What changed in this filing

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Item 1. Financial Statements

2023-07-27 compared with 2023-04-27 · 270 added, 107 removed, 609 unchanged (38% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

(Unaudited) December 31,

2023 December 31,

Current assets:

21 unchanged sentences

Total current liabilities 2,949,462 2,753,522

Borrowings under revolving credit facility 100,000 —

Long-term debt and finance lease liabilities 231,454 231,625

22 unchanged sentences

Three months ended

June 30, Six months ended

2023 2022 2023 2022

Revenues $ 3,045,622 $ 2,707,388 $ 5,936,054 $ 5,299,937

17 unchanged sentences

Three months ended

June 30, Six months ended

2023 2022 2023 2022

Net income $ 140,595 $ 100,664 $ 252,068 $ 174,050

3 unchanged sentences

loss included in net income (1)

534 429 1,053 884

Other comprehensive income (loss) 4,148 ( 7,274 ) 6,924 ( 9,661 )

Comprehensive income $ 144,743 $ 93,390 $ 258,992 $ 164,389

(1) Net of tax of $ 0.2 million for each of the three months ended March 31, 2023 and 2022.

(1) Net of tax of $ 0.2 million and $ 0.1 million for the three months ended June 30, 2023 and 2022, respectively, and net of tax of $ 0.4 million and $ 0.3 million for the six months ended June 30, 2023 and 2022, respectively.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(In thousands)(Unaudited)

Three months ended

Six months ended

Cash flows - operating activities:

Net income $ 252,068 $ 174,050

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

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 25,393 23,106

3 unchanged sentences

Changes in operating assets and liabilities, excluding the effect of businesses acquired ( 98,479 ) ( 254,791 )

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

Net cash provided by (used in) operating activities 214,932 ( 18,851 )

Cash flows - investing activities:

5 unchanged sentences

Proceeds from revolving credit facility 100,000 100,000

Repayments of revolving credit facility ( 100,000 ) ( 100,000 )

Repayments of finance lease liabilities ( 1,477 ) ( 1,889 )

4 unchanged sentences

Payments for contingent consideration arrangements ( 3,026 ) ( 2,049 )

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

Net cash used in financing activities ( 126,370 ) ( 475,090 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 5,856 ( 11,757 )

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

Increase (decrease) in cash, cash equivalents, and restricted cash 45,984 ( 559,026 )

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

3 unchanged sentences

(1) Includes $ 0.6 million and $ 1.2 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively.

(2) Includes $ 0.8 million and $ 1.4 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of March 31, 2023 and 2022, respectively.

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

See Notes to Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended March 31, 2022 and 2023

For the three months ended June 30, 2022 and 2023

(In thousands)(Unaudited)

4 unchanged sentences

stock Noncontrolling

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

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

Net income 100,664 — — — 100,664 — —

6 unchanged sentences

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

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

Balance, March 31, 2023 $ 2,066,325 $ 610 $ 75,850 $ ( 90,675 ) $ 3,318,560 $ ( 1,238,722 ) $ 702

Net income 140,595 — — — 140,595 — —

Other comprehensive income 4,148 — — 4,148 — — —

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

Tax withholding for common stock issued under share-based compensation plans ( 53 ) — ( 53 ) — — — —

Common stock issued under employee stock purchase plan 2,273 — 2,273 — — — —

Common stock dividends ( 8,563 ) — 39 — ( 8,602 ) — —

Repurchases of common stock ( 90,086 ) — — — — ( 90,086 ) —

Share-based compensation expense 3,448 — 3,448 — — — —

Balance, June 30, 2023 $ 2,118,087 $ 611 $ 81,556 $ ( 86,527 ) $ 3,450,553 $ ( 1,328,808 ) $ 702

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

See Notes to Consolidated Financial Statements.

