 | EXHIBIT 99.1 | |
FOR: | EMCOR GROUP, INC. | |
News Release | ||
CONTACT: | R. Kevin Matz Executive Vice President Shared Services (203) 849-7938 | |
FTI Consulting, Inc. Investors: Jamie Baird (212) 850-5600 | ||
LAK Public Relations, Inc. Media: Lisa Linden / David Simpson (212) 575-4545 | ||
EMCOR GROUP, INC. REPORTS SECOND QUARTER 2018 RESULTS |
- Record Second Quarter Revenues of $1.95 Billion, 3.1% Increase Year-over-Year - |
- Record Second Quarter Diluted EPS from Cont. Operations of $1.21, 27.4% Increase Year-over-Year - |
- Increases Full-Year Revenue Guidance and Diluted EPS Guidance Range - |
NORWALK, CONNECTICUT, July 26, 2018 - EMCOR Group, Inc. (NYSE: EME) today reported results for the second quarter ended June 30, 2018.
For the second quarter of 2018, net income from continuing operations attributable to EMCOR was $71.0 million, or $1.21 per diluted share, compared to $56.8 million, or $0.95 per diluted share, for the second quarter of 2017. Excluding the impairment charge detailed below, non-GAAP net income from continuing operations attributable to EMCOR was $71.9 million, or $1.23 per diluted share, for the second quarter of 2018. Revenues for the second quarter of 2018 totaled $1.95 billion, an increase of 3.1%, compared to $1.90 billion for the second quarter 2017.
Operating income for the second quarter of 2018 was $99.7 million, or 5.1% of revenues, compared to $92.4 million, or 4.9% of revenues, in the prior year period. Included in operating income for the second quarter of 2018 was an impairment charge of $0.9 million. Excluding this impairment charge, non-GAAP operating income for the second quarter of 2018 was $100.6 million, or 5.1% of revenues.
Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures.
Selling, general and administrative expenses for the second quarter of 2018 totaled $189.9 million, or 9.7% of revenues, compared to $181.7 million, or 9.6% of revenues, in the year ago period.
The Company's income tax rate in the second quarter of 2018 was 27.2%, compared to an income tax rate of 36.8% in the year ago period.
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EMCOR Reports Second Quarter Results | Page 2 |
On January 1, 2018, EMCOR adopted the Financial Accounting Standards Board’s new revenue recognition standard, which requires the disclosure of remaining unsatisfied performance obligations (“Remaining Performance Obligations”). Prior to the adoption of the new standard and the related disclosure of Remaining Performance Obligations, the Company had reported backlog on a quarterly basis. As backlog is not a term recognized under the United States generally accepted accounting principles, the Company has eliminated backlog from its reporting starting in the second quarter of 2018. For a detailed discussion regarding the primary difference between Remaining Performance Obligations and historical backlog, please refer to Note 3 in the Company’s Notes to Condensed Consolidated Financial Statements and Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations within the Company’s Form 10-Q for the quarterly period ended March 31, 2018.
Remaining Performance Obligations as of June 30, 2018 were $3.67 billion, compared to $3.60 billion at March 31, 2018. Domestic Remaining Performance Obligations increased $98.0 million from the first quarter of 2018, while Remaining Performance Obligations in the U.K. Building Services segment fell $28.6 million.
Tony Guzzi, Chairman, President and Chief Executive Officer of EMCOR, commented, “The Company delivered record second quarter revenue and record quarterly diluted earnings per share, building upon the strong momentum that we saw during the start of the year. This was driven by continued strength in our U.S. Construction and Building Services segments, as well as excellent performance in our U.K. Building Services segment. Consistent project execution across our business drove an 8% increase in operating income year-over-year and solid operating margin expansion to 5.1% of revenues. We are very pleased with these results, and continue to see strong project opportunities across geographies and end markets.”
Mr. Guzzi added, “Our U.S. Construction segments continued to perform exceptionally, with combined revenue and operating income growth of 2.4% and 9.8%, respectively. Our U.S. Electrical Construction segment revenue increased 6.7% year-over-year driven by solid execution on our diverse mix of projects. We are pleased with the performance in our U.S. Mechanical Construction segment, which grew operating income 8.5% year-over-year, despite a difficult comparison to the year ago period, due to the benefit of certain cost recoveries from a project completed in 2016. Our U.S. Building Services segment continued to deliver solid results, with double-digit operating income growth driven by strong performance in our government and energy services businesses. Results in our U.S. Industrial Services segment reflected expected weakness due to typical seasonality, further impacted by the continued residual effects from Hurricane Harvey. However, we believe that we have largely surpassed the headwinds in this segment, and expect improved performance in the second half of 2018 with the resumption of normal demand and increased project activity in our shop business. Finally, our U.K. Building Services segment had another outstanding quarter, with revenue growth of over 33% year-over-year, as we continue to execute specialty project work and expand our business with new contract awards.”
