Exhibit 13

Financial Highlights

In Thousands, Except Per Share Amounts



|                                                |  |   |           |  |   |          
|----------------------------------------------- |  | - | --------- |  | - | ---------
|                                                |  |   | 2006      |  |   | 2005     
|For Fiscal Years                                |  |   |           |  |   |          
|                                                |  |  
|Operating Results                               |  |   |           |  |   |          
|Net sales                                       |  | $ | 972,275   |  | $ | 835,403  
|Segment earnings                                |  |   | 120,848   |  |   | 105,799  
|Income from continuing operations               |  |   | 55,615    |  |   | 51,034   
|Income from discontinued operations, net of tax |  |   |          |  |   | 6,992    
|Net earnings                                    |  |   | 55,615    |  |   | 58,026   
|                                                |  |  
|Earnings per share  diluted:                   |  |   |           |  |   |          
|Continuing operations                           |  | $ | 2.15      |  | $ | 2.02     
|Discontinued operations                         |  |   |          |  |   | .27      
|Earnings per share                              |  |   | 2.15      |  |   | 2.29     
|                                                |  |  
|Weighted average shares outstanding  diluted   |  |   | 25,818    |  |   | 25,302   
|                                                |  |  
|Financial Position                              |  |   |           |  |   |          
|Total assets                                    |  | $ | 1,290,451 |  | $ | 1,115,248
|Property, plant and equipment, net              |  |   | 170,442   |  |   | 138,214  
|Long-term debt, net                             |  |   | 282,307   |  |   | 175,682  
|Shareholders equity                            |  |   | 707,989   |  |   | 620,864  



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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 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 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, and thermally engineered components for critical aerospace applications. 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 in three key technologies: avionics and controls, sensors and systems and specialized high-performance elastomers and other complex materials, 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. We acquired Wallop Defence Systems Limited (Wallop) and FR Countermeasures on
March 24, 2006 and December 23, 2005, respectively, from Cobham plc. Wallop and FR Countermeasures are manufacturers of military pyrotechnic countermeasure devices. We paid approximately $65.0 million for both companies,
including acquisition costs and an adjustment based on the amount of indebtedness and net working capital as of closing. In addition, we may pay an additional purchase price of up to U.K. £10.0 million, or approximately
$19.0 million, depending on the achievement of certain objectives. 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, 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 our engineered-to-order model and is included in our Advanced Materials
segment.

On January 28, 2005, we completed the sale of our wholly-owned subsidiary Fluid Regulators Corporation (Fluid Regulators), which was
included in our Sensors & Systems segment, for approximately $21.4 million. As a result of the sale, we recorded a gain of approximately $7.0 million, net of tax of $2.4 million, in fiscal 2005. The disposition is reported as



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discontinued operations and the consolidated financial statements for all prior periods have been adjusted to reflect this presentation.

Income from continuing operations for fiscal 2006 was $55.6 million, or $2.15 per diluted share, compared with $51.0 million, or $2.02 per diluted share, in
fiscal 2005, principally reflecting strong results in Avionics & Controls, weaker earnings in Sensors & Systems and increased earnings in Advanced Materials. Avionics & Controls earnings were stronger from cockpit controls
reflecting new OEM programs, higher aftermarket spares sales and improved margins on medical equipment devices. The decrease in Sensors & Systems earnings was principally due to the completion of a pressure sensor retrofit program in fiscal
2005, excess production costs and increased research and development expenses for the A400M program. Advanced Materials earnings mainly reflected incremental earnings from our Darchem acquisition and improved sales and earnings from our Arkansas
flare countermeasure operations.

On June 26, 2006, an explosion occurred at our 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 the advanced flare facility. Although the advanced flare facility is expected to be closed for about 18 months due to the requirements
of the Health Safety Executive (HSE) to review the cause of the accident, operations will continue at a portion of our facility located on the same site as the advanced flare facility. The HSE investigation will not be completed until the
Coroners Inquest is filed possibly in July or August 2007. 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. The damaged building and inventory is fully covered by insurance and,
accordingly, no loss as a result of the accident has been recorded related to these assets in fiscal 2006. We have recorded business interruption insurance recoveries of $4.9 million for losses incurred in fiscal 2006. As we continue to incur
losses in future periods as a result of the accident, business interruption insurance recoveries that can be estimated and are probable of collection will be recorded in our consolidated financial statements.

Non-operating expense in the first fiscal quarter of 2006 included a $1.4 million, net of tax, prepayment penalty arising from the $40.0 million prepayment of
our 6.77% Senior Notes.

Net income was $55.6 million, or $2.15 per share on a diluted basis, compared with $58.0 million, or $2.29 per share on
a diluted basis, in fiscal 2005. Net income in fiscal 2005 included income from discontinued operations of $7.0 million, or $0.27 per share on a diluted basis.



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Results of Continuing Operations

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; we expect to replace these sales from new or existing customers who meet our targeted profile
of requiring highly engineered solutions with low production volumes and high mix. During fiscal 2006 and 2005, sales of cockpit displays to the Chinese market aggregated $7.6 million and $6.7 million, respectively. Our future sales of
cockpit control displays to the Chinese market may be precluded by the proposed Bureau of Industry and Securitys (BIS) catch-all rule, currently scheduled for implementation in fiscal 2007. We expect the effect of this regulation, if
implemented, to be immaterial to our consolidated results of operations in future periods, but the loss of income from this market opportunity may have a measurable effect on the results of operations of our Avionics & Controls segment.

The 4.3% increase in Sensors & Systems principally reflected growth in OEM programs for temperature and pressure sensors and electrical power
switching 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 of combustible ordnance are expected to decline in fiscal 2007 due to reduced U.S. Army requirements but
be offset by increases in flare countermeasure sales.

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



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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 pressure and 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 electrical power switching 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.

Advanced Materials segment gross margin was 24.7% and 25.3% for fiscal 2006 and 2005, respectively. Gross margin was impacted by the explosion at our Wallop facility, as
explained above 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 13 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



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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. Research, development and related engineering spending is expected to return to more historical levels during the second half of fiscal 2007.

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 reflected manufacturing inefficiencies and incremental direct labor costs incurred to reduce
delinquent shipments at our pressure and temperature 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. 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.

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



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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. On December 21, 2006, the Tax Relief and Health Care Act of 2006 (the Act) was signed into law. The Act retroactively extends the Federal Research and Experimentation tax credit from January 1, 2006 through December 31,
2007. As a result of the extension of the Research and Experimentation tax credit, during the first quarter of fiscal 2007, we anticipate that the Company will recognize approximately $2.0 million of tax benefits related to fiscal 2006. In addition,
we expect that the Company will recognize approximately $2.0 million of research and experimentation tax benefits related to fiscal 2007 in our full year results of operations.

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 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. Approximately $165.8 million is scheduled to be delivered after fiscal
2007. Backlog is subject to cancellation until delivery.



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Fiscal 2005 Compared with Fiscal 2004

Sales for fiscal 2005 increased 36.1% over the prior year. Sales by segment were as follows:



|                     |  |                                    |  |      |         |      |   |        
|-------------------- |  | ---------------------------------- |  | ---- | ------- | ---- | - | -------
|Dollars In Thousands |  | Increase (Decrease)From Prior Year |  | 2005 |         | 2004
|                     |  |                                    | 
|Avionics & Controls  |  | 24.8%                              |  | $    | 261,550 |      | $ | 209,498
|Sensors & Systems    |  | 76.8%                              |  |      | 319,539 |      |   | 180,768
|Advanced Materials   |  | 13.9%                              |  |      | 254,314 |      |   | 223,344
|                    
|Total                |  |                                    |  | $    | 835,403 |      | $ | 613,610
|                    

The 24.8% increase in Avionics & Controls reflected incremental sales from the Leach medical and Palomar
business units, higher sales of cockpit controls, and increased sales volumes of aftermarket cockpit switches. These increases were partially offset by lower sales of technology interface systems for land-based military vehicles.

The 76.8% increase in Sensors & Systems principally reflected $107.7 million in incremental sales from the Leach acquisition, enhanced sales of temperature
and pressure sensors, and motion control distribution sales to the British Ministry of Defence (British MoD). The increase also reflected a stronger euro relative to the U.S. dollar, as the average exchange rate from the euro to the U.S. dollar
increased from 1.22 in fiscal 2004 to 1.27 in fiscal 2005.

The 13.9% increase in Advanced Materials reflected higher sales of flare countermeasure
devices, elastomer material and increased sales at our metal finishing unit. These increases were partially offset by lower sales of combustible ordnance due to reduced U.S. Army requirements.

Sales to foreign customers, including export sales by domestic operations, totaled $345.8 million and $244.2 million, and accounted for 41.4% and 39.8% of our
sales for fiscal 2005 and 2004, respectively.

Overall, gross margin as a percentage of sales was 31.4% and 31.8% for fiscal 2005 and 2004, respectively.
Avionics & Controls segment gross margin was 33.3% and 33.7% for fiscal 2005 and 2004, respectively, reflecting a higher mix of lower margin medical equipment sales. The impact from medical equipment sales was partially offset by a higher
mix of aftermarket products and cockpit controls sales and software support services performed by our AVISTA unit. Additionally, gross margin in fiscal 2004 reflected plant relocations and consolidation of facilities. Mason Electric Co. and
Janco Corporation moved from their respective facilities to one new facility. This move required more time to execute than originally anticipated, resulting in higher than expected moving expenses, operating inefficiencies and delayed shipments.

Sensors & Systems segment gross margin was 34.5% and 36.5% for fiscal 2005 and 2004, respectively. The decrease in Sensors & Systems
gross margin from fiscal 2004 was largely a result of a higher sales mix of electrical power switching, control and data communication devices sold by Leach. Leach products tend to have a lower gross margin on average than other products included in
the Sensors & Systems segment. A loss provision on shipments of off-spec



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products also contributed to the decrease in gross margin. Gross margin was also impacted by a weaker U.S. dollar compared to the euro on U.S.
dollar-denominated sales and euro-based cost of sales.

Advanced Materials segment gross margin was 25.3% and 26.1% for fiscal 2005 and 2004, respectively.
Lower sales volumes of combustible ordnance and incremental start-up costs on certain flare countermeasure devices were partially offset by improved gross margins at our elastomer material and metal finishing operations. Comparing fiscal 2005 and
fiscal 2004, our elastomer material gross margins were aided by lower integration and workers compensation expenses and higher sales volumes to aerospace customers, resulting in an increased recovery of fixed expenses. In fiscal 2004, our
elastomer material operations were impacted by certain operational inefficiencies from integrating acquired businesses, which resulted in higher labor costs. Improved gross margins at our metal finishing operations reflected an improved recovery of
fixed expenses due to higher sales and increased selling prices.

Selling, general and administrative expenses (which include corporate expenses) increased
to $137.4 million in fiscal 2005 compared with $118.7 million in fiscal 2004. Selling, general and administrative expenses include stock option expense of $2.8 million and $4.3 million in fiscal 2005 and 2004, respectively. These
are non-cash charges resulting from mark-to-market adjustments under the variable method of accounting. The increase in selling, general and administrative expenses primarily reflected incremental selling, general and administrative expenses from
the Leach acquisition partially offset by certain expense reductions at our Sensors & Systems operations and the decrease in stock option expense. As a percentage of sales, selling, general and administrative expenses were 16.5% and 19.4%
in fiscal 2005 and 2004, respectively. The decrease in selling, general and administrative expense as a percentage of sales principally reflected $4.5 million in severance expense in our Sensors & Systems segment incurred in the
prior-year period, lower stock option expense and higher sales volumes without a proportional increase in the expense during fiscal 2005.

Research,
development and related engineering spending increased to $42.2 million, or 5.1% of sales, in fiscal 2005 compared with $25.9 million, or 4.2% of sales, in fiscal 2004. 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.

Segment earnings (which exclude corporate expenses and other income or expense) increased 55.8% during fiscal 2005 to $105.8 million compared to $67.9 million in the prior year. Avionics & Controls segment earnings were
$37.3 million for fiscal 2005 compared with $32.1 million in fiscal 2004 and reflected increased earnings from higher sales of cockpit controls to the aftermarket and OEM customers. These earnings included a $3.1 million increase in
research, development and engineering spending. Avionics & Controls results were partially offset by weaker earnings from medical equipment operations. Comparatively, fiscal 2004 Avionics & Controls earnings were impacted by the
relocation and consolidation of facilities.

Sensors & Systems segment earnings were $34.5 million for fiscal 2005 compared with
$7.8 million in fiscal 2004. The increase in Sensors & Systems earnings from fiscal 2004



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reflected incremental earnings from the Leach acquisition, higher sales volumes, and lower severance expenses. Sensors & Systems earnings also
reflected a $13.1 million increase in research, development and engineering spending which was principally incurred by our Leach units. The decrease in severance expense compared with fiscal 2004 reflected $4.5 million in severance and
legal costs incurred in the first fiscal quarter of 2004. 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 $34.0 million for fiscal 2005 compared with $28.0 million for fiscal 2004. Advanced Materials earnings reflected
higher sales and earnings from our elastomer and metal finishing operations. Advanced Materials earnings were impacted by lower sales and earnings at our combustible ordnance operations, and higher operating expenses at our flare countermeasure
operations.

During the fourth quarter of fiscal 2004, we sold a product line in our Sensors & Systems segment and recorded a gain of
$3.4 million. The gain is reflected in Other Expense, Net.

Interest income increased to $4.1 million during fiscal 2005 compared with
$2.0 million in fiscal 2004, reflecting interest earned on increased balances of cash and cash equivalents and short-term investments. Interest expense increased to $18.2 million during fiscal 2005 compared with $17.3 million in the
prior year, due to the increased interest rate on our variable rate borrowing. 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.

The effective income tax
rate for continuing operations for fiscal 2005 was 24.1% compared with 24.6% in fiscal 2004. The effective tax rate was lower than the statutory rate, as both years benefited from various tax credits and deductions. In addition, 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 U.S. and non-U.S. tax returns to the provision for income taxes.
In fiscal 2004, we recognized a $1.9 million reduction of previously estimated tax liabilities as a result of receiving a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Service covering the audit of research and development tax
credits for fiscal years 1997 through 1999. Due to the NOPA and the expectation of a similar result for fiscal years 2000 through 2003, we revised our estimated liability for income taxes as of January 30, 2004. The current years results
benefited from the 18-month extension by the U.S. Congress of the Research and Experimentation Credit (R&D credit) from June 30, 2004 to December 31, 2005.

Income from continuing operations was $51.0 million, or $2.02 per share on a diluted basis, compared with $29.4 million, or $1.37 per share, in fiscal 2004. Net earnings were $58.0 million, or $2.29 per
share on a diluted basis in fiscal 2005, compared with net earnings of $39.6 million, or $1.84 per share, in fiscal 2004. Net earnings in fiscal 2005 included net income of $7.0 million, or $.27 per share, from discontinued operations. Net
earnings in fiscal 2004 included net income of $10.2 million, or $.47 per share, from discontinued operations.



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New orders for fiscal 2005 were $894.4 million compared with $742.8 million for fiscal 2004.
Avionics & Controls orders for fiscal 2005 increased 24.4% from the prior-year period and reflected the acquisitions of the Leach medical and Palomar units. Sensors & Systems orders for fiscal 2005 increased 26.5% from the
prior-year period and reflected the acquisition of Leach. Advanced Materials orders for fiscal 2005 increased 9.1% from the prior-year period and reflected increased aerospace orders and was partially offset by lower program requirements for
combustible ordnance. Backlog at the end of fiscal 2005 was $482.8 million compared with $423.8 million at the end of the prior year. The increase in backlog principally reflects the Palomar acquisition.



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Liquidity and Capital Resources

Working Capital and Statement of Cash Flows

Cash and cash equivalents and short-term investments at the end
of fiscal 2006 totaled $42.6 million, a decrease of $138.3 million from the prior year. Net working capital increased to $267.7 million at the end of fiscal 2006 from $265.2 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 $36.7 million and $76.4 million in fiscal 2006 and 2005, respectively. The decrease principally reflected lower cash flows from operating activities of our non-U.S. units, including the
$5.2 million research and development subsidy from France not yet received in cash. In addition, the decrease reflects increased cash payments for inventory. Customers are now requiring shorter lead times and higher levels of safety stock which
have resulted in a significantly higher investment in inventory. The decrease also reflects higher payments of taxes and interest, the $2.2 million prepayment penalty on the 6.77% Senior Notes and increased cash payments for incentive
compensation, which is paid annually in December.

Cash flows used by investing activities were $153.0 million and $91.5 million in fiscal 2006
and 2005, respectively. The increase in the use of cash for investing activities mainly reflected cash paid for acquisitions. Additionally, fiscal 2005 included $21.4 million in proceeds from the sale of our discontinued operations.

Cash flows provided by financing activities were $39.1 million and $105.1 million in fiscal 2006 and 2005, respectively. The decrease in cash provided by
financing activities principally reflected the net proceeds of $108.5 million from our public offering of 3.7 million shares of common stock completed in fiscal 2005. Additionally, the decrease reflected the repayment of our
$30.0 million 6.40% Senior Notes in accordance with terms and the $40.0 million prepayment of our 6.77% Senior Notes in the first fiscal quarter of 2006. These decreases were partially offset by our borrowing of $100.0 million under
our term loan facility in fiscal 2006.

Capital Expenditures

Net property, plant and equipment was $170.4 million at the end of fiscal 2006 compared with $138.2 million at the end of the prior year. Capital expenditures for fiscal 2006 were $26.5 million
(excluding acquisitions) and included machinery and equipment and enhancements to information technology systems. Capital expenditures are anticipated to approximate $27.5 million for fiscal 2007. We will continue to support expansion through
investments in infrastructure including machinery, equipment, buildings and information systems.

Debt Financing

Total debt increased $47.3 million from the prior year to $295.9 million at the end of fiscal 2006. Total debt outstanding including the fair value of the
interest rate swap at the end of fiscal 2006 consisted of $174.3 million under our Senior Subordinated Notes, $108.1 million under our GBP Term Loan and $13.5 million under our credit facility and various foreign currency debt
agreements, including capital lease obligations. The Senior Subordinated Notes are due June 15, 2013 at an interest rate of 7.75%. The Senior Subordinated Notes are general unsecured



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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.

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 amended the credit agreement to
provide a $100.0 million term loan facility, which may be drawn in U.S. dollars, U.K. pounds or euros. In addition to the $100.0 million term loan facility, we have a $100.0 million revolving credit facility that provides up to
$25.0 million of the credit facility and up to $50.0 million of the letter of credit may be drawn in U.K. pounds or euros in addition to U.S. dollars. Available credit under the above credit facilities was $111.0 million at fiscal
2006 year end, when reduced by outstanding borrowings of $8.1 million and letters of credit of $0.6 million. 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 27, 2006, the interest rate on the term loan was 5.72%. 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 margin amount determined by reference to the Companys leverage ratio. At October 27, 2006, the fair value of the interest rate swap was a $1.5 million asset. The interest rate swap is
accounted for as a cash flow hedge and the fair value is included in Other Comprehensive Income.

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 2007; 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.



13



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Pension Obligations

Our pension plans, which principally include a U.S. pension plan maintained by Esterline and U.S. and non-U.S. plans maintained by Leach, were under-funded $20.5 million at October 27, 2006. This under-funding principally
resulted from the acquisition of Leach and assumption of its under-funded pension 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 2006, operating cash flow included $0.7 million of cash funding to these pension plans. We expect pension funding
requirements to be approximately $5.3 million in fiscal 2007 for the plans maintained by Leach, and we do not expect the U.S. Esterline pension plan to require any contributions in fiscal 2007. 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 an 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 2006 and 2005:



|                                                |  |            |   |  |      |  
|----------------------------------------------- |  | ---------- | - |  | ---- | -
|                                                |  | 2006       |   |  | 2005 |  
|Principal assumptions as of fiscal year end:    |  |            |   |  |      |  
|Discount Rate                                   |  | 5.75  6.0 | % |  | 5.5  | %
|Rate of increase in future compensation levels  |  | 4.5        | % |  | 4.5  | %
|Assumed long-term rate of return on plan assets |  | 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 $4.7 million or increased $4.9 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 2007.

