The effective tax rate for the fourth quarter of 2016 was 12.0% compared with 19.0%. The fourth quarter of 2016 reflected net discrete income tax benefits of $9.4 million compared with $1.3 million. The 2016 amount included a $2.7 million income tax benefit due to the adoption of ASU 2016-09 related to share-based accounting. Excluding the net discrete income tax benefits in both periods, the effective tax rates would have been 27.6% for the fourth quarter of 2016 and 20.8% for the fourth quarter of 2015. The lower rate in the fourth quarter of 2015 primarily reflected the permanent extension of research and development tax credits, retroactive to January 1, 2015, which reduced the fourth quarter 2015 tax provision by approximately $5.9 million.
Stock option expense was $2.8 million for the fourth quarter of 2016, compared with $2.5 million. Pension income was $0.6 million for the fourth quarter of 2016 compared with pension expense of $1.1 million. Interest expense, net of interest income, was $6.0 million for both the fourth quarter of 2016 and 2015. Interest expense in the fourth quarter of 2016 reflects $0.5 million in fees related to the Bridge Facility. Corporate expense increased to $13.4 million for the fourth quarter of 2016, compared with $10.1 million, and reflected higher professional fees expense, including $1.9 million related to the pending e2v acquisition. Other expense was $4.4 million for the fourth quarter of 2016 compared with $1.7 million. The fourth quarter of 2016 reflected $5.5 million of expense for a foreign currency hedge contract related to the pending e2v acquisition.
Based on its current outlook, and excluding the e2v transaction, the company’s management believes that first quarter 2017 earnings per diluted share will be in the range of $1.15 to $1.17 and full year 2017 earnings per diluted share will be in the range of $5.40 to $5.50. The company’s effective tax rate for 2017 is expected to be 28.0%, before discrete items.
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 and divestitures, product sales, capital expenditures, pension matters, stock option compensation expense, interest expense, taxes, exchange rate fluctuations, cost reductions, facility consolidation costs, severance expenses 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; risks associated with our pending acquisition of e2v, including failure to satisfy closing conditions and failure to successfully integrate the to be acquired business; impacts from the United Kingdom's decision to exit the European Union; uncertainties related to the policies of the new U.S. Presidential Administration; and threats to the security of our confidential and proprietary information, including cyber security threats. Continued 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 further 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, including the pending e2v transaction, 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 2015 Annual Report on Form 10-K and subsequent Form 10-Q’s.
The company assumes no duty to publicly update or revise any
forward-looking statements, whether as a result of new information or