UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-8267


EMCOR Group, Inc.
(Exact Name of Registrant as Specified in Its Charter)


Delaware		11-2125338
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
301 Merritt Seven
Norwalk,	Connecticut	06851-1092
(Address of Principal Executive Offices)		(Zip Code)


(203)			849-7800
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

EME

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Applicable Only To Corporate Issuers

Number of shares of Common Stock outstanding as of the close of business on October ~~22, 2021: 53,374,384~~21, 2022: 47,655,251 shares.

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Table of Contents

EMCOR Group, Inc.

TABLE OF CONTENTS


		Page No.
PART I. - Financial Information.
Item 1.	Financial Statements.
	Consolidated Balance Sheets - as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021	1
	Condensed Consolidated Statements of Operations - three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	2
	Condensed Consolidated Statements of Comprehensive Income - three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	3
	Condensed Consolidated Statements of Cash Flows - nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	4
	Condensed Consolidated Statements of Equity - three months ended September 30, ~~2021~~2022 and ~~2020~~2021	5
	Condensed Consolidated Statements of Equity - nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	2827
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	4643
Item 4.	Controls and Procedures.	4744
PART II. - Other Information.
Item 1.	Legal Proceedings.	48
~~Item 1A.~~	~~Risk Factors.~~	4845
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	4945
Item 4.	Mine Safety Disclosures.	4945
Item 6.	Exhibits.	5046

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They generally contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” variations of such wording and other words or phrases of similar meaning. Forward-looking statements in this report include discussions of our future operating or financial performance and other forward-looking commentary regarding aspects of our business, including market share growth, gross profit, remaining performance obligations, project mix, projects with varying profit margins, selling, general and administrative expenses, our ability to maintain a strong safety record, and trends in our business, and other characterizations of future events or circumstances, such as the effects of the COVID-19 ~~pandemic.~~pandemic and supply chain disruptions and delays. Each forward-looking statement included in this report is subject to risks and uncertainties, including those identified in ~~the “Risk Factors” section,~~ the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, and other sections of this report, and in our Form 10-K for the year ended December 31, ~~2020.~~2021, including, without limitation, the “Risk Factors” section of such Form 10-K. Applicable risks and uncertainties include, but are not limited to, adverse effects of general economic conditions; changes in interest rates; domestic and international political developments; changes in the specific markets for EMCOR’s services; adverse business conditions, including scarcity of skilled labor, productivity challenges, the nature and extent of supply chain disruptions impacting availability and pricing of materials, and inflationary trends more generally, including fluctuations in energy costs; the impact of legislation and/or government regulations; the availability of adequate levels of surety bonding; increased competition; unfavorable developments in the mix of our business; and the continuing impact of the COVID-19 pandemic, including the nature, extent, and impact of future variant surges, as well as other health emergencies, and government orders and mandates related thereto, on our revenue and operations. Such risks and uncertainties could cause actual results to differ materially from those that might be anticipated from, or projected or implied by, our forward-looking statements. Accordingly, these statements do not guarantee future performance or events. The forward-looking statements contained in this report speak only as of the filing date of this report. We undertake no obligation to update any forward-looking ~~statements.~~statements unless required by law. However, any further disclosures made on related subjects in our subsequent reports ~~on Forms 10-K, 10-Q,~~filed with the Securities and ~~8-K~~Exchange Commission (the “SEC”) should be consulted. We caution investors not to place undue reliance on forward-looking statements, due to their inherent uncertainty.

Table of Contents

PART I. – FINANCIAL INFORMATION.

ITEM 1. FINANCIAL STATEMENTS.

EMCOR Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


		September 30, 2021 (Unaudited)		December 31, 2020			September 30, 2022 (Unaudited)		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	663,905	$	902,867	Cash and cash equivalents	$	403,816	$	821,345
Accounts receivable, less allowance for credit losses of $22,627 and $18,031, respectively		2,181,730		1,922,096
Accounts receivable, less allowance for credit losses of $25,270 and $23,534, respectively						Accounts receivable, less allowance for credit losses of $25,270 and $23,534, respectively	2,510,579		2,204,519
Contract assets	Contract assets	245,489		171,956		Contract assets	299,336		230,143
Inventories	Inventories	64,489		53,338		Inventories	101,874		54,098
Prepaid expenses and other	Prepaid expenses and other	70,954		70,679		Prepaid expenses and other	63,657		80,889
Total current assets	Total current assets	3,226,567		3,120,936		Total current assets	3,379,262		3,390,994
Property, plant and equipment, net	Property, plant and equipment, net	153,584		158,427		Property, plant and equipment, net	156,090		152,066
Operating lease right-of-use assets	Operating lease right-of-use assets	268,657		242,155		Operating lease right-of-use assets	262,976		260,778
Goodwill	Goodwill	888,303		851,783		Goodwill	916,812		890,268
Identifiable intangible assets, net	Identifiable intangible assets, net	602,234		582,893		Identifiable intangible assets, net	605,949		589,365
Other assets	Other assets	157,333		107,646		Other assets	117,640		157,975
Total assets	Total assets	$	5,296,678	$	5,063,840	Total assets	$	5,438,729	$	5,441,446
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current maturities of long-term debt and finance lease liabilities	Current maturities of long-term debt and finance lease liabilities	$	16,328	$	16,910	Current maturities of long-term debt and finance lease liabilities	$	15,635	$	16,235
Accounts payable	Accounts payable	637,865		671,886		Accounts payable	751,074		734,275
Contract liabilities	Contract liabilities	780,666		722,252		Contract liabilities	1,046,312		788,134
Accrued payroll and benefits	Accrued payroll and benefits	494,133		450,955		Accrued payroll and benefits	514,166		490,867
Other accrued expenses and liabilities	Other accrued expenses and liabilities	263,178		247,597		Other accrued expenses and liabilities	248,382		274,406
Operating lease liabilities, current	Operating lease liabilities, current	57,953		53,632		Operating lease liabilities, current	63,227		57,814
Total current liabilities	Total current liabilities	2,250,123		2,163,232		Total current liabilities	2,638,796		2,361,731
Borrowings under revolving credit facility						Borrowings under revolving credit facility	170,000		—
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	259,337		259,619		Long-term debt and finance lease liabilities	245,101		245,450
Operating lease liabilities, long-term	Operating lease liabilities, long-term	228,561		205,362		Operating lease liabilities, long-term	218,968		220,836
Other long-term obligations	Other long-term obligations	416,607		382,383		Other long-term obligations	323,442		360,340
Total liabilities	Total liabilities	3,154,628		3,010,596		Total liabilities	3,596,307		3,188,357
Equity:	Equity:					Equity:
EMCOR Group, Inc. stockholders’ equity:	EMCOR Group, Inc. stockholders’ equity:					EMCOR Group, Inc. stockholders’ equity:
Preferred stock, $0.10 par value, 1,000,000 shares authorized, zero issued and outstanding	Preferred stock, $0.10 par value, 1,000,000 shares authorized, zero issued and outstanding	—		—		Preferred stock, $0.10 par value, 1,000,000 shares authorized, zero issued and outstanding	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized, 60,716,955 and 60,571,140 shares issued, respectively		607		606
Common stock, $0.01 par value, 200,000,000 shares authorized, 60,928,336 and 60,737,006 shares issued, respectively						Common stock, $0.01 par value, 200,000,000 shares authorized, 60,928,336 and 60,737,006 shares issued, respectively	609		607
Capital surplus	Capital surplus	57,473		47,464		Capital surplus	70,121		61,874
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(107,812)		(109,233)		Accumulated other comprehensive loss	(101,531)		(83,562)
Retained earnings	Retained earnings	2,740,817		2,480,321		Retained earnings	3,095,166		2,835,504
Treasury stock, at cost 7,334,395 and 5,815,240 shares, respectively		(549,737)		(366,490)
Treasury stock, at cost 13,281,222 and 7,437,268 shares, respectively						Treasury stock, at cost 13,281,222 and 7,437,268 shares, respectively	(1,222,645)		(562,036)
Total EMCOR Group, Inc. stockholders’ equity	Total EMCOR Group, Inc. stockholders’ equity	2,141,348		2,052,668		Total EMCOR Group, Inc. stockholders’ equity	1,841,720		2,252,387
Noncontrolling interests	Noncontrolling interests	702		576		Noncontrolling interests	702		702
Total equity	Total equity	2,142,050		2,053,244		Total equity	1,842,422		2,253,089
Total liabilities and equity	Total liabilities and equity	$	5,296,678	$	5,063,840	Total liabilities and equity	$	5,438,729	$	5,441,446

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)(Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenues	Revenues	$	2,521,672	$	2,201,714	$	7,263,387	$	6,515,567	Revenues	$	2,826,361	$	2,521,672	$	8,126,298	$	7,263,387
Cost of sales	Cost of sales	2,140,329		1,838,530		6,164,692		5,504,036		Cost of sales	2,413,130		2,140,329		6,977,504		6,164,692
Gross profit	Gross profit	381,343		363,184		1,098,695		1,011,531		Gross profit	413,231		381,343		1,148,794		1,098,695
Selling, general and administrative expenses	Selling, general and administrative expenses	243,922		226,793		710,912		658,964		Selling, general and administrative expenses	263,137		243,922		761,099		710,912
Restructuring expenses		—		536		—		605
Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets		—		—		—		232,750
Operating income	Operating income	137,421		135,855		387,783		119,212		Operating income	150,094		137,421		387,695		387,783
Net periodic pension (cost) income	Net periodic pension (cost) income	908		751		2,738		2,211		Net periodic pension (cost) income	1,025		908		3,288		2,738
Interest expense, net	Interest expense, net	(1,286)		(1,484)		(3,965)		(6,082)		Interest expense, net	(3,194)		(1,286)		(6,234)		(3,965)
Income before income taxes	Income before income taxes	137,043		135,122		386,556		115,341		Income before income taxes	147,925		137,043		384,749		386,556
Income tax provision	Income tax provision	37,303		73,936		104,523		62,179		Income tax provision	42,153		37,303		104,927		104,523
Net income including noncontrolling interests	Net income including noncontrolling interests	99,740		61,186		282,033		53,162		Net income including noncontrolling interests	105,772		99,740		279,822		282,033
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	—		—		169		—		Net income attributable to noncontrolling interests	—		—		—		169
Net income attributable to EMCOR Group, Inc.	Net income attributable to EMCOR Group, Inc.	$	99,740	$	61,186	$	281,864	$	53,162	Net income attributable to EMCOR Group, Inc.	$	105,772	$	99,740	$	279,822	$	281,864

Basic earnings per common share	Basic earnings per common share	$	1.86	$	1.11	$	5.19	$	0.96	Basic earnings per common share	$	2.16	$	1.86	$	5.52	$	5.19

Diluted earnings per common share	Diluted earnings per common share	$	1.85	$	1.11	$	5.17	$	0.96	Diluted earnings per common share	$	2.16	$	1.85	$	5.50	$	5.17

Dividends declared per common share	Dividends declared per common share	$	0.13	$	0.08	$	0.39	$	0.24	Dividends declared per common share	$	0.13	$	0.13	$	0.39	$	0.39

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)(Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net income including noncontrolling interests	Net income including noncontrolling interests	$	99,740	$	61,186	$	282,033	$	53,162	Net income including noncontrolling interests	$	105,772	$	99,740	$	279,822	$	282,033
Other comprehensive (loss) income, net of tax:	Other comprehensive (loss) income, net of tax:									Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(1,687)		2,148		(991)		(832)		Foreign currency translation adjustments	(8,712)		(1,687)		(19,257)		(991)
Post retirement plans, amortization of actuarial loss included in net income (1)	Post retirement plans, amortization of actuarial loss included in net income (1)	800		540		2,412		1,636		Post retirement plans, amortization of actuarial loss included in net income (1)	404		800		1,288		2,412
Other comprehensive (loss) income	Other comprehensive (loss) income	(887)		2,688		1,421		804		Other comprehensive (loss) income	(8,308)		(887)		(17,969)		1,421
Comprehensive income	Comprehensive income	98,853		63,874		283,454		53,966		Comprehensive income	97,464		98,853		261,853		283,454
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	—		—		169		—		Comprehensive income attributable to noncontrolling interests	—		—		—		169
Comprehensive income attributable to EMCOR Group, Inc.	Comprehensive income attributable to EMCOR Group, Inc.	$	98,853	$	63,874	$	283,285	$	53,966	Comprehensive income attributable to EMCOR Group, Inc.	$	97,464	$	98,853	$	261,853	$	283,285

_________

(1)Net of tax of $0.1 million and $0.2 million for ~~each of~~ the three months ended September 30, 2022 and 2021, ~~and 2020,~~respectively, and net of tax of ~~$0.6~~$0.4 million and ~~$0.4~~$0.6 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)(Unaudited)


		Nine months ended September 30,					Nine months ended September 30,
		2021		2020			2022		2021
Cash flows - operating activities:	Cash flows - operating activities:					Cash flows - operating activities:
Net income including noncontrolling interests	Net income including noncontrolling interests	$	282,033	$	53,162	Net income including noncontrolling interests	$	279,822	$	282,033
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	36,088		34,881		Depreciation and amortization	35,168		36,088
Amortization of identifiable intangible assets	Amortization of identifiable intangible assets	48,159		44,765		Amortization of identifiable intangible assets	45,465		48,159
Provision for credit losses		5,829		3,409
Deferred income taxes		(3,650)		(28,104)
Non-cash expense for impairment of goodwill, identifiable intangible assets, and other long-lived assets		—		232,750
Non-cash share-based compensation expense	Non-cash share-based compensation expense	8,467		8,510		Non-cash share-based compensation expense	9,322		8,467
Other reconciling items	Other reconciling items	624		1,169		Other reconciling items	(682)		2,803
Changes in operating assets and liabilities, excluding the effect of businesses acquired	Changes in operating assets and liabilities, excluding the effect of businesses acquired	(263,609)		196,292		Changes in operating assets and liabilities, excluding the effect of businesses acquired	(130,741)		(263,609)
Net cash provided by operating activities	Net cash provided by operating activities	113,941		546,834		Net cash provided by operating activities	238,354		113,941
Cash flows - investing activities:	Cash flows - investing activities:					Cash flows - investing activities:
Payments for acquisitions of businesses, net of cash acquired	Payments for acquisitions of businesses, net of cash acquired	(113,658)		(44,930)		Payments for acquisitions of businesses, net of cash acquired	(91,078)		(113,658)
Proceeds from sale or disposal of property, plant and equipment	Proceeds from sale or disposal of property, plant and equipment	1,930		1,891		Proceeds from sale or disposal of property, plant and equipment	6,897		1,930
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(25,954)		(34,180)		Purchases of property, plant and equipment	(38,717)		(25,954)
Distributions from unconsolidated entities	Distributions from unconsolidated entities	196		—		Distributions from unconsolidated entities	—		196
Net cash used in investing activities	Net cash used in investing activities	(137,486)		(77,219)		Net cash used in investing activities	(122,898)		(137,486)
Cash flows - financing activities:	Cash flows - financing activities:					Cash flows - financing activities:
Proceeds from revolving credit facility	Proceeds from revolving credit facility	—		200,000		Proceeds from revolving credit facility	270,000		—
Repayments of revolving credit facility	Repayments of revolving credit facility	—		(250,000)		Repayments of revolving credit facility	(100,000)		—
Proceeds from long-term debt		—		300,000
Repayments of long-term debt and debt issuance costs		—		(280,049)
Repayments of finance lease liabilities	Repayments of finance lease liabilities	(3,253)		(3,390)		Repayments of finance lease liabilities	(2,741)		(3,253)
Dividends paid to stockholders	Dividends paid to stockholders	(21,224)		(13,280)		Dividends paid to stockholders	(20,037)		(21,224)
Repurchases of common stock	Repurchases of common stock	(183,247)		(99,048)		Repurchases of common stock	(656,573)		(183,247)
Taxes paid related to net share settlements of equity awards	Taxes paid related to net share settlements of equity awards	(4,020)		(2,574)		Taxes paid related to net share settlements of equity awards	(7,295)		(4,020)
Issuances of common stock under employee stock purchase plan	Issuances of common stock under employee stock purchase plan	5,418		4,887		Issuances of common stock under employee stock purchase plan	6,097		5,418
Payments for contingent consideration arrangements	Payments for contingent consideration arrangements	(6,758)		(4,070)		Payments for contingent consideration arrangements	(2,049)		(6,758)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(43)		(70)		Distributions to noncontrolling interests	—		(43)
Net cash used in financing activities	Net cash used in financing activities	(213,127)		(147,594)		Net cash used in financing activities	(512,598)		(213,127)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1,870)		(1,304)		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(20,540)		(1,870)
(Decrease) increase in cash, cash equivalents, and restricted cash		(238,542)		320,717
Decrease in cash, cash equivalents, and restricted cash						Decrease in cash, cash equivalents, and restricted cash	(417,682)		(238,542)
Cash, cash equivalents, and restricted cash at beginning of year (1)	Cash, cash equivalents, and restricted cash at beginning of year (1)	903,562		359,920		Cash, cash equivalents, and restricted cash at beginning of year (1)	822,568		903,562
Cash, cash equivalents, and restricted cash at end of period (2)	Cash, cash equivalents, and restricted cash at end of period (2)	$	665,020	$	680,637	Cash, cash equivalents, and restricted cash at end of period (2)	$	404,886	$	665,020

_________

(1)Includes ~~$0.7~~$1.2 million and ~~$1.1~~$0.7 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

(2)Includes $1.1 ~~million and $1.3~~ million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of September 30, ~~2021~~2022 and ~~2020, respectively.~~2021.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended September 30, ~~2020~~2021 and ~~2021~~2022

(In thousands)(Unaudited)


				EMCOR Group, Inc. Stockholders															EMCOR Group, Inc. Stockholders
		Total		Common stock		Capital surplus		Accumulated other comprehensive loss (1)		Retained earnings		Treasury stock		Noncontrolling interests
Balance, June 30, 2020		$	1,944,198	$	605	$	38,975	$	(91,172)	$	2,348,199	$	(352,985)	$	576
Net income including noncontrolling interests		61,186		—		—		—		61,186		—		—
Other comprehensive income		2,688		—		—		2,688		—		—		—
Tax withholding for common stock issued under share-based compensation plans		(24)		—		(24)		—		—		—		—
Common stock issued under employee stock purchase plan		1,659		—		1,659		—		—		—		—
Common stock dividends		(4,392)		—		29		—		(4,421)		—		—
Share-based compensation expense		2,550		—		2,550		—		—		—		—
Balance, September 30, 2020		$	2,007,865	$	605	$	43,189	$	(88,484)	$	2,404,964	$	(352,985)	$	576
																	Total		Common stock		Capital surplus		Accumulated other comprehensive loss (1)		Retained earnings		Treasury stock		Noncontrolling interests
Balance, June 30, 2021	Balance, June 30, 2021	$	2,091,177	$	607	$	53,204	$	(106,925)	$	2,648,109	$	(504,520)	$	702	Balance, June 30, 2021	$	2,091,177	$	607	$	53,204	$	(106,925)	$	2,648,109	$	(504,520)	$	702
Net income including noncontrolling interests	Net income including noncontrolling interests	99,740		—		—		—		99,740		—		—		Net income including noncontrolling interests	99,740		—		—		—		99,740		—		—
Other comprehensive loss	Other comprehensive loss	(887)		—		—		(887)		—		—		—		Other comprehensive loss	(887)		—		—		(887)		—		—		—
Tax withholding for common stock issued under share-based compensation plans	Tax withholding for common stock issued under share-based compensation plans	(249)		—		(249)		—		—		—		—		Tax withholding for common stock issued under share-based compensation plans	(249)		—		(249)		—		—		—		—
Common stock issued under employee stock purchase plan	Common stock issued under employee stock purchase plan	1,857		—		1,857		—		—		—		—		Common stock issued under employee stock purchase plan	1,857		—		1,857		—		—		—		—
Common stock dividends	Common stock dividends	(6,988)		—		44		—		(7,032)		—		—		Common stock dividends	(6,988)		—		44		—		(7,032)		—		—
Repurchases of common stock	Repurchases of common stock	(45,217)		—		—		—		—		(45,217)		—		Repurchases of common stock	(45,217)		—		—		—		—		(45,217)		—
Share-based compensation expense	Share-based compensation expense	2,617		—		2,617		—		—		—		—		Share-based compensation expense	2,617		—		2,617		—		—		—		—
Balance, September 30, 2021	Balance, September 30, 2021	$	2,142,050	$	607	$	57,473	$	(107,812)	$	2,740,817	$	(549,737)	$	702	Balance, September 30, 2021	$	2,142,050	$	607	$	57,473	$	(107,812)	$	2,740,817	$	(549,737)	$	702

Balance, June 30, 2022																Balance, June 30, 2022	$	1,952,791	$	609	$	65,212	$	(93,223)	$	2,995,844	$	(1,016,353)	$	702
Net income including noncontrolling interests																Net income including noncontrolling interests	105,772		—		—		—		105,772		—		—
Other comprehensive loss																Other comprehensive loss	(8,308)		—		—		(8,308)		—		—		—
Tax withholding for common stock issued under share-based compensation plans																Tax withholding for common stock issued under share-based compensation plans	(56)		—		(56)		—		—		—		—
Common stock issued under employee stock purchase plan																Common stock issued under employee stock purchase plan	2,074		—		2,074		—		—		—		—
Common stock dividends																Common stock dividends	(6,418)		—		32		—		(6,450)		—		—
Repurchases of common stock																Repurchases of common stock	(206,292)		—		—		—		—		(206,292)		—
Share-based compensation expense																Share-based compensation expense	2,859		—		2,859		—		—		—		—
Balance, September 30, 2022																Balance, September 30, 2022	$	1,842,422	$	609	$	70,121	$	(101,531)	$	3,095,166	$	(1,222,645)	$	702

_________

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

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the nine months ended September 30, ~~2020~~2021 and ~~2021~~2022

(In thousands)(Unaudited)


