EMCOR Group Inc

Previous wording

Revenues of $12.58 billion for the year ended December 31, 2023 set a new annual record for the Company and represent an increase of 13.6% from revenues of $11.08 billion for the year ended December 31, 2022. Demand for our services continues to be strong across the majority of the market sectors we serve and, as described in further detail below, we experienced revenue growth within all of our reportable segments except for our United Kingdom building services segment.

Current wording

Revenues of $14.57 billion for the year ended December 31, 2024 set a new annual record for the Company and represent an increase of 15.8% from revenues of $12.58 billion for the year ended December 31, 2023. Demand for our services continues to be strong across most of the market sectors we serve and, as described in further detail below, we experienced revenue growth within the majority of our reportable segments. Revenues for the year ended December 31, 2024 included incremental acquisition contribution of approximately $251.5 million.

Previous wording

Operating income for 2023 was $875.8 million, or 7.0% of revenues, establishing new annual records for the Company with respect to both operating income and operating margin. This compares to operating income of $564.9 million, or 5.1% of revenues, in 2022. The $310.9 million increase in operating income, and corresponding 190 basis point improvement in operating margin, were a result of improved operating performance across all of our reportable segments other than our United Kingdom building services segment. As described in further detail below, these improvements in profitability were predominantly a result of: (a) better project execution and productivity, (b) a more favorable mix of work, (c) the successful close-out of several projects and resolution of certain disputes within our United States construction segments, and (d) a reduction in the price of certain commodities and materials utilized in our operations.

Current wording

Operating income for 2024 was $1,344.9 million, or 9.2% of revenues, establishing new annual records for the Company with respect to both operating income and operating margin. This compares to operating income of $875.8 million, or 7.0% of revenues, in 2023. The $469.1 million increase in operating income, and corresponding 220 basis point expansion in operating margin, were predominantly a result of improved operating performance within our United States construction segments, as described in further detail below. Operating income for the year ended December 31, 2024 included incremental acquisition contribution of $13.4 million, net of amortization expense attributable to identifiable intangible assets of $15.3 million.

Previous wording

Net income of $633.0 million, or $13.31 per diluted share, for the year ended December 31, 2023, compares favorably to net income of $406.1 million, or $8.10 per diluted share, for the year ended December 31, 2022. In addition to the increase in operating income referenced above, our diluted earnings per share for 2023 benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2022 and 2023.

Current wording

Net income of $1,007.1 million, or $21.52 per diluted share, for the year ended December 31, 2024, compares favorably to net income of $633.0 million, or $13.31 per diluted share, for the year ended December 31, 2023. While the majority of the increase in our net income and diluted earnings per share was a result of the increased operating income referenced above, these amounts additionally benefited from greater interest income and a reduction in interest expense in 2024. Further, our diluted earnings per share for the year ended December 31, 2024 was positively impacted by a reduced weighted average share count due to common stock repurchases made by us throughout 2023 and 2024.

Previous wording

In order to provide a more meaningful period-over-period discussion of our operating results, we may discuss amounts generated or incurred (revenues, gross profit, selling, general and administrative expenses, and operating income) from companies acquired. The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period.

Current wording

In order to provide a more meaningful period-over-period discussion of our operating results, we may discuss amounts generated or incurred (revenues, gross profit, selling, general and administrative expenses, and operating income) from companies acquired. The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period. For further discussion regarding our acquisitions, refer to Note 4 - Acquisitions of Businesses of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

As a result of strong demand for our services across the majority of the market sectors we serve, revenues for the year ended December 31, 2023 increased to $12.58 billion compared to revenues of $11.08 billion for the year ended December 31, 2022. As described in more detail below, we experienced increases in revenues from all of our reportable segments, except for our United Kingdom building services segment. Companies acquired in 2023 and 2022 generated incremental revenues of $107.1 million in 2023.

Current wording

As a result of strong demand for our services across most of the market sectors we serve, revenues for the year ended December 31, 2024 increased to $14.57 billion compared to revenues of $12.58 billion for the year ended December 31, 2023. As described in more detail below, we experienced increases in revenues from the majority of our reportable segments. Additionally, revenues for 2024 included incremental acquisition contribution of approximately $251.5 million.

Previous wording

Our United States mechanical construction and facilities services segment revenues for the year ended December 31, 2023 were $5,074.8 million, a $782.6 million increase compared to revenues of $4,292.2 million for the year ended December 31, 2022. The year-over-year increase in this segment’s revenues was primarily attributable to revenue growth within: (a) the high-tech manufacturing market sector, as a result of increased demand for our mechanical construction and/or fire protection services by certain customers: (i) engaged in either the design and manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries, and (ii) within the biotech, life-sciences, and pharmaceutical industries, (b) the network and communications market sector, due to increased data center project activity, and (c) the manufacturing and industrial market sector, due in part to continued re-shoring of critical supply chain by certain of our customers.