EMCOR Group, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the six months ended June 30, 2022 and 2023

(In thousands)(Unaudited)

EMCOR Group, Inc.

stock Capital

surplus Accumulated other comprehensive loss (1)

earnings Treasury

stock Noncontrolling

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

Net income 174,050 — — — 174,050 — —

Other comprehensive loss ( 9,661 ) — — ( 9,661 ) — — —

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

Tax withholding for common stock issued under share-based compensation plans ( 7,239 ) — ( 7,239 ) — — — —

Common stock issued under employee stock purchase plan 4,023 — 4,023 — — — —

Common stock dividends ( 13,619 ) — 91 — ( 13,710 ) — —

Repurchases of common stock ( 454,317 ) — — — — ( 454,317 ) —

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

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

Balance, December 31, 2022 $ 1,974,291 $ 609 $ 74,795 $ ( 93,451 ) $ 3,214,281 $ ( 1,222,645 ) $ 702

Net income 252,068 — — — 252,068 — —

Other comprehensive income 6,924 — — 6,924 — — —

5 unchanged sentences

Share-based compensation expense 7,535 — 7,535 — — — —

Balance, March 31, 2023 $ 2,066,325 $ 610 $ 75,850 $ ( 90,675 ) $ 3,318,560 $ ( 1,238,722 ) $ 702

Balance, June 30, 2023 $ 2,118,087 $ 611 $ 81,556 $ ( 86,527 ) $ 3,450,553 $ ( 1,328,808 ) $ 702

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

12 unchanged sentences

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

Additionally, to align our legal structure with changes in our reporting structure that were made in prior periods, effective April 1, 2023, ownership of the subsidiaries of Bahnson, Inc.

has been transferred from Bahnson, Inc.

to EMCOR Construction Services, Inc.

and EMCOR Mechanical Services, Inc.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

NOTE 2 - New Accounting Pronouncements

2 unchanged sentences

Such accounting pronouncement, as amended, allows entities to account for and present certain contract modifications, which occur before December 31, 2024 and result from the transition to an alternative reference rate, as an event that does not require remeasurement at the modification date or reassessment of a previous accounting determination.

In order to utilize such guidance, an entity must first conclude that the modified terms directly replace or have the potential to replace an eligible reference rate due to reference rate reform, and that any contemporaneous changes to other terms that change, or have the potential to change, the amount or timing of contractual cash flows are related to the replacement of a reference rate.

Our credit agreement contains provisions that allow for an amendment to use alternative reference rates upon the discontinuation of LIBOR.

In accordance with these provisions, we anticipate amending such agreement during the second quarter of 2023, to change the reference rate from LIBOR to an interest rate based on the secured overnight financing rate (“SOFR”).

At that point, we will utilize the optional expedients provided for in this accounting pronouncement.

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

In accordance with these provisions, we amended such agreement during the second quarter of 2023, to change the reference rate from LIBOR to an interest rate based on the secured overnight financing rate, as administered by the Federal Reserve Bank of New York (“SOFR”).

As such amendment falls within the scope of the aforementioned guidance, we adopted this accounting pronouncement and utilized the optional expedients referenced above.

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

A copy of the amendment to our credit agreement is included as Exhibit 4(a) to this quarterly report.

Refer to Note 7 - Debt for further information regarding our credit agreement, including our borrowing rates.

NOTE 3 - Revenue from Contracts with Customers

86 unchanged sentences

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

Based on an evaluation of individual projects that had revisions to total estimated costs or anticipated contract value, which resulted in a reduction of profitability in excess of $ 1.0 million, our operating results were negatively impacted by approximately $ 6.4 million and $ 10.0 million during the three months ended March 31, 2023 and 2022, respectively.

Of the amount recorded during the three months ended March 31, 2023, approximately $ 5.2 million was reported within our United States electrical construction and facilities services segment and approximately $ 1.2 million was reported within our United States mechanical construction and facilities services segment.

