Press Release

BELLEVUE, Wash., May 27, 2010 — Esterline Corporation (NYSE: ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2010 second quarter (ended April 30) income from continuing operations of $29.6 million, or $.98 per diluted share, on sales of $387.6 million. Year-ago income from continuing operations was $25.3 million, or $.85 per diluted share, on sales of $359.5 million. Income from discontinued operations in last year’s second quarter was $.01 per diluted share, bringing net income per diluted share to $.86.

Brad Lawrence, Esterline’s CEO, said the company’s solid performance — year-over-year sales up nearly 8% and earnings from continuing operations up 17% — reflected strength from the Avionics & Controls segment, where sales improved nearly 18% and segment income was up 31% compared with last year. He said, “…sales and gross margin improvement in this segment reflects a particularly successful ramp up of T-6B military trainer cockpit production and good progress on military transport retrofit projects.” In addition, he said Esterline’s military markets continue to show strength, specifically from “…increased Advanced Materials segment sales at our U.S. and non-U.S. countermeasure flare operations.”

Lawrence noted that Esterline’s commercial air transport spare parts business “…showed only sporadic improvement during the quarter, while business jet markets continue to struggle.” He said that although market conditions appear to be improving, “…we are still experiencing plenty of market volatility and some of our operations have yet to turn the corner.” Overall, however, he said, “…many elements are beginning to move into place, giving us more confidence in our full-year outlook.” The company is raising its full-year earnings per share guidance range to $3.45 to $3.65 from its earlier range of $3.20 to $3.45.

Lawrence said one source of strength is improved performance at certain operations serving markets adjacent to Esterline’s core aerospace and defense business. He said the company is benefiting primarily from “…solid sales of interface technologies devices to medical equipment markets and casino gaming machine manufacturers.”

Consolidated gross margin in the quarter was 33.3% compared with 31.3% a year ago. The increase in gross margin mainly reflected cost control measures, improved recovery of fixed costs due to higher sales volumes, and a favorable sales mix of military and commercial aerospace products.

Selling, general and administrative expenses (SG&A) as a percent of sales were 16.8% in the quarter compared with 15.2% in the prior-year period. The increase in SG&A expenses was due principally to the effect of exchange rates on operating expenses at our non-U.S. operations. In addition, last year’s SG&A benefited from foreign currency gains on forward contracts.

Research, development and engineering expense declined during the quarter to 4.8% of sales compared with 5.1% a year ago. Lawrence said R&D has stabilized in the 4.5% to 5% range.

For the first half of fiscal 2010, Esterline reported income from continuing operations and net income of $42.4 million, or $1.40 per diluted share, on sales of $727.0 million. Income from continuing operations in the same period last year was $36.8 million, or $1.23 per diluted share. Income from discontinued operations in the first half of 2009 was $.53 per diluted share. Net income in that period was $52.7 million, or $1.76 per diluted share, on $669.2 million in sales.

Backlog at quarter-end totaled $1.1 billion, about even with last year. New orders in the first half of FY10 totaled $743.3 million, up nearly 10% compared with the same period a year ago.

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will,” or the negative of such terms, or other comparable terminology. These forward-looking statements are only predictions based on the current intent and expectations of the management of Esterline, are not guarantees of future performance or actions, and involve risks and uncertainties that are difficult to predict and may cause Esterline’s or its industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Esterline’s actual results and the timing and outcome of events may differ materially from those expressed in or implied by the forward-looking statements due to risks detailed in Esterline’s public filings with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K.

