Management’s Discussion and Analysis of Results of Operations and Financial Condition standards requiring derivative instruments, as defined, to be  measured in the financial statements at fair value. SFAS 133 also requires that changes in the derivative instruments’ fair value be recognized currently in earnings unless certain accounting criteria are met. EMCOR has evaluated this standard and has concluded that the provisions of SFAS 133 will have no significant effect on the financial condition or results of operations of EMCOR. In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” (“SFAS 140”). SFAS 140 is a  replacement of Statement of Financial Accounting Standards No. 125. SFAS 140 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities occurring after March 31, 2001. EMCOR has evaluated this standard and has concluded that the provisions of SFAS 140 will not have a significant effect on the financial conditions or results of operations of EMCOR. (9.5% at December 31, 2000) plus 0% to 0.5%, based on certain financial tests or (2) at a LIBOR rate (6.3% at December 31, 2000) plus 1.25% to 2.0% based on certain financial tests. The interest rates in effect at December 31, 2000 were 9.5% and 7.6%, respectively. Letters of credit fees issued under the credit facility ranging from 0.5% to 2.0% are charged based on type of letters  of credit issued and certain financial tests. As of December 31, 2000 and 1999, EMCOR had approximately $12.1 million and  $17.4 million of letters of credit outstanding, respectively. No revolving loans were outstanding under the credit facility at December 31, 2000 or 1999. In 1998, EMCOR issued notes in connection with the  acquisition of two companies. A principal payment of $1.0 million was made in August 1999 in respect of one note issued in August 1998, and a principal payment of the balance of $1.15 million was made in respect of that note in August 2000. Interest on the note was paid together with payments of principal. The other note, issued in the principal amount of $6.2 million in December 1998, was paid in full in January 1999. The Company believes that current cash balances and  borrowing capacity available under lines of credit, combined with cash expected to be generated from operations, will be sufficient to provide short-term and foreseeable long-term liquidity and meet expected capital expenditure requirements. As of December 31, 2000, EMCOR was utilizing approximately $12.1 million of letters of credit obtained under its working capital credit facility as collateral for its current insurance obligations. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 133, as amended by Statement of Financial Accounting Standards No. 137, “Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of SFAS No. 133”, and Statement of Financial Accounting Standards No. 138 “Accounting for Certain Derivative Instruments and Hedging Activities” (“SFAS 138”), establishes for fiscal quarters of fiscal years beginning after June 15, 2000 accounting and reporting  This Annual Report contains certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995, particularly statements regarding market opportunities, market share growth, competitive growth, gross profit, and selling, general and administrative expenses. These forward-looking statements involve risks and uncertainties, that could cause actual results to differ  materially from those in any such forward-looking statements. Such factors include, but are not limited to adverse changes in general economic conditions, including changes in the specific markets for the Company’s services, adverse business conditions, decreased or lack of growth in the mechanical and electrical construction and facilities services industries, increased competition, pricing pressures and risk associated with foreign operations and other factors. Amounts invested in EMCOR’s 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 income, a component of stockholders’ equity, in the consolidated balance sheets. EMCOR is exposed to market risk for changes in interest rates for borrowings under its working capital credit facility. The working capital credit facility bears interest at variable rates, and the fair value of this borrowing is not significantly affected by changes in market interest rates. Quantitative and Qualitative Disclosures About  Market Risk Certain Insurance Matters New Accounting Pronouncements 22 EMCOR, 2000 Annual Report In December 2000, the Company’s Canadian subsidiary, Comstock Canada Ltd., renewed a credit agreement with a bank providing for an overdraft facility of up to C$0.5 million. The facility is secured by a standby letter of credit and provides for interest at the bank’s prime rate (7.5% at December 31, 2000). There were no borrowings outstanding under this credit  agreement at December 31, 2000 or 1999. The Canadian  subsidiary may utilize EMCOR’s credit facility for its working  capital requirements.