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What changed in EMCOR Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of EMCOR Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+302 added−329 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-23)

Top changes in EMCOR Group, Inc.'s 2023 10-K

302 paragraphs added · 329 removed · 235 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

48 edited+3 added−2 removed31 unchanged
Biggest changeOur largest projects typically include those: (a) for commercial purposes (such as office buildings, data centers, convention centers, sports stadiums, and shopping malls); (b) for high-tech manufacturing purposes (such as semiconductor, biotech, life-sciences, and pharmaceutical facilities); (c) for traditional manufacturing and industrial purposes (such as steel, pulp and paper mills, food processing and automotive manufacturing facilities, power generation (including sustainable energy solutions such as solar and wind), oil and gas refineries, and chemical processing plants); (d) for transportation purposes (such as highways, bridges, airports, and transit systems); (e) for institutional purposes (such as educational and correctional facilities and research laboratories); (f) for healthcare purposes (such as hospitals, surgical centers, rehabilitation and nursing facilities, and medical offices); (g) for water and wastewater purposes; and (h) for hospitality purposes (such as resorts, hotels, and gaming facilities).
Biggest changeOf such revenues, approximately 35% were generated by our electrical construction operations and approximately 65% were generated by our mechanical construction operations. 2 Table of Contents Our largest projects typically include those within: (a) the commercial market sector (including warehousing and distribution facilities, office or mixed-use buildings, and shopping malls); (b) the network and communications market sector (including data centers, data and fiber projects, and cabling); (c) the manufacturing and industrial market sector (including steel, pulp and paper mills, food processing and traditional automotive manufacturing facilities, power generation (including sustainable energy solutions such as solar and wind), oil and gas refineries, and chemical processing plants); (d) the high-tech manufacturing market sector (including semiconductor, biotech, life-sciences, and pharmaceutical facilities, as well as projects across the electric vehicle value chain); (e) the healthcare market sector (including hospitals, surgical centers, rehabilitation and nursing facilities, and medical offices); (f) the institutional market sector (including educational and correctional facilities and research laboratories); (g) the water and wastewater market sector; (h) the transportation market sector (including highways, bridges, airports, and transit systems); and (i) the hospitality and entertainment market sector (including resorts, hotels, gaming facilities, convention centers, and sports stadiums).
Such operating subsidiaries are organized into the following reportable segments: • United States electrical construction and facilities services • United States mechanical construction and facilities services • United States building services • United States industrial services • United Kingdom building services Our operating subsidiaries offer comprehensive and diverse solutions on a broad scale and have many long-standing customer relationships.
Such operating subsidiaries are organized into the following reportable segments: • United States electrical construction and facilities services; • United States mechanical construction and facilities services; • United States building services; • United States industrial services; and • United Kingdom building services. Our operating subsidiaries offer comprehensive and diverse solutions on a broad scale and have many long-standing customer relationships.
Such services include: (a) engineering and planning in advance of complex refinery turnarounds; (b) overhaul and maintenance of critical process units (including hydrofluoric alkylation units, fluid catalytic cracking units, coking units, heaters, heat exchangers, and related mechanical equipment) during refinery and petrochemical plant shut downs; (c) replacement and new construction capital projects for refineries and petrochemical plants; (d) instrumentation and electrical services for energy infrastructure; and (e) other related specialty services such as: (i) welding (including pipe welding) and fabrication; (ii) heater, boiler, and reformer repairs and replacements; converter repair and revamps; and vessel, exchanger and tower services; (iii) tower and column repairs in refineries and petrochemical plants; (iv) installation and repair of refractory materials for critical units in process plants to protect equipment from corrosion, erosion, and extreme temperatures; and (v) acid-proofing services to protect critical components at refineries from chemical exposure.
Such services include: (a) engineering and planning in advance of complex refinery and petrochemical turnarounds; (b) overhaul and maintenance of critical process units (including hydrofluoric alkylation units, fluid catalytic cracking units, coking units, heaters, heat exchangers, and related mechanical equipment) during refinery and petrochemical plant shut downs; (c) replacement and new construction capital projects for refineries and petrochemical plants; (d) instrumentation and electrical services for energy infrastructure; and (e) other related specialty services such as: (i) welding (including pipe welding) and fabrication; (ii) heater, boiler, and reformer repairs and replacements; converter repair and revamps; and vessel, exchanger and tower services; (iii) tower and column repairs in refineries and petrochemical plants; (iv) installation and repair of refractory materials for critical units in process plants to protect equipment from corrosion, erosion, and extreme temperatures; and (v) acid-proofing services to protect critical components at refineries from chemical exposure.
In addition to these traditional industrial services, we are working to leverage our expertise in industrial services to construct and maintain carbon capture technologies and renewable energy projects. 4 Table of Contents Competition Across our operations, we compete with national, regional, and local companies, many of which are small, owner-operated entities that carry on their businesses in a limited geographic area, as well as with certain foreign companies.
In addition to these traditional industrial services, we are beginning to leverage our expertise in industrial services to construct and maintain carbon capture technologies and renewable energy projects. 4 Table of Contents Competition Across our operations, we compete with national, regional, and local companies, many of which are small, owner-operated entities that carry on their businesses in a limited geographic area, as well as with certain foreign companies.
We work to unlock the full potential of all employees at every level through: (a) the EMCOR Manager Certificate Program, which promotes supervisory management skills, (b) our Degree Assistance Program, which provides tuition reimbursement for continuing education, and (c) the resources available to all employees on our online learning platform, the EMCOR Learning Center, which includes thousands of on-demand training courses on a wide range of topics.
We work to unlock the full potential of all employees at every level through: (a) the EMCOR Manager Certificate Program, which promotes supervisory management skills, (b) our Degree Assistance Program, which provides tuition reimbursement for continuing education, and (c) the resources available to all employees on our online learning platform, EMCOR University Online, which includes thousands of on-demand training courses on a wide range of topics.
We constantly strive to ensure these values are reflected in how we do business every day, from our corporate culture and “tone at the top,” established by our Board of Directors and management team, to the critical work performed by all of our people at every level throughout our organization. We reinforce our EMCOR Values through many ongoing initiatives.
We consistently strive to ensure these values are reflected in how we do business every day, from our corporate culture and “tone at the top,” established by our Board of Directors and management team, to the critical work performed by all of our people at every level throughout our organization. We reinforce our EMCOR Values through many ongoing initiatives.
Additionally, based on such information, our U.S. employees had the following race and ethnicity demographics: Employee Demographic % of Total White 69 % Hispanic / Latinx 18 % Black / African American 8 % Asian 2 % Multiracial, Native American, Native Hawaiian, and Pacific Islander 3 % 5 Table of Contents Approximately 60% of our employees are represented by various unions pursuant to approximately 450 collective bargaining agreements between our individual subsidiaries or trade associations and local unions, as well as two collective bargaining agreements that are national or regional in scope.
Additionally, based on such information, our U.S. employees had the following race and ethnicity demographics: Employee Demographic % of Total White 69 % Hispanic / Latino 18 % Black / African American 8 % Asian 2 % Multiracial, Native American, Native Hawaiian, and Pacific Islander 3 % 5 Table of Contents Approximately 60% of our employees are represented by various unions pursuant to nearly 450 collective bargaining agreements between our individual subsidiaries or trade associations and local unions, as well as two collective bargaining agreements that are national or regional in scope.
This represents our fourteenth consecutive year with a Total Recordable Incident Rate which was less than half the industry average. Our position as an industry leader in safety begins with a strong culture of care and vigilance embodied in our EMCOR Values and is supported by a comprehensive suite of training, resources, and analytics.
This represents our fifteenth consecutive year with a Total Recordable Incident Rate which was less than half the industry average. Our position as an industry leader in safety begins with a strong culture of care and vigilance embodied in our EMCOR Values and is supported by a comprehensive suite of training, resources, and analytics.
Our services are provided to a broad range of commercial, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities.
Our services are provided to a broad range of commercial, technology, manufacturing, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities.
We provide construction services and building services directly to corporations, municipalities and federal and state governmental entities, owners/developers, and tenants of buildings. We also provide our construction services indirectly by acting as a subcontractor to general contractors, systems suppliers, construction managers, developers, property managers, and other subcontractors. Our industrial services are generally provided directly to refineries and petrochemical plants.
We provide construction services and building services directly to corporations, municipalities and federal and state governmental entities, owners/developers, and tenants of buildings. We also provide our construction services indirectly by acting as a subcontractor to general contractors, systems suppliers, construction managers, developers, property managers, and other subcontractors. We generally provide industrial services directly to refineries and petrochemical plants.
The agreements pursuant to which this division provides services to the federal government are frequently for a base period and a number of option years exercisable at the sole discretion of the government, are often subject to renegotiation by the government in terms of scope of services, and are subject to termination by the government prior to the expiration of the applicable term.
The agreements pursuant to which this division provides services to the federal government are frequently for a base period and a number of option years exercisable at the sole discretion of the government, are often subject to modification or renegotiation by the government in terms of scope of services, and are subject to termination by the government prior to the expiration of the applicable term.
In addition, to develop and reinforce our values company-wide, and empower our leaders to perform at the highest levels, senior leaders are invited to our Leadership for Results course at Babson College and our Leading with Character program at the Thayer Leadership Development Group at West Point.
In addition, to develop and reinforce our values company-wide, and empower our leaders to perform at the highest levels, senior leaders are invited to our Leadership for Results course and our Leading with Character program at the Thayer Leadership Development Group at West Point.
Campaign, (b) incident and injury prevention planning, including in-person and online training tools, adoption of new technology, and best practice guides available through our company intranet, (c) enterprise level reporting and analysis of leading and lagging indicators, (d) a 24-hour incident reporting hotline, and (e) a company-wide program to share and champion best safety practices across our range of businesses.
Campaign, (b) incident and injury prevention planning, including in-person and online training tools and best practice guides available through our company intranet, (c) enterprise level reporting and analysis of leading and lagging indicators, (d) a 24-hour incident reporting hotline, and (e) a company-wide program to share and champion best safety practices across our range of businesses.
We have also designed and implemented policies and practices to promote a workplace free from discrimination, including our Affirmative Action and Equal Opportunity Policy, the implementation, effectiveness, and reporting requirements of which are overseen by our designated Affirmative Action Officer. 6 Table of Contents We strive to help all our employees realize their full potential with an equal opportunity to succeed.
We have also designed and implemented policies and practices to promote a workplace free from discrimination, including our Affirmative Action and Equal Opportunity Policy, the implementation, effectiveness, and reporting requirements of which are overseen by our designated Affirmative Action Officer. We strive to help all our employees realize their full potential with an equal opportunity to succeed.
Our building services operations have built upon our traditional electrical and mechanical construction operations and our client relationships to expand the scope of services being offered and to develop packages of services for customers on a local, regional, and national basis. 3 Table of Contents Our building services operations, which generated approximately 29% of our 2022 total revenues, provide services to owners, operators, tenants, and managers of all types of facilities both on a contractual basis for a specified period of time and on an individual task order basis.
Our building services operations have built upon our traditional electrical and mechanical construction operations and our client relationships to expand the scope of services being offered and to develop packages of services for customers on a local, regional, and national basis. 3 Table of Contents Our building services operations, which generated approximately 28% of our 2023 total revenues, provide services to owners, operators, tenants, and managers of all types of facilities both on a contractual basis for a specified period of time and on an individual task order basis.
In the manufacture of heat exchangers, we compete with both U.S. and foreign manufacturers. Competitors within this industry include JVIC Catalyst Services, Universal Plant Services, Inc., Turner Industries Group, LLC, Team, Inc., Cust-O-Fab, Inc., Dunn Heat Exchangers, Inc., and Wyatt Field Service Company, LLC, among others.
In the manufacture of heat exchangers, we compete with both U.S. and foreign manufacturers. Competitors within this industry include JVIC Catalyst Services, Universal Plant Services, Inc., Turner Industries Group, LLC, Team, Inc., Cust-O-Fab, Inc., Dunn Heat Exchangers, Inc., Turn2 Specialty Companies, and Wyatt Field Service Company, LLC, among others.
We make available, free of charge, through www.emcorgroup.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our Internet address is www.emcorgroup.com. We make available, free of charge, through www.emcorgroup.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We believe that our range of service offerings, technical capability, skilled workforce, and strong project execution, along with our safety culture and financial resources, differentiate us from our competition and position us to benefit from future capital and maintenance spending by our customers.
Financial Statements and Supplementary Data. We believe that our range of service offerings, technical capability, skilled workforce, and strong project execution, along with our safety culture and financial resources, differentiate us from our competition and position us to benefit from future capital and maintenance spending by our customers.