Of the amount recorded during the three months ended March 31, 2022, approximately $ 4.6 million was reported within our United States electrical construction and facilities services segment and approximately $ 5.4 million was reported within our United States mechanical construction and facilities services segment.

There were no significant amounts of revenue recognized during the three months ended March 31, 2023 or 2022 related to performance obligations satisfied in prior periods.

Disaggregation of Revenues

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

Our contracts are with many different customers in numerous industries.

Based on an evaluation of individual projects that had revisions to total estimated costs or anticipated contract value, which resulted in a reduction of profitability in excess of $ 1.0 million, our operating results were negatively impacted during the three and six months ended June 30, 2023 and 2022, as summarized in the following table (in thousands):

For the three months ended

June 30, For the six months ended

2023 2022 2023 2022

United States electrical construction and facilities services $ 2,616 $ 7,721 $ 8,345 $ 14,261

United States mechanical construction and facilities services — 4,110 2,686 9,533

United States building services 1,084 — 1,544 —

Total impact $ 3,700 $ 11,831 $ 12,575 $ 23,794

EMCOR Group, Inc.

2 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three months ended March 31, 2023 and 2022 (in thousands).

During the three and six months ended June 30, 2023, we recognized revenue of approximately $ 8.0 million and $ 9.0 million, respectively, on individual projects that were substantially complete in prior periods, but had revisions to total estimated cost or anticipated contract value, which resulted in an increase to profitability in excess of $ 1.0 million.

Such revenue was recognized entirely within our United States mechanical construction and facilities services segment.

There were no significant amounts of revenue recognized during the three and six months ended June 30, 2022 related to performance obligations satisfied in prior periods.

Disaggregation of Revenues

Our contracts are with many different customers in numerous industries.

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three and six months ended June 30, 2023 and 2022 (in thousands, except for percentages).

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

1 unchanged sentence

All prior period disclosures have been adjusted to additionally reflect these changes.

For the three months ended March 31,

For the three months ended June 30,

Total 2022 % of

15 unchanged sentences

Total segment revenues $ 678,167 $ 564,112

For the three months ended March 31,

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended June 30,

Total 2022 % of

16 unchanged sentences

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

For the three months ended June 30,

Total 2022 % of

United States building services:

Mechanical services $ 514,505 66 % $ 448,024 65 %

Commercial site-based services 207,323 27 % 193,082 28 %

Government site-based services 53,184 7 % 45,439 7 %

Total segment revenues $ 775,012 $ 686,545

For the three months ended June 30,

Total 2022 % of

United States industrial services:

Field services $ 250,877 86 % $ 247,542 87 %

Shop services 41,406 14 % 36,992 13 %

Total segment revenues $ 292,283 $ 284,534

Total United States operations $ 2,939,575 $ 2,592,840

For the three months ended June 30,

Total 2022 % of

United Kingdom building services:

Service work $ 51,682 49 % $ 54,261 47 %

Project work 54,365 51 % 60,287 53 %

Total segment revenues $ 106,047 $ 114,548

Total operations $ 3,045,622 $ 2,707,388

EMCOR Group, Inc.

2 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended March 31,

For the six months ended June 30,

Total 2022 % of

United States electrical construction and facilities services:

Network and communications market sector $ 429,039 32 % $ 324,865 30 %

Commercial market sector 190,918 14 % 195,850 18 %

Manufacturing and industrial market sector 181,124 14 % 131,769 12 %

Healthcare market sector 120,316 9 % 75,348 7 %

High-tech manufacturing market sector 68,593 5 % 42,824 4 %

Institutional market sector 74,661 6 % 69,455 6 %

Transportation market sector 75,149 6 % 87,522 8 %

Water and wastewater market sector 12,061 1 % 10,496 1 %

Hospitality and entertainment market sector 39,802 3 % 11,294 1 %

Short duration projects (1)

98,420 7 % 108,916 10 %

Service work 34,153 3 % 30,424 3 %

1,324,236 1,088,763

Less intersegment revenues ( 1,323 ) ( 2,621 )

