Who We Are

      Teledyne Technologies Incorporated is a leading provider of sophisticated electronic components, instruments and communications products, including defense electronics, data acquisition and communications equipment for airlines and business aircraft, monitoring and control instruments for industrial and environmental applications and components, and subsystems for wireless and satellite communications. We also provide systems engineering solutions and information technology services for defense, space and environmental applications, and manufacture general aviation and missile engines and components, as well as on-site gas and power generation systems.

      We serve niche market segments where performance, precision and reliability are critical. Our customers include major industrial and communications companies, government agencies, aerospace prime contractors and general aviation companies.

      Total sales in 2005 were $1,206.5 million, compared with $1,016.6 million and $840.7 million in 2004 and 2003, respectively. Our aggregate segment operating profit and other segment income were $126.6 million, $89.2 million and $61.9 million in 2005, 2004 and 2003, respectively. Approximately 58% of our total sales in 2005 were to commercial customers and the balance was to the U.S. Government, as a prime contractor or subcontractor. Approximately 47% of these U.S. Government sales were attributable to fixed price-type contracts and the balance to cost plus fee-type contracts. International sales accounted for approximately 18% of total sales in 2005.

      Our four business segments and their respective contributions to our total sales in 2005, 2004 and 2003 are summarized in the following table:

      Our principal executive offices are located at 12333 West Olympic Boulevard, Los Angeles, California 90064-1021. Our telephone number is (310)  893-1600.

Strategy

      Our strategy emphasizes growth in our core markets of defense electronics, environmental instruments and government systems engineering. We intend to strengthen and expand our core businesses with targeted acquisitions. We intend to aggressively pursue operational excellence to continually improve our margins and earnings. Operational excellence to Teledyne includes the rapid integration of the businesses we acquire. Over time, our goal is to create a set of businesses that are truly superior in their niches. We intend to continue to evaluate our product lines to ensure that they are aligned with our strategy.

Our Recent Acquisitions

      During 2005 and subsequently, Teledyne has engaged in a number of acquisitions intended to add to its product and service offerings in the electronic instrumentation market.

In addition to complementing each other, the above-listed acquisitions expand the existing underwater acoustic instruments of Teledyne Geophysical Instruments and the existing water flow measurement instruments of Teledyne Isco, Inc., the latter itself being a June 2004 acquisition.

      Other acquisitions have continued to focus on broadening our line of microwave products for defense and other commercial customers:

These acquisitions serve the same markets and customers as our other defense electronics businesses and also complement our 2004 acquisitions of the defense electronics assets of Filtronic Solid State and Celeritek, Inc.

Teledyne spent $58.4 million, net of cash acquired, on acquisitions in 2005. Teledyne spent $32.2 million, net of cash acquired, in 2006 for the Benthos acquisition.

      Each of the acquired businesses is part of our Electronics and Communications segment. Their results are included in our consolidated financial statements since their respective dates of acquisition. The Benthos acquisition was completed in fiscal year 2006.

Available Information

      Our Annual Report on Form  10-K, our Quarterly Reports on Form  10-Q, any Current Reports on Form  8-K, and any amendments to these reports, are available on our Internet website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. In addition, our Corporate Governance Guidelines, our Corporate Objectives and Guidelines for Employee Conduct and the charters of the standing committees of our Board of Directors are available on our website. Our website address is www.teledyne.com .

      You will be responsible for any costs normally associated with electronic access, such as usage and telephone charges. Alternatively, if you would like a paper copy of any such SEC report (without exhibits) or document, please write to John T. Kuelbs, Executive Vice President, General Counsel and Secretary, Teledyne Technologies Incorporated, 12333 West Olympic Blvd., Los Angeles, California 90064-1021, and a copy of such requested document will be provided to you, free of charge.

      In April 2005, we submitted to the New York Stock Exchange the CEO certification required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual. The certification was not qualified in any respect. Additionally, we filed with the SEC as exhibits to our Form  10-K the CEO and CFO certifications required under Section 302 of the Sarbanes-Oxley Act of 2002.

