Northrop subleased a portion of the property with the approval of the Port District until early 2001. TDY also entered into three separate sublease arrangements for portions of the property subject to the approval of the Port District, which the Port District refused. After its administrative appeal to the Port District was denied, TDY commenced a lawsuit against the Port District. TDY alleged breach of contract, inverse condemnation, tortious interference with a prospective economic advantage and other causes of action relating to the Port District’s failure to consent to subleases of the space. The Port District filed a cross-complaint against TDY in March 2003. The Complaint alleged breach of contract for failure to pay rent and breach relating to removal of structures from the property. Trial on the state court matter commenced on February 25, 2004 and concluded on March 10, 2004. The jury rendered a verdict in favor of the Port on its claim and awarded damages to the Port District. As a result, ATI’s results for 2003 reflect a charge of $22.5 million, which includes the jury award and related costs. The company plans to appeal the verdict. This charge is included in accrued liabilities on the consolidated balance sheet at December 31, 2003. In June 2003, the Port District also commenced a separate action in United States District Court in San Diego against the Company (“Federal Court Complaint”) alleging federal, state and common law claims related to alleged environmental contamination on the property. The Federal Court Complaint seeks an unspecified amount of damages and a declaratory judgment as to TDY’s liability for contamination on the property. Oral argument on the Company’s Motion to Dismiss portions of the Federal Court Complaint is scheduled for March 15, 2004. The Company has denied the remaining allegations in the Federal Court Complaint. In another matter related to the San Diego facility, the Port District requested that the California Department of Toxic Substances Control (“DTSC”) evaluate whether the property is regulated as a hazardous waste transportation, storage, or disposal facility under the Resource Conservation and Recovery Act (“RCRA”) and similar state laws. In response to the Port District’s request, on October 30, 2003 DTSC informed the Company that the closure of the four solid waste management units (“unit”) at the San Diego facility is subject to DTSC oversight and that since facility-wide corrective action is proceeding under the oversight of the San Diego Regional Water Quality Control Board (“Regional Board”), DTSC’s involvement would be limited, to the extent applicable, to unit closure and post-closure. The Company is evaluating data from the Site to respond to DTSC’s positions. The Company conducted an environmental assessment of portions of the San Diego facility at the request of the Regional Board. A report of the assessment was submitted to the Regional Board and at this stage of the assessment, the Company cannot predict if any remediation will be necessary. The Company remediated in 1998 and continues to monitor a lagoon near the San Diego facility. Also, prior to vacating the San Diego facility, the Company was seeking approval from the San Diego Department of Public Health for the 1996 closure of four underground storage tanks at the San Diego facility. The Port District has removed underground storage tanks from the facility, and the Company is no longer awaiting approval of the closure. The Company is evaluating potential claims it has against neighboring property owners and other PRPs related to the environmental condition of the San Diego facility. The Port District has informed the Company that it has commenced a site-wide environmental investigation of the Property. While the outcome of these environmental matters cannot be predicted with certainty, and the Company believes that the claims against it are not meritorious, an adverse resolution of the matters relating to the San Diego facility could have a material adverse affect on the Company’s results of operations and financial condition. TDY and another wholly-owned subsidiary of the Company, among others, have been identified by the U.S. Environmental Protection Agency (EPA) as PRPs at the Li Tungsten Superfund Site in Glen Cove, New York. The Company believes that most of the contamination at the Site resulted from work done while the U.S. Government either owned or controlled operations at the Site, or from processes done for various agencies of the United States, and that the United States is liable for a substantial portion of the remediation costs at the Site. In November 2000, TDY filed a cost recovery and contribution action against the U.S. Government. No trial date has been scheduled. In March 2003, the Court ordered the parties, including the U.S. Government, to fund a portion of the remediation costs at the Site. TDY and EPA continue discussions to settle this matter. The U.S. Government and two other PRPs have reached a proposed settlement with EPA in 2003 (“the Settlement”), the terms of which may preclude TDY’s complaint from proceeding against the U.S. Government. The Settlement is subject to public comment and approval by the Court. The Company submitted comments on the Settlement on the grounds that it is not supported by the facts, and is unfair and unreasonable. The Company expects to oppose entry of the Settlement by the Court. The Company is also seeking contribution from other PRPs at the Site. Based on information presently available, the Company believes its reserves on this matter are adequate. An adverse resolution of this matter could have a material adverse effect on the Company’s results of operations and financial condition. ATI Annual Report 2003 63