				EMCOR Group, Inc. Stockholders															EMCOR Group, Inc. Stockholders
		Total		Common stock		Capital surplus		Accumulated other comprehensive loss (1)		Retained earnings		Treasury stock		Noncontrolling interests
Balance, December 31, 2019		$	2,057,780	$	604	$	32,274	$	(89,288)	$	2,367,481	$	(253,937)	$	646
Net income including noncontrolling interests		53,162		—		—		—		53,162		—		—
Other comprehensive income		804		—		—		804		—		—		—
Cumulative-effect adjustment (2)		(2,307)		—		—		—		(2,307)		—		—
Common stock issued under share-based compensation plans		1		1		—		—		—		—		—
Tax withholding for common stock issued under share-based compensation plans		(2,574)		—		(2,574)		—		—		—		—
Common stock issued under employee stock purchase plan		4,887		—		4,887		—		—		—		—
Common stock dividends		(13,280)		—		92		—		(13,372)		—		—
Repurchases of common stock		(99,048)		—		—		—		—		(99,048)		—
Distributions to noncontrolling interests		(70)		—		—		—		—		—		(70)
Share-based compensation expense		8,510		—		8,510		—		—		—		—
Balance, September 30, 2020		$	2,007,865	$	605	$	43,189	$	(88,484)	$	2,404,964	$	(352,985)	$	576
																	Total		Common stock		Capital surplus		Accumulated other comprehensive loss (1)		Retained earnings		Treasury stock		Noncontrolling interests
Balance, December 31, 2020	Balance, December 31, 2020	$	2,053,244	$	606	$	47,464	$	(109,233)	$	2,480,321	$	(366,490)	$	576	Balance, December 31, 2020	$	2,053,244	$	606	$	47,464	$	(109,233)	$	2,480,321	$	(366,490)	$	576
Net income including noncontrolling interests	Net income including noncontrolling interests	282,033		—		—		—		281,864		—		169		Net income including noncontrolling interests	282,033		—		—		—		281,864		—		169
Other comprehensive income	Other comprehensive income	1,421		—		—		1,421		—		—		—		Other comprehensive income	1,421		—		—		1,421		—		—		—
Common stock issued under share-based compensation plans	Common stock issued under share-based compensation plans	1		1		—		—		—		—		—		Common stock issued under share-based compensation plans	1		1		—		—		—		—		—
Tax withholding for common stock issued under share-based compensation plans	Tax withholding for common stock issued under share-based compensation plans	(4,020)		—		(4,020)		—		—		—		—		Tax withholding for common stock issued under share-based compensation plans	(4,020)		—		(4,020)		—		—		—		—
Common stock issued under employee stock purchase plan	Common stock issued under employee stock purchase plan	5,418		—		5,418		—		—		—		—		Common stock issued under employee stock purchase plan	5,418		—		5,418		—		—		—		—
Common stock dividends	Common stock dividends	(21,224)		—		144		—		(21,368)		—		—		Common stock dividends	(21,224)		—		144		—		(21,368)		—		—
Repurchases of common stock	Repurchases of common stock	(183,247)		—		—		—		—		(183,247)		—		Repurchases of common stock	(183,247)		—		—		—		—		(183,247)		—
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(43)		—		—		—		—		—		(43)		Distributions to noncontrolling interests	(43)		—		—		—		—		—		(43)
Share-based compensation expense	Share-based compensation expense	8,467		—		8,467		—		—		—		—		Share-based compensation expense	8,467		—		8,467		—		—		—		—
Balance, September 30, 2021	Balance, September 30, 2021	$	2,142,050	$	607	$	57,473	$	(107,812)	$	2,740,817	$	(549,737)	$	702	Balance, September 30, 2021	$	2,142,050	$	607	$	57,473	$	(107,812)	$	2,740,817	$	(549,737)	$	702

Balance, December 31, 2021																Balance, December 31, 2021	$	2,253,089	$	607	$	61,874	$	(83,562)	$	2,835,504	$	(562,036)	$	702
Net income including noncontrolling interests																Net income including noncontrolling interests	279,822		—		—		—		279,822		—		—
Other comprehensive loss																Other comprehensive loss	(17,969)		—		—		(17,969)		—		—		—
Common stock issued under share-based compensation plans																Common stock issued under share-based compensation plans	2		2		—		—		—		—		—
Tax withholding for common stock issued under share-based compensation plans																Tax withholding for common stock issued under share-based compensation plans	(7,295)		—		(7,295)		—		—		—		—
Common stock issued under employee stock purchase plan																Common stock issued under employee stock purchase plan	6,097		—		6,097		—		—		—		—
Common stock dividends																Common stock dividends	(20,037)		—		123		—		(20,160)		—		—
Repurchases of common stock																Repurchases of common stock	(660,609)		—		—		—		—		(660,609)		—
Share-based compensation expense																Share-based compensation expense	9,322		—		9,322		—		—		—		—
Balance, September 30, 2022																Balance, September 30, 2022	$	1,842,422	$	609	$	70,121	$	(101,531)	$	3,095,166	$	(1,222,645)	$	702

_________

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

~~(2)Represents adjustment to retained earnings upon the adoption of Accounting Standards Codification Topic 326.~~

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. References to the “Company,” “EMCOR,” “we,” “us,” “our,” and similar words refer to EMCOR Group, Inc. and its consolidated subsidiaries unless the context indicates otherwise. Readers of this report should refer to the consolidated financial statements and the notes thereto included in our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission.

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of those of a normal recurring nature) necessary to present fairly our financial position and the results of our operations.

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

The results of operations for the three and nine months ended September 30, ~~2021~~2022 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2021.~~2022.

NOTE 2 - New Accounting Pronouncements

On January 1, 2021, we adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to intraperiod tax allocations and the methodology for calculating income taxes in an interim period. The guidance also simplifies aspects of the accounting for franchise taxes as well as enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this accounting pronouncement did not have a material impact on our financial position and/or results of operations.

The Company is currently evaluating the impact of an accounting standards update issued by the ~~FASB,~~Financial Accounting Standards Board (the “FASB”), which provides temporary optional expedients and exceptions to existing U.S. GAAP. This guidance is aimed at easing the financial reporting burdens related to reference rate reform, including the ~~expected~~ market transition from LIBOR, or other interbank offered rates, to alternative reference rates. Such accounting pronouncement allows entities to account for and present certain contract modifications, which occur before December 31, 2022 and result from the transition to an alternative reference rate, as an event that does not require remeasurement at the modification date or reassessment of a previous accounting determination. Although not yet reflected within such accounting pronouncement, the FASB has announced its intention to extend the period of time that entities can utilize this guidance from December 31, 2022 to December 31, 2024. While we are still evaluating the impact of this pronouncement, we do not anticipate that it will have a material impact on our financial position and/or results of operations, as we are not exposed to any contracts that reference LIBOR, other than our credit agreement dated as of March 2, 2020, which contains provisions that allow for the amendment of such agreement to use alternative reference rates ~~in the event of~~upon the discontinuation of LIBOR.

In October 2021, an accounting pronouncement was issued by the FASB, that changes how an entity accounts for revenue contracts it acquires in a business combination. The pronouncement requires entities to apply the revenue recognition guidance within Accounting Standards Codification Topic 606 to recognize and measure contract assets and liabilities from contracts with customers in a business combination, creating an exception to the fair value recognition and measurement principle typically utilized when valuing acquired assets. The guidance is aimed at improving comparability by addressing when an acquirer should recognize a contract asset or contract liability, as well as how such assets and liabilities should be measured, and will generally result in companies recognizing contract assets and contract liabilities at amounts consistent with those recorded by the target entity prior to acquisition. This guidance is effective for public business entities for fiscal years beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the potential impact of this accounting pronouncement; however, we do not believe that its adoption will have a material impact on our financial position and/or results of operations.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which ~~the Company expects~~we expect to be entitled in exchange for those goods or services by applying the following five step model:

(1) Identify the contract with a customer

A contract with a customer exists when: (a) the parties have approved the contract and are committed to perform their respective obligations, (b) the rights of the parties can be identified, (c) payment terms can be identified, (d) the arrangement has commercial substance, and (e) collectability of consideration is probable. Judgment is required when determining if the contractual criteria are met, specifically in the earlier stages of a project when a formally executed contract may not yet exist. In these situations, the Company evaluates all relevant facts and circumstances, including the existence of other forms of documentation or historical experience with our customers that may indicate a contractual agreement is in place and revenue should be recognized. In determining if the collectability of consideration is probable, the Company considers the customer’s ability and intention to pay such consideration through an evaluation of several factors, including an assessment of the creditworthiness of the customer and our prior collection history with such customer.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 3 - Revenue from Contracts with Customers (Continued)~~

(2) Identify the performance obligations in the contract

At contract inception, the Company assesses the goods or services promised in a contract and identifies, as a separate performance obligation, each distinct promise to transfer goods or services to the customer. The identified performance obligations represent the “unit of account” for purposes of determining revenue recognition. In order to properly identify separate performance obligations, the Company applies judgment in determining whether each good or service provided is: (a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract.

In addition, when assessing performance obligations within a contract, the Company considers the warranty provisions included within such contract. To the extent the warranty terms provide the customer with an additional service, other than assurance that the promised good or service complies with agreed upon specifications, such warranty is accounted for as a separate performance obligation. In determining whether a warranty provides an additional service, the Company considers each warranty provision in comparison to warranty terms which are standard in the industry.

Our contracts are often modified through change orders to account for changes in the scope and price of the goods or services we are providing. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of our change orders are for goods or services that are not distinct within the context of our original contract and, therefore, are not treated as separate performance obligations.

(3) Determine the transaction price

The transaction price represents the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to our customers. The consideration promised within a contract may include fixed amounts, variable amounts, or both. To the extent the performance obligation includes variable consideration, including contract bonuses and penalties that can either increase or decrease the transaction price, 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. Such methods include: (a) the expected value method, whereby the amount of variable consideration to be recognized represents the sum of probability-weighted amounts in a range of possible consideration amounts, and (b) the most likely amount method, whereby the amount of variable consideration to be recognized represents the single most likely amount in a range of possible consideration amounts. When applying these methods, the Company considers all information that is reasonably available, including historical, current, and estimates of future performance. The expected value method is typically utilized in situations where a contract contains a large number of possible outcomes while the most likely amount method is typically utilized in situations where a contract has only two possible outcomes.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s 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. This threshold is referred to as the variable consideration constraint. In assessing whether to apply the variable consideration constraint, the Company considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue, including, but not limited to, whether: (a) the amount of consideration is highly susceptible to factors outside of the Company’s influence, such as the actions of third parties, (b) the uncertainty surrounding the amount of consideration is not expected to be resolved for a long period of time, (c) the Company’s experience with similar types of contracts is limited or that experience has limited predictive value, (d) the Company has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances, and (e) the contract has a large number and broad range of possible consideration amounts.

Pending change orders represent one of the most common forms of variable consideration included within contract value and typically represent contract modifications for which a change in scope has been authorized or acknowledged by our customer but the final adjustment to contract price is yet to be negotiated. In estimating the transaction price for pending change orders, the Company considers all relevant facts, including documented correspondence with the customer regarding acknowledgment of and/or agreement with the modification, as well as historical experience with the customer or similar contractual circumstances. Based upon this assessment, the Company estimates the transaction price, including whether the variable consideration constraint should be applied.

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 3 - Revenue from Contracts with Customers (Continued)~~

Contract claims are another form of variable consideration which is common within our industry. Claim amounts represent revenue that has been recognized for contract modifications that are not submitted or are in dispute as to both scope and price. In estimating the transaction price for claims, the Company considers all relevant facts available. However, given the uncertainty surrounding claims, including the potential long-term nature of dispute resolution and the broad range of possible consideration amounts, there is an increased likelihood that any additional contract revenue associated with contract claims is constrained. The resolution of claims involves negotiations and, in certain cases, litigation. In the event litigation costs are incurred by us in connection with claims, such litigation costs are expensed as incurred, although we may seek to recover these costs.

For some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer. For such contracts, the Company evaluates whether this timing difference represents a financing arrangement within the contract. Although rare, if a contract is determined to contain a significant financing component, the Company adjusts the promised amount of consideration for the effects of the time value of money when determining the transaction price of such contract. Although our customers may retain a portion of the contract price until completion of the project and final contract settlement, these retainage amounts are not considered a significant financing component as the intent of the withheld amounts is to provide the customer with assurance that we will complete our obligations under the contract rather than to provide financing to the customer. In addition, although we may be entitled to advanced payments from our customers on certain contracts, these advanced payments generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract.

Changes in the estimates of transaction prices are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate. For the three and nine months ended September 30, ~~2020, we recognized revenue of $4.4 million~~2022 and $6.1 million, respectively, associated with the final settlement of the contract value for two projects within our United States electrical construction and facilities services segment that were completed or substantially completed in prior periods. There2021, there were no significant amounts of revenue recognized during the ~~three and nine months ended September 30, 2021~~period related to performance obligations satisfied in prior periods. In addition, for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, there were no significant reversals of revenue recognized associated with the revision of transaction prices.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price. The Company determines the standalone selling price based on the price at which the performance obligation would have been sold separately in similar circumstances to similar customers. If the standalone selling price is not observable, the Company estimates the standalone selling price taking into account all available information such as market conditions and internal pricing guidelines. In certain circumstances, the standalone selling price is determined using an expected profit margin on anticipated costs related to the performance obligation.

(5) Recognize revenue as performance obligations are satisfied

The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to its customers. A good or service is considered to be transferred when the customer obtains control. The Company can transfer control of a good or service and satisfy its performance obligations either over time or at a point in time. The Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following three criteria are met: (a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as we perform, (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the Company’s performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date.

For our performance obligations satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of that performance obligation. The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 3 - Revenue from Contracts with Customers (Continued)~~

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 ~~amount~~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.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the ~~near-term.~~near term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation ~~indicate~~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. ~~For~~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, ~~2021~~2022, respectively. The entire amount recorded during the three months ended September 30, 2022, was reported within our United States electrical construction and ~~2020, there~~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. In addition, there were no significant losses recognized~~results during the three and nine months ended September 30, ~~2021 and 2020.~~2021.

Disaggregation of Revenues

Our revenues are principally derived from contracts to provide construction services relating to electrical and mechanical systems, as well as to provide a number of building services and industrial services to our customers. Our contracts are with many different customers in numerous industries. Refer to Note 1514 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable ~~segment, as well as a more complete description of our business.~~

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 3 - Revenue from Contracts with Customers (Continued)~~segment.

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

For the three months ended September 30,
2021 % of
Total 2020 % of
Total
United States electrical construction and facilities services:
Commercial market sector $ 274,954 52 % $ 252,197 53 %
Institutional market sector 42,002 8 % 36,230 8 %
Hospitality market sector 2,522 1 % 7,028 1 %
Manufacturing market sector 60,965 11 % 62,537 13 %
Healthcare market sector 29,377 6 % 16,929 4 %
Transportation market sector 49,578 9 % 58,765 12 %
Water and wastewater market sector 4,381 1 % 2,351 1 %
Short duration projects (1)
53,881 10 % 31,008 7 %
Service work 10,931 2 % 6,847 1 %
528,591 473,892
Less intersegment revenues (656) (1,808)
Total segment revenues $ 527,935 $ 472,084


		For the three months ended September 30,									For the three months ended September 30,
		2021		% of Total		2020		% of Total			2022		% of Total		2021		% of Total
United States mechanical construction and facilities services:
United States electrical construction and facilities services:										United States electrical construction and facilities services:
Commercial market sector	Commercial market sector	$	369,654	37	%	$	346,911	39	%	Commercial market sector	$	339,478	54	%	$	275,824	52	%
Institutional market sector		74,867		8	%	112,264		13	%
Hospitality market sector		10,806		1	%	12,570		1	%
Manufacturing market sector	Manufacturing market sector	142,250		14	%	93,919		11	%	Manufacturing market sector	78,562		12	%	61,618		12	%
Healthcare market sector	Healthcare market sector	123,071		12	%	78,814		9	%	Healthcare market sector	43,911		7	%	29,419		5	%
Institutional market sector										Institutional market sector	46,344		7	%	42,153		8	%
Transportation market sector	Transportation market sector	23,954		3	%	19,824		2	%	Transportation market sector	40,525		6	%	49,578		9	%
Water and wastewater market sector	Water and wastewater market sector	53,367		5	%	45,255		5	%	Water and wastewater market sector	5,466		1	%	4,381		1	%
Hospitality market sector										Hospitality market sector	4,575		1	%	2,522		1	%
Short duration projects (1)	Short duration projects (1)	82,510		8	%	84,461		9	%	Short duration projects (1)	58,637		9	%	54,678		10	%
Service work	Service work	121,013		12	%	99,649		11	%	Service work	16,829		3	%	11,433		2	%
		1,001,492				893,667					634,327				531,606
Less intersegment revenues	Less intersegment revenues	(1,908)				(2,158)				Less intersegment revenues	(944)				(656)
Total segment revenues	Total segment revenues	$	999,584			$	891,509			Total segment revenues	$	633,383			$	530,950

________

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

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For the three months ended September 30,
2021 % of
Total 2020 % of
Total
United States building services:
Commercial site-based services $ 166,375 26 % $ 147,768 27 %
Government site-based services 49,293 8 % 44,664 8 %
Mobile mechanical services 394,559 62 % 341,279 61 %
Energy services 22,228 4 % 22,803 4 %
Total segment revenues $ 632,455 $ 556,514

For the three months ended September 30,
2021 % of
Total 2020 % of
Total
United States industrial services:
Field services $ 196,846 85 % $ 145,165 85 %
Shop services 35,372 15 % 26,367 15 %
Total segment revenues $ 232,218 $ 171,532
Total United States operations $ 2,392,192 $ 2,091,639

For the three months ended September 30,
2021 % of
Total 2020 % of
Total
United Kingdom building services:
Service work $ 65,486 51 % $ 55,594 51 %
Project work 63,994 49 % 54,481 49 %
Total segment revenues $ 129,480 $ 110,075
Total operations $ 2,521,672 $ 2,201,714


		For the nine months ended September 30,									For the three months ended September 30,
		2021		% of Total		2020		% of Total			2022		% of Total		2021		% of Total
United States electrical construction and facilities services:
United States mechanical construction and facilities services:										United States mechanical construction and facilities services:
Commercial market sector	Commercial market sector	$	773,711	52	%	$	704,361	52	%	Commercial market sector	$	444,515	40	%	$	369,791	37	%
Institutional market sector		137,718		9	%	106,314		8	%
Hospitality market sector		11,286		1	%	17,009		1	%
Manufacturing market sector	Manufacturing market sector	161,386		11	%	185,290		14	%	Manufacturing market sector	156,524		14	%	154,644		15	%
Healthcare market sector	Healthcare market sector	74,469		5	%	52,179		4	%	Healthcare market sector	120,562		11	%	123,415		12	%
Institutional market sector										Institutional market sector	104,306		9	%	74,867		8	%
Transportation market sector	Transportation market sector	144,788		10	%	150,911		11	%	Transportation market sector	15,494		1	%	23,954		2	%
Water and wastewater market sector	Water and wastewater market sector	9,909		1	%	6,587		1	%	Water and wastewater market sector	66,667		6	%	53,367		5	%
Hospitality market sector										Hospitality market sector	6,513		1	%	10,806		1	%
Short duration projects (1)	Short duration projects (1)	135,165		9	%	104,785		8	%	Short duration projects (1)	77,261		7	%	78,218		8	%
Service work	Service work	27,602		2	%	20,293		1	%	Service work	128,792		11	%	116,824		12	%
		1,476,034				1,347,729					1,120,634				1,005,886
Less intersegment revenues	Less intersegment revenues	(2,444)				(3,454)				Less intersegment revenues	(3,246)				(1,479)
Total segment revenues	Total segment revenues	$	1,473,590			$	1,344,275			Total segment revenues	$	1,117,388			$	1,004,407

________

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


	For the three months ended September 30,
	2022		% of Total		2021		% of Total
United States building services:
Mobile mechanical services	$	462,401	65	%	$	408,949	65	%
Commercial site-based services	199,957		28	%	166,375		27	%
Government site-based services	48,292		7	%	49,293		8	%
Total segment revenues	$	710,650			$	624,617


	For the three months ended September 30,
	2022		% of Total		2021		% of Total
United States industrial services:
Field services	$	213,866	87	%	$	196,846	85	%
Shop services	33,373		13	%	35,372		15	%
Total segment revenues	$	247,239			$	232,218

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


	For the three months ended September 30,
	2022		% of Total		2021		% of Total
United Kingdom building services:
Service work	$	51,762	44	%	$	65,486	51	%
Project work	65,939		56	%	63,994		49	%
Total segment revenues	$	117,701			$	129,480

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

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


		For the nine months ended September 30,									For the nine months ended September 30,
		2021		% of Total		2020		% of Total			2022		% of Total		2021		% of Total
United States mechanical construction and facilities services:
United States electrical construction and facilities services:										United States electrical construction and facilities services:
Commercial market sector	Commercial market sector	$	1,133,811	40	%	$	925,035	37	%	Commercial market sector	$	908,999	53	%	$	776,121	52	%
Institutional market sector		215,635		8	%	289,090		12	%
Hospitality market sector		30,593		1	%	29,382		1	%
Manufacturing market sector	Manufacturing market sector	349,901		12	%	310,109		12	%	Manufacturing market sector	210,331		12	%	162,186		11	%
Healthcare market sector	Healthcare market sector	357,601		12	%	247,401		10	%	Healthcare market sector	119,259		7	%	75,417		5	%
Institutional market sector										Institutional market sector	115,799		6	%	138,973		9	%
Transportation market sector	Transportation market sector	63,075		2	%	53,839		2	%	Transportation market sector	128,047		7	%	144,788		10	%
Water and wastewater market sector	Water and wastewater market sector	141,917		5	%	131,374		5	%	Water and wastewater market sector	15,962		1	%	9,909		1	%
Hospitality market sector										Hospitality market sector	9,887		1	%	11,286		1	%
Short duration projects (1)	Short duration projects (1)	254,897		9	%	255,618		10	%	Short duration projects (1)	167,553		10	%	137,260		9	%
Service work	Service work	320,031		11	%	279,226		11	%	Service work	47,253		3	%	29,008		2	%
		2,867,461				2,521,074					1,723,090				1,484,948
Less intersegment revenues	Less intersegment revenues	(5,266)				(5,012)				Less intersegment revenues	(3,565)				(2,473)
Total segment revenues	Total segment revenues	$	2,862,195			$	2,516,062			Total segment revenues	$	1,719,525			$	1,482,475


