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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

----------

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 COMMISSION FILE NUMBER 0-2315

EMCOR GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 11-2125338
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)

301 MERRITT SEVEN CORPORATE PARK 06851-1060
Norwalk, Connecticut (zip code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(203) 849-7800

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of each class)

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filings pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in Part III of this Form 10-K to be filed as an
amendment hereto. [X]

Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant on December 31, 2002 was approximately
$790,000,000.

Number of shares of Common Stock outstanding as of the close of business on
February 19, 2003: 16,056,862 shares.

================================================================================


TABLE OF CONTENTS



PAGE

PART I


Item 1. Business

General ..................................................................................................... 1

The Business ................................................................................................ 1

Competition ................................................................................................. 4

Employees ................................................................................................... 4

Backlog ..................................................................................................... 4

Item 2. Properties ........................................................................................................ 5

Item 3. Legal Proceedings ................................................................................................. 8

Item 4. Submission of Matters to a Vote of Security Holders ............................................................... 8

Executive Officers of the Registrant .............................................................................. 9

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters ......................................... 10

Item 6. Selected Financial Data ........................................................................................... 11

Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition ............................. 11

Item 7A. Quantitative and Qualitative Disclosures about Market Risk ....................................................... 20

Item 8. Financial Statements and Supplementary Data ....................................................................... 22

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .............................. 50

PART III

Item 10. Directors and Executive Officers of the Registrant ............................................................... 51

Item 11. Executive Compensation ........................................................................................... 51

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ................... 51

Item 13. Certain Relationships and Related Transactions ................................................................... 51

Item 14. Controls and Procedures .......................................................................................... 51

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K .................................................. 52





PART I

ITEM 1. BUSINESS

The Internet website address of EMCOR Group, Inc. ("EMCOR") is
http://www.emcorgroup.com. The Company's annual reports on Form 10-K, quarterly
reports on Forms 10-Q and current reports on Forms 8-K (and any amendments to
those reports) will be made available free of charge on or through its Internet
website as soon as reasonably practicable after such material is electronically
filed with or furnished to the Securities and Exchange Commission.

GENERAL

EMCOR is one of the largest mechanical and electrical construction and
facilities services firms in the United States, Canada, the United Kingdom and
in the world. In 2002, EMCOR had revenues of approximately $3.97 billion. EMCOR
provides services to a broad range of commercial, industrial, utility, and
institutional customers through approximately 70 principal operating
subsidiaries, joint ventures and a majority-owned interest in a limited
liability company in the United States. EMCOR has offices in 37 states and the
District of Columbia in the United States, eight provinces in Canada and ten
primary locations in the United Kingdom. In the United Arab Emirates, Saudi
Arabia and South Africa, EMCOR carries on business through joint ventures.
EMCOR's executive offices are located at 301 Merritt Seven Corporate Park,
Norwalk, Connecticut 06851-1060, and its telephone number at those offices is
(203) 849-7800.

EMCOR specializes in the design, integration, installation, start-up,
operation and maintenance of:

o Systems for generation and distribution of electrical power;

o Lighting systems;

o Low-voltage systems, such as fire alarm, security, communications and
process control systems;

o Voice and data communications systems;

o Heating, ventilation, air conditioning, refrigeration and clean-room
process ventilation systems; and

o Plumbing, process and high-purity piping systems.

EMCOR also provides services needed to support the operation of customers'
facilities, which services are not related to customers' construction programs.
These services, frequently referred to as facilities services, include
site-based operations and maintenance, mobile maintenance and service,
facilities management, remote monitoring, installation and support for building
systems, technical consulting and diagnostic services, small modification and
retrofit projects, and program development and management for energy systems.
Facilities services are provided to a wide range of commercial, industrial,
utility and institutional facilities, including those at which EMCOR provided
construction services and others at which construction services were provided by
other contractors. EMCOR's varied facilities services are frequently combined to
provide integrated service packages which include mechanical, electrical and
other services.

EMCOR provides mechanical and electrical construction services and facilities
services directly to corporations, municipalities and other governmental
entities, owners/developers and tenants of buildings. It also provides these
services indirectly by acting as a subcontractor to general contractors, systems
suppliers and other subcontractors. Worldwide, EMCOR employs approximately
26,000 people.

EMCOR's revenues are derived from many different customers in numerous
industries which have operations in several different geographical areas. Of
EMCOR's 2002 revenues, approximately 79% were generated in the United States and
approximately 21% were generated internationally. In 2002, approximately 42% of
revenues were derived from new construction projects, while the remaining 58%
were derived from renovation and retrofit of customer's existing facilities
(41%) and facilities services operations (17%). For the period 1999 through
2002, revenues and EBITDA grew at compound annual growth rates of 11.3% and
21.9%, respectively. EBITDA is not a term recognized under accounting principles
generally accepted in the United States; however, it is a common measurement
used in EMCOR's industry. EBITDA is calculated as earnings before interest,
taxes, depreciation and amortization.

On December 19, 2002, EMCOR acquired Consolidated Engineering Services, Inc.
and its subsidiaries (collectively, "CES"). CES had 2002 revenues in excess of
$400.0 million, of which $8.4 million is reflected in EMCOR's 2002 revenues, and
employs approximately 3,400 technical and service employees in over 20 states in
the Northeast, Midwest, Mid-Atlantic and Southeast regions. CES provides a broad
array of facility services to a customer base that includes pharmaceutical,
industrial, financial services and commercial companies as well as federal
government agencies. CES provides its services to approximately 9,500 facilities
comprising approximately 265 million square feet of space.

THE BUSINESS

The broad scope of EMCOR's operations are more particularly described below.


1


MECHANICAL AND ELECTRICAL CONSTRUCTION SERVICES AND FACILITIES SERVICES

EMCOR believes that the mechanical and electrical construction services and
facilities services business is highly fragmented, consisting of thousands of
small companies across the United States and around the world. Because EMCOR has
total assets, annual revenues, net worth, access to bank credit and surety
bonding, and expertise significantly greater than most of its competitors, EMCOR
believes it has a significant competitive advantage. The mechanical and
electrical construction services industry has a higher growth rate than the
overall construction industry, due principally to the increase in content and
complexity of mechanical and electrical systems in all types of projects. This
increased content and complexity is, in part, a result of the expanded use of
computers and more technologically advanced voice and data communications,
lighting, and environmental control systems in all types of facilities. For
these reasons, buildings of all types consume more electricity per square foot
than in the past and thus need more extensive electrical distribution systems.
In addition, advanced voice and data communication systems require more
sophisticated power supplies and extensive low voltage and fiber-optic
communications cabling. Moreover, the need for greater environmental controls
within a building, such as the heightened need for climate control to maintain
extensive computer systems at optimal temperatures, and the growing demand for
environmental control in individual spaces, have created expanded opportunities
for the mechanical and electrical construction services and facilities services
business.

Mechanical and electrical construction services primarily involve the design,
integration, installation and start-up of: (1) systems for the generation and
distribution of electrical power, including power cables, conduits, distribution
panels, transformers, generators, uninterruptible power supply systems and
related switch gear and controls; (2) lighting systems, including fixtures and
controls; (3) low-voltage systems, including fire alarm, security, and process
control systems; (4) voice and data communications systems, including
fiber-optic and low voltage copper cabling; (5) heating, ventilation, air
conditioning, refrigeration and clean-room process ventilation systems and (6)
plumbing, process and high-purity piping systems.

Mechanical and electrical construction services generally fall into one of
two categories: (1) large installation projects with contracts often in the
multi-million dollar range that involve construction of industrial and
commercial buildings and institutional and public works facilities or the
fit-out of large blocks of space within commercial buildings and (2) smaller
installation projects typically involving fit-out, renovation and retrofit work.

EMCOR's mechanical and electrical construction services operations accounted
for about 83% of its 2002 revenues, of which revenues approximately 51% was
related to new construction and approximately 49% was related to renovation and
retrofit projects. EMCOR provides mechanical and electrical construction
services for both large and small installation and renovation projects. Its
largest projects include those (1) for institutional use (such as water and
wastewater treatment facilities, hospitals, correctional facilities, schools and
research laboratories); (2) for industrial use (such as pharmaceutical plants,
steel, pulp and paper mills, chemical, automotive and semiconductor
manufacturing facilities, and oil refineries); (3) for transportation projects
(such as highways, airports and transit systems); (4) for commercial use (such
as office buildings, data centers, hotels, casinos, convention centers, sports
stadiums, shopping malls and resorts) and (5) for power generation and energy
management projects. EMCOR's largest projects, which typically range in size
from $10.0 million up to and occasionally exceeding $50.0 million and are
usually multi-year projects, represented about 27% of EMCOR's construction
services revenues in 2002.

EMCOR's projects of less than $10.0 million accounted for approximately 73%
of 2002 construction services revenues. These projects are typically completed
in less than a year. They usually involve mechanical and electrical construction
services when an end-user or owner undertakes construction or modification of a
facility to accommodate a specific use. These projects frequently require
mechanical and electrical systems to meet special needs such as redundant power
supply systems, special environmental controls and high-purity air systems,
sophisticated electrical and mechanical systems for data centers, including
those associated with internet service providers and electronic commerce,
trading floors in financial services businesses, new production lines in
manufacturing plants, and office arrangements in existing office buildings. They
are not usually dependent upon the new construction market. Demand for these
projects and types of services is often prompted by the expiration of leases,
changes in technology or changes in the customer's plant or office layout in the
normal course of a customer's business.

EMCOR performs its services pursuant to contracts with owners, such as
corporations, municipalities and other governmental entities, general
contractors, systems suppliers, construction managers, developers, other
subcontractors and tenants of commercial properties. Institutional and public
works projects are frequently long-term complex projects that require
significant technical and management skills and the financial strength to obtain
bid and performance bonds, which are often a condition to bidding for and
winning these projects.

EMCOR also installs and maintains street, highway, bridge and tunnel
lighting, traffic signals, computerized traffic control systems, and signal and
communication systems for mass transit systems in several metropolitan areas. In
addition, in the United States, EMCOR manufactures and installs sheet metal air
handling systems for both its own mechanical construction operations and for
unrelated mechanical contractors. EMCOR also maintains welding and pipe
fabrication shops in support of some of its own mechanical operations.


2


In the early 1990's, the market for facilities services grew rapidly in the
United Kingdom as a result of government initiatives. EMCOR's United Kingdom
subsidiary expanded its traditional technical service business in response to
these opportunities and established a dedicated unit to focus on the facilities
services business. This unit currently provides a full range of facilities
services to public and private sector customers under multi-year agreements,
including the maintenance of British Airways' facilities at Heathrow and Gatwick
Airports, GlaxoSmithKline Research Laboratories, and the Jubilee Line Extension
of the London Underground. In the United Kingdom, EMCOR also provides facilities
services at several BAE Systems manufacturing plants. In addition, the United
Kingdom operations provide on-call and mobile service support on a task-order or
contract basis, small renovation project work, and installation and maintenance
services for data communications and security systems.

EMCOR, by virtue of its construction and facilities services expertise, is
involved with private finance initiatives ("PFIs") sponsored by the British
government. The PFIs, which involve governmental bodies responsible, among other
things, for the national healthcare system, social security, air traffic
control, schools, and hospitals, seek to transfer ownership and management of
United Kingdom government facilities, including office buildings and
institutional buildings, to groups of financial institutions, consulting service
organizations, and others, which competitively bid for PFI contracts. EMCOR has
been awarded several contracts by such groups to provide mechanical and
electrical services, grounds maintenance and other ancillary services for
periods typically ranging from 5 to 35 years at buildings which were formerly
owned and managed by government bodies and privatized as part of the PFI
program. EMCOR has built on its United Kingdom experience to market its
facilities services business to international markets and currently provides
facilities services through a joint venture to several companies in South
Africa.

In 1997, EMCOR established a subsidiary to expand its facilities services
operations in North America patterned on its United Kingdom business. This unit
has built on EMCOR's traditional mechanical and electrical services operations,
facilities services activities at its mechanical and electrical contracting
subsidiaries, and EMCOR's client relationships , as well as acquisitions, to
expand the scope of services currently offered and to develop packages of
services for customers on a regional, national and global basis.

As a consequence, the Company's facility services unit presently offers a
broad range of facilities services, including maintenance and service of
mechanical and electric systems, which EMCOR has historically provided to
customers following completion of construction projects, and site-based
operations and maintenance, mobile maintenance and service, facilities
management, remote monitoring, installation and support for building systems,
technical consulting and diagnostic services, small modification and retrofit
projects, and program development and management for energy systems.

EMCOR's facilities services are provided to a wide range of commercial,
industrial and institutional facilities, including both those for which EMCOR
provided construction services and those for which construction services were
provided by others. The services are frequently bundled to provide integrated
service packages and may include services in addition to EMCOR's core mechanical
and electrical services. Services are provided from EMCOR's locations on a
mobile basis or from a customer's site by EMCOR employees assigned to the
customer premises.

These services, which generated approximately 17% of 2002 revenues, are
provided to owners, operators, tenants and managers of all types of facilities
both on a contract basis for a specified period of time and on an individual
task order basis.

EMCOR has experienced an expansion in the demand for its facilities services
which it believes is driven by customers' decisions to focus on their own core
competencies, the increasing technical complexity of their facilities and their
mechanical, electrical, voice and data and other systems, and the need for
increased reliability, especially in mechanical and electrical systems. These
trends have led to outsourcing and privatization programs whereby customers in
both the private and public sectors seek to contract out those activities that
support but are not directly associated with the customer's core business.

Illustrative of the outsourcing of companies' facilities services is a
three-year agreement, expiring June 2005, with Bank One under which EMCOR
provides comprehensive facilities management services for approximately 2,200
Bank One facilities encompassing 34 million square feet of space in 30 states;
its 4 1/2 year agreement with LAM Research, expiring December 2006 under which
EMCOR provides such services to approximately 1 million square feet of
laboratory and office space; and its three-year agreement with Mattson
Technology, Inc., expiring December 2005 under which EMCOR provides integrated
services to approximately 800,000 square feet of commercial space. In April
2000, EMCOR and CB Richard Ellis Inc., a nationwide real estate management
company, created a limited liability company, in which EMCOR has a majority
interest and principally provides operations and maintenance services to over
10,000 commercial facilities comprising approximately 30 million square feet of
space.

As noted earlier, in December 2002 EMCOR acquired CES, a facilities services
business, which generated in 2002 in excess of $400.0 million in revenues, of
which $8.4 million is reflected in EMCOR's 2002 revenues, and which provided its
services to approximately 9,500 facilities with an aggregate of approximately
265 million square feet of space. In Washington D.C., CES is the second largest
facilities services provider to the federal government behind the General
Services Administration and currently provides services to such preeminent
buildings as the National Archives and the Ronald Reagan Building, the second
largest government facility after the Pentagon. It currently provides its
services in 27 states throughout the Northeast, Midwest, Mid-Atlantic, and
Southeast. As part of its operation, CES is responsible for (i) the oversight of
all or most of a business' facility operations, including operation and

3


maintenance, (ii) the over sight of logistical processes, (iii) tenant services
and management, (iv) servicing upgrade and retrofit of HVAC, electrical,
plumbing, and industrial piping and sheet metal systems in existing facilities
and (v) diagnostic and solution engineering for building systems and their
components.

The deregulation of, and increased competition in, the utility industry,
along with government mandates calling for reduced energy consumption by
government entities, have led to renewed focus on energy costs and conservation
measures. These measures typically include energy assessments and engineering
studies, retrofit construction to implement energy savings measures, and the
implementation of energy savings measures to ensure continued performance.
Various subsidiaries of EMCOR participate in energy savings programs, such as an
energy conservation project for Washington Mutual, which evolved from the
facilities services provided by EMCOR to Washington Mutual. EMCOR believes it
has the ability to be a single source provider of construction and facilities
services required for energy assessment and for design, installation, and
operations and maintenance of energy savings measures.

The deregulation and expansion of the telecommunications industry has led to
a rapid expansion of installed infrastructure, including wireless communication
systems and long distance networks, much of which has been developed by
companies that do not have maintenance capabilities and which seek to contract
out such services. EMCOR has provided construction services for the
infrastructure of telecommunications companies and facilities services to
support their operations. In this industry, EMCOR has installed and maintained
equipment for suppliers such as Lucent, Nortel, and Siemens and has provided
construction and maintenance services to local service providers and to users
who maintain their own systems. While the construction of these facilities is at
the present time largely complete, they require on-going maintenance, and EMCOR
has agreements with several telecommunications companies to provide such
services.

EMCOR believes mechanical and electrical construction services and facilities
services activities are complementary, permitting it to offer customers a
comprehensive package of services. The ability to offer both construction and
facilities services should enhance EMCOR's competitive position with customers.
Furthermore, EMCOR's facilities services operations tend to be less cyclical
than its construction operations because facilities services are more responsive
to the needs of an industry's operational requirements rather than its
construction requirements.

COMPETITION

EMCOR believes that the mechanical and electrical construction services
business is highly fragmented and competitive. A majority of EMCOR's revenues
are derived from projects requiring competitive bids; however, an invitation to
bid is often conditioned upon prior experience, technical capability and
financial strength. EMCOR competes with national, regional and local companies,
many of which are small, owner-operated entities that operate in a limited
geographic area. However, there are a few public companies focused on providing
mechanical and electrical construction services. EMCOR is one of the largest
providers of mechanical and electrical construction services in the United
States, Canada, the United Kingdom and in the world. Competitive factors in the
mechanical and electrical construction services business include: (1) the
availability of qualified and/or licensed personnel; (2) reputation for
integrity and quality; (3) safety record; (4) cost structure; (5) relationships
with customers; (6) geographic diversity; (7) the ability to control project
costs; (8) experience in specialized markets; (9) the ability to obtain surety
bonding; (10) adequate working capital and (11) access to bank credit.

While the facilities services business is also highly fragmented, a number of
large corporations such as Johnson Controls, Inc., Fluor Corp., Siemens, Trammel
Crow and Jones Lang LaSalle are engaged in this field. EMCOR's facilities
services operations are being expanded both through organic growth and
acquisitions.

EMPLOYEES

EMCOR presently employs approximately 26,000 people, approximately 65% of
whom are represented by various unions pursuant to more than 450 collective
bargaining agreements between EMCOR's individual subsidiaries and local unions.
EMCOR believes that its employee relations are generally good. None of these
collective bargaining agreements are national or regional in scope.

BACKLOG

EMCOR had contract backlog as of December 31, 2002 of approximately $2.9
billion, compared with backlog of approximately $2.4 billion as of December 31,
2001. Backlog is not a term recognized under accounting principles generally
accepted in the United States; however, it is a common measurement used in
EMCOR's industry. Backlog includes the unrecognized revenue on construction
contracts plus facilities services revenues to be derived during the immediately
succeeding 12 months pursuant to then existing contracts. Backlog increased by
$0.5 billion as of December 31, 2002 compared to December 31, 2001. Backlog
attributable to United States construction and facilities services increased
approximately $0.4 billion as of December 31, 2002 (primarily attributable to
companies acquired during 2002), when compared to December 31, 2001, and backlog
attributable to Canada and United Kingdom construction and facilities services
increased approximately $0.1 billion as of December 31, 2002, when compared to
December 31, 2001. For the year ended December 31, 2002, EMCOR had approximately
$3.97 billion in revenues compared to approximately $3.42 billion in revenues
for the year ended December 31, 2001.


