EMCOR Group, Inc. [EME] Filings

10-Q 1 eme-20230930.htm FORM 10-Q eme-20230930

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, 2023


☐			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 (§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 23, 2023: 47,044,440 shares.

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EMCOR Group, Inc.

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		PAGE
PART I. - Financial Information.
Item 1.	Financial Statements.
	Consolidated Balance Sheets - as of September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations - three and nine months ended September 30, 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Income - three and nine months ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Cash Flows - nine months ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Equity - three months ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Equity - nine months ended September 30, 2023 and 2022	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	40
Item 4.	Controls and Procedures.	41
PART II. - Other Information.
Item 1.	Legal Proceedings.	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	42
Item 4.	Mine Safety Disclosures.	42
Item 5.	Other Information.	42
Item 6.	Exhibits.	43

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They generally contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” variations of such wording and other words or phrases of similar meaning. Forward-looking statements in this report include discussions of our future operating or financial performance and other forward-looking commentary regarding aspects of our business, including market share growth, gross profit, remaining performance obligations, project mix, projects with varying profit margins and contractual terms, selling, general and administrative expenses, our ability to maintain a strong safety record, and trends in our business, and other characterizations of future events or circumstances, such as the effects of supply chain disruptions and delays. Each forward-looking statement included in this report is subject to risks and uncertainties, including those identified in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, and other sections of this report, and in our Form 10-K for the year ended December 31, 2022, including, without limitation, the “Risk Factors” section of such Form 10-K. Applicable risks and uncertainties include, but are not limited to:

•adverse effects of general economic conditions;

•changes in interest rates;

•domestic and international political developments;

•changes in the specific markets for EMCOR’s services;

•adverse business conditions, including scarcity of skilled labor, productivity challenges, the nature and extent of supply chain disruptions impacting availability and pricing of materials, and inflationary trends more generally, including fluctuations in energy costs;

•the impact of legislation and/or government regulations;

•the availability of adequate levels of surety bonding;

•increased competition;

•unfavorable developments in the mix of our business; and

•other factors discussed elsewhere in this report.

Such risks and uncertainties could cause actual results to differ materially from those that might be anticipated from, or projected or implied by, our forward-looking statements. Accordingly, these statements do not guarantee future performance or events. The forward-looking statements contained in this report speak only as of the filing date of this report. We undertake no obligation to update any forward-looking statements unless required by law. However, any further disclosures made on related subjects in our subsequent reports filed with the Securities and Exchange Commission (the “SEC”) should be consulted. We caution investors not to place undue reliance on forward-looking statements, due to their inherent uncertainty.

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PART I. – FINANCIAL INFORMATION.

ITEM 1. FINANCIAL STATEMENTS.

EMCOR Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	(Unaudited) September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	523,632	$	456,439
Accounts receivable, less allowance for credit losses of $21,644 and $22,382, respectively	3,063,917		2,567,371
Contract assets	308,868		273,176
Inventories	115,466		85,641
Prepaid expenses and other	57,012		79,346
Total current assets	4,068,895		3,461,973
Property, plant and equipment, net	170,693		157,819
Operating lease right-of-use assets	306,112		268,063
Goodwill	953,359		919,151
Identifiable intangible assets, net	600,790		593,975
Other assets	124,344		123,626
Total assets	$	6,224,193	$	5,524,607
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt and finance lease liabilities	$	6,482	$	15,567
Accounts payable	824,155		849,284
Contract liabilities	1,489,324		1,098,263
Accrued payroll and benefits	553,838		465,000
Other accrued expenses and liabilities	284,275		258,190
Operating lease liabilities, current	74,728		67,218
Total current liabilities	3,232,802		2,753,522
Long-term debt and finance lease liabilities	97,480		231,625
Operating lease liabilities, long-term	256,306		220,764
Other long-term obligations	357,636		344,405
Total liabilities	3,944,224		3,550,316
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, 61,074,439 and 60,947,947 shares issued, respectively	611		609
Capital surplus	87,018		74,795
Accumulated other comprehensive loss	(91,357)		(93,451)
Retained earnings	3,611,442		3,214,281
Treasury stock, at cost 13,932,485 and 13,281,222 shares, respectively	(1,328,784)		(1,222,645)
Total EMCOR Group, Inc. stockholders’ equity	2,278,930		1,973,589
Noncontrolling interests	1,039		702
Total equity	2,279,969		1,974,291
Total liabilities and equity	$	6,224,193	$	5,524,607