	For the nine months ended September 30,
	2022		% of Total		2021		% of Total
United States mechanical construction and facilities services:
Commercial market sector	$	1,225,897	38	%	$	1,133,092	39	%
Manufacturing market sector	461,385		15	%	394,439		14	%
Healthcare market sector	367,866		12	%	357,483		12	%
Institutional market sector	267,373		8	%	215,635		7	%
Transportation market sector	47,793		1	%	63,075		2	%
Water and wastewater market sector	196,157		6	%	141,917		5	%
Hospitality market sector	22,892		1	%	30,593		1	%
Short duration projects (1)	257,571		8	%	246,812		9	%
Service work	345,414		11	%	308,871		11	%
	3,192,348				2,891,917
Less intersegment revenues	(8,143)				(4,345)
Total segment revenues	$	3,184,205			$	2,887,572

________

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


		For the nine months ended September 30,									For the nine months ended September 30,
		2021		% of Total		2020		% of Total			2022		% of Total		2021		% of Total
United States building services:	United States building services:									United States building services:
Mobile mechanical services										Mobile mechanical services	$	1,275,298	63	%	$	1,172,663	65	%
Commercial site-based services	Commercial site-based services	$	494,873	27	%	$	423,284	27	%	Commercial site-based services	596,589		30	%	494,873		27	%
Government site-based services	Government site-based services	136,952		8	%	126,000		8	%	Government site-based services	144,411		7	%	136,952		8	%
Mobile mechanical services		1,128,322		61	%	943,729		61	%
Energy services		78,603		4	%	70,094		4	%
Total segment revenues	Total segment revenues	$	1,838,750			$	1,563,107			Total segment revenues	$	2,016,298			$	1,804,488

For the nine months ended September 30,
2021 % of
Total 2020 % of
Total
United States industrial services:
Field services $ 613,197 87 % $ 675,107 87 %
Shop services 89,566 13 % 101,447 13 %
Total segment revenues $ 702,763 $ 776,554
Total United States operations $ 6,877,298 $ 6,199,998

For the nine months ended September 30,
2021 % of
Total 2020 % of
Total
United Kingdom building services:
Service work $ 194,049 50 % $ 161,839 51 %
Project work 192,040 50 % 153,730 49 %
Total segment revenues $ 386,089 $ 315,569
Total operations $ 7,263,387 $ 6,515,567

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


	For the nine months ended September 30,
	2022		% of Total		2021		% of Total
United States industrial services:
Field services	$	732,826	87	%	$	613,197	87	%
Shop services	109,698		13	%	89,566		13	%
Total segment revenues	$	842,524			$	702,763

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


	For the nine months ended September 30,
	2022		% of Total		2021		% of Total
United Kingdom building services:
Service work	$	170,840	47	%	$	194,049	50	%
Project work	192,906		53	%	192,040		50	%
Total segment revenues	$	363,746			$	386,089

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

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recognized in the period we deliver goods and 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, ~~2021~~2022 and December 31, ~~2020,~~2021, our allowance for credit losses was ~~$22.6~~$25.3 million and ~~$18.0~~$23.5 million, respectively. The increase in our allowance for credit losses was ~~predominantly~~ 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 ~~evaluation of a specific outstanding receivable within our United States industrial services segment~~allowance for credit losses during the ~~second quarter~~first nine months of ~~2021.~~2022 to account for the impact of changing economic conditions, including rising interest rates. Allowances for credit losses are based on the best facts available and are reassessed and adjusted on a regular basis as additional information is received. Should anticipated collections fail to materialize, or if future economic conditions compare unfavorably to our forecasts, we could experience an increase in our credit losses.

The change in the allowance for credit losses for the nine months ended September 30, ~~2021~~2022 was as follows (in thousands):


Balance at December 31, ~~2020~~2021	$	~~18,031~~23,534
Provision for credit losses	~~5,829~~3,211
Amounts written off against the allowance, net of recoveries	~~(1,233)~~(1,475)
Balance at September 30, ~~2021~~2022	$	~~22,627~~25,270

Contract Assets and Contract Liabilities

The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts ~~cannot be billed~~are not yet billable under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. In addition, many of our time and materials arrangements, as well as our contracts to perform turnaround services within the United States industrial services segment, are billed in arrears pursuant

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

Also included in contract assets are amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to scope and/or price, or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders). Our contract assets do not include capitalized costs to obtain and fulfill a contract. Contract assets are generally classified as current within the Consolidated Balance Sheets.

Contract liabilities from our construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when we expect to recognize such revenue. The long-term portion of contract liabilities is included in “Other long-term obligations” in the Consolidated Balance Sheets.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 3 - Revenue from Contracts with Customers (Continued)~~

Net contract liabilities in the accompanying Consolidated Balance Sheets consisted of the following as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Contract assets, current	Contract assets, current	$	245,489	$	171,956	Contract assets, current	$	299,336	$	230,143
Contract assets, non-current	Contract assets, non-current	—		—		Contract assets, non-current	—		—
Contract liabilities, current	Contract liabilities, current	(780,666)		(722,252)		Contract liabilities, current	(1,046,312)		(788,134)
Contract liabilities, non-current	Contract liabilities, non-current	(2,391)		(2,283)		Contract liabilities, non-current	(1,972)		(2,505)
Net contract liabilities	Net contract liabilities	$	(537,568)	$	(552,579)	Net contract liabilities	$	(748,948)	$	(560,496)

Contract assets and contract liabilities increased by approximately ~~$8.8~~$1.9 million and ~~$24.1~~$13.6 million, respectively, as a result of acquisitions made by us in ~~2021.~~2022. Excluding the impact of acquisitions, net contract liabilities ~~decreased~~increased by approximately ~~$30.3~~$176.8 million during the nine months ended September 30, ~~2021,~~2022, primarily attributable to an increase in net contract liabilities on our uncompleted construction projects, partially as a result of the timing of invoicing to our customers, which included advanced billings on ~~our uncompleted construction~~several large projects ~~which, based on~~in the ~~various~~earlier stages of completion, ~~included a greater percentage of contracts that were recorded~~resulting in ~~contract asset positions.~~amounts invoiced exceeding the revenue recognized for such projects. There was no significant impairment of contract assets recognized during the periods presented.

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of September 30, ~~2021~~2022 (in thousands, except for percentages):


		September 30, 2021		% of Total			September 30, 2022		% of Total
Remaining performance obligations:	Remaining performance obligations:					Remaining performance obligations:
United States electrical construction and facilities services	United States electrical construction and facilities services	$	1,244,053	23	%	United States electrical construction and facilities services	$	2,063,134	29	%
United States mechanical construction and facilities services	United States mechanical construction and facilities services	3,037,573		56	%	United States mechanical construction and facilities services	3,662,623		51	%
United States building services	United States building services	810,619		15	%	United States building services	1,109,221		16	%
United States industrial services	United States industrial services	143,299		3	%	United States industrial services	122,714		2	%
Total United States operations	Total United States operations	5,235,544		97	%	Total United States operations	6,957,692		98	%
United Kingdom building services	United Kingdom building services	143,202		3	%	United Kingdom building services	143,769		2	%
Total operations	Total operations	$	5,378,746	100	%	Total operations	$	7,101,461	100	%

Our remaining performance obligations at September 30, ~~2021~~2022 were ~~$5.38~~$7.10 billion. Remaining performance obligations increase with awards of new contracts and decrease as we perform work and recognize revenue on existing contracts. We include a project within our remaining performance obligations at such time the project is awarded and agreement on contract terms has been reached. Our remaining performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of the total transaction price can be made.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Remaining performance obligations include unrecognized revenues to be realized from uncompleted construction contracts. Although many of our construction contracts are subject to cancellation at the election of our customers, in accordance with industry practice, we do not limit the amount of unrecognized revenue included within remaining performance obligations for these contracts as the risk of cancellation is very low due to the inherent substantial economic penalty that our customers would incur upon cancellation or termination. We believe our reported remaining performance obligations for our construction contracts are firm and contract cancellations have not had a material adverse effect on us.

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

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 3 - Revenue from Contracts with Customers (Continued)~~

Our remaining performance obligations are comprised of: (a) original contract amounts, (b) change orders for which we have received written confirmations from our customers, (c) pending change orders for which we expect to receive confirmations in the ordinary course of business, (d) claim amounts that we have made against customers for which we have determined we have a legal basis under existing contractual arrangements and as to which the variable consideration constraint does not apply, and (e) other forms of variable consideration to the extent that such variable consideration has been included within the transaction price of our contracts. Such claim and other variable consideration amounts were immaterial for all periods presented.

Refer to the table below for additional information regarding our remaining performance obligations, including an estimate of when we expect to recognize such remaining performance obligations as revenue (in thousands):


		Within one year		Greater than one year			Within one year		Greater than one year
Remaining performance obligations:	Remaining performance obligations:					Remaining performance obligations:
United States electrical construction and facilities services	United States electrical construction and facilities services	$	1,088,085	$	155,968	United States electrical construction and facilities services	$	1,758,203	$	304,931
United States mechanical construction and facilities services	United States mechanical construction and facilities services	2,466,793		570,780		United States mechanical construction and facilities services	3,051,512		611,111
United States building services	United States building services	723,103		87,516		United States building services	990,999		118,222
United States industrial services	United States industrial services	143,299		—		United States industrial services	122,714		—
Total United States operations	Total United States operations	4,421,280		814,264		Total United States operations	5,923,428		1,034,264
United Kingdom building services	United Kingdom building services	116,512		26,690		United Kingdom building services	120,548		23,221
Total operations	Total operations	$	4,537,792	$	840,954	Total operations	$	6,043,976	$	1,057,485

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 nine months of ~~2021,~~2022, we acquired 5four companies for total consideration of ~~$125.4~~$93.2 million. Such ~~companies~~acquisitions include: (a) a company that provides electrical construction services in the Greater Boston area, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (b) three companies that enhance our presence in geographies where we have existing operations, the results of operations of which were de minimis, consisting of: (i) two companies that provide fire protection services in the Northeastern and Southern regions of the United States, respectively, and that have been included within our United States mechanical construction and facilities services segment, and (ii) a company that specializes in building automation and controls in the Southwestern region of the United States and that has been included within our United States building services segment. In connection with these acquisitions, we acquired working capital of $7.6 million and other net liabilities of $3.0 million, and have preliminarily ascribed $26.5 million to goodwill and $62.1 million to identifiable intangible assets.

During calendar year 2021, we acquired eight companies for total consideration of $131.2 million. Such acquisitions include: (a) two companies, the results of operations of which have been included within our United States mechanical construction and facilities services segment, consisting of: (i) a company that provides mechanical services within the Southern region of the United States and (ii) a company that provides fire protection services in the ~~results~~Midwestern region of ~~operations of which have been included in our~~the United States, ~~mechanical construction and facilities services segment,~~ (b) two companies that provide electrical construction services for a broad array of customers in the Midwestern region

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 - Acquisitions of Businesses (Continued)

of the United States, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (c) ~~two~~four companies, the results of operations of which have been included inwithin our United States building services segment, consisting of: (i) a company that provides mobile mechanical services across North Texas and (ii) ~~a company~~three companies that ~~provides~~enhance our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls ~~solutions in the Southern region of the United States.~~solutions. In connection with these acquisitions, we acquired working capital of ~~$23.1~~$22.9 million and other net liabilities of ~~$1.6~~$0.6 million, including certain deferred tax liabilities, and have ~~preliminarily~~ ascribed ~~$36.4~~$38.3 million to goodwill and ~~$67.5 million to identifiable intangible assets.~~

During 2020, we acquired 3 companies for total consideration of $50.3 million. Such companies include: (a) a company that provides building automation and controls solutions within the Northeastern region of the United States, (b) a full service provider of mechanical services within the Washington, D.C. metro area, and (c) a company that provides mobile mechanical services in the Southern region of the United States. The results of operations for all three companies have been included within our United States building services segment. In connection with these acquisitions, we acquired working capital of $3.0 million and other net liabilities of $3.9 million and have ascribed $13.1 million to goodwill and $38.1$70.6 million to identifiable intangible assets.

We expect that the majority of the goodwill acquired in connection with these acquisitions will be deductible for tax purposes. The purchase price allocations for ~~three of~~ the businesses acquired in ~~2021~~2022 are preliminary and subject to change during their respective measurement periods. As we finalize such purchase price allocations, adjustments may be recorded relating to finalization of intangible asset valuations, tax matters, or other items. Although not expected to be significant, such adjustments may result in changes in the valuation of assets and liabilities acquired. The purchase price allocations for the ~~other~~ businesses acquired in 2021 ~~and the businesses acquired in 2020~~ have been finalized during their respective measurement periods with an insignificant impact.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

The following tables summarize our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands, except share and per share data):


		For the three months ended September 30,					For the three months ended September 30,
		2021		2020			2022		2021
Numerator:	Numerator:					Numerator:
Net income attributable to EMCOR Group, Inc. common stockholders	Net income attributable to EMCOR Group, Inc. common stockholders	$	99,740	$	61,186	Net income attributable to EMCOR Group, Inc. common stockholders	$	105,772	$	99,740
Denominator:	Denominator:					Denominator:
Weighted average shares outstanding used to compute basic earnings per common share	Weighted average shares outstanding used to compute basic earnings per common share	53,700,603		54,979,310		Weighted average shares outstanding used to compute basic earnings per common share	48,867,420		53,700,603
Effect of dilutive securities—Share-based awards	Effect of dilutive securities—Share-based awards	284,055		220,935		Effect of dilutive securities—Share-based awards	182,731		284,055
Shares used to compute diluted earnings per common share	Shares used to compute diluted earnings per common share	53,984,658		55,200,245		Shares used to compute diluted earnings per common share	49,050,151		53,984,658

Basic earnings per common share	Basic earnings per common share	$	1.86	$	1.11	Basic earnings per common share	$	2.16	$	1.86

Diluted earnings per common share	Diluted earnings per common share	$	1.85	$	1.11	Diluted earnings per common share	$	2.16	$	1.85


		For the nine months ended September 30,					For the nine months ended September 30,
		2021		2020			2022		2021
Numerator:	Numerator:					Numerator:
Net income attributable to EMCOR Group, Inc. common stockholders	Net income attributable to EMCOR Group, Inc. common stockholders	$	281,864	$	53,162	Net income attributable to EMCOR Group, Inc. common stockholders	$	279,822	$	281,864
Denominator:	Denominator:					Denominator:
Weighted average shares outstanding used to compute basic earnings per common share	Weighted average shares outstanding used to compute basic earnings per common share	54,290,002		55,302,385		Weighted average shares outstanding used to compute basic earnings per common share	50,676,365		54,290,002
Effect of dilutive securities—Share-based awards	Effect of dilutive securities—Share-based awards	269,719		207,337		Effect of dilutive securities—Share-based awards	197,010		269,719
Shares used to compute diluted earnings per common share	Shares used to compute diluted earnings per common share	54,559,721		55,509,722		Shares used to compute diluted earnings per common share	50,873,375		54,559,721

Basic earnings per common share	Basic earnings per common share	$	5.19	$	0.96	Basic earnings per common share	$	5.52	$	5.19

Diluted earnings per common share	Diluted earnings per common share	$	5.17	$	0.96	Diluted earnings per common share	$	5.50	$	5.17

The number of share-based awards excluded from the computation of diluted EPS for the three and nine months ended September 30, 2022 because they would be anti-dilutive were 850 and 1,350, respectively. There were no anti-dilutive share-based awards for the three months ended September 30, 2021. The number of ~~outstanding~~ share-based awards excluded from the computation of diluted EPS for the nine months ended September 30, 2021 because they would be anti-dilutive were 2,550. The number of outstanding share-based awards excluded from the computation of diluted EPS for the three and nine months ended September 30, 2020 because they would be anti-dilutive were 19,450 and 94,155, respectively.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 6 - Inventories

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Raw materials and construction materials	Raw materials and construction materials	$	48,653	$	42,240	Raw materials and construction materials	$	93,051	$	46,186
Work in process	Work in process	15,836		11,098		Work in process	8,823		7,912
Inventories	Inventories	$	64,489	$	53,338	Inventories	$	101,874	$	54,098

~~NOTE 7 Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets~~

~~Goodwill~~

~~In connection with our acquisition~~The increase in inventories as of businesses, we have recorded goodwill, which represents the excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets acquired. 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 15 - Segment Information of the notes to consolidated financial statements.

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, 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.

~~We did not identify any impairment indicators during the three and nine months ended~~ September 30, 2022, compared to December 31, 2021, that would necessitate an interim impairment assessment of our goodwill. However, our operations were significantly impacted by the COVID-19 pandemic starting with the second quarter of 2020. During the same period, the demand for oil and other refined products significantly deteriorated aswas primarily a result of ~~the pandemic~~advanced purchases of materials and ~~the corresponding preventative measures taken around the world~~equipment for use on specific construction projects, in an effort to mitigate the ~~spread~~impact of the virus, including various local, state, and national jurisdictional “shelter-in-place” orders. Further, other macroeconomic events during such period, including geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia,increased lead times, which have resulted in a significant drop in the price of crude oil. These negative factors created significant volatility and uncertainty in the markets in which our United States industrial services segment operates, resulting in a significant decrease in the demand for our service offerings. Consequently, in the second quarter of 2020, we revised our near-term revenue and operating margin expectations for such segment and concluded that a triggering event had occurred which indicated that it was more likely than not that its fair value was less than its carrying amount.

Accordingly, we performed a quantitative impairment test and determined the fair value of our United States industrial services segment 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. Such weighted average cost of capital was developed with the assistance of an independent third-party valuation specialist and reflected the overall level of inherent risk within the business and the rate of return a market participant would expect to earn as of that date. Cash flow projections were derived from internal forecasts of anticipated revenue growth rates and operating margins, updated for the events discussed above, 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.

Based on the outcome of our second quarter 2020 interim goodwill impairment test, we concluded that the carrying amount of our United States industrial services segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of $225.5 million, which was included within our results of operations for the nine months ended September 30, 2020. We did not identify impairment indicators related to any other reporting unit that would have required an interim impairment assessment. Additionally, we subsequently (as of October 1, 2020) performed our annual impairment assessment of all reporting units and determined there was no incremental impairment of goodwill.

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 7 Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets - (Continued)~~

~~Identifiable Intangible Assets and Other Long-Lived Assets~~

Our identifiable intangible assets, arising out of the acquisition of businesses, include contract backlog, developed technology/vendor network, customer relationships, and certain subsidiary trade names, all of which are subject to amortization. In addition, our identifiable intangible assets include certain other subsidiary trade names, which are indefinite-lived and therefore not subject to amortization.

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 of the trade name 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.

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 fully 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.

Given the negative market conditions disclosed above, we evaluated certain of our identifiable intangible assets and other long-lived assets for impairment during the second quarter of 2020. Such assets included those associated with the businesses in our United States industrial services segment. As a result of these assessments, during the quarter ended June 30, 2020, we recorded non-cash impairment charges of $7.3 million. We subsequently (as of October 1, 2020) performed our annual impairment assessment of all subsidiary trade names that are not subject to amortization and determined there was no incremental impairment of these assets. Additionally, we have not identified any impairment indicators during the three and nine months ended September 30, 2021 that would necessitate an interim impairment assessment of either our identifiable intangible assets or other long-lived assets.

supply chain disruptions.

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

NOTE 87 - Debt

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Revolving credit facility						Revolving credit facility	$	170,000	$	—
Term loan	Term loan	$	270,563	$	270,563	Term loan	256,688		256,688
Unamortized debt issuance costs	Unamortized debt issuance costs	(3,280)		(4,000)		Unamortized debt issuance costs	(2,320)		(3,040)
Finance lease liabilities	Finance lease liabilities	8,382		9,966		Finance lease liabilities	6,368		8,037
Total debt	Total debt	275,665		276,529		Total debt	430,736		261,685
Less: current maturities	Less: current maturities	16,328		16,910		Less: current maturities	15,635		16,235
Total long-term debt	Total long-term debt	$	259,337	$	259,619	Total long-term debt	$	415,101	$	245,450

Credit Agreement

~~Until March 2, 2020, we had~~We have a credit agreement dated as of August 3, 2016, which provided for a $900.0 million revolving credit facility (the “2016 Revolving Credit Facility”) and a $400.0 million term loan (the “2016 Term Loan”) (collectively referred to as the “2016 Credit Agreement”). On March 2, 2020, ~~we amended and restated the 2016 Credit Agreement to provide~~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. We may allocate up to $400.0 million of available capacity under the 2020 Revolving Credit Facility to letters of credit for our account or for the account of any of our subsidiaries.

As of September 30, 2022 and December 31, 2021, the balance of the 2020 Term Loan was $256.7 million and as of September 30, 2022, we had $170.0 million in direct borrowings outstanding under the 2020 Revolving Credit Facility. There were no direct borrowings outstanding under the 2020 Revolving Credit Facility as of December 31, 2021. Outstanding letters of credit reduce the available capacity under such facility, and as of September 30, 2022 and December 31, 2021, we had $71.4 million and $71.3 million, respectively, of letters of credit outstanding.