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EMCOR Reports Second Quarter Results | Page 3 |
Revenues for the first six months of 2018 totaled $3.85 billion, an increase of 1.8% compared to $3.79 billion for the first six months of 2017. Net income from continuing operations attributable to EMCOR for the first six months of 2018 was $126.7 million, or $2.15 per diluted share, compared to $109.9 million, or $1.84 per diluted share, for the first six months of 2017. Excluding the impairment charge recorded in the second quarter of 2018, non-GAAP net income from continuing operations attributable to EMCOR for the first six months of 2018 was $127.6 million, or $2.17 per diluted share.
Operating income for the first six months of 2018 was $177.7 million, or 4.6% of revenues, compared to $174.8 million, or 4.6% of revenues, for the first six months of 2017. Included in operating income for the first six months of 2018 was a $0.9 million impairment charge. Excluding this charge, non-GAAP operating income for the first six months of 2018 was $178.6 million, or 4.6% of revenues. SG&A totaled $380.9 million, or 9.9% of revenues, for the first six months of 2018 compared to $365.1 million, or 9.6% of revenues, for the first six months of 2017.
Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures.
Based on favorable project mix and market conditions, EMCOR is raising its full year 2018 revenue guidance to approximately $7.8 billion, an increase from the prior range of $7.6 billion to $7.7 billion. The Company now expects its full year 2018 diluted earnings per share from continuing operations to be in the range of $4.40 to $4.80, an increase from the prior range of $4.10 to $4.70.
Mr. Guzzi concluded, “We are encouraged by our performance thus far in 2018, and are well positioned for continued growth in the second half of the year. As a result, we are raising our guidance for both revenue and diluted earnings per share for the full year. Our updated guidance reflects our better than expected results in the first half of the year, continued excellent operational execution, and a strong, diverse pipeline of project work. As we look ahead, our healthy balance sheet will continue to allow us to pursue strategic acquisition opportunities that enhance our geographic reach and the breadth of our services, while returning capital to our shareholders through additional share repurchases and dividends.”
EMCOR Group, Inc. is a Fortune 500 leader in mechanical and electrical construction services, industrial and energy infrastructure and building services. This press release and other press releases may be viewed at the Company’s website at www.emcorgroup.com.
EMCOR Group's second quarter conference call will be available live via internet broadcast today, Thursday, July 26, at 10:30 AM Eastern Daylight Time. The live call may be accessed through the Company's website at www.emcorgroup.com.
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EMCOR Reports Second Quarter Results | Page 4 |
Forward Looking Statements:
This release contains certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995. Any such comments speak only as of this date and EMCOR assumes no obligation to update any such forward-looking statements. These forward-looking statements may include statements regarding anticipated future operating and financial performance, the nature and impact of our backlog, our ability to pursue acquisitions, our ability to return capital to shareholders, market opportunities, and market growth. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly these statements are no guarantee of future performance. Such risk and uncertainties include, but are not limited to, adverse effects of general economic conditions, changes in the political environment, changes in the specific markets for EMCOR’s services, adverse business conditions, availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity and mix of business. Certain of the risk factors associated with EMCOR’s business are also discussed in Part I, Item 1A “Risk Factors,” of the Company’s 2017 Form 10-K and in other reports filed from time to time with the Securities and Exchange Commission and available at www.sec.gov and www.emcorgroup.com. Such risk factors should be taken into account in evaluating any forward-looking statements.
Non-GAAP Measures:
This release also includes certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company uses these non-GAAP measures as key performance indicators for the purpose of evaluating performance internally. We also believe that these non-GAAP measures provide investors with useful information with respect to our historical operations. Any non-GAAP financial measures presented are not, and should not be viewed as, substitutes for financial measures required by GAAP, have no standardized meaning prescribed by GAAP and may not be comparable to the calculation of similar measures of other companies.