Our Business Segments

Electronics and Communications

      Our Electronics and Communications segment, sometimes referred to as Teledyne Electronic Technologies, provides a wide range of specialized electronic systems, instruments, components and services that address niche market applications in defense, commercial aerospace, communications, industrial, scientific and medical markets.

      Traveling Wave Tubes. Our helix traveling wave tubes are used to provide broadband power amplification of microwave signals. Military applications include radar, electronic warfare and satellite communication. Commercial applications for traveling wave tubes include electromagnetic compatibility test equipment and satellite communication terminals for mobile newsgathering.

      Microwave Components and Subsystems. We design, develop, and manufacture RF and microwave components and subassemblies used in aerospace and defense applications, including electronic warfare and radar. With the 2005 acquisition of Cougar Components, our products include cascadable amplifiers, voltage-controlled oscillators and microwave mixers.

      High Voltage Connectors and Subassemblies. Through Teledyne Reynolds, Inc., we supply specialized high voltage connectors and subassemblies for defense, aerospace and industrial applications. We also produce pilot helmet mounted display components and subsystems for the Joint Helmet Mounted Cueing System, which is designed to give military pilots the ability to designate a target just by looking at it.

      Microelectronic Modules. We develop and manufacture custom microelectronic modules that provide both high reliability and extremely dense packaging for military applications. We also develop custom tamper-resistant microcircuits designed to provide enhanced security in military communication.

      Rigid-Flex Printed Circuit Boards. Our patented rigid-flex printed circuit boards permit our customers to assemble reliable high-density electronic modules that are used in a variety of military and commercial aerospace applications.

      Sequencers. Teledyne Electronic Safety Products continues to provide microprocessor-controlled aircraft ejection seat sequencers and related support elements to military aircraft programs, including the F/ A-18E/ F and F/ A-22. We have developed a new sequencer, which is currently undergoing testing, in support of the F-35 Joint Strike Fighter program.

      Relays and Switches. Teledyne Relays supplies electromechanical relays, solid-state power relays and coaxial switching devices to military and aerospace markets.

      Electronic Manufacturing Services. We serve the market for high-mix, low-volume manufacturing of sophisticated military electronics equipment principally from our facility in Tennessee.

      During 2001, we formed Teledyne Instruments, a group of business units drawn from our Electronics and Communications segment and our Systems Engineering Solutions segment, to focus on monitoring and process control instrumentation. Since then, through acquisitions, we have greatly expanded our presence in the environmental instrumentation markets. In addition to environmental monitoring instruments, we also serve a range of other market applications including industrial process control, petrochemical manufacturing, semiconductor manufacturing, drug discovery and energy exploration and production.

      Environmental Instruments. As a result of our acquisitions, we offer a wide range of products for environmental monitoring. Teledyne Advanced Pollution Instrumentation, Inc. manufactures a broad line of instruments for monitoring low levels of gases such as sulfur dioxide, carbon monoxide and ozone in the air we breathe. Teledyne Monitor Labs, Inc. supplies environmental monitoring systems for the detection,

measurement and reporting of air pollutants from industrial stack emissions. Teledyne Tekmar Company manufactures instruments that automate the preparation and concentration of drinking water and wastewater samples for the analysis of volatile organic compounds in gas chromatographs. It also provides laboratory analytical systems for the detection of total organic carbon. Through Teledyne Leeman Labs, we provide inductively coupled plasma laboratory spectrometers that are used by environmental and quality control laboratories to detect low levels of inorganic contaminants in water and other environmental samples.

      Teledyne Isco, Inc. produces water quality monitoring products such as wastewater samplers and open channel flow meters. Flow meters detect leaks in sewer systems and monitor run off in storm drains. Teledyne Isco, Inc. also manufactures chromatography instruments and accessories for purification of organic compounds. Its liquid chromatography customers include pharmaceutical laboratories involved in drug discovery and development. Additionally, Teledyne Isco manufactures chemical separation instruments for industrial and research use.