At the Company’s election, borrowings under the 2020 Credit Agreement bear interest at either: (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR ~~(0.08%~~(3.67% at September 30, ~~2021)~~2022) plus 1.00% to 1.75%, based on certain financial tests. The base rate is determined by the greater of: (a) the prime commercial lending rate announced by Bank of Montreal from time to time ~~(3.25%~~(6.25% at September 30, ~~2021)~~2022), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00%, or (d) 0.00%. Upon the discontinuation of LIBOR, our 2020 Credit Agreement contains provisions which allow for the use of alternate benchmark rates. The weighted average interest rates in effect at September 30, 2022 were 4.67% for the 2020 Term Loan and 4.20% for the 2020 Revolving Credit Facility. The interest rate in effect at ~~September 30,~~December 31, 2021 for the 2020 Term Loan was ~~1.08%~~1.10%. A commitment fee is payable on the average daily unused amount of the 2020 Revolving Credit Facility, which ranges from 0.10% to 0.25%, based on certain financial tests. The fee was 0.10% of the unused amount as of September 30, 2022 and December 31, 2021. Fees for letters of credit issued under the 2020 Revolving Credit Facility range from 0.75% to 1.75% of the respective face amounts of outstanding letters of credit, depending on the nature of the letter of credit, and are computed based on certain financial tests.

As of September 30, 2021 and December 31, 2020, the balance of the 2020 Term Loan was $270.6 million. As of September 30, 2021 and December 31, 2020, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility; however, we had $71.3 million of letters of credit outstanding, which reduce the available capacity under such facility. We capitalized an additional $3.1 million of debt issuance costs associated with the 2020 Credit Agreement. Debt issuance costs are amortized over the life of the agreement as part of interest expense.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 - Debt (Continued)

Obligations under the 2020 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets. 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 September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

We are required to make annual principal payments on the 2020 Term Loan. Any voluntary prepayments are applied against the outstanding balance of the loan and reduce our future scheduled payments on a ratable basis. Based on our outstanding balance, principal payments of $13.9 million are due on December 31 of each year until maturity, with any remaining unpaid principal and interest due on March 2, 2025.

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

NOTE 98 - Fair Value Measurements

For disclosure purposes, we utilize a fair value hierarchy to categorize qualifying assets and liabilities into three broad levels based on the priority of the inputs used to determine their fair values. The hierarchy, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs, is comprised of the following three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 – Observable inputs, other than Level 1 inputs, that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

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

Recurring Fair Value Measurements

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


		Assets at Fair Value as of September 30, 2021									Assets at Fair Value as of September 30, 2022
Asset Category	Asset Category	Level 1		Level 2		Level 3		Total		Asset Category	Level 1		Level 2		Level 3		Total
Cash and cash equivalents (1)	Cash and cash equivalents (1)	$	663,905	$	—	$	—	$	663,905	Cash and cash equivalents (1)	$	403,816	$	—	$	—	$	403,816
Restricted cash (2)	Restricted cash (2)	1,115		—		—		1,115		Restricted cash (2)	1,070		—		—		1,070
Deferred compensation plan assets (3)	Deferred compensation plan assets (3)	40,294		—		—		40,294		Deferred compensation plan assets (3)	34,526		—		—		34,526
Total	Total	$	705,314	$	—	$	—	$	705,314	Total	$	439,412	$	—	$	—	$	439,412


		Assets at Fair Value as of December 31, 2020									Assets at Fair Value as of December 31, 2021
Asset Category	Asset Category	Level 1		Level 2		Level 3		Total		Asset Category	Level 1		Level 2		Level 3		Total
Cash and cash equivalents (1)	Cash and cash equivalents (1)	$	902,867	$	—	$	—	$	902,867	Cash and cash equivalents (1)	$	821,345	$	—	$	—	$	821,345
Restricted cash (2)	Restricted cash (2)	695		—		—		695		Restricted cash (2)	1,223		—		—		1,223
Deferred compensation plan assets (3)	Deferred compensation plan assets (3)	36,491		—		—		36,491		Deferred compensation plan assets (3)	42,344		—		—		42,344
Total	Total	$	940,053	$	—	$	—	$	940,053	Total	$	864,912	$	—	$	—	$	864,912

________

(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 September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$365.7~~$114.8 million and ~~$482.2~~$336.0 million, respectively, in money market funds.

(2)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.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 - Fair Value Measurements (Continued)

Nonrecurring Fair Value Measurements

We have recorded goodwill and identifiable intangible assets in connection with our business acquisitions. Such assets are measured at fair value at the time of acquisition based on valuation techniques that appropriately represent the methods which would be used by other market participants in determining fair value. In addition, goodwill and intangible assets are tested for impairment using similar valuation methodologies to determine the fair value of such assets. Periodically, we engage an independent third-party valuation specialist to assist with the valuation process, including the selection of appropriate methodologies and the development of market-based assumptions. The inputs used for these nonrecurring fair value measurements represent Level 3 inputs.

Fair Value of Financial Instruments

We believe that the carrying values of our financial instruments, which include accounts receivable and other financing commitments, approximate their fair values due primarily to their short-term maturities and low risk of counterparty default. The carrying value of our debt associated with the 2020 Credit Agreement approximates its fair value due to the variable rate on such debt.

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

NOTE 109 - Income Taxes

The following table presents our income tax provision and our income tax rate for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands, except percentages):


		For the three months ended September 30,						For the nine months ended September 30,							For the three months ended September 30,						For the nine months ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Income tax provision	Income tax provision	$	37,303		$	73,936		$	104,523		$	62,179		Income tax provision	$	42,153		$	37,303		$	104,927		$	104,523
Income tax rate	Income tax rate	27.2		%	54.7		%	27.1		%	53.9		%	Income tax rate	28.5		%	27.2		%	27.3		%	27.1		%

The difference between the U.S. statutory tax rate of 21% and our income tax rate for both the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was primarily a result of state and local income taxes and other permanent ~~book to~~book-to-tax differences. The increase in our income tax ~~differences, including, in the case of~~provision for the three and nine months ended September 30, ~~2020,~~2022 was due to an increase in our income tax rate. The increase in our income tax provision for the ~~tax-effect~~three months ended September 30, 2022 was additionally a result of an increase in income before income taxes. The increase in our income tax rate for the ~~$232.8 million~~three and nine months ended September 30, 2022 was attributable to an increase in certain permanent book-to-tax differences and the unfavorable impact of ~~non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded~~certain discrete tax items during the ~~second~~third quarter of ~~2020, the majority of which were non-deductible for tax purposes.~~2022.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had no unrecognized income tax benefits.

We file a consolidated federal income tax return including all of our U.S. subsidiaries with the Internal Revenue Service. We additionally file income tax returns with various state, local, and foreign tax agencies. Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years ~~2015~~2017 through ~~2019.~~2020.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) was signed into law on August 16, 2022. Among other provisions, such act creates an excise tax of 1% on the fair value of net stock repurchases in excess of share issuances made by publicly traded U.S. corporations, effective for repurchases after December 31, 2022. The impact of this excise tax on our financial position, and/or liquidity, in future periods, will vary based on the level of repurchases made by us in a given year. While we are still evaluating the potential impact of this excise tax on our results of operations, interpretive accounting guidance indicates that this tax likely can be recorded as a component of treasury stock, as opposed to an expense within the statement of operations, given that it is a direct cost associated with the repurchase of our common stock.

For tax years beginning after December 31, 2022, the Inflation Reduction Act additionally creates a 15% corporate alternative minimum tax on profits of corporations whose average annual adjusted financial statement income exceeds $1.0 billion for any consecutive three-tax-year period preceding the then current tax year. Based on our average annual income for the preceding three years, which has remained below the aforementioned $1.0 billion threshold, as well as the fact that our effective federal income tax rate has historically been in excess of the 15% alternative minimum tax rate, we do not anticipate that this alternative minimum tax will have an impact on our financial position and/or results of operations.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1110 - Common Stock

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were ~~53,382,560~~47,647,114 and ~~54,755,900~~53,299,738 shares of our common stock outstanding, respectively.

During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we issued ~~18,528~~19,573 and ~~24,694~~18,528 shares of common stock, respectively. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we issued ~~145,815~~191,330 and ~~186,544~~145,815 shares of common stock, respectively. These shares were issued upon either the satisfaction of required conditions under our share-based compensation plans or the purchase of common stock pursuant to our employee stock purchase plan.

We have paid quarterly dividends since October 25, 2011. ~~We currently pay a regular quarterly~~Commencing with the dividend ofto be paid on October 31, 2022, our dividend will increase from $0.13 per share to $0.15 per share.

In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock. Subsequently, the Board has from time to time increased the amount ~~of our common stock that we may repurchase~~authorized for repurchases under such program. Since the inception of the repurchase program, the Board has authorized us to repurchase up to ~~$1.15~~$2.15 billion of our outstanding common stock. During the nine months ended September 30, ~~2021,~~2022, we repurchased approximately ~~1.5~~5.8 million shares of our common stock for approximately ~~$183.2~~$660.6 million. Since the inception of the repurchase program through September 30, ~~2021,~~2022, we have repurchased approximately ~~19.1~~25.0 million shares of our common stock for approximately ~~$1.09~~$1.76 billion. As of September 30, ~~2021,~~2022, there remained authorization for us to repurchase approximately ~~$62.7~~$389.8 million of our shares. ~~Subsequent to September 30, 2021, the Board authorized us to repurchase up to an additional $300.0 million of our outstanding common stock.~~ The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements, including provisions in our 2020 Credit Agreement placing limitations on such repurchases. ~~The repurchase program has been and will be funded from our operations.~~

NOTE 1211 - Retirement Plans

The funded status of our defined benefit plans, which represents the difference between the fair value of plan assets and the projected benefit obligations, is recognized in ~~our balance sheet~~the Consolidated Balance Sheets with a corresponding adjustment to accumulated other comprehensive income (loss). Gains and losses for the differences between actuarial assumptions and actual results ~~and unrecognized service costs,~~ are recognized through accumulated other comprehensive income (loss). These amounts will be subsequently recognized as net periodic pension cost (income) within the ~~statement~~Consolidated Statements of ~~operations.~~Operations.

Our United Kingdom subsidiary has a defined benefit pension plan covering all eligible employees (the “UK Plan”); however, no individual joining the company after October 31, 2001 may participate in the UK Plan. On May 31, 2010, we curtailed the future accrual of benefits for active employees under such plan.

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 12 - Retirement Plans (Continued)~~

We also sponsor 3three domestic retirement plans in which participation by new individuals is frozen. Amounts related to these domestic retirement plans were immaterial for all periods presented.

Components of Net Periodic Pension Cost

The components of net periodic pension cost (income) of the UK Plan for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 were as follows (in thousands):


		For the three months ended September 30,				For the nine months ended September 30,					For the three months ended September 30,				For the nine months ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Interest cost	Interest cost	$	1,333	$	1,613	$	4,019	$	4,765	Interest cost	$	1,344	$	1,333	$	4,325	$	4,019
Expected return on plan assets	Expected return on plan assets	(3,185)		(3,030)		(9,600)		(8,949)		Expected return on plan assets	(2,856)		(3,185)		(9,182)		(9,600)
Amortization of unrecognized loss	Amortization of unrecognized loss	911		602		2,746		1,778		Amortization of unrecognized loss	490		911		1,574		2,746
Net periodic pension cost (income)	Net periodic pension cost (income)	$	(941)	$	(815)	$	(2,835)	$	(2,406)	Net periodic pension cost (income)	$	(1,022)	$	(941)	$	(3,283)	$	(2,835)

Employer Contributions

For the nine months ended September 30, ~~2021,~~2022, our United Kingdom subsidiary contributed approximately ~~$3.6~~$3.2 million to the UK Plan and anticipates contributing an additional ~~$1.3~~$0.5 million during the remainder of ~~2021.~~2022.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1312 - Commitments and Contingencies

Severance Agreements

We have agreements with our executive officers and certain other key management personnel providing for severance benefits for such employees upon termination of their employment under certain circumstances.

Guarantees

In the ordinary course of business, we, at times, guarantee obligations of our subsidiaries under certain contracts. Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract. Historically, we have not incurred any substantial liabilities as a consequence of these guarantees.

Surety Bonds

The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. 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.

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 September 30, 2022, we satisfied approximately $48.1 million of the collateral requirements of our insurance programs by utilizing surety bonds.

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

Hazardous Materials

We are subject to regulation with respect to the handling or disposal of certain materials used in the performance of our services, which are classified as hazardous or toxic by federal, state, and local agencies. Our practice is to avoid participation in projects principally involving the remediation or removal of such materials. However, when remediation is required as part of our contract performance, we believe we comply with all applicable regulations governing the discharge of hazardous materials into the environment or otherwise relating to the protection of the environment.

Government Contracts

As a government contractor, we are subject to U.S. government audits and investigations relating to our operations, which such audits may result in fines, penalties and compensatory and treble damages, and possible suspension or debarment from doing business with the government. Based on currently available information, we believe the outcome of ongoing government disputes and investigations will not have a material impact on our financial position, results of operations, or liquidity.

Legal Proceedings

We are involved in several legal proceedings in which damages and claims have been asserted against us. We believe that we have a number of valid defenses to such proceedings and claims and intend to vigorously defend ourselves. We do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity. We record a loss contingency if the potential loss from a proceeding or claim is considered probable and the amount can be reasonably estimated or a range of loss can be determined. We provide disclosure when it is reasonably possible that a loss will be incurred in excess of any recorded provision. Significant judgment is required in these determinations. As additional information becomes available, we reassess prior determinations and may change our estimates. Additional claims may be asserted against us in the future. Litigation is subject to many uncertainties, and the outcome of litigation is not predictable with assurance. It is possible that a litigation matter for which liabilities have not been recorded could be decided unfavorably to us, and that any such unfavorable decision could have a material adverse effect on our financial position, results of operations, or liquidity.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 - Commitments and Contingencies (continued)

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. AtAs of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were ~~$65.2~~$52.8 million and ~~$48.2~~$61.5 million, respectively. The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” atas of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~$241.3~~$216.0 million and ~~$192.8~~$242.4 million, respectively. The current portion of anticipated insurance recoveries of ~~$28.9~~$16.1 million and ~~$14.4~~$26.4 million atas of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of ~~$102.2~~$59.5 million and ~~$54.3~~$99.0 million atas of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets. These balances ~~increased~~decreased from December 31, ~~2020~~2021 primarily as a result of ~~revised estimates~~the payment, by our insurers, of certain claims for ~~claims on~~ which we ~~expect substantial coverage by insurance.~~

~~Table of Contents~~

~~EMCOR Group, Inc.~~previously maintained a reserve and ~~Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 13 - Commitments and Contingencies (Continued)~~

~~Restructuring expenses~~

No material expenses in connection with restructuring were incurred during the three and nine months ended September 30, 2021 and 2020, and no material restructuring expenses are expected to be incurred during the remainder of 2021. As of September 30, 2021, the balance of restructuring obligations yet to be paid was approximately $1.0 million. Such remaining amounts will be paid pursuant to our contractual obligations through 2022.corresponding insurance receivable.

NOTE 1413 - Additional Cash Flow Information

The following table presents additional cash flow information for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):


		For the nine months ended September 30,					For the nine months ended September 30,
		2021		2020			2022		2021
Cash paid for:	Cash paid for:					Cash paid for:
Interest	Interest	$	3,945	$	6,867	Interest	$	6,343	$	3,945
Income taxes	Income taxes	$	120,855	$	98,094	Income taxes	$	133,540	$	120,855
Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	$	72,616	$	35,432	Right-of-use assets obtained in exchange for new operating lease liabilities	$	52,431	$	72,616
Right-of-use assets obtained in exchange for new finance lease liabilities	Right-of-use assets obtained in exchange for new finance lease liabilities	$	1,670	$	2,295	Right-of-use assets obtained in exchange for new finance lease liabilities	$	1,124	$	1,670

NOTE 1514 - Segment Information

We ~~have~~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. Such operating subsidiaries are organized into the following reportable segments: ~~(a)~~

•United States electrical construction and facilities services (involving systems for electrical power transmission, distribution, and generation, including sustainable energy solutions such as solar, photovoltaic, and wind; premises electrical and lighting systems; process instrumentation in the refining, chemical processing, and food processing industries; low-voltage systems, such as fire alarm, security, and process control; voice and data communication, including fiber-optic and low-voltage cabling, distributed antenna systems, and audiovisual systems; roadway and transit lighting and signaling; and fiber optic lines); (b) services;

•United States mechanical construction and facilities services (involving systems for heating, ventilation, air conditioning, refrigeration, and clean-room process ventilation; fire protection; plumbing, process, and high-purity piping; controls and filtration; water and wastewater treatment; central plant heating and cooling; cranes and rigging; millwrighting; and steel fabrication, erection, and welding); (c) services;

•United States building services; ~~(d)~~

•United States industrial services; and ~~(e)~~

•United Kingdom building services. ~~The “United States building services”~~

For a more complete description of our operations, refer to Item 1. Business of our Form 10-K for the year ended December 31, 2021.

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EMCOR Group, Inc. and ~~“United Kingdom building services” segments principally consist of those operations which provide a portfolio of services needed~~Subsidiaries

Notes to support the operation and maintenance of customers’ facilities, including commercial and government site-based operations and maintenance; facility management, maintenance, and services; outage services to utilities and industrial plants; military base operations support services; mobile mechanical maintenance and services, including maintenance and service of mechanical, electrical, plumbing, and building automation systems; indoor air quality improvement services; floor care and janitorial services; landscaping, lot sweeping, and snow removal; other building services, including reception, security, and catering; vendor management; call center services; installation and support for building systems; program development, management, and maintenance for energy systems, including services aimed at assisting our customers in reducing energy consumption; technical consulting and diagnostic services; infrastructure and building projects for federal, state, and local governmental agencies and bodies; and small modification and retrofit projects, which services are not generally related to customers’ construction programs. The “United States industrial services” segment principally consists of those operations which provide industrial maintenance and services for refineries, petrochemical plants, and other customers within the oil and gas industry. Services of this segment include refinery turnaround planning and engineering; specialty welding; overhaul and maintenance of critical process units; specialty technical services; instrumentation and electrical services for energy infrastructure; on-site repairs, maintenance, and service of heat exchangers, towers, vessels, and piping; and design, manufacturing, repair, and hydroblast cleaning of shell and tube heat exchangers and related equipment.Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (continued)

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


	For the three months ended September 30,
	2022		2021
Revenues from unrelated entities:
United States electrical construction and facilities services	$	633,383	$	530,950
United States mechanical construction and facilities services	1,117,388		1,004,407
United States building services	710,650		624,617
United States industrial services	247,239		232,218
Total United States operations	2,708,660		2,392,192
United Kingdom building services	117,701		129,480
Total operations	$	2,826,361	$	2,521,672

Total revenues:
United States electrical construction and facilities services	$	634,957	$	531,735
United States mechanical construction and facilities services	1,133,895		1,007,993
United States building services	736,068		648,718
United States industrial services	266,182		232,479
Less intersegment revenues	(62,442)		(28,733)
Total United States operations	2,708,660		2,392,192
United Kingdom building services	117,701		129,480
Total operations	$	2,826,361	$	2,521,672

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1514 - Segment Information ~~(Continued)~~(continued)


	For the nine months ended September 30,
	2022		2021
Revenues from unrelated entities:
United States electrical construction and facilities services	$	1,719,525	$	1,482,475
United States mechanical construction and facilities services	3,184,205		2,887,572
United States building services	2,016,298		1,804,488
United States industrial services	842,524		702,763
Total United States operations	7,762,552		6,877,298
United Kingdom building services	363,746		386,089
Total operations	$	8,126,298	$	7,263,387

Total revenues:
United States electrical construction and facilities services	1,724,400		1,485,324
United States mechanical construction and facilities services	3,212,374		2,895,930
United States building services	2,091,128		1,876,141
United States industrial services	878,123		730,851
Less intersegment revenues	(143,473)		(110,948)
Total United States operations	7,762,552		6,877,298
United Kingdom building services	363,746		386,089
Total operations	$	8,126,298	$	7,263,387

~~The following tables present financial information for each of our reportable segments for the three and nine months ended September 30, 2021 and 2020 (in thousands):~~


		For the three months ended September 30,					For the three months ended September 30,
		2021		2020			2022		2021
Revenues from unrelated entities:
Operating income (loss):						Operating income (loss):
United States electrical construction and facilities services	United States electrical construction and facilities services	$	527,935	$	472,084	United States electrical construction and facilities services	$	35,558	$	44,284
United States mechanical construction and facilities services	United States mechanical construction and facilities services	999,584		891,509		United States mechanical construction and facilities services	90,952		80,797
United States building services	United States building services	632,455		556,514		United States building services	45,589		32,865
United States industrial services	United States industrial services	232,218		171,532		United States industrial services	(1,392)		(3,012)
Total United States operations	Total United States operations	2,392,192		2,091,639		Total United States operations	170,707		154,934
United Kingdom building services	United Kingdom building services	129,480		110,075		United Kingdom building services	8,369		6,582
Corporate administration						Corporate administration	(28,982)		(24,095)
Total operations	Total operations	$	2,521,672	$	2,201,714	Total operations	150,094		137,421

Total revenues:
United States electrical construction and facilities services		$	528,720	$	474,438
United States mechanical construction and facilities services		1,003,709		896,551
United States building services		656,017		578,274
United States industrial services		232,479		175,488
Less intersegment revenues		(28,733)		(33,112)
Total United States operations		2,392,192		2,091,639
United Kingdom building services		129,480		110,075
Total operations		$	2,521,672	$	2,201,714
Other items:						Other items:
Net periodic pension (cost) income						Net periodic pension (cost) income	1,025		908
Interest expense, net						Interest expense, net	(3,194)		(1,286)
Income before income taxes						Income before income taxes	$	147,925	$	137,043

For the nine months ended
September 30,
2021 2020
Revenues from unrelated entities:
United States electrical construction and facilities services $ 1,473,590 $ 1,344,275
United States mechanical construction and facilities services 2,862,195 2,516,062
United States building services 1,838,750 1,563,107
United States industrial services 702,763 776,554
Total United States operations 6,877,298 6,199,998
United Kingdom building services 386,089 315,569
Total operations $ 7,263,387 $ 6,515,567
Total revenues:
United States electrical construction and facilities services $ 1,476,410 $ 1,348,646
United States mechanical construction and facilities services 2,873,721 2,528,395
United States building services 1,907,264 1,620,310
United States industrial services 730,851 788,426
Less intersegment revenues (110,948) (85,779)
Total United States operations 6,877,298 6,199,998
United Kingdom building services 386,089 315,569
Total operations $ 7,263,387 $ 6,515,567

