10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 26, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-6357

ESTERLINE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	13-2595091
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

500 108th Avenue NE Bellevue, Washington	98004
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code 425/453-9400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock ($.20 par value)	New York Stock Exchange
Preferred Stock Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x        No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.                              Yes             X      No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.              X      Yes                       No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x                    Accelerated filer  ¨                    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                  Yes            X      No

As of December 17, 2007, 29,368,089 shares of the Registrant’s common stock were outstanding. The aggregate market value of shares of common stock held by non-affiliates as of April 27, 2007 was $1,081,230,557 (based upon the closing sales price of $42.22 per share).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Annual Report to Shareholders for fiscal year ended October 26, 2007 – Parts I, II and IV.

Portions of Definitive Proxy Statement relating to the Annual Meeting of Shareholders, to be held on March 5, 2008 – Part III.

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PART I

This Report includes a number of forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. Please refer to the section addressing forward-looking information on page 12 for further discussion. In this report, “we,” “our,” “us,” “Company,” and “Esterline” refer to Esterline Technologies Corporation and subsidiaries, unless otherwise noted or context otherwise indicates.

Item 1. Business

(a) General Development of Business.

Esterline, a Delaware corporation formed in 1967, is a leading specialized manufacturing company principally serving aerospace and defense customers. We design, manufacture and market highly engineered products and systems for application within the industries we serve.

Our strategy is to maintain a leadership position in niche markets for the development and manufacture of highly engineered products that are essential to our customers. We are concentrating our efforts to expand selectively our capabilities in these markets, to anticipate the global needs of our customers and to respond to such needs with comprehensive solutions. Our current business and strategic growth plan focuses on the continuous development of these products in three key technology segments – avionics and controls, sensors and systems, and advanced materials including thermally engineered components and specialized high-performance elastomers and other complex materials, principally for aerospace and defense markets. As part of our implementation of this growth plan, we focus on, among other things, expansion of our capabilities as a more comprehensive supplier to our customers, which in fiscal 2007 included the acquisition of CMC Electronics, as described in more detail in the “Overview” section of Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations contained in the Annual Report to Shareholders for the fiscal year ended October 26, 2007, included as Exhibit 13 to this report. Our products are often mission-critical equipment, which have been designed into particular military and commercial platforms and in certain cases can only be replaced by products of other manufacturers following a formal certification process.

Our products have a long history in the aerospace and defense industry and are found on most military and commercial aircraft, helicopters, and land-based systems. For example, our products are used on the majority of active and in-production U.S. military aircraft and on every Boeing commercial aircraft platform manufactured in the past 65 years. In addition, our products are supplied to Airbus, all of the major regional and business jet manufacturers, and the major aircraft engine manufacturers. We differentiate ourselves through our engineering and manufacturing capabilities and our reputation for quality, reliability, and innovation. We work closely with original equipment manufacturers (OEMs) on new, highly engineered product designs which often results in our products being designed into their platforms; this integration often results in sole-source positions for OEM production and aftermarket business. In fiscal 2007, we estimate that 25% of our sales to commercial and military aerospace customers were derived from aftermarket business. Our aftermarket sales, including retrofits, spare parts, and repair services, historically carry a higher gross margin and have more stability than sales to OEMs. In many cases, aftermarket sales extend well beyond the OEM production period, supporting the platform during its entire life cycle.

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Our sales are diversified across three broad markets: defense, commercial aerospace, and general industrial. For fiscal 2007, we estimate we derived approximately 36% of our sales from the defense market, 46% from the commercial aerospace market and 18% from the general industrial market.

(b) Financial Information About Industry Segments.

A summary of net sales to unaffiliated customers, operating earnings and identifiable assets attributable to our business segments for fiscal years 2007, 2006 and 2005 is reported in Note 15 to the Company’s Consolidated Financial Statements contained in the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

(c) Narrative Description of Business.

Avionics & Controls

Our Avionics & Controls business segment designs and manufactures technology interface systems for military and commercial aircraft and land- and sea-based military vehicles, secure communications systems, specialized medical equipment, and other industrial applications.

We are a market leader in developing, manufacturing and marketing sophisticated high reliability technology interface systems for commercial and military aircraft. These products include lighted push-button and rotary switches, keyboards, lighted indicators, panels and displays, and global positioning systems, head-up displays, enhanced vision systems, and electronic flight management systems that are used in a broad variety of control and display applications. They have been integrated into many existing aircraft designs, including every Boeing commercial aircraft platform currently in production. This large installed base provides us with a significant spare parts and retrofit business. We are a Tier 1 supplier on the Boeing 787 program to design and manufacture all of the cockpit overhead panels and embedded software for these systems. In addition, we manufacture control sticks, grips and wheels, as well as specialized switching systems. In this area, we primarily serve commercial and military aviation, and airborne and ground-based military equipment manufacturing customers. For example, we are a leading manufacturer of pilot control grips for most types of military fighter jets and helicopters. Additionally, our software engineering center supports our customers’ needs with such applications as primary flight displays, flight management systems, air data computers and engine control systems.

Our proprietary products meet critical operational requirements and provide customers with significant technological advantages in such areas as night vision compatibility and active-matrix liquid-crystal displays (a technology enabling pilots to read display screens in a variety of light conditions as well as from extreme angles). Our products are incorporated in a wide variety of platforms ranging from military helicopters, fighters and transports, to commercial wide-body, regional and business jets. In fiscal 2007, some of our largest customers for these products included The Boeing Company, Honeywell, Lockheed Martin, BAE Systems, Rockwell Collins, U.S. Department of Defense, Sikorsky, and Smiths Aerospace.

We are also a supplier in custom input integration with a full line of keyboard switch and input technologies for specialized medical equipment, communications systems and comparable equipment for military applications. These products include custom keyboards, keypads, and input devices that integrate cursor control devices, bar-code scanners, displays, laser pointers, and voice activation. We also produce meters that are used for point-of-use and point-of-care in vitro diagnostics. We have

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developed a wide variety of technologies, including plastic and vinyl membranes that protect high-use switches and fully depressible buttons, and backlit elastomer switch coverings that are resistant to exposure from harsh chemicals. These technologies now serve as the foundation for a small but growing portion of our product line. In fiscal 2007, some of our largest customers for these products included Roche, Philips, General Electric, and L-3 Communications.

Sensors & Systems

Our Sensors & Systems business segment produces high-precision temperature, pressure and speed sensors, electrical power switching, control and data communication devices, fluid control components, micro-motors, motion control sensors, and other related systems principally for aerospace and defense customers. We are a market leader for these products in Europe with growing positions in the United States. For example, we are the sole-source supplier of temperature probes for use on all versions of the General Electric/Snecma CFM-56 jet engine. The CFM-56 has an installed base of over 17,000 engines, is standard equipment on new generation Boeing 737 aircraft and was selected as the engine for approximately 45% of all Airbus aircraft delivered to date. We are contracted to design and manufacture the 787’s sensors for the environmental control system and the primary power distribution assembly for the new Airbus A400M military transport. Additionally, we have secured a Tier 1 position with Rolls Royce for the complete suite of sensors for the engine that will power the A400M. The principal customers for our products in this business segment are jet engine manufacturers and airframe manufacturers. In fiscal 2007, some of our largest customers for these products included SAFRAN, Flame, Rolls Royce, Dassault, The Boeing Company, Honeywell, BAE Systems, Pratt & Whitney, British Ministry of Defence, and Eurocopter.

Advanced Materials

Our Advanced Materials business segment develops and manufactures high-performance elastomer products used in a wide range of commercial aerospace and military applications, and combustible ordnance for military applications. We also develop and manufacture highly engineered thermal components for commercial aerospace and industrial applications. This segment focuses principally on process-related technologies.

Specialized High-Performance Applications. We specialize in the development of proprietary formulations for silicone rubber and other elastomer products. Our elastomer products are engineered to address specific customer requirements where superior performance in high temperature, high pressure, caustic, abrasive and other difficult environments is critical. These products include clamping devices, thermal fire barrier insulation products, seals, tubing and coverings designed in custom-molded shapes. Some of the products include proprietary elastomers that are specifically designed for use on or near a jet engine. We are a leading U.S. supplier of high-performance elastomer products to the aerospace industry, with our primary customers for these products being jet and rocket engine manufacturers, commercial and military airframe manufacturers, as well as commercial airlines. In fiscal 2007, some of the largest customers for these products included the U.S. Department of Defense, The Boeing Company, Alliant Techsystems, General Dynamics, Rolls Royce, British Ministry of Defence, Spirit AeroSystems, KAPCO, and Honeywell. We also develop and manufacture high temperature lightweight insulation equipment for aerospace and automotive applications. Our commercial aerospace programs include the 737 and A320 series aircraft and the V2500 and BR710 engines. Our insulation material is used on diesel engine manifolds for earthmover and agricultural applications. In addition, we specialize in the development of thermal protection for petrochemical fire protection systems and nuclear insulation. We design and manufacture high temperature components for industrial and marine markets. Our manufacturing

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processes consist of cutting, pressing, welding stainless steel, Inconel and titanium fabrications. In fiscal 2007, some of the largest customers of these products included Rolls Royce, Airbus, and Spirit AeroSystems.

Other Defense Applications. We develop and manufacture combustible ordnance and electronic warfare countermeasure devices for military customers. We manufacture molded fiber cartridge cases, mortar increments, igniter tubes and other combustible ordnance components primarily for the U.S. Department of Defense. We are currently the sole supplier of combustible casings utilized by the U.S. Armed Forces. Sales are made either directly to the U.S. Department of Defense or through prime contractors, Alliant Techsystems and General Dynamics. These products include the combustible case for the U.S. Army’s new generation 155mm Modular Artillery Charge System, the 120mm combustible case used with the main armament system on the U.S. Army and Marine Corps’ M1-A1/2 tanks, and the 60mm, 81mm and 120mm combustible mortar increments. We are currently the only U.S. supplier of radar countermeasure chaff and one of two suppliers to the U.S. Army of infrared decoy flares used by aircraft to help protect against radar and infrared guided missiles.

A summary of product lines contributing sales of 10% or more of total sales for fiscal years 2007, 2006 and 2005 is reported in Note 15 to the Consolidated Financial Statements contained in the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

Marketing and Distribution

We believe that a key to continued success is our ability to meet customer requirements both domestically and internationally. We have and will continue to improve our world-wide sales and distribution channels in order to provide a wider variety of products and to improve the effectiveness of our customers’ supply chain. For example, our medical device assembly operation in Shanghai, China, which was opened in 2005, serves our global medical customers. In addition, our service center in Singapore has improved our capabilities in Asia for our temperature sensor customers. Other enhancements include combining sales and marketing forces of our operating units where appropriate, cross-training our sales representatives on multiple product lines, and cross-stocking our spares and components.

In the technical and highly engineered product segments in which we compete, relationship selling is particularly appropriate in targeted marketing segments where customer and supplier design and engineering inputs need to be tightly integrated. Participation in industry trade shows is an effective method of meeting customers, introducing new products, and exchanging technical specifications. In addition to technical and industry conferences, our products are supported through direct internal international sales efforts, as well as through manufacturer representatives and selected distributors. Currently, 239 sales people, 279 representatives, and 170 distributors support our operations internationally.

Backlog

Backlog at October 26, 2007, was $985.1 million, compared with $653.5 million at October 27, 2006. We estimate that approximately $253.7 million of backlog is scheduled to be shipped after fiscal 2008.

Backlog is subject to cancellation until delivered, and therefore, we cannot assure that our backlog will be converted into revenue in any particular period or at all. Backlog does not include the total

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contract value of cost-plus reimbursable contracts, which are funded as we incur the costs. Except for the released portion, backlog also does not include fixed-price multi-year contracts.

Competition

Our products and services are affected by varying degrees of competition. We compete with other companies in most markets we serve, many of which have far greater sales volumes and financial resources. Some of our competitors are also our customers on certain programs. The principal competitive factors in the commercial markets in which we participate are product performance, service and price. Part of product performance requires expenditures in research and development that lead to product improvement. The market for many of our products may be affected by rapid and significant technological changes and new product introductions. Our principal competitors include Avidyne, Eaton, ECE, EMS, Gables Engineering, GE Aerospace, Honeywell, Otto Controls, Rockwell Collins, Thales, Ultra Electronics, Telephonics, and Universal Avionics Systems Corporation in our Avionics & Controls segment; Ametek, Meggitt, Deutsch, Tyco, MPC Products and Goodrich in our Sensors & Systems segment; and Kmass, ULVA, Doncasters, Hitemp, Meggitt (including Dunlop Standard Aerospace Group), Adel Wiggins, RE Darling and Parker in our Advanced Materials segment.

Research and Development

Currently, our product development and design programs utilize an extensive base of professional engineers, technicians and support personnel, supplemented by outside engineering and consulting firms when needed. In fiscal 2007, approximately $70.5 million was expended for research, development and engineering, compared with $52.6 million in fiscal 2006 and $42.2 million in fiscal 2005. We believe continued product development is key to our long-term growth, and consequently, we consistently invest in research and development. Examples include research and development projects relating to a ground fault interrupter for aircraft applications, insulation material for various rocket and missile programs, high temperature, low observable material for military applications, and kinematic countermeasure flares for military applications, as well as new sensing technologies including silicon-on-insulator pressure sensors. In fiscal 2005 and 2004, we began bidding and winning new aerospace programs which will result in increased company-funded research and development. These programs included the A400M power distribution assembly, TP400 engine sensors, 787 overhead control panel and 787 environmental control system programs. As a result of the acquisition of CMC in fiscal 2007, we are funding the development of the integrated avionics system for the T6-B. In addition, we actively participate in customer-funded research and development programs, including applications on the new MMA aircraft, UH-60M Blackhawk, VH-71 Presidential Helicopter and Russian Regional Jet.

Foreign Operations

Our principal foreign operations consist of manufacturing facilities located in France, Germany, Canada and the United Kingdom and include sales and service operations located in Singapore and China. For further information regarding foreign operations, see Note 15 to the Consolidated Financial Statements contained in the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

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Government Contracts and Subcontracts

As a contractor and subcontractor to the U.S. government (primarily the U.S. Department of Defense), we are subject to various laws and regulations that are more restrictive than those applicable to private sector contractors. Approximately 11% of our sales were made directly to the U.S. government in fiscal 2007. In addition, we estimate that our subcontracting activities to contractors for the U.S. government accounted for approximately 13% of sales during fiscal 2007. Therefore, we estimate that approximately 24% of our sales during the fiscal year were subject to U.S. government contracting regulations. Such contracts may be subject to termination, reduction or modification in the event of changes in government requirements, reductions in federal spending, and other factors.

Historically, our U.S. government contracts and subcontracts have been predominately fixed-price contracts. Generally, fixed-price contracts offer higher margins than cost-plus contracts in return for accepting the risk that increased or unexpected costs may reduce anticipated profits or cause us to sustain losses on the contracts. The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. government under both cost-plus and fixed-price contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. Department of Defense. The contracts and subcontracts to which we are a party are also subject to profit and cost controls and standard provisions for termination at the convenience of the U.S. government. Upon termination, other than for our default, we will normally be entitled to reimbursement for allowable costs and to an allowance for profit. To date, none of our significant fixed-price contracts have been terminated.

Patents and Licenses

Although we hold a number of patents and licenses, we do not believe that our operations are dependent on our patents and licenses. In general, we rely on technical superiority, continual product improvement, exclusive product features, superior lead-time, on-time delivery performance, quality and customer relationships to maintain competitive advantage.

Seasonality

The timing of our revenues is impacted by the purchasing patterns of our customers and as a result we do not generate revenues evenly throughout the year. Moreover, our first fiscal quarter, November through January, includes significant holiday vacation periods in both Europe and North America. This leads to decreased order and shipment activity; consequently, first quarter results are typically weaker than other quarters and not necessarily indicative of our performance in subsequent quarters.

Sources and Availability of Raw Materials and Components

Due to our diversification, the sources and availability of certain raw materials and components are not as critical as they would be for manufacturers of a single product line. However, certain components, supplies and raw materials for our operations are purchased from single sources. In such instances, we strive to develop alternative sources and design modifications to minimize the effect of business interruptions.

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Environmental Matters

We are subject to federal, state, local and foreign laws, regulations and ordinances that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and water, as well as handling and disposal practices for solid and hazardous waste, and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites or past spills, disposals or other releases of hazardous substances.

At various times we have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and analogous state environmental laws, for the cleanup of contamination resulting from past disposals of hazardous wastes at certain sites to which we, among others, sent wastes in the past. CERCLA requires potentially responsible persons to pay for cleanup of sites from which there has been a release or threatened release of hazardous substances. Courts have interpreted CERCLA to impose strict, joint and several liability on all persons liable for cleanup costs. As a practical matter, however, at sites where there are multiple potentially responsible persons, the costs of cleanup typically are allocated among the parties according to a volumetric or other standard.

We have accrued liabilities for environmental remediation costs expected to be incurred by our operating facilities. Environmental exposures are provided for at the time they are known to exist or are considered reasonably probable and estimable. No provision has been recorded for environmental remediation costs that could result from changes in laws or other circumstances we have not currently contemplated.

Employees

We had approximately 9,361 employees at October 26, 2007, of which 5,081 were based in the United States, 2,729 in Europe, 1,135 in Canada, 305 in Mexico and 111 in Asia. Approximately 20% of the U.S.-based employees were represented by a labor union. Our European operations are subject to national trade union agreements and to local regulations governing employment.

(d) Financial Information About Foreign and Domestic Operations and Export Sales.

See risk factor below entitled “Political and economic changes in foreign countries and markets, including foreign currency fluctuations, may have a material adverse impact on our operating results” under Item 1A of this report and Note 15 to the Consolidated Financial Statements contained in the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

(e) Available Information of the Registrant.

You can access financial and other information on our website, www.esterline.com. We make available through our website, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission. Our Corporate Governance Guidelines and charters for our board committees are available on our website, www.esterline.com/governance/default.stm and our Code of Business Conduct and Ethics, which includes a code of ethics applicable to our accounting and financial employees, including our Chief

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Executive Officer and Chief Financial Officer, is available on our website at www.esterline.com/governance/ethics.stm. Each of these documents is also available in print (at no charge) to any shareholder upon request. Our website and the information contained therein or connected thereto are not incorporated by reference into this Form 10-K.

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Executive Officers of the Registrant

The names and ages of all executive officers of the Company and the positions and offices held by such persons as of December 21, 2007 are as follows:

Name	Position with the Company	Age
Robert W. Cremin	Chairman, President and Chief Executive Officer	67
Robert D. George	Vice President, Chief Financial Officer, Secretary and Treasurer	51
Marcia J. M. Greenberg	Vice President, Human Resources	55
Frank E. Houston	Group Vice President	56
Larry A. Kring	Senior Group Vice President	67
Stephen R. Larson	Vice President, Strategy & Technology	63
Richard B. Lawrence	Group Vice President	60

Mr. Cremin has been Chairman since January 2001. In addition, he has served as Chief Executive Officer and President since January 1999 and September 1997, respectively. Mr. Cremin has an M.B.A. from the Harvard Business School and a B.S. degree in Metallurgical Engineering from Polytechnic Institute of Brooklyn. He has been a director of the Company since 1998.

Mr. George has been Vice President, Chief Financial Officer, Secretary and Treasurer since July 1999. Mr. George has an M.B.A. from the Fuqua School of Business at Duke University and a B.A. degree in Economics from Drew University.

Ms. Greenberg has been Vice President, Human Resources since March 1993. Ms. Greenberg has a J.D. degree from Northwestern University School of Law and a B.A. degree in Political Science from Portland State University.

Mr. Houston has been Group Vice President since March 2005. Previously, he was President of Korry Electronics Co., part of Esterline’s Avionics & Controls segment, since October 2002. Mr. Houston has an M.B.A. from the University of Washington and a B.A. degree in Political Science from Seattle Pacific University.

Mr. Kring has been Senior Group Vice President since February 2005. Previously, he was Group Vice President from August 1993. Mr. Kring has an M.B.A. from California State University at Northridge and a B.S. degree in Aeronautical Engineering from Purdue University.

Mr. Larson has been Vice President, Strategy & Technology since January 2000. Mr. Larson has an M.B.A. from the University of Chicago and a B.S. degree in Electrical Engineering from Northwestern University.

Mr. Lawrence has been Group Vice President since January 2007. From September 2002 to January 2007, he was President of Advanced Input Systems, part of Esterline’s Avionics & Controls segment. Mr. Lawrence has an M.B.A from the University of Pittsburgh and a B.S. degree in Business Administration from Pennsylvania State University.

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Forward-Looking Statements

This annual report on Form 10-K includes forward-looking statements. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this report under the headings “Risks Relating to Our Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” and “Business” are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this report under the headings “Risks Relating to Our Business and Our Industry,” “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” and “Business” may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations are:

• A significant downturn in the aerospace industry;

• A significant reduction in defense spending;

• A decrease in demand for our products as a result of competition, technological innovation or otherwise;

• Our inability to integrate acquired operations or complete acquisitions; and

• Loss of a significant customer or defense program.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included or incorporated by reference into this report are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.

Item 1A. Risk Factors

Risks Relating to Our Business and Our Industry

Implementing our acquisition strategy involves risks, and our failure to successfully implement this strategy could have a material adverse effect on our business.

One of our key strategies is to grow our business by selectively pursuing acquisitions. Since 1996 we have completed over 30 acquisitions, and we are continuing to actively pursue additional acquisition opportunities, some of which may be material to our business and financial performance. Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for a number of reasons, including:

• Encountering difficulties identifying and executing acquisitions;

• Increased competition for targets, which may increase acquisition costs;

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• Consolidation in our industry reducing the number of acquisition targets;

• Acquisition financing not being available on acceptable terms or at all; and

• Competition laws and regulations preventing us from making certain acquisitions.

In addition, there are potential risks associated with growing our business through acquisitions, including the failure to successfully integrate and realize the expected benefits of an acquisition. For example, with any past or future acquisition, there is the possibility that:

• The business culture of the acquired business may not match well with our culture;

• Technological and product synergies, economies of scale and cost reductions may not occur as expected;

• Management may be distracted from overseeing existing operations by the need to integrate acquired businesses;

• We may acquire or assume unexpected liabilities;

• Unforeseen difficulties may arise in integrating operations and systems;

• We may fail to retain and assimilate employees of the acquired business;

• We may experience problems in retaining customers and integrating customer bases; and

• Problems may arise in entering new markets in which we may have little or no experience.

Failure to continue implementing our acquisition strategy, including successfully integrating acquired businesses, could have a material adverse effect on our business, financial condition and results of operations.

Our future financial results could be adversely impacted by asset impairment charges.

Under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (Statement No. 142), we are required to test both acquired goodwill and other indefinite-lived intangible assets for impairment on an annual basis based upon a fair value approach, rather than amortizing them over time. We have chosen to perform our annual impairment reviews of goodwill and other indefinite-lived intangible assets during the fourth quarter of each fiscal year. We also are required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. If the fair market value is less than the book value of goodwill, we could be required to record an impairment charge. The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life cycles. In making these judgments, we evaluate the financial health of the business, including such factors as industry performance, changes in technology and operating cash flows. As we have grown through acquisitions, we have accumulated $656.9 million of goodwill, and have $57.6 million of indefinite-lived intangible assets, out of total assets of $2.1 billion at October 26, 2007. As a result, the amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken. We performed our impairment review for fiscal 2007 as of July 28, 2007, and our Step One analysis indicates that no impairment of goodwill and other indefinite-lived assets exist at any of our reporting units. We performed our impairment test of one of our indefinite-lived assets, a trade name used by our temperature and pressure sensors reporting unit, which has a book value of $6.4 million. We determined that the trade name was not impaired because the discounted cash flows (using a relief from royalty valuation method) of the trade name were greater than the carrying amount of the intangible asset. Our estimated discounted

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cash flows assume the successful renegotiation and price increase of a U.S. dollar-denominated long-term agreement, expiring in December 2007, the successful start-up of a low-cost country manufacturing operation in fiscal 2008 and 2009, and the successful development and commercialization of new high-margin products. In the event some or all of these initiatives are not successful, an amount up to $6.4 million would be written off. We also may be required to record an earnings charge or incur unanticipated expenses if, due to a change in strategy or other reason, we determine the value of other assets has been impaired.

We account for the impairment of long-lived assets to be held and used in accordance with Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets” (Statement No. 144). Statement No. 144 requires that a long-lived asset to be disposed of be reported at the lower of its carrying amount or fair value less cost to sell. An asset (other than goodwill and indefinite-lived intangible assets) is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not deemed recoverable, the asset is adjusted to its estimated fair value. Fair value is generally determined based upon estimated discounted future cash flows. As we have grown through acquisitions, we have accumulated $307.7 million of definite-lived intangible assets. As a result, the amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken. We performed an impairment test of an acquired program value of our temperature and pressure sensor reporting unit in the fourth quarter of fiscal 2007 and we determined that the acquired program value was not impaired because the estimated future cash flows of the program were greater than the carrying amount of the intangible asset. Our estimated future cash flows assume the successful renegotiation and price increase of a U.S. dollar-denominated long-term agreement, expiring in December 2007, the successful start up of a low-cost country manufacturing operation in fiscal 2008 and 2009, and the successful development and commercialization of new high-margin products. In the event some or all of these initiatives are not successful, an amount up to $3.6 million could be written off.

The loss of a significant customer or defense program could have a material adverse effect on our operating results.

Some of our operations are dependent on a relatively small number of customers and defense programs, which change from time to time. Significant customers in fiscal 2007 included the U.S. Department of Defense, The Boeing Company, General Dynamics, Flame, Rolls Royce, Honeywell, Lockheed Martin and Smiths Aerospace. There can be no assurance that our current significant customers will continue to buy our products at current levels. The loss of a significant customer or the cancellation of orders related to a sole-source defense program could have a material adverse effect on our operating results if we were unable to replace the related sales.

Our operating results are subject to fluctuations that may cause our revenues to decline.

Our business is susceptible to seasonality and economic cycles, and as a result, our operating results have fluctuated widely in the past and are likely to continue to do so. Our revenue tends to fluctuate based on a number of factors, including domestic and foreign economic conditions and developments affecting the specific industries and customers we serve. For example, the events of September 11, 2001 and the downturn in commercial aviation, due to, among other things, the conflict in Iraq, impacted our operations. It is possible that in the future our operating results in a particular quarter or quarters will not meet the expectations of securities analysts or investors, causing the market price of our common stock, senior subordinated notes or senior notes to decline. We believe that quarter-to-quarter

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comparisons of our operating results are not a good indication of our future performance and should not be relied upon to predict our future performance.

Political and economic changes in foreign countries and markets, including foreign currency fluctuations, may have a material adverse effect on our operating results.

Foreign sales were approximately 53% of our total sales in fiscal 2007, and we have manufacturing facilities in a number of foreign countries. A substantial portion of our Avionics & Controls operations are based in Canada and a substantial portion of our Sensors & Systems operations are based in the U.K. and France. Doing business in foreign countries is subject to numerous risks, including political and economic instability, restrictive trade policies of foreign governments, economic conditions in local markets, health concerns, inconsistent product regulation or unexpected changes in regulatory and other legal requirements by foreign agencies or governments, the imposition of product tariffs and the burdens of complying with a wide variety of international and U.S. export laws and differing regulatory requirements. To the extent that foreign sales are transacted in a foreign currency, we are subject to the risk of losses due to foreign currency fluctuations. In addition, we have substantial assets denominated in foreign currencies, primarily the Canadian dollar, U.K. pound and euro, that are not offset by liabilities denominated in those foreign currencies. These net foreign currency investments are subject to material changes in the event of fluctuations in foreign currencies against the U.S. dollar.

Among other things, we are subject to the Foreign Corrupt Practices Act, or FCPA, which generally prohibits U.S. companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment. In particular, we may be held liable for actions taken by our strategic or local partners even though our partners are not subject to the FCPA. Any determination that we have violated the FCPA could result in sanctions that could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to compete effectively.

Our products and services are affected by varying degrees of competition. We compete with other companies and divisions and units of larger companies in most markets we serve, many of which have greater sales volumes or financial, technological or marketing resources than we do. Our principal competitors include: Avidyne, Eaton, ECE, EMS, Gables Engineering, GE Aerospace, Honeywell, Otto Controls, Rockwell Collins, Thales, Ultra Electronics, Telephonics, and Universal Avionics Systems Corporation in our Avionics & Controls segment; Ametek, Meggitt, Deutsch, Tyco, MPC Products and Goodrich in our Sensors & Systems segment; and Kmass, ULVA, Doncasters, Hitemp, Meggitt (including Dunlop Standard Aerospace Group), Adel Wiggins, RE Darling and Parker in our Advanced Materials segment. The principal competitive factors in the commercial markets in which we participate are product performance, service and price. Maintaining product performance requires expenditures in research and development that lead to product improvement and new product introduction. Companies with more substantial financial resources may have a better ability to make such expenditures. We cannot assure that we will be able to continue to successfully compete in our markets, which could adversely affect our business, financial condition and results of operations.

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Our backlog is subject to modification or termination, which may reduce our sales in future periods.

We currently have a backlog of orders based on our contracts with customers. Under many of our contracts, our customers may unilaterally modify or terminate their orders at any time. In addition, the maximum contract value specified under a government contract awarded to us is not necessarily indicative of the sales that we will realize under that contract. For example, we are a sole-source prime contractor for many different military programs with the U.S. Department of Defense. We depend heavily on the government contracts underlying these programs. Over its lifetime, a program may be implemented by the award of many different individual contracts and subcontracts. The funding of government programs is subject to congressional appropriation.