Current wording

Our United States mechanical construction and facilities services segment revenues for the year ended December 31, 2024 were $6,405.7 million, a $1,330.9 million increase compared to revenues of $5,074.8 million for the year ended December 31, 2023. This segment’s results included $172.5 million of incremental acquisition revenues for the year ended December 31, 2024. Excluding the impact of acquisitions, the increase in this segment’s revenues was attributable to revenue growth within the majority of the market sectors in which we operate, as well as greater levels of service work. This segment experienced notable increases in revenues within: (a) the high-tech manufacturing market sector, as a result of stronger demand for our mechanical construction and/or fire protection services by certain customers: (i) engaged in either the design and manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries and (ii) within the biotech, life-sciences, and pharmaceutical industries, (b) the network and communications market sector, due to increased data center project activity as this segment benefited from the same market demand described above within our United States electrical construction and facilities services segment, (c) the institutional market sector, given several public sector or university projects which were active during 2024, (d) the manufacturing and industrial market sector largely as a result of the re-shoring of critical supply chain by certain of our customers, (e) the water and wastewater market sector, driven by several projects within the Southeast region of the United States, and (f) the healthcare market sector, due to an increase in projects throughout several of the regions in which we operate. Partially offsetting these increases was a reduction in revenues within the commercial market sector, largely as a result of the completion of various warehouse and distribution projects, that were active in 2023.

Previous wording

Revenues of our United States building services segment were $3,120.1 million and $2,755.0 million for the years ended December 31, 2023 and 2022, respectively. Excluding incremental acquisition contribution of $18.6 million, the $346.6 million increase in this segment’s revenues was primarily attributable to its mechanical services division, due to increased: (a) HVAC project and retrofit work, as a result of greater: (i) project execution stemming from the increased availability of materials and equipment when compared to the prior year, which experienced greater supply chain disruptions and delays, and (ii) demand for system upgrades and replacements, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, (b) service repair and maintenance volumes, given growth in our service contract base, and (c) building automation and controls projects, as we continue to expand our service offerings. In addition to increased revenues from its mechanical services division, this segment also experienced revenue growth from its commercial site-based services and government site-based services divisions, due to the award of facilities maintenance contracts with new customers as well as scope or site expansion and increased project work with existing customers. Such increased revenues were despite the loss of certain facilities maintenance contracts not renewed pursuant to rebid.

Current wording

Revenues of our United States building services segment were $3,114.8 million for the year ended December 31, 2024 compared to $3,120.1 million for the year ended December 31, 2023. Excluding incremental acquisition contribution of $31.0 million, this segment’s revenues decreased by $36.3 million as the strength of its mechanical services division was more than offset by revenue declines within its commercial site-based services and government site-based services divisions due to the loss of certain facilities maintenance contracts not renewed pursuant to rebid. With respect to this segment’s mechanical services division, revenue growth was experienced from: (a) HVAC project and retrofit work, as a result of greater: (i) project execution stemming from the increased availability of materials and equipment when compared to the prior year, which experienced greater supply chain disruptions and delays, and (ii) demand for system upgrades and replacements, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, (b) service repair and maintenance volumes, given growth in our service contract base, and (c) building automation and controls projects, as we continue to expand our service offerings in this area.

Previous wording

Our gross profit for the year ended December 31, 2023 was $2,089.3 million, or 16.6% of revenues, compared to gross profit of $1,603.6 million, or 14.5% of revenues, for the year ended December 31, 2022. While the increase in gross profit can be partially attributed to the incremental revenue contribution described above, such increase, and the expansion in gross profit margin, were also the result of stronger operating performance within the majority of our reportable segments due to improved revenue mix, project execution and close-out, and/or favorable pricing. In 2023, acquisitions contributed incremental gross profit of approximately $15.9 million, inclusive of amortization expense attributable to identifiable intangible assets of $3.6 million.

Current wording

Our gross profit for the year ended December 31, 2024 was $2,765.1 million, or 19.0% of revenues, compared to gross profit of $2,089.3 million, or 16.6% of revenues, for the year ended December 31, 2023. The increase in gross profit and the expansion in gross profit margin were driven by each of our domestic reportable segments due to an improved revenue mix, excellent project execution, and/or favorable pricing. Our gross profit for 2024 included incremental acquisition contribution of $46.2 million net of amortization expense attributable to identifiable intangible assets of $8.6 million. Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments.