4


ITEM 2. PROPERTIES

The operations of EMCOR are conducted primarily in leased properties. The
following table lists major facilities, both leased and owned:



LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------- ----------------

CORPORATE HEADQUARTERS
301 Merritt Seven Corporate Park
Norwalk, Connecticut .............................. 32,500 10/31/09
OPERATING FACILITIES
4050 Cotton Center Boulevard
Phoenix, Arizona .................................. 9,704 3/30/06
1200 North Sickles Drive
Tempe, Arizona .................................... 29,000 Owned
1000 N. Kraemer Place
Anaheim, California ............................... 24,384 8/14/12
3208 Landco Drive
Bakersfield, California ........................... 49,875 6/30/07
1166 Fesler Street
El Cajun, California .............................. 42,760 8/31/10
25601 Clawiter Road
Hayward, California ............................... 34,800 6/30/03
24041 Amador Street
Hayward, California ............................... 40,000 10/31/11
5 Vanderbilt
Irvine, California ................................ 18,000 7/31/04
4462 Corporate Center Drive
Los Alamitos, California .......................... 57,863 7/31/06
825 Howe Road
Martinez, California .............................. 109,800 12/31/07
4464 Alvarado Canyon Road
San Diego, California ............................. 40,000 10/31/07
9505 and 9525 Chesapeake Drive
San Diego, California ............................. 25,124 12/31/06
414 Brannan Street
San Francisco, California ......................... 10,283 3/31/03
4405 and 4420 Race Street
Denver, Colorado .................................. 17,704 9/30/11
345 Sheridan Boulevard
Lakewood, Colorado ................................ 63,000 Owned
367 and 377 Research Parkway
Meriden, Connecticut .............................. 27,700 7/31/04
1781 N.W. North River Drive
Miami, Florida .................................... 11,285 Owned
5801 Miami Lakes Drive
Miami Lakes, Florida .............................. 10,000 5/31/03
3145 Northwoods Parkway
Norcross, Georgia ................................. 25,808 1/31/06
400 Lake Ridge Drive
Smyrna, Georgia ................................... 30,000 9/30/12
7614 and 7720 Opportunity Drive
Fort Wayne, Indiana ............................... 136,695 10/31/08



5




LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------- ----------------

2655 Garfield Road
Highland, Indiana ................................ 45,816 6/30/06
5124-5128 W. 79th Street
Indianapolis, Indiana ............................ 12,600 9/30/06
2600 N. Ninth Street Road
Lafayette, Indiana ............................... 13,798 10/31/08
2160 North Asland Avenue
Chicago, Illinois ................................ 67,000 6/30/05
2100 South York Road
Oak Brook, Illinois .............................. 87,700 5/31/08
1406 Cardinal Court
Urbana, Illinois ................................. 33,750 10/01/07
3100 Brinkerhoff Road
Kansas City, Kansas .............................. 42,836 11/30/05
3125 Brinkerhoff Road
Kansas City, Kansas .............................. 22,676 Owned
631 Pecan Circle
Manhattan, Kansas ................................ 22,750 8/31/03
2118 Wittary
Wichita, Kansas .................................. 25,600 8/31/07
300 Walnut Street
Owensboro, Kentucky .............................. 20,600 1/07/04
4530 Hollins Ferry Road
Baltimore, Maryland .............................. 26,792 Owned
645 A-F & 647 A & B Lofstrand Lane
Rockville, Maryland .............................. 10,600 2/28/05
643 Lofstrand Lane
Rockville, Maryland .............................. 15,000 2/28/05
306 Northern Avenue
Boston, Massachusetts ............................ 47,456 6/30/05
200 Old Colony Way
Boston, Massachusetts ............................ 11,500 3/31/05
70-70D Hawes Way
Stoughton, Massachusetts ......................... 24,400 12/31/05
80 Hawes Way
Stoughton, Massachusetts ......................... 36,000 12/31/12
1743 Maplelawn
Troy, Michigan ................................... 22,000 4/30/06
6060 Hix Road
Westland, Michigan ............................... 23,000 12/31/03
3555 W. Oquendo Road
Las Vegas, Nevada ................................ 90,000 11/30/03
6325 South Valley Boulevard
Las Vegas, Nevada ................................ 23,190 12/31/04
6754 W. Washington Avenue
Pleasantville, New Jersey ........................ 45,400 1/14/04
348 New Country Road
Secaucus, New Jersey ............................. 37,905 12/31/07



6




LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------- ----------------

26 West Street
Brooklyn, New York .............................. 15,000 Owned
24-37 46th Street
Brooklyn, New York .............................. 10,000 1/31/07
301 and 305 Suburban Avenue
Deer Park, New York ............................. 33,535 3/31/05
111-01 and 109-15 14th Avenue
Long Island City, New York ...................... 82,000 2/28/11
111 West 19th Street
New York, New York .............................. 26,885 5/31/03
Two Penn Plaza
New York, New York .............................. 57,200 2/01/06
704 Clinton Avenue South
Rochester, New York ............................. 25,000 7/31/04
8740 Reading Road and
10-15 West Vorhees Street
Cincinnati, Ohio ................................ 25,500 6/30/05
2300-2310 International Street
Columbus, Ohio .................................. 25,500 10/31/05
700 Gracern Road
Columbia, South Carolina ........................ 11,850 2/28/07
4067 New Getwell Road
Memphis, Tennessee .............................. 36,000 8/28/07
6936 Commerce Avenue
El Paso, Texas .................................. 18,028 1/31/07
5550 Airline Drive
Houston, Texas .................................. 78,483 12/31/09
515 Norwood Road
Houston, Texas .................................. 26,676 12/31/09
1574 South West Temple
Salt Lake City, Utah ............................ 64,170 12/31/06
320 23rd Street
Arlington, Virginia ............................. 45,284 3/6/10
22930 Shaw Road
Dulles, Virginia ................................ 32,600 7/31/06
2925-2941 Space Road
Richmond, Virginia .............................. 26,000 8/19/03
109-D Executive Drive
Dulles, Virginia ................................ 19,000 8/31/04
6950 Gisholt Drive
Madison, Wisconsin .............................. 32,000 5/30/09
1 Thameside Centre
Kew Bridge Road
Kew Bridge, Middlesex, United Kingdom ........... 14,000 12/22/12
86 Talbot Road
Old Trafford, Manchester, United Kingdom ........ 24,300 12/24/06
2116 Logan Avenue
Winnipeg, Manitoba, Canada ...................... 19,800 Owned
3455 Landmark Boulevard
Burlington, Ontario, Canada ..................... 16,100 Owned



7


EMCOR believes that all of its property, plant and equipment are well
maintained, in good operating condition and suitable for the purposes for which
they are used.

See Note K -- Commitments and Contingencies of the notes to consolidated
financial statements for additional information regarding lease costs. EMCOR
utilizes substantially all of its leased or owned facilities and believes there
will be no difficulty either in negotiating the renewal of its real property
leases as they expire or in finding alternative space, if necessary.

ITEM 3. LEGAL PROCEEDINGS

In February 1995, as part of an investigation by the New York County District
Attorney's office into the business affairs of a general contractor that did
business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a search
warrant was executed at Forest's executive offices. On July 12, 2000, Forest was
served with a Subpoena Duces Tecum to produce certain documents as part of a
broader investigation by the New York County District Attorney's office into
illegal business practices in the New York City construction industry. Forest
has been informed by the New York County District Attorney's office that it and
certain of its officers are targets of the investigation. Forest has produced
documents in response to the subpoena and intends to cooperate fully with the
District Attorney's office investigation as it proceeds.

In December 2001, the Company's Canadian subsidiary Comstock Canada Limited
("Comstock") commenced an action against Atomic Energy of Canada Limited
("AECL") claiming approximately Cdn. $6.0 million in connection with Comstock's
work on two medical isotope nuclear reactors and associated works at AECL's
facility at Chalk River, Ontario. Comstock's claim is for holdback, unpaid
change requests, loss of productivity and extended duration costs. AECL has
filed an amended defense denying Comstock's claim and counterclaimed against
Comstock for Cdn. $47.0 million claiming fraud and substantial deficiencies in
Comstock's performance of work which are alleged to have resulted in the need to
replace much of Comstock's work and installed materials and the need to redesign
and reinstall various components of the reactor systems. These deficiencies are
alleged to have caused a significant delay in AECL's ability to obtain the
necessary certifications for operation of the systems. There has been no
document exchange or discoveries in this litigation. The Company believes it has
good and meritorious defenses to the AECL counterclaim.

In August 2002, the Company's subsidiary Heritage Air Systems, Inc,
("Heritage") was added as one of twenty-one defendants named in a civil action
pending in the United States District Court for the Eastern District of New York
by a competitor under the Sherman Act, 15 U.S.C. Sections 1 & 2, the Clayton
Act, 15 U.S.C. Section 15 & 26, The Labor Management Relations Act, 29 U.S.C.
Section 187 (a), and New York state law. Plaintiff, Cool Wind Ventilation Corp.,
alleges a conspiracy in restraint of trade and a monopoly in the sheet metal
duct industry in New York City and Long Island. Specifically, the plaintiff
alleges that the defendant Sheet Metal Workers International Association Local
No. 28 ("Local 28"), certain other trade unions, contractors, including
Heritage, building owners and building managers violated federal antitrust and
federal labor laws by entering into agreements whereby Local 28 would engage in,
and to threaten to engage in, localized and widespread picketing and work
stoppages at job sites where plaintiff or other non-Local 28 contractors were
working in order to compel mechanical contractors to stop or change the way they
did business with plaintiff and other non-Local 28 contractors. As a result of
the alleged conspiracy, plaintiff alleges that it and others were prevented from
competing in the most lucrative area of the sheet metal ductwork industry.
Plaintiff claims judgment for treble the damages it believes it sustained and
which it estimates to be no less than $50.0 million. Heritage answered the
amended complaint, denying all claims of wrongdoing. Discovery continued in the
matter until December 2002 when the action was stayed voluntarily to permit
settlement discussions. In January 2003, the District Court entered an order
dismissing the amended complaint, without prejudice, after it was advised an
agreement in principle settling the matter had been reached by the parties. That
agreement in principle does not require Heritage to pay any damages or desist
from engaging in any of the conduct alleged in the amended complaint.

EMCOR is involved in other proceedings in which damages and claims have been
asserted against it. EMCOR believes it has a number of valid defenses to such
proceedings and claims and intends to vigorously defend itself and does not
believe that a significant liability will result.

Inasmuch as the proceedings and claims in which EMCOR is involved range from
a few thousand dollars to $50.0 million, the outcome of which cannot be
predicted, adverse results could have a material adverse effect on EMCOR's
financial position and/or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


8


EXECUTIVE OFFICERS OF THE REGISTRANT

FRANK T. MACINNIS, Age 56; Chairman of the Board and Chief Executive Officer
of the Company since April 1994 and President of the Company from April 1994 to
April 1997. From April 1990 to April 1994, Mr. MacInnis served as President and
Chief Executive Officer, and from August 1990 to April 1994 as Chairman of the
Board, of Comstock Group, Inc., a nationwide electrical contracting company.
From 1986 to April 1990, Mr. MacInnis was Senior Vice President and Chief
Financial Officer of Comstock Group, Inc. In addition, from 1986 to April 1994,
Mr. MacInnis was also President of Spie Group Inc., which had interests in
Comstock Group, Inc., Spie Construction Inc., a Canadian pipeline construction
company, and Spie Horizontal Drilling Inc., a U.S. company engaged in
underground drilling for the installation of pipelines and communications cable.

JEFFREY M. LEVY, Age 50; President of the Company since April 1997 and Chief
Operating Officer of the Company since February 1994, Executive Vice President
of the Company from November 1994 to April 1997, Senior Vice President of the
Company from December 1993 to November 1994. From May 1992 to December 1993, Mr.
Levy was President and Chief Executive Officer of the Company's subsidiary EMCOR
Mechanical/Electrical Services (East) Inc. From January 1991 to May 1992, Mr.
Levy served as Executive Vice President and Chief Operating Officer of Lehrer
McGovern Bovis, Inc., a construction management and construction company.

SHELDON I. CAMMAKER, Age 63; Executive Vice President and General Counsel of
the Company since September 1987 and Secretary of the Company since May 1997.
Prior to September 1987, Mr. Cammaker was a senior partner of the New York City
law firm of Botein, Hays, & Sklar.

LEICLE E. CHESSER, Age 56; Executive Vice President and Chief Financial
Officer of the Company since May 1994. From April 1990 to May 1994, Mr. Chesser
served as Executive Vice President and Chief Financial Officer of Comstock
Group, Inc., and from 1986 to May 1994, Mr. Chesser was also Executive Vice
President and Chief Financial Officer of Spie Group, Inc.

R. KEVIN MATZ, Age 44; Vice President and Treasurer of the Company since
April 1996 and Staff Vice President - Financial Services of the Company from
March 1993 to April 1996. From March 1991 to March 1993, Mr. Matz was Treasurer
of Sprague Technologies Inc., a manufacturer of electronic components.

MARK A. POMPA, Age 38; Vice President and Controller of the Company since
September 1994.


9


PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

MARKET INFORMATION. EMCOR's common stock trades on the New York Stock
Exchange under the symbol "EME".

The following table sets forth high and low sales prices for the common stock
for the periods indicated as reported by the New York Stock Exchange:

2002 HIGH LOW
---- ------ ------
First Quarter .............................. $59.71 $43.87
Second Quarter ............................. $64.35 $51.91
Third Quarter .............................. $60.80 $45.20
Fourth Quarter ............................. $58.15 $44.71

2001 HIGH LOW
---- ------ ------
First Quarter .............................. $31.42 $23.75
Second Quarter ............................. $45.98 $29.87
Third Quarter .............................. $45.20 $30.60
Fourth Quarter ............................. $49.14 $31.74

HOLDERS. As of February 19, 2003, there were 130 shareholders of record and,
as of that date, EMCOR estimates there were approximately 3,800 beneficial
owners holding stock in nominee or "street" name.

DIVIDENDS. EMCOR did not pay dividends on its common stock during 2002 or
2001, and it does not anticipate that it will pay dividends on its common stock
in the foreseeable future. EMCOR's working capital credit facility limits the
payment of dividends on its common stock.


10


ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data has been derived from audited financial
statements and should be read in conjunction with the consolidated financial
statements, the related notes thereto and the report of independent auditors and
the report of independent public accountants thereon included elsewhere in this
and in previously filed annual reports on Form 10-K of EMCOR.

INCOME STATEMENT DATA
(In thousands, except per share data)



YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------

Revenues ................................................. $3,968,051 $3,419,854 $3,460,204 $2,893,962 $2,210,374
Gross profit ............................................. 482,634 391,823 357,817 295,907 223,287
Operating income ......................................... 114,425 88,682 78,925 58,091 37,224
Income before extraordinary item ......................... 62,902 50,012 40,089 27,821 17,092
Extraordinary item -- loss on early
extinguishment of debt, net of income taxes ............ -- -- -- -- (4,777)
---------- ---------- ---------- ---------- ----------
Net income ............................................... $ 62,902 $ 50,012 $ 40,089 $ 27,821 $ 12,315
---------- ---------- ---------- ---------- ----------
Basic earnings per share:
Income before extraordinary item ......................... $ 4.23 $ 3.86 $ 3.84 $ 2.86 $ 1.67
Extraordinary item-- loss on early
extinguishment of debt, net of income taxes ............ -- -- -- -- (0.47)
---------- ---------- ---------- ---------- ----------
Basic earnings per share ................................. $ 4.23 $ 3.86 $ 3.84 $ 2.86 $ 1.20
========== ========== ========== ========== ==========
Diluted earnings per share:
Income before extraordinary item ......................... $ 4.07 $ 3.40 $ 2.95 $ 2.21 $ 1.46
Extraordinary item-- loss on early
extinguishment of debt, net of income taxes ............ -- -- -- -- (0.35)
---------- ---------- ---------- ---------- ----------
Diluted earnings per share ............................... $ 4.07 $ 3.40 $ 2.95 $ 2.21 $ 1.11
========== ========== ========== ========== ==========


BALANCE SHEET DATA
(In thousands)



AS OF DECEMBER 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------

Stockholders' equity (a) ................................. $ 489,870 $ 421,933 $ 233,503 $ 170,249 $ 119,816
Total assets ............................................. $1,758,491 $1,349,664 $1,261,864 $1,052,246 $ 801,002
Goodwill ................................................. $ 290,412 $ 56,011 $ 67,625 $ 68,009 $ 22,745
Notes payable ............................................ $ 21,815 $ 573 $ -- $ 1,150 $ 8,314
Borrowings under working capital credit lines ............ $ 112,000 $ -- $ -- $ -- $ --
Other long-term debt, including current maturities ....... $ 1,015 $ 973 $ 116,056 $ 116,534 $ 116,086
Capital lease obligations ................................ $ 351 $ 249 $ 573 $ 554 $ 837


- -----------
(a) No cash dividends on EMCOR's common stock have been paid during the past
five years.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

HIGHLIGHTS

Revenues for the year ended December 31, 2002 were $3.97 billion, compared to
$3.42 billion and $3.46 billion for the years ended December 31, 2001 and 2000,
respectively. Net income was $62.9 million for 2002, an increase of $12.9
million, or 25.8%, from $50.0 million for 2001. For 2000, net income was $40.1
million. Diluted earnings per share on net income were $4.07 per share for 2002,
compared to $3.40 per share for 2001 and $2.95 per share for 2000.

On March 1, 2002, EMCOR acquired from Comfort Systems USA, Inc. (the
"Seller") a group of companies (the "Acquired Comfort Companies"). Accordingly,
the Consolidated Results of Operations for EMCOR for the year ended December 31,
2002 include the results of operations for the Acquired Comfort Companies since
March 1, 2002. The purchase price paid for a 100% voting interest of the
Acquired Comfort Companies was $186.25 million and was comprised of $164.15
million in cash and $22.1 million by assumption of Seller's notes payable to
former owners of certain of the Acquired Comfort Companies. Pursuant to the
terms of the acquisition agreement, an addi-


11


tional $7.1 million of cash purchase price was paid by EMCOR to Seller
subsequent to the acquisition date due to an increase in net assets of the
Acquired Comfort Companies between the closing date and an agreed upon
preclosing date. The acquisition was funded with $121.25 million of EMCOR's
funds and $50.0 million from borrowings under EMCOR's revolving credit facility.
The Acquired Comfort Companies, which are based predominantly in the Midwest
United States and New Jersey, are active in the installation and maintenance of
mechanical system and the design and installation of process and fire protection
systems. Services are provided to a broad range of businesses, including food
processing, pharmaceutical and manufacturing/distribution.

On December 19, 2002, EMCOR acquired all the capital stock of Consolidated
Engineering Services, Inc. ("CES") from Archstone-Smith Operating Trust and
others. CES primarily provides a broad array of facility services including
comprehensive facilities management, site-based operations and maintenance,
mobile maintenance and services, remote monitoring, technical consulting and
diagnostic services, and the installation and support for building systems. The
purchase price paid for CES was $178.0 million, of which $156.0 million was paid
from borrowings under EMCOR's revolving credit facility and $22.0 million from
EMCOR's funds. The purchase price is subject to adjustment based on the
difference between the net assets of CES on the closing date and an agreed upon
preclosing date.

EMCOR acquired two additional companies during 2002 for which EMCOR paid an
aggregate of $3.4 million.

OPERATING SEGMENTS

EMCOR's business consists of the following operating segments: United States
electrical construction and facilities services, United States mechanical
construction and facilities services, United States other services, Canada
construction and facilities services, United Kingdom construction and facilities
services and Other international construction and facilities services. The
segment "United States other services" principally consists of those operations
which provide consulting and maintenance services, and "Other international
construction and facilities services" consists of EMCOR's operations outside of
the United States, Canada, and the United Kingdom (primarily South Africa, the
Middle East and Western Europe) performing electrical construction, mechanical
construction and facilities services.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The consolidated financial statements are based on the application of
significant accounting policies, which require management to make significant
estimates and assumptions. EMCOR's significant accounting policies are described
in Note B -- Summary of Significant Accounting Policies of the notes to
consolidated financial statements included in Item 8 of this Form 10-K. There
was no initial adoption of any accounting policies during 2002 other than those
listed under "New Accounting Pronouncements" below. EMCOR believes that some of
the more critical judgment areas in the application of accounting policies that
affect the financial condition and results of operations are: the impact of
changes in the estimates and judgments pertaining to (a) revenue recognition
from (i) long term construction contracts for which the percentage of completion
method of accounting is used and (ii) services contracts, (b) collectibility or
valuation of accounts receivable, (c) insurance liabilities, (d) income taxes
and (e) intangible assets.

REVENUE RECOGNITION FOR LONG-TERM CONSTRUCTION CONTRACTS AND SERVICES CONTRACTS

EMCOR believes its most critical accounting policy is revenue recognition
from long-term construction contracts for which EMCOR uses the
percentage-of-completion method of accounting. Percentage-of-completion
accounting is the prescribed method of accounting for long-term contracts in
accordance with accounting principles generally accepted in the United States,
Statement of Position No. 81-1, "Accounting for Performance of Construction --
Type and Certain Production -- Type Contracts" and, accordingly, the method used
for revenue recognition within EMCOR's industry. Percentage-of-completion for
each contract is measured principally by the ratio of costs incurred to date for
each contract to the estimated total costs for each contract at completion.
Certain of EMCOR's electrical contracting business units measure
percentage-of-completion by the percentage of labor costs incurred to date for
each contract to the estimated total labor costs for such contract. Provisions
for the entirety of estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Application of
percentage-of-completion accounting results in the recognition of costs and
estimated earnings in excess of billings on uncompleted contracts in its
consolidated balance sheets. Costs and estimated earnings in excess of billings
on uncompleted contracts reflected on the consolidated balance sheets arise when
revenues have been recognized but the amounts cannot be billed under the terms
of contracts. Such amounts are recoverable from customers upon various measures
of performance, including achievement of certain milestones, completion of
specified units or completion of a contract. Costs and estimated earnings in
excess of billings on uncompleted contracts also include amounts EMCOR seeks or
will seek to collect from customers or others for errors or changes in contract
specifications or design, contract change orders in dispute or unapproved as to
both scope and price, or other customer-related causes of unanticipated
additional contract costs. Such amounts are recorded at estimated net realizable
value and take into account factors that may affect the ability to bill and
collect amounts billed. Due to uncertainties inherent within estimates employed
to apply percentage-of-completion accounting, estimates may be revised as
project work progresses. Application of percentage-of-completion accounting
requires that the impact of those revised estimates be reported in the
consolidated financial statements prospectively.

12


In addition to revenue recognition for long-term construction contracts,
EMCOR recognizes revenues from services contracts as these services are
performed in accordance with Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). There are two basic types of
services contracts: 1) fixed price services contracts which are signed in
advance for maintenance, repair and retrofit work over periods typically ranging
from one to three years (for which there may be EMCOR employees on the
customer's site full time) and 2) services contracts not signed in advance for
similar maintenance, repair and retrofit work on an as needed basis. Fixed price
services contracts are generally performed evenly over the contract period, and
accordingly, revenue is recognized on a pro-rata basis over the life of the
contract. Revenues derived from other services contracts are recognized when the
services are performed in accordance with SAB 101. Expenses related to all
service contracts are recognized as services are provided.

ACCOUNTS RECEIVABLE

EMCOR is required to estimate the collectibility of accounts receivable. A
considerable amount of judgment is required in assessing the realization of
receivables, which assessment factors include the creditworthiness of the
customer, EMCOR's prior collection history with the customer and related aging
of the past due balances. The provisions for bad debts during 2002, 2001, and
2000 amounted to approximately $3.4 million, $2.9 million and $6.4 million,
respectively. At December 31, 2002 and 2001, accounts receivable of $965.0
million and $777.1 million, respectively, included allowances of $40.6 million
and $35.1 million, respectively. Specific accounts receivable are evaluated when
EMCOR believes a customer may not be able to meet its financial obligations due
to a deterioration of its financial condition, credit ratings or bankruptcy. The
allowance requirements are based on the best facts available and are
re-evaluated and adjusted as additional information is received.

