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, 2019~~March 31, 2020



☐	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 24, 2019: 56,153,125~~April 27, 2020: 54,846,251 shares.

Table of Contents

[This Page Intentionally Left Blank]

Table of Contents

EMCOR Group, Inc.

~~INDEX~~TABLE OF CONTENTS



		Page No.
PART I. - Financial Information.
Item 1.	Financial Statements.
	Consolidated Balance Sheets - as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	1
	Condensed Consolidated Statements of Operations - three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	2
	Condensed Consolidated Statements of Comprehensive Income - three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	3
	Condensed Consolidated Statements of Cash Flows - ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	4
	Condensed Consolidated Statements of Equity - three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	5
	~~Condensed Consolidated Statements of Equity - nine months ended September 30, 2019 and 2018~~	6
	Notes to Consolidated Financial Statements	76
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	2821
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	4335
Item 4.	Controls and Procedures.	4336
PART II. - Other Information.
Item 1.	Legal Proceedings.	37
Item 1A.	Risk Factors.	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	44
~~Item 4.~~	~~Mine Safety Disclosures.~~	4438
Item 6.	Exhibits.	4438

Table of Contents

FORWARD-LOOKING STATEMENTS

Certain information included in this report, or in other materials we have filed or will file with the Securities and Exchange Commission (the “SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Act”). Such statements are being made pursuant to the 1995 Act and with the intention of obtaining the benefit of the “Safe Harbor” provisions of the 1995 Act. Forward-looking statements are based on information available to us and our perception of such information as of the date of this report and our current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They 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 in connection with a discussion of our future operating or financial performance, and other aspects of our business, including market share growth, gross profit, project mix, projects with varying profit margins, selling, general and administrative expenses, and trends in our business and other characterizations of future events or circumstances. Any or all of the forward-looking statements included in this report and in any other reports or public statements made by us are only predictions and are subject to risks, uncertainties, and assumptions, including, but not limited to adverse effects of general economic conditions, changes in the political environment, changes in the specific markets for our services, adverse business conditions, availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity, mix of business, the impact of the 2020 ransomware attack, and the impact of the COVID-19 pandemic on our revenue and operations. These risks and uncertainties are discussed 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/or our Form 10-K for the year ended December 31, 2019 filed with the SEC and available at www.sec.gov and www.emcorgroup.com. Such risks, uncertainties, and assumptions are difficult to predict, beyond our control and may turn out to be inaccurate, causing actual results to differ materially from those that might be anticipated (whether expressly or implied) from our forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted.

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, 2019 (Unaudited)			December 31, 2018			March 31, 2020 (Unaudited)			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	368,073		$	363,907		$	347,092		$	358,818
Accounts receivable, less allowance for doubtful accounts of $15,095 and $15,361, respectively	1,926,765			1,773,620
Accounts receivable, less allowance for credit losses of $19,993 and $14,466, respectively							2,055,483			2,030,813
Contract assets	179,005			158,243			195,265			177,830
Inventories	38,721			42,321			35,387			40,446
Prepaid expenses and other	45,549			48,116			52,161			51,976
Total current assets	2,558,113			2,386,207			2,685,388			2,659,883
Investments, notes and other long-term receivables	1,478			2,899
Property, plant and equipment, net	149,023			134,351			157,848			156,187
Operating lease right-of-use assets	232,996			—			237,796			245,471
Goodwill	1,019,590			990,887			1,064,853			1,063,911
Identifiable intangible assets, net	482,785			488,286			597,897			611,444
Other assets	88,736			86,177			91,765			93,462
Total assets	$	4,532,721		$	4,088,807		$	4,835,547		$	4,830,358
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt and finance lease liabilities	$	18,196		$	16,013		$	10,360		$	18,092
Accounts payable	584,824			652,091			592,576			665,402
Contract liabilities	565,957			552,290			590,873			623,642
Accrued payroll and benefits	387,351			343,069			301,878			382,573
Other accrued expenses and liabilities	185,414			170,935			237,973			195,757
Operating lease liabilities, current	51,632			—			52,722			53,144
Total current liabilities	1,793,374			1,734,398			1,786,382			1,938,610
Borrowings under revolving credit facility	—			25,000			200,000			50,000
Long-term debt and finance lease liabilities	247,837			254,764			294,181			244,139
Operating lease liabilities, long-term	193,502			—			198,492			204,950
Other long-term obligations	322,197			333,204			328,898			334,879
Total liabilities	2,556,910			2,347,366			2,807,953			2,772,578
Equity:
EMCOR Group, Inc. stockholders’ equity:
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, 60,287,296 and 60,123,184 shares issued, respectively	603			601
Common stock, $0.01 par value, 200,000,000 shares authorized, 60,460,947 and 60,359,252 shares issued, respectively							605			604
Capital surplus	30,786			21,103			34,745			32,274
Accumulated other comprehensive loss	(87,370		)	(87,662		)	(91,722		)	(89,288		)
Retained earnings	2,285,083			2,060,440			2,436,305			2,367,481
Treasury stock, at cost 4,139,421 shares	(253,937		)	(253,937		)
Treasury stock, at cost 5,623,176 and 4,139,421 shares, respectively							(352,985		)	(253,937		)
Total EMCOR Group, Inc. stockholders’ equity	1,975,165			1,740,545			2,026,948			2,057,134
Noncontrolling interests	646			896			646			646
Total equity	1,975,811			1,741,441			2,027,594			2,057,780
Total liabilities and equity	$	4,532,721		$	4,088,807		$	4,835,547		$	4,830,358

See Notes to Consolidated Financial Statements.

Table of Contents

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,
2019 2018 2019 2018
Revenues $ 2,287,741
$ 2,047,049
$ 6,770,671
$ 5,901,323
Cost of sales 1,951,754
1,737,710
5,779,550
5,032,021
Gross profit 335,987
309,339
991,121
869,302
Selling, general and administrative expenses 220,119
197,334
652,536
578,266
Restructuring expenses 119
229
567
693
Impairment loss on identifiable intangible assets —
—
—
907
Operating income 115,749
111,776
338,018
289,436
Net periodic pension (cost) income 381
615
1,187
2,069
Interest expense, net (2,678 ) (2,736 ) (8,732 ) (8,011 )
Income from continuing operations before income taxes 113,452
109,655
330,473
283,494
Income tax provision 31,618
29,711
92,257
76,873
Income from continuing operations 81,834
79,944
238,216
206,621
Loss from discontinued operation, net of income taxes —
(523 ) —
(1,010 )
Net income including noncontrolling interests 81,834
79,421
238,216
205,611
Less: Net income attributable to noncontrolling interests —
(48 ) —
(48 )
Net income attributable to EMCOR Group, Inc. $ 81,834
$ 79,373
$ 238,216
$ 205,563

Basic earnings (loss) per common share:
From continuing operations attributable to EMCOR Group, Inc. common stockholders $ 1.46
$ 1.37
$ 4.24
$ 3.54
From discontinued operation —
(0.01 ) —
(0.02 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 1.46
$ 1.36
$ 4.24
$ 3.52
Diluted earnings (loss) per common share:
From continuing operations attributable to EMCOR Group, Inc. common stockholders $ 1.45
$ 1.36
$ 4.22
$ 3.52
From discontinued operation —
(0.01 ) —
(0.02 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 1.45
$ 1.35
$ 4.22
$ 3.50

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



	Three months ended March 31,
	2020			2019
Revenues	$	2,299,832		$	2,158,728
Cost of sales	1,966,771			1,849,974
Gross profit	333,061			308,754
Selling, general and administrative expenses	226,997			206,169
Restructuring expenses	69			275
Operating income	105,995			102,310
Net periodic pension (cost) income	742			406
Interest expense, net	(2,488		)	(2,823		)
Income before income taxes	104,249			99,893
Income tax provision	28,584			27,483
Net income	$	75,665		$	72,410

Basic earnings per common share	$	1.35		$	1.29

Diluted earnings per common share	$	1.35		$	1.28

Dividends declared per common share	$	0.08		$	0.08

See Notes to Consolidated Financial Statements.

Table of Contents

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 March 31,
	2019			2018			2019			2018			2020			2019
Net income including noncontrolling interests	$	81,834		$	79,421		$	238,216		$	205,611
Net income													$	75,665		$	72,410
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(983		)	(289		)	(1,280		)	(669		)	(2,984		)	611
Post retirement plans, amortization of actuarial loss included in net income ⁽¹⁾	509			573			1,572			1,553			550			535
Other comprehensive (loss) income	(474		)	284			292			884			(2,434		)	1,146
Comprehensive income	81,360			79,705			238,508			206,495			$	73,231		$	73,556
Less: Comprehensive income attributable to noncontrolling interests	—			(48		)	—			(48		)
Comprehensive income attributable to EMCOR Group, Inc.	$	81,360		$	79,657		$	238,508		$	206,447

_________


(1)	Net of tax of $0.1 million for each of the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019~~, and net of tax of $0.4 million and $0.7 million for the nine months ended September 30, 2019 and 2018, respectively.~~.

See Notes to Consolidated Financial Statements.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)(Unaudited)


	Nine months ended September 30,						Three months ended March 31,
	2019			2018			2020			2019
Cash flows - operating activities:
Net income including noncontrolling interests	$	238,216		$	205,611
Adjustments to reconcile net income to net cash provided by operating activities:
Net income							$	75,665		$	72,410
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	32,412			28,685			11,767			10,585
Amortization of identifiable intangible assets	34,500			31,482			14,747			11,610
Provision for doubtful accounts	1,621			261
Provision for (recovery of) credit losses							2,614			(673		)
Deferred income taxes	(913		)	4,685			4,375			2,496
Excess tax benefits from share-based compensation	(601		)	(1,065		)	(157		)	(499		)
Equity loss (income) from unconsolidated entities	1,213			(247		)
Non-cash expense from contingent consideration arrangements	1,203			186
Non-cash expense for impairment of identifiable intangible assets	—			907
Non-cash share-based compensation expense	8,840			8,502			3,291			3,557
Distributions from unconsolidated entities	916			2,442
Other reconciling items	364			446			199			467
Changes in operating assets and liabilities, excluding the effect of businesses acquired	(140,850		)	(216,003		)	(191,314		)	(157,388		)
Net cash provided by operating activities	176,921			65,892
Net cash used in operating activities							(78,813		)	(57,435		)
Cash flows - investing activities:
Payments for acquisitions of businesses, net of cash acquired	(79,984		)	(25,710		)	(2,582		)	(31,124		)
Proceeds from sale of property, plant and equipment	1,612			915
Proceeds from sale or disposal of property, plant and equipment							196			1,023
Purchase of property, plant and equipment	(35,829		)	(28,674		)	(12,035		)	(13,113		)
Investments in and advances to unconsolidated entities	(794		)	(3,484		)	—			(794		)
Distributions from unconsolidated entities	38			82
Net cash used in investing activities	(114,957		)	(56,871		)	(14,421		)	(44,008		)
Cash flows - financing activities:
Proceeds from revolving credit facility							200,000			—
Repayments of revolving credit facility	(25,000		)	—			(50,000		)	—
Proceeds from long-term debt							300,000			—
Repayments of long-term debt and debt issuance costs	(11,400		)	(11,434		)	(257,549		)	(3,800		)
Repayments of finance lease liabilities	(3,357		)	(1,050		)	(1,277		)	(1,053		)
Dividends paid to stockholders	(13,458		)	(14,036		)	(4,500		)	(4,480		)
Repurchase of common stock	—			(90,804		)	(99,048		)	—
Taxes paid related to net share settlements of equity awards	(3,771		)	(3,745		)	(2,492		)	(3,735		)
Issuance of common stock under employee stock purchase plan	4,501			4,286			1,638			1,323
Payments for contingent consideration arrangements	(3,589		)	(3,300		)	(653		)	(23		)
Distributions to noncontrolling interests	(250		)	—			—			(40		)
Net cash used in financing activities	(56,324		)	(120,083		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,047		)	(1,985		)
Increase (decrease) in cash, cash equivalents and restricted cash	3,593			(113,047		)
Cash, cash equivalents and restricted cash at beginning of year ⁽¹⁾	366,214			469,388
Cash, cash equivalents and restricted cash at end of period ⁽²⁾	$	369,807		$	356,341
Supplemental cash flow information:
Cash paid for:
Interest	$	9,891		$	9,078
Income taxes	$	94,514		$	95,330
Net cash provided by (used in) financing activities							86,119			(11,808		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash							(4,678		)	1,298
Decrease in cash, cash equivalents, and restricted cash							(11,793		)	(111,953		)
Cash, cash equivalents, and restricted cash at beginning of year ⁽¹⁾							359,920			366,214
Cash, cash equivalents, and restricted cash at end of period ⁽²⁾							$	348,127		$	254,261

_________


(1)	Includes ~~$2.3~~$1.1 million and ~~$2.0~~$2.3 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, ~~2018~~2019 and ~~2017,~~2018, respectively.


(2)	Includes ~~$1.7~~$1.0 million and ~~$2.4~~$2.2 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

See Notes to Consolidated Financial Statements.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

~~For the three months ended September 30, 2018 and 2019~~

~~(In thousands)(Unaudited)~~

EMCOR Group, Inc. Stockholders
Total
Common
stock

Capital
surplus

Accumulated other comprehensive loss ⁽¹⁾

Retained
earnings

Treasury
stock

Noncontrolling
interests
Balance, June 30, 2018 $ 1,735,133
$ 600
$ 13,054
$ (93,600 ) $ 1,912,430
$ (98,201 ) $ 850
Net income including noncontrolling interests 79,421
—
—
—
79,373
—
48
Other comprehensive income 284
—
—
284
—
—
—
Common stock issued under employee stock purchase plan 1,528
1
1,527
—
—
—
—
Common stock dividends (4,655 ) —
35
—
(4,690 ) —
—
Repurchase of common stock (35,131 ) —
—
—
—
(35,131 ) —
Share-based compensation expense 2,546
—
2,546
—
—
—
—
Balance, September 30, 2018 $ 1,779,126
$ 601
$ 17,162
$ (93,316 ) $ 1,987,113
$ (133,332 ) $ 898
Balance, June 30, 2019 $ 1,894,831
$ 603
$ 26,640
$ (86,896 ) $ 2,207,775
$ (253,937 ) $ 646
Net income including noncontrolling interests 81,834
—
—
—
81,834
—
—
Other comprehensive loss (474 ) —
—
(474 ) —
—
—
Tax withholding for common stock issued under share-based compensation plans (36 ) —
(36 ) —
—
—
—
Common stock issued under employee stock purchase plan 1,532
—
1,532
—
—
—
—
Common stock dividends (4,491 ) —
35
—
(4,526 ) —
—
Share-based compensation expense 2,615
—
2,615
—
—
—
—
Balance, September 30, 2019 $ 1,975,811
$ 603
$ 30,786
$ (87,370 ) $ 2,285,083
$ (253,937 ) $ 646

~~_________~~


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

~~See Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~For the nine months ended September 30, 2018 and 2019~~

(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			Total			Common stock		Capital surplus			Accumulated other comprehensive loss ⁽¹⁾			Retained earnings			Treasury stock			Noncontrolling interests
Balance, December 31, 2017	$	1,674,117		$	599	$	8,005		$	(94,200	)	$	1,796,556		$	(37,693	)	$	850
Net income including noncontrolling interests	205,611			—		—			—			205,563			—			48
Balance, December 31, 2018																					$	1,741,441		$	601	$	21,103		$	(87,662	)	$	2,060,440		$	(253,937	)	$	896
Net income																					72,410			—		—			—			72,410			—			—
Other comprehensive income	884			—		—			884			—			—			—			1,146			—		—			1,146			—			—			—
Common stock issued under share-based compensation plans																					—			1		(1		)	—			—			—			—
Tax withholding for common stock issued under share-based compensation plans																					(3,735		)	—		(3,735		)	—			—			—			—
Common stock issued under employee stock purchase plan																					1,323			—		1,323			—			—			—			—
Common stock dividends																					(4,480		)	—		44			—			(4,524		)	—			—
Distributions to noncontrolling interests																					(40		)	—		—			—			—			—			(40		)
Share-based compensation expense																					3,557			—		3,557			—			—			—			—
Balance, March 31, 2019																					$	1,811,622		$	602	$	22,291		$	(86,516	)	$	2,128,326		$	(253,937	)	$	856
Balance, December 31, 2019																					$	2,057,780		$	604	$	32,274		$	(89,288	)	$	2,367,481		$	(253,937	)	$	646
Net income																					75,665			—		—			—			75,665			—			—
Other comprehensive loss																					(2,434		)	—		—			(2,434		)	—			—			—
Cumulative-effect adjustment ⁽²⁾	(854		)	—		—			—			(854		)	—			—			(2,307		)	—		—			—			(2,307		)	—			—
Common stock issued under share-based compensation plans	—			1		(1		)	—			—			—			—			1			1		—			—			—			—			—
Tax withholding for common stock issued under share-based compensation plans	(3,745		)	—		(3,745		)	—			—			—			—			(2,492		)	—		(2,492		)	—			—			—			—
Common stock issued under employee stock purchase plan	4,286			1		4,285			—			—			—			—			1,638			—		1,638			—			—			—			—
Common stock dividends	(14,036		)	—		116			—			(14,152		)	—			—			(4,500		)	—		34			—			(4,534		)	—			—
Repurchase of common stock	(95,639		)	—		—			—			—			(95,639		)	—			(99,048		)	—		—			—			—			(99,048		)	—
Share-based compensation expense	8,502			—		8,502			—			—			—			—			3,291			—		3,291			—			—			—			—
Balance, September 30, 2018	$	1,779,126		$	601	$	17,162		$	(93,316	)	$	1,987,113		$	(133,332	)	$	898
Balance, December 31, 2018	$	1,741,441		$	601	$	21,103		$	(87,662	)	$	2,060,440		$	(253,937	)	$	896
Net income including noncontrolling interests	238,216			—		—			—			238,216			—			—
Other comprehensive income	292			—		—			292			—			—			—
Common stock issued under share-based compensation plans	—			2		(2		)	—			—			—			—
Tax withholding for common stock issued under share-based compensation plans	(3,771		)	—		(3,771		)	—			—			—			—
Common stock issued under employee stock purchase plan	4,501			—		4,501			—			—			—			—
Common stock dividends	(13,458		)	—		115			—			(13,573		)	—			—
Distributions to noncontrolling interests	(250		)	—		—			—			—			—			(250		)
Share-based compensation expense	8,840			—		8,840			—			—			—			—
Balance, September 30, 2019	$	1,975,811		$	603	$	30,786		$	(87,370	)	$	2,285,083		$	(253,937	)	$	646
Balance, March 31, 2020																					$	2,027,594		$	605	$	34,745		$	(91,722	)	$	2,436,305		$	(352,985	)	$	646

_________


(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 ~~606, “Revenue from Contracts with Customers.”~~326.

See Notes to Consolidated Financial Statements.

Table of Contents

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 ~~the Quarterly Report on~~ 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 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 reflect certain reclassifications of prior year amounts from our United States mechanical construction and facilities services segment to our United States industrial services segment due to changes in our internal reporting structure.

The results of operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2019~~2020.

