10-Q 1 eme-20210930.htm FORM 10-Q eme-20210930
000010563412/312021Q3FALSE1111111At the Company’s election, borrowings under the 2020 Credit Agreement bear interest at either: (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR (0.08% at September 30, 2021) plus 1.00% to 1.75%, based on certain financial tests. The base rate is determined by the greater of: (a) the prime commercial lending rate announced by Bank of Montreal from time to time (3.25% at September 30, 2021), (b) the federal funds effective rate, plus 1/2 of 1.00%, (c) the daily one month LIBOR rate, plus 1.00%, or (d) 0.00%. The interest rate in effect at September 30, 2021 was 1.08%. A commitment fee is payable on the average daily unused amount of the 2020 Revolving Credit Facility, which ranges from 0.10% to 0.25%, based on certain financial tests. The fee was 0.10% of the unused amount as of September 30, 2021. Fees for letters of credit issued under the 2020 Revolving Credit Facility range from 0.75% to 1.75% of the respective face amounts of outstanding letters of credit, depending on the nature of the letter of credit, and are computed based on certain financial 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
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)
Delaware11-2125338
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
301 Merritt Seven
Norwalk,Connecticut06851-1092
(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 classTrading SymbolName of each exchange on which registered
Common StockEMENew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes      No  
Applicable Only To Corporate Issuers
Number of shares of Common Stock outstanding as of the close of business on October 22, 2021: 53,374,384 shares.




























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EMCOR Group, Inc.
TABLE OF CONTENTS
 
  Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 4.
Item 6.


FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They generally contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” variations of such wording and other words or phrases of similar meaning. Forward-looking statements in this report include discussions of our future operating or financial performance and other forward-looking commentary regarding aspects of our business, including market share growth, gross profit, remaining performance obligations, project mix, projects with varying profit margins, selling, general and administrative expenses, and trends in our business and other characterizations of future events or circumstances, such as the effects of the COVID-19 pandemic. Each forward-looking statement included in this report is subject to risks and uncertainties, including those identified in the “Risk Factors” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, and other sections of this report, and in our Form 10-K for the year ended December 31, 2020. 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. 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. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q, and 8-K should be consulted. We caution investors not to place undue reliance on forward-looking statements, due to their inherent uncertainty.


PART I. – FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
EMCOR Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30,
2021
(Unaudited)
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$663,905 $902,867 
Accounts receivable, less allowance for credit losses of $22,627 and $18,031, respectively
2,181,730 1,922,096 
Contract assets245,489 171,956 
Inventories64,489 53,338 
Prepaid expenses and other70,954 70,679 
Total current assets3,226,567 3,120,936 
Property, plant and equipment, net153,584 158,427 
Operating lease right-of-use assets268,657 242,155 
Goodwill888,303 851,783 
Identifiable intangible assets, net602,234 582,893 
Other assets157,333 107,646 
Total assets$5,296,678 $5,063,840 
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt and finance lease liabilities$16,328 $16,910 
Accounts payable637,865 671,886 
Contract liabilities780,666 722,252 
Accrued payroll and benefits494,133 450,955 
Other accrued expenses and liabilities263,178 247,597 
Operating lease liabilities, current57,953 53,632 
Total current liabilities2,250,123 2,163,232 
Long-term debt and finance lease liabilities259,337 259,619 
Operating lease liabilities, long-term228,561 205,362 
Other long-term obligations416,607 382,383 
Total liabilities3,154,628 3,010,596 
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, 60,716,955 and 60,571,140 shares issued, respectively
607 606 
Capital surplus57,473 47,464 
Accumulated other comprehensive loss(107,812)(109,233)
Retained earnings2,740,817 2,480,321 
Treasury stock, at cost 7,334,395 and 5,815,240 shares, respectively
(549,737)(366,490)
Total EMCOR Group, Inc. stockholders’ equity2,141,348 2,052,668 
Noncontrolling interests702 576 
Total equity2,142,050 2,053,244 
Total liabilities and equity$5,296,678 $5,063,840 
See Notes to Consolidated Financial Statements.
1


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,
2021202020212020
Revenues$2,521,672 $2,201,714 $7,263,387 $6,515,567 
Cost of sales2,140,329 1,838,530 6,164,692 5,504,036 
Gross profit381,343 363,184 1,098,695 1,011,531 
Selling, general and administrative expenses243,922 226,793 710,912 658,964 
Restructuring expenses 536  605 
Impairment loss on goodwill, identifiable intangible assets,
and other long-lived assets
   232,750 
Operating income137,421 135,855 387,783 119,212 
Net periodic pension (cost) income908 751 2,738 2,211 
Interest expense, net(1,286)(1,484)(3,965)(6,082)
Income before income taxes137,043 135,122 386,556 115,341 
Income tax provision37,303 73,936 104,523 62,179 
Net income including noncontrolling interests99,740 61,186 282,033 53,162 
Net income attributable to noncontrolling interests  169  
Net income attributable to EMCOR Group, Inc.$99,740 $61,186 $281,864 $53,162 
Basic earnings per common share$1.86 $1.11 $5.19 $0.96 
Diluted earnings per common share$1.85 $1.11 $5.17 $0.96 
Dividends declared per common share$0.13 $0.08 $0.39 $0.24 
See Notes to Consolidated Financial Statements.