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EMCOR GROUP, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except share and per share information)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues | $ | 1,953,886 | $ | 1,895,937 | $ | 3,854,274 | $ | 3,787,669 | ||||||||
Cost of sales | 1,663,042 | 1,621,436 | 3,294,311 | 3,246,828 | ||||||||||||
Gross profit | 290,844 | 274,501 | 559,963 | 540,841 | ||||||||||||
Selling, general and administrative expenses | 189,907 | 181,745 | 380,932 | 365,132 | ||||||||||||
Restructuring expenses | 374 | 343 | 464 | 908 | ||||||||||||
Impairment loss on identifiable intangible assets | 907 | — | 907 | — | ||||||||||||
Operating income | 99,656 | 92,413 | 177,660 | 174,801 | ||||||||||||
Net periodic pension (cost) income | 717 | 408 | 1,454 | 794 | ||||||||||||
Interest expense | (3,457 | ) | (3,069 | ) | (6,453 | ) | (6,140 | ) | ||||||||
Interest income | 634 | 73 | 1,178 | 330 | ||||||||||||
Income from continuing operations before income taxes | 97,550 | 89,825 | 173,839 | 169,785 | ||||||||||||
Income tax provision | 26,529 | 33,019 | 47,162 | 59,865 | ||||||||||||
Income from continuing operations | 71,021 | 56,806 | 126,677 | 109,920 | ||||||||||||
Loss from discontinued operation, net of income taxes | (205 | ) | (18 | ) | (487 | ) | (522 | ) | ||||||||
Net income including noncontrolling interests | 70,816 | 56,788 | 126,190 | 109,398 | ||||||||||||
Less: Net income attributable to noncontrolling interests | — | (30 | ) | — | — | |||||||||||
Net income attributable to EMCOR Group, Inc. | $ | 70,816 | $ | 56,758 | $ | 126,190 | $ | 109,398 | ||||||||
Basic earnings (loss) per common share: | ||||||||||||||||
From continuing operations | $ | 1.22 | $ | 0.96 | $ | 2.16 | $ | 1.85 | ||||||||
From discontinued operation | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
Diluted earnings (loss) per common share: | ||||||||||||||||
From continuing operations | $ | 1.21 | $ | 0.95 | $ | 2.15 | $ | 1.84 | ||||||||
From discontinued operation | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
Amounts attributable to EMCOR Group, Inc. common stockholders: | ||||||||||||||||
Net income from continuing operations attributable to EMCOR Group, Inc. | $ | 71,021 | $ | 56,776 | $ | 126,677 | $ | 109,920 | ||||||||
Loss from discontinued operation, net of income taxes | (205 | ) | (18 | ) | (487 | ) | (522 | ) | ||||||||
Net income attributable to EMCOR Group, Inc. | $ | 70,816 | $ | 56,758 | $ | 126,190 | $ | 109,398 | ||||||||
Weighted average shares of common stock outstanding: | ||||||||||||||||
Basic | 58,332,934 | 59,290,420 | 58,531,150 | 59,527,863 | ||||||||||||
Diluted | 58,670,595 | 59,639,061 | 58,862,505 | 59,873,416 | ||||||||||||
Dividends declared per common share | $ | 0.08 | $ | 0.08 | $ | 0.16 | $ | 0.16 | ||||||||
EMCOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, 2018 (Unaudited) | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 306,624 | $ | 467,430 | ||||
Accounts receivable, net | 1,635,289 | 1,607,922 | ||||||
Contract assets | 156,134 | 122,621 | ||||||
Inventories | 43,665 | 42,724 | ||||||
Prepaid expenses and other | 48,511 | 43,812 | ||||||
Total current assets | 2,190,223 | 2,284,509 | ||||||
Investments, notes and other long-term receivables | 4,180 | 2,309 | ||||||
Property, plant & equipment, net | 124,993 | 127,156 | ||||||
Goodwill | 978,303 | 964,893 | ||||||
Identifiable intangible assets, net | 481,577 | 495,036 | ||||||
Other assets | 90,125 | 92,001 | ||||||
Total assets | $ | 3,869,401 | $ | 3,965,904 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt and capital lease obligations | $ | 15,625 | $ | 15,364 | ||||
Accounts payable | 505,379 | 567,840 | ||||||
Contract liabilities | 551,614 | 524,156 | ||||||
Accrued payroll and benefits | 282,159 | 322,865 | ||||||
Other accrued expenses and liabilities | 150,153 | 220,727 | ||||||
Total current liabilities | 1,504,930 | 1,650,952 | ||||||
Borrowings under revolving credit facility | 25,000 | 25,000 | ||||||
Long-term debt and capital lease obligations | 262,492 | 269,786 | ||||||
Other long-term obligations | 341,846 | 346,049 | ||||||