Research and Development Expense

For the three years ended October 27, 2006, research and development expense has averaged 4.9% 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 2007 will be approximately 5.0% of sales for the full year.



14



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Equity Offering

On August 3, 2004, we filed a shelf registration statement on Form S-3 registering $300.0 million of equity and debt securities, which was declared effective on August 25, 2004. The shelf registration statement
enables us to issue equity and debt securities in response to market conditions. 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, of which $5.0 million was used to retire existing credit facilities. The funds provided additional financial resources for acquisitions and
general corporate purposes.

Contractual Obligations

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



|                              |  |   |         |  |                 |  |   |          |  |   |          |  |   |             
|----------------------------- |  | - | ------- |  | --------------- |  | - | -------- |  | - | -------- |  | - | ------------
|In Thousands                  |  |   | Total   |  | Less than1 year |  |   | 1-3years |  |   | 4-5years |  |   | After 5years
|                              |  |   |         |  |                
|Long-term debt                |  | $ | 287,845 |  | $    5,538      |  | $ | 31,844   |  | $ | 76,014   |  | $ | 174,449     
|Credit facilities             |  |   | 8,075   |  | 8,075           |  |   |         |  |   |         |  |   |            
|Operating lease obligations   |  |   | 65,982  |  | 10,602          |  |   | 18,731   |  |   | 16,785   |  |   | 19,864      
|Purchase obligations          |  |   | 289,679 |  | 278,396         |  |   | 6,823    |  |   | 4,460    |  |   |            
|Total contractual obligations |  | $ | 651,581 |  | $302,611        |  | $ | 57,398   |  | $ | 97,259   |  | $ | 194,313     
|                             

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.



15



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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 27, 2006 and October 28, 2005.

At October 27, 2006

Dollars In Thousands



|                        |  |                             |  |              |                    |  |   |                |   |  |                    |  |                     |  
|----------------------- |  | --------------------------- |  | ------------ | ------------------ |  | - | -------------- | - |  | ------------------ |  | ------------------- | -
|                        |  | Long-Term Debt  Fixed Rate |  |              | Interest Rate Swap | 
|Maturing in:            |  | PrincipalAmount             |  | AverageRates |                    |  |   | NotionalAmount |   |  | AveragePay Rate(1) |  | AverageReceive Rate |  
|                        |  |                             |  |              |                   
|2007                    |  | $          1,484            |  | 6.04         | %                  |  | $ |               |   |  | *                  |  | 7.75                | %
|2008                    |  | 2,346                       |  | 5.87         | %                  |  |   |               |   |  | *                  |  | 7.75                | %
|2009                    |  | 1,117                       |  | 7.50         | %                  |  |   |               |   |  | *                  |  | 7.75                | %
|2010                    |  | 210                         |  | 7.69         | %                  |  |   |               |   |  | *                  |  | 7.75                | %
|2011                    |  | 122                         |  | 7.64         | %                  |  |   |               |   |  | *                  |  | 7.75                | %
|Thereafter              |  | 175,147                     |  | 7.75         | %                  |  |   | 75,000         |   |  | *                  |  | 7.75                | %
|                        | 
|Total                   |  | $      180,426              |  |              |                    |  | $ | 75,000         |   |  |                    |  |                     |  
|                        | 
|                        |  |                             |  |              |                   
|Fair Valueat 10/27/2006 |  | $      192,439              |  |              |                    |  | $ | (698           | ) |  |                    |  |                     |  



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



16



---

At October 27, 2006

Dollars In Thousands



|                                                                                                                                                                                                                                                                                                                           |  |                                |  |                  |                    |  |                |         |   |                    |       |   |                        |      |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ |  | ---------------- | ------------------ |  | -------------- | ------- | - | ------------------ | ----- | - | ---------------------- | ---- | -
|                                                                                                                                                                                                                                                                                                                           |  | Long-Term Debt  Variable Rate |  |                  | Interest Rate Swap | 
|Maturing in:                                                                                                                                                                                                                                                                                                               |  | PrincipalAmount                |  | Average Rates(1) |                    |  | NotionalAmount |         |   | AveragePay Rate    |       |   | AverageReceive 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 at10/27/2006                                                                                                                                                                                                                                                                                                    |  | $      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.   At October 28, 2005 Dollars In Thousands | 
|                                                                                                                                                                                                                                                                                                                           |  | Long-Term Debt  Fixed Rate    |  |                  | Interest Rate Swap | 
|Maturing in:                                                                                                                                                                                                                                                                                                               |  | PrincipalAmount                |  | Average Rates    |                    |  | NotionalAmount |         |   | AveragePay Rate(1) |       |   | AverageReceive Rate    |     
|                                                                                                                                                                                                                                                                                                                           |  |                                |  |                  |                   
|2006                                                                                                                                                                                                                                                                                                                       |  | $        70,934                |  | 6.62             | %                  |  | $              |        |   |                    | *     |   |                        | 7.75 | %
|2007                                                                                                                                                                                                                                                                                                                       |  | 763                            |  | 5.79             | %                  |  |                |        |   |                    | *     |   |                        | 7.75 | %
|2008                                                                                                                                                                                                                                                                                                                       |  | 464                            |  | 7.20             | %                  |  |                |        |   |                    | *     |   |                        | 7.75 | %
|2009                                                                                                                                                                                                                                                                                                                       |  | 390                            |  | 7.08             | %                  |  |                |        |   |                    | *     |   |                        | 7.75 | %
|2010                                                                                                                                                                                                                                                                                                                       |  | 22                             |  | 7.18             | %                  |  |                |        |   |                    | *     |   |                        | 7.75 | %
|Thereafter                                                                                                                                                                                                                                                                                                                 |  | 175,055                        |  | 7.75             | %                  |  |                | 75,000  |   |                    | *     |   |                        | 7.75 | %
|                                                                                                                                                                                                                                                                                                                           | 
|Total                                                                                                                                                                                                                                                                                                                      |  | $      247,628                 |  |                  |                    |  | $              | 75,000  |   |                    |       |   |                        |      |  
|                                                                                                                                                                                                                                                                                                                           | 
|                                                                                                                                                                                                                                                                                                                           |  |                                |  |                  |                   
|Fair Valueat 10/28/2005                                                                                                                                                                                                                                                                                                    |  | $      252,330                 |  |                  |                    |  | $              | (1,012  | ) |                    |       |   |                        |      |  



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



17



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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 France, Germany and the United Kingdom and, accordingly, we may experience gains or losses due to foreign exchange fluctuations. Comparing October 27, 2006 and October 28, 2005, the foreign
exchange rate for the dollar relative to the euro decreased to .785 from .829, or 5.2%, and the dollar relative to the U.K. pound decreased to .527 from .564, or 6.5%. Comparing October 28, 2005 to October 29, 2004, the foreign
exchange rate for the dollar relative to the euro increased to .829 from .781, or 6.1%, and the dollar relative to the U.K. pound increased to .564 from .544, or 3.6%.

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 27, 2006 and October 28, 2005, the notional value of foreign currency forward contracts was $52.8 million and $38.5 million, respectively. The fair value of these contracts was a $0.8 million asset and a
$0.9 million liability at October 27, 2006 and October 28, 2005, 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.

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 27, 2006 and October 28, 2005. 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 27, 2006

Principal Amount by Expected Maturity

In Thousands



|             |  |                                                        |  |                                                       
|------------ |  | ------------------------------------------------------ |  | ------------------------------------------------------
|             |  | Euro                                                   |  | U.K. Pound                                            
|Fiscal Years |  | Firmly CommittedSales Contracts inUnited States Dollar |  | Firmly CommittedSales Contracts inUnited States Dollar
|             |  |                                                       
|2007         |  | $              55,135                                  |  | $              28,219                                 
|2008         |  | 8,074                                                  |  | 6,714                                                 
|2009         |  | 109                                                    |  | 5,202                                                 
|2010         |  |                                                       |  | 861                                                   
|2011         |  |                                                       |  | 757                                                   
|            
|Total        |  | $              63,318                                  |  | $              41,753                                 
|            



18



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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 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  |  |                   



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.
|- | -------------------------------------------------------------------



19



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Firmly Committed Sales Contracts

Operations with Foreign Functional Currency

At October 28, 2005

Principal Amount by Expected Maturity

In Thousands



|             |  |                                                        |  |                                                       
|------------ |  | ------------------------------------------------------ |  | ------------------------------------------------------
|             |  | Euro                                                   |  | U.K. Pound                                            
|Fiscal Years |  | Firmly CommittedSales Contracts inUnited States Dollar |  | Firmly CommittedSales Contracts inUnited States Dollar
|             |  |                                                       
|2006         |  | $              26,883                                  |  | $              15,705                                 
|2007         |  | 6,153                                                  |  | 2,072                                                 
|2008         |  | 2,094                                                  |  | 402                                                   
|2009         |  |                                                       |  | 2,909                                                 
|2010         |  |                                                       |  | 46                                                    
|            
|Total        |  | $              35,130                                  |  | $              21,134                                 
|            



20



---

Derivative Contracts

Operations with Foreign Functional Currency

At October 28, 2005

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
|                         |  |                     
|2006                     |  | $          17,800    |   |  | 1.266             
|2007                     |  | 2,090                |   |  | 1.244             
|                        
|Total                    |  | $          19,890    |   |  |                   
|                         |  |                      |  
|                         |  |                     
|Fair Value at 10/28/2005 |  | $              (501  | ) |  |                   



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



|                         |  |                      |   |  |                   
|------------------------ |  | -------------------- | - |  | ------------------
|                         |  | United States Dollar
|Fiscal Years             |  | Notional Amount      |   |  | Avg. Contract Rate
|                         |  |                     
|2006                     |  | $          16,370    |   |  | 1.824             
|2007                     |  | 2,240                |   |  | 1.800             
|                        
|Total                    |  | $          18,610    |   |  |                   
|                         |  |                      |  
|                         |  |                     
|Fair Value at 10/28/2005 |  | $              (433  | ) |  |                   



|1 | The Company has no derivative contracts maturing after fiscal 2007.
|- | -------------------------------------------------------------------

As more fully described under Note 11 of the consolidated financials 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 $6.8 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 27, 2006, the fair value of the interest rate swap was a $1.5 million asset.



21



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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 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, claims or other items 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.

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.



22



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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.

We performed our impairment review for
fiscal 2006 as of July 29, 2006, and our Step One analysis indicates that no impairment of goodwill exists in any of the Companys reporting units. Our Step One test was based upon a market and discounted cash flow valuation
method.

As we have grown through acquisitions, we have accumulated $366.2 million of goodwill and $29.3 million of indefinite-lived intangible
assets out of total assets of $1,290.5 million at October 27, 2006. The amount of any annual or interim impairment could be significant and



23



---

could have a material adverse effect on our reported financial results for the period in which the charge is taken.

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 $212.3 million of 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.

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 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 Benefits

We account for employee pension benefit costs and obligations 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. 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.



24



---

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

In October 2006, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 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 postretirement plans overfunded status or a liability for a plans underfunded status.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Measure a defined benefit postretirement 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 postretirement 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
postretirement benefit plan accounting. The requirement to recognize the funded status of a defined benefit postretirement plan and the disclosure requirements are effective as of October 26, 2007. If we had implemented Statement No. 158
as of October 27, 2006, the effect on our balance sheet would be an increase in pension liabilities and a decrease in accumulated other comprehensive income of approximately $8.5 million.

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 30, 2009. The Company is currently
evaluating the impact of Statement No. 157 on the Companys financial statements.



25



---

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 are assessing the potential impact that the adoption of FIN No. 48 will have on our financial statements.

In March 2005, the Financial Accounting Standards Board issued FASB Interpretation No. (FIN) 47  Accounting for Conditional Asset Retirement
Obligations, an interpretation of FASB Statement No. 143, which clarifies the term conditional asset retirement obligation as used in SFAS No. 143, Accounting for Asset Retirement Obligations. Specifically,
FIN No. 47 provides that an asset retirement obligation is conditional when either the timing and (or) method of settling the obligation is conditioned on a future event. Accordingly, an entity is required to recognize a liability for the fair
value of a conditional asset retirement obligation if the fair market value of the liability can be reasonably estimated. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into
the measurement of the liability when sufficient information exists. This interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN No. 47 was
effective for fiscal years ending after December 15, 2005. Our adoption of FIN No. 47 on October 27, 2006 did not have a material impact on our consolidated results of operation and financial condition.

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.

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 151, Inventory
Costs  An Amendment of ARB No. 43, Chapter 4. Statement No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs and wasted material (spoilage). Among other provisions, the new rule requires that items, such as idle facility expense, excessive spoilage, double freight and rehandling costs, be recognized as current period charges
regardless of whether they meet the criterion of so abnormal as stated in ARB No. 43. Additionally, Statement No. 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. Adoption of Statement No. 151 in the first fiscal quarter of 2006 did not have a material impact on our consolidated results of operations and financial condition.



26



---

Market Price of Esterline Common Stock

In Dollars



|                 |  |      |       |      |   |       |  |     |       |  |   |      
|---------------- |  | ---- | ----- | ---- | - | ----- |  | --- | ----- |  | - | -----
|For Fiscal Years |  | 2006 |       | 2005
|                 |  | High |       | Low  |   | High  |  | Low
|                 |  |      |       |     
|Quarter          |  |      |       |      |   |       |  |     |       |  |   |      
|First            |  | $    | 42.36 |      | $ | 35.55 |  | $   | 36.62 |  | $ | 28.70
|Second           |  |      | 46.12 |      |   | 38.70 |  |     | 36.52 |  |   | 29.20
|Third            |  |      | 46.65 |      |   | 38.60 |  |     | 43.01 |  |   | 31.60
|Fourth           |  |      | 42.40 |      |   | 30.97 |  |     | 44.27 |  |   | 35.85
|                

Principal Market  New York Stock Exchange

At the end of fiscal 2006, there were approximately 510 holders of record of the Companys common stock.

No cash
dividends were paid during fiscal 2006 and 2005. We are restricted from paying dividends under our current credit facility, and so we do not anticipate paying any dividends in the foreseeable future.



27



---

Selected Financial Data

In Thousands, Except Per Share Amounts



|                                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|For Fiscal Years                                       |  | 2006 |         |   | 2005 |   |         | 2004 |  |   | 2003    |   |  | 2002 |        
|                                                       |  |      |         |   |     
|Operating Results1                                     |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net sales                                              |  | $    | 972,275 |   |      | $ | 835,403 |      |  | $ | 613,610 |   |  | $    | 549,132 |   |  | $ | 421,706 |  
|Cost of sales                                          |  |      | 671,419 |   |      |   | 573,453 |      |  |   | 418,590 |   |  |      | 376,931 |   |  |   | 285,900 |  
|Selling, general and administrative                    |  |      | 159,624 |   |      |   | 137,426 |      |  |   | 118,746 |   |  |      | 105,301 |   |  |   | 79,085  |  
|Research, development and engineering                  |  |      | 52,612  |   |      |   | 42,238  |      |  |   | 25,856  |   |  |      | 17,782  |   |  |   | 13,829  |  
|Other (income) expense                                 |  |      | (490    | ) |      |   | 514     |      |  |   | (509    | ) |  |      |        |   |  |   |        |  
|Insurance recovery                                     |  |      | (4,890  | ) |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Loss (gain) on sale of product line                    |  |      |        |   |      |   |        |      |  |   | (3,434  | ) |  |      | 66      |   |  |   |        |  
|Loss (gain) on derivative financial instruments        |  |      |        |   |      |   |        |      |  |   |        |   |  |      | (2,676  | ) |  |   | 1       |  
|Interest income                                        |  |      | (2,642  | ) |      |   | (4,057  | )    |  |   | (1,964  | ) |  |      | (868    | ) |  |   | (1,814  | )
|Interest expense                                       |  |      | 21,290  |   |      |   | 18,159  |      |  |   | 17,336  |   |  |      | 11,991  |   |  |   | 7,117   |  
|Loss on extinguishment of debt                         |  |      | 2,156   |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Income from continuing operations before income taxes  |  |      | 73,196  |   |      |   | 67,670  |      |  |   | 38,989  |   |  |      | 40,605  |   |  |   | 37,588  |  
|                                                       |  |      |         |   |     
|Income tax expense                                     |  |      | 16,716  |   |      |   | 16,301  |      |  |   | 9,592   |   |  |      | 12,458  |   |  |   | 9,111   |  
|Income from continuing operations                      |  |      | 55,615  |   |      |   | 51,034  |      |  |   | 29,375  |   |  |      | 28,147  |   |  |   | 28,477  |  
|Income (loss) from discontinued operations, net of tax |  |      |        |   |      |   | 6,992   |      |  |   | 10,208  |   |  |      | (5,312  | ) |  |   | (25,264 | )
|Cumulative effect of a change in accounting principle  |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | (7,574  | )
|Net earnings (loss)                                    |  |      | 55,615  |   |      |   | 58,026  |      |  |   | 39,583  |   |  |      | 22,835  |   |  |   | (4,361  | )
|                                                       |  |      |         |   |     
|Earnings (loss) per share  diluted:                   |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Continuing operations                                  |  | $    | 2.15    |   |      | $ | 2.02    |      |  | $ | 1.37    |   |  | $    | 1.33    |   |  | $ | 1.35    |  
|Discontinued operations                                |  |      |        |   |      |   | .27     |      |  |   | .47     |   |  |      | (.25    | ) |  |   | (1.20   | )
|Cumulative effect of a change in accounting principle  |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | (.36    | )
|Earnings (loss) per share  diluted                    |  |      | 2.15    |   |      |   | 2.29    |      |  |   | 1.84    |   |  |      | 1.08    |   |  |   | (.21    | )
|                                                       | 



28



---

Selected Financial Data

In Thousands, Except Per Share Amounts



|                                                                                                                                                                                                                           |  |      |           |      |   |           |  |      |         |      |   |         |  |   |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|For Fiscal Years                                                                                                                                                                                                           |  | 2006 |           | 2005 |   | 2004      |  | 2003 |         | 2002
|                                                                                                                                                                                                                           |  |      |           |      |  
|Financial Structure                                                                                                                                                                                                        |  |      |           |      |   |           |  |      |         |      |   |         |  |   |        
|Total assets                                                                                                                                                                                                               |  | $    | 1,290,451 |      | $ | 1,115,248 |  | $    | 935,348 |      | $ | 802,827 |  | $ | 573,678
|Long-term debt, net                                                                                                                                                                                                        |  |      | 282,307   |      |   | 175,682   |  |      | 249,056 |      |   | 246,792 |  |   | 102,133
|Shareholders equity                                                                                                                                                                                                       |  |      | 707,989   |      |   | 620,864   |  |      | 461,028 |      |   | 396,069 |  |   | 357,164
|                                                                                                                                                                                                                           |  |      |           |      |  
|Weighted average shares outstanding  diluted                                                                                                                                                                              |  |      | 25,818    |      |   | 25,302    |  |      | 21,539  |      |   | 21,105  |  |   | 21,021 
|                                                                                                                                                                                                                          
|1Operating results for 2005 through 2002 and balance sheet items for 2003 through 2002 reflect the segregation
of continuing operations from discontinued operations. See Note 3 to the Consolidated Financial Statements.
|For Fiscal Years                                                                                                                                                                                                           |  | 2006 |           | 2005 |   | 2004      |  | 2003 |         | 2002
|                                                                                                                                                                                                                           |  |      |           |      |  
|Other Selected Data2                                                                                                                                                                                                       |  |      |           |      |   |           |  |      |         |      |   |         |  |   |        
|EBITDA from continuing operations                                                                                                                                                                                          |  | $    | 141,258   |      | $ | 118,812   |  | $    | 87,440  |      | $ | 73,918  |  | $ | 61,732 
|Stock option expense                                                                                                                                                                                                       |  |      | 5,430     |      |   | 2,799     |  |      | 4,326   |      |   | 1,428   |  |   | 4,711  
|Capital expenditures                                                                                                                                                                                                       |  |      | 26,540    |      |   | 23,730    |  |      | 21,800  |      |   | 16,764  |  |   | 15,008 
|Interest expense                                                                                                                                                                                                           |  |      | 21,290    |      |   | 18,159    |  |      | 17,336  |      |   | 11,991  |  |   | 7,117  
|                                                                                                                                                                                                                           |  |      |           |      |  
|Depreciation and amortization from continuing operations                                                                                                                                                                   |  |      | 41,828    |      |   | 34,241    |  |      | 28,753  |      |   | 23,438  |  |   | 14,129 



|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 stock option expense and 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.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