Changes in defense procurement models may make it more difficult for us to successfully bid on projects as a prime contractor and limit sole-source opportunities available to us.

In recent years, the trend in combat system design and development appears to be evolving towards the technological integration of various battlefield components, including combat vehicles, command and control network communications, advanced technology artillery systems and robotics. If the U.S. military procurement approach continues to require this kind of overall battlefield combat system integration, we expect to be subject to increased competition from aerospace and defense companies who have significantly greater resources than we do. This trend could create a role for a prime contractor with broader capabilities that would be responsible for integrating various battlefield component systems and potentially eliminating or reducing the role of sole-source providers or prime contractors of component weapon systems.

The amount of debt we have outstanding, as well as any debt we may incur in the future, could have an adverse effect on our operational and financial flexibility.

As of October 26, 2007, we had $475.8 million of debt outstanding, of which $455.0 million is long-term debt. Our primary U.S. dollar credit facility as of October 26, 2007 totaled $200.0 million and is made available through a group of banks. In fiscal 2006, we borrowed U.K. £57.0 million under our credit facility of which $112.6 million was outstanding at October 26, 2007. Up to $25.0 million of our $200.0 million credit facility and up to $50.0 million in letters of credit may be drawn in U.K. pounds or euros in addition to U.S. dollars. The credit agreement is secured by substantially all of the Company’s assets and interest is based on standard inter-bank offering rates. In addition, we have unsecured foreign currency credit facilities that have been extended by foreign banks for up to $37.3 million. Available credit under the above credit facilities was $217.2 million at October 26, 2007, when reduced by outstanding foreign bank borrowings of $8.6 million and letters of credit of $11.5 million.

The indentures governing our outstanding $175.0 million 7.75% senior subordinated notes and $175.0 million 6.625% senior notes and other debt agreements limit, but do not prohibit, us from incurring additional debt in the future. Our level of debt could have significant consequences to our business, including the following:

• Depending on interest rates and debt maturities, a substantial portion of our cash flow from operations could be dedicated to paying principal and interest on our debt, thereby reducing funds available for our acquisition strategy, capital expenditures or other purposes;

• A significant amount of debt could make us more vulnerable to changes in economic conditions or increases in prevailing interest rates;

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• Our ability to obtain additional financing for acquisitions, capital expenditures or for other purposes could be impaired;

• The increase in the amount of debt we have outstanding increases the risk of non-compliance with some of the covenants in our debt agreements which require us to maintain specified financial ratios; and

• We may be more leveraged than some of our competitors, which may result in a competitive disadvantage.

If we were unable to protect our intellectual property rights adequately, the value of our products could be diminished.

Our success is dependent in part on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietary rights of others. While we take precautionary steps to protect our technological advantages and intellectual property and rely in part on patent, trademark, trade secret and copyright laws, we cannot assure that the precautionary steps we have taken will completely protect our intellectual property rights. Because patent applications in the United States are maintained in secrecy until either the patent application is published or a patent is issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our products that may block our use of our intellectual property or may be used in third-party products that compete with our products and processes. In the event a competitor successfully challenges our products, processes, patents or licenses or claims that we have infringed upon their intellectual property, we could incur substantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual property at issue, any of which could have a material adverse effect on our business, operating results and financial condition.

In addition to our patent rights, we also rely on unpatented technology, trade secrets and confidential information. Others may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We may not be able to protect our rights in unpatented technology, trade secrets and confidential information effectively. We require each of our employees and consultants to execute a confidentiality agreement at the commencement of an employment or consulting relationship with us. However, these agreements may not provide effective protection of our information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.

We may lose money or generate less than expected profits on our fixed-price contracts.

Our customers set demanding specifications for product performance, reliability and cost. Some of our government contracts and subcontracts provide for a predetermined, fixed price for the products we make regardless of the costs we incur. Therefore, we must absorb cost overruns, notwithstanding the difficulty of estimating all of the costs we will incur in performing these contracts and in projecting the ultimate level of sales that we may achieve. Our failure to anticipate technical problems, estimate costs accurately, integrate technical processes effectively or control costs during performance of a fixed-price contract may reduce the profitability of a fixed-price contract or cause a loss. While we believe that we have recorded adequate provisions in our financial statements for losses on our fixed-price contracts as required under GAAP, we cannot assure that our contract loss provisions will be adequate to cover all actual future losses. Therefore, we may incur losses on fixed-price contracts that we had expected to be profitable, or such contracts may be less profitable than expected.

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We depend on the continued contributions of our executive officers and other key management, each of whom would be difficult to replace.

Our future success depends to a significant degree upon the continued contributions of our senior management and our ability to attract and retain other highly qualified management personnel. We face competition for management from other companies and organizations. Therefore, we may not be able to retain our existing management personnel or fill new management positions or vacancies created by expansion or turnover at our existing compensation levels. Although we have entered into change of control agreements with some members of senior management, we do not have employment contracts with our key executives, nor have we purchased “key-person” insurance on the lives of any of our key officers or management personnel to reduce the impact to our company that the loss of any of them would cause. Specifically, the loss of any of our executive officers would disrupt our operations and divert the time and attention of our remaining officers. Additionally, failure to attract and retain highly qualified management personnel would damage our business prospects.

A downturn in the aircraft market could adversely affect our business.

The aerospace industry is cyclical in nature and affected by periodic downturns that are beyond our control. The principal markets for manufacturers of commercial aircraft are the commercial and regional airlines, which are adversely affected by a number of factors, including fuel and labor costs, intense price competition, outbreak of infectious disease and terrorist attacks, as well as economic cycles, all of which can be unpredictable and are outside our control. Commercial aircraft production may increase or decrease in response to changes in customer demand caused by general economic conditions and the perceived safety and ease of airline travel.

The military aircraft industry is dependent upon the level of equipment expenditures by the armed forces of countries throughout the world, and especially those of the United States. Although the events of September 11, 2001 and the conflict in Iraq have increased the level of equipment expenditures by the U.S. Armed Forces, this level of spending may not be sustainable in light of government spending priorities by the U.S. In addition, in the past this industry has been adversely affected by a number of factors, including the reduction in military spending since the end of the Cold War. Decreases in military spending could depress demand for military aircraft.

Any decrease in demand for new aircraft or use of existing aircraft will likely result in a decrease in demand of our products and services, and correspondingly, our revenues, thereby adversely affecting our business, financial condition and results of operations.

The market for our products may be affected by our ability to adapt to technological change.

The rapid change of technology is a key feature of all of the markets in which our businesses operate. To succeed in the future, we will need to design, develop, manufacture, assemble, test, market, and support new products and enhancements to our existing products in a timely and cost-effective manner. Historically, our technology has been developed through internal research and development expenditures, as well as customer-sponsored research and development programs. There is no guarantee that we will continue to maintain, or benefit from, comparable levels of research and development in the future. In addition, our competitors may develop technologies and products that are more effective than those we develop or that render our technology and products obsolete or noncompetitive. Furthermore, our products could become unmarketable if new industry standards emerge. We cannot assure that our existing products will not require significant modifications in the

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future to remain competitive or that new products we introduce will be accepted by our customers, nor can we assure that we will successfully identify new opportunities and continue to have the needed financial resources to develop new products in a timely or cost-effective manner.

Our business is subject to government contracting regulations, and our failure to comply with such laws and regulations could harm our operating results and prospects.

We estimate that approximately 24% of our sales in fiscal 2007 were attributable to contracts in which we were either the prime contractor to, or a subcontractor to a prime contractor to, the U.S. government. As a contractor and subcontractor to the U.S. government, we must comply with laws and regulations relating to the formation, administration and performance of federal government contracts that affect how we do business with our clients and may impose added costs on our business. For example, these regulations and laws include provisions that contracts we have been awarded are subject to:

• Protest or challenge by unsuccessful bidders; and

• Unilateral termination, reduction or modification in the event of changes in government requirements.

The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. government under both cost-plus and fixed-price contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. Department of Defense. Responding to governmental audits, inquiries or investigations may involve significant expense and divert management attention. Our failure to comply with these or other laws and regulations could result in contract termination, suspension or debarment from contracting with the federal government, civil fines and damages, and criminal prosecution and penalties, any of which could have a material adverse effect on our operating results.

A significant portion of our business depends on U.S. government contracts, which contracts are often subject to competitive bidding, and a failure to compete effectively or accurately anticipate the success of future projects could adversely affect our business.

We obtain many of our U.S. government contracts through a competitive bidding process that subjects us to risks associated with:

• The frequent need to bid on programs in advance of the completion of their design, which may result in unforeseen technological difficulties and/or cost overruns;

• The substantial time and effort, including design, development and marketing activities, required to prepare bids and proposals for contracts that may not be awarded to us; and

• The design complexity and rapid rate of technological advancement of defense-related products.

In addition, in order to win the award of developmental programs, we must be able to align our research and development and product offerings with the government’s changing concepts of national defense and defense systems. The government’s termination of, or failure to fully fund, one or more of the contracts for our programs would have a negative impact on our operating results and financial condition. Furthermore, we serve as a subcontractor on several military programs that, in large part, involve the same risks as prime contracts.

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Overall, we rely on key contracts with U.S. government entities for a significant portion of our sales and business. A substantial reduction in these contracts would materially adversely affect our operating results and financial position.

The airline industry is heavily regulated and if we fail to comply with applicable requirements, our results of operations could suffer.

Governmental agencies throughout the world, including the U.S. Federal Aviation Administration, or the FAA, prescribe standards and qualification requirements for aircraft components, including virtually all commercial airline and general aviation products, as well as regulations regarding the repair and overhaul of aircraft engines. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. We include, with the replacement parts that we sell to our customers, documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries. In order to sell our products, we and the products we manufacture must also be certified by our individual OEM customers. If any of the material authorizations or approvals qualifying us to supply our products is revoked or suspended, then the sale of the subject product would be prohibited by law, which would have an adverse effect on our business, financial condition and results of operations.

From time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations, which are usually more stringent than existing regulations. If these proposed regulations are adopted and enacted, we may incur significant additional costs to achieve compliance, which could have a material adverse effect on our business, financial condition and results of operations.

Future asbestos claims could harm our business.

We are subject to potential liabilities relating to certain products we manufactured containing asbestos. To date, our insurance has covered claims against us relating to those products. Commencing November 1, 2003, insurance coverage for asbestos claims has been unavailable. However, we continue to have some insurance coverage for exposure to asbestos contained in our products prior to that date.

We continue to manufacture for one customer a product that contains asbestos. We have an agreement with the customer for indemnification for certain losses we may incur as a result of asbestos claims relating to that product, but we cannot assure that this indemnification agreement will fully protect us from losses arising from asbestos claims.

To the extent we are not insured or indemnified for losses from asbestos claims relating to our products, asbestos claims could adversely affect our operating results and our financial condition.

Environmental laws and regulations may subject us to significant liability.

Our business and our facilities are subject to a number of federal, state, local and foreign laws, regulations and ordinances governing, among other things, the use, manufacture, storage, handling and disposal of hazardous materials and certain waste products. Among these environmental laws are rules by which a current or previous owner or operator of land may be liable for the costs of investigation, removal or remediation of hazardous materials at such property. In addition, these laws

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typically impose liability regardless of whether the owner or operator knew of, or was responsible for, the presence of any hazardous materials. Persons who arrange for the disposal or treatment of hazardous materials may be liable for the costs of investigation, removal or remediation of such substances at the disposal or treatment site, regardless of whether the affected site is owned or operated by them.

Because we own and operate a number of facilities that use, manufacture, store, handle or arrange for the disposal of various hazardous materials, we may incur costs for investigation, removal and remediation, as well as capital costs, associated with compliance with environmental laws. At the time of the acquisition of Wallop Defence Systems Limited, we and the seller agreed that some environmental remedial activities may need to be carried out and these activities are currently on-going. Under the terms of the Stock Purchase Agreement, a portion of the costs of any environmental remedial activities will be reimbursed by the seller if the cost is incurred within five years of the consummation of the acquisition. Additionally, at the time of our asset acquisition of the Electronic Warfare Passive Expendables Division of BAE Systems North America, certain environmental remedial activities were required under a Part B Permit issued to the infrared decoy flare facility by the Arkansas Department of Environmental Quality under the Federal Resource Conservation and Recovery Act. The Part B Permit was transferred to our subsidiary, Armtec, along with the remedial obligations. Under the terms of the asset purchase agreement, BAE Systems agreed to complete all remedial obligations at the infrared decoy flare facility and to indemnify us for all environmental liabilities related to that facility to a maximum amount of $25.0 million. Although environmental costs have not been material in the past, we cannot assure that these matters, or any similar liabilities that arise in the future, will not exceed our resources, nor can we completely eliminate the risk of accidental contamination or injury from these materials.

We may be required to defend lawsuits or pay damages in connection with the alleged or actual harm caused by our products.

We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in harm to others or to property. For example, our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft component that has been designed, manufactured or serviced by us. We may incur significant liability if product liability lawsuits against us are successful. While we believe our current general liability and product liability insurance is adequate to protect us from future product liability claims, we cannot assure that coverage will be adequate to cover all claims that may arise. Additionally, we may not be able to maintain insurance coverage in the future at an acceptable cost. Any liability not covered by insurance or for which third-party indemnification is not available could have a material adverse effect on our business, financial condition and results of operations.

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Item 2. Properties

The following table summarizes our properties that are greater than 100,000 square feet or related to a principal operation, including identification of the business segment, as of October 26, 2007:

Location	Type of Facility	Business Segment	Approximate Square         Footage	Owned or       Leased
Brea, CA	Office, Plant & Warehouse	Advanced Materials	429,000	Owned
Québec, Canada	Office & Plant	Avionics & Controls	269,000	Owned
Seattle, WA	Office & Plant	Avionics & Controls	200,000	Leased
Stillington, U.K.	Office & Plant	Advanced Materials	186,000	Owned
East Camden, AR	Office & Plant	Advanced Materials	175,000	Leased
Coachella, CA	Office & Plant	Advanced Materials	112,000	Owned
Buena Park, CA	Office & Plant	Sensors & Systems	110,000	Owned*
Bourges, France	Office & Plant	Sensors & Systems	109,000	Leased
Farnborough, U.K.	Office & Plant	Sensors & Systems	108,000	Leased
Milan, TN	Office & Plant	Advanced Materials	100,000	Leased
Sylmar, CA	Office & Plant	Avionics & Controls	96,000	Leased
Ontario, Canada	Office & Plant	Avionics & Controls	94,000	Leased
Valencia, CA	Office & Plant	Advanced Materials	88,000	Owned
Coeur d’Alene, ID	Office & Plant	Avionics & Controls	88,000	Leased
Hampshire, U.K.	Office & Plant	Advanced Materials	82,000	Owned
Gloucester, U.K.	Office & Plant	Advanced Materials	59,000	Leased

* The building is located on a parcel of land covering 16.1 acres that is leased by the Company.

In total, we own approximately 1,700,000 square feet and lease approximately 1,600,000 square feet of manufacturing facilities and properties.

Item 3. Legal Proceedings

From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe we have adequately reserved for these liabilities and that there is no litigation pending that could have a material adverse effect on our results of operations and financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year ended October 26, 2007.

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PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
              Equity Securities

We hereby incorporate by reference the following information that appears in our Annual Report to Shareholders for the fiscal year ended October 26, 2007:

(a) The high and low market sales prices of our common stock for each quarterly period during fiscal years 2007 and 2006, respectively, is set forth under the section entitled “Market Price of Esterline Common Stock” of the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

(b) Restrictions on the ability to pay future cash dividends is set forth in Note 10 to the Consolidated Financial Statements contained in the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

No cash dividends were paid during fiscal years 2007 and 2006. We are restricted from paying dividends under our current debt instruments and do not anticipate paying any dividends in the foreseeable future.

On December 17, 2007, there were 475 holders of record of our common stock.

The principal market for our Common Stock is the New York Stock Exchange.

Item 6.  Selected Financial Data

We hereby incorporate by reference the information set forth under the section entitled, “Selected Financial Data” of the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Continuing               Operations

We hereby incorporate by reference the information set forth under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” of the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

We hereby incorporate by reference the information set forth under the section “Disclosures About Market Risk” of the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

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Item 8. Financial Statements and Supplementary Data

The report of Ernst & Young LLP, Independent Registered Public Accounting Firm, and the consolidated financial statements are included in the Annual Report to Shareholders for the fiscal year ended October 26, 2007 and are hereby incorporated by reference. Quarterly results of operations are reported in Note 16 of the Company’s Annual Report to Shareholders for the fiscal year ended October 26, 2007 and are hereby incorporated by reference. The Annual Report is included as Exhibit 13 to this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our principal executive and financial officers evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of October 26, 2007. Based upon that evaluation, they concluded as of October 26, 2007, that our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in Securities and Exchange Commission rules and forms. In addition, our principal executive and financial officers concluded as of October 26, 2007 that our disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

We hereby incorporate by reference the information set forth under “Management’s Report on Internal Control Over Financial Reporting” that appears on page 98 of our Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

Attestation Report of the Registered Public Accounting Firm

We hereby incorporate by reference the information set forth under “Report of Independent Registered Public Accounting Firm” relating to Ernst & Young’s audit of management’s assessment of the Company’s internal control over financial reporting in our Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

Changes in Internal Control Over Financial Reporting

During the three months ended October 26, 2007, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

We hereby incorporate by reference the information set forth under “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Ethics,” “Other Information as to Directors – Board and Board Committees,” and “Other Information as to Directors – Director Nominations and Qualifications” in the definitive form of the Company’s Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 5, 2008.

Information regarding our executive officers required by this item appears in Item 1 of this report under “Executive Officers of the Registrant.”

Item 11. Executive Compensation

We hereby incorporate by reference the information set forth under “Other Information as to Directors – Director Compensation,” “Executive Compensation – Compensation Discussion and Analysis,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” in the definitive form of the Company’s Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 5, 2008.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
               Matters

The following table gives information about the shares of Common Stock that may be issued upon the exercise of options, warrants and rights under the Amended and Restated 1987 Stock Option Plan, the Non-Employee Directors’ Stock Compensation Plan, the Amended and Restated 1997 Stock Option Plan, the 2002 Employee Stock Purchase Plan and the 2004 Equity Incentive Plan, the only equity compensation plans of the Company in effect as of the end of the Company’s last fiscal year.

	Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders	1,506,400	$30.89	901,409    (1)(2)
Equity compensation plans not approved by security holders	—	—	—
Total	1,506,400	$30.89	901,409

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(1) Of these shares, 747,600 shares are available for issuance under the 2004 Equity Incentive Plan, 122,891 shares are available for purchase under the 2002 Employee Stock Purchase Plan, and 30,918 shares are available for grant under the Non-Employee Directors’ Stock Compensation Plan, as of the end of the Company’s last completed fiscal year.

(2) Pursuant to the Non-Employee Directors’ Stock Compensation Plan effective beginning fiscal 2007, each of the Company’s non-employee directors will receive an automatic grant of shares of Common Stock not subject to any restriction within 45 days of each annual shareholders meeting with an aggregate market value of $60,000 based on the closing price of the Common Stock on that date.

We hereby incorporate by reference the information set forth under “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the definitive form of the Company’s Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 5, 2008.

Item 13. Certain Relationships and Related Transactions, and Director Independence

We hereby incorporate by reference the information set forth under “Certain Relationships and Related Transactions” and “Other Information as to Directors” in the definitive form of the Company’s Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 5, 2008.

Item 14. Independent Registered Public Accounting Firm Fees and Services

We hereby incorporate by reference the information set forth under “Independent Registered Public Accounting Firm’s Fees” in the definitive form of the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on March 5, 2008.

26

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Financial Statements.

The following consolidated financial statements, together with the report of Ernst & Young LLP, Independent Registered Public Accounting Firm, dated December 18, 2007, appearing in the Company’s Annual Report to Shareholders for the fiscal year ended October 26, 2007.

	Annual Report Reference
Consolidated Statement of Operations – Fiscal years 2007, 2006, and 2005	*
Consolidated Balance Sheet – October 26, 2007 and October 27, 2006	*
Consolidated Statement of Cash Flows – Fiscal years 2007, 2006, and 2005	*
Consolidated Statement of Shareholders’ Equity and Comprehensive Income – Fiscal years 2007, 2006, and 2005	*
Notes to Consolidated Financial Statements – October 26, 2007	*
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm	*

*     Incorporated by reference to the Annual Report to Shareholders for the fiscal year ended October 26, 2007. The Annual Report is included as Exhibit 13 to this report.

Refer also to Part II, Item 8 – Financial Statements and Supplementary Data for additional information.

(a)(2) Financial Statement Schedules.

The following consolidated financial statement schedule of the Company is included as follows:

Schedule II – Valuation and Qualifying Accounts, see page 36.

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

(a)(3) Exhibits.

See Exhibit Index on pages 30-35.

27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ESTERLINE TECHNOLOGIES CORPORATION
(Registrant)
By	/s/ Robert D. George
	Robert D. George
	Vice President, Chief Financial Officer, Secretary and Treasurer
	(Principal Financial Officer)

Dated: December 21, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Robert W. Cremin	Chairman, President and	December 21, 2007
(Robert W. Cremin)	Chief Executive Officer	Date
	(Principal Executive Officer)
/s/ Robert D. George	Vice President,	December 21, 2007
(Robert D. George)	Chief Financial Officer,	Date
	Secretary and Treasurer
	(Principal Financial Officer)
/s/ Gary J. Posner	Corporate Controller and	December 21, 2007
(Gary J. Posner)	Chief Accounting Officer	Date
	(Principal Accounting Officer)
/s/ Lewis E. Burns	Director	December 21, 2007
(Lewis E. Burns)		Date
/s/ John F. Clearman	Director	December 21, 2007
(John F. Clearman)		Date

28

/s/ Robert S. Cline	Director	December 21, 2007
(Robert S. Cline)		Date
/s/ Anthony P. Franceschini	Director	December 21, 2007
(Anthony P. Franceschini)		Date
/s/ Paul V. Haack	Director	December 21, 2007
(Paul V. Haack)		Date
/s/ Charles R. Larson	Director	December 21, 2007
(Charles R. Larson)		Date
/s/ Jerry D. Leitman	Director	December 21, 2007
(Jerry D. Leitman)		Date
/s/ James J. Morris	Director	December 21, 2007
(James J. Morris)		Date
/s/ James L. Pierce	Director	December 21, 2007
(James L. Pierce)		Date

29

Exhibit Number	Exhibit Index
2.1	Share Purchase Agreement among Cobham plc, Esterline Acquisition Limited and Esterline Technologies Corporation dated March 8, 2006. (Incorporated by reference to Exhibit 2.1 to the Company’s Annual Report on Form 10-K for the year ended October 27, 2006 [Commission File Number 1-6357].)
2.2	Share Purchase Agreement among ONCAP L.P., ONCAP (Cayman) L.P., Onex Corporation, the other vendors, CMC Electronics Holdings Inc., CMC Electronics Inc., CMC Electronics Aurora Inc., and Esterline Technologies Corporation dated as of January 31, 2007. (Incorporated by reference to Exhibit 10.45 to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 26, 2007 [Commission File Number 1-6357].)
3.1	Restated Certificate of Incorporation for Esterline Technologies Corporation, dated June 6, 2002 (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 26, 2002 [Commission File Number 1-6357], with Form of Certificate of Designation, dated December 11, 2002). (Incorporated by reference to Exhibit 4.1 to Esterline’s Registration of Securities on Form 8-A filed December 12, 2002 [Commission File Number 1-6357].)
3.2	By-laws of the Company, as amended and restated September 8, 2005. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated September 9, 2005 [Commission File Number 1-6357].)
4.1	Rights Agreement dated as of December 11, 2002, between Esterline Technologies Corporation and Mellon Investor Services LLC, as Rights Agent, which includes as Exhibit A the Form of Certificate of Designation of Series B Serial Preferred Stock, as Exhibit B the Form of Rights of Certificate and as Exhibit C the Summary of Rights to Purchase Preferred Shares. (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A, as amended, filed on December 12, 2002 [Commission File Number 1-6357].)
4.2	Indenture relating to Esterline Technologies Corporation’s 7.75% Senior Subordinated Notes due 2013, dated as of June 11, 2003. (Incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended August 1, 2003 [Commission File Number 1-6357].)
4.3	Form of Exchange Note for the 7.75% Senior Subordinated Notes due 2013. (Incorporated by reference to Exhibit 4.3 to the Company’s Form S-4, as amended, filed on September 30, 2003 [Commission File Number 333-109325].)
4.4	Registration Rights Agreement among Esterline Technologies Corporation, its subsidiaries listed on Schedule 1 thereto, Wachovia Capital Markets, LLC, Banc of Americas Securities LLC, KeyBanc Capital Markets, a division of McDonald Investments and Wells Fargo Securities, LLC, dated March 1, 2007 (“2007 Registration Rights Agreement”). (Incorporated by reference to Exhibit 10.47 to the Company’s Current Report on Form 8-K filed on March 7, 2007 [Commission File Number 1-6357].)

30

Exhibit Number	Exhibit Index
4.5	Indenture relating to Esterline Technologies Corporation’s 6.625% Senior Notes due 2017, dated as of March 1, 2007. (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 7, 2007 [Commission File Number 1-6357].)
4.6	Form of Exchange Note for the 6.625% Senior Notes due 2017. (Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-4 filed on June 29, 2007 [Commission File Number 333-144161].)
4.7	Supplemental Indenture, relating to Esterline Technologies Corporation’s 7.75% Senior Subordinated Notes due 2013, dated as of June 27, 2007. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 28, 2007 [Commission File Number 1-6357].)
4.8	Amendment dated as of July 31, 2007 to 2007 Registration Rights Agreement. (Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-4/A filed on August 6, 2007 [Commission File Number 333-144161].)
4.9	Supplemental Indenture, relating to Esterline Technologies Corporation’s 6.625% Senior Notes due 2017, dated as of July 26, 2007. (Incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-4/A filed on August 6, 2007 [Commission File Number 333-144161].)
10.1	Amendment No. 5 Credit Agreement, dated as of March 13, 2007, among Esterline Technologies Corporation, the financial institutions referred to therein and Wachovia Bank, National Association, as Administrative Agent. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 19, 2007 [Commission File Number 1-6357].)
10.2	Industrial Lease dated July 17, 1984, between 901 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 901 Dexter Avenue N., Seattle, Washington. (Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)
10.2a	Fourth Amendment dated July 27, 1994, to Industrial Lease dated July 17, 1984 between Houg Family Partnership, as successor to 901 Dexter Associates, and Korry Electronics Co. (Incorporated by reference to Exhibit 10.4a to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)

31

Exhibit Number	Exhibit Index
10.3	Industrial Lease dated July 17, 1984, between 801 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 801 Dexter Avenue N., Seattle, Washington. (Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)
10.3a	Fourth Amendment dated March 28, 1994, to Industrial Lease dated July 17, 1984, between Michael Maloney and the Bancroft & Maloney general partnership, as successor to 801 Dexter Associates, and Korry Electronics Co. (Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)
10.4*	Compensation of Directors for fiscal year ended October 26, 2007. (Incorporated by reference to Item 1.01 of the Company’s Current Report on Form 8-K filed June 14, 2006 [Commission File Number 1-6357].)
10.6*	Esterline Technologies Corporation Supplemental Retirement Income Plan. (Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended October 27, 2006 [Commission File Number 1-6357].)
10.7*	Esterline Technologies Corporation Long-Term Incentive Plan. (Incorporated by reference to Exhibit 10.16k to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 29, 2005 [Commission File Number 1-6357].)
10.8*	Executive Officer Termination Protection Agreement. (Incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)
10.9a*	Offer Letter from Esterline Technologies Corporation to Richard Wood dated February 2, 2005. (Incorporated by reference to Exhibit 10.19b to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2005 [Commission File Number 1-6357].)
10.9b*	Severance Protection Agreement between Richard Wood and Esterline Technologies Corporation, dated February 23, 2005. (Incorporated by reference to Exhibit 10.19c to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2005 [Commission File Number 1-6357].)

32

Exhibit Number	Exhibit Index
10.10*	Offer Letter from Esterline Technologies Corporation to Frank Houston dated March 4, 2005. (Incorporated by reference to Exhibit 10.19e to the Company’s Current Report on Form 8-K dated March 29, 2005 [Commission File Number 1-6357].)
10.11*	Offer Letter from Esterline Technologies Corporation to Brad Lawrence dated December 11, 2006. (Incorporated by reference to Exhibit 10.19f to the Company’s Current Report on Form 8-K dated January 23, 2007 [Commission File Number 1-6357].)
10.12	Real Property Lease and Sublease, dated June 28, 1996, between 810 Dexter L.L.C. and Korry Electronics Co. (Incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)
10.13*	Esterline Technologies Corporation Amended and Restated 1997 Stock Option Plan. (Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed March 14, 2003 [Commission File Number 333-103846].)
10.14	Property lease between Slibail Immobilier and Norbail Immobilier and Auxitrol S.A., dated April 29, 1997, relating to the manufacturing facility of Auxitrol at 5, allée Charles Pathé, 18941 Bourges Cedex 9, France, effective on the construction completed date (December 5, 1997). (Incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)
10.15	Industrial and build-to-suit purchase and sale agreement between The Newhall Land and Farming Company, Esterline Technologies Corporation and TA Mfg. Co., dated February 13, 1997 including Amendments, relating to premises located at 28065 West Franklin Parkway, Valencia, CA. (Incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the year ended October 28, 2005 [Commission File Number 1-6357].)
10.16	Lease Agreement, dated as of February 27, 1998, between Glacier Partners and Advanced Input Devices, Inc., Lease Amendment #1, dated February 27, 1998. (Incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the year ended October 27, 2000 [Commission File Number 1-6357].)
10.17*	Esterline Technologies Corporation 2002 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed June 14, 2006 [Commission File Number 333-135025].)

