Exhibit 13

Financial Highlights

In Thousands, Except Per Share Amounts





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



1



---

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

OVERVIEW

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

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

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



2



---

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



3



---

Results of Continuing Operations

Fiscal 2007 Compared with Fiscal 2006

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



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

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

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

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

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

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



4



---

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

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

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

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



5



---

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

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

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

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

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



6



---

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

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

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

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

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



7



---

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



8



---

Fiscal 2006 Compared with Fiscal 2005

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



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

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

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

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

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

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

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



9



---

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

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

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

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

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



10



---

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

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

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

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

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



11



---

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.



12



---

Liquidity and Capital Resources

Working Capital and Statement of Cash Flows

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

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

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

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

Capital Expenditures

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

Debt Financing

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



13



---

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

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

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



14



---

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

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

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

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



15



---

Pension and Other Post-Retirement Benefit Obligations

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

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

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



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

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



16



---

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



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

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

Research and
Development Expense

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

Equity Offering

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

Contractual Obligations

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



|                              |  |            |  |                 |  |            |  |           |  |             
|----------------------------- |  | ---------- |  | --------------- |  | ---------- |  | --------- |  | ------------
|In Thousands                  |  |            |  |                 |  |            |  |           |  |             
|                              |  | Total      |  | Less than1 year |  | 1-3years   |  | 4-5years  |  | After 5years
|                              |  |            |  |                 | 
|Long-term debt                |  | $  467,168 |  | $  12,166       |  | $  85,500  |  | $  19,232 |  | $  350,270  
|Credit facilities             |  | 8,634      |  | 8,634           |  |           |  |          |  |            
|Operating lease obligations   |  | 75,102     |  | 14,641          |  | 25,003     |  | 18,674    |  | 16,784      
|Purchase obligations          |  | 190,403    |  | 178,323         |  | 11,344     |  | 736       |  |            
|Total contractual obligations |  | $  741,307 |  | $  213,764      |  | $  121,847 |  | $  38,642 |  | $  367,054  
|                             



17



---

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.



18



---

Disclosures About Market Risk

Interest Rate Risks

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

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

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

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

At October 26, 2007

Dollars In Thousands



|                         |  |                             |         |              |                    |   |                |   |                     |  |                     |  |      |  
|------------------------ |  | --------------------------- | ------- | ------------ | ------------------ | - | -------------- | - | ------------------- |  | ------------------- |  | ---- | -
|                         |  | Long-Term Debt  Fixed Rate |         |              | Interest Rate Swap |  
|Maturing in:             |  | PrincipalAmount             |         | AverageRates |                    |   | NotionalAmount |   | AveragePay Rate (1) |  | AverageReceive Rate | 
|                         |  |                             |         |              |                   
|2008                     |  | $                           |        |              | 7.75               | % |                | $ |                    |  | *                   |  | 7.75 | %
|2009                     |  |                             |        |              | 7.75               | % |                |   |                    |  | *                   |  | 7.75 | %
|2010                     |  |                             |        |              | 7.75               | % |                |   |                    |  | *                   |  | 7.75 | %
|2011                     |  |                             |        |              | 7.75               | % |                |   |                    |  | *                   |  | 7.75 | %
|2012                     |  |                             |        |              | 7.75               | % |                |   |                    |  | *                   |  | 7.75 | %
|Thereafter               |  |                             | 175,000 |              | 7.75               | % |                |   | 75,000              |  | *                   |  | 7.75 | %
|                         | 
|Total                    |  | $                           | 175,000 |              |                    |   |                | $ | 75,000              |  |                     |  |      |  
|                         | 
|                         |  |                             |         |              |                   
|Fair Value at 10/26/2007 |  | $                           | 177,328 |              |                    |   |                | $ | 252                 |  |                     |  |      |  



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



19



---

At October 26, 2007

Dollars In Thousands



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



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



20



---

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 Valueat 10/27/2006 |  | $                              | 108,117 |                    |   |                | $ | 1,498           |  |       |                         |  |  