      Underwater Acoustic Instruments. We manufacture geophysical streamer cables, hydrophones and specialty products used in offshore hydrocarbon exploration to locate oil and gas reserves beneath the ocean floor. We continue to adapt this technology for the military market, where these products can be used to detect submarines, surface ships and torpedoes.

      With the acquisitions of RD Instruments, Inc. and Benthos, Inc., we have expanded our underwater acoustic instrumentation capabilities. Teledyne RD Instruments, Inc.’s acoustic Doppler current profilers perform precise measurement of currents at varying depths in oceans and rivers, and its Doppler Velocity Logs are used for navigation of civilian and military surface ships and unmanned underwater vehicles and by U.S. Navy divers. Teledyne Benthos, Inc. is a leading provider of oceanographic products used by the U.S. Navy, energy exploration, oceanographic research and port and harbor security services. Its products include acoustic modems for networked underwater communication, a three-dimensional sidescan sonar system and remotely operated underwater vehicles.

      Industrial Gas Analysis. Teledyne Analytical Instruments was a pioneer in the development of precision oxygen analyzers and now offers a broad range of products with various sensitivities for petrochemical, semiconductor manufacturing and other industrial applications. We also manufacture analyzers for a variety of other gases for such market applications. In addition, we sell gas analyzers to a leading supplier of carbon dioxide to the food and beverage market.

      Vacuum and Flow Measurement. Teledyne Hastings Instruments manufactures a broad line of instruments for precise measurement and control of vacuum and gas flows. Our instruments are used in varied applications such as semiconductor manufacturing, refrigeration, metallurgy and food processing.

      Package Inspection Systems. Since the acquisition of Benthos, Inc., under the Taptone ^® brand, we develop quality control equipment for flexible plastic, glass and other packaging used in the beverage, food and pharmaceutical markets.

      Test Services. We manufacture torque sensors and provide technical services for critical applications such as monitoring valves in nuclear power plants.

      Aircraft Information Management. Our aircraft information management solutions are designed to increase the reliability and efficiency of airline transportation. Through Teledyne Controls, we are a leading supplier of digital flight data acquisition and flight safety systems to civil aviation customers. These systems acquire data for use by the aircraft’s flight data recorder, and record additional data for the airline’s operation, such as performance and engine condition monitoring. We have provided these systems for over one-half of Boeing aircraft models in existing airline fleets. We have been increasingly providing our systems to the Airbus A320 and A330/340 family aircraft, and we estimate that our forward fit market share was over 50% at the end of 2005. In addition, our Aviation Information Solutions (AIS) business

designs and manufactures aerospace data acquisition devices, networking products, and flight deck and cabin displays.

      Microelectronic Modules. In addition to military microelectronic modules, we develop and manufacture custom microelectronic modules that provide both high reliability and extremely dense packaging for implantable medical devices, such as pacemakers and defibrillators, and commercial communication products.

      Relays and Switches. In addition to military and aerospace markets, Teledyne Relays supplies electromechanical relays, solid-state power relays and coaxial switching devices to industrial and commercial markets. Applications include microwave and wireless communication infrastructure, RF and general broadband test equipment, test equipment used in semiconductor manufacturing, and industrial and commercial machinery and control equipment.

      Wireless Transceivers and Amplifiers. Our line of integrated transceiver modules provides high data rate point-to -point connectivity in cellular telephone infrastructure. We also supply solid-state microwave power amplifiers used in satellite uplink terminals for corporate networking. They are also used to provide two-way internet access via satellite for both consumer and commercial customers.

      Connectors. We manufacture custom surface mount connectors for applications in computer disk drives and consumer medical electronic devices.

      Electronics Equipment and Printed Circuit Card Assembly. We serve the market for high-mix, low-volume manufacturing of electronic products principally through facilities in Tennessee and Mexico. We manufacture, principally for one customer, key subsystems in medical equipment such as magnetic resonance imaging (MRI) and x-ray systems.