INSURANCE LIABILITIES

EMCOR has deductibles for certain workers' compensation, auto liability,
general liability and property claims, has self-insured retentions for certain
other casualty claims, and is self-insured for employee-related health care
claims. Losses are recorded based upon estimates of the liability for claims
incurred and an estimate of claims incurred but not reported. The liabilities
are derived from known facts, historical trends and industry averages utilizing
the assistance of an actuary to determine the best estimate of these
obligations. EMCOR believes its liabilities for these obligations are adequate.
However, such obligations are difficult to assess and estimate due to numerous
factors, including severity of injury, determination of liability in proportion
to other parties, timely reporting of occurrences and effectiveness of safety
and risk management programs. Therefore, if actual experience differs from the
assumptions and estimates used for recording the liabilities, adjustments may be
required and would be recorded in the period that the experience becomes known.

INCOME TAXES

EMCOR has net deferred tax assets primarily resulting from deductible
temporary differences, which will reduce taxable income in future periods. A
valuation allowance is required when it is more likely than not that all or a
portion of a deferred tax asset will not be realized. As of December 31, 2002
and 2001, the total valuation allowance on net deferred tax assets was
approximately $2.1 million and $3.6 million, respectively.

INTANGIBLE ASSETS

As of December 31, 2002, EMCOR had goodwill and net identifiable intangible
assets of $290.4 million and $13.8 million, respectively, in connection with the
acquisition of certain companies. The determination of related estimated useful
lives for identifiable intangible assets and whether those assets are impaired
involves significant judgments based upon short and long-term projections of
future performance. Certain of these forecasts reflect assumptions regarding the
ability to successfully integrate acquired companies. Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("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 identifiable intangible
assets other than goodwill to be amortized over their useful lives unless these
lives are determined to be indefinite. Changes in strategy and/or market
conditions may result in adjustments to recorded intangible asset balances. As
of December 31, 2002, no indicators of impairment of its goodwill or
identifiable intangible assets existed after EMCOR's initial and first annual
impairment review in accordance with the provisions of SFAS 142. See Note B --
Summary of Significant Accounting Policies of the notes to consolidated
financial statements for additional discussion of the provisions of SFAS 142.

DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

REVENUES

Revenues for the year ended December 31, 2002 increased 16.0% to $3.97
billion compared to $3.42 billion of revenues for 2001. The $548.2 million
increase in revenues for 2002 when compared to 2001 was primarily due to
revenues of $502.6 million from companies acquired in 2002 and to increased
revenues in the United States other services, Canada and the United Kingdom
segments of $27.0 million, $118.1 million and $70.3 million, respectively.
Partially offsetting this increase was a reduction, when compared to 2001, of
rev-

13


venues related to "fast-track" (projects with accelerated time tables earlier
than typical contracts for similar projects) telecom and other contracts, as
well as a shift to larger longer-term projects which typically result in revenue
being recognized over a longer period of time. Revenues for 2001 of $3.42
billion represented a 1.2% decrease over revenues of $3.46 billion for 2000. The
$40.3 million decrease in revenues for 2001 compared to 2000 was primarily due
to reduced fast-track data center construction in the New York, Chicago,
Washington D. C. and California markets, as well as a reduced level of activity
in the Las Vegas and Ohio markets and in Canada. The decrease was partially
offset by growth in revenues associated with energy generation projects and
transportation infrastructure construction on the United States west and east
coasts and revenue growth from various operations in the Boston area market.

The following table presents EMCOR's revenues by operating segment and the
approximate percentages of total revenues for the years ended December 31, 2002,
2001 and 2000 (in millions, except for percentages):



% OF % OF % OF
2002 TOTAL 2001 TOTAL 2000 TOTAL
-------- ----- -------- ----- -------- -----

Revenues:
United States electrical construction and facilities services $1,152.4 29% $1,334.7 39% $1,350.7 39%
United States mechanical construction and facilities services 1,728.7 44% 1,202.1 35% 1,262.1 36%
United States other services 236.7 6% 209.7 6% 163.9 5%
-------- -------- --------
Total United States operations 3,117.8 79% 2,746.5 80% 2,776.7 80%
Canada construction and facilities services 316.3 8% 198.2 6% 237.0 7%
United Kingdom construction and facilities services 533.9 13% 463.6 14% 446.2 13%
Other international construction and facilities services -- -- 11.6 -- 0.3 --
-------- -------- --------
Total worldwide operations $3,968.0 100% $3,419.9 100% $3,460.2 100%
======== === ======== === ======== ===


Revenues for EMCOR's United States electrical construction and facilities
services segment for 2002 decreased by $182.3 million compared to 2001. The
decrease in revenues was primarily due to a reduction in fast-track telecom and
other contracts in 2002 compared to the prior year. During 2002, transportation
infrastructure work increased and energy generation work remained steady
compared to the prior year. The $16.0 million, or 1.2%, decrease in 2001
revenues attributable to this segment compared to 2000 was due to reduced levels
of fast-track data center and commercial construction in the New York, Chicago,
Washington D. C. and California markets, as well as reduced levels of activity
in the Las Vegas and Ohio markets. The decrease was partially offset by
increases in revenues associated with energy generation and transportation
infrastructure construction markets on the west and east coasts and increased
revenues from various activities in the Salt Lake City market.

United States mechanical construction and facilities services revenues
increased in 2002 by $526.6 million, or 43.8% when compared to 2001. This
increase in revenues was primarily attributable to $488.5 million of revenues
from the Acquired Comfort Companies and growth in revenues in the northern
California market. These increases were partially offset by decreased revenues
as a result of the performance of fewer fast-track contracts. A $60.0 million,
or 4.8%, decrease in revenues for 2001 compared to 2000 was due to reduced
fast-track data center construction, reduced levels of activity in the Las Vegas
and Denver markets and planned reductions in operations at EMCOR's Poole & Kent
subsidiary operations in the North and South Carolina markets. The decrease in
revenues was partially offset by increased revenues associated with energy
generation construction on the west and east coasts and increased revenues from
the Boston area market.

United States other services revenues, which include those operations that
principally provide consulting and maintenance services, increased by $27.0
million, or 12.9%, for 2002 compared to 2001. The increase in revenues was
attributable primarily to an increase in facilities services contracts and, to a
lesser extent, to revenues from the acquisition of CES, partially offset by a
decline in telecommunications related work. Revenues for 2001 increased by $45.8
million compared to 2000. The increase in revenues was primarily attributable to
an increase in maintenance services provided to customers.

Revenues of Canada construction and facilities services increased by $118.1
million, or 59.6%, for 2002 as compared to 2001 revenues. The increase in
revenues was primarily attributable to the performance of work on certain
long-term contracts. The $38.8 million, or 16.4%, decrease in revenues for 2001
compared with 2000 was attributable to project start date delays in Eastern
Canada and a reduction of revenues in Western Canada due to timing of
anticipated projects.

United Kingdom construction and facilities services revenues increased $70.3
million, or 15.2%, for 2002 compared to 2001 revenues principally due to growth
in the facilities services market, offsetting a decline in the overall
construction market. The decline in the overall construction market principally
resulted in fewer attractive bid opportunities, and thereby caused EMCOR to be
more selective in submitting project bids. Construction revenues for 2002 do not
include revenues from certain multi-year rail projects that were awarded in 2002
which will produce revenues in future periods. The $17.4 million, or 3.9%,
increase in 2001 revenues compared with 2000 revenues was principally due to
growth in construction and facilities markets in the United Kingdom during the
first half of 2001.


14


Other international construction and facilities services revenues primarily
consist of EMCOR's operations in the Middle East, South Africa and Europe.
Revenues from those operations were zero for 2002, $11.6 million for 2001 and
$0.3 million for 2000. All of the 2002 projects in these markets are being
performed by joint ventures. The results of these joint venture operations are
accounted for under the equity method of accounting because EMCOR has less than
majority ownership in foreign joint ventures, and, accordingly, revenues
attributable to such joint ventures are not reflected as revenues in the
consolidated financial statements. In 2001, certain European projects were
performed entirely by EMCOR subsidiaries and therefore, revenues were recorded.
EMCOR continues to pursue new business selectively in these markets; however,
the availability of opportunities has been significantly reduced as a result of
local economic factors, particularly in the Middle East.

COST OF SALES AND GROSS PROFIT

The following table presents EMCOR's cost of sales, gross profit, and gross
profit as a percentage of revenues, for the years ended December 31, 2002, 2001
and 2000 (in millions, except for percentages):

2002 2001 2000
-------- -------- --------
Cost of sales .............................. $3,485.4 $3,028.0 $3,102.4
Gross profit ............................... $ 482.6 $ 391.8 $ 357.8
Gross profit as a percentage of revenues ... 12.2% 11.5% 10.3%

Gross profit increased $90.8 million, or 23.2%, for 2002 compared to 2001.
Gross profit as a percentage of revenues was 12.2% for 2002 compared to 11.5%
for 2001. The increase in gross profit was primarily due to gross profit of
$81.2 million earned by companies acquired in 2002. The increase in gross profit
of $9.6 million attributable to EMCOR's other subsidiaries was due to the type
and location of construction and facilities services contracts performed,
efficient deployment of local labor, effective procurement of materials and
focus on risk management programs. The increase in gross profit as a percentage
of revenues was principally attributable to the Acquired Comfort Companies and
their higher gross profit as a percentage of sales in 2002 as compared to EMCOR
in 2001, as well as improvements for gross margin in EMCOR's other subsidiaries.
Gross profit increased $34.0 million, or 9.5%, for 2001 compared to 2000, and
gross profit as a percentage of revenues increased to 11.5% for 2001 compared
with 10.3% for 2000. The dollar increase in gross profit, as well as the
increase in gross profit as a percentage of revenues, were primarily due to an
increase in gross profits realized due to the type and location of construction
and facilities services contracts performed and continued improvement in project
management.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The following table presents EMCOR's selling, general and administrative
expenses, and selling, general and administrative expenses as a percentage of
revenues, for the years ended December 31, 2002, 2001 and 2000 (in millions,
except for percentages):



2002 2001 2000
------ ------ ------

Selling, general and administrative expenses ................................... $368.2 $303.1 $278.9
Selling, general and administrative expenses as a percentage of revenues........ 9.3% 8.9% 8.1%


Selling, general and administrative expenses increased $65.1 million, or
21.5%, between 2002 and 2001. As a percentage of revenues, total selling,
general and administrative expenses increased to 9.3% in 2002 as compared to
8.9% in 2001. The dollar increase and increase in expenses as a percentage of
revenues during 2002 compared to 2001 was primarily attributable to $61.0
million of expenses of companies acquired in 2002 and increased variable
selling, general and administrative expenses in certain markets, which increased
expenses were partially offset by a $5.5 million reduction in goodwill
amortization expense as goodwill is no longer required to be amortized per SFAS
142. Selling, general and administrative expenses increased $24.2 million, or
8.7%, between 2001 and 2000. As a percentage of revenues, total selling, general
and administrative expenses increased to 8.9% in 2001 as compared to 8.1% in
2000. This dollar increase and increase in expenses as a percentage of revenues
during 2001 as compared to 2000 was primarily attributable to the type and
location of construction and facilities services contracts performed, increased
variable overhead costs associated with marketing and business development
efforts and expansion of information technology infrastructure support. Goodwill
amortization expense for the year ended December 31, 2002 and 2001 was zero and
$5.5 million, respectively. Amortization expense of certain identifiable
intangible assets associated with the Acquired Comfort Companies was $0.8
million for the year ended December 31, 2002.


15


OPERATING INCOME

The following table presents EMCOR's operating income, and operating income
as a percentage of segment revenues, for the years ended December 31, 2002, 2001
and 2000 (in millions, except for percentages):



% OF % OF % OF
SEGMENT SEGMENT SEGMENT
2002 REVENUES 2001 REVENUES 2000 REVENUES
------ -------- ------ -------- ------ --------

Operating income (loss):
United States electrical construction and facilities services $ 78.9 6.8% $ 75.3 5.6% $ 58.6 4.3%
United States mechanical construction and facilities services 60.3 3.5% 41.4 3.4% 35.9 2.8%
United States other services 3.3 1.4% (7.2) -- (5.5) --
------ ------ ------
Total United States operations 142.5 4.6% 109.5 4.0% 89.0 3.2%
Canada construction and facilities services 3.3 1.0% 2.3 1.2% 5.2 2.2%
United Kingdom construction and facilities services 0.0 -- 7.2 1.6% 6.0 1.3%
Other international construction and facilities services (0.1) -- (1.2) -- 0.5 --
Corporate administration (31.3) -- (29.1) -- (21.8) --
------ ------ ------
Total worldwide operations 114.4 2.9% 88.7 2.6% 78.9 2.3%
Other corporate items:
Interest expense (4.1) (4.8) (9.7)
Interest income 2.0 5.6 2.4
------ ------ ------
Income before taxes $112.3 $ 89.5 $ 71.6
====== ====== ======


Operating income increased for the United States electrical construction and
facilities services operations for 2002 compared to 2001. The dollar increase in
operating income for 2002 of $3.6 million, or 4.8%, as compared to 2001, and the
related increase as a percentage of revenues, was primarily attributable to the
increased activity from increased transportation infrastructure and continuing
energy generation construction projects on the west coast, the successful
completion and settlement of several contracts and increased operating income
attributable to various commercial and industrial projects in the San Diego, Las
Vegas, Washington D.C. and Denver markets offset, in part, by a reduction in
fast-track data center construction work across other markets. Operating income
for 2001 for the United States electrical construction and facilities services
operations increased $16.7 million, or 28.5%, from 2000 levels. The increase in
operating income, and operating income, as a percentage of revenues, for 2001
versus 2000 was attributable to an increase in operations associated with
transportation infrastructure and power plant construction contracts on the west
and east coasts, and increased levels of activity in the Salt Lake City market.
This increase in operating income was partially offset by reduced levels of
fast-track data center construction projects in the San Francisco, Washington
D.C. and Denver markets and the decrease in construction activity in the Las
Vegas market.

United States mechanical construction and facilities services operating
income increased $18.9 million for 2002, a 45.7% increase over 2001. This
increase in dollars and increase as a percentage of revenues was primarily due
to (i) operating income from the Acquired Comfort Companies of $19.7 million,
(ii) operating income associated with power plant construction contracts on the
west coast and (iii) improved results at the Poole & Kent subsidiary operations
which had losses in the prior year. The increases were partially offset by
reduced operating income attributable to fewer fast-track contracts in the 2002
than the prior year. Operating income for 2001 compared to 2000 increased $5.5
million, or 15.3%, and as a percentage of revenues increased to 3.4% from 2.8%,
primarily due to (i) increased energy generation construction projects on the
west and east coasts, partially offset by a reduction in construction projects
in the Las Vegas market and (ii) reduced losses at certain Poole & Kent
subsidiaries compared to the prior year.

United States other services operating income was $3.3 million for 2002
compared to operating losses of $7.2 million for 2001. The increase in operating
profit was primarily attributable to new facilities services contracts and a
decrease in selling, general and administrative expenses as the facilities
services operations became more established and thus required less overhead
spending relating to the development of new business. The contribution to 2002
operating income by CES, which was acquired on December 19, 2002, was not
material. Operating losses in this segment for 2001 compared to 2000 increased
by $1.7 million primarily due to costs associated with the continued development
of the consulting operations and maintenance services activities of EMCOR.

Canada construction and facilities services operating income increased by
$1.0 million for 2002 compared to 2001 principally due to increased work on
longer-term contracts that result in profit recognition over an extended time
period, partially offset by a reduction in the number of fast-track type
contracts. For 2001 compared to 2000, operating income decreased by $2.9 million
principally due to project start date delays in Eastern Canada for certain
projects in backlog and a reduction of revenues in Western Canada due to the
timing of anticipated projects.


16


United Kingdom construction and facilities services operating income
decreased by $7.2 million for 2002 compared to 2001. The decrease in operating
income was primarily attributable to unfavorable settlements and closeouts of
certain construction projects completed during the year. During 2002 the
facilities services business continued to realize increased revenues and
operating income while the construction activities have slowed since 2001. For
2001, operating income increased by $1.2 million as compared to 2000. This
increase was primarily attributable to growth in construction and facilities
markets in the United Kingdom during the first half of 2001.

Other international construction and facilities services operating losses
were $0.1 million for 2002 compared to operating losses of $1.2 million in 2001
and operating income of $0.5 million in 2000. EMCOR continues to pursue new
business selectively in the Middle Eastern, South African and European markets;
however, the availability of opportunities has been significantly reduced as a
result of local economic factors, particularly in the Middle East.

General corporate expenses for 2002 increased by $2.2 million from 2001
levels, and increased by $7.3 million between 2001 and 2000. The increase in
general corporate expenses was primarily due to the expansion of operations
support activities such as information technology infrastructure, human
resources and communications in order to meet the level of service expected by
clients and manage the increased number of operations due to acquisitions. Costs
associated with the integration of companies acquired during 2002 were
approximately $0.5 million of the $2.2 million increase from 2001 to 2002.

Interest expense decreased by $0.7 million in 2002 compared to 2001
principally due to the conversion of $115.0 million of EMCOR's 5.75% Convertible
Subordinated Notes into approximately 4.2 million shares of EMCOR common stock
in the second quarter of 2001. For the same reason, interest expense decreased
by $4.9 million in 2001 compared to 2000.

Interest income decreased by $3.6 million in 2002 compared with 2001.
Interest income increased by $3.2 million in 2001 compared to 2000. The decrease
in interest income for 2002 compared to 2001 was due to a reduction in cash on
hand in 2002 related to cash used for acquisitions and repayment of borrowings
related to the acquisitions, and to lower interest rates.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents EMCOR's net cash provided by (used in) operating
activities, investing activities and financing activities for the years ended
December 31, 2002 and 2001 (in millions):

2002 2001
------- ------
Net cash provided by operating activities ........... $ 154.7 $ 81.1
Net cash used in investing activities ............... $(364.8) $(31.2)
Net cash provided by financing activities ........... $ 113.4 $ 2.2

The Company's consolidated cash balance decreased by $96.7 million from
$189.8 million at December 31, 2001 to $93.1 million at December 31, 2002
primarily due to the use of cash for the acquisition of the Acquired Comfort
Companies and CES, partially offset by net cash provided by operating
activities. Net cash provided by operating activities for 2002 was $154.7
million, an increase of $73.6 million from $81.1 million for 2001. The cash
provided by operating activities in 2002 was primarily due to increased net
income, increased accounts payable, increased accrued expenses and decreased
accounts receivable, partially offset by increased contracts in progress, net.
Net cash used in investing activities in 2002 of $364.8 million consisted
primarily of payments of an aggregate of $334.7 million for acquisitions in 2002
and earn-out payments of $8.6 million for acquisitions in prior periods, net
disbursement for other investments of $7.7 million and $15.6 million for the
purchase of property, plant and equipment. This activity compares to net cash
used in investing activities for 2001 of $17.9 million for the purchase of
property, plant and equipment, $8.8 million for payments for acquisitions and
related earn-out agreements for prior year acquisitions and net disbursements
for other investments of $6.5 million. Net cash provided by financing activities
for 2002 of $113.4 million was primarily attributable to borrowings under
working capital credit lines used to finance the CES acquisition in December
2002 and proceeds from the exercise of stock options, offset by a reduction due
to net repayments of long-term debt and capital lease payments.


17


The following is a summary of EMCOR's material contractual obligations and
other commercial commitments (in millions):



PAYMENTS DUE BY PERIOD
---------------------------------------------------------------------
LESS
CONTRACTUAL THAN 1-3 4-5 AFTER
OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS
----------- ----- ------ ------ ------ -------

Notes payable ......................................... $ 21.8 $ 21.8 $ -- $ -- $ --
Other long-term debt .................................. 1.0 0.3 0.2 0.2 0.3
Capital lease obligations ............................. 0.4 0.2 0.2 -- --
Operating leases ...................................... 141.9 38.6 55.1 25.9 22.3
Open purchase obligations (1).......................... 340.4 293.1 35.3 12.0 --
Other long-term obligations (2) ....................... 87.8 -- 87.8 -- --
------ ------ ------ ------ ------
Total Contractual Obligations ......................... $593.3 $354.0 $178.6 $ 38.1 $ 22.6
====== ====== ====== ====== ======

AMOUNT OF COMMITMENT EXPIRATION BY PERIOD
----------------------------------------------------------------------
TOTAL LESS
OTHER COMMERCIAL AMOUNTS THAN 1-3 4-5 AFTER
COMMITMENTS COMMITTED 1 YEAR YEARS YEARS 5 YEARS
---------------- --------- ------ ----- ----- -------

Revolving Credit Facility (3) ..................... $112.0 $ -- $ -- $112.0 $ --
Letters of credit ................................. 39.9 12.0 1.3 1.3 25.3
Guarantees ........................................ 25.0 -- -- -- 25.0
------ ------ ----- ------ ------
Total Commercial Commitments ...................... $176.9 $ 12.0 $ 1.3 $113.3 $ 50.3
====== ====== ===== ====== ======


- -----------
(1) Represent open purchase orders for material and subcontracting costs related
to the Company's construction and service contracts. These purchase orders are
not reflected in EMCOR's consolidated balance sheet and should not impact future
cash flows as amounts will be recovered through customer billings.
(2) Represent primarily insurance related liabilities, the timing for which
payments beyond one year is not practical to estimate.
(3) EMCOR classifies these borrowings as short-term on its consolidated balance
sheet because of EMCOR's intent and ability to repay the amounts on a short-term
basis.