Total liabilities | 2,134,268 | 2,291,787 | ||||||
Equity: | ||||||||
Total EMCOR Group, Inc. stockholders’ equity | 1,734,283 | 1,673,267 | ||||||
Noncontrolling interests | 850 | 850 | ||||||
Total equity | 1,735,133 | 1,674,117 | ||||||
Total liabilities and equity | $ | 3,869,401 | $ | 3,965,904 | ||||
EMCOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(In thousands) (Unaudited)
2018 | 2017 | |||||||
Cash flows - operating activities: | ||||||||
Net income including noncontrolling interests | $ | 126,190 | $ | 109,398 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 19,233 | 20,354 | ||||||
Amortization of identifiable intangible assets | 21,352 | 24,257 | ||||||
Provision for doubtful accounts | 7 | 2,543 | ||||||
Deferred income taxes | 4,855 | (6,410 | ) | |||||
Excess tax benefits from share-based compensation | (1,065 | ) | (1,554 | ) | ||||
Equity income from unconsolidated entities | (290 | ) | (758 | ) | ||||
Non-cash expense for impairment of identifiable intangible assets | 907 | — | ||||||
Distributions from unconsolidated entities | 1,847 | 1,829 | ||||||
Other reconciling items | 6,531 | 2,208 | ||||||
Changes in operating assets and liabilities, excluding the effect of businesses acquired | (212,217 | ) | (49,204 | ) | ||||
Net cash (used in) provided by operating activities | (32,650 | ) | 102,663 | |||||
Cash flows - investing activities: | ||||||||
Payments for acquisitions of businesses, net of cash acquired | (25,207 | ) | (82,724 | ) | ||||
Proceeds from sale of property, plant and equipment | 605 | 1,629 | ||||||
Purchase of property, plant and equipment | (15,914 | ) | (17,668 | ) | ||||
Investments in and advances to unconsolidated entities | (3,484 | ) | — | |||||
Distributions from unconsolidated entities | 83 | — | ||||||
Net cash used in investing activities | (43,917 | ) | (98,763 | ) | ||||
Cash flows - financing activities: | ||||||||
Repayments of long-term debt and debt issuance costs | (7,634 | ) | (7,601 | ) | ||||
Repayments of capital lease obligations | (696 | ) | (716 | ) | ||||
Dividends paid to stockholders | (9,381 | ) | (9,531 | ) | ||||
Repurchase of common stock | (60,508 | ) | (65,775 | ) | ||||
Taxes paid related to net share settlements of equity awards | (3,745 | ) | (2,637 | ) | ||||
Issuance of common stock under employee stock purchase plan | 2,758 | 2,191 | ||||||
Payments for contingent consideration arrangements | (3,298 | ) | (1,017 | ) | ||||
Net cash used in financing activities | (82,504 | ) | (85,086 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,121 | ) | 1,739 | |||||
Decrease in cash, cash equivalents and restricted cash | (160,192 | ) | (79,447 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of year | 469,388 | 466,660 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 309,196 | $ | 387,213 | ||||
EMCOR GROUP, INC.
SEGMENT INFORMATION
(In thousands) (Unaudited)
For the three months ended June 30, | ||||||||
2018 | 2017 | |||||||
Revenues from unrelated entities: | ||||||||
United States electrical construction and facilities services | $ | 479,542 | $ | 449,222 | ||||
United States mechanical construction and facilities services | 740,657 | 741,817 | ||||||
United States building services | 461,033 | 438,264 | ||||||
United States industrial services | 167,147 | 187,476 | ||||||
Total United States operations | 1,848,379 | 1,816,779 | ||||||
United Kingdom building services | 105,507 | 79,158 | ||||||
Total worldwide operations | $ | 1,953,886 | $ | 1,895,937 | ||||
For the six months ended June 30, | ||||||||
2018 | 2017 | |||||||
Revenues from unrelated entities: | ||||||||
United States electrical construction and facilities services | $ | 934,294 | $ | 892,238 | ||||
United States mechanical construction and facilities services | 1,439,504 | 1,412,946 | ||||||
United States building services | 915,785 | 878,294 | ||||||
United States industrial services | 352,294 | 446,015 | ||||||
Total United States operations | 3,641,877 | 3,629,493 | ||||||
United Kingdom building services | 212,397 | 158,176 | ||||||
Total worldwide operations | $ | 3,854,274 | $ | 3,787,669 | ||||
EMCOR GROUP, INC.