Systems Engineering Solutions

      Our Systems Engineering Solutions segment, principally through Teledyne Brown Engineering, Inc., applies the skills of its extensive staff of engineers and scientists to provide innovative systems engineering, advanced technology, and manufacturing solutions to defense, space, environmental, and homeland security requirements.

      Teledyne Brown Engineering is a well-recognized full-service missile defense contractor with over 50 years of experience in missile defense and related systems integration. Our diverse customer base in this field includes the U.S. Army Aviation and Missile Command (“AMCOM”), the U.S. Army’s Space and Missile Defense Command (“SMDC”), the Missile Defense Agency (“MDA”) and Defense Department major prime contractors.

      We play significant roles in diverse missile defense areas, which range from targets and countermeasures, systems engineering and modeling and simulation, to test and evaluation, as well as other related areas. Our engineering and technological services include systems design, development, integration and testing, with specialization in real-time distributed systems.

      During 2005, we continued our long-standing support of several missile defense programs, including the Ground-based Midcourse Defense (“GMD”) Program, Missile Defense Systems Exerciser and, as part of the Lockheed Martin team, the Targets and Countermeasures Program. These programs involve the test and verification of ballistic missile defense system performance on a large number of major programs, including the Airborne Laser, the Kinetic Energy Interceptor, the Ground-based Midcourse Defense, the Aegis Ballistic Missile Defense, the Patriot Advanced Capability 3, and the Terminal High Altitude Area Defense (“THAAD”). Additionally, we have commenced work on an enhanced test program, launched in December 2005, to support an integrated test lab for the GMD system.

      In addition to our missile defense activities, we are supporting several other U.S. Army programs. After reaching agreement with Germany’s Rheinmetall Defence Electronics in November 2004 to market

its Unmanned Aircraft Systems in the United States, we won Phase I of a three-phase down select program to develop a Class III Unmanned Aerial Vehicle under the Future Combat System Program. During 2005, we also introduced a Multipurpose Troop Transport Carrier System, which is designed to protect soldiers from small arms fire and fragments from improvised explosive devises. This system can be mounted on the Army’s standard trucks or dismounted and configured on the ground to provide fixed-position armor protection.

      We have been active in U.S. space programs for almost 50 years and continue to be a significant contributor to NASA programs. We have played a key role in the International Space Station (“ISS”), and have had roles in the Space Shuttle program. We currently supply 24-hour -per-day service for the payload operation cadre for the ISS Payload Operations and Integration Center, located at NASA’s Marshall Space Flight Center. As a subcontractor to Lockheed Martin, we also work on the ISS Cargo Mission Contract at the Johnson Space Center in 2005. This six-year contract, which began in 2003, involves providing services related to planning, preparation and execution of cargo missions to the ISS.

      We are the prime contractor on the Marshall Space Flight Center Systems Development and Operations Support Contract, which provides engineering services and hardware development support for a variety of space activities. We have been the prime contractor for the Propellants, Pressurants and Calibration Services Contract at Marshall Space Flight Center since 1971. We furnish management, personnel, equipment and materials to operate and maintain the propellant and pressurant generating systems, storage and distribution systems, as well as management and operation of the calibration facilities at the Marshall Space Flight Center.

      We support the U.S. Government’s efforts to clean up dangerous materials and waste. Since 1996, we have supported the U.S. Army’s Non-Stockpile Chemical Materiel Program and we continue to operate the U.S. Army’s Rapid Response System, a mobile chemical waste treatment system used to process chemical agents for disposal. These chemical agents had been used in the past to train military personnel in the detection, measurement and decontamination of dangerous chemicals. During 2005, we continued our work on the U.S. Army’s Non-Stockpile Chemical Materiel Program in support of the destruction of binary chemical warfare materiel stored at the Pine Bluff Arsenal in Arkansas. We also began applying sophisticated computer aided engineering, design, modeling and manufacturing skills to support the U.S. Army’s Edgewood Chemical and Biological Center. In addition, we produce canisters for the processing, stabilization and storage of nuclear-waste products.