United States and United Kingdom building services operations: Our building services include: • Mobile mechanical maintenance and services for mechanical, electrical, plumbing, fire safety, and building automation systems; • Modification and retrofit projects; • Program development, management, and maintenance for energy systems, including LEED and other sustainable solutions to assist our customers in reducing energy consumption; • Technical consulting and diagnostic services; • Services aimed at improving indoor air quality; • Installation and support for building systems; • Commercial and government site-based operations and maintenance; • Facility management, maintenance, and services; • Floor care and janitorial services, including enhanced cleaning and sanitization services; • Landscaping, lot sweeping, and snow removal; • Other building services, including reception, security, and catering services; • Vendor management and call center services; • Military base operations support services; and • Infrastructure and building projects for federal, state, and local governmental agencies.
United States and United Kingdom building services operations: Our building services include: • Maintenance and services for mechanical, electrical, plumbing, fire safety, and building automation systems; • Modification and retrofit projects; • Program development, management, and maintenance for energy systems, including LEED and other sustainable solutions to assist our customers in reducing energy consumption; • Energy efficiency retrofit services, including HVAC, lighting, water, weatherization, and air flow management solutions: • Technical consulting and diagnostic services; • Services aimed at improving indoor air quality; • Installation and support for building systems; • Commercial and government site-based operations and maintenance; • Facility management, maintenance, and services; • Floor care and janitorial services, including enhanced cleaning and sanitization services; • Landscaping, lot sweeping, and snow removal; • Other building services, including reception, security, and catering services; • Vendor management and call center services; • Military base operations support services; and • Infrastructure and building projects for federal, state, and local governmental agencies.
We believe our financial position, operating results, access to bank credit and surety bonding, technical expertise, and safety record, among other factors, give us an advantage over many of our competitors. However, relatively few barriers exist to prevent entry into the electrical and mechanical construction services industry.
We believe our financial position, operating results, access to bank credit and surety bonding, technical expertise including prefabrication and BIM capabilities, and safety record, among other factors, give us an advantage over many of our competitors. However, relatively few barriers exist to prevent entry into the electrical and mechanical construction services industry.
The electrical and mechanical construction services industry has experienced growth due principally to the increased content, complexity, and sophistication of electrical and mechanical systems resulting, in part, from growth in digital processing, cloud computing, and data storage.
The electrical and mechanical construction services industry has experienced growth principally due to the increased content, complexity, and sophistication of electrical and mechanical systems resulting, in part, from growth in digital processing, cloud computing, data storage, and the emergence of artificial intelligence.
Our largest projects, which typically range in size from $10 million up to and occasionally exceeding $200 million, represented approximately 40% of our electrical and mechanical construction services revenues in 2022. These projects often involve new construction and a combination of design, installation, and start-up services.
Our largest projects, which typically range in size from $10 million up to and occasionally exceeding $200 million, represented approximately 45% of our electrical and mechanical construction services revenues in 2023. These projects often involve new construction and a combination of design, installation, and start-up services.
Our industrial services business, which generated approximately 10% of our 2022 total revenues, is a recognized leader in the refinery turnaround market and has a presence in the petrochemical market. Demand for these services is highly dependent on the strength of the oil and gas and related industrial markets.
Our industrial services business, which generated approximately 9% of our 2023 total revenues, is a recognized leader in the refinery turnaround market and has a presence in the petrochemical market. Demand for these services is highly dependent on the strength of the oil and gas and related industrial markets.
Increasingly, our services are focused on delivering sustainable energy solutions, enhancements in energy efficiency, reductions in waste and emissions, and improvements in the safety and comfort of our customers’ facilities, as discussed in further detail below. The broad scope of our operations is more particularly described below.
Increasingly, our services are focused on delivering sustainable energy solutions, enhancements in energy efficiency, reductions in waste and emissions, and improvements in the safety and comfort of our customers’ facilities. The broad scope of our operations is more particularly described below.
In addition, we compete with several regional firms serving all or portions of the markets we target, such as BrightView Holdings, Inc., Kellermeyer Bergensons Services, LLC, SMS Assist, L.L.C., and Ferrandino & Son, Inc. Our principal competitors in the United Kingdom include CBRE Group, Inc., Bouygues UK Ltd., ISS UK Ltd., and Mitie Group PLC.
In addition, we compete with several regional firms serving all or portions of the markets we target, such as BrightView Holdings, Inc., Kellermeyer Bergensons Services, LLC, and SMS Assist, L.L.C. Our principal competitors in the United Kingdom include CBRE Group, Inc., ISS UK Ltd., Equans Services Limited, OCS Group UK Limited, and Mitie Group PLC.
This extends to our senior leadership and Board of Directors, where we require that any slate of recruited candidates for a named executive officer or other corporate officer position, and new management-supported director nominees, include individuals from underrepresented demographics.
This extends to our senior leadership and Board of Directors, where we require that any slate of recruited candidates for a named executive officer or other corporate officer position, and new management-supported director nominees, include a diverse group of individuals.
Our Board of Directors has an audit committee, a compensation and personnel committee, and a nominating and corporate governance committee. Each of these committees has a formal charter.
Our Board of Directors has an audit committee, a compensation and personnel committee, and a nominating and corporate governance committee. Each of these committees has a formal charter and is comprised of independent directors.
Competitive factors in the electrical and mechanical construction services business include: (a) the availability of qualified and/or licensed personnel; (b) reputation for integrity and quality; (c) safety record; (d) cost structure and the ability to control project costs; (e) relationships with customers; (f) price; (g) geographic diversity; (h) experience in specialized markets; (i) the ability to obtain surety bonding; and (j) adequate working capital or access to bank credit.
Competitive factors in the electrical and mechanical construction services business include: (a) the availability of qualified and/or licensed personnel; (b) reputation for integrity and quality; (c) safety record; (d) cost structure and the ability to control project costs; (e) relationships with customers; (f) price; (g) geographic diversity; (h) experience in specialized markets; (i) the ability to obtain surety bonding; (j) adequate working capital or access to bank credit; and (k) the use of technology such as building information modeling (BIM).
Human Capital At December 31, 2022, we employed approximately 35,500 people, approximately 32,000 of whom were located within the United States and approximately 3,500 of whom were located in the United Kingdom. Based on the most recent information available from our latest filing with the U.S.
Human Capital At December 31, 2023, we employed approximately 38,300 people, approximately 35,000 of whom were located within the United States and approximately 3,300 of whom were located in the United Kingdom. Based on the most recent information available from our latest filing with the U.S.
Our electrical and mechanical construction services generally fall into one of three categories: (a) large installation projects, with contracts often in the multi-million dollar range, that involve: (i) the construction of manufacturing facilities, data centers, warehousing and distribution facilities, and commercial buildings, (ii) institutional and public works projects, or (iii) the fit-out of large blocks of space within commercial or mixed-use buildings, (b) large and medium sized capital and maintenance projects for commercial, manufacturing, pharmaceutical, healthcare, oil and gas, and industrial clients, and (c) smaller installation projects, of a short duration, typically involving fit-out, renovation, and retrofit work. 2 Table of Contents Our United States electrical and mechanical construction operations accounted for approximately 61% of our 2022 total revenues.
Our electrical and mechanical construction services generally fall into one of three categories: (a) large installation projects, with contracts often in the multi-million dollar range, that involve: (i) the construction of manufacturing facilities, data centers, warehousing and distribution facilities, and commercial buildings, (ii) institutional and public works projects, or (iii) the fit-out of large blocks of space within commercial or mixed-use buildings, (b) large and medium sized capital and maintenance projects for commercial, manufacturing, pharmaceutical, healthcare, oil and gas, and industrial clients, and (c) smaller installation projects, of a short duration, typically involving fit-out, renovation, and retrofit work.
Our projects of less than $10 million accounted for approximately 60% of our electrical and mechanical construction services revenues in 2022. These projects are typically completed in less than one year.
Our projects of less than $10 million accounted for approximately 55% of our electrical and mechanical construction services revenues in 2023. These projects are typically completed in less than one year.
We provide building services at a number of prominent buildings in the United States, including those that house the National Archives and Records Administration, the Federal Deposit Insurance Corporation, the Government Accountability Office, and the Department of Health and Human Services, as well as other government facilities, including the NASA Jet Propulsion Laboratory.
We provide building services at a number of prominent buildings in the United States, including those that house the National Archives and Records Administration, the Federal Deposit Insurance Corporation, the Government Accountability Office, and the Departments of Transportation, Education, Health and Human Services, Energy, and Homeland Security, as well as other government facilities, including the NASA Jet Propulsion Laboratory.
The key competitive factors in the building services industry include: (a) availability of qualified personnel and managers; (b) service quality and technical expertise; (c) cost structure and the ability to control project costs; (d) price; and (e) geographic diversity.
The key competitive factors in the building services industry include: (a) availability of qualified personnel and managers; (b) service quality and technical expertise; (c) the use of technology tools and data analytics; (d) cost structure and the ability to control project costs; (e) price; and (f) geographic diversity.
The demand for these services is typically driven by non-residential construction and renovation activity and, in recent years, has benefited from the re-shoring of the supply chain, the need for additional high-tech manufacturing facilities, and the energy transition/expansion throughout the United States.
The demand for these services is typically driven by non-residential construction and renovation activity and, in recent years, has benefited from the re-shoring of the supply chain, the need for additional high-tech manufacturing facilities, and the energy transition/expansion throughout the United States, all of which have been bolstered by certain government incentives.
Equal Employment Opportunity Commission, the gender demographic of our U.S. employees was 90% male and 10% female.
Equal Employment Opportunity Commission, the gender demographic of our U.S. employees was 89% male and 11% female.
This begins with offering competitive employee compensation and benefits packages, specifically designed to meet the unique needs of each individual in our organization, which include: • Health and Welfare Plans : All full-time employees who do not participate in union plans are offered a range of choices among medical, dental and vision plans, life, accident, dependent and disability insurance, and pre-tax health spending accounts that include employer contributions. • Retirement Savings : We help provide our employees with financial security by offering a 401(k) Savings Plan and an Employee Stock Purchase Plan, both of which include company matching contributions. • Degree Assistance : Eligible employees may apply for reimbursement for job-related courses or courses taken as part of a curriculum for a business or job-related degree at an accredited institution. • Employee Assistance Program : Through our Employee Assistance Program, we offer our employees, and their dependents or household members, access to services and counseling on a variety of personal, professional, legal, and financial matters, at no cost.
This begins with offering competitive employee compensation and benefits packages, specifically designed to meet the unique needs of each individual in our organization, which include: • Health and Welfare Plans : All full-time employees who do not participate in union plans are offered a range of choices among medical, dental and vision plans, life, accident, dependent and disability insurance, and pre-tax health savings accounts that include employer contributions. • Retirement Savings : We help provide our employees with financial security by offering a 401(k) Savings Plan, which includes company matching contributions. • Degree Assistance : Eligible employees may apply for reimbursement for job-related courses or courses taken as part of a curriculum for a business or job-related degree at an accredited institution. • Employee Assistance Program : Through our Employee Assistance Program, we offer our employees, and their dependents or household members, access to services and counseling on a variety of personal, professional, legal, and financial matters, at no cost. • College Coaching : Our College Coach Program provided through Bright Horizons provides employees and their families with support as they navigate the college admissions process, including live webinars, tuition payment financial planning, and insight from former admissions officers, finance professionals, and educators.
Our revenues are derived from many different customers in numerous industries, which have operations in several different geographical areas. Of our 2022 revenues, approximately 96% were generated in the United States and approximately 4% were generated in foreign countries, substantially all in the United Kingdom.
We derive revenues from many different customers in numerous industries, which have operations in several different geographical areas. Of our 2023 revenues, approximately 97% were generated in the United States and approximately 3% were generated in foreign countries, substantially all in the United Kingdom.
Of our building services revenues for 2022, approximately 85% were generated in the United States and approximately 15% were generated in the United Kingdom.
Of our building services revenues for 2023, approximately 88% were generated in the United States and approximately 12% were generated in the United Kingdom.
In furtherance of our EMCOR Values, all EMCOR employees are required to complete diversity and inclusion training, and our current and future leaders undergo implicit association and unconscious bias training. Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC.
In furtherance of our EMCOR Values, all EMCOR employees are required to complete inclusive workplace training, and our current and future leaders undergo implicit association training. Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public over the internet at the SEC’s website at http://www.sec.gov.
For additional information regarding our revenues, see Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.
In 2023, we derived approximately 63% of our revenues from our construction operations, approximately 28% of our revenues from our building services operations, and approximately 9% of our revenues from our industrial services operations. For additional information regarding our revenues, see Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements included in Item 8.
Our Board of Directors is regularly briefed and provides input on key human capital initiatives and metrics. Commitment to Core Values We are committed to our EMCOR Values of Mission First: Integrity, Discipline, and Transparency and People Always: Mutual Respect and Trust, Commitment to Safety, and Teamwork.