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

Currency Risks

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

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



21



---

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

Firmly Committed Sales Contracts

Operations with Foreign Functional Currency

At October 26, 2007

Principal Amount by Expected Maturity



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



22



---

Derivative Contracts

Operations with Foreign Functional Currency

At October 26, 2007

Notional Amount by Expected Maturity

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



Dollars in Thousands, Except for Average Contract Rate

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



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



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



Derivative Contracts

Operations with Foreign Functional Currency

At October 26, 2007

Notional Amount by Expected Maturity

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



Dollars in Thousands, Except for Average Contract Rate

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



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



23



---

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 |                                                        | $ | 16,998
|2008         |  |                                                        | 8,074  |                                                        |   | 4,999 
|2009         |  |                                                        | 109    |                                                        |   | 1,369 
|2010         |  |                                                        |       |                                                        |   | 71    
|2011         |  |                                                        |       |                                                        |   | 63    
|Total        |  | $                                                      | 63,318 |                                                        | $ | 23,500
|             |  |                                                        |        |                                                        |   |       

Derivative Contracts

Operations with Foreign Functional Currency

At October 27, 2006

Notional Amount by Expected Maturity

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

Dollars In Thousands, Except for Average Contract Rate

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



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



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



24



---

Derivative Contracts

Operations with Foreign Functional Currency

At October 27, 2006

Notional Amount by Expected Maturity

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

Dollars In Thousands, Except for Average Contract Rate

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



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



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



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



25



---

Critical Accounting Policies

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

Revenue Recognition

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

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

Allowance for Doubtful Accounts

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

Inventories

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



26



---

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

Goodwill and Intangible Assets in Business Combinations

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

Impairment of Goodwill and Intangible Assets

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

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

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

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



27



---

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

Impairment of Long-lived Assets

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

Contingencies

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



28



---

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

Pension and Other Post-Retirement Benefits

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

Income Taxes

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

Recent Accounting Pronouncements

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

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



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



29



---

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



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



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



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



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



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



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



30



---

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

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

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



31



---

Market Price of Esterline Common Stock

In Dollars

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

Principal Market  New York Stock Exchange

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

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



32



---

Selected Financial Data

In Thousands, Except Per Share Amounts



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



33



---

Selected Financial Data

In Thousands, Except Per Share Amounts



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



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



34



---

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



35



---

Consolidated Statement of Operations

In Thousands, Except Per Share Amounts



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



36



---

Consolidated Statement of Operations

In Thousands, Except Per Share Amounts



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

See Notes to Consolidated Financial Statements.



37



---

Consolidated Balance Sheet

In Thousands, Except Share and Per Share Amounts



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

See Notes to Consolidated Financial Statements.



38



---

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

See Notes to Consolidated Financial Statements.



39



---

Consolidated Statement of Cash Flows

In Thousands



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



40



---

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

See Notes to Consolidated Financial Statements.



41



---

Consolidated Statement of Shareholders

Equity and Comprehensive Income

In Thousands, Except Per Share Amounts



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



42



---

Consolidated Statement of Shareholders

Equity and Comprehensive Income

In Thousands, Except Per Share Amounts



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

See Notes to Consolidated Financial Statements.