33

Exhibit Number	Exhibit Index
10.18	Lease Agreement, dated as of August 6, 2003, by and between the Prudential Insurance Company of America and Mason Electric Co., relating to premises located at Sylmar, California. (Incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended October 31, 2003 [Commission File Number 1-6357].)
10.19	Occupation Lease of Buildings known as Phases 3 and 4 on the Solartron Site at Victoria Road, Farnborough, Hampshire between J Sainsbury Developments Limited and Weston Aerospace Limited, dated July 21, 2000. (Incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the year ended October 31, 2003 [Commission File Number 1-6357].)
10.20a*	Esterline Technologies Corporation 2004 Equity Incentive Plan. (Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 [Commission File Number 333-135025] filed June 14, 2006.)
10.20b*	Form of Stock Option Agreement. (Incorporated by reference to Exhibit 10.36a to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2005 [Commission File Number 1-6357].)
10.21	Lease Agreement dated as of March 19, 1969, as amended, between Leach Corporation and Gin Gor Ju, Trustee of Ju Family Trust, relating to premises located in Orange County. (Incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended October 29, 2004 [Commission File Number 1-6357].)
10.22	Lease Agreement, dated November 29, 2005 between Lordbay Investments Limited, Darchem Engineering Limited and Darchem Holdings Limited relating to premises located at Units 4 and 5 Eastbrook Road, London Borough of Gloucestershire Gloucester. (Incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 28, 2006 [Commission File Number 1-6357].)
10.23*	Esterline Technologies Corporation Amended and Restated Non-Employee Directors’ Stock Compensation Plan. (Incorporated by reference to Exhibit 10.40 to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2005 [Commission File Number 1-6357].)
10.24	Amendment No. 1 dated as of November 23, 2005 to Lease Agreement dated as of March 1, 1994 between Highland Industrial Park, Inc. and Armtec Countermeasures Company. (Incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 28, 2006 [Commission File Number 1-6357].)
10.25*	Esterline Technologies Corporation Fiscal Year 2007 Annual Incentive Compensation Plan. (Incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the year ended October 27, 2006 [Commission File Number 1-6357].)

34

Exhibit Number	Exhibit Index
10.26*	Esterline Technologies Supplemental Executive Retirement and Deferred Compensation Plan. (Incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K for the year ended October 27, 2006 [Commission File Number 1-6357].)
10.27	Lease Agreement dated November 4, 2002, between American Ordnance LLC and FR Countermeasures, relating to premises located at 25A Ledbetter Gate Road, Milan, Tennessee. (Incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the year ended October 27, 2006 [Commission File Number 1-6357].)
11.1	Schedule setting forth computation of earnings per share for the five fiscal years ended October 26, 2007.
12.1	Statement of Computation of Ratio of Earnings to Fixed Charges.
13	Portions of the Annual Report to Shareholders for the fiscal year ended October 26, 2007, incorporated by reference herein.
21.1	List of subsidiaries.
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer.
31.2	Certification of Chief Financial Officer.
32.1	Certification (of Robert W. Cremin) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification (of Robert D. George) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*      Indicates management contract or compensatory plan or arrangement.

35

ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(In Thousands)

Description	Balance at Beginning of Year		Charged to Costs & Expenses		Other 2		Deductions			Balance at End     of Year
Reserve for Doubtful Accounts Receivable
Fiscal Years
2007	$	4,338	$	791	$	874	$	(625	)1	$	5,378
2006	$	4,462	$	540	$	57	$	(721	)1	$	4,338
2005	$	3,687	$	1,511	$	—	$	(736	)1	$	4,462

¹ Uncollectible accounts written off, net of recoveries.

² Acquisition-related addition.

36

EX-11.1

Exhibit 11.1

ESTERLINE TECHNOLOGIES CORPORATION

(In thousands, except per share amounts)

Computation of Earnings (Loss) Per Share – Basic

	2007		2006		2005		2004		2003
Income From Continuing Operations	$	92,284	$	55,615	$	51,034	$	29,375	$	28,147
Income (Loss) From Discontinued Operations, Net of Tax		—		—		6,992		10,208		(5,312	)
Net Earnings	$	92,284	$	55,615	$	58,026	$	39,583	$	22,835
Weighted Average Number of Shares Outstanding – Basic		25,824		25,413		24,927		21,195		20,900
Earnings (Loss) Per Share – Basic:
Continuing operations	$	3.57	$	2.19	$	2.05	$	1.39	$	1.35
Discontinued operations		—		—		.28		.48		(.26	)
Earnings Per Share – Basic	$	3.57	$	2.19	$	2.33	$	1.87	$	1.09

1

ESTERLINE TECHNOLOGIES CORPORATION

(In thousands, except per share amounts)

Computation of Earnings (Loss) Per Share – Diluted

	2007		2006		2005		2004		2003
Income From Continuing Operations	$	92,284	$	55,615	$	51,034	$	29,375	$	28,147
Income (Loss) From Discontinued Operations, Net of Tax		—		—		6,992		10,208		(5,312	)
Net Earnings	$	92,284	$	55,615	$	58,026	$	39,583	$	22,835
Weighted Average Number of Shares Outstanding		25,824		25,413		24,927		21,195		20,900
Net Shares Assumed to be Issued for Stock Options		428		405		375		344		205
Weighted Average Number of Shares and Equivalent Shares Outstanding – Diluted		26,252		25,818		25,302		21,539		21,105
Earnings (Loss) Per Share – Diluted:
Continuing operations	$	3.52	$	2.15	$	2.02	$	1.37	$	1.33
Discontinued operations		—		—		.27		.47		(.25	)
Earnings Per Share – Diluted	$	3.52	$	2.15	$	2.29	$	1.84	$	1.08
Earnings Per Share – Basic	$	3.57	$	2.19	$	2.33	$	1.87	$	1.09
Dilutive Effect Per Share	$	.05	$	.04	$	.04	$	.03	$	.01

2

EX-12.1

Exhibit 12.1

ESTERLINE TECHNOLOGIES CORPORATION

(In thousands)

Statement of Computation of Ratio of Earnings to Fixed Charges

	2007		2006		2005		2004		2003
Income from continuing operations before income taxes	$	114,956	$	73,196	$	67,670	$	38,989	$	40,605
Fixed charges 1
Interest expense		35,302		21,290		18,159		17,336		11,991
Amortization of debt issuance cost		—		172		56		56		703
Interest included in rental expense		4,602		3,505		3,137		2,894		2,398
Total		39,904		24,967		21,352		20,286		15,092
Earnings 2	$	154,860	$	98,163	$	89,022	$	59,275	$	55,697
Ratio of earnings available to cover fixed charges		3.9		3.9		4.2		2.9		3.7

¹ Fixed charges consist of interest on indebtedness and amortization of debt issuance cost plus that portion of lease rental expense representative of the interest factor.

² Earnings consist of income from continuing operations before income taxes plus fixed charges.

EX-13

Exhibit 13

Financial Highlights

In Thousands, Except Per Share Amounts

For Fiscal Years	2007		2006
Operating Results
Net sales	$	1,266,555	$	972,275
Segment earnings		181,692		120,848
Net earnings		92,284		55,615
Earnings per share – diluted	$	3.52	$	2.15
Weighted average shares outstanding – diluted		26,252		25,818
Financial Position
Total assets	$	2,050,306	$	1,290,451
Property, plant and equipment, net		217,421		170,442
Long-term debt, net		455,002		282,307
Shareholders’ equity		1,121,826		707,989

1

Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations

OVERVIEW

We operate our businesses in three segments: Avionics & Controls, Sensors & Systems and Advanced Materials. The Avionics & Controls segment designs and manufactures integrated cockpit systems, technology interface systems for military and commercial aircraft and land- and sea-based military vehicles, secure communications systems, specialized medical equipment, and other industrial applications. The Sensors & Systems segment produces high-precision temperature and pressure sensors, electrical power switching, control and data communication devices, micro-motors, motion control sensors, and other related systems, principally for aerospace and defense customers. The Advanced Materials segment develops and manufactures thermally engineered components and high-performance elastomer products used in a wide range of commercial aerospace and military applications, combustible ordnance components and electronic warfare countermeasure devices for military customers. All segments include sales to domestic, international, defense and commercial customers.

Our current business and strategic plan focuses on the continued development of our products principally for aerospace and defense markets. We are concentrating our efforts to expand our capabilities in these markets and to anticipate the global needs of our customers and respond to such needs with comprehensive solutions. These efforts focus on continuous research and new product development, acquisitions and establishing strategic realignments of operations to expand our capabilities as a more comprehensive supplier to our customers across our entire product offering. On March 14, 2007, we acquired CMC Electronics Inc. (CMC) a manufacturer of high technology avionics including global positioning systems, head-up displays, enhanced vision systems and electronic flight management systems. The acquisition significantly expands the scale of our existing Avionics & Controls business. CMC is included in the Avionics & Controls segment and the results of its operations were included from the effective date of the acquisition. We acquired Wallop Defence Systems Limited (Wallop) and FR Countermeasures on March 24, 2006 and December 23, 2005, respectively. Wallop and FR Countermeasures are manufacturers of military pyrotechnic countermeasure devices. The acquisitions strengthen our international and U.S. position in countermeasure devices. Wallop and FR Countermeasures are included in our Advanced Materials segment. On December 16, 2005, we acquired Darchem Holdings Limited (Darchem), a manufacturer of thermally engineered components for critical aerospace applications. Darchem holds a leading position in its niche market and fits our engineered-to-order model and is included in our Advanced Materials segment.

Net earnings for fiscal 2007 were $92.3 million, or $3.52 per diluted share, including a $26.2 million, net of tax or $1.00 per diluted share, insurance recovery, compared with $55.6 million, or $2.15 per diluted share, including a $3.4 million, net of tax or $0.13 per diluted share, insurance recovery in fiscal 2006. Avionics & Controls performance was strong compared to the prior-year period, offset by the effect of the shipment of acquired inventory of CMC which was required to be valued at fair market as of the date of acquisition and the impact of a weakening of the U.S. dollar against the Canadian dollar since the acquisition of CMC. Results in Sensors & Systems improved and Advanced Materials earnings reflected strong sales and

2

earnings, as well as the insurance recovery referenced above. Interest expense increased $14.0 million over the prior-year period, reflecting the cost of financing the CMC acquisition. Net earnings for fiscal 2007 reflected an effective tax rate of 19.6% compared to 22.8% for the prior-year period.

3

Results of Continuing Operations

Fiscal 2007 Compared with Fiscal 2006

Sales for fiscal 2007 increased 30.3% over the prior year. Sales by segment were as follows:

Dollars In Thousands	Increase (Decrease) From Prior Year	2007		2006
Avionics & Controls	60.6%	$	454,520	$	283,011
Sensors & Systems	15.1%		383,477		333,257
Advanced Materials	20.4%		428,558		356,007
Total		$	1,266,555	$	972,275

The 60.6% increase in Avionics & Controls reflected incremental sales from the CMC acquisition in the second quarter of fiscal 2007 and higher sales of cockpit controls and medical equipment devices from new OEM programs as well as strong after-market sales.

The 15.1% increase in Sensors & Systems principally reflected growth in OEM programs for temperature sensors and power distribution devices as well as the effect of exchange rates. Sales in fiscal 2007 reflected a stronger U.K. pound and euro relative to the U.S. dollar, as the average exchange rate from the U.K. pound and euro increased from 1.81 and 1.23, respectively, in fiscal 2006, to 1.98 and 1.34, respectively, in fiscal 2007.

The 20.4% increase in Advanced Materials reflected strong sales across the segment. While combustible ordnance sales were up modestly compared with the prior year, sales of flare countermeasures and elastomer material were strong, reflecting new OEM programs. Sales of flare countermeasures from our Wallop facility were higher in fiscal 2007 compared to fiscal 2006, but less than our expectations due to the continued shut-down in a portion of the facility.

Sales to foreign customers, including export sales by domestic operations, totaled $668.8 million and $437.0 million, and accounted for 52.8% and 45.0% of our sales for fiscal 2007 and 2006, respectively.

Overall, gross margin as a percentage of sales was 30.8% and 30.9% in fiscal 2007 and 2006, respectively. Avionics & Controls segment gross margin was 32.9% and 35.3% for fiscal 2007 and 2006, respectively, reflecting the shipment of acquired inventory of CMC, which was valued at fair value at acquisition. In addition, CMC’s gross margins were impacted by the effect of a weaker U.S. dollar compared to the Canadian dollar on U.S. dollar-denominated sales and Canadian-denominated cost of sales. Excluding CMC, Avionics & Controls gross margin was 36.4% and 35.3% for fiscal 2007 and 2006, respectively, reflecting increased after-market spares sales and pricing strength on certain cockpit control devices, partially offset by a $2.0 million unfavorable estimate to complete adjustment on certain firm fixed-price long-term contracts for the development and manufacture of secure military communications products.

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Sensors & Systems segment gross margin was 33.3% and 33.9% for fiscal 2007 and 2006, respectively. The decrease in Sensors & Systems gross margin from fiscal 2006 reflected lower sales of high-margin pressure sensors and the effect of a weaker U.S. dollar compared with the U.K. pound and euro on U.S.-denominated sales and U.K. pound- and euro-denominated cost of sales. We expect to negotiate higher unit selling prices under certain U.S. dollar-denominated long-term agreements, which expire in December 2007, at our U.K. temperature and pressure sensor operations. Additionally, gross margin in fiscal 2007 was impacted by a $2.1 million contract overrun at a small unit which manufactures precision gears and data concentrators. These decreases were partially offset by improved operating efficiencies at our U.K. temperature and pressure sensor operations and pricing strength at our U.S. manufacturer of power distribution devices.

Advanced Materials segment gross margin was 26.5% and 24.7% for fiscal 2007 and 2006, respectively. The increase in Advanced Materials gross margin was due to strong gross margins at our U.S. flare operations resulting from a more favorable mix of product shipments and improved operating efficiencies at our Arkansas countermeasure flare operation. Additionally, gross margins improved at our elastomer material operations, reflecting increased recovery of fixed expenses due to strong OEM sales and a shift in sales mix to higher margin space and defense products. Comparing fiscal 2007 to 2006, the increase in gross margin also reflected the impact of the shipment of acquired inventories at Darchem, which were valued at fair market at acquisition in 2006. Gross margin in fiscal 2007 was impacted by the continued shut-down of our advanced flare operations at Wallop as a result of the 2006 explosion and the start-up costs at our FR Countermeasures unit acquired in 2005.

Selling, general and administrative expenses (which include corporate expenses) increased to $209.5 million in fiscal 2007 compared with $159.6 million in fiscal 2006. The increase in selling, general and administrative expenses primarily reflected incremental selling, general and administrative expenses from the CMC, Wallop, and FR Countermeasures acquisitions. The increase in corporate expense principally reflected bank fees associated with the modification of our 2013 note indenture, increased incentive compensation, professional fees, and the cost of an option to buy Canadian dollars to cover a portion of the purchase price of CMC. Post-retirement benefit expense increased $2.2 million reflecting the acquisition of CMC and an adjustment to post-retirement benefit expense of $1.6 million at our temperature and pressure sensor operations. These increases were partially offset by a $2.4 million decrease in pension expense. In fiscal 2006, pension expense included a $1.2 million increase in the Leach pension obligation existing as of the acquisition of Leach in August 2004, which was identified during an audit of its pension plan. Additionally, in fiscal 2006, selling, general and administrative expense included a $1.0 million charge as a result of a customer contract termination. As a percentage of sales, selling, general and administrative expenses were 16.5% and 16.4% in fiscal 2007 and 2006, respectively.

Research, development and related engineering spending increased to $70.5 million, or 5.6% of sales, in fiscal 2007 compared with $52.6 million, or 5.4% of sales, in fiscal 2006. The increase in research, development and related engineering largely reflects spending on the T6-B, A400M primary power distribution assembly, TP400 engine sensors, 787 overhead panel control and 787 environmental control programs. Research, development and engineering expense in fiscal 2007

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and 2006 is net of $6.7 million and $5.2 million, respectively, in government subsidies. Research, development and engineering spending is expected to be about 5% of sales in fiscal 2008.

Segment earnings (which exclude corporate expenses and other income and expense) increased 50.3% during fiscal 2007 to $181.7 million compared to $120.8 million in the prior year. Business interruption insurance recoveries of $37.5 million were a contributor to this growth, partially offset by losses of $7.6 million at CMC.

Avionics & Controls segment earnings were $49.5 million for fiscal 2007 compared with $45.1 million in fiscal 2006 and reflected strong earnings from our cockpit control and medical equipment operations, partially offset by the shipment of acquired inventory of CMC, which was valued at fair value at acquisition. CMC’s earnings were impacted by the effect of a weaker U.S. dollar compared with the Canadian dollar on U.S. dollar-denominated sales and Canadian-denominated cost of sales. Since the acquisition of CMC, the U.S. dollar relative to the Canadian dollar has declined 18.2%. Approximately $94.0 million of CMC’s sales of $128.0 million were denominated in U.S. dollars. Additionally, CMC’s earnings were impacted by significant research and development expenses, principally related to the T6-B program. While CMC’s partial-year results of operations were impacted by the above items, the underlying business is performing well and is meeting our expectations as earnings from CMC’s products, including Flight Management Systems, Global Positioning System Receivers, Satcom antennas, and after-market military engine instruments remain robust.

Sensors & Systems segment earnings were $34.9 million for fiscal 2007 compared with $29.3 million in fiscal 2006. Operating earnings at our power distribution operation reflected improved results from increased sales from new OEM programs, a $1.0 million reimbursement of research, development and engineering expense negotiated with a customer and price increases, which were partially offset by higher research, development and engineering expenses on the A400M program. Earnings at our temperature and pressure sensors operations increased from 2006, reflecting the benefit of reduced indirect labor and research, development and engineering costs, and improved operating efficiencies, partially offset by a post-retirement benefit adjustment of $1.6 million. Sensors & Systems earnings were also impacted by $3.4 million in contract overruns and additional research and development expense at a small unit which manufactures precision gears and data concentrators. Comparing fiscal 2007 to 2006, Sensors & Systems earnings in fiscal 2006 were impacted by a $1.2 million increase in the Leach pension obligation explained above and manufacturing inefficiencies and incremental direct labor costs incurred to reduce delinquent shipments at our temperature and pressure sensors operations. Sensors & Systems earnings also reflected the impact of a weaker U.S. dollar relative to the euro and the U.K. pound on U.S. dollar-denominated sales and euro- and U.K. pound-based operating expenses.

Advanced Materials segment earnings were $97.3 million for fiscal 2007 compared with $46.5 million for fiscal 2006, principally reflecting $37.5 million in business interruption insurance recoveries, incremental earnings from our Darchem acquisition and improved earnings from our elastomer and Arkansas countermeasure flare operations. Earnings in both years were impacted by start-up costs at our FR Countermeasures unit and low sales at our Wallop

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operations. The $37.5 million recovery is related to an explosion that occurred at Wallop on June 26, 2006. Although a portion of the facility is expected to be closed for about two years due to the requirements of the Health Safety Executive (HSE) to review the cause of the accident, normal operations are continuing at unaffected portions of the facility. The HSE investigation will not be completed until a Coroner’s Inquest is filed, possibly in 2008. Although it is not possible to determine the results of the HSE investigation or how the Coroner will rule, management does not expect to be found in breach of the Health & Safety Act related to the accident and, accordingly, no amounts have been recorded for any potential fines that may be assessed by the HSE. The HSE will also review and approve the plans and construction of the new flare facility. The $37.5 million insurance recovery is to reimburse the Company for the loss of earnings and damage to a portion of the facility. We expect construction to be completed by the end of fiscal 2008 and in full production following customary start-up and commissioning activities.

Interest expense increased to $35.3 million during fiscal 2007 compared with $21.3 million in the prior year, reflecting increased borrowings to finance the CMC acquisition.

Non-operating expenses in the fourth fiscal quarter of 2007 included a $1.1 million write off of debt issuance costs as a result of the prepayment of our $100.0 million U.S. term loan. Non-operating expense in the first fiscal quarter of 2006 included a $2.2 million prepayment penalty arising from the $40.0 million prepayment of our 6.77% Senior Notes. Both prepayments were recorded as a loss on extinguishment of debt.

The effective income tax rate for fiscal 2007 was 19.6% compared with 22.8% in fiscal 2006. The effective tax rate was lower than the statutory rate, as both years benefited from various tax credits and certain foreign interest expense deductions. In addition, in fiscal 2007, we recognized a $3.4 million reduction of previously estimated income tax liabilities, which was the result of the following items: a $2.8 million net reduction in deferred income tax liabilities as a result of the enactment of tax laws reducing U.K., Canadian and German statutory corporate income tax rates and a $1.0 million tax benefit as a result of the retroactive extension of the U.S. Research and Experimentation tax credit that was signed into law on December 21, 2006. These benefits were offset by $0.4 million of additional income tax resulting from the reconciliation of prior-years’ U.S. and foreign income tax returns to the provisions for income taxes. The effective tax rate for fiscal 2007 also reflected CMC’s tax credits and other tax efficiencies. In fiscal 2006, we recognized a $4.5 million reduction of previously estimated tax liabilities, which was the result of the following items: $1.6 million due to the expiration of the statute of limitations and adjustments resulting from a reconciliation of the prior year’s U.S. income tax return to the U.S. provision for income taxes, $2.0 million as a result of receiving a Notice of Proposed Adjustment (NOPA) from the State of California Franchise Tax Board covering, among other items, the examination of research and development tax credits for fiscal years 1997 through 2002, and $0.9 million as a result of a favorable conclusion of a tax examination.

New orders for fiscal 2007 were $1.6 billion compared with $1.1 billion for fiscal 2006. Avionics & Controls orders for fiscal 2007 increased 120.0% from the prior-year period, principally reflecting the CMC acquisition. Sensors & Systems orders for fiscal 2007 increased 26.6% from the prior-year period. Advanced Materials orders for fiscal 2007 decreased 4.0%

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from the prior-year period due to the timing of receiving orders. Backlog at the end of fiscal 2007 was $985.1 million compared with $653.5 million at the end of the prior year. Approximately $253.7 million is scheduled to be delivered after fiscal 2008. Backlog is subject to cancellation until delivery.

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Fiscal 2006 Compared with Fiscal 2005

Sales for fiscal 2006 increased 16.4% over the prior year. Sales by segment were as follows:

Dollars In Thousands	Increase (Decrease) From Prior Year	2006		2005
Avionics & Controls	8.2%	$	283,011	$	261,550
Sensors & Systems	4.3%		333,257		319,539
Advanced Materials	40.0%		356,007		254,314
Total		$	972,275	$	835,403

The 8.2% increase in Avionics & Controls reflected incremental sales from the Palomar acquisition in the third quarter of fiscal 2005 and higher sales of cockpit controls. These increases were partially offset by decreased sales of diagnostic medical devices.

The 4.3% increase in Sensors & Systems principally reflected growth in OEM programs for temperature and pressure sensors and power distribution devices. These increases were partially offset by lower motion control distribution sales to the British Ministry of Defence (British MoD). In addition, pressure sensor sales in the first nine months of fiscal 2005 were enhanced by a retrofit program.

The 40.0% increase in Advanced Materials reflected $76.1 million in incremental sales from the acquisitions of Darchem, Wallop and FR Countermeasures and higher sales of flare countermeasure devices, elastomer material and increased sales at our metal finishing unit.

Sales to foreign customers, including export sales by domestic operations, totaled $437.0 million and $345.8 million, and accounted for 45.0% and 41.4% of our sales for fiscal 2006 and 2005, respectively.

Overall, gross margin as a percentage of sales was 30.9% and 31.4% for fiscal 2006 and 2005, respectively. Avionics & Controls segment gross margin was 35.3% and 33.3% for fiscal 2006 and 2005, respectively, reflecting a higher mix of cockpit control and after-market sales and an improved recovery of fixed expenses. The increase also reflects enhanced medical equipment margins.

Sensors & Systems segment gross margin was 33.9% and 34.5% for fiscal 2006 and 2005, respectively. The decrease in Sensors & Systems gross margin from fiscal 2005 was largely a result of production inefficiencies and incremental direct labor costs incurred to reduce delinquent shipments at our temperature and pressure sensor operations. In addition, fiscal 2005 benefited from a retrofit program. Gross margin in fiscal 2005 was impacted by a loss provision on shipments of off-spec power distribution devices. In fiscal 2006, the Company was able to negotiate a favorable settlement with its customer and, accordingly, nearly all of the loss provision recorded in fiscal 2005 was reversed. Gross margin was also impacted by a weaker U.S. dollar compared to the euro and U.K. pound on U.S. dollar-denominated sales and euro- and U.K. pound-based cost of sales.

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Advanced Materials segment gross margin was 24.7% and 25.3% for fiscal 2006 and 2005, respectively. Gross margin was impacted by the 2006 explosion at our Wallop facility, as explained in Note 2 of the consolidated financial statements, and start-up costs at our FR Countermeasures unit. This decrease in gross margin was partially offset by improved operating efficiencies at our Arkansas flare countermeasure operation. Additionally, gross margins improved at our elastomer material operations, reflecting increased recovery of fixed expenses and a shift in sales mix to higher margin space and defense products.

Selling, general and administrative expenses (which include corporate expenses) increased to $159.6 million in fiscal 2006 compared with $137.4 million in fiscal 2005. Selling, general and administrative expenses include stock option expense of $5.4 million resulting from accounting for stock option expense under Financial Accounting Standards No. 123(R), “Share-Based Payment,” (Statement No. 123(R)). For information on our adoption of Statement No. 123(R), see Note 12 to the consolidated financial statements. In fiscal 2005, we recorded $2.8 million of stock option expense under the variable method of accounting. The increase in selling, general and administrative expenses primarily reflected incremental selling, general and administrative expenses from the Darchem, Wallop, FR Countermeasures and Palomar acquisitions. In addition, pension expense was $4.3 million and $3.0 million in fiscal 2006 and 2005, respectively. Pension expense in fiscal 2006 included a $1.2 million increase in the Leach pension obligation existing as of our acquisition of Leach in August 2004, which was identified during an audit of its pension plan. The increase in selling, general and administrative expense also reflected a $1.0 million charge as a result of a customer contract termination and higher commission expense from increased sales. As a percentage of sales, selling, general and administrative expenses were 16.4% and 16.5% in fiscal 2006 and 2005, respectively.

Research, development and related engineering spending increased to $52.6 million, or 5.4% of sales, in fiscal 2006 compared with $42.2 million, or 5.1% of sales, in fiscal 2005. Darchem’s research and development and engineering spending as a percentage of sales is lower than our other operating units. If research, development and engineering spending as a percentage of sales is calculated excluding Darchem, the percentage is 5.8%, which we consider to be a better comparison to the prior year. The increase in research, development and related engineering largely reflects spending on the A400M primary power distribution assembly, TP400 engine sensors, 787 overhead panel control and 787 environmental control programs. Research, development and engineering expense in fiscal 2006 is net of a $5.2 million government subsidy due from France.

Segment earnings (which exclude corporate expenses and other income and expense) increased 14.2% during fiscal 2006 to $120.8 million compared to $105.8 million in the prior year. Avionics & Controls segment earnings were $45.1 million for fiscal 2006 compared with $37.3 million in fiscal 2005 and reflected incremental earnings from the Palomar acquisition completed in June 2005 and strong earnings from our cockpit control and medical equipment operations.

Sensors & Systems segment earnings were $29.3 million for fiscal 2006 compared with $34.5 million in fiscal 2005. The decrease in Sensors & Systems earnings from fiscal 2005

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reflected manufacturing inefficiencies and incremental direct labor costs incurred to reduce delinquent shipments at our temperature and pressure sensors operations. Sensors & Systems earnings were also impacted by a $1.0 million charge as a result of a customer contract termination as well as a $4.6 million increase in research, development and engineering spending which was principally incurred by our Leach units. Sensors & Systems earnings also reflected the impact of a weaker U.S. dollar relative to the euro on U.S. dollar-denominated sales and euro-based operating expenses.

Advanced Materials segment earnings were $46.5 million for fiscal 2006 compared with $34.0 million for fiscal 2005. Advanced Materials earnings reflected incremental earnings from the Darchem acquisition and improved earnings from our elastomer and Arkansas flare countermeasure operations. Advanced Materials earnings were impacted by lower sales and earnings at our combustible ordnance operations, start-up costs at our FR Countermeasures unit and the incident at our Wallop operations described above. Business interruption insurance recoveries of $4.9 million were recorded during fiscal 2006.

Interest income decreased to $2.6 million during fiscal 2006 compared with $4.1 million in fiscal 2005, reflecting lower balances of cash and cash equivalents and short-term investments. Interest expense increased to $21.3 million during fiscal 2006 compared with $18.2 million in the prior year, reflecting increased borrowings to finance acquisitions and working capital requirements. In February 2006, we entered into an interest rate swap agreement on the full principal amount of our U.K. £57.0 million term loan, exchanging the variable interest rate for a fixed interest rate of 4.75% plus an additional margin amount determined by reference to the Company’s leverage ratio.