NOTE 2 New Accounting Pronouncements

On January 1, ~~2019,~~2020, we adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases continue to be recognized in a manner similar to previous accounting guidance. We adopted this pronouncement utilizing the transition practical expedient added by the FASB, which eliminated the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption. The adoption of this accounting pronouncement resulted in the recognition of operating lease right-of-use assets and associated lease liabilities on our balance sheet of $220.2 million and $227.1 million, respectively, as of January 1, 2019. Additional required disclosures have been included within Note 14 - Leases of the notes to consolidated financial statements. Such adoption did not have an impact on our liquidity, results of operations or our compliance with the various covenants contained within our 2016 Credit Agreement as described in further detail within Note 8 - Debt of the notes to consolidated financial statements.

On January 1, 2019, we adopted the accounting pronouncement issued by the FASB related to the reporting of certain items in accumulated other comprehensive income (loss) (“AOCI”). This guidance provides entities the option to reclassify to retained earnings certain tax effects stranded in AOCI as a result of tax reform. As part of our adoption of this accounting pronouncement, we elected not to reclassify the stranded tax effects related to the retirement plans of our United States subsidiaries as such amounts are immaterial. Tax effects remaining in AOCI will be released upon liquidation of each individual retirement plan.

~~In June 2016, an accounting pronouncement was issued by the FASB~~, which changes the way in which entities estimate and present credit losses for most financial assets, including accounts ~~receivable.~~receivable and contract assets. This pronouncement replaces the previous incurred loss model with an expected credit loss model that requires consideration of a broader range of information when estimating expected credit losses over the lifetime of an asset. This guidance requires entities to estimate expected credit losses by considering forecasts of future economic conditions in addition to information about past events and current conditions. The cumulative effect of applying the new guidance was recorded as a reduction to retained earnings in the amount of $2.3 million, net of tax.

In accordance with the guidance described above, we maintain an allowance for credit losses, which represents the portion of our financial assets (accounts receivable and contract assets) that we do not expect to collect over the contractual life of such assets. Credit 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. A considerable amount of judgment is required in determining expected credit losses. Relevant factors 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. At March 31, 2020 and December 31, 2019, our allowance for credit losses was $20.0 million and $14.5 million, respectively. Our allowance for credit losses increased based on our evaluation of forecasts of future economic conditions and the expected impact on customer collections. Allowances for credit losses are based on the best facts available and are re-evaluated and adjusted on a regular basis as additional information is received. Negative macroeconomic trends, including the impact of COVID-19, could result in an increase in our credit losses if we experience delays in the payment of outstanding receivables or if future economic conditions differ from our forecasts.

The change in the allowance for credit losses for the three months ended March 31, 2020 was as follows (in thousands):



Balance at December 31, 2019	$	14,466
Cumulative-effect adjustment	3,150
Provision for credit losses	2,614
Amounts written off against the allowance	(237		)
Balance at March 31, 2020	$	19,993

In December 2019, an accounting pronouncement was issued by the 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 pronouncement is effective for annual and interim periods beginning after December 15, ~~2019,~~2020, with early adoption permitted. ~~In preparation for adoption, we have substantially completed~~Certain aspects of this standard must be applied retrospectively while other aspects are to be applied on a ~~process~~modified retrospective basis through a cumulative-effect adjustment to ~~identify and group financial assets with similar characteristics into collective pools. We have additionally begun implementing processes and internal controls~~retained earnings as of the beginning of the year of adoption. The Company intends to identify information, including macroeconomic forecasts and key credit indicators, relevant to estimating expected credit losses. As a result, we are in the process of quantifying the impact that the adoption ofadopt this accounting pronouncement ~~will have~~on January 1, 2021, and we are currently evaluating the potential impact on our financial position and/or results of operations.

Table of Contents

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 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) collectibility 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,

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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

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 collectibility 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.

(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~~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.

Table of Contents

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,

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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

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.

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,~~March 31, 2020 and 2019, there were no significant amounts of revenue recognized during the period related to performance obligations satisfied in prior periods. For the three and nine months ended September 30, 2018, we recognized revenue of $6.3 million associated with the final settlement of contract value for two projects which were completed in prior periods. In addition, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ there were no significant reversals of revenue recognized associated with the revision of transaction prices.

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

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.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

(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.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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

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.

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 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.

Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, there were no changes in total estimated costs that had a significant impact on our operating results. During the three and nine months ended September 30, 2018, we recognized losses of $4.7 million and $5.5 million, respectively, related to a change in total estimated costs on a transportation project within our United States electrical construction and facilities services segment, resulting in part from contract scope issues. ThereIn addition, there were no significant losses recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

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.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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

The following tables provide further disaggregation of our revenues by categories we use to evaluate our financial performance within each of our reportable segments for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (in thousands):



	For the three months ended March 31,
	2020			% of Total		2019			% of Total
United States electrical construction and facilities services:
Commercial market sector	$	242,841		46	%	$	269,441		51	%
Institutional market sector	41,518			8	%	22,345			4	%
Hospitality market sector	5,082			1	%	6,841			1	%
Manufacturing market sector	120,372			23	%	98,803			19	%
Healthcare market sector	20,646			4	%	17,615			3	%
Transportation market sector	44,180			8	%	58,139			11	%
Water and wastewater market sector	2,329			1	%	6,015			1	%
Short duration projects ⁽¹⁾	32,721			6	%	40,409			8	%
Service work	16,296			3	%	9,262			2	%
	525,985					528,870
Less intersegment revenues	(756		)			(800		)
Total segment revenues	$	525,229				$	528,070


	For the three months ended September 30,										For the three months ended March 31,
	2019			% of Total		2018			% of Total		2020			% of Total		2019			% of Total
United States electrical construction and facilities services:
United States mechanical construction and facilities services:
Commercial market sector	$	260,871		47	%	$	196,293		40	%	$	304,690		36	%	$	281,862		37	%
Institutional market sector	33,702			6	%	27,903			6	%	76,997			9	%	61,283			8	%
Hospitality market sector	2,243			1	%	9,860			2	%	7,714			1	%	13,648			2	%
Manufacturing market sector	121,488			22	%	100,563			20	%	115,582			14	%	98,763			13	%
Healthcare market sector	24,701			4	%	28,121			6	%	88,059			10	%	61,374			8	%
Transportation market sector	52,744			9	%	72,816			15	%	14,346			2	%	5,734			1	%
Water and wastewater market sector	3,709			1	%	4,194			1	%	40,513			5	%	43,211			6	%
Short duration projects ⁽¹⁾	42,296			7	%	38,452			8	%	97,202			12	%	99,936			13	%
Service work	14,174			3	%	8,147			2	%	90,893			11	%	89,466			12	%
	555,928					486,349					835,996					755,277
Less intersegment revenues	(1,291		)			(375		)			(1,884		)			(2,868		)
Total segment revenues	$	554,637				$	485,974				$	834,112				$	752,409

United States mechanical construction and facilities services:
Commercial market sector $ 293,202
33 % $ 287,350
38 %
Institutional market sector 94,886
11 % 77,676
10 %
Hospitality market sector 6,888
1 % 26,170
3 %
Manufacturing market sector 150,199
17 % 89,779
12 %
Healthcare market sector 84,418
10 % 55,843
7 %
Transportation market sector 7,855
1 % 3,072
1 %
Water and wastewater market sector 42,637
5 % 43,033
6 %
Short duration projects ⁽¹⁾
91,897
10 % 72,388
9 %
Service work 100,196
12 % 107,168
14 %
872,178

762,479

Less intersegment revenues (2,990 )

(2,984 )
Total segment revenues $ 869,188

$ 759,495

________


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

1110

Table of Contents

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,
2019 % of
Total 2018 % of
Total
United States building services:
Commercial site-based services $ 133,179
25 % $ 120,917
26 %
Government site-based services 42,412
8 % 52,332
11 %
Mechanical services 333,696
63 % 276,722
58 %
Energy services 22,835
4 % 23,730
5 %
Total segment revenues $ 532,122

$ 473,701

United States industrial services:

Field services $ 194,569
83 % $ 181,873
80 %
Shop services 39,597
17 % 45,440
20 %
Total segment revenues $ 234,166

$ 227,313

Total United States operations $ 2,190,113
$ 1,946,483

United Kingdom building services:
Service work $ 49,098
50 % $ 51,815
52 %
Projects & extras 48,530
50 % 48,751
48 %
Total segment revenues $ 97,628

$ 100,566

Total worldwide operations $ 2,287,741

$ 2,047,049

For the nine months ended September 30,
2019
% of
Total
2018
% of
Total
United States electrical construction and facilities services:
Commercial market sector $ 816,602
49 % $ 579,958
41 %
Institutional market sector 87,643
5 % 86,971
6 %
Hospitality market sector 11,930
1 % 22,665
2 %
Manufacturing market sector 338,448
20 % 280,375
20 %
Healthcare market sector 63,725
4 % 103,307
7 %
Transportation market sector 162,538
10 % 216,591
15 %
Water and wastewater market sector 14,342
1 % 14,947
1 %
Short duration projects ⁽¹⁾
124,152
8 % 93,177
6 %
Service work 35,439
2 % 25,151
2 %
1,654,819
1,423,142

Less intersegment revenues (2,710 ) (2,874 )
Total segment revenues $ 1,652,109
$ 1,420,268

~~________~~


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

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

NOTE 3 Revenue from Contracts with Customers - (Continued)



	For the three months ended March 31,
	2020		% of Total		2019		% of Total
United States building services:
Commercial site-based services	$	143,438	28	%	$	155,978	30	%
Government site-based services	42,917		8	%	48,791		10	%
Mechanical services	303,391		59	%	274,166		54	%
Energy services	28,337		5	%	33,144		6	%
Total segment revenues	$	518,083			$	512,079

For the nine months ended September 30,
2019 % of
Total 2018 % of
Total
United States mechanical construction and facilities services:
Commercial market sector $ 874,512
36 % $ 780,629
36 %
Institutional market sector 232,843
9 % 219,830
10 %
Hospitality market sector 28,807
1 % 73,888
3 %
Manufacturing market sector 386,853
16 % 271,133
13 %
Healthcare market sector 220,445
9 % 181,669
8 %
Transportation market sector 22,880
1 % 13,002
1 %
Water and wastewater market sector 131,385
5 % 122,275
6 %
Short duration projects ⁽¹⁾
273,001
11 % 223,200
10 %
Service work 282,094
12 % 291,694
13 %
2,452,820
2,177,320

Less intersegment revenues (8,137 ) (9,193 )
Total segment revenues $ 2,444,683
$ 2,168,127

~~________~~


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

For the nine months ended September 30,
2019 % of
Total 2018 % of
Total
United States building services:
Commercial site-based services $ 420,078
27 % $ 386,721
28 %
Government site-based services 133,990
8 % 162,888
12 %
Mechanical services 920,684
59 % 764,313
55 %
Energy services 93,147
6 % 75,564
5 %
Total segment revenues $ 1,567,899
$ 1,389,486



	For the three months ended March 31,
	2020		% of Total		2019		% of Total
United States industrial services:
Field services	$	269,756	87	%	$	216,770	84	%
Shop services	40,275		13	%	41,875		16	%
Total segment revenues	$	310,031			$	258,645

Total United States operations	$	2,187,455			$	2,051,203

United States industrial services:
Field services $ 664,188
84 % $ 486,362
80 %
Shop services 124,083
16 % 124,117
20 %
Total segment revenues $ 788,271
$ 610,479

Total United States operations $ 6,452,962
$ 5,588,360


									For the three months ended March 31,
									2020		% of Total		2019		% of Total
United Kingdom building services:
Service work	$	160,561	51	%	$	162,088	52	%	$	55,106	49	%	$	54,634	51	%
Projects & extras	157,148		49	%	150,875		48	%	57,271		51	%	52,891		49	%
Total segment revenues	$	317,709			$	312,963			$	112,377			$	107,525

Total worldwide operations	$	6,770,671			$	5,901,323			$	2,299,832			$	2,158,728

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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

Contract Assets and Contract Liabilities

Accounts receivable are recognized in the period when our right to consideration is unconditional. Accounts receivable are recognized net of an allowance for ~~doubtful accounts.~~credit losses. A considerable amount of judgment is required in assessing the likelihood of realization of receivables.

The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our long-term 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 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 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.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 Revenue from Contracts with Customers - (Continued)

Contract liabilities from our long-term 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.

Net contract liabilities consisted of the following (in thousands):


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Contract assets, current	$	179,005		$	158,243		$	195,265		$	177,830
Contract assets, non-current	—			—			—			—
Contract liabilities, current	(565,957		)	(552,290		)	(590,873		)	(623,642		)
Contract liabilities, non-current	(2,025		)	(2,069		)	(2,051		)	(2,142		)
Net contract liabilities	$	(388,977	)	$	(396,116	)	$	(397,659	)	$	(447,954	)

The ~~$7.1~~$50.3 million decrease in net contract liabilities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was primarily attributable to a decrease in net contract liabilities on our uncompleted long-term construction contracts, partially as a result of the ~~timing~~completion or substantial completion of ~~billings~~certain large projects which were previously billed in advance pursuant to contract terms. The acquisition completed in the first quarter of 2020 did not have a significant impact on our ~~customers. Contract~~contract assets and contract ~~liabilities increased by approximately $6.2 million and $13.0 million, respectively, as a result of acquisitions made by us in 2019.~~liabilities. There was 0 significant impairment of contract assets recognized during either period presented.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

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


	September 30, 2019		% of Total		March 31, 2020		% of Total
Remaining performance obligations:
United States electrical construction and facilities services	$	1,095,254	27	%	$	1,032,611	23	%
United States mechanical construction and facilities services	2,190,556		54	%	2,601,659		59	%
United States building services	544,913		14	%	545,803		12	%
United States industrial services	83,478		2	%	109,192		3	%
Total United States operations	3,914,201		97	%	4,289,265		97	%
United Kingdom building services	120,887		3	%	134,634		3	%
Total worldwide operations	$	4,035,088	100	%	$	4,423,899	100	%

Our remaining performance obligations at ~~September 30, 2019~~March 31, 2020 were ~~$4.04~~$4.42 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.

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 due to the inherent substantial economic penalty that would be incurred by our customers upon cancellation. ~~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:
United States electrical construction and facilities services	$	999,218	$	96,036	$	842,643	$	189,968
United States mechanical construction and facilities services	1,758,285		432,271		1,996,744		604,915
United States building services	534,628		10,285		525,161		20,642
United States industrial services	83,478		—		109,192		—
Total United States operations	3,375,609		538,592		3,473,740		815,525
United Kingdom building services	80,841		40,046		99,059		35,575
Total worldwide operations	$	3,456,450	$	578,638	$	3,572,799	$	851,100

We believe our reported remaining performance obligations are firm and contract cancellations have not historically had a material adverse effect on us. However, the extent to which the COVID-19 pandemic may impact our remaining performance obligations is highly uncertain and will be affected by a number of factors that are difficult to predict. These include the duration and extent of the outbreak; the duration and extent of imposed or recommended containment and mitigation measures; the impact of the pandemic on economic activity, including on construction projects and our customers’ demand for our goods and services; any further closures of our customers’ offices and facilities; and any additional project delays or shutdowns.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

NOTE 4 Acquisitions of Businesses

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

~~During the first nine months of 2019,~~In January 2020, we acquired ~~five companies~~a company for ~~total consideration of $83.6 million. One~~an immaterial amount. This company provides ~~electrical contracting services in central Iowa~~building automation and controls solutions within the Northeastern region of the United States, and its results of operations have been included within our United States ~~electrical~~building services segment.

On November 1, 2019, we completed the acquisition of Batchelor & Kimball, Inc. (“BKI”), a leading full service provider of mechanical construction and ~~facilities services segment. Another company provides mechanical contracting services~~maintenance services. This acquisition strengthens our position and broadens our capabilities in ~~south-central~~the Southern and ~~eastern Texas~~Southeastern regions of the United States, and its results of operations have been included within our United States mechanical construction and facilities services segment. Under the terms of the transaction, we acquired 100% of BKI’s outstanding capital stock for total consideration of approximately $220.0 million. In connection with the acquisition of BKI, we acquired working capital of $29.8 million and other net assets of $4.9 million and have preliminarily ascribed $43.6 million to goodwill and $141.7 million to identifiable intangible assets. Goodwill is calculated as the excess of the consideration transferred over the fair value of the net assets acquired and represents the future economic benefits expected from this strategic acquisition. The weighted average amortization period for the identifiable intangible assets, which consist of a trade name, customer relationships, and contract backlog, is approximately 10.5 years.

In addition to BKI, during 2019, we completed six other acquisitions for total consideration of $85.3 million. Such companies include: (a) a company which provides electrical contracting services in central Iowa, the results of operations ~~for the remaining three companies~~of which have been included within our United States electrical construction and facilities services segment, (b) a company which provides mechanical contracting services in south-central and eastern Texas, the results of operations of which have been included within our United States mechanical construction and facilities services segment, and (c) four companies within our United States building services ~~segment. Of these three companies, one company provides~~segment which bolster our presence in geographies where we have existing operations and provide either mobile mechanical services ~~in the Southern region of the United States while the remaining two companies provide~~or building automation and controls ~~solutions in the Western region of the United States.~~solutions. In connection with these acquisitions, we acquired working capital of ~~$25.3~~

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 Acquisitions of Businesses - (Continued)

$25.3 million and other net assets of ~~$1.0~~$1.3 million and have preliminarily ascribed ~~$28.3~~$29.1 million to goodwill and ~~$29.0 million to identifiable intangible assets.~~

During calendar year 2018, we acquired four companies for total consideration of $71.6 million. Two companies provide mobile mechanical services, one within the Eastern region and the other within the Western region of the United States. The third company is a full service provider of mechanical services within the Southern region of the United States. The results of these three companies have been included in our United States building services segment. The fourth company provides electrical construction and maintenance services for industrial and commercial buildings in north Texas, and its results have been included in our United States electrical construction and facilities services segment. In connection with these acquisitions, we acquired working capital of $8.7 million and have preliminarily ascribed $26.3 million to goodwill and $36.6$29.6 million to identifiable intangible assets.

We expect that all of the goodwill acquired in connection with these acquisitions will be deductible for tax purposes. The purchase price allocations for the ~~businesses~~business acquired in ~~2019~~2020, BKI, and one of the other businesses acquired in ~~2018~~2019 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 remaining ~~three~~ businesses acquired in ~~2018~~2019 have been finalized with an insignificant impact.

~~NOTE 5 Disposition of Assets~~

Due to a historical pattern of losses in the construction operations of our United Kingdom segment and our negative assessment of construction market conditions in the United Kingdom, we ceased construction operations in the United Kingdom during the third quarter of 2014. The results of the construction operations of our United Kingdom segment for all periods are presented in the consolidated financial statements as discontinued operations.