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Revenues	$	3,207,598	$	2,826,361	$	9,143,652	$	8,126,298
Cost of sales	2,662,126		2,413,130		7,672,058		6,977,504
Gross profit	545,472		413,231		1,471,594		1,148,794
Selling, general and administrative expenses	308,139		263,137		882,684		761,099
Impairment loss on long-lived assets	2,350		—		2,350		—
Operating income	234,983		150,094		586,560		387,695
Net periodic pension (cost) income	(284)		1,025		(840)		3,288
Interest expense, net	(90)		(3,194)		(4,614)		(6,234)
Income before income taxes	234,609		147,925		581,106		384,749
Income tax provision	64,863		42,153		159,292		104,927
Net income including noncontrolling interests	169,746		105,772		421,814		279,822
Net income attributable to noncontrolling interests	337		—		337		—
Net income attributable to EMCOR Group, Inc.	$	169,409	$	105,772	$	421,477	$	279,822

Basic earnings per common share	$	3.59	$	2.16	$	8.88	$	5.52

Diluted earnings per common share	$	3.57	$	2.16	$	8.85	$	5.50

Dividends declared per common share	$	0.18	$	0.13	$	0.51	$	0.39

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net income including noncontrolling interests	$	169,746	$	105,772	$	421,814	$	279,822
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(5,368)		(8,712)		503		(19,257)
Post-retirement plans, amortization of actuarial loss included in net income (1)	538		404		1,591		1,288
Other comprehensive (loss) income	(4,830)		(8,308)		2,094		(17,969)
Comprehensive income	164,916		97,464		423,908		261,853
Comprehensive income attributable to noncontrolling interests	337		—		337		—
Comprehensive income attributable to EMCOR Group, Inc.	$	164,579	$	97,464	$	423,571	$	261,853

_________

(1)Net of tax of $0.5 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively, and net of tax of $0.2 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)(Unaudited)


	Nine months ended September 30,
	2023		2022
Cash flows - operating activities:
Net income including noncontrolling interests	$	421,814	$	279,822
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	38,444		35,168
Amortization of identifiable intangible assets	49,335		45,465
Non-cash expense for impairment of long-lived assets	2,350		—
Non-cash share-based compensation expense	10,703		9,322
Other reconciling items	(3,865)		(682)
Changes in operating assets and liabilities, excluding the effect of businesses acquired	(42,884)		(130,741)
Net cash provided by operating activities	475,897		238,354
Cash flows - investing activities:
Payments for acquisitions of businesses, net of cash acquired	(89,741)		(91,078)
Proceeds from sale or disposal of property, plant and equipment	12,015		6,897
Purchases of property, plant and equipment	(56,306)		(38,717)
Net cash used in investing activities	(134,032)		(122,898)
Cash flows - financing activities:
Proceeds from revolving credit facility	100,000		270,000
Repayments of revolving credit facility	(100,000)		(100,000)
Repayments of long-term debt	(142,813)		—
Repayments of finance lease liabilities	(2,138)		(2,741)
Dividends paid to stockholders	(24,198)		(20,037)
Repurchases of common stock	(105,299)		(656,573)
Taxes paid related to net share settlements of equity awards	(5,365)		(7,295)
Issuances of common stock under employee stock purchase plan	6,769		6,097
Payments for contingent consideration arrangements	(3,113)		(2,049)
Net cash used in financing activities	(276,157)		(512,598)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	856		(20,540)
Increase (decrease) in cash, cash equivalents, and restricted cash	66,564		(417,682)
Cash, cash equivalents, and restricted cash at beginning of year (1)	457,068		822,568
Cash, cash equivalents, and restricted cash at end of period (2)	$	523,632	$	404,886

_________

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

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

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended September 30, 2022 and 2023

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

Balance, June 30, 2023	$	2,118,087	$	611	$	81,556	$	(86,527)	$	3,450,553	$	(1,328,808)	$	702
Net income including noncontrolling interests	169,746		—		—		—		169,409		—		337
Other comprehensive loss	(4,830)		—		—		(4,830)		—		—		—
Tax withholding for common stock issued under share-based compensation plans	(70)		—		(70)		—		—		—		—
Common stock issued under employee stock purchase plan	2,328		—		2,328		—		—		—		—
Common stock dividends	(8,484)		—		36		—		(8,520)		—		—
Repurchases of common stock (2)	24		—		—		—		—		24		—
Share-based compensation expense	3,168		—		3,168		—		—		—		—
Balance, September 30, 2023	$	2,279,969	$	611	$	87,018	$	(91,357)	$	3,611,442	$	(1,328,784)	$	1,039