Previous wording

Our selling, general and administrative expenses for the year ended December 31, 2023 were $1,211.2 million, or 9.6% of revenues, compared to selling, general and administrative expenses of $1,038.7 million, or 9.4% of revenues, for the year ended December 31, 2022. For the year ended December 31, 2023, selling, general and administrative expenses included $17.3 million of incremental expenses directly related to companies acquired in 2023 and 2022, including amortization expense attributable to identifiable intangible assets of $4.6 million. Excluding incremental expenses from businesses acquired, the increase in selling, general and administrative expenses, and SG&A margin, was predominantly attributable to increases in incentive compensation expense across the majority of our reportable segments, due to higher operating results than in the prior year, and salaries and related employment expenses, largely as a result of additional headcount to support our organic revenue growth as well as annual cost of living adjustments. In addition to these increases in employment costs, our SG&A for 2023 included incremental: (a) computer hardware and software costs, as a result of various information technology and cybersecurity initiatives currently in process, (b) travel and entertainment expenses, and (c) rent and other occupancy costs driven by: (i) the expansion or addition of certain fabrication facilities, which support our operations, and (ii) the impact of inflation on the real estate market.

Current wording

Our selling, general and administrative expenses for the year ended December 31, 2024 were $1,420.2 million, or 9.7% of revenues, compared to selling, general and administrative expenses of $1,211.2 million, or 9.6% of revenues, for the year ended December 31, 2023. Selling, general and administrative expenses for 2024 included $32.8 million of incremental expenses directly related to companies acquired in 2024 and 2023, including amortization expense attributable to identifiable intangible assets of $6.7 million. Excluding incremental expenses from businesses acquired, the increase in selling, general and administrative expenses was predominantly attributable to greater: (a) salaries and related employment expenses, largely as a result of additional headcount to support our organic revenue growth as well as annual cost of living adjustments, and (b) incentive compensation expense at certain of our operating subsidiaries, due to higher operating results than in the prior year.

Previous wording

Our United States industrial services segment’s operating income for the year ended December 31, 2023 was $35.4 million, or 3.0% of revenues, compared to operating income of $19.8 million, or 1.8% of revenues, for the year ended December 31, 2022. In addition to the growth in this segment’s revenues referenced above, which resulted in greater gross profit contribution, the improved year-over-year performance was due to an increase in gross profit margin within both this segment’s field services and shop services divisions. Operating performance of this segment continues to improve steadily and we are beginning to experience better pricing, most notably within the shop services division.

Current wording

Our United States industrial services segment’s operating income for the year ended December 31, 2024 was $44.2 million, or 3.5% of revenues, compared to operating income of $35.4 million, or 3.0% of revenues, for the year ended December 31, 2023. Operating income of this segment benefited from greater gross profit generated within its: (a) field services division due to the increase in revenues referenced above, and (b) shop services division as a result of an improvement in gross profit margin given favorable pricing. The increase in operating margin of this segment was attributable to the increased gross profit margin within the shop services division.

Previous wording

Interest expense was $17.2 million and $13.2 million for the years ended December 31, 2023 and 2022, respectively. The year-over-year increase in interest expense was a result of higher interest rates, partially offset by reduced average outstanding borrowings. Interest income was $15.4 million and $2.8 million for the years ended December 31, 2023 and 2022, respectively. The increase in annual interest income resulted from greater returns on our invested cash, due to the previously referenced interest rate environment, as well as an increase in average bank deposits.

Current wording

Interest expense was $3.8 million and $17.2 million for the years ended December 31, 2024 and 2023, respectively. The year-over-year decrease in interest expense was a result of the repayment, in December of 2023, of all previously outstanding direct borrowings under our credit facility. Interest income was $35.4 million and $15.4 million for the years ended December 31, 2024 and 2023, respectively. The increase in annual interest income resulted from greater returns on our invested cash, due to an increase in our average daily invested cash balance.

Previous wording

Our income tax provision for the year ended December 31, 2023 was $239.5 million, based on an income tax rate of 27.5%, compared to an income tax provision and an income tax rate of $152.6 million and 27.3%, respectively, for the year ended December 31, 2022. Refer to Note 11 - Income Taxes of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further discussion regarding our income tax provision and effective income tax rate.

Current wording

Our income tax provision for the year ended December 31, 2024 was $370.2 million, based on an income tax rate of 26.9%, compared to an income tax provision and an income tax rate of $239.5 million and 27.5%, respectively, for the year ended December 31, 2023. Refer to Note 11 - Income Taxes of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further discussion regarding our income tax provision and effective income tax rate.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of $789.8 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less. Both our short-term and long-term liquidity requirements are expected to be met through our cash and cash equivalent balances, cash generated from our operations, and, as necessary, the borrowing capacity under our revolving credit facility. Our credit agreement provides for a $1.30 billion revolving credit facility, for which there is $1.18 billion of available capacity as of December 31, 2023.

