8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

August 3, 2017

Date of Report (Date of earliest event reported)

ESTERLINE TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	001-06357	13-2595091
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)
500-108th Avenue NE, Bellevue, Washington		98004
(Address of principal executive offices)		(Zip Code)

(425) 453-9400

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02 Results of Operations and Financial Condition.

On August 3, 2017, Esterline Technologies Corporation issued a press release announcing financial results for the three and nine months ended June 30, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. In addition, supplemental information regarding the financial results for periods presented in the press release is attached hereto as Exhibit 99.2. The press release and the supplemental financial information should be read in conjunction with the note regarding forward-looking statements, which is included in the text of the press release and as part of the supplemental financial information.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press release announcing financial results issued by Esterline Technologies Corporation dated August 3, 2017.
99.2	Supplemental Financial Information dated August 3, 2017.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ESTERLINE TECHNOLOGIES CORPORATION
Dated: August 3, 2017	By:	/s/ ROBERT D. GEORGE
	Name:	Robert D. George
	Title:	Executive Vice President, Chief Financial Officer & Corporate Development

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release announcing financial results issued by Esterline Technologies Corporation dated August 3, 2017.
99.2	Supplemental Financial Information dated August 3, 2017.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:	John Hobbs
	+1 425-453-9400

ESTERLINE REPORTS FISCAL 2017 THIRD QUARTER RESULTS

• Sales of $503.8 million in the third fiscal quarter; $1.47 billion year-to-date

• Third fiscal quarter earnings from continuing operations of $31.3 million; adjusted earnings from continuing operations of $32.5 million

• Third fiscal quarter GAAP earnings from continuing operations of $1.04 per diluted share; adjusted earnings per diluted share of $1.08

• Free cash flow of $96.7 million year-to-date

• Company updates full-year guidance

BELLEVUE, Wash., August 3, 2017 – Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace and defense markets, today reported results for the third fiscal quarter ended June 30, 2017. The company reported consolidated revenue of $503.8 million during the quarter compared with $517.1 million in the year-ago period. Lower sales volume in the company’s Avionics & Controls segment primarily contributed to the lower year-over-year quarterly revenue result. The company reported year-to-date (YTD) fiscal 2017 revenues of $1.47 billion, slightly ahead of the prior-year result of $1.45 billion.

Earnings from continuing operations in the third fiscal quarter of 2017 were $31.3 million, or $1.04 per diluted share, compared with prior-year earnings from continuing operations of $38.0 million, or $1.28 per diluted share. Earnings from continuing operations in the third fiscal quarter of 2017 were affected by higher research, development and engineering (R&D) spending and a higher effective tax rate. U.S. GAAP earnings from continuing operations YTD in fiscal 2017 were $88.0 million, or $2.94 per diluted share, compared with $64.9 million, or $2.18 per diluted share, in the 2016 period.

Adjusted earnings from continuing operations for the third fiscal quarter of 2017 were $32.5 million, or $1.08 per diluted share (see Table 1 below). In the comparable period of the prior year, adjusted earnings from continuing operations were $40.9 million, or $1.38 per diluted share. Adjusted earnings from continuing operations YTD in fiscal 2017 were $93.0 million, or $3.11 per diluted share, compared with $86.6 million, or $2.91 per diluted share, in the prior year (see Table 2 below).

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Page 2 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

Curtis Reusser, Esterline’s Chief Executive Officer, said, “We delivered modest year-to-date revenue growth over last year and improved operating profit across our business through the third quarter of fiscal 2017. The cadence of our earnings has evolved from our original expectation and we expect to achieve results within our original full-year guidance. Our global facilities are focused on execution as our integration and compliance enhancement efforts near completion, and we are generating strong cash returns.”

Table 1:	Effect of Certain Items on Third Fiscal Quarter 2017
	Earnings from Continuing Operations

	$ Millions		EPS
Earnings (U.S. GAAP)	$	31.3	$	1.04
Advanced Displays Integration Costs		0.1		0.01
Compliance Costs		1.1		0.03
Adjusted Earnings	$	32.5	$	1.08

Full-Year Outlook

The company noted that its fiscal 2017 full-year expectation for sales is approximately $2.0 billion. For GAAP earnings from continuing operations, the company narrowed its guidance range to $4.30 to $4.50 per diluted share, from $4.30 to $4.70 per diluted share. The expectation for full-year adjusted earnings from continuing operations, which exclude certain compliance and integration costs, was adjusted similarly to a range of $4.50 to $4.70 per diluted share, from the prior range of $4.50 to $4.90 per diluted share. The company also updated its guidance for fiscal 2017 full-year EBITDA to a range of $300 million to $310 million. Full-year free cash flow is expected to be in excess of 100% of net income and in a range of $130 million to $150 million.

