MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Subsequent Event New Accounting Pronouncements Quantitative and Qualitative Disclosures  about Market Risk 25 EMCOR ANNUAL REPORT 2001  In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”) and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 141 requires all business combinations be accounted for using the purchase method of accounting and that certain intangible assets acquired in a business combination be recognized as assets apart from goodwill. SFAS 141 was effective for all business combinations initiated after June 30, 2001. SFAS 142 requires goodwill to be tested for impairment under certain circumstances, and written down when impaired, rather than being amortized as previous standards required. Furthermore, SFAS 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. The annual reduction in expense due to the discontinuance of goodwill amortization beginning in 2002 should be approximately $3.4 to $4.4 million. SFAS 142 is effective for fiscal years beginning  after December 15, 2001. All companies have six months subsequent to the date of adoption to complete the initial goodwill impairment test. EMCOR has not yet determined any further impact SFAS 142 will have on its  existing goodwill. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). SFAS 144 establishes a single accounting model, based on the framework established in Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” (“SFAS 121”), for long-lived assets to be disposed of by sale, and resolves significant implementation issues related to SFAS 121. This statement also supercedes the accounting reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” (“APB 30”) for the disposal of a segment of a business. The provisions of SFAS No. 144 are effective for the fiscal years beginning after December 15, 2001. EMCOR believes that the adoption of SFAS 144 will not have a material impact on its results of operations, financial position or cash flows. 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 risks and uncertainties include, but are not limited to, adverse changes in general economic conditions, including changes in the specific markets for EMCOR’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 loss, 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 credit facility. The credit facility bears interest at variable rates, and the fair value of this borrowing is not significantly affected by changes in market interest rates. On February 11, 2002, EMCOR signed a definitive agreement with Comfort Systems USA, Inc. (“Comfort Systems”) to acquire nineteen of Comfort Systems’ subsidiaries. Under the terms of the agreement, EMCOR  will pay Comfort Systems $186.25 million, approximately $164.25 million in cash and approximately $22.0 million by assumption of Comfort Systems notes payable to former owners of certain of the acquired companies. EMCOR will fund the acquisition through a combination of cash on hand and borrowings under its revolving credit facility. The acquisition is expected to close in the first quarter of  2002, pending customary closing conditions and  regulatory approval.