Contracts with Customers

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

Our fixed price construction projects generally use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts.

Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the number of units produced or delivered, when our performance does not produce significant amounts of work in process or finished goods prior to complete satisfaction of such performance obligations.

For our services contracts, revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service.

For our fixed price service contracts with specified service periods, revenue is generally recognized on a straight-line basis over such service period when our inputs are expended evenly and the customer receives and consumes the benefits of our performance throughout the contract term.

The timing of revenue recognition for the manufacturing of new build heat exchangers within our United States industrial services segment depends on the payment terms of the contract, as our performance does not create an asset with an alternative use to us.

For those contracts for which we have a right to payment for performance completed to date at all times throughout our performance, inclusive of a cancellation, we recognize revenue over time.

For these performance obligations, we use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts.

However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date, we recognize revenue at the point in time when control is transferred to the customer.

For bill-and-hold arrangements, revenue is recognized when the customer obtains control of the heat exchanger, which may be prior to shipping if certain recognition criteria are met.

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.

The nature of our contracts gives rise to several types of variable consideration, including pending change orders and claims;

contract bonuses and incentive fees;

and liquidated damages and penalties.

We recognize revenue for such variable consideration when it is probable, in our judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company estimates the amount of variable consideration to be included in the transaction price utilizing one of two prescribed methods, depending on which method better predicts the amount of consideration to which the entity will be entitled.

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.

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.

Due to the significant judgments utilized in the estimation process described above, if subsequent actual results and/or updated assumptions, estimates, or projections related to our underlying project positions were to change from those utilized at September 30, 2022, it could result in a material impact to our results of operations.

For example, a 50 basis point increase or decrease in the estimated gross profit margin on our uncompleted construction projects, in the aggregate, as a result of a revision in estimated costs to complete a performance obligation or a revision in estimated transaction price, would have resulted in an increase or decrease to operating income in excess of $80 million for the nine months ended September 30, 2022.

See Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements for further disclosure regarding revenue recognition.

Accounts Receivable and Allowance for Credit Losses

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

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

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

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

Factors relevant to our assessment include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends in credit quality indicators or past events, and forecasts of future economic conditions.

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

At September 30, 2022 and December 31, 2021, our accounts receivable of $2,510.6 million and $2,204.5 million, respectively, were recorded net of allowances for credit losses of $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 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.

The provision for credit losses amounted to approximately $3.2 million and $5.8 million for the nine months ended September 30, 2022 and 2021, respectively.

The period-over-period decrease in the provision for credit losses was a result the impact of an approximately $4.1 million reserve taken for a specific customer bankruptcy within our United States industrial services segment in the 2021 period, partially offset by incremental expense taken during the first nine months of 2022, which primarily resulted from the aforementioned change in economic conditions.

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

For example, if economic conditions were to significantly deteriorate, such as to those experienced during the last global financial crisis, the portion of our allowance for credit losses, which is estimated based on our historical credit loss experience, could increase by up to approximately $13 million.

Insurance Liabilities

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

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

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

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.

We believe the liabilities recognized on the Consolidated Balance Sheets for these obligations are adequate.

However, such obligations are difficult to assess and estimate due to numerous factors, including severity of injury, determination of liability in proportion to other parties, timely reporting of occurrences, and effectiveness of safety and risk management programs.

Therefore, if our actual experience differs from the assumptions and estimates used for recording the liabilities, adjustments may be required and will be recorded in the period that the experience becomes known.

In addition, as discussed above, an increase in the cost to settle insurance claims could result in

higher insurance costs and deductibles.

Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $14.7 million at September 30, 2022 compared to December 31, 2021, partially as a result of greater potential exposures and an increase in certain of our deductibles or self-insured retentions.

If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $19.3 million of additional expense for the nine months ended September 30, 2022.

As of September 30, 2022 and December 31, 2021, we had net deferred income tax liabilities of $52.4 million and $51.0 million, respectively, primarily resulting from differences between the carrying value and income tax bases of certain identifiable intangible assets, goodwill, and depreciable fixed assets.