      We operate a Department of Energy-certified radiological analysis services laboratory in Knoxville, Tennessee. This laboratory has received certification from the National Environmental Laboratory Accreditation Program in 12 states, including Utah where the largest commercial radiological waste disposal site resides. With its Nuclear Utilities Procurement Issues Committee certification, the laboratory also serves one-third of the nuclear power plants in United States.

      We continue to work to leverage our broad capabilities into the Homeland Defense market. As part of homeland security initiatives, we are supporting the Federal Aviation Administration in the development of an Automated Airborne Flight Alert System. This system, developed in conjunction with Teledyne Controls, is designed to detect flight irregularities by providing selected aircraft flight data and situational awareness data to ground agencies over existing communications links.

      Through Teledyne Solutions, Inc., we are a primary Ballistic Missile Defense (“BMD”) systems engineering and technical assistance contractor for the U.S. Army. Teledyne Solutions is a principal prime

contractor for the Systems Engineering and Technical Assistance Contract (“SETAC”) in support of the U.S. Army Space and Missile Defense Command. We also provide engineering and services support to other major Department of Defense customers including the Missile Defense Agency, the Program Executive Office for Missiles and Space, the Defense Threat Reduction Agency, the Mobile, Alabama Army Corps of Engineers and the Army Environmental Center.

Aerospace Engines and Components

      Our Aerospace Engines and Components segment focuses on the design, development and manufacture of piston engines, turbine engines, electronic engine controls and aviation batteries.

      Principally through Teledyne Continental Motors, Inc., we design, develop and manufacture piston engines and ignition systems for major general aviation airframe manufacturers and provide spare parts and engine rebuilding services to the corresponding aftermarket. We are one of two primary worldwide original equipment producers of piston aircraft engines for the general aviation marketplace.

      Our current OEM product lines include engines powering high-speed composite aircraft, such as the Cirrus SR-20 and SR-22, the Diamond C1, and Lancair Columbia 350 and 400 series, the Liberty XL2 two seat aircraft, and the twin engine Adam A500. In addition, our engines power the Raytheon Beech Bonanza and Baron aircraft, the Mooney Aircraft line of advanced single engine aircraft, and the New Piper Seneca V twin-engine aircraft. We also continue to work with Honda Motor Company to explore the development of a new aircraft piston engine primarily targeted at lower power markets not currently served by our existing business.

      In addition to the sales of new aircraft engines to aircraft producers, we actively support the aircraft engine aftermarket. Piston aircraft engines have a defined life limit generally expressed as time between overhauls or TBO. Our aftermarket support includes building and rebuilding of complete engines, as well as providing a full complement of spare parts such as cylinders, crankcases, fuel systems, crankshafts, camshafts and ignition products. In addition, through Teledyne Mattituck Services, Inc., located in Long Island, New York, and our Fairhope, Alabama service center, we serve as an aftermarket supplier of overhauled piston engines and engine installations to the general aviation marketplace.

      Through Aerosance, Inc., we developed the first production full authority digital electronic controls for piston aircraft engines. These controls, known as PowerLink ^tm FADEC (Full Authority Digital Electronic Control), are designed to automate many functions that currently require manual control, such as fuel flow and power management. This system also saves fuel as a result of improved engine management and facilitates modern electronic driven maintenance of our engines. During 2005, a milestone was realized when Liberty Aircraft began production and delivery of the XL-2 two seat aircraft bearing the PowerLink ^tm controls, We continue the development of FADEC-equipped engines targeted at the most popular models of four and six cylinder piston aircraft engines in use throughout the world. We continue to believe that these control systems will become standard equipment on selected new aircraft and will be retrofitted on higher-end piston engine general aviation aircraft.

      In addition, our Gill ^® line of lead acid batteries is widely recognized as the premier power source for general aviation. We have developed sealed recombinant batteries for business and light jet applications. Teledyne Battery Products, in conjunction with Teledyne Controls, jointly developed an onboard charging and cockpit display kit that permits existing NiCad battery systems to be replaced with Gill ^® sealed lead acid batteries.