Current wording

As of December 31, 2024, we had cash and cash equivalents, excluding restricted cash, of $1,339.6 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less. Both our short-term and long-term liquidity requirements are expected to be met through our cash and cash equivalent balances, cash generated from our operations, and, as necessary, the borrowing capacity under our revolving credit facility. Our credit agreement provides for a $1.30 billion revolving credit facility, for which there was $1.23 billion of available capacity as of December 31, 2024.

Previous wording

During the year ended December 31, 2023, our cash balance, including cash equivalents and restricted cash, increased by $332.7 million from $457.1 million at December 31, 2022 to $789.8 million at December 31, 2023. Changes in our cash position from December 31, 2022 to December 31, 2023 are described in further detail below. For a discussion of the changes in our cash position from December 31, 2021 to December 31, 2022, refer to the Liquidity and Capital Resources section included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2022.

Current wording

During the year ended December 31, 2024, our cash balance, including cash equivalents and restricted cash, increased by $550.6 million from $789.8 million at December 31, 2023 to $1,340.4 million at December 31, 2024. Changes in our cash position from December 31, 2023 to December 31, 2024 are described in further detail below. For a discussion of the changes in our cash position from December 31, 2022 to December 31, 2023, refer to the Liquidity and Capital Resources section included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2023.

Previous wording

Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities. For 2023, net cash provided by operating activities was approximately $899.7 million compared to approximately $497.9 million of net cash provided by operating activities in 2022. The $401.7 million increase in operating cash flows during 2023, when compared to 2022, was largely a result of increased income, coupled with customer deposits and advanced payments on certain construction contracts, as evidenced by the growth in our contract liabilities.

Current wording

Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities. For 2024, net cash provided by operating activities was approximately $1,407.9 million compared to approximately $899.7 million in 2023. The $508.2 million year-over-year increase in operating cash flows was primarily a result of: (a) our improved operating performance and the corresponding increase in our net income and (b) the timing of cash receipts from our customers.

Previous wording

Investing Activities – Investing cash flows consist primarily of payments for the acquisition of businesses, capital expenditures, and proceeds from the sale or disposal of property, plant, and equipment. During 2023, we utilized approximately $161.3 million of cash for investing activities compared to $140.8 million during 2022. The increase in investing cash outflows year-over-year was primarily driven by higher capital expenditures to support our organic growth, partially offset by an increase in proceeds from the sale or disposal of property, plant, and equipment. Payments for the acquisition of businesses were fairly consistent each year as we utilized $96.5 million in 2023, compared to $98.7 million in 2022.

Current wording

Investing Activities – Investing cash flows consist primarily of payments for acquisition of businesses, capital expenditures, and proceeds from the sale or disposal of property, plant, and equipment. Net cash used in investing activities for 2024 increased by approximately $138.0 million compared to 2023, primarily due to an increase in payments for acquisitions.

Previous wording

Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, payments of dividends to stockholders, and the issuance of common stock through certain equity plans. Net cash used in financing activities during 2023 was $412.1 million compared to $710.1 million during 2022. The $298.1 million reduction in financing cash outflows was primarily due to a decrease in funds used for the repurchase of our common stock during 2023, partially offset by an increase in net repayments of debt under our credit agreement. The timing of common stock repurchases is at management’s discretion subject to securities laws and other legal requirements and depends upon several factors, including market and business conditions, current and anticipated future liquidity, share price, and share availability, among others. For additional detail regarding our share repurchase program, refer to Note 12 - Common Stock of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Current wording

Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, payments of dividends to stockholders, and the issuance of common stock through certain equity plans. Net cash used in financing activities during 2024 was $555.4 million compared to $412.1 million during 2023. The $143.3 million variance was primarily due to an increase in common stock repurchases made by us during 2024, partially offset by the impact of repayments on our outstanding debt in the prior year period. The timing of common stock repurchases is at management’s discretion subject to securities laws and other legal requirements and depends upon several factors, including market and business conditions, current and anticipated future liquidity, share price, and share availability, among others. For additional detail regarding our share repurchase program, refer to Note 12 - Common Stock of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

We currently pay a regular quarterly dividend of $0.18 per share. For the years ended December 31, 2023 and 2022, cash payments related to dividends were $32.7 million and $27.2 million, respectively. Subsequent to December 31, 2023, our Board of Directors announced its intention to increase the regular quarterly dividend to $0.25 per share commencing with the dividend to be paid in April 2024. Our credit agreement places limitations on the payment of dividends on our common stock. However, we do not believe that the terms of such agreement currently materially limit our ability to pay such quarterly dividends for the foreseeable future.

Current wording

We currently pay a regular quarterly dividend of $0.25 per share. For the years ended December 31, 2024 and 2023, cash payments related to dividends were $43.4 million and $32.7 million, respectively. Our credit agreement places limitations on the payment of dividends on our common stock. However, we do not believe that the terms of such agreement currently materially limit our ability to pay such quarterly dividends for the foreseeable future.