Included within these net deferred income tax liabilities are $213.8 million and $212.3 million of deferred income tax assets as of September 30, 2022 and December 31, 2021, respectively.

The total valuation allowance on deferred income tax assets was approximately $2.5 million as of both September 30, 2022 and December 31, 2021.

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

Based on our taxable income, which has generally exceeded the amount of our net deferred income tax asset balance, as well as current projections of future taxable income, we have determined that it is more likely than not that our net deferred income tax assets 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.

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

As of September 30, 2022 and December 31, 2021, we had goodwill of $916.8 million and $890.3 million, respectively, arising out of the acquisition of businesses.

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

We have determined that our reporting units are consistent with the reportable segments identified in Note 14 - Segment Information of the notes to consolidated financial statements.

As of September 30, 2022, approximately 19.2% of our goodwill related to our United States electrical construction and facilities services segment, approximately 34.4% related to our United States mechanical construction and facilities services segment, approximately 34.0% related to our United States building services segment, and approximately 12.4% related to our United States industrial services segment.

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

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

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

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

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

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

As of the date of our most recent impairment test (October 1, 2021), the fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment exceeded their carrying values by approximately $1,516.1 million, $2,772.7 million, $784.2 million, and $40.6 million, respectively.

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

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

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

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

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

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

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

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

For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average cost of capital would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $103.6 million, $185.5 million, $74.5 million, and $25.9 million, respectively.

In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $52.4 million, $95.9 million, $35.8 million, and $9.5 million, respectively.

Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, the decreases in estimated fair values described above would not have significantly impacted the results of our impairment tests.

Further, for each of our reporting units, other than our United States industrial services segment, a 10% decline in the estimated fair value of such reporting unit, due to other changes in our assumptions, including forecasted future cash flows, would not have significantly impacted the results of our impairment tests.

In the case of our United States industrial services segment, however, a 10% decrease would cause the estimated fair value of this reporting unit to approximate its carrying value.

No impairment of our goodwill was recognized during the three and nine months ended September 30, 2022 and 2021.

Identifiable Intangible Assets and Other Long-Lived Assets

As of September 30, 2022 and December 31, 2021, net identifiable intangible assets (primarily consisting of our customer relationships, subsidiary trade names, developed technology/vendor network, and contract backlog) arising out of the acquisition of businesses were $605.9 million and $589.4 million, respectively.

The determination of related estimated useful lives for identifiable intangible assets and whether those assets are impaired involves significant judgments based upon short- and long-term projections of future performance.

These forecasts reflect assumptions regarding anticipated macroeconomic conditions as well as our ability to successfully integrate acquired businesses.

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

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

This approach involves two steps:

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

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

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

As of October 1, 2021, we performed our annual impairment testing of all subsidiary trade names that are not subject to amortization and determined that there was no impairment of these assets.

In performing this impairment assessment, we considered the sensitivity of the reported amounts to the methods, assumptions, and estimates underlying our testing.

For example, we performed sensitivity analyses and concluded that, individually, none of the following changes in estimates or assumptions would have significantly impacted the results of our testing or resulted in an impairment of our subsidiary trade names:

(a) a 50 basis point increase in the discount rate utilized in our testing, (b) a 50 basis point decline in the perpetual growth rate utilized in our testing, or (c) a 10% decrease in the estimated fair value of each trade name.

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

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

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

No impairment of our identifiable intangible assets or other long-lived assets was recognized during the three and nine months ended September 30, 2022 and 2021.

Other Considerations

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

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

These assumptions and estimates may change in future periods.

Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future impairment charges, particularly with respect to our United States industrial services segment given that the fair value of this reporting unit more closely approximates its carrying value.

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

There have been no significant changes to our critical accounting policies or methods for the three months ended March 31, 2023.

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 2. Management’s Discussion and Analysis