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1514 - Segment Information ~~(Continued)~~(continued)


		For the three months ended September 30,					For the nine months ended September 30,
		2021		2020			2022		2021
Operating income (loss):	Operating income (loss):					Operating income (loss):
United States electrical construction and facilities services	United States electrical construction and facilities services	$	44,055	$	45,928	United States electrical construction and facilities services	$	90,646	$	127,548
United States mechanical construction and facilities services	United States mechanical construction and facilities services	82,302		80,048		United States mechanical construction and facilities services	226,571		220,697
United States building services	United States building services	31,589		38,449		United States building services	107,672		96,523
United States industrial services	United States industrial services	(3,012)		(8,907)		United States industrial services	18,324		(5,663)
Total United States operations	Total United States operations	154,934		155,518		Total United States operations	443,213		439,105
United Kingdom building services	United Kingdom building services	6,582		5,327		United Kingdom building services	25,372		23,040
Corporate administration	Corporate administration	(24,095)		(24,454)		Corporate administration	(80,890)		(74,362)
Restructuring expenses		—		(536)
Total operations	Total operations	137,421		135,855		Total operations	387,695		387,783
Other items:	Other items:					Other items:
Net periodic pension (cost) income	Net periodic pension (cost) income	908		751		Net periodic pension (cost) income	3,288		2,738
Interest expense, net	Interest expense, net	(1,286)		(1,484)		Interest expense, net	(6,234)		(3,965)
Income before income taxes	Income before income taxes	$	137,043	$	135,122	Income before income taxes	$	384,749	$	386,556


		For the nine months ended September 30,					September 30, 2022		December 31, 2021
		2021		2020
Operating income (loss):
Total assets:						Total assets:
United States electrical construction and facilities services	United States electrical construction and facilities services	$	127,024	$	117,866	United States electrical construction and facilities services	$	1,075,648	$	855,417
United States mechanical construction and facilities services	United States mechanical construction and facilities services	226,511		192,156		United States mechanical construction and facilities services	1,825,503		1,672,546
United States building services	United States building services	91,233		86,325		United States building services	1,201,947		1,089,844
United States industrial services	United States industrial services	(5,663)		9,800		United States industrial services	583,411		589,017
Total United States operations	Total United States operations	439,105		406,147		Total United States operations	4,686,509		4,206,824
United Kingdom building services	United Kingdom building services	23,040		16,442		United Kingdom building services	230,330		241,740
Corporate administration	Corporate administration	(74,362)		(70,022)		Corporate administration	521,890		992,882
Restructuring expenses		—		(605)
Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets		—		(232,750)
Total operations	Total operations	387,783		119,212		Total operations	$	5,438,729	$	5,441,446
Other items:
Net periodic pension (cost) income		2,738		2,211
Interest expense, net		(3,965)		(6,082)
Income before income taxes		$	386,556	$	115,341

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~~EMCOR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~NOTE 15 - Segment Information (Continued)~~

September 30,
2021 December 31,
2020
Total assets:
United States electrical construction and facilities services $ 842,143 $ 672,226
United States mechanical construction and facilities services 1,653,631 1,542,531
United States building services 1,149,330 1,040,160
United States industrial services 607,999 550,513
Total United States operations 4,253,103 3,805,430
United Kingdom building services 246,711 227,894
Corporate administration 796,864 1,030,516
Total operations $ 5,296,678 $ 5,063,840

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ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Business Description

We are one of the largest specialty contractors in the United States and a leading provider of electrical and mechanical construction and facilities services, ~~firms in the United States. In addition, we provide a number of~~ 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. Our offices~~subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities. Such operating subsidiaries are ~~located in the United States and the United Kingdom.~~

~~We have~~organized into the following reportable segments: ~~(a)~~

•United States building services; ~~(d)~~

•United States industrial services; and ~~(e)~~

•United Kingdom building services. ~~The “United States building services” and “United Kingdom building services” segments principally consist~~

For a more complete description of ~~those~~our operations, ~~which provide a portfolio~~refer to Item 1. Business of ~~services needed to support~~our Form 10-K for the operation and maintenance of customers’ facilities, including commercial and government site-based operations and maintenance; facility management, maintenance, and services; outage services to utilities and industrial plants; military base operations support services; mobile mechanical maintenance and services, including maintenance and service of mechanical, electrical, plumbing, and building automation systems; indoor air quality improvement services; floor care and janitorial services; landscaping, lot sweeping, and snow removal; other building services, including reception, security, and catering; vendor management; call center services; installation and support for building systems; program development, management, and maintenance for energy systems, including services aimed at assisting our customers in reducing energy consumption; technical consulting and diagnostic services; infrastructure and building projects for federal, state, and local governmental agencies and bodies; and small modification and retrofit projects, which services are not generally related to customers’ construction programs. The “United States industrial services” segment principally consists of those operations which provide industrial maintenance and services for refineries, petrochemical plants, and other customers within the oil and gas industry. Services of this segment include refinery turnaround planning and engineering; specialty welding; overhaul and maintenance of critical process units; specialty technical services; instrumentation and electrical services for energy infrastructure; on-site repairs, maintenance, and service of heat exchangers, towers, vessels, and piping; and design, manufacturing, repair, and hydroblast cleaning of shell and tube heat exchangers and related equipment.year ended December 31, 2021.

~~COVID-19 and~~ Market Update

As a result of the COVID-19 pandemic, we experienced significant disruptions throughout calendar year 2020, which impacted our ability to execute on our remaining performance obligations in many of the markets in which we operate. The economic and operational impact of the pandemic, which were most acute during the second quarter of 2020, negatively affected our results of operations during such period and continue to impact portions ofAlthough our business ~~in 2021. However, our strong balance sheet and operational flexibility have allowed us~~continues to ~~successfully manage through the ongoing impacts of the pandemic while protecting our cash flow and liquidity.~~

~~Although the majority of our businesses have largely recovered~~recover from the financial impacts of the COVID-19 pandemic ~~experienced~~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 ~~2020, as evidenced by our consolidated performance~~excess of normal levels while also experiencing the effects of inflation through increases in fuel, material, and ~~the growth in our remaining performance obligations,~~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 ~~industrial~~construction segments and our United States building services ~~segment continues to be negatively impacted by~~segment. In addition, the ~~lingering effects~~market for trade labor remains tight in many of the pandemic. The prolonged impacts of lower demand and the overall lagging recovery of the oil and gas market have resulted in customers of this segment canceling or deferring regularly scheduled maintenance projects, reducing capital spending, implementing various cost cutting measures, and closing certain of their facilities. Such customer actions continue to impact the demand for our service offerings within this segment.

~~Table of Contents~~

We continue to monitor the short- and long-term impacts of the pandemic. While our employees and customers have adapted to a new work environment and there continues to be scientific, societal, and economic progress to address the effects of COVID-19, including the widespread availability of effective vaccines in the markets we serve, there remains significant uncertainty about the future impacts of the pandemic, or any resulting market disruption or volatility, including the potential effects on our operations. We continue to be cautiously optimistic about the marketsregions in which we operate and the ~~customers~~conflict in Ukraine has added another layer of uncertainty, especially with respect to energy costs. In response to these challenges, we ~~serve; however, should there be a slowdown in economic activity due~~continue to ~~surges in the number of cases, or an increase in variants of the virus that are~~strive to more contagious or against which current vaccines are less effective, it is possible that projects could be delayed or canceled or that we could experience access restrictions to our customers’ facilities, preventing us from performing maintenance and service projects. The extent to whicheffectively manage our business through enhanced labor planning and ~~results of operations are impacted in future periods will also depend upon a number of other factors. These include the duration and extent of the pandemic;~~limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to quarantine; the cost and disruption of mandatory testing that may be required of unvaccinated employees; the extent, duration, and effective execution of ongoing government stabilization and recovery efforts; the widespread adoption and long-term efficacy of vaccines and the availability and efficacy of other preventative treatments; our customers’ demand for our services; our ability to continue to safely and effectively operate in this environment; and the ability of our customers to pay us for services rendered.

On September 8, 2021, President Biden directed the Occupational Safety and Health Administration to implement an emergency temporary standard (“ETS”) requiring employers with 100 or more employees to ensure their workforce is fully vaccinated or to require unvaccinated workers to produce a negative test result on at least a weekly basis. The ETS has not yet been issued and, as of the date of this report, many details of the testing requirements are unknown, including the requirements for testing, the types of tests that will be acceptable, who will bear the costs of the tests, and whether or not employees’ time to undergo testing will be compensated. The costs related to mandatory testing, however, will likely represent a substantial expense to the Company, which could have a material adverse effect on our business, financial condition, and/or results of operationsproject scheduling, increased pricing to the extent ~~that a significant portion of~~contractually permitted, and by leveraging our ~~workforce does not choose to become vaccinated.~~

~~Supply chain disruptions, material shortages, or escalating commodity prices could negatively impact~~relationships with our ~~business. To date,~~suppliers and customers. While we believe the actions we have ~~been able~~taken continue to ~~source~~be effective, as evidenced in part by the ~~supplies and materials needed to operate~~sequential improvement in our ~~business with only modest disruptions, and recent volatility in commodity prices has not had a significant impact on us. However,~~operating performance throughout each quarter of 2022, the impact of ~~the COVID-19 pandemic on our vendors and the pricing and availability of materials or supplies utilized in our operations~~these disruptions continues to evolve and ~~may have an adverse impact on~~there can be no assurance that our ~~operations~~actions will serve to mitigate such impacts in future periods. ~~While~~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 ~~may also slow down decision-making, delay planned work, or seek~~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.

Table of Contents

Overview

The following table presents selected financial data for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands, except percentages and per share data):


		For the three months ended September 30,							For the three months ended September 30,
		2021			2020				2022			2021
Revenues	Revenues	$	2,521,672		$	2,201,714		Revenues	$	2,826,361		$	2,521,672
Revenues increase (decrease) from prior year		14.5		%	(3.8)		%
Revenues increase from prior year								Revenues increase from prior year	12.1		%	14.5		%
Gross profit	Gross profit	$	381,343		$	363,184		Gross profit	$	413,231		$	381,343
Gross profit as a percentage of revenues	Gross profit as a percentage of revenues	15.1		%	16.5		%	Gross profit as a percentage of revenues	14.6		%	15.1		%
Operating income	Operating income	$	137,421		$	135,855		Operating income	$	150,094		$	137,421
Operating income as a percentage of revenues	Operating income as a percentage of revenues	5.4		%	6.2		%	Operating income as a percentage of revenues	5.3		%	5.4		%
Net income attributable to EMCOR Group, Inc.	Net income attributable to EMCOR Group, Inc.	$	99,740		$	61,186		Net income attributable to EMCOR Group, Inc.	$	105,772		$	99,740
Diluted earnings per common share	Diluted earnings per common share	$	1.85		$	1.11		Diluted earnings per common share	$	2.16		$	1.85

Revenues of ~~$2.52~~$2.83 billion for the quarter ended September 30, ~~2021~~2022 set a new quarterly record for the Company and represent an increase of ~~14.5%~~12.1% from revenues of ~~$2.20~~$2.52 billion for the quarter ended September 30, ~~2020. As~~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. In addition,~~segments except for our United Kingdom building services segment, the reduction in revenues of which was entirely due to unfavorable exchange rate movements during ~~the third quarter of 2021, companies~~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 ~~2020~~facilities services segment, generated incremental revenues of approximately ~~$50.3 million.~~

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$32.8 million during the three months ended September 30, 2022.

Operating income for the quarter ended September 30, ~~2021 of $137.4~~2022 was $150.1 million, ~~represents~~ a ~~marginal~~$12.7 million increase compared to operating income of ~~$135.9~~$137.4 million for the quarter ended September 30, ~~2020. Despite the growth~~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 ofwas 5.3% and 5.4% for the ~~third quarter of~~quarters ended September 30, 2022 and 2021, ~~decreased when compared to~~respectively. The slight decrease in operating margin ~~of 6.2% for the third quarter of 2020. Declines~~period over period was driven by a reduction in gross profit margin, predominantly within our United States electrical construction ~~segments as well as our United States building~~and facilities services segment, ~~were only partially~~which was almost entirely offset by a reduction in the ratio of selling, general and administrative expenses to revenues ~~across~~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 ~~such segment.~~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 compares favorably to net income of $61.2 million, or $1.11 per diluted share, for the quarter ended September 30, 2020. While such increases were partially attributable~~2021. In addition to the ~~growth~~increase in operating income referenced above, ~~both net income and~~our diluted earnings per ~~common~~ share for the third quarter of ~~2021 also~~2022 benefited from: (a) a more normalized tax rate, as our income tax rate in the prior year period was negatively impacted by the non-cash impairment charges recorded in the second quarter of 2020, the majority of which were non-deductible for tax purposes, and (b)from a reduced weighted average share count ~~in the 2021 period~~ given the impact of common stock repurchases made by us throughout ~~2020~~2021 and ~~2021.~~2022.

Impact of Acquisitions

In order to provide a more meaningful period-over-period discussion of our operating results, we may discuss amounts generated or incurred (revenues, gross profit, selling, general and administrative expenses, and operating income) from companies acquired. 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 ~~2021,~~2022, we acquired ~~five~~four companies ~~including:~~for total consideration of $93.2 million. Such acquisitions include: (a) a company that provides electrical construction services in the Greater Boston area, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (b) three companies, that enhance our presence in geographies where we have existing operations, the results of operations of which were de minimis, consisting of: (i) two companies that provide fire protection services in the Northeastern and Southern regions of the United States, respectively, and that have been included within our United States mechanical construction and facilities services segment, and (ii) a company that specializes in building automation and controls in the Southwestern region of the United States and that has been included within our United States building services segment.

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We acquired eight companies during calendar year 2021 for total consideration of $131.2 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 ~~has been included~~(ii) a company that provides fire protection services in ~~our~~the Midwestern region of the United States, ~~mechanical construction and facilities services segment,~~ (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) ~~two~~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) ~~a company,~~three companies, the results of operations of which were de minimis, that ~~provides~~enhance our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls ~~solutions in the Southern region of the United States.~~

During calendar year 2020, we acquired three companies, including: (a) a company that provides building automation and controls solutions within the Northeastern region of the United States, (b) a full service provider of mechanical services within the Washington, D.C. metro area, and (c) a company, the results of operations of which were de minimis, that provides mobile mechanical services in the Southern region of the United States. The results of operations for all three companies have been included within our United States building services segment.solutions.

Results of Operations

Revenues

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,									For the three months ended September 30,
		2021		% of Total		2020		% of Total			2022		% of Total		2021		% of Total
Revenues:	Revenues:									Revenues:
United States electrical construction and facilities services	United States electrical construction and facilities services	$	527,935	21	%	$	472,084	21	%	United States electrical construction and facilities services	$	633,383	22	%	$	530,950	21	%
United States mechanical construction and facilities services	United States mechanical construction and facilities services	999,584		40	%	891,509		41	%	United States mechanical construction and facilities services	1,117,388		40	%	1,004,407		40	%
United States building services	United States building services	632,455		25	%	556,514		25	%	United States building services	710,650		25	%	624,617		25	%
United States industrial services	United States industrial services	232,218		9	%	171,532		8	%	United States industrial services	247,239		9	%	232,218		9	%
Total United States operations	Total United States operations	2,392,192		95	%	2,091,639		95	%	Total United States operations	2,708,660		96	%	2,392,192		95	%
United Kingdom building services	United Kingdom building services	129,480		5	%	110,075		5	%	United Kingdom building services	117,701		4	%	129,480		5	%
Total operations	Total operations	$	2,521,672	100	%	$	2,201,714	100	%	Total operations	$	2,826,361	100	%	$	2,521,672	100	%

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		For the nine months ended September 30,									For the nine months ended September 30,
		2021		% of Total		2020		% of Total			2022		% of Total		2021		% of Total
Revenues:	Revenues:									Revenues:
United States electrical construction and facilities services	United States electrical construction and facilities services	$	1,473,590	20	%	$	1,344,275	21	%	United States electrical construction and facilities services	$	1,719,525	21	%	$	1,482,475	20	%
United States mechanical construction and facilities services	United States mechanical construction and facilities services	2,862,195		40	%	2,516,062		38	%	United States mechanical construction and facilities services	3,184,205		39	%	2,887,572		40	%
United States building services	United States building services	1,838,750		25	%	1,563,107		24	%	United States building services	2,016,298		25	%	1,804,488		25	%
United States industrial services	United States industrial services	702,763		10	%	776,554		12	%	United States industrial services	842,524		11	%	702,763		10	%
Total United States operations	Total United States operations	6,877,298		95	%	6,199,998		95	%	Total United States operations	7,762,552		96	%	6,877,298		95	%
United Kingdom building services	United Kingdom building services	386,089		5	%	315,569		5	%	United Kingdom building services	363,746		4	%	386,089		5	%
Total operations	Total operations	$	7,263,387	100	%	$	6,515,567	100	%	Total operations	$	8,126,298	100	%	$	7,263,387	100	%

As described below in more detail, our revenues for the third quarter of ~~2021~~2022 increased to ~~$2.52~~$2.83 billion compared to ~~$2.20~~$2.52 billion for the third quarter of ~~2020,~~2021, and our revenues for the nine months ended September 30, ~~2021~~2022 increased to ~~$7.26~~$8.13 billion compared to ~~$6.52~~$7.26 billion for the nine months ended September 30, ~~2020. The increase~~2021. For both 2022 periods presented, we experienced increases in revenues ~~for both periods was attributable to revenue growth within~~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 ~~case~~three months ended September 30, 2022, and incremental revenues of approximately $116.0 million for the nine months ended September 30, 2021, our United States industrial services segment. Companies acquired in 2021 and 2020 generated incremental revenues of approximately $50.3 million and $133.2 million for the three and nine months ended September 30, 2021, respectively.2022.

Revenues of our United States electrical construction and facilities services segment were ~~$527.9~~$633.4 million and ~~$1,473.6~~$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, compared to revenues of $472.1 million and $1,344.3 million~~respectively. This segment’s results for the three and nine months ended September 30, ~~2020, respectively.~~2022 included $32.8 million and $101.4 million, respectively, of incremental revenues from acquired companies. Excluding the impact of acquisitions, ~~the increase in~~ revenues of this segment ~~for both periods, was~~increased by $69.6 million and $135.6 million, respectively, primarily ~~attributable to:~~as a result of an increase in revenues from: (a) ~~a resumption~~the commercial market sector, predominantly within the telecommunications sub-market sector, inclusive of ~~project activity within certain major metropolitan areas, where work was previously postponed due~~our data center projects, and the technology sub-market sector,

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(b) the manufacturing market sector, driven by an increase in: (i) transmission and distribution projects, including those to ~~access restrictions caused by the various containment~~support sustainable energy solutions such as solar and ~~mitigation measures mandated in the prior year by~~wind, (ii) revenues from contracts with certain of our other energy sector customers, ~~and/or governmental authorities in response to the COVID-19 pandemic, leading to: (i) an increase in commercial market sector revenues~~ and ~~(ii) greater short-duration project volumes in the current year, (b) revenue growth~~(iii) food processing construction projects within the ~~healthcare market sector, due to greater construction project activity in the Northeastern~~Midwestern region of the United States, and (c) ~~an increase in public works projects in~~ the ~~Western region~~healthcare market sector due to large project activity. Revenues of ~~the United States, resulting in greater revenue contribution from the institutional market sector. In addition,~~this segment for the nine months ended September 30, ~~2021, this segment’s revenues were positively impacted by~~2022 additionally benefited from an increase in ~~telecommunication~~traditional commercial construction ~~project activity within the commercial market sector. The results of this segment for~~projects. For the three and nine months ended September 30, ~~2021 included $29.5 million and $44.5 million, respectively, of incremental revenues generated by companies acquired in 2021. The~~2022, the aforementioned revenue increases ~~referenced above~~ 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 ~~revenues within the transportation and manufacturing~~institutional market ~~sectors~~sector activity, in each case, due to the completion or substantial completion of ~~certain projects in the Northeastern and Western regions of the United States.~~various projects.

Our United States mechanical construction and facilities services segment revenues for the three months ended September 30, ~~2021~~2022 were ~~$999.6~~$1,117.4 million, a ~~$108.1~~$113.0 million increase compared to revenues of ~~$891.5~~$1,004.4 million for the three months ended September 30, ~~2020.~~2021. Revenues of this segment for the nine months ended September 30, ~~2021~~2022 were ~~$2,862.2~~$3,184.2 million, a ~~$346.1~~$296.6 million increase compared to revenues of ~~$2,516.1~~$2,887.6 million for the nine months ended September 30, ~~2020.~~2021. The increase in this segment’s revenues for both ~~2021~~ periods was primarily attributable to revenue growth ~~within the majority of the market sectors in which we operate, including:~~within: (a) the commercial market sector, ~~driven by:~~as a result of increased demand for: (i) our mechanical construction and/or fire protection services by certain customers engaged in the ~~continued~~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, which has resulted in increased demand for our fire protection services within their warehousing and distribution facilities, and (ii) continued growth in digital processing, cloud computing, and data storage, which has resulted in an increase in telecommunication construction project opportunities, (b) the ~~healthcare~~institutional market sector, due to ~~increased mechanical system retrofits and installations as our healthcare customers seek to upgrade their existing facilities or build new facilities,~~project activity throughout several of the regions in which we operate, and (c) the ~~manufacturing~~water and wastewater market sector, inclusive of certain large food processing projects, which began to accelerate during the third quarter of 2021. These increases were partially offset by the completion or substantial completion of certain projectsgiven greater project activity within the ~~institutional~~Southern region of the United States. While commercial market sector ~~which resulted in a reduction~~revenues of ~~revenues during both~~this segment for the ~~three and~~ nine months ended September 30, ~~2021.~~

~~Table~~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 ~~Contents~~

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 ~~$632.5~~$710.7 million and ~~$1,838.8~~$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, compared to revenues of $556.5 million and $1,563.1 million for the three and nine months ended September 30, 2020,~~ respectively. Excluding incremental acquisition revenues within this segment’s mobile mechanical services division of ~~$20.8~~$14.6 million ~~and $88.6 million for~~during the ~~three and~~ nine months ended September 30, ~~2021, respectively,~~2022, this segment’s revenue growth for both ~~2021~~ periods was primarily attributable to: (a) ~~greater~~its mobile mechanical services division, due to: (i) increased project ~~service repair and maintenance,~~work, including incremental demand for HVAC system retrofits and building automation and controls ~~activities within~~services, partially as our ~~mobile mechanical services operations as well as an increase in project volume within our commercial site-based services operations, in both cases,~~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 ~~resumption~~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 ~~certain of our service offerings~~HVAC repair and maintenance services during the peak cooling season, when compared to the prior year which was negatively impacted by the COVID-19 pandemic given the temporary closure of certain customer facilities, (b) a net increase in facilities maintenance contract revenues, partially as a result of new contract awards, and (c) increased customer demand for certain services aimed at improving the indoor air quality within their facilities. In addition, revenues for the nine months ended September 30, 2021 benefited from an increase in snow removal activity year-over-year within our commercial site-based services division.period.