29



---

In Thousands



|                                                         |  |      |         |      |   |         |  |      |        |      |   |        |  |   |       
|-------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|For Fiscal Years                                         |  | 2006 |         | 2005 |   | 2004    |  | 2003 |        | 2002
|                                                         |  |      |         |      |  
|Operating earnings from continuing operations            |  | $    | 94,000  |      | $ | 81,772  |  | $    | 54,361 |      | $ | 49,052 |  | $ | 42,892
|Stock option expense                                     |  |      | 5,430   |      |   | 2,799   |  |      | 4,326  |      |   | 1,428  |  |   | 4,711 
|Depreciation and amortization from continuing operations |  |      | 41,828  |      |   | 34,241  |  |      | 28,753 |      |   | 23,438 |  |   | 14,129
|                                                        
|EBITDA from continuing operations                        |  | $    | 141,258 |      | $ | 118,812 |  | $    | 87,440 |      | $ | 73,918 |  | $ | 61,732
|                                                        



30



---

Consolidated Statement of Operations

In Thousands, Except Per Share Amounts



|                                                                        |  |      |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|For Each of the Three Fiscal Years in the Period
Ended October 27, 2006 |  | 2006 |         |   | 2005 |   |         | 2004 | 
|                                                                        |  |      |        
|Net Sales                                                               |  | $    | 972,275 |   |      | $ | 835,403 |      |  | $ | 613,610 |  
|Cost of Sales                                                           |  |      | 671,419 |   |      |   | 573,453 |      |  |   | 418,590 |  
|                                                                        | 
|                                                                        |  |      | 300,856 |   |      |   | 261,950 |      |  |   | 195,020 |  
|Expenses                                                                |  |      |         |   |      |   |         |      |  |   |         |  
|Selling, general and administrative                                     |  |      | 159,624 |   |      |   | 137,426 |      |  |   | 118,746 |  
|Research, development and engineering                                   |  |      | 52,612  |   |      |   | 42,238  |      |  |   | 25,856  |  
|                                                                        | 
|Total Expenses                                                          |  |      | 212,236 |   |      |   | 179,664 |      |  |   | 144,602 |  
|Other                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Other (income) expense                                                  |  |      | (490    | ) |      |   | 514     |      |  |   | (509    | )
|Insurance recovery                                                      |  |      | (4,890  | ) |      |   |        |      |  |   |        |  
|Gain on sale of product line                                            |  |      |        |   |      |   |        |      |  |   | (3,434  | )
|                                                                        | 
|Total Other                                                             |  |      | (5,380  | ) |      |   | 514     |      |  |   | (3,943  | )
|                                                                        | 
|Operating Earnings From                                                 |  |      |         |   |      |   |         |      |  |   |         |  
|Continuing Operations                                                   |  |      | 94,000  |   |      |   | 81,772  |      |  |   | 54,361  |  
|                                                                        |  |      |        
|Interest income                                                         |  |      | (2,642  | ) |      |   | (4,057  | )    |  |   | (1,964  | )
|Interest expense                                                        |  |      | 21,290  |   |      |   | 18,159  |      |  |   | 17,336  |  
|Loss on extinguishment of debt                                          |  |      | 2,156   |   |      |   |        |      |  |   |        |  
|                                                                        | 
|Other Expense, Net                                                      |  |      | 20,804  |   |      |   | 14,102  |      |  |   | 15,372  |  
|                                                                        | 
|                                                                        |  |      |        
|Income From Continuing OperationsBefore Income Taxes                    |  |      | 73,196  |   |      |   | 67,670  |      |  |   | 38,989  |  
|Income Tax Expense                                                      |  |      | 16,716  |   |      |   | 16,301  |      |  |   | 9,592   |  
|                                                                        | 
|Income From Continuing OperationsBefore Minority Interest               |  |      | 56,480  |   |      |   | 51,369  |      |  |   | 29,397  |  
|                                                                        |  |      |        
|Minority Interest                                                       |  |      | (865    | ) |      |   | (335    | )    |  |   | (22     | )
|                                                                        | 
|Income From Continuing Operations                                       |  |      | 55,615  |   |      |   | 51,034  |      |  |   | 29,375  |  
|                                                                        |  |      |        
|Income From DiscontinuedOperations, Net of Tax                          |  |      |        |   |      |   | 6,992   |      |  |   | 10,208  |  
|                                                                        | 
|                                                                        |  |      |        
|Net Earnings                                                            |  | $    | 55,615  |   |      | $ | 58,026  |      |  | $ | 39,583  |  
|                                                                        | 



31



---

Consolidated Statement of Operations

In Thousands, Except Per Share Amounts



|                                                                        |  |      |      |  |      |   |      |      |  |   |      | 
|----------------------------------------------------------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|For Each of the Three Fiscal Years in the Period
Ended October 27, 2006 |  | 2006 |      |  | 2005 |   |      | 2004 | 
|                                                                        |  |      |     
|Earnings Per Share  Basic:                                             |  |      |      |  |      |   |      |      |  |   |      | 
|Continuing operations                                                   |  | $    | 2.19 |  |      | $ | 2.05 |      |  | $ | 1.39 | 
|Discontinued operations                                                 |  |      |     |  |      |   | .28  |      |  |   | .48  | 
|                                                                        | 
|                                                                        |  |      |     
|Earnings Per Share  Basic                                              |  | $    | 2.19 |  |      | $ | 2.33 |      |  | $ | 1.87 | 
|                                                                        | 
|                                                                        |  |      |     
|Earnings Per Share  Diluted:                                           |  |      |      |  |      |   |      |      |  |   |      | 
|Continuing operations                                                   |  | $    | 2.15 |  |      | $ | 2.02 |      |  | $ | 1.37 | 
|Discontinued operations                                                 |  |      |     |  |      |   | .27  |      |  |   | .47  | 
|                                                                        | 
|                                                                        |  |      |     
|Earnings Per Share  Diluted                                            |  | $    | 2.15 |  |      | $ | 2.29 |      |  | $ | 1.84 | 
|                                                                        | 

See Notes to Consolidated Financial Statements.



32



---

Consolidated Balance Sheet

In Thousands, Except Share and Per Share Amounts



|                                                                          |  |      |           |      |   |          
|------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|As of October 27, 2006 and October 28, 2005                               |  | 2006 |           | 2005
|                                                                          |  |     
|Assets                                                                    |  |      |           |      |   |          
|                                                                          |  |     
|Current Assets                                                            |  |      |           |      |   |          
|Cash and cash equivalents                                                 |  | $    | 42,638    |      | $ | 118,304  
|Cash in escrow                                                            |  |      | 4,409     |      |   | 11,918   
|Short-term investments                                                    |  |      |          |      |   | 62,656   
|Accounts receivable, net of allowances of $4,338 and $4,462               |  |      | 191,737   |      |   | 149,751  
|Inventories                                                               |  |      | 185,846   |      |   | 130,469  
|Income tax refundable                                                     |  |      | 6,231     |      |   |         
|Deferred income tax benefits                                              |  |      | 27,932    |      |   | 26,868   
|Prepaid expenses                                                          |  |      | 9,545     |      |   | 7,533    
|                                                                         
|Total Current Assets                                                      |  |      | 468,338   |      |   | 507,499  
|                                                                          |  |     
|Property, Plant and Equipment                                             |  |      |           |      |   |          
|Land                                                                      |  |      | 16,903    |      |   | 15,869   
|Buildings                                                                 |  |      | 96,451    |      |   | 79,219   
|Machinery and equipment                                                   |  |      | 226,037   |      |   | 187,022  
|                                                                         
|                                                                          |  |      | 339,391   |      |   | 282,110  
|Accumulated depreciation                                                  |  |      | 168,949   |      |   | 143,896  
|                                                                         
|                                                                          |  |      | 170,442   |      |   | 138,214  
|                                                                          |  |     
|Other Non-Current Assets                                                  |  |      |           |      |   |          
|Goodwill                                                                  |  |      | 366,155   |      |   | 261,167  
|Intangibles, net                                                          |  |      | 241,657   |      |   | 166,118  
|Debt issuance costs, net of accumulated amortization of $2,277 and $1,602 |  |      | 4,469     |      |   | 5,144    
|Deferred income tax benefits                                              |  |      | 14,790    |      |   | 13,320   
|Other assets                                                              |  |      | 24,600    |      |   | 23,786   
|                                                                         
|Total Assets                                                              |  | $    | 1,290,451 |      | $ | 1,115,248
|                                                                         

See Notes to Consolidated Financial Statements.



33



---

|                                                                                                                             |  |      |           |      |   |          
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|As of October 27, 2006 and October 28, 2005                                                                                  |  | 2006 |           | 2005
|                                                                                                                             |  |     
|Liabilities and Shareholders Equity                                                                                         |  |      |           |      |   |          
|                                                                                                                             |  |     
|Current Liabilities                                                                                                          |  |      |           |      |   |          
|Accounts payable                                                                                                             |  | $    | 62,693    |      | $ | 41,453   
|Accrued liabilities                                                                                                          |  |      | 121,419   |      |   | 119,115  
|Credit facilities                                                                                                            |  |      | 8,075     |      |   | 2,031    
|Current maturities of long-term debt                                                                                         |  |      | 5,538     |      |   | 70,934   
|Federal and foreign income taxes                                                                                             |  |      | 2,874     |      |   | 8,798    
|                                                                                                                            
|Total Current Liabilities                                                                                                    |  |      | 200,599   |      |   | 242,331  
|                                                                                                                             |  |     
|Long-Term Liabilities                                                                                                        |  |      |           |      |   |          
|Long-term debt, net of current maturities                                                                                    |  |      | 282,307   |      |   | 175,682  
|Deferred income taxes                                                                                                        |  |      | 72,349    |      |   | 46,421   
|Other liabilities                                                                                                            |  |      | 23,629    |      |   | 27,237   
|                                                                                                                             |  |     
|Commitments and Contingencies                                                                                                |  |      |          |      |   |         
|                                                                                                                             |  |     
|Minority Interest                                                                                                            |  |      | 3,578     |      |   | 2,713    
|                                                                                                                             |  |     
|Shareholders Equity                                                                                                         |  |      |           |      |   |          
|Common stock, par value $.20 per share, authorized 60,000,000 shares,issued and outstanding 25,489,651 and 25,319,892
shares |  |      | 5,098     |      |   | 5,064    
|Additional paid-in capital                                                                                                   |  |      | 270,074   |      |   | 260,095  
|Retained earnings                                                                                                            |  |      | 400,985   |      |   | 345,370  
|Accumulated other comprehensive income                                                                                       |  |      | 31,832    |      |   | 10,335   
|                                                                                                                            
|Total Shareholders Equity                                                                                                   |  |      | 707,989   |      |   | 620,864  
|                                                                                                                            
|Total Liabilities and Shareholders Equity                                                                                   |  | $    | 1,290,451 |      | $ | 1,115,248
|                                                                                                                            

See Notes to Consolidated Financial Statements.



34



---

Consolidated Statement of Cash Flows

In Thousands



|                                                                           |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|For Each of the Three Fiscal Years in the Period
Ended October 27, 2006    |  | 2006 |          |   | 2005 |   |          | 2004 | 
|                                                                           |  |      |         
|Cash Flows Provided (Used) by Operating Activities                         |  |      |          |   |      |   |          |      |  |   |          |  
|Net earnings                                                               |  | $    | 55,615   |   |      | $ | 58,026   |      |  | $ | 39,583   |  
|Minority interest                                                          |  |      | 865      |   |      |   | 335      |      |  |   | 22       |  
|Depreciation and amortization                                              |  |      | 42,833   |   |      |   | 35,308   |      |  |   | 31,145   |  
|Deferred income tax                                                        |  |      | (1,623   | ) |      |   | (4,501   | )    |  |   | 3,264    |  
|Share-based compensation                                                   |  |      | 5,430    |   |      |   | 2,799    |      |  |   | 4,326    |  
|Loss (gain) on disposal and holding period loss on discontinued operations |  |      |         |   |      |   |         |      |  |   | (12,521  | )
|Loss (gain) on sale of discontinued operations                             |  |      |         |   |      |   | (9,456   | )    |  |   |         |  
|Loss (gain) on sale of building                                            |  |      |         |   |      |   | 59       |      |  |   |         |  
|Loss (gain) on sale of land                                                |  |      |         |   |      |   |         |      |  |   | (892     | )
|Loss (gain) on sale of product line                                        |  |      |         |   |      |   |         |      |  |   | (3,434   | )
|Loss (gain) on sale of short-term investments                              |  |      | (610     | ) |      |   | (1,397   | )    |  |   |         |  
|Working capital changes, net of effect of acquisitions                     |  |      |          |   |      |   |          |      |  |   |          |  
|Accounts receivable                                                        |  |      | (16,511  | ) |      |   | (17,645  | )    |  |   | (9,032   | )
|Inventories                                                                |  |      | (39,241  | ) |      |   | (11,636  | )    |  |   | (9,095   | )
|Prepaid expenses                                                           |  |      | (1,305   | ) |      |   | 1,702    |      |  |   | (659     | )
|Other current assets                                                       |  |      |         |   |      |   | 435      |      |  |   |         |  
|Accounts payable                                                           |  |      | 8,106    |   |      |   | 4,166    |      |  |   | 2,600    |  
|Accrued liabilities                                                        |  |      | (646     | ) |      |   | 19,916   |      |  |   | 10,240   |  
|Federal and foreign income taxes                                           |  |      | (12,530  | ) |      |   | 5,169    |      |  |   | 8,951    |  
|Other liabilities                                                          |  |      | (1,677   | ) |      |   | (6,414   | )    |  |   | 4,359    |  
|Other, net                                                                 |  |      | (2,030   | ) |      |   | (454     | )    |  |   | (5,530   | )
|                                                                           | 
|                                                                           |  |      | 36,676   |   |      |   | 76,412   |      |  |   | 63,327   |  
|                                                                           | 
|                                                                           |  |      |         
|Cash Flows Provided (Used) by Investing Activities                         |  |      |          |   |      |   |          |      |  |   |          |  
|Purchases of capital assets                                                |  |      | (26,540  | ) |      |   | (23,776  | )    |  |   | (22,126  | )
|Proceeds from sale of discontinued operations                              |  |      |         |   |      |   | 21,421   |      |  |   | 10,000   |  
|Proceeds from sale of building                                             |  |      |         |   |      |   | 2,319    |      |  |   |         |  
|Proceeds from sale of product line                                         |  |      |         |   |      |   |         |      |  |   | 3,475    |  
|Proceeds from sale of land                                                 |  |      |         |   |      |   |         |      |  |   | 1,654    |  
|Escrow deposit                                                             |  |      |         |   |      |   | (4,207   | )    |  |   | (12,500  | )
|Proceeds from sale of capital assets                                       |  |      | 643      |   |      |   | 2,312    |      |  |   | 778      |  
|Purchase of short-term investments                                         |  |      |         |   |      |   | (173,273 | )    |  |   |         |  
|Proceeds from sale of short-term investments                               |  |      | 63,266   |   |      |   | 112,014  |      |  |   | 12,797   |  
|Acquisitions of businesses, net of cash acquired                           |  |      | (190,344 | ) |      |   | (28,261  | )    |  |   | (138,811 | )
|                                                                           | 
|                                                                           |  |      | (152,975 | ) |      |   | (91,451  | )    |  |   | (144,733 | )
|                                                                           | 



35



---

|                                                                        |  |   |         |   |  |   |         |   |  |   |          |  
|----------------------------------------------------------------------- |  | - | ------- | - |  | - | ------- | - |  | - | -------- | -
|For Each of the Three Fiscal Years in the Period Ended
October 27, 2006 |  |   | 2006    |   |  |   | 2005    |   |  |   | 2004     |  
|                                                                        |  |   |        
|Cash Flows Provided (Used) by Financing Activities                      |  |   |         |   |  |   |         |   |  |   |          |  
|Proceeds provided by stock issuance under employee stock plans          |  |   | 4,038   |   |  |   | 3,519   |   |  |   | 2,267    |  
|Excess tax benefits from stock option exercise                          |  |   | 545     |   |  |   | 1,208   |   |  |   | 540      |  
|Proceeds provided by sale of common stock                               |  |   |        |   |  |   | 108,490 |   |  |   |         |  
|Net change in credit facilities                                         |  |   | 5,905   |   |  |   | (4,829  | ) |  |   | 4,122    |  
|Repayment of long-term debt, net                                        |  |   | (71,372 | ) |  |   | (3,302  | ) |  |   | (29,429  | )
|Proceeds from issuance of long-term debt                                |  |   | 100,000 |   |  |   |        |   |  |   |         |  
|Debt and other issuance costs                                           |  |   |        |   |  |   |        |   |  |   | (268     | )
|                                                                        | 
|                                                                        |  |   | 39,116  |   |  |   | 105,086 |   |  |   | (22,768  | )
|                                                                        | 
|                                                                        |  |   |        
|Effect of foreign exchange rates on cash                                |  |   | 1,517   |   |  |   | (1,222  | ) |  |   | 2,290    |  
|                                                                        | 
|                                                                        |  |   |        
|Net increase (decrease) in cash and cash equivalents                    |  |   | (75,666 | ) |  |   | 88,825  |   |  |   | (101,884 | )
|Cash and cash equivalents  beginning of year                           |  |   | 118,304 |   |  |   | 29,479  |   |  |   | 131,363  |  
|                                                                        | 
|Cash and cash equivalents  end of year                                 |  | $ | 42,638  |   |  | $ | 118,304 |   |  | $ | 29,479   |  
|                                                                        | 
|                                                                        |  |   |        
|Supplemental Cash Flow Information                                      |  |   |         |   |  |   |         |   |  |   |          |  
|Cash paid for interest                                                  |  | $ | 21,548  |   |  | $ | 16,610  |   |  | $ | 17,394   |  
|Cash paid (refunded) for taxes                                          |  |   | 23,710  |   |  |   | 14,193  |   |  |   | (1,909   | )

See Notes to Consolidated Financial Statements.