Commitment to Core Values We are committed to our EMCOR Values of Mission First: Integrity, Discipline, and Transparency and People Always: Mutual Respect and Trust, Commitment to Safety, and Teamwork.
Most recently, we started offering college counseling services for the children of our employees. Key to our attraction and retention of employees is our commitment to our EMCOR Values and our focus on employee safety and diversity, equity, and inclusion. Our Board of Directors and senior leadership engage in oversight and management, respectively, of our significant human capital initiatives.
Key to our attraction and retention of employees is our commitment to our EMCOR Values and our focus on employee safety and inclusion. Our Board of Directors and senior leadership engage in direct oversight and management, respectively, of our significant human capital initiatives. Our Board of Directors is regularly briefed and provides input on key human capital initiatives and metrics.
Due to our technical capabilities, skilled workforce, and safety record, we believe that we are in a strong competitive position in the industrial services markets that we serve. Because of the complex tasks associated with turnaround projects, and the precision and cost investment required in manufacturing heat exchangers, we believe that the barriers to entry in this business are significant.
Due to our technical capabilities, skilled workforce, and safety record, we believe that we are in a strong competitive position in the industrial services markets that we serve.
In 2022, we had revenues of approximately $11.1 billion.
In 2023, we had revenues of approximately $12.6 billion.
Diversity, Equity, and Inclusion We believe that a diverse workforce is important to the long-term success of our business. We actively seek to increase the diversity of our workforce and to practice our commitment to diversity and inclusion in hiring, development, and training.
We actively seek to increase the diversity of our workforce and to practice our commitment to diversity and inclusion in hiring, development, and training, embracing diversity of experience, background, and personal characteristics.
Of such revenues, approximately 36% were generated by our electrical construction operations and approximately 64% were generated by our mechanical construction operations.
Our United States electrical and mechanical construction operations accounted for approximately 63% of our 2023 total revenues.
We also provide building services, as a prime contractor or a subcontractor, to U.S. military bases, including the Defense Intelligence Agency located on Joint Base Anacostia-Bolling, and are involved in a joint venture providing building services to NASA’s Armstrong Flight Research Center.
We also provide building services, as a prime contractor or a subcontractor, to U.S. military bases and various other governmental agencies.
Workplace Safety We believe that our focus on employee safety and well-being is reflected in our results. In a year in which our employees worked approximately 77.5 million hours, the Company’s Total Recordable Incident Rate in 2022 was approximately 1.2, which was approximately 55% lower than the most recently available industry average of 2.70.
During a year in which our people worked over 80 million hours, the Company’s Total Recordable Incident Rate in 2023 was just under 1.2, which was approximately 50% lower than the U.S. Bureau of Labor Statistics’ most recently available industry average of 2.4 for NAICS Code 2382, Building Equipment Contractors.
Removed
In 2022, approximately 61% of our revenues were derived from our construction operations, approximately 29% of our revenues were derived from our building services operations and approximately 10% of our revenues were derived from our industrial services operations.
Added
Although the technical expertise and capital investment that is required in manufacturing heat exchangers may be considered a barrier to entry in this field, there are significantly fewer barriers to entry as it pertains to turnaround projects and services.
Removed
These filings are available to the public over the internet at the SEC’s website at http://www.sec.gov. Our Internet address is www.emcorgroup.com.
Added
In addition, identified front line leaders such as project managers, superintendents and supervisors are invited to our Leader Development Program, which focuses on the development of skills to enhance their growth as leaders and emphasizes the importance of our EMCOR Values. Workplace Safety We believe that our focus on employee safety and well-being is reflected in our results.
Added
These tools are evolving with the way our people work, including employees in the field. For example, we have deployed an online safety training program available to any employee on a mobile device. 6 Table of Contents A Diverse and Inclusive Workplace We believe that a diverse and inclusive workforce is important to the long-term success of our business.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAll of these risks could have a material adverse effect on our business, financial position, and/or stock price. We may be unable to achieve our current or future climate commitments and targets, or we may incur substantial costs in meeting such targets.
Biggest changeWe may be unable to achieve our current or future climate commitments and targets, or we may incur substantial costs in meeting such targets. To help mitigate the impacts of GHG emissions on climate change, EMCOR has established initial carbon-based fuel consumption and GHG emission reduction targets and committed to investigating the establishment of science-based GHG emissions targets.
Although the majority of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future. However, only two of our collective bargaining agreements are national or regional in scope, and not all of our collective bargaining agreements expire at the same time.
However, only two of our collective bargaining agreements are national or regional in scope, and not all of our collective bargaining agreements expire at the same time. Although the majority of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future.
Increases in benchmark interest rates impact our interest expense and cost of capital, which may adversely impact our ability to make payments on outstanding debt, raise additional funds through the issuance of debt, fund capital expenditures or other liquidity needs. Any of these impacts may adversely affect our liquidity, results of operations, and financial position.
Increases in benchmark interest rates impact our interest expense and cost of capital, which may adversely impact our ability to make payments on future outstanding debt, raise funds through the issuance of debt, fund capital expenditures or other liquidity needs. Any of these impacts may adversely affect our liquidity, results of operations, and financial position.
These include the rules and regulations of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the various regulations, standards, and guidance put forth by the SEC and other governmental agencies to implement and enforce those laws.
These include the rules and regulations of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the various regulations, standards, and guidance put forth by the SEC and other federal and state governmental agencies to implement and enforce those laws.
We are exposed to market risk of increases in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in our operations. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet of approximately 13,200 vehicles.
We are exposed to market risk of increases in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in our operations. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet of approximately 13,800 vehicles.
Further, climate change poses direct physical risks to infrastructure across the industry sectors we serve, both as a result of chronic environmental changes, such as rising sea levels and temperatures, as well as acute events, such as hurricanes, droughts, and wildfires.
Further, climate change poses direct physical risks to infrastructure across the market sectors we serve, both as a result of chronic environmental changes, such as rising sea levels and temperatures, as well as acute events, such as hurricanes, droughts, and wildfires.
Our unionized workforce could adversely affect our operations; our participation in many multiemployer pension plans could result in substantial liabilities being incurred . As of December 31, 2022, approximately 60% of our employees were covered by collective bargaining agreements.
Our unionized workforce could adversely affect our operations; our participation in many multiemployer pension plans could result in substantial liabilities being incurred . As of December 31, 2023, approximately 60% of our employees were covered by collective bargaining agreements.
New laws, rules, and regulations, or changes to existing laws or their interpretations, could create added legal and compliance costs and uncertainty for us. In addition, our United Kingdom operations are subject to laws and regulations that are in some cases different from those of the United States, including labor laws such as the U.K.
New laws, rules, and regulations, or changes to existing laws or their interpretations, could 14 Table of Contents create added legal and compliance costs and uncertainty for us. In addition, our United Kingdom operations are subject to laws and regulations that are in some cases different from those of the United States, including labor laws such as the U.K.
If our remaining performance obligations fail to materialize, we could experience a decline in profitability, which could result in a deterioration of our financial position and liquidity. We recognize revenue for the majority of our construction projects based on estimates; therefore, variations of actual results from our assumptions may reduce our profitability.
If our remaining performance obligations fail to materialize, we could experience a decline in profitability, which could result in a deterioration of our financial position and liquidity. 12 Table of Contents We recognize revenue for the majority of our construction projects based on estimates; therefore, variations of actual results from our assumptions may reduce our profitability.
A loss of business from a significant customer, or a number of significant customers, could have a material adverse effect on our business, financial position, and results of operations. 9 Table of Contents Our industry is highly competitive. Our industry is served by numerous small, owner-operated private companies, a few public companies, and several large regional companies.
A loss of business from a significant customer, or a number of significant customers, could have a material adverse effect on our business, financial position, and results of operations. Our industry is highly competitive. Our industry is served by numerous small, owner-operated private companies, a few public companies, and several large regional companies.
Our efforts to comply with evolving laws, regulations, and reporting standards may increase our general and administrative expenses, divert management time and attention, or limit our operational 14 Table of Contents flexibility, all of which could have a material adverse effect on our business, financial position, and results of operations.
Our efforts to comply with evolving laws, regulations, and reporting standards may increase our general and administrative expenses, divert management time and attention, or limit our operational flexibility, all of which could have a material adverse effect on our business, financial position, and results of operations.
Depending upon the size of a particular project, variations from the estimated contract costs can have a significant impact on our operating results for any fiscal quarter or year. 10 Table of Contents We could incur additional costs to cover certain guarantees or other contractual requirements.
Depending upon the size of a particular project, variations from the estimated contract costs can have a significant impact on our operating results for any fiscal quarter or year. We could incur additional costs to cover certain guarantees or other contractual requirements.
We are dependent upon a workforce of approximately 35,500 employees, including our project managers and field supervisors who are responsible for managing our projects, and there can be no assurance that any individual will continue in his or her capacity for any particular period of time. The loss of such qualified employees could have an adverse effect on our business.
We are dependent upon a workforce of approximately 38,300 employees, including our project managers and field supervisors who are responsible for managing our projects, and there can be no assurance that any individual will continue in his or her capacity for any particular period of time. The loss of such qualified employees could have an adverse effect on our business.
Such changes could result in significant additional costs to us and could require the diversion of management’s attention from our existing businesses or other strategic initiatives. 12 Table of Contents Amounts included in our remaining performance obligations may not result in actual revenues or translate into profits.
Such changes could result in significant additional costs to us and could require the diversion of management’s attention from our existing businesses or other strategic initiatives. Amounts included in our remaining performance obligations may not result in actual revenues or translate into profits.
Such impacts include, but are not limited to, access restrictions and temporary job site shutdowns, reduced labor efficiency resulting from adherence to physical distancing, quarantine, and isolation requirements due to illness or exposure to an infected person, and other enhanced safety protocols mandated at the majority of our worksite locations, and the deferral of maintenance and service projects by our customers.
Such impacts included, but were not limited to, access restrictions and temporary job site shutdowns, reduced labor efficiency resulting from adherence to physical distancing, quarantine, and isolation requirements due to illness or exposure to an infected person, and other enhanced safety protocols mandated at the majority of our worksite locations, and the deferral of maintenance and service projects by our customers.
For further information on our outstanding debt and borrowing rates, refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. Many of our clients depend on the availability of credit to help finance their capital and maintenance projects.
For further information on our credit facility and associated borrowing rates, refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. Many of our clients depend on the availability of credit to help finance their capital and maintenance projects.
These risks and uncertainties include, but are not limited to: (a) our ability to execute our operational strategies and achieve our goals within the currently projected costs and the expected timeframes; (b) the availability and cost of alternative fuels, electrical charging infrastructure, off-site renewable energy, and other materials and components; (c) unforeseen design, operational, and technological difficulties; (d) the outcome of research efforts and future technology developments, including alternate or more fuel efficient vehicles for our fleet, such as hybrid or electric vehicles, the availability of which has been impacted by the global shortage in supply of vehicles generally; (e) regulations and requirements that restrict or prohibit our ability to impose requirements on third party contractors; (f) an acquisition of or merger with another company that has not adopted similar targets and goals or whose progress towards reaching its goals is not as advanced as ours; and (g) the pace of recovery from the COVID-19 pandemic, which could result in fluctuations in our fuel consumption and GHG emissions in a given period.
These risks and uncertainties include, but are not limited to: (a) our ability to execute our operational strategies and achieve our goals within the currently projected costs and the expected timeframes; (b) the availability and cost of alternative fuels, electrical charging infrastructure, off-site renewable energy, and other materials and components; (c) unforeseen design, operational, and technological difficulties; (d) the outcome of research efforts and future technology developments, including alternate or more fuel efficient vehicles for our fleet, such as hybrid or electric vehicles, the availability of which has been impacted by the global shortage in supply of vehicles generally; (e) regulations and requirements that restrict or prohibit our ability to impose requirements on third party contractors; (f) an acquisition of or merger with another company that has not adopted similar targets and goals or whose progress towards reaching its goals is not as advanced as ours; and (g) exogenous macroeconomic or supply chain shocks, such as those experienced during the COVID-19 pandemic, which could result in fluctuations in our fuel consumption and GHG emissions in a given period.
Strikes or work stoppages likely would adversely impact our relationships with our customers and could have a material adverse effect on our financial position, results of operations, and cash flows. We contribute to approximately 200 multiemployer pension plans.
Strikes or work stoppages likely would adversely impact our relationships with our customers and could have a material adverse effect on our financial position, results of operations, and cash flows. 16 Table of Contents We contribute to approximately 200 multiemployer pension plans.
Further, if any of our key personnel are unable to perform their duties for a period of time, including as a result of illness, our results of operations could be adversely affected. Terrorist attacks and other catastrophic events could disrupt our operations and services .