      We design, develop and manufacture small turbine engines primarily used in tactical missiles for military markets.

      Our J402 engine powers the Harpoon missile system. Derivatives of this engine power the Standoff Land Attack Missile and the Standoff Land Attack Missile-Expanded Response. Lockheed Martin Corporation selected a derivative of the J402 engine to power the Joint Air-to -Surface Standoff Missile (“JASSM”). We are the sole source provider of engines for the baseline JASSM system.

      Our J700 engine provides the turbine power for the Improved Tactical Air Launched Decoy (“ITALD”) built for the U.S. Navy. The ITALD system enhances combat aircraft survivability by both serving as a decoy and identifying enemy radar sources.

      In 2005, we continued to work under a contract related to the U.S. Army’s Future Combat System for the development of new and derivative turbine engines for unmanned air vehicles, commonly called UAVs, and other future aircraft.

Energy Systems

      Our Energy Systems segment, through Teledyne Energy Systems, Inc., provides hydrogen gas generators and thermoelectric and fuel cell-based power sources. Teledyne Energy Systems, Inc., a majority owned subsidiary of Teledyne, was formed in 2001 by combining Teledyne Brown Engineering’s Energy Systems business unit with assets and intellectual properties of then Florida-based Energy Partners, Inc.

      We manufacture hydrogen/oxygen gas generators that utilize the principle of electrolysis to convert water into high purity hydrogen gas at useable pressures. Our Teledyne Titan ^tm gas generators are used worldwide in electrical power generation plants, semiconductor manufacture, optical fiber production, chemical processing, specialty metals, float glass and other industrial processes. Historically, our sales of hydrogen generators have been largely to the developing countries. Recently, however, the combination of rising hydrogen prices and weather-induced supply disruptions has increased our sales and sales opportunities in the North American market.

      For over 50 years, we have supplied high reliability energy conversion devices and gas generation products based on thermoelectric and electrochemical processes. We provided the thermoelectric power systems for the Pioneer 10 and 11 deep-space missions to Jupiter and Saturn and for the Viking 1 and Viking 2 Mars Landers. In 2005, in partnership with Boeing and under a ten-year $57 million contract signed in 2003 with the U.S. Department of Energy, we produced and tested an operational prototype of the new Multi-Mission Radioisotope Thermoelectric Generator capable of supporting planetary landing and deep space probe missions. If selected for flight, the first of two production units could be used to power the Mars Science Laboratory scheduled to launch in 2009.

      We have a line of fuel cell test stations designed to provide a completely integrated system for fuel cell testing for the PEM fuel cell development market. Our Medusa line of fuel cell test systems provides high quality, simple to use automated test stations for fuel cell and fuel cell stack testing up to 12 kilowatts.

      In 2005, we successfully supplied NASA with a 12 kilowatt PEM full cell engineering unit, and have obtained additional work from NASA to continue development of advanced PEM fuel cell technologies for space.

Customers

      We have hundreds of customers in the electronics, communications, aerospace and defense industries. No commercial customer accounted for more than 10% of our total sales during 2005, 2004 or 2003.

      Approximately 42%, 43%, and 46% of our total sales for 2005, 2004 and 2003, respectively, were derived from contracts with agencies of, and prime contractors to, the U.S. Government. Our principal U.S. Government customer is the U.S. Department of Defense. These sales represented 32%, 33% and 31% of our total sales for 2005, 2004 and 2003, respectively. In 2005, our largest program with the U.S. Government was the Systems Engineering and Technical Assistance contract with the Space and Missile Defense Command, and it represented 5.5% of total sales. In 2004 and 2003, our largest program with the U.S. Government was The Boeing Company — Ground-based Midcourse Defense contract, representing 5.4%, and 5.8% of total sales, respectively. Set forth below are sales by our segments to agencies and prime contractors to the U.S. Government for the periods presented:

      Our total backlog of confirmed orders was approximately $521.9 million at January 1, 2006, $471.3 million at January 2, 2005, and $369.7 million at December 28, 2003. We expect to fulfill 99% of such backlog of confirmed orders during 2006.