Total segment revenues $ 1,322,913 $ 1,086,142

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

For the six months ended June 30,

Total 2022 % of

United States mechanical construction and facilities services:

Network and communications market sector $ 186,455 8 % $ 116,277 6 %

Commercial market sector 545,150 24 % 527,821 26 %

Manufacturing and industrial market sector 307,686 13 % 304,861 15 %

Healthcare market sector 230,570 10 % 246,817 12 %

High-tech manufacturing market sector 294,449 13 % 129,101 6 %

Institutional market sector 135,674 6 % 152,649 7 %

Transportation market sector 21,447 1 % 32,299 2 %

Water and wastewater market sector 135,948 6 % 129,490 6 %

Hospitality and entertainment market sector 23,608 1 % 24,198 1 %

Short duration projects (1)

155,395 7 % 178,029 9 %

Service work 239,466 11 % 213,649 10 %

2,275,848 2,055,191

Less intersegment revenues ( 3,177 ) ( 4,898 )

Total segment revenues $ 2,272,671 $ 2,050,293

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the six months ended June 30,

Total 2022 % of

United States building services:

3 unchanged sentences

Total segment revenues $ 1,500,387 $ 1,322,172

For the three months ended March 31,

For the six months ended June 30,

Total 2022 % of

4 unchanged sentences

Total United States operations $ 5,719,137 $ 5,053,892

For the three months ended March 31,

For the six months ended June 30,

Total 2022 % of

11 unchanged sentences

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

At March 31, 2023 and December 31, 2022, our allowance for credit losses was $ 21.8 million and $ 22.4 million, respectively.

We continue to adjust our allowance for credit losses to account for the impact of changing economic conditions, including rising interest rates.

At June 30, 2023 and December 31, 2022, our allowance for credit losses was $ 20.7 million and $ 22.4 million, respectively.

The decrease in our allowance for credit losses was attributable to the write-off of specific amounts deemed uncollectible, partially offset by the provision for credit losses recorded during the first six months of 2023.

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

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

The change in the allowance for credit losses for the six months ended June 30, 2023 was as follows (in thousands):

Balance at December 31, 2022 $ 22,382

Provision for credit losses 3,115

Net amounts written off against the allowance ( 4,790 )

Balance at June 30, 2023 $ 20,707

EMCOR Group, Inc.

2 unchanged sentences

NOTE 3 - Revenue from Contracts with Customers (Continued)

The change in the allowance for credit losses for the three months ended March 31, 2023 was as follows (in thousands):

Balance at December 31, 2022 $ 22,382

Recovery of credit losses ( 343 )

Net amounts written off against the allowance ( 211 )

Balance at March 31, 2023 $ 21,828

Contract Assets and Contract Liabilities

10 unchanged sentences

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

Net contract liabilities in the accompanying Consolidated Balance Sheets consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

Net contract liabilities in the accompanying Consolidated Balance Sheets consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

2023 December 31, 2022

4 unchanged sentences

Net contract liabilities $ ( 1,070,492 ) $ ( 827,360 )

The $ 28.6 million increase in net contract liabilities for the three months ended March 31, 2023 was primarily attributable to an increase in net contract liabilities on our uncompleted construction projects, partially as a result of the timing of invoicing to our customers, which included advanced billings on several large projects in the earlier stages of completion, resulting in amounts invoiced exceeding the revenue recognized for such projects.

The $ 243.1 million increase in net contract liabilities for the six months ended June 30, 2023 was primarily attributable to an increase in net contract liabilities on our uncompleted construction projects, partially as a result of the timing of invoicing to our customers, which included customer deposits and advanced billings on several large projects in the earlier stages of completion, resulting in amounts invoiced exceeding the revenue recognized for such projects.