Consolidated Sales and Income from Continuing Operations by Segment (unaudited)


	Three Months Ended						Six Months Ended
	April 30, 2010			May 1, 2009			April 30, 2010			May 1, 2009
Net Sales	$	387,620		$	359,502		$	726,980		$	669,219
Cost of Sales		258,422			246,904			493,253			454,469

		129,198			112,598			233,727			214,750
Expenses
Selling, general and administrative		65,294			54,619			127,609			114,344
Research, development and engineering		18,477			18,294			35,524			35,692
Other (income) expense		(38	)		2,714			3			7,728

Total Expenses		83,733			75,627			163,136			157,764

Operating Earnings from Continuing Operations		45,465			36,971			70,591			56,986

Interest income		(20	)		(370	)		(403	)		(781	)
Interest expense		7,348			7,610			15,309			14,346

Income from Continuing Operations
Before Income Taxes		38,137			29,731			55,685			43,421
Income Tax Expense		8,465			4,316			13,234			6,484

Income from Continuing Operations
Including Noncontrolling Interests		29,672			25,415			42,451			36,937
Income Attributable to Noncontrolling Interests		(24	)		(77	)		(78	)		(112	)

Income from Continuing Operations		29,648			25,338			42,373			36,825

Income from Discontinued Operations, Net of Tax		—			375			—			15,831

Net Earnings	$	29,648		$	25,713		$	42,373		$	52,656

Earnings Per Share – Basic:
Continuing Operations	$	.99		$	.85		$	1.42		$	1.24
Discontinued Operations		—			.02			—			.53

Earnings Per Share – Basic	$	.99		$	.87		$	1.42		$	1.77

Earnings Per Share – Diluted:
Continuing Operations	$	.98		$	.85		$	1.40		$	1.23
Discontinued Operations		—			.01			—			.53

Earnings Per Share – Diluted	$	.98		$	.86		$	1.40		$	1.76

Weighted Average Number of Shares Outstanding – Basic		29,908			29,705			29,848			29,684

Weighted Average Number of Shares Outstanding – Diluted		30,406			29,829			30,312			29,847


	Three Months Ended						Six Months Ended
	April 30, 2010			May 1, 2009			April 30, 2010			May 1, 2009
Segment Sales
Avionics & Controls	$	198,719		$	169,111		$	368,976		$	297,579
Sensors & Systems		80,346			86,755			155,088			171,310
Advanced Materials		108,555			103,636			202,916			200,330

Net Sales	$	387,620		$	359,502		$	726,980		$	669,219

Income from Continuing Operations
Avionics & Controls	$	28,461		$	21,685		$	47,893		$	36,160
Sensors & Systems		8,693			9,899			13,789			20,151
Advanced Materials		17,127			14,359			25,857			24,333

		54,281			45,943			87,539			80,644

Corporate expense		(8,854	)		(6,258	)		(16,945	)		(15,930	)
Other income (expense)		38			(2,714	)		(3	)		(7,728	)
Interest income		20			370			403			781
Interest expense		(7,348	)		(7,610	)		(15,309	)		(14,346	)

Income from Continuing Operations Before Income Taxes	$	38,137		$	29,731		$	55,685		$	43,421


In thousands	April 30, 2010		May 1, 2009
Assets
Current Assets
Cash and cash equivalents	$	223,665	$	115,406
Accounts receivable, net		278,580		266,589
Inventories		262,789		286,194
Income tax refundable		4,299		7,635
Deferred income tax benefits		38,029		36,432
Prepaid expenses		18,490		15,036
Other current assets		14,684		55

Total Current Assets		840,536		727,347

Property, Plant and Equipment, Net		272,628		219,820

Other Non-Current Assets
Goodwill		732,140		690,518
Intangibles, net		397,421		410,050
Debt issuance costs, net		6,182		8,151
Deferred income tax benefits		81,408		60,597
Other assets		13,419		38,137

	$	2,343,734	$	2,154,620

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	76,083	$	78,205
Accrued liabilities		181,654		201,074
Credit facilities		4,299		2,398
Current maturities of long-term debt		8,425		12,482
Deferred income tax liabilities		8,244		3,869
Federal and foreign income taxes		5,046		316

Total Current Liabilities		283,751		298,344

Long-Term Liabilities
Long-term debt, net of current maturities		528,638		513,559
Deferred income tax liabilities		126,379		122,499
Pension and post-retirement obligations		92,475		74,915
Other liabilities		23,923		48,537

Shareholders’ Equity		1,288,568		1,096,766

	$	2,343,734	$	2,154,620