On September 26, 2002, EMCOR entered into a new $275.0 million five year
revolving credit agreement (the "Revolving Credit Facility"). The Revolving
Credit Facility, which replaced a credit facility entered into on December 22,
1998 (the "1998 Credit Facility"), is guaranteed by certain direct and indirect
subsidiaries of EMCOR, is secured by substantially all of the assets of EMCOR
and most of its subsidiaries, and provides for borrowings in the form of
revolving loans and letters of credit. The Revolving Credit Facility contains
various covenants requiring, among other things, maintenance of certain
financial ratios and certain restrictions with respect to cumulative aggregate
payments for dividends, common stock repurchases, investments, acquisitions,
indebtedness and capital expenditures. A commitment fee is payable on the
average daily unused amount of the Revolving Credit Facility. The fee ranges
from 0.3% to 0.5% of the unused amount, based on certain financial tests. Loans
under the Revolving Credit Facility bear interest at (1) a rate which is the
prime commercial lending rate announced by Harris Trust and Savings Bank from
time to time (4.25% at December 31, 2002) plus 0% to 1.0%, based on certain
financial tests or (2) at a LIBOR rate (1.38% at December 31, 2002) plus 1.5% to
2.5% based on certain financial tests. The interest rates in effect at December
31, 2002 were 4.25% and 2.88%, respectively. Letter of credit fees issued under
this facility range from 0.75% to 2.5% and are charged based on the type of
letter of credit issued and certain financial tests. As of December 31, 2002 and
2001, EMCOR had approximately $39.9 million and $20.5 million of letters of
credit outstanding, respectively. EMCOR had borrowings of $112.0 million
outstanding under the Revolving Credit Facility at December 31, 2002. No
revolving loans were outstanding under the 1998 Credit Facility at December 31,
2001.

In August 2001, the Company's Canadian subsidiary, Comstock Canada Ltd.,
renewed a credit agreement with a bank providing for an overdraft facility of up
to Cdn. $0.5 million. The facility is secured by a standby letter of credit and
provides for interest at the bank's prime rate (4.0% at December 31, 2002).
There were no borrowings outstanding under this credit agreement at December 31,
2002 or 2001.

A subsidiary of EMCOR has guaranteed indebtedness of a venture in which it
has a 40% interest; the other venture partner, Baltimore Gas and Electric, has a
60% interest. The venture designs, constructs, owns, operates, leases and
maintains facilities to produce chilled water for sale to customers for use in
cooling. These guarantees are not expected to have a material effect on EMCOR's
financial position or results of operations. Each of the venturers is jointly
and severally liable, in the event of default, for the venture's $25.0 million
borrowing due December 2031. During September 2002, each venture partner
contributed equity to the venture, of which EMCOR's contribution was $14.0
million.

There are $22.3 million in current maturities of EMCOR's long-term debt and
capital lease obligations as of December 31, 2002. $21.8 million of this amount
relates to notes payable to former owners of the Acquired Comfort Companies,
which were assumed in connection with the acquisition. These notes accrue
interest at an annual rate of 10% and are payable in April 2003.

EMCOR is contingently liable to sureties in respect of performance and
payment bonds issued by sureties, usually at the request of customers in
connection with construction projects which secure EMCOR payment and performance
obligations under contracts for such projects. In addition, at the request of
unions representing EMCOR employees, bonds are provided to secure such
obligations for wages and benefits payable to or for such employees. As of
December 31, 2002, sureties had issued bonds for the account of EMCOR in the


18


aggregate amount of approximately $1.3 billion. To the extent such bonds were
for the benefit of customers (as opposed to unions), they related to over 675
construction projects. The bonds are issued by EMCOR's sureties in return for a
premium which varies depending on the size of the bonds. The individual amounts
for bonded projects range up to $170.0 million. EMCOR has agreed to indemnify
the sureties for any payments made by them in respect of bonds.

On March 18, 1998, EMCOR sold, pursuant to an underwritten public offering,
$115.0 million principal amount of 5.75% Convertible Subordinated Notes. During
the second quarter of 2001, EMCOR called its 5.75% Convertible Subordinated
Notes for redemption. As a consequence, all of the Convertible Subordinated
Notes were converted into approximately 4.2 million shares of EMCOR common
stock.

EMCOR does not have any other material financial guarantees or off-balance
sheet arrangements other than those discussed herein.

The primary source of liquidity for EMCOR has been, and is expected to
continue to be, cash generated by operating activities. EMCOR also maintains a
revolving credit facility that may be utilized, among other things, to meet
short-term liquidity needs in the event cash generated by operating activities
is insufficient, or to enable EMCOR to seize opportunities to participate in
joint ventures or to make acquisitions that may require access to cash on short
notice or for any other reason. EMCOR may also increase liquidity through an
equity offering or other debt instruments. Short-term changes in macroeconomic
trends may have an effect, positively or negatively, on liquidity. In order to
manage through these uncertainties, EMCOR generally will not borrow funds to the
maximum amounts allowable and, therefore, should have the capacity to borrow
funds, if necessary, to meet short-term requirements. In addition to managing
borrowings, EMCOR's focus on the facilities services market is intended to
provide an additional buffer against economic downturns as the facilities
services market is characterized by annual and multi-year contracts that provide
a more predictable stream of cash flows than the construction market. The
acquisition of CES in December 2002, which is primarily facilities services
market focused, is part of EMCOR's plan to grow its services business.
Short-term liquidity is also impacted by the type and length of construction
contracts in place. During economic downturns, such as the 2001 through 2002
period, construction contracts trended away from short-cycle contracts toward
larger longer-term infrastructure and public sector contracts. Performance of
longer duration contracts usually requires higher upfront cash requirements
until billings can occur in accordance with contractual provisions. While EMCOR
strives to maintain a net over-billed position with its customers, there can be
no assurance that the net over-billed position can be maintained. EMCOR's net
over-billings, defined as the balance sheet accounts cost and estimated earnings
in excess of billings on uncompleted contracts less billings in excess of costs
and estimated earnings on uncompleted contracts, was $127.3 million and $97.9
million as of December 31, 2002 and 2001.

Long-term liquidity requirements can be expected to be met through cash
generated from operating activities, the Revolving Credit Facility, and the sale
of various secured or unsecured debt and/or equity interests in the public and
private markets. Based upon EMCOR's current credit ratings and financial
position, EMCOR can reasonably expect to be able to issue long-term debt
instruments and/or equity. For example, in September 2002, EMCOR was able to
increase its capacity to borrow under credit facilities from $150.0 million to
$275.0 million. Over the long term, EMCOR's primary revenue risk factor
continues to be the level of demand for non-residential construction services,
which is in turn influenced by macroeconomic trends including interest rates and
governmental economic policy. In order to provide protection against demand
cycles in private sector construction services, EMCOR has increased its
participation, and its backlog of contracts, in the public sector and in the
facilities services market.

EMCOR believes that current cash balances and borrowing capacity available
under existing lines of credit or other forms of financing available through
debt or equity offerings, 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. However, EMCOR is
a party to several lawsuits and other proceedings in which other parties seek to
recover from it amounts ranging from a few thousand dollars to $50.0 million. If
EMCOR was required to pay damages in one or more such proceedings, such payments
could have a material adverse effect on its cash flow and/or earnings.

CERTAIN INSURANCE MATTERS

As of December 31, 2002, EMCOR was utilizing approximately $24.5 million of
letters of credit obtained under its Revolving Credit Facility as collateral for
its insurance obligations.

NEW ACCOUNTING PRONOUNCEMENTS

In May 2002, the FASB issued Statement of Financial Accounting Standards No.
145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB
Statement No. 13 and Technical Corrections" which is effective for fiscal years
beginning after May 15, 2002. This statement, among other matters, provides
guidance with respect to the accounting for gain or loss on capital leases that
were modified to become operating leases. The statement also eliminates the
requirement that gains or losses on the early extinguishment of debt be
classified as extraordinary items and provides guidance when the gain or loss on
the early retirement of debt should or should not be reflected as an
extraordinary item.


19


In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." This
statement requires that costs associated with terminating employees or contracts
or closing or relocating facilities are to be recognized at fair value at the
time the liability is incurred. The Company does not anticipate that this
statement will have an effect on its financial statements when it becomes
effective for disposal activities initiated after December 31, 2002.

In November 2002, the FASB issued Financial Accounting Standards Board
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, an
interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB
Interpretation No. 34" ("FIN 45" or the "Interpretation"). FIN 45 clarifies the
requirements of FASB Statement No. 5, "Accounting for Contingencies," relating
to the guarantor's accounting for, and disclosure of, the issuance of certain
types of guarantees. FIN 45 requires that upon issuance of a guarantee, the
entity (i.e., the guarantor) must recognize a liability for the fair value of
the obligation it assumes under that guarantee. The disclosure provisions of the
Interpretations are effective for financial statements of interim or annual
periods that end after December 15, 2002. The Interpretation's provisions for
initial recognition and measurement should be applied on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. The guarantor's previous accounting for guarantees
that were issued before the date of FIN 45's initial application may not be
revised or restated to reflect the effect of the recognition and measurement
provisions of the Interpretation. EMCOR has guarantees that will be subject to
the accounting and disclosure provisions of the Interpretation, and therefore,
adoption of FIN 45 may impact disclosures in the first quarter of its next
fiscal year. EMCOR is currently evaluating the recognition and measurement
impacts of adoption.

In January 2003, the FASB issued Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure"
("SFAS 148"). SFAS 148 amends FASB Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements of the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. SFAS 148 was effective for fiscal years beginning after December 15,
2002 and was adopted by EMCOR for all periods presented. EMCOR did not change to
the fair value based method of accounting for stock-based employee compensation;
and therefore, adoption of SFAS 148 will impact only future disclosures, not the
financial results, of EMCOR.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

EMCOR has not used derivative financial instruments for any purpose during
the years ended December 31, 2002 and 2001, including trading or speculating on
changes in interest rates, or commodity prices of materials used in its
business.

EMCOR is exposed to market risk for changes in interest rates for borrowings
under its Revolving Credit Facility. Borrowings under the credit facility bear
interest at variable rates, and the fair value of this borrowing is not
significantly affected by changes in market interest rates. As of December 31,
2002, there was $112.0 million of borrowings outstanding under the Revolving
Credit Facility, and these borrowings bear interest at (1) a rate which is the
prime commercial lending rate announced by Harris Trust and Savings Bank from
time to time (4.25% at December 31, 2002) plus 0% to 1.0%, based on certain
financial tests or (2) at a LIBOR rate (1.38% at December 31, 2002) plus 1.5% to
2.5% based on certain financial tests. Based on the borrowings outstanding of
$112.0 million, if interest rates were to increase by 1.0%, the net of tax
interest expense would increase $0.7 million in the next twelve months.
Conversely, if interest rates were to decrease by 1.0%, interest expense would
decrease by $0.7 million in the next 12 months. The Revolving Credit Facility
expires in September 2007. There is no guarantee that EMCOR will be able to
renew the agreement at its expiration.

EMCOR is also exposed to market risk and its potential related impact on
accounts receivable or costs and estimated earnings in excess of billings on
uncompleted contracts. The amounts recorded may be at risk if customers' ability
to settle these obligations is negatively impacted by economic conditions. EMCOR
continually monitors the credit worthiness of its customers and maintains
on-going discussions with customers regarding contract status with respect to
change orders and billing terms. Therefore, EMCOR believes it takes appropriate
action to manage market and other risks, but there is no assurance that it will
be able to reasonably identify all risks with respect to collectibility of these
assets. Refer also to the previous discussion of Accounts Receivable under the
heading, "Application of Critical Accounting Policies."


20


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 (loss), a
component of stockholders' equity, in the consolidated balance sheets. EMCOR
believes the exposure to the effects that fluctuating foreign currencies may
have on the consolidated results of operations is limited because the foreign
operations primarily invoice customers and collect obligations in their
respective local currencies. Additionally, the cost of revenues associated with
these transactions is generally contracted and paid for in their same local
currencies.

THIS ANNUAL REPORT ON FORM 10-K 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, 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.


21


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

EMCOR GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



DECEMBER 31,
---------------------------
2002 2001
---------- ----------
ASSETS

Current assets:
Cash and cash equivalents ...................................................................... $ 93,103 $ 189,766
Accounts receivable, less allowance for doubtful accounts of $40,611
and $35,091, respectively .................................................................... 964,968 777,102
Costs and estimated earnings in excess of billings on uncompleted contracts .................... 235,809 221,272
Inventories .................................................................................... 12,271 7,158
Prepaid expenses and other ..................................................................... 28,784 22,026
---------- ----------
Total current assets ........................................................................... 1,334,935 1,217,324
Investments, notes and other long-term receivables ............................................... 24,642 16,817
Property, plant and equipment, net ............................................................... 70,750 42,548
Goodwill ......................................................................................... 290,412 56,011
Identifiable intangible assets, less accumulated amortization of $755 ............................ 13,845 --
Other assets ..................................................................................... 23,907 16,964
---------- ----------
Total assets ..................................................................................... $1,758,491 $1,349,664
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Borrowings under working capital credit line ................................................... $ 112,000 $ --
Current maturities of long-term debt and capital lease obligations ............................. 22,276 947
Accounts payable ............................................................................... 409,562 313,227
Billings in excess of costs and estimated earnings on uncompleted contracts .................... 363,092 319,165
Accrued payroll and benefits ................................................................... 159,416 121,196
Other accrued expenses and liabilities ......................................................... 113,529 99,726
---------- ----------
Total current liabilities .................................................................... 1,179,875 854,261
Long-term debt and capital lease obligations ..................................................... 905 848
Other long-term obligations ...................................................................... 87,841 72,622
---------- ----------
Total liabilities ................................................................................ 1,268,621 927,731
---------- ----------
Stockholders' equity:
Preferred stock, $0.10 par value, 1,000,000 shares authorized, zero issued and outstanding ....... -- --
Common stock, $0.01 par value, 30,000,000 shares authorized, 16,050,862 and
15,945,699 shares issued, respectively ......................................................... 161 159
Capital surplus .................................................................................. 312,393 307,636
Accumulated other comprehensive loss ............................................................. (5,148) (5,424)
Retained earnings ................................................................................ 199,300 136,398
Treasury stock, at cost, 1,131,985 shares ........................................................ (16,836) (16,836)
---------- ----------
Total stockholders' equity ....................................................................... 489,870 421,933
---------- ----------
Total liabilities and stockholders' equity ....................................................... $1,758,491 $1,349,664
========== ==========


The accompanying notes to consolidated financial statements
are an integral part of these statements.


22


EMCOR GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)



2002 2001 2000
---------- ---------- ----------

Revenues ......................................................... $3,968,051 $3,419,854 $3,460,204
Cost of sales .................................................... 3,485,417 3,028,031 3,102,387
---------- ---------- ----------
Gross profit ..................................................... 482,634 391,823 357,817
Selling, general and administrative expenses ..................... 368,209 303,141 278,892
---------- ---------- ----------
Operating income ................................................. 114,425 88,682 78,925
Interest expense ................................................. (4,096) (4,795) (9,705)
Interest income .................................................. 1,997 5,587 2,367
---------- ---------- ----------
Income before income taxes ....................................... 112,326 89,474 71,587
Income tax provision ............................................. 49,424 39,462 31,498
---------- ---------- ----------
Net income ....................................................... $ 62,902 $ 50,012 $ 40,089
========== ========== ==========

Basic earnings per share ......................................... $ 4.23 $ 3.86 $ 3.84
========== ========== ==========

Diluted earnings per share ....................................... $ 4.07 $ 3.40 $ 2.95
========== ========== ==========


The accompanying notes to consolidated financial statements are
an integral part of these statements.


23


EMCOR GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)



2002 2001 2000
-------- -------- --------

Cash flows from operating activities:
Net income ................................................................................ $ 62,902 $ 50,012 $ 40,089
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ........................................................... 15,371 12,694 11,483
Amortization of goodwill ................................................................ -- 5,506 4,618
Amortization of identifiable intangible assets .......................................... 755 -- --
Provision for doubtful accounts ......................................................... 3,354 2,856 6,419
Deferred income taxes ................................................................... 7,432 3,725 --
Non-cash expense for amortization of debt issuance costs ................................ 630 890 1,236
Non-cash expense for Restricted Stock Units ............................................. 557 1,132 --
Non-cash interest expense for converted subordinated notes .............................. -- 1,239 --
Provision in lieu of income taxes ....................................................... -- 21,425 24,422
-------- -------- --------
91,001 99,479 88,267
Change in operating assets and liabilities excluding effect of businesses
acquired:
Decrease (increase) in accounts receivable .............................................. 28,464 48,974 (118,629)
(Increase) decrease in inventories and contracts in progress, net ....................... (14,174) (59,217) 76,376
Increase (decrease) in accounts payable ................................................. 32,653 (52,337) 22,222
Increase in accrued payroll and benefits and other accrued expenses and liabilities ..... 14,860 47,836 19,533
Changes in other assets and liabilities, net ............................................ 1,893 (3,644) 3,667
-------- -------- --------
Net cash provided by operating activities ................................................. 154,697 81,091 91,436
-------- -------- --------
Cash flows from investing activities:
Proceeds from sales of assets ........................................................... 1,819 1,925 2,765
Purchase of property, plant and equipment ............................................... (15,585) (17,939) (16,698)
Payments for acquisitions of businesses and related earn-out agreements ................. (343,358) (8,750) (4,234)
Net (disbursements) proceeds from other investments ..................................... (7,679) (6,453) 7,047
-------- -------- --------
Net cash used in investing activities ..................................................... (364,803) (31,217) (11,120)
-------- -------- --------
Cash flows from financing activities:
Proceeds from working capital credit lines .............................................. 248,000 -- 722,829
Repayments of working capital credit lines .............................................. (136,000) -- (722,829)
Borrowings for long-term debt ........................................................... 70 2,930 5,114
Repayments for long-term debt ........................................................... (1,100) (2,761) (6,686)
Net repayments for capital lease obligations ............................................ (34) (26) (37)
Net proceeds from exercise of stock options ............................................. 2,507 2,064 426
-------- -------- --------
Net cash provided by (used in) financing activities ....................................... 113,443 2,207 (1,183)
-------- -------- --------
(Decrease) increase in cash and cash equivalents .......................................... (96,663) 52,081 79,133
Cash and cash equivalents at beginning of year ............................................ 189,766 137,685 58,552
-------- -------- --------
Cash and cash equivalents at end of year .................................................. $ 93,103 $189,766 $137,685
======== ======== ========


The accompanying notes to consolidated financial statements are
an integral part of these statements.


24


EMCOR GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
(IN THOUSANDS)



TOTAL ACCUMULATED
STOCK- OTHER
HOLDERS' COMMON CAPITAL COMPREHENSIVE RETAINED TREASURY COMPREHENSIVE
EQUITY STOCK SURPLUS INCOME (LOSS)(1) EARNINGS STOCK INCOME
-------- ------ -------- --------------- -------- -------- ------------

Balance, December 31, 1999 ............... $170,249 $ 117 $142,894 $(2,223) $ 46,297 $(16,836)
Net income ............................. 40,089 -- -- -- 40,089 -- $40,089
Foreign currency translation
adjustments ......................... (1,683) -- -- (1,683) -- -- (1,683)
-------
Comprehensive income ................... -- -- -- -- -- -- $38,406
=======
Provision in lieu of income
taxes ............................... 24,422 -- 24,422 -- -- --
Common stock issued under
stock option plans .................. 426 -- 426 -- -- --
-------- ------ -------- ------- -------- --------
Balance, December 31, 2000 ............... 233,503 117 167,742 (3,906) 86,386 (16,836)
Net income ............................. 50,012 -- -- -- 50,012 -- $50,012
Foreign currency translation
adjustments ......................... (1,518) -- -- (1,518) -- -- (1,518)
-------
Comprehensive income ................... -- -- -- -- -- -- $48,494
=======
Provision in lieu of income
taxes................................ 21,425 -- 21,425 -- -- --
Common stock issued under
stock option plans .................. 2,063 -- 2,063 -- -- --
Conversion of 5.75%
Convertible Subordinated
Notes (2) ........................... 113,874 42 113,832 -- -- --
Value of Restricted Stock Units (3) .... 2,574 -- 2,574 -- -- --
-------- ------ -------- ------- -------- --------
Balance, December 31, 2001 ............... 421,933 159 307,636 (5,424) 136,398 (16,836)
Net income ............................ 62,902 -- -- -- 62,902 -- $62,902
Foreign currency translation
adjustments ......................... 3,725 -- -- 3,725 -- -- 3,725
Pension plan additional
minimum liability, net of
tax benefit of $1.9 million ......... (3,449) -- -- (3,449) -- -- (3,449)
-------
Comprehensive income................... -- -- -- -- -- -- $63,178
=======
Common stock issued under
stock option plans .................. 2,507 2 2,505 -- -- --
Value of Restricted Stock
Units (3) ........................... 2,252 -- 2,252 -- -- --
-------- ------ -------- ------- -------- --------
Balance, December 31, 2002 ............... $489,870 $ 161 $312,393 $(5,148) $199,300 $(16,836)
======== ====== ======== ======= ======== ========


- -----------
(1) Represents cumulative foreign currency translation and minimum pension
liability adjustments.
(2) Represents conversion of $115.0 million 5.75% convertible subordinated notes
into common stock, net of related interest and deferred financing costs.
(3) Shares of common stock will be issued in respect of restricted stock units.
This amount represents the value of restricted stock units at the date of
grant plus the related compensation expense in the current year due to an
increase in market value of the underlying common stock. As of October 2002,
the terms of the restricted stock unit plan were changed resulting in fixed
plan accounting after the grant date from the date of this change for both
existing and new grants.