Further, if any of our key personnel are unable to perform their duties for a period of time, including as a result of illness, our results of operations could be adversely affected. 18 Table of Contents Terrorist attacks and other catastrophic events could disrupt our operations and services .
Additionally, as many of our employees use our information technology systems to collaborate with colleagues in different geographic locations and periodically access our systems remotely, we may be subject to heightened security risks, including the risks of cyber-attacks.
Additionally, as many of our employees use our information technology systems to collaborate with colleagues in different geographic locations and access our systems and those of our customers remotely, we and our customers may be subject to heightened security risks, including the risks of cyber-attacks.
Additional legislation or regulation by the federal government or state and local governments or agencies, and/or any international agreements to which the United States may become a party that control or limit GHG emissions or otherwise seek to address climate change, could result in increased compliance costs for us and our clients or have other impacts on our clients, including those who are involved in the exploration, production, or refining of fossil fuels, or who emit greenhouse gases through the combustion of fossil fuels or through the mining, manufacture, utilization, or production of materials or goods.
Such laws or regulations enacted by the federal government or state and local governments or agencies, and/or any international agreements to which the United States may become a party that control or limit GHG emissions or otherwise seek to address climate change, could result in increased compliance costs for us and our clients or have other impacts on our clients, including those who are involved in the exploration, production, or refining of fossil fuels, or who emit greenhouse gases through the combustion of fossil fuels or through the mining, manufacture, utilization, or production of materials or goods.
If we are not successful, we may not be able to achieve internal growth, expand operations, or grow our business. Fluctuating foreign currency exchange rates impact our financial results. We have operations in the United Kingdom, which in 2022 accounted for approximately 4% of our revenues.
If we are not successful, we may not be able to achieve internal growth, expand operations, or grow our business. Fluctuating foreign currency exchange rates impact our financial results. We have operations in the United Kingdom, which in 2023 accounted for approximately 3% of our revenues.
An uninsured claim, either in part or in whole, as well as any claim covered by insurance but subject to a policy limit, high deductible and/or retention, could have a material adverse effect on our business, financial condition, and results of operations.
An uninsured claim, either in part or in whole, as well as any claim covered by insurance but subject to a policy limit, high deductible/retention, or the denial of coverage by an insurance carrier, could have a material adverse effect on our business, financial condition, and results of operations.
The risk of contracts included in our remaining performance obligations being delayed or canceled generally increases during economic slowdowns or in response to significant fluctuations in commodity prices. Accordingly, there is no assurance that revenue from remaining performance obligations will actually be realized.
The risk of contracts included in our remaining performance obligations being delayed or canceled generally increases during economic slowdowns, periods of restrictive credit markets, or in response to significant fluctuations in commodity prices. Accordingly, there is no assurance that revenue from remaining performance obligations will actually be realized.
In addition, we could be required to expend amounts in future periods as we continue to work towards achieving our targets, which may have a material effect on our business, financial condition, results of operations, or liquidity. General Risk Factors Public health emergencies, epidemics, or pandemics, including the COVID-19 pandemic, impact our business.
In addition, we could be required to expend amounts in future periods as we continue to work towards achieving our targets, which may have a material effect on our business, financial condition, results of operations, or liquidity. General Risk Factors Public health emergencies, epidemics, or pandemics impact our business.
Significant reductions in spending aimed at reducing federal, state, or local budget deficits, the absence of a bipartisan agreement on the federal government's budget or raising the debt ceiling, renewed focus on budget deficits following recent increases in government spending in response to the COVID-19 pandemic, personnel reductions, the closure of government facilities and offices, or other changes in budget priorities could result in the deferral, delay, disruption, or cancellation of projects or contracts that we might otherwise have sought to perform.
Significant reductions in spending aimed at reducing federal, state, or local budget deficits, the absence of a bipartisan agreement on the federal government's budget or raising the debt ceiling (and any disruption caused by a federal government shutdown as a result thereof), renewed focus on budget deficits following increases in government spending in response to the COVID-19 pandemic, personnel reductions, the closure of government facilities and offices, or other changes in budget priorities could result in the deferral, delay, disruption, or cancellation of projects or contracts that we might otherwise have sought to perform.
In such case, adjustments may be required to increase our insurance liabilities in the period that the experience becomes known. External market conditions, including catastrophic losses resulting from an increase in severe weather events and the prolonged pandemic, among other factors, have resulted in an insurance market that is characterized by higher premiums, diminished capacity, and more conservative underwriting.
In such case, adjustments may be required to increase our insurance liabilities in the period that the experience becomes known. 11 Table of Contents External market conditions, including catastrophic losses resulting from an increase in severe weather events, among other factors, have resulted in an insurance market that is characterized by higher premiums, diminished capacity, and more conservative underwriting.
Such surety bonds secure our payment and performance obligations. Under standard terms in the surety market, surety companies issue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of collateral as a condition to issuing any bonds.
Under standard terms in the surety market, surety companies issue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of collateral as a condition to issuing any bonds.
However, these liabilities are difficult to assess and estimate due to many relevant 11 Table of Contents factors, the effects of which are often unknown, including the severity of an injury or damage, the determination of liability in proportion to other parties, the timeliness of reported claims, the effectiveness of our risk management and safety programs, and the terms and conditions of our insurance policies.
However, these liabilities are difficult to assess and estimate due to many relevant factors, the effects of which are often unknown, including the severity of an injury or damage, the determination of liability in proportion to other parties, the timeliness of reported claims, the effectiveness of our risk management and safety programs, denial of coverage by our insurance carriers, and the terms and conditions of our insurance policies and/or customer contracts.
Fluctuations in energy prices as well as in commodity prices of materials, whether resulting from fluctuations in market supply or demand, or geopolitical conditions, including Russia’s invasion of Ukraine and the resulting supply chain disruptions and sanctions on Russian exports, an increase in trade protection measures such as tariffs, or the disruption, modification, or cancellation of multilateral trade agreements, may adversely affect our customers and as a result cause them to curtail the use of our services.
Fluctuations in the price of energy and commodity materials, whether resulting from fluctuations in market supply or demand, geopolitical conditions, including supply chain disruptions and sanctions on Russian exports as a result of Russia’s invasion of Ukraine and recent shipping lane disruptions following maritime attacks in the Gulf of Aden, an increase in trade protection measures such as tariffs, or the disruption, modification, or cancellation of multilateral trade agreements, may adversely affect our customers and as a result cause them to curtail the use of our services.
Government authorities in the United States and United Kingdom have at various times recommended or imposed certain social distancing, quarantine, and isolation measures to varying degrees, with many such measures impacting large portions of the population.
Government authorities in the United States and United Kingdom have at various times recommended or imposed certain social distancing, quarantine, and isolation measures to varying degrees, with many such measures impacting large portions of the population, including limitations on travel and mandatory cessation of certain business activities.
For example, we experienced supply chain delays, including long lead times for certain materials and equipment, as well as an escalation in material and fuel prices, to varying degrees throughout 2021 and 2022. These disruptions, which are anticipated to persist throughout 2023, resulted in declines in gross profit and gross profit margin for certain of our operations.
For example, in recent years, we experienced supply chain delays, including long lead times for certain materials and equipment, as well as an escalation in material and fuel prices, to varying degrees. These disruptions resulted in declines in gross profit and gross profit margin for certain of our operations.
Continued uncertain conditions within these markets, including the impact of geopolitical instability and the lingering impacts of the COVID-19 pandemic, could negatively impact our financial position, results of operations, and cash flows. Our business is vulnerable to the cyclical nature of the markets in which our clients operate and is dependent upon the timing and funding of new awards.
Continued volatility within these markets, including the impact of geopolitical instability, could negatively impact our financial position, results of operations, and cash flows. 8 Table of Contents Our business is vulnerable to the cyclical nature of the markets in which our clients operate and is dependent upon the timing and funding of new awards.
Financial Statements and Supplementary Data for additional information regarding multiemployer pension plans. 16 Table of Contents Risk Factors Related to the Ownership of our Common Stock Certain provisions of our corporate governance documents could make an acquisition of us, or a substantial interest in us, more difficult.
See Note 14 - Retirement Plans of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for additional information regarding multiemployer pension plans. Risk Factors Related to the Ownership of our Common Stock Certain provisions of our corporate governance documents could make an acquisition of us, or a substantial interest in us, more difficult.
Certain of our competitors have lower overhead cost structures and, therefore, are able to provide their services at lower rates than we are currently able to provide. Our project and service work is frequently awarded through a competitive bidding process, which is standard in our industry. We are constantly competing for contracts based on pricing, schedule, and technical expertise.
Certain of our competitors have lower overhead cost structures and, therefore, are able to provide their services at lower rates than we are 9 Table of Contents currently able to provide. Our project and service work is frequently awarded through a competitive bidding process, which is standard in our industry.
The extent to which the COVID-19 pandemic or another epidemic, pandemic or public health emergency could impact our business and results of operations in the future remains highly uncertain and will be affected by a number of factors.
The extent to which another epidemic, pandemic or public health emergency could impact our business and results of operations in the future remains highly uncertain and will be affected by a number of factors, which could have a material adverse effect on our business, financial condition, results of operations, and/or stock price.
The availability and costs to adequately train and maintain a skilled labor force could be impacted by factors we cannot control, including changes in the unemployment rate, prevailing wage rates, benefit costs, the ongoing impacts of the COVID-19 pandemic, and competition for labor from our competitors in the markets we serve.
The availability and costs to adequately train and maintain a skilled labor force could be impacted by factors we cannot control, including changes in the unemployment rate, prevailing wage rates, benefit costs, potential labor force disruptions resulting from public health emergencies, such as those experienced in connection with the COVID-19 pandemic, and competition for labor from our competitors in the markets we serve.
If government agencies determine through these audits or reviews that costs are improperly allocated to specific contracts, they will not reimburse the contractor for those costs or may require the contractor to refund previously reimbursed costs.
Government agencies may review a contractor’s performance under its contracts, cost structure, and compliance with applicable laws, regulations, and standards. If government agencies determine through these audits or reviews that costs are improperly allocated to specific contracts, they will not reimburse the contractor for those costs or may require the contractor to refund previously reimbursed costs.
We are increasingly dependent on sophisticated information technology systems; our business and results of operations are subject to adverse impacts due to disruption, failure, and cybersecurity breaches of these systems. We and our customers and third-party providers rely on information technology systems, hardware, and software to run critical accounting, project management, and financial information systems.
We are increasingly dependent on sophisticated information technology systems; our business and results of operations are subject to adverse impacts due to disruption, failure, and cybersecurity breaches of these systems.
We are exposed to market risk for changes in interest rates for borrowings under our credit facilities, which bear interest at variable rates. Throughout 2022, the Federal Reserve Board significantly increased the federal funds rate, further raised it in February 2023, and has indicated that rate increases are likely to continue through the remainder of 2023.
We are exposed to market risk for changes in interest rates for any borrowings under our credit facility, which bear interest at variable rates. Throughout 2022 and much of 2023, the Federal Reserve Board increased the federal funds rate.
If any of these events were to occur, we could be required to expend additional capital and other resources, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.
As such threats increase in frequency and sophistication, we could be required to expend additional capital and other resources, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.
Additionally, circumstances beyond our control, such as rising interest rates, inflation and the ongoing impacts of the COVID-19 pandemic, may hinder our ability to pursue and complete acquisitions.
Additionally, circumstances beyond our control, such as rising interest rates, inflation and potential disruptions resulting from public health emergencies, such as those experienced in connection with the COVID-19 pandemic, may hinder our ability to pursue and complete acquisitions.
We may be unable to compete for or work on certain projects if we are not able to obtain the necessary surety bonds. Our construction contracts frequently require that we obtain from surety companies, and provide to our customers, payment and performance bonds as a condition to the award of such contracts.
Our construction contracts frequently require that we obtain from surety companies, and provide to our customers, payment and performance bonds as a condition to the award of such contracts. Such surety bonds secure our payment and performance obligations.
In addition, new or evolving laws and regulations governing data privacy and the unauthorized disclosure of confidential information, including the European Union General Data Protection Regulation ("GDPR"), the California Consumer Privacy Act, the California Privacy Rights Act, state biometric laws, and other emerging U.S. state privacy laws pose increasingly complex compliance challenges and could potentially elevate our compliance costs.
Such operational disruptions and/or misappropriation or inappropriate disclosure of information could result in lost or reduced revenues, negative publicity, loss of customers or contracts, or business delays that could have a material adverse effect on our business, financial position, and results of operations. 13 Table of Contents In addition, new or evolving laws and regulations governing data privacy and the unauthorized disclosure of confidential information, including the European Union General Data Protection Regulation ("GDPR"), the California Consumer Privacy Act, the California Privacy Rights Act, state biometric laws, and other emerging U.S. state privacy laws pose increasingly complex compliance challenges and could potentially elevate our compliance costs.