The effective income tax rate for continuing operations for fiscal 2006 was 22.8% compared with 24.1% in fiscal 2005. The effective tax rate was lower than the statutory rate, as both years benefited from various tax credits and deductions. In addition, in fiscal 2006, we recognized a $4.5 million reduction of previously estimated tax liabilities, which was the result of the following items: $1.6 million due to the expiration of the statute of limitations and adjustments resulting from a reconciliation of prior year’s U.S. income tax return to the U.S. income tax return’s provision for income taxes, $2.0 million as a result of receiving a Notice of Proposed Adjustment (NOPA) from the State of California Franchise Tax Board covering, among other items, the examination of research and development tax credits for fiscal years 1997 through 2002 and $0.9 million as a result of a favorable conclusion of a tax examination. In fiscal 2005, we recognized a $2.0 million reduction of previously estimated tax liabilities due to the expiration of the statute of limitations and adjustments resulting from a reconciliation of prior year’s U.S. income tax return to the U.S. income tax return’s provision for income taxes. While the effective tax rate in fiscal 2006 was impacted by the expiration of the U.S. Research and Experimentation Credit at December 31, 2005, the impact was partially offset by increased benefits from various tax credits and foreign interest deductions.

New orders for fiscal 2006 were $1,143.0 million compared with $894.4 million for fiscal 2005. Avionics & Controls orders for fiscal 2006 increased 7.2% from the prior-year period. Sensors & Systems orders for fiscal 2006 decreased 4.0% from the prior-year period, principally reflecting the timing of receiving orders. Advanced Materials orders for fiscal 2006 increased

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92.3% from the prior-year period, principally reflecting the Darchem and Wallop acquisitions. Backlog at the end of fiscal 2006 was $653.5 million compared with $482.8 million at the end of the prior year.

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Liquidity and Capital Resources

Working Capital and Statement of Cash Flows

Cash and cash equivalents at the end of fiscal 2007 totaled $147.1 million, an increase of $104.4 million from the prior year. Net working capital increased to $420.1 million at the end of fiscal 2007 from $267.7 million at the end of the prior year. Sources of cash flows from operating activities principally consist of cash received from the sale of products offset by cash payments for material, labor and operating expenses.

Cash flows from operating activities were $121.7 million and $36.7 million in fiscal 2007 and 2006, respectively. The increase principally reflected higher net earnings, which included cash received from our insurance carrier. This increase was partially offset by an increased pension contribution to our U.S. pension plan maintained by Leach, non-U.S. pension plans maintained by CMC, and higher payments for income taxes.

Cash flows used by investing activities were $382.3 million and $153.0 million in fiscal 2007 and 2006, respectively. The increase in the use of cash for investing activities mainly reflected cash paid for acquisitions, partially offset by the proceeds from the sale of short-term investments in fiscal 2006.

Cash flows provided by financing activities were $361.9 million and $39.1 million in fiscal 2007 and 2006, respectively. Cash provided by financing activities in fiscal 2007 reflected the issuance of $175.0 million Senior Notes due 2017, a $100.0 million U.S. term loan, and the sale of $187.1 million of common stock, partially offset by the subsequent prepayment of the $100.0 million U.S. term loan in October 2007. In fiscal 2006 cash provided by financing activities reflected our $100.0 million borrowing under our term loan facility, the repayment of our $30.0 million 6.40% Senior Notes in accordance with the terms and the $40.0 million prepayment of our 6.77% Senior Notes in the first fiscal quarter of 2006.

Capital Expenditures

Net property, plant and equipment was $217.4 million at the end of fiscal 2007 compared with $170.4 million at the end of the prior year. Capital expenditures for fiscal 2007 were $30.5 million (excluding acquisitions) and included machinery and equipment and enhancements to information technology systems. Capital expenditures are anticipated to approximate $43 million for fiscal 2008. We will continue to support expansion through investments in infrastructure including machinery, equipment, buildings and information systems.

Debt Financing

Total debt increased $179.9 million from the prior year to $475.8 million at the end of fiscal 2007. Total debt outstanding, including the fair value of the interest rate swap at the end of fiscal 2007, consisted of $175.0 million of Senior Notes due in 2017, $175.3 million of Senior Subordinated Notes due in 2013, $112.6 million of the GBP Term Loan and $12.9 million in borrowings under our credit facility and various foreign currency debt agreements, including capital lease obligations. The Senior Notes are due March 1, 2017 and bear an interest rate of 6.625%. The Senior Notes are general unsecured senior obligations of the Company. The Senior Notes are guaranteed, jointly and severally on a senior basis, by all the existing and future

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domestic subsidiaries of the Company unless designated as an “unrestricted subsidiary,” and those foreign subsidiaries that executed related subsidiary guarantees under the indenture covering the Senior Notes. The Senior Notes are subject to redemption at the option of the Company at any time prior to March 1, 2012 at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. In addition, before March 1, 2010 the Company may redeem up to 35% of the principal amount at 106.625% plus accrued interest with proceeds of one or more Public Equity Offerings. The Senior Notes are also subject to redemption at the option of the Company, in whole or in part, on or after March 1, 2012 at redemption prices starting at 103.3125% of the principal amount plus accrued interest during the period beginning March 1, 2007 and declining annually to 100% of principal and accrued interest on or after March 1, 2015. The Senior Subordinated Notes are general unsecured obligations of the Company and are subordinated to all existing and future senior debt of the Company. In addition, the Senior Subordinated Notes are effectively subordinated to all existing and future senior debt and other liabilities (including trade payables) of the Company’s foreign subsidiaries. The Senior Subordinated Notes are guaranteed, jointly and severally, by all the existing and future domestic subsidiaries of the Company unless designated as an “unrestricted subsidiary” under the indenture covering the Senior Subordinated Notes. The Senior Subordinated Notes are subject to redemption at the option of the Company, in whole or in part, on or after June 15, 2008, at redemption prices starting at 103.875% of the principal amount plus accrued interest during the period beginning June 11, 2003 and declining annually to 100% of principal and accrued interest on June 15, 2011. In September 2003, we entered into an interest rate swap agreement on $75.0 million of our Senior Subordinated Notes due in 2013. The swap agreement exchanged the fixed interest rate for a variable interest rate on $75.0 million of the $175.0 million principal amount outstanding.

On November 15, 2005, $30.0 million of the 6.4% Senior Notes matured and was paid. Additionally, on November 15, 2005, we exercised our option under the terms of the Note Purchase Agreement, dated as of November 1, 1998, to prepay the outstanding principal amount of $40.0 million of the 6.77% Senior Notes due November 15, 2008. Under the terms of the Note Purchase Agreement, we paid an additional $2.0 million to the holders of the 6.77% Senior Notes as a prepayment penalty and wrote off debt issuance costs associated with the 6.77% Senior Notes. The payment of the prepayment penalty and the write off of the debt issuance costs were accounted for as a loss on extinguishment of debt in the first quarter of fiscal 2006.

On February 10, 2006, we borrowed U.K. £57.0 million, or approximately $100.0 million, under the term loan facility. We used the proceeds from the loan as working capital for our U.K. operations and to repay a portion of our outstanding borrowings under the revolving credit facility. The principal amount of the loan is payable quarterly commencing on March 31, 2007 through the termination date of November 14, 2010, according to a payment schedule by which 1.25% of the principal amount is paid in each quarter of 2007, 2.50% in each quarter of 2008, 5.00% in each quarter of 2009 and 16.25% in each quarter of 2010. The loan accrues interest at a variable rate based on the British Bankers Association Interest Settlement Rate for deposits in U.K. pounds plus an additional margin amount that ranges from 1.13% to 0.50% depending upon the Company’s leverage ratio. As of October 26, 2007, the interest rate on the term loan was 7.22%. We entered into an interest rate swap agreement on the full principal amount by which the variable interest rate was exchanged for a fixed interest rate of 4.75% plus an additional

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margin amount determined by reference to the Company’s leverage ratio. At October 26, 2007, the fair value of the interest rate swap was a $2.1 million asset. The interest rate swap is accounted for as a cash flow hedge and the fair value is included in Other Comprehensive Income.

On March 14, 2007, we acquired CMC Electronics Inc. (CMC) for approximately $344.5 million in cash, including acquisition costs. The acquisition was financed in part with the proceeds of the $175 million Senior Notes due March 1, 2017. In addition, on March 13, 2007, we amended our credit agreement to increase the existing revolving credit facility to $200.0 million and to provide an additional $100.0 million U.S. term loan facility. On March 13, 2007, we borrowed $60.0 million under the revolving credit facility and $100.0 million under the U.S. term loan facility to pay a portion of the purchase price of the acquisition of CMC.

On October 12, 2007, we completed an underwritten public offering of 3.45 million shares of common stock, generating net proceeds of $187.1 million. Proceeds from the offering were used to pay off our $100.0 million U.S. term loan facility and pay down our revolving credit facility. We wrote off $1.1 million in debt issuance costs related to the $100.0 million term loan in fiscal 2007 as a result of its pay-off.

We believe cash on hand, funds generated from operations and other available debt facilities are sufficient to fund operating cash requirements and capital expenditures through fiscal 2008; however, we may periodically utilize our lines of credit for working capital requirements. In addition, we believe we have adequate access to capital markets to fund future acquisitions.

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Pension and Other Post-Retirement Benefit Obligations

Our pension plans principally include a U.S. pension plan maintained by Esterline, U.S. and non-U.S. plans maintained by Leach, and non-U.S. plans maintained by CMC. Our principal post-retirement plans include non-U.S. plans maintained by CMC, which are non-contributory healthcare and life insurance plans.

We account for pension expense using the end of the fiscal year as our measurement date and we make actuarially computed contributions to our pension plans as necessary to adequately fund benefits. Our funding policy is consistent with the minimum funding requirements of ERISA. In fiscal 2007 and 2006, operating cash flow included $9.7 million and $0.7 million, respectively, of cash funding to these pension plans. We expect pension funding requirements to be approximately $4.7 million in fiscal 2008 for the plans maintained by Leach and CMC, and we do not expect the U.S. Esterline pension plan to require any contributions in fiscal 2008. The rate of increase in future compensation levels is consistent with our historical experience and salary administration policies. The expected long-term rate of return on plan assets is based on long-term target asset allocations of 70% equity and 30% fixed income. We periodically review allocations of plan assets by investment type and evaluate external sources of information regarding long-term historical returns and expected future returns for each investment type and, accordingly, believe a 7.0 – 8.5% assumed long-term rate of return on plan assets is appropriate. Current allocations are consistent with the long-term targets.

We made the following assumptions with respect to our pension obligation in 2007 and 2006:

	2007		2006
Principal assumptions as of fiscal year end:
Discount Rate	5.6 – 6.25	%	5.75 – 6.0	%
Rate of increase in future compensation levels	3.5 – 4.5	%	4.5	%
Assumed long-term rate of return on plan assets	7.0 – 8.5	%	8.5	%

We use a discount rate for expected returns that is a spot rate developed from a yield curve established from high-quality corporate bonds and matched to plan-specific projected benefit payments. Although future changes to the discount rate are unknown, had the discount rate increased or decreased by 25 basis points, pension liabilities in total would have decreased $8.2 million or increased $8.0 million, respectively. If all other assumptions are held constant, the estimated effect on fiscal 2007 pension expense from a hypothetical 25 basis point increase or decrease in both the discount rate and expected long-term rate of return on plan assets would not have a material effect on our pension expense. We are not aware of any legislative or other initiatives or circumstances that will significantly impact our pension obligations in fiscal 2008.

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We made the following assumptions with respect to our post-retirement obligation in 2007 and 2006:

	2007		2006
Principal assumptions as of fiscal year end:
Discount Rate	5.6% – 6.25	%	6	%
Initial weighted average health care trend rate	5% – 10	%	10	%
Ultimate weighted average health care trend rate	3.5% – 10	%	10	%

The assumed health care trend rate has a significant impact on our post-retirement benefit obligations. Our health care trend rate was based on the experience of our plan and expectations for the future. A 100 basis point increase in the health care trend rate would increase our post-retirement benefit obligation by $1.6 million. A 100 basis point decrease in the health care trend rate would decrease our post-retirement benefit obligation by $1.2 million. Assuming all other assumptions are held constant, the estimated effect on fiscal 2007 post-retirement benefit expense from a hypothetical 100 basis point increase or decrease in the health care trend rate would not have a material effect on our post-retirement benefit expense.

Research and Development Expense

For the three years ended October 26, 2007, research and development expense has averaged 5.4% of sales. In fiscal 2005 and 2004, we began bidding and winning new aerospace programs which will result in increased company-funded research and development. These programs included the A400M primary power distribution assembly, TP400 engine sensors, 787 overhead panel control and 787 environmental control programs. We estimate that research and development expense in fiscal 2008 will be approximately 5.0% of sales for the full year.

Equity Offering

On November 24, 2004 we completed a public offering of 3.7 million shares of common stock, including shares sold under the underwriters’ over-allotment option, priced at $31.25 per share, generating net proceeds of $108.5 million. The funds provided additional financial resources for acquisitions and general corporate purposes. On October 12, 2007, we completed an underwritten public offering of 3.45 million shares of common stock, generating net proceeds of $187.1 million. Proceeds from the public offering were used to pay off our $100.0 million U.S. term loan facility and pay down our revolving credit facility of $27.0 million.

Contractual Obligations

The following table summarizes our outstanding contractual obligations as of fiscal year end.

In Thousands
	Total	Less than 1 year	1-3 years	4-5 years	After 5 years
Long-term debt	$  467,168	$  12,166	$  85,500	$  19,232	$  350,270
Credit facilities	8,634	8,634	—	—	—
Operating lease obligations	75,102	14,641	25,003	18,674	16,784
Purchase obligations	190,403	178,323	11,344	736	—
Total contractual obligations	$  741,307	$  213,764	$  121,847	$  38,642	$  367,054

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Seasonality

The timing of our revenues is impacted by the purchasing patterns of our customers and, as a result, we do not generate revenues evenly throughout the year. Moreover, our first fiscal quarter, November through January, includes significant holiday vacation periods in both Europe and North America. This leads to decreased order and shipment activity; consequently, first quarter results are typically weaker than other quarters and not necessarily indicative of our performance in subsequent quarters.

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Disclosures About Market Risk

Interest Rate Risks

Our debt includes fixed rate and variable rate obligations. We are not subject to interest rate risk on the fixed rate obligations. We are subject to interest rate risk on $75.0 million of our Senior Subordinated Notes due in 2013. We hold an interest rate swap agreement, which exchanged the fixed interest rate for a variable rate on $75.0 million of the $175.0 million principal amount outstanding under our Senior Subordinated Notes due in 2013.

We also have a variable rate note with our £57.0 million GBP Term Loan. We hold an interest rate swap agreement, which exchanged the variable interest rate for a fixed rate on the £57.0 million GBP Term Loan.

Inclusive of the effect of the interest rate swaps, a hypothetical 10% increase or decrease in average market interest rates would not have a material effect on our pretax income.

The following table provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For long-term debt, the table presents principal cash flows and the related weighted-average interest rates by contractual maturities. For our interest rate swap, the following tables present notional amounts and, as applicable, the interest rate by contractual maturity date at October 26, 2007 and October 27, 2006.

At October 26, 2007

Dollars In Thousands

	Long-Term Debt – Fixed Rate				Interest Rate Swap
Maturing in:	Principal Amount		Average Rates		Notional Amount		Average Pay Rate (1)	Average Receive Rate
2008	$	—	7.75	%	$	—	*	7.75	%
2009		—	7.75	%		—	*	7.75	%
2010		—	7.75	%		—	*	7.75	%
2011		—	7.75	%		—	*	7.75	%
2012		—	7.75	%		—	*	7.75	%
Thereafter		175,000	7.75	%		75,000	*	7.75	%
Total	$	175,000			$	75,000
Fair Value at 10/26/2007	$	177,328			$	252

⁽¹⁾ The average pay rate is LIBOR plus 2.56%.

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At October 26, 2007

Dollars In Thousands

	Long-Term Debt – Variable Rate				Interest Rate Swap
Maturing in:		Principal Amount	Average Rates (1)			Notional Amount		Average Pay Rate		Average Receive Rate (1)
2008	$	10,239	*		$	10,239		4.755	%	*
2009		20,479	*			20,479		4.755	%	*
2010		62,899	*			62,899		4.755	%	*
2011		19,016	*			19,016		4.755	%	*
Total	$	112,633			$	112,633
Fair Value at 10/26/2007	$	112,633			$	2,100
(1)    The average rate on the long-term debt and the average receive rate on the interest rate swap is the British Bankers Association Interest Settlement Rate for deposits in U.K. pounds plus an additional margin of 1.13% to 0.50% depending on the Company’s leverage ratio. At October 27, 2006 Dollars In Thousands
	Long-Term Debt – Fixed Rate				Interest Rate Swap
Maturing in:		Principal Amount	Average Rates			Notional Amount		Average Pay Rate (1)		Average Receive Rate
2007	$	—	7.75	%	$	—		*		7.75	%
2008		—	7.75	%		—		*		7.75	%
2009		—	7.75	%		—		*		7.75	%
2010		—	7.75	%		—		*		7.75	%
2011		—	7.75	%		—		*		7.75	%
Thereafter		175,000	7.75	%		75,000		*		7.75	%
Total	$	175,000			$	75,000
Fair Value at 10/27/2006	$	178,938			$	(698	)

⁽¹⁾ The average pay rate is LIBOR plus 2.56%.

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At October 27, 2006

Dollars In Thousands

	Long-Term Debt – Variable Rate			Interest Rate Swap
Maturing in:	Principal Amount		Average Rates (1)	Notional Amount		Average Pay Rate		Average Receive Rate (1)
2007	$	4,054	*	$	4,054	4.755	%	*
2008		9,460	*		9,460	4.755	%	*
2009		18,921	*		18,921	4.755	%	*
2010		58,113	*		58,113	4.755	%	*
2011		17,569	*		17,569	4.755	%	*
Total	$	108,117		$	108,117
Fair Value at 10/27/2006	$	108,117		$	1,498

⁽¹⁾ The average rate on the long-term debt and the average receive rate on the interest rate swap is the British Bankers Association Interest Settlement Rate for deposits in U.K. pounds plus an additional margin of 1.13% to 0.50% depending on the Company’s leverage ratio.

Currency Risks

To the extent that sales are transacted in a foreign currency, we are subject to foreign currency fluctuation risk. Furthermore, we have assets denominated in foreign currencies that are not offset by liabilities in such foreign currencies. We own significant operations in Canada, France, Germany and the United Kingdom and, accordingly, we may experience gains or losses due to foreign exchange fluctuations. Between the acquisition of CMC on March 14, 2007 and our fiscal year-end on October 26, 2007, the foreign exchange rate for the U.S. dollar relative to the Canadian dollar decreased from 1.1756 to 0.9622 or 18.2%, and from October 26, 2007 to October 27, 2006, the foreign exchange rate for the dollar relative to the euro decreased to .695 from .785, or 11.5%, and the dollar relative to the U.K. pound decreased to .487 from .527, or 7.6%. Comparing October 27, 2006 to October 28, 2005, the foreign exchange rate for the dollar relative to the euro decreased to .785 from .829, or 5.3%, and the dollar relative to the U.K. pound decreased to .527 from .564, or 6.5%.

Our policy is to hedge a portion of our forecasted transactions using forward exchange contracts with maturities up to fifteen months. The Company does not enter into any forward contracts for trading purposes. At October 26, 2007 and October 27, 2006, the notional value of foreign currency forward contracts was $72.9 million and $67.0 million, respectively. The fair value of these contracts was a $2.9 million asset and a $0.6 million asset at October 26, 2007 and October 27, 2006, respectively. If the U.S. dollar increased or decreased in value against all hedged currencies by a hypothetical 10%, the effect on the fair value of the foreign currency contracts would not be material.

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The following tables provide information about our derivative financial instruments, including foreign currency forward exchange agreements and certain firmly committed sales transactions denominated in currencies other than the functional currency at October 26, 2007 and October 27, 2006. The information about certain firmly committed sales contracts and derivative financial instruments is in U.S. dollar equivalents. For forward foreign currency exchange agreements, the following tables present the notional amounts at the current exchange rate and weighted-average contractual foreign currency exchange rates by contractual maturity dates.

Firmly Committed Sales Contracts

Operations with Foreign Functional Currency

At October 26, 2007

Principal Amount by Expected Maturity

In Thousands
	Canadian Dollar		Euro		U.K. Pound
	Firmly Committed Sales Contracts in United States Dollar		Firmly Committed Sales Contracts in United States Dollar		Firmly Committed Sales Contracts in United States Dollar
Fiscal Years
2008	$	101,632	$	56,704	$	55,867
2009		15,082		7,553		5,838
2010		3,228		194		77
2011		18,420		—		54
2012		37,011		—		7
Total	$	175,373	$	64,451	$	61,843

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Derivative Contracts

Operations with Foreign Functional Currency

At October 26, 2007

Notional Amount by Expected Maturity

Average Foreign Currency Exchange Rate (USD/Foreign Currency) ⁽¹⁾

Dollars in Thousands, Except for Average Contract Rate

Related Forward Contracts to Sell U.S. Dollar for Euro

	United States Dollar
Fiscal Years		Notional Amount	Avg. Contract Rate
2008	$	32,780	1.349
2009		5,290	1.414
Total	$	38,070
Fair Value at 10/26/2007	$	2,210

¹ The Company has no derivative contracts maturing after fiscal 2009.

Derivative Contracts

Operations with Foreign Functional Currency

At October 26, 2007

Notional Amount by Expected Maturity

Average Foreign Currency Exchange Rate (USD/Foreign Currency) ⁽¹⁾

Dollars in Thousands, Except for Average Contract Rate

Related Forward Contracts to Sell U.S. Dollar for U.K. Pound

	United States Dollar
Fiscal Years	Notional Amount		Avg. Contract Rate
2008	$	28,295	1.980
2009		6,555	2.011
Total	$	34,850
Fair Value at 10/26/2007	$	716
1       The Company has no derivative contracts maturing after fiscal 2009.

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Firmly Committed Sales Contracts

Operations with Foreign Functional Currency

At October 27, 2006

Principal Amount by Expected Maturity

In Thousands
	Euro		U.K. Pound
Fiscal Years	Firmly Committed Sales Contracts in United States Dollar		Firmly Committed Sales Contracts in United States Dollar
2007	$	55,135	$	16,998
2008		8,074		4,999
2009		109		1,369
2010		—		71
2011		—		63
Total	$	63,318	$	23,500

Derivative Contracts

Operations with Foreign Functional Currency

At October 27, 2006

Notional Amount by Expected Maturity

Average Foreign Currency Exchange Rate (USD/Foreign Currency)¹

Dollars In Thousands, Except for Average Contract Rate

Related Forward Contracts to Sell U.S. Dollar for Euro

	United States Dollar
Fiscal Years		Notional Amount	Avg. Contract Rate
2007	$	31,800	1.265
2008		5,470	1.294
Total	$	37,270
Fair Value at 10/27/2006	$	297

¹ The Company has no derivative contracts maturing after fiscal 2008.

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Derivative Contracts

Operations with Foreign Functional Currency

At October 27, 2006

Notional Amount by Expected Maturity

Average Foreign Currency Exchange Rate (USD/Foreign Currency)¹

Dollars In Thousands, Except for Average Contract Rate

Related Forward Contracts to Sell U.S. Dollar for U.K. Pound

	United States Dollar
Fiscal Years		Notional Amount	Avg. Contract Rate
2007	$	26,675	1.841
2008		3,015	1.868
Total	$	29,690
Fair Value at 10/27/2006	$	311

¹ The Company has no derivative contracts maturing after fiscal 2008.

As more fully described under Note 10 of the consolidated financial statements, on February 10, 2006, we borrowed U.K. £57.0 million, or approximately $100.0 million, under our term loan facility. We designated the U.K. £57.0 million loan as a hedge of the investment in a certain U.K. business unit. The foreign currency gain or loss that is effective as a hedge is reported as a component of Other Comprehensive Income in shareholders’ equity. A 10% increase or decrease in the U.K. pound would increase or decrease Other Comprehensive Income by $7.1 million, net of tax. We also hold an interest rate swap agreement, which exchanged the variable interest rate for a fixed rate on the £57.0 million GBP Term Loan. At October 26, 2007, the fair value of the interest rate swap was a $2.1 million asset.

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Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from estimates under different assumptions or conditions. These estimates and assumptions are affected by our application of accounting policies. Our critical accounting policies include revenue recognition, accounting for the allowance for doubtful accounts receivable, accounting for inventories at the lower of cost or market, accounting for goodwill and intangible assets in business combinations, impairment of goodwill and intangible assets, accounting for legal contingencies, accounting for pension benefits, and accounting for income taxes.

Revenue Recognition

We recognize revenue when the title and risk of loss have passed to the customer, there is persuasive evidence of an agreement, delivery has occurred or services have been rendered, the price is determinable, and the collectibility is reasonably assured. We recognize product revenues at the point of shipment or delivery in accordance with the terms of sale. Sales are net of returns and allowances. Returns and allowances are not significant because products are manufactured to customer specification and are covered by the terms of the product warranty.

Revenues and profits on fixed-price contracts with significant engineering as well as production requirements are recorded based on the achievement of contractual milestones and the ratio of total actual incurred costs to date to total estimated costs for each contract (cost-to-cost method) in accordance with the American Institute of Certified Public Accountants Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” We review cost performance and estimates to complete on our ongoing contracts at least quarterly. The impact of revisions of profit estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period they become evident. Amounts representing contract change orders are included in revenue only when they can be reliably estimated and realization is probable, and are determined on a percentage-of-completion basis measured by the cost-to-cost method. Claims are included in revenue only when they are probable of collection.

Allowance for Doubtful Accounts

We establish an allowance for doubtful accounts for losses expected to be incurred on accounts receivable balances. Judgment is required in estimation of the allowance and is based upon specific identification, collection history and creditworthiness of the debtor.

Inventories

We account for inventories on a first-in, first-out or average cost method of accounting at the lower of its cost or market. The determination of market requires judgment in estimating future demand, selling prices and cost of disposal. Judgment is required when determining inventory reserves. These reserves are provided when inventory is considered to be excess or obsolete

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based upon an analysis of actual on-hand quantities on a part level basis to forecasted product demand and historical usage. Inventory reserves are released based upon adjustments to forecasted demand.

Goodwill and Intangible Assets in Business Combinations

We account for business combinations, goodwill and intangible assets in accordance with Financial Accounting Standards No. 141, “Business Combinations,” (Statement No. 141) and Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (Statement No. 142). Statement No. 141 specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill.

Impairment of Goodwill and Intangible Assets

Statement No. 142 requires goodwill and indefinite-lived intangible assets to be tested for impairment at least annually. We are also required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors.

The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life cycles. In making these judgments, we evaluate the financial health of the business, including such factors as industry performance, changes in technology and operating cash flows.

Statement No. 142 outlines a two-step process for testing goodwill for impairment. The first step (Step One) of the goodwill impairment test involves estimating the fair value of a reporting unit. Statement No. 142 defines fair value (Fair Value) as “the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced liquidation sale.” A reporting unit is generally defined at the operating segment level or at the component level one level below the operating segment, if said component constitutes a business. The Fair Value of a reporting unit is then compared to its carrying value, which is defined as the book basis of total assets less total liabilities. In the event a reporting unit’s carrying value exceeds its estimated Fair Value, evidence of potential impairment exists. In such a case, the second step (Step Two) of the impairment test is required, which involves allocating the Fair Value of the reporting unit to all of the assets and liabilities of that unit, with the excess of Fair Value over allocated net assets representing the Fair Value of goodwill. An impairment loss is measured as the amount by which the carrying value of the reporting unit’s goodwill exceeds the estimated Fair Value of goodwill.

As we have grown through acquisitions, we have accumulated $656.9 million of goodwill and $57.6 million of indefinite-lived intangible assets out of total assets of $2,050.3 million at October 26, 2007. The amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the

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charge is taken. We performed our impairment review for fiscal 2007 as of July 28, 2007, and our Step One analysis indicates that no impairment of goodwill or other indefinite-lived assets exists at any of our reporting units. We performed an impairment test of one of our indefinite-lived assets, a trade name used by our temperature and pressure sensors reporting unit, which has a book value of $6.4 million. We determined that the trade name was not impaired because the discounted cash flows (using a relief from royalty valuation method) of the trade name were greater than the carrying amount of the intangible asset. Our estimated discounted cash flows assume the successful renegotiation and price increase of a U.S. dollar-denominated long-term agreement, expiring in December 2007, the successful start-up of a low-cost country manufacturing operation in fiscal 2008 and 2009, and the successful development and commercialization of new high-margin products. In the event some or all of these initiatives are not successful, an amount up to $6.4 million could be written off.

Impairment of Long-lived Assets

We account for the impairment of long-lived assets to be held and used in accordance with Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (Statement No. 144). Statement No. 144 requires that a long-lived asset to be disposed of be reported at the lower of its carrying amount or fair value less cost to sell. An asset (other than goodwill and indefinite-lived intangible assets) is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not deemed recoverable, the asset is adjusted to its estimated fair value. Fair value is generally determined based upon estimated discounted future cash flows. As we have grown through acquisitions, we have accumulated $307.7 million of definite-lived intangible assets. The amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken. We performed an impairment test of an acquired program value of our temperature and pressure sensor reporting unit in the fourth quarter of fiscal 2007 and we determined that the acquired program value was not impaired because the estimated future cash flows of the program were greater than the carrying amount of the intangible asset. Our estimated future cash flows assume the successful renegotiation and price increase of a U.S. dollar-denominated long-term agreement, expiring in December 2007, the successful start up of a low-cost country manufacturing operation in fiscal 2008 and 2009, and the successful development and commercialization of new high-margin products. In the event some or all of these initiatives are not successful, an amount up to $3.6 million could be written off.

