Press Release

BELLEVUE, Wash., August 30, 2007 — Esterline Corporation (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2007 third quarter (ended July 27) net earnings of $38.8 million, or $1.49 per diluted share, including $23.0 million after tax, or $.88 per share, from a previously announced insurance recovery. Sales in the third quarter of FY07 were $326.4 million, including $40.9 million from recently acquired CMC Electronics. Year-ago net earnings were $11.2 million, or $.43 per diluted share, on sales of $248.4 million.

Robert W. Cremin, Esterline CEO, characterized the quarter as “…another solid performance for Esterline, with organic sales up 15% and earnings from operations up 41% over last year.” Cremin added that on a year-over-year-basis, “…all three Esterline business segments contributed to the growth.” He also emphasized that the quarter’s performance absorbed nearly $3.4 million of acquisition-related accounting expense associated with the CMC acquisition. “We like the way the quarter came together, and more importantly, many elements are now in place for an excellent fourth quarter.” On that note, the company raised its full-year operating earnings guidance by $.05 to a range of $2.55 to $2.65 per share, excluding the insurance recovery of $.88 in the third quarter.

Regarding CMC, Cremin said that the final impact of acquisition accounting “…was booked in the third quarter, so the purchase accounting anomalies are now behind us.” He added that since the date of the acquisition, the company has reduced its term loan credit facility by $35 million, “…reflecting Esterline’s strong cash flow generation.”

Backlog at quarter end totaled $978 million. Cremin said, “…at this point, the backlog number includes only a few million dollars from such high-profile new programs as the 787, A400M or A380. What this says to me is regardless of what may or may not happen to the schedules of these platforms, we have plenty of good things happening on hundreds of other programs.”

Consolidated gross margin in the quarter was 30.5% compared with 30.3% a year ago. The primary reason for the level margin performance was the purchase accounting effect on inventory costs associated with the acquisition of CMC. Selling, general and administrative expenses (SG&A) as a percent of sales were 17.0% in the third quarter of 2007 compared with 16.7% in the prior-year period. Cremin said, “…the company’s operations have done a good job keeping our overhead slim and a lid on our capital spending.”

Cremin noted that, “…as anticipated, research, development and engineering expense during the quarter declined to 5.2% of sales. That level compares with 6.1% last quarter and 5.8% a year ago.” He said he anticipates R&D spending to continue to decline as the 787 and A400M programs move closer to production. R&D spending in the company’s fourth fiscal quarter is anticipated to be about 5% of sales.

The insurance recovery relates to property damage and business interruption claims related to last year’s explosion at Esterline’s UK-based countermeasure flares operation. During the third quarter of fiscal 2007, the company recorded insurance recoveries of $23.0 million, net of tax of $9.9 million. Year-to-date, insurance recoveries totaled $26.1 million, net of tax of $11.2 million. The insurance recovery reimburses Esterline for damage and the loss of earnings at the affected facility. The company expects the damaged facility to be back in operation at the end of its fiscal 2008.

Interest expense for the third fiscal quarter of 2007 was $10.8 million compared with $5.6 million a year ago, reflecting increased borrowings to finance acquisitions and working capital requirements.

Year-to-date net earnings were $71.4 million, or $2.74 per diluted share, on sales of $895.9 million, compared with $37.2 million, or $1.44 per diluted share, on sales of $702.0 million last year.

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will,” or the negative of such terms, or other comparable terminology. These forward-looking statements are only predictions based on the current intent and expectations of the management of Esterline, are not guarantees of future performance or actions, and involve risks and uncertainties that are difficult to predict and may cause Esterline’s or its industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Esterline’s actual results and the timing and outcome of events may differ materially from those expressed in or implied by the forward-looking statements due to risks and uncertainties detailed in Esterline’s public filings with the Securities and Exchange Commission.


	Three months ended						Nine months ended
	July 27, 2007			July 28, 2006			July 27, 2007			July 28, 2006
Segment Sales
Avionics & Controls	$	121,512		$	71,191		$	305,331		$	205,497
Sensors & Systems		97,418			84,672			281,732			241,319
Advanced Materials		107,446			92,535			308,837			255,186

Net Sales		326,376			248,398			895,900			702,002
Cost of Sales		226,734			173,041			622,827			483,047

		99,642			75,357			273,073			218,955
Expenses
Selling, general and administrative		55,461			41,560			148,237			118,423
Research, development and engineering		16,952			14,480			49,585			37,752

Total Expenses		72,413			56,040			197,822			156,175
Other
Other (income) expense		7			17			24			(445	)
Insurance recovery		(32,857	)		—			(37,314	)		—

Total Other		(32,850	)		17			(37,290	)		(445	)

Operating Earnings		60,079			19,300			112,541			63,225
Interest income		(821	)		(393	)		(2,110	)		(2,250	)
Interest expense		10,790			5,586			25,042			15,881
Loss on extinguishment of debt		—			—			—			2,156

Other Expense, Net		9,969			5,193			22,932			15,787


Income Before Income Taxes		50,110			14,107			89,609			47,438
Income Tax Expense		11,217			2,576			18,096			9,439

Income Before Minority Interest		38,893			11,531			71,513			37,999
Minority Interest		(58	)		(308	)		(117	)		(753	)

Net Earnings	$	38,835		$	11,223		$	71,396		$	37,246

Earnings Per Share:
Basic	$	1.51		$	.44		$	2.79		$	1.47
Diluted	$	1.49		$	.43		$	2.74		$	1.44

Weighted Average Number of Shares Outstanding—Basic		25,691			25,448			25,604			25,390

Weighted Average Number of Shares Outstanding—Diluted		26,139			25,867			26,022			25,809


	July 27, 2007		July 28, 2006
Assets
Current Assets
Cash and cash equivalents	$	83,682	$	38,642
Cash in escrow		—		4,345
Accounts receivable, net		223,157		167,766
Inventories		251,612		185,150
Income tax refundable		15,601		3,291
Deferred income tax benefits		36,893		27,275
Prepaid expenses		14,056		8,205

Total Current Assets		625,001		434,674

Property, Plant and Equipment, Net		214,550		170,641

Other Non-Current Assets
Goodwill		604,230		361,968
Intangibles, net		371,080		244,265
Debt issuance costs, net		10,691		4,638
Deferred income tax benefits		16,547		17,766
Other assets		31,372		25,691

	$	1,873,471	$	1,259,643

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	83,468	$	68,569
Accrued liabilities		164,571		108,031
Credit facilities		28,622		5,181
Current maturities of long-term debt		10,245		4,099
Federal and foreign income taxes		7,973		2,861

Total Current Liabilities		294,879		188,741

Long-Term Liabilities
Long-term debt, net of current maturities		555,385		280,775
Deferred income taxes		120,991		73,748
Other liabilities		42,956		30,374

Commitments and Contingencies		—		—
Minority Interest		2,932		3,466

Shareholders’ Equity		856,328		682,539

	$	1,873,471	$	1,259,643