For other arrangements, including those within our government services operations, the terms of our contracts may include provisions which require us to achieve certain minority participation or small or disadvantaged business “set-aside” goals.
For other arrangements, including those within our government services operations, the terms of our contracts may include provisions which require us to achieve certain minority participation or small or disadvantaged business “set-aside” goals. Such requirements have become more frequent in recent years and we expect them to be increasingly prevalent, especially under the current administration in Washington, D.C.
The continuing impact of the global spread of COVID-19, and the responses of governments, businesses, and individuals to combat it, have caused significant volatility, uncertainty, and economic disruption, which has and may continue to adversely impact our operations and those of our customers.
The global spread of COVID-19, and the responses of governments, businesses, and individuals to combat it, caused significant volatility, uncertainty, and economic disruption, which adversely impacted our operations and those of our customers. A renewed significant spread of COVID-19, new variants thereof, or new infectious diseases, could lead to similar impacts.
If the SEC Climate Rules take effect, in whole or in part, our legal, accounting, and other compliance expenses may increase significantly, and compliance efforts may divert management time and attention. We may also be exposed to legal or regulatory action or claims as a result of these new regulations.
Compliance with these new rules may increase our legal, accounting, and other compliance expenses and may divert management time and attention. We may also be exposed to legal or regulatory action or claims as a result of these new regulations. All of these risks could have a material adverse effect on our business, financial position, and/or stock price.
To help mitigate the impacts of GHG emissions on climate change, EMCOR has established initial carbon-based fuel consumption and GHG emission reduction targets and committed to setting science-based GHG emissions targets. However, achievement of such targets, or similar targets that may be established in the future, is subject to risks and uncertainties, many of which are outside of our control.
However, achievement of such targets, or similar targets that may be established in the future, is subject to risks and uncertainties, many of which are outside of our control.
We rely upon security measures, products, and services to attempt to secure our information technology systems and the confidential, proprietary, and sensitive information they contain.
We and our customers and third-party providers rely on information technology systems, hardware, and software, including third party “cloud based” systems, to run critical accounting, project management, and financial information systems. We rely upon security measures, systems redundancy, and third-party products and services to attempt to secure our information technology systems and the confidential, proprietary, and sensitive information they contain.
As a government contractor, we are subject to a number of procurement rules and other regulations, any deemed violation of which could lead to fines or penalties or a loss of business. Government agencies routinely audit and investigate government contractors. Government agencies may review a contractor’s performance under its contracts, cost structure, and compliance with applicable laws, regulations, and standards.
When we perform work as a federal government contractor/subcontractor, or if we perform work on a project that has received federal government funding, we are subject to a number of procurement rules and other regulations, any deemed violation of which could lead to fines or penalties or a loss of business. Government agencies routinely audit and investigate government contractors.
Any failure to comply with these laws and regulations could result in significant penalties and legal liability, and increased costs in this area could have a negative impact on our financial condition, results of operations, and cash flow. 13 Table of Contents Financial Risk Factors A material portion of our business depends on our ability to provide surety bonds.
Any failure to comply with these laws and regulations, or an exposure or exfiltration of information covered by such laws and regulations, including, without limitation, in connection with a cybersecurity incident, could result in significant penalties and legal liability, and increased costs in this area could have a negative impact on our reputation and our financial condition, results of operations, and cash flow.
We cannot predict with certainty what the effect of such regulation may be on us or our customers. 17 Table of Contents In addition, in March 2022, the SEC proposed new rules that would require significant climate-related disclosures by public companies, including evaluation and disclosure of material climate-related risks and opportunities, GHG emissions inventory, climate-related targets and goals, and financial impacts of physical and transition risks (the “SEC Climate Rules”).
In addition, in March 2022, the SEC proposed new rules that would require significant climate-related disclosures by public companies, including evaluation and disclosure of material climate-related risks and opportunities, GHG emissions inventory, climate-related targets and goals, and financial impacts of physical and transition risks. Subsequently, other legislation, including certain state laws, have been passed that would require similar climate-related disclosure.
To the extent that any of these events occur, the total costs of a project could exceed the original estimated costs, and we would experience reduced profits or, in some cases, a loss.
To the extent that any of these events occur, the total costs of a project could exceed the original estimated costs, and we would experience reduced profits or, in some cases, a loss. 10 Table of Contents Many of our contracts, especially our building and industrial services contracts, may be canceled or delayed on short notice, and we may be unsuccessful in replacing such contracts if they are canceled or as they are completed or expire.
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. For further discussion of our impairment testing, see Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets included in Item 8. Financial Statements and Supplementary Data.
For further discussion of our impairment testing, see Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets included in Item 8. Financial Statements and Supplementary Data.
While no impairment was recognized during 2022 or 2021, we recorded $232.8 million of impairment charges during 2020 as a result of certain of these conditions. Significant judgment is required in determining whether goodwill and indefinite-lived intangible assets are impaired and assumptions utilized for purposes of our impairment testing may change in future periods.
Significant judgment is required in determining whether goodwill and indefinite-lived intangible assets are impaired and assumptions utilized for purposes of our impairment testing may change in future periods. There can be no assurance that our estimates and assumptions will prove to be accurate predictions of the future.
However, our information technology systems and data, and that of our customers and third-party providers, are subject to cyber-attacks, hacking, nation state threats, and other intrusions, encryption, erasure, failure, and damage, which could result in operational disruption and information misappropriation, such as theft of intellectual property or inappropriate disclosure of customer data or confidential or personal information.
However, our information technology systems and data, and that of our customers and third-party providers, are subject to cybersecurity incidents, such as hacking, computer viruses or other malicious or destructive software, ransomware, denial of service attacks, malicious social engineering and other intrusions, encryption, erasure, failure, and damage by individuals (which may include our and our third party providers’ employees), groups or nation states or state-sponsored threats.
Any of these events could have a material adverse effect on our business, financial condition, results of operations, and/or stock price. 18 Table of Contents Additionally, as many of our employees continue to periodically access our systems remotely, in part as a result of the COVID-19 pandemic and the potential business or facility closures or reduced or staggered in-person attendance, we may be subject to heightened security risks, including the risks of cyber-attacks.
Additionally, public health emergencies may result in more of our employees accessing our systems remotely as a result of potential business or facility closures or reduced or staggered in-person attendance in response to such emergencies. This remote access may subject us to heightened security risks, including the risks of cyber-attacks.
There can be no assurance that our estimates and assumptions will prove to be accurate predictions of the future. Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future impairment charges.
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.
Our workforce and ongoing operations have been, are, and may continue to be impacted by the COVID-19 pandemic. For example, we have experienced disruptions that have impacted our ability to perform our work.
The impact to our business and operations in another public health emergency will depend in part on the severity and duration of those measures and the extent and pace of economic recovery, which are difficult to predict. Our workforce and operations were impacted by the COVID-19 pandemic. For example, we experienced disruptions that impacted our ability to perform our work.
On February 15, 2020, for example, we became aware of an infiltration and encryption of portions of our information technology network. This attack temporarily disrupted our use of the impacted systems. While we maintain insurance coverage for these types of incidents, such policies may not completely provide coverage for, or completely offset, the costs associated with such incidents.
While we maintain insurance coverage for these types of cybersecurity incidents, such policies may not completely provide coverage for, or completely offset, the costs associated with such incidents, including losses from reputational harm or the costs to improve security against future similar threats.
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For example, during 2020, the escalation of geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia contributed to a significant drop in the price of crude oil, impacting customers in the energy sector and the demand for certain of our services.
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We are constantly competing for contracts based on pricing, schedule, and technical expertise.
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On the other hand, the Russian invasion of Ukraine in February 2022 and the resulting supply chain disruptions and sanctions 8 Table of Contents imposed on Russian oil and gas exports caused the prices of crude oil and natural gas to increase significantly for several months.
Added
Unsafe outdoor air quality, such as that resulting from large wildfires in the United States or Canada, could have a similar adverse effect.
Removed
Such requirements have become more frequent in recent years and we expect them to be increasingly prevalent, and more strictly enforced in the near future, especially under the current administration in Washington, D.C.
Added
For example, in 2023, our United States building services segment and our United Kingdom building services segment were unsuccessful in retaining certain contracts upon rebid.
Removed
Many of our contracts, especially our building and industrial services contracts, may be canceled or delayed on short notice, and we may be unsuccessful in replacing such contracts if they are canceled or as they are completed or expire.
Added
Such cybersecurity incidents could result in operational disruption and information misappropriation, such as theft of intellectual property or inappropriate disclosure of customer data or confidential, sensitive, or personal information, or in reputational harm with customers.
Removed
For example, for the year ended December 31, 2022, revenues and operating income of our United Kingdom building services segment were negatively impacted by $53.5 million and $3.1 million, respectively, when compared to the results for the year ended December 31, 2021, as a result of unfavorable exchange rate movements.
Added
Threats are continually evolving and threat actors may adopt new or different means of breaching our information technology systems and data, including the potential use of artificial intelligence (“AI”) tools to engage in automated, targeted, and coordinated attacks.
Removed
Such operational disruptions and/or misappropriation or inappropriate disclosure of information could result in lost or reduced revenues, negative publicity, loss of customers or contracts, or business delays that could have a material adverse effect on our business, financial position, and results of operations.
Added
As cybersecurity threats become more sophisticated and difficult to detect, our ability to promptly prevent, detect and mitigate the effects of cybersecurity incidents may be impacted, potentially resulting in more material adverse effects.
Removed
See Note 14 - Retirement Plans of the notes to consolidated financial statements included in Item 8.
Added
For additional information on our strategy and processes for assessing, identifying, and managing the risks posed by cybersecurity threats, and the management and oversight of such efforts, refer to Part I, Item 1C. Cybersecurity.
Removed
Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs.
Added
Errors or other defects in the design or implementation of hardware or software applications by our employees or third-party providers could also disrupt our networks, information systems or data. System redundancy may be ineffective or inadequate, and the Company’s disaster recovery and business continuity planning may not be sufficient to address all potential cybersecurity incidents or other disruptions.
Removed
These measures have included limitations on travel and mandatory cessation of certain business activities, some of which have been relaxed or adjusted and others of which remain in effect.
Added
We may also utilize new information technology tools, including AI tools, in certain business functions, and such tools could be subject to malfunction, security vulnerabilities, or algorithmic flaws (including AI generation of false or biased information).
Removed
Both the outbreak and the containment and mitigation measures resulted in serious adverse impacts on the economy, some of which are ongoing, and both the severity and duration of those impacts and the extent and pace of economic recovery continue to remain uncertain.
Added
Unsettled regulations and case law regarding the ownership of intellectual property generated or used by AI could also expose us to claims of copyright or license infringement or other liability resulting from our use of such tools.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

6 edited+2 added−1 removed1 unchanged
Biggest changeMauricio was a Senior Vice President of the Company from January 2016 to February 2021. From January 2012 to December 2015, Ms. Mauricio was Vice President and Deputy General Counsel of the Company, and from May 2002 to December 2011, she served as Assistant General Counsel of the Company. Prior to joining the Company, Ms.
Biggest changeMauricio was Vice President and Deputy General Counsel of the Company, and from May 2002 to December 2011, she served as Assistant General Counsel of the Company. Prior to joining the Company, Ms. Mauricio was an associate at Ropes & Gray LLP. 21 Table of Contents PART II
ITEM 4. MINE SAFETY DISCLOSURES Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Form 10-K. 19 Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Anthony J.
ITEM 4. MINE SAFETY DISCLOSURES Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Form 10-K. 20 Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Anthony J.
Pompa, Age 58; Executive Vice President and Chief Financial Officer of the Company since April 2006 and Treasurer of the Company from October 2019 to June 2020. From June 2003 to April 2006, Mr. Pompa was Senior Vice President-Chief Accounting Officer of the Company, and from June 2003 to January 2007, Mr. Pompa also served as Treasurer of the Company.
Pompa, Age 59; Executive Vice President and Chief Financial Officer of the Company since April 2006 and Treasurer of the Company from October 2019 to June 2020. From June 2003 to April 2006, Mr. Pompa was Senior Vice President-Chief Accounting Officer of the Company, and from June 2003 to January 2007, Mr. Pompa also served as Treasurer of the Company.
Guzzi, Age 58; President since October 2004, Chief Executive Officer since January 2011 and Chairman of the Board since June 2018. From October 2004 to January 2011, Mr. Guzzi served as Chief Operating Officer of the Company. From August 2001 until he joined the Company, Mr.
Guzzi, Age 59; President since October 2004, Chief Executive Officer since January 2011 and Chairman of the Board since June 2018. From October 2004 to January 2011, Mr. Guzzi served as Chief Operating Officer of the Company. From August 2001 until he joined the Company, Mr.