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

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of March 31, 2023 (in thousands, except for percentages):

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of June 30, 2023 (in thousands, except for percentages):

2023 % of Total

7 unchanged sentences

Total operations $ 8,286,159 100 %

Our remaining performance obligations at March 31, 2023 were $ 7.87 billion.

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Our remaining performance obligations at June 30, 2023 were $ 8.29 billion.

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

19 unchanged sentences

Total operations $ 6,804,491 $ 1,481,668

EMCOR Group, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 - Acquisitions of Businesses

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

During the first quarter of 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.

During the first half of 2023, we acquired five companies, each for an immaterial amount.

Two companies have been included within our Unites States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services, and one of which provides fire protection services, both in the Midwestern region of the United States.

The other three companies have been included within our United States building services segment and provide mechanical services in the Western and Midwestern regions of the United States.

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

During calendar year 2022, we acquired six companies for total consideration of $ 100.8 million.

1 unchanged sentence

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

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

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

(i) two companies that provide fire protection services in the Northeastern and Southern regions of the

EMCOR Group, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 - Acquisitions of Businesses (Continued)

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

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

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

The purchase price allocations for the businesses acquired in 2023 and for one of the businesses acquired in 2022 are preliminary and subject to change during their respective measurement periods.

The purchase price allocations for the businesses acquired in 2023 are preliminary and subject to change during their respective measurement periods.

As we finalize such purchase price allocations, adjustments may be recorded relating to finalization of intangible asset valuations, tax matters, or other items.

Although not expected to be significant, such adjustments may result in changes in the valuation of assets and liabilities acquired.

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

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

On June 30, 2023, we entered into a definitive agreement to acquire ECM Holding Group, Inc.

(“ECM”) in an all-cash transaction.

ECM is a leading national energy specialty services firm, with estimated 2023 revenues of approximately $ 60 million.

The transaction is expected to close in the third quarter of 2023, subject to customary closing conditions.

Upon closing, its results will be included within our United States building services segment.

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

The following table summarizes our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three months ended March 31, 2023 and 2022 (in thousands, except share and per share data):

The following tables summarize our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three and six months ended June 30, 2023 and 2022 (in thousands, except share and per share data):

For the three months ended

5 unchanged sentences

Diluted earnings per common share $ 2.95 $ 1.99

There were no anti-dilutive share-based awards for the three months ended March 31, 2023.

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

For the six months ended

Net income $ 252,068 $ 174,050

Weighted average shares outstanding used to compute basic earnings per common share 47,584,656 51,610,014

Effect of dilutive securities—Share-based awards 182,586 204,150

Shares used to compute diluted earnings per common share 47,767,242 51,814,164

Basic earnings per common share $ 5.30 $ 3.37

Diluted earnings per common share $ 5.28 $ 3.36

EMCOR Group, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

NOTE 5 - Earnings Per Share (Continued)

The number of share-based awards excluded from the computation of diluted EPS for the three and six months ended June 30, 2023 because they would be anti-dilutive were 8,726 and 9,026 , respectively.

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

NOTE 6 - Inventories

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of March 31, 2023 and December 31, 2022 (in thousands):

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2023 and December 31, 2022 (in thousands):

2023 December 31,

2 unchanged sentences

Inventories $ 106,080 $ 85,641

The increase in inventories as of March 31, 2023, compared to December 31, 2022, was a result of:

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

The increase in inventories as of June 30, 2023, compared to December 31, 2022, was a result of:

(a) advanced purchases of materials and equipment for use on specific construction projects, in an effort to mitigate the impact of increased lead times, which have resulted from supply chain disruptions, (b) an increase in raw materials on hand to support our fabrication facilities given the growth in demand for our fire protection services, and (c) higher levels of work in process inventory within our United States industrial services segment given greater new build heat exchanger orders.