36



---

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 27, 2006 |  |   | 2006    |   |  |   | 2005    |   |  |   | 2004    |  
|                                                                        |  |   |        
|Common Stock, Par Value $.20 Per Share                                  |  |   |         |   |  |   |         |   |  |   |         |  
|Beginning of year                                                       |  | $ | 5,064   |   |  | $ | 4,264   |   |  | $ | 4,213   |  
|Shares issued under stock option plans                                  |  |   | 34      |   |  |   | 64      |   |  |   | 51      |  
|Shares issued under equity offering                                     |  |   |        |   |  |   | 736     |   |  |   |        |  
|                                                                        | 
|End of year                                                             |  |   | 5,098   |   |  |   | 5,064   |   |  |   | 4,264   |  
|                                                                        | 
|                                                                        |  |   |        
|Additional Paid-in Capital                                              |  |   |         |   |  |   |         |   |  |   |         |  
|Beginning of year                                                       |  |   | 260,095 |   |  |   | 144,879 |   |  |   | 137,797 |  
|Shares issued under stock option plans                                  |  |   | 4,549   |   |  |   | 4,663   |   |  |   | 2,756   |  
|Shares issued under equity offering                                     |  |   |        |   |  |   | 107,754 |   |  |   |        |  
|Share-based compensation expense                                        |  |   | 5,430   |   |  |   | 2,799   |   |  |   | 4,326   |  
|                                                                        | 
|End of year                                                             |  |   | 270,074 |   |  |   | 260,095 |   |  |   | 144,879 |  
|                                                                        | 
|                                                                        |  |   |        
|Retained Earnings                                                       |  |   |         |   |  |   |         |   |  |   |         |  
|Beginning of year                                                       |  |   | 345,370 |   |  |   | 287,344 |   |  |   | 247,761 |  
|Net earnings                                                            |  |   | 55,615  |   |  |   | 58,026  |   |  |   | 39,583  |  
|                                                                        | 
|End of year                                                             |  |   | 400,985 |   |  |   | 345,370 |   |  |   | 287,344 |  
|                                                                        | 
|                                                                        |  |   |        
|Accumulated Other Comprehensive Gain (Loss)                             |  |   |         |   |  |   |         |   |  |   |         |  
|Beginning of year                                                       |  |   | 10,335  |   |  |   | 24,541  |   |  |   | 6,298   |  
|Change in fair value of derivative financial instruments, net of tax    |  |   | 2,089   |   |  |   | 43      |   |  |   | 581     |  
|Adjustment for minimum pension liability, net of tax                    |  |   | (2,346  | ) |  |   | (75     | ) |  |   | (850    | )
|Foreign currency translation adjustment                                 |  |   | 21,754  |   |  |   | (14,174 | ) |  |   | 18,512  |  
|                                                                        | 
|End of year                                                             |  |   | 31,832  |   |  |   | 10,335  |   |  |   | 24,541  |  
|                                                                        | 
|Total Shareholders Equity                                              |  | $ | 707,989 |   |  | $ | 620,864 |   |  | $ | 461,028 |  
|                                                                        | 
|                                                                        |  |   |        
|Comprehensive Income                                                    |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings                                                            |  | $ | 55,615  |   |  | $ | 58,026  |   |  | $ | 39,583  |  
|Change in fair value of derivative financial instruments, net of tax    |  |   | 2,089   |   |  |   | 43      |   |  |   | 581     |  
|Adjustment for minimum pension liability, net of tax                    |  |   | (2,346  | ) |  |   | (75     | ) |  |   | (850    | )
|Foreign currency translation adjustment                                 |  |   | 21,754  |   |  |   | (14,174 | ) |  |   | 18,512  |  
|                                                                        | 
|Comprehensive Income                                                    |  | $ | 77,112  |   |  | $ | 43,820  |   |  | $ | 57,826  |  
|                                                                        | 

See Notes to Consolidated Financial Statements.



37



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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



38



---

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 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. 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, claims or other items 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.

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 $300.6 million and $252.3 million at fiscal year end 2006 and 2005,
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 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 27, 2006. At October 27, 2006 and October 28, 2005, the notional value of foreign currency forward contracts
was $52.8 million and $38.5 million, respectively. The fair value



39



---

of these contracts was a $0.8 million asset and a $0.9 million liability at October 27, 2006 and October 28, 2005,
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 transaction loss included in Other Comprehensive Income at October 27, 2006 was $5.1 million net of taxes. To the extent that this hedge is ineffective, the foreign currency gain or
loss is recorded in earnings. There was no ineffectiveness in 2006.

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 a liability of $0.7 million and $1.0 million
at October 27, 2006 and October 28, 2005, 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 a $1.5 million asset at October 27, 2006.

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



40



---

liabilities are included in shareholders equity as a component of comprehensive income. Accumulated foreign currency translation adjustment was
$38.5 million, $16.7 million and $30.9 million as of the fiscal years ended October 27, 2006, October 28, 2005 and October 29, 2004, respectively. Foreign currency transaction gains and losses are included in results of
operations and have not been significant in amount in any of the three fiscal years in the period ended October 27, 2006.

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 27,
2006 and October 28, 2005.

Short-term Investments

Short-term investments consist of highly liquid debt securities with maturities of more than three months at the date of purchase. Short-term investments are classified as available for sale securities and are carried at fair value.
Unrealized gains and losses are reported as a net amount in a separate component of stockholders equity until realized. The gains or losses on short-term securities sold were determined under the specific identification method. Unrealized
gains and losses were not significant at October 28, 2005. At October 28, 2005, short-term investments having maturities within one year aggregated $28.9 million, after one year through five years aggregated $1.0 million and
after ten years aggregated $32.8 million.

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.

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 $26,757,000, $23,578,000 and $21,609,000 for fiscal
years 2006, 2005 and 2004, respectively.



41



---

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.

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.



42



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Share-based Compensation

Prior to October 29, 2005, the Company accounted for its share-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. The variable method of
accounting was used to account for stock option plans where the option holders were permitted to exercise options by surrendering the option subject to the grant in payment of the exercise price of the option and the related statutory taxes. No
compensation expense was recognized at the date of grant because the exercise price of all stock option grants is equal to the market price of the Companys common stock as of the date of grant. However, subsequent changes in the market price
of the Companys stock to the date of exercise or forfeiture resulted in a change in the measurement of compensation costs. 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.

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 years ended in 2005 and 2004:

In Thousands, Except Per Share Amounts



|                                                                                          |  |      |        |   |      |   |        |  
|----------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                          |  | 2005 |        |   | 2004 |  
|                                                                                          |  |     
|Net earnings as reported                                                                  |  | $    | 58,026 |   |      | $ | 39,583 |  
|Share-based compensation cost,net of income tax included in net earnings as reported      |  |      | 1,862  |   |      |   | 2,906  |  
|Share-based compensation cost,net of income tax under the fair value method of accounting |  |      | (2,504 | ) |      |   | (1,784 | )
|                                                                                          | 
|Pro forma net earnings                                                                    |  | $    | 57,384 |   |      | $ | 40,705 |  
|                                                                                          | 
|                                                                                          |  |     
|Basic earnings per share as reported                                                      |  | $    | 2.33   |   |      | $ | 1.87   |  
|Pro forma basic earnings per share                                                        |  |      | 2.30   |   |      |   | 1.92   |  
|                                                                                          |  |     
|Diluted earnings per share as reported                                                    |  | $    | 2.29   |   |      | $ | 1.84   |  
|Pro forma diluted earnings per share                                                      |  |      | 2.26   |   |      |   | 1.89   |  
|                                                                                          | 

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.



43



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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 the exercise price was greater than the closing market price for fiscal 2006 and 2005 were 346,800 and 180,400, respectively. The weighted average number of shares
outstanding used to compute basic earnings per share was 25,413,000, 24,927,000 and 21,195,000 for fiscal years 2006, 2005 and 2004, respectively. The weighted average number of shares outstanding used to compute diluted earnings per share was
25,818,000, 25,302,000 and 21,539,000 for fiscal years 2006, 2005 and 2004, respectively.

Recent Accounting Pronouncements

In October 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 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 postretirement plans overfunded status or a liability for a plans underfunded status.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Measure a defined benefit postretirement 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 postretirement 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
postretirement benefit plan accounting. The requirement to recognize the funded status of a defined benefit postretirement plan and the disclosure requirements are effective for the Company on October 26, 2007. If the Company had implemented
Statement No. 158 as of October 27, 2006, the effect on the balance sheet would be an increase in pension liabilities and a decrease in accumulated other comprehensive income of approximately $8.5 million.

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



44



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liability. Statement No. 157 is effective for the Companys year ending 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. Management is assessing the potential impact that the adoption of FIN No. 48 will have on the Companys consolidated
financial statements.

In March 2005, the Financial Accounting Standards Board issued FASB Interpretation No. (FIN) 47  Accounting
for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143, which clarifies the term conditional asset retirement obligation as used in SFAS No. 143, Accounting for Asset Retirement
Obligations. Specifically, FIN No. 47 provides that an asset retirement obligation is conditional when either the timing and (or) method of settling the obligation is conditioned on a future event. Accordingly, an entity is required to
recognize a liability for the fair value of a conditional asset retirement obligation if the fair market value of the liability can be reasonably estimated. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when sufficient information exists. This interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement
obligation. FIN No. 47 is effective for fiscal years ending after December 15, 2005. Implementation of FIN No. 47 did not have a material impact on the consolidated results of operations and financial condition.

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.

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 151, Inventory
Costs  An Amendment of ARB No. 43, Chapter 4. Statement No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs and wasted material (spoilage). Among other provisions, the new rule requires that items, such as idle facility expense, excessive spoilage, double freight and rehandling costs, be recognized as current period
charges regardless of whether they meet the criterion of so abnormal as stated in



45



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ARB No. 43. Additionally, Statement No. 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. Adoption of Statement No. 151 in the first fiscal quarter of 2006 did not have a material impact on the Companys consolidated results of operations and financial condition.



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 the advanced flare facility. Although the advanced flare facility is expected to be closed for about 18 months due to the requirement of the Health Safety Executive (HSE)
to review the cause of the accident, operations will continue at a portion of the facility located on the same site as the advanced flare facility. The HSE investigation will not be completed until the Coroners Inquest is filed possibly in
July or August 2007. 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. The damaged building and inventory is fully covered by insurance and,
accordingly, no loss as a result of the accident has been recorded on these assets in fiscal 2006. Repairs and incremental costs related to the accident, which are fully covered by insurance, are recorded on the consolidated balance sheet as a
receivable from the insurance carrier. The Company recorded business interruption insurance recoveries of $4.9 million for losses incurred in fiscal 2006. As the Company continues to incur losses in future periods as a result of the incident,
business insurance recoveries which can be estimated and are probable of collection will be recorded in the consolidated financial statements.



46



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NOTE 3: Discontinued Operations

On July 25, 2002, the Board of Directors adopted a formal plan for the sale of the assets and operations of the Companys Automation segment. As a result, the consolidated financial statements present
the Automation segment as a discontinued operation. On August 31, 2004, the Company sold the stock of W. A. Whitney for $10.0 million in cash. Upon the final disposition of its discontinued operations, the Company recorded an
$8.0 million gain, net of $4.5 million in tax, including the reversal of estimated reserves, which were recognizable upon the sale of the business. 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 $4,421,000 and $31,451,000 in fiscal years 2005 and 2004, respectively. The
operating results of the discontinued segment for fiscal years 2005 and 2004 consist of the following:

In Thousands



|                                                             |  |      |       |   |      |   |       
|------------------------------------------------------------ |  | ---- | ----- | - | ---- | - | ------
|                                                             |  | 2005 |       |   | 2004
|                                                             |  |     
|Income (loss) before taxes                                   |  | $    | (52   | ) |      | $ | 3,261 
|Tax expense (benefit)                                        |  |      | (13   | ) |      |   | 1,067 
|Net income (loss)                                            |  |      | (39   | ) |      |   | 2,194 
|Gain on disposal, including tax expense of $2,435 and $4,507 |  |      | 7,031 |   |      |   | 8,014 
|Income from discontinued operations                          |  | $    | 6,992 |   |      | $ | 10,208
|                                                            



NOTE 4: Inventories

Inventories at the end of fiscal 2006 and 2005 consisted of the following:



|                                  |  |   |         |  |   |        
|--------------------------------- |  | - | ------- |  | - | -------
|In Thousands                      |  |   | 2006    |  |   | 2005   
|                                  |  |  
|Raw materials and purchased parts |  | $ | 89,480  |  | $ | 64,377 
|Work in process                   |  |   | 66,333  |  |   | 45,798 
|Finished goods                    |  |   | 30,033  |  |   | 20,294 
|                                  |  | $ | 185,846 |  | $ | 130,469
|                                 



47



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NOTE 5: Goodwill

The following table summarizes the changes in goodwill by segment for fiscal 2006 and 2005:

In Thousands



|                                        |  |                    |         |   |                  |   |        |                   |  |       |         |  |   |         |  
|--------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------ | ----------------- |  | ----- | ------- |  | - | ------- | -
|                                        |  | Avionics &Controls |         |   | Sensors &Systems |   |        | AdvancedMaterials |  | Total |        
|                                        |  |                    |         |  
|Balance, October 29, 2004               |  | $                  | 78,113  |   |                  | $ | 86,239 |                   |  | $     | 83,465  |  | $ | 247,817 |  
|Goodwill from acquisitions              |  |                    | 20,180  |   |                  |   | 3,611  |                   |  |       |        |  |   | 23,791  |  
|Sale of business                        |  |                    |        |   |                  |   | (7,070 | )                 |  |       |        |  |   | (7,070  | )
|Foreign currency translation adjustment |  |                    | (1,169  | ) |                  |   | (2,202 | )                 |  |       |        |  |   | (3,371  | )
|                                        | 
|                                        |  |                    |         |  
|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 |  
|                                        | 



NOTE 6: Intangible
Assets

Intangible assets at the end of fiscal 2006 and 2005 were as follows:

In Thousands



|                                             |  |                                  |  |                     |         |              |   |                     |  |              |         |  |   |       
|-------------------------------------------- |  | -------------------------------- |  | ------------------- | ------- | ------------ | - | ------------------- |  | ------------ | ------- |  | - | ------
|                                             |  |                                  |  | 2006                |         | 2005        
|                                             |  | WeightedAverage YearsUseful Life |  | GrossCarryingAmount |         | Accum.Amort. |   | GrossCarryingAmount |  | Accum.Amort.
|                                             |  |                                  |  |                     |        
|Programs                                     |  | 18                               |  | $                   | 204,817 |              | $ | 31,932              |  | $            | 140,460 |  | $ | 20,307
|Core technology                              |  | 16                               |  |                     | 8,981   |              |   | 2,728               |  |              | 8,976   |  |   | 2,105 
|Patents and other                            |  | 14                               |  |                     | 56,467  |              |   | 23,280              |  |              | 37,329  |  |   | 20,135
|Total                                        |  |                                  |  | $                   | 270,265 |              | $ | 57,940              |  | $            | 186,765 |  | $ | 42,547
|                                            
|                                             |  |                                  |  |                     |        
|Indefinite-lived Intangible Assets Trademark |  |                                  |  | $                   | 29,332  |              |   |                     |  | $            | 21,900  |  |   |       
|                                            

Amortization of intangible assets was $14,899,000, $10,690,000 and $8,533,000 in fiscal years 2006, 2005 and 2004,
respectively.



48



---

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

In Thousands

Fiscal Year



|     |  |   |       
|---- |  | - | ------
|2007 |  | $ | 15,559
|2008 |  |   | 15,248
|2009 |  |   | 14,499
|2010 |  |   | 13,955
|2011 |  |   | 13,594



NOTE 7: Accrued Liabilities

Accrued liabilities at the end of fiscal 2006 and 2005 consisted of the following:



|                               |  |      |         |      |   |        
|------------------------------ |  | ---- | ------- | ---- | - | -------
|In Thousands                   |  | 2006 |         | 2005
|                               |  |     
|Payroll and other compensation |  | $    | 52,293  |      | $ | 47,781 
|Casualty and medical           |  |      | 12,296  |      |   | 13,022 
|Interest                       |  |      | 5,698   |      |   | 6,962  
|Warranties                     |  |      | 7,952   |      |   | 8,811  
|State and other tax accruals   |  |      | 16,055  |      |   | 13,537 
|Acquisition related payments   |  |      | 4,394   |      |   | 7,895  
|Pension obligations            |  |      | 5,601   |      |   |       
|Customer deposits              |  |      | 5,139   |      |   | 6,203  
|Other                          |  |      | 11,991  |      |   | 14,904 
|                               |  | $    | 121,419 |      | $ | 119,115
|                              



NOTE 8: Other Liabilities

Other liabilities at the end of fiscal 2006 and 2005 consisted of the following:



|                                       |  |      |        |      |   |       
|-------------------------------------- |  | ---- | ------ | ---- | - | ------
|In Thousands                           |  | 2006 |        | 2005
|                                       |  |     
|Pension and post retirement obligation |  | $    | 23,629 |      | $ | 22,994
|Acquisition related payments           |  |      |       |      |   | 4,243 
|                                       |  | $    | 23,629 |      | $ | 27,237
|                                      



49



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NOTE 9: Retirement Benefits

Pension benefits are provided for approximately 37% of all U.S. employees under the Esterline contributory pension plan or the Leach noncontributory defined benefit pension plan.

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 noncontributory defined benefit 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 key management in addition to amounts received under the Companys existing
retirement plan.

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
2007. 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 $44,789,000 and $45,553,000,
respectively, with plan assets of $23,633,000 as of October 27, 2006. The accrued benefit liabilities for these Leach plans are $17,107,000 at October 27, 2006. Contributions to the Leach plans totaled $735,000 in fiscal 2006.
Contributions of $5,271,000 will be made in fiscal 2007.



|                                                |  |            |   |  |      |  
|----------------------------------------------- |  | ---------- | - |  | ---- | -
|                                                |  | 2006       |   |  | 2005 |  
|                                                |  |           
|Principal assumptions as of fiscal year end:    |  |            |   |  |      |  
|Discount Rate                                   |  | 5.75  6.0 | % |  | 5.5  | %
|Rate of increase in future compensation levels  |  | 4.5        | % |  | 4.5  | %
|Assumed long-term rate of return on plan assets |  | 8.5        | % |  | 8.5  | %

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%



50



---

assumed long-term rate of return on plan assets is appropriate. Allocations by investment type are as follows:



|                                              |  |         |   |  |        |   |  |       |  
|--------------------------------------------- |  | ------- | - |  | ------ | - |  | ----- | -
|                                              |  |         |   |  | Actual |  
|                                              |  | Target  |   |  | 2006   |   |  | 2005  |  
|Plan assets allocation as of fiscal year end: |  |         |   |  |        |   |  |       |  
|Equity securities                             |  | 65  75 | % |  | 67.0   | % |  | 65.4  | %
|Debt securities                               |  | 25  35 | % |  | 31.7   | % |  | 32.2  | %
|Cash                                          |  | 0       | % |  | 1.3    | % |  | 2.4   | %
|                                              | 
|Total                                         |  |         |   |  | 100.0  | % |  | 100.0 | %

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



|                                   |  |      |         |   |      |   |         |      |  |   |        |  
|---------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                   |  | 2006 |         |   | 2005 |   |         | 2004 | 
|In Thousands                       |  |      |         |   |      |   |         |      |  |   |        |  
|                                   |  |      |        
|Components of Net Periodic Cost    |  |      |         |   |      |   |         |      |  |   |        |  
|Service cost                       |  | $    | 4,021   |   |      | $ | 3,537   |      |  | $ | 3,838  |  
|Interest cost                      |  |      | 10,304  |   |      |   | 10,055  |      |  |   | 7,618  |  
|Expected return on plan assets     |  |      | (12,756 | ) |      |   | (11,851 | )    |  |   | (9,766 | )
|Amortization of prior service cost |  |      | 18      |   |      |   | 18      |      |  |   | 19     |  
|Amortization of actuarial loss     |  |      | 1,569   |   |      |   | 1,260   |      |  |   | 468    |  
|One-time charge benefit adjustment |  |      | 1,188   |   |      |   |        |      |  |   |       |  
|                                   | 
|Net periodic cost                  |  | $    | 4,344   |   |      | $ | 3,019   |      |  | $ | 2,177  |  
|                                   | 



51



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The funded status of the defined benefit pension plans at the end of fiscal 2006 and 2005 were as follows:

In Thousands



|                                                           |  |      |         |   |      |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                           |  | 2006 |         |   | 2005 |  
|Benefit Obligation                                         |  |      |         |   |      |   |         |  
|Beginning balance                                          |  | $    | 190,329 |   |      | $ | 166,328 |  
|Currency translation adjustment                            |  |      | 376     |   |      |   | (325    | )
|Service cost                                               |  |      | 4,021   |   |      |   | 3,537   |  
|Interest cost                                              |  |      | 10,304  |   |      |   | 10,055  |  
|One-time charge benefit adjustment                         |  |      | 1,188   |   |      |   |        |  
|Actuarial loss                                             |  |      | (7,318  | ) |      |   | 19,412  |  
|Acquisitions                                               |  |      |        |   |      |   | 1,127   |  
|Benefits paid                                              |  |      | (10,312 | ) |      |   | (9,805  | )
|                                                           | 
|Ending balance                                             |  | $    | 188,588 |   |      | $ | 190,329 |  
|                                                           | 
|                                                           |  |     
|Plan Assets  Fair Value                                   |  |      |         |   |      |   |         |  
|Beginning balance                                          |  | $    | 155,464 |   |      | $ | 142,311 |  
|Currency translation adjustment                            |  |      | 56      |   |      |   |        |  
|Realized and unrealized gain on plan assets                |  |      | 21,149  |   |      |   | 17,357  |  
|Unrecognized gain                                          |  |      | 157     |   |      |   |        |  
|Acquisitions                                               |  |      |        |   |      |   | 976     |  
|Company contributions                                      |  |      | 1,552   |   |      |   | 5,232   |  
|Benefits paid                                              |  |      | (10,312 | ) |      |   | (10,412 | )
|                                                           | 
|Ending balance                                             |  | $    | 168,066 |   |      | $ | 155,464 |  
|                                                           | 
|                                                           |  |     
|Reconciliation of Funded Status to Net Amount Recognized   |  |      |         |   |      |   |         |  
|Funded status  plan assets relative to benefit obligation |  | $    | (20,522 | ) |      | $ | (34,865 | )
|Unrecognized net actuarial loss                            |  |      | 13,753  |   |      |   | 31,119  |  
|Unrecognized prior service benefit                         |  |      | (50     | ) |      |   | (31     | )
|Unrecognized net loss                                      |  |      | 5       |   |      |   | 27      |  
|                                                           | 
|Net amount recognized                                      |  | $    | (6,814  | ) |      | $ | (3,750  | )
|                                                           | 
|                                                           |  |     
|Amount Recognized in the Consolidated Balance Sheet        |  |      |         |   |      |   |         |  
|Prepaid benefit cost                                       |  | $    | 14,801  |   |      | $ | 16,129  |  
|Accrued benefit liability                                  |  |      | (21,615 | ) |      |   | (19,879 | )
|Additional minimum liability                               |  |      | (5,254  | ) |      |   | (1,582  | )
|Intangible assets                                          |  |      | 73      |   |      |   | 107     |  
|Accumulated other comprehensive income                     |  |      | 5,181   |   |      |   | 1,475   |  
|                                                           | 
|Net amount recognized                                      |  | $    | (6,814  | ) |      | $ | (3,750  | )
|                                                           | 

The accumulated benefit obligation for all pension plans was $182,214,223 at October 27, 2006 and
$180,844,351 at October 28, 2005.