Revenues of our United States industrial services segment for the three months ended September 30, ~~2021~~2022 were ~~$232.2~~$247.2 million, ~~a $60.7 million increase~~ compared to revenues of ~~$171.5~~$232.2 million for the three months ended September 30, ~~2020. While, in comparison to the prior year, we experienced improved demand for the service offerings of both our field services and shop services divisions during the third quarter of 2021, revenues~~2021. Revenues of this segment for the nine months ended September 30, ~~2021~~2022 were $842.5 million, compared to revenues of $702.8 million ~~a reduction of $73.8 million versus the comparable 2020 period. This segment’s results~~ for the ~~2021 year-to-date period have been negatively impacted by~~nine months ended September 30, 2021. While there remains significant disruption and uncertainty within the ~~market conditions within the~~broader oil and gas industry, most notably within the upstream and ~~related industrial markets, including sustained lower~~midstream energy sectors, we began to experience a resumption in downstream energy demand ~~for oil~~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 ~~other refined products, which, although recovering, has not returned to pre-pandemic levels. These market conditions have resulted in: (a) a decrease~~an increase in maintenance and capital project ~~activities within our~~activity, when compared to the prior year, has resulted in increased revenues from this segment’s field services operations during the three and ~~(b)~~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 ~~reduction in~~result of greater new build heat exchanger sales and ~~related services within our shop services operations.~~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, compared to~~respectively. The decrease in this segment’s revenues for both periods was entirely a result of ~~$110.1~~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 ~~$315.6~~$36.6 million for the three and nine months ended September 30, ~~2020,~~2022, respectively. ~~The increase in~~Excluding the impact of foreign exchange rate movements, this segment’s revenues for ~~both the three and nine month periods was primarily~~each 2022 period increased as a result of growth in project activities with existing customers, primarily within the commercial market sector, ~~partially as a result~~including certain telecommunication projects.

Table of a resumption in demand as customers began to release projects which were previously deferred due to the uncertainty created by the COVID-19 pandemic. In addition, this segment’s revenues for the three and nine months ended September 30, 2021 were positively impacted by $8.0 million and $32.0 million, respectively, related to the effect of favorable exchange rates for the British pound versus the United States dollar.Contents

Cost of sales and gross profit

The following table presents our cost of sales, gross profit (revenues less cost of sales), and gross profit margin (gross profit as a percentage of revenues) (in thousands, except for percentages):


		For the three months ended September 30,						For the nine months ended September 30,							For the three months ended September 30,						For the nine months ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Cost of sales	Cost of sales	$	2,140,329		$	1,838,530		$	6,164,692		$	5,504,036		Cost of sales	$	2,413,130		$	2,140,329		$	6,977,504		$	6,164,692
Gross profit	Gross profit	$	381,343		$	363,184		$	1,098,695		$	1,011,531		Gross profit	$	413,231		$	381,343		$	1,148,794		$	1,098,695
Gross profit margin	Gross profit margin	15.1		%	16.5		%	15.1		%	15.5		%	Gross profit margin	14.6		%	15.1		%	14.1		%	15.1		%

Our gross profit for the three months ended September 30, ~~2021~~2022 was ~~$381.3~~$413.2 million, or ~~15.1%~~14.6% of revenues, compared to gross profit of ~~$363.2~~$381.3 million, or ~~16.5%~~15.1% of revenues, for the three months ended September 30, ~~2020.~~2021. Gross profit for the nine months ended September 30, ~~2021~~2022 was ~~$1,098.7~~$1,148.8 million, or ~~15.1%~~14.1% of revenues, compared to gross profit of ~~$1,011.5~~$1,098.7 million, or ~~15.5%~~15.1% of revenues, for the nine months ended September 30, ~~2020. The~~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 from all of our reportable segments except, in the case of the nine months ended September 30, 2021, our United States industrial services segment, which experienced a decrease in gross profit when compared to the prior year given the negative macroeconomic conditions previously referenced.profit.

The decrease in gross profit margin for ~~the three months ended September 30, 2021 compared to the three months ended September 30, 2020,~~both 2022 periods was primarily attributable to a reduction in gross profit margin within each of our United States construction segments, partially as ~~well as our United States building services segment.~~a result of a less favorable project mix. The decrease in gross profit margin for the ~~nine~~three months ended September 30, ~~2021 compared~~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, ~~2020, was predominantly attributable to a reduction in~~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 ~~within our United States building services segment.~~by 50 basis points. Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments.

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Selling, general and administrative expenses

The following table presents our selling, general and administrative expenses and SG&A margin (selling, general and administrative expenses as a percentage of revenues) (in thousands, except for percentages):


		For the three months ended September 30,						For the nine months ended September 30,							For the three months ended September 30,						For the nine months ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Selling, general and administrative expenses	Selling, general and administrative expenses	$	243,922		$	226,793		$	710,912		$	658,964		Selling, general and administrative expenses	$	263,137		$	243,922		$	761,099		$	710,912
SG&A margin	SG&A margin	9.7		%	10.3		%	9.8		%	10.1		%	SG&A margin	9.3		%	9.7		%	9.4		%	9.8		%

Our selling, general and administrative expenses for the three months ended September 30, ~~2021~~2022 were ~~$243.9~~$263.1 million compared to selling, general and administrative expenses of ~~$226.8~~$243.9 million for the three months ended September 30, ~~2020.~~2021. Selling, general and administrative expenses for the nine months ended September 30, ~~2021~~2022 were ~~$710.9~~$761.1 million compared to selling, general and administrative expenses of ~~$659.0~~$710.9 million for the nine months ended September 30, ~~2020.~~ 2021.

For the three and nine months ended September 30, ~~2021,~~2022, selling, general and administrative expenses included ~~$5.3~~$3.7 million and $12.1 million, respectively, of incremental expenses directly related to companies acquired in ~~2021~~2022 and ~~2020,~~2021, including amortization expense attributable to identifiable intangible assets of $1.2 million and ~~$3.1~~$3.3 million, respectively. Excluding incremental expenses from businesses acquired, our selling, general and administrative expenses increased by ~~$11.9~~$15.5 million and ~~$39.9~~$38.1 million for the three and nine months ended September 30, ~~2021,~~2022, respectively. The organic increase in selling, general and administrative expenses for both ~~the three and nine month~~ periods was primarily attributable to an increase in: (a) ~~employee benefit costs, driven by greater medical claim activity,~~salaries and ~~(b) salaries,~~related employment expenses, largely as a result ~~of: (i)~~of an increase in headcount to support our organic revenue growth, in the current year, and (ii) the favorable impact in the prior year periods of certain short-term cost cutting measures enacted in response to the COVID-19 pandemic, including temporary furloughs and salary reductions. In addition, the increase in selling, general and administrative expenses for the nine months ended September 30, 2021 was partially a result of greater(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 ~~which were anticipated during~~of the ~~same~~ prior year, ~~period.~~(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 ~~9.7%~~9.3% and ~~10.3%~~9.7% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~9.8%~~9.4% and ~~10.1%~~9.8% for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The decrease in SG&A margin for both ~~the three and nine month~~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.

~~Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets~~

During the second quarter of 2020, we identified certain indicators of impairment resulting from the COVID-19 pandemic and its impact on the oil and gas and related industrial markets. These adverse conditions resulted in lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of such markets, resulting in the recognition of a $232.8 million impairment charge within our United States industrial services segment.

Despite the weaker results of our United States industrial services segment for the year-to-date 2021 period, when compared to the prior year, we did not identify any indicators of impairment in the current year, as the operating performance and near term expectations of this segment are materially consistent with the forecasts utilized in our most recent impairment test. However, a further deterioration in our operating performance, significant adverse changes to external market conditions or the assumptions utilized in our impairment tests, such as the weighted average cost of capital and our internal forecasts, if any, could result in the identification of future impairment indicators and potentially future goodwill impairment charges. It is not possible at this time to determine if any future impairment charge will result or, if it does, whether such charge would be material to our results of operations.

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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,									For the three months ended September 30,
		2021		% of Segment Revenues		2020		% of Segment Revenues			2022		% of Segment Revenues		2021		% of Segment Revenues
Operating income (loss):	Operating income (loss):									Operating income (loss):
United States electrical construction and facilities services	United States electrical construction and facilities services	$	44,055	8.3	%	$	45,928	9.7	%	United States electrical construction and facilities services	$	35,558	5.6	%	$	44,284	8.3	%
United States mechanical construction and facilities services	United States mechanical construction and facilities services	82,302		8.2	%	80,048		9.0	%	United States mechanical construction and facilities services	90,952		8.1	%	80,797		8.0	%
United States building services	United States building services	31,589		5.0	%	38,449		6.9	%	United States building services	45,589		6.4	%	32,865		5.3	%
United States industrial services	United States industrial services	(3,012)		(1.3)	%	(8,907)		(5.2)	%	United States industrial services	(1,392)		(0.6)	%	(3,012)		(1.3)	%
Total United States operations	Total United States operations	154,934		6.5	%	155,518		7.4	%	Total United States operations	170,707		6.3	%	154,934		6.5	%
United Kingdom building services	United Kingdom building services	6,582		5.1	%	5,327		4.8	%	United Kingdom building services	8,369		7.1	%	6,582		5.1	%
Corporate administration	Corporate administration	(24,095)		—		(24,454)		—		Corporate administration	(28,982)		—		(24,095)		—
Restructuring expenses		—		—		(536)		—
Total operations	Total operations	137,421		5.4	%	135,855		6.2	%	Total operations	150,094		5.3	%	137,421		5.4	%
Other items:	Other items:									Other items:
Net periodic pension (cost) income	Net periodic pension (cost) income	908				751				Net periodic pension (cost) income	1,025				908
Interest expense, net	Interest expense, net	(1,286)				(1,484)				Interest expense, net	(3,194)				(1,286)
Income before income taxes	Income before income taxes	$	137,043			$	135,122			Income before income taxes	$	147,925			$	137,043


		For the nine months ended September 30,									For the nine months ended September 30,
		2021		% of Segment Revenues		2020		% of Segment Revenues			2022		% of Segment Revenues		2021		% of Segment Revenues
Operating income (loss):	Operating income (loss):									Operating income (loss):
United States electrical construction and facilities services	United States electrical construction and facilities services	$	127,024	8.6	%	$	117,866	8.8	%	United States electrical construction and facilities services	$	90,646	5.3	%	$	127,548	8.6	%
United States mechanical construction and facilities services	United States mechanical construction and facilities services	226,511		7.9	%	192,156		7.6	%	United States mechanical construction and facilities services	226,571		7.1	%	220,697		7.6	%
United States building services	United States building services	91,233		5.0	%	86,325		5.5	%	United States building services	107,672		5.3	%	96,523		5.3	%
United States industrial services	United States industrial services	(5,663)		(0.8)	%	9,800		1.3	%	United States industrial services	18,324		2.2	%	(5,663)		(0.8)	%
Total United States operations	Total United States operations	439,105		6.4	%	406,147		6.6	%	Total United States operations	443,213		5.7	%	439,105		6.4	%
United Kingdom building services	United Kingdom building services	23,040		6.0	%	16,442		5.2	%	United Kingdom building services	25,372		7.0	%	23,040		6.0	%
Corporate administration	Corporate administration	(74,362)		—		(70,022)		—		Corporate administration	(80,890)		—		(74,362)		—
Restructuring expenses		—		—		(605)		—
Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets		—		—		(232,750)		—
Total operations	Total operations	387,783		5.3	%	119,212		1.8	%	Total operations	387,695		4.8	%	387,783		5.3	%
Other items:	Other items:									Other items:
Net periodic pension (cost) income	Net periodic pension (cost) income	2,738				2,211				Net periodic pension (cost) income	3,288				2,738
Interest expense, net	Interest expense, net	(3,965)				(6,082)				Interest expense, net	(6,234)				(3,965)
Income before income taxes	Income before income taxes	$	386,556			$	115,341			Income before income taxes	$	384,749			$	386,556

Operating income for the three months ended September 30, ~~2021 of $137.4~~2022 was $150.1 million, ~~represents~~ a ~~marginal~~$12.7 million increase compared to operating income of ~~$135.9~~$137.4 million for the three months ended September 30, ~~2020. Despite the growth~~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 ofwas 5.3% and 5.4% for the three months ended September 30, 2022 and 2021, ~~decreased when compared to~~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 ~~6.2%~~selling, general and administrative expenses to revenues as we continue to leverage our overhead cost structure during periods of revenue growth. Operating income for the ~~three~~nine months ended September 30, ~~2020. As described below~~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 ~~more detail, the declines~~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 ~~our United States building services segment~~the impact of certain discrete project losses, described in further detail below. These declines in gross profit margin were ~~only~~once again partially offset by a reduction in the ratio of selling, general and administrative expenses to ~~revenues across such segments.~~

revenues.

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Operating income for the nine months ended September 30, 2021 was $387.8 million, or 5.3% of revenues, and compares favorably to operating income of $119.2 million, or 1.8% of revenues, for the nine months ended September 30, 2020. Our operating results for the 2020 year-to-date period included $232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the second quarter of 2020. Excluding the impact of such impairment charges on our 2020 results, operating income increased by $35.8 million for the nine months ended September 30, 2021, largely as a result of greater organic operating income contribution from our United States mechanical construction and facilities services segment. Companies acquired in 2021 and 2020 generated incremental operating income of $3.5 million, inclusive of $8.6 million of amortization expense associated with identifiable intangible assets, for the nine months ended September 30, 2021.

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, ~~2021 was $44.1 million, a slight reduction~~2022, compared to ~~operating income~~$44.3 million, or 8.3% of ~~$45.9 million~~revenues, for the three months ended September 30, ~~2020.~~2021. Operating income of this segment for the nine months ended September 30, ~~2021~~2022 was ~~$127.0~~$90.6 million, or 5.3% of revenues, compared to operating income of ~~$117.9~~$127.5 million, or 8.6% of revenues, for the nine months ended September 30, 2020. The increase in operating income for nine months ended September 30, 2021 was predominantly a result of increased gross profit from construction projects within the institutional, commercial, and healthcare market sectors, largely as a result of the revenue growth within these market sectors, as referenced above. These increases were partially offset by a decline in gross profit from the transportation and manufacturing market sectors due to the completion or close-out of certain projects in the prior year. Companies acquired in 2021 contributed2021. This segment’s results included incremental operating income from acquired companies of ~~$0.9~~$1.4 million and ~~$2.1~~$5.6 million, inclusive of ~~$1.8~~$1.0 million and ~~$2.8~~$3.3 million of amortization expense associated with identifiable intangible assets, for the three and nine months ended September 30, ~~2021,~~2022, respectively. ~~Operating margin~~Excluding the contribution from acquisitions, operating income of this segment ~~was 8.3%~~decreased by $10.2 million and 9.7% for the three months ended September 30, 2021 and 2020, respectively, and 8.6% and 8.8% for the nine months ended September 30, 2021 and 2020, respectively. The decrease in operating margin for both 2021 periods was a result of a decline in this segment’s gross profit margin$42.5 million during the third quarter of 2021, predominantly within the commercial and transportation market sectors, partially due to a change in the composition of project work performed period-over-period. In addition, gross profit margin for the prior year periods benefited from the settlement of the final contract value on certain projects within the transportation and institutional market sectors, which favorably impacted this segment’s gross profit margin by 0.7% and 0.4% for the three and nine months ended September 30, ~~2020,~~2022, respectively. ~~Such decreases~~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 ~~expenses~~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 ~~2021 three and nine month periods.~~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, ~~2021~~2022 was ~~$82.3~~$91.0 million, ~~a slight increase~~or 8.1% of revenues, compared to operating income of ~~$80.0~~$80.8 million, or 8.0% of revenues, for the three months ended September 30, ~~2020.~~2021. Operating ~~margin~~income of this segment for the nine months ended September 30, 2022 was ~~8.2%~~$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 ~~9.0%~~nine months ended September 30, 2022, as well as the increase in operating margin for the three months ended September 30, ~~2021 and 2020, respectively. The 80 basis point reduction in this segment’s operating margin period-over-period~~2022, was primarily a result of ~~a decrease in~~increased gross profit ~~margin within~~contribution from the ~~manufacturing~~commercial market sector, ~~as:~~including profit recognized on: (a) ~~the results for the prior year period benefited from the favorable close-out of~~ several fire protection projects and (b) certain construction projects for customers engaged in the ~~results~~manufacturing of semiconductors. Partially offsetting the growth in operating income for the ~~current quarter include increased revenues from~~first nine months of 2022, and the primary factor resulting in the decline in operating margin for such nine month period, were certain ~~large food processing projects, for~~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 ~~acting as~~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 ~~manager~~ and ~~therefore carry lower than average gross profit margins. The quarterly decrease~~facilities services segment were negatively impacted by approximately $8.4 million during the nine months ended September 30, 2022. These reductions in ~~gross profit~~estimated project profitability negatively affected the year-to-date operating margin ~~was partially offset~~of this segment by ~~a reduction~~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 ~~segment~~ 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, ~~2021~~2022 was ~~$226.5~~$107.7 million, or 5.3% of revenues, compared to operating income of ~~$192.2~~$96.5 million, or 5.3% of revenues, for the nine months ended September 30, ~~2020.~~2021. The ~~$34.4 million~~ increase in operating income for both 2022 periods, as well as the ~~nine month period was a result of an~~ increase in ~~gross profit from construction projects within the majority of the market sectors in which we operate, driven by increased revenue volume year- over-year. Despite the reduction in~~ operating margin during the third quarter of 2021, the operating margin of this segment for the nine month period ended September 30, 2021 of 7.9%, represents an improvement from the 7.6% operating margin for the nine months ended September 30, 2020. A slight reduction in this segment’s gross profit margin for the year-to-date period, was ~~more than offset by a decrease~~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 ~~ratio of selling, general and administrative expenses to~~increase in revenues ~~as referenced above.~~

~~Operating income of our United States building~~from this segment’s commercial site-based services ~~segment for the three months ended September 30, 2021 was $31.6 million, or 5.0% of revenues, compared to~~division, operating income of ~~$38.4~~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.

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Our United States industrial services segment reported an operating loss of $1.4 million, or ~~6.9%~~(0.6)% of revenues, for the three months ended September 30, ~~2020. Despite an increase in quarterly revenues, gross profit remained consistent with the prior year period, as~~2022, a result of lower gross profit margins across this segment’s portfolio of work, most notably within its mobile mechanical services division. Flat gross profit, combined with an increase in selling, general and administrative expenses to support the revenue growth within this segment, resulted in a decrease in operating income quarter over quarter. The decrease in operating margin for the quarterly period was a direct result of the reduced gross profit margin just referenced. Operating income of this segment for the nine months ended September 30, 2021 was $91.2 million, or 5.0% of revenues,slight improvement compared to operating income of $86.3 million, or 5.5% of revenues, for the nine months ended September 30, 2020. The increase in this segment’s operating income for the year-to-date 2021 period was primarily due to the resumption in demand for certain of our service offerings when compared to the prior year period, which led to increased gross profit from: (a) project, service repair and maintenance, and building automation and controls activities within our mobile mechanical services operations, and (b)

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project volumes within our commercial site-based services operations. In addition, gross profit for the nine months ended September 30, 2021 benefited from greater snow removal activity for our customers with whom we are contracted on a per snow event basis. Companies acquired in 2021 and 2020, which are included within this segment’s mobile mechanical services division, generated incremental operating income of approximately $1.6 million, inclusive of $5.6 million of amortization expense associated with identifiable intangible assets, during the nine months ended September 30, 2021. The decrease in operating margin for the nine month period was primarily attributable to a decrease in gross profit margin given a less favorable mix of work within this segment’s mobile mechanical services and government services divisions, including, with respect to the mobile mechanical services division, a greater number of fixed price capital projects, which traditionally have lower gross profit margins. The decreases in gross profit margin for both the three and nine month periods were partially offset by a reduction in the ratio of selling, general and administrative expenses to revenues as this segment was able to effectively leverage its overhead cost structure during this period of revenue growth.

~~Our United States industrial services segment reported~~ an operating loss of $3.0 million, or (1.3)% of revenues, for the three months ended September 30, ~~2021, compared to an operating loss of $8.9 million, or (5.2)% of revenues, for~~2021. For the ~~three~~nine months ended September 30, ~~2020. This~~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, compared to operating income of $9.8 million, or 1.3% of revenues,~~2021. The improved performance for the nine months ended September 30, ~~2020. Despite~~2022 was primarily due to increased gross profit, resulting from the ~~improved quarterly operating performance~~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 this segment’s results continue to be negatively impacted by the effects of adverse macroeconomic conditions within the oil and gas industry, as demonstrated by the unfavorable comparison for the year-to-date period. Given such conditions, which began to significantly impact our business starting with the second quarter of 2020, this segment’s operating results for the nine months ended September 30, 2021 reflect a reduction in gross profit and gross profit margin from both our field services and shop services operations when compared to the nine months ended September 30, 2020. In addition, the results ofperiod, given: (a) this segment ~~for~~was able to leverage its overhead cost structure during a period of revenue growth and (b) the ~~nine months ended September 30, 2021 include~~effect, in the prior year, of a $4.1 million ~~increase in the~~ provision for credit losses taken in connection with a specific customer bankruptcy, which negatively impacted ~~the~~this segment’s operating margin by 60 basis points for the nine months ended September 30, ~~2021~~2021. This segment’s operating margin for the first nine months of 2022 additionally benefited from an increase in gross profit margin driven by ~~60 basis points.~~greater absorption of certain indirect cost of sales given the increase in year-to-date revenues.