~~No income or expense was recognized from the discontinued operation for the three and nine months ended September 30, 2019.~~

~~The results of discontinued operations for the three and nine months ended September 30, 2018 were as follows (in thousands):~~

For the three months ended September 30, 2018 For the nine months ended September 30, 2018
Revenues $ —
$ —
Loss from discontinued operation, net of income taxes $ (523 ) $ (1,010 )
Diluted loss per share from discontinued operation $ (0.01 ) $ (0.02 )

~~The loss from discontinued operations in 2018 was primarily due to legal costs related to the settlement of final contract balances on certain construction projects completed in prior years.~~

Included in the Consolidated Balance Sheet at December 31, 2018 were approximately $3.7 million of current liabilities associated with the discontinued operation, primarily consisting of contract retentions, contract warranty obligations and other accrued expenses. NaN significant liabilities remain as of September 30, 2019.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

NOTE 65 Earnings Per Share

Calculation of Basic and Diluted Earnings ~~(Loss)~~ per Common Share

The following tables summarize our calculation of Basic and Diluted Earnings ~~(Loss)~~ per Common Share (“EPS”) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (in thousands, except share and per share data):

For the three months ended September 30,
2019 2018
Numerator:
Income from continuing operations attributable to EMCOR Group, Inc. common stockholders $ 81,834
$ 79,896
Loss from discontinued operation, net of income taxes —
(523 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 81,834
$ 79,373
Denominator:
Weighted average shares outstanding used to compute basic earnings (loss) per common share 56,216,840
58,208,203
Effect of dilutive securities—Share-based awards 341,610
333,107
Shares used to compute diluted earnings (loss) per common share 56,558,450
58,541,310
Basic earnings (loss) per common share:
From continuing operations attributable to EMCOR Group, Inc. common stockholders $ 1.46
$ 1.37
From discontinued operation —
(0.01 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 1.46
$ 1.36
Diluted earnings (loss) per common share:
From continuing operations attributable to EMCOR Group, Inc. common stockholders $ 1.45
$ 1.36
From discontinued operation —
(0.01 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 1.45
$ 1.35

For the nine months ended September 30,
2019 2018
Numerator:
Income from continuing operations attributable to EMCOR Group, Inc. common stockholders $ 238,216
$ 206,573
Loss from discontinued operation, net of income taxes —
(1,010 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 238,216
$ 205,563
Denominator:
Weighted average shares outstanding used to compute basic earnings (loss) per common share 56,189,388
58,422,928
Effect of dilutive securities—Share-based awards 305,042
331,939
Shares used to compute diluted earnings (loss) per common share 56,494,430
58,754,867
Basic earnings (loss) per common share:
From continuing operations attributable to EMCOR Group, Inc. common stockholders $ 4.24
$ 3.54
From discontinued operation —
(0.02 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 4.24
$ 3.52
Diluted earnings (loss) per common share:
From continuing operations attributable to EMCOR Group, Inc. common stockholders $ 4.22
$ 3.52
From discontinued operation —
(0.02 )
Net income attributable to EMCOR Group, Inc. common stockholders $ 4.22
$ 3.50



	For the three months ended March 31,
	2020		2019
Numerator:
Net income available to common stockholders	$	75,665	$	72,410
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share	56,007,122		56,168,356
Effect of dilutive securities—Share-based awards	203,606		255,866
Shares used to compute diluted earnings per common share	56,210,728		56,424,222

Basic earnings per common share	$	1.35	$	1.29

Diluted earnings per common share	$	1.35	$	1.28

~~There were 0 anti-dilutive share-based awards for the three and nine months ended September 30, 2019 and the three months ended September 30, 2018.~~ The number of outstanding share-based awards that were excluded from the computation of diluted EPS for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2020 and 2019 because they would be anti-dilutive were ~~550.~~95,084 and 2,150, respectively.

NOTE 6 Inventories

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts (in thousands):



	March 31, 2020		December 31, 2019
Raw materials and construction materials	$	25,749	$	31,365
Work in process	9,638		9,081
Inventories	$	35,387	$	40,446

1714

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~NOTE 7 Inventories~~

~~Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts (in thousands):~~

September 30,
2019 December 31,
2018
Raw materials and construction materials $ 29,829
$ 30,006
Work in process 8,892
12,315
Inventories $ 38,721
$ 42,321

NOTE 87 Debt

Debt in the accompanying Consolidated Balance Sheets consisted of the following amounts (in thousands):


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Revolving credit facility	$	—		$	25,000		$	200,000		$	50,000
Term loan	258,228			269,620			300,000			254,431
Unamortized debt issuance costs	(2,175		)	(3,065		)	(4,720		)	(1,879		)
Finance lease obligations ⁽¹⁾	9,980			4,213			9,261			9,679
Other	—			9
Total debt	266,033			295,777			504,541			312,231
Less: current maturities	18,196			16,013			10,360			18,092
Total long-term debt	$	247,837		$	279,764		$	494,181		$	294,139

~~________~~


~~(1)~~	~~See Note 14 - Leases for further disclosure regarding finance lease obligations.~~

Credit Agreement

~~We have~~Until March 2, 2020, we had a credit agreement dated as of August 3, 2016, which ~~provides~~provided for a $900.0 million revolving credit facility (the “2016 Revolving Credit Facility”) and a $400.0 million term loan (the “2016 Term Loan”) (collectively referred to as the “2016 Credit Agreement”). On March 2, 2020, we amended and restated the 2016 Credit Agreement to provide for a $1.3 billion revolving credit facility (the “2020 Revolving Credit Facility”) and a $300.0 million term loan (the “2020 Term Loan”) (collectively referred to as the “2020 Credit Agreement”) expiring ~~August 3, 2021~~March 2, 2025. We may increase the ~~2016~~2020 Revolving Credit Facility to $~~1.3~~1.9 billion if additional lenders are identified and/or existing lenders are willing to increase their current commitments. We may allocate up to $~~300.0~~400.0 million of available capacity under the ~~2016~~2020 Revolving Credit Facility to letters of credit for our account or for the account of any of our subsidiaries. Obligations under the ~~2016~~2020 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets. The ~~2016~~2020 Credit Agreement contains various covenants providing for, among other things, maintenance of certain financial ratios and certain limitations on payment of dividends, common stock repurchases, investments, acquisitions, indebtedness, and capital expenditures. We were in compliance with all such covenants as of ~~September 30, 2019~~March 31, 2020 with respect to the 2020 Credit Agreement and, as of December 31, ~~2018.~~2019, with respect to the 2016 Credit Agreement. A commitment fee is payable on the average daily unused amount of the ~~2016~~2020 Revolving Credit Facility, which ranges from ~~0.15%~~0.10% to ~~0.30%~~0.25%, based on certain financial tests. The fee was ~~0.15%~~0.10% of the unused amount as of ~~September 30, 2019.~~March 31, 2020. Borrowings under the ~~2016~~2020 Credit Agreement bear interest at (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR ((0.87% and ~~2.04%~~0.99% at ~~September 30, 2019~~March 31, 2020) for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively) 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 ~~(5.00%~~(3.25% at ~~September 30, 2019)~~March 31, 2020), (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~~rates in effect at ~~September 30, 2019 was 3.04%.~~March 31, 2020 were 1.87% and 1.99% for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively. Fees for letters of credit issued under the ~~2016~~2020 Revolving Credit Facility range from ~~1.00%~~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. 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 and are included as part of interest expense. ~~The 2016~~We are required to make annual installment payments on the 2020 Term Loan, ~~previously required us to make~~with a principal payment of $7.5 million on December 31, 2020 and principal payments ~~of $5.0 million~~ on ~~the last day of March, June, September and~~ December 31 of each subsequent year ~~which commenced with~~in the ~~calendar quarter ended December 31, 2016. On December 30, 2016, we made a payment~~amount of $100.0 million, of which $5.0 million represented our required quarterly payment and $95.0 million represented a prepayment of outstanding principal. Such prepayment was applied against the remaining mandatory quarterly payments on a ratable basis. As a result, commencing with the calendar quarter ended March 31, 2017, our required quarterly payment has been reduced to $3.8$15.0 million. All unpaid principal and interest is due on ~~August 3, 2021.~~March 2, 2025. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the balance of the 2020 Term Loan and the 2016 Term Loan was ~~$258.2~~$300.0 million and ~~$269.6~~$254.4 million, respectively. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, we had approximately $~~109.0~~79.0 million and $109.0 million of letters of credit ~~outstanding.~~outstanding, respectively. There were 0$200.0 million in borrowings outstanding under the ~~2016~~2020 Revolving Credit Facility as of ~~September 30, 2019. There~~March 31, 2020, and there were ~~$25.0~~$50.0 million in borrowings outstanding under the 2016 Revolving Credit Facility as of December 31, ~~2018.~~2019.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

NOTE 98 Fair Value Measurements

We use a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, which gives the highest priority to quoted prices in active markets, is comprised of the following three levels:

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

Level 2 – Observable inputs, other than Level 1 inputs. Level 2 inputs would typically include quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 Fair Value Measurements - (Continued)

Level 3 – Prices or valuations that require inputs that are both significant to the measurement and unobservable.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (in thousands):


	Assets at Fair Value as of September 30, 2019								Assets at Fair Value as of March 31, 2020
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents ⁽¹⁾	$	368,073	$	—	$	—	$	368,073	$	347,092	$	—	$	—	$	347,092
Restricted cash ⁽²⁾	1,734		—		—		1,734		1,035		—		—		1,035
Deferred compensation plan assets ⁽³⁾	27,937		—		—		27,937		29,626		—		—		29,626
Total	$	397,744	$	—	$	—	$	397,744	$	377,753	$	—	$	—	$	377,753



	Assets at Fair Value as of December 31, 2019
Asset Category	Level 1		Level 2		Level 3		Total
Cash and cash equivalents ⁽¹⁾	$	358,818	$	—	$	—	$	358,818
Restricted cash ⁽²⁾	1,102		—		—		1,102
Deferred compensation plan assets ⁽³⁾	30,295		—		—		30,295
Total	$	390,215	$	—	$	—	$	390,215

Assets at Fair Value as of December 31, 2018
Asset Category Level 1 Level 2 Level 3 Total
Cash and cash equivalents ⁽¹⁾
$ 363,907
$ —
$ —
$ 363,907
Restricted cash ⁽²⁾
2,307
—
—
2,307
Deferred compensation plan assets ⁽³⁾
23,124
—
—
23,124
Total $ 389,338
$ —
$ —
$ 389,338

________


(1)	Cash and cash equivalents ~~include~~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, 2019~~March 31, 2020 and December 31, ~~2018~~2019, we had $~~176.6~~120.0 million and $~~161.3~~164.0 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.

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 ~~2016~~2020 Credit Agreement approximates its fair value due to the variable rate on such debt.

NOTE 109 Income Taxes

In 2018, we finalized our accounting for the income tax effects of the Tax Cuts and Jobs Act (the “Tax Act”). We continue to monitor for potential future changes in certain state and local tax regulations resulting from the Tax Act which may have an impact on our consolidated income tax provision in future periods.

For the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ our income tax provision ~~from continuing operations~~ was $~~31.6~~28.6 million and $~~29.7~~27.5 million, respectively, based on an effective income tax rate, before discrete items, of27.6% and ~~less amounts attributable to noncontrolling interests, of~~ ~~27.9% and 27.7%~~28.0%, respectively. The actual income tax rate ~~on income from continuing operations, less amounts attributable to noncontrolling interests,~~ for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, inclusive of discrete items, was ~~27.9%~~27.4% and ~~27.1%~~27.5%, respectively. For the nine months ended September 30, 2019 and 2018, our income tax provision from continuing operations was $92.3 million and $76.9 million, respectively, based on an effective income tax rate, before discrete items and less amounts attributable to noncontrolling interests, of ~~28.1% and 27.7%, respectively. The actual income tax rate on income from continuing operations, less amounts attributable to noncontrolling interests, for the nine months ended September 30, 2019 and~~ ~~2018, inclusive of discrete items, was 27.9% and 27.1%~~, respectively. The actual income tax rates differed from the statutory tax rate due to state and local income taxes and other permanent book to tax differences. The increase in the ~~2019~~2020 income tax provision was primarily due to increased income ~~from continuing operations. The increase in the actual~~before income ~~tax rate on income from continuing operations for both the three and nine months ended September 30, 2019 compared to the three and nine~~taxes.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

~~NOTE 10 Income Taxes - (Continued)~~

months ended September 30, 2018, was primarily due to the continued application of the Tax Act, including the implementation of interpretative guidance issued regarding certain permanent differences and other non-deductible expenses.

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, we had 0 unrecognized income tax benefits.

We file a consolidated federal income tax ~~returns~~return including all of our U.S. subsidiaries with the Internal Revenue ~~Service and~~Service. We additionally file income tax returns with various state, local, and foreign tax agencies. The Company is currently under examination by various taxing authorities for the years 2014 through ~~2017.~~2018.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides for various tax relief and tax incentive measures, which are not expected to have a material impact on our results of operations or liquidity.

NOTE 1110 Common Stock

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, there were ~~56,147,875~~54,837,771 and ~~55,983,763~~56,219,831 shares of our common stock outstanding, respectively.

During the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, we issued ~~18,651~~101,695 and ~~47,125~~100,947 ~~shares of common stock, respectively. During the nine months ended September 30, 2019 and 2018, we issued 164,112 and 218,055~~ shares of common stock, respectively. These shares were issued primarily upon: (a) the satisfaction of required conditions under certain of our share-based

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 10 Common Stock - (Continued)

compensation plans, ~~and~~ (b) the purchase of common stock pursuant to our employee stock purchase ~~plan.~~

plan, and (c) the exercise of stock options. We have paid quarterly dividends since October 25, 2011. We currently pay a regular quarterly dividend of $0.08 per share.

OnIn September ~~26,~~ 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to ~~repurchase up to~~ ~~$100.0 million~~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.~~repurchase under such program. Since the inception of the repurchase program, the Board has authorized us to repurchase up to ~~$950.0 million~~$1.15 billion of our outstanding common stock. ~~NaN~~During the first quarter of 2020, we repurchased approximately 1.5 million shares of our common stock ~~were repurchased during the nine months ended September 30, 2019.~~for approximately $99.0 million. Since the inception of the repurchase program through ~~September 30, 2019,~~March 31, 2020, we have repurchased approximately ~~15.9~~17.4 million shares of our common stock for approximately $~~791.5~~890.5 million. As of ~~September 30, 2019,~~March 31, 2020, there remained authorization for us to repurchase approximately ~~$158.5~~$259.5 million of our shares. The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements, including provisions in our ~~2016~~2020 Credit Agreement, placing limitations on such repurchases. The repurchase program has been and will be funded from our operations.

NOTE 1211 Retirement Plans

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. We also sponsor 3 domestic retirement plans in which participation by new individuals is frozen.

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, 2019~~March 31, 2020 and ~~2018~~2019 were as follows (in thousands):


	For the three months ended September 30,						For the nine months ended September 30,						For the three months ended March 31,
	2019			2018			2019			2018			2020			2019
Interest cost	$	1,925		$	1,959		$	5,968		$	6,103		$	1,596		$	2,039
Expected return on plan assets	(2,941		)	(3,344		)	(9,121		)	(10,415		)	(2,997		)	(3,116		)
Amortization of unrecognized loss	566			638			1,756			1,985			595			600
Net periodic pension cost (income)	$	(450	)	$	(747	)	$	(1,397	)	$	(2,327	)	$	(806	)	$	(477	)

The net periodic pension cost associated with the domestic plans was approximately $0.1 million for each of the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018 and $0.2 million for each of the nine months ended September 30, 2019 and 2018.~~2019.

Employer Contributions

For the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020, our United Kingdom subsidiary contributed approximately $~~3.1~~1.0 million to the UK Plan and anticipates contributing an additional $~~1.2~~3.5 million during the remainder of ~~2019. Contributions~~2020. NaN contributions were made to the domestic plans ~~were approximately $0.2 million~~ for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

NOTE 1312 Commitments and Contingencies

Government Contracts

As a government contractor, we are subject to U.S. government audits and investigations relating to our operations, 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.

Computer System Attack

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 Commitments and Contingencies - (Continued)

exfiltration of customer or employee data or any inappropriate access to our accounting or finance systems. The Company maintains insurance coverage for these types of incidents; such policies, however, may not completely provide coverage for, or completely offset the costs of, this infiltration.

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. ~~Other potential claims may exist that have not yet been asserted against us.~~ 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 ~~some~~a litigation ~~matters~~matter for which liabilities have not been recorded could be decided unfavorably to us, and that any such unfavorable ~~decisions~~decision could have a material adverse effect on our financial position, results of operations or liquidity.

Restructuring expenses

Restructuring expenses, relating to employee severance obligations, were $0.1 million and ~~$0.6~~$0.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2018,~~ respectively. As of ~~September 30, 2019~~March 31, 2020, the balance of restructuring obligations yet to be paid was $~~0.7~~1.1 million. Such remaining amounts will be paid pursuant to our contractual obligations throughout 2020 and 2021. NoBased on current plans in place, no material expenses in connection with restructuring ~~from continuing operations~~ are expected to be incurred during the remainder of ~~2019.~~2020.

The changes in restructuring activity by reportable segment during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ were as follows (in thousands):


	United States electrical construction and facilities services segment			United States building services segment			Corporate administration			Total			United States electrical construction and facilities services segment			United States building services segment			Corporate administration			Total
Balance at December 31, 2017	$	452		$	40		$	—		$	492
Charges	—			693			—			693
Payments	(330		)	(646		)	—			(976		)
Balance at September 30, 2018	$	122		$	87		$	—		$	209
Balance at December 31, 2018	$	30		$	176		$	1,424		$	1,630		$	30		$	176		$	1,424		$	1,630
Charges	—			567			—			567			—			275			—			275
Payments	(30		)	(708		)	(723		)	(1,461		)	(30		)	(381		)	(30		)	(441		)
Balance at September 30, 2019	$	—		$	35		$	701		$	736
Balance at March 31, 2019													$	—		$	70		$	1,394		$	1,464
Balance at December 31, 2019													$	445		$	412		$	701		$	1,558
Charges													—			69			—			69
Payments													(89		)	(481		)	—			(570		)
Balance at March 31, 2020													$	356		$	—		$	701		$	1,057

NOTE ~~14 Leases~~ 13 Additional Cash Flow Information

~~On January 1,~~The following presents additional cash flow information for the three months ended March 31, 2020 and 2019 we adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”). This pronouncement requires lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. We adopted this pronouncement utilizing the transition practical expedient which eliminates the requirement that the new lease standard be applied to comparative periods presented in the year of adoption.(in thousands):

As part of our adoption, we elected to utilize the package of practical expedients permitted under the new standard, which allowed us to not reassess: (a) whether an existing contract is or contains a lease, (b) the classification for existing leases and (c) initial direct costs. Further, as permitted by the standard, we made an accounting policy election not to record right-of-use assets or lease liabilities for leases with an initial term of 12 months or less. Instead, consistent with previous accounting guidance, we will recognize payments for such leases in the statement of operations on a straight-line basis over the lease term.



	For the three months ended March 31,
	2020		2019
Cash paid for:
Interest	$	3,030	$	3,218
Income taxes	$	4,265	$	3,787
Right-of-use assets obtained in exchange for new operating lease liabilities	$	7,652	$	23,956
Right-of-use assets obtained in exchange for new finance lease liabilities	$	882	$	2,973

We lease real estate, vehicles and equipment under various operating and finance leases. A lease exists when a contract or part of a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, we consider whether a contract provides us with both: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset and (b) the right to direct the use of the identified asset.

2118

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~NOTE 14 Leases - (Continued)~~

Many of our leases include base rental periods coupled with options to renew or terminate the lease, generally at our discretion. Certain leases additionally include options to purchase the leased asset. In evaluating the lease term, we consider whether we are reasonably certain to exercise such options. To the extent a significant economic incentive exists to exercise an option, that option is included within the lease term. However, based on the nature of our lease arrangements, options generally do not provide us with a significant economic incentive and are therefore excluded from the lease term for the majority of our arrangements.