NOTE 7 - Debt

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of March 31, 2023 and December 31, 2022 (in thousands):

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2023 and December 31, 2022 (in thousands):

2023 December 31,

Revolving credit facility $ 100,000 $ —

Term loan $ 242,813 $ 242,813

5 unchanged sentences

Credit Agreement

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

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

On April 28, 2023 , we entered into the First Amendment to the Original 2020 Credit Agreement (the “First Amendment”), pursuant to which the reference rate contained therein was changed from LIBOR to Adjusted Term SOFR (as defined below).

The Original 2020 Credit Agreement, as amended by the First Amendment, is hereinafter referred to as “the 2020 Credit Agreement.” We may increase the 2020 Revolving Credit Facility to $ 1.9 billion if additional lenders are identified and/or existing lenders are willing to increase their current commitments.

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

As of March 31, 2023 and December 31, 2022, the balance of the 2020 Term Loan was $ 242.8 million and as of March 31, 2023, we had $ 100.0 million in direct borrowings outstanding under the 2020 Revolving Credit Facility.

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

Outstanding letters of credit reduce the available capacity under such facility, and as of March 31, 2023 and December 31, 2022, we had $ 71.3 million of letters of credit outstanding.

As of June 30, 2023 and December 31, 2022, the balance of the 2020 Term Loan was $ 242.8 million.

There were no direct borrowings outstanding under the 2020 Revolving Credit Facility as of June 30, 2023 and December 31, 2022.

However, outstanding letters of credit reduce the available capacity under such facility, and as of June 30, 2023 and December 31, 2022, we had $ 130.9 million and $ 71.3 million, respectively, of letters of credit outstanding.

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

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) United States dollar LIBOR ( 5.16 % at March 31, 2023) plus 1.00 % to 1.75 %, based on certain financial tests.

(1) a base rate plus a margin of 0.00 % to 0.75 %, based on certain financial tests, or (2) a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable tenor plus 0.10 % (“Adjusted Term SOFR”) ( 5.34 % at June 30, 2023) plus a margin of 1.00 % to 1.75 %, based on certain financial tests.

The base rate is determined by the greater of:

(a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 8.00 % at March 31, 2023), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00 %, or (d) 0.00 %.

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

In accordance with such provisions, we anticipate amending such agreement during the second quarter of 2023 to change the reference rate from LIBOR to SOFR.

The interest rates in effect at March 31, 2023 were 6.16 % for the 2020 Term Loan and 5.81 % for the 2020 Revolving Credit Facility.

The interest rate in effect at December 31, 2022 for the 2020 Term Loan was 5.73 %.

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

The fee was 0.10 % of the unused amount as of March 31, 2023 and December 31, 2022.

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

(a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 8.25 % at June 30, 2023), (b) the federal funds effective rate, plus ½ of 1.00%, (c) Adjusted Term SOFR for a one-month tenor, plus 1.00 %, or (d) 0.00 %.

EMCOR Group, Inc.

2 unchanged sentences

NOTE 7 - Debt (Continued)

The interest rates in effect at June 30, 2023 and December 31, 2022 were 6.34 % and 5.73 %, respectively.

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

The fee was 0.10 % of the unused amount as of June 30, 2023 and December 31, 2022.

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

2 unchanged sentences

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

We were in compliance with all such covenants as of March 31, 2023 and December 31, 2022.

We were in compliance with all such covenants as of June 30, 2023 and December 31, 2022.

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

10 unchanged sentences

Recurring Fair Value Measurements

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):

Assets at Fair Value as of March 31, 2023

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2023 and December 31, 2022 (in thousands):

Assets at Fair Value as of June 30, 2023

Asset Category Level 1 Level 2 Level 3 Total

1 unchanged sentence

$ 503,052 $ — $ — $ 503,052

Restricted cash (2)

Deferred compensation plan assets (2)

5 unchanged sentences

$ 456,439 $ — $ — $ 456,439

Restricted cash (2)

Deferred compensation plan assets (2)

36,882 — — 36,882

Restricted cash (3)

Total $ 493,950 $ — $ — $ 493,950

_________________________

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

At March 31, 2023 and December 31, 2022, we had $ 173.4 million and $ 209.4 million, respectively, in money market funds.