From September 1994 to June 2003, Mr. Pompa was Vice President and Controller of the Company. R. Kevin Matz, Age 64; Executive Vice President-Shared Services of the Company since December 2007 and Senior Vice President-Shared Services from June 2003 to December 2007. From April 1996 to June 2003, Mr.
Nalbandian, the Company’s Senior Vice President and Chief Accounting Officer, who will be promoted to Chief Financial Officer effective April 1, 2024, as previously announced. R. Kevin Matz, Age 65; Executive Vice President-Shared Services of the Company since December 2007 and Senior Vice President-Shared Services from June 2003 to December 2007. From April 1996 to June 2003, Mr.
Matz served as Vice President and Treasurer of the Company and Staff Vice President-Financial Services of the Company from March 1993 to April 1996. Maxine L. Mauricio , Age 51; General Counsel and Secretary of the Company since January 2016 and Executive Vice President since February 2021. Ms.
Matz served as Vice President and Treasurer of the Company and Staff Vice President-Financial Services of the Company from March 1993 to April 1996. On December 15, 2023, the Company announced that Mr. Matz will step down as Executive Vice President-Shared Services and depart from the Company, effective as of April 1, 2024. Maxine L.
Removed
Mauricio was an associate at Ropes & Gray LLP. 20 Table of Contents PART II
Added
From September 1994 to June 2003, Mr. Pompa was Vice President and Controller of the Company. On December 15, 2023, the Company announced that Mr. Pompa will step down as Executive Vice President and Chief Financial Officer and depart from the Company, effective as of April 1, 2024. Mr. Pompa will be succeeded by Jason R.
Added
Mauricio , Age 52; General Counsel and Secretary of the Company since January 2016, Executive Vice President since February 2021, and Chief Administrative Officer since December 2023. Ms. Mauricio was a Senior Vice President of the Company from January 2016 to February 2021. From January 2012 to December 2015, Ms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−0 removed1 unchanged
Biggest changePurchase of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes repurchases of our common stock made by us during the quarter ended December 31, 2022: Period Total Number of Shares Purchased (1) (2) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plan or Programs October 1, 2022 to October 31, 2022 — — — $389,799,870 November 1, 2022 to November 30, 2022 — — — $389,799,870 December 1, 2022 to December 31, 2022 — — — $389,799,870 Total — — — _________ (1) In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock.
Biggest changePurchase of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes repurchases of our common stock made by us during the quarter ended December 31, 2023: Period Total Number of Shares Purchased (1) (2) Average Price Paid Per Share (3) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan or Programs October 1, 2023 to October 31, 2023 114,292 $196.09 114,292 $261,064,294 November 1, 2023 to November 30, 2023 — — — $261,064,294 December 1, 2023 to December 31, 2023 — — — $261,064,294 Total 114,292 $196.09 114,292 _________ (1) In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock.
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. See Note 9 - Debt of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further information regarding our 2020 Credit Agreement.
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. See Note 9 - Debt of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further information regarding our 2023 Credit Agreement.
We expect that such quarterly dividends will be paid for the foreseeable future. Prior to October 25, 2011, no cash dividends had been paid on the Company’s common stock. We currently pay a regular quarterly dividend of $0.15 per share.
We expect that such quarterly dividends will be paid for the foreseeable future. Prior to October 25, 2011, no cash dividends had been paid on the Company’s common stock. We currently pay a regular quarterly dividend of $0.18 per share.
As of December 31, 2022, there remained authorization for us to repurchase approximately $389.8 million of our shares. No shares have been repurchased by us since the program was announced other than pursuant to such program. Refer to Note 12 - Common Stock of the notes to consolidated financial statements included in Item 8.
As of December 31, 2023, there remained authorization for us to repurchase approximately $261.1 million of our shares. No shares have been repurchased by us since the program was announced other than pursuant to such program. Refer to Note 12 - Common Stock of the notes to consolidated financial statements included in Item 8.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information. Our common stock trades on the New York Stock Exchange under the symbol “EME.” Holders. As of February 17, 2023, there were approximately 470 stockholders of record. Dividends. We have paid quarterly dividends since October 25, 2011.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information. Our common stock trades on the New York Stock Exchange under the symbol “EME.” Holders. As of February 22, 2024, there were approximately 585 stockholders of record. Dividends. We have paid quarterly dividends since October 25, 2011.
Subsequent to December 31, 2022, our Board of Directors announced its intention to increase the regular quarterly dividend to $0.18 per share commencing with the dividend to be paid in April 2023. Our 2020 Credit Agreement places limitations on the payment of dividends on our common stock.
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 2023 Credit Agreement places limitations on the payment of dividends on our common stock.
Financial Statements and Supplementary Data for further information regarding our share repurchase program. (2) Excludes 1,751 shares surrendered to the Company by participants in our share-based compensation plans to satisfy minimum tax withholdings for common stock issued under such plans.
Financial Statements and Supplementary Data for further information regarding our share repurchase program. (2) Excludes 3,333 shares surrendered to the Company by participants in our share-based compensation plans to satisfy minimum tax withholdings for common stock issued under such plans. (3) Price paid per share excludes any applicable broker commission or excise tax due.
Added
However, as such amounts are considered direct costs associated with the repurchase of our common stock, they have been reflected as a reduction in the remaining authorization under our share repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

106 edited+44 added−72 removed49 unchanged
Biggest changeSuch acquisitions include: (a) a company that provides electrical construction services in the Greater Boston area, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (b) five companies that enhance our presence in geographies where we have existing operations, the results of operations of which were de minimis, consisting of: (i) two companies that provide fire protection services in the Northeastern and Southern regions of the United States, respectively, and that have been included within our United States mechanical construction and facilities services segment, (ii) two companies that specialize in either building automation and controls or mechanical services in the Southwestern and Southern regions of the United States, respectively, and that have been included within our United States building services segment, and (iii) a company that provides electrical construction services in the Midwestern region of the United States and that has been included within our United States electrical construction and facilities services segment. 23 Table of Contents We acquired eight companies during 2021 for total consideration of $131.2 million.
Biggest changeSuch acquisitions include: (a) a company that provides electrical construction services in the Greater Boston area, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (b) five companies that enhance our presence in geographies where we have existing operations, the results of operations of which were de minimis, consisting of: (i) two companies that provide fire protection services in the Northeastern and Southern regions of the United States, respectively, and that have been included within our United States mechanical construction and facilities services segment, (ii) two companies that specialize in either building automation and controls or mechanical services in the Southwestern and Southern regions of the United States, respectively, and that have been included within our United States building services segment, and (iii) a company that provides electrical construction services in the Midwestern region of the United States and that has been included within our United States electrical construction and facilities services segment. 24 Table of Contents Discussion and Analysis of Results of Operations Revenues The following table presents our revenues for each of our operating segments and the approximate percentages that each segment’s revenues were of total revenues for the years ended December 31, 2023 and 2022 (in thousands, except for percentages): 2023 % of Total 2022 % of Total Revenues from unrelated entities: United States electrical construction and facilities services $ 2,783,723 22 % $ 2,433,114 22 % United States mechanical construction and facilities services 5,074,803 41 % 4,292,208 39 % United States building services 3,120,134 25 % 2,754,953 25 % United States industrial services 1,167,790 9 % 1,118,767 10 % Total United States operations 12,146,450 97 % 10,599,042 96 % United Kingdom building services 436,423 3 % 477,078 4 % Total operations $ 12,582,873 100 % $ 11,076,120 100 % 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.
Our reportable segments and related disclosures reflect certain reclassifications of prior year amounts from our United States mechanical construction and facilities services segment to our United States building services segment, and from our United States building services segment to our United States construction segments, due to changes in our internal reporting structure aimed at realigning our service offerings.
Our reportable segments and related disclosures reflect certain reclassifications of prior year amounts from our United States mechanical construction and facilities services segment to our United States building services segment due to changes in our internal reporting structure aimed at realigning our service offerings.
We are focused on the efficient conversion of operating income into cash to provide for the Company’s material cash requirements, including working capital needs, investment in our growth strategies through business acquisitions and capital expenditures, satisfaction of contractual commitments, including principal and interest payments on our outstanding indebtedness, and shareholder return through dividend payments and share repurchases.
We are focused on the efficient conversion of operating income into cash to provide for the Company’s material cash requirements, including working capital needs, investment in our growth strategies through business acquisitions and capital expenditures, satisfaction of contractual commitments, including principal and interest payments on any outstanding indebtedness, and shareholder return through dividend payments and share repurchases.
Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, the decreases in estimated fair values described above would not have significantly impacted the results of our impairment tests.
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.
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, 2022, it could result in a material impact to our results of operations.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2021. 29 Table of Contents Liquidity and Capital Resources The following section discusses our principal liquidity and capital resources, as well as our primary liquidity requirements and sources and uses of cash.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2022. 29 Table of Contents Liquidity and Capital Resources The following section discusses our principal liquidity and capital resources, as well as our primary liquidity requirements and sources and uses of cash.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2021. Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2022. Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities.
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. We currently pay a regular quarterly dividend of $0.15 per share.
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. We currently pay a regular quarterly dividend of $0.18 per share.
In addition to the increase in operating income referenced above, our diluted earnings per share for 2022 benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2021 and 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.
There have been no significant changes to our critical accounting policies or methods for the year ended December 31, 2022. We believe the following critical accounting policies govern the more significant judgments and estimates used in the preparation of our financial statements.
There have been no significant changes to our critical accounting policies or methods for the year ended December 31, 2023. We believe the following critical accounting policies govern the more significant judgments and estimates used in the preparation of our financial statements.
Financial Statements and Supplementary Data for further disclosure regarding our remaining performance obligations. 2021 versus 2020 For discussion and analysis of results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to Item 7.
Financial Statements and Supplementary Data for further disclosure regarding our remaining performance obligations. 2022 versus 2021 For discussion and analysis of results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Item 7.
Changes in our cash position from December 31, 2021 to December 31, 2022 are described in further detail below. For a discussion of the changes in our cash position from December 31, 2020 to December 31, 2021, refer to the Liquidity and Capital Resources section included in Item 7.
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.
As of December 31, 2022, we satisfied approximately $48.1 million and $71.2 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.
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.
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, 2022, the present value of expected future payments relating to these contingent consideration arrangements was $16.9 million.
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.
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 $1.23 billion of available capacity as of December 31, 2022.
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.
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, the operating results of our United States electrical construction and facilities services segment were negatively impacted by approximately $33.5 million during the year ended December 31, 2022.
For example, 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, the operating results of our United States electrical construction and facilities services segment were negatively impacted by approximately $12.5 million during the year ended December 31, 2023, compared to $33.5 million during the year ended December 31, 2022.
Our services are provided to a broad range of commercial, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries.
Our services are provided to a broad range of commercial, technology, manufacturing, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries.
The weighted average cost of capital used in our annual impairment testing was 10.3% for our United States construction segments, 10.2% for our United States building services segment, and 11.2% for our United States industrial services segment.
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.
Of this net amount, approximately $38.8 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.
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.
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, 2022, our insurance liabilities, net of estimated recoveries, were $201.5 million.
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.
Identifiable Intangible Assets and Other Long-Lived Assets As of December 31, 2022 and 2021, 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 $594.0 million and $589.4 million, respectively.
Identifiable Intangible Assets and Other Long-Lived Assets 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.
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 nearly $90 million for the year ended December 31, 2022.
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.
Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $22.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, partially as a result of greater potential exposures and an increase in certain of our deductibles or self-insured retentions.
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.
Our income tax provision for the year ended December 31, 2022 was $152.6 million, based on an income tax rate of 27.3%, compared to an income tax provision and an income tax rate of $145.6 million and 27.5%, respectively, for the year ended December 31, 2021.
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.
During 2022, 2021, and 2020, contributions made to these plans were $449.9 million, $399.5 million, and $360.4 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.
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.
Operating income of our United States electrical construction and facilities services segment for the year ended December 31, 2022 was $148.7 million, or 6.1% of revenues, compared to operating income for the year ended December 31, 2021 of $169.4 million, or 8.3% of revenues.
Operating income of our United States electrical construction and facilities services segment for the year ended December 31, 2023 was $230.6 million, or 8.3% of revenues, compared to operating income for the year ended December 31, 2022 of $148.7 million, or 6.1% of revenues.
For the years ended December 31, 2022 and 2021, cash payments related to dividends were $27.2 million and $28.2 million, respectively. Subsequent to December 31, 2022, our Board of Directors announced its intention to increase the regular quarterly dividend to $0.18 per share commencing with the dividend to be paid in April 2023.
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.
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 $20.1 million of additional expense for the year ended December 31, 2022.
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.