Our leases typically include a combination of fixed and variable payments. Fixed payments are generally included when measuring the right-of-use asset and lease liability. Variable payments, which primarily represent payments based on usage of the underlying asset, are generally excluded from such measurement and expensed as incurred. In addition, certain of our lease arrangements may contain a lease coupled with an arrangement to provide other services, such as maintenance, or may require us to make other payments on behalf of the lessor related to the leased asset, such as payments for taxes or insurance. As permitted by ASC 842, we have elected to account for these non-lease components together with the associated lease component. This election has been made for each of our asset classes.

The measurement of right-of-use assets and lease liabilities requires us to estimate appropriate discount rates. To the extent the rate implicit in the lease is readily determinable, such rate is utilized. However, based on information available at lease commencement for the majority of our leases, the rate implicit in the lease is not known. In these instances, we utilize an incremental borrowing rate, which represents the rate of interest that we would pay to borrow on a collateralized basis over a similar term.

Our lease arrangements generally do not contain significant restrictions or covenants; however, certain of our vehicle and equipment leases include residual value guarantees, whereby we provide a guarantee to the lessor that the value of the underlying asset will be at least a specified amount at the end of the lease. Amounts probable of being owed under these guarantees are included within the measurement of the right-of-use asset and lease liability.

~~Lease Position as of September 30, 2019~~

~~The following table presents the lease-related assets and liabilities reported in the Consolidated Balance Sheet as of September 30, 2019 (in thousands):~~

Classification on the Consolidated Balance Sheet September 30,
2019
Assets
Operating lease assets Operating lease right-of-use assets $ 232,996
Finance lease assets Property, plant and equipment, net 9,894
Total lease assets $ 242,890

Liabilities
Current
Operating Operating lease liabilities, current $ 51,632
Finance Current maturities of long-term debt and finance lease liabilities 4,192
Noncurrent
Operating Operating lease liabilities, long-term 193,502
Finance Long-term debt and finance lease liabilities 5,788
Total lease liabilities $ 255,114

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

~~NOTE 14 Leases - (Continued)~~

~~Lease Costs~~

~~The following table presents information related to lease expense for the nine months ended September 30, 2019 (in thousands):~~

For the nine months ended September 30, 2019
Finance lease expense:
Amortization expense $ 3,396
Interest expense 325
Operating lease expense 49,408
Short-term lease expense 108,930
Variable lease expense 3,358
Total lease expense $ 165,417

~~Lease Term and Discount Rate~~

~~The following table presents certain information related to lease terms and discount rates for leases as of September 30, 2019:~~



	September 30, 2019
~~Weighted-average remaining lease term:~~
~~Operating leases~~	~~6.6 years~~
~~Finance leases~~	~~3.0 years~~
~~Weighed-average discount rate:~~
~~Operating leases~~	~~4.17~~	%
~~Finance leases~~	~~4.16~~	%

~~Other Information~~

~~The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019 (in thousands):~~

For the nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases $ 48,966
Operating cash flows used for finance leases $ 325
Financing cash flows used for finance leases $ 3,357
Right-of-use assets obtained in exchange for new operating lease liabilities $ 57,400
Right-of-use assets obtained in exchange for new finance lease liabilities $ 4,471

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

~~NOTE 14 Leases - (Continued)~~

~~Maturity of Lease Liabilities~~

The following table reconciles future minimum lease payments on an undiscounted cash flow basis to the lease liabilities reported in the Consolidated Balance Sheet as of September 30, 2019 (in thousands):

Operating Leases Finance Leases
October 1, 2019 to September 30, 2020 $ 60,630
$ 4,507
October 1, 2020 to September 30, 2021 49,507
3,077
October 1, 2021 to September 30, 2022 40,141
1,857
October 1, 2022 to September 30, 2023 33,471
838
October 1, 2023 to September 30, 2024 24,566
164
Thereafter 73,298
142
Total minimum lease payments 281,613
10,585
Less: Amount of lease payments representing interest (36,479 ) (605 )
Present value of future minimum lease payments $ 245,134
$ 9,980

Current portion of lease liabilities $ 51,632
$ 4,192
Noncurrent portion of lease liabilities 193,502
5,788
Present value of future minimum lease payments $ 245,134
$ 9,980

NOTE 1514 Segment Information

Our reportable segments reflect certain reclassifications of prior year amounts from our United States mechanical construction and facilities services segment to our United States industrial services segment due to changes in our internal reporting structure.

We have the following reportable ~~segments, which provide services associated with the design, integration, installation, start-up, operation and maintenance of various systems:~~segments: (a) United States electrical construction and facilities services (involving systems for electrical power transmission and distribution; premises electrical and lighting systems; process instrumentation in the refining, chemical processing, food processing, and mining industries; low-voltage systems, such as fire alarm, security, and process control; voice and data communication; roadway and transit lighting; and fiber optic lines); (b) 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) 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 of those operations which provide a portfolio of services needed to support the operation and maintenance of customers’ facilities, including commercial and government site-based operations and maintenance; facility maintenance and services, including reception, security, and catering services; outage services to utilities and industrial plants; military base operations support services; mobile mechanical maintenance and ~~services;~~services, including maintenance and service of mechanical, electrical, plumbing, and building automation systems; floor care and janitorial services; landscaping, lot sweeping, and snow removal; facilities management; vendor management; call center services; installation and support for building systems; program development, management and maintenance for energy systems; 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 ~~including those~~ for refineries, ~~and~~ petrochemical plants, ~~including~~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; on-site repairs, maintenance and service of heat exchangers, towers, vessels, and piping; design, manufacturing, repair, and hydro blast cleaning of shell and tube heat exchangers and related equipment; ~~refinery turnaround planning~~ and ~~engineering services; specialty welding services; overhaul and maintenance of critical process units in refineries and petrochemical plants; and specialty technical~~other support services for ~~refineries~~customers within the upstream and ~~petrochemical plants.~~midstream sectors.

The following tables present information about industry segments and geographic areas for the three months ended March 31, 2020 and 2019 (in thousands):



	For the three months ended March 31,
	2020			2019
Revenues from unrelated entities:
United States electrical construction and facilities services	$	525,229		$	528,070
United States mechanical construction and facilities services	834,112			752,409
United States building services	518,083			512,079
United States industrial services	310,031			258,645
Total United States operations	2,187,455			2,051,203
United Kingdom building services	112,377			107,525
Total worldwide operations	$	2,299,832		$	2,158,728

Total revenues:
United States electrical construction and facilities services	$	526,245		$	528,982
United States mechanical construction and facilities services	838,804			759,764
United States building services	532,477			530,596
United States industrial services	316,230			259,275
Less intersegment revenues	(26,301		)	(27,414		)
Total United States operations	2,187,455			2,051,203
United Kingdom building services	112,377			107,525
Total worldwide operations	$	2,299,832		$	2,158,728

2419

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1514 Segment Information - (Continued)

~~The following tables present information about industry segments and geographic areas for the three and nine months ended~~ ~~September 30, 2019~~ ~~and~~ ~~2018~~ ~~(in thousands):~~

For the three months ended September 30,
2019 2018
Revenues from unrelated entities:
United States electrical construction and facilities services $ 554,637
$ 485,974
United States mechanical construction and facilities services 869,188
759,495
United States building services 532,122
473,701
United States industrial services 234,166
227,313
Total United States operations 2,190,113
1,946,483
United Kingdom building services 97,628
100,566
Total worldwide operations $ 2,287,741
$ 2,047,049

Total revenues:
United States electrical construction and facilities services $ 556,088
$ 486,642
United States mechanical construction and facilities services 877,571
770,617
United States building services 550,002
490,624
United States industrial services 247,258
227,487
Less intersegment revenues (40,806 ) (28,887 )
Total United States operations 2,190,113
1,946,483
United Kingdom building services 97,628
100,566
Total worldwide operations $ 2,287,741
$ 2,047,049

For the nine months ended September 30,
2019 2018
Revenues from unrelated entities:
United States electrical construction and facilities services $ 1,652,109
$ 1,420,268
United States mechanical construction and facilities services 2,444,683
2,168,127
United States building services 1,567,899
1,389,486
United States industrial services 788,271
610,479
Total United States operations 6,452,962
5,588,360
United Kingdom building services 317,709
312,963
Total worldwide operations $ 6,770,671
$ 5,901,323

Total revenues:
United States electrical construction and facilities services $ 1,655,147
$ 1,425,190
United States mechanical construction and facilities services 2,465,287
2,195,951
United States building services 1,622,509
1,437,498
United States industrial services 809,510
611,947
Less intersegment revenues (99,491 ) (82,226 )
Total United States operations 6,452,962
5,588,360
United Kingdom building services 317,709
312,963
Total worldwide operations $ 6,770,671
$ 5,901,323

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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


	For the three months ended September 30,						For the three months ended March 31,
	2019			2018			2020			2019
Operating income (loss):
United States electrical construction and facilities services	$	33,630		$	34,473		$	43,903		$	42,951
United States mechanical construction and facilities services	61,213			59,236			45,171			40,985
United States building services	35,051			29,315			20,838			27,483
United States industrial services	5,561			7,637			12,257			9,636
Total United States operations	135,455			130,661			122,169			121,055
United Kingdom building services	4,754			4,457			5,764			4,141
Corporate administration	(24,341		)	(23,113		)	(21,869		)	(22,611		)
Restructuring expenses	(119		)	(229		)	(69		)	(275		)
Total worldwide operations	115,749			111,776			105,995			102,310
Other corporate items:
Net periodic pension (cost) income	381			615			742			406
Interest expense, net	(2,678		)	(2,736		)	(2,488		)	(2,823		)
Income from continuing operations before income taxes	$	113,452		$	109,655
Income before income taxes							$	104,249		$	99,893



	March 31, 2020		December 31, 2019
Total assets:
United States electrical construction and facilities services	$	783,887	$	834,802
United States mechanical construction and facilities services	1,506,313		1,536,325
United States building services	1,022,266		996,664
United States industrial services	902,791		829,793
Total United States operations	4,215,257		4,197,584
United Kingdom building services	190,143		181,147
Corporate administration	430,147		451,627
Total worldwide operations	$	4,835,547	$	4,830,358

For the nine months ended September 30,
2019 2018
Operating income (loss):
United States electrical construction and facilities services $ 120,380
$ 106,309
United States mechanical construction and facilities services 156,152
156,273
United States building services 90,535
68,822
United States industrial services 31,209
12,312
Total United States operations 398,276
343,716
United Kingdom building services 14,371
12,828
Corporate administration (74,062 ) (65,508 )
Restructuring expenses (567 ) (693 )
Impairment loss on identifiable intangible assets —
(907 )
Total worldwide operations 338,018
289,436
Other corporate items:
Net periodic pension (cost) income 1,187
2,069
Interest expense, net (8,732 ) (8,011 )
Income from continuing operations before income taxes $ 330,473
$ 283,494

~~Table of Contents~~

~~EMCOR Group, Inc. and Subsidiaries~~

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

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

September 30,
2019 December 31,
2018
Total assets:
United States electrical construction and facilities services $ 820,229
$ 702,112
United States mechanical construction and facilities services 1,228,920
1,080,829
United States building services 984,514
846,221
United States industrial services 872,115
864,622
Total United States operations 3,905,778
3,493,784
United Kingdom building services 163,069
146,379
Corporate administration 463,874
448,644
Total worldwide operations $ 4,532,721
$ 4,088,807

~~NOTE 16 Subsequent Event~~

On October 4, 2019, we entered into a definitive agreement to acquire Batchelor & Kimball, Inc. (“BKI”) in an all-cash transaction. BKI is a leading full service provider of mechanical construction and maintenance services in the South and Southeast regions of the United States, and its results will be included within our United States mechanical construction and facilities services segment. The transaction is expected to close by the end of 2019, subject to customary closing conditions and regulatory approvals.

2720

Table of Contents



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

We are one of the largest 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 80 operating subsidiaries and joint venture entities. Our offices are located in the United States and the United Kingdom.

Operating Segments

Overview

The following table presents selected financial data for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019 (in thousands, except percentages and per share data):


	For the three months ended September 30,						For the three months ended March 31,
	2019			2018			2020			2019
Revenues	$	2,287,741		$	2,047,049		$	2,299,832		$	2,158,728
Revenues increase from prior year	11.8		%	8.5		%	6.5		%	13.6		%
Operating income	$	115,749		$	111,776		$	105,995		$	102,310
Operating income as a percentage of revenues	5.1		%	5.5		%	4.6		%	4.7		%
Net income attributable to EMCOR Group, Inc.	$	81,834		$	79,373
Diluted earnings per common share from continuing operations	$	1.45		$	1.36
Net income							$	75,665		$	72,410
Diluted earnings per common share							$	1.35		$	1.28

The results for the three months ended ~~September 30, 2019~~March 31, 2020 set new company records for a ~~third~~first quarter in terms of revenues, operating income, net income, ~~attributable to EMCOR Group, Inc.~~ and diluted earnings per common ~~share from continuing operations.~~ share.

Revenues for the ~~third~~first quarter of ~~2019~~2020 increased by ~~11.8%~~6.5% from ~~$2.05~~$2.16 billion for the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$2.29~~$2.30 billion for the three months ended September 30, 2019. Operating income for the three months ended September 30, 2019 of $115.7 million increased by $4.0 million compared to operating income of $111.8 million for the three months ended September 30, 2018.

~~Table of Contents~~

~~The~~March 31, 2020. Such increase in revenues ~~for the 2019 third quarter~~ was ~~primarily~~ attributable to revenue growth within all of our reportable segments, except for our United ~~Kingdom building services segment as the results of such segment were negatively impacted by the effect of unfavorable exchange rates for the British pound versus the United States dollar.~~

The overall increase in operating income for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 was primarily a result of increased operating income from our United States mechanical construction and facilities services segment and our United States building services segment, partially offset by a decrease in operating income from our United States electrical construction and facilities services segment, ~~and our United States industrial services segment.~~which experienced a slight decrease in revenues period over period.

Table of Contents

Operating income for the three months ended March 31, 2020 of $106.0 million increased by $3.7 million compared to operating income of $102.3 million for the three months ended March 31, 2019. Operating margin (operating income as a percentage of revenues) for the ~~third~~first quarter of ~~2019~~2020 was ~~5.1%~~4.6% compared to ~~5.5%~~4.7% for the ~~third~~first quarter of ~~2018.~~2019. The overall ~~decrease~~increase in operating ~~margin~~income was ~~primarily due to a decrease in operating margin within our domestic construction segments, partially as~~ a result of improved operating performance from all of our reportable segments, except for our United States building services segment, which experienced both a ~~change~~decline in ~~revenue mix~~operating income and operating margin when compared to the prior year.

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.

In January 2020, we acquired a company for an immaterial amount. This company provides building automation and controls solutions within the Northeastern region of the United States, and its results of operations have been included within our United States building services segment.

During calendar year 2019, we ~~acquired~~completed the acquisition of Batchelor & Kimball, Inc. (“BKI”), a leading full service provider of mechanical construction and maintenance services. This acquisition strengthens our position and broadens our capabilities in the Southern and Southeastern regions of the United States, and the results of its operations have been included within our United States mechanical construction and facilities services segment. In addition to BKI, during 2019, we acquired: (a) a company which provides electrical contracting services in central Iowa, ~~and a company which provides mechanical contracting services in south-central and eastern Texas. The~~the results of operations ~~for these companies~~of which have been included within our United States electrical construction and facilities services segment, (b) a company which provides mechanical contracting services in south-central and eastern Texas, the results of operations of which have been included within our United States mechanical construction and facilities services segment, ~~respectively. In addition,~~and (c) four companies included within our United States building services segment, ~~we acquired three companies. One such~~consisting of: (i) a company which provides mobile mechanical services in the Southern region of the United States ~~while the remaining two~~and (ii) three companies, the results of operations of which were de minimis, which bolster our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls ~~solutions within the Western region of the United States.~~

We acquired four companies in calendar year 2018. Two companies provide mobile mechanical services, one within the Eastern region and the other within the Western region of the United States. The third company is a full service provider of mechanical services within the Southern region of the United States. The results of operations for these three companies have been included in our United States building services segment. The fourth company provides electrical construction and maintenance services for industrial and commercial buildings in north Texas, and its results have been included in our United States electrical construction and facilities services segment.solutions.

Companies acquired in ~~2019~~2020 and ~~2018~~2019 generated incremental revenues of ~~$75.6~~$82.5 million and incremental operating income of ~~$4.8~~$3.6 million, inclusive of ~~$1.7~~$4.1 million of amortization expense associated with identifiable intangible assets, for the three months ended ~~September 30, 2019.~~March 31, 2020.

Results of Operations

Revenues

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

For the three months ended September 30,
2019
% of
Total
2018
% of
Total
Revenues:
United States electrical construction and facilities services $ 554,637
24 % $ 485,974
24 %
United States mechanical construction and facilities services 869,188
38 % 759,495
37 %
United States building services 532,122
23 % 473,701
23 %
United States industrial services 234,166
10 % 227,313
11 %
Total United States operations 2,190,113
96 % 1,946,483
95 %
United Kingdom building services 97,628
4 % 100,566
5 %
Total worldwide operations $ 2,287,741
100 % $ 2,047,049
100 %

~~Table of Contents~~


	For the nine months ended September 30,								For the three months ended March 31,
	2019		% of Total		2018		% of Total		2020		% of Total		2019		% of Total
Revenues:
United States electrical construction and facilities services	$	1,652,109	24	%	$	1,420,268	24	%	$	525,229	23	%	$	528,070	24	%
United States mechanical construction and facilities services	2,444,683		36	%	2,168,127		37	%	834,112		36	%	752,409		35	%
United States building services	1,567,899		23	%	1,389,486		24	%	518,083		23	%	512,079		24	%
United States industrial services	788,271		12	%	610,479		10	%	310,031		13	%	258,645		12	%
Total United States operations	6,452,962		95	%	5,588,360		95	%	2,187,455		95	%	2,051,203		95	%
United Kingdom building services	317,709		5	%	312,963		5	%	112,377		5	%	107,525		5	%
Total worldwide operations	$	6,770,671	100	%	$	5,901,323	100	%	$	2,299,832	100	%	$	2,158,728	100	%

As described below in more detail, our revenues for the three months ended ~~September 30, 2019~~March 31, 2020 increased to ~~$2.29~~$2.30 billion compared to ~~$2.05~~$2.16 billion for the three months ended ~~September 30, 2018, and our revenues for the nine months ended September 30, 2019 increased to $6.77 billion compared to $5.90 billion for the nine months ended September 30, 2018.~~March 31, 2019. The increase in revenues for ~~both periods~~the three months ended March 31, 2020 was attributable to increased revenues from all of our reportable segments, except ~~in the case of the three months ended September 30, 2019,~~for our United ~~Kingdom building~~States electrical construction and facilities services ~~segment as such segment’s results were negatively impacted by the effect of unfavorable exchange rates for the British pound versus the United States dollar.~~segment. Companies acquired in ~~2019~~2020 and ~~2018,~~2019, which are reported in our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment, generated incremental revenues of ~~$75.6 million and $196.7~~$82.5 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively.~~March 31, 2020.