Results of Operations

Including discontinued operations, net earnings for the third fiscal quarter of 2017 were $30.5 million, or $1.01 per diluted share, compared with $29.4 million, or $0.99 per diluted share, in the comparable period in fiscal 2016. Net earnings in the third fiscal quarter of 2017 and 2016 included losses from discontinued operations of $0.8 million and $8.7 million, respectively.

New orders in the third fiscal quarter of 2017 were $532.0 million, compared with $569.7 million in the comparable prior-year period. Fiscal 2016 benefited from large defense orders booked in the Avionics & Controls segment in the third quarter. Backlog at the end of the third fiscal quarter of 2017 was $1.24 billion, compared with $1.36 billion at the end of the third fiscal quarter of 2016.

Gross profit in the third fiscal quarter of 2017 was $170.6 million, compared with $173.6 million in the prior-year period. Gross margin as a percentage of sales in the third fiscal quarter of 2017 was 33.9% compared with 33.6% in the prior-year period. Improved gross margin performance on lower sales is the result of favorable product mix in Avionics & Controls and recovery of defense countermeasure volumes in Advanced Materials.

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Page 3 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

Selling, general and administrative (SG&A) expenses during the third fiscal quarter of 2017 were $93.6 million, compared with $96.8 million in the prior year. Fiscal 2017 third quarter SG&A expenses as a percentage of sales were 18.6%, compared with the prior-year level of 18.7%.

R&D spending in the third fiscal quarter of 2017 was $27.9 million, or 5.5% of sales, compared with $22.2 million, or 4.3% of sales, in the prior-year period. Year-to-date fiscal 2017 R&D spending was $75.7 million, or 5.1% of sales. Full-year R&D expense for fiscal 2017 is expected to be 5.1%.

The company’s income tax rate in the third fiscal quarter of 2017 was 24.8% compared with 17.2% in the prior-year period. The company expects a tax rate in the fourth fiscal quarter of 2017 of approximately 27% to 28% and a full-year tax rate in a range of 24% to 25%. This will move to a normalized rate of 27% to 28% in fiscal 2018 and beyond. U.K. tax law changes implemented in 2017 are driving the tax rate increase from prior years.

Year-to-Date Results of Operations

For the nine months of fiscal 2017 ended June 30, 2017, sales were $1.47 billion, compared with $1.45 billion in the prior-year period. Fiscal 2017 YTD GAAP earnings from continuing operations were $88.0 million, or $2.94 per diluted share, compared with the prior-year period results of $64.9 million, or $2.18 per diluted share. Excluding the discrete costs described in Table 2 below, adjusted earnings from continuing operations in the first nine months of fiscal 2017 were $93.0 million, or $3.11 per diluted share. Adjusted earnings from continuing operations for the first nine months of 2016 were $86.6 million, or $2.91 per diluted share.

Table 2:	Effect of Certain Items on YTD Fiscal 2017
	Earnings from Continuing Operations

	$ Millions		EPS
Earnings (U.S. GAAP)	$	88.0	$	2.94
Advanced Displays Integration Costs		0.9		0.03
Compliance Costs		4.1		0.14
Adjusted Earnings	$	93.0	$	3.11

Cash flow from operations through the nine months ended June 30, 2017, was $138.9 million, compared with $118.6 million through the nine months ended July 1, 2016. Free cash flow was $96.7 million in the first nine months of fiscal 2017 and capital expenditures were $42.2 million. Free cash flow was $60.1 million in the first nine months of fiscal 2016 and capital expenditures were $58.5 million.

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Page 4 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

Conference Call Information

Esterline will host a conference call to discuss this announcement today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). The U.S. dial-in number is 877-307-0078; outside the U.S., use 531-289-2890. The pass code for the call is: 51662751. The company has posted a presentation on its website (www.esterline.com) under “Presentations” in the Investor Relations section to provide additional information about its third fiscal quarter operational and financial results. The presentation is also included as Exhibit 99.2 to the company’s report on Form 8-K, which is being submitted today to the SEC.

Non-GAAP Financial Information

This press release and the related presentation providing supplemental financial information include non-GAAP financial measures—adjusted earnings from continuing operations, adjusted earnings from continuing operations per diluted share, adjusted earnings before interest and tax (EBIT), operating earnings from continuing operations adjusted to exclude depreciation and amortization expense (EBITDA), adjusted gross margin, and free cash flow—that have not been calculated in accordance with generally accepted accounting principles in the U.S. (GAAP). Adjusted earnings from continuing operations consist of earnings from continuing operations attributable to Esterline less the costs associated with certain integration activities—including restructuring charges—and incremental compliance costs as well as discrete items associated with our acquisition of the Advanced Displays business in January 2015, in each case, as further detailed in the tables below. Adjusted earnings from continuing operations per diluted share divides each element of adjusted earnings from continuing operations by the weighted average number of shares outstanding, diluted for the periods presented. EBIT is defined as operating earnings from continuing operations. Adjusted EBIT and adjusted gross margin exclude the same costs excluded from adjusted earnings from continuing operations. EBITDA consists of EBIT plus depreciation and amortization of $25.5 million in the third quarter and $76.0 million in the first nine months of fiscal 2017, and $24.2 million in the third quarter and $72.2 million in the first nine months of fiscal 2016. In accordance with the SEC’s requirements, below is the reconciliation of the non-GAAP adjusted earnings from continuing operations to the comparable GAAP earnings from continuing operations. Additional relevant reconciliations are included in the presentation providing supplemental financial information.

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Page 5 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

In millions, except per share amounts

	Three Months Ended June 30, 2017				Three Months Ended July 1, 2016
			Diluted EPS					Diluted EPS
Earnings from Continuing Operations Attributable to Esterline (GAAP), Net of Tax	$	31.3	$	1.04	$	38.0		$	1.28
Advanced Displays Integration Costs, Net of Tax of $0.1 and $0.7		0.1		0.01		2.1			0.07
Compliance Costs, Net of Tax of $0.4 and $0.6		1.1		0.03		2.1			0.08
Accelerated Integration Costs, Net of Tax of $0.3		—		—		1.2			0.04
Long-term Contract Adjustments, Net of Tax of $0.2		—		—		(2.5	)		(0.09	)
Adjusted Earnings from Continuing Operations (non-GAAP), Net of Tax	$	32.5	$	1.08	$	40.9		$	1.38

In millions, except per share amounts

	Nine Months Ended June 30, 2017				Nine Months Ended July 1, 2016
			Diluted EPS				Diluted EPS
Earnings from Continuing Operations Attributable to Esterline (GAAP), Net of Tax	$	88.0	$	2.94	$	64.9	$	2.18
Advanced Displays Integration Costs, Net of Tax of $0.3 and $1.5		0.9		0.03		8.9		0.30
Compliance Costs, Net of Tax of $1.1 and $1.2		4.1		0.14		7.0		0.23
Accelerated Integration Costs, Net of Tax of $0.7		—		—		4.2		0.14
Long-term Contract Adjustments, Net of Tax of $0.3		—		—		1.6		0.06
Adjusted Earnings from Continuing Operations (non-GAAP), Net of Tax	$	93.0	$	3.11	$	86.6	$	2.91

The company provides these non-GAAP financial measures as supplemental information to the GAAP financial measures. Management uses these non-GAAP financial measures to (a) evaluate the company’s historical and prospective financial performance and its performance relative to the performance of its competitors, (b) allocate resources, and (c) measure the operational performance of the company’s business units.

In addition, management believes investors’ and financial analysts’ understanding of the company’s performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing the company’s historical results of operations.

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Page 6 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures, and free cash flow is not necessarily indicative of amounts available for discretionary use. There are limitations to these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items that comprise the calculation. The company compensates for these limitations by using these non-GAAP financial measures as a supplement to the GAAP measures and by providing reconciliations of the non-GAAP and comparable GAAP financial measures. The non-GAAP financial measures should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP.

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 the company’s 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.

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Page 7 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

ESTERLINE TECHNOLOGIES CORPORATION

Consolidated Statement of Operations (unaudited)

In thousands, except per share amounts

	Three Months Ended						Nine Months Ended
	June 30, 2017			July 1, 2016			June 30, 2017			July 1, 2016
Segment Sales
Avionics & Controls	$	209,168		$	222,583		$	615,443		$	607,493
Sensors & Systems		184,450			186,337			534,001			514,836
Advanced Materials		110,135			108,172			321,224			326,550
Net Sales		503,753			517,092			1,470,668			1,448,879
Cost of Sales		333,124			343,508			980,073			981,403
		170,629			173,584			490,595			467,476
Expenses
Selling, general and administrative		93,615			96,769			286,331			293,283
Research, development and engineering		27,866			22,211			75,712			72,760
Insurance recovery		—			—			(7,789	)		—
Restructuring charges		—			559			—			2,430
Total Expenses		121,481			119,539			354,254			368,473
Operating Earnings from Continuing Operations		49,148			54,045			136,341			99,003
Interest Income		(150	)		(30	)		(346	)		(211	)
Interest Expense		7,299			7,659			22,645			22,169
Earnings from Continuing Operations
Before Income Taxes		41,999			46,416			114,042			77,045
Income Tax Expense		10,433			7,975			25,013			11,358
Earnings from Continuing Operations
Including Noncontrolling Interests		31,566			38,441			89,029			65,687
Earnings Attributable to Noncontrolling Interests		(278	)		(395	)		(1,069	)		(781	)
Earnings from Continuing Operations Attributable to Esterline, Net of Tax		31,288			38,046			87,960			64,906
Gain (Loss) from Discontinued Operations, Attributable to Esterline, Net of Tax		(815	)		(8,690	)		(6,185	)		(15,493	)
Net Earnings Attributable to Esterline	$	30,473		$	29,356		$	81,775		$	49,413
Earnings (Loss) Per Share—Basic:
Continuing Operations	$	1.05		$	1.30		$	2.96		$	2.19
Discontinued Operations		(.03	)		(.30	)		(.21	)		(.52	)
Earnings (Loss) Per Share—Basic	$	1.02		$	1.00		$	2.75		$	1.67
Earnings (Loss) Per Share—Diluted:
Continuing Operations	$	1.04		$	1.28		$	2.94		$	2.18
Discontinued Operations		(.03	)		(.29	)		(.21	)		(.52	)
Earnings (Loss) Per Share—Diluted	$	1.01		$	.99		$	2.73		$	1.66
Weighted Average Number of Shares Outstanding—Basic		29,830			29,381			29,698			29,517
Weighted Average Number of Shares Outstanding—Diluted		30,068			29,601			29,953			29,788

Page 8 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

ESTERLINE TECHNOLOGIES CORPORATION

Consolidated Sales and Earnings From Continuing Operations by Segment (unaudited)

In thousands

	Three Months Ended						Nine Months Ended
	June 30, 2017			July 1, 2016			June 30, 2017			July 1, 2016
Segment Sales
Avionics & Controls	$	209,168		$	222,583		$	615,443		$	607,493
Sensors & Systems		184,450			186,337			534,001			514,836
Advanced Materials		110,135			108,172			321,224			326,550
Net Sales	$	503,753		$	517,092		$	1,470,668		$	1,448,879
Earnings from Continuing Operations Before Income Taxes
Avionics & Controls	$	22,495		$	28,517		$	62,173		$	40,579
Sensors & Systems		24,842			27,942			71,944			61,670
Advanced Materials		17,780			15,512			55,982			51,710
Segment Earnings		65,117			71,971			190,099			153,959
Corporate expense		(15,969	)		(17,926	)		(53,758	)		(54,956	)
Interest income		150			30			346			211
Interest expense		(7,299	)		(7,659	)		(22,645	)		(22,169	)
Earnings from Continuing Operations Before Income Taxes	$	41,999		$	46,416		$	114,042		$	77,045

Page 9 of 9 Esterline Reports Fiscal 2017 Third Quarter Financial Results

ESTERLINE TECHNOLOGIES CORPORATION

Consolidated Balance Sheet (unaudited)

In thousands

	June 30, 2017		September 30, 2016
Assets
Current Assets
Cash and cash equivalents	$	279,398	$	258,520
Cash in escrow		—		1,125
Accounts receivable, net		401,479		422,073
Inventories		487,700		450,206
Income tax refundable		5,569		5,183
Prepaid expenses		22,371		17,909
Other current assets		9,689		5,322
Current assets of businesses held for sale		3,868		15,450
Total Current Assets		1,210,074		1,175,788
Property, Plant and Equipment, Net		343,082		338,034
Other Non-Current Assets
Goodwill		1,032,034		1,024,667
Intangibles, net		361,927		393,035
Deferred income tax benefits		75,387		75,409
Other assets		16,870		13,698
Non-current assets of businesses held for sale		10,257		11,400
	$	3,049,631	$	3,032,031
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	128,293	$	121,816
Accrued liabilities		228,742		238,163
Current maturities of long-term debt		14,215		16,774
Federal and foreign income taxes		4,561		10,932
Current liabilities of businesses held for sale		471		10,813
Total Current Liabilities		376,282		398,498
Long-Term Liabilities
Credit facilities		65,000		155,000
Long-term debt, net of current maturities		701,024		698,796
Deferred income tax liabilities		45,357		53,798
Pension and post-retirement obligations		93,347		92,520
Other liabilities		19,388		21,968
Non-current liabilities of businesses held for sale		1,685		320
Total Shareholders’ Equity		1,747,548		1,611,131
	$	3,049,631	$	3,032,031

EX-99.2

Q3 2017 Supplemental Financial Information August 3, 2017 Exhibit 99.2

This presentation may contain "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. This presentation also contains references to non-GAAP financial information subject to Regulation G. The reconciliations of each non-GAAP financial measure to its comparable GAAP measure as well as further information on management’s use of non-GAAP financial measures are included in Esterline’s press release dated August 3, 2017, included as Exhibit 99.1 to Form 8-K filed with the SEC on the same date, as well as in this presentation, including the Appendix.

Strategic Direction Key Focus Areas – Continued Drive for Sales Growth A high-performing aerospace and defense company whose engaged employees deliver value through world-class products, services, and technologies. Profitable & Balanced Sales Growth Enterprise Excellence Leverage the Enterprise Employee Engagement Regulatory & Customer Compliance

Q3 2017 Financial Results Sales of $503.8 million, down 2.6% * YoY quarterly comparison impacted by order timing, sales moving from Q3 2017 to Q2 2017, and discrete program softness GAAP EPS of $1.04 (per diluted share) Adjusted EPS of $1.08 ** Free cash flow of $97 million ** 119% of net income * Comparison is to fiscal Q3 2016 ** Excludes certain discrete items; see Page 1 regarding non-GAAP financial measures.

Q3 2017 Year-over-Year (YOY) Summary Dollars in millions, except EPS Q3 2017 Q3 2016 Change Sales $ 504 $ 517 ($ 13) Gross Margin $ 171 $ 174 ($ 3) - % of sales 33.9% 33.6% 0.3% Operating Earnings from Continuing Operations $ 49 $ 54 ($ 5) - % of sales 9.8% 10.5% (0.7)% Earnings from Continuing Operations $ 31 $ 38 ($ 7) Earnings Per Diluted Share from Continuing Operations $ 1.04 $ 1.28 ($ 0.24)

Q3 2017 Sales Change (YOY) Items Sales Q3 2016 $ 517 Foreign currency translation (6) Sales volume / mix (9) Other 2 Q3 2017 $ 504 Dollars in millions

Q3 2017 Segment Sales Change (YOY) Total ESL Avionics & Controls Sensors & Systems Advanced Materials Organic Sales¹ (2)% (6)% 1% 2% FX (1)% <1% (2)% (2)% Other <1% (1)% <1% 2% Total Change (3)% (6)% (1)% 2% ¹ Q3 2017 organic sales change represents the total reported increase/(decrease) within the company’s continuing operations less the impact of all foreign currency translation and hedging activities.