Contingencies

We are party to various lawsuits and claims, both as plaintiff and defendant, and have contingent liabilities arising from the conduct of business. We are covered by insurance for general liability, product liability, workers’ compensation and certain environmental exposures, subject to certain deductible limits. We are self-insured for amounts less than our deductible and where no insurance is available. Financial Accounting Standards No. 5, “Accounting for Contingencies,” requires that an estimated loss from a contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a

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reasonable possibility that a loss has been incurred. We evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.

Pension and Other Post-Retirement Benefits

We account for employee pension and post-retirement benefit costs in accordance with the applicable statements issued by the Financial Accounting Standards Board. In accordance with these statements, we select appropriate assumptions including discount rate, rate of increase in future compensation levels and assumed long-term rate of return on plan assets and expected annual increases in costs of medical and other healthcare benefits in regard to our post-retirement benefit obligations. Our assumptions are based upon historical results, the current economic environment and reasonable expectations of future events. Actual results which vary from our assumptions are accumulated and amortized over future periods and, accordingly, are recognized in expense in these periods. Significant differences between our assumptions and actual experience or significant changes in assumptions could impact the pension costs and the pension obligation.

Income Taxes

We account for income taxes in accordance with Financial Accounting Standards No. 109, “Accounting for Income Taxes.” The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position and results of operations.

Recent Accounting Pronouncements

On December 4, 2007, the Financial Accounting Standards Board issued Financial Accounting Standard No. 141(R), “Business Combinations,” (Statement No. 141(R)) and Statement No. 160, “Accounting and Reporting of Non-controlling Interest in Consolidated Financial Statements, an amendment of ARB No. 51,” (Statement No. 160). These new standards will significantly change the accounting for and reporting of business combination transactions and non-controlling (minority) interests in consolidated financial statements. Statement No. 141(R) and Statement No. 160 are required to be adopted simultaneously and are effective for fiscal 2010.

The significant changes in the accounting for business combination transactions under Statement No. 141(R) include:

• Recognition, with certain exceptions, of 100% of the fair values of assets acquired, liabilities assumed, and non-controlling interests of acquired businesses.

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• Measurement of all acquirer shares issued in consideration for a business combination at fair value on the acquisition date. With the effectiveness of Statement No. 141(R), the “agreement and announcement date” measurement principles in EITF Issue 99-12 will be nullified.

• Recognition of contingent consideration arrangements at their acquisition-date fair values, with subsequent changes in fair value generally reflected in earnings.

• With the one exception described in the last sentence of this section, recognition of pre-acquisition gain and loss contingencies at their acquisition-date fair values. Subsequent accounting for pre-acquisition loss contingencies is based on the greater of acquisition-date fair value or the amount calculated pursuant to FASB Statement No. 5, “Accounting for Contingencies,” (Statement No. 5). Subsequent accounting for pre-acquisition gain contingencies is based on the lesser of acquisition-date fair value or the best estimate of the future settlement amount. Adjustments after the acquisition date are made only upon the receipt of new information on the possible outcome of the contingency, and changes to the measurement of pre-acquisition contingencies are recognized in ongoing results of operations. Absent new information, no adjustments to the acquisition-date fair value are made until the contingency is resolved. Pre-acquisition contingencies that are both (1) non-contractual and (2) as of the acquisition date are “not more likely than not” of materializing are not recognized in acquisition accounting and, instead, are accounted for based on the guidance in Statement No. 5, “Accounting for Contingencies.”

• Capitalization of in-process research and development (IPR&D) assets acquired at acquisition date fair value. After acquisition, apply the indefinite-lived impairment model (lower of basis or fair value) through the development period to capitalized IPR&D without amortization. Charge development costs incurred after acquisition to results of operations. Upon completion of a successful development project, assign an estimated useful life to the amount then capitalized, amortize over that life, and consider the asset a definite-lived asset for impairment accounting purposes.

• Recognition of acquisition-related transaction costs as expense when incurred.

• Recognition of acquisition-related restructuring cost accruals in acquisition accounting only if the criteria in Statement No. 146 are met as of the acquisition date. With the effectiveness of Statement No. 141(R), the EITF Issue 95-3 concepts of “assessing, formulating, finalizing and committing/communicating” that currently pertain to recognition in purchase accounting of an acquisition-related restructuring plan will be nullified.

• Recognition of changes in the acquirer’s income tax valuation allowance resulting from the business combination separately from the business combination as adjustments to income tax expense. Also, changes after the acquisition date in an acquired entity’s valuation allowance or tax uncertainty established at the acquisition date are accounted for as adjustments to income tax expense.

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The Company is currently evaluating the impact of Statement No. 141(R) and Statement No. 160 on our financial statements.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.” Statement No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Statement No. 157 applies under other accounting pronouncements that require or permit fair value measurements. Statement No. 157 indicates, among other things, that a fair value measurement assumes the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Statement No. 157 is effective for the Company’s year ending October 29, 2010, for all non-financial assets and liabilities. For those items that are recognized or disclosed at fair value in the financial statements, the effective date is October 30, 2009. The Company is currently evaluating the impact of Statement No. 157 on the Company’s financial statements.

In June 2006, the Financial Accounting Standards Board issued FIN No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition method and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 requires recognition of tax benefits that satisfy a greater than 50% probability threshold. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for us beginning October 27, 2007. We have substantially completed the process of evaluating the effect of FIN 48 on our consolidated financial statements as of the beginning of the period of adoption, October 27, 2007. We estimate that the cumulative effect of applying this interpretation will be recorded as a $300,000 to $500,000 decrease to beginning retained earnings. In addition, in accordance with the provisions of FIN 48, we will reclassify an estimated $3.3 million of long-term deferred income tax liabilities to income taxes payable.

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Market Price of Esterline Common Stock

In Dollars

For Fiscal Years		2007				2006
		High		Low		High		Low
Quarter
First	$	41.84	$	36.74	$	42.36	$	35.55
Second		43.07		38.15		46.12		38.70
Third		52.00		41.73		46.65		38.60
Fourth		59.20		45.10		42.49		30.97

Principal Market – New York Stock Exchange

At the end of fiscal 2007, there were approximately 478 holders of record of the Company’s common stock.

No cash dividends were paid during fiscal 2007 and 2006. We are restricted from paying dividends under our current credit facility, and so we do not anticipate paying any dividends in the foreseeable future.

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Selected Financial Data

In Thousands, Except Per Share Amounts

For Fiscal Years		2007			2006			2005			2004			2003
Operating Results1
Net sales	$	1,266,555		$	972,275		$	835,403		$	613,610		$	549,132
Cost of sales		876,030			671,419			573,453			418,590			376,931
Selling, general and administrative		209,460			159,624			137,426			118,746			105,301
Research, development and engineering		70,531			52,612			42,238			25,856			17,782
Other (income) expense		24			(490	)		514			(509	)		—
Insurance recovery		(37,467	)		(4,890	)		—			—			—
Loss (gain) on sale of product line		—			—			—			(3,434	)		66
Loss (gain) on derivative financial instruments		—			—			—			—			(2,676	)
Interest income		(3,381	)		(2,642	)		(4,057	)		(1,964	)		(868	)
Interest expense		35,302			21,290			18,159			17,336			11,991
Loss on extinguishment of debt		1,100			2,156			—			—			—
Income from continuing operations before income taxes		114,956			73,196			67,670			38,989			40,605
Income tax expense		22,519			16,716			16,301			9,592			12,458
Income from continuing operations		92,284			55,615			51,034			29,375			28,147
Income (loss) from discontinued operations, net of tax		—			—			6,992			10,208			(5,312	)
Net earnings		92,284			55,615			58,026			39,583			22,835
Earnings (loss) per share – diluted:
Continuing operations	$	3.52		$	2.15		$	2.02		$	1.37		$	1.33
Discontinued operations		—			—			.27			.47			(.25	)
Earnings per share – diluted		3.52			2.15			2.29			1.84			1.08

33

Selected Financial Data

In Thousands, Except Per Share Amounts

For Fiscal Years		2007		2006		2005		2004		2003
Financial Structure
Total assets	$	2,050,306	$	1,290,451	$	1,115,248	$	935,348	$	802,827
Long-term debt, net		455,002		282,307		175,682		249,056		246,792
Shareholders’ equity		1,121,826		707,989		620,864		461,028		396,069
Weighted average shares outstanding – diluted		26,252		25,818		25,302		21,539		21,105
1  Operating results for 2005 through 2003 and balance sheet items for 2003 reflect the segregation of continuing operations from discontinued operations. See Note 3 to the Consolidated Financial Statements.
For Fiscal Years		2007		2006		2005		2004		2003
Other Selected Data2
EBITDA from continuing operations	$	202,383	$	135,828	$	116,013	$	83,114	$	72,490
Capital expenditures		30,467		27,053		23,730		21,800		16,764
Interest expense		35,302		21,290		18,159		17,336		11,991
Depreciation and amortization from continuing operations		54,406		41,828		34,241		28,753		23,438

² EBITDA from continuing operations is a measurement not calculated in accordance with GAAP. We define EBITDA from continuing operations as operating earnings from continuing operations plus depreciation and amortization (excluding amortization of debt issuance costs). We do not intend EBITDA from continuing operations to represent cash flows from continuing operations or any other items calculated in accordance with GAAP, or as an indicator of Esterline’s operating performance. Our definition of EBITDA from continuing operations may not be comparable with EBITDA from continuing operations as defined by other companies. We believe EBITDA is commonly used by financial analysts and others in the aerospace and defense industries and thus provides useful information to investors. Our management and certain financial creditors use EBITDA as one measure of our leverage capacity and debt servicing ability, and is shown here with respect to Esterline for comparative purposes. EBITDA is not necessarily indicative of amounts that may be available for discretionary uses by us. The following table reconciles operating earnings from continuing operations to EBITDA from continuing operations.

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In Thousands
For Fiscal Years		2007		2006		2005		2004		2003
Operating earnings from continuing operations	$	147,977	$	94,000	$	81,772	$	54,361	$	49,052
Depreciation and amortization from continuing operations		54,406		41,828		34,241		28,753		23,438
EBITDA from continuing operations	$	202,383	$	135,828	$	116,013	$	83,114	$	72,490

35

Consolidated Statement of Operations

In Thousands, Except Per Share Amounts

For Each of the Three Fiscal Years in the Period Ended October 26, 2007		2007			2006			2005
Net Sales	$	1,266,555		$	972,275		$	835,403
Cost of Sales		876,030			671,419			573,453
		390,525			300,856			261,950
Expenses
Selling, general and administrative		209,460			159,624			137,426
Research, development and engineering		70,531			52,612			42,238
Total Expenses		279,991			212,236			179,664
Other
Other (income) expense		24			(490	)		514
Insurance recovery		(37,467	)		(4,890	)		—
Total Other		(37,443	)		(5,380	)		514
Operating Earnings From Continuing Operations		147,977			94,000			81,772
Interest income		(3,381	)		(2,642	)		(4,057	)
Interest expense		35,302			21,290			18,159
Loss on extinguishment of debt		1,100			2,156			—
Other Expense, Net		33,021			20,804			14,102
Income From Continuing Operations Before Income Taxes		114,956			73,196			67,670
Income Tax Expense		22,519			16,716			16,301
Income From Continuing Operations Before Minority Interest		92,437			56,480			51,369
Minority Interest		(153	)		(865	)		(335	)
Income From Continuing Operations		92,284			55,615			51,034
Income From Discontinued Operations, Net of Tax		—			—			6,992
Net Earnings	$	92,284		$	55,615		$	58,026

36

Consolidated Statement of Operations

In Thousands, Except Per Share Amounts

For Each of the Three Fiscal Years in the Period Ended October 26, 2007		2007		2006		2005
Earnings Per Share – Basic:
Continuing operations	$	3.57	$	2.19	$	2.05
Discontinued operations		—		—		.28
Earnings Per Share – Basic	$	3.57	$	2.19	$	2.33
Earnings Per Share – Diluted:
Continuing operations	$	3.52	$	2.15	$	2.02
Discontinued operations		—		—		.27
Earnings Per Share – Diluted	$	3.52	$	2.15	$	2.29

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheet

In Thousands, Except Share and Per Share Amounts

As of October 26, 2007 and October 27, 2006		2007		2006
Assets
Current Assets
Cash and cash equivalents	$	147,069	$	42,638
Cash in escrow		—		4,409
Accounts receivable, net of allowances of $5,378 and $4,338		262,087		191,737
Inventories		258,176		185,846
Income tax refundable		11,580		6,231
Deferred income tax benefits		37,830		27,932
Prepaid expenses		13,256		9,545
Total Current Assets		729,998		468,338
Property, Plant and Equipment
Land		23,986		16,903
Buildings		127,018		96,451
Machinery and equipment		267,784		226,037
		418,788		339,391
Accumulated depreciation		201,367		168,949
		217,421		170,442
Other Non-Current Assets
Goodwill		656,865		366,155
Intangibles, net		365,317		241,657
Debt issuance costs, net of accumulated amortization of $4,618 and $3,204		9,192		5,297
Deferred income tax benefits		43,670		14,790
Other assets		27,843		23,772
Total Assets	$	2,050,306	$	1,290,451

See Notes to Consolidated Financial Statements.

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As of October 26, 2007 and October 27, 2006		2007		2006
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	90,257	$	62,693
Accrued liabilities		187,596		121,419
Credit facilities		8,634		8,075
Current maturities of long-term debt		12,166		5,538
Federal and foreign income taxes		11,247		2,874
Total Current Liabilities		309,900		200,599
Long-Term Liabilities
Long-term debt, net of current maturities		455,002		282,307
Deferred income taxes		123,758		72,349
Pension and post-retirement obligations		36,852		23,629
Commitments and Contingencies		—		—
Minority Interest		2,968		3,578
Shareholders’ Equity
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued and outstanding 29,364,269 and 25,489,651 shares		5,873		5,098
Additional paid-in capital		475,816		270,074
Retained earnings		493,269		400,985
Accumulated other comprehensive income		146,868		31,832
Total Shareholders’ Equity		1,121,826		707,989
Total Liabilities and Shareholders’ Equity	$	2,050,306	$	1,290,451

See Notes to Consolidated Financial Statements.

39

Consolidated Statement of Cash Flows

In Thousands

For Each of the Three Fiscal Years in the Period Ended October 26, 2007		2007			2006			2005
Cash Flows Provided (Used) by Operating Activities
Net earnings	$	92,284		$	55,615		$	58,026
Minority interest		153			865			335
Depreciation and amortization		55,820			42,833			35,308
Deferred income tax		(15,432	)		(1,623	)		(4,501	)
Share-based compensation		6,902			5,430			2,799
Gain on sale of discontinued operations		—			—			(9,456	)
Gain on sale of building		—			—			59
Gain on sale of short-term investments		—			(610	)		(1,397	)
Working capital changes, net of effect of acquisitions
Accounts receivable		(8,021	)		(16,511	)		(17,645	)
Inventories		(12,072	)		(39,241	)		(11,636	)
Prepaid expenses		(929	)		(1,305	)		1,702
Other current assets		—			—			435
Accounts payable		7,520			8,106			4,166
Accrued liabilities		(3,434	)		(646	)		19,916
Federal and foreign income taxes		4,713			(12,530	)		5,169
Other liabilities		(3,874	)		(1,677	)		(6,414	)
Other, net		(1,906	)		(2,030	)		(454	)
		121,724			36,676			76,412
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(30,467	)		(27,053	)		(23,776	)
Proceeds from sale of discontinued operations		—			—			21,421
Proceeds from sale of building		—			—			2,319
Escrow deposit		—			—			(4,207	)
Proceeds from sale of capital assets		3,075			1,156			2,312
Purchase of short-term investments		—			—			(173,273	)
Proceeds from sale of short-term investments		—			63,266			112,014
Acquisitions of businesses, net of cash acquired		(354,948	)		(190,344	)		(28,261	)
		(382,340	)		(152,975	)		(91,451	)

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For Each of the Three Fiscal Years in the Period Ended October 26, 2007		2007			2006			2005
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		9,742			4,038			3,519
Excess tax benefits from stock option exercise		2,728			545			1,208
Proceeds provided by sale of common stock		187,145			—			108,490
Net change in credit facilities		144			5,905			(4,829	)
Repayment of long-term debt		(105,673	)		(71,372	)		(3,302	)
Proceeds from issuance of long-term debt		275,000			100,000			—
Dividends paid to minority interest		(763	)		—			—
Debt and other issuance costs		(6,409	)		—			—
		361,914			39,116			105,086
Effect of foreign exchange rates on cash		3,133			1,517			(1,222	)
Net increase (decrease) in cash and cash equivalents		104,431			(75,666	)		88,825
Cash and cash equivalents – beginning of year		42,638			118,304			29,479
Cash and cash equivalents – end of year	$	147,069		$	42,638		$	118,304
Supplemental Cash Flow Information
Cash paid for interest	$	32,091		$	21,548		$	16,610
Cash paid for taxes		28,140			23,710			14,193

See Notes to Consolidated Financial Statements.

41

Consolidated Statement of Shareholders’

Equity and Comprehensive Income

In Thousands, Except Per Share Amounts

For Each of the Three Fiscal Years
in the Period Ended October 26, 2007	2007		2006			2005
Common Stock, Par Value $.20 Per Share
Beginning of year	$	5,098	$	5,064		$	4,264
Shares issued under stock option plans		85		34			64
Shares issued under equity offering		690		—			736
End of year		5,873		5,098			5,064
Additional Paid-in Capital
Beginning of year		270,074		260,095			144,879
Shares issued under stock option plans		12,385		4,549			4,663
Shares issued under equity offering		186,455		—			107,754
Share-based compensation expense		6,902		5,430			2,799
End of year		475,816		270,074			260,095
Retained Earnings
Beginning of year		400,985		345,370			287,344
Net earnings		92,284		55,615			58,026
End of year		493,269		400,985			345,370
Accumulated Other Comprehensive Gain
Beginning of year		31,832		10,335			24,541
Adjustment for adoption of FAS 158, net of tax expense of $334		1,172		—			—
Change in fair value of derivative financial instruments, net of tax expense of $860, $574, and $26		1,501		2,089			43
Adjustment for minimum pension liability, net of tax (expense) benefit of $(461), $1,362 and $61		938		(2,346	)		(75	)
Foreign currency translation adjustment		111,425		21,754			(14,174	)
End of year		146,868		31,832			10,335
Total Shareholders’ Equity	$	1,121,826	$	707,989		$	620,864

42

Consolidated Statement of Shareholders’

Equity and Comprehensive Income

In Thousands, Except Per Share Amounts

For Each of the Three Fiscal Years
in the Period Ended October 26, 2007	2007		2006			2005
Comprehensive Income
Net earnings	$	92,284	$	55,615		$	58,026
Change in fair value of derivative financial instruments, net of tax		1,501		2,089			43
Adjustment for minimum pension liability, net of tax		938		(2,346	)		(75	)
Foreign currency translation adjustment		111,425		21,754			(14,174	)
Comprehensive Income	$	206,148	$	77,112		$	43,820

See Notes to Consolidated Financial Statements.

43

Notes to Consolidated Financial Statements

NOTE 1: Accounting Policies

Nature of Operations

Esterline Technologies Corporation (the Company) designs, manufactures and markets highly engineered products. The Company serves the aerospace and defense industry, primarily in the United States and Europe. The Company also serves the industrial/commercial and medical markets.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany accounts and transactions have been eliminated. Classifications have been changed for certain amounts in prior periods to conform with the current year’s presentation. The Company’s fiscal year ends on the last Friday of October.

Management Estimates

To prepare financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Risks

The Company’s products are principally focused on the aerospace and defense industry, which includes military and commercial aircraft original equipment manufacturers and their suppliers, commercial airlines, and the United States and foreign governments. Accordingly, the Company’s current and future financial performance is dependent on the economic condition of the aerospace and defense industry. The commercial aerospace market has historically been subject to cyclical downturns during periods of weak economic conditions or material changes arising from domestic or international events. Management believes that the Company’s sales are fairly well balanced across its customer base, which includes not only aerospace and defense customers but also medical and industrial commercial customers. However, material changes in the economic conditions of the aerospace industry could have a material effect on the Company’s results of operations, financial position or cash flows.

Revenue Recognition

The Company recognizes revenue when the title and risk of loss have passed to the customer, there is persuasive evidence of an agreement, delivery has occurred or services have been rendered, the price is determinable, and the collectibility is reasonably assured. The Company recognizes product revenues at the point of shipment or delivery in accordance with the terms

44

of sale. Sales are net of returns and allowances. Returns and allowances are not significant because products are manufactured to customer specification and are covered by the terms of the product warranty.

Revenues and profits on fixed-price contracts with significant engineering as well as production requirements are recorded based on the achievement of contractual milestones and the ratio of total actual incurred costs to date to total estimated costs for each contract (cost-to-cost method) in accordance with the American Institute of Certified Public Accountants Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” Types of milestones include design review and prototype completion. The Company reviews cost performance and estimates to complete on its ongoing contracts at least quarterly. The impact of revisions of profit estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period they become evident. Amounts representing contract change orders are included in revenue only when they can be reliably estimated and realization is probable, and are determined on a percentage-of-completion basis measured by the cost-to-cost method. Claims are included in revenue only when they are probable of collection.

Research and Development

Expenditures for internally-funded research and development are expensed as incurred. Customer-funded research and development projects performed under contracts are accounted for as work in process as work is performed and recognized as cost of sales and sales when contract milestones are achieved. Research and development expenditures are net of government assistance and tax subsidies, which are not contingent upon paying income tax.

Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings, long-term debt, foreign currency forward contracts, and interest rate swap agreements. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments. The fair market value of the Company’s long-term debt and short-term borrowings was estimated at $469.5 million and $300.6 million at fiscal year end 2007 and 2006, respectively. These estimates were derived using discounted cash flows with interest rates currently available to the Company for issuance of debt with similar terms and remaining maturities.

Foreign Currency Exchange Risk Management

The Company is subject to risks associated with fluctuations in foreign currency exchange rates from the sale of products in currencies other than its functional currency. The Company’s policy is to hedge a portion of its forecasted transactions using forward exchange contracts, with maturities up to fifteen months. These forward contracts have been designated as cash flow hedges. The portion of the net gain or loss on a derivative instrument that is effective as a hedge is reported as a component of other comprehensive income in

45

shareholders’ equity and is reclassified into earnings in the same period during which the hedged transaction affects earnings. The remaining net gain or loss on the derivative in excess of the present value of the expected cash flows of the hedged transaction is recorded in earnings immediately. If a derivative does not qualify for hedge accounting, or a portion of the hedge is deemed ineffective, the change in fair value is recorded in earnings. The amount of hedge ineffectiveness has not been material in any of the three fiscal years in the period ended October 26, 2007. At October 26, 2007 and October 27, 2006, the notional value of foreign currency forward contracts accounted for as a cash flow hedge was $54.2 million and $52.8 million, respectively. The fair value of these contracts was a $2.6 million asset and a $0.8 million asset at October 26, 2007 and October 27, 2006, respectively. The Company does not enter into any forward contracts for trading purposes.

In February 2006, the Company entered into a term loan for U.K. £57.0 million. The Company designated the term loan as a hedge of the investment in a certain U.K. business unit. The foreign currency gain or loss that is effective as a hedge is reported as a component of other comprehensive income in shareholders’ equity. The amount of foreign currency translation loss included in Other Comprehensive Income was $5.6 million and $5.1 million net of taxes at October 26, 2007 and October 27, 2006, respectively. To the extent that this hedge is ineffective, the foreign currency gain or loss is recorded in earnings. There was no ineffectiveness in 2007.

Interest Rate Risk Management

Depending on the interest rate environment, the Company may enter into interest rate swap agreements to convert the fixed interest rates on notes payable to variable interest rates or terminate any swap agreements in place. These interest rate swap agreements have been designated as fair value hedges. Accordingly, gain or loss on swap agreements as well as the offsetting loss or gain on the hedged portion of notes payable are recognized in interest expense during the period of the change in fair values. The Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions which are expected to be able to fully perform under the terms of the agreement. In September 2003, the Company entered into an interest rate swap agreement on $75.0 million of its Senior Subordinated Notes due in 2013. The swap agreement exchanged the fixed interest rate for a variable interest rate on $75.0 million of the $175.0 million principal amount outstanding. The fair market value of the Company’s interest rate swap was an asset of $0.3 million and a liability of $0.7 million at October 26, 2007 and October 27, 2006, respectively.

Depending on the interest rate environment, the Company may enter into interest rate swap agreements to convert the variable interest rates on notes payable to fixed interest rates. These swap agreements are accounted for as cash flow hedges and the fair market value of the hedge instrument is included in Other Comprehensive Income. In February 2006, the Company entered into an interest rate swap agreement on the full principal amount of its U.K. £57.0 million term loan facility. The swap agreement exchanged the variable interest rate for a fixed interest rate of 4.75% plus an additional margin amount determined by reference to the Company’s leverage ratio. The fair value of the interest rate swap was an asset of $2.1 million and $1.5 million at October 26, 2007 and October 27, 2006, respectively.

46

The fair market value of the interest rate swaps was estimated by discounting expected cash flows using quoted market interest rates.

Foreign Currency Translation

Foreign currency assets and liabilities are translated into their U.S. dollar equivalents based on year-end exchange rates. Revenue and expense accounts are translated at average exchange rates. Aggregate exchange gains and losses arising from the translation of foreign assets and liabilities are included in shareholders’ equity as a component of comprehensive income. Accumulated foreign currency translation adjustment was $155.7 million, $38.5 million and $16.7 million as of the fiscal years ended October 26, 2007, October 27, 2006 and October 28, 2005, respectively. Foreign currency transaction gains and losses are included in results of operations. These transactions resulted in a $6.1 million and $0.5 million loss in fiscal 2007 and 2006, respectively, and a $1.2 million gain in fiscal 2005.

Cash Equivalents and Cash in Escrow

Cash equivalents consist of highly liquid investments with maturities of three months or less at the date of purchase. Fair value of cash equivalents approximates carrying value. Cash in escrow represents amounts held in escrow pending finalization of a purchase transaction. Cash equivalents include $10.0 million in cash under a letter of credit facility at October 26, 2007 and October 27, 2006.

Accounts Receivable

Accounts receivable are recorded at the net invoice price for sales billed to customers. Accounts receivable are considered past due when outstanding more than normal trade terms allow. An allowance for doubtful accounts is established when losses are expected to be incurred. Accounts receivable are written off to the allowance for doubtful accounts when the balance is considered to be uncollectible.

Inventories

Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) or average cost method. Inventory cost includes material, labor and factory overhead. The Company defers pre-production engineering costs as work-in-process inventory in connection with long-term supply arrangements that include contractual guarantees for reimbursement from the customer. Inventory reserves are provided when inventory is considered to be excess or obsolete based upon an analysis of actual on-hand quantities on a part level basis to forecasted product demand and historical usage. Inventory reserves are released based upon adjustments to forecasted demand.

47

Property, Plant and Equipment, and Depreciation

Property, plant and equipment is carried at cost and includes expenditures for major improvements. Depreciation is generally provided on the straight-line method based upon estimated useful lives ranging from 15 to 30 years for buildings, and 3 to 10 years for machinery and equipment. Depreciation expense was $34,273,000, $26,757,000 and $23,578,000 for fiscal years 2007, 2006 and 2005, respectively. The fair value of liabilities related to the retirement of property is recorded when there is a legal or contractual obligation to incur asset retirement costs and the costs can be estimated. The Company records the asset retirement cost by increasing the carrying cost of the underlying property by the amount of the asset retirement obligation. The asset retirement cost is depreciated over the estimated useful life of the underlying property.

Debt Issuance Costs

Costs incurred to issue debt are deferred and amortized as interest expense over the term of the related debt using a method that approximates the effective interest method.

Long-lived Assets

The carrying amount of long-lived assets is reviewed periodically for impairment. An asset (other than goodwill and indefinite-lived intangible assets) is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not deemed recoverable, the asset is adjusted to its estimated fair value. Fair value is generally determined based upon estimated discounted future cash flows.

Goodwill and Intangibles

Goodwill is not amortized under Statement No. 142, but is tested for impairment at least annually. A reporting unit is generally defined at the operating segment level or at the component level one level below the operating segment, if said component constitutes a business. Goodwill and intangible assets are allocated to reporting units based upon the purchase price of the acquired unit, the valuation of acquired tangible and intangible assets, and liabilities assumed. When a reporting unit’s carrying value exceeds its estimated fair value, an impairment test is required. This test involves allocating the fair value of the reporting unit to all of the assets and liabilities of that unit, with the excess of fair value over allocated net assets representing the fair value of goodwill. An impairment loss is measured as the amount by which the carrying value of goodwill exceeds the estimated fair value of goodwill.

Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from 2 to 20 years. The Company periodically evaluates the recoverability of intangible assets and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate that an impairment exists.

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Indefinite-lived intangible assets (other than goodwill) are tested annually for impairment or more frequently on an interim basis if circumstances require. This test is comparable to the impairment test for goodwill described above.