Table of Contents

Revenues of our United States electrical construction and facilities services segment were ~~$554.6 million and $1,652.1~~$525.2 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020 compared to revenues of ~~$486.0 million and $1,420.3~~$528.1 million for the three ~~and nine~~ months ended ~~September 30, 2018, respectively.~~March 31, 2019. The ~~increase~~slight decrease in revenues for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was attributable to: (a) an increase in revenues from the commercial market sector, primarily as a result of several large telecommunication construction projects, and (b) an increase in project activities within the manufacturing market sector. In addition, the results for the three and nine months ended September 30, 2019 included $43.8 million and $106.7 million, respectively, of incremental revenues generated by companies acquired in 2019 and 2018. These increases were partially offset by a decrease in revenues ~~due to~~from construction projects within the commercial and transportation market sectors, partially as a result of the completion or substantial completion of certain ~~construction~~ projects in the Northeastern and Western regions of the United States, and (b) a decrease in short duration project activities within this segment. These decreases were partially offset by increased project activity within the ~~transportation, healthcare,~~manufacturing and ~~hospitality~~institutional market sectors. The results for the three months ended March 31, 2020 additionally included $25.4 million of incremental revenues generated by a company acquired in 2019.

Our United States mechanical construction and facilities services segment revenues for the three months ended ~~September 30, 2019~~March 31, 2020 were ~~$869.2~~$834.1 million, ~~a $109.7~~an $81.7 million increase compared to revenues of ~~$759.5~~$752.4 million for the three months ended ~~September 30, 2018. Revenues~~March 31, 2019. Excluding the impact of ~~this segment for~~acquisitions, the ~~nine months ended September 30, 2019 were $2,444.7 million, a $276.6 million increase compared to revenues of $2,168.1 million for the nine months ended September 30, 2018. The~~ increase in revenues for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was primarily attributable to ~~an increase in revenues from~~revenue growth within the majority of the market sectors in which we operate, including: (a) the manufacturing market sector, ~~due to several new contract awards, including~~inclusive of certain large food processing construction projects, ~~(b) the commercial market sector, primarily as a result of certain telecommunication~~ and ~~technology construction projects currently in process, and (c)~~(b) the healthcare, institutional, and transportation market sectors, ~~due to~~primarily as a result of increased project activity. In addition, the results for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 included ~~$4.7~~$55.5 million of incremental revenues generated by ~~a company~~companies acquired in 2019. These increases were partially offset by decreased revenues within the commercial and hospitality market ~~sector~~sectors as a result of the completion or substantial completion of certain large projects.

~~Revenues~~For the first quarter of 2020, revenues of our United States building services segment were ~~$532.1~~$518.1 million, ~~and $1,567.9 million for the three and nine months ended September 30, 2019, respectively,~~ compared to revenues of ~~$473.7 million and $1,389.5~~$512.1 million for the ~~three and nine months ended September 30, 2018, respectively.~~first quarter of 2019. The ~~increase in~~increased revenues ~~for both periods was due to: (a)~~period over period were primarily a result of greater project, ~~controls,~~service, and ~~service repair and maintenance~~controls activities within our mobile mechanical services operations. Increased revenues from such operations ~~and (b) an increase in~~were partially offset by decreased revenues ~~within~~from: (a) our commercial site-based services operations, partially as a result ~~of: (i) scope expansion on certain contracts with existing customers and (ii) new contract awards. In addition, the increase~~of a decrease in ~~revenues for the nine months ended September 30, 2019 was partially attributable~~snow removal activity, (b) our energy services operations due to ~~increased~~a reduction in large project activity, ~~within~~and (c) our ~~energy~~government services operations. The results for the three and nine months ended September 30, 2019 included $27.1 million and $85.3 million, respectively, of incremental revenues generated by companies acquired in 2019 and 2018 within our mobile mechanical services operations. These increases were partially offset by a decrease in revenuesbusiness due to the loss of certain contracts not renewed pursuant to rebid, which resulted in a reduction to both base maintenance and indefinite-delivery, indefinite-quantity project revenues. The results of this segment for the three months ended March 31, 2020 included $1.6 million of incremental revenues generated by a company acquired in 2020 within our ~~government site-based~~mobile mechanical services operations.

~~Table of Contents~~

Revenues of our United States industrial services segment for the three months ended ~~September 30, 2019~~March 31, 2020 were ~~$234.2~~$310.0 million, a ~~$6.9~~$51.4 million increase compared to revenues of ~~$227.3~~$258.6 million for the three months ended September 30, 2018. Revenues for the nine months ended September 30, 2019 were $788.3 million, a $177.8 million increase compared to revenues of $610.5 million for the nine months ended September 30, 2018.March 31, 2019. The increase in revenues ~~for both periods~~period over period was due to ~~an increase in revenues from~~greater maintenance and capital project activity within our field services operations, as a result of increased maintenance and capital project activity. In addition, the results for the nine months ended September 30, 2019 benefited from a more normalized demand pattern compared to the prior year, which was negatively impacted by the lingering effects of Hurricane Harvey, which led to the cancellation or deferral of certain previously scheduled maintenance activities with our customers during the first half of 2018. The increased revenues for the three months ended September 30, 2019 were partially offset by a ~~decrease~~slight decline in revenues from our shop services operations ~~primarily as a result of~~due to a reduction in new build heat exchanger sales.

Our United Kingdom building services segment revenues for the three months ended ~~September 30, 2019~~March 31, 2020 were ~~$97.6~~$112.4 million compared to revenues for the three months ended ~~September 30, 2018~~March 31, 2019 of $100.6 million. Revenues of this segment for the nine months ended September 30, 2019 were $317.7 million compared to revenues for the nine months ended September 30, 2018 of $313.0 million. The decrease in revenues for the three months ended September 30, 2019 was attributable to the effects of unfavorable exchange rates for the British pound versus the United States dollar, which negatively impacted revenues for the third quarter of 2019 by $5.6$107.5 million. The increase in revenues ~~for the nine months ended September 30, 2019~~within this segment was ~~primarily the result of:~~attributable to: (a) new maintenance contract awards within the commercial market sector, and (b) increased project activity with existing ~~customers.~~customers within the commercial and water and wastewater market sectors. Unfavorable exchange rates for the British pound versus the United States dollar negatively impacted this segment’s revenues for the ~~nine months~~quarter ended ~~September 30, 2019~~March 31, 2020 by ~~$19.6~~$2.2 million.

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 March 31,
	2019			2018			2019			2018			2020			2019
Cost of sales	$	1,951,754		$	1,737,710		$	5,779,550		$	5,032,021		$	1,966,771		$	1,849,974
Gross profit	$	335,987		$	309,339		$	991,121		$	869,302		$	333,061		$	308,754
Gross profit, as a percentage of revenues	14.7		%	15.1		%	14.6		%	14.7		%	14.5		%	14.3		%

Our gross profit increased by ~~$26.6~~$24.3 million for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018,~~March 31, 2019, and our gross profit margin increased ~~by $121.8 million for the nine months ended September 30, 2019 compared~~ to the nine months ended September 30, 2018. Our gross profit margin was 14.7% and 14.6% for the three and nine months ended September 30, 2019, respectively, compared to gross profit margin of 15.1% and 14.7% for the three and nine months ended September 30, 2018, respectively.14.5% from 14.3%. The increase in gross profit ~~for the three and nine months ended September 30, 2019~~ was the result of an increase in gross profit from all of our reportable segments, except ~~in the case of the three months ended September 30, 2019,~~for our United States ~~industrial~~building services segment. The ~~increased gross profit within each such segment was partially attributable to an~~ increase ~~in revenues during the respective period. The decrease~~ in gross profit margin ~~for the three months ended September 30, 2019 compared~~was primarily attributable to the three months ended September 30, 2018 was predominantly due to lower gross profit margins within our domestic construction segments, as well as our United States industrial services segment, partially offset by improved gross profit margins within both our United States and United Kingdom building services segments. Gross profit and gross profit margin for the three months ended September 30, 2018 were favorably impacted by the final settlement of contract value for two projectsoperating performance within our United States ~~mechanical~~ construction ~~and facilities services segment which were completed in prior periods. Such settlements resulted in a 0.2% favorable impact on the Company’s consolidated gross profit margin for the third quarter~~segments.

Table of ~~2018.~~Contents

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 March 31,
	2019			2018			2019			2018			2020			2019
Selling, general and administrative expenses	$	220,119		$	197,334		$	652,536		$	578,266		$	226,997		$	206,169
Selling, general and administrative expenses, as a percentage of revenues	9.6		%	9.6		%	9.6		%	9.8		%	9.9		%	9.6		%

~~Table of Contents~~

Our selling, general and administrative expenses for the three months ended ~~September 30, 2019~~March 31, 2020 increased by ~~$22.8~~$20.8 million to ~~$220.1~~$227.0 million compared to ~~$197.3~~$206.2 million for the three months ended September 30, 2018. Selling, general and administrative expenses for the nine months ended September 30, 2019 increased by $74.3 million to $652.5 million compared to $578.3 million for the nine months ended September 30, 2018. The increase in selling, general and administrative expenses for the three and nine months ended September 30, 2019 included $9.7 million and $26.5 million, respectively, of incremental expenses directly related to companies acquired in 2019 and 2018, including amortization expense attributable to identifiable intangible assets of $0.8 million and $2.3 million, respectively. In addition to the impact of acquisitions, selling, general and administrative expenses for both the three and nine month periods increased due to: (a) an increase in salaries and related employment costs, partially as a result of an increase in headcount due to higher revenues than in the same prior year period, (b) an increase in information technology costs related to certain initiatives currently in process, and (c) an increase in the provision for doubtful accounts. Selling, general and administrative expenses for the nine months ended September 30, 2019 were also impacted by an increase in incentive compensation expense as a result of higher projected annual operating results than in the same prior year period.

March 31, 2019. Selling, general and administrative expenses as a percentage of revenues ~~was~~were 9.9% and 9.6% ~~for both the three and nine months ended September 30, 2019 compared to 9.6% and 9.8%~~ for the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2020 and 2019, respectively. ~~The decrease~~For the first quarter of 2020, selling, general and administrative expenses included $9.0 million of incremental expenses directly related to companies acquired in 2020 and 2019, including amortization expense attributable to identifiable intangible assets of $2.7 million. In addition to the impact of acquisitions, the increase in selling, general and administrative expenses, and SG&A margin, for the ~~nine~~three months ended ~~September 30, 2019 compared to the nine months ended September 30, 2018~~March 31, 2020 was ~~primarily due to~~a result of: (a) an increase in ~~revenues without commensurate increases~~the provision for credit losses and (b) the favorable impact of a legal settlement within our United States industrial services segment during the prior year, thatresulted in ~~our overhead cost structure.~~the recovery of $3.6 million, whichwas recorded as a reduction to selling, general, and administrative expenses for the three months ended March 31, 2019.

Restructuring expenses

Restructuring expenses, relating to employee severance obligations, were $0.1 million and ~~$0.6~~$0.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2018,~~ respectively. As of ~~September 30, 2019,~~March 31, 2020, the balance of restructuring obligations yet to be paid was ~~$0.7~~$1.1 million. Such remaining amounts will be paid pursuant to our contractual obligations throughout 2020 and 2021. NoBased on current plans in place, no material expenses in connection with restructuring ~~from continuing operations~~ are expected to be incurred during the remainder of ~~2019.~~2020.

Operating income

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

For the three months ended September 30,
2019
% of
Segment
Revenues
2018
% of
Segment
Revenues
Operating income (loss):
United States electrical construction and facilities services $ 33,630
6.1 % $ 34,473
7.1 %
United States mechanical construction and facilities services 61,213
7.0 % 59,236
7.8 %
United States building services 35,051
6.6 % 29,315
6.2 %
United States industrial services 5,561
2.4 % 7,637
3.4 %
Total United States operations 135,455
6.2 % 130,661
6.7 %
United Kingdom building services 4,754
4.9 % 4,457
4.4 %
Corporate administration (24,341 ) —
(23,113 ) —
Restructuring expenses (119 ) —
(229 ) —
Total worldwide operations 115,749
5.1 % 111,776
5.5 %
Other corporate items:
Net periodic pension (cost) income 381
615

Interest expense, net (2,678 ) (2,736 )
Income from continuing operations before income taxes $ 113,452
$ 109,655

~~Table of Contents~~


	For the nine months ended September 30,										For the three months ended March 31,
	2019			% of Segment Revenues		2018			% of Segment Revenues		2020			% of Segment Revenues		2019			% of Segment Revenues
Operating income (loss):
United States electrical construction and facilities services	$	120,380		7.3	%	$	106,309		7.5	%	$	43,903		8.4	%	$	42,951		8.1	%
United States mechanical construction and facilities services	156,152			6.4	%	156,273			7.2	%	45,171			5.4	%	40,985			5.4	%
United States building services	90,535			5.8	%	68,822			5.0	%	20,838			4.0	%	27,483			5.4	%
United States industrial services	31,209			4.0	%	12,312			2.0	%	12,257			4.0	%	9,636			3.7	%
Total United States operations	398,276			6.2	%	343,716			6.2	%	122,169			5.6	%	121,055			5.9	%
United Kingdom building services	14,371			4.5	%	12,828			4.1	%	5,764			5.1	%	4,141			3.9	%
Corporate administration	(74,062		)	—		(65,508		)	—		(21,869		)	—		(22,611		)	—
Restructuring expenses	(567		)	—		(693		)	—		(69		)	—		(275		)	—
Impairment on identifiable intangible assets	—			—		(907		)	—
Total worldwide operations	338,018			5.0	%	289,436			4.9	%	105,995			4.6	%	102,310			4.7	%
Other corporate items:
Net periodic pension (cost) income	1,187					2,069					742					406
Interest expense, net	(8,732		)			(8,011		)			(2,488		)			(2,823		)
Income from continuing operations before income taxes	$	330,473				$	283,494
Income before income taxes											$	104,249				$	99,893

As described below in more detail, operating income was ~~$115.7~~$106.0 million and ~~$338.0~~$102.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~respectively, compared to $111.8 million and $289.4 million for the three and nine months ended September 30, 2018,~~ respectively. The increase in operating income for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was the result of an increase in gross profit from all of our reportable segments, except ~~in the case of the three months ended September 30, 2019,~~for our United States ~~industrial~~building services ~~segment. Such increased gross profit was~~segment, partially offset by an increase in selling, general, and administrative expenses ~~for each 2019 period.~~as discussed above. Operating margin was ~~5.1%~~4.6% and ~~5.0% for the three and nine months ended September 30, 2019, respectively, compared to 5.5% and 4.9% for the three and nine months ended September 30, 2018, respectively. Operating margin~~4.7% for the three months ended ~~September 30, 2018 was favorably impacted by the final settlement~~March 31, 2020 and 2019, respectively.

Table of contract value for two projects within our United States mechanical construction and facilities services segment which were completed in prior periods. Such settlements resulted in a 0.3% favorable impact on the Company’s consolidated operating margin for the third quarter of 2018.Contents

Operating income of our United States electrical construction and facilities services segment for the three months ended ~~September 30, 2019~~March 31, 2020 was ~~$33.6~~$43.9 million, or ~~6.1%~~8.4% of revenues, compared to operating income of ~~$34.5~~$43.0 million, or ~~7.1%~~8.1% of revenues, for the three months ended ~~September 30, 2018. Operating income for the nine months ended September 30,~~March 31, 2019. A company acquired in 2019 ~~was $120.4 million, or 7.3% of revenues, compared to~~contributed incremental operating income of ~~$106.3~~$1.6 million, ~~or 7.5%~~inclusive of ~~revenues, for~~$0.1 million of amortization expense associated with identifiable intangible assets, during the ~~nine months ended September 30, 2018.~~first quarter of 2020. Excluding such incremental contribution, operating income within this segment remained relatively consistent with that of the prior year. The ~~$14.1 million~~ increase in operating ~~income~~margin for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was ~~primarily~~ attributable to an increase in gross profit ~~within~~margin resulting from favorable project execution, including the ~~commercial market sector, inclusive~~successful close out of certain ~~telecommunication construction projects,~~large projects. Increased gross profit margin was partially offset by ~~a decrease~~an increase in ~~gross profit within~~ the ~~transportation market sector as a result~~ratio of selling, general and administrative expenses to revenues.

Our United States mechanical construction and facilities services segment operating income for the ~~completion or substantial completion~~quarter ended March 31, 2020 was $45.2 million compared to operating income of ~~certain construction projects. Additionally, companies~~$41.0 million for the quarter ended March 31, 2019. Companies acquired in 2019 ~~and 2018~~ contributed incremental operating income of ~~$1.0 million and $3.2~~$2.0 million, inclusive of ~~$0.4 million and $1.5~~$3.9 million of amortization expense associated with identifiable intangible assets, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020. Excluding the impact of acquired businesses, operating income of this segment increased by approximately $2.2 million, primarily due to increased gross profit within the manufacturing market sector, inclusive of certain large food processing contracts. Operating margin within this segment was 5.4% for each of the three months ended March 31, 2020 and 2019.

Operating income of our United States building services segment for the three months ended March 31, 2020 was $20.8 million, or 4.0% of revenues, compared to operating income for the three months ended March 31, 2019 ~~respectively.~~of $27.5 million, or 5.4% of revenues. The decrease in operating income for the three months ended March 31, 2020 was primarily attributable to decreased gross profit from: (a) our commercial site-based services operations, primarily as a result of a reduction in revenues from snow removal activities, and (b) our energy services operations, as a result of a decrease in large project activity. The decline in operating margin for the three months ended ~~September 30, 2019~~March 31, 2020 was attributable to: (a) a decrease in gross profit margin, partially as a result of the completion or substantial completion of the aforementioned transportation construction projects which favorably impacted the results of the prior year, and (b) an increase in the ratio of selling, general, and administrative expenses to revenues. The decrease in operating margin for the nine months ended September 30, 2019 was attributable to an increase in the ratio of selling, general, and administrative expenses to revenues, partially as a result of (i) under-absorption of certain overhead costs within our commercial site-based services operations due to the reduction in revenue previously referenced, as well as (ii) an increase in the provision for ~~doubtful accounts.~~

Our United States mechanical construction and facilities services segment operating income for the three and nine months ended September 30, 2019 was $61.2 million and $156.2 million, respectively, compared to operating income of $59.2 million and $156.3 million for the three and nine months ended September 30, 2018, respectively. A company acquired in 2019 contributed incremental operating income of less than $0.1 million, inclusive of $0.2 million of amortization expense associated with identifiable intangible assets, for the three and nine months ended September 30, 2019. The slight increase in operating income for the three months ended September 30, 2019 wascredit losses, primarily ~~attributable to an increase in gross profit from activities~~ within the commercial and institutional market sectors, partially offset by a decrease in gross profit from construction projects within the hospitality and manufacturing market sectors. Operating income within this segment for the nine months ended September 30, 2019 was relatively consistent with the nine months ended September 30, 2018. Increased gross profit within the commercial and institutional market

~~Table of Contents~~

sectors was offset by decreased gross profit from manufacturing, hospitality, and short duration project activities. Operating margins within this segment for the three and nine months ended September 30, 2019 were 7.0% and 6.4%, respectively, compared to operating margins for the three and nine months ended September 30, 2018 of 7.8% and 7.2%, respectively. The decrease in operating margin for both 2019 periods was partially attributable to a decrease in gross profit margin, primarily within the manufacturing market sector, as the mix of work in the current year included a greater number of projects which are in the earlier stages of completion and typically carry lower gross profit margins. For the three months ended September 30, 2018, operating margin of this segment was favorably impacted by 0.6% as a result of the final settlement of contract value for two projects which were completed in prior periods.