Future payments for such leases, excluding leases with initial terms of one year or less, were $325.7 million at December 31, 2022, with $78.3 million payable within the next 12 months. Refer to Note 16 - Leases of the notes to consolidated financial statements included in Item 8.
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. Open Purchase Obligations – As of December 31, 2022, we had $2.24 billion of open purchase obligations, of which payments totaling approximately $1.94 billion are expected to become due within the next 12 months.
Financial Statements and Supplementary Data for further detail surrounding our lease obligations and the timing of expected future payments. 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.
For the year ended December 31, 2022, selling, general and administrative expenses included $17.2 million of incremental expenses directly related to companies acquired in 2022 and 2021, including amortization expense attributable to identifiable intangible assets of $4.5 million.
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.
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 for 2022 was $710.1 million compared to $245.5 million in 2021.
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.
Further, for each of our reporting units, other than our United States industrial services segment, 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 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.
As of December 31, 2022, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.5 billion, which represents approximately 20% of our total remaining performance obligations.
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.
While the continued growth in our remaining performance obligations is largely due to the strength in demand for our services, a portion of this increase can likely be attributed to external market factors such as material and labor inflation, which has increased the price of certain of our project work, as well as supply chain delays, which has impacted the timing of conversion of our remaining performance obligations to revenue, in certain instances.
While the continued growth in our remaining performance obligations is largely due to the strength in demand for our services, a portion of this increase can likely be attributed to external market factors such as material and labor inflation, which has increased the price of certain of our project work.
While we believe the actions we have taken continue to be effective, as evidenced in part by the sequential improvement in our operating performance throughout each quarter of 2022, the impact of these disruptions continues to evolve and there can be no assurance that our actions will serve to mitigate such impacts in future periods.
While we believe the actions we have taken continue to be effective, as evidenced in part by our operating performance and operating cash flow in 2023, the impact of these disruptions continues to evolve and there can be no assurance that our actions will serve to mitigate such impacts in future periods.
Market Update Throughout 2022, our business and end markets remained resilient despite the impact of uncertain global economic conditions, including supply chain, production, and other logistical issues, an inflationary cost environment, rising interest rates, skilled labor shortages in certain regions, and the lingering effects of the COVID-19 pandemic.
Market Update Our business and end markets remained resilient despite the impact of uncertain global economic conditions, including supply chain, production, and other logistical issues, an inflationary cost environment, elevated interest rates, and skilled labor shortages in certain regions.
Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets Goodwill As of December 31, 2022 and 2021, we had goodwill of $919.2 million and $890.3 million, respectively, arising out of the acquisition of businesses.
Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets Goodwill 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.
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 $90.9 million, $172.1 million, $92.8 million, and $24.1 million, respectively.
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.
The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period. During 2022, we acquired six companies for total consideration of $100.8 million.
The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period. During 2023, we acquired eight companies for total consideration of $99.6 million.
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 $45.0 million, $94.2 million, $48.1 million, and $9.2 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.
Material Cash Requirements from Contractual and Other Obligations As of December 31, 2022, our short-term and long-term material cash requirements for known contractual and other obligations were as follows: Outstanding Debt and Interest Payments – As of December 31, 2022, there were no direct borrowings outstanding under our revolving credit facility and the amount outstanding under our term loan was $242.8 million.
Material Cash Requirements from Contractual and Other Obligations As of December 31, 2023, our short-term and long-term material cash requirements for known contractual and other obligations were as follows: Outstanding Debt and Interest Payments – As of December 31, 2023, there were no direct borrowings outstanding under our revolving credit facility.
As of December 31, 2022, we had cash and cash equivalents, excluding restricted cash, of $456.4 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less.
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.
Therefore, the $11.2 million variance between the years ended December 31, 2022 and 2021 was a direct result of unfavorable exchange rate movements for the British pound versus the United States dollar.
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.
These reductions in estimated project profitability negatively affected the operating margin of this segment by 140 basis points in 2022.
While these reductions in estimated project profitability negatively affected operating margin of this segment by 40 basis points for 2023, the impact in 2022 was 140 basis points.
For 2022, net cash provided by operating activities was approximately $497.9 million compared to approximately $318.8 million of net cash provided by operating activities in 2021.
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.
However, if we experience changes in our bonding relationships or if there are adverse changes in the surety industry, we may: (a) seek to satisfy certain customer requests for surety bonds by posting other forms of collateral in lieu of surety bonds, such as letters of credit, parent company guarantees, or cash, in order to convince customers to forego the requirement for surety bonds, (b) increase our activities in our businesses that rarely require surety bonds, and/or (c) refrain from bidding for certain projects that require surety bonds.
However, if we experience changes in our bonding relationships or if there are adverse changes in the surety industry, we may: (a) seek to satisfy certain customer requests for surety bonds by posting other forms of collateral in lieu of surety bonds, such as letters of credit, parent company guarantees, or cash, in order to convince customers to forego the requirement for surety bonds, (b) increase our activities in our businesses that rarely require surety bonds, and/or (c) refrain from bidding for certain projects that require surety bonds. 32 Table of Contents There can be no assurance that we would be able to effectuate alternatives to providing surety bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require surety bonds.
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.
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.
Net income of $406.1 million, or $8.10 per diluted share, for the year ended December 31, 2022, compares favorably to net income of $383.5 million, or $7.06 per diluted share, for the year ended December 31, 2021.
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.
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 $1,135.3 million, $2,580.5 million, $1,035.9 million, and $48.0 million, respectively.
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.
Any of these events could have a material adverse effect on our business, financial condition, and/or results of operations. 22 Table of Contents 2022 versus 2021 Overview The following table presents selected financial data for the fiscal years ended December 31, 2022 and 2021 (in thousands, except percentages and per share data): 2022 2021 Revenues $ 11,076,120 $ 9,903,580 Revenues increase from prior year 11.8 % 12.6 % Gross profit $ 1,603,594 $ 1,501,737 Gross profit as a percentage of revenues 14.5 % 15.2 % Operating income $ 564,877 $ 530,800 Operating income as a percentage of revenues 5.1 % 5.4 % Net income attributable to EMCOR Group, Inc. $ 406,122 $ 383,532 Diluted earnings per common share $ 8.10 $ 7.06 Revenues of $11.08 billion for the year ended December 31, 2022 set a new annual record for the Company and represent an increase of 11.8% from revenues of $9.90 billion for the year ended December 31, 2021.
Any of these events could result in reduced demand for our services or affect our ability to collect payment, and therefore, have a material adverse effect on our business, financial condition, and/or results of operations. 23 Table of Contents 2023 versus 2022 Overview The following table presents selected financial data for the fiscal years ended December 31, 2023 and 2022 (in thousands, except percentages and per share data): 2023 2022 Revenues $ 12,582,873 $ 11,076,120 Revenues increase from prior year 13.6 % 11.8 % Gross profit $ 2,089,339 $ 1,603,594 Gross profit as a percentage of revenues 16.6 % 14.5 % Operating income $ 875,756 $ 564,877 Operating income as a percentage of revenues 7.0 % 5.1 % Net income attributable to EMCOR Group, Inc. $ 632,994 $ 406,122 Diluted earnings per common share $ 13.31 $ 8.10 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.
We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future. 32 Table of Contents From time to time, we discuss with our current and other surety bond providers the amounts of surety bonds that may be available to us based on our financial strength and the absence of any default by us on any surety bond issued on our behalf and believe those amounts are currently adequate for our needs.
From time to time, we discuss with our current and other surety bond providers the amounts of surety bonds that may be available to us based on our financial strength and the absence of any default by us on any surety bond issued on our behalf and believe those amounts are currently adequate for our needs.
The $179.1 million increase in operating cash flows during 2022, when compared to 2021, was primarily a result of the collection of advanced billings on certain of our uncompleted construction projects, as evidenced in part by the growth in our contract liabilities, net of the increase in outstanding accounts receivable. 30 Table of Contents 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.
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. 30 Table of Contents 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.
Absent earlier indicators of impairment, we test for impairment of subsidiary trade names that are not subject to amortization on an annual basis (October 1). In addition, we review for impairment of identifiable intangible assets that are being amortized as well as other long-lived assets whenever facts and circumstances indicate that their carrying values may not be fully recoverable.
In addition, we review for impairment of identifiable intangible assets that are being amortized as well as other long-lived assets whenever facts and circumstances indicate that their carrying values may not be fully recoverable. 35 Table of Contents As of October 1, 2023, we performed our annual impairment testing of all subsidiary trade names that are not subject to amortization and determined that there was no impairment of these assets.
Cost of sales and gross profit The following table presents cost of sales, gross profit (revenues less cost of sales), and gross profit margin (gross profit as a percentage of revenues) for the years ended December 31, 2022 and 2021 (in thousands, except for percentages): 2022 2021 Cost of sales $ 9,472,526 $ 8,401,843 Gross profit $ 1,603,594 $ 1,501,737 Gross profit margin 14.5 % 15.2 % Our gross profit for the year ended December 31, 2022 was $1,603.6 million, a $101.9 million increase compared to gross profit of $1,501.7 million for the year ended December 31, 2021.
Cost of sales and gross profit The following table presents cost of sales, gross profit (revenues less cost of sales), and gross profit as a percentage of revenues (“gross profit margin”) for the years ended December 31, 2023 and 2022 (in thousands, except for percentages): 2023 2022 Cost of sales $ 10,493,534 $ 9,472,526 Gross profit $ 2,089,339 $ 1,603,594 Gross profit margin 16.6 % 14.5 % 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.
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. During 2022, EMCOR purchased carbon credits totaling 31,000 metric tons, for approximately $0.2 million.
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.
In addition, material cash requirements for other potential obligations, for which we cannot reasonably estimate future payments, include the following: Legal Proceedings – We are involved in several legal proceedings in which damages and claims have been asserted against us.
Of this amount, $6.1 million is estimated as being payable during 2024, with the remainder due in 2025. In addition, material cash requirements for other potential obligations, for which we cannot reasonably estimate future payments, include the following: Legal Proceedings – We are involved in several legal proceedings in which damages and claims have been asserted against us.
Our United States mechanical construction and facilities services segment revenues for the year ended December 31, 2022 were $4,326.7 million, a $374.1 million increase compared to revenues of $3,952.6 million for the year ended December 31, 2021.
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 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. 33 Table of Contents Due to uncertainties inherent in the estimation process, as well as the significant judgment involved in determining variable consideration, it is possible that estimates of costs to complete a performance obligation, and/or our estimates of transaction prices, will be revised in the near term.
Due to uncertainties inherent in the estimation process, as well as the significant judgment involved in determining variable consideration, it is possible that estimates of costs to complete a performance obligation, and/or our estimates of transaction prices, will be revised in the near term.
Cash Flows The following table presents a summary of our operating, investing, and financing cash flows (in thousands): 2022 2021 Net cash provided by operating activities $ 497,933 $ 318,817 Net cash used in investing activities $ (140,800) $ (153,076) Net cash used in financing activities $ (710,118) $ (245,456) Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ (12,515) $ (1,279) Decrease in cash, cash equivalents, and restricted cash $ (365,500) $ (80,994) For the year ended December 31, 2022, our cash balance, including cash equivalents and restricted cash, decreased by $365.5 million from $822.6 million at December 31, 2021 to $457.1 million at December 31, 2022.
Cash Flows The following table presents a summary of our operating, investing, and financing cash flows (in thousands): 2023 2022 Net cash provided by operating activities $ 899,655 $ 497,933 Net cash used in investing activities $ (161,291) $ (140,800) Net cash used in financing activities $ (412,054) $ (710,118) Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ 6,372 $ (12,515) Increase (decrease) in cash, cash equivalents, and restricted cash $ 332,682 $ (365,500) 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.
Our United Kingdom building services segment operating income for the year ended December 31, 2022 was $29.8 million, or 6.3% of revenues, which compares favorably to operating income of $28.0 million, or 5.5% of revenues, for the year ended December 31, 2021.
Operating income of our United States building services segment for the year ended December 31, 2023 was $183.0 million, or 5.9% of revenues, compared to operating income of $146.6 million, or 5.3% of revenues, for the year ended December 31, 2022.
Most notably, we experienced an increase in remaining performance obligations from: (a) our United States construction segments, driven by the award of various construction projects within the majority of the market sectors in which we operate, and (b) our United States building services segment given increased project opportunities within its mobile mechanical services division and the award or renewal of several facilities maintenance contracts within its commercial site-based services division.
The increase in remaining performance obligations year-over-year was attributable to an increase in remaining performance obligations within: (a) each of our United States construction segments, driven by the award of various projects within the majority of the market sectors in which we operate, and (b) our United States building services segment, largely due to increased project opportunities within its mechanical services division.