Environmental

Environmental exposures are provided for at the time they are known to exist or are considered probable and reasonably estimable. No provision has been recorded for environmental remediation costs which could result from changes in laws or other circumstances currently not contemplated by the Company. Costs provided for future expenditures on environmental remediation are not discounted to present value.

Pension Plan and Post-Retirement Benefit Plan Obligations

The Company accounts for the obligations of its employee pension benefit costs and post-retirement benefits in accordance with the applicable statements issued by the Financial Accounting Standards Board. In accordance with these statements, management selects appropriate assumptions including discount rate, rate of increase in future compensation levels and assumed long-term rate of return on plan assets and expected annual increases in costs of medical and other healthcare benefits in regard to the Company’s post-retirement benefit obligations. These assumptions are based upon historical results, the current economic environment and reasonable expectations of future events. Actual results which vary from assumptions are accumulated and amortized over future periods and, accordingly, are recognized in expense in these periods. Significant differences between our assumptions and actual experience or significant changes in assumptions could impact the pension costs and the pension obligation.

Share-Based Compensation

Effective October 29, 2005, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (Statement No. 123(R)), which requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The Company adopted Statement No. 123(R) using the modified prospective method effective October 29, 2005. The cumulative effect of the change in accounting principle upon adoption of Statement No. 123(R) was included in selling, general and administrative expense as the amount was not significant.

49

The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value method for fiscal year ended in 2005:

In Thousands, Except Per Share Amounts

	2005
Net earnings as reported	$	58,026
Share-based compensation cost, net of income tax included in net earnings as reported		1,862
Share-based compensation cost, net of income tax under the fair value method of accounting		(2,504	)
Pro forma net earnings	$	57,384
Basic earnings per share as reported	$	2.33
Pro forma basic earnings per share		2.30
Diluted earnings per share as reported	$	2.29
Pro forma diluted earnings per share		2.26

Product Warranties

Estimated product warranty expenses are recorded when the covered products are shipped to customers and recognized as revenue. Product warranty expense is estimated based upon the terms of the warranty program.

Earnings Per Share

Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding during the year. Diluted earnings per share also includes the dilutive effect of stock options. Common shares issuable from stock options that are excluded from the calculation of diluted earnings per share because they were anti-dilutive were 96,048, 356,349 and 347,400 for fiscal 2007, 2006 and 2005, respectively. The weighted average number of shares outstanding used to compute basic earnings per share was 25,824,000, 25,413,000 and 24,927,000 for fiscal years 2007, 2006 and 2005, respectively. The weighted average number of shares outstanding used to compute diluted earnings per share was 26,252,000, 25,818,000 and 25,302,000 for fiscal years 2007, 2006 and 2005, respectively.

Recent Accounting Pronouncements

On December 4, 2007, the Financial Accounting Standards Board issued Financial Accounting Standard No. 141(R), “Business Combinations,” (Statement No. 141(R)) and Statement No. 160, “Accounting and Reporting of Non-controlling Interest in Consolidated Financial Statements, an amendment of ARB No. 51,” (Statement No. 160). These new standards will significantly change the accounting for and reporting of business combination transactions and non-controlling

50

(minority) interests in consolidated financial statements. Statement No. 141(R) and Statement No. 160 are required to be adopted simultaneously and are effective for fiscal 2010.

The significant changes in the accounting for business combination transactions under Statement No. 141(R) include:

• Recognition, with certain exceptions, of 100% of the fair values of assets acquired, liabilities assumed, and non-controlling interests of acquired businesses.

• Measurement of all acquirer shares issued in consideration for a business combination at fair value on the acquisition date. With the effectiveness of Statement No. 141(R), the “agreement and announcement date” measurement principles in EITF Issue 99-12 will be nullified.

• Recognition of contingent consideration arrangements at their acquisition-date fair values, with subsequent changes in fair value generally reflected in earnings.

• With the one exception described in the last sentence of this section, recognition of pre-acquisition gain and loss contingencies at their acquisition-date fair values. Subsequent accounting for pre-acquisition loss contingencies is based on the greater of acquisition-date fair value or the amount calculated pursuant to FASB Statement No. 5, “Accounting for Contingencies,” (Statement No. 5). Subsequent accounting for pre-acquisition gain contingencies is based on the lesser of acquisition-date fair value or the best estimate of the future settlement amount. Adjustments after the acquisition date are made only upon the receipt of new information on the possible outcome of the contingency, and changes to the measurement of pre-acquisition contingencies are recognized in ongoing results of operations. Absent new information, no adjustments to the acquisition-date fair value are made until the contingency is resolved. Pre-acquisition contingencies that are both (1) non-contractual and (2) as of the acquisition date are “not more likely than not” of materializing are not recognized in acquisition accounting and, instead, are accounted for based on the guidance in Statement No. 5, “Accounting for Contingencies.”

• Capitalization of in-process research and development (IPR&D) assets acquired at acquisition date fair value. After acquisition, apply the indefinite-lived impairment model (lower of basis or fair value) through the development period to capitalized IPR&D without amortization. Charge development costs incurred after acquisition to results of operations. Upon completion of a successful development project, assign an estimated useful life to the amount then capitalized, amortize over that life, and consider the asset a definite-lived asset for impairment accounting purposes.

• Recognition of acquisition-related transaction costs as expense when incurred.

• Recognition of acquisition-related restructuring cost accruals in acquisition accounting only if the criteria in Statement No. 146 are met as of the acquisition date. With the effectiveness of Statement No. 141(R), the EITF Issue 95-3 concepts of

51

“assessing, formulating, finalizing and committing/communicating” that currently pertain to recognition in purchase accounting of an acquisition-related restructuring plan will be nullified.

• Recognition of changes in the acquirer’s income tax valuation allowance resulting from the business combination separately from the business combination as adjustments to income tax expense. Also, changes after the acquisition date in an acquired entity’s valuation allowance or tax uncertainty established at the acquisition date are accounted for as adjustments to income tax expense.

The Company is currently evaluating the impact of Statement No. 141(R) and Statement No. 160 on the Company’s financial statements.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.” Statement No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Statement No. 157 applies under other accounting pronouncements that require or permit fair value measurements. Statement No. 157 indicates, among other things, that a fair value measurement assumes the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Statement No. 157 is effective for the Company’s year ending October 29, 2010, for all non-financial assets and liabilities. For those items that are recognized or disclosed at fair value in the financial statements, the effective date is October 30, 2009. The Company is currently evaluating the impact of Statement No. 157 on the Company’s financial statements.

In June 2006, the Financial Accounting Standards Board issued FIN No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” which clarifies the accounting for uncertainty in income taxes recognized in an enterprises’ financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition method and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 requires recognition of tax benefits that satisfy a greater than 50% probability threshold. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for the Company beginning October 27, 2007. The Company has substantially completed the process of evaluating the effect of FIN 48 on its consolidated financial statements as of the beginning of the period of adoption, October 27, 2007. The Company estimates that the cumulative effect of applying this interpretation will be recorded as a $300,000 to $500,000 decrease to beginning retained earnings. In addition, in accordance with the provisions of FIN 48, the Company will reclassify an estimated $3.3 million of long-term deferred income tax liabilities to income taxes payable.

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NOTE 2: Recovery of Insurance Claims

On June 26, 2006, an explosion occurred at the Company’s Wallop facility, which resulted in one fatality and several minor injuries. The incident destroyed an oven complex for the production of advanced flares and significantly damaged a portion of the facility. Although the facility is expected to be closed for more than two years due to the requirement of the Health Safety Executive (HSE) to review the cause of the accident, normal operations are continuing at unaffected portions of the facility. The HSE investigation will not be completed until the Coroner’s Inquest is filed possibly in 2008. Although it is not possible to determine the results of the HSE investigation or how the Coroner will rule, management does not expect to be found in breach of the Health & Safety Act related to the accident and, accordingly, no amounts have been recorded for any potential fines that may be assessed by the HSE. The HSE will also review and approve the plans and construction of the new flare facility.

The operation is insured under a property, casualty and business interruption insurance policy and in June 2007, the Company settled its insurance claim for £24.0 million, including payments already received. In fiscal 2007, insurance recoveries totaled $37.5 million, net of the write-off of the damaged facility. The Company recorded business interruption insurance recoveries of $4.9 million for losses incurred in fiscal 2006.

NOTE 3: Discontinued Operations

On January 28, 2005, the Company completed the sale of the outstanding stock of its wholly owned subsidiary Fluid Regulators Corporation (Fluid Regulators), which was included in the Sensors & Systems segment, for approximately $21.4 million. As a result of the sale, the Company recorded a gain of approximately $7.0 million, net of tax of $2.4 million, in the first fiscal quarter of 2005. On May 13, 2005, the Company closed a small unit in its Other segment and incurred $0.4 million in severance, net of $0.2 million in tax, in the second quarter of fiscal 2005.

Sales of the discontinued operations were $4.4 million in fiscal year 2005. The operating results of the discontinued segment for fiscal year 2005 consisted of the following:

In Thousands

	2005
Loss before taxes	$	(52	)
Tax benefit		(13	)
Net loss		(39	)
Gain on disposal, net of tax expense of $2,435		7,031
Income from discontinued operations	$	6,992

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NOTE 4: Inventories

Inventories, net of reserves, at the end of fiscal 2007 and 2006 consisted of the following:

In Thousands		2007			2006
Raw materials and purchased parts	$	111,998		$	89,480
Work in process		83,870			61,556
Inventory costs under long-term contracts		15,233			4,777
Finished goods		47,075			30,033
	$	258,176		$	185,846
Inventory Reserve Rollforward:
In Thousands		2007			2006
Beginning balance	$	18,175		$	13,222
Reserves related to acquisitions		9,983			370
Accruals		5,601			6,868
Write-offs		(4,192	)		(2,344	)
Release of reserves		(636	)		(238	)
Currency translation adjustment		2,957			297
	$	31,888		$	18,175

NOTE 5: Goodwill

The following table summarizes the changes in goodwill by segment for fiscal 2007 and 2006:

In Thousands

	Avionics & Controls		Sensors & Systems		Advanced Materials			Total
Balance, October 28, 2005	$	97,124	$	80,578	$	83,465		$	261,167
Goodwill from acquisitions		3,519		—		89,854			93,373
Goodwill adjustments		143		176		—			319
Foreign currency translation adjustment		1,238		3,207		6,851			11,296
Balance, October 27, 2006	$	102,024	$	83,961	$	180,170		$	366,155
Goodwill from acquisitions		209,982		—		11,965			221,947
Goodwill adjustments		12		6,848		(678	)		6,182
Foreign currency translation adjustment		49,227		5,286		8,068			62,581
Balance, October 26, 2007	$	361,245	$	96,095	$	199,525		$	656,865

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NOTE 6: Intangible Assets

Intangible assets at the end of fiscal 2007 and 2006 were as follows:

In Thousands

		2007				2006
	Weighted Average Years Useful Life	Gross Carrying Amount		Accum. Amort.		Gross Carrying Amount		Accum. Amort.
Amortized Intangible Assets
Programs	17	$	317,940	$	50,205	$	204,817	$	31,932
Core technology	16		8,988		2,472		8,981		2,728
Patents and other	14		60,391		26,955		56,467		23,280
Total		$	387,319	$	79,632	$	270,265	$	57,940
Indefinite-lived Intangible Assets
Trademark		$	57,630			$	29,332

Amortization of intangible assets was $20,133,000, $14,899,000 and $10,690,000 in fiscal years 2007, 2006 and 2005, respectively.

Estimated amortization expense related to intangible assets for each of the next five fiscal years is as follows:

In Thousands

Fiscal Year
2008	$	22,377
2009		21,718
2010		21,696
2011		21,320
2012		21,152

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NOTE 7: Accrued Liabilities

Accrued liabilities at the end of fiscal 2007 and 2006 consisted of the following:

In Thousands	2007			2006
Payroll and other compensation	$	77,523		$	56,463
Commissions		3,177			1,674
Casualty and medical		12,573			12,058
Interest		7,496			5,698
Warranties		18,206			7,952
State and other tax accruals		27,734			16,055
Acquisition-related payments		—			4,394
Customer deposits		12,687			5,139
Deferred revenue		1,723			422
Contract reserves		7,797			1,134
Other		18,680			10,430
	$	187,596		$	121,419
Accrued liabilities are recorded to reflect the Company’s contractual obligations relating to warranty commitments to customers. Warranty coverage of various lengths and terms is provided to customers depending on standard offerings and negotiated contractual agreements. An estimate for warranty expense is recorded at the time of sale based on the length of the warranty and historical warranty return rates and repair costs.
Changes in the carrying amount of accrued product warranty costs are summarized as follows:
In Thousands	2007			2006
Balance, beginning of year	$	7,952		$	8,811
Warranty costs incurred		(3,378	)		(2,155	)
Product warranty accrual		5,790			2,662
Acquisitions		7,402			—
Release of reserves		(1,560	)		(1,546	)
Foreign currency translation adjustment		2,000			180
Balance, end of year	$	18,206		$	7,952

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NOTE 8: Retirement Benefits

Approximately 45% of U.S. employees have a defined benefit earned under the Esterline pension plan or the Leach pension plan. The Leach pension plan was frozen as of December 31, 2003.

Under the Esterline plan, pension benefits are based on years of service and five-year average compensation or under a cash balance formula, with annual pay credits ranging from 2% to 6% of salary. Esterline amended its defined benefit plan to add the cash balance formula effective January 1, 2003. Participants elected either to continue earning benefits under the current plan formula or to earn benefits under the cash balance formula. Effective January 1, 2003, all new participants are enrolled in the cash balance formula. Esterline also has an unfunded supplemental retirement plan for key executives providing for periodic payments upon retirement.

Under the Leach pension plan, benefits are based on an employee’s years of service and the highest five consecutive years’ compensation during the last ten years of employment. Leach’s non-U.S. subsidiaries have retirement plans covering substantially all of its employees. Benefits become vested after ten years of employment and are due in full upon retirement, disability or death of the employee. Leach also has a supplemental retirement plan which provides supplemental pension benefits to former key management in addition to amounts received under the Company’s existing retirement plan.

CMC sponsors defined benefit pension plans and other retirement benefit plans for its non-U.S. employees. Pension benefits are based upon years of service and final average salary. Other retirement benefit plans are non-contributory healthcare and life insurance plans.

In October 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statement Nos. 87, 88, 106 and 123(R).” Statement No. 158 requires an entity to:

• Recognize in its statements of financial position an asset for a defined benefit post-retirement plan’s overfunded status or a liability for a plan’s underfunded status.

• Measure a defined benefit post-retirement plan’s assets and obligations that determine its funded status as of the end of the employer’s fiscal year.

• Recognize changes in the funded status of a defined benefit post-retirement plan in comprehensive income in the year in which the changes occur.

Statement No. 158 does not change the amount of net periodic benefit cost included in net income or address the various measurement issues associated with post-retirement benefit plan accounting. The Company adopted the recognition and disclosure provisions of Statement No. 158 effective at the end of its 2007 fiscal year.

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The following table presents the balance sheet balances at October 26, 2007 prior to the initial adoption of Statement No. 158, the amount of the adjustment and the balances after the adoption of Statement No. 158.

In Thousands

	Before Application of FAS No. 158			Adjustments			After Application of FAS No. 158
Deferred income taxes	$	8,204		$	(334	)	$	7,870
Intangible assets		39			(39	)		—
Liabilities		(26,994	)		1,545			(25,449	)
Accumulated other comprehensive loss (gain)		775			(1,172	)		(397	)

The Company accounts for pension expense using the end of the fiscal year as its measurement date. In addition, the Company makes actuarially computed contributions to these plans as necessary to adequately fund benefits. The Company’s funding policy is consistent with the minimum funding requirements of ERISA. The Esterline plan will require no contributions in fiscal 2008. Effective December 2003, the Leach plan was frozen and employees no longer accrue benefits for future services. The accumulated benefit obligation and projected benefit obligation for the Leach plans are $45,125,000 and $45,743,000, respectively, with plan assets of $30,780,000 as of October 26, 2007. The funded status liabilities for these Leach plans are $14,963,000 at October 26, 2007. Contributions to the Leach plans totaled $5,023,000 and $735,000 in fiscal years 2007 and 2006, respectively. Contributions of $1,265,000 will be made in fiscal 2008. The accumulated benefit obligation and projected benefit obligation for the CMC plans are $108,389,000 and $110,821,000, respectively, with plan assets of $107,763,000 as of October 26, 2007. The funded status liabilities for these CMC plans are $3,058,000 at October 26, 2007. Contributions to the CMC plans totaled $4,664,000 in fiscal 2007. Contributions of $3,465,000 will be made in fiscal 2008.

	Defined Benefit Pension Plans				Post-Retirement Benefit Plans
	2007		2006		2007		2006
Principal assumptions as of fiscal year end:
Discount Rate	5.6 – 6.25	%	5.75 – 6.0	%	5.6 – 6.25	%	6.0	%
Rate of increase in future compensation levels	3.5 – 4.5	%	4.5	%	—		—
Assumed long-term rate of return on plan assets	7.0 – 8.5	%	8.5	%	—		—
Initial weighted average health care trend rate	—		—		5.0 – 10.0	%	10.0	%
Ultimate weighted average health care trend rate	—		—		3.5 – 10.0	%	10.0	%

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The Company uses a discount rate for expected returns that is a spot rate developed from a yield curve established from high-quality corporate bonds and matched to plan-specific projected benefit payments. Although future changes to the discount rate are unknown, had the discount rate increased or decreased by 25 basis points, pension liabilities in total would have decreased $8.2 million or increased $8.0 million, respectively. If all other assumptions are held constant, the estimated effect on fiscal 2007 pension expense from a hypothetical 25 basis point increase or decrease in both the discount rate and expected long-term rate of return on plan assets would not have a material effect on our pension expense. Management is not aware of any legislative or other initiatives or circumstances that will significantly impact the Company’s pension obligations in fiscal 2008.

The assumed health care trend rate has a significant impact on the Company’s post-retirement benefit obligations. The Company’s health care trend rate was based on the experience of its plan and expectations for the future. A 100 basis point increase in the health care trend rate would increase the post-retirement benefit obligation by $1.6 million. A 100 basis point decrease in the health care trend rate would decrease the post-retirement benefit obligation by $1.2 million. Assuming all other assumptions are held constant, the estimated effect on fiscal 2007 post-retirement benefit expense from a hypothetical 100 basis point increase or decrease in the health care trend rate would not have a material effect on our post-retirement benefit expense.

Plan assets are invested in a diversified portfolio of equity and debt securities, consisting primarily of common stocks, bonds and government securities. The objective of these investments is to maintain sufficient liquidity to fund current benefit payments and achieve targeted risk-adjusted returns. Management periodically reviews allocations of plan assets by investment type and evaluates external sources of information regarding the long-term historical returns and expected future returns for each investment type and, accordingly, believes an 8.5% assumed long-term rate of return on plan assets is appropriate. Allocations by investment type are as follows:

			Actual
	Target		2007		2006
Plan assets allocation as of fiscal year end:
Equity securities	55 – 75	%	64.0	%	67.0	%
Debt securities	25 – 45	%	36.0	%	31.7	%
Cash	0	%	0.0	%	1.3	%
Total			100.0	%	100.0	%

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Net periodic pension cost for the Company’s defined benefit plans at the end of each fiscal year consisted of the following:

In Thousands

	Defined Benefit Pension Plans									Post-Retirement Benefit Plans
		2007			2006			2005			2007		2006		2005
Components of Net Periodic Cost
Service cost	$	5,474		$	4,021		$	3,537		$	205	$	7	$	7
Interest cost		14,470			10,304			10,055			430		34		34
Expected return on plan assets		(18,283	)		(12,756	)		(11,851	)		—		—		—
Amortization of prior service cost		18			18			18			—		—		—
Amortization of actuarial loss		252			1,569			1,260			—		—		—
One-time charge benefit adjustment		—			1,188			—			1,655		—		—
Net periodic cost	$	1,931		$	4,344		$	3,019		$	2,290	$	41	$	41

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The funded status of the defined benefit pension and post-retirement plans at the end of fiscal 2007 and 2006 were as follows:

In Thousands

	Defined Benefit Pension Plans						Post-Retirement Benefit Plans
		2007			2006			2007			2006
Benefit Obligation
Beginning balance	$	188,588		$	190,329		$	656		$	643
Currency translation adjustment		940			376			—			—
Service cost		5,474			4,021			205			7
Interest cost		14,469			10,304			430			34
One-time charge benefit adjustment		—			1,188			1,655			—
Plan participants contributions		31			—			—			—
Actuarial loss		(10,917	)		(7,318	)		(1,278	)		—
Acquisitions		116,455			—			12,695			—
Benefits paid		(13,939	)		(10,312	)		(499	)		(28	)
Ending balance	$	301,101		$	188,588		$	13,864		$	656
Plan Assets – Fair Value
Beginning balance	$	168,066		$	155,464		$	—		$	—
Currency translation adjustment		182			56			—			—
Realized and unrealized gain on plan assets		17,592			21,149			—			—
Unrecognized gain		—			157			—			—
Acquisitions		107,454			—			—			—
Plan participants contributions		31			—
Company contributions		10,413			1,552			480			28
Expenses paid		(283	)		—			—			—
Benefits paid		(13,939	)		(10,312	)		(480	)		(28	)
Ending balance	$	289,516		$	168,066		$	—		$	—
Funded Status
Fair value of plan assets	$	289,516		$	—		$	—		$	—
Benefit obligations		(301,101	)		—			(13,864	)		—
Funded status – plan assets relative to benefit obligation		—			(20,522	)		—			(656	)
Unrecognized net actuarial loss		—			13,753			—			—
Unrecognized prior service cost		—			(50	)		—			—
Unrecognized net loss		—			5			—			—
Net amount recognized	$	(11,585	)	$	(6,814	)	$	(13,864	)	$	(656	)

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In Thousands

	Defined Benefit Pension Plans						Post-Retirement Benefit Plans
		2007			2006			2007			2006
Amount Recognized in the Consolidated Balance Sheet
Non-current asset	$	13,903		$	—		$	—		$	—
Current liability		(511	)		—			(1,989	)		—
Non-current liability		(24,977	)		—			(11,875	)		—
Prepaid benefit cost		—			14,801			—			—
Accrued benefit liability		—			(21,615	)		—			(656	)
Additional minimum liability		—			(5,254	)		—			—
Intangible assets		—			73			—			—
Accumulated other comprehensive income		—			5,181			—			—
Net amount recognized	$	(11,585	)	$	(6,814	)	$	(13,864	)	$	(656	)
Amounts Recognized in Accumulated Other Comprehensive Income
Net actuarial loss (gain)	$	3,717		$	—		$	(1,285	)	$	—
Prior service cost		57			—			—			—
Ending balance	$	3,774		$	—		$	(1,285	)	$	—

The accumulated benefit obligation for all pension plans was $292,492,000 at October 26, 2007 and $182,214,223 at October 27, 2006.

Estimated future benefit payments expected to be paid from the plan or from the Company’s assets are as follows:

In Thousands

Fiscal Year
2008	$	16,390
2009		20,928
2010		22,218
2011		23,662
2012		25,208
2013-2017		103,011

Employees may participate in certain defined contribution plans. The Company’s contribution expense under these plans totaled $10,323,000, $8,107,000 and $7,133,000 in fiscal 2007, 2006 and 2005, respectively.

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NOTE 9: Income Taxes

Income tax expense from continuing operations for each of the fiscal years consisted of:

In Thousands		2007			2006			2005
Current
U.S. Federal	$	18,533		$	16,746		$	13,726
State		2,538			(2,790	)		2,657
Foreign		16,880			4,383			4,419
		37,951			18,339			20,802
Deferred
U.S. Federal		(50	)		(82	)		(1,656	)
State		(179	)		259			(1,104	)
Foreign		(15,203	)		(1,800	)		(1,741	)
		(15,432	)		(1,623	)		(4,501	)
Income tax expense	$	22,519		$	16,716		$	16,301
U.S. and foreign components of income from continuing operations before income taxes for each of the fiscal years were:
In Thousands		2007			2006			2005
U.S.	$	69,549		$	48,489		$	40,162
Foreign		45,407			24,707			27,508
Income from continuing operations, before income taxes	$	114,956		$	73,196		$	67,670
Primary components of the Company’s deferred tax assets (liabilities) at the end of the fiscal year resulted from temporary tax differences associated with the following:
In Thousands					2007			2006
Reserves and liabilities				$	26,238		$	17,971
NOL carryforwards (net of valuation allowances of $6.2 million at fiscal year end 2007)					614			8,984
Tax credit carryforwards					29,548			1,850
Employee benefits					12,777			5,113
Non-qualified stock options					4,358			3,201
Hedging activities					6,239			3,028
Other					1,726			2,575
Total deferred tax assets					81,500			42,722
Depreciation and amortization					(17,251	)		(14,462	)
Intangibles and amortization					(92,837	)		(56,098	)
Deferred costs					(11,991	)		—
Other					(1,679	)		(1,789	)
Total deferred tax liabilities					(123,758	)		(72,349	)
Net deferred tax liabilities				$	(42,258	)	$	(29,627	)

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In connection with the Leach acquisition in fiscal 2004, the Company assumed a U.S. net operating loss (NOL) of $38.6 million which can be carried forward to subsequent years, subject to limitations under Internal Revenue Code Section 382. As a result of an IRS examination of Leach’s pre-acquisition U.S. federal income tax returns, the amount of NOLs available to carry forward were reduced by $16.6 million ($5.8 million tax effected) and the remaining balance has been fully utilized as of the end of fiscal 2007. Further, as a result of an IRS examination of Leach’s pre-acquisition U.S. federal income tax returns, the Company recorded an additional $1.2 million of current tax payable. In accordance with ETIF 97-3, both the $5.8 million reduction of Leach’s pre-acquisition NOLs and the increase in the current tax payable were recorded to purchased goodwill.

In connection with the acquisition of CMC, the Company assumed a U.S. NOL of $18.6 million associated with CMC’s U.S. subsidiary. While this NOL can be carried forward to subsequent years, subject to limitation under Internal Revenue Code Section 382, as part of the purchase accounting a full valuation offsetting this NOL has been established. A full valuation has been established because by virtue of being owned by CMC, this U.S. subsidiary is not included in the Company’s consolidated U.S. federal income tax return. The NOL expires beginning in 2018.

During fiscal 2007, the Company recognized a $2.8 million tax benefit as a result of the enactment of tax laws reducing U.K., Canadian, and German statutory corporate income tax rates.

The Company operates in numerous taxing jurisdictions and is subject to regular examinations by various U.S. federal, state and foreign jurisdictions for various tax periods. Additionally, the Company has retained tax liabilities and the rights to tax refunds in connection with various acquisitions and divestitures of businesses in prior years. The Company’s income tax positions are based on research and interpretations of income tax laws and rulings in each of the jurisdictions in which we do business. Due to the subjectivity and complexity of the interpretations of the tax laws and rulings in each jurisdiction, the differences and interplay in the tax laws between those jurisdictions as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities and assets may differ from actual payments, assessments or refunds.

Management believes that it is more likely than not that the Company will realize the current and long-term deferred tax assets as a result of future taxable income. Significant factors management considered in determining the probability of the realization of the deferred tax assets include the reversal of deferred tax liabilities, our historical operating results and expected future earnings. Accordingly, no valuation allowance has been recorded on the deferred tax assets.

The U.S. federal income returns for fiscal years ended 2003, 2004, 2005 and 2006 remain open for examination and presently, fiscal years ended 2003, 2004 and 2005 are currently under examination. Additionally, various state and foreign income tax returns are open to examination and presently several foreign income tax returns are under examination. Such examinations could result in challenges to tax positions taken and, accordingly, the Company may record

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adjustments to provisions based on the outcomes of such matters. However, the Company believes that the resolution of these matters, after considering amounts accrued, will not have a material adverse effect on its consolidated financial statements.

The incremental tax benefit received by the Company upon exercise of non-qualified employee stock options was $2.7 million, $0.5 million and $1.2 million in fiscal 2007, 2006 and 2005, respectively.

A reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate for each of the fiscal years was as follows:

	2007		2006		2005
U.S. statutory income tax rate	35.0	%	35.0	%	35.0	%
State income taxes	1.3		1.3		1.5
Foreign taxes	(9.6	)	(8.6	)	(6.6	)
Export sales benefit	(0.1	)	(0.7	)	(1.2	)
Pass-through entities	—		0.4		0.9
Domestic manufacturing deduction	(0.4	)	(0.7	)	—
Foreign tax credits	—		—		—
Research & development credits	(7.6	)	(0.5	)	(3.8	)
Tax accrual adjustment	1.4		(4.0	)	(2.5	)
Valuation allowance	0.4		—		—
Change in foreign tax rates	(2.5	)	—		—
Other, net	1.7		0.6		0.8
Effective income tax rate	19.6	%	22.8	%	24.1	%

No provision for federal income taxes has been made on accumulated earnings of foreign subsidiaries, since such earnings are considered indefinitely reinvested. The amount of the unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries is not practical to determine because of the complexities regarding the calculation of unremitted earnings and the potential for tax credits.