2

EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)(Unaudited)        
Three months ended September 30,Nine months ended September 30,
2021202020212020
Net income including noncontrolling interests$99,740 $61,186 $282,033 $53,162 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments(1,687)2,148 (991)(832)
Post retirement plans, amortization of actuarial
loss included in net income (1)
800 540 2,412 1,636 
Other comprehensive (loss) income(887)2,688 1,421 804 
Comprehensive income98,853 63,874 283,454 53,966 
Comprehensive income attributable to
noncontrolling interests
  169  
Comprehensive income attributable to EMCOR Group, Inc.$98,853 $63,874 $283,285 $53,966 
_________
(1)Net of tax of $0.2 million for each of the three months ended September 30, 2021 and 2020, and net of tax of $0.6 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively.
See Notes to Consolidated Financial Statements.

3

EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited) 
Nine months ended September 30,
20212020
Cash flows - operating activities:
Net income including noncontrolling interests$282,033 $53,162 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization36,088 34,881 
Amortization of identifiable intangible assets48,159 44,765 
Provision for credit losses5,829 3,409 
Deferred income taxes(3,650)(28,104)
Non-cash expense for impairment of goodwill, identifiable intangible assets,
and other long-lived assets
 232,750 
Non-cash share-based compensation expense8,467 8,510 
Other reconciling items624 1,169 
Changes in operating assets and liabilities, excluding the effect of businesses acquired(263,609)196,292 
Net cash provided by operating activities113,941 546,834 
Cash flows - investing activities:
Payments for acquisitions of businesses, net of cash acquired(113,658)(44,930)
Proceeds from sale or disposal of property, plant and equipment1,930 1,891 
Purchases of property, plant and equipment(25,954)(34,180)
Distributions from unconsolidated entities196  
Net cash used in investing activities(137,486)(77,219)
Cash flows - financing activities:
Proceeds from revolving credit facility 200,000 
Repayments of revolving credit facility (250,000)
Proceeds from long-term debt 300,000 
Repayments of long-term debt and debt issuance costs (280,049)
Repayments of finance lease liabilities(3,253)(3,390)
Dividends paid to stockholders(21,224)(13,280)
Repurchases of common stock(183,247)(99,048)
Taxes paid related to net share settlements of equity awards(4,020)(2,574)
Issuances of common stock under employee stock purchase plan5,418 4,887 
Payments for contingent consideration arrangements(6,758)(4,070)
Distributions to noncontrolling interests(43)(70)
Net cash used in financing activities(213,127)(147,594)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(1,870)(1,304)
(Decrease) increase in cash, cash equivalents, and restricted cash(238,542)320,717 
Cash, cash equivalents, and restricted cash at beginning of year (1)
903,562 359,920 
Cash, cash equivalents, and restricted cash at end of period (2)
$665,020 $680,637 
_________
(1)Includes $0.7 million and $1.1 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2020 and 2019, respectively.
(2)Includes $1.1 million and $1.3 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of September 30, 2021 and 2020, respectively.

See Notes to Consolidated Financial Statements.
4

EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the three months ended September 30, 2020 and 2021
(In thousands)(Unaudited)        
  EMCOR Group, Inc. Stockholders 
 TotalCommon
stock
Capital
surplus
Accumulated other comprehensive loss (1)
Retained
earnings
Treasury
stock
Noncontrolling
interests
Balance, June 30, 2020$1,944,198 $605 $38,975 $(91,172)$2,348,199 $(352,985)$576 
Net income including noncontrolling interests61,186 — — — 61,186 — — 
Other comprehensive income2,688 — — 2,688 — — — 
Tax withholding for common stock issued under share-based compensation plans(24)— (24)— — — — 
Common stock issued under employee stock purchase plan1,659 — 1,659 — — — — 
Common stock dividends(4,392)— 29 — (4,421)— — 
Share-based compensation expense2,550 — 2,550 — — — — 
Balance, September 30, 2020$2,007,865 $605 $43,189 $(88,484)$2,404,964 $(352,985)$576 
Balance, June 30, 2021$2,091,177 $607 $53,204 $(106,925)$2,648,109 $(504,520)$702 
Net income including noncontrolling interests99,740 — — — 99,740 — — 
Other comprehensive loss(887)— — (887)— — — 
Tax withholding for common stock issued under share-based compensation plans(249)— (249)— — — — 
Common stock issued under employee stock purchase plan1,857 — 1,857 — — — — 
Common stock dividends(6,988)— 44 — (7,032)— — 
Repurchases of common stock(45,217)— — — — (45,217)— 
Share-based compensation expense2,617 — 2,617 — — — — 
Balance, September 30, 2021$2,142,050 $607 $57,473 $(107,812)$2,740,817 $(549,737)$702 
 _________
(1)Represents cumulative foreign currency translation adjustments and post retirement liability adjustments.
See Notes to Consolidated Financial Statements.
5

EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the nine months ended September 30, 2020 and 2021
(In thousands)(Unaudited)        
  EMCOR Group, Inc. Stockholders 
 TotalCommon
stock
Capital
surplus
Accumulated other comprehensive loss (1)
Retained
earnings
Treasury
stock
Noncontrolling
interests
Balance, December 31, 2019$2,057,780 $604 $32,274 $(89,288)$2,367,481 $(253,937)$646 
Net income including noncontrolling interests53,162 — — — 53,162 — — 
Other comprehensive income804 — — 804 — — — 
Cumulative-effect adjustment (2)
(2,307)— — — (2,307)— — 
Common stock issued under share-based compensation plans1 1 — — — — — 
Tax withholding for common stock issued under share-based compensation plans(2,574)— (2,574)— — — — 
Common stock issued under employee stock purchase plan4,887 — 4,887 — — — — 
Common stock dividends(13,280)— 92 — (13,372)— — 
Repurchases of common stock(99,048)— — — — (99,048)— 
Distributions to
noncontrolling interests
(70)— — — — — (70)
Share-based compensation expense8,510 — 8,510 — — — — 
Balance, September 30, 2020$2,007,865 $605 $43,189 $(88,484)$2,404,964 $(352,985)$576 
Balance, December 31, 2020$2,053,244 $606 $47,464 $(109,233)$2,480,321 $(366,490)$576 
Net income including noncontrolling interests282,033 — — — 281,864 — 169 
Other comprehensive income1,421 — — 1,421 — — — 
Common stock issued under share-based compensation plans1 1 — — — — — 
Tax withholding for common stock issued under share-based compensation plans(4,020)— (4,020)— — — — 
Common stock issued under employee stock purchase plan5,418 — 5,418 — — — — 
Common stock dividends(21,224)— 144 — (21,368)— — 
Repurchases of common stock(183,247)— — — — (183,247)— 
Distributions to
noncontrolling interests
(43)— — — — — (43)
Share-based compensation expense8,467 — 8,467 — — — — 
Balance, September 30, 2021$2,142,050 $607 $57,473 $(107,812)$2,740,817 $(549,737)$702 
 _________
(1)Represents cumulative foreign currency translation adjustments and post retirement liability adjustments.
(2)Represents adjustment to retained earnings upon the adoption of Accounting Standards Codification Topic 326.
See Notes to Consolidated Financial Statements.
6


EMCOR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. References to the “Company,” “EMCOR,” “we,” “us,” “our,” and similar words refer to EMCOR Group, Inc. and its consolidated subsidiaries unless the context indicates otherwise. Readers of this report should refer to the consolidated financial statements and the notes thereto included in our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission.
In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of those of a normal recurring nature) necessary to present fairly our financial position and the results of our operations.
Our reportable segments and related disclosures reflect certain reclassifications of prior year amounts from our United States electrical construction and facilities services segment to our United States industrial services and our United States building services segments due to changes in our internal reporting structure aimed at realigning our service offerings.
The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.
NOTE 2 - New Accounting Pronouncements
On January 1, 2021, we adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to intraperiod tax allocations and the methodology for calculating income taxes in an interim period. The guidance also simplifies aspects of the accounting for franchise taxes as well as enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this accounting pronouncement did not have a material impact on our financial position and/or results of operations.
The Company is currently evaluating the impact of an accounting standards update issued by the FASB, which provides temporary optional expedients and exceptions to existing U.S. GAAP. This guidance is aimed at easing the financial reporting burdens related to reference rate reform, including the expected market transition from LIBOR, or other interbank offered rates, to alternative reference rates. Such accounting pronouncement allows entities to account for and present certain contract modifications, which occur before December 31, 2022 and result from the transition to an alternative reference rate, as an event that does not require remeasurement at the modification date or reassessment of a previous accounting determination. While we are still evaluating the impact of this pronouncement, we do not anticipate that it will have a material impact on our financial position and/or results of operations as we are not exposed to any contracts that reference LIBOR, other than our credit agreement dated as of March 2, 2020, which contains provisions that allow for the amendment of such agreement to use alternative reference rates in the event of the discontinuation of LIBOR.
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) 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.