At June 30, 2023 and December 31, 2022, we had $ 272.4 million and $ 209.4 million, respectively, in money market funds.

From time to time, we have cash balances in certain of our domestic bank accounts that exceed federally insured limits.

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

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

Restricted cash primarily represents cash held in account for use on customer contracts.

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

EMCOR Group, Inc.

12 unchanged sentences

NOTE 9 - Income Taxes

The following table presents our income tax provision and our income tax rate for the three months ended March 31, 2023 and 2022 (in thousands, except percentages):

The following table presents our income tax provision and our income tax rate for the three and six months ended June 30, 2023 and 2022 (in thousands, except percentages):

For the three months ended

June 30, For the six months ended

2023 2022 2023 2022

Income tax provision $ 53,098 $ 36,323 $ 94,429 $ 62,774

1 unchanged sentence

The difference between the U.S.

statutory tax rate of 21 % and our effective income tax rate for both the three months ended March 31, 2023 and 2022 was primarily a result of state and local income taxes and other permanent book-to-tax differences.

The increase in our income tax provision for the three months ended March 31, 2023, when compared to the three months ended March 31, 2022, was due to:

statutory tax rate of 21 % and our effective income tax rate for both the three and six months ended June 30, 2023 and 2022 was primarily a result of state and local income taxes and other permanent book-to-tax differences.

The increase in our income tax provision for the three and six months ended June 30, 2023, when compared to the three and six months ended June 30, 2022, was due to:

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

1 unchanged sentence

For periods after December 31, 2022, the tax deduction for business meals has been reduced to 50%.

As of March 31, 2023 and December 31, 2022, we had no unrecognized income tax benefits.

As of June 30, 2023 and December 31, 2022, we had no unrecognized income tax benefits.

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

3 unchanged sentences

NOTE 10 - Common Stock

As of March 31, 2023 and December 31, 2022, there were 47,635,583 and 47,666,725 shares of our common stock outstanding, respectively.

During the three months ended March 31, 2023 and 2022, we issued 72,076 and 95,331 shares of common stock, respectively.

As of June 30, 2023 and December 31, 2022, there were 47,130,116 and 47,666,725 shares of our common stock outstanding, respectively.

During the three months ended June 30, 2023 and 2022, we issued 42,578 and 76,426 shares of common stock, respectively.

During the six months ended June 30, 2023 and 2022, we issued 114,654 and 171,757 shares of common stock, respectively.

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

We have paid quarterly dividends since October 25, 2011.

Commencing with the dividend to be paid on April 28, 2023, our dividend will increase from $ 0.15 per share to $ 0.18 per share.

We currently pay a regular quarterly dividend of $ 0.18 per share.

EMCOR Group, Inc.

5 unchanged sentences

Since the inception of the repurchase program, the Board has authorized us to repurchase up to $ 2.15 billion of our outstanding common stock.

During the three months ended March 31, 2023, we repurchased approximately 0.1 million shares of our common stock for approximately $ 16.1 million.

Since the inception of the repurchase program through March 31, 2023, we have repurchased approximately 25.1 million shares of our common stock for approximately $ 1.78 billion.

As of March 31, 2023, there remained authorization for us to repurchase approximately $ 373.7 million of our shares.

During the six months ended June 30, 2023, we repurchased approximately 0.7 million shares of our common stock for approximately $ 106.2 million.

Since the inception of the repurchase program through June 30, 2023, we have repurchased approximately 25.7 million shares of our common stock for approximately $ 1.87 billion.

As of June 30, 2023, there remained authorization for us to repurchase approximately $ 283.6 million of our shares.