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NOTE 10: Debt

Long-term debt at the end of fiscal 2007 and 2006 consisted of the following:

In Thousands		2007		2006
GBP Term Loan, due November 2010	$	112,633	$	108,117
7.75% Senior Subordinated Notes, due June 2013		175,000		175,000
6.625% Senior Notes, due March 2017		175,000		—
Other		4,283		5,426
		466,916		288,543
Fair value of interest rate swap agreement		252		(698	)
Less current maturities		12,166		5,538
Carrying amount of long-term debt	$	455,002	$	282,307

In June 2003, the Company sold $175.0 million of 7.75% Senior Subordinated Notes due in 2013 and requiring semi-annual interest payments in December and June of each year until maturity. The net proceeds from this offering were used to acquire the Weston Group from The Roxboro Group PLC for U.K. £55.0 million (approximately $94.6 million based on the closing exchange rate and including acquisition costs) and for general corporate purposes, including the repayment of debt and possible future acquisitions. The Senior Subordinated Notes are general unsecured obligations of the Company and are subordinated to all existing and future senior debt of the Company. In addition, the Senior Subordinated Notes are effectively subordinated to all existing and future senior debt and other liabilities (including trade payables) of the Company’s foreign subsidiaries. The Senior Subordinated Notes are guaranteed, jointly and severally, by all the existing and future domestic subsidiaries of the Company unless designated as an “unrestricted subsidiary” under the indenture covering the Senior Subordinated Notes. The Senior Subordinated Notes are subject to redemption at the option of the Company, in whole or in part, on or after June 15, 2008 at redemption prices starting at 103.875% of the principal amount plus accrued interest during the period beginning June 11, 2003 and declining annually to 100% of principal and accrued interest on June 15, 2011.

In September 2003, the Company entered into an interest rate swap agreement on $75.0 million of its Senior Subordinated Notes due in 2013. The swap agreement exchanged the fixed interest rate for a variable interest rate on $75.0 million of the $175.0 million principal amount outstanding. The variable interest rate is based upon LIBOR plus 2.56% and was 7.40% at October 26, 2007. The fair market value of the Company’s interest rate swap was a $252,000 asset at October 26, 2007 and was estimated by discounting expected cash flows using quoted market interest rates.

On February 10, 2006, the Company borrowed U.K. £57.0 million, or approximately $100.0 million, under a $100.0 million term loan facility. The Company used the proceeds from the loan as working capital for its U.K. operations and to repay a portion of its outstanding borrowings under the revolving credit facility. The principal amount of the loan is

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payable quarterly commencing on March 31, 2007 through the termination date of November 14, 2010, according to a payment schedule by which 1.25% of the principal amount is paid in each quarter of 2007, 2.50% in each quarter of 2008, 5.00% in each quarter of 2009 and 16.25% in each quarter of 2010. The loan accrues interest at a variable rate based on the British Bankers Association Interest Settlement Rate for deposits in U.K. pounds plus an additional margin amount that ranges from 1.13% to 0.50% depending upon the Company’s leverage ratio. As of October 26, 2007, the interest rate on the term loan was 7.22%. The Company entered into an interest rate swap agreement on the full principal amount by which the variable interest rate was exchanged for a fixed interest rate of 4.75% plus an additional margin amount determined by reference to the Company’s leverage ratio. At October 26, 2007, the fair value of the interest rate swap was a $2.1 million asset. The interest rate swap is accounted for as a cash flow hedge and is included in Other Comprehensive Income. Subsequent to year-end, the swap was terminated for a gain of $1.9 million and £31.0 million was paid down on the £57.0 million term loan.

On March 1, 2007, the Company issued $175.0 million in 6.625% Senior Notes due March 1, 2017 and requiring semi-annual interest payments in March and September of each year until maturity. The net proceeds from this offering were used to pay a portion of the purchase price of the acquisition of CMC for approximately $344.5 million. The Senior Notes are general unsecured senior obligations of the Company. The Senior Notes are guaranteed, jointly and severally on a senior basis, by all the existing and future domestic subsidiaries of the Company unless designated as an “unrestricted subsidiary,” and those foreign subsidiaries that executed related subsidiary guarantees under the indenture covering the Senior Notes. The Senior Notes are subject to redemption at the option of the Company at any time prior to March 1, 2012 at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. In addition, before March 1, 2010 the Company may redeem up to 35% of the principal amount at 106.625% plus accrued interest with proceeds of one or more Public Equity Offerings. The Senior Notes are also subject to redemption at the option of the Company, in whole or in part, on or after March 1, 2012 at redemption prices starting at 103.3125% of the principal amount plus accrued interest during the period beginning March 1, 2007 and declining annually to 100% of principal and accrued interest on or after March 1, 2015.

On March 13, 2007, the Company amended its credit agreement to increase the existing revolving credit facility from $100.0 million to $200.0 million and to provide an additional $100.0 million U.S. term loan facility. On March 13, 2007, the Company borrowed $60.0 million under the revolving credit facility and $100.0 million under the U.S. term loan facility. The proceeds were used to pay a portion of the purchase price of CMC. The term loan accrues interest at a variable rate based on the Eurodollar rate plus an additional margin amount that ranges from 0.625% to 1.250% depending upon the Company’s leverage ratio. On October 15, 2007, the Company paid off the $100.0 million U.S. term loan facility and wrote off $1.1 million in related debt issuance costs.

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Maturities of long-term debt at October 26, 2007, were as follows:

In Thousands

Fiscal Year
2008	$	12,166
2009		22,409
2010		63,091
2011		19,120
2012		112
2013 and thereafter		350,018
	$	466,916

Short-term credit facilities at the end of fiscal 2007 and 2006 consisted of the following:

In Thousands	2007				2006
		Outstanding Borrowings	Interest Rate			Outstanding Borrowings	Interest Rate
U.S.	$	—	—		$	5,000	6.07	%
Foreign		8,634	5.65	%		3,075	3.98	%
	$	8,634			$	8,075

At October 26, 2007, the Company’s primary U.S. dollar credit facility totals $200,000,000 and is made available through a group of banks. The credit agreement is secured by substantially all of the Company’s assets and interest is based on standard inter-bank offering rates. An additional $37,300,000 of unsecured foreign currency credit facilities have been extended by foreign banks for a total of $237,300,000 available companywide.

A number of underlying agreements contain various covenant restrictions which include maintenance of net worth, payment of dividends, interest coverage, and limitations on additional borrowings. The Company was in compliance with these covenants at October 26, 2007. Available credit under the above credit facilities was $217,151,000 at fiscal 2007 year end, when reduced by outstanding borrowings of $8,634,000 and letters of credit of $11,515,000.

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NOTE 11: Commitments and Contingencies

Rental expense for operating leases for engineering, selling, administrative and manufacturing totaled $14,547,000, $11,462,000 and $9,651,000 in fiscal years 2007, 2006 and 2005, respectively.

At October 26, 2007, the Company’s rental commitments for noncancelable operating leases with a duration in excess of one year were as follows:

In Thousands

Fiscal Year
2008	$	14,641
2009		13,146
2010		11,857
2011		9,849
2012		8,825
2013 and thereafter		16,784
	$	75,102

The Company receives government funding under the Technology Partnership Canada program to assist in the development of certain new products. The amounts are reimbursable through royalties on future revenues derived from funded products if and when they are commercialized.

The Company is subject to purchase obligations for goods and services. The purchase obligations include amounts under legally enforceable agreements for goods and services with defined terms as to quantity, price and timing of delivery. As of October 26, 2007, the Company’s purchase obligations were as follows:

In Thousands
		Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Purchase obligations	$	190,403	$	178,323	$	11,344	$	736	$	—

The Company is a party to various lawsuits and claims, both as plaintiff and defendant, and has contingent liabilities arising from the conduct of business, none of which, in the opinion of management, is expected to have a material effect on the Company’s financial position or results of operations. The Company believes that it has made appropriate and adequate provisions for contingent liabilities.

Approximately 956 U.S.-based employees or 20% of total U.S.-based employees were represented by various labor unions. In October 2007, a collective bargaining agreement covering about 300 employees expired and a successor agreement was reached with the labor

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union. Management believes that the Company has established a good relationship with these employees and their union. The Company’s European operations are subject to national trade union agreements and to local regulations governing employment.

NOTE 12: Employee Stock Plans

The Company has two share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans for fiscal 2007 and 2006 was $6.9 million and $5.4 million, respectively. The total income tax benefit recognized in the income statement for the share-based compensation arrangement for fiscal 2007 and 2006 was $2.0 million and $1.5 million, respectively.

In March 2002, the Company’s shareholders approved the establishment of an Employee Stock Purchase Plan (ESPP) under which 300,000 shares of the Company’s common stock are reserved for issuance to employees. On March 1, 2006, the Company’s shareholders authorized an additional 150,000 shares of the Company’s stock under the ESPP. The plan qualifies as a noncompensatory employee stock purchase plan under Section 423 of the Internal Revenue Code. Employees are eligible to participate through payroll deductions subject to certain limitations.

At the end of each offering period, usually six months, shares are purchased by the participants at 85% of the lower of the fair market value on the first day of the offering period or the purchase date. During fiscal 2007, employees purchased 79,404 shares at a fair market value price of $40.13 per share, leaving a balance of 122,891 shares available for issuance in the future. As of October 26, 2007, deductions aggregating $1,104,147 were accrued for the purchase of shares on December 15, 2007.

The fair value of the awards under the employee stock purchase plan was estimated using a Black-Scholes pricing model which uses the assumptions noted in the following table. The Company uses historical data to estimate volatility of the Company’s common stock. The risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect the time of grant.

	2007		2006		2005
Volatility	21.4 – 39.9	%	30.0 – 30.7	%	30.7	%
Risk-free interest rate	5.15	%	3.20 – 5.15	%	1.64 – 2.44	%
Expected life (months)	6		6		6
Dividends	—		—		—

The Company also provides a nonqualified stock option plan for officers and key employees. On March 1, 2006, the Company’s shareholders authorized the issuance of an additional 1,000,000 shares of the Company’s common stock under the equity incentive plan. At the end of fiscal 2007, the Company had 2,254,000 shares reserved for issuance to officers and key employees, of which 747,600 shares were available to be granted in the future.

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The Board of Directors authorized the Compensation Committee to administer awards granted under the equity incentive plan, including option grants, and to establish the terms of such awards. Awards under the equity incentive plan may be granted to eligible employees of the Company over the 10-year period ending March 3, 2014. Options granted become exercisable ratably over a period of four years following the date of grant and expire on the tenth anniversary of the grant. Option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The weighted-average grant date fair value of the options granted in fiscal 2007 and 2006 was $21.62 per share and $22.04 per share, respectively.

The fair value of each option granted by the Company was estimated using a Black-Scholes pricing model which uses the assumptions noted in the following table. The Company uses historical data to estimate volatility of the Company’s common stock and option exercise and employee termination assumptions. The range of the expected term reflects the results from certain groups of employees exhibiting different behavior. The risk-free rate for the periods within the contractual life of the grant is based upon the U.S. Treasury zero coupon issues in effect at the time of the grant.

	2007		2006		2005
Volatility	36.15 – 44.26	%	44.26 – 44.95	%	45.3	%
Risk-free interest rate	4.31 – 4.82	%	4.53 – 5.18	%	4.48 – 4.60	%
Expected life (years)	4.5 – 9.5		6.5 – 9.5		6 – 9
Dividends	—		—		—

The following table summarizes the changes in outstanding options granted under the Company’s stock option plans:

	2007				2006				2005
	Shares Subject to Option			Weighted Average Exercise Price	Shares Subject to Option			Weighted Average Exercise Price	Shares Subject to Option			Weighted Average Exercise Price
Outstanding, beginning of year	1,469,000		$	25.80	1,401,100		$	23.56	1,438,000		$	18.34
Granted	420,000			40.24	176,400			38.87	347,400			36.36
Exercised	(332,950	)		19.68	(90,500	)		16.54	(340,050	)		14.93
Cancelled	(49,650	)		35.62	(18,000	)		25.92	(44,250	)		20.65
Outstanding, end of year	1,506,400		$	30.89	1,469,000		$	25.80	1,401,100		$	23.56
Exercisable, end of year	775,300		$	23.95	886,300		$	20.61	738,200		$	18.32

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The aggregate intrinsic value of the option shares outstanding and exercisable at October 26, 2007 was $35.0 million and $23.4 million, respectively.

The number of option shares vested or that are expected to vest at October 26, 2007 was 1.5 million and the aggregate intrinsic value was $34.7 million. The weighted average exercise price and weighted average remaining contractual term of option shares vested or that are expected to vest at October 26, 2007 was $30.73 and 6.76 years, respectively. The weighted-average remaining contractual term of option shares currently exercisable is 5.2 years as of October 26, 2007.

The table below presents stock activity related to stock options exercised in fiscal 2007 and 2006:

In Thousands	2007		2006
Proceeds from stock options exercised	$	6,553	$	1,497
Tax benefits related to stock options exercised	$	2,729	$	797
Intrinsic value of stock options exercised	$	9,843	$	2,266

Total unrecognized compensation expense for options that have not vested as of October 26, 2007, is $7.0 million, which will be recognized over a weighted average period of 1.4 years. The total fair value of option shares vested during the year ended October 26, 2007 was $3.7 million.

The following table summarizes information for stock options outstanding at October 26, 2007:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Life (years)	Weighted Average Price		Shares	Weighted Average Price
$    11.38 – 18.95	301,750	3.89	$	15.72	301,750	$	15.72
18.96 – 27.19	331,750	5.22		23.99	282,000		23.84
27.20 – 38.90	307,400	7.44		36.59	151,200		36.56
38.91 – 38.91	315,600	9.12		38.91	—		—
38.92 – 50.89	249,900	8.66		41.23	40,350		39.04

NOTE 13: Capital Stock

The authorized capital stock of the Company consists of 25,000 shares of preferred stock ($100 par value), 475,000 shares of serial preferred stock ($1.00 par value), each issuable in series, and 60,000,000 shares of common stock ($.20 par value). At the end of fiscal 2007, there were no shares of preferred stock or serial preferred stock outstanding.

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On October 12, 2007, the Company completed an underwritten public offering of 3.45 million shares of common stock, generating proceeds of $187.1 million. Proceeds from the offering were used to pay off its $100.0 million U.S. term loan facility and pay down a revolving credit facility of $27.0 million. On November 24, 2004, the Company completed a public offering of 3.7 million shares of common stock, including shares sold under the underwriters’ over-allotment option, priced at $31.25 per share, generating net proceeds of approximately $109 million, of which $5.0 million was used to pay off existing credit facilities. The funds provided additional financial resources for acquisitions and general corporate purposes.

Effective December 5, 2002, the Board of Directors adopted a Shareholder Rights Plan, providing for the distribution of one Series B Serial Preferred Stock Purchase Right (Right) for each share of common stock held as of December 23, 2002. Each Right entitles the holder to purchase one one-hundredth of a share of Series B Serial Preferred Stock at an exercise price of $161.00, as may be adjusted from time to time.

The Right to purchase shares of Series B Serial Preferred Stock is triggered once a person or entity (together with such person’s or entity’s affiliates) beneficially owns 15% or more of the outstanding shares of common stock of the Company (such person or entity, an Acquiring Person). When the Right is triggered, the holder may purchase one one-hundredth of a share of Series B Serial Preferred Stock at an exercise price of $161.00 per share. If after the Rights are triggered, (i) the Company is the surviving corporation in a merger or similar transaction with an Acquiring Person, (ii) the Acquiring Person beneficially owns more than 15% of the outstanding shares of common stock or (iii) the Acquiring Person engages in other “self-dealing” transactions, holders of the Rights can elect to purchase shares of common stock of the Company with a market value of twice the exercise price. Similarly, if after the Rights are triggered, the Company is not the surviving corporation of a merger or similar transaction or the Company sells 50% or more of its assets to another person or entity, holders of the Rights may elect to purchase shares of common stock of the surviving corporation or that person or entity who purchased the Company’s assets with a market value of twice the exercise price.

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NOTE 14: Acquisitions

On March 14, 2007, the Company acquired all of the outstanding capital stock of CMC Electronics Inc. (CMC), a leading aerospace/defense avionics company, for approximately $344.5 million in cash, including acquisition costs and an adjustment based on the amount of cash and net working capital as of closing. The acquisition significantly expands the scale of the Company’s existing Avionics & Controls business. CMC is included in the Avionics & Controls segment.

The following summarizes the estimated fair market value of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price was based upon a preliminary independent valuation report. The Company has not finalized the allocation of the purchase price to tangible and intangible assets and acquired net operating losses, unused tax credits and tax basis of acquired assets and liabilities. The purchase price includes the value of future development of existing technologies, the introduction of new technologies, and the addition of new customers. These factors resulted in the recording of goodwill of $212.7 million. The amount allocated to goodwill is not expected to be deductible for income tax purposes.

In Thousands

As of March 14, 2007

Current assets	$	90,532
Property, plant and equipment		39,136
Intangible assets subject to amortization
Programs (15 year weighted average useful life)		83,189
Trade names		22,370
		105,559
Goodwill		212,650
Deferred income tax benefit		19,273
Total assets acquired		467,150
Current liabilities assumed		68,583
Deferred tax liabilities		35,571
Pension and other liabilities		18,481
Net assets acquired	$	344,515

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Pro Forma Financial Information

The following pro forma financial information shows the results of operations for the years ended October 26, 2007 and October 27, 2006, as though the acquisition of CMC had occurred at the beginning of each respective fiscal year. The pro forma financial information includes, where applicable, adjustments for: (i) the amortization of acquired intangible assets, (ii) additional interest expense on acquisition-related borrowings and (iii) the income tax effect on the pro forma adjustments using a statutory tax rate of 32.0%. The pro forma adjustments related to the acquisition of CMC are based on a preliminary purchase price allocation. Differences between the preliminary and final purchase price allocation could have an impact on the pro forma financial information presented and such impact could be material. The pro forma financial information below is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the acquisition been completed as of the date indicated above or the results that may be obtained in the future.

In Thousands

	Year Ended
	October 26, 2007		October 27, 2006
	(unaudited)		(unaudited)
Pro forma net sales	$	1,338,253	$	1,152,611
Pro forma net income	$	91,417	$	52,139
Basic earnings per share as reported	$	3.57	$	2.19
Pro forma basic earnings per share	$	3.54	$	2.05
Diluted earnings per share as reported	$	3.52	$	2.15
Pro forma diluted earnings per share	$	3.48	$	2.02

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The Company acquired Wallop Defence Systems Limited (Wallop) and FR Countermeasures from Cobham plc on March 24, 2006 and December 23, 2005, respectively. Wallop and FR Countermeasures, manufacturers of military pyrotechnic countermeasure devices, strengthen the Company’s international and U.S. position in countermeasure devices. The Company paid $77.0 million for both companies, including acquisition costs and an adjustment based on the amount of indebtedness and net working capital as of closing. The Company assumed a $4.2 million obligation at FR Countermeasures. In addition, the Company may pay an additional purchase price up to U.K. £4.1 million, or approximately $8.4 million, depending on the achievement of certain objectives. At the time of the acquisition of Wallop, the Company and the seller agreed that some environmental remedial activities may need to be carried out, and these activities are currently on-going. Under the terms of the Stock Purchase Agreement, a portion of the costs of any environmental remedial activities will be reimbursed by the seller if the cost is incurred within five years of the consummation of the acquisition. Wallop and FR Countermeasures are included in the Advanced Materials segment.

The following summarizes the estimated fair market value of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price was based upon an independent valuation report. The purchase price includes the value of future development of existing technologies, the introduction of new technologies, and the addition of new customers. These factors resulted in the recording of goodwill of $40.9 million. The amount allocated to goodwill is not expected to be deductible for income tax purposes.

In Thousands

As of March 24, 2006 (Wallop) and December 23, 2005 (FR Countermeasures)

Current Assets	$	11,479
Property, plant and equipment		20,963
Intangible assets subject to amortization
Programs (17 year weighted average useful life)		21,793
Goodwill		40,913
Deferred income tax benefit		2,151
Total assets acquired		97,299
Debt assumed		4,212
Current liabilities assumed		9,180
Deferred tax liabilities		6,909
Net assets acquired	$	76,998

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On December 16, 2005, the Company acquired Darchem Holdings Limited (Darchem), a manufacturer of thermally engineered components for critical aerospace applications for U.K. £68.7 million (approximately $121.7 million), including acquisition costs and an adjustment based on the amount of cash and net working capital of Darchem as of closing. Darchem holds a leading position in its niche market and fits the Company’s engineered-to-order model. Darchem is included in the Advanced Materials segment.

The following summarizes the estimated fair market value of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price was based upon an independent valuation report. The purchase price includes the value of future development of existing technologies, the introduction of new technologies, and the addition of new customers. These factors resulted in the recording of goodwill of $60.3 million. The amount allocated to goodwill is not expected to be deductible for income tax purposes.

In Thousands

As of December 16, 2005

Current Assets	$	21,864
Property, plant and equipment		8,499
Intangible assets subject to amortization
Programs (18 year weighted average useful life)		46,441
Customer relationships (6 year weighted useful life)		2,215
Patents (11 year weighted average useful life)		3,083
Other (1 year useful life)		284
		52,023
Trade name		6,219
Other		171
Goodwill		60,313
Total assets acquired		149,089
Current liabilities assumed		8,499
Deferred tax liabilities		18,933
Net assets acquired	$	121,657

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On June 3, 2005, the Company acquired Palomar Products, Inc. (Palomar), a California-based manufacturer of secure military communications products, for $29.2 million. Palomar’s products extend the Company’s avionics and controls product lines. Palomar is included in the Avionics & Controls segment.

The following summarizes the estimated fair market value of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price was based upon an independent valuation report. The purchase price includes the value of future development of existing technologies, the introduction of new technologies, and the addition of new customers. These factors resulted in the recording of goodwill of $17.2 million. The amount allocated to goodwill is not expected to be deductible for income tax purposes.

In Thousands

As of June 3, 2005
Current Assets	$	8,079
Property, plant and equipment		2,151
Intangible assets subject to amortization
Programs (16 year weighted average useful life)		9,001
Patents (15 year weighted average useful life)		2,082
Other (3 year useful life)		5
		11,088
Deferred income tax benefits		1,526
Goodwill		17,201
Total assets acquired		40,045
Current liabilities assumed		6,571
Deferred tax liabilities		4,317
Net assets acquired	$	29,157

The above acquisitions were accounted for under the purchase method of accounting and the results of operations were included from the effective date of each acquisition.

NOTE 15: Business Segment Information

The Company’s businesses are organized and managed in three reporting segments: Avionics & Controls, Sensors & Systems and Advanced Materials. Operating segments within each reporting segment are aggregated. Operations within the Avionics & Controls segment focus on integrated cockpit systems, technology interface systems for commercial and military aircraft, and similar devices for land- and sea-based military vehicles, secure communications systems, specialized medical equipment and other industrial applications. Sensors & Systems includes operations that produce high-precision temperature and pressure sensors, electrical power switching, control and data communication devices, motion control components and other related systems principally for aerospace and defense customers. The

78

Advanced Materials segment focuses on thermally engineered components for critical aerospace applications, high-performance elastomer products used in a wide range of commercial aerospace and military applications, and combustible ordnance and electronic warfare countermeasure devices. All segments include sales to domestic, international, defense and commercial customers.

Geographic sales information is based on product origin. The Company evaluates these segments based on segment profits prior to net interest, other income/expense, corporate expenses and federal/foreign income taxes.

Details of the Company’s operations by business segment for the last three fiscal years were as follows:

In Thousands		2007			2006			2005
Sales
Avionics & Controls	$	454,520		$	283,011		$	261,550
Sensors & Systems		383,477			333,257			319,539
Advanced Materials		428,558			356,007			254,314
	$	1,266,555		$	972,275		$	835,403
Income From Continuing Operations
Avionics & Controls	$	49,482		$	45,050		$	37,325
Sensors & Systems		34,915			29,305			34,482
Advanced Materials		97,295			46,493			33,992
Segment Earnings		181,692			120,848			105,799
Corporate expense		(33,691	)		(27,338	)		(23,513	)
Other income (expense)		(24	)		490			(514	)
Loss on extinguishment of debt		(1,100	)		(2,156	)		—
Interest income		3,381			2,642			4,057
Interest expense		(35,302	)		(21,290	)		(18,159	)
	$	114,956		$	73,196		$	67,670
Identifiable Assets
Avionics & Controls	$	843,664		$	266,090		$	245,016
Sensors & Systems		475,769			431,091			398,801
Advanced Materials		568,475			518,841			266,327
Corporate1		162,398			74,429			205,104
	$	2,050,306		$	1,290,451		$	1,115,248
Capital Expenditures
Avionics & Controls	$	5,654		$	4,890		$	3,538
Sensors & Systems		9,547			10,093			11,155
Advanced Materials		15,054			11,937			8,283
Discontinued Operations		—			—			46
Corporate		212			133			754
	$	30,467		$	27,053		$	23,776

79

In Thousands		2007			2006			2005
Depreciation and Amortization
Avionics & Controls	$	15,694		$	6,904		$	6,972
Sensors & Systems		15,903			15,097			14,311
Advanced Materials		22,320			19,164			12,469
Discontinued Operations		—			—			141
Corporate		1,903			1,668			1,415
	$	55,820		$	42,833		$	35,308
1         Primarily cash, prepaid pension expense (see Note 8) and deferred tax assets (see Note 9). The Company’s operations by geographic area for the last three fiscal years were as follows:
In Thousands		2007			2006			2005
Sales
Domestic
Unaffiliated customers – U.S.	$	597,738		$	535,259		$	489,644
Unaffiliated customers – export		151,041			120,247			95,370
Intercompany		11,672			12,017			10,179
		760,451			667,523			595,193
Canada
Unaffiliated customers		122,087			—			—
Intercompany		—			—			—
		122,087			—			—
France
Unaffiliated customers		143,740			121,553			108,236
Intercompany		19,564			14,878			13,528
		163,304			136,431			121,764
United Kingdom
Unaffiliated customers		206,857			165,204			108,901
Intercompany		13,341			11,931			3,021
		220,198			177,135			111,922
All Other Foreign
Unaffiliated customers		45,092			30,012			33,252
Intercompany		2,821			4,747			2,850
		47,913			34,759			36,102
Eliminations		(47,398	)		(43,573	)		(29,578	)
	$	1,266,555		$	972,275		$	835,403

80

In Thousands		2007			2006		2005
Segment Earnings1
Domestic	$	120,664		$	95,496	$	79,555
Canada		(7,621	)		—		—
France		15,025			12,239		14,987
United Kingdom		50,024			9,466		7,975
All other foreign		3,600			3,647		3,282
	$	181,692		$	120,848	$	105,799
Identifiable Assets2
Domestic	$	641,143		$	619,100	$	569,000
Canada		568,650			—		—
France		188,430			157,631		140,049
United Kingdom		430,876			387,197		190,090
All other foreign		58,809			52,094		11,005
	$	1,887,908		$	1,216,022	$	910,144

¹ Before corporate expense, shown on page 79.

² Excludes corporate, shown on page 79.

The Company’s principal foreign operations consist of manufacturing facilities located in Canada, France, Germany and the United Kingdom, and include sales and service operations located in Singapore and China. Sensors & Systems segment operations are dependent upon foreign sales, which represented $253.9 million, $219.2 million and $214.4 million of Sensors & Systems sales in fiscal 2007, 2006 and 2005, respectively. Intercompany sales are at prices comparable with sales to unaffiliated customers. U.S. Government sales as a percent of Advanced Materials and Avionics & Controls sales were 26.1% and 6.0%, respectively, in fiscal 2007 and 11.2% of consolidated sales. In fiscal 2006, U.S. Government sales as a percent of Advanced Materials and Avionics & Controls sales were 29.1% and 4.3%, respectively, and 12.0% of consolidated sales.

Product lines contributing sales of 10% or more of total sales in any of the last three fiscal years were as follows:

	2007	2006	2005
Elastomeric products	12%	13%	14%
Sensors	12%	14%	16%
Aerospace switches and indicators	12%	11%	12%

81

NOTE 16: Quarterly Financial Data (Unaudited)

The following is a summary of unaudited quarterly financial information:

In Thousands, Except Per Share Amounts

Fiscal Year 2007		Fourth			Third			Second			First
Net sales	$	370,655		$	326,376		$	312,280		$	257,244
Gross margin		117,452			99,642			98,862			74,569
Net earnings 1	$	20,888	2, 3	$	38,835	4	$	19,760		$	12,801	5
Earnings per share – basic	$	.79		$	1.51		$	.77		$	.50
Earnings per share – diluted 10	$	.78		$	1.49		$	.76		$	.49
Fiscal Year 2006		Fourth			Third			Second			First
Net sales	$	270,273		$	248,398		$	247,939		$	205,665
Gross margin		81,901			75,357			80,739			62,859
Net earnings 1	$	18,369		$	11,223	6	$	17,659	7	$	8,364	8, 9
Earnings per share – basic	$	.72		$	.44		$	.70		$	.33
Earnings per share – diluted 10	$	.71		$	.43		$	.68		$	.32

82

¹ The effects of the business interruption insurance recovery are included in income from continuing operations and presented below:

		Fourth		Third		Second		First
Fiscal Year 2007	$	153	$	32,857	$	2,810	$	1,647
Fiscal Year 2006		4,104		786		—		—

² Included a $1.1 million loss on early extinguishment of debt.

³ Included a $1.4 million net reduction in deferred income tax liabilities which was the result of enactment of tax laws reducing U.K., Canadian, and German statutory corporate income tax rates.