Sales and Marketing

      Our sales and marketing approach varies by segment and by products within our segments. A shared fundamental tenet is the commitment to work closely with our customers to understand their needs, with an aim to secure preferred supplier and longer-term relationships.

      Our business segments use a combination of internal sales forces, distributors and commissioned sales representatives to market and sell our products and services. As part of on-going acquisition integration efforts, some of our Teledyne Instruments companies have been consolidating internal sales and servicing efforts.

      Products are also advertised in appropriate trade journals and by means of various websites. To promote our products and other capabilities, our personnel regularly participate in relevant trade shows and professional associations.

      Many of our government contracts are awarded after a competitive bidding process in which we seek to emphasize our ability to provide superior products and technical solutions in addition to competitive pricing.

      Through Teledyne Technologies International Corp. and other subsidiaries, the Company has established branch offices in foreign countries to facilitate international sales for various businesses.

Competition

      We believe that technological capabilities and innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete. Although we have certain advantages that we believe help us compete effectively in our markets, each of our markets is highly competitive. Our businesses vigorously compete on the basis of quality, product performance and reliability, technical expertise, price and service. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources than we do.

Research and Development

      Our research and development efforts primarily involve engineering and design related to improving product lines and developing new products and technologies in the same or similar fields. We spent a total of $291.5 million, $263.3 million, and $218.1 million on research and development and bid and proposal costs for 2005, 2004, and 2003, respectively. Customer-funded research and development, most of which was attributable to work under contracts with the U.S. Government, represented approximately 85%, 88%, and 87% of total research and development costs for 2005, 2004, and 2003, respectively.

      In 2005, approximately 73.6% of the $44.9 million in Company-funded research and development and bid and proposal costs were incurred in our electronics and communications businesses. We expect the level of Company-funded research and development and bid and proposal costs to be approximately $54.4 million in 2006.

Intellectual Property

      While we own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights, which, in the aggregate, are of material importance to our business, our management believes that our business as a whole is not materially dependent upon any one intellectual property or related group of such properties. We own several hundred active patents and are licensed to use certain patents, technology and other intellectual property rights owned and controlled by others. Similarly, other companies are licensed to use certain patents, technology and other intellectual property rights owned and controlled by us.

      Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the expiration or termination of these patents, patent applications and license agreements to have a material adverse effect on our business, results of operations or financial condition.

Employees

      Our total current workforce consists of approximately 7,270 employees. The International Union of United Automobile, Aerospace and Agricultural Implement Workers of America represents approximately 265 active employees in Mobile, Alabama under a collective bargaining agreement that expires by its terms on February 20, 2007. This union also represents approximately 15 of our active employees in Toledo, Ohio under a collective bargaining agreement that expires by its terms on November 9, 2006. We consider our relations with our employees to be good.

Executive Management

      Teledyne’s executive management includes:

      Dr. Mehrabian and Teledyne have entered into a Second Amended and Restated Employment Agreement dated as of January 24, 2006. The agreement provides that we will employ him as the Chairman, President and Chief Executive Officer. The agreement terminates on December 31, 2006, but will automatically be extended annually unless either party gives the other written notice prior to October 31 of the year of such term that it will not be extended. Under the agreement, Dr. Mehrabian’s annual base salary is $700,003. The agreement provides that Dr. Mehrabian is entitled to participate in Teledyne’s annual incentive bonus plan and other executive compensation and benefit programs. The agreement provides Dr. Mehrabian with a non-qualified pension arrangement, under which Teledyne will pay him starting six months following his retirement, as payments supplemental to any accrued pension under our qualified pension plan, an amount equal to 50% of his base compensation as in effect at retirement. The number of years for which such annual amount shall be paid will be equal to the number of years of his service to Teledyne (including service to ATI), but not more than 10 years.