43



---

Notes to Consolidated Financial Statements

NOTE 1: Accounting Policies

Nature of Operations

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

Principles of Consolidation and Basis
of Presentation

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

Management Estimates

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

Concentration of Risks

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

Revenue Recognition

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



44



---

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

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

Research
and Development

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

Financial Instruments

Fair Value of Financial Instruments

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

Foreign Currency Exchange Risk Management

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



45



---

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

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

Interest Rate Risk Management

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

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



46



---

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

Foreign Currency Translation

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

Cash Equivalents and Cash in Escrow

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

Accounts Receivable

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

Inventories

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



47



---

Property, Plant and Equipment, and Depreciation

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

Debt
Issuance Costs

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

Long-lived Assets

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

Goodwill and Intangibles

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

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



48



---

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

Environmental

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

Pension Plan and Post-Retirement Benefit Plan Obligations

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

Share-Based Compensation

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



49



---

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

In Thousands, Except Per Share Amounts



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

Product Warranties

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

Earnings Per Share

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

Recent Accounting Pronouncements

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



50



---

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

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



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



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



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



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



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



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



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



51



---

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



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

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

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

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



52



---

NOTE 2: Recovery of Insurance Claims

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

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

NOTE 3: Discontinued Operations

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

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

In Thousands



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



53



---

NOTE 4: Inventories

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



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

NOTE 5: Goodwill

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

In Thousands



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



54



---

NOTE 6: Intangible Assets

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

In Thousands



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

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

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

In Thousands



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



55



---

NOTE 7: Accrued Liabilities

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



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



56



---

NOTE 8: Retirement Benefits

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

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

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

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

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



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



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



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

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



57



---

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

In Thousands

|                                            |  |                                 |         |   |             |   |        |                                |  |   |         |  
|------------------------------------------- |  | ------------------------------- | ------- | - | ----------- | - | ------ | ------------------------------ |  | - | ------- | -
|                                            |  | BeforeApplicationof FAS No. 158 |         |   | Adjustments |   |        | AfterApplicationof FAS No. 158 | 
|                                            |  |                                 |        
|Deferred income taxes                       |  | $                               | 8,204   |   |             | $ | (334   | )                              |  | $ | 7,870   |  
|Intangible assets                           |  |                                 | 39      |   |             |   | (39    | )                              |  |   |        |  
|Liabilities                                 |  |                                 | (26,994 | ) |             |   | 1,545  |                                |  |   | (25,449 | )
|Accumulated other comprehensive loss (gain) |  |                                 | 775     |   |             |   | (1,172 | )                              |  |   | (397    | )

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



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



58



---

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

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

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



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



59



---

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

In Thousands



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



60



---

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

In Thousands



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



61



---

In Thousands

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

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

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

In Thousands



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

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



62



---

NOTE 9: Income Taxes

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



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



63



---

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

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

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

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

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

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



64



---

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

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

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



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

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



65



---

NOTE 10: Debt

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



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

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

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

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



66



---

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

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

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



67



---

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

In Thousands



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

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



|             |  |      |                       |  |              |   |  |   |                       |  |              |  
|------------ |  | ---- | --------------------- |  | ------------ | - |  | - | --------------------- |  | ------------ | -
|In Thousands |  | 2007 |                       |  | 2006         |  
|             |  |      | OutstandingBorrowings |  | InterestRate |   |  |   | OutstandingBorrowings |  | InterestRate |  
|             |  |      |                       | 
|U.S.         |  | $    |                      |  |             |   |  | $ | 5,000                 |  | 6.07         | %
|Foreign      |  |      | 8,634                 |  | 5.65         | % |  |   | 3,075                 |  | 3.98         | %
|             |  | $    | 8,634                 |  |              |   |  | $ | 8,075                 |  |              |  
|             |  |      |                       |  |              |   |  |   |                       |  |              |  

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

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



68



---

NOTE 11: Commitments and Contingencies

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

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

In Thousands



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

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

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



|                     |  |   |         |  |   |                 |  |   |           |  |   |          |  |   |             
|-------------------- |  | - | ------- |  | - | --------------- |  | - | --------- |  | - | -------- |  | - | ------------
|In Thousands         |  |   |         |  |   |                 |  |   |           |  |   |          |  |   |             
|                     |  |   | Total   |  |   | Less than1 year |  |   | 1-3 years |  |   | 4-5years |  |   | After 5years
|                     |  |   |         |  |  
|Purchase obligations |  | $ | 190,403 |  | $ | 178,323         |  | $ | 11,344    |  | $ | 736      |  | $ |            

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

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



69



---

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

NOTE 12: Employee Stock Plans

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

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

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

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



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

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



70



---

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

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



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

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



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



71



---

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

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

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



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

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

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



|                        |  |                     |  |                                      |  |                      |       |        |         |                      |   |      
|----------------------- |  | ------------------- |  | ------------------------------------ |  | -------------------- | ----- | ------ | ------- | -------------------- | - | -----
|                        |  | Options Outstanding |  | Options Exercisable                 
|Range ofExercise Prices |  | Shares              |  | WeightedAverageRemainingLife (years) |  | WeightedAveragePrice |       | Shares |         | WeightedAveragePrice
|                        |  |                     |  |                                      | 
|$    11.38  18.95      |  | 301,750             |  | 3.89                                 |  | $                    | 15.72 |        | 301,750 |                      | $ | 15.72
|18.96  27.19           |  | 331,750             |  | 5.22                                 |  |                      | 23.99 |        | 282,000 |                      |   | 23.84
|27.20  38.90           |  | 307,400             |  | 7.44                                 |  |                      | 36.59 |        | 151,200 |                      |   | 36.56
|38.91  38.91           |  | 315,600             |  | 9.12                                 |  |                      | 38.91 |        |        |                      |   |     
|38.92  50.89           |  | 249,900             |  | 8.66                                 |  |                      | 41.23 |        | 40,350  |                      |   | 39.04

NOTE 13: Capital Stock

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



72



---

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

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

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



73



---

NOTE 14: Acquisitions

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

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

In Thousands

As of March 14, 2007



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



74



---

Pro Forma Financial Information

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

In Thousands

Year EndedOctober 26,2007

October 27,2006(unaudited)