⁴ Included a $1.4 million net reduction in deferred income tax liabilities which was the result of enactment of tax laws reducing U.K. statutory corporate income tax rates. The third quarter of fiscal 2007 also included a $0.9 million reduction of the estimated $1.9 million credit taken in the first quarter of fiscal 2007 relating to the retroactive extension of the U.S. Research and Experimentation tax credit that was signed into law on December 21, 2006.

⁵ Included a $1.9 million tax benefit as a result of the retroactive extension of the U.S. Research and Experimentation tax credit that was signed into law on December 21, 2006.

⁶ Included a $1.6 million reduction of previously estimated tax liabilities due to the expiration of the statute of limitations and adjustments resulting from a reconciliation of the prior year’s U.S. income tax return to the provision for income taxes.

⁷ Included a $2.0 million reduction of previously estimated tax liabilities as a result of receiving a Notice of Proposed Adjustment (NOPA) from the State of California Franchise Tax Board covering, among other items, the examination of research and development tax credits for fiscal years 1997 through 2002.

⁸ Included a $0.9 million reduction of previously estimated tax liabilities as a result of a favorable tax audit which concluded on December 23, 2005.

⁹ Included a $2.2 million loss on early extinguishment of debt.

¹⁰ The sum of the quarterly per share amounts may not equal per share amounts reported for year-to-date periods. This is due to changes in the number of weighted average shares outstanding and the effects of rounding for each period.

83

NOTE 17: Guarantors

The following schedules set forth condensed consolidating financial information as required by Rule 3-10 of Securities and Exchange Commission Regulation S-X for fiscal 2007, 2006 and 2005 for (a) Esterline Technologies Corporation (the Parent); (b) on a combined basis, the subsidiary guarantors (Guarantor Subsidiaries) of the Senior Notes and Senior Subordinated Notes which include Advanced Input Devices, Inc., Amtech Automated Manufacturing Technology, Angus Electronics Co., Armtec Countermeasures Co., Armtec Countermeasures TNO Co., Armtec Defense Products Co., AVISTA, Incorporated, BVR Technologies Co., CMC DataComm Inc., CMC Electronics Acton Inc., CMC Electronics Aurora Inc., EA Technologies Corporation, Equipment Sales Co., Esterline Canadian Holding Co., Esterline Sensors Services Americas, Inc., Esterline Technologies Holdings Limited, Esterline Technologies Ltd. (England), H.A. Sales Co., Hauser Inc., Hytek Finishes Co., Janco Corporation, Kirkhill-TA Co., Korry Electronics Co., Leach Holding Corporation, Leach International Corporation, Leach International Mexico S. de R.L. de C.V. (Mexico), Leach Technology Group, Inc., Mason Electric Co., MC Tech Co., Memtron Technologies Co., Norwich Aero Products, Inc., Palomar Products, Inc., Pressure Systems, Inc., Pressure Systems International, Inc., Surftech Finishes Co., UMM Electronics Inc., and (c) on a combined basis, the subsidiary non-guarantors (Non-Guarantor Subsidiaries), which include Advanced Input Devices Ltd. (U.K.), Auxitrol S.A., BAE Systems Canada/Air TV LLC, Beacon Electronics Inc., CMC Electronics Inc., Darchem Engineering Limited, Darchem Holdings Ltd., Darchem Insulation Systems Limited, Esterline Acquisition Ltd. (U.K.), Esterline Canadian Acquisition Company, Esterline Canadian Limited Partnership, Esterline Foreign Sales Corporation (U.S. Virgin Islands), Esterline Input Devices Asia Ltd. (Barbados), Esterline Input Devices Ltd. (Shanghai), Esterline Sensors Services Asia PTE, Ltd. (Singapore), Esterline Technologies Denmark ApS (Denmark), Guizhou Leach-Tianyi Aviation Electrical Company Ltd. (China), Leach International Asia-Pacific Ltd. (Hong Kong), Leach International Europe S.A. (France), Leach International Germany GmbH (Germany), Leach International U.K. (England), Leach Italia Srl. (Italy), LRE Medical GmbH (Germany), Wallop Industries Limited (U.K.), Muirhead Aerospace Ltd., Norcroft Dynamics Ltd., Pressure Systems International Ltd., TA Mfg. Limited (U.K.), Wallop Defence Systems Limited, Weston Aero Ltd. (England), and Weston Aerospace Ltd. (England). Adjustments have been made to prior-year reported financial statements of the parent, guarantor, non-guarantor and eliminations to conform with the current year’s presentation due to certain reclassifications of guarantor and non-guarantor subsidiaries and to apply the equity method of accounting for certain guarantor subsidiaries. At October 27, 2006, total assets of guarantors increased $95.5 million, total liabilities increased $24.4 million, and total equity increased $71.1 million. Total assets of non-guarantors increased $10.8 million, total liabilities decreased by $110.1 million, and total equity increased $120.9 million. For the fiscal year ended October 27, 2006, net earnings of guarantors increased $2.1 million. Net loss of non-guarantors decreased $1.9 million. The guarantor subsidiaries are direct and indirect wholly-owned subsidiaries of Esterline Technologies and have fully and unconditionally, jointly and severally, guaranteed the Senior Notes and Senior Subordinated Notes.

84

Condensed Consolidating Balance Sheet as of October 26, 2007

In Thousands

	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	89,275	$	879	$	56,915	$	—		$	147,069
Cash in escrow		—		—		—		—			—
Accounts receivable, net		183		123,510		138,394		—			262,087
Inventories		—		117,706		140,470		—			258,176
Income tax refundable		—		—		11,580		—			11,580
Deferred income tax benefits		29,884		2		7,944		—			37,830
Prepaid expenses		26		4,351		8,879		—			13,256
Total Current Assets		119,368		246,448		364,182		—			729,998
Property, Plant & Equipment, Net		2,018		104,110		111,293		—			217,421
Goodwill		—		201,405		455,460		—			656,865
Intangibles, Net		—		69,653		295,664		—			365,317
Debt Issuance Costs, Net		9,192		—		—		—			9,192
Deferred Income Tax Benefits		13,370		—		30,300		—			43,670
Other Assets		3,255		15,352		9,236		—			27,843
Amounts Due To (From) Subsidiaries		243,815		—		—		(243,815	)		—
Investment in Subsidiaries		1,269,230		199,713		24,774		(1,493,717	)		—
Total Assets	$	1,660,248	$	836,681	$	1,290,909	$	(1,737,532	)	$	2,050,306

85

Condensed Consolidating Balance Sheet as of October 26, 2007

In Thousands

	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Total
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	1,798	$	26,233		$	62,226	$	—		$	90,257
Accrued liabilities		28,692		56,002			102,902		—			187,596
Credit facilities		—		—			8,634		—			8,634
Current maturities of long-term debt		10,239		1,152			775		—			12,166
Federal and foreign income taxes		4,564		(5,072	)		11,755		—			11,247
Total Current Liabilities		45,293		78,315			186,292		—			309,900
Long-Term Debt, Net		452,645		1,167			1,190		—			455,002
Deferred Income Taxes		33,567		—			90,191		—			123,758
Other Liabilities		6,917		8,734			21,201		—			36,852
Amounts Due To (From) Subsidiaries		—		58,935			99,759		(158,694	)		—
Minority Interest		—		—			2,968		—			2,968
Shareholders’ Equity		1,121,826		689,530			889,308		(1,578,838	)		1,121,826
Total Liabilities and Shareholders’ Equity	$	1,660,248	$	836,681		$	1,290,909	$	(1,737,532	)	$	2,050,306

86

Condensed Consolidating Statement of Operations for the fiscal year ended October 26, 2007

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	738,056		$	544,625		$	(16,126	)	$	1,266,555
Cost of Sales		—			501,823			390,333			(16,126	)		876,030
		—			236,233			154,292			—			390,525
Expenses
Selling, general and administrative		—			101,045			108,415			—			209,460
Research, development and engineering		—			27,276			43,255			—			70,531
Total Expenses		—			128,321			151,670			—			279,991
Other
Other expense		—			—			24			—			24
Insurance recovery		—			—			(37,467	)		—			(37,467	)
Total Other		—			—			(37,443	)		—			(37,443	)
Operating Earnings from Continuing Operations		—			107,912			40,065			—			147,977
Interest income		(20,662	)		(4,797	)		(22,663	)		44,741			(3,381	)
Interest expense		34,450			21,267			24,326			(44,741	)		35,302
Loss on extinguishment of debt		1,100			—			—			—			1,100
Other Expense, Net		14,888			16,470			1,663			—			33,021
Income (Loss) from Continuing Operations Before Taxes		(14,888	)		91,442			38,402			—			114,956
Income Tax Expense (Benefit)		(3,362	)		20,819			5,062			—			22,519
Income (Loss) From Continuing Operations
Before Minority Interest		(11,526	)		70,623			33,340			—			92,437
Minority Interest		—			—			(153	)		—			(153	)
Income (Loss) From Continuing Operations		(11,526	)		70,623			33,187			—			92,284
Equity in Net Income of Consolidated Subsidiaries		103,810			12,658			(2,063	)		(114,405	)		—
Net Income (Loss)	$	92,284		$	83,281		$	31,124		$	(114,405	)	$	92,284

87

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 26, 2007

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss)	$	92,284		$	83,281		$	31,124		$	(114,405	)	$	92,284
Minority interest		—			—			153			—			153
Depreciation & amortization		—			26,981			28,839			—			55,820
Deferred income tax		3,729			23			(19,184	)		—			(15,432	)
Share-based compensation		—			3,764			3,138			—			6,902
Working capital changes, net of effect of acquisitions
Accounts receivable		118			(17,511	)		9,372			—			(8,021	)
Inventories		—			(3,422	)		(8,650	)		—			(12,072	)
Prepaid expenses		138			360			(1,427	)		—			(929	)
Accounts payable		1,073			4,794			1,653			—			7,520
Accrued liabilities		3,148			(2,253	)		(4,329	)		—			(3,434	)
Federal & foreign income taxes		1,773			(1,329	)		4,269			—			4,713
Other liabilities		145			(637	)		(3,382	)		—			(3,874	)
Other, net		497			(6,038	)		3,635			—			(1,906	)
		102,905			88,013			45,211			(114,405	)		121,724
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(212	)		(14,533	)		(15,722	)		—			(30,467	)
Proceeds from sale of capital assets		29			714			2,332			—			3,075
Acquisitions of businesses, net		—			—			(354,948	)		—			(354,948	)
		(183	)		(13,819	)		(368,338	)		—			(382,340	)

88

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 26, 2007

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Total
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		9,742			—			—			—		9,742
Excess tax benefits from stock option exercises		2,728			—			—			—		2,728
Proceeds provided by sale of common stock		187,145			—			—			—		187,145
Debt and other issuance costs		(6,409	)		—			—			—		(6,409	)
Dividends paid to minority interest		—			—			(763	)				(763	)
Net change in credit facilities		(5,000	)		—			5,144			—		144
Proceeds from issuance of long-term debt		275,000			—			—			—		275,000
Repayment of long-term debt		(104,291	)		(1,065	)		(317	)		—		(105,673	)
Net change in intercompany financing		(386,661	)		(74,903	)		347,159			114,405		—
		(27,746	)		(75,968	)		351,223			114,405		361,914
Effect of foreign exchange rates on cash		(44	)		(19	)		3,196			—		3,133
Net increase (decrease) in cash and cash equivalents		74,932			(1,793	)		31,292			—		104,431
Cash and cash equivalents – beginning of year		14,343			2,672			25,623			—		42,638
Cash and cash equivalents – end of year	$	89,275		$	879		$	56,915		$	—	$	147,069

89

Condensed Consolidating Balance Sheet as of October 27, 2006

In Thousands

	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	14,343	$	2,672	$	25,623	$	—		$	42,638
Cash in escrow		4,409		—		—		—			4,409
Accounts receivable, net		301		105,584		85,852		—			191,737
Inventories		—		107,864		77,982		—			185,846
Income tax refundable		—		3,394		2,837		—			6,231
Deferred income tax benefits		25,227		5		2,700		—			27,932
Prepaid expenses		164		4,480		4,901		—			9,545
Total Current Assets		44,444		223,999		199,895		—			468,338
Property, Plant & Equipment, Net		2,324		95,070		73,048		—			170,442
Goodwill		—		195,474		170,681		—			366,155
Intangibles, Net		73		75,928		165,656		—			241,657
Debt Issuance Costs, Net		5,297		—		—		—			5,297
Deferred Income Tax Benefits		13,531		—		1,259		—			14,790
Other Assets		2,708		15,344		5,720		—			23,772
Amounts Due To (From) Subsidiaries		168,889		—		—		(168,889	)		—
Investment in Subsidiaries		826,622		192,010		—		(1,018,632	)		—
Total Assets	$	1,063,888	$	797,825	$	616,259	$	(1,187,521	)	$	1,290,451

90

Condensed Consolidating Balance Sheet as of October 27, 2006

In Thousands

	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Total
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	725	$	20,678		$	41,290	$	—		$	62,693
Accrued liabilities		30,651		57,455			33,313		—			121,419
Credit facilities		5,000		—			3,075		—			8,075
Current maturities of long-term debt		4,054		—			1,484		—			5,538
Federal and foreign income taxes		2,791		72			11		—			2,874
Total Current Liabilities		43,221		78,205			79,173		—			200,599
Long-Term Debt, Net		278,365		—			3,942		—			282,307
Deferred Income Taxes		27,942		(20	)		44,427		—			72,349
Other Liabilities		6,371		9,998			7,260		—			23,629
Amounts Due To (From) Subsidiaries		—		28,228			187,381		(215,609	)		—
Minority Interest		—		—			3,578		—			3,578
Shareholders’ Equity		707,989		681,414			290,498		(971,912	)		707,989
Total Liabilities and Shareholders’ Equity	$	1,063,888	$	797,825		$	616,259	$	(1,187,521	)	$	1,290,451

91

Condensed Consolidating Statement of Operations for the fiscal year ended October 27, 2006

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	638,494		$	349,078		$	(15,297	)	$	972,275
Cost of Sales		—			436,358			250,358			(15,297	)		671,419
		—			202,136			98,720			—			300,856
Expenses
Selling, general and administrative		—			95,185			64,439			—			159,624
Research, development and engineering		—			22,298			30,314			—			52,612
Total Expenses		—			117,483			94,753			—			212,236
Other
Other income		—			—			(490	)		—			(490	)
Insurance recovery		—			—			(4,890	)		—			(4,890	)
Total Other		—			—			(5,380	)		—			(5,380	)
Operating Earnings from Continuing Operations		—			84,653			9,347			—			94,000
Interest income		(20,857	)		(4,758	)		(1,723	)		24,696			(2,642	)
Interest expense		20,551			13,902			11,533			(24,696	)		21,290
Loss on extinguishment of debt		2,156			—			—			—			2,156
Other Expense, Net		1,850			9,144			9,810			—			20,804
Income (Loss) from Continuing Operations Before Taxes		(1,850	)		75,509			(463	)		—			73,196
Income Tax Expense (Benefit)		(517	)		17,636			(403	)		—			16,716
Income (Loss) From Continuing Operations
Before Minority Interest		(1,333	)		57,873			(60	)		—			56,480
Minority Interest		—			—			(865	)		—			(865	)
Income (Loss) From Continuing Operations		(1,333	)		57,873			(925	)		—			55,615
Equity in Net Income of Consolidated Subsidiaries		56,948			4,010			—			(60,958	)		—
Net Income (Loss)	$	55,615		$	61,883		$	(925	)	$	(60,958	)	$	55,615

92

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 27, 2006

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss)	$	55,615		$	61,883		$	(925	)	$	(60,958	)	$	55,615
Minority interest		—			—			865			—			865
Depreciation & amortization		—			23,585			19,248			—			42,833
Deferred income tax		(1,561	)		87			(149	)		—			(1,623	)
Share-based compensation		—			3,667			1,763			—			5,430
Gain on sale of short-term investments		(610	)		—			—			—			(610	)
Working capital changes, net of effect of acquisitions
Accounts receivable		370			(8,653	)		(8,228	)		—			(16,511	)
Inventories		—			(23,513	)		(15,728	)		—			(39,241	)
Prepaid expenses		15			1			(1,321	)		—			(1,305	)
Accounts payable		(265	)		801			7,570			—			8,106
Accrued liabilities		(146	)		4,209			(4,709	)		—			(646	)
Federal & foreign income taxes		810			(1,853	)		(11,487	)		—			(12,530	)
Other liabilities		(1,579	)		(4,619	)		4,521			—			(1,677	)
Other, net		(1,541	)		785			(1,274	)		—			(2,030	)
		51,108			56,380			(9,854	)		(60,958	)		36,676
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(133	)		(16,624	)		(10,296	)		—			(27,053	)
Proceeds from sale of capital assets		6			1,006			144			—			1,156
Proceeds from sale of short-term investments		63,266			—			—			—			63,266
Acquisitions of businesses, net		—			(125,456	)		(64,888	)		—			(190,344	)
		63,139			(141,074	)		(75,040	)		—			(152,975	)

93

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 27, 2006

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Total
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		4,038			—			—			—		4,038
Excess tax benefits from stock option exercises		545			—			—			—		545
Net change in credit facilities		5,000			—			905			—		5,905
Proceeds from issuance of long-term debt		100,000			—			—			—		100,000
Repayment of long-term debt		(70,001	)		—			(1,371	)		—		(71,372	)
Net change in intercompany financing		(214,850	)		85,236			68,656			60,958		—
		(175,268	)		85,236			68,190			60,958		39,116
Effect of foreign exchange rates on cash		—			(24	)		1,541			—		1,517
Net increase (decrease) in cash and cash equivalents		(61,021	)		518			(15,163	)		—		(75,666	)
Cash and cash equivalents – beginning of year		75,364			2,154			40,786			—		118,304
Cash and cash equivalents – end of year	$	14,343		$	2,672		$	25,623		$	—	$	42,638

94

Condensed Consolidating Statement of Operations for the fiscal year ended October 28, 2005

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	574,864		$	278,767		$	(18,228	)	$	835,403
Cost of Sales		—			403,823			187,858			(18,228	)		573,453
		—			171,041			90,909			—			261,950
Expenses
Selling, general and administrative		—			90,892			46,534			—			137,426
Research, development and engineering		—			17,399			24,839			—			42,238
Total Expenses		—			108,291			71,373			—			179,664
Other
Other expense		50			86			378			—			514
Total Other		50			86			378			—			514
Operating Earnings from
Continuing Operations		(50	)		62,664			19,158			—			81,772
Interest income		(15,940	)		(4,112	)		(1,582	)		17,577			(4,057	)
Interest expense		18,261			10,153			7,322			(17,577	)		18,159
Other Expense, Net		2,321			6,041			5,740			—			14,102
Income (Loss) from Continuing
Operations Before Taxes		(2,371	)		56,623			13,418			—			67,670
Income Tax Expense (Benefit)		(686	)		12,072			4,915			—			16,301
Income (Loss) From
Continuing Operations
Before Minority Interest		(1,685	)		44,551			8,503			—			51,369
Minority Interest		—			—			(335	)		—			(335	)
Income (Loss) From
Continuing Operations		(1,685	)		44,551			8,168			—			51,034
Income From Discontinued
Operations, Net of Tax		—			6,992			—			—			6,992
Equity in Net Income of
Consolidated Subsidiaries		59,711			5,646			—			(65,357	)		—
Net Income (Loss)	$	58,026		$	57,189		$	8,168		$	(65,357	)	$	58,026

95

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 28, 2005

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss)	$	58,026		$	57,189		$	8,168		$	(65,357	)	$	58,026
Minority interest		—			—			335			—			335
Depreciation & amortization		—			22,152			13,156			—			35,308
Deferred income tax		3,205			(112	)		(7,594	)		—			(4,501	)
Share-based compensation		—			2,262			537			—			2,799
Gain on disposal of discontinued operations		—			(9,456	)		—			—			(9,456	)
Loss on sale of building		—			59			—			—			59
Gain on sale of short-term investments		(1,397	)		—			—			—			(1,397	)
Working capital changes, net of effect of acquisitions
Accounts receivable		1,550			(11,458	)		(7,737	)		—			(17,645	)
Inventories		—			(6,350	)		(5,286	)		—			(11,636	)
Prepaid expenses		174			(903	)		2,431			—			1,702
Other current assets		147			288			—			—			435
Accounts payable		470			2,638			1,058			—			4,166
Accrued liabilities		9,540			7,401			2,975			—			19,916
Federal & foreign income taxes		638			(1,544	)		6,075			—			5,169
Other liabilities		40			(6,838	)		384			—			(6,414	)
Other, net		7,829			(3,653	)		(4,630	)		—			(454	)
		80,222			51,675			9,872			(65,357	)		76,412
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(754	)		(15,289	)		(7,733	)		—			(23,776	)
Proceeds from sale of discontinued operations		—			21,421			—			—			21,421
Proceeds from sale of building		—			2,319			—			—			2,319
Escrow deposit		(4,207	)		—			—			—			(4,207	)
Proceeds from sale of capital assets		3			2,017			292			—			2,312
Purchase of short-term investments		(173,273	)		—			—			—			(173,273	)
Proceeds from sale of short-term investments		112,014			—			—			—			112,014
Acquisitions of businesses, net		—			(28,261	)		—			—			(28,261	)
		(66,217	)		(17,793	)		(7,441	)		—			(91,451	)

96

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 28, 2005

In Thousands

	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Total
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		3,519			—			—			—		3,519
Excess tax benefits from stock option exercises		1,208			—			—			—		1,208
Proceeds provided by sale of common stock		108,490			—			—			—		108,490
Net change in credit facilities		(5,000	)		—			171			—		(4,829	)
Repayment of long-term debt		(2,781	)		(57	)		(464	)		—		(3,302	)
Net change in intercompany financing		(50,478	)		(34,116	)		19,237			65,357		—
		54,958			(34,173	)		18,944			65,357		105,086
Effect of foreign exchange rates on cash		(458	)		92			(856	)		—		(1,222	)
Net increase (decrease) in cash and cash equivalents		68,505			(199	)		20,519			—		88,825
Cash and cash equivalents – beginning of year		6,859			2,353			20,267			—		29,479
Cash and cash equivalents – end of year	$	75,364		$	2,154		$	40,786		$	—	$	118,304

97

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control system over financial reporting is designed by, or under the supervision of, our chief executive officer and chief financial officer, and is effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i)      pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the assets of the Company;

(ii)     provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that transactions are made only in accordance with the authorization of our management and directors; and

(iii)    provide reasonable assurance regarding prevention or timely detection of unauthorized transactions that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of Esterline’s internal control over financial reporting as of October 26, 2007. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. On March 14, 2007, the Company completed the acquisition of CMC Electronics Inc. As permitted by applicable rules promulgated by the Securities and Exchange Commission, our management excluded the CMC Electronics Inc. operations from its assessment of internal control over financial reporting as of October 26, 2007. CMC Electronics Inc. constituted approximately $568.7 million of consolidated total assets and $424.3 million of consolidated total net assets as of October 26, 2007, and $128.0 million and $3.7 million of consolidated net sales and net earnings, respectively, for the year then ended. CMC Electronics Inc. will be included in the Company’s assessment as of October 31, 2008. Based on management’s assessment and those criteria, our management concluded that our internal control over financial reporting was effective as of October 26, 2007.

98

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our assessment and the effectiveness of our internal control over financial reporting. This report appears on page 100.

/s/ Robert W. Cremin

Robert W. Cremin

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

/s/ Robert D. George

Robert D. George

Vice President, Chief Financial Officer,

Secretary and Treasurer

(Principal Financial Officer)

/s/ Gary J. Posner

Gary J. Posner

Corporate Controller and Chief Accounting Officer

(Principal Accounting Officer)

99

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Esterline Technologies Corporation

Bellevue, Washington

We have audited Esterline Technologies Corporation’s internal control over financial reporting as of October 26, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Esterline Technologies Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

100

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of CMC Electronics Inc., which is included in the 2007 consolidated financial statements of Esterline Technologies Corporation and constituted $568.7 million and $424.3 million of total and net assets, respectively, as of October 26, 2007 and $128.0 million and $3.7 million of revenues and net earnings, respectively, for the year then ended. Our audit of internal control over financial reporting of Esterline Technologies Corporation also did not include an evaluation of the internal control over financial reporting of CMC Electronics Inc.

In our opinion, Esterline Technologies Corporation maintained, in all material respects, effective internal control over financial reporting as of October 26, 2007 based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Esterline Technologies Corporation as of October 26, 2007 and October 27, 2006, and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended October 26, 2007 of Esterline Technologies Corporation and our report dated December 18, 2007 expressed an unqualified opinion thereon.

Ernst & Young LLP

Seattle, Washington

December 18, 2007

101

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Esterline Technologies Corporation

Bellevue, Washington

We have audited the accompanying consolidated balance sheets of Esterline Technologies Corporation as of October 26, 2007 and October 27, 2006, and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended October 26, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Esterline Technologies Corporation at October 26, 2007 and October 27, 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 26, 2007, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 8 to the financial statements, in 2007 the Company changed its method of accounting for defined pension and other postretirement plans in accordance with FASB Statement No. 158. Also as discussed in Note 1 to the financial statements, in 2006 the Company changed its method of accounting for share-based payments in accordance with FASB Statement No. 123(R).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Esterline Technologies Corporation’s internal control over financial reporting as of October 26, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 18, 2007 expressed an unqualified opinion thereon.

Ernst & Young LLP

Seattle, Washington

December 18, 2007

102

EX-21.1

Exhibit 21.1

SUBSIDIARIES

The subsidiaries of the Company as of October 26, 2007 are as follows:

Name of Subsidiary	Jurisdiction of Incorporation
Advanced Input Devices, Inc.	Delaware
Memtron Technologies Co.	Delaware
Advanced Input Devices (UK) Ltd.	England
LRE Medical GmbH	Germany
Esterline Input Devices (Shanghai) Ltd.	China
Armtec Defense Products Co.	Delaware
Armtec Countermeasures Co.	Delaware
Armtec Countermeasures TNO Co.	Delaware
Wallop Defence Systems	England
Auxitrol Technologies S.A.	France
Auxitrol S.A.	France
Esterline Sensors Services Americas, Inc.	Delaware
BVR Technologies Co.	Delaware
CMC Electronics Incorporated	Canada
CMC Electronics Aurora Incorporated	Delaware
Darchem Engineering Ltd.	Scotland
Hytek Finishes Co.	Delaware
Kirkhill – TA Co.	California
Korry Electronics Co.	Delaware
AVISTA Incorporated	Wisconsin
Palomar Products, Inc.	Delaware
Leach International Corporation	Delaware
Leach International Europe S.A.	France
Mason Electric Co.	Delaware
Muirhead Aerospace Limited	England
Weston Aerospace Ltd.	England
Norwich Aero Products Ltd.	New York
Pressure Systems, Inc.	Virginia

The above list excludes certain subsidiaries that, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of October 26, 2007.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in this Annual Report (Form 10-K) of Esterline Technologies Corporation of our reports dated December 18, 2007, with respect to the consolidated financial statements of Esterline Technologies Corporation, and the effectiveness of internal control over financial reporting of Esterline Technologies Corporation, included in the 2007 Annual Report to Shareholders of Esterline Technologies Corporation.

Our audits also included the financial statement schedule of Esterline Technologies Corporation listed in Item 15(a). This schedule is the responsibility of Esterline Technologies Corporation’s management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-43843) pertaining to the Esterline Technologies Corporation 1997 Stock Option Plan;

(2) Registration Statement (Form S-8 No. 33-58375) pertaining to the Esterline Technologies Corporation Non-Employee Directors’ Stock Compensation Plan;

(3) Registration Statement (Form S-8 No. 333-62650) pertaining to the Esterline Technologies Corporation Amended and Restated 1997 Stock Option Plan;

(4) Registration Statement (Form S-8 No. 333-85440) pertaining to the Esterline Technologies Corporation 2002 Employee Stock Purchase Plan;

(5) Registration Statement (Form S-8 No. 333-103846) pertaining to the Esterline Technologies Corporation Amended and Restated 1997 Stock Option Plan;

(6) Registration Statement (Form S-8 No. 333-113475) pertaining to the Esterline Technologies Corporation 2004 Equity Incentive Plan;

(7) Registration Statement (Form S-8 No. 333-135025) pertaining to the Esterline Technologies Corporation 2004 Equity Incentive Plan and the Esterline Technologies Corporation 2002 Employee Stock Purchase Plan;

of our reports dated December 18, 2007, with respect to the consolidated financial statements of Esterline Technologies Corporation, and the effectiveness of internal control over financial reporting of Esterline Technologies Corporation, incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule of Esterline Technologies Corporation included in this Annual Report (Form 10-K) of Esterline Technologies Corporation.

Ernst & Young LLP

Seattle, Washington

December 18, 2007

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Robert W. Cremin, certify that:

1. I have reviewed this annual report on Form 10-K of Esterline Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: December 21, 2007	By:	/s/ Robert W. Cremin
		Robert W. Cremin
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Robert D. George, certify that:

1. I have reviewed this annual report on Form 10-K of Esterline Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: December 21, 2007	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer, Secretary and Treasurer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Esterline Technologies Corporation (the “Company”) on Form 10-K for the fiscal year ended October 26, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-K”), I, Robert W. Cremin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: December 21, 2007
	By:	/s/ Robert W. Cremin
		Robert W. Cremin
		Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Esterline Technologies Corporation (the “Company”) on Form 10-K for the fiscal year ended October 26, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “the Form 10-K”), I, Robert D. George, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: December 21, 2007
	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer, Secretary and Treasurer