Previous wording

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash– We are exposed to fluctuations in foreign currency exchange rates, almost entirely with respect to the British pound. Therefore, the $18.9 million variance between the years ended December 31, 2023 and 2022 was a direct result of favorable exchange rate movements for the British pound versus the United States dollar.

Current wording

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash– We are exposed to fluctuations in foreign currency exchange rates, almost entirely with respect to the British pound. Therefore, the $9.0 million variance between the years ended December 31, 2024 and 2023 was a direct result of exchange rate movements for the British pound versus the United States dollar.

Previous wording

Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases. Future payments for such leases, excluding leases with initial terms of one year or less, were $381.7 million at December 31, 2023, with $89.7 million payable within the next 12 months. Refer to Note 16 - Leases of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further detail surrounding our lease obligations and the timing of expected future payments.

Current wording

Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases. Future payments for such leases, excluding leases with initial terms of one year or less, were $390.1 million at December 31, 2024, with $96.9 million payable within the next 12 months. Refer to Note 16 - Leases of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further detail surrounding our lease obligations and the timing of expected future payments.

Previous wording

Open Purchase Obligations – As of December 31, 2023, we had $2.33 billion of open purchase obligations, of which payments totaling approximately $2.02 billion are expected to become due within the next 12 months. These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts. These purchase orders are not reflected in the Consolidated Balance Sheets and are not expected to impact future liquidity as amounts should be recovered through customer billings.

Current wording

Open Purchase Obligations – As of December 31, 2024, we had $2.33 billion of open purchase obligations, of which payments totaling approximately $2.01 billion are expected to become due within the next 12 months. These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts. These purchase orders are not reflected in the Consolidated Balance Sheets and are not expected to impact future liquidity as amounts should be recovered through customer billings.

Previous wording

Insurance Obligations – As described in further detail in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, we have loss payment deductibles and/or self-insured retentions for certain insurance matters. As of December 31, 2023, our insurance liabilities, net of estimated recoveries, were $220.1 million. Of this net amount, approximately $39.2 million is estimated to be payable within the next 12 months. Due to many uncertainties inherent in resolving these matters, it is not practical to estimate these payments beyond such period. To the extent that the amount required to settle claims covered by insurance continues to increase, the cost of our insurance coverage, including premiums and deductibles, is likely to increase.

Current wording

Insurance Obligations – As described in further detail in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, we have loss payment deductibles and/or self-insured retentions for certain insurance matters. As of December 31, 2024, our insurance liabilities, net of estimated recoveries, were $240.1 million. Of this net amount, approximately $41.6 million is estimated to be payable within the next 12 months. Due to many uncertainties inherent in resolving these matters, it is not practical to estimate these payments beyond such period. To the extent that the amount required to settle claims covered by insurance continues to increase, the cost of our insurance coverage, including premiums and deductibles, is likely to increase.

Previous wording

Contingent Consideration Liabilities – We have incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods. The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value. As of December 31, 2023, the present value of expected future payments relating to these contingent consideration arrangements was $9.5 million. Of this amount, $6.1 million is estimated as being payable during 2024, with the remainder due in 2025.

Current wording

Contingent Consideration Liabilities – We have incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods. The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value. As of December 31, 2024, the present value of expected future payments relating to these contingent consideration arrangements was $29.7 million. Of this amount, $20.4 million is estimated as being payable during 2025, with the remainder due pursuant to the terms of our contractual agreements, some of which extend into 2027.

Previous wording

Multiemployer Benefit Plans – In addition to our Company sponsored benefit plans, we participate in certain multiemployer pension and other post retirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining agreements. During 2023, 2022, and 2021, contributions made to these plans were $502.3 million, $449.9 million, and $399.5 million, respectively; however, our future contributions to the multiemployer plans are dependent upon a number of factors. Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated. Refer to Note 14 - Retirement Plans of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for more information regarding these multiemployer benefit plans.

Current wording

Multiemployer Benefit Plans – In addition to our Company sponsored benefit plans, we participate in certain multiemployer pension and other post-retirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining agreements. During 2024, 2023, and 2022, contributions made to these plans were $577.0 million, $502.3 million, and $449.9 million, respectively; however, our future contributions to the multiemployer plans are dependent upon a number of factors. Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated. Refer to Note 14 - Retirement Plans of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for more information regarding multiemployer benefit plans.

Previous wording

The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. As of December 31, 2023, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $2.2 billion, which represents approximately 25% of our total remaining performance obligations.

Current wording

The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. As of December 31, 2024, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $2.5 billion, which represents approximately 25% of our total remaining performance obligations.

