Pension income was $0.2 million for the first quarter of 2015 compared with pension income of $0.3 million. In the first quarter of 2015 Teledyne froze the non-qualified pension plan for top executives resulting in a one-time gain of $1.2 million in the first quarter of 2015. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $3.5 million for both the first quarter of 2015 and 2014. Pension expense determined allowable under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government.
The effective tax rate for the first quarter of 2015 was 29.8% compared with 25.8%. The first quarter of 2015 reflected net discrete tax expense of $0.2 million compared with net discrete tax benefits of $2.3 million. Excluding the net discrete tax items in both periods, the effective tax rates would have been 29.5% for both the first quarter of 2015 and 2014.
Stock Option Compensation Expense
For the first quarter of 2015, the company recorded a total of $3.8 million in stock option expense, of which $2.6 million was recorded in the operating segment results and $1.2 million was recorded as corporate expense. For the first quarter of 2014, the company recorded a total of $2.6 million in stock option expense, of which $1.7 million was recorded in the operating segment results and $0.9 million was recorded as corporate expense.
Interest expense, net of interest income, was $5.9 million for the first quarter of 2015, compared with $4.7 million, and primarily reflected higher average debt levels, due to recent acquisitions and the stock repurchase program. Corporate expense was $10.2 million for the first quarter of 2015, compared with $11.1 million, and primarily reflected lower professional fees expense. Other income was $0.8 million for the first quarter of 2015 compared with $0.6 million.
Based on its current outlook, the company’s management believes that second quarter 2015 earnings per diluted share will be in the range of approximately $1.30 to $1.34 and the full year 2015 earnings per diluted share outlook is expected to be in the range of approximately $5.60 to $5.65. The company’s effective tax rate for 2015 is expected to be 29.5%, before discrete items. For the company’s domestic pension plan, the discount rate for 2015 decreased to 4.5% from 5.4%. Total year 2015 pension expense is expected to be $3.0 million, including the one-time gain of $1.2 million in the first quarter, compared with pension income of $1.3 million for total year 2014.
Forward-Looking Statements Cautionary Notice
This press release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, relating to earnings, growth opportunities, acquisitions, product sales, capital expenditures, pension matters, stock option compensation expense, stock repurchases, interest expense, taxes, exchange rate fluctuations and strategic plans. Forward-looking statements are generally accompanied by words such as “estimate”, “project”, “predict”, “believes” or “expect”, that convey the uncertainty of future events or outcomes. All statements made in this press release that are not historical in nature should be considered forward-looking.
Actual results could differ materially from these forward-looking statements. Many factors could change the anticipated results, including: disruptions in the global economy; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures; and threats to the security of our confidential and proprietary information, including cyber security threats. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including with respect to hydraulic fracturing, could negatively affect the company’s businesses that supply the oil and gas industry. Increasing fuel costs could negatively affect the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the company’s pension assets.
Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions or realignment in defense or other government spending and further changes in programs in which the company participates.
While the company’s growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain customers and achieve identified financial and operating synergies. There are additional risks associated with acquiring, owning and operating businesses internationally, including those arising from U.S. and foreign policy changes and exchange rate fluctuations.
While the company believes its internal and disclosure control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and may not be detected.
Readers are urged to read the company’s periodic reports filed with the
Securities and Exchange Commission (“SEC”) for a more complete
description of the company, its businesses, its strategies and the
various risks that the company faces. Various risks are identified in
Teledyne’s 2014 Annual Report on Form 10-K. The company assumes no duty
to publicly update or revise any forward-looking statements, whether as
a result of new information or otherwise.