SEGMENT INFORMATION
(In thousands) (Unaudited)
For the three months ended June 30, | ||||||||
2018 | 2017 | |||||||
Operating income (loss): | ||||||||
United States electrical construction and facilities services | $ | 35,985 | $ | 32,118 | ||||
United States mechanical construction and facilities services | 57,583 | 53,073 | ||||||
United States building services | 22,430 | 20,237 | ||||||
United States industrial services | 1,068 | 4,373 | ||||||
Total United States operations | 117,066 | 109,801 | ||||||
United Kingdom building services | 4,601 | 3,018 | ||||||
Corporate administration | (20,730 | ) | (20,063 | ) | ||||
Restructuring expenses | (374 | ) | (343 | ) | ||||
Impairment loss on identifiable intangible assets | (907 | ) | — | |||||
Total worldwide operations | 99,656 | 92,413 | ||||||
Other corporate items: | ||||||||
Net periodic pension (cost) income | 717 | 408 | ||||||
Interest expense | (3,457 | ) | (3,069 | ) | ||||
Interest income | 634 | 73 | ||||||
Income from continuing operations before income taxes | $ | 97,550 | $ | 89,825 | ||||
For the six months ended June 30, | ||||||||
2018 | 2017 | |||||||
Operating income (loss): | ||||||||
United States electrical construction and facilities services | $ | 71,836 | $ | 63,152 | ||||
United States mechanical construction and facilities services | 97,175 | 93,525 | ||||||
United States building services | 39,507 | 34,502 | ||||||
United States industrial services | 4,537 | 21,417 | ||||||
Total United States operations | 213,055 | 212,596 | ||||||
United Kingdom building services | 8,371 | 4,236 | ||||||
Corporate administration | (42,395 | ) | (41,123 | ) | ||||
Restructuring expenses | (464 | ) | (908 | ) | ||||
Impairment loss on identifiable intangible assets | (907 | ) | — | |||||
Total worldwide operations | 177,660 | 174,801 | ||||||
Other corporate items: | ||||||||
Net periodic pension (cost) income | 1,454 | 794 | ||||||
Interest expense | (6,453 | ) | (6,140 | ) | ||||
Interest income | 1,178 | 330 | ||||||
Income from continuing operations before income taxes | $ | 173,839 | $ | 169,785 | ||||
EMCOR GROUP, INC.
RECONCILIATION OF 2018 AND 2017 OPERATING INCOME
(In thousands) (Unaudited)
In our press release, we provide actual 2018 and 2017 second quarter June 30, 2018 and 2017 operating income. The following table provides a reconciliation between 2018 and 2017 operating income based on non-GAAP measures to the most directly comparable GAAP measures.
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
GAAP operating income | $ | 99,656 | $ | 92,413 | $ | 177,660 | $ | 174,801 | ||||||||
Impairment loss on identifiable intangible assets | 907 | — | 907 | — | ||||||||||||
Non-GAAP operating income, excluding impairment loss on identifiable intangible assets | $ | 100,563 | $ | 92,413 | $ | 178,567 | $ | 174,801 | ||||||||
EMCOR GROUP, INC.
RECONCILIATION OF 2018 AND 2017 NET INCOME
(In thousands) (Unaudited)
In our press release, we provide actual 2018 and 2017 second quarter June 30, 2018 and 2017 net income from continuing operations attributable to EMCOR Group, Inc. The following table provides a reconciliation between 2018 and 2017 net income from continuing operations attributable to EMCOR Group, Inc. based on non-GAAP measures to the most directly comparable GAAP measures.
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
GAAP net income from continuing operations attributable to EMCOR Group, Inc. (1) | $ | 71,021 | $ | 56,776 | $ | 126,677 | $ | 109,920 | ||||||||
Impairment loss on identifiable intangible assets (2) | 907 | — | 907 | — | ||||||||||||
Non-GAAP net income from continuing operations attributable to EMCOR Group, Inc., excluding impairment loss on identifiable intangible assets | $ | 71,928 | $ | 56,776 | $ | 127,584 | $ | 109,920 | ||||||||
(1) Amount is income from continuing operations less net income attributable to noncontrolling interest.
(2) Amount excludes de minimus income tax benefit.
EMCOR GROUP, INC.
RECONCILIATION OF 2018 AND 2017 DILUTED EARNINGS PER SHARE FIGURES
(Unaudited)
In our press release, we provide actual 2018 and 2017 second quarter June 30, 2018 and 2017 diluted earnings per common share from continuing operations. The following table provides a reconciliation between 2018 and 2017 diluted earnings per common share based on non-GAAP measures to the most directly comparable GAAP measures.
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
GAAP diluted earnings per common share from continuing operations | $ | 1.21 | $ | 0.95 | $ | 2.15 | $ | 1.84 | ||||||||
Impairment loss on identifiable intangible assets (1) | 0.02 | — | 0.02 | — | ||||||||||||
Non-GAAP diluted earnings per common share from continuing operations, excluding impairment loss on identifiable intangible assets | $ | 1.23 | $ | 0.95 | $ | 2.17 | $ | 1.84 | ||||||||
(1) Amount excludes de minimus income tax benefit.
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