Previous wording

Surety bonds are sometimes provided to secure obligations for wages and benefits payable to or for certain of our employees, at the request of labor unions representing such employees. In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations. As of December 31, 2023, we satisfied approximately $48.1 million and $71.1 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively. All such letters of credit were issued under our revolving credit facility, therefore reducing the available capacity of such facility.

Current wording

Surety bonds are sometimes provided to secure obligations for wages and benefits payable to or for certain of our employees, at the request of labor unions representing such employees. In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations. As of December 31, 2024, we satisfied approximately $61.7 million and $71.1 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively. All such letters of credit were issued under our revolving credit facility, therefore reducing the available capacity of such facility.

Previous wording

To help mitigate the impacts of greenhouse gas emissions on climate change, EMCOR has established initial carbon-based fuel consumption and greenhouse gas emission reduction targets, and has committed to investigating the establishment of science-based greenhouse gas emissions targets. Although to date we have not incurred any material costs or capital expenditures associated with achieving our targets, we could be required to expend amounts in future periods as we continue to work towards our goals. It is not possible, at this time, to estimate the impact that future costs and/or capital expenditures may have on our business, financial condition, results of operations, or liquidity.

Current wording

To help mitigate the impacts of greenhouse gas emissions on climate change, EMCOR has established initial carbon-based fuel consumption and greenhouse gas emission reduction targets. Although to date we have not incurred any material costs or capital expenditures associated with achieving our targets, we could be required to expend amounts in future periods as we continue to work towards our goals. It is not possible, at this time, to estimate the impact that future costs and/or capital expenditures may have on our business, financial condition, results of operations, or liquidity.

Previous wording

During the year ended December 31, 2023, we recognized revenue of approximately $16.5 million 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 this amount, approximately $3.4 million was reported within our United States electrical construction and facilities services segment and approximately $13.1 million was reported within our United States mechanical construction and facilities services segment. There were no significant amounts of revenue recognized during the years ended December 31, 2022 or 2021 related to performance obligations satisfied in prior periods.

Current wording

There were no significant amounts of revenue recognized during the year ended December 31, 2022 related to performance obligations satisfied in prior periods.

Previous wording

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 years ended December 31, 2023, 2022, and 2021, as summarized in the following table (in thousands):

Current wording

Based on an evaluation of individual projects that had revisions to total estimated costs or anticipated contract value that resulted in a reduction of profitability in excess of $1.0 million, our operating results were negatively impacted during the years ended December 31, 2024, 2023, and 2022, as summarized in the following table (in thousands):

Previous wording

Due to the significant judgments utilized in the estimation process described above, if subsequent actual results and/or updated assumptions, estimates, or projections related to our underlying project positions were to change from those utilized at December 31, 2023, it could result in a material impact to our results of operations. For example, a 50 basis point increase or decrease in the estimated gross profit margin on our uncompleted construction projects, in the aggregate, as a result of a revision in estimated costs to complete a performance obligation or a revision in estimated transaction price, would have resulted in an increase or decrease to operating income of approximately $100 million for the year ended December 31, 2023.

Current wording

Due to the significant judgments utilized in the estimation process described above, if subsequent actual results and/or updated assumptions, estimates, or projections related to our underlying project positions were to change from those utilized at December 31, 2024, it could result in a material impact to our results of operations. For example, a 50 basis point increase or decrease in the estimated gross profit margin on our uncompleted construction projects, in the aggregate, as a result of a revision in estimated costs to complete a performance obligation or a revision in estimated transaction price, would have resulted in an increase or decrease to operating income of approximately $130 million for the year ended December 31, 2024.

Previous wording

We have loss payment deductibles for certain workers’ compensation, automobile liability, general liability, and property claims, have self-insured retentions for certain other casualty claims, and are self-insured for employee-related healthcare claims. In addition, we maintain a wholly-owned captive insurance subsidiary to manage certain of our insurance liabilities. Losses are recorded based upon estimates of our liability for claims incurred and for claims incurred but not reported. The liabilities are derived from known facts, historical trends, and industry averages, utilizing the assistance of an independent third-party actuary to determine the best estimate for the majority of these obligations. We believe the liabilities recognized on the Consolidated Balance Sheets for these obligations are adequate. However, such obligations are difficult to assess and estimate due to numerous factors, including severity of injury, determination of liability in proportion to other parties, timely reporting of occurrences, and effectiveness of safety and risk management programs. Therefore, if our actual experience differs from the assumptions and estimates used for recording the liabilities, adjustments may be required and will be recorded in the period that the experience becomes known. In addition, as discussed above, an increase in the cost to settle insurance claims could result in higher insurance costs and deductibles. Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $18.6 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, partially as a result of greater potential exposures and an increase in certain of our deductibles or self-insured retentions. If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $22.0 million of additional expense for the year ended December 31, 2023.