~~Our~~Operating income of our United Kingdom building services ~~segment’s operating income for the three months ended September 30, 2021~~segment was ~~$6.6~~$8.4 million, or ~~5.1% of revenues, compared to operating income of $5.3 million, or 4.8%~~7.1% of revenues, for the three months ended September 30, ~~2020.~~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, ~~2021~~2022 was $25.4 million, or 7.0% of revenues, compared to $23.0 million, or 6.0% ~~of revenues, compared to operating income of $16.4 million, or 5.2%~~ of revenues, for the nine months ended September 30, 2020. The increase in this segment’s operating income and operating margin for the three and nine months ended September 30, 2021 was primarily a result of an increase in gross profit and gross profit margin from projects within the commercial market sector, partially offset by an increase in selling, general and administrative expenses to support the segment’s revenue growth. In addition, this segment’s operating income and operating margin for the nine months ended September 30, 2021 benefited from successful contract close-outs during the first quarter of the year.2021. This segment’s operating income for the three and nine months ended September 30, ~~2021~~2022 was ~~positively~~negatively impacted by ~~$0.4~~$1.4 million and ~~$2.0~~$2.4 million, respectively, related to the effect of ~~favorable~~unfavorable exchange rates for the British pound versus the United States dollar.

~~Our corporate administration~~ Excluding the impact of foreign exchange rate movements, operating ~~loss~~income of this segment represented a $3.2 million and $4.7 million increase for the three and nine months ended September 30, ~~2021 was $24.1 million and $74.4 million,~~2022, respectively, when compared to ~~$24.5 million and $70.0 million~~operating income for the three and nine months ended September 30, ~~2020, respectively.~~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 ~~the nine months ended September 30, 2021~~both 2022 periods was primarily due ~~to:~~to greater: (a) ~~an increase in computer hardware and software costs, including depreciation,~~incentive compensation expense, partially as a result of ~~various information technology~~incremental expense taken during the third quarter of 2022, necessitated by revised estimates of our annual operating performance, and ~~cyber security initiatives currently in process, and~~ (b) employment costs, given an increase in ~~incentive compensation expense due~~headcount to ~~higher projected~~support the revenue growth within our business as well as annual ~~operating results than those which were anticipated during the same prior year period. These increases were partially offset by a decrease in salary expense given the realignment~~cost of ~~certain of our back office functions in 2020.~~living wage increases.

Other items

Net interest expense for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$1.3~~$3.2 million and ~~$1.5~~$1.3 million, respectively. Net interest expense for the nine months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$4.0~~$6.2 million and ~~$6.1~~$4.0 million, respectively. The ~~decrease~~increase in net interest expense for ~~the 2021~~both 2022 periods ~~resulted from~~was a result of both ~~lower~~an increase in interest rates and ~~reduced~~greater average outstanding borrowings.

For the three and nine months ended September 30, ~~2021,~~2022, our income tax provision was ~~$37.3~~$42.2 million and ~~$104.5~~$104.9 million, respectively, compared to an income tax provision of ~~$73.9~~$37.3 million and ~~$62.2~~$104.5 million for the three and nine months ended September 30, ~~2020,~~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, ~~2021~~2022 was ~~27.2%~~28.5% and ~~27.1%~~27.3%, respectively, compared to an income tax rate for the three and nine months ended September 30, ~~2020~~2021 of ~~54.7%~~27.2% and ~~53.9%~~27.1%, respectively. ~~Our~~The increase in our income tax rate for both 2022 periods was attributable to an increase in certain permanent book-to-tax differences and ~~resulting income~~the unfavorable impact of certain discrete tax ~~provision, for~~items during the ~~three and nine months ended September 30, 2020 were impacted by~~third quarter of 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. Such act implements various new tax ~~effect~~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 $232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the second quarter of 2020, the majority of which was non-deductible for tax purposes.notes to consolidated financial statements.

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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, 2021		% of Total		December 31, 2020		% of Total		September 30, 2020		% of Total			September 30, 2022		% of Total		December 31, 2021		% of Total		September 30, 2021		% of Total
Remaining performance obligations:	Remaining performance obligations:													Remaining performance obligations:
United States electrical construction and facilities services	United States electrical construction and facilities services	$	1,244,053	23	%	$	1,055,089	23	%	$	1,042,797	23	%	United States electrical construction and facilities services	$	2,063,134	29	%	$	1,224,577	22	%	$	1,260,495	23	%
United States mechanical construction and facilities services	United States mechanical construction and facilities services	3,037,573		56	%	2,673,293		58	%	2,633,017		58	%	United States mechanical construction and facilities services	3,662,623		51	%	3,272,124		58	%	2,998,965		56	%
United States building services	United States building services	810,619		15	%	618,353		13	%	630,559		14	%	United States building services	1,109,221		16	%	872,550		16	%	832,785		15	%
United States industrial services	United States industrial services	143,299		3	%	117,212		3	%	90,212		2	%	United States industrial services	122,714		2	%	111,838		2	%	143,299		3	%
Total United States operations	Total United States operations	5,235,544		97	%	4,463,947		97	%	4,396,585		97	%	Total United States operations	6,957,692		98	%	5,481,089		98	%	5,235,544		97	%
United Kingdom building services	United Kingdom building services	143,202		3	%	130,673		3	%	133,566		3	%	United Kingdom building services	143,769		2	%	118,208		2	%	143,202		3	%
Total operations	Total operations	$	5,378,746	100	%	$	4,594,620	100	%	$	4,530,151	100	%	Total operations	$	7,101,461	100	%	$	5,599,297	100	%	$	5,378,746	100	%

Remaining performance obligations increase with awards of new contracts and decrease as we perform work and recognize revenue on existing contracts. We include a project within our remaining performance obligations at such time as the project is awarded and agreement on contract terms has been reached. Our remaining performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of the total transaction price can be made.

Our remaining performance obligations at September 30, ~~2021~~2022 were ~~$5.38~~$7.10 billion compared to ~~$4.59~~$5.60 billion at December 31, ~~2020~~2021 and ~~$4.53~~$5.38 billion at September 30, ~~2020.~~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~~within: (a) our United States construction segments, driven by the award of ~~certain telecommunications, food processing, and water and wastewater~~various construction projects ~~as well as~~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 ~~commercial~~ 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.

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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Liquidity and Capital Resources

The following section discusses our principal liquidity and capital resources, as well as our primary liquidity requirements and sources and uses of cash. ~~Our~~

We are focused on the efficient conversion of operating income into cash ~~and~~to provide for the Company’s material cash ~~equivalents are maintained in highly liquid investments with original maturity dates of three months or less.~~

~~Our short-term liquidity~~ requirements, ~~primarily arise from: (a)~~including working capital ~~requirements, (b)~~needs, investment in our growth strategies through business acquisitions ~~(c) share repurchases, (d) cash dividend~~and capital expenditures, satisfaction of contractual commitments, including principal and interest payments ~~(e) interest and principal payments related to~~on our outstanding indebtedness, ~~(f)~~and shareholder return through dividend payments and share repurchases. We strive to maintain a balanced approach to capital ~~expenditures,~~allocation in order to achieve growth, deliver value, and ~~(g) income tax payments. We can expect to meet those requirements through~~minimize risk.

Management monitors financial markets and overall economic conditions for factors that may affect our ~~cash~~liquidity and ~~cash equivalent balances, cash generated from~~capital resources and adjusts our ~~operations, and, if necessary, the borrowing capacity available under our revolving credit facility. However, negative~~capital allocation strategy as necessary. Negative macroeconomic trends could have an adverse effect on future liquidity if we experience delays in the payment of outstanding receivables beyond normal payment terms, or an increase in credit ~~losses.~~losses, or significant increases in the price of commodities or the materials and equipment utilized for our project and service work, beyond those experienced to date. In addition, during economic downturns, there have typically been fewer small discretionary projects from the private sector and our competitors have aggressively bid larger long-term infrastructure and public sector contracts. Our ~~short-term~~ liquidity is also impacted by: (a) the type and length of construction contracts in place, as performance of long duration contracts typically requires greater amounts of working capital, (b) the level of turnaround activities within our United States industrial services segment, as such projects are billed in arrears pursuant to contractual terms that are standard within the industry, and (c) the billing terms of our maintenance contracts, including those within our United States and United Kingdom building services segments. 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.

~~Our~~

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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. Both our short-term and long-term liquidity requirements ~~can be~~are expected to be met ~~initially~~ through our cash and cash equivalent balances, cash generated from ~~operating activities~~our operations, and, ifas necessary, the borrowing capacity ~~available~~ 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.

Refer to Note 7 - Debt of the notes to consolidated financial statements for further information regarding our credit agreement. Based upon our current credit rating and financial position, we can also reasonably expect to be able to secure long-term debt financing if required to achieve our strategic ~~objectives. Over the long term, our primary revenue risk factor continues to~~objectives; however, no assurances can be the level of demand for non-residential construction as well as building and industrial services, all of which are influenced by macroeconomic trends including interest rates, inflation, and governmental economic policy. In addition, our ability to perform work is critical to meeting our long-term liquidity requirements.

made that such debt financing will be available on favorable terms. We believe that we have sufficient financial resources available to meet our short-term and foreseeable long-term liquidity requirements.

Cash Flows

The following table presents a summary of our ~~net cash provided by (used in)~~ operating, ~~activities,~~ investing, ~~activities,~~ and financing ~~activities~~cash flows (in thousands):


		For the nine months ended September 30,					For the nine months ended September 30,
		2021		2020			2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	113,941	$	546,834	Net cash provided by operating activities	$	238,354	$	113,941
Net cash used in investing activities	Net cash used in investing activities	$	(137,486)	$	(77,219)	Net cash used in investing activities	$	(122,898)	$	(137,486)
Net cash used in financing activities	Net cash used in financing activities	$	(213,127)	$	(147,594)	Net cash used in financing activities	$	(512,598)	$	(213,127)
(Decrease) increase in cash, cash equivalents, and restricted cash		$	(238,542)	$	320,717
Effect of exchange rate changes on cash, cash equivalents, and restricted cash						Effect of exchange rate changes on cash, cash equivalents, and restricted cash	$	(20,540)	$	(1,870)
Decrease in cash, cash equivalents, and restricted cash						Decrease in cash, cash equivalents, and restricted cash	$	(417,682)	$	(238,542)

During the nine months ended September 30, ~~2021,~~2022, our cash balance, including cash equivalents and restricted cash, decreased by approximately ~~$238.5~~$417.7 million from ~~$903.6~~$822.6 million at December 31, ~~2020~~2021 to ~~$665.0~~$404.9 million at September 30, ~~2021.~~2022. Changes in our cash position from December 31, 2021 to September 30, 2022 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, ~~2021~~2022 was approximately ~~$113.9~~$238.4 million compared to approximately ~~$546.8~~$113.9 million of net cash provided by operating activities for the nine months ended September 30, ~~2020.~~2021. The ~~$432.9 million decrease~~increase in net cash provided by operating ~~cash flows~~activities for the first nine months of 2022, compared to the first nine months of 2021, was ~~primarily attributable to strong organic revenue~~primary a result of the collection of advanced billings on certain of our uncompleted construction projects, as evidenced in part by the growth in ~~the current year, which resulted in an increase in working capital balances, most notably accounts receivable and~~our contract assets. In addition, operating cash flow for the nine months ended September 30, 2020 benefited from the deferral of approximately $67.3 million of payroll tax payments given the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which allowed employers to defer payment of the employer’s portion of Social Security taxes throughout the majority of calendar year 2020.liabilities.

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, ~~2021 increased~~2022 decreased by approximately ~~$60.3~~$14.6 million compared to the nine months ended September 30, ~~2020~~2021 due to ~~an increase~~a decrease in payments for business acquisitions, partially offset by ~~lower~~higher capital ~~expenditures.~~expenditures used to invest in organic growth.

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Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, ~~payment~~payments of dividends to stockholders, and the issuance of common stock through certain ~~employee~~ equity plans. Net cash used in financing activities for the nine months ended September 30, ~~2021~~2022 was ~~$213.1~~$512.6 million compared to net cash used in financing activities for the nine months ended September 30, ~~2020~~2021 of ~~$147.6~~$213.1 million. The ~~$65.5~~$299.5 million increase in cash used in financing activities was primarily due to ~~an $84.2~~a $473.3 million increase in funds used for the repurchase of our common stock, partially offset by ~~a reduction in repayments of our outstanding debt given a voluntary prepayment of $22.5~~$170.0 million in ~~the prior year period.~~

~~Debt~~

~~Until March 2, 2020, we had a credit agreement dated as of August 3, 2016, which provided for a $900.0 million~~net borrowings made under our revolving credit facility (the “2016 Revolving Credit Facility”) and a $400.0 million term loan (the “2016 Term Loan”) (collectively referred to as the “2016 Credit Agreement”). On March 2, 2020, we amended and restated the 2016 Credit Agreement to provide for a $1.3 billion revolving credit facility (the “2020 Revolving Credit Facility”) and a $300.0 million term loan (the “2020 Term Loan”) (collectively referred to as the “2020 Credit Agreement”) expiring March 2, 2025. 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 millionduring 2022. The timing 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.~~

At the Company’s election, borrowings under the 2020 Credit Agreement bear interest at either: (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR (0.08% at September 30, 2021) plus 1.00% to 1.75%, based on certain financial tests. The base rate is determined by the greater of: (a) the prime commercial lending rate announced by Bank of Montreal from time to time (3.25% at September 30, 2021), (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%. The interest rate in effect at September 30, 2021 was 1.08%. 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 September 30, 2021. Fees for letters of credit issued under the 2020 Revolving Credit Facility range from 0.75% to 1.75% of the respective face amounts of outstanding letters of credit, depending on the nature of the letter of credit, and are computed based on certain financial tests.

Obligations under the 2020 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets. The 2020 Credit Agreement contains various covenants providing for, among other things, the maintenance of certain financial ratios and certain limitations on the payment of dividends, common stock repurchases ~~investments, acquisitions, indebtedness, and capital expenditures. We were in compliance with all such covenants as of September 30, 2021 and December 31, 2020.~~

~~We are required~~is at management’s discretion subject to make annual principal payments on the 2020 Term Loan. Any voluntary prepayments are applied against the outstanding balance of the loan and reduce our future scheduled payments on a ratable basis. Based on our outstanding balance, principal payments of $13.9 million are due on December 31 of each year until maturity, with any remaining unpaid principal and interest due on March 2, 2025.

~~Share Repurchase Program and Dividends~~

In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock. Subsequently, the Board has from time to time increased the amount of our common stock that we may repurchase under such program. Since the inception of the repurchase program, the Board has authorized us to repurchase up to $1.15 billion of our outstanding common stock. During the nine months ended September 30, 2021, we repurchased approximately 1.5 million shares of our common stock for approximately $183.2 million. Since the inception of the repurchase program through September 30, 2021, we have repurchased approximately 19.1 million shares of our common stock for approximately $1.09 billion. As of September 30, 2021, there remained authorization for us to repurchase approximately $62.7 million of our shares. Subsequent to September 30, 2021, the Board authorized us to repurchase up to an additional $300.0 million of our outstanding common stock. The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements and depends upon several factors, including ~~provisions in~~market and business conditions, current and anticipated future liquidity, share price, and share availability, among others. For additional detail regarding our ~~2020 Credit Agreement placing limitations on such repurchases. The~~share repurchase program, ~~has been and will be funded from our operations.~~refer to Note 10 - Common Stock of the notes to consolidated financial statements.

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~~We have paid quarterly dividends since October 25, 2011.~~ We currently pay a regular quarterly dividend, ofwhich 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. Our ~~2020 Credit Agreement~~credit agreement places limitations on the payment of dividends on our common stock. However, we do not believe that the terms of such agreement currently materially limit our ability to pay asuch quarterly ~~dividend of $0.13 per share~~dividends for the foreseeable future. ~~The payment~~

Effect of ~~dividends has been~~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.

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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. We are required to make annual principal payments on our term loan of $13.9 million on December 31 of each year until maturity. All remaining unpaid amounts are due on March 2, 2025, when the credit agreement governing our term loan and revolving credit facility expires. Until such time, we are required to make periodic interest payments on our outstanding indebtedness. Future interest payments will be ~~funded from~~determined based on prevailing interest rates during that time, which are anticipated to increase in the near term. Refer to Note 7 - Debt of the notes to consolidated financial statements for further detail of our ~~operations.~~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. These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts. These purchase orders are not reflected in the Consolidated Balance Sheets and are not expected to impact future liquidity as amounts should be recovered through customer billings.

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. Of this net amount, approximately $36.7 million is estimated to be payable within the next 12 months. Due to many uncertainties inherent in resolving these matters, it is not practical to estimate these payments beyond such period. 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. Of this amount, $13.7 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.

In addition, material cash requirements for other potential obligations, for which we cannot reasonably estimate future payments, include the following:

Legal Proceedings – We are involved in several legal proceedings in which damages and claims have been asserted against us. While litigation is subject to many uncertainties and the outcome of litigation is not predictable with assurance, we do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity. Refer to Note 12 - Commitments and Contingencies of the notes to consolidated financial statements for more information regarding legal proceedings.

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Multiemployer Benefit Plans – In addition to our Company sponsored benefit plans, we participate in certain multiemployer pension and other post retirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining agreements. Our future contributions to the multiemployer plans are dependent upon a number of factors. Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated.

Off-Balance Sheet Arrangements and Other Commercial Commitments

The terms of our construction contracts frequently require that we obtain from surety companies, ~~(“Surety Companies”),~~ and provide to our customers, ~~payment and performance~~surety bonds ~~(“Surety Bonds”)~~ as a condition to the award of such contracts. ~~Surety Bonds~~These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the ~~Surety Companies~~surety companies for amounts, if any, paid by them in respect of ~~Surety Bonds~~surety bonds issued on our behalf. ~~Public~~As of September 30, 2022, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.5 billion, which represents approximately 21% of our total remaining performance obligations.

Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances. Such amounts can also fluctuate from period to period based upon the mix and level of our bonded operating activity. For example, public sector contracts require ~~Surety Bonds~~surety bonds more frequently than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases. AsOur estimated maximum exposure as it relates to the value of ~~September 30, 2021, based~~the surety bonds outstanding is lowered on each bonded project as the ~~percentage-of-completion~~cost to complete is reduced, and each commitment under a surety bond generally extinguishes concurrently with the expiration of ~~our projects covered by~~ its related contractual obligation.

Surety Bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.4 billion, which represents approximately 27% of our total remaining performance obligations. In addition, Surety Bondsbonds 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,~~employees. In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations. As of September 30, ~~2021,~~2022, we satisfied approximately ~~$37.5~~$48.1 million and $71.2 million of the collateral requirements of our insurance programs by utilizing ~~Surety Bonds.~~ 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.

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

From time to time, we discuss with our current and other ~~Surety Bond~~surety bond providers the amounts of ~~Surety Bonds~~surety bonds that may be available to us based on our financial strength and the absence of any default by us on any ~~Surety Bond~~surety bond issued on our behalf and believe those amounts are currently adequate for our needs. However, if we experience changes in our bonding relationships or if there are adverse changes in the surety industry, we may: (a) seek to satisfy certain customer requests for ~~Surety Bonds~~surety bonds by posting other forms of collateral in lieu of ~~Surety Bonds,~~surety bonds, such as letters of credit, parent company guarantees, or cash, in order to convince customers to forego the requirement for ~~Surety Bonds,~~surety bonds, (b) increase our activities in our ~~business segments~~businesses that rarely require ~~Surety Bonds, such as our building and industrial services segments,~~surety bonds, and/or (c) refrain from bidding for certain projects that require ~~Surety Bonds.~~surety bonds.

There can be no assurance that we would be able to effectuate alternatives to providing ~~Surety Bonds~~surety bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require ~~Surety Bonds.~~surety bonds. Accordingly, a reduction in the availability of ~~Surety Bonds~~surety bonds could have a material adverse effect on our financial position, results of operations, and/or cash flows.

We do not have any other material financial guarantees or off-balance sheet arrangements other than those disclosed herein.

~~Deferred Payroll Taxes~~

As allowed under the CARES Act, we deferred payment of approximately $102.5 million of employer payroll taxes during the year ended December 31, 2020. These temporary deferrals are to be paid in two equal installments with the first due on or before January 3, 2022 and the second due on or before January 3, 2023.

~~Legal Proceedings~~

We are involved in several legal proceedings in which damages and claims have been asserted against us. While litigation is subject to many uncertainties and the outcome of litigation is not predictable with assurance, we do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity.

~~Certain Insurance Matters~~

As of September 30, 2021 and December 31, 2020, we utilized approximately $71.2 million of letters of credit obtained under our 2020 Revolving Credit Facility as collateral for insurance obligations. As of September 30, 2021 and December 31, 2020, we satisfied an additional $37.5 million of these collateral requirements by utilizing Surety Bonds.

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New Accounting Pronouncements

We review new accounting standards to determine the expected impact, if any, that the adoption of such standards will have on our financial position and/or results of operations. See Note 2 - New Accounting Pronouncements of the notes to consolidated financial statements ~~included in Item 1. Financial Statements~~ for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations, or liquidity.

