EMCOR Group Q3 2024: Credit Facility Interest Rates Detailed

TL;DR

EMCOR's Q3 10-Q shows credit facility rates tied to leverage ratio. Watch those margins!

AI Summary

EMCOR Group, Inc. filed its 10-Q for the period ending September 30, 2024. The filing details the company's financial position, including information on its 2023 Revolving Credit Facility. Borrowings under this facility can bear interest at a base rate plus a margin of 0.125% to 0.875% or Adjusted Term SOFR plus a margin of 1.125% to 1.875%, both dependent on the company's Leverage Ratio.

Why It Matters

This filing provides insight into EMCOR's debt financing costs, which directly impact its profitability and ability to fund operations and growth.

Risk Assessment

Risk Level: medium — Interest rate fluctuations and leverage ratios can significantly impact a company's financial health and borrowing costs.

Key Numbers

• 0.125% — Base Rate Margin (Min) (Lowest interest rate margin on the revolving credit facility)
• 1.875% — SOFR Margin (Max) (Highest interest rate margin on the revolving credit facility)

Key Players & Entities

• EMCOR Group, Inc. (company) — Filer of the 10-Q
• 2023 Revolving Credit Facility (company) — Debt instrument detailed in the filing
• 0.125% (dollar_amount) — Minimum margin for base rate borrowings
• 0.875% (dollar_amount) — Maximum margin for base rate borrowings
• 1.125% (dollar_amount) — Minimum margin for Adjusted Term SOFR borrowings
• 1.875% (dollar_amount) — Maximum margin for Adjusted Term SOFR borrowings
• September 30, 2024 (date) — End of the reporting period

FAQ

Filing Documents

• eme-20240930.htm (10-Q) — 1533KB
• eme-ex311_2024930xq3.htm (EX-31.1) — 10KB
• eme-ex312_2024930xq3.htm (EX-31.2) — 10KB
• eme-ex321_2024930xq3.htm (EX-32.1) — 5KB
• eme-ex322_2024930xq3.htm (EX-32.2) — 5KB
• eme-ex951_2024930xq3.htm (EX-95.1) — 1KB
• 0000105634-24-000037.txt ( ) — 7843KB
• eme-20240930.xsd (EX-101.SCH) — 45KB
• eme-20240930_cal.xml (EX-101.CAL) — 58KB
• eme-20240930_def.xml (EX-101.DEF) — 218KB
• eme-20240930_lab.xml (EX-101.LAB) — 548KB
• eme-20240930_pre.xml (EX-101.PRE) — 378KB
• eme-20240930_htm.xml (XML) — 1494KB

- Financial Information

PART I. - Financial Information.

Financial Statements

Item 1. Financial Statements. Consolidated Balance Sheets - as of September 30, 2024 and December 31, 2023 1 Condensed Consolidated Statements of Operations - three and nine months ended September 30, 2024 and 2023 2 Condensed Consolidated Statements of Comprehensive Income - three and nine months ended September 30, 2024 and 2023 3 Condensed Consolidated Statements of Cash Flows - nine months ended September 30, 2024 and 2023 4 Condensed Consolidated Statements of Equity - three months ended September 30, 2024 and 2023 5 Condensed Consolidated Statements of Equity - nine months ended September 30, 2024 and 2023 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 27

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk. 38

Controls and Procedures

Item 4. Controls and Procedures. 39

- Other Information

PART II. - Other Information.

Legal Proceedings

Item 1. Legal Proceedings. 40

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 40

Mine Safety Disclosures

Item 4. Mine Safety Disclosures. 40

Other Information

Item 5. Other Information. 40

Exhibits

Item 6. Exhibits. 41 Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They generally contain words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "may," "can," "could," "might," variations of such wording and other words or phrases of similar meaning. Forward-looking statements in this report include discussions of our future operating or financial performance and other forward-looking commentary regarding aspects of our business, including market share growth, gross profit, remaining performance obligations, project mix, projects with varying profit margins and contractual terms, selling, general and administrative expenses, our ability to maintain a strong safety record, and trends in our business, and other characterizations of future events or circumstances, such as the effects of supply chain disruptions and delays. Each forward-looking statement included in this report is subject to risks and uncertainties, including those identified in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, and other sections of this report, and in our Form 10-K for the year ended December 31, 2023, including, without limitation, the "Risk Factors" section of such Form 10-K. Applicable risks and uncertainties include, but are not limited to: adverse effects of general economic conditions; domestic and international political developments and/or conflicts; changes in the specific markets for EMCOR's services; adverse business conditions, including scarcity of skilled labor, productivity challenges, the nature and extent of supply chain disruptions impacting availability and pricing of materials, and inflationary trends more generally, including fluctuations in energy costs; the impact of legislation and/or government regulations; changes in interest rates; the availability

– FINANCIAL INFORMATION

PART I. – FINANCIAL INFORMATION.