Current wording

We have loss payment deductibles for certain workers’ compensation, automobile liability, general liability, and property claims, have self-insured retentions for certain other casualty claims, and are self-insured for employee-related healthcare claims. In addition, we maintain a wholly-owned captive insurance subsidiary to manage certain of our insurance liabilities. Losses are recorded based upon estimates of our liability for claims incurred and for claims incurred but not reported. The liabilities are derived from known facts, historical trends, and industry averages, utilizing the assistance of an independent third-party actuary to determine the best estimate for the majority of these obligations. We believe the liabilities recognized on the Consolidated Balance Sheets for these obligations are adequate. However, such obligations are difficult to assess and estimate due to numerous factors, including severity of injury, determination of liability in proportion to other parties, timely reporting of occurrences, and effectiveness of safety and risk management programs. Therefore, if our actual experience differs from the assumptions and estimates used for recording the liabilities, adjustments may be required and will be recorded in the period that the experience becomes known. In addition, an increase in the cost to settle insurance claims could result in higher insurance costs and deductibles. Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $20.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, partially as a result of greater potential exposures and an increase in certain of our deductibles or self-insured retentions. If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $24.0 million of additional expense for the year ended December 31, 2024.

Previous wording

As of December 31, 2023 and 2022, we had goodwill of $956.5 million and $919.2 million, respectively, arising out of the acquisition of businesses. Goodwill is not amortized but instead allocated to its respective reporting unit and evaluated for impairment annually, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. We have determined that our reporting units are consistent with the reportable segments identified in Note 18 - Segment Information of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. As of December 31, 2023, approximately 18.6% of our goodwill related to our United States electrical construction and facilities services segment, approximately 33.3% related to our United States mechanical construction and facilities services segment, approximately 36.2% related to our United States building services segment, and approximately 11.9% related to our United States industrial services segment.

Current wording

As of December 31, 2024 and 2023, we had goodwill of $1,018.4 million and $956.5 million, respectively, arising out of the acquisition of businesses. Goodwill is not amortized but instead allocated to its respective reporting unit and evaluated for impairment annually, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. We have determined that our reporting units are consistent with the reportable segments identified in Note 18 - Segment Information of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. As of December 31, 2024, approximately 18.8% of our goodwill related to our United States electrical construction and facilities services segment, approximately 33.8% related to our United States mechanical construction and facilities services segment, approximately 35.2% related to our United States building services segment, and approximately 12.2% related to our United States industrial services segment.

Previous wording

We performed our annual impairment assessment of all reporting units as of October 1, 2023 and determined there was no impairment of goodwill. Based on these impairment assessments, the fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment exceeded their carrying values by approximately $1,724.3 million, $4,411.7 million, $1,048.0 million, and $89.1 million, respectively. As part of such annual testing, we compared the aggregate fair value of our reporting units to our market capitalization, noting that such comparison supported the reasonableness of the key assumptions utilized in determining the fair value of each of our reporting units.

Current wording

We performed our annual impairment assessment of all reporting units as of October 1, 2024 and determined there was no impairment of goodwill. Based on these impairment assessments, the fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment exceeded their carrying values by approximately $3,940.5 million, $6,852.3 million, $1,143.8 million, and $163.1 million, respectively. As part of such annual testing, we compared the aggregate fair value of our reporting units to our market capitalization, noting that such comparison supported the reasonableness of the key assumptions utilized in determining the fair value of each of our reporting units.

Previous wording

In completing our annual impairment assessment, we determined the fair value of each of our reporting units using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital. The weighted average cost of capital used in our annual impairment testing was 10.9% for our United States construction segments, 11.2% for our United States building services segment, and 11.0% for our United States industrial services segment. These weighted average cost of capital estimates were developed with the assistance of an independent third-party valuation specialist and reflect the overall level of inherent risk within the respective reporting unit and the rate of return a market participant would expect to earn.

Current wording

In completing our annual impairment assessment, we determined the fair value of each of our reporting units using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital. The weighted average cost of capital used in our annual impairment testing was 10.6% for our United States construction segments, 10.9% for our United States building services segment, and 10.5% for our United States industrial services segment. These weighted average cost of capital estimates were developed with the assistance of an independent third-party valuation specialist and reflect the overall level of inherent risk within the respective reporting unit and the rate of return a market participant would expect to earn.