~~Application~~

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Critical Accounting Policies and Estimates

~~Our~~The preparation of our consolidated financial statements ~~are~~is based on the application of significant accounting policies, which require management to make estimates and assumptions. Our significant accounting policies are described further in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8 of our ~~annual report on~~ Form 10-K for the year ended December 31, ~~2020.~~2021. We base our estimates on historical experience, known or expected trends, third-party valuations, and various other assumptions that we believe to be reasonable under the circumstances. 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 ~~that some of~~the following critical accounting policies govern the more ~~subjective areas~~significant judgments and estimates used in the ~~application~~preparation of ~~accounting policies that affect~~ our financial condition and results of operations are the impact of changes in the estimates and judgments pertaining to: (a) revenue recognition from contracts with customers; (b) collectability or valuation of accounts receivable and the associated allowance for credit losses; (c) insurance liabilities; (d) income taxes; and (e) goodwill, identifiable intangible assets, and other long-lived assets.statements.

Revenue Recognition from Contracts with Customers

We believe our most critical accounting policy is revenue recognition. The Company recognizes revenue by applying the following five step model: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue as performance obligations are satisfied.

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

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Based on an evaluation of individual projects that had revisions to total estimated costs, ~~for~~which resulted in a ~~performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made~~reduction of profitability in ~~the period in which the loss becomes evident. For~~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, ~~2021~~2022, respectively. The entire amount recorded during the three months ended September 30, 2022, was reported within our United States electrical construction and ~~2020, there~~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. In addition, there were no significant losses recognized~~results during the three and nine months ended September 30, ~~2021 and 2020.~~2021.

~~The timing~~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 ~~revenue recognition may differ from~~operations. For example, a 50 basis point increase or decrease in the ~~timing of invoicing to customers. Contract assets include unbilled amounts from~~estimated gross profit margin on our uncompleted construction projects, ~~when revenues recognized under~~in the ~~cost-to-cost measure of progress exceed the amounts invoiced to our customers,~~aggregate, as the amounts cannot be billed under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units, or completiona result of a ~~contract. In addition, many of our time and materials arrangements, as well as our contracts to perform turnaround services within the United States industrial services segment, are billed~~revision in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded as revenue is recognized in advance of billings. Also included in contract assets are amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to scope and/or price, or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders). Our contract assets do not include capitalizedestimated costs to ~~obtain and fulfill~~complete a ~~contract. Contract assets are generally classified as current within the Consolidated Balance Sheets.~~

Contract liabilities from our construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation ~~and are recorded as either current~~ or ~~long-term, depending upon when we expect~~a revision in estimated transaction price, would have resulted in an increase or decrease to ~~recognize such revenue. The long-term portion~~operating income in excess of ~~contract liabilities is included in “Other long-term obligations” in~~$80 million for the ~~Consolidated Balance Sheets.~~nine months ended September 30, 2022.

See Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements ~~included in Item 1. 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, ~~2021~~2022 and December 31, ~~2020,~~2021, our accounts receivable of ~~$2,181.7~~$2,510.6 million and ~~$1,922.1~~$2,204.5 million, respectively, were recorded net of allowances for credit losses of ~~$22.6~~$25.3 million and ~~$18.0~~$23.5 million, respectively. The increase in our allowance for credit losses was ~~predominantly~~ 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 ~~evaluation of a specific outstanding receivable within our United States industrial services segment~~allowance for credit losses during the ~~second quarter~~nine months of ~~2021.~~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. ~~The provision~~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, ~~amounted~~which is estimated based on our historical credit loss experience, could increase by up to approximately ~~$5.8 million and $3.4 million for the nine months ended September 30, 2021 and 2020, respectively.~~

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$13 million.

Insurance Liabilities

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higher insurance costs and deductibles. Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by ~~$3.0~~$14.7 million at September 30, ~~2021~~2022 compared to December 31, ~~2020,~~2021, partially as a result of greater potential exposures ~~including the impact~~and an increase in certain of ~~acquired companies.~~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 ~~$17.5~~$19.3 million of additional expense for the nine months ended September 30, ~~2021.~~2022.

Income Taxes

~~Deferred income tax assets and liabilities are recognized for the expected future tax consequences~~As of temporary differences between the financial statement and income tax bases of assets and liabilities as well as for net operating loss and tax credit carryforwards. Deferred income taxes are valued using enacted tax rates expected to be in effect when income taxes are paid or recovered, with the effect of a change in tax laws or rates recognized in the statement of operations in the period in which such change is enacted. 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. Deferred income taxes are recorded net of a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In making such determination, we consider all available evidence, including projections of future taxable income, tax-planning strategies, and recent results of operations.

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had net deferred income tax liabilities of ~~$29.6~~$52.4 million and ~~$29.4~~$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 ~~$228.0~~$213.8 million and ~~$217.1~~$212.3 million of deferred income tax assets as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The total valuation allowance on deferred income tax assets ~~primarily related to state net operating loss carryforwards,~~ was approximately ~~$3.9~~$2.5 million as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~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

Goodwill

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had goodwill of ~~$888.3~~$916.8 million and ~~$851.8~~$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 1514 - Segment Information of the notes to consolidated financial statements. As of September 30, ~~2021,~~2022, approximately ~~17.9%~~19.2% of our goodwill related to our United States electrical construction and facilities services segment, approximately ~~34.1%~~34.4% related to our United States mechanical construction and facilities services segment, approximately ~~35.2%~~34.0% related to our United States building services segment, and approximately ~~12.8%~~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.

~~Table of Contents~~

We did not identify any impairment indicators during the three and nine months ended September 30, 2021 that would necessitate an interim impairment assessment of our goodwill and no impairment of our goodwill was recognized during such periods. However, our operations were significantly impacted by the COVID-19 pandemic starting with the second quarter of 2020. During the same period, the demand for oil and other refined products significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus, including various local, state, and national jurisdictional “shelter-in-place” orders. Further, other macroeconomic events during such period, including geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia, resulted in a significant drop in the price of crude oil. These negative factors created significant volatility and uncertainty in the markets in which our United States industrial services segment operates, resulting in a significant decrease in the demand for our service offerings. Consequently, in the second quarter of 2020, we revised our near-term revenue and operating margin expectations for such segment and concluded that a triggering event had occurred which indicated that it was more likely than not that its fair value was less than its carrying amount.

Based on the outcome of our second quarter 2020 interim goodwill impairment test, we concluded that the carrying amount of our United States industrial services segment exceeded its fair value by $225.5 million, resulting in the recognition of a non-cash goodwill impairment charge in that amount, which was included within our results of operations for the nine months ended September 30, 2020. We did not identify impairment indicators related to any other reporting unit that would have required an interim impairment assessment. Additionally, as described below, we subsequently (as of October 1, 2020) performed our annual impairment assessment of all reporting units and determined there was no incremental impairment of goodwill.

As of the date of our most recent impairment test (October 1, ~~2020)~~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 ~~$946.5~~$1,516.1 million, ~~$1,682.2~~$2,772.7 million, ~~$715.8~~$784.2 million, and ~~$18.9~~$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 ~~10.6%,~~ 10.4%~~, and 11.6%~~ for our United States construction segments and our United States building services segment, and 11.3% for our United States industrial services ~~segment, respectively.~~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 as of the date of our impairment test.~~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.

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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 ~~$63.3~~$103.6 million, ~~$115.9~~$185.5 million, ~~$69.9~~$74.5 million, and ~~$23.2~~$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 ~~$31.0~~$52.4 million, ~~$58.9~~$95.9 million, ~~$33.5~~$35.8 million, and ~~$9.7~~$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 ~~decreases in~~ estimated fair ~~values described above~~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, ~~such decreases~~a 10% decrease would cause the estimated fair value of ~~such~~this reporting unit to approximate its carrying value.

~~Table~~No impairment of ~~Contents~~

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, ~~2021~~2022 and December 31, ~~2020,~~2021, net identifiable intangible assets (primarily consisting of our ~~contract backlog,~~customer relationships, subsidiary trade names, developed technology/vendor network, ~~customer relationships,~~ and ~~subsidiary trade names)~~contract backlog) arising out of the acquisition of businesses were ~~$602.2~~$605.9 million and ~~$582.9~~$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 ~~of the trade name~~ 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 ~~fully~~ 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.

~~Given the negative market conditions disclosed above, we evaluated certain~~No impairment of our identifiable intangible assets ~~and~~or other long-lived assets for impairment during the second quarter of 2020. Such assets included those associated with the businesses in our United States industrial services segment. As a result of these assessments, during the quarter ended June 30, 2020, we recorded non-cash impairment charges of $7.3 million. We subsequently (as of October 1, 2020) performed our annual impairment assessment of all subsidiary trade names that are not subject to amortization and determined there was ~~no incremental impairment of these assets. Additionally, we have not identified any impairment indicators~~recognized during the three and nine months ended September 30, ~~2021 that would necessitate an interim impairment assessment of either our identifiable intangible assets or other long-lived assets,~~2022 and ~~no impairment of these assets was recognized during such 2021 periods.~~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, especially in consideration of the uncertainty created by the COVID-19 pandemic and its potential impact on the broader economy and our results of operations in future periods, particularly with respect to our United States industrial services segment.periods. Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future impairment ~~charges.~~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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We have not used any derivative financial instruments during the nine months ended September 30, ~~2021,~~2022, including trading or speculating on changes in interest rates or commodity prices of materials used in our business.

In an effort to mitigate inflation, the Federal Reserve has increased interest rates throughout the first nine months of 2022, and it is anticipated that interest rates will continue to rise in the near term. We are exposed to market risk for changes in interest rates for borrowings under the 2020 Credit Agreement, which provides for a revolving credit facility and a term loan. Borrowings under the 2020 Credit Agreement bear interest at variable ~~rates.~~rates and, as a result of the actions referenced above, such rates have increased throughout 2022. For further information on our outstanding debt and borrowing rates, refer to Note 7 - Debt of the notes to consolidated financial statements. As of September 30, ~~2021,~~2022, there were ~~no direct~~ borrowings of $170.0 million outstanding under the 2020 Revolving Credit ~~Facility; however,~~Facility and the balance of the 2020 Term Loan was ~~$270.6~~$256.7 million. ~~At the Company’s election, this instrument bears interest at either: (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar~~LIBOR (0.08% at September 30, 2021) plus 1.00% to 1.75%, based on certain financial tests. The base rate is determined by the greater of: (a) the prime commercial lending rate announced by Bank of Montreal from time to time (3.25% at September 30, 2021), (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%. The interest rate in effect at September 30, 2021 was 1.08%. 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. Based on the ~~$270.6~~$426.7 million of borrowings outstanding under the 2020 Credit Agreement, if overall interest rates were to increase by ~~100~~200 basis points, interest expense, net of income taxes, would increase by approximately ~~$2.0~~$6.2 million in the next twelve months. Conversely, if overall interest rates were to decrease by ~~100~~200 basis points, interest expense, net of income taxes, would decrease by approximately ~~$2.0~~$6.2 million in the next twelve months. The 2020 Credit Agreement expires on March 2, 2025.

At the end of 2021, one-week and two-month LIBOR were discontinued. It is expected that ~~a number~~the remaining maturities of ~~banks currently reporting information used to set~~ LIBOR will ~~stop doing so after 2021, which could either cause LIBOR~~continue to ~~stop publication or cause LIBOR to no longer~~ be ~~representative of the underlying market.~~published through June 2023. We believe our exposure to market risk associated with the discontinuation of LIBOR is limited asas: (a) our 2020 Credit Agreement contains provisions which allow for the use of alternate benchmark ~~rates. We~~rates, (b) we have not historically utilized the maturities that were discontinued in 2021 for any transaction, including borrowings under our 2020 Credit Agreement, and (c) we are not exposed to any other material contracts that reference LIBOR.

We are exposed to construction market risk and its potential related impact on accounts receivable or contract assets on uncompleted contracts. The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions. We continually monitor the creditworthiness of our customers and maintain on-going discussions with customers regarding contract status with respect to change orders and billing terms. Therefore, we believe we take appropriate action to manage market and other risks, but there is no assurance that we will be able to reasonably identify all risks with respect to the collectability of these assets. See also the previous ~~discussions~~discussion of ~~Revenue Recognition from Contracts with Customers and~~ Accounts Receivable and Allowance for Credit Losses under the heading ~~“Application of Critical~~“Critical Accounting ~~Policies”~~Policies and Estimates” in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at the end of the period. The resulting translation adjustments are recorded as accumulated other comprehensive (loss) income, a component of equity, in the Consolidated Balance Sheets. We believe our exposure to the effects that fluctuating foreign currencies may have on our consolidated results of operations is limited because our foreign operations primarily invoice customers and collect obligations in their respective local currencies. Additionally, expenses associated with these transactions are generally contracted and paid for in their same local currencies.

In addition, we are exposed to market risk of fluctuations in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in our construction, building services, and industrial services operations. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet of approximately ~~11,500~~12,800 vehicles. While we believe we can increase our contract prices to adjust for some price increases in commodities, there can be no assurance that such price increases, if they were to occur, would be recoverable. Additionally, our fixed price contracts generally do not allow us to adjust our prices and, as a result, increases in material costs could reduce our profitability with respect to projects in progress. Refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion regarding the impact of fluctuations in commodity and material prices on our results of operations for the nine months ended September 30, 2022.

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ITEM 4. CONTROLS AND PROCEDURES.

Based on an evaluation of our disclosure controls and procedures (as required by Rule 13a-15(b) of the Securities Exchange Act of 1934), our Chairman, President, and Chief Executive Officer, Anthony J. Guzzi, and our Executive Vice President and Chief Financial Officer, Mark A. Pompa, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) are effective as of the end of the period covered by this report.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. – OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.

~~ITEM 1A. RISK FACTORS.~~

~~There were no material changes during the three months ended September 30, 2021 to the risk factors identified in the Company's annual report for 2020 on Form 10-K, except as noted below.~~

~~Public health emergencies, epidemics, or pandemics, including the novel coronavirus, impact our business.~~ The impact of the global spread of COVID-19, and the responses of governments, businesses, and individuals to combat it, have caused significant volatility, uncertainty, and economic disruption, which has and will continue to adversely impact our operations and those of our customers and clients. In March 2020, the World Health Organization characterized COVID-19 as a global pandemic, and the President declared a national emergency concerning the COVID-19 outbreak. Government authorities in the United States and United Kingdom have at various times recommended or imposed certain social distancing, quarantine, and isolation measures to varying degrees, with many such measures impacting large portions of the population. These measures have included limitations on travel and mandatory cessation of certain business activities, some of which have been relaxed or adjusted and others of which remain in effect. Both the outbreak and the containment and mitigation measures resulted in serious adverse impacts on the economy, some of which are ongoing, and both the severity and duration of those impacts and the extent and pace of economic recovery are uncertain. The extent to which government stabilization efforts to date have and will continue to have a mitigating effect on these economic consequences is difficult to predict and the scope, scale, and effectiveness of any additional stimulus measures remains unknown.

Although we have established a pandemic response plan and related procedures, our workforce and ongoing operations have been, are, and may continue to be impacted by the COVID-19 pandemic. For example, we have experienced disruptions that have impacted our ability to perform our work. Such impacts include, but are not limited to, access restrictions and temporary job site shutdowns, reduced labor efficiency resulting from adherence to physical distancing and other enhanced safety protocols mandated at the majority of our worksite locations, and the deferral of maintenance and service projects by our customers. The extent to which the COVID-19 pandemic will continue to impact our business and results of operations remains highly uncertain and will be affected by a number of factors. These include the duration and extent of the pandemic; the duration and extent of containment and mitigation measures that continue to be imposed or recommended; the extent, duration, and effective execution of ongoing government stabilization and recovery efforts; the widespread adoption and long-term efficacy of vaccines and the availability and efficacy of other preventative treatments; the cost and disruption of mandatory testing that may be required of unvaccinated employees; the continued impact of the pandemic on economic activity, including on planning and funding for construction projects and our customers’ demand for our services; supply chain disruptions or commodity price volatility that could impact our and our vendors’ ability to source the supplies and materials needed to operate our business; our ability to effectively operate, including as a result of travel restrictions and mandatory business and facility closures; the ability of our customers to pay us for services rendered; any further closures of our and our customers’ offices and facilities; and any additional project delays or shutdowns. Customers may also slow down decision-making, delay planned work, or seek to terminate existing agreements. Any of these events could have a material adverse effect on our business, financial condition, results of operations, and/or stock price.

On September 8, 2021, President Biden directed the Occupational Safety and Health Administration to implement an emergency temporary standard (“ETS”) requiring employers with 100 or more employees to ensure their workforce is fully vaccinated or to require unvaccinated workers to produce a negative test result on at least a weekly basis. The ETS has not yet been issued and, as of the date of this report, many details of the testing requirements are unknown, including the requirements for testing, the types of tests that will be acceptable, and who will bear the costs of testing, including the costs of the tests and whether or not employees’ time to undergo testing will be compensated. The costs related to mandatory testing, however, will likely represent a substantial expense to the Company, which could have a material adverse effect on our business, financial condition, and/or results of operations to the extent that a significant portion of our workforce does not choose to become vaccinated.

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Additionally, as many of our employees continue to access our systems remotely, as a result of the COVID-19 pandemic and the associated business or facility closures or reduced or staggered in-person attendance, we may be subject to heightened security risks, including the risks of cyber-attacks. Further, if any of our key personnel are unable to perform their duties for a period of time, including as a result of illness, our results of operations could be adversely affected.

In addition, our business, financial condition, results of operations, and/or stock price could be adversely affected in the future by the effects of another epidemic or pandemic, or otherwise by the spread of contagious diseases other than COVID-19. Such effects could be similar to those of the COVID-19 pandemic or could impact our business in different ways, including supply-chain disruptions, restrictions on our ability to provide services in the regions affected, adverse impacts on our workforce, and impacts to the U.S. or global economy or financial markets generally.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table summarizes repurchases of our common stock made by us during the quarter ended September 30, ~~2021:~~2022:

Period
Total Number of
Shares Purchased (1) (2)
Average Price
Paid Per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs Approximate Dollar Value
of Shares That May Yet Be
Purchased Under
the Plans or Programs
July 1, 2021 to
July 31, 2021 — — — $107,924,737
August 1, 2021 to
August 31, 2021 170,814 118.36 170,814 $87,706,973
September 1, 2021 to
September 30, 2021 212,506 117.64 212,506 $62,706,987
Total 383,320 117.96 383,320


Period	Total Number of Shares Purchased (1) (2)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 1, 2022 to July 31, 2022	23,978	99.66	23,978	$593,701,818
August 1, 2022 to August 31, 2022	850,332	121.08	850,332	$490,746,485
September 1, 2022 to September 30, 2022	863,130	116.95	863,130	$389,799,870
Total	1,737,440	118.73	1,737,440

(1)In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock. Subsequently, the Board has from time to time increased the amount ~~of our common stock that we may repurchase~~authorized for repurchases under such program. Since the inception of the repurchase program, the Board has authorized us to repurchase up to ~~$1.15~~$2.15 billion of our outstanding common stock. As of September 30, ~~2021,~~2022, there remained authorization for us to repurchase approximately ~~$62.7~~$389.8 million of our shares. No shares have been repurchased by us since the program was announced other than pursuant to such program. ~~Subsequent~~Refer to ~~September 30, 2021,~~Note 10 - Common Stock of the ~~Board authorized us~~notes to consolidated financial statements for further information regarding our share repurchase ~~up to an additional $300.0 million of our outstanding common stock.~~ The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements, including provisions in our credit agreement placing limitations on such repurchases.program.

(2)Excludes ~~2,126~~529 shares surrendered to the Company by participants in our share-based compensation plans to satisfy minimum tax withholdings for common stock issued under such plans.

ITEM 4. MINE SAFETY DISCLOSURES.

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank

Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this quarterly report.

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ITEM 6. EXHIBITS.

EXHIBIT INDEX

Exhibit
No.

Description

Incorporated By Reference to or
Filed Herewith, as Indicated Below

3(a-1)

Restated Certificate of Incorporation of EMCOR filed December 15, 1994

Exhibit 3(a-5) to EMCOR’s Registration Statement on Form 10 as originally filed March 17, 1995 (“Form 10”)

3(a-2)

Amendment dated November 28, 1995 to the Restated Certificate of Incorporation of EMCOR

Exhibit 3(a-2) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 1995 (“1995 ~~Form10-K”~~Form 10-K”)

3(a-3)

Amendment dated February 12, 1998 to the Restated Certificate of Incorporation of EMCOR

Exhibit 3(a-3) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 1997 (“1997 Form 10-K”)

3(a-4)

Amendment dated January 27, 2006 to the Restated Certificate of Incorporation of EMCOR

Exhibit 3(a-4) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2005 (“2005 Form 10-K”)

3(a-5)

Amendment dated September 18, 2007 to the Restated Certificate of Incorporation of EMCOR

Exhibit A to EMCOR’s Proxy Statement dated August 17, 2007 for Special Meeting of Stockholders held September 18, 2007

3(b)

Second Amended and Restated By-Laws ~~and Amendments thereto~~of EMCOR

Exhibit ~~3(b)~~3.1 to EMCOR’s ~~Annual~~ Report on Form ~~10-K for the year ended December 31, 2016 (“2016 Form 10-K”)~~ 8-K (Date of Report October 25, 2022)

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Anthony J. Guzzi, the Chairman, President and Chief Executive Officer

Filed herewith

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Mark A. Pompa, the Executive Vice President and Chief Financial Officer

Filed herewith

32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chairman, President and Chief Executive Officer

Furnished

32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Executive Vice President and Chief Financial Officer

Furnished

95.1

Information concerning mine safety violations or other regulatory matters

Filed herewith

101

The following materials from EMCOR Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2021,~~2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Equity and (vi) the Notes to Consolidated Financial Statements.

Filed

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

Filed

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October ~~28, 2021~~27, 2022


			EMCOR GROUP, INC.
			(Registrant)

BY:			/s/ ANTHONY J. GUZZI
			Anthony J. Guzzi
			Chairman, President and Chief Executive Officer (Principal Executive Officer)

BY:			/s/ MARK A. POMPA
			Mark A. Pompa
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)

BY:			/s/ JASON R. NALBANDIAN
			Jason R. Nalbandian
			Vice President and Chief Accounting Officer (Principal Accounting Officer)

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