The effective tax rate for the fourth quarter of 2021 was 6.2%, compared with 6.4%. The fourth quarter of 2021 reflected net discrete income tax benefits of $26.2 million, which included an income tax benefit of $18.2 million primarily related to the resolution of certain FLIR tax reserves and a $3.2 million income tax benefit related to share-based accounting. The fourth quarter of 2020 reflected net discrete income tax benefits of $18.8 million which included $5.7 million in income tax benefit related to share-based accounting. The fourth quarter of 2020 also included net discrete income tax benefits of $9.8 million primarily related to U.S. export sales, U.S. research credits and other items. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 21.4% for the fourth quarter of 2021, compared with 19.7%.

Other

Stock option expense was $6.4 million for the fourth quarter of 2021 compared with $5.9 million. Stock option expense for fiscal year 2021 was $20.0 million, compared with $24.7 million for fiscal year 2020. Restricted stock unit expense for FLIR employees was $1.5 million in the fourth quarter of 2021 and was $7.8 million for fiscal year 2021 and is included in the Digital Imaging segment results. Non-service retirement benefit income was $2.8 million for the fourth quarter of 2021, compared with $3.2 million. Interest expense, net of interest income, increased to $23.5 million for the fourth quarter of 2021 compared with $3.4 million. The higher 2021 amount included interest and debt expense on the debt incurred to fund the FLIR acquisition. Corporate expense increased to $17.5 million for the fourth quarter of 2021, compared with $14.7 million. The higher 2021 amount included higher professional fees and compensation expense.

Outlook

Based on its current outlook, the company’s management believes that first quarter 2022 GAAP diluted earnings per common share will be in the range of $3.12 to $3.22 and full year 2022 GAAP diluted earnings per common share will be in the range of $14.10 to $14.55. The company's management further believes that first quarter 2022 non-GAAP diluted earnings per common share will be in the range of $4.02 to $4.10 and full year 2022 non-GAAP diluted earnings per common share will be in the range of $17.60 to $18.00. The non-GAAP outlook excludes acquired intangible asset amortization for all acquisitions. The company’s annual expected tax rate for 2022 is 22.8%, before discrete tax items.

Use of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). We supplement the reporting of our financial results determined under GAAP with certain non-GAAP financial measures. The non-GAAP financial measures presented provides management, financial analysts, and investors with additional useful information in evaluating the performance of the company. The non-GAAP financial measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Further details on reasons that we use non-GAAP financial measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included following our GAAP financial statements.

Forward-Looking Statements Cautionary Notice

This earnings release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, with respect to management’s beliefs about the financial condition, results of operations and businesses of Teledyne in the future. Forward-looking statements involve risks and uncertainties, are based on the current expectations of the management of Teledyne and are subject to uncertainty and changes in circumstances.

The forward-looking statements contained herein may include statements relating to stock option compensation expense, and about the expected effects on Teledyne of the acquisition of FLIR and synergies related to the transaction, anticipated capital expenditures and product developments, and other strategic options. Forward-looking statements generally are accompanied by words such as “projects”, “intends”, “expects”, “anticipates”, “targets”, “estimates”, “will” and words of similar import that convey the uncertainty of future events or outcomes. All statements made in this communication that are not historical in nature should be considered forward-looking. By its nature, forward-looking information is not a guarantee of future performance or results and involves risks and uncertainties because it relates to events and depends on circumstances that will occur in the future.

Actual results could differ materially from these forward-looking statements. Many factors could change anticipated results, including ongoing challenges and uncertainties posed by the COVID pandemic for businesses and governments around the world, including production, supply, contractual and other disruptions, facility closures, furloughs and travel restrictions; the inability to achieve operating synergies with respect to the FLIR acquisition; changes in relevant tax and other laws; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages, higher inflation, including wage competition and higher shipping costs, and labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards; operating results of FLIR being lower than anticipated; disruptions in the global economy; customer and supplier bankruptcies; 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 or changes to U.S. and foreign government spending and budget priorities triggered by the COVID pandemic; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the policies of the U.S. Presidential Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s export and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including cyber security threats; and natural and man-made disasters, including those related to or intensified by climate change. 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 those implemented in response to climate change, could further negatively affect our businesses that supply the oil and gas industry. Continued weakness in the commercial aerospace industry will 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.

Additional factors that could cause results to differ materially from those described above can be found in Teledyne’s Annual Report on Form 10-K for the year ended January 3, 2021, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are on file with the SEC and available in the “Investors” section of Teledyne’s website, teledyne.com, under the heading “Investor Information” and in other documents Teledyne files with the SEC.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. Teledyne assumes no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

A live webcast of Teledyne’s fourth quarter earnings conference call will be held at 11:00 a.m. (Eastern) on Thursday, January 27, 2022. To access the call, go to www.teledyne.com/investors/events-and-presentations approximately ten minutes before the scheduled start time. A replay will also be available for one month starting at 12:00 p.m. (Eastern) on Thursday, January 27, 2022.