52



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

In Thousands



|          |  |   |       
|--------- |  | - | ------
|2007      |  | $ | 10,889
|2008      |  |   | 11,222
|2009      |  |   | 11,517
|2010      |  |   | 11,905
|2011      |  |   | 12,123
|2012-2016 |  |   | 63,595

Employees may participate in certain defined contribution plans. The Companys contribution expense under
these plans totaled $8,107,000, $7,133,000 and $5,796,000 in fiscal 2006, 2005 and 2004, respectively.



NOTE 10: Income Taxes

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

In Thousands



|                                                                                                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                     |  | 2006 |        |   | 2005 |   |        | 2004 | 
|Current                                                                                                                              |  |      |        |   |      |   |        |      |  |   |        |  
|U.S. Federal                                                                                                                         |  | $    | 16,746 |   |      | $ | 13,726 |      |  | $ | 7,835  |  
|State                                                                                                                                |  |      | (2,790 | ) |      |   | 2,657  |      |  |   | 1,000  |  
|Foreign                                                                                                                              |  |      | 4,383  |   |      |   | 4,419  |      |  |   | 284    |  
|                                                                                                                                     | 
|                                                                                                                                     |  |      | 18,339 |   |      |   | 20,802 |      |  |   | 9,119  |  
|Deferred                                                                                                                             |  |      |        |   |      |   |        |      |  |   |        |  
|U.S. Federal                                                                                                                         |  |      | (82    | ) |      |   | (1,656 | )    |  |   | 3,705  |  
|State                                                                                                                                |  |      | 259    |   |      |   | (1,104 | )    |  |   | 847    |  
|Foreign                                                                                                                              |  |      | (1,800 | ) |      |   | (1,741 | )    |  |   | (4,079 | )
|                                                                                                                                     | 
|                                                                                                                                     |  |      | (1,623 | ) |      |   | (4,501 | )    |  |   | 473    |  
|                                                                                                                                     | 
|Income tax expense                                                                                                                   |  | $    | 16,716 |   |      | $ | 16,301 |      |  | $ | 9,592  |  
|                                                                                                                                     | 
|U.S. and foreign components of income from continuing
operations before income taxes for each of the fiscalyears were:  In
Thousands | 
|                                                                                                                                     |  | 2006 |        |   | 2005 |   |        | 2004 | 
|                                                                                                                                     |  |      |       
|U.S.                                                                                                                                 |  | $    | 48,489 |   |      | $ | 40,162 |      |  | $ | 32,705 |  
|Foreign                                                                                                                              |  |      | 24,707 |   |      |   | 27,508 |      |  |   | 6,284  |  
|                                                                                                                                     | 
|Income from continuing operations, before income taxes                                                                               |  | $    | 73,196 |   |      | $ | 67,670 |      |  | $ | 38,989 |  
|                                                                                                                                     | 



53



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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



|                               |  |      |         |   |      |   |         |  
|------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                               |  | 2006 |         |   | 2005 |  
|                               |  |     
|Reserves and liabilities       |  | $    | 17,971  |   |      | $ | 18,320  |  
|NOL carryforwards              |  |      | 8,984   |   |      |   | 11,343  |  
|Tax credit carryforwards       |  |      | 1,850   |   |      |   | 2,274   |  
|Employee benefits              |  |      | 5,113   |   |      |   | 5,689   |  
|Non-qualified stock options    |  |      | 3,201   |   |      |   | 2,066   |  
|Hedging activities             |  |      | 3,028   |   |      |   |        |  
|Other                          |  |      | 2,575   |   |      |   | 496     |  
|                               | 
|Total deferred tax assets      |  |      | 42,722  |   |      |   | 40,188  |  
|                               |  |     
|Depreciation and amortization  |  |      | (14,462 | ) |      |   | (17,083 | )
|Intangibles and amortization   |  |      | (56,098 | ) |      |   | (29,338 | )
|Other                          |  |      | (1,789  | ) |      |   |        |  
|                               | 
|Total deferred tax liabilities |  |      | (72,349 | ) |      |   | (46,421 | )
|                               | 
|Net deferred tax liabilities   |  | $    | (29,627 | ) |      | $ | (6,233  | )
|                               | 

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. Approximately $2.4 million of the tax benefit associated with the NOL carryforward is included in current
deferred income tax benefits each year, reflecting the amount of NOL available in the current year under Section 382. The remainder is reported as non-current deferred income tax benefits, reflecting the amount of the NOL that is expected to be
utilized in future fiscal years. The non-current deferred income tax benefit associated with the NOL was $6.6 million and $9.0 million at the end of fiscal 2006 and 2005, respectively. The NOL expires beginning in 2022.

The incremental tax benefit received by the Company upon exercise of non-qualified employee stock options was $0.5 million, $1.2 million and $0.5 million
in fiscal 2006, 2005 and 2004, respectively.

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 our historical operating results and expected future earnings.
Accordingly, no valuation allowance has been recorded on the deferred tax assets.

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



54



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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.

The U.S. federal income returns for
fiscal years ended 2003, 2004 and 2005 remain open for examination and presently, fiscal years ended 2003 and 2004 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 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.

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:



|                                 |  |      |   |  |      |   |  |      |  
|-------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                 |  | 2006 |   |  | 2005 |   |  | 2004 |  
|                                 |  |      |  
|U.S. statutory income tax rate   |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
|State income taxes               |  | 1.3  |   |  | 1.5  |   |  | 1.7  |  
|Foreign taxes                    |  | (8.6 | ) |  | (6.6 | ) |  | (5.8 | )
|Export sales benefit             |  | (0.7 | ) |  | (1.2 | ) |  | (1.7 | )
|Pass-through entities            |  | 0.4  |   |  | 0.9  |   |  | 6.8  |  
|Domestic manufacturing deduction |  | (0.7 | ) |  |     |   |  |     |  
|Foreign tax credits              |  |     |   |  |     |   |  | (5.6 | )
|Research & development credits   |  | (0.5 | ) |  | (3.8 | ) |  | (4.4 | )
|Tax accrual adjustment           |  | (4.0 | ) |  | (2.5 | ) |  | (1.8 | )
|Other, net                       |  | 0.6  |   |  | 0.8  |   |  | 0.4  |  
|                                 | 
|Effective income tax rate        |  | 22.8 | % |  | 24.1 | % |  | 24.6 | %
|                                 | 

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.

In fiscal 2005, the Company completed its evaluation of the repatriation provision
of the American Jobs Creation Act (the Act), signed into law on October 22, 2004. The Act created a special one-time deduction related to the repatriation of certain foreign earnings. Based upon its evaluation, the Company has elected to not
repatriate earnings from its foreign subsidiaries.



55



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NOTE 11: Debt

Long-term debt at the end of fiscal 2006 and 2005 consisted of the following:

In Thousands



|                                               |  |      |         |   |      |   |         |  
|---------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                               |  | 2006 |         |   | 2005 |  
|                                               |  |     
|GBP Term Loan, due November 2010               |  | $    | 108,117 |   |      | $ |        |  
|7.75% Senior Subordinated Notes, due June 2013 |  |      | 175,000 |   |      |   | 175,000 |  
|6.77% Senior Notes, due November 2008          |  |      |        |   |      |   | 40,000  |  
|6.40% Senior Notes, due November 2005          |  |      |        |   |      |   | 30,000  |  
|Other                                          |  |      | 5,426   |   |      |   | 2,628   |  
|                                               | 
|                                               |  |      | 288,543 |   |      |   | 247,628 |  
|                                               |  |     
|Fair value of interest rate swap agreement     |  |      | (698    | ) |      |   | (1,012  | )
|Less current maturities                        |  |      | 5,538   |   |      |   | 70,934  |  
|                                               | 
|Carrying amount of long-term debt              |  | $    | 282,307 |   |      | $ | 175,682 |  
|                                               | 

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 28, 2008 at redemption prices starting
at 103.875% of the principal amount plus accrued interest during the period beginning June 28, 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 7.98% at October 27, 2006. The
fair market value of the Companys interest rate swap was a $698,000 liability at October 27, 2006 and was estimated by discounting expected cash flows using quoted market interest rates.

On November 15, 2005, the Company exercised its option under the terms of the Note Purchase Agreement, dated as of November 1, 1998, to prepay the outstanding
principal amount of $40,000,000 of the 6.77% Senior Notes due November 15, 2008. Under the terms



56



---

of the Note Purchase Agreement, the Company paid an additional $1,984,000 to the holders of the 6.77% Senior Notes as a prepayment penalty and wrote off
$172,000 of debt issuance costs associated with the 6.77% Senior Notes. The payment of the prepayment penalty and write-off of debt issuance costs are accounted for as a loss on extinguishment of debt.

On February 10, 2006, the Company amended its credit agreement to provide a $100.0 million term loan facility, which may be drawn in U.S. dollars, U.K. pounds
or euros. In addition to the $100.0 million term loan facility, the Company has a $100.0 million revolving credit facility that provides up to $25.0 million of the credit facility and up to $50.0 million of the letter of credit
may be drawn in U.K. pounds or euros in addition to U.S. dollars. On February 10, 2006, the Company borrowed U.K. £57.0 million, or approximately $100.0 million, under the 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 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 27, 2006, the interest rate on the term loan was 5.72%. 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 27, 2006, the fair value of the interest rate swap was a $1,498,000 asset. The interest rate swap is accounted for as a cash flow hedge
and is included in Other Comprehensive Income.

Maturities of long-term debt at October 27, 2006, were as follows:

In Thousands

|                    |  |   |        
|------------------- |  | - | -------
|Fiscal Year         |  |   |        
|                    | 
|2007                |  | $ | 5,538  
|2008                |  |   | 11,806 
|2009                |  |   | 20,038 
|2010                |  |   | 58,323 
|2011                |  |   | 17,691 
|2012 and thereafter |  |   | 175,147
|                   
|                    |  | $ | 288,543
|                   



57



---

Short-term credit facilities at the end of fiscal 2006 and 2005 consisted of the following:

In Thousands



|        |  |                       |       |              |      |   |                       |   |              |  |      |  
|------- |  | --------------------- | ----- | ------------ | ---- | - | --------------------- | - | ------------ |  | ---- | -
|        |  | 2006                  |       |              | 2005 |  
|        |  | OutstandingBorrowings |       | InterestRate |      |   | OutstandingBorrowings |   | InterestRate | 
|        |  |                       |       |             
|U.S.    |  | $                     | 5,000 |              | 6.07 | % |                       | $ |             |  |     |  
|Foreign |  |                       | 3,075 |              | 3.98 | % |                       |   | 2,031        |  | 2.76 | %
|        | 
|        |  | $                     | 8,075 |              |      |   |                       | $ | 2,031        |  |      |  
|        | 

At October 27, 2006, the Companys primary U.S. dollar credit facility totals $100,000,000 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 $19,646,000 of unsecured foreign currency credit
facilities have been extended by foreign banks for a total of $119,646,000 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 27, 2006. Available credit under
the above credit facilities was $110,987,000 at fiscal 2006 year end, when reduced by outstanding borrowings of $8,075,000 and letters of credit of $584,000.



NOTE 12: Commitments and Contingencies

Rental expense for
operating leases totaled $11,462,000, $9,651,000 and $9,482,000 in fiscal years 2006, 2005 and 2004, respectively.

At October 27, 2006, the
Companys rental commitments for noncancelable operating leases with a duration in excess of one year were as follows:

In Thousands

|                    |  |   |       
|------------------- |  | - | ------
|Fiscal Year         |  |   |       
|                    | 
|2007                |  | $ | 10,602
|2008                |  |   | 9,539 
|2009                |  |   | 9,192 
|2010                |  |   | 8,657 
|2011                |  |   | 8,128 
|2012 and thereafter |  |   | 19,864
|                   
|                    |  | $ | 65,982
|                   

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



58



---

results of operations. The Company believes that it has made appropriate and adequate provisions for contingent liabilities.

Approximately 989 U.S.-based employees or 21% of total U.S.-based employees were represented by various labor unions. In June 2006, a collective bargaining agreement
covering about 200 employees expired and a successor agreement was reached with the labor union. A second agreement covering about 100 employees expired in September 2006 and a successor agreement covering about 150 employees was reached. 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 13: 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 2006
was $5.4 million. The total income tax benefit recognized in the income statement for the share-based compensation arrangement was $1.5 million.

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 2006, employees purchased 70,683 shares at a fair market value price of
$36.55 per share, leaving a balance of 202,295 shares available for issuance in the future. As of October 27, 2006, deductions aggregating $937,679 were accrued for the purchase of shares on December 15, 2006.

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.



59



---

|                        |  |             |   |  |              |   |  |             |  
|----------------------- |  | ----------- | - |  | ------------ | - |  | ----------- | -
|                        |  | 2006        |   |  | 2005         |   |  | 2004        |  
|                        |  |             |  
|Volatility              |  | 30.0  30.7 | % |  | 30.7         | % |  | 30.7  38.8 | %
|Risk-free interest rate |  | 3.20  5.15 | % |  | 1.64   2.44 | % |  | 0.94  1.01 | %
|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 2006, the Company had 2,586,950 shares
reserved for issuance to officers and key employees, of which 1,117,950 shares were available to be granted in the future.

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 2006 and 2005, was $22.04 per share and $19.56 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.



|                        |  |               |   |  |             |   |  |             |  
|----------------------- |  | ------------- | - |  | ----------- | - |  | ----------- | -
|                        |  | 2006          |   |  | 2005        |   |  | 2004        |  
|                        |  |               |  
|Volatility              |  | 44.26  44.95 | % |  | 45.3        | % |  | 47.1        | %
|Risk-free interest rate |  | 4.53  5.18   | % |  | 4.48  4.60 | % |  | 3.12  3.84 | %
|Expected life (years)   |  | 6.5  9.5     |   |  | 6  9       |   |  | 5  8       |  
|Dividends               |  |              |   |  |            |   |  |            |  
|                        | 



60



---

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



|                               |  |                        |   |      |                              |       |                        |           |   |                              |   |                        |  |           |                              |  |   |      
|------------------------------ |  | ---------------------- | - | ---- | ---------------------------- | ----- | ---------------------- | --------- | - | ---------------------------- | - | ---------------------- |  | --------- | ---------------------------- |  | - | -----
|                               |  | 2006                   |   | 2005 |                              | 2004 
|                               |  | SharesSubject toOption |   |      | WeightedAverageExercisePrice |       | SharesSubject toOption |           |   | WeightedAverageExercisePrice |   | SharesSubject toOption |  |           | WeightedAverageExercisePrice
|                               |  |                        |   |      |                              |      
|Outstanding, beginning of year |  | 1,401,100              |   |      | $                            | 23.56 |                        | 1,438,000 |   |                              | $ | 18.34                  |  | 1,497,750 |                              |  | $ | 16.25
|Granted                        |  | 176,400                |   |      |                              | 38.87 |                        | 347,400   |   |                              |   | 36.36                  |  | 229,000   |                              |  |   | 25.09
|Exercised                      |  | (90,500                | ) |      |                              | 16.54 |                        | (340,050  | ) |                              |   | 14.93                  |  | (278,250  | )                            |  |   | 12.53
|Cancelled                      |  | (18,000                | ) |      |                              | 25.92 |                        | (44,250   | ) |                              |   | 20.65                  |  | (10,500   | )                            |  |   | 21.99
|                              
|Outstanding, end of year       |  | 1,469,000              |   |      | $                            | 25.80 |                        | 1,401,100 |   |                              | $ | 23.56                  |  | 1,438,000 |                              |  | $ | 18.34
|                              
|Exercisable, end of year       |  | 886,300                |   |      | $                            | 20.61 |                        | 738,200   |   |                              | $ | 18.32                  |  | 877,750   |                              |  | $ | 16.39
|                              

The aggregate intrinsic value of the option shares outstanding and exercisable at October 27, 2006 was
$15.4 million and $13.3 million, respectively.

The number of option shares vested or that are expected to vest at October 27, 2006 was
1.4 million and the aggregate intrinsic value was $17.7 million. The weighted average exercise price and weighted average remaining contractual term of option shares vested or that are expected to vest at October 27, 2006 was $25.67
and 6.24 years, respectively. The weighted-average remaining contractual term of option shares currently exercisable is 4.9 years as of October 27, 2006.

The table below presents stock activity related to stock options exercised in fiscal 2006 and 2005:

In Thousands



|                                                |  |      |       |      |   |      
|----------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                |  | 2006 |       | 2005
|                                                |  |     
|Proceeds from stock options exercised           |  | $    | 1,497 |      | $ | 2,539
|Tax benefits related to stock options exercised |  | $    | 797   |      | $ | 2,690
|Intrinsic value of stock options exercised      |  | $    | 2,266 |      | $ | 7,575

Total unrecognized compensation expense for options that have not vested as of October 27, 2006, is
$4.6 million, which will be recognized over a weighted average period of 1.3 years. The total fair value of option shares vested during the year ended October 27, 2006 was $3.3 million.



61



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The following table summarizes information for stock options outstanding at October 27, 2006:



|                         |  |                     |  |                                      |  |   |                      |  |         |  |   |                     
|------------------------ |  | ------------------- |  | ------------------------------------ |  | - | -------------------- |  | ------- |  | - | --------------------
|                         |  | Options Outstanding |  | Options Exercisable                 
|Range of Exercise Prices |  | Shares              |  | WeightedAverageRemainingLife (years) |  |   | WeightedAveragePrice |  | Shares  |  |   | WeightedAveragePrice
|                         |  |                     |  |                                      | 
|$11.38  15.82           |  | 266,000             |  | 3.95                                 |  | $ | 13.89                |  | 266,000 |  | $ | 13.89               
|15.83  19.88            |  | 284,200             |  | 4.93                                 |  |   | 18.78                |  | 239,200 |  |   | 18.81               
|19.89  23.85            |  | 264,500             |  | 5.27                                 |  |   | 22.53                |  | 206,500 |  |   | 22.16               
|23.86  35.12            |  | 307,500             |  | 7.45                                 |  |   | 30.56                |  | 130,750 |  |   | 29.01               
|35.13  40.80            |  | 346,800             |  | 8.86                                 |  |   | 38.97                |  | 43,850  |  |   | 38.90               
|                        



NOTE 14: 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 2006, there were no shares of preferred stock or serial preferred stock outstanding.

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



62



---

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.



NOTE 15: Acquisitions and Sale of Product Line

Acquisitions

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 $65.0 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. £10.0 million, or approximately $19.0 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 a preliminary independent valuation report, as management continues to finalize the valuation of certain assets. 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 amortizationPrograms (17 year weighted average useful life) |  |   | 20,921
|                                                                                         | 
|Goodwill                                                                                 |  |   | 29,544
|Deferred income tax benefit                                                              |  |   | 2,151 
|                                                                                        
|Total assets acquired                                                                    |  |   | 85,058
|                                                                                         | 
|Debt assumed                                                                             |  |   | 4,212 
|Current liabilities assumed                                                              |  |   | 9,182 
|Deferred tax liabilities                                                                 |  |   | 6,648 
|                                                                                        
|Net assets acquired                                                                      |  | $ | 65,016
|                                                                                        



63



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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 a preliminary independent
valuation report, as management continues to finalize the value of certain acquired assets. 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
|                                                    



64



---

On June 3, 2005, the Company acquired Palomar Products, Inc. (Palomar), a California-based manufacturer of
secure military communications products, for $29.1 million, including a $4.2 million escrow deposit. 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 a valuation report. 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                                        |  |   | 17,166
|                                               
|Total assets acquired                           |  |   | 40,010
|                                                | 
|Current liabilities assumed                     |  |   | 6,571 
|Deferred tax liabilities                        |  |   | 4,317 
|                                               
|Net assets acquired                             |  | $ | 29,122
|                                               

On August 27, 2004, the Company acquired Leach Holding Corporation (Leach), a manufacturer of electrical
power switching, control and data communication devices for the aerospace industry for approximately $147.4 million including acquisition costs. Leach also manufactures medical diagnostic, therapeutic and patient monitoring devices, and
analytical, optical and biosensor instruments for medical, laboratory and industrial applications.

The aerospace business is included in the
Sensors & Systems segment and the medical business is included in the Avionics & Controls segment.



65



---

The following summarizes the estimated fair market value of the assets acquired and liabilities assumed at the date of
acquisition. The amount allocated to goodwill is not expected to be deductible for income tax purposes.

In Thousands

As of August 27, 2004



|                                                     |  |   |        
|---------------------------------------------------- |  | - | -------
|Current Assets                                       |  | $ | 50,977 
|Property, plant and equipment                        |  |   | 24,380 
|Intangible assets subject to amortization            |  |   |        
|Programs (20 year weighted average useful life)      |  |   | 30,117 
|Patents (15 year weighted average useful life)       |  |   | 2,235  
|Leasehold interest (64 year remaining term of lease) |  |   | 4,300  
|Other (10 year useful life)                          |  |   | 4,721  
|                                                    
|                                                     |  |   | 41,373 
|                                                     | 
|Trade names                                          |  |   | 13,720 
|Deferred income tax benefits                         |  |   | 14,123 
|Goodwill                                             |  |   | 56,441 
|Other assets                                         |  |   | 4,259  
|                                                    
|Total assets acquired                                |  |   | 205,273
|                                                     | 
|Current liabilities assumed                          |  |   | 20,631 
|Long-term debt                                       |  |   | 2,192  
|Pension and other liabilities                        |  |   | 20,144 
|Deferred tax liabilities                             |  |   | 12,511 
|Minority interest                                    |  |   | 2,356  
|                                                    
|Net assets acquired                                  |  | $ | 147,439
|                                                    

On December 1, 2003, the Company acquired AVISTA, Incorporated (AVISTA), a Wisconsin-based developer of
embedded avionic software, for approximately $13.3 million, including contingent purchase price payments of $3.3 million and $3.5 million made in December 2004 and 2005, respectively, which were recorded as additional consideration
for the acquired assets. AVISTA provides a software engineering center to support the Companys customers with such applications as primary flight displays, flight management systems, air data computers and engine control systems. AVISTA is
included in the Avionics & Controls segment. Revenues are largely fees charged for software engineering services.

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.

Sale of
Product Line

During the fourth quarter of fiscal 2004, the Company sold a product line in its Sensors & Systems segment and recorded a gain of
$3.4 million.



66



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NOTE 16: 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 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 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.



67



---

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



|                                  |  |      |           |   |      |   |           |      |  |   |         |  
|--------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | ------- | -
|In Thousands                      |  | 2006 |           |   | 2005 |   |           | 2004 | 
|                                  |  |      |          
|Sales                             |  |      |           |   |      |   |           |      |  |   |         |  
|Avionics & Controls               |  | $    | 283,011   |   |      | $ | 261,550   |      |  | $ | 209,498 |  
|Sensors & Systems                 |  |      | 333,257   |   |      |   | 319,539   |      |  |   | 180,768 |  
|Advanced Materials                |  |      | 356,007   |   |      |   | 254,314   |      |  |   | 223,344 |  
|                                  | 
|                                  |  | $    | 972,275   |   |      | $ | 835,403   |      |  | $ | 613,610 |  
|                                  | 
|                                  |  |      |          
|Income From Continuing Operations |  |      |           |   |      |   |           |      |  |   |         |  
|Avionics & Controls               |  | $    | 45,050    |   |      | $ | 37,325    |      |  | $ | 32,077  |  
|Sensors & Systems                 |  |      | 29,305    |   |      |   | 34,482    |      |  |   | 7,809   |  
|Advanced Materials                |  |      | 46,493    |   |      |   | 33,992    |      |  |   | 28,004  |  
|                                  | 
|Segment Earnings                  |  |      | 120,848   |   |      |   | 105,799   |      |  |   | 67,890  |  
|                                  |  |      |          
|Corporate expense                 |  |      | (27,338   | ) |      |   | (23,513   | )    |  |   | (17,472 | )
|Other income (expense)            |  |      | 490       |   |      |   | (514      | )    |  |   | 509     |  
|Loss on extinguishment of debt    |  |      | (2,156    | ) |      |   |          |      |  |   |        |  
|Gain on sale of product line      |  |      |          |   |      |   |          |      |  |   | 3,434   |  
|Interest income                   |  |      | 2,642     |   |      |   | 4,057     |      |  |   | 1,964   |  
|Interest expense                  |  |      | (21,290   | ) |      |   | (18,159   | )    |  |   | (17,336 | )
|                                  | 
|                                  |  | $    | 73,196    |   |      | $ | 67,670    |      |  | $ | 38,989  |  
|                                  | 
|                                  |  |      |          
|Identifiable Assets               |  |      |           |   |      |   |           |      |  |   |         |  
|Avionics & Controls               |  | $    | 266,090   |   |      | $ | 245,016   |      |  | $ | 198,142 |  
|Sensors & Systems                 |  |      | 431,091   |   |      |   | 398,801   |      |  |   | 374,123 |  
|Advanced Materials                |  |      | 518,841   |   |      |   | 266,327   |      |  |   | 267,811 |  
|Other                             |  |      |          |   |      |   |          |      |  |   | 2       |  
|Corporate1                        |  |      | 74,429    |   |      |   | 205,104   |      |  |   | 95,270  |  
|                                  | 
|                                  |  | $    | 1,290,451 |   |      | $ | 1,115,248 |      |  | $ | 935,348 |  
|                                  | 
|                                  |  |      |          
|Capital Expenditures              |  |      |           |   |      |   |           |      |  |   |         |  
|Avionics & Controls               |  | $    | 4,890     |   |      | $ | 3,538     |      |  | $ | 6,483   |  
|Sensors & Systems                 |  |      | 10,093    |   |      |   | 11,155    |      |  |   | 3,335   |  
|Advanced Materials                |  |      | 11,424    |   |      |   | 8,283     |      |  |   | 11,492  |  
|Discontinued Operations           |  |      |          |   |      |   | 46        |      |  |   | 326     |  
|Corporate                         |  |      | 133       |   |      |   | 754       |      |  |   | 490     |  
|                                  | 
|                                  |  | $    | 26,540    |   |      | $ | 23,776    |      |  | $ | 22,126  |  
|                                  | 



68



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|                                                                                             |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|In Thousands                                                                                 |  | 2006 |         |   | 2005 |   |         | 2004 | 
|                                                                                             |  |      |        
|Depreciation and Amortization                                                                |  |      |         |   |      |   |         |      |  |   |         |  
|Avionics & Controls                                                                          |  | $    | 6,904   |   |      | $ | 6,972   |      |  | $ | 5,525   |  
|Sensors & Systems                                                                            |  |      | 15,097  |   |      |   | 14,311  |      |  |   | 10,337  |  
|Advanced Materials                                                                           |  |      | 19,164  |   |      |   | 12,469  |      |  |   | 12,394  |  
|Discontinued Operations                                                                      |  |      |        |   |      |   | 141     |      |  |   | 1,452   |  
|Corporate                                                                                    |  |      | 1,668   |   |      |   | 1,415   |      |  |   | 1,437   |  
|                                                                                             | 
|                                                                                             |  | $    | 42,833  |   |      | $ | 35,308  |      |  | $ | 31,145  |  
|                                                                                             | 
|1Primarily cash, prepaid pension expense (see Note 9) and deferred tax assets (see
Note 10). | 
|The Companys operations by geographic area for the last three fiscal years were as follows: | 
|                                                                                             |  |      |        
|In Thousands                                                                                 |  | 2006 |         |   | 2005 |   |         | 2004 | 
|                                                                                             |  |      |        
|Sales                                                                                        |  |      |         |   |      |   |         |      |  |   |         |  
|Domestic                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Unaffiliated customers  U.S.                                                                |  | $    | 535,259 |   |      | $ | 489,644 |      |  | $ | 369,424 |  
|Unaffiliated customers  export                                                              |  |      | 120,247 |   |      |   | 95,370  |      |  |   | 88,567  |  
|Intercompany                                                                                 |  |      | 12,017  |   |      |   | 10,179  |      |  |   | 2,769   |  
|                                                                                             | 
|                                                                                             |  |      | 667,523 |   |      |   | 595,193 |      |  |   | 460,760 |  
|                                                                                             | 
|                                                                                             |  |      |        
|France                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Unaffiliated customers                                                                       |  |      | 121,553 |   |      |   | 108,236 |      |  |   | 58,788  |  
|Intercompany                                                                                 |  |      | 14,878  |   |      |   | 13,528  |      |  |   | 5,050   |  
|                                                                                             | 
|                                                                                             |  |      | 136,431 |   |      |   | 121,764 |      |  |   | 63,838  |  
|                                                                                             | 
|                                                                                             |  |      |        
|United Kingdom                                                                               |  |      |         |   |      |   |         |      |  |   |         |  
|Unaffiliated customers                                                                       |  |      | 165,204 |   |      |   | 108,901 |      |  |   | 90,531  |  
|Intercompany                                                                                 |  |      | 11,931  |   |      |   | 3,021   |      |  |   | 2,406   |  
|                                                                                             | 
|                                                                                             |  |      | 177,135 |   |      |   | 111,922 |      |  |   | 92,937  |  
|                                                                                             | 
|                                                                                             |  |      |        
|All Other Foreign                                                                            |  |      |         |   |      |   |         |      |  |   |         |  
|Unaffiliated customers                                                                       |  |      | 30,012  |   |      |   | 33,252  |      |  |   | 6,300   |  
|Intercompany                                                                                 |  |      | 4,747   |   |      |   | 2,850   |      |  |   | 938     |  
|                                                                                             | 
|                                                                                             |  |      | 34,759  |   |      |   | 36,102  |      |  |   | 7,238   |  
|                                                                                             | 
|                                                                                             |  |      |        
|Eliminations                                                                                 |  |      | (43,573 | ) |      |   | (29,578 | )    |  |   | (11,163 | )
|                                                                                             | 
|                                                                                             |  | $    | 972,275 |   |      | $ | 835,403 |      |  | $ | 613,610 |  
|                                                                                             | 



69



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|                     |  |      |           |      |   |         |  |   |        
|-------------------- |  | ---- | --------- | ---- | - | ------- |  | - | -------
|In Thousands         |  | 2006 |           | 2005 |   | 2004   
|                     |  |      |          
|Segment Earnings1    |  |      |           |      |   |         |  |   |        
|Domestic             |  | $    | 95,496    |      | $ | 79,555  |  | $ | 62,743 
|France               |  |      | 12,239    |      |   | 14,987  |  |   | 227    
|United Kingdom       |  |      | 9,466     |      |   | 7,975   |  |   | 4,746  
|All other foreign    |  |      | 3,647     |      |   | 3,282   |  |   | 174    
|                    
|                     |  | $    | 120,848   |      | $ | 105,799 |  | $ | 67,890 
|                    
|                     |  |      |          
|Identifiable Assets2 |  |      |           |      |   |         |  |   |        
|Domestic             |  | $    | 697,804   |      | $ | 569,000 |  | $ | 432,365
|France               |  |      | 157,631   |      |   | 140,049 |  |   | 197,431
|United Kingdom       |  |      | 308,493   |      |   | 190,090 |  |   | 202,411
|All other foreign    |  |      | 52,094    |      |   | 11,005  |  |   | 7,871  
|                    
|                     |  | $    | 1,216,022 |      | $ | 910,144 |  | $ | 840,078
|                    



|1 | Before corporate expense, shown on page 68.
|- | -------------------------------------------



|2 | Excludes corporate, shown on page 68.
|- | -------------------------------------

The Companys principal foreign operations consist of manufacturing facilities located in 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 $219.2 million, $214.4 million and $144.3 million of Sensors & Systems sales in
fiscal 2006, 2005 and 2004, 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 29.1% and 4.3%,
respectively, in fiscal 2006 and 12.0% of consolidated sales. In fiscal 2005, U.S. Government sales as a percent of Advanced Materials and Avionics & Controls sales were 35.4% and 4.0%, respectively, and 12.7% 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:



|                                  |  |      |   |  |      |   |  |      |  
|--------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                  |  | 2006 |   |  | 2005 |   |  | 2004 |  
|                                  |  |      |  
|Elastomeric products              |  | 13   | % |  | 14   | % |  | 16   | %
|Sensors                           |  | 14   | % |  | 16   | % |  | 19   | %
|Aerospace switches and indicators |  | 11   | % |  | 12   | % |  | 13   | %
|                                  | 



70



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NOTE 17: Quarterly Financial Data (Unaudited)

The following is a summary of unaudited quarterly financial information:

In Thousands, Except Per Share Amounts



|                                   |  |        |         |       |   |         |        |  |   |         |   |  |   |         |     
|---------------------------------- |  | ------ | ------- | ----- | - | ------- | ------ |  | - | ------- | - |  | - | ------- | ----
|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  |     
|                                   |  |        |         |      
|Income from continuing operations1 |  |        | 18,369  |       |   | 11,223  | 2      |  |   | 17,659  | 3 |  |   | 8,364   | 4, 5
|                                   | 
|Net earnings                       |  | $      | 18,369  |       | $ | 11,223  | 2      |  | $ | 17,659  | 3 |  | $ | 8,364   | 4, 5
|                                   | 
|                                   |  |        |         |      
|Earnings per share  basic         |  |        |         |       |   |         |        |  |   |         |   |  |   |         |     
|Continuing operations              |  | $      | .72     |       | $ | .44     |        |  | $ | .70     |   |  | $ | .33     |     
|                                   | 
|Earnings per share  basic         |  | $      | .72     |       | $ | .44     |        |  | $ | .70     |   |  | $ | .33     |     
|                                   | 
|                                   |  |        |         |      
|Earnings per share  diluted       |  |        |         |       |   |         |        |  |   |         |   |  |   |         |     
|Continuing operations6             |  | $      | .71     |       | $ | .43     |        |  | $ | .68     |   |  | $ | .32     |     
|                                   | 
|Earnings per share  diluted6      |  | $      | .71     |       | $ | .43     |        |  | $ | .68     |   |  | $ | .32     |     
|                                   | 



71



---

In Thousands, Except Per Share Amounts



|                                                                                                                                    |  |        |         |       |   |         |        |  |   |         |   |  |   |        
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------ | ------- | ----- | - | ------- | ------ |  | - | ------- | - |  | - | -------
|Fiscal Year 2005                                                                                                                    |  | Fourth |         | Third |   |         | Second |  |   | First  
|                                                                                                                                    |  |        |         |      
|Net sales                                                                                                                           |  | $      | 224,146 |       | $ | 209,873 |        |  | $ | 211,592 |   |  | $ | 189,792
|Gross margin                                                                                                                        |  |        | 69,619  |       |   | 65,693  |        |  |   | 68,538  |   |  |   | 58,100 
|                                                                                                                                    |  |        |         |      
|Income from continuing operations                                                                                                   |  |        | 15,366  |       |   | 11,859  | 7      |  |   | 13,726  |   |  |   | 10,083 
|Income from discontinued operations                                                                                                 |  |        | 24      |       |   | 3       |        |  |   | (562    | ) |  |   | 7,527  
|                                                                                                                                   
|Net earnings                                                                                                                        |  | $      | 15,390  |       | $ | 11,862  | 7      |  | $ | 13,164  |   |  | $ | 17,610 
|                                                                                                                                   
|                                                                                                                                    |  |        |         |      
|Earnings per share  basic                                                                                                          |  |        |         |       |   |         |        |  |   |         |   |  |   |        
|Continuing operations                                                                                                               |  | $      | .61     |       | $ | .47     |        |  | $ | .55     |   |  | $ | .42    
|Discontinued operations                                                                                                             |  |        |        |       |   |        |        |  |   | (.03    | ) |  |   | .31    
|                                                                                                                                   
|Earnings per share  basic                                                                                                          |  | $      | .61     |       | $ | .47     |        |  | $ | .52     |   |  | $ | .73    
|                                                                                                                                   
|                                                                                                                                    |  |        |         |      
|Earnings per share  diluted                                                                                                        |  |        |         |       |   |         |        |  |   |         |   |  |   |        
|Continuing operations6                                                                                                              |  | $      | .60     |       | $ | .46     |        |  | $ | .54     |   |  | $ | .41    
|Discontinued operations6                                                                                                            |  |        |        |       |   |        |        |  |   | (.02    | ) |  |   | .31    
|                                                                                                                                   
|Earnings per share  diluted6                                                                                                       |  | $      | .60     |       | $ | .46     |        |  | $ | .52     |   |  | $ | .72    
|                                                                                                                                   
|1The effects of the business interruption insurance recovery are included in income from continuing
operations and presented below:
|                                                                                                                                    |  | Fourth |         | Third |   |         | Second |  |   | First  
|Fiscal Year 2006                                                                                                                    |  | $      | 4,104   |       | $ | 786     |        |  | $ |        |   |  | $ |       



|2 | 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.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3 | 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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4 | 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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------



|5 | Included a $2.2 million loss on early extinguishment of debt.
|- | -------------------------------------------------------------



|6 | 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.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7 | Included 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 U.S. and non-U.S. tax returns to the provision for income taxes.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



72



---

NOTE 18: 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 2006, 2005 and 2004 for
(a) Esterline Technologies Corporation (the Parent); (b) on a combined basis, the subsidiary guarantors (Guarantor Subsidiaries) of the 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., EA Technologies Corporation, Equipment
Sales Co., Esterline Sensors Services Americas, Inc., Esterline Technologies Holdings Limited, H.A. Sales Co., Hauser Inc., Hytek Finishes Co., Janco Corporation, Kirkhill-TA Co., Korry Electronics Co., Leach Holding
Corporation, Leach International Corporation, 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.,
Auxitrol Technologies S.A.S., Darchem Engineering Limited, Darchem Holdings Ltd., Esterline Acquisition Ltd. (U.K.), Esterline Input Devices Asia Ltd. (Barbados), Esterline Input Devices Ltd. (Shanghai), Esterline Sensors Services Asia PTD,
Ltd., Esterline Technologies Denmark Aps (Denmark), Esterline Technologies Ltd. (England), Esterline Technologies Ltd. (Hong Kong), 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 Mexico S. de R.L. de C.V. (Mexico), Leach International U.K. (England), Leach Italia Srl. (Italy), LRE Medical GmbH (Germany), ML Wallop
Defence Systems Ltd. (U.K.), Muirhead Aerospace Ltd., Norcroft Dynamics Ltd., Pressure Systems International Ltd., Wallop Defence Systems Limited, Weston Aero Ltd. (England), and Weston Aerospace Ltd. (England). The guarantor subsidiaries
are direct and indirect wholly-owned subsidiaries of Esterline Technologies and have fully and unconditionally, jointly and severally, guaranteed the Senior Subordinated Notes.



73



---

Condensed Consolidating Balance Sheet as of October 27, 2006

In Thousands



|                                   |  |        |           |                       |   |                            |  |              |         |  |       |            |   |  |   |          
|---------------------------------- |  | ------ | --------- | --------------------- | - | -------------------------- |  | ------------ | ------- |  | ----- | ---------- | - |  | - | ---------
|                                   |  | Parent |           | GuarantorSubsidiaries |   | 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    
|Short-term investments             |  |        |          |                       |   |                           |  |              |        |  |       |           |   |  |   |         
|Accounts receivable, net           |  |        | 301       |                       |   | 105,995                    |  |              | 85,441  |  |       |           |   |  |   | 191,737  
|Inventories                        |  |        |          |                       |   | 110,904                    |  |              | 74,942  |  |       |           |   |  |   | 185,846  
|Income tax refundable              |  |        |          |                       |   | 4                          |  |              | 6,227   |  |       |           |   |  |   | 6,231    
|Deferred income tax benefits       |  |        | 25,227    |                       |   | 5                          |  |              | 2,700   |  |       |           |   |  |   | 27,932   
|Prepaid expenses                   |  |        | 164       |                       |   | 4,631                      |  |              | 4,750   |  |       |           |   |  |   | 9,545    
|                                  
|Total Current Assets               |  |        | 44,444    |                       |   | 224,211                    |  |              | 199,683 |  |       |           |   |  |   | 468,338  
|                                   |  |        |           |                       |  
|Property, Plant & Equipment, Net   |  |        | 2,324     |                       |   | 105,621                    |  |              | 62,497  |  |       |           |   |  |   | 170,442  
|Goodwill                           |  |        |          |                       |   | 195,474                    |  |              | 170,681 |  |       |           |   |  |   | 366,155  
|Intangibles, Net                   |  |        | 73        |                       |   | 75,928                     |  |              | 165,656 |  |       |           |   |  |   | 241,657  
|Debt Issuance Costs, Net           |  |        | 4,469     |                       |   |                           |  |              |        |  |       |           |   |  |   | 4,469    
|Deferred Income Tax Benefits       |  |        | 13,531    |                       |   |                           |  |              | 1,259   |  |       |           |   |  |   | 14,790   
|Other Assets                       |  |        | 3,536     |                       |   | 15,344                     |  |              | 5,720   |  |       |           |   |  |   | 24,600   
|Amounts Due To (From) Subsidiaries |  |        | 247,727   |                       |   | 85,734                     |  |              |        |  |       | (333,461   | ) |  |   |         
|Investment in Subsidiaries         |  |        | 747,784   |                       |   |                           |  |              |        |  |       | (747,784   | ) |  |   |         
|                                  
|Total Assets                       |  | $      | 1,063,888 |                       | $ | 702,312                    |  | $            | 605,496 |  | $     | (1,081,245 | ) |  | $ | 1,290,451
|                                  



74



---

Condensed Consolidating Balance Sheet as of October 27, 2006

In Thousands



|                                           |  |        |           |                       |   |         |                            |  |              |         |  |       |            |   |  |   |          
|------------------------------------------ |  | ------ | --------- | --------------------- | - | ------- | -------------------------- |  | ------------ | ------- |  | ----- | ---------- | - |  | - | ---------
|                                           |  | Parent |           | GuarantorSubsidiaries |   |         | Non-Guarantor Subsidiaries |  | Eliminations |         |  | Total
|                                           |  |        |           |                       |  
|Liabilities and Shareholders Equity       |  |        |           |                       |   |         |                            |  |              |         |  |       |            |   |  |   |          
|                                           |  |        |           |                       |  
|Current Liabilities                        |  |        |           |                       |   |         |                            |  |              |         |  |       |            |   |  |   |          
|Accounts payable                           |  | $      | 725       |                       | $ | 20,924  |                            |  | $            | 41,044  |  | $     |           |   |  | $ | 62,693   
|Accrued liabilities                        |  |        | 30,651    |                       |   | 57,687  |                            |  |              | 33,081  |  |       |           |   |  |   | 121,419  
|Credit facilities                          |  |        | 5,000     |                       |   |        |                            |  |              | 3,075   |  |       |           |   |  |   | 8,075    
|Current maturities of long-term debt       |  |        | 4,054     |                       |   | 792     |                            |  |              | 692     |  |       |           |   |  |   | 5,538    
|Federal and foreign income taxes           |  |        | 2,791     |                       |   | 72      |                            |  |              | 11      |  |       |           |   |  |   | 2,874    
|                                          
|Total Current Liabilities                  |  |        | 43,221    |                       |   | 79,475  |                            |  |              | 77,903  |  |       |           |   |  |   | 200,599  
|                                           |  |        |           |                       |  
|Long-Term Debt, Net                        |  |        | 278,365   |                       |   | 2,592   |                            |  |              | 1,350   |  |       |           |   |  |   | 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         |  |        |          |                       |   |        |                            |  |              | 301,391 |  |       | (301,391   | ) |  |   |         
|Minority Interest                          |  |        |          |                       |   |        |                            |  |              | 3,578   |  |       |           |   |  |   | 3,578    
|Shareholders Equity                       |  |        | 707,989   |                       |   | 610,267 |                            |  |              | 169,587 |  |       | (779,854   | ) |  |   | 707,989  
|                                          
|Total Liabilities and Shareholders Equity |  | $      | 1,063,888 |                       | $ | 702,312 |                            |  | $            | 605,496 |  | $     | (1,081,245 | ) |  | $ | 1,290,451
|                                          



75



---

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

In Thousands



|                                                                |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|--------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |        
|                                                                |  |        |         |   |                      
|Net Sales                                                       |  | $      |        |   |                       | $ | 640,688 |                           |  | $ | 346,884      |   |  | $     | (15,297 | ) |  | $ | 972,275 |  
|Cost of Sales                                                   |  |        |        |   |                       |   | 442,497 |                           |  |   | 244,219      |   |  |       | (15,297 | ) |  |   | 671,419 |  
|                                                                | 
|                                                                |  |        |        |   |                       |   | 198,191 |                           |  |   | 102,665      |   |  |       |        |   |  |   | 300,856 |  
|Expenses                                                        |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Selling, general and administrative                             |  |        |        |   |                       |   | 96,183  |                           |  |   | 63,441       |   |  |       |        |   |  |   | 159,624 |  
|Research, development and engineering                           |  |        |        |   |                       |   | 22,298  |                           |  |   | 30,314       |   |  |       |        |   |  |   | 52,612  |  
|                                                                | 
|Total Expenses                                                  |  |        |        |   |                       |   | 118,481 |                           |  |   | 93,755       |   |  |       |        |   |  |   | 212,236 |  
|Other                                                           |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Other income                                                    |  |        |        |   |                       |   |        |                           |  |   | (490         | ) |  |       |        |   |  |   | (490    | )
|Insurance recovery                                              |  |        |        |   |                       |   |        |                           |  |   | (4,890       | ) |  |       |        |   |  |   | (4,890  | )
|                                                                | 
|Total Other                                                     |  |        |        |   |                       |   |        |                           |  |   | (5,380       | ) |  |       |        |   |  |   | (5,380  | )
|                                                                | 
|Operating Earnings from Continuing Operations                   |  |        |        |   |                       |   | 79,710  |                           |  |   | 14,290       |   |  |       |        |   |  |   | 94,000  |  
|                                                                |  |        |         |   |                      
|Interest income                                                 |  |        | (20,857 | ) |                       |   | (2,522  | )                         |  |   | (3,959       | ) |  |       | 24,696  |   |  |   | (2,642  | )
|Interest expense                                                |  |        | 20,551  |   |                       |   | 4,029   |                           |  |   | 21,406       |   |  |       | (24,696 | ) |  |   | 21,290  |  
|Loss on extinguishment of debt                                  |  |        | 2,156   |   |                       |   |        |                           |  |   |             |   |  |       |        |   |  |   | 2,156   |  
|                                                                | 
|Other Expense, Net                                              |  |        | 1,850   |   |                       |   | 1,507   |                           |  |   | 17,447       |   |  |       |        |   |  |   | 20,804  |  
|                                                                | 
|                                                                |  |        |         |   |                      
|Income (Loss) from ContinuingOperations Before Taxes            |  |        | (1,850  | ) |                       |   | 78,203  |                           |  |   | (3,157       | ) |  |       |        |   |  |   | 73,196  |  
|Income Tax Expense (Benefit)                                    |  |        | (517    | ) |                       |   | 18,387  |                           |  |   | (1,154       | ) |  |       |        |   |  |   | 16,716  |  
|                                                                | 
|Income (Loss) From ContinuingOperations BeforeMinority Interest |  |        | (1,333  | ) |                       |   | 59,816  |                           |  |   | (2,003       | ) |  |       |        |   |  |   | 56,480  |  
|Minority Interest                                               |  |        |        |   |                       |   |        |                           |  |   | (865         | ) |  |       |        |   |  |   | (865    | )
|                                                                | 
|Income (Loss) From Continuing Operations                        |  |        | (1,333  | ) |                       |   | 59,816  |                           |  |   | (2,868       | ) |  |       |        |   |  |   | 55,615  |  
|                                                                |  |        |         |   |                      
|Equity in Net Income of Consolidated Subsidiaries               |  |        | 56,948  |   |                       |   |        |                           |  |   |             |   |  |       | (56,948 | ) |  |   |        |  
|                                                                | 
|Net Income (Loss)                                               |  | $      | 55,615  |   |                       | $ | 59,816  |                           |  | $ | (2,868       | ) |  | $     | (56,948 | ) |  | $ | 55,615  |  
|                                                                | 



76



---

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

In Thousands



|                                                                          |  |        |        |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|------------------------------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | -------- | -
|                                                                          |  | Parent |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |        
|                                                                          |  |        |        |   |                      
|Cash Flows Provided (Used) by Operating Activities                        |  |        |        |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|Net earnings (loss)                                                       |  | $      | 55,615 |   |                       | $ | 59,816  |                           |  | $ | (2,868       | ) |  | $     | (56,948 | ) |  | $ | 55,615   |  
|Minority interest                                                         |  |        |       |   |                       |   |        |                           |  |   | 865          |   |  |       |        |   |  |   | 865      |  
|Depreciation & amortization                                               |  |        |       |   |                       |   | 24,201  |                           |  |   | 18,632       |   |  |       |        |   |  |   | 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 acquisitionsAccounts receivable |  |        | 370    |   |                       |   | (8,948  | )                         |  |   | (7,933       | ) |  |       |        |   |  |   | (16,511  | )
|Inventories                                                               |  |        |       |   |                       |   | (25,447 | )                         |  |   | (13,794      | ) |  |       |        |   |  |   | (39,241  | )
|Prepaid expenses                                                          |  |        | 15     |   |                       |   | (138    | )                         |  |   | (1,182       | ) |  |       |        |   |  |   | (1,305   | )
|Accounts payable                                                          |  |        | (265   | ) |                       |   | 665     |                           |  |   | 7,706        |   |  |       |        |   |  |   | 8,106    |  
|Accrued liabilities                                                       |  |        | (146   | ) |                       |   | 4,040   |                           |  |   | (4,540       | ) |  |       |        |   |  |   | (646     | )
|Federal & foreign income taxes                                            |  |        | 810    |   |                       |   | (8      | )                         |  |   | (13,332      | ) |  |       |        |   |  |   | (12,530  | )
|Other liabilities                                                         |  |        | (1,579 | ) |                       |   | (4,619  | )                         |  |   | 4,521        |   |  |       |        |   |  |   | (1,677   | )
|Other, net                                                                |  |        | (1,541 | ) |                       |   | 914     |                           |  |   | (1,403       | ) |  |       |        |   |  |   | (2,030   | )
|                                                                          | 
|                                                                          |  |        | 51,108 |   |                       |   | 54,230  |                           |  |   | (11,714      | ) |  |       | (56,948 | ) |  |   | 36,676   |  
|                                                                          |  |        |        |   |                      
|Cash Flows Provided (Used) by Investing Activities                        |  |        |        |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|Purchases of capital assets                                               |  |        | (133   | ) |                       |   | (16,624 | )                         |  |   | (9,783       | ) |  |       |        |   |  |   | (26,540  | )
|Proceeds from sale of capital assets                                      |  |        | 6      |   |                       |   | 495     |                           |  |   | 142          |   |  |       |        |   |  |   | 643      |  
|Proceeds from sale of short-term investments                              |  |        | 63,266 |   |                       |   |        |                           |  |   |             |   |  |       |        |   |  |   | 63,266   |  
|Acquisitions of businesses, net                                           |  |        |       |   |                       |   | (12,566 | )                         |  |   | (177,778     | ) |  |       |        |   |  |   | (190,344 | )
|                                                                          | 
|                                                                          |  |        | 63,139 |   |                       |   | (28,695 | )                         |  |   | (187,419     | ) |  |       |        |   |  |   | (152,975 | )



77



---

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

In Thousands



|                                                               |  |        |          |   |                       |   |         |                           |  |   |              |   |       |   |        |  |   |         |  
|-------------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - | ----- | - | ------ |  | - | ------- | -
|                                                               |  | Parent |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | 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, net                               |  |        | (70,001  | ) |                       |   | (828    | )                         |  |   | (543         | ) |       |   |       |  |   | (71,372 | )
|Net change in intercompany financing                           |  |        | (214,850 | ) |                       |   | (24,103 | )                         |  |   | 182,005      |   |       |   | 56,948 |  |   |        |  
|                                                               | 
|                                                               |  |        | (175,268 | ) |                       |   | (24,931 | )                         |  |   | 182,367      |   |       |   | 56,948 |  |   | 39,116  |  
|                                                               |  |        |          |   |                      
|Effect of foreign exchange rates on cash                       |  |        |         |   |                       |   | (86     | )                         |  |   | 1,603        |   |       |   |       |  |   | 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  |  
|                                                               | 



78



---

Condensed Consolidating Balance Sheet as of October 28, 2005

In Thousands



|                                   |  |        |         |                       |   |                           |  |   |              |   |  |       |          |   |  |   |          
|---------------------------------- |  | ------ | ------- | --------------------- | - | ------------------------- |  | - | ------------ | - |  | ----- | -------- | - |  | - | ---------
|                                   |  | Parent |         | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total
|                                   |  |        |         |                       |  
|Assets                             |  |        |         |                       |   |                           |  |   |              |   |  |       |          |   |  |   |          
|                                   |  |        |         |                       |  
|Current Assets                     |  |        |         |                       |   |                           |  |   |              |   |  |       |          |   |  |   |          
|Cash and cash equivalents          |  | $      | 75,364  |                       | $ | 2,154                     |  | $ | 40,786       |   |  | $     |         |   |  | $ | 118,304  
|Cash in escrow                     |  |        | 11,918  |                       |   |                          |  |   |             |   |  |       |         |   |  |   | 11,918   
|Short-term investments             |  |        | 62,656  |                       |   |                          |  |   |             |   |  |       |         |   |  |   | 62,656   
|Accounts receivable, net           |  |        | 671     |                       |   | 96,931                    |  |   | 52,149       |   |  |       |         |   |  |   | 149,751  
|Inventories                        |  |        |        |                       |   | 84,351                    |  |   | 46,118       |   |  |       |         |   |  |   | 130,469  
|Deferred income tax benefits       |  |        | 25,115  |                       |   | 102                       |  |   | 1,651        |   |  |       |         |   |  |   | 26,868   
|Prepaid expenses                   |  |        | 179     |                       |   | 4,481                     |  |   | 2,873        |   |  |       |         |   |  |   | 7,533    
|                                  
|Total Current Assets               |  |        | 175,903 |                       |   | 188,019                   |  |   | 143,577      |   |  |       |         |   |  |   | 507,499  
|                                   |  |        |         |                       |  
|Property, Plant & Equipment, Net   |  |        | 2,687   |                       |   | 95,001                    |  |   | 40,526       |   |  |       |         |   |  |   | 138,214  
|Goodwill                           |  |        |        |                       |   | 191,919                   |  |   | 69,248       |   |  |       |         |   |  |   | 261,167  
|Intangibles, Net                   |  |        | 107     |                       |   | 82,196                    |  |   | 83,815       |   |  |       |         |   |  |   | 166,118  
|Debt Issuance Costs, Net           |  |        | 5,144   |                       |   |                          |  |   |             |   |  |       |         |   |  |   | 5,144    
|Deferred Income Tax Benefits       |  |        | 11,257  |                       |   |                          |  |   | 2,063        |   |  |       |         |   |  |   | 13,320   
|Other Assets                       |  |        | 2,638   |                       |   | 16,266                    |  |   | 4,882        |   |  |       |         |   |  |   | 23,786   
|Amounts Due To (From) Subsidiaries |  |        | 134,964 |                       |   | 64,835                    |  |   |             |   |  |       | (199,799 | ) |  |   |         
|Investment in Subsidiaries         |  |        | 615,599 |                       |   | 129                       |  |   | (128         | ) |  |       | (615,600 | ) |  |   |         
|                                  
|Total Assets                       |  | $      | 948,299 |                       | $ | 638,365                   |  | $ | 343,983      |   |  | $     | (815,399 | ) |  | $ | 1,115,248
|                                  



79



---

Condensed Consolidating Balance Sheet as of October 28, 2005

In Thousands



|                                           |  |        |         |                       |   |         |                           |  |              |         |  |       |          |   |  |   |          
|------------------------------------------ |  | ------ | ------- | --------------------- | - | ------- | ------------------------- |  | ------------ | ------- |  | ----- | -------- | - |  | - | ---------
|                                           |  | Parent |         | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | Eliminations |         |  | Total
|                                           |  |        |         |                       |  
|Liabilities and Shareholders Equity       |  |        |         |                       |   |         |                           |  |              |         |  |       |          |   |  |   |          
|                                           |  |        |         |                       |  
|Current Liabilities                        |  |        |         |                       |   |         |                           |  |              |         |  |       |          |   |  |   |          
|Accounts payable                           |  | $      | 990     |                       | $ | 19,877  |                           |  | $            | 20,586  |  | $     |         |   |  | $ | 41,453   
|Accrued liabilities                        |  |        | 38,620  |                       |   | 53,246  |                           |  |              | 27,249  |  |       |         |   |  |   | 119,115  
|Credit facilities                          |  |        |        |                       |   |        |                           |  |              | 2,031   |  |       |         |   |  |   | 2,031    
|Current maturities of long-term debt       |  |        | 70,000  |                       |   |        |                           |  |              | 934     |  |       |         |   |  |   | 70,934   
|Federal and foreign income taxes           |  |        | 3,634   |                       |   | 76      |                           |  |              | 5,088   |  |       |         |   |  |   | 8,798    
|                                          
|Total Current Liabilities                  |  |        | 113,244 |                       |   | 73,199  |                           |  |              | 55,888  |  |       |         |   |  |   | 242,331  
|                                           |  |        |         |                       |  
|Long-Term Debt, Net                        |  |        | 173,988 |                       |   |        |                           |  |              | 1,694   |  |       |         |   |  |   | 175,682  
|Deferred Income Taxes                      |  |        | 30,880  |                       |   | (10     | )                         |  |              | 15,551  |  |       |         |   |  |   | 46,421   
|Other Liabilities                          |  |        | 9,323   |                       |   | 11,209  |                           |  |              | 6,705   |  |       |         |   |  |   | 27,237   
|Amounts Due To (From) Subsidiaries         |  |        |        |                       |   |        |                           |  |              | 195,829 |  |       | (195,829 | ) |  |   |         
|Minority Interest                          |  |        |        |                       |   |        |                           |  |              | 2,713   |  |       |         |   |  |   | 2,713    
|Shareholders Equity                       |  |        | 620,864 |                       |   | 553,967 |                           |  |              | 65,603  |  |       | (619,570 | ) |  |   | 620,864  
|                                          
|Total Liabilities and Shareholders Equity |  | $      | 948,299 |                       | $ | 638,365 |                           |  | $            | 343,983 |  | $     | (815,399 | ) |  | $ | 1,115,248
|                                          



80



---

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

In Thousands



|                                                                  |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|----------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                  |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | 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 | ) |                       |   | (3,015  | )                         |  |   | (2,679       | ) |  |       | 17,577  |   |  |   | (4,057  | )
|Interest expense                                                  |  |        | 18,261  |   |                       |   | 4,642   |                           |  |   | 12,833       |   |  |       | (17,577 | ) |  |   | 18,159  |  
|                                                                  | 
|Other Expense, Net                                                |  |        | 2,321   |   |                       |   | 1,627   |                           |  |   | 10,154       |   |  |       |        |   |  |   | 14,102  |  
|                                                                  | 
|                                                                  |  |        |         |   |                      
|Income (Loss) from Continuing Operations Before Taxes             |  |        | (2,371  | ) |                       |   | 61,037  |                           |  |   | 9,004        |   |  |       |        |   |  |   | 67,670  |  
|Income Tax Expense (Benefit)                                      |  |        | (728    | ) |                       |   | 14,409  |                           |  |   | 2,620        |   |  |       |        |   |  |   | 16,301  |  
|                                                                  | 
|Income (Loss) From Continuing Operations Before Minority Interest |  |        | (1,643  | ) |                       |   | 46,628  |                           |  |   | 6,384        |   |  |       |        |   |  |   | 51,369  |  
|Minority Interest                                                 |  |        |        |   |                       |   |        |                           |  |   | (335         | ) |  |       |        |   |  |   | (335    | )
|                                                                  | 
|Income (Loss) From Continuing Operations                          |  |        | (1,643  | ) |                       |   | 46,628  |                           |  |   | 6,049        |   |  |       |        |   |  |   | 51,034  |  
|                                                                  |  |        |         |   |                      
|Income From Discontinued Operations, Net of Tax                   |  |        |        |   |                       |   | 6,992   |                           |  |   |             |   |  |       |        |   |  |   | 6,992   |  
|Equity in Net Income of Consolidated Subsidiaries                 |  |        | 59,669  |   |                       |   |        |                           |  |   |             |   |  |       | (59,669 | ) |  |   |        |  
|                                                                  | 
|Net Income (Loss)                                                 |  | $      | 58,026  |   |                       | $ | 53,620  |                           |  | $ | 6,049        |   |  | $     | (59,669 | ) |  | $ | 58,026  |  
|                                                                  | 



81



---

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

In Thousands



|                                                                           |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|-------------------------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | -------- | -
|                                                                           |  | Parent |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |        
|                                                                           |  |        |          |   |                      
|Cash Flows Provided (Used) by Operating Activities                         |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|Net earnings (loss)                                                        |  | $      | 58,026   |   |                       | $ | 53,620  |                           |  | $ | 6,049        |   |  | $     | (59,669 | ) |  | $ | 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       |                           |  |   | 4,530        |   |  |       |        |   |  |   | 5,169    |  
|Other liabilities                                                          |  |        | 40       |   |                       |   | (6,838  | )                         |  |   | 384          |   |  |       |        |   |  |   | (6,414   | )
|Other, net                                                                 |  |        | 7,830    |   |                       |   | (3,783  | )                         |  |   | (4,501       | ) |  |       |        |   |  |   | (454     | )
|                                                                           | 
|                                                                           |  |        | 80,223   |   |                       |   | 49,521  |                           |  |   | 6,337        |   |  |       | (59,669 | ) |  |   | 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  | )



82



---

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

In Thousands



|                                                               |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |        |  |   |         |  
|-------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - | ----- | - | ------ |  | - | ------- | -
|                                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | 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 from stock issuance                                   |  |        | 108,490 |   |                       |   |        |                           |  |   |             |   |       |   |       |  |   | 108,490 |  
|Net change in credit facilities                                |  |        | (5,000  | ) |                       |   |        |                           |  |   | 171          |   |       |   |       |  |   | (4,829  | )
|Repayment of long-term debt, net                               |  |        | (2,781  | ) |                       |   | (57     | )                         |  |   | (464         | ) |       |   |       |  |   | (3,302  | )
|Net change in intercompany financing                           |  |        | (50,479 | ) |                       |   | (31,962 | )                         |  |   | 22,772       |   |       |   | 59,669 |  |   |        |  
|                                                               | 
|                                                               |  |        | 54,957  |   |                       |   | (32,019 | )                         |  |   | 22,479       |   |       |   | 59,669 |  |   | 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 |  
|                                                               | 



83



---

Condensed Consolidating Statement of Operations for the fiscal year ended October 29, 2004

In Thousands



|                                                                |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|--------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |        
|                                                                |  |        |         |   |                      
|Net Sales                                                       |  | $      |        |   |                       | $ | 461,067 |                           |  | $ | 155,073      |   |  | $     | (2,530  | ) |  | $ | 613,610 |  
|Cost of Sales                                                   |  |        |        |   |                       |   | 320,285 |                           |  |   | 100,835      |   |  |       | (2,530  | ) |  |   | 418,590 |  
|                                                                | 
|                                                                |  |        |        |   |                       |   | 140,782 |                           |  |   | 54,238       |   |  |       |        |   |  |   | 195,020 |  
|Expenses                                                        |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Selling, general and administrative                             |  |        |        |   |                       |   | 79,038  |                           |  |   | 39,708       |   |  |       |        |   |  |   | 118,746 |  
|Research, development and engineering                           |  |        |        |   |                       |   | 10,275  |                           |  |   | 15,581       |   |  |       |        |   |  |   | 25,856  |  
|                                                                | 
|Total Expenses                                                  |  |        |        |   |                       |   | 89,313  |                           |  |   | 55,289       |   |  |       |        |   |  |   | 144,602 |  
|Other                                                           |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Other expense (income)                                          |  |        | (520    | ) |                       |   | (239    | )                         |  |   | 250          |   |  |       |        |   |  |   | (509    | )
|Gain on sale of business                                        |  |        | (1,700  | ) |                       |   |        |                           |  |   | (1,734       | ) |  |       |        |   |  |   | (3,434  | )
|                                                                | 
|Total Other                                                     |  |        | (2,220  | ) |                       |   | (239    | )                         |  |   | (1,484       | ) |  |       |        |   |  |   | (3,943  | )
|                                                                | 
|Operating Earnings from Continuing Operations                   |  |        | 2,220   |   |                       |   | 51,708  |                           |  |   | 433          |   |  |       |        |   |  |   | 54,361  |  
|                                                                |  |        |         |   |                      
|Interest income                                                 |  |        | (14,316 | ) |                       |   | (3,017  | )                         |  |   | (828         | ) |  |       | 16,197  |   |  |   | (1,964  | )
|Interest expense                                                |  |        | 17,010  |   |                       |   | 3,272   |                           |  |   | 13,251       |   |  |       | (16,197 | ) |  |   | 17,336  |  
|                                                                | 
|Other Expense, Net                                              |  |        | 2,694   |   |                       |   | 255     |                           |  |   | 12,423       |   |  |       |        |   |  |   | 15,372  |  
|                                                                | 
|                                                                |  |        |         |   |                      
|Income (Loss) from Continuing Operations Before Taxes           |  |        | (474    | ) |                       |   | 51,453  |                           |  |   | (11,990      | ) |  |       |        |   |  |   | 38,989  |  
|Income Tax Expense (Benefit)                                    |  |        | (140    | ) |                       |   | 12,934  |                           |  |   | (3,202       | ) |  |       |        |   |  |   | 9,592   |  
|                                                                | 
|Income (Loss) From ContinuingOperationsBefore Minority Interest |  |        | (334    | ) |                       |   | 38,519  |                           |  |   | (8,788       | ) |  |       |        |   |  |   | 29,397  |  
|Minority Interest                                               |  |        |        |   |                       |   |        |                           |  |   | (22          | ) |  |       |        |   |  |   | (22     | )
|                                                                | 
|Income (Loss) From Continuing Operations                        |  |        | (334    | ) |                       |   | 38,519  |                           |  |   | (8,810       | ) |  |       |        |   |  |   | 29,375  |  
|                                                                | 
|                                                                |  |        |         |   |                      
|Income From Discontinued Operations, Net of Tax                 |  |        |        |   |                       |   | 10,208  |                           |  |   |             |   |  |       |        |   |  |   | 10,208  |  
|Equity in Net Income of Consolidated Subsidiaries               |  |        | 39,917  |   |                       |   |        |                           |  |   |             |   |  |       | (39,917 | ) |  |   |        |  
|                                                                | 
|Net Income (Loss)                                               |  | $      | 39,583  |   |                       | $ | 48,727  |                           |  | $ | (8,810       | ) |  | $     | (39,917 | ) |  | $ | 39,583  |  
|                                                                | 



84



---

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 29, 2004

In Thousands



|                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|------------------------------------------------------ |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | -------- | -
|                                                       |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |        
|                                                       |  |        |         |   |                      
|Cash Flows Provided (Used) by Operating Activities     |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|Net earnings (loss)                                    |  | $      | 39,583  |   |                       | $ | 48,727  |                           |  | $ | (8,810       | ) |  | $     | (39,917 | ) |  | $ | 39,583   |  
|Minority interest                                      |  |        |        |   |                       |   |        |                           |  |   | 22           |   |  |       |        |   |  |   | 22       |  
|Depreciation & amortization                            |  |        |        |   |                       |   | 22,320  |                           |  |   | 8,825        |   |  |       |        |   |  |   | 31,145   |  
|Deferred income tax                                    |  |        | 3,375   |   |                       |   |        |                           |  |   | (111         | ) |  |       |        |   |  |   | 3,264    |  
|Share-based compensation                               |  |        |        |   |                       |   | 3,191   |                           |  |   | 1,135        |   |  |       |        |   |  |   | 4,326    |  
|Gain on disposal of discontinued operations            |  |        |        |   |                       |   | (12,521 | )                         |  |   |             |   |  |       |        |   |  |   | (12,521  | )
|Gain on sale of land                                   |  |        |        |   |                       |   | (892    | )                         |  |   |             |   |  |       |        |   |  |   | (892     | )
|Gain on sale of product line                           |  |        | (1,700  | ) |                       |   |        |                           |  |   | (1,734       | ) |  |       |        |   |  |   | (3,434   | )
|Working capital changes, net of effect of acquisitions |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|Accounts receivable                                    |  |        | (2,126  | ) |                       |   | (5,513  | )                         |  |   | (1,393       | ) |  |       |        |   |  |   | (9,032   | )
|Inventories                                            |  |        |        |   |                       |   | (6,897  | )                         |  |   | (2,198       | ) |  |       |        |   |  |   | (9,095   | )
|Prepaid expenses                                       |  |        | (219    | ) |                       |   | 760     |                           |  |   | (1,200       | ) |  |       |        |   |  |   | (659     | )
|Accounts payable                                       |  |        | 382     |   |                       |   | (684    | )                         |  |   | 2,902        |   |  |       |        |   |  |   | 2,600    |  
|Accrued liabilities                                    |  |        | 11,800  |   |                       |   | (1,444  | )                         |  |   | (116         | ) |  |       |        |   |  |   | 10,240   |  
|Federal & foreign income taxes                         |  |        | 8,935   |   |                       |   | (804    | )                         |  |   | 820          |   |  |       |        |   |  |   | 8,951    |  
|Other liabilities                                      |  |        | 9,283   |   |                       |   | (923    | )                         |  |   | (4,001       | ) |  |       |        |   |  |   | 4,359    |  
|Other, net                                             |  |        | (9,734  | ) |                       |   | 5,668   |                           |  |   | (1,464       | ) |  |       |        |   |  |   | (5,530   | )
|                                                       | 
|                                                       |  |        | 59,579  |   |                       |   | 50,988  |                           |  |   | (7,323       | ) |  |       | (39,917 | ) |  |   | 63,327   |  
|Cash Flows Provided (Used) by Investing Activities     |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |          |  
|Purchases of capital assets                            |  |        | (490    | ) |                       |   | (18,881 | )                         |  |   | (2,755       | ) |  |       |        |   |  |   | (22,126  | )
|Proceeds from sale of discontinued operations          |  |        |        |   |                       |   | 10,000  |                           |  |   |             |   |  |       |        |   |  |   | 10,000   |  
|Proceeds from sale of product line                     |  |        | 1,700   |   |                       |   |        |                           |  |   | 1,775        |   |  |       |        |   |  |   | 3,475    |  
|Proceeds from sale of land                             |  |        |        |   |                       |   | 1,654   |                           |  |   |             |   |  |       |        |   |  |   | 1,654    |  
|Escrow deposit                                         |  |        | (12,500 | ) |                       |   |        |                           |  |   |             |   |  |       |        |   |  |   | (12,500  | )
|Proceeds from sale of capital assets                   |  |        | 23      |   |                       |   | 1,190   |                           |  |   | (435         | ) |  |       |        |   |  |   | 778      |  
|Proceeds from sale of short-term investments           |  |        | 12,797  |   |                       |   |        |                           |  |   |             |   |  |       |        |   |  |   | 12,797   |  
|Acquisitions of businesses, net                        |  |        |        |   |                       |   | (50,855 | )                         |  |   | (87,956      | ) |  |       |        |   |  |   | (138,811 | )
|                                                       | 
|                                                       |  |        | 1,530   |   |                       |   | (56,892 | )                         |  |   | (89,371      | ) |  |       |        |   |  |   | (144,733 | )



85



---

Condensed Consolidating Statement of Cash Flows for the fiscal year ended October 29, 2004

In Thousands



|                                                               |  |        |          |   |                       |   |       |                           |  |   |              |   |       |   |        |  |   |          |  
|-------------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - | ----- | - | ------ |  | - | -------- | -
|                                                               |  | Parent |          |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   | Total |  
|                                                               |  |        |          |   |                      
|Cash Flows Provided (Used) by Financing Activities             |  |        |          |   |                       |   |       |                           |  |   |              |   |       |   |        |  |   |          |  
|Proceeds provided by stock issuance under employee stock plans |  |        | 2,267    |   |                       |   |      |                           |  |   |             |   |       |   |       |  |   | 2,267    |  
|Excess tax benefits from stock option exercises                |  |        | 540      |   |                       |   |      |                           |  |   |             |   |       |   |       |  |   | 540      |  
|Net change in credit facilities                                |  |        | 5,000    |   |                       |   | (180  | )                         |  |   | (698         | ) |       |   |       |  |   | 4,122    |  
|Repayment of long-term debt, net                               |  |        | (27,996  | ) |                       |   | (77   | )                         |  |   | (1,356       | ) |       |   |       |  |   | (29,429  | )
|Debt and other issuance costs                                  |  |        | (268     | ) |                       |   |      |                           |  |   |             |   |       |   |       |  |   | (268     | )
|Net change in intercompany financing                           |  |        | (143,641 | ) |                       |   | 5,573 |                           |  |   | 98,151       |   |       |   | 39,917 |  |   |         |  
|                                                               | 
|                                                               |  |        | (164,098 | ) |                       |   | 5,316 |                           |  |   | 96,097       |   |       |   | 39,917 |  |   | (22,768  | )
|                                                               |  |        |          |   |                      
|Effect of foreign exchange rates on cash                       |  |        | 14       |   |                       |   | (89   | )                         |  |   | 2,365        |   |       |   |       |  |   | 2,290    |  
|                                                               | 
|                                                               |  |        |          |   |                      
|Net increase (decrease) in cash and cash equivalents           |  |        | (102,975 | ) |                       |   | (677  | )                         |  |   | 1,768        |   |       |   |       |  |   | (101,884 | )
|Cash and cash equivalents  beginning of year                  |  |        | 109,834  |   |                       |   | 3,030 |                           |  |   | 18,499       |   |       |   |       |  |   | 131,363  |  
|                                                               | 
|Cash and cash equivalents  end of year                        |  | $      | 6,859    |   |                       | $ | 2,353 |                           |  | $ | 20,267       |   |       | $ |       |  | $ | 29,479   |  
|                                                               | 



86



---

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 27, 2006. 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 27, 2006, the company completed the acquisition of Wallop Defence Systems Ltd. As permitted by applicable rules promulgated by the Securities and Exchange Commission, our
management excluded the Wallop Defence Systems Ltd. operations from its assessment of internal control over financial reporting as of October 27, 2006. Wallop Defence Systems Ltd. constituted approximately 6.0% and 7.7% of consolidated total
assets and total shareholders equity, respectively, as of October 27, 2006, and 0.9% and (1.4%) of consolidated net sales and net earnings, respectively, for the year then ended. Wallop Defence Systems Ltd. will be included in the
companys assessment as of October 26, 2007. Based on managements assessment and those criteria, our management concluded that our internal control over financial reporting was effective as of October 27, 2006.

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 89.



|                                               
|-----------------------------------------------
|/s/ Robert W. Cremin                           
|Robert W. Cremin                               
|Chairman, President and Chief Executive Officer
|(Principal Executive Officer)                  



87



---

|                                                                                              
|----------------------------------------------------------------------------------------------
|/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)              



88



---

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Esterline Technologies Corporation

Bellevue, Washington

We have audited managements
assessment, included in the accompanying Managements Report on Internal Control Over Financial Reporting, that Esterline Technologies Corporation maintained effective internal control over financial reporting as of October 27, 2006, 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. Our responsibility is to express an opinion on managements assessment and an opinion on
the effectiveness of 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, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, 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



89



---

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.

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 Wallop Defence Systems Ltd., which is included in the 2006 consolidated financial statements of Esterline Technologies
Corporation and constituted 6.0% and 7.7% of consolidated total assets and total shareholders equity, respectively, as of October 27, 2006 and 0.9% and (1.4%) of consolidated net sales 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 Wallop Defence Systems Ltd.

In our opinion, managements assessment that Esterline Technologies Corporation maintained effective internal control over financial reporting as of
October 27, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Esterline Technologies Corporation maintained, in all material respects, effective internal control over financial reporting as of
October 27, 2006, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Esterline Technologies Corporation as of October 27, 2006, and October 28, 2005, 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 27, 2006 of Esterline Technologies Corporation and our report dated December 18, 2006 expressed an unqualified opinion thereon.

Ernst & Young LLP

Seattle, Washington

December 18, 2006



90



---

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 27, 2006 and October 28, 2005, 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 27, 2006. 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 27, 2006 and October 28, 2005, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended October 27, 2006, in conformity with U.S. generally accepted accounting principles.

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 27, 2006,
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, 2006 expressed an unqualified opinion thereon.

As discussed in Note 1 to the financial statements, in 2006 the Company changed its method of accounting for share-based payments.



Ernst & Young LLP



Seattle, Washington

December 18, 2006



91