Previous wording

Due to the inherent uncertainties involved in making estimates, our assumptions may change in future periods. Estimates and assumptions made for purposes of our goodwill impairment testing may prove to be inaccurate predictions of the future, and other factors used in assessing fair value, such as the weighted average cost of capital, are outside the control of management. Unfavorable changes in certain of these key assumptions may affect future testing results. For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average cost of capital would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $115.2 million, $249.9 million, $84.2 million, and $25.2 million, respectively. In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $56.5 million, $137.1 million, $40.4 million, and $9.3 million, respectively. Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, the decreases in estimated fair values described above would not have significantly impacted the results of our 2023 impairment tests. Further, for each of our reporting units, a 10% decline in the estimated fair value of such reporting unit, due to other changes in our assumptions, including forecasted future cash flows, would not have significantly impacted the results of our 2023 impairment tests.

Current wording

Due to the inherent uncertainties involved in making estimates, our assumptions may change in future periods. Estimates and assumptions made for purposes of our goodwill impairment testing may prove to be inaccurate predictions of the future, and other factors used in assessing fair value, such as the weighted average cost of capital, are outside the control of management. Unfavorable changes in certain of these key assumptions may affect future testing results. For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average cost of capital would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $226.5 million, $383.7 million, $93.5 million, and $32.5 million, respectively. In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $123.2 million, $210.1 million, $46.0 million, and $13.0 million, respectively. Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, the decreases in estimated fair values described above would not have significantly impacted the results of our 2024 impairment tests. Further, for each of our reporting units, a 10% decline in the estimated fair value of such reporting unit, due to other changes in our assumptions, including forecasted future cash flows, would not have significantly impacted the results of our 2024 impairment tests.

Previous wording

As of December 31, 2023 and 2022, net identifiable intangible assets (primarily consisting of our customer relationships, subsidiary trade names, developed technology/vendor network, and contract backlog) arising out of the acquisition of businesses were $586.0 million and $594.0 million, respectively. The determination of related estimated useful lives for identifiable intangible assets and whether those assets are impaired involves significant judgments based upon short- and long-term projections of future performance. These forecasts reflect assumptions regarding anticipated macroeconomic conditions as well as our ability to successfully integrate acquired businesses.

Current wording

As of December 31, 2024 and 2023, net identifiable intangible assets (primarily consisting of our customer relationships, subsidiary trade names, developed technology/vendor network, and contract backlog) arising out of the acquisition of businesses were $648.2 million and $586.0 million, respectively. The determination of related estimated useful lives for identifiable intangible assets and whether those assets are impaired involves significant judgments based upon short- and long-term projections of future performance. These forecasts reflect assumptions regarding anticipated macroeconomic conditions as well as our ability to successfully integrate acquired businesses.

Previous wording

During the quarter ended September 30, 2023, we identified facts and circumstances that indicated the carrying values of certain long-lived assets within our United States mechanical construction and facilities services segment may not be fully recoverable, necessitating a comparison of their carrying values to the undiscounted pre-tax cash flows estimated to result from the use of such assets. As a result of this test, we determined that these assets were impaired, and, during the third quarter of 2023, recognized a $2.4 million impairment charge as calculated using a discounted cash flow model. For the year ended December 31, 2023, there were no other indicators of impairment with respect to identifiable intangible assets that are being amortized as well as other long-lived assets.

Current wording

During 2023, we identified facts and circumstances that indicated the carrying values of certain long-lived assets within our United States mechanical construction and facilities services segment may not be fully recoverable, necessitating a comparison of their carrying values to the undiscounted pre-tax cash flows estimated to result from the use of such assets. As a result of this test, we determined that these assets were impaired, and recognized a $2.4 million impairment charge as calculated using a discounted cash flow model.

Previous wording

As referenced above, impairment testing is based upon assumptions and estimates determined by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations. In addition, estimates of weighted average costs of capital are developed with the assistance of an independent third-party valuation specialist. These assumptions and estimates may change in future periods, especially in times of uncertain economic conditions and rising interest rates. Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future impairment charges, particularly with respect to our United States industrial services segment given that the fair value of this reporting unit more closely approximates its carrying value. It is not possible at this time to determine if any future impairment charge will result or, if it does, whether such a charge would be material to our results of operations.

Current wording

As referenced above, impairment testing is based upon assumptions and estimates determined by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations. In addition, estimates of weighted average costs of capital are developed with the assistance of an independent third-party valuation specialist. These assumptions and estimates may change in future periods. Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future impairment charges. It is not possible at this time to determine if any future impairment charge will result or, if it does, whether such a charge would be material to our results of operations.

Previous wording

Refer to Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further information about our goodwill and identifiable intangible assets as well as our impairment testing. No impairment of our goodwill, identifiable intangible assets, or other long-lived assets was recognized during the years ended December 31, 2022 or 2021.

Current wording

Refer to Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further information about our goodwill and identifiable intangible assets as well as our impairment testing. No impairment of our goodwill or identifiable intangible assets was recognized during the years ended December 31, 2024, 2023, or 2022.