(unaudited)Pro forma net sales

$
1,338,253

$
1,152,611Pro forma net income

$
91,417

$
52,139Basic earnings per share as reported

$
3.57

$
2.19Pro forma basic earnings per share

$
3.54

$
2.05Diluted earnings per share as reported

$
3.52

$
2.15Pro forma diluted earnings per share

$
3.48

$
2.02




75



---

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

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

In Thousands

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



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



76



---

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

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

In Thousands

As of December 16, 2005



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



77



---

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

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

In Thousands

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

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

NOTE 15: Business Segment Information

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



78



---

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

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

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



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



79



---

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



80



---

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



|1 | Before corporate expense, shown on page 79.
|- | -------------------------------------------

|2 | Excludes corporate, shown on page 79.
|- | -------------------------------------

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

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



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



81



---

NOTE 16: Quarterly Financial Data (Unaudited)

The following is a summary of unaudited quarterly financial information:

In Thousands, Except Per Share Amounts



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



82



---

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



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



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



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



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



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



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



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



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



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



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



83



---

NOTE 17: Guarantors

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



84



---

Condensed Consolidating Balance Sheet as of October 26, 2007

In Thousands



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



85



---

Condensed Consolidating Balance Sheet as of October 26, 2007

In Thousands



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



86



---

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

In Thousands



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



87



---

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

In Thousands



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



88



---

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

In Thousands



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



89



---

Condensed Consolidating Balance Sheet as of October 27, 2006

In Thousands



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



90



---

Condensed Consolidating Balance Sheet as of October 27, 2006

In Thousands



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



91



---

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

In Thousands



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



92



---

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

In Thousands



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



93



---

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

In Thousands



|                                                               |  |        |          |   |                       |   |        |                           |  |   |              |   |       |   |        |  |   |         |  
|-------------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------ | ------------------------- |  | - | ------------ | - | ----- | - | ------ |  | - | ------- | -
|                                                               |  | Parent |          |   | 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 oflong-term debt                        |  |        | 100,000  |   |                       |   |       |                           |  |   |             |   |       |   |       |  |   | 100,000 |  
|Repayment of long-term debt                                    |  |        | (70,001  | ) |                       |   |       |                           |  |   | (1,371       | ) |       |   |       |  |   | (71,372 | )
|Net change in intercompany financing                           |  |        | (214,850 | ) |                       |   | 85,236 |                           |  |   | 68,656       |   |       |   | 60,958 |  |   |        |  
|                                                               | 
|                                                               |  |        | (175,268 | ) |                       |   | 85,236 |                           |  |   | 68,190       |   |       |   | 60,958 |  |   | 39,116  |  
|                                                               |  |        |          |   |                      
|Effect of foreign exchange rates on cash                       |  |        |         |   |                       |   | (24    | )                         |  |   | 1,541        |   |       |   |       |  |   | 1,517   |  
|                                                               | 
|                                                               |  |        |          |   |                      
|Net increase (decrease) in cash and cash equivalents           |  |        | (61,021  | ) |                       |   | 518    |                           |  |   | (15,163      | ) |       |   |       |  |   | (75,666 | )
|Cash and cash equivalents beginning of year                   |  |        | 75,364   |   |                       |   | 2,154  |                           |  |   | 40,786       |   |       |   |       |  |   | 118,304 |  
|                                                               | 
|Cash and cash equivalents end of year                         |  | $      | 14,343   |   |                       | $ | 2,672  |                           |  | $ | 25,623       |   |       | $ |       |  | $ | 42,638  |  
|                                                               | 



94



---

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

In Thousands



|                                      |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | ------- | -
|                                      |  | Parent |         |   | 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 | ) |                       |   | (4,112  | )                         |  |   | (1,582       | ) |  |       | 17,577  |   |  |   | (4,057  | )
|Interest expense                      |  |        | 18,261  |   |                       |   | 10,153  |                           |  |   | 7,322        |   |  |       | (17,577 | ) |  |   | 18,159  |  
|                                      | 
|Other Expense, Net                    |  |        | 2,321   |   |                       |   | 6,041   |                           |  |   | 5,740        |   |  |       |        |   |  |   | 14,102  |  
|                                      | 
|                                      |  |        |         |   |                      
|Income (Loss) from Continuing         |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Operations Before Taxes               |  |        | (2,371  | ) |                       |   | 56,623  |                           |  |   | 13,418       |   |  |       |        |   |  |   | 67,670  |  
|Income Tax Expense (Benefit)          |  |        | (686    | ) |                       |   | 12,072  |                           |  |   | 4,915        |   |  |       |        |   |  |   | 16,301  |  
|                                      | 
|Income (Loss) From                    |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Continuing Operations                 |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Before Minority Interest              |  |        | (1,685  | ) |                       |   | 44,551  |                           |  |   | 8,503        |   |  |       |        |   |  |   | 51,369  |  
|Minority Interest                     |  |        |        |   |                       |   |        |                           |  |   | (335         | ) |  |       |        |   |  |   | (335    | )
|                                      | 
|Income (Loss) From                    |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Continuing Operations                 |  |        | (1,685  | ) |                       |   | 44,551  |                           |  |   | 8,168        |   |  |       |        |   |  |   | 51,034  |  
|                                      |  |        |         |   |                      
|Income From Discontinued              |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Operations, Net of Tax                |  |        |        |   |                       |   | 6,992   |                           |  |   |             |   |  |       |        |   |  |   | 6,992   |  
|Equity in Net Income of               |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |         |  
|Consolidated Subsidiaries             |  |        | 59,711  |   |                       |   | 5,646   |                           |  |   |             |   |  |       | (65,357 | ) |  |   |        |  
|                                      | 
|Net Income (Loss)                     |  | $      | 58,026  |   |                       | $ | 57,189  |                           |  | $ | 8,168        |   |  | $     | (65,357 | ) |  | $ | 58,026  |  
|                                      | 



95



---

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

In Thousands



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



96



---

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

In Thousands



|                                                               |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |        |  |   |         |  
|-------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - | ----- | - | ------ |  | - | ------- | -
|                                                               |  | Parent |         |   | 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 provided by sale of common stock                      |  |        | 108,490 |   |                       |   |        |                           |  |   |             |   |       |   |       |  |   | 108,490 |  
|Net change in credit facilities                                |  |        | (5,000  | ) |                       |   |        |                           |  |   | 171          |   |       |   |       |  |   | (4,829  | )
|Repayment of long-term debt                                    |  |        | (2,781  | ) |                       |   | (57     | )                         |  |   | (464         | ) |       |   |       |  |   | (3,302  | )
|Net change in intercompany financing                           |  |        | (50,478 | ) |                       |   | (34,116 | )                         |  |   | 19,237       |   |       |   | 65,357 |  |   |        |  
|                                                               | 
|                                                               |  |        | 54,958  |   |                       |   | (34,173 | )                         |  |   | 18,944       |   |       |   | 65,357 |  |   | 105,086 |  
|                                                               |  |        |         |   |                      
|Effect of foreign exchange rates on cash                       |  |        | (458    | ) |                       |   | 92      |                           |  |   | (856         | ) |       |   |       |  |   | (1,222  | )
|                                                               | 
|                                                               |  |        |         |   |                      
|Net increase (decrease) in cash and cash equivalents           |  |        | 68,505  |   |                       |   | (199    | )                         |  |   | 20,519       |   |       |   |       |  |   | 88,825  |  
|Cash and cash equivalents beginning of year                   |  |        | 6,859   |   |                       |   | 2,353   |                           |  |   | 20,267       |   |       |   |       |  |   | 29,479  |  
|                                                               | 
|Cash and cash equivalents end of year                         |  | $      | 75,364  |   |                       | $ | 2,154   |                           |  | $ | 40,786       |   |       | $ |       |  | $ | 118,304 |  
|                                                               | 



97



---

Managements Report on Internal Control Over Financial Reporting

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

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

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

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

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

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



98



---

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



|                                                 
|-------------------------------------------------
|/s/ Robert W. Cremin                             
|Robert W. Cremin                                 
|Chairman, President and Chief Executive Officer  
|(Principal Executive Officer)                    
|                                                 
|/s/ Robert D. George                             
|Robert D. George                                 
|Vice President, Chief Financial Officer,         
|Secretary and Treasurer                          
|(Principal Financial Officer)                    
|                                                 
|/s/ Gary J. Posner                               
|Gary J. Posner                                   
|Corporate Controller and Chief Accounting Officer
|(Principal Accounting Officer)                   



99



---

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Esterline Technologies Corporation

Bellevue, Washington

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

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

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

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



100



---

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

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

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

Ernst & Young LLP

Seattle, Washington

December 18, 2007



101



---

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Esterline Technologies Corporation

Bellevue, Washington

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

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

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

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

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

Ernst & Young LLP

Seattle, Washington

December 18, 2007



102