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

13 unchanged sentences

Components of Net Periodic Pension Cost

The components of net periodic pension cost (income) of the UK Plan for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

The components of net periodic pension cost (income) of the UK Plan for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):

For the three months ended

June 30, For the six months ended

2023 2022 2023 2022

Interest cost $ 2,451 $ 1,452 $ 4,827 $ 2,981

14 unchanged sentences

We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf.

As of March 31, 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.

As of June 30, 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 $ 1.4 billion, which represents approximately 17 % of our total remaining performance obligations.

Surety bonds are sometimes provided to secure obligations for wages and benefits payable to or for certain of our employees, at the request of labor unions representing such employees.

In addition, surety bonds may be issued as collateral for certain insurance obligations.

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

As of June 30, 2023, we satisfied approximately $ 48.1 million of the collateral requirements of our insurance programs by utilizing surety bonds.

We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.

27 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $ 54.3 million and $ 54.8 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of March 31, 2023 and December 31, 2022 were $ 231.4 million and $ 221.7 million, respectively.

The current portion of anticipated insurance recoveries of $ 16.3 million and $ 16.0 million as of March 31, 2023 and December 31, 2022, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 62.3 million and $ 59.0 million as of March 31, 2023 and December 31, 2022, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

As of June 30, 2023 and December 31, 2022, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $ 53.9 million and $ 54.8 million, respectively.

The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of June 30, 2023 and December 31, 2022 were $ 234.3 million and $ 221.7 million, respectively.

The current portion of anticipated insurance recoveries of $ 15.1 million and $ 16.0 million as of June 30, 2023 and December 31, 2022, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $ 57.9 million and $ 59.0 million as of June 30, 2023 and December 31, 2022, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

NOTE 13 - Additional Cash Flow Information

The following table presents additional cash flow information for the three months ended March 31, 2023 and 2022 (in thousands):

For the three months ended

The following table presents additional cash flow information for the six months ended June 30, 2023 and 2022 (in thousands):

For the six months ended

Cash paid for:

18 unchanged sentences

NOTE 14 - Segment Information (Continued)

The following tables present financial information for each of our reportable segments for the three months ended March 31, 2023 and 2022 (in thousands):

The following tables present financial information for each of our reportable segments for the three and six months ended June 30, 2023 and 2022 (in thousands):

For the three months ended

16 unchanged sentences

Total operations $ 3,045,622 $ 2,707,388

For the six months ended

Revenues from unrelated entities:

United States electrical construction and facilities services $ 1,322,913 $ 1,086,142

United States mechanical construction and facilities services 2,272,671 2,050,293

United States building services 1,500,387 1,322,172

United States industrial services 623,166 595,285

Total United States operations 5,719,137 5,053,892

United Kingdom building services 216,917 246,045

Total operations $ 5,936,054 $ 5,299,937

Total revenues:

United States electrical construction and facilities services $ 1,324,660 $ 1,089,443

United States mechanical construction and facilities services 2,308,726 2,061,955

United States building services 1,551,544 1,371,584

United States industrial services 631,564 611,941

Less intersegment revenues ( 97,357 ) ( 81,031 )

Total United States operations 5,719,137 5,053,892

United Kingdom building services 216,917 246,045

Total operations $ 5,936,054 $ 5,299,937

EMCOR Group, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (Continued)

For the three months ended

11 unchanged sentences

Income before income taxes $ 193,693 $ 136,987

For the six months ended

Operating income (loss):

United States electrical construction and facilities services $ 91,238 $ 55,088

United States mechanical construction and facilities services 206,074 135,045

United States building services 83,787 62,657

United States industrial services 22,907 19,716

Total United States operations 404,006 272,506

United Kingdom building services 11,351 17,003

Corporate administration ( 63,780 ) ( 51,908 )

Total operations 351,577 237,601

Net periodic pension (cost) income ( 556 ) 2,263

Interest expense, net ( 4,524 ) ( 3,040 )

Income before income taxes $ 346,497 $ 236,824

EMCOR Group, Inc.

13 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements