Press release

BELLEVUE, Wash., August 28, 2008 — Esterline Corporation, (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2008 third quarter (ended August 1) net earnings of $20.5 million, or $.68 per diluted share. Year-ago net earnings were $38.8 million, or $1.49 per diluted share, including $23.0 million after tax, or $.88 per diluted share, from an insurance recovery. Sales in the third quarter of 2008 were $382.1 million compared with $326.4 million a year ago.

Previously, the company estimated third quarter earnings would be $.55 to $.60 per share, reflecting postponed research and development assistance discussions with the Canadian government.

Robert W. Cremin, Esterline CEO, said, “…third quarter results were stronger than we expected, principally due to strong performance from our European operations during the month of July.” Cremin also said that sales of spare parts and other aftermarket activity remained robust in both commercial aerospace and defense markets.

Cremin advised that the company was increasing its full-year (ended October 31) earnings guidance range to $3.50 to $3.60 per share, up from the previous guidance range of $3.45 to $3.55. Regarding the discussions in Canada, Cremin said, “…although we are optimistic, we have excluded any results of those talks from our full-year earnings estimate.” Formal talks are expected to resume in September.

Overall research, development and engineering (R&D) expense in the third quarter was $22.4 million, or 5.9% of sales. Cremin noted that R&D spending as a percent of sales was down in the quarter “…from the 7% peak level in the prior quarter, reflecting Esterline’s residual efforts on several major development programs, including the Boeing 787 and Airbus A400M.”

He said that Esterline’s R&D will “…trend down somewhat on a percent of sales basis as we move forward.” He emphasized that “…investment in new product development remains essential to our delivering the value our customers have come to expect.”

Backlog at the end of the third quarter was $1.06 billion compared with $977.9 million at the end of the prior-year period. Orders in the quarter increased to $380.4 million from $349.8 million a year ago.

Year-to-date net earnings were $76.7 million, or $2.56 per diluted share. For the first nine months of fiscal 2007, comparable earnings were $71.4 million, or $2.74 per diluted share, including $26.1 million after tax, or $1.00 per share, from an insurance recovery. Sales for the first nine months of 2008 were $1.13 billion compared with $895.9 million a year ago. The effective tax rate in the first nine months reflects $5.9 million in discrete tax benefits.

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 detailed in Esterline’s public filings with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K.


	Three months ended						Nine months ended
	Aug 1, 2008			Jul 27, 2007			Aug 1, 2008			Jul 27, 2007
Segment Sales
Avionics & Controls	$	147,925		$	123,410		$	438,008		$	310,379
Sensors & Systems		121,927			95,520			343,825			276,684
Advanced Materials		112,218			107,446			346,621			308,837

Net Sales		382,070			326,376			1,128,454			895,900
Cost of Sales		262,668			226,734			762,421			622,827

		119,402			99,642			366,033			273,073
Expenses
Selling, general and administrative		63,183			55,461			184,804			148,237
Research, development and engineering		22,396			16,952			71,328			49,585

Total Expenses		85,579			72,413			256,132			197,822
Other
Other expense		—			7			86			24
Insurance recovery		—			(32,857	)		—			(37,314	)

Total Other		—			(32,850	)		86			(37,290	)

Operating Earnings		33,823			60,079			109,815			112,541
Interest income		(1,125	)		(821	)		(3,512	)		(2,110	)
Interest expense		7,339			10,790			22,517			25,042
Gain on derivative financial instrument		—			—			(1,850	)		—

Other Expense, Net		6,214			9,969			17,155			22,932

Income Before Income Taxes		27,609			50,110			92,660			89,609
Income Tax Expense		7,091			11,217			15,780			18,096

Income Before Minority Interest		20,518			38,893			76,880			71,513
Minority Interest		(36	)		(58	)		(229	)		(117	)

Net Earnings	$	20,482		$	38,835		$	76,651		$	71,396

Earnings Per Share:
Basic	$	.69		$	1.51		$	2.60		$	2.79
Diluted	$	.68		$	1.49		$	2.56		$	2.74
Weighted Average Number of Shares Outstanding—Basic		29,575			25,691			29,466			25,604
Weighted Average Number of Shares Outstanding—Diluted		29,994			26,139			29,894			26,022


	Aug 1, 2008		July 27, 2007
Assets
Current Assets
Cash and cash equivalents	$	162,552	$	83,682
Accounts receivable, net		249,083		223,157
Inventories		298,461		251,612
Income tax refundable		6,495		15,601
Deferred income tax benefits		31,907		36,893
Prepaid expenses		15,774		14,056

Total Current Assets		764,272		625,001
Property, Plant and Equipment, Net		215,909		214,550
Other Non-Current Assets
Goodwill		651,381		604,230
Intangibles, net		339,146		371,080
Debt issuance costs, net		7,957		10,691
Deferred income tax benefits		46,041		16,547
Other assets		25,715		31,372

	$	2,050,421	$	1,873,471

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	88,763	$	83,468
Accrued liabilities		181,583		164,571
Credit facilities		8,550		28,622
Current maturities of long-term debt		8,649		10,245
Federal and foreign income taxes		14,173		7,973

Total Current Liabilities		301,718		294,879
Long-Term Liabilities
Long-term debt, net of current maturities		390,221		555,385
Deferred income taxes		118,307		120,991
Other liabilities		54,051		42,956
Commitments and Contingencies		—		—
Minority Interest		2,643		2,932
Shareholders’ Equity		1,183,481		856,328

	$	2,050,421	$	1,873,471