Operating income of our United States building services segment for the three months ended September 30, 2019 was $35.1 million, or 6.6% or revenues, compared to operating income for the three months ended September 30, 2018 of $29.3 million, or 6.2% of revenues. Operating income of this segment for the nine months ended September 30, 2019 was $90.5 million, or 5.8% of revenues, compared to operating income for the nine months ended September 30, 2018 of $68.8 million, or 5.0% of revenues. The increase in operating income for the three and nine months ended September 30, 2019 was primarily attributable to our mobile mechanical services operations, and (b) a reduction in gross profit margin, as a result of ~~increased gross profit from project, controls, and service repair and maintenance activities. In addition, operating income for~~a change in the nine months ended September 30, 2019 benefited from increased gross profit from: (a) our energy services operations, due to an increase in large project activity, and (b) our commercial site-based services operations, as a resultmix of scope expansion on certain existing contracts. Companies acquired in 2019 and 2018 contributed incremental operating income of $3.8 million and $8.8 million, inclusive of $1.1 million and $3.9 million of amortization expense associated with identifiable intangible assets, for the three and nine months ended September 30, 2019, respectively. The increase in operating margin for both the three and nine month periods was attributable to an increase in gross profit margin, primarily from project, controls, and repair activities within our mobile mechanical services operations.work.

Our United States industrial services segment operating income for the three months ended ~~September 30, 2019 was $5.6~~March 31, 2020 increased by approximately $2.6 million ~~or 2.4% of revenues, compared~~ to ~~operating income of $7.6 million, or 3.4% of revenues, for the three months ended September 30, 2018. Operating income of this segmentfor the nine months ended September 30, 2019 was $31.2~~$12.3 million, or 4.0% of revenues, compared to operating income of ~~$12.3~~$9.6 million, or ~~2.0%~~3.7% of revenues, for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The ~~decrease~~increase in operating income for the quarter ended ~~September 30, 2019~~March 31, 2020 was primarily attributable to ~~the mix of work~~improved operating performance within our field services operations which included a greater number of capital projects which carry relatively lower gross profit margins than our typical turnaround work. The $18.9 million increase in operating income for the nine months ended September 30, 2019 was primarily due to an increase inas we experienced stronger demand for our service offerings ~~during the year as we experienced a more normalized demand pattern~~when compared to the prior year. Additionally, the results for the nine months ended September 30, 2019 benefited from the recovery of $3.6 million associated with a legal settlement, which has been recorded as a reduction to selling, general and administrative expenses. The ~~decrease~~increase in operating margin for the three months ended ~~September 30, 2019~~March 31, 2020 was attributable to a decrease in gross profit margin, partially as a result of the unfavorable mix of work described above. The increase in operating margin for the nine months ended September 30, 2019 was primarily attributable toto: (a) a decrease in the ratio of selling, general, and administrative expenses to revenues, as a result ~~of: (a) an~~of revenue growth without a commensurate increase ~~in revenues without commensurate increases~~ in this segment’s overhead cost structure, and (b) an increase in gross profit margin, partially as a result of a more favorable mix of work within our field services operations.

For the ~~legal settlement referenced above.~~

~~Our~~quarter ended March 31, 2020, operating income of our United Kingdom building services segment ~~operating income~~ was $4.8 million for the quarter ended September 30, 2019 compared to operating income of $4.5 million for the quarter ended September 30, 2018. Operating income for the nine months ended September 30, 2019 was $14.4$5.8 million compared to operating income of ~~$12.8~~$4.1 million for the ~~nine months~~quarter ended ~~September 30, 2018.~~March 31, 2019. Operating margins within this segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 were ~~4.9%~~5.1% and ~~4.5%, respectively, compared to operating margins for the three and nine months ended September 30, 2018 of 4.4% and 4.1%~~3.9%, respectively. Operating income ~~for both 2019 periods~~ increased primarily as a result of increased gross profit within the commercial market sector due to: (a) ~~an increase in~~greater project activity with existing customers and (b) incremental gross profit from new maintenance contract awards. This segment’s operating income for the first quarter of 2020 was negatively impacted by ~~$0.3~~approximately $0.1 million ~~and $0.9 million for the three and nine months ended September 30, 2019, respectively,~~ related to the effect of unfavorable exchange rates for the British pound versus the United States dollar. The increase in operating margin for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was attributable to an increase in gross profit ~~margin.~~margin and a decrease in the ratio of selling, general, and administrative expenses to revenues.

Our corporate administration operating loss for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was ~~$24.3~~$21.9 million ~~and $74.1 million, respectively,~~ compared to ~~$23.1 million and $65.5~~$22.6 million for the three ~~and nine~~ months ended ~~September 30, 2018, respectively.~~March 31, 2019. The ~~increase~~decrease in corporate administration expenses for ~~both 2019 periods~~the three months ended March 31, 2020 was primarily due to ~~an increase~~a decrease in employment costs, such as incentive ~~compensation and salaries, as well as an increase in professional fees as a result of certain information technology initiatives currently in process.~~compensation.

Net interest expense for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$2.7 million. Net interest expense for the nine months ended September 30, 2019 and 2018 was $8.7~~$2.5 million and ~~$8.0~~$2.8 million, respectively. The ~~increase~~decrease in net interest expense for the ~~nine month period was due to: (a) the impact of higher~~quarter ended March 31, 2020 resulted from lower interest rates, ~~on interest expense,~~ partially offset by ~~the~~

~~Table of Contents~~

~~impact of decreased~~higher average outstanding ~~borrowings, and (b) reduced interest income as a result of lower average daily cash balances during the first half of 2019.~~borrowings.

For the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ our income tax provision ~~from continuing operations~~ was ~~$31.6~~$28.6 million and ~~$29.7~~$27.5 million, respectively, based on an effective income tax rate, before discrete items, of 27.6% and ~~less amounts attributable to noncontrolling interests, of 27.9% and 27.7%~~28.0%, respectively. The actual income tax rate ~~on income from continuing operations, less amounts attributable to noncontrolling interests,~~ for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, inclusive of discrete items, was ~~27.9%~~27.4% and ~~27.1%~~27.5%, respectively. For the nine months ended September 30, 2019 and 2018, our income tax provision from continuing operations was $92.3 million and $76.9 million, respectively, based on an effective income tax rate, before discrete items and less amounts attributable to noncontrolling interests, of~~28.1% and 27.7%~~, respectively. The actual income tax rates differed from the statutory tax rate ondue to state and local income ~~from continuing operations, less amounts attributable~~taxes and other permanent book to ~~noncontrolling interests, for the nine months ended September 30, 2019 and~~ ~~2018, inclusive of discrete items, was 27.9% and 27.1%, respectively.~~tax differences. The increase in the ~~2019~~2020 income tax provision was primarily due to increased income ~~from continuing operations. The increase in the actual~~before income tax rate on income from continuing operations for both the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018, was primarily due to the continued applicationtaxes.

Table of ~~the Tax Cuts and Jobs Act, including the implementation of interpretative guidance issued regarding certain permanent differences and other non-deductible expenses.~~Contents

~~Discontinued operations~~

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


	September 30, 2019		% of Total		December 31, 2018		% of Total		September 30, 2018		% of Total		March 31, 2020		% of Total		December 31, 2019		% of Total		March 31, 2019		% of Total
Remaining performance obligations:
United States electrical construction and facilities services	$	1,095,254	27	%	$	1,085,571	27	%	$	1,181,620	30	%	$	1,032,611	23	%	$	1,036,216	26	%	$	1,125,052	27	%
United States mechanical construction and facilities services	2,190,556		54	%	2,226,183		57	%	2,131,486		54	%	2,601,659		59	%	2,229,090		55	%	2,256,936		54	%
United States building services	544,913		14	%	435,074		11	%	434,386		11	%	545,803		12	%	542,269		13	%	544,618		13	%
United States industrial services	83,478		2	%	86,930		2	%	95,444		2	%	109,192		3	%	104,613		3	%	78,861		2	%
Total United States operations	3,914,201		97	%	3,833,758		97	%	3,842,936		97	%	4,289,265		97	%	3,912,188		97	%	4,005,467		96	%
United Kingdom building services	120,887		3	%	130,524		3	%	126,732		3	%	134,634		3	%	124,176		3	%	151,124		4	%
Total worldwide operations	$	4,035,088	100	%	$	3,964,282	100	%	$	3,969,668	100	%	$	4,423,899	100	%	$	4,036,364	100	%	$	4,156,591	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.

~~Table of Contents~~

Our remaining performance obligations at ~~September 30, 2019~~March 31, 2020 were ~~$4.04~~$4.42 billion compared to ~~$3.96~~$4.04 billion at December 31, ~~2018~~2019 and ~~$3.97~~$4.16 billion at ~~September 30, 2018.~~March 31, 2019. The increase in remaining performance obligations at ~~September 30, 2019~~March 31, 2020 compared to December 31, ~~2018~~2019 was attributable to an increase in remaining performance obligations within all of our reportable segments, except for our United States electrical construction and facilities services segment, which experienced a slight decline in remaining performance obligations.

Novel Coronavirus

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has spread around the world. On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide. On March 13, 2020, U.S. President Trump announced a National Emergency relating to the pandemic. Government authorities in the U.S. and U.K. have recommended or imposed various social distancing, quarantine, and isolation measures on large portions of the population, which include limitations on travel and mandatory cessation of certain business activities. Both the outbreak and the containment and mitigation measures could have a serious adverse impact on the economy, the severity and duration of which are uncertain. It is likely that government stabilization efforts will only partially mitigate the consequences to the economy. The extent to which the COVID-19 pandemic will impact our business and results of operations is highly uncertain and will be affected by a number of factors. These include the duration and extent of the pandemic; the duration

Table of Contents

and extent of imposed or recommended containment and mitigation measures; the extent, duration, and effective execution of government stabilization and recovery efforts; the impact of the pandemic on economic activity, including on construction projects, our customers’ demand for our services and our ~~United States building~~vendors’ ability to supply us with raw materials; 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 ~~segment.~~rendered; any further closures of our and our customers’ offices and facilities; and any additional project delays or shutdowns. While we believe our remaining performance obligations are firm, 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, and/or results of operations.

Although the ongoing COVID-19 pandemic did not have a material adverse impact on our result of operations for the first quarter of 2020, we began to experience disruptions caused by the pandemic, as well as the related containment and mitigation measures mandated by governmental authorities. As a result, we have enacted our business continuity plans and have implemented certain short-term cost reductions, including reducing executive and director compensation. We continue to bid on projects despite the challenging environment; however, our ability to execute on such work is impacted by closures, work stoppages, job site delays, access restrictions to certain facilities, and reduced capital spending by our customers across the geographies in which we operate. While we believe these disruptions will be temporary, it is difficult to predict how long they will last and the impact they will have on us in future periods. We will continue to evaluate the effect of COVID-19 on our business.

Computer System Attack

On February 15, 2020, we became aware on an infiltration and encryption of portions of our information technology network. This attack temporarily disrupted our use of the impacted systems. As part of our investigation into this incident, we have engaged outside security experts. Although our investigation is still ongoing, the procedures performed to date have not identified any exfiltration of customer or employee data or any inappropriate access to our accounting or finance systems. The Company maintains insurance coverage for these types of incidents; such policies, however, may not completely provide coverage for, or completely offset the costs of, this infiltration.

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 cash and 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) working capital requirements, (b) business acquisitions and joint venture investments, (c) cash dividend payments, (d) interest and principal payments related to our outstanding indebtedness, and (e) payment of income taxes. We can expect to meet those requirements through our cash and cash equivalent balances, cash generated from our operations, and the borrowing capacity available under our revolving credit facility. However, negative macroeconomic trends, including the impact of COVID-19, 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. 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. 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 building services segment. 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.

Long-term liquidity requirements can be expected to be met initially through cash generated from operating activities and the borrowing capacity available under our revolving credit facility. Based upon our current credit ratings 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 be the level of demand for non-residential construction and building and industrial services, which are influenced by macroeconomic trends including interest rates and governmental economic policy. In addition, our ability to perform work is critical to meeting our long-term liquidity requirements.

Despite the economic uncertainty described above, we believe that our current cash and cash equivalents and the borrowing capacity available under our revolving credit facility or other forms of financing available to us through borrowings, combined with cash expected to be generated from our operations, will be sufficient to provide short-term and foreseeable long-term liquidity and meet our expected capital expenditure requirements.

Table of Contents

Cash Flows

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


	For the nine months ended September 30,						For the three months ended March 31,
	2019			2018			2020			2019
Net cash provided by operating activities	$	176,921		$	65,892
Net cash used in operating activities							$	(78,813	)	$	(57,435	)
Net cash used in investing activities	$	(114,957	)	$	(56,871	)	$	(14,421	)	$	(44,008	)
Net cash used in financing activities	$	(56,324	)	$	(120,083	)
Net cash provided by (used in) financing activities							$	86,119		$	(11,808	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	$	(2,047	)	$	(1,985	)	$	(4,678	)	$	1,298

Our consolidated cash balance, including cash equivalents and restricted cash, ~~increased~~decreased by approximately ~~$3.6~~$11.8 million from ~~$366.2~~$359.9 million at December 31, ~~2018~~2019 to ~~$369.8~~$348.1 million at ~~September 30, 2019.~~March 31, 2020. Net cash ~~provided by~~used in operating activities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was ~~$176.9~~$78.8 million compared to ~~$65.9~~$57.4 million of cash used in operating activities for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The increase in cash ~~provided by~~used in operating activities was primarily due ~~to: (a) a $32.6 million increase in net income including noncontrolling interests and (b)~~to the timing of cash receipts from our customers, ~~including~~partially offset by a decrease in payments ~~of advanced billings on~~to our ~~long-term construction contracts.~~vendors. Net cash used in investing activities ~~was $115.0 million~~ for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 decreased by approximately $29.6 million compared to ~~$56.9 million for~~ the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The ~~increase~~decrease in net cash used in investing activities was primarily due to ~~an increase~~a decrease in payments for the acquisitions of ~~businesses and purchases of property, plant and equipment.~~businesses. Net cash provided by financing activities for the three months ended March 31, 2020 was $86.1 million compared to net cash used in financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 ~~decreased~~of $11.8 million. The increase in net cash provided by ~~approximately $63.8~~financing activities was primarily due to net borrowings of $192.5 million ~~compared to~~under our credit facility during the ~~nine months ended September 30, 2018, primarily as~~first quarter of 2020, partially offset by a ~~result of a $90.8~~$99.0 million ~~decrease~~increase in funds used for the repurchase of our common ~~stock, partially offset by~~stock.

Debt

Until March 2, 2020, we had a ~~$25.0~~credit agreement dated as of August 3, 2016, which provided for a $900.0 million ~~repayment of our~~ revolving credit facility ~~during~~(the “2016 Revolving Credit Facility”) and a $400.0 million term loan (the “2016 Term Loan”) (collectively referred to as the ~~2019 period. Cash flows from discontinued operations were immaterial~~“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 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. 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, maintenance of certain financial ratios and certain limitations on payment of dividends, common stock repurchases, investments, acquisitions, indebtedness, and capital expenditures. We were in compliance with all such covenants as of March 31, 2020 with respect to the 2020 Credit Agreement and, as of December 31, 2019, with respect to the 2016 Credit Agreement. A commitment fee is payable on the average daily unused amount of the 2020 Revolving Credit Facility, which ranges from 0.10% to 0.25%, based on certain financial tests. The fee was 0.10% of the unused amount as of March 31, 2020. Borrowings under the 2020 Credit Agreement bear interest at (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR (0.87% and 0.99% at March 31, 2020 for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively) 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 March 31, 2020), (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 rates in effect at March 31, 2020 were 1.87% and 1.99% for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively. 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. 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 and are included as part of interest expense. We are required to make annual installment payments on the 2020 Term Loan, with a principal payment of $7.5 million on December 31, 2020 and principal payments on December 31 of each subsequent year in the amount of $15.0 million. All unpaid principal and interest is due on March 2, 2025. As of March 31, 2020 and December 31, 2019, the balance of the 2020 Term Loan and the 2016 Term Loan was $300.0 million and $254.4 million, respectively. As of March 31, 2020 and December 31, 2019, we had approximately $79.0 million and $109.0 million of letters of credit outstanding, respectively. There were $200.0 million in borrowings outstanding under the 2020 Revolving Credit Facility as of March 31, 2020, and there were $50.0 million in borrowings outstanding under the 2016 Revolving Credit Facility as of December 31, 2019.

Table of Contents

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 first quarter of 2020, we repurchased approximately 1.5 million shares of our common stock for approximately $99.0 million. Since the inception of the repurchase program through March 31, 2020, we have repurchased approximately 17.4 million shares of our common stock for approximately $890.5 million. As of March 31, 2020, there remained authorization for us to repurchase approximately $259.5 million of our shares. The repurchase program has no expiration date, does not ~~expected~~obligate the Company to ~~significantly affect future liquidity.~~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.

We have paid quarterly dividends since October 25, 2011. We currently pay a regular quarterly dividend of $0.08 per share. Our 2020 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 a quarterly dividend of $0.08 per share for the foreseeable future. The payment of dividends has been and will be funded from our operations.

Off-Balance Sheet Arrangements and Other 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 bonds (“Surety Bonds”) as a condition to the award of such contracts. 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. Public sector contracts require Surety Bonds more frequently than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases. In addition, at the request of labor unions representing certain of our employees, Surety Bonds are sometimes provided to secure obligations for wages and benefits payable to or for such employees. As of March 31, 2020, 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 $1.3 billion, which represents approximately 30% of our total remaining performance obligations. We are not aware of any losses in connection with Surety Bonds, which 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 providers the amounts of 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 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 by posting other forms of collateral in lieu of Surety Bonds, such as letters of credit, parent company guarantees or cash, in order to convince customers to forego the requirement for Surety Bonds, (b) increase our activities in our business segments that rarely require Surety Bonds, such as our building and industrial services segments, and/or (c) refrain from bidding for certain projects that require Surety Bonds. There can be no assurance that we would be able to effectuate alternatives to providing Surety Bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require Surety Bonds. Accordingly, if we were to experience a reduction in the availability of Surety Bonds, we could experience a material adverse effect on our financial position, results of operations and/or cash flows.

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.