_________

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

(2)Represents adjustment to estimate of excise tax on net share repurchases. Estimates of excise tax are subject to change in subsequent reporting periods, particularly if the amount of our share issuances exceed our share repurchases, thereby reducing the estimated excise tax due for the annual period. Refer to Note 10 - Common Stock for further detail regarding the excise tax on net share repurchases.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the nine months ended September 30, 2022 and 2023

(In thousands)(Unaudited)


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

Balance, December 31, 2022	$	1,974,291	$	609	$	74,795	$	(93,451)	$	3,214,281	$	(1,222,645)	$	702
Net income including noncontrolling interests	421,814		—		—		—		421,477		—		337
Other comprehensive income	2,094		—		—		2,094		—		—		—
Common stock issued under share-based compensation plans	—		2		(2)		—		—		—		—
Tax withholding for common stock issued under share-based compensation plans	(5,365)		—		(5,365)		—		—		—		—
Common stock issued under employee stock purchase plan	6,769		—		6,769		—		—		—		—
Common stock dividends	(24,198)		—		118		—		(24,316)		—		—
Repurchases of common stock	(106,139)		—		—		—		—		(106,139)		—
Share-based compensation expense	10,703		—		10,703		—		—		—		—
Balance, September 30, 2023	$	2,279,969	$	611	$	87,018	$	(91,357)	$	3,611,442	$	(1,328,784)	$	1,039

_________

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

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 - Basis of Presentation

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

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

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

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

NOTE 2 - New Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) has issued an accounting standards update, which provides temporary optional expedients and exceptions to existing U.S. GAAP. This guidance is aimed at easing the financial reporting burdens related to reference rate reform, including the market transition from the London interbank offered rate (“LIBOR”), or other interbank offered rates, to alternative reference rates. Such accounting pronouncement, as amended, allows entities to account for and present certain contract modifications, which occur before December 31, 2024 and result from the transition to an alternative reference rate, as an event that does not require remeasurement at the modification date or reassessment of a previous accounting determination. In order to utilize such guidance, an entity must first conclude that the modified terms directly replace or have the potential to replace an eligible reference rate due to reference rate reform, and that any contemporaneous changes to other terms that change, or have the potential to change, the amount or timing of contractual cash flows are related to the replacement of a reference rate. During the second quarter of 2023, we amended our credit agreement to change the reference rate from LIBOR to an interest rate based on the secured overnight financing rate, as administered by the Federal Reserve Bank of New York (“SOFR”). As such amendment falls within the scope of the aforementioned guidance, we adopted this accounting pronouncement and utilized the optional expedients referenced above. We are not exposed to any other material contracts that reference LIBOR. The amendment of our credit agreement and the adoption of this accounting pronouncement did not have a material impact on our financial position and/or results of operations.

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 we expect to be entitled in exchange for those goods or services by applying the following five step model:

(1) Identify the contract with a customer

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

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

(2) Identify the performance obligations in the contract

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

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

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

(3) Determine the transaction price

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

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

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

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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

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

Changes in the estimates of transaction prices are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate.

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

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

(5) Recognize revenue as performance obligations are satisfied

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

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

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For our construction contracts, revenue is generally recognized over time as our performance creates or enhances an asset that the customer controls as it is created or enhanced. Our fixed price construction projects generally use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the number of units produced or delivered, when our performance does not produce significant amounts of work in process or finished goods prior to complete satisfaction of such performance obligations.

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

The timing of revenue recognition for the manufacturing of new build heat exchangers within our United States industrial services segment depends on the payment terms of the contract, as our performance does not create an asset with an alternative use to us. For those contracts for which we have a right to payment for performance completed to date at all times throughout our performance, inclusive of a cancellation, we recognize revenue over time. For these performance obligations, we use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date, we recognize revenue at the point in time when control is transferred to the customer. For bill-and-hold arrangements, revenue is recognized when the customer obtains control of the heat exchanger, which may be prior to shipping if certain recognition criteria are met.