Q3 2017 Gross Margin Change (YOY) Items Gross Margin Q3 2016 $ 174 Foreign currency translation (2) Sales volume / mix 4 Other (5) Q3 2017 $ 171 Dollars in millions

Q3 2017 Earnings Adjustment Dollars in millions, except EPS Adjustments are net of tax Earnings from Continuing Ops Diluted EPS GAAP $ 31 $ 1.04 Advanced Displays Integration Costs and Compliance Costs 1 0.04 Adjusted * $ 32 $ 1.08 * See Page 1 regarding non-GAAP financial measures.

YTD Q3 2017 Free Cash Flow Reconciliation YTD Q3 2017 YTD Q3 2016 Net Earnings $ 83 $ 50 Depreciation and amortization 77 73 Change in working capital (A/R, Inventory, A/P) (5) (23) Other (16) 19 Cash flow from operations $ 139 $ 119 Capital expenditures (42) (59) Free cash flow * $ 97 $ 60 Dollars in millions; GAAP results Amounts included in Free Cash Flow YTD Q3 2017 YTD Q3 2016 Adjustments to Net Income (net of tax) * $ 5 $ 22 Loss from Discontinued Operations $ (6) $ (15) * See Page 1 regarding non-GAAP financial measures.

Q3 2017 EBITDA * See Page 1 regarding non-GAAP financial measures. Q3 2017 Q3 2016 Operating Earnings from Continuing Operations¹ $ 49 $ 54 Depreciation and amortization² 26 24 EBITDA from Continuing Operations * $ 75 $ 78 Dollars in millions ¹Operating earnings from continuing operations is earnings before interest and income taxes ²Excludes amortization of debt issuance costs, which is included in interest expense

YTD Q3 2017 EBITDA * See Page 1 regarding non-GAAP financial measures. YTD Q3 2017 YTD Q3 2016 Operating Earnings from Continuing Operations¹ $ 136 $ 99 Depreciation and amortization² 76 72 EBITDA from Continuing Operations * $ 212 $ 171 Dollars in millions ¹Operating earnings from continuing operations is earnings before interest and income taxes ²Excludes amortization of debt issuance costs of $1 million in each period, which is included in interest expense

2017 Guidance Guidance Sales ~$2.0B GAAP EPS (diluted, continuing ops) $4.30 - $4.50 Adjusted EPS * (diluted, continuing ops) $4.50 - $4.70 EBITDA* $300M - $310M Free Cash Flow * $130M - $150M Guidance 2017 Adjusted EPS GAAP EPS (diluted, continuing ops) $4.30 - $4.50 Compliance Costs ~$0.18 Advanced Displays Integration Costs ~$0.02 Adjusted EPS * (diluted, continuing ops) $4.50 - $4.70 * See Page 1 regarding non-GAAP financial measures. Full-Year Guidance Updated

2017 Guidance Assumptions Interest expense ~$29 million Tax rate ~24%-25% Average diluted shares outstanding 30.020 million Depreciation / Amortization expense ~$100 million Cap Ex $55 - $60 million

2017 Tax Outlook Q3 2017 Supplemental Financial Information 2017 Q1 Discrete Tax Benefits 2017 Q1 Tax Rate (Excluding Discrete Benefits) 2017 Q1 Tax Rate 2017 Full-Year Estimated Tax Rate ~ 24% – 25% 2017 Q2 Tax Rate 28.4% Effective Tax Rate 2017 Q3 Tax Rate 24.8% Effective Tax Rate 27.7% Tax Rate (Excl. Discrete Items) 2017 Q4 Est. Tax Rate ~27% – 28% Effective Tax Rate 0% 5% 10% 15% 20% 25% 30% 1.9% Effective Tax Rate

Share Repurchase Update # Shares In thousands $ Value In millions $ Authorization Remaining In millions FY 2014 269 $ 30.3 FY 2015 2,562 259.5 FY 2016 305 18.7 YTD 2017 - - Total since inception * 3,136 $ 308.5 $ 91.5 * $400 million total authorization for share repurchase.

Appendix

Q3 2017 Adjusted Gross Margin and EBIT * * See Page 1 regarding non-GAAP financial measures

Q3 2016 Adjusted Gross Margin and EBIT * * See Page 1 regarding non-GAAP financial measures

YTD 2017 Adjusted Gross Margin and EBIT * * See Page 1 regarding non-GAAP financial measures

YTD 2016 Adjusted Gross Margin and EBIT * * See Page 1 regarding non-GAAP financial measures