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

Table of Contents

Contractual Obligations

The following is a summary of material contractual obligations and other commercial commitments (in millions):

Payments Due by Period
Contractual Obligations Total
Less
than
1 year

1-3
years

3-5
years

After
5 years
Term loan (including interest at 3.04%) ⁽¹⁾
$ 272.3
$ 23.0
$ 249.3
$ —
$ —
Finance leases 10.6
4.5
4.9
1.0
0.2
Operating leases 281.6
60.6
89.7
58.0
73.3
Open purchase obligations ⁽²⁾
1,238.5
980.8
215.7
42.0
—
Other long-term obligations, including current portion ⁽³⁾
394.8
70.7
315.1
9.0
—
Total Contractual Obligations $ 2,197.8
$ 1,139.6
$ 874.7
$ 110.0
$ 73.5

~~Table of Contents~~



			Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Revolving credit facility (including interest at 1.87%) ⁽¹⁾	$	218.7	$	3.8	$	7.6	$	207.3	$	—
Term loan (including interest at 1.99%) ⁽¹⁾	327.1		13.5		41.3		272.3		—
Finance leases	9.9		4.1		4.6		1.1		0.1
Operating leases	288.0		61.9		90.9		58.8		76.4
Open purchase obligations ⁽²⁾	1,250.8		1,094.0		156.1		0.7		—
Other long-term obligations, including current portion ⁽³⁾	396.5		66.9		320.4		9.2		—
Total Contractual Obligations	$	2,491.0	$	1,244.2	$	620.9	$	549.4	$	76.5


			Amount of Commitment Expiration by Period										Amount of Commitment Expiration by Period
Other Commercial Commitments	Total Committed		Less than 1 year		1-3 years		3-5 years		After 5 years		Total Committed		Less than 1 year		1-3 years		3-5 years		More than 5 years
Letters of credit	$	109.0	$	109.0	$	—	$	—	$	—	$	79.0	$	79.0	$	—	$	—	$	—

_________

(1)

On ~~August 3, 2016,~~March 2, 2020, we entered into a ~~$900.0 million~~$1.3 billion revolving credit facility (the ~~“2016~~“2020 Revolving Credit Facility”) and a ~~$400.0~~$300.0 million term loan (the ~~“2016~~“2020 Term Loan”) (collectively referred to as the ~~“2016~~“2020 Credit Agreement”). As of ~~September 30, 2019,~~March 31, 2020, the amount outstanding under the ~~2016~~2020 Term Loan was ~~$258.2 million. There~~$300.0 million, and there were no borrowings outstanding of $200.0 million under the ~~2016~~2020 Revolving Credit ~~Facility as of September 30, 2019.~~Facility.


(2)	Represents open purchase orders for material and subcontracting costs related to construction and services contracts. These purchase orders are not reflected in EMCOR’s Consolidated Balance Sheets and should not impact future cash flows as amounts should be recovered through customer billings.

(3)

Primarily represents insurance related liabilities, and liabilities for deferred income taxes, incentive compensation and deferred compensation, classified as other long-term liabilities in the Consolidated Balance Sheets. Cash payments for insurance and deferred compensation related liabilities may be payable beyond three years, however, it is not practical to estimate these payments; therefore, these liabilities are reflected in the 1-3 years payment period. We provide funding to our post retirement plans based on at least the minimum funding required by applicable regulations. In determining the minimum required funding, we utilize current actuarial assumptions and exchange rates to forecast amounts that may be payable for up to five years in the future. In our judgment, minimum funding estimates beyond a five year time horizon cannot be reliably estimated and, therefore, have not been included in the table.

We have a credit agreement dated as of August 3, 2016, which provides 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”) expiring August 3, 2021. We may increase the 2016 Revolving Credit Facility to $1.3 billion if additional lenders are identified and/or existing lenders are willing to increase their current commitments. We may allocate up to $300.0 million of available capacity under the 2016 Revolving Credit Facility to letters of credit for our account or for the account of any of our subsidiaries. Obligations under the 2016 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets. The 2016 Credit Agreement contains various covenants providing for, among other things, maintenance of certain financial ratios and certain limitations on payment of dividends, common stock repurchases, investments, acquisitions, indebtedness and capital expenditures. We were in compliance with all such covenants as of September 30, 2019 and December 31, 2018. A commitment fee is payable on the average daily unused amount of the 2016 Revolving Credit Facility, which ranges from 0.15% to 0.30%, based on certain financial tests. The fee was ~~0.15%~~ ~~of the unused amount as of~~ ~~September 30, 2019. Borrowings under the 2016 Credit Agreement bear interest at (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR (2.04%~~ at September 30, 2019) 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 (5.00% at September 30, 2019), (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, 2019 was 3.04%. Fees for letters of credit issued under the 2016 Revolving Credit Facility range from 1.00% to 1.75% of the respective face amounts of outstanding letters of credit and are computed based on certain financial tests. Debt issuance costs are amortized over the life of the agreement and are included as part of interest expense. The 2016 Term Loan previously required us to make principal payments of $5.0 million on the last day of March, June, September and December of each year, which commenced with the calendar quarter ended December 31, 2016. On December 30, 2016, we made a payment of $100.0 million, of which $5.0 million represented our required quarterly payment and $95.0 million represented a prepayment of outstanding principal. Such prepayment was applied against the remaining mandatory quarterly payments on a ratable basis. As a result, commencing with the calendar quarter ended March 31, 2017, our required quarterly payment has been reduced to $3.8 million. All unpaid principal and interest is due on August 3, 2021. As of September 30, 2019 and December 31, 2018, the balance of the 2016 Term Loan was $258.2 million and $269.6 million, respectively. As of ~~September 30, 2019~~ ~~and December 31, 2018, we had approximately~~ ~~$109.0 million~~ of letters of credit outstanding. There were no borrowings outstanding under the 2016 Revolving Credit Facility as of September 30, 2019. There were $25.0 million in borrowings outstanding under the 2016 Revolving Credit Facility as of December 31, 2018.

~~Table of Contents~~

defaults on all our then existing contractual obligations, was approximately $1.2 billion. Surety Bonds are issued by Surety Companies in return for premiums, which vary depending on the size and type of bond.

From time to time, we discuss with our current and other Surety Bond providers the amounts of 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 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 (i) seek to satisfy certain customer requests for Surety Bonds by posting other forms of collateral in lieu of Surety Bonds, such as letters of credit, parent company guarantees or cash, in order to convince customers to forego the requirement for Surety Bonds, (ii) increase our activities in our business segments that rarely require Surety Bonds, such as our building and industrial services segments, and/or (iii) refrain from bidding for certain projects that require Surety Bonds. There can be no assurance that we would be able to effectuate alternatives to providing Surety Bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require Surety Bonds. Accordingly, if we were to experience a reduction in the availability of Surety Bonds, we could experience 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.~~Legal Proceedings

We are ~~a party to lawsuits and other~~involved in several legal proceedings in which ~~other parties seek to recover amounts from~~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.

On September 26, 2011, our Board of Directors (the “Board”) authorized us to repurchase up to $100.0 million of our outstanding common stock. Subsequently, the Board has from time to time increased the amount of our common stock that we may repurchase. Since the inception of the repurchase program, the Board has authorized us to repurchase up to $950 million of our outstanding common stock. No shares of our common stock were repurchased during the nine months ended September 30, 2019. Since the inception of the repurchase program through September 30, 2019, we have repurchased approximately ~~15.9 million~~ ~~shares of our common stock for approximately~~ ~~$791.5 million. As of September 30, 2019, there remained authorization for us to repurchase approximately~~ ~~$158.5 million~~ of our shares. The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced or discontinued at any time or from time to time without prior notice. We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements, including provisions in our 2016 Credit Agreement, placing limitations on such repurchases. The repurchase program has been and will be funded from our operations.

We have paid quarterly dividends since October 25, 2011. We currently pay a regular quarterly dividend of $0.08 per share. Our 2016 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 a quarterly dividend of $0.08 per share for the foreseeable future. The payment of dividends has been and will be funded from our operations.

Our primary source of liquidity has been, and is expected to continue to be, cash generated by operating activities. We also maintain our 2016 Revolving Credit Facility that may be utilized, among other things, to meet short-term liquidity needs in the event cash generated by operating activities is insufficient or to enable us to participate in joint ventures or to make acquisitions that may require access to cash on short notice or for any other reason. Negative macroeconomic trends may have an adverse effect on liquidity. 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. Short-term liquidity is also impacted by the type and length of construction contracts in place and large turnaround activities in our United States industrial services segment that are billed in arrears pursuant to contractual terms that are standard within the industry. Performance of long duration contracts typically requires greater amounts of working capital. 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.

Long-term liquidity requirements can be expected to be met initially through cash generated from operating activities and our 2016 Revolving Credit Facility. Based upon our current credit ratings and financial position, we can reasonably expect to be able to incur long-term debt to fund acquisitions. Over the long term, our primary revenue risk factor continues to be the level of demand for non-residential construction services and for building and industrial services, which is influenced by macroeconomic trends including interest rates and governmental economic policy. In addition, our ability to perform work is critical to meeting long-term liquidity requirements.

~~Table of Contents~~

We believe that our current cash balances and our borrowing capacity available under our 2016 Revolving Credit Facility or other forms of financing available to us through borrowings, combined with cash expected to be generated from operations, will be sufficient to provide short-term and foreseeable long-term liquidity and meet our expected capital expenditure requirements.

Certain Insurance Matters

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, we utilized approximately $78.9 million of letters of credit obtained under our 2020 Revolving Credit Facility and $108.9 million of letters of credit obtained under our 2016 Revolving Credit Facility, respectively, as collateral for our insurance obligations.

New Accounting Pronouncements

We review new accounting standards to determine the expected financial impact, if any, that the adoption of such standards will have. 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.

Table of Contents

Application of Critical Accounting Policies

Our consolidated financial statements are based on the application of significant accounting policies, which require management to make significant estimates and assumptions. Our significant accounting policies are described 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, ~~2018.~~2019. We believe that some of the more critical judgment areas in the application 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) collectibility or valuation of accounts receivable; (c) insurance liabilities; (d) income taxes; and (e) goodwill and identifiable intangible assets.

Revenue Recognition from Contracts with Customers

We believe our most critical accounting policy is revenue recognition in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). In accordance with ASC 606, 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.

~~Table of Contents~~

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.

Table of Contents

The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our long-term 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 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 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.

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

Accounts receivable are recognized in the period we deliver goods or provide services to our customers or when our right to consideration is unconditional. We are required to estimate the collectibility of accounts receivable. A considerable amount of judgment is required in assessing the likelihood of realization of receivables. Relevant assessment factors include the creditworthiness of the customer, our prior collection history with the customer and related aging of the past due balances. At ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018, our accounts receivable of~~ ~~$1,926.8 million~~ ~~and~~ ~~$1,773.6 million, respectively, were recorded net of allowances for doubtful accounts of~~ ~~$15.1 million~~ ~~and~~ ~~$15.4 million, respectively.~~ Specific accounts receivable are evaluated when we believe a customer may not be able to meet its financial obligations due to the deterioration of its financial condition or its credit ratings. ~~The~~In addition, a considerable amount of judgment is required in assessing the likelihood of realization of receivables. Relevant assessment factors include the creditworthiness of the customer, our prior collection history with the customer, 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. At March 31, 2020 and December 31, 2019, our accounts receivable of $2,055.5 million and $2,030.8 million, respectively, were recorded net of allowances for credit losses of $20.0 million and $14.5 million, respectively. Our allowance for ~~doubtful accounts requirements~~credit losses increased based on our evaluation of forecasts of future economic conditions and the expected impact on customer collections, in accordance with Accounting Standards Codification Topic 326, “Financial Instruments - Credit Losses,” as described in Note 2 - New Accounting Pronouncements of the notes to consolidated financial statements included in Item 1. Financial Statements. Allowances for credit losses are based on the best facts available and are re-evaluated and adjusted on a regular basis as additional information is received.

~~Table~~ Negative macroeconomic trends, including the impact of ~~Contents~~COVID-19, could result in an increase in our credit losses if we experience delays in the payment of outstanding receivables or if future economic conditions differ from our forecasts.

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 actuary to determine the best estimate for the majority of these obligations. We believe the liabilities recognized on the Consolidated Balance Sheets for these obligations are adequate. However, such obligations are difficult to assess and estimate due to numerous factors, including severity of injury, determination of liability in proportion to other parties, timely reporting of occurrences and effectiveness of safety and risk management programs. Therefore, if our actual experience differs from the assumptions and estimates used for recording the

Table of Contents

liabilities, adjustments may be required and will be recorded in the period that the experience becomes known. Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by ~~$8.9~~$2.7 million at ~~September 30, 2019~~March 31, 2020 compared to December 31, ~~2018,~~2019, partially as a result of ~~higher revenues,~~greater potential exposures, including the impact of acquired companies. 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 ~~$17.1~~$17.2 million of additional expense for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

Income Taxes

We had net deferred income tax liabilities at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 of ~~$70.4~~$75.8 million and ~~$70.8~~$71.7 million, respectively, primarily resulting from differences between the carrying value and income tax basis of certain identifiable intangible assets, goodwill, and depreciable fixed assets, which will impact our taxable income in future periods. Included within these net deferred income tax liabilities are ~~$103.2~~$169.9 million and ~~$104.1~~$176.2 million of deferred income tax assets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. A valuation allowance is required when it is more likely than not that all or a portion of a deferred income tax asset will not be realized. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, the total valuation allowance on deferred income tax assets, primarily related to state net operating loss carryforwards, was approximately ~~$3.8 million and $3.9 million, respectively.~~$3.5 million. 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 tax asset balance, as well as current projections of future taxable income, we have determined that it is more likely than not that the 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 tax assets.

Goodwill and Identifiable Intangible Assets

As of ~~September 30, 2019~~March 31, 2020, we had ~~$1,019.6~~$1,064.9 million and $~~482.8~~597.9 million, respectively, of goodwill and net identifiable intangible assets (primarily consisting of our contract backlog, developed technology/vendor network, customer relationships, ~~non-competition agreements~~ and trade names), arising out of the acquisition of companies. As of December 31, ~~2018~~2019, goodwill and net identifiable intangible assets were $~~990.9~~1,063.9 million and $~~488.3~~611.4 million, respectively. As of ~~September 30, 2019,~~March 31, 2020, approximately ~~14.0%~~13.4% of our goodwill related to our United States electrical construction and facilities services segment, approximately ~~25.1%~~28.1% related to our United States mechanical construction and facilities services segment, approximately ~~28.3%~~27.2% related to our United States building services segment, and approximately ~~32.6%~~31.3% related to our United States industrial services segment. The ~~changes~~change to goodwill since December 31, ~~2018 were~~2019 was the result of ~~acquisitions~~an acquisition completed in ~~2019~~2020. Accounting Standards Codification Topic 350, “Intangibles – Goodwill and ~~purchase price adjustments related~~Other” (“ASC 350”) requires that goodwill and other identifiable intangible assets with indefinite useful lives not be amortized, but instead be tested at least annually for impairment (which we test each October 1, absent any earlier identified impairment indicators), and be written down if impaired. ASC 350 requires that goodwill be allocated to ~~acquisitions completed in the fourth quarter of 2018.~~its respective reporting unit and that identifiable intangible assets with finite lives be amortized over their useful lives. 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 the ability to successfully integrate acquired companies, as well as macroeconomic conditions. ASC Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”) requires that goodwill and other identifiable intangible assets with indefinite useful lives not be amortized, but instead tested at least annually for impairment (which we test each October 1, absent any impairment indicators), and be written down if impaired. ASC 350 requires that goodwill be allocated to its respective reporting unit and that identifiable intangible assets with finite lives be amortized over their useful lives.

We test for impairment of our goodwill at the reporting unit level. Our reporting units are consistent with the reportable segments identified in Note ~~15,~~14, “Segment ~~Information”,~~Information,” of the notes to consolidated financial statements. In assessing whether our goodwill is impaired, we compare the fair value of the reporting unit to ~~the~~its carrying amount, including goodwill. If the fair value exceeds the carrying amount, no impairment loss 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. The fair value of each of our reporting units is generally determined using discounted estimated future cash flows; however, in certain circumstances, consideration is given to a market approach whereby fair value is measured based on a multiple of earnings.

As of the date of our latest impairment test (October 1, ~~2018)~~2019), the carrying 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 were approximately ~~$251.2~~$331.0 million, ~~$398.8~~$369.5 million, ~~$499.5~~$546.8 million, and ~~$657.5~~$705.2 million, respectively. 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

~~Table of Contents~~

and our United States industrial services segment exceeded their carrying values by approximately ~~$1,203.0~~$1,321.8 million, ~~$1,710.9~~$2,011.5 million, ~~$628.2~~$922.3 million, and ~~$81.2~~$40.5 million, respectively. No impairment of our goodwill was recognized during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

Table of Contents

The weighted average cost of capital used in our annual testing for impairment as of October 1, ~~2018~~2019 was ~~9.8%~~9.5%, ~~9.7%~~9.1%, and 10.5% for our domestic construction segments, our United States building services segment and our United States industrial services segment, respectively. The perpetual growth rate used for our annual testing was 2.7% for all of our domestic segments. Unfavorable changes in these key assumptions may affect future testing results. For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average costs 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 ~~$91.7~~$108.8 million, ~~$132.4~~$156.7 million, ~~$71.2~~$98.0 million, and ~~$46.4~~$40.3 million, respectively. In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately ~~$52.5~~$61.4 million, ~~$74.1~~$90.5 million, ~~$38.3~~$55.7 million, and ~~$23.3~~$20.5 million, respectively. Given the amounts by which the fair value exceeds the carrying value for each of our reporting units other than our United States industrial services segment, the decreases in estimated fair values described above would not have significantly impacted our 2019 impairment test. In the case of our United States industrial services segment, however, such decreases would cause the estimated fair value to approach its carrying value.

We also test for the impairment of trade names that are not subject to amortization by calculating the fair value 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. No impairment of our indefinite-lived trade names was recognized during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

In addition, we review for the impairment of other identifiable intangible assets that are being amortized 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 ~~discounted~~ cash flows. ~~During the second quarter of 2018, we recorded a $0.9 million non-cash impairment charge associated with a finite-lived trade name within our United States industrial services segment.~~ No ~~additional~~ impairment of our other identifiable intangible assets was recognized during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

We have certain businesses, particularly within our United States industrial services segment, whose results are highly impacted by the demand for some of our offerings within the industrial and oil and gas markets. Volatility in the price of oil has historically caused some of our refinery customers to curtail or delay maintenance or capital projects. Prolonged volatility in the price of oil may adversely affect some of our refinery customers causing them to defer maintenance and/or capital projects performed by our companies or delay purchases or repairs of heat exchangers that are manufactured and repaired by some of our companies. Future performance of this segment, along with a continued evaluation of the conditions of its end user markets, will be important to ongoing impairment assessments. Should this segment’s actual results suffer a decline or expected future results be revised downward, the risk of goodwill impairment or impairment of other identifiable intangible assets would increase.

Our development of the ~~present value of~~discounted future cash flow projections used in impairment testing is based upon assumptions and estimates by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, ~~and~~among other considerations. In addition, estimates of the weighted average cost of capital ~~among~~for each reporting unit are developed with the assistance of a third-party valuation specialist and certain other ~~considerations. Those~~factors used in assessing fair value, such as interest rates, are outside the control of management. These assumptions and estimates can change in future periods, especially in consideration of the uncertainty created by the COVID-19 pandemic and ~~other factors used in assessing fair value are outside~~how it will impact the ~~control~~broader economy and our results of ~~management, such as interest rates.~~operations. There can be no assurance that estimates and assumptions made for purposes of our goodwill and identifiable intangible asset impairment testing will prove to be accurate predictions of the future. If our assumptions regarding future business performance orincluding anticipated growth rates ~~and/or~~and margins are not achieved, or there is a rise in interest rates, we may be required to record goodwill and/or identifiable intangible asset impairment charges in future periods.

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.

4234

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We ~~did~~have not ~~use~~used any derivative financial instruments during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020, including trading or speculating on changes in interest rates or commodity prices of materials used in our business.