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

Changes in Estimates

Due to uncertainties inherent in the estimation process, as well as the significant judgment involved in determining variable consideration, it is possible that estimates of costs to complete a performance obligation, and/or our estimates of transaction prices, will be revised in the near term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, or changes in the estimate of transaction prices, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

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


	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
United States electrical construction and facilities services	$	2,635	$	10,549	$	12,219	$	26,460
United States mechanical construction and facilities services	7,933		1,273		13,416		8,443
United States building services	—		—		2,977		—
Total impact	$	10,568	$	11,822	$	28,612	$	34,903

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

During the three and nine months ended September 30, 2023, we recognized revenue of approximately $10.0 million and $22.6 million, respectively, on individual projects that were substantially complete in prior periods, but had revisions to total estimated cost or anticipated contract value, which resulted in an increase to profitability in excess of $1.0 million. Of the amounts recorded during the three and nine months ended September 30, 2023, approximately $4.2 million and $4.3 million, respectively, were reported within our United States electrical construction and facilities services segment and approximately $5.8 million and $18.3 million, respectively, were reported within our United States mechanical construction and facilities services segment. There were no significant amounts of revenue recognized during the three and nine months ended September 30, 2022 related to performance obligations satisfied in prior periods.

Disaggregation of Revenues

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

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, 2023 and 2022 (in thousands, except for percentages). Refer to Note 14 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment.

Due to continued growth in certain of our end markets, beginning with the first quarter of 2023, we have expanded the market sectors included in the disclosure for each of our United States construction segments, as shown below. All prior period disclosures have been adjusted to additionally reflect these changes.


	For the three months ended September 30,
	2023		% of Total		2022		% of Total
United States electrical construction and facilities services:
Network and communications market sector	$	236,454	34	%	$	209,265	33	%
Commercial market sector	104,270		15	%	106,058		17	%
Manufacturing and industrial market sector	97,788		14	%	78,562		12	%
Healthcare market sector	62,126		9	%	43,911		7	%
High-tech manufacturing market sector	33,482		5	%	20,132		3	%
Institutional market sector	37,916		6	%	46,344		7	%
Transportation market sector	43,287		6	%	40,525		7	%
Water and wastewater market sector	6,327		1	%	5,466		1	%
Hospitality and entertainment market sector	16,708		2	%	8,598		1	%
Short duration projects (1)	43,481		6	%	58,637		9	%
Service work	15,927		2	%	16,829		3	%
	697,766				634,327
Less intersegment revenues	(360)				(944)
Total segment revenues	$	697,406			$	633,383

________

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

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


	For the three months ended September 30,
	2023		% of Total		2022		% of Total
United States mechanical construction and facilities services:
Network and communications market sector	$	102,630	8	%	$	87,070	8	%
Commercial market sector	283,659		21	%	271,908		25	%
Manufacturing and industrial market sector	178,123		13	%	156,524		14	%
Healthcare market sector	123,025		9	%	120,185		11	%
High-tech manufacturing market sector	255,229		19	%	81,970		7	%
Institutional market sector	89,215		7	%	99,066		9	%
Transportation market sector	10,168		1	%	15,494		1	%
Water and wastewater market sector	65,219		5	%	66,667		6	%
Hospitality and entertainment market sector	14,716		1	%	9,910		1	%
Short duration projects (1)	81,851		6	%	76,073		7	%
Service work	128,912		10	%	127,033		11	%
	1,332,747				1,111,900
Less intersegment revenues	(3,147)				(3,245)
Total segment revenues	$	1,329,600			$	1,108,655

________

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


	For the three months ended September 30,
	2023		% of Total		2022		% of Total
United States building services:
Mechanical services	$	542,371	66	%	$	471,134	65	%
Commercial site-based services	222,499		27	%	199,957		28	%
Government site-based services	52,848		7	%	48,292		7	%
Total segment revenues	$	817,718			$	719,383


	For the three months ended September 30,
	2023		% of Total		2022		% of Total
United States industrial services:
Field services	$	214,341	85	%	$	213,866	87	%
Shop services	37,807		15	%	33,373		13	%
Total segment revenues	$	252,148			$	247,239

Total United States operations	$	3,096,872			$	2,708,660


	For the three months ended September 30,
	2023		% of Total		2022		% of Total
United Kingdom building services:
Service work	$	54,286	49	%	$	51,762	44	%
Project work	56,440		51	%	65,939		56	%
Total segment revenues	$	110,726			$	117,701