The accompanying notes to the consolidated financial statements are
an integral part of these statements.


25


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A -- NATURE OF OPERATIONS

EMCOR Group, Inc., a Delaware corporation, and subsidiaries (collectively
"EMCOR") is one of the largest mechanical and electrical construction and
facilities services firms in the United States, Canada, the United Kingdom and
in the world. EMCOR specializes in the design, integration and installation and
start-up of: (1) systems for the generation and distribution of electrical
power, including power cables, conduits, distribution panels, transformers,
generators, uninterruptible power supply systems and related switch gear and
controls; (2) lighting systems, including fixtures and controls; (3) low-voltage
systems, including fire alarm, security, and process control systems; (4) voice
and data communications systems, including fiber-optic and low voltage copper
cabling; (5) heating, ventilation, air conditioning, refrigeration and
clean-room process ventilation systems and (6) plumbing, process and high-purity
piping systems. EMCOR provides mechanical and electrical construction services
and facilities services directly to corporations, municipalities and other
governmental entities, owners/developers and tenants of buildings. It also
provides these services indirectly by acting as a subcontractor to general
contractors, systems suppliers and other subcontractors. Mechanical and
electrical construction services generally fall into one of two categories: (1)
large installation projects with contracts often in the multi-million dollar
range that involve construction of industrial and commercial buildings and
institutional and public works facilities or the fit-out of large blocks of
space within commercial buildings and (2) smaller installation projects
typically involving fit-out, renovation and retrofit work. In addition, EMCOR
provides services needed to support a customer's facilities not related to
construction projects. These services, frequently referred to as facilities
services, include site-based operations and maintenance, mobile maintenance and
service, facilities management, remote monitoring, small modification and
retrofit projects, technical consulting and diagnostic services, installation
and support for building systems, and program development and management for
energy systems. These services are provided to a wide range of commercial,
industrial, and institutional buildings including facilities at which EMCOR
provided construction services and at which construction services were provided
by others. Facilities services are frequently bundled to provide integrated
service packages and may include services in addition to EMCOR's core mechanical
and electrical services.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of EMCOR and its
majority-owned subsidiaries. Significant intercompany accounts and transactions
have been eliminated. All investments over which EMCOR exercises significant
influence, but does not control (a 20% to 50% ownership interest), are accounted
for using the equity method of accounting.

The results of operations for the year ended December 31, 2002 include, from
the respective dates of acquisition, the results of a group of companies (the
"Acquired Comfort Companies") acquired from Comfort Systems USA, Inc. ("Seller")
on March 1, 2002 and the results of Consolidated Engineering Services, Inc.
("CES") acquired on December 19, 2002.

PRINCIPLES OF PREPARATION

The preparation of the consolidated financial statements, in conformity with
accounting principles generally accepted in the United States, requires EMCOR to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Reclassifications of prior years data have been made in the accompanying
consolidated financial statements where appropriate to conform to the current
presentation.

REVENUE RECOGNITION

Revenues from long-term construction contracts are recognized on the
percentage-of-completion method. Percentage-of-completion is measured
principally by the percentage of costs incurred to date for each contract to the
estimated total costs for each contract at completion. Certain of EMCOR's
electrical contracting business units measure percentage-of-completion by the
percentage of labor costs incurred to date for each contract to the estimated
total labor costs for such contract. Revenues from services contracts are
recognized as services are provided. There are two basic types of services
contracts; 1) fixed price facility services contracts which are signed in
advance for maintenance, repair and retrofit work over periods typically ranging
from one to three years (for which there may be EMCOR employees on the
customer's site full time) and 2) services contracts not signed in advance for
similar maintenance, repair and retrofit work on an as needed basis. Fixed price
services contracts are generally performed evenly over the contract period, and
accordingly, revenue is recognized on a pro-rata basis over the life of the
contract. Revenues derived from other services contracts are recognized when the
services are performed in accordance with Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements." Expenses related to services
contracts are recognized as services are provided.


26


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Provisions for estimated losses on uncompleted long-term contracts are made
in the period in which such losses are determined. In the case of customer
change orders for uncompleted long-term construction contracts, estimated
recoveries are included for work performed in forecasting ultimate profitability
on certain contracts. Due to uncertainties inherent in the estimation process,
it is reasonably possible that completion costs, including those arising from
contract penalty provisions and final contract settlements, will be revised in
the near-term. Such revisions to costs and income are recognized in the period
in which the revisions are determined.

COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed under
the terms of the contracts. Such amounts are recoverable from customers upon
various measures of performance, including achievement of certain milestones,
completion of specified units or completion of the contract.

Also included in costs and estimated earnings on uncompleted contracts are
amounts EMCOR seeks or will seek to collect from customers or others for errors
or changes in contract specifications or design, contract change orders in
dispute or unapproved as to scope or price, or other customer-related causes of
unanticipated additional contract costs (claims and unapproved change orders).
These amounts are recorded at their estimated net realizable value when
realization is probable and can be reasonably estimated. No profit is recognized
on the construction costs incurred in connection with these amounts. Claims and
unapproved change orders made by EMCOR involve negotiation and, in certain
cases, litigation. In the event litigation costs are incurred by EMCOR in
connection with claims or unapproved change orders, such litigation costs are
expensed as incurred, although EMCOR may seek to recover these costs. EMCOR
believes that it has established legal basis for pursuing recovery of recorded
unapproved change orders and claims, and it is management's intention to pursue
and litigate such claims, if necessary, until a decision or settlement is
reached. Unapproved change orders and claims also involve the use of estimates,
and it is reasonably possible that revisions to the estimated recoverable
amounts of recorded claims may be made in the near-term. If EMCOR does not
successfully resolve these matters, an expense may be required, in addition to
amounts that have been previously provided for. Claims against EMCOR are
recognized when a loss is considered probable and amounts are reasonably
determinable.

Costs and estimated earnings on uncompleted contracts and related amounts
billed as of December 31, 2002 and 2001 were as follows (in thousands):

2002 2001
---------- ----------
Costs incurred on uncompleted contracts ........ $7,022,638 $4,779,515
Estimated earnings ............................. 604,732 485,394
---------- ----------
7,627,370 5,264,909
Less: billings to date ......................... 7,754,653 5,362,802
---------- ----------
$ (127,283) $ (97,893)
========== ==========

Such amounts were included in the accompanying Consolidated Balance Sheets at
December 31, 2002 and 2001 under the following captions (in thousands):

2002 2001
--------- ---------
Costs and estimated earnings in excess of
billings on uncompleted contracts ............. $ 235,809 $ 221,272
Billings in excess of costs and estimated
earnings on uncompleted contracts .............. (363,092) (319,165)
--------- ---------
$(127,283) $( 97,893)
========= =========

As of December 31, 2002, costs and estimated earnings in excess of billings
on uncompleted contracts included unbilled revenues for unapproved change orders
of approximately $35.9 million and claims of approximately $53.3 million. In
addition, accounts receivable as of December 31, 2002 include claims and
contractually billed amounts related to such contracts of approximately $45.1
million. Generally, contractually billed amounts will not be paid by the
customer to EMCOR until final resolution of related claims. Included in the
claims amount is approximately $38.7 million related to two projects of EMCOR's
Poole & Kent subsidiary which had commenced prior to EMCOR's acquisition of
Poole & Kent in 1999.


27


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

CLASSIFICATION OF CONTRACT AMOUNTS

In accordance with industry practice, EMCOR classifies as current all assets
and liabilities related to the performance of long-term contracts. The
contracting cycle for certain long-term contracts may extend beyond one year
and, accordingly, collection or payment of amounts related to these contracts
may extend beyond one year. Accounts receivable at December 31, 2002 and 2001
included $172.1 million and $138.6 million, respectively, of retainage billed
under terms of the contracts. EMCOR estimates that approximately 85% of
retainage recorded at December 31, 2002 will be collected during 2003.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated financial statements, EMCOR considers all
highly liquid instruments with original maturities of three months or less to be
cash equivalents. EMCOR maintains a centralized cash management program whereby
its excess cash balances are invested in high quality, short-term money market
instruments which are considered cash equivalents. At times, cash balances in
EMCOR's bank accounts usually exceeds federally insured limits.

INVENTORIES

Inventories, which consist primarily of construction materials, are stated at
the lower of cost or market. Cost is determined principally using the average
cost method. Inventories increased by $5.1 million to $12.3 million at December
31, 2002 compared to $7.2 million at December 31, 2001 primarily due to
inventories of the companies acquired during 2002.

INVESTMENTS, NOTES AND OTHER LONG-TERM RECEIVABLES

Investments, notes and other long-term receivables at December 31, 2002 were
$24.6 million compared to $16.8 million at December 31, 2001, and primarily
consist of investments in joint ventures accounted for using the equity method
of accounting. The increase was primarily due to a $14.0 million capital
contribution to a venture with Baltimore Gas & Electric to design, construct,
own, operate, lease and maintain facilities to produce chilled water for sale to
customers for use in cooling, which was partially offset by decreases in other
investments.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost. Depreciation, including
amortization of assets under capital leases, is recorded principally using the
straight-line method over estimated useful lives ranging from 2 to 40 years. As
events and circumstances indicate, EMCOR reviews the carrying amount of
property, plant and equipment for impairment. In performing the review for
recoverability, long-lived assets are assessed for possible impairment by
comparing their carrying values to their undiscounted net pre-tax cash flows
expected to result from the use of the asset. Impaired assets are written down
to their fair values, generally their discounted cash flows. Through December
31, 2002, no adjustment for the impairment of property, plant and equipment
carrying value has been required.

Property, plant and equipment in the accompanying Consolidated Balance Sheets
consisted of the following amounts as of December 31, 2002 and 2001 (in
thousands):

2002 2001
-------- --------
Machinery and equipment ............................ $ 72,698 $ 54,225
Furniture and fixtures ............................. 36,527 22,858
Land, buildings and leasehold improvements ......... 38,475 28,016
-------- --------
147,700 105,099
Accumulated depreciation and amortization .......... (76,950) (62,551)
-------- --------
$ 70,750 $ 42,548
======== ========

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

Goodwill at December 31, 2002 and 2001 was approximately $290.4 million and
$56.0 million, respectively, and reflects the excess of cost over fair market
value of net identifiable assets of companies acquired.


28


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

EMCOR has adopted the following accounting standards issued by the Financial
Accounting Standards Board ("FASB"): 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 that 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 142
requires goodwill to be tested for impairment under certain circumstances and
written down when impaired, rather than being amortized as previous standards
required. The goodwill impairment test is calculated by comparing the discounted
estimated future cash flows to the carrying value of goodwill on the date of the
test. Furthermore, SFAS 142 requires identifiable intangibles assets other than
goodwill to be amortized over their useful lives unless these lives are
determined to be indefinite. After the initial impairment and the annual review
required by SFAS 142, EMCOR determined that the adoption of SFAS 142 has not
resulted in the impairment of the carrying value of its existing goodwill.

The following table presents EMCOR's adjusted net income attributable to
common stock, basic earnings per share and diluted earnings per share assuming
the add back of amortization of goodwill for the years ended December 31, 2001
and 2000 (in thousands, except per share data):



FOR THE YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------
BASIC DILUTED
---------------------------- ---------------------------
INCOME INCOME
AVAILABLE TO AVAILABLE TO
COMMON EARNINGS COMMON EARNINGS
STOCKHOLDERS PER SHARE STOCKHOLDERS PER SHARE
------------ --------- ------------- ---------

Reported net income attributed to EMCOR common stock ................... $50,012 $ 3.86 $51,747 $ 3.40
Add back amortization of goodwill, net of income tax ................... 3,083 0.24 3,083 0.20
------- -------- ------- --------
Adjusted net income attributed to EMCOR common stock ................... $53,095 $ 4.10 $54,830 $ 3.60
======= ======== ======= ========

FOR THE YEAR ENDED DECEMBER 31, 2000
----------------------------------------------------------
BASIC DILUTED
---------------------------- ---------------------------
INCOME INCOME
AVAILABLE TO AVAILABLE TO
COMMON EARNINGS COMMON EARNINGS
STOCKHOLDERS PER SHARE STOCKHOLDERS PER SHARE
------------ --------- ------------- ---------

Reported net income attributed to EMCOR common stock ................... $40,089 $ 3.84 $44,057 $ 2.95
Add back amortization of goodwill, net of income tax ................... 2,586 0.25 2,586 0.17
------- -------- ------- --------
Adjusted net income attributed to EMCOR common stock ................... $42,675 $ 4.09 $46,643 $ 3.12
======= ======== ======= ========


The changes in the carrying amount of goodwill during the year ended December
31, 2002 were as follows (in thousands):

2002
--------
Balance at beginning of period ................................ $ 56,011
Goodwill for acquisition of businesses ........................ 225,783
Earn-out payments on prior year acquisitions .................. 8,618
--------
Balance at end of period ...................................... $290,412
========


29


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Identifiable intangible assets are comprised of $8.2 million in market value
of customer backlog and $6.4 million of trademarks and tradenames acquired as a
result of acquisitions in 2002. The $8.2 million is being amortized on the
straight-line method over periods from one to four years depending on the values
ascribed to each contract type. The $6.4 million is not being amortized as
trademarks and tradenames are not amortizable in accordance with SFAS 142 but
are subject to at least an annual review for impairment in accordance with
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). See Note C --
Acquisitions of Businesses for additional information. The following table
presents the estimated future amortization expense of identifiable intangible
assets (in thousands):

2003 .............................................................. $2,818
2004 .............................................................. 2,132
2005 .............................................................. 1,781
2006 .............................................................. 714
Thereafter ........................................................ --
------
$7,445
======

INSURANCE LIABILITIES

EMCOR's insurance liability is determined actuarially based on claims filed
and an estimate of claims incurred but not yet reported. At December 31, 2002
and 2001, the estimated current portion of undiscounted insurance liabilities of
$9.1 million and $7.6 million, respectively, were included in "Other accrued
expenses and liabilities" in the accompanying Consolidated Balance Sheets. The
estimated non-current portion of the undiscounted insurance liabilities were
included in "Other long-term obligations," and at December 31, 2002 and 2001 was
$73.5 million and $66.0 million, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of EMCOR's financial instruments, which include accounts
receivable and other financing commitments, approximate their fair values due
primarily to their short term maturities.

During the second quarter of 2001, EMCOR called for redemption of its $115.0
million 5.75% convertible subordinated notes. As a consequence, all of the
convertible subordinated notes were converted into approximately 4.2 million
shares of EMCOR common stock.

FOREIGN OPERATIONS

The financial statements and transactions of EMCOR's foreign subsidiaries are
maintained in their functional currency and translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation." Translation adjustments have been accumulated as a
separate component of Stockholders' equity as Accumulated other comprehensive
loss.

INCOME TAXES

EMCOR accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which
requires the recognition of deferred tax assets and deferred tax liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Valuation
allowances are established when necessary to reduce net deferred tax assets to
the amount expected to be realized.

DERIVATIVES AND HEDGING ACTIVITIES

Gains and losses on contracts designated as hedges of net investments in
foreign subsidiaries are recognized in the Consolidated Statements of
Stockholders' Equity and Comprehensive Income as a component of Accumulated
other comprehensive income (loss).

As of December 31, 2002, 2001 and 2000, EMCOR did not have any derivative
instruments.


30


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

VALUATION OF STOCK OPTION GRANTS

At December 31, 2002, EMCOR has six stock-based compensation plans and
programs, which are described more fully in Note I -- Stock Options and Stock
Plans. EMCOR applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related interpretations in accounting
for its stock options. Accordingly, no compensation cost has been recognized in
the accompanying Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000 in respect of stock options granted during
those years inasmuch as EMCOR grants stock options at fair market value. Had
compensation cost for these options been determined consistent with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), EMCOR's net income, basic earnings per share ("Basic
EPS") and diluted earnings per share ("Diluted EPS") would have been reduced
from the following "as reported amounts" to the following "pro forma amounts"
(in thousands, except per share amounts):



2002 2001 2000
------- ------- -------

Net income:
As reported ......................................................................... $62,902 $50,012 $40,089
Less: Total stock-based compensation expense determined under fair
value based method, (described in Note I), net of related tax effects ............. 2,690 4,772 2,885
------- ------- -------
Pro forma ........................................................................... $60,212 $45,240 $37,204
======= ======= =======
Basic EPS:
As reported ......................................................................... $ 4.23 $ 3.86 $ 3.84
Pro forma ........................................................................... $ 4.05 $ 3.49 $ 3.56
Diluted EPS:
As reported ......................................................................... $ 4.07 $ 3.40 $ 2.95
Pro forma ........................................................................... $ 3.90 $ 3.08 $ 2.76


NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued SFAS 141 and SFAS 142. SFAS 141 requires that
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. The
goodwill impairment test is calculated by comparing the discounted estimated
future cash flows to the carrying value of goodwill on the date of the test.
Furthermore, SFAS 142 requires identifiable intangible assets other than
goodwill to be amortized over their useful lives unless these lives are
determined to be indefinite. After the initial impairment and the annual review
required by SFAS 142, EMCOR determined that the adoption of SFAS 142 has not
resulted in the impairment of the carrying value of its existing goodwill. The
2002 reduction in expense due to the discontinuance of goodwill amortization was
$5.5 million. For the year ended December 31, 2002, $0.8 million of amortization
expense was recorded related to certain identifiable intangible assets of $9.6
million for the Acquired Comfort Companies.

In May 2002, the FASB issued Statement of Financial Accounting Standards No.
145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB
Statement No. 13 and Technical Corrections" which is effective for fiscal years
beginning after May 15, 2002. This statement, among other matters, provides
guidance with respect to the accounting for gain or loss on capital leases that
were modified to become operating leases. The statement also eliminates the
requirement that gains or losses on the early extinguishment of debt be
classified as extraordinary items and provides guidance when the gain or loss on
the early retirement of debt should or should not be reflected as an
extraordinary item.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." This
statement requires that costs associated with terminating employees or contracts
or closing or relocating facilities are to be recognized at fair value at the
time the liability is incurred. The Company does not anticipate that this
statement will have an effect on its financial statements when it becomes
effective for disposal activities initiated after December 31, 2002.

31


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

In November 2002, the FASB issued Financial Accounting Standards Board
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, an
interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB
Interpretation No. 34" ("FIN 45" or the "Interpretation"). FIN 45 clarifies the
requirements of FASB Statement No. 5, "Accounting for Contingencies," relating
to the guarantor's accounting for, and disclosure of, the issuance of certain
types of guarantees. FIN 45 requires that upon issuance of a guarantee, the
guarantor must recognize a liability for the fair value of the obligation it
assumes under that guarantee. The disclosure provisions of the Interpretations
are effective for financial statements of interim or annual periods that end
after December 15, 2002. The Interpretation's provisions for initial recognition
and measurement should be applied on a prospective basis to guarantees issued or
modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The guarantor's previous accounting for guarantees that were issued
before the date of FIN 45's initial application may not be revised or restated
to reflect the effect of the recognition and measurement provisions of the
Interpretation. EMCOR has guarantees that will be subject to the accounting and
disclosure provisions of the Interpretation, and therefore, adoption of FIN 45
may impact disclosures in the first quarter of its next fiscal year. EMCOR is
currently evaluating the recognition and measurement impacts of adoption.

In January 2003, the FASB issued Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure"
("SFAS 148"). SFAS 148 amends FASB Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements of the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. SFAS 148 is effective for fiscal years beginning after December 15,
2002 and was adopted by EMCOR for all periods presented. EMCOR did not change to
the fair value based method of accounting for stock-based employee compensation;
therefore, adoption of SFAS 148 will impact only future disclosures, not the
financial results, of EMCOR.

NOTE C -- ACQUISITIONS OF BUSINESSES

On March 1, 2002, EMCOR acquired the Acquired Comfort Companies. Accordingly,
the Consolidated Results of Operations for EMCOR for the year ended December 31,
2002 include the results of operations for the Acquired Comfort Companies since
March 1, 2002. The purchase price paid for a 100% voting interest of the
Acquired Comfort Companies was $186.25 million and was comprised of $164.15
million in cash and $22.1 million by assumption of Seller's notes payable to
former owners of certain of the Acquired Comfort Companies. Pursuant to the
terms of the acquisition agreement, an additional $7.1 million of cash purchase
price was paid by EMCOR to Seller subsequent to the acquisition date due to an
increase in net assets of the Acquired Comfort Companies between the closing
date and an agreed upon preclosing date. The acquisition was funded with $121.25
million of EMCOR's funds and $50.0 million from borrowings under EMCOR's
revolving credit facility. The Acquired Comfort Companies, which are based
predominantly in the Midwest United States and New Jersey, are active in the
installation and maintenance of mechanical system and the design and
installation of process and fire protection systems. Services are provided to a
wide variety of industries, including the food processing, pharmaceutical and
manufacturing/distribution sectors.

On December 19, 2002, EMCOR acquired CES. CES primarily provides a broad
array of facility services, including comprehensive facilities management,
operation and maintenance, mobile services, remote monitoring, technical
consulting and diagnostic services, and installation and support for building
systems. The purchase price paid for CES was $178.0 million, of which $156.0
million was paid from borrowings under EMCOR's revolving credit facility and
$22.0 million was paid from EMCOR's funds. The purchase price is subject to
adjustment based on the difference between the net assets of CES on the closing
date and an agreed upon preclosing date.

EMCOR acquired two additional companies during 2002 for which EMCOR paid an
aggregate of $3.4 million.

