Based on currently available information, the Company does not believe that there is a reasonable possibility that a loss exceeding the amount already accrued for any of the sites with which the Company is currently associated (either individually or in the aggregate) will be an amount that would be material to a decision to buy or sell the Company’s securities. 

Additional future developments, administrative actions or liabilities relating to environmental matters however could have a material adverse effect on the Company’s financial condition or results of operations. 

At December 31, 2003, the Company’s reserves for environmental remediation obligations totaled approximately $40.9 million, of which approximately $20.1 million were included in other current liabilities. The reserve includes estimated probable future costs of $13.7 million for federal Superfund and comparable state- managed sites; $8.8 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; $6.5 million for owned or controlled sites at which Company operations have been discontinued; and $11.9 million for sites utilized by the Company in its ongoing operations. The Company continues to evaluate whether it may be able to recover a portion of future costs for environmental liabilities from third parties other than participating potentially responsible parties. 

The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of participating PRPs, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accruals over many years, and will complete remediation of all sites with which it has been identified in up to thirty years. 

Various claims (whether based on U.S. Government or Company audits and investigations or otherwise) have been or may be asserted against the Company related to its U.S. Government contract work, principally related to the former operations of Teledyne, Inc., including claims based on business practices and cost classifications and actions under the False Claims Act. Depending on the circumstances and the outcome, such proceedings could result in fines, penalties, compensatory and treble damages or the cancellation or suspension of payments under one or more U.S. Government contracts. Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. Given the limited extent of the Company’s business with the U.S. Government, the Company believes that a suspension or debarment of the Company would not have a material adverse effect on the future operating results and consolidated financial condition of the Company. Although the outcome of these matters cannot be predicted with certainty, management does not believe there is any audit, review or investigation currently pending against the Company of which management is aware that is likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s results of operations for that period. 

In June 1995, the U.S. Government commenced an action against Allegheny Ludlum in the United States District Court for the Western District of Pennsylvania alleging multiple violations of the Federal Clean Water Act. The trial of this matter concluded in February 2001. In February 2002, the Court issued a decision imposing a penalty of $8.2 million for incidents at five facilities that occurred over a period of approximately six years which Allegheny Ludlum had reported to the appropriate environmental agencies. The Company asked the Court to reconsider its decision, which the Court denied in October 2002. The Company has appealed the Court decision. At December 31, 2003, the Company had adequate reserves, including accrued interest, for this matter. 

In March 1995, Kaiser Aerospace & Electronics Corporation (“Kaiser”) filed a civil complaint against Teledyne Industries, Inc. (now TDY Industries, Inc. (“TDY”), a wholly-owned subsidiary of the Company, and Dimeling Schreiber & Park (“DS&P”), DS&P’s general partners, and New Piper Aircraft, Inc. in the state court for Miami-Dade County, Florida. The complaint alleged that TDY breached a Cooperation and Shareholder’s Agreement with Kaiser under which the parties agreed to cooperate in the filing and promotion of a proposed plan for acquiring out of bankruptcy the assets of Piper Aircraft, a manufacturer of general aviation aircraft. TDY and Kaiser are engaged in discovery and have agreed to participate in a mediation. Kaiser requested that the court impose a constructive trust on TDY’s equity interest in privately held New Piper Aircraft, Inc., which represented approximately 30% of the equity of New Piper Aircraft, Inc., which interest was terminated in 2003 in a merger transaction involving New Piper. In the alternative, Kaiser also seeks unspecified damages in an amount “to be determined at trial.” The trial for this matter is not set. While the outcome of the litigation cannot be predicted, and the Company believes that the claims are not meritorious, an adverse resolution of this matter could have a material adverse effect on the Company’s results of operations and financial condition. 

TDY Industries, Inc. and the San Diego Unified Port District (“Port District”) are involved in litigation in State Court in San Diego, California concerning a lease of property located in San Diego, California (“San Diego facility”). TDY operated its Teledyne Ryan Aeronautical division (“Ryan”) at the San Diego facility until May 1999, when substantially all the assets and business of Ryan were sold to Northrop Grumman Corporation (“Northrop”). 