Total operations	$	3,207,598			$	2,826,361

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


	For the nine months ended September 30,
	2023		% of Total		2022		% of Total
United States electrical construction and facilities services:
Network and communications market sector	$	665,493	33	%	$	534,130	31	%
Commercial market sector	295,188		15	%	301,908		17	%
Manufacturing and industrial market sector	278,912		14	%	210,331		12	%
Healthcare market sector	182,442		9	%	119,259		7	%
High-tech manufacturing market sector	102,075		5	%	62,956		4	%
Institutional market sector	112,577		5	%	115,799		7	%
Transportation market sector	118,436		6	%	128,047		7	%
Water and wastewater market sector	18,388		1	%	15,962		1	%
Hospitality and entertainment market sector	56,510		3	%	19,892		1	%
Short duration projects (1)	141,901		7	%	167,553		10	%
Service work	50,080		2	%	47,253		3	%
	2,022,002				1,723,090
Less intersegment revenues	(1,683)				(3,565)
Total segment revenues	$	2,020,319			$	1,719,525

________

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


	For the nine months ended September 30,
	2023		% of Total		2022		% of Total
United States mechanical construction and facilities services:
Network and communications market sector	$	289,085	8	%	$	203,347	6	%
Commercial market sector	828,809		23	%	799,729		25	%
Manufacturing and industrial market sector	485,809		13	%	461,385		15	%
Healthcare market sector	353,595		10	%	367,002		12	%
High-tech manufacturing market sector	549,678		15	%	211,071		7	%
Institutional market sector	224,889		6	%	251,715		8	%
Transportation market sector	31,615		1	%	47,793		1	%
Water and wastewater market sector	201,167		6	%	196,157		6	%
Hospitality and entertainment market sector	38,324		1	%	34,108		1	%
Short duration projects (1)	237,246		7	%	254,102		8	%
Service work	368,378		10	%	340,682		11	%
	3,608,595				3,167,091
Less intersegment revenues	(6,324)				(8,143)
Total segment revenues	$	3,602,271			$	3,158,948

________

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

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)


	For the nine months ended September 30,
	2023		% of Total		2022		% of Total
United States building services:
Mechanical services	$	1,519,410	65	%	$	1,300,555	64	%
Commercial site-based services	639,193		28	%	596,589		29	%
Government site-based services	159,502		7	%	144,411		7	%
Total segment revenues	$	2,318,105			$	2,041,555


	For the nine months ended September 30,
	2023		% of Total		2022		% of Total
United States industrial services:
Field services	$	751,062	86	%	$	732,826	87	%
Shop services	124,252		14	%	109,698		13	%
Total segment revenues	$	875,314			$	842,524

Total United States operations	$	8,816,009			$	7,762,552


	For the nine months ended September 30,
	2023		% of Total		2022		% of Total
United Kingdom building services:
Service work	$	157,631	48	%	$	170,840	47	%
Project work	170,012		52	%	192,906		53	%
Total segment revenues	$	327,643			$	363,746

Total operations	$	9,143,652			$	8,126,298

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recognized in the period we deliver goods and services to our customers or when our right to consideration is unconditional. The Company maintains an allowance for credit losses to reduce outstanding receivables to their net realizable value. A considerable amount of judgment is required when determining expected credit losses. Estimates of such losses are recorded when we believe a customer, or group of customers, may not be able to meet their financial obligations due to deterioration in financial condition or credit rating. Factors relevant to our assessment include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends in credit quality indicators or past events, and forecasts of future economic conditions. In addition to monitoring delinquent accounts, management reviews the credit quality of its receivables by, among other things, obtaining credit ratings of significant customers, assessing economic and market conditions, and evaluating material changes to a customer’s business, cash flows, and financial condition.

At September 30, 2023 and December 31, 2022, our allowance for credit losses was $21.6 million and $22.4 million, respectively. The decrease in our allowance for credit losses was attributable to the write-off of specific amounts deemed uncollectible, partially offset by the provision for credit losses recorded during the first nine months of 2023. Allowances for credit losses are based on the best facts available and are reassessed and adjusted on a regular basis as additional information is received. Should anticipated collections fail to materialize, or if future economic conditions compare unfavorably to our forecasts, we could experience an increase in our credit losses.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

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


Balance at December 31, 2022	$	22,382
Provision for credit losses	5,256
Net amounts written off against the allowance, net of recoveries	(5,994)
Balance at September 30, 2023	$	21,644

Contract Assets and Contract Liabilities

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

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

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

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


	September 30, 2023		December 31, 2022
Contract assets, current	$	308,868	$	273,176
Contract assets, non-current	—		—
Contract liabilities, current	(1,489,324)		(1,098,263)
Contract liabilities, non-current	(2,060)		(2,273)
Net contract liabilities	$	(1,182,516)	$	(827,360)