EMCOR believes the addition of the companies acquired in 2002, which are
generally in geographic markets where EMCOR did not have significant presence,
will further EMCOR's goal of market and geographic diversification, expansion of
its facilities services operations and expansion of its services offerings.
Additionally, the acquisitions create more opportunities for EMCOR companies to
collaborate on national facilities services contracts. These factors contributed
to preliminary 2002 acquisition goodwill of $225.8 million, which represents the
excess of purchase price paid to the estimated fair value of the net assets at
date of acquisition.

During 2002 and 2001, EMCOR paid an aggregate of $8.6 million and $6.2
million in cash, respectively, by reason of earn-out obli-gations in respect of
prior year acquisitions.


32


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE C -- ACQUISITIONS OF BUSINESSES -- (CONTINUED)

The purchase price of certain acquisitions are subject to finalization based
on certain contingencies provided for in the purchase agreements. These
acquisitions were accounted for by the purchase method, and the purchase price
has been allocated to the assets acquired and liabilities assumed, based upon
the estimated fair values of these assets and liabilities at the dates of
acquisition. Goodwill, representing the excess purchase price over the fair
value of amounts assigned to the net tangible assets acquired, was $290.4
million and $56.0 million at December 31, 2002 and 2001, respectively. Goodwill
amortization expense for the years ended December 31, 2001 and 2000 was $5.5
million and $4.6 million, respectively. See Note M -- Segment Information, for
goodwill by reportable segment.

The following table summarizes the preliminary purchase price allocation
related to the aforementioned acquisitions at December 31, 2002 (in thousands):



ACQUIRED COMFORT OTHER
COMPANIES CES ACQUISITIONS TOTAL
---------------- -------- ------------ --------

Current assets, including cash acquired .................. $158,198 $ 92,430 $7,571 $258,199
Property, plant and equipment ............................ 11,384 16,094 189 27,667
Goodwill ................................................. 122,348 102,083 1,352 225,783
Identifiable intangible assets ........................... 9,600 5,000 -- 14,600
Other assets ............................................. 1,183 12,010 -- 13,193
-------- -------- ------ --------
Total assets acquired .................................. 302,713 227,617 9,112 539,442
-------- -------- ------ --------
Current liabilities ...................................... 109,060 48,004 5,568 162,632
Long-term obligations .................................... 288 1,613 144 2,045
-------- -------- ------ --------
Total liabilities assumed .............................. 109,348 49,617 5,712 164,677
-------- -------- ------ --------
Net assets acquired .................................... 193,365 178,000 3,400 374,765
Notes payable assumed .................................. 22,115 -- -- 22,115
-------- -------- ------ --------
Cash purchase price .................................. $171,250 $178,000 $3,400 $352,650
======== ======== ====== ========


The goodwill of $225.8 million was recorded based on preliminary purchase
price allocations primarily to the United States mechanical construction and
facilities services and United States other services operating segments. It is
expected that approximately $151.0 million of the goodwill associated with the
acquisitions will be deductible for tax purposes. In accordance with SFAS 141
and SFAS 142, goodwill will not be amortized, while certain other intangible
assets that have been preliminarily identified will be subject to amortization
over their useful lives. As of December 31, 2002, $0.3 million of the Notes
payable assumed has been paid by EMCOR.

Of the total purchase price paid for the acquisitions, approximately $14.6
million has been allocated to identifiable intangible assets, which includes
acquired backlog and trademarks and tradenames. Based on an independent
valuation of the Acquired Comfort Companies, $3.2 million was allocated to the
value of the contract backlog and will be amortized on a straight-line basis
over the individual related contract terms and $6.4 million was allocated to
trademarks and tradenames and will not be amortized, but subject to an annual
impairment test per SFAS 144. EMCOR has preliminarily estimated that $5.0
million of the purchase price for CES, which is subject to a final valuation,
will be allocated to contract backlog as an identifiable intangible asset, which
amounts are subject to amortization on a straight-line method. The amortization
periods range from one to four years. See also Note B -- Summary of Significant
Accounting Policies for additional information.


33


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE C -- ACQUISITIONS OF BUSINESSES -- (CONTINUED)

The following tables present unaudited pro forma results of operations
including all companies acquired during 2002 as if the acquisitions had occurred
at the beginning of fiscal 2001. The unaudited pro forma results of operations
are not necessarily indicative of the results of operations had the acquisitions
actually occurred at the beginning of fiscal 2001, nor is it necessarily
indicative of future operating results (in thousands, except per share data):



ADJUSTMENTS TO ARRIVE AT PRO FORMA RESULTS OF OPERATIONS
--------------------------------------------------------
(UNAUDITED)
---------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2002
-----------------------------------------------------------------------------------
ACQUIRED
EMCOR COMFORT OTHER PRO
AS REPORTED COMPANIES (1) CES (2) ACQUISITIONS (3) FORMA
----------- ------------- ----------- --------------- ------------

Revenues .................................. $ 3,968,051 $ 94,084 $ 403,900 $ 15,284 $ 4,481,319
Operating income .......................... $ 114,425 $ (40) $ 11,401 $ 1,401 $ 127,187
Interest (expense) income, net ............ $ (2,099) $ 162 $ (6,509) $ 7 $ (8,439)
Income before income taxes ................ $ 112,326 $ 122 $ 4,892 $ 1,408 $ 118,748
Net income ................................ $ 62,902 $ 68 $ 2,740 $ 788 $ 66,498
Basic earnings per share .................. $ 4.23 $ 0.01 $ 0.18 $ 0.05 $ 4.47
Diluted earnings per share ................ $ 4.07 $ 0.00 $ 0.18 $ 0.05 $ 4.30



FOR THE YEAR ENDED DECEMBER 31, 2002
-----------------------------------------------------------------------------------
ACQUIRED
EMCOR COMFORT OTHER PRO
AS REPORTED COMPANIES (1) CES (2) ACQUISITIONS (3) FORMA
----------- ------------- ----------- --------------- -----------

Revenues .................................. $ 3,419,854 $ 659,803 $ 400,915 $ 16,809 $ 4,497,381
Operating income .......................... $ 88,682 $ 30,118 $ 17,278 $ 473 $ 136,551
Interest (expense) income, net ............ $ 792 $ (1,499) $ (9,903) $ 19 $ (10,591)
Income before income taxes ................ $ 89,474 $ 28,619 $ 7,375 $ 492 $ 125,960
Net income ................................ $ 50,012 $ 16,027 $ 4,130 $ 275 $ 70,444
Basic earnings per share .................. $ 3.86 $ 1.24 $ 0.32 $ 0.02 $ 5.44
Diluted earnings per share ................ $ 3.40 $ 1.05 $ 0.27 $ 0.02 $ 4.74


The unaudited pro forma results of operations, for segment information, is
included in Note M -- Segment Information.

- -----------
(1) Adjustments to arrive at pro forma results of operations for the year ended
December 31, 2002 represent results from January 1, 2002 through the
acquisition date of March 1, 2002. The adjustments for the year ended
December 31, 2001 represent results from operations from January 1, 2001
through December 31, 2001.
(2) Adjustments to arrive at pro forma results of operations for the year ended
December 31, 2002 represent results from January 1, 2002 through the
acquisition date of December 19, 2002. The adjustments for the year ended
December 31, 2001 represent results from operations from January 1, 2001
through December 31, 2001.
(3) Adjustments to arrive at pro forma results of operations for the year ended
December, 31, 2002 represent results from January 1, 2002 through the date
of each acquisition. The adjustments for the year ended December 31, 2001
represent results for operations from January 1, 2001 through December 31,
2001.


34


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE D -- EARNINGS PER SHARE

The following tables summarize EMCOR's calculation of Basic and Diluted
Earnings per Share ("EPS") for the years ended December 31, 2002, 2001 and 2000:



INCOME SHARES PER SHARE
2002 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ----------- ---------

BASIC EPS
Income available to common stockholders .................................... $62,902,000 14,876,906 $4.23
=====
EFFECT OF DILUTIVE SECURITIES:
Options .................................................................... -- 580,096
----------- ----------
DILUTED EPS ................................................................ $62,902,000 15,457,002 $4.07
=========== ========== =====



INCOME SHARES PER SHARE
2001 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ----------- ---------

BASIC EPS
Income available to common stockholders .................................... $50,012,000 12,948,230 $3.86
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes including assumed interest savings,
net of tax ............................................................... 1,735,395 1,820,273
Options .................................................................... -- 471,705
----------- ----------
DILUTED EPS ................................................................ $51,747,395 15,240,208 $3.40
=========== ========== =====


INCOME SHARES PER SHARE
2000 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ----------- ---------

BASIC EPS
Income available to common stockholders .................................... $40,089,000 10,440,089 $3.84
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes including assumed interest savings,
net of tax ............................................................... 3,967,500 4,206,291
Options .................................................................... -- 297,306
----------- ----------
DILUTED EPS ................................................................ $44,056,500 14,943,686 $2.95
=========== ========== =====



The number of EMCOR's options granted, which were excluded from the
computation of Diluted EPS for the years ended December 31, 2002, 2001 and 2000
because they would be antidilutive, were 45,000, 210,100 and 37,000,
respectively.

NOTE E -- CURRENT DEBT

2002 CREDIT FACILITY

On September 26, 2002, EMCOR entered into a new $275.0 million five year
revolving credit agreement (the "Revolving Credit Facility"). The Revolving
Credit Facility, which replaced a credit facility entered into on December 22,
1998 (the "1998 Credit Facility"), is guaranteed by certain direct and indirect
subsidiaries of EMCOR, is secured by substantially all of the assets of EMCOR
and most of its subsidiaries, and provides for borrowings in the form of
revolving loans and for letters of credit. The Revolving Credit Facility
contains various covenants requiring, among other things, maintenance of certain
financial ratios and certain restrictions with respect to cumulative aggregate
payments for dividends, common stock repurchases, investments, acquisitions,
indebtedness and capital expenditures. A commitment fee is payable on the
average daily unused amount of the Revolving Credit Facility. The fee ranges
from 0.3% to 0.5% of the unused amount, based on certain financial tests. Loans
under the Revolving Credit Facility bear interest at (1) a rate which is the
prime commercial lending rate announced by Harris Trust and Savings Bank from
time to time (4.25% at December 31, 2002) plus 0% to 1.0%, based on certain
financial tests or (2) a LIBOR rate (1.38% at December 31, 2002) plus 1.5% to
2.5% based on certain financial tests. The interest rates in effect at December
31, 2002 were 4.25% and 2.88%, respectively. Letter of credit fees issued under
the facility range from 0.75% to 2.5% and are charged based on the type of
letter of credit issued and certain financial tests. As of December 31, 2002 and
2001, EMCOR had approximately $39.9 million and $20.5 million of letters of
credit outstanding, respectively. EMCOR had borrowings of $112.0 million
outstanding under the Revolving Credit Facility at December 31, 2002. No
revolving loans were outstanding under the 1998 Credit Facility at December 31,
2001.


35


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE E -- CURRENT DEBT -- (CONTINUED)

FOREIGN BORROWINGS

In August 2001, EMCOR's Canadian subsidiary, Comstock Canada Ltd., renewed a
credit agreement with a bank providing for an overdraft facility of up to Cdn.
$0.5 million. The facility is secured by a standby letter of credit and provides
for interest at the bank's prime rate which was 4.0% at December 31, 2002. There
were no borrowings outstanding under this credit agreement at December 31, 2002
or 2001.

NOTE F -- LONG-TERM DEBT

Long-term debt in the accompanying Consolidated Balance Sheets consisted of
the following amounts as of December 31, 2002 and 2001 (in thousands):


2002 2001
------- -------

Notes Payable at 10.0% due 2003 .................................................................... $21,815 $ --
Note Payable at 3.0%, due 2002 ..................................................................... -- 573
Capitalized Lease Obligations at weighted average interest rates from 3.0% to 12.5%,
payable in varying amounts through 2006 .......................................................... 351 249
Other, at weighted average interest rates of approximately 10.0%, payable in varying
amounts through 2012 ............................................................................. 1,015 973
------- -------
23,181 1,795
Less: current maturities ........................................................................... 22,276 947
------- -------
$ 905 $ 848
======= =======


NOTES AND NOTE PAYABLE

The Notes Payable of $21.8 million are notes made by Seller to former owners
of certain Acquired Comfort Companies, which notes were assumed by EMCOR in
connection with the acquisition. The Notes Payable accrue interest at 10.0% per
annum and are due in full in April 2003. A $0.6 million Note Payable outstanding
at December 31, 2001 was paid in January 2002.

CAPITALIZED LEASE OBLIGATIONS

See Note K -- Commitments and Contingencies.

OTHER LONG-TERM DEBT

Other long-term debt consists primarily of loans for real estate, office
equipment, automobiles and building improvements. The aggregate amount of other
long-term debt maturing during the next five years is approximately $0.3 million
in 2003, $0.1 million in each of 2004, 2005, 2006 and 2007, and $0.3 million
thereafter.

CONVERTIBLE SUBORDINATED NOTES

In March 1998, EMCOR sold, pursuant to an underwritten public offering,
$115.0 million principal amount of 5.75% Convertible Subordinated Notes. During
the second quarter of 2001, EMCOR called for redemption its $115.0 million 5.75%
Convertible Subordinated Notes and, as a consequence, the Convertible
Subordinated Notes were converted into approximately 4.2 million shares of EMCOR
common stock.

NOTE G -- INCOME TAXES

EMCOR files a consolidated federal income tax return including all its U.S.
subsidiaries. At December 31, 2002, EMCOR had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $2.9 million, which
expire in the year 2019. The NOLs are subject to review by the Internal Revenue
Service.

EMCOR adopted Fresh-Start Accounting in connection with EMCOR's bankruptcy
reorganization in December 1994. As a result, the tax benefit of any net
operating loss carryforwards or net deductible temporary differences which
existed as of December 15, 1994 resulted in a charge to the tax provision
(provision in lieu of income taxes) and a credit to capital surplus. These NOLs
were substantially utilized as of December 31, 2001. Amounts credited to capital
surplus were $21.4 million and $24.4 million for the years ended December 31,
2001 and 2000, respectively.


36


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE G -- INCOME TAXES -- (CONTINUED)

The income tax provision in the accompanying Consolidated Statements of
Operations for the years ended December 31, 2002, 2001 and 2000 consisted of the
following (in thousands):

2002 2001 2000
------- ------- -------
Current:
Federal ............................... $33,762 $ 5,274 $ 1,364
State and local ....................... 7,686 7,049 3,394
Foreign ............................... 544 1,989 1,180
------- ------- -------
41,992 14,312 5,938
------- ------- -------
Deferred .............................. 7,432 3,725 1,138
------- ------- -------
Provision in lieu of income taxes ....... -- 21,425 24,422
------- ------- -------
$49,424 $39,462 $31,498
======= ======= =======

Factors accounting for the variation from U.S. statutory income tax rates
relating to continuing operations for the years ended December 31, 2002, 2001
and 2000 were as follows (in thousands):



2002 2001 2000
------- ------- -------

Federal income taxes at the statutory rate .................................. $39,314 $31,316 $25,055
State and local income taxes, net of federal tax benefits ................... 7,742 5,376 3,894
Foreign income taxes ........................................................ 85 68 890
Other non-deductible expenses, including goodwill ........................... 1,201 2,088 1,771
Other ....................................................................... 1,082 614 (112)
------- ------- -------
$49,424 $39,462 $31,498
======= ======= =======


The components of the net deferred income tax asset are included in "Prepaid
expenses and other" and "Other assets" at December 31, 2002 and 2001 in the
accompanying Consolidated Balance Sheets. The amounts recorded for the years
ended December 31, 2002, and 2001 were as follows (in thousands):



2002 2001
------- -------

Deferred income tax assets:
Net operating loss carryforwards ................................................................... $ 1,014 $ 1,166
Excess of amounts expensed for financial statement purposes over amounts deducted
for income tax purposes .......................................................................... 52,570 61,931
------- -------
Total deferred income tax assets ................................................................... 53,584 63,097
------- -------
Valuation allowance for deferred tax assets ........................................................ (2,124) (3,624)
------- -------
Net deferred income tax assets ..................................................................... 51,460 59,473
------- -------
Deferred income tax liabilities:
Costs capitalized for financial statement purposes and deducted for income tax purposes ............ (24,011) (33,971)
------- -------
Total deferred income tax liabilities .............................................................. (24,011) (33,971)
------- -------
Net deferred income tax asset ...................................................................... $27,449 $25,502
======= =======


Income before income taxes for the years ended December 31, 2002, 2001, and
2000 consisted of the following (in thousands):

2002 2001 2000
-------- ------- -------
United States ............... $108,733 $79,699 $59,105
Foreign ..................... 3,593 9,775 12,482
-------- ------- -------
$112,326 $89,474 $71,587
======== ======= =======



37


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE H -- COMMON STOCK

As of December 31, 2002 and 2001, 14,918,877 and 14,813,714 shares of EMCOR
common stock were outstanding, respectively. Pursuant to a program authorized by
the Board of Directors, EMCOR purchased 1,131,985 shares of its common stock
prior to January 1, 2000. The aggregate amount of $16.8 million paid for those
shares has been classified as "Treasury stock, at cost" in the Consolidated
Balance Sheet at December 31, 2002. EMCOR management is authorized to expend up
to an additional $3.2 million to purchase EMCOR's common stock under this
program.

NOTE I -- STOCK OPTIONS AND STOCK PLANS

EMCOR has stock option plans and programs under which employees receive stock
options and a stock bonus plan for executives pursuant to which they receive
restricted stock units. EMCOR also has stock option plans and restricted stock
plans under which non-employee directors may receive stock options or shares of
common stock. A summary of the general terms of the grants under stock option
plans and programs and stock plans, were as follows:



AUTHORIZED EXERCISE PRICE/
SHARES VESTING EXPIRATION VALUATION DATE
---------- ------- ---------- --------------

1994 Management Stock Option Plan 1,000,000 Generally, 33 1/3% Ten years from Fair market value
(the "1994 Plan") on each anniversary grant date of common stock
of grant date on grant date

1995 Non-Employee Directors' Non- 200,000 100% on grant date Ten years from Fair market value
Qualified Stock Option Plan grant date of common stock
(the "1995 Plan") on grant date

1997 Non-Employee Directors' Non- 300,000 (1) Five years from Fair market value
Qualified Stock Option Plan grant date of common stock
(the "1997 Directors' Stock on grant date (3)
Option Plan")

1997 Stock Plan for Directors (the 150,000 (2) Five years from Fair market value
"1997 Directors' Stock Plan") grant date of common stock
on grant date (3)

Executive Stock Bonus Plan 220,000 100% on grant date Ten years from Fair market value
("ESBP") grant date of common stock
on grant date

Other Stock Option Grants Not applicable Generally, either Ten years from Fair market value
100% on first grant date of common stock
anniversary on grant date
of grant date
or 33 1/3% on grant or
on or about each
anniversary of
grant date


- -----------
(1) Until July 2000, non-employee directors could elect to receive one-third,
two-thirds or all of their retainer for a calendar year in the form of stock
options. Since then such directors have received and will receive all of
their retainer in the form of stock options. All options under this plan
become exercisable quarterly over the calendar year. In addition, each
director will receive additional stock options equal to the product of 0.5
times the amount of stock options otherwise issued.
(2) Until July 2000, each non-employee director could elect to receive
one-third, two-thirds or all of his retainer for a calendar year in the form
of restricted stock units equal in value to the retainer. In addition, the
individual would have been entitled to receive additional restricted stock
units equal to 0.2 times the amount of restricted stock units otherwise
issued as a result of his election. Following termination of Board service,
the director, would receive shares of common stock equal to the number of
restricted stock units.
(3) Generally, the grant date is the first business day of a calendar year.


38


NOTE I -- STOCK OPTIONS AND STOCK PLANS -- (CONTINUED)

The following table summarizes EMCOR's stock option and stock bonus plan
activity since December 31, 1999:



1997 DIRECTORS' STOCK
1994 PLAN 1995 PLAN OPTION PLAN
------------------------ ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------ ------- ------ -------- ------ --------

Balance, December 31, 1999 ............ 704,768 $10.47 93,000 $15.74 76,753 $17.94
Granted ............................. -- -- 18,000 $27.13 45,612 $17.56
Forfeited ........................... -- -- -- -- -- --
Exercised ........................... (23,001) $7.54 (10,500) $6.34 (6,828) $16.19
------- ------- -------
Balance, December 31, 2000 ............ 681,767 $10.57 100,500 $18.76 115,537 $17.89
Granted ............................. -- -- 18,000 $42.30 31,950 $25.44
Forfeited ........................... -- -- -- -- -- --
Exercised ........................... (97,366) $14.56 (15,000) $15.09 (7,602) $17.56
------- ------- -------
Balance, December 31, 2001 ............ 584,401 $9.90 103,500 $23.39 139,885 $19.64
Granted ............................. -- -- 18,000 $54.87 16,933 $46.81
Forfeited ........................... (3,000) $19.75 -- -- -- --
Exercised ........................... (57,200) $14.46 (10,500) $6.34 (24,296) $20.00
------- ------- -------
Balance, December 31, 2002 ............ 524,201 $9.35 111,000 $30.10 132,522 $23.04
======= ======= =======


1997 DIRECTORS' STOCK OTHER STOCK OPTION
PLAN ESBP GRANTS
----------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------ ------- ------ -------- ------- --------

Balance, December 31, 1999 ............ 930 $19.87 -- -- 315,000 $18.49
Granted ............................. -- -- -- -- 94,000 $18.44
Forfeited ........................... -- -- -- -- -- --
Exercised ........................... (600) $20.00 -- -- (2,000) $16.50
--- ------ -------
Balance, December 31, 2000 ............ 330 $19.63 -- -- 407,000 $18.49
Granted ............................. -- -- 56,707 $21.62 262,100 $37.36
Forfeited ........................... -- -- -- -- -- --
Exercised ........................... -- -- -- -- (16,666) $17.28
--- ------ -------
Balance, December 31, 2001 ............ 330 $19.63 56,707 $21.62 652,434 $26.10
Granted ............................. -- -- 36,569 $46.35 157,700 $47.00
Forfeited ........................... -- -- -- -- (2,000) $16.50
Exercised ........................... -- -- -- -- (13,167) $19.52
--- ------ -------
Balance, December 31, 2002 ............ 330 $19.63 93,276 $31.32 794,967 $30.38
=== ====== =======



39


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE I -- STOCK OPTIONS AND STOCK PLANS -- (CONTINUED)

At December 31, 2002, 2001 and 2000, approximately 1,635,000, 1,271,000 and
1,005,000 options were exercisable, respectively. The weighted average exercise
price of exercisable options at December 31, 2002, 2001 and 2000 was
approximately $23.00, $18.18 and $12.77, respectively.