      Fifteen current members of management have entered into Change in Control Severance Agreements with Teledyne. The agreements have a three-year, automatically renewing term. Under the agreements, the executive is entitled to severance benefits if (1) there is a change in control of Teledyne and (2) within three months before or 24 months after the change in control, either we terminate the executive’s

employment for reasons other than for cause or the executive terminates employment for good reason. “Severance benefits” consist of:

Item 1A. Risk Factors.

Risk Factors; Cautionary Statement as to Forward-Looking Statements

      The following text highlights various risks and uncertainties associated with Teledyne. These factors could materially affect “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that we may from time to time make, including forward-looking statements contained in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” of this Form  10-K and in Teledyne’s 2005 Annual Report to Stockholders. It is not possible for management to predict all of such factors, and new factors may emerge. Additionally, management cannot assess the impact of each such factor on Teledyne or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Our dependence on revenue from government contracts subjects us to many risks, including the risk that we may not be successful in bidding for future contracts and the risk that U.S. Government funding for our existing contracts may be diverted to other uses or delayed.

      We perform work on a number of contracts with the Department of Defense and other agencies and departments of the U.S. Government including sub-contracts with government prime contractors. Sales under contracts with the U.S. Government as a whole, including sales under contracts with the Department of Defense, as prime contractor or subcontractor, represented approximately 42% of our total

revenue for 2005, as compared to 43% and 46% of our total revenue for 2004 and 2003, respectively. Performance under government contracts has certain inherent risks that could have a material effect on our business, results of operations and financial condition.

      Government contracts are conditioned upon the continuing availability of Congressional appropriations. Congress typically appropriates funds for a given program on a fiscal-year basis even though contract performance may take more than one year. As a result, at the beginning of a major program, a contract is typically only partially funded, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations available for future fiscal years.

      While U.S. defense spending increased as a result of the September 11th terrorist attacks and the war in Iraq, it is currently expected to moderate over the next few years. Hurricane relief efforts, the continued war on terrorism and the Middle East situation could result in a diversion of funds from programs in which Teledyne participates. Also, continued defense spending does not necessarily correlate to continued business for the Company, because not all the programs in which Teledyne participates or has current capabilities may be provided with continued funding.

      Our Electronics and Communications segment provides a variety of products for newer military platforms such as the F/ A-22 aircraft and F-35 aircraft. Development and production of these aircrafts are very expensive, and there is no guarantee that the Department of Defense, as it balances budget priorities, will continue to provide funding to manufacture and support these platforms.

      Also, over time and for a variety of reasons, programs can evolve and affect the extent of our participation. For example, Teledyne Brown Engineering’s Ground-based Midcourse Defense program was restructured in 2003 to change the emphasis from a focus on test and evaluation to a focus on deployment and sustainment. This resulted in a nearly 16% decline in revenues from this contract that year compared to 2002 (from $58 million to $49 million). Then, in 2004 and 2005, revenues related to this program totaled approximately $54 million and $51 million, respectively, with the increases over 2003 resulting from unanticipated ground tests. The Company expects revenues from this program to decline further in 2006.

      In addition, the U.S. Missile Defense Agency or MDA has been undergoing changes that could affect our Systems Engineering Solution segment. The MDA is in the process of relocating personnel from the Washington, DC area to Huntsville, Alabama. It is difficult to predict the effects of such move and the efficiencies and costs-savings that the U.S. Government will try to extract from such relocation, including possible consolidation with functions of the U.S. Army Space and Missile Defense Command and other government units. Further, a new director has begun additional restructuring of the Ground-based Midcourse Defense program and redefining roles of program participants, and it is too early to tell the impact of such changes.

      The Company, principally and traditionally through its Systems Engineering Solutions segment, has been a significant participant in NASA programs. The centerpiece of our current NASA activities is the International Space Station. While the Company anticipates participating in NASA’s lunar and interplanetary exploration activities, funding for these activities may be reduced to the extent additional funding is sought to return the Space Shuttle to flight.

      Furthermore, we obtain many U.S. Government prime contracts and subcontracts through th