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS. EMCOR Group, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 1,035,534 $ 789,750 Accounts receivable, less allowance for credit losses of $ 32,702 and $ 22,502 , respectively 3,509,202 3,203,490 Contract assets 296,523 269,885 Inventories 94,475 110,774 Prepaid expenses and other 70,681 73,072 Total current assets 5,006,415 4,446,971 Property, plant, and equipment, net 204,547 179,378 Operating lease right-of-use assets 322,912 310,498 Goodwill 1,002,218 956,549 Identifiable intangible assets, net 648,123 586,032 Other assets 137,737 130,293 Total assets $ 7,321,952 $ 6,609,721 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 897,059 $ 935,967 Contract liabilities 1,881,444 1,595,109 Accrued payroll and benefits 753,680 596,936 Other accrued expenses and liabilities 312,799 315,107 Operating lease liabilities, current 80,245 75,236 Total current liabilities 3,925,227 3,518,355 Operating lease liabilities, long-term 269,517 259,430 Other long-term obligations 368,089 361,121 Total liabilities 4,562,833 4,138,906 Equity: EMCOR Group, Inc. stockholders' equity: Preferred stock, $ 0.10 par value, 1,000,000 shares authorized, zero issued and outstanding — — Common stock, $ 0.01 par value, 200,000,000 shares authorized, 61,175,811 and 61,094,042 shares issued, respectively 612 611 Capital surplus 96,939 91,813 Accumulated other comprehensive loss ( 76,279 ) ( 85,704 ) Retained earnings 4,497,430 3,814,439 Treasury stock, at cost 15,178,383 and 14,046,777 shares, respectively ( 1,760,620 ) ( 1,351,381 ) Total EMCOR Group, Inc. stockholders' equity 2,758,082 2,469,778 Noncontrolling interests 1,037 1,037 Total equity 2,759,119 2,470,815 Total liabilities and equity $ 7,321,952 $ 6,609,721 See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) NOTE 1 - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted. References to the "Company," "EMCOR," "we," "us," "our," and similar words refer to EMCOR Group, Inc. and its consolidated subsidiaries unless the context indicates otherwise. Readers of this report should refer to the consolidated financial statements and the notes thereto included in our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of those of a normal recurring nature) necessary to present fairly our financial position and the results of our operations. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024. NOTE 2 - New Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (the "FASB") issued an Accounting Standards Update ("ASU"), which expands the required disclosure for reportable segments. This guidance requires entities to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all segment disclosures which are currently required annually. This ASU additionally requires entities to disclose the title and position of the individual or the name of the group or committee identified as its chief operating decision-maker. Such guidance, which is required to be applied retrospectively, is effective for fiscal

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) NOTE 3 - Revenue from Contracts with Customers (Continued) (2) Identify the performance obligations in the contract At contract inception, the Company assesses the goods or services promised in a contract and identifies, as a separate performance obligation, each distinct promise to transfer goods or services to the customer. The identified performance obligations represent the "unit of account" for purposes of determining revenue recognition. In order to properly identify separate performance obligations, the Company applies judgment in determining whether each good or service provided is: (a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract. In addition, when assessing performance obligations within a contract, the Company considers the warranty provisions included within such contract. To the extent the warranty terms provide the customer with an additional service, other than assurance that the promised good or service complies with agreed upon specifications, such warranty is accounted for as a separate performance obligation. In determining whether a warranty provides an additional service, the Company considers each warranty provision in comparison to warranty terms which are standard in the industry. Our contracts are often modified through change orders to account for changes in the scope and price of the goods or services we are providing. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of our change orders are for goods or services that are not distinct within the context of our original contract and

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) NOTE 3 - Revenue from Contracts with Customers (Continued) Contract claims are another form of variable consideration which is common within our industry. Claim amounts represent revenue that has been recognized for contract modifications that are not submitted or are in dispute as to both scope and price. In estimating the transaction price for claims, the Company considers all relevant facts available. However, given the uncertainty surrounding claims, including the potential long-term nature of dispute resolution and the broad range of possible consideration amounts, there is an increased likelihood that any additional contract revenue associated with contract claims is constrained. The resolution of claims involves negotiations and, in certain cases, litigation. In the event litigation costs are incurred by us in connection with claims, such litigation costs are expensed as incurred, although we may seek to recover these costs. For some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer. For such contracts, the Company evaluates whether this timing difference represents a financ

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