The following table summarizes information about EMCOR's stock options at
December 31, 2002:



OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ---------------------------------
RANGE OF WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICES NUMBER REMAINING LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
--------------- ------- ---------------- ---------------- ------- ----------------

$4.75-$5.13 369,200 2.26 Years $4.92 369,200 $4.92

$14.31-$20.00 635,469 4.81 Years $18.61 635,469 $18.61

$20.38-$22.13 93,375 6.19 Years $21.70 87,043 $21.68

$25.44-$27.13 119,950 6.61 Years $25.69 119,950 $25.69

$41.70-$46.35 406,869 8.77 Years $43.99 392,869 $44.07

$51.75-$55.49 31,433 9.30 Years $54.72 30,716 $54.79


The weighted average fair value of options granted during 2002, 2001 and 2000
were $47.50, $30.02 and $19.18, respectively.

The pro forma effect on EMCOR's net income, Basic EPS and Diluted EPS, had
compensation costs been determined consistent with the recognition of
compensation costs provisions of SFAS 123, is presented in Note B -- Summary of
Significant Accounting Policies. The associated pro forma compensation costs
related to the provisions of SFAS 123, net of tax effects, were $2.7 million,
$4.8 million and $2.9 million for the years ending December 31, 2002, 2001 and
2000, respectively. The pro forma effect was calculated using an estimated fair
value of each option grant on the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions used for grants in
2002, 2001 and 2000: risk-free interest rates of 2.6% to 6.6% (representing the
risk-free interest rate at the date of the grant); expected dividend yields of
zero percent; expected terms of 3.3 to 4.5 years; and expected volatility of
67.2%, 83.5%, 71.2% and 73.6% for options granted during 2002, 2001, 2000 and
1999, respectively.


40


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE J -- RETIREMENT PLANS

EMCOR's United Kingdom subsidiary has a defined benefit pension plan covering
all eligible employees. The benefits under the plan are based on wages and years
of service with the subsidiary. EMCOR's policy is to fund the minimum amount
required by law.

The change in benefit obligations and plan assets for the years ended
December 31, 2002 and 2001 consisted of the following components (in thousands):


2002 2001
-------- --------

CHANGE IN PENSION BENEFIT OBLIGATION
Benefit obligation at beginning of year ................... $110,598 $101,488
Service cost .............................................. 7,240 5,693
Interest cost ............................................. 7,532 6,083
Plan participants' contributions .......................... 3,219 2,943
Actuarial (loss) gain ..................................... (1,186) 89
Benefits paid ............................................. (2,897) (3,176)
Foreign currency exchange rate changes .................... 11,675 (2,522)
-------- --------
Benefit obligation at end of year ......................... $136,181 $110,598
-------- --------
CHANGE IN PENSION PLAN ASSETS
Fair value of plan assets at beginning of year ............ $ 89,053 $ 95,882
Actual return on plan assets .............................. (13,894) (10,322)
Employer contributions .................................... 6,709 6,108
Plan participants' contributions .......................... 3,219 2,943
Benefits paid ............................................. (2,897) (3,176)
Foreign currency exchange rate changes .................... 9,402 (2,382)
-------- --------
Fair values of plan assets at end of year ................. $ 91,592 $ 89,053
-------- --------

Funded status ............................................. $(44,589) $(21,545)
Unrecognized transition amount ............................ (140) (199)
Unrecognized prior service cost ........................... 290 331
Unrecognized losses ....................................... 42,791 21,441
-------- --------
Net amount recognized ..................................... $ (1,648) $ 28
======== ========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED FINANCIAL STATEMENTS
Prepaid benefit cost ...................................... $ -- $ 28
Accrued benefit liability ................................. (7,243) --
Intangible asset .......................................... 290 --
Accumulated other comprehensive income .................... 5,305 --
-------- --------
Net amount recognized ..................................... $ (1,648) $ 28
======== ========


The assumptions used as of December 31, 2002, 2001 and 2000 in determining
pension cost and liability shown above were as follows:

2002 2001 2000
---- ---- ----
Discount rate .............................. 6.0% 6.0% 6.0%
Annual rate of salary provision ............ 4.0% 4.0% 4.0%
Annual rate of return on plan assets ....... 7.0% 7.0% 7.0%

For measurement purposes, a 2.5% annual rate of increase in the per capita
cost of covered pension benefits was assumed for 2002 and 2001.


41


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE J -- RETIREMENT PLANS -- (CONTINUED)

The components of net periodic pension benefit cost for the years ended
December 31, 2002, 2001 and 2000 were as follows (in thousands):



2002 2001 2000
------ ------ ------

Service cost .................................................................... $7,240 $5,693 $6,028
Interest cost ................................................................... 7,532 6,083 5,553
Expected return on plan assets .................................................. (7,225) (6,781) 1,359
Net amortization of prior service cost and actuarial loss/(gain) ................ 76 69 (8,549)
Amortization of unrecognized loss ............................................... 765 -- --
------ ------ ------
Net periodic pension benefit cost ............................................... $8,388 $5,064 $4,391
====== ====== ======


The accumulated benefit obligation for the defined benefit pension plan for
the years ended December 31, 2002 and 2001 was $98.8 million and $88.6 million,
respectively.

EMCOR contributes to various union pension funds based upon wages paid to its
union employees. Such contributions approximated $101.2 million, $92.0 million
and $88.9 million for the years ended December 31, 2002, 2001 and 2000,
respectively.

EMCOR has a defined contribution retirement plan that covers U.S. eligible
non-union employees. Contributions to this plan are based on a percentage of the
employee's base compensation. The expense recognized for the years ended
December 31, 2002, 2001 and 2000 for the defined contribution plan was $3.5
million, $3.2 million and $2.9 million, respectively.

EMCOR's United Kingdom subsidiary has a defined contribution retirement plan
that began in 2002. The expense recognized for the year ended December 31, 2002
was $0.3 million.

EMCOR's Canadian subsidiary has a defined contribution retirement plan. The
expense recognized was approximately $0.3 million in each of the years ended
December 31, 2002 and 2001.

NOTE K -- COMMITMENTS AND CONTINGENCIES

EMCOR and its subsidiaries lease land, buildings and equipment under various
leases. The leases frequently include renewal options and require EMCOR to pay
for utilities, taxes, insurance and maintenance expenses.

Future minimum payments, by year and in the aggregate, under capital leases,
non-cancelable operating leases and related subleases with initial or remaining
terms of one or more years at December 31, 2002 were as follows (in thousands):



CAPITAL OPERATING SUBLEASE
LEASE LEASE INCOME
------- -------- ------

2003 ................................................... $200 $ 38,624 $ 852
2004 ................................................... 107 31,524 650
2005 ................................................... 45 23,577 538
2006 ................................................... 16 15,690 393
2007 ................................................... -- 10,206 393
Thereafter ............................................. -- 22,320 2,679
---- -------- ------
Total minimum lease payment ............................ 368 $141,941 $5,505
======== ======
Amounts representing interest .......................... (17)
----
Present value of net minimum lease payments ............ $351
====


Rent expense for operating leases and other rental items for the years ended
December 31, 2002, 2001 and 2000 was $36.5 million, $28.5 million and $25.4
million, respectively. Rent expense for the years ended December 31, 2002, 2001
and 2000 included sublease rental income of $0.8 million, $0.7 million and $0.6
million, respectively.


42


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE K -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

EMCOR has employment agreements with its executive officers and its key
management personnel. The employment agreements with executive officers may be
terminated by the executive or EMCOR but if terminated by EMCOR, the agreements
provide for severance benefits. Certain of the agreements provide the executive
officers with certain additional rights if a change of control, as defined, of
EMCOR occurs.

EMCOR is contingently liable to sureties in respect of performance and
payment bonds issued by sureties, usually at the request of customers in
connection with construction projects which secure EMCOR payment and performance
obligations under contracts for such projects. In addition, at the request of
unions representing EMCOR employees, bonds are provided to secure such
obligations for wages and benefits payable to or for such employees. As of
December 31, 2002 sureties had issued bonds for the account of EMCOR in the
aggregate amount of approximately $1.3 billion. To the extent such bonds were
for the benefit of customers (as opposed to unions), they related to over 675
construction projects. The bonds are issued by EMCOR's sureties in return for a
premium which varies depending on the size of the bonds. The individual amounts
for bonded projects range up to $170.0 million. EMCOR has agreed to indemnify
the sureties for any payments made by them in respect of bonds.

EMCOR is subject to regulation with respect to the handling of certain
materials used in construction which are classified as hazardous or toxic by
Federal, State and local agencies. EMCOR's practice is to avoid participation in
projects principally involving the remediation or removal of such materials.
However, when remediation is a required part of its contract performance, EMCOR
believes it complies with all applicable regulations governing the discharge of
material into the environment or otherwise relating to the protection of the
environment.

A subsidiary of EMCOR has guaranteed indebtedness of a venture in which it
has a 40% interest; the other venture partner, Baltimore Gas and Electric, has a
60% interest. The venture designs, constructs, owns, operates, leases and
maintains facilities to produce chilled water for sale to customers for use in
cooling. These guarantees are not expected to have a material adverse effect on
EMCOR's financial position or results of operations. Each of the venturers is
jointly and severally liable, in the event of default, for the venture's $25.0
million borrowing due December 2031. During September 2002, each venture partner
contributed equity to the venture, of which EMCOR's contribution was $14.0
million.

NOTE L -- ADDITIONAL CASH FLOW INFORMATION

The following presents information about cash paid for interest and income
taxes for the years ended December 31, 2002, 2001 and 2000 (in thousands):



2002 2001 2000
-------- -------- ------

Cash paid during the year for:
Interest ............................................................................ $ 7,042 $ 4,195 $8,290
Income taxes ........................................................................ $45,785 $ 7,846 $4,039
Non-cash financing activities:
Debt assumed in acquisition ......................................................... $22,115 $ -- $ --
5.75% Convertible Subordinated Notes due 2005, converted into common stock .......... $ -- $115,000 $ --


NOTE M -- SEGMENT INFORMATION

EMCOR has the following reportable segments: United States electrical
construction and facilities services, United States mechanical construction and
facilities services, United States other services, Canada construction and
facilities services, United Kingdom construction and facilities services and
Other international construction and facilities services. The segment "United
States other services" principally consists of those operations which primarily
provide consulting and maintenance services, and "Other international
construction and facilities services" represents EMCOR's operations outside of
the United States, Canada, and the United Kingdom (primarily in South Africa,
the Middle East and Western Europe) performing electrical construction,
mechanical construction and facilities services. The following tables present
information about industry segments and geographic areas for the years ended
December 31, 2002, 2001 and 2000.


43


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE M -- SEGMENT INFORMATION -- (CONTINUED)

The tables also present unaudited pro forma revenues and operating income as
if the acquisitions had occurred at the beginning of fiscal 2001. The unaudited
pro forma revenues and operating income are not necessarily indicative of future
operating results (in millions):




PRO FORMA
---------------------
AS REPORTED (UNAUDITED)
---------------------------------- ---------------------
2002 2001 2000 2002 2001
-------- -------- -------- -------- --------

Revenues from unrelated entities:
United States electrical construction and
facilities services ........................................... $1,152.4 $1,334.7 $1,350.7 $1,154.8 $1,347.5
United States mechanical construction and
facilities services ........................................... 1,728.7 1,202.1 1,262.1 1,861.8 1,894.2
United States other services .................................... 236.7 209.7 163.9 614.5 582.3
-------- -------- -------- -------- --------
Total United States operations .................................. 3,117.8 2,746.5 2,776.7 3,631.1 3,824.0
Canada construction and facilities services ..................... 316.3 198.2 237.0 316.3 198.2
United Kingdom construction and facilities services ............. 533.9 463.6 446.2 533.9 463.6
Other international construction and facilities services ........ -- 11.6 0.3 -- 11.6
-------- -------- -------- -------- --------
Total worldwide operations ...................................... $3,968.0 $3,419.9 $3,460.2 $4,481.3 $4,497.4
======== ======== ======== ======== ========
Total revenues:
United States electrical construction and
facilities services ........................................... $1,191.3 $1,371.2 $1,374.0 $1,193.6 $1,384.0
United States mechanical construction and
facilities services ........................................... 1,732.6 1,234.9 1,283.7 1,865.8 1,927.1
United States other services .................................... 238.7 215.5 166.8 616.5 588.0
Less intersegment revenues ...................................... (44.8) (75.1) (47.8) (44.8) (75.1)
-------- -------- -------- -------- --------
Total United States operations .................................. 3,117.8 2,746.5 2,776.7 3,631.1 3,824.0
Canada construction and facilities services ..................... 316.3 198.2 237.0 316.3 198.2
United Kingdom construction and facilities services ............. 533.9 463.6 446.2 533.9 463.6
Other international construction and facilities services ........ -- 11.6 0.3 -- 11.6
-------- -------- -------- -------- --------
Total worldwide operations ...................................... $3,968.0 $3,419.9 $3,460.2 $4,481.3 $4,497.4
======== ======== ======== ======== ========
Operating income (loss):
United States electrical construction and
facilities services ........................................... $ 78.9 $ 75.3 $ 58.6 $ 79.2 $ 77.0
United States mechanical construction and
facilities services ........................................... 60.3 41.4 35.9 62.9 70.8
United States other services .................................... 3.3 (7.2) (5.5) 13.2 9.6
-------- -------- -------- -------- --------
Total United States operations .................................. 142.5 109.5 89.0 155.3 157.4
Canada construction and facilities services ..................... 3.3 2.3 5.2 3.3 2.3
United Kingdom construction and facilities services ............. 0.0 7.2 6.0 0.0 7.2
Other international construction and facilities services ........ (0.1) (1.2) 0.5 (0.1) (1.2)
Corporate administration ........................................ (31.3) (29.1) (21.8) (31.3) (29.1)
-------- -------- -------- -------- --------
Total worldwide operations ...................................... 114.4 88.7 78.9 127.2 136.6
Other corporate items:
Interest expense ................................................ (4.1) (4.8) (9.7) (10.7) (16.4)
Interest income ................................................. 2.0 5.6 2.4 2.2 5.8
-------- -------- -------- -------- --------
Income before taxes ............................................. $ 112.3 $ 89.5 $ 71.6 $ 118.7 $ 126.0
======== ======== ======== ======== ========



44


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE M -- SEGMENT INFORMATION -- (CONTINUED)



2002 2001 2000
----- ----- -----

Capital expenditures:
United States electrical construction and facilities services .................... $ 3.0 $ 3.7 $ 3.5
United States mechanical construction and facilities services .................... 5.1 5.1 6.1
United States other services ..................................................... 1.2 2.0 1.8
----- ----- -----
Total United States operations ................................................... 9.3 10.8 11.4
Canada construction and facilities services ...................................... 0.3 1.0 1.5
United Kingdom construction and facilities services .............................. 4.2 5.1 3.5
Other international construction and facilities services ......................... -- -- --
Corporate administration ......................................................... 1.8 1.0 0.3
----- ----- -----
Total worldwide operations ....................................................... $15.6 $17.9 $16.7
===== ===== =====
Depreciation and amortization:
United States electrical construction and facilities services .................... $ 3.5 $ 3.5 $ 3.1
United States mechanical construction and facilities services .................... 7.1 3.9 3.7
United States other services ..................................................... 1.7 1.1 0.9
----- ----- -----
Total United States operations ................................................... 12.3 8.5 7.7
Canada construction and facilities services ...................................... 0.6 0.8 0.8
United Kingdom construction and facilities services .............................. 2.4 2.8 2.9
Other international construction and facilities services ......................... -- -- --
Corporate administration ......................................................... 0.1 0.6 0.1
----- ----- -----
Total worldwide operations ....................................................... $15.4 $12.7 $11.5
===== ===== =====




2002 2001
------ ------

Costs and estimated earnings in excess of billings on uncompleted contracts:
United States electrical construction and facilities services ................................ $ 31.9 $ 70.8
United States mechanical construction and facilities services ................................ 158.0 122.1
United States other services ................................................................. 10.1 1.2
------ ------
Total United States operations ............................................................... 200.0 194.1
Canada construction and facilities services .................................................. 15.9 13.4
United Kingdom construction and facilities services .......................................... 19.9 13.8
Other international construction and facilities services ..................................... -- --
------ ------
Total worldwide operations ................................................................... $235.8 $221.3
====== ======
Billings in excess of costs and estimated earnings on uncompleted contracts:
United States electrical construction and facilities services ................................ $156.9 $176.4
United States mechanical construction and facilities services ................................ 131.7 99.3
United States other services ................................................................. 10.1 1.9
------ ------
Total United States operations ............................................................... 298.7 277.6
Canada construction and facilities services .................................................. 10.8 7.2
United Kingdom construction and facilities services .......................................... 53.6 34.2
Other international construction and facilities services ..................................... -- 0.1
------ ------
Total worldwide operations ................................................................... $363.1 $319.1
====== ======



45


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE M -- SEGMENT INFORMATION -- (CONTINUED)



2002 2001
-------- --------

Long-lived assets:
Unites States electrical construction and facilities services .......................... $ 12.5 $ 12.6
United States mechanical construction and facilities services .......................... 204.0 45.9
United States other services ........................................................... 139.4 22.1
-------- --------
Total United States operations ......................................................... 355.9 80.6
Canada construction and facilities services ............................................ 3.3 3.7
United Kingdom construction and facilities services .................................... 13.7 10.7
Other international construction and facilities services ............................... -- --
Corporate administration ............................................................... 2.1 3.6
-------- --------
Total worldwide operations ............................................................. $ 375.0 $ 98.6
======== ========
Goodwill:
United States electrical construction and facilities services .......................... $ 3.8 $ 3.5
United States mechanical construction and facilities services .......................... 170.8 31.8
United States other services ........................................................... 115.8 20.7
-------- --------
Total United States operations ......................................................... 290.4 56.0
Canada construction and facilities services ............................................ -- --
United Kingdom construction and facilities services .................................... -- --
Other international construction and facilities services ............................... -- --
Corporate administration ............................................................... -- --
-------- --------
Total worldwide operations ............................................................. $ 290.4 $ 56.0
======== ========
Total assets:
United States electrical construction and facilities services .......................... $ 308.8 $ 417.7
United States mechanical construction and facilities services .......................... 815.5 457.6
United States other services ........................................................... 287.2 61.0
-------- --------
Total United States operations ......................................................... 1,411.5 936.3
Canada construction and facilities services ............................................ 77.7 62.2
United Kingdom construction and facilities services .................................... 191.6 153.0
Other international construction and facilities services ............................... 5.1 11.5
Corporate administration ............................................................... 72.6 186.7
-------- --------
Total worldwide operations ............................................................. $1,758.5 $1,349.7
======== ========


NOTE N -- SELECTED UNAUDITED QUARTERLY INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)



MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- ---------- ----------

2002 QUARTERLY RESULTS
Revenues ....................................... $810,299 $986,399 $1,052,285 $1,119,068
Gross profit ................................... $ 89,386 $120,216 $ 129,233 $ 143,799
Net income ..................................... $ 7,251 $ 14,828 $ 19,479 $ 21,344
Basic EPS ...................................... $ 0.49 $ 1.00 $ 1.31 $ 1.43
======== ======== ========== ==========
Diluted EPS .................................... $ 0.47 $ 0.96 $ 1.26 $ 1.38
======== ======== ========== ==========
2001 QUARTERLY RESULTS
Revenues ....................................... $837,555 $869,506 $ 848,629 $ 864,164
Gross profit ................................... $ 80,519 $ 92,744 $ 100,867 $ 117,693
Net income ..................................... $ 5,657 $ 11,622 $ 15,291 $ 17,442
Basic EPS ...................................... $ 0.54 $ 1.00 $ 1.03 $ 1.18
======== ======== ========== ==========
Diluted EPS .................................... $ 0.44 $ 0.81 $ 1.00 $ 1.14
======== ======== ========== ==========


46


EMCOR GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE O -- LEGAL PROCEEDINGS

In February 1995, as part of an investigation by the New York County District
Attorney's office into the business affairs of a general contractor that did
business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a search
warrant was executed at Forest's executive offices. On July 12, 2000, Forest was
served with a Subpoena Duces Tecum to produce certain documents as part of a
broader investigation by the New York County District Attorney's office into
illegal business practices in the New York City construction industry. Forest
has been informed by the New York County District Attorney's office that it and
certain of its officers are targets of the investigation. Forest has produced
documents in response to the subpoena and intends to cooperate fully with the
District Attorney's office investigation as it proceeds.