Contract assets and contract liabilities increased by approximately $1.8 million and $5.0 million, respectively, as a result of acquisitions made by us during the first nine months of 2023. Excluding the impact of acquisitions, net contract liabilities increased by approximately $352.0 million during the nine months ended September 30, 2023, primarily attributable to an increase in net contract liabilities on our uncompleted construction projects, partially as a result of the timing of invoicing to our customers, which included customer deposits and advanced billings on several large projects in the earlier stages of completion, resulting in amounts invoiced exceeding the revenue recognized for such projects. There was no significant impairment of contract assets recognized during the periods presented.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

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


	September 30, 2023		% of Total
Remaining performance obligations:
United States electrical construction and facilities services	$	2,158,104	25	%
United States mechanical construction and facilities services	4,875,551		56	%
United States building services	1,313,779		15	%
United States industrial services	133,894		2	%
Total United States operations	8,481,328		98	%
United Kingdom building services	154,115		2	%
Total operations	$	8,635,443	100	%

Our remaining performance obligations at September 30, 2023 were $8.64 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 as the risk of cancellation is very low due to the inherent substantial economic penalty that our customers would incur upon cancellation or termination. We believe our reported remaining performance obligations for our construction contracts are firm and contract cancellations have not had a material adverse effect on us.

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

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
Remaining performance obligations:
United States electrical construction and facilities services	$	1,743,345	$	414,759
United States mechanical construction and facilities services	4,021,465		854,086
United States building services	1,166,368		147,411
United States industrial services	133,894		—
Total United States operations	7,065,072		1,416,256
United Kingdom building services	107,125		46,990
Total operations	$	7,172,197	$	1,463,246

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EMCOR Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 - Acquisitions of Businesses

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

During the first nine months of 2023, we acquired seven companies for total consideration of $92.8 million. Such acquisitions include: (a) a national energy efficiency specialty services firm, the results of operations of which have been included in our United States building services segment, and (b) six companies that enhance our presence in geographies where we have existing operations, the results of operations of which were de minimis, consisting of: (i) two companies that have been included within our Unites States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services, and one of which provides fire protection services, both in the Midwestern region of the United States, and (ii) four mechanical services companies in the Western and Midwestern regions of the United States, that have been included within our United States building services segment. In connection with these acquisitions, we acquired working capital of $9.1 million and other net liabilities of $6.7 million, including certain deferred tax liabilities, and have preliminarily ascribed $34.2 million to goodwill and $56.2 million to identifiable intangible assets. We expect that $23.2 million of the goodwill and identifiable intangible assets acquired in connection with these 2023 acquisitions will be deductible for tax purposes.

During calendar year 2022, we acquired six companies for total consideration of $100.8 million. Such acquisitions include: (a) a company that provides electrical construction services in the Greater Boston area, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (b) five companies that enhance our presence in geographies where we have existing operations, the results of operations of which were de minimis, consisting of: (i) two companies that provide fire protection services in the Northeastern and Southern regions of the United States, respectively, and that have been included within our United States mechanical construction and facilities services segment, (ii) two companies that specialize in either building automation and controls or mechanical services in the Southwestern and Southern regions of the United States, respectively, and that have been included within our United States building services segment, and (iii) a company that provides electrical construction services in the Midwestern region of the United States and that has been included within our United States electrical construction and facilities services segment. In connection with these acquisitions, we acquired working capital of $7.1 million and other net liabilities of $1.1 million, and have ascribed $28.9 million to goodwill and $65.9 million to identifiable intangible assets. We expect that all of the goodwill and identifiable intangible assets acquired in connection with these 2022 acquisitions will be deductible for tax purposes.

The purchase price allocations for the businesses acquired in 2023 are preliminary and subject to change during their respective measurement periods. As we finalize such purchase price allocations, adjustments may be recorded relating to finalization of intangible asset valuations, tax matters, or other items. Although not expected to be significant, such adjustments may result in changes in the valuation of assets and liabilities acquired. The purchase price allocations for the businesses acquired in 2022 have been finalized during their respective measurement periods with an insignificant impact.

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

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


	For the three months ended September 30,
	2023		2022
Numerator:
Net income attributable to EMCOR Group, Inc.	$	169,409	$	105,772
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share	47,173,974		48,867,420
Effect of dilutive securities—Share-based awards	224,223		182,731
Shares used to compute diluted earnings per common share	47,398,197		49,050,151

Basic earnings per common share	$	3.59	$	2.16

Diluted earnings per common share	$	3.57	$	2.16

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 5 - Earnings Per Share (Continued)


			For the nine months ended September 30,