Canada construction and facilities services operations operating income decreased by $1.0 million for 1999 compared to 1998 principally due to the decrease in revenues derived from Eastern Canada operations and the delay in commencing certain projects in 1999 caused by delays in the bidding process for certain jobs. Operating income as a percentage of revenues decreased 0.5% in 1999 compared to 1998 for the same reasons attributable to the dollar decrease in operating income. The 0.2% increase in operating income as a percentage of revenues for 1998 compared to 1997 was primarily due to the increase in construction and facility services activities in the Eastern Canadian markets, which markets generally have higher operating margin jobs than typical in other markets in which EMCOR operates.

United Kingdom construction and facilities services operating income of $3.2 million for 1999 was an improvement compared to an operating loss of $0.9 million for 1998. The improvement was primarily attributable to growth in selected construction and facilities services markets in the United Kingdom. For 1998, operating losses decreased to $0.9 million, as compared to operating losses of $4.9 million for 1997. This decrease was attributable to growth in revenues for EMCOR operations in the Southern United Kingdom.

General corporate expenses for 1999 increased by $2.5 million from 1998 levels, and increased by $2.1 million between 1998 and 1997 periods. The increases are attributable to increased variable overhead costs associated with the Company's increased revenues, as well as incremental fixed costs to support future growth in operations.

Interest expense decreased by $0.5 million for 1999 compared to 1998, principally due to lower average outstanding borrowings. In addition, EMCOR's cost of borrowing was lower during 1999 as compared to 1998. The cost of borrowing was lower due to the 1998 issuance of 5.75% convertible subordinated notes, a portion of the proceeds from which were used to repay the Series C notes. These transactions accounted for the decrease in interest expense. In addition, in December 1998 EMCOR amended its working capital facility which generally provided for lower costs of borrowing. Interest expense decreased $2.0 million for 1998 compared with 1997 due primarily to the above mentioned Series C and convertible subordinated notes transactions in March 1998.

Interest income decreased by $1.5 million for 1999 compared with 1998, primarily due to reduced cash available to invest after approximately $55.8 million was utilized for acquisitions in 1999. Interest income increased by $2.5 million for 1998 compared to 1997. This increase was due to the increase in available cash balances resulting from the sales proceeds of the 5.75% convertible subordinated notes and equity offering.

Liquidity and Capital Resources On March 18, 1998, EMCOR sold, pursuant to underwritten public offerings, $100.0 million principal amount of 5.75% convertible subordinated notes and 1,100,000 shares of its common stock. Interest on the 5.75% convertible subordinated notes is payable semi-annually. The 5.75% convertible subordinated notes are unsecured indebtedness of EMCOR and are convertible at any time into common stock of EMCOR at a conversion price of $27.34 per share.

On March 24, 1998, the underwriter of the 5.75% convertible subordinated notes offering exercised in full its over-allotment option to purchase an additional $15.0 million of 5.75% convertible subordinated notes, and accordingly, an additional $15.0 million principal amount of such notes were issued.

During the third quarter of 1998, EMCOR's Board of Directors authorized a stock repurchase program under which EMCOR may repurchase up to $20.0 million of its common stock. As of December 31, 1999, EMCOR had repurchased 1,131,995 shares of its common stock at an aggregate cost of approximately $16.8 million.

Proceeds received from the sale of the 5.75% convertible subordinated notes along with proceeds from the sale of common stock were used to redeem the Series C notes, repay then outstanding borrowings under EMCOR's working capital credit lines, prepay EMCOR's Supplemental Sellco Note and accrued interest thereon and for the acquisition of certain businesses through December 31, 1999.