In December 2001, the Company's Canadian subsidiary Comstock Canada Limited
("Comstock") commenced an action against Atomic Energy of Canada Limited
("AECL") claiming approximately Cdn. $6.0 million in connection with Comstock's
work on two medical isotope nuclear reactors and associated works at AECL's
facility at Chalk River, Ontario. Comstock's claim is for holdback, unpaid
change requests, loss of productivity and extended duration costs. AECL has
filed an amended defense denying Comstock's claim and counterclaimed against
Comstock for Cdn. $47.0 million claiming fraud and substantial deficiencies in
Comstock's performance of work which are alleged to have resulted in the need to
replace much of Comstock's work and installed materials and the need to redesign
and reinstall various components of the reactor systems. These deficiencies are
alleged to have caused a significant delay in AECL's ability to obtain the
necessary certifications for operation of the systems. There has been no
document exchange or discoveries in this litigation. The Company believes it has
good and meritorious defenses to the AECL counterclaim.

In August 2002, the Company's subsidiary Heritage Air Systems, Inc,
("Heritage") was added as one of twenty-one defendants named in a civil action
pending in the United States District Court for the Eastern District of New York
by a competitor under the Sherman Act, 15 U.S.C. Section 1 & 2, the Clayton Act,
15 U.S.C. Section 15 & 26, The Labor Management Relations Act, 29 U.S.C. Section
187 (a), and New York state law. Plaintiff, Cool Wind Ventilation Corp., alleges
a conspiracy in restraint of trade and a monopoly in the sheet metal duct
industry in New York City and Long Island. Specifically, the plaintiff alleges
that the defendant Sheet Metal Workers International Association Local No. 28
("Local 28"), certain other trade unions, contractors, including Heritage,
building owners and building managers violated federal antitrust and federal
labor laws by entering into agreements whereby Local 28 would engage in, and to
threaten to engage in, localized and widespread picketing and work stoppages at
job sites where plaintiff or other non-Local 28 contractors were working in
order to compel mechanical contractors to stop or change the way they did
business with plaintiff and other non-Local 28 contractors. As a result of the
alleged conspiracy, plaintiff alleges that it and others were prevented from
competing in the most lucrative area of the sheet metal ductwork industry.
Plaintiff claims judgment for treble the damages it believes it sustained and
which it estimates to be no less than $50.0 million. Heritage answered the
amended complaint, denying all claims of wrongdoing. Discovery continued in the
matter until December 2002 when the action was stayed voluntarily to permit
settlement discussions. In January 2003, the District Court entered an order
dismissing the amended complaint, without prejudice, after it was advised an
agreement in principle settling the matter had been reached by the parties. That
agreement in principle does not require Heritage to pay any damages or desist
from engaging in any of the conduct alleged in the amended complaint.

EMCOR is involved in other proceedings in which damages and claims have been
asserted against it. EMCOR believes it has a number of valid defenses to such
proceedings and claims and intends to vigorously defend itself and does not
believe that a significant liability will result.

Inasmuch as the proceedings and claims in which EMCOR is involved range from
a few thousand dollars to $50.0 million, the outcome of which cannot be
predicted, adverse results could have a material adverse effect on EMCOR's
financial position and/or results of operations.


47


REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of EMCOR Group, Inc.:

We have audited the accompanying consolidated balance sheet of EMCOR Group,
Inc. and subsidiaries as of December 31, 2002, and the related consolidated
statements of operations, cash flows and stockholders' equity and comprehensive
income for the year then ended. Our audit also included the financial statement
schedule listed on Schedule II in Item 15. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audit. The financial statements and schedule of EMCOR Group, Inc. and
subsidiaries as of December 31, 2001, and for each of the two years in the
period then ended were audited by other auditors who have ceased operations and
whose report dated February 20, 2002, expressed an unqualified opinion on those
statements and schedule.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of EMCOR Group, Inc.
and subsidiaries at December 31, 2002, and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note B to the financial statements, on January 1, 2002, the
Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets," which changed the method of accounting for
goodwill and other intangible assets.




Stamford, Connecticut /S/ ERNST & YOUNG LLP
February 21, 2003


48


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of EMCOR Group, Inc.:

We have audited the accompanying consolidated balance sheets of EMCOR Group,
Inc. (a Delaware corporation) and subsidiaries (the "Company") as of December
31, 2001 and 2000, and the related consolidated statements of operations, cash
flows and stockholders' equity and comprehensive income for each of the three
years in the period ended December 31, 2001. These consolidated financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2001 and 2000, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of Valuation and Qualifying
Accounts is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP


Stamford, Connecticut
February 20, 2002


Note:

This is a copy of the Audit Report previously issued by Arthur Andersen LLP
in connection with EMCOR's filing on Form 10-K for the fiscal year ended
December 31, 2001. This Audit Report has not been reissued by Arthur Andersen
LLP in connection with this filing on Form 10-K for the fiscal year ended
December 31, 2002. For further discussion, see Exhibit 23.2 which is filed
herewith and herby incorporated by reference into the Form 10-K for the fiscal
year ended December 31, 2002 of which this report forms a part.


49


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On May 15, 2002, EMCOR dismissed Arthur Andersen LLP ("Arthur Andersen") as
its independent auditors and engaged Ernst & Young LLP ("Ernst & Young") to
serve as its independent auditors for the fiscal year ending December 31, 2002.
The Arthur Andersen dismissal and the Ernst & Young engagement were recommended
by EMCOR's Audit Committee and approved by EMCOR's Board of Directors and became
effective immediately.

Arthur Andersen's reports on EMCOR's consolidated financial statements as of
and for the fiscal years ended December 31, 2001 and December 31, 2000 did not
contain an adverse opinion or disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope or accounting principles.

During the interim period from January 1, 2002 through May 15, 2002 and
EMCOR's 2001 and 2000 fiscal years, there were (i) no disagreements with Arthur
Andersen on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to Arthur Andersen's satisfaction, would have caused Arthur Andersen to
make a reference to the subject matter of the disagreements in connection with
Arthur Andersen's reports on EMCOR's financial statements for such periods and
(ii) no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

EMCOR previously provided Arthur Andersen with a copy of the foregoing
disclosures, and a letter from Arthur Andersen confirming its agreement with
these disclosures was filed as an exhibit to EMCOR's Current Report on Form 8-K
filed with the SEC on May 15, 2002 and which is hereby incorporated herein by
reference.

During the interim period from January 1, 2002 through May 15, 2002 and
EMCOR's 2001 and 2000 fiscal years, EMCOR did not consult Ernst & Young with
respect to the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on EMCOR's consolidated financial statements, or any other matters or
reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.


50


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item 10 with respect to directors is
incorporated herein by reference to the sections of the registrant's definitive
proxy statement for the 2003 Annual Meeting of Stockholders entitled "Election
of Directors," which Proxy Statement is to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year to which this Form 10-K relates (the "Proxy Statement").
The information required by this Item 10 concerning compliance with Section
16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference
to the section of the Proxy Statement entitled "Section 16(a) Beneficial
Ownership Reporting Compliance." Information regarding executive officers is
contained in Part I of this Form 10-K following Item 4 under the heading
"Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated herein by reference
to the sections of the Proxy Statement entitled "Executive Compensation,"
"Employment Contracts and Termination of Employment and Change of Control
Arrangements," "Director Compensation," "Compensation Committee Interlocks and
Insider Participation," and "Compensation Committee Report."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this Item 12 is incorporated herein by reference
to the sections of the Proxy Statement entitled "Security Ownership of Certain
Beneficial Owners," "Security Ownership of Management," and "Equity Compensation
Plans."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item 13 is incorporated herein by reference
to the section of the Proxy Statement entitled "Certain Related Transactions."

ITEM 14. CONTROLS AND PROCEDURES

(a) Based on an evaluation of EMCOR's disclosure controls and procedures
conducted within 90 days of the date of filing this Form 10-K, the Chairman of
the Board and Chief Executive Officer of EMCOR, Frank T. MacInnis, and the Chief
Financial Officer of EMCOR, Leicle E. Chesser, have concluded that disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c))
promulgated under the Securities Exchange Act of 1934 are effective.

(b) There were no significant changes in the internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their most recent evaluation.


51


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The following consolidated financial statements of EMCOR Group, Inc.
and Subsidiaries are included in Part II, Item 8: Financial
Statements:
Consolidated Balance Sheets -- December 31, 2002 and 2001
Consolidated Statements of Operations -- Years Ended December 31,
2002, 2001 and 2000 Consolidated Statements of Cash Flows -- Years
Ended December 31, 2002, 2001 and 2000 Consolidated Statements of
Stockholders' Equity and Comprehensive Income -- Years Ended
December 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements
Report of Independent Auditors

(a)(2) The following financial statement schedules are included in this Form
10-K report: Schedule II -- Valuation and Qualifying Accounts

All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the
consolidated financial statements or notes thereto.

(a)(3) The exhibits listed on the Exhibit Index following the consolidated
financial statements hereof are filed herewith in response to this
Item.

(b) Report on Form 8-K:

A report on Form 8-K was filed by EMCOR on October 4, 2002 and that
filing includes a U.S.$275,000,000 Credit Agreement signed September
26, 2002 by and among EMCOR and certain of its subsidiaries and
Harris Trust and Savings Bank individually and as Agent and the
Lenders which are or become parties thereto.


52


SCHEDULE II

EMCOR GROUP, INC.
AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)



BALANCE AT ADDITIONS
BEGINNING COSTS AND CHARGED TO BALANCE AT
DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS (1) DEDUCTIONS (2) END OF YEAR
------------------------------------------- ---------- --------- ----------------- ------------- -----------

ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 2002 .................... $35,091 3,354 5,129 (2,963) $40,611
Year Ended December 31, 2001 .................... $36,917 2,856 -- (4,682) $35,091
Year Ended December 31, 2000 .................... $31,083 6,419 -- (585) $36,917


- -----------
(1) Amount principally relates to business acquisitions.
(2) Deductions represent uncollectible balances of accounts receivable written
off, net of recoveries.


53


EMCOR GROUP, INC.
AND SUBSIDIARIES

EXHIBIT INDEX



EXHIBIT INCORPORATED BY REFERENCE TO, OR
NO. DESCRIPTION PAGE NUMBER
------ ---------- --------------------------------


2(a) -- Disclosure Statement and Third Amended Joint Plan of Exhibit 2(a) to EMCOR's Registration
Reorganization (the "Plan of Reorganization") Statement on Form 10 as originally filed
proposed by EMCOR Group, Inc. (formerly JWP INC.) March 17, 1995 (the "Form 10")
or "EMCOR") and its subsidiary SellCo Corporation
(the "Company" ("SellCo"), as approved for
dissemination by the United States Bankruptcy Court,
Southern District of New York (the "Bankruptcy Court"),
on August 22, 1994.

2(b) -- Modification to the Plan of Reorganization dated Exhibit 2(b) to Form 10
September 29, 1994

2(c) -- Second Modification to the Plan of Reorganization dated Exhibit 2(c) to Form 10
September 30, 1994

2(d) -- Confirmation Order of the Bankruptcy Court dated September 30, Exhibit 2(d) to Form 10
1994 (the "Confirmation Order") confirming the Plan of
Reorganization, as amended

2(e) -- Amendment to the Confirmation Order dated December 8, 1994 Exhibit 2(e) to Form 10

2(f) -- Post-confirmation modification to the Plan of Reorganization Exhibit 2(f) to Form 10
entered on December 13, 1994

2.1 -- Purchase Agreement dated as of February 11, 2002 by and among Exhibit 2.1 to EMCOR's Report on Form
Comfort Systems USA, Inc. and EMCOR-CSI Holding Co. 8-K dated February 14, 2002

3(a-1) -- Restated Certificate of Incorporation of EMCOR filed Exhibit 3(a-5) to Form 10
December 15, 1994

3(a-2) -- Amendment dated November 28, 1995 to the Restated Certificate Exhibit 3(a-2) to EMCOR's Annual Report
of Incorporation of EMCOR on Form 10-K for the year ended
December 31, 1995 (the "1995 Form 10-K")

3(a-3) -- Amendment dated February 12, 1998 to the Restated Certificate Exhibit 3(a-3) to EMCOR's Annual Report
of Incorporation on Form 10-K for the year ended
December 31, 1997 (the "1997 Form 10-K")

3(b) -- Amended and Restated By-Laws Exhibit 3(b) to EMCOR's Annual Report
on Form 10-K for the year ended December
31, 1998 (the "1998 Form 10-K")

3(c) -- Rights Agreement dated March 3, 1997 between EMCOR and Exhibit 1 to EMCOR's Report on Form 8-K
the Bank of New York dated March 3, 1997

4.1(a) -- U.S. $275,000,000 Credit Agreement by and among EMCOR Exhibit 4 to EMCOR's Report on Form 8-K
Group, Inc. and certain of its Subsidiaries and Harris Trust dated October 4, 2002
and Savings Bank individually and as Agent and the Lenders
which are or become parties thereto dated as of September 26,
2002 (the "Credit Agreement")

4.1(b) -- Amendment and Waiver letter dated December 10, 2002 to the Page
Credit Agreement*

4.2 -- Subordinated Indenture dated as of March 18, 1998 Exhibit 4(b) to EMCOR's Quarterly Report
("Indentured") between EMCOR and State Street Bank and on Form 10-Q for the quarter ended
Trust Company, as Trustee ("State Street Bank" March 31, 1998 ("March 1998 Form 10-Q")

4.3 -- First Supplemental Indenture dated as of March 18, 1998 to Exhibit 4(c) to March 1998 Form 10-Q
Indenture between EMCOR and State Street Bank



54


EMCOR GROUP, INC.
AND SUBSIDIARIES

EXHIBIT INDEX



EXHIBIT INCORPORATED BY REFERENCE TO, OR
NO. DESCRIPTION PAGE NUMBER
------ ---------- --------------------------------

4.4 -- Indenture dated as of December 15, 1994, between SellCo and Exhibit 4.4 to Form 10
Fleet National Bank of Connecticut, as trustee, in respect
of SellCo's 12% Subordinated Contingent Payment Notes, Due 2004

10(a) -- Employment Agreement made as of January 1, 2002 between Exhibit 10(a) to EMCOR's Annual Report
EMCOR and Frank T. MacInnis on Form 10-K for the year ended
December 31, 2001 (the "2001 Form 10-K")

10(b) -- Employment Agreement made as of January 1, 2002 between Exhibit 10(b) to 2001 Form 10-K
EMCOR and Sheldon I. Cammaker

10(c) -- Employment Agreement made as of January 1, 2002 between Exhibit 10(c) to 2001 Form 10-K
EMCOR and Leicle E. Chesser

10(d) -- Employment Agreement made as of January 1, 2002 between Exhibit 10(d) to 2001 Form 10-K
EMCOR and Jeffrey M. Levy

10(e) -- Employment Agreement made as of January 1, 2002 between Exhibit 10(e) to 2001 Form 10-K
EMCOR and R. Kevin Matz

10(f) -- Employment Agreement made as of January 1, 2002 between Exhibit 10(f) to 2001 Form 10-K
EMCOR and Mark A. Pompa

10(g-1) -- 1994 Management Stock Option Plan ("1994 Option Plan") Exhibit 10(o) to Form 10

10(g-2) -- Amendment to Section 12 of the 1994 Option Plan Exhibit 10(g-2) to 2001 Form 10-K

10(g-3) -- Amendment to Section 13 of the 1994 Option Plan Exhibit 10(g-3) to 2001 Form 10-K

10(h-1) -- 1995 Non-Employee Directors' Non-Qualified Stock Option Plan Exhibit 10(p) to Form 10
("1995 Option Plan")

10(h-2) -- Amendment to Section 10 of the 1995 Option Plan Exhibit 10(h-2) to 2001 Form 10-K

10(i-1) -- 1997 Non-Employee Directors' Non-Qualified Stock Option Plan Exhibit 10(k) to 1999 Form 10-K
("1997 Option Plan")

10(i-2) -- Amendment to Section 9 of the 1997 Option Plan Exhibit 10(i-2) to 2001 Form 10-K

10(j) -- 1997 Stock Plan for Directors Exhibit 10(l) to 1999 Form 10-K

10(k-1) -- Continuity Agreement dated as of June 22, 1998 between Exhibit 10(a) to EMCOR's Quarterly
Frank T. MacInnis and EMCOR ("MacInnis Continuity Agreement") Report on Form 10-Q for the quarter
ended June 30, 1998 ("June 1998 Form
10-Q")

10(k-2) -- Amendment dated as of May 4, 1999 to MacInnis Continuity Exhibit 10(h) to June 1999 Form 10-Q
Agreement


55


EMCOR GROUP, INC.
AND SUBSIDIARIES

EXHIBIT INDEX



EXHIBIT INCORPORATED BY REFERENCE TO, OR
NO. DESCRIPTION PAGE NUMBER
------ ---------- --------------------------------

10(l-1) -- Continuity Agreement dated as of June 22, 1998 between Exhibit 10(c) to the June 1998 Form 10-Q
Sheldon I. Cammaker and EMCOR ("Cammaker Continuity
Agreement")

10(l-2) -- Amendment dated as of May 4, 1999 to Cammaker Continuity Exhibit 10(i) to June 1999 Form 10-Q
Agreement

10(m-1) -- Continuity Agreement dated as of June 22, 1998 between Exhibit 10(d) to the June 1998 Form 10-Q
Leicle E. Chesser and EMCOR ("Chesser Continuity Agreement")

10(m-2) -- Amendment dated as of May 4, 1999 to Chesser Continuity Exhibit 10(j) to June 1999 Form 10-Q
Agreement

10(n-1) -- Continuity Agreement dated as of June 22, 1998 between Exhibit 10(b) to the June 1998 Form 10-Q
Jeffrey M. Levy and EMCOR ("Levy Continuity Agreement")

10(n-2) -- Amendment dated as of May 4, 1999 to Levy Continuity Exhibit 10(l) to June 1999 Form 10-Q
Agreement
10(o-1) -- Continuity Agreement dated as of June 22, 1998 between Exhibit 10(f) to the June 1998 Form 10-Q
R. Kevin Matz and EMCOR ("Matz Continuity Agreement")

10(o-2) -- Amendment dated as of May 4, 1999 to Matz Continuity Exhibit 10(m) to June 1999 Form 10-Q
Agreement

10(o-3) -- Amendment dated as of January 1, 2002 to R. Kevin Matz Exhibit 10(o-3) to March 31, 2002
Continuity Agreement Form 10-Q

10(p-1) -- Continuity Agreement dated as of June 22, 1998 between Exhibit 10(g) to the June 1998 Form 10-Q
Mark A. Pompa and EMCOR ("Pompa Continuity Agreement")

10(p-2) -- Amendment dated as of May 4, 1999 to Pompa Continuity Exhibit 10(n) to June 1999 Form 10-Q
Agreement

10(p-3) -- Amendment dated as of January 1, 2002 to Mark A. Pompa Exhibit 10(p-3) to March 31, 2002
Continuity Agreement Form 10-Q

10(q) -- Release and Settlement Agreement dated December 22, 1999 Exhibit 10(q) to EMCOR's Annual Report
between EMCOR and Thomas D. Cunningham on Form 10-K for the year ended
December 31, 1999

10(r)(i) -- Executive Stock Bonus Plan Exhibit 10(r) to 2001 Form 10-K

10(r)(ii) -- Amendment to Executive Stock Bonus Plan* Page

11 -- Computation of Basic EPS and Diluted EPS for the years ended Page
December 2002 and 2001*

16 -- Current Report on Form 8-K--Changes in Registrant's Exhibit 16 to EMCOR's Report on
Certifying Accountant, dated May 15, 2002 Form 8-K dated May 15, 2002

21 -- List of Significant Subsidiaries* Page

23.1 -- Consent of Ernst & Young LLP* Page

23.2 -- Notice Regarding Consent of Arthur Andersen LLP* Page

99.1 -- Certification Pursuant to Section 906 of the Sarbanes--Oxley Page
Act of 2002 by the Chairman of the Board of Directors and
Chief Executive Officer*

99.2 -- Certification Pursuant to Section 906 of the Sarbanes--
Oxley Act of 2002 by the Executive Vice President Page
and Chief Financial Officer*


- -----------
* Filed Herewith

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, upon request of the
Securities and Exchange Commission, the Registrant hereby undertakes to furnish
a copy of any unfiled instrument which defines the rights of holders of
long-term debt of the Registrant's subsidiaries.


56


SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

EMCOR GROUP, INC.
(Registrant)

Date: February 26, 2003 by /S/ FRANK T. MACINNIS
----------------------------
FRANK T. MACINNIS
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON FEBRUARY 26, 2003.

/S/ FRANK T. MACINNIS Chairman of the Board of Directors and
- ------------------------------ Chief Executive Officer
Frank T. MacInnis

/S/ STEPHEN W. BERSHAD Director
- ------------------------------
Stephen W. Bershad

/S/ DAVID A. B. BROWN Director
- ------------------------------
David A. B. Brown

/S/ ALBERT FRIED, JR. Director
- ------------------------------
Albert Fried, Jr.

/S/ RICHARD F. HAMM, JR. Director
- ------------------------------
Richard F. Hamm, Jr.

/S/ MICHAEL T. YONKER Director
- ------------------------------
Michael T. Yonker

/S/ LEICLE E. CHESSER Executive Vice President and
- ------------------------------ Chief Financial Officer
Leicle E. Chesser

/S/ MARK A. POMPA Vice President and Controller
- ------------------------------
Mark A. Pompa



57


CERTIFICATION

I, Frank T. MacInnis, Chairman of the Board of Directors and Chief Executive
Officer of EMCOR Group, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of EMCOR Group, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.


Date: February 26, 2003 /S/ FRANK T. MACINNIS
--------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer


58


CERTIFICATION

I, Leicle E. Chesser, Executive Vice President and Chief Financial Officer of
EMCOR Group, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of EMCOR Group, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: February 26, 2003 /S/ LEICLE E. CHESSER
-------------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer


59