We are exposed to market risk for changes in interest rates for borrowings under the ~~2016~~2020 Credit Agreement, which provides for a revolving credit facility and a term loan. Borrowings under the ~~2016~~2020 Credit Agreement bear interest at variable rates. As of ~~September 30, 2019~~March 31, 2020, there were no$200.0 million in borrowings outstanding under the ~~2016~~2020 Revolving Credit Facility and the balance of the ~~2016~~2020 Term Loan was ~~$258.2~~$300.0 million. This instrument bears interest at (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar ~~LIBOR (2.04%~~ LIBOR (0.87% and 0.99% at ~~September 30, 2019~~)March 31, 2020 for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively) 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 ~~(5.00%~~(3.25% at ~~September 30, 2019)~~March 31, 2020), (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~~rates in effect at ~~September 30, 2019~~March 31, 2020 ~~was~~ ~~3.04%~~.were 1.87% and 1.99% for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively. Fees for letters of credit issued under the ~~2016~~2020 Revolving Credit Facility range from ~~1.00%~~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 ~~$258.2~~$500.0 million of borrowings outstanding under the ~~2016~~2020 Credit Agreement, if overall interest rates were to increase by 100 basis points, interest expense, net of income taxes, would increase by approximately ~~$1.9~~$3.7 million in the next twelve months. Conversely, if overall interest rates were to decrease by 100 basis points, interest expense, net of income taxes, would decrease by approximately ~~$1.9~~$3.7 million in the next twelve months. The ~~2016~~2020 Credit Agreement expires on ~~August 3, 2021. There is no guarantee that we will be able to renew the 2016 Credit Agreement at its expiration.~~March 2, 2025.

It is expected that a number of banks currently reporting information used to set LIBOR will stop doing so after 2021, which could either cause LIBOR to stop publication or cause LIBOR to no longer be representative of the underlying market. We believe our exposure to market risk associated with the discontinuation of LIBOR is limited as our ~~2016~~2020 Credit Agreement ~~expires prior to~~contains provisions which allow for the ~~end~~use of ~~2021 and given that we~~alternate benchmark rates. 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 collectibility of these assets. See also the previous discussions of Revenue Recognition from Contracts with Customers and Accounts Receivable under the heading, “Application of Critical Accounting Policies” 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 ~~the~~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 ~~11,000~~11,500 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 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.

Table of Contents

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, Chief Financial Officer, and Treasurer, Mark A. Pompa, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchanges 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, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

4336

Table of Contents

PART II. – OTHER INFORMATION.

ITEM 1. 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.

ITEM 1A. RISK FACTORS.

There were no material changes during the first quarter of 2020 to the risk factors identified in the Company’s annual report for 2019 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 of the responses of governments, businesses, and individuals to combat it, have caused significant volatility, uncertainty, and economic disruption, which has adversely impacted our operations and those of our customers and clients. On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide. On March 13, 2020, U.S. President Trump announced a National Emergency relating to the pandemic. Government authorities in the U.S. and U.K. have recommended or imposed various social distancing, quarantine, and isolation measures on large portions of the population, which include limitations on travel and mandatory cessation of certain business activities. Both the outbreak and the containment and mitigation measures have a serious adverse impact on the economy, the severity and duration of which are uncertain. It is likely that government stabilization efforts will only partially mitigate the consequences to the economy.

The extent to which the COVID-19 pandemic will impact our business and results of operations is 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 imposed or recommended containment and mitigation measures; the extent, duration and effective execution of government stabilization and recovery efforts; the impact of the pandemic on economic activity, including on construction projects, our customers’ demand for our services and our vendors’ ability to supply us with raw materials; 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.

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

Table of Contents

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, 2019~~March 31, 2020:



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
January 1, 2020 to January 31, 2020	—	—	—	$158,506,898
February 1, 2020 to February 29, 2020	214,500	$78.41	214,500	$141,687,752
March 1, 2020 to March 31, 2020	1,269,255	$64.79	1,269,255	$259,458,907
Total	1,483,755	$66.75	1,483,755



~~Period~~	~~Total Number of~~ ~~Shares Purchased (1)~~	~~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 Plan or Programs~~
~~July 1, 2019 to~~ ~~July 31, 2019~~	—	—	—	~~$158,506,898~~
~~August 1, 2019 to~~ ~~August 31, 2019~~	—	—	—	~~$158,506,898~~
~~September 1, 2019 to~~ ~~September 30, 2019~~	—	—	—	~~$158,506,898~~
~~Total~~	—	—	—

(1)

OnIn September ~~26,~~ 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to ~~repurchase up to $100.0 million~~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.~~repurchase under such program. Since the inception of the repurchase program, the Board has authorized us to repurchase up to ~~$950.0 million~~$1.15 billion of our outstanding common stock. As of ~~September 30, 2019,~~March 31, 2020, there remained authorization for us to repurchase approximately ~~$158.5~~$259.5 million of our shares. No shares have been repurchased by us since the program was announced other than pursuant to such program. 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.


(2)	Excludes 31,748 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 to this quarterly report.

ITEM 6. EXHIBITS.

For the list of exhibits, see the Exhibit Index immediately following the signature page hereof, which Exhibit Index is incorporated herein by reference.

4438

Table of Contents

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 29, 2019~~April 30, 2020



	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, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

4539

Table of Contents

EXHIBIT INDEX



Exhibit No.	Description	Incorporated By Reference to or Filed Herewith, as Indicated Below

2(a)	Purchase and Sale Agreement, dated as of June 17, 2013 by and among Texas Turnaround LLC, a Delaware limited liability company, Altair Strickland Group, Inc., a Texas corporation, Rep Holdings LLC, a Texas limited liability company, ASG Key Employee LLC, a Texas limited liability company, Repcon Key Employee LLC, a Texas limited liability company, Gulfstar MBII, Ltd., a Texas limited partnership, The Trustee of the James T. Robinson and Diana J. Robinson 2010 Irrevocable Trust, The Trustee of the Steven Rothbauer 2012 Descendant’s Trust, The Co-Trustees of the Patia Strickland 2012 Descendant’s Trust, The Co-Trustees of the Carter Strickland 2012 Descendant’s Trust, and The Co-Trustees of the Walton 2012 Grandchildren’s Trust (collectively, “Sellers”) and EMCOR Group, Inc.	Exhibit 2.1 to EMCOR’s Report on Form 8-K (Date of Report June 17, 2013)
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”)
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)	Amended and Restated By-Laws and Amendments thereto	Exhibit 3(b) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K”)
4(a)	~~Fifth~~Sixth Amended and Restated Credit Agreement dated as of ~~August 3, 2016~~March 2, 2020 by and among EMCOR ~~Group, Inc.~~ and a subsidiary and Bank of Montreal, as Agent and the lenders listed on the signature pages thereof ~~(the “Credit Agreement”)~~	~~Exhibit 4(a) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (“September 2016 Form 10-Q”)~~Filed herewith
4(b)	~~Fifth~~Sixth Amended and Restated Security Agreement dated as of ~~August 3, 2016~~March 2, 2020 among EMCOR, certain of its U.S. subsidiaries, and Bank of Montreal, as Agent	~~Exhibit 4(b) to the September 2016 Form 10-Q~~Filed herewith
4(c)	~~Fifth~~Sixth Amended and Restated Pledge Agreement dated as of ~~August 3, 2016~~March 2, 2020 among EMCOR, certain of its U.S. subsidiaries, and Bank of Montreal, as Agent	~~Exhibit 4(c) to the September 2016 Form 10-Q~~Filed herewith
4(d)	~~Fourth~~Fifth Amended and Restated Guaranty Agreement dated as of ~~August 3, 2016~~March 2, 2020 by certain of EMCOR’s U.S. subsidiaries in favor of Bank of Montreal, as Agent	~~Exhibit 4(d) to the September 2016 Form 10-Q~~Filed herewith

4640

Table of Contents

EXHIBIT INDEX



Exhibit No.	Description	Incorporated By Reference to or Filed Herewith, as Indicated Below

10(a)	Form of Severance Agreement (“Severance Agreement”) between EMCOR and each of R. Kevin Matz and Mark A. Pompa	Exhibit 10.1 to the April 2005 Form 8-K
10(b)	Form of Amendment to Severance Agreement between EMCOR and each of R. Kevin Matz and Mark A. Pompa	Exhibit 10(c) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (“March 2007 Form 10-Q”)
10(c)	Letter Agreement dated October 12, 2004 between Anthony Guzzi and EMCOR (the “Guzzi Letter Agreement”)	Exhibit 10.1 to EMCOR’s Report on Form 8-K (Date of Report October 12, 2004)
10(d)	Form of Confidentiality Agreement between Anthony Guzzi and EMCOR	Exhibit C to the Guzzi Letter Agreement
10(e)	Form of Indemnification Agreement between EMCOR and each of its officers and directors	Exhibit F to the Guzzi Letter Agreement
10(f-1)	Severance Agreement (“Guzzi Severance Agreement”) dated October 25, 2004 between Anthony Guzzi and EMCOR	Exhibit D to the Guzzi Letter Agreement
10(f-2)	Amendment to Guzzi Severance Agreement	Exhibit 10(g-2) to the March 2007 Form 10-Q
10(g-1)	Continuity Agreement dated as of June 22, 1998 between R. Kevin Matz and EMCOR (“Matz Continuity Agreement”)	Exhibit 10(f) to the June 1998 Form 10-Q
10(g-2)	Amendment dated as of May 4, 1999 to Matz Continuity Agreement	Exhibit 10(m) to the June 1999 Form 10-Q
10(g-3)	Amendment dated as of January 1, 2002 to Matz Continuity Agreement	Exhibit 10(o-3) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (“March 2002 Form 10-Q”)
10(g-4)	Amendment dated as of March 1, 2007 to Matz Continuity Agreement	Exhibit 10(n-4) to the March 2007 Form 10-Q
10(h-1)	Continuity Agreement dated as of June 22, 1998 between Mark A. Pompa and EMCOR (“Pompa Continuity Agreement”)	Exhibit 10(g) to the June 1998 Form 10-Q
10(h-2)	Amendment dated as of May 4, 1999 to Pompa Continuity Agreement	Exhibit 10(n) to the June 1999 Form 10-Q
10(h-3)	Amendment dated as of January 1, 2002 to Pompa Continuity Agreement	Exhibit 10(p-3) to the March 2002 Form 10-Q
10(h-4)	Amendment dated as of March 1, 2007 to Pompa Continuity Agreement	Exhibit 10(o-4) to the March 2007 Form 10-Q
10(i-1)	Change of Control Agreement dated as of October 25, 2004 between Anthony Guzzi (“Guzzi”) and EMCOR (“Guzzi Continuity Agreement”)	Exhibit E to the Guzzi Letter Agreement
10(i-2)	Amendment dated as of March 1, 2007 to Guzzi Continuity Agreement	Exhibit 10(p-2) to the March 2007 Form 10-Q
10(i-3)	Amendment to Continuity Agreements and Severance Agreements with Anthony J. Guzzi, R. Kevin Matz and Mark A. Pompa	Exhibit 10(q) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2008 (“2008 Form 10-K”)

4741

Table of Contents

EXHIBIT INDEX



Exhibit No.	Description	Incorporated By Reference to or Filed Herewith, as Indicated Below

10(j)	Amendment dated as of March 29, 2010 to Severance Agreement with Anthony J. Guzzi, R. Kevin Matz and Mark A. Pompa	Exhibit 10.1 to Form 8-K (Date of Report March 29, 2010) (“March 2010 Form 8-K”)
10(k-1)	Severance Agreement dated as of October 26, 2016 between EMCOR and Maxine L. Mauricio	Exhibit 10(l-1) to the September 2016 Form 10-Q
10(k-2)	Continuity Agreement dated as of October 26, 2016 between EMCOR and Maxine L. Mauricio (“Mauricio Continuity Agreement”)	Exhibit 10(l-2) to the September 2016 Form 10-Q
10(k-3)	Amendment dated April 10, 2017 to Mauricio Continuity Agreement	Exhibit 10(l-3) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
10(l-1)	EMCOR Group, Inc. Long-Term Incentive Plan (“LTIP”)	Exhibit 10 to Form 8-K (Date of Report December 15, 2005)
10(l-2)	First Amendment to LTIP and updated Schedule A to LTIP	Exhibit 10(s-2) to 2008 Form 10-K
10(l-3)	Second Amendment to LTIP	Exhibit 10.2 to March 2010 Form 8-K
10(l-4)	Third Amendment to LTIP	Exhibit 10(q-4) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 (“March 2012 Form 10-Q”)
10(l-5)	Fourth Amendment to LTIP	Exhibit 10(l-5) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013
10(l-6)	Form of Certificate Representing Stock Units issued under LTIP	Exhibit 10(t-2) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2007 (“2007 Form 10-K”)
10(l-7)	Fifth Amendment to LTIP	Exhibit 10(l-7) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Form 10-K”)
10(l-8)	Sixth Amendment to LTIP	Exhibit 10(l-8) to 2015 Form 10-K
10(m)	Key Executive Incentive Bonus Plan, as amended and restated	Exhibit B to EMCOR’s Proxy Statement for its Annual Meeting held June 13, 2013
~~10(n-1)~~10(n)	Amended and Restated 2010 Incentive Plan	Exhibit 10(q-1) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
~~10(n-2)~~	~~Form of Option Agreement under 2010 Incentive Plan between EMCOR and each non-employee director with respect to grant of options upon re-election at June 11, 2010 Annual Meeting of Stockholders~~	~~Exhibit 10(i)(i-2) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010~~
~~10(n-3)~~	~~Form of Option Agreement under 2010 Incentive Plan, as amended, between EMCOR and each non-employee director electing to receive options as part of annual retainer~~	~~Exhibit 10(q)(q) to 2011 Form 10-K~~
10(o)	EMCOR Group, Inc. Employee Stock Purchase Plan	Exhibit C to EMCOR’s Proxy Statement for its Annual Meeting held June 18, 2008
10(p)	Director Award Program Adopted May 13, 2011, as amended and restated December 14, 2011	Exhibit 10(n)(n) to 2011 Form 10-K
10(q)	~~Amendment to Option Agreements~~	~~Exhibit 10(r)(r) to 2011 Form 10-K~~
~~10(r)~~	Form of Non-LTIP Stock Unit Certificate	Exhibit 10(p)(p) to the March 31, 2012 Form 10-Q
~~10(s)~~10(r)	Form of Director Restricted Stock Unit Agreement	Exhibit 10(k)(k) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (“June 2012 Form 10-Q”)
10(s)	Director Award Program, as Amended and Restated December 16, 2014	Exhibit 10(z) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2014
10(t)	EMCOR Group, Inc. Voluntary Deferral Plan	Exhibit 10(e)(e) to 2012 Form 10-K
10(u)	First Amendment to EMCOR Group, Inc. Voluntary Deferral Plan	Exhibit 10(e)(e) to 2013 Form 10-K
10(v)	Form of Executive Restricted Stock Unit Agreement	Exhibit 10(f)(f) to 2012 Form 10-K

4842

Table of Contents

EXHIBIT INDEX



Exhibit No.	Description	Incorporated By Reference to or Filed Herewith, as Indicated Below

~~10(t)~~	~~Director Award Program, as Amended and Restated December 16, 2014~~	~~Exhibit 10(z) to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2014~~
~~10(u)~~	~~EMCOR Group, Inc. Voluntary Deferral Plan~~	~~Exhibit 10(e)(e) to 2012 Form 10-K~~
~~10(v)~~	~~First Amendment to EMCOR Group, Inc. Voluntary Deferral Plan~~	~~Exhibit 10(e)(e) to 2013 Form 10-K~~
10(w)	~~Form of Executive Restricted Stock Unit Agreement~~	~~Exhibit 10(f)(f) to 2012 Form 10-K~~
~~10(x)~~	Restricted Stock Unit Award Agreement dated June 11, 2015 between EMCOR and Stephen W. Bershad	Exhibit 10(f)(f) to the June 30, 2015 Form 10-Q
~~10(y)~~10(x)	Executive Compensation Recoupment Policy	Exhibit 10(h)(h) to 2015 Form 10-K
~~10(z)~~10(y)	Restricted Stock Unit Award Agreement dated June 30, 2017 between EMCOR and Mark A. Pompa	Exhibit 10(f)(f) to EMCOR’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017
11	Computation of Basic EPS and Diluted EPS for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	Note 65 of the Notes to the Consolidated Financial Statements
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, Chief Financial Officer and Treasurer	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, Chief Financial Officer and Treasurer	Furnished
95	Information concerning mine safety violations or other regulatory matters	~~Filed herewith~~Exhibit 95 to EMCOR’s Annual Report on Form 10-K for the year ended December 31, 2019
101	The following materials from EMCOR Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2019,~~March 31, 2020, 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

4943



United States mechanical construction and facilities services:
Commercial market sector	$	293,202		33	%	$	287,350		38	%
Institutional market sector	94,886			11	%	77,676			10	%
Hospitality market sector	6,888			1	%	26,170			3	%
Manufacturing market sector	150,199			17	%	89,779			12	%
Healthcare market sector	84,418			10	%	55,843			7	%
Transportation market sector	7,855			1	%	3,072			1	%
Water and wastewater market sector	42,637			5	%	43,033			6	%
Short duration projects ⁽¹⁾	91,897			10	%	72,388			9	%
Service work	100,196			12	%	107,168			14	%
	872,178					762,479
Less intersegment revenues	(2,990		)			(2,984		)
Total segment revenues	$	869,188				$	759,495



United States industrial services:
Field services	$	194,569	83	%	$	181,873	80	%
Shop services	39,597		17	%	45,440		20	%
Total segment revenues	$	234,166			$	227,313

Total United States operations	$	2,190,113			$	1,946,483



United Kingdom building services:
Service work	$	49,098	50	%	$	51,815	52	%
Projects & extras	48,530		50	%	48,751		48	%
Total segment revenues	$	97,628			$	100,566

Total worldwide operations	$	2,287,741			$	2,047,049



United States industrial services:
Field services	$	664,188	84	%	$	486,362	80	%
Shop services	124,083		16	%	124,117		20	%
Total segment revenues	$	788,271			$	610,479

Total United States operations	$	6,452,962			$	5,588,360



	For the nine months ended September 30, 2019
Finance lease expense:
Amortization expense	$	3,396
Interest expense	325
Operating lease expense	49,408
Short-term lease expense	108,930
Variable lease expense	3,358
Total lease expense	$	165,417



	For the nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	48,966
Operating cash flows used for finance leases	$	325
Financing cash flows used for finance leases	$	3,357
Right-of-use assets obtained in exchange for new operating lease liabilities	$	57,400
Right-of-use assets obtained in exchange for new finance lease liabilities	$	4,471



	Operating Leases			Finance Leases
October 1, 2019 to September 30, 2020	$	60,630		$	4,507
October 1, 2020 to September 30, 2021	49,507			3,077
October 1, 2021 to September 30, 2022	40,141			1,857
October 1, 2022 to September 30, 2023	33,471			838
October 1, 2023 to September 30, 2024	24,566			164
Thereafter	73,298			142
Total minimum lease payments	281,613			10,585
Less: Amount of lease payments representing interest	(36,479		)	(605		)
Present value of future minimum lease payments	$	245,134		$	9,980


Current portion of lease liabilities	$	51,632		$	4,192
Noncurrent portion of lease liabilities	193,502			5,788
Present value of future minimum lease payments	$	245,134		$	9,980