7

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.
8

EMCOR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
NOTE 3 - Revenue from Contracts with Customers (Continued)
Contract claims are another form of variable consideration which is common within our industry. Claim amounts represent revenue that has been recognized for contract modifications that are not submitted or are in dispute as to both scope and price. In estimating the transaction price for claims, the Company considers all relevant facts available. However, given the uncertainty surrounding claims, including the potential long-term nature of dispute resolution and the broad range of possible consideration amounts, there is an increased likelihood that any additional contract revenue associated with contract claims is constrained. The resolution of claims involves negotiations and, in certain cases, litigation. In the event litigation costs are incurred by us in connection with claims, such litigation costs are expensed as incurred, although we may seek to recover these costs.
For some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer. For such contracts, the Company evaluates whether this timing difference represents a financing arrangement within the contract. Although rare, if a contract is determined to contain a significant financing component, the Company adjusts the promised amount of consideration for the effects of the time value of money when determining the transaction price of such contract. Although our customers may retain a portion of the contract price until completion of the project and final contract settlement, these retainage amounts are not considered a significant financing component as the intent of the withheld amounts is to provide the customer with assurance that we will complete our obligations under the contract rather than to provide financing to the customer. In addition, although we may be entitled to advanced payments from our customers on certain contracts, these advanced payments generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract.
Changes in the estimates of transaction prices are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate. For the three and nine months ended September 30, 2020, we recognized revenue of $4.4 million and $6.1 million, respectively, associated with the final settlement of the contract value for two projects within our United States electrical construction and facilities services segment that were completed or substantially completed in prior periods. There were no significant amounts of revenue recognized during the three and nine months ended September 30, 2021 related to performance obligations satisfied in prior periods. In addition, for the three and nine months ended September 30, 2021 and 2020, 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.
(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.

9

EMCOR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
NOTE 3 - Revenue from Contracts with Customers (Continued)
For our construction contracts, revenue is generally recognized over time as our performance creates or enhances an asset that the customer controls as it is created or enhanced. Our fixed price construction projects generally use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the amount 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, 2021 and 2020, there were no changes in total estimated costs that had a significant impact on our operating results. In addition, there were no significant losses recognized during the three and nine months ended September 30, 2021 and 2020.
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 15 - 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.





10

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, 2021 and 2020 (in thousands):
For the three months ended September 30,
2021% of
Total
2020% of
Total
United States electrical construction and facilities services:
Commercial market sector$274,954 52 %$252,197 53 %
Institutional market sector42,002 8 %36,230 8 %
Hospitality market sector2,522 1 %7,028 1 %
Manufacturing market sector60,965 11 %62,537 13 %
Healthcare market sector29,377 6 %16,929 4 %
Transportation market sector49,578 9 %58,765 12 %
Water and wastewater market sector4,381 1 %2,351 1 %
Short duration projects (1)
53,881 10 %31,008 7 %
Service work10,931 2 %6,847 1 %
528,591 473,892 
Less intersegment revenues(656)(1,808)
Total segment revenues$527,935 $472,084 

For the three months ended September 30,
2021% of
Total
2020% of
Total
United States mechanical construction and facilities services:
Commercial market sector$369,654 37 %$346,911 39 %
Institutional market sector74,867 8 %112,264 13 %
Hospitality market sector10,806 1 %12,570 1 %
Manufacturing market sector142,250 14 %93,919 11 %
Healthcare market sector123,071 12 %78,814 9 %
Transportation market sector23,954 3 %19,824 2 %
Water and wastewater market sector53,367 5 %45,255 5 %
Short duration projects (1)
82,510 8 %84,461 9 %
Service work121,013 12 %99,649 11 %
1,001,492 893,667 
Less intersegment revenues(1,908)(2,158)
Total segment revenues$999,584 $891,509 
 ________
(1)Represents those projects which generally are completed within three months or less.







11

EMCOR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
NOTE 3 - Revenue from Contracts with Customers (Continued)
For the three months ended September 30,
2021% of
Total
2020% of
Total
United States building services:
Commercial site-based services$166,375 26 %$147,768 27 %
Government site-based services49,293 8 %44,664 8 %
Mobile mechanical services394,559 62 %341,279 61 %
Energy services22,228 4 %22,803 4 %
Total segment revenues$632,455 $556,514 
For the three months ended September 30,
2021% of
Total
2020% of
Total
United States industrial services:
Field services$196,846 85 %$145,165 85 %
Shop services35,372 15 %26,367 15 %
Total segment revenues$232,218 $171,532 
Total United States operations$2,392,192 $2,091,639 
For the three months ended September 30,
2021% of
Total
2020% of
Total
United Kingdom building services:
Service work$65,486 51 %$55,594 51 %
Project work63,994 49 %54,481 49 %
Total segment revenues