Companies acquired in 2022 and 2021 generated incremental revenues of $149.7 million in 2022. Revenues of our United States electrical construction and facilities services segment were $2,433.1 million for the year ended December 31, 2022 compared to revenues of $2,029.9 million for the year ended December 31, 2021.
Revenues of our United States electrical construction and facilities services segment were $2,783.7 million for the year ended December 31, 2023 compared to revenues of $2,433.1 million for the year ended December 31, 2022. This segment’s results included $88.5 million of incremental acquisition revenues for the year ended December 31, 2023.
Financial Statements and Supplementary Data for further detail of our debt obligations, including our term loan and revolving credit facility. Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases.
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.
However, if the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is impaired and an impairment loss in the amount of the excess is recognized and charged to operations. 35 Table of Contents We performed our annual impairment assessment of all reporting units as of October 1, 2022 and determined there was no impairment of goodwill.
If the fair value exceeds the carrying amount, no impairment is recognized. However, if the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is impaired and an impairment loss in the amount of the excess is recognized and charged to operations.
Such acquisitions include: (a) two companies, the results of operations of which were de minimis, included within our United States mechanical construction and facilities services segment, consisting of: (i) a company that provides mechanical services within the Southern region of the United States and (ii) a company that provides fire protection services in the Midwestern region of the United States, (b) two companies that provide electrical construction services for a broad array of customers in the Midwestern region of the United States, the results of operations of which have been included in our United States electrical construction and facilities services segment, and (c) four companies included within our United States building services segment, consisting of: (i) a company that provides mobile mechanical services across North Texas and (ii) three companies, the results of operations of which were de minimis, that enhance our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls solutions.
Such acquisitions include: (a) a national energy efficiency specialty services firm, the results of operations of which have been included in our United States building services segment, and (b) seven companies, the results of operations of which were de minimis, consisting of: (i) three companies that have been included within our United States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services in the Midwestern region of the United States, and two of which add capabilities to our national fire protection services, and (ii) four mechanical services companies in the Western and Midwestern regions of the United States that have been included within our United States building services segment and enhance our presence in geographies where we have existing operations.
We do not have any other material financial guarantees or off-balance sheet arrangements other than those disclosed herein. Other Items 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 setting science-based targets.
Other Items 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.
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.
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.
In the ordinary course of business, we, at times, guarantee obligations of our subsidiaries under certain contracts. Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract. Historically, we have not incurred any substantial liabilities as a consequence of these guarantees.
Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract. Historically, we have not incurred any substantial liabilities as a consequence of these guarantees. We do not have any other material financial guarantees or off-balance sheet arrangements other than those disclosed herein.
Remaining Unsatisfied Performance Obligations The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentage of total remaining performance obligations (in thousands, except for percentages): December 31, 2022 % of Total December 31, 2021 % of Total Remaining performance obligations: United States electrical construction and facilities services $ 2,014,079 27 % $ 1,224,577 22 % United States mechanical construction and facilities services 4,008,919 54 % 3,272,124 58 % United States building services 1,151,031 15 % 872,550 16 % United States industrial services 124,653 2 % 111,838 2 % Total United States operations 7,298,682 98 % 5,481,089 98 % United Kingdom building services 160,617 2 % 118,208 2 % Total operations $ 7,459,299 100 % $ 5,599,297 100 % 28 Table of Contents Our remaining performance obligations at December 31, 2022 were $7.46 billion compared to $5.60 billion at December 31, 2021.
Remaining Unsatisfied Performance Obligations The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentage of total remaining performance obligations (in thousands, except for percentages): December 31, 2023 % of Total December 31, 2022 % of Total Remaining performance obligations: United States electrical construction and facilities services $ 2,387,844 27 % $ 2,014,079 27 % United States mechanical construction and facilities services 4,940,519 56 % 3,987,134 53 % United States building services 1,264,818 14 % 1,172,816 16 % United States industrial services 113,291 1 % 124,653 2 % Total United States operations 8,706,472 98 % 7,298,682 98 % United Kingdom building services 140,949 2 % 160,617 2 % Total operations $ 8,847,421 100 % $ 7,459,299 100 % Our remaining performance obligations at December 31, 2023 were $8.85 billion compared to $7.46 billion at December 31, 2022.
Contingent Consideration Liabilities – We have incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods.
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. 31 Table of Contents 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.
For the year ended December 31, 2021, no impairment of our goodwill, identifiable intangible assets, or other long-lived assets was recognized. 37 Table of Contents
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. 36 Table of Contents
Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments, including the above referenced losses. 25 Table of Contents Selling, general and administrative expenses The following table presents selling, general and administrative expenses and SG&A margin (selling, general and administrative expenses as a percentage of revenues) for the years ended December 31, 2022 and 2021 (in thousands, except for percentages): 2022 2021 Selling, general and administrative expenses $ 1,038,717 $ 970,937 SG&A margin 9.4 % 9.8 % Our selling, general and administrative expenses for the year ended December 31, 2022 were $1,038.7 million compared to selling, general and administrative expenses of $970.9 million for the year ended December 31, 2021.
Selling, general and administrative expenses The following table presents selling, general and administrative expenses (“SG&A”) and selling, general and administrative expenses as a percentage of revenues (“SG&A margin”) for the years ended December 31, 2023 and 2022 (in thousands, except for percentages): 2023 2022 Selling, general and administrative expenses $ 1,211,233 $ 1,038,717 SG&A margin 9.6 % 9.4 % 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.
Demand for our services continues to be strong and, as described in further detail below, we experienced revenue growth within all of our reportable segments except for our United Kingdom building services segment, the reduction in revenues of which was entirely due to unfavorable exchange rate movements during 2022, which more than offset revenue growth that was experienced on a local currency basis.
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.
Refer to Note 14 - Retirement Plans of the notes to consolidated financial statements in Item 8. Financial Statements and Supplementary Data for further information about our post retirement plans.
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.
For 2022, we utilized approximately $140.8 million of cash for investing activities compared to $153.1 million in 2021. The decrease in investing cash outflows year-over-year was primarily driven by a decrease in payments for business acquisitions, partially offset by higher capital expenditures used to invest in organic growth.
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.
Excluding incremental acquisition revenues within this segment’s mobile mechanical services division of $14.6 million during 2022, this segment’s revenue growth was primarily attributable to: (a) its mobile mechanical services division, due to: (i) increased project work, including incremental demand for HVAC system retrofits and building automation and controls services, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, and (ii) greater service repair and maintenance volumes, partially as a result of incremental repair opportunities driven by supply chain delays, which have created a need to extend the life of existing equipment in instances when replacement equipment is not readily available, and (b) its commercial site-based services division, due to the award of facilities maintenance contracts with new customers, as well as scope or site expansion and increased project work with existing customers.
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.
Revenues of our United States industrial services segment for the year ended December 31, 2022 were $1,118.8 million, a $132.4 million increase compared to revenues of $986.4 million for the year ended December 31, 2021.
Such increased revenues were despite the loss of certain facilities maintenance contracts not renewed pursuant to rebid. 25 Table of Contents Revenues of our United States industrial services segment for the year ended December 31, 2023 were $1,167.8 million, a $49.0 million increase compared to revenues of $1,118.8 million for the year ended December 31, 2022.
With respect to identifiable intangible assets that are being amortized as well as other long-lived assets, no impairment was recognized during the year ended December 31, 2022. 36 Table of Contents Other Considerations As referenced above, impairment testing is based upon assumptions and estimates determined by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations.
Other Considerations As referenced above, impairment testing is based upon assumptions and estimates determined by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations. In addition, estimates of weighted average costs of capital are developed with the assistance of an independent third-party valuation specialist.
Until such time, we are required to make periodic interest payments on our outstanding indebtedness. Future interest payments will be determined based on prevailing interest rates during that time, which are anticipated to increase in the near term. Refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8.
Interest payments on any future borrowings will be determined based on prevailing interest rates at that time. Refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for further detail of our debt obligations, including our revolving credit facility.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−8 removed1 unchanged
Biggest changeBorrowings under the 2020 Credit Agreement bear interest at variable rates and, as a result of the actions referenced above, such rates have increased throughout 2022. For further information on our outstanding debt and borrowing rates, refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.
Biggest changeWe are exposed to market risk for changes in interest rates for borrowings under our revolving credit facility. Borrowings under such facility bear interest at variable rates and, as a result of the actions referenced above, such rates have increased throughout 2022 and 2023.
We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet of approximately 13,200 vehicles. While we believe we can increase our contract prices to adjust for some price increases in commodities, there can be no assurance that such price increases, if they were to occur, would be recoverable.
We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet of approximately 13,800 vehicles. While we believe we can increase our contract prices to adjust for some price increases in commodities, there can be no assurance that such price increases, if they were to occur, would be recoverable.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have not used any derivative financial instruments during the years ended December 31, 2022 and 2021, including trading or speculating on changes in interest rates or commodity prices of materials used in our business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have not used any derivative financial instruments during the years ended December 31, 2023 and 2022, including trading or speculating on changes in interest rates or commodity prices of materials used in our business. Throughout 2022 and much of 2023, the Federal Reserve Board increased the federal funds rate.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion regarding the impact of fluctuations in commodity and material prices on our results of operations for the year ended December 31, 2022. 38 Table of Contents
Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion regarding the impact of fluctuations in commodity and material prices on our results of operations. 37 Table of Contents
In addition, we are exposed to market risk of fluctuations in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in our construction, building services, and industrial services operations.
Additionally, expenses associated with these transactions are generally contracted and paid for in their same local currencies. In addition, we are exposed to market risk of fluctuations in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in our construction, building services, and industrial services operations.
Therefore, we believe we take appropriate action to manage market and other risks, but there is no assurance that we will be able to reasonably identify all risks with respect to the collectability of these assets. See also the previous discussion of Accounts Receivable and Allowance for Credit Losses under the heading “Critical Accounting Policies and Estimates” in Item 7.
Therefore, we believe we take appropriate action to manage market and other risks, but there is no assurance that we will be able to reasonably identify all risks with respect to the collectability of these assets.
We continually monitor the creditworthiness of our customers and maintain on-going discussions with customers regarding contract status with respect to change orders and billing terms.
The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions. We continually monitor the creditworthiness of our customers and maintain on-going discussions with customers regarding contract status with respect to change orders and billing terms.
We believe our exposure to the effects that fluctuating foreign currencies may have on our consolidated results of operations is limited because our foreign operations primarily invoice customers and collect obligations in their respective local currencies. Additionally, expenses associated with these transactions are generally contracted and paid for in their same local currencies.
The resulting translation adjustments are recorded as accumulated other comprehensive (loss) income, a component of equity, in the Consolidated Balance Sheets. We believe our exposure to the effects that fluctuating foreign currencies may have on our consolidated results of operations is limited because our foreign operations primarily invoice customers and collect obligations in their respective local currencies.
Removed
As noted previously, the Federal Reserve Board has been increasing interest rates, and it is anticipated that rate increases will continue throughout 2023. We are exposed to market risk for changes in interest rates for borrowings under the 2020 Credit Agreement, which provides for a revolving credit facility and a term loan.
Added
For further information regarding our credit facility and associated borrowing rates, refer to Note 9 - Debt of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. We are exposed to construction market risk and its potential related impact on accounts receivable or contract assets on uncompleted contracts.
Removed
As of December 31, 2022, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility; however, the balance of the 2020 Term Loan was $242.8 million.
Added
For further discussion regarding the collectability of our outstanding accounts receivable, refer to Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at the end of the period.
Removed
Based on the $242.8 million of borrowings outstanding under the 2020 Credit Agreement, if overall interest rates were to increase by 200 basis points, interest expense, net of income taxes, would increase by approximately $3.6 million in the next twelve months.
Removed
Conversely, if overall interest rates were to decrease by 200 basis points, interest expense, net of income taxes, would decrease by approximately $3.6 million in the next twelve months. The 2020 Credit Agreement expires on March 2, 2025. At the end of 2021, one-week and two-month LIBOR were discontinued.
Removed
It is expected that the remaining maturities of LIBOR will continue to be published through June 2023.
Removed
We believe our exposure to market risk associated with the discontinuation of LIBOR is limited as: (a) our 2020 Credit Agreement contains provisions which allow for the use of alternate benchmark rates, (b) we have not historically utilized the maturities that were discontinued in 2021 for any transaction, including borrowings under our 2020 Credit Agreement, and (c) we are not exposed to any other material contracts that reference LIBOR.
Removed
We are exposed to construction market risk and its potential related impact on accounts receivable or contract assets on uncompleted contracts. The amounts recorded may be at risk if our customers’ ability to pay these obligations is negatively impacted by economic conditions.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations. Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at year end. The resulting translation adjustments are recorded as accumulated other comprehensive (loss) income, a component of equity, in the Consolidated Balance Sheets.

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