10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 29, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                                       to                                                      

Commission file number  1-6357

          ESTERLINE TECHNOLOGIES CORPORATION          

(Exact name of registrant as specified in its charter)

Delaware	13-2595091
(State or other Jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

500  108th Avenue N.E., Bellevue, Washington 98004

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code 425/453-9400

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes                     X                                             No                                      

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes                     X                                                 No                                      

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes                                                                    No                     X            

As of May 31, 2011, 30,555,518 shares of the issuer’s common stock were outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEET

As of April 29, 2011 and October 29, 2010

(In thousands, except share amounts)

	April 29, 2011		October 29, 2010
ASSETS	(Unaudited)
Current Assets
Cash and cash equivalents	$	391,514	$	422,120
Cash in escrow		5,000		0
Accounts receivable, net of allowances
of $4,692 and $4,865		308,103		309,242
Inventories
Raw materials and purchased parts		126,862		109,595
Work in process		124,269		99,592
Finished goods		64,863		53,186
		315,994		262,373
Income tax refundable		12,067		17,806
Deferred income tax benefits		38,232		37,539
Prepaid expenses		18,369		16,264
Other current assets		18,673		11,241
Total Current Assets		1,107,952		1,076,585
Property, Plant and Equipment		578,266		546,004
Accumulated depreciation		290,324		272,234
		287,942		273,770
Other Non-Current Assets
Goodwill		835,167		739,730
Intangibles, net		456,648		389,017
Debt issuance costs, net of accumulated
amortization of $1,780 and $4,536		9,759		7,774
Deferred income tax benefits		95,048		87,622
Other assets		22,404		13,240
	$	2,814,920	$	2,587,738

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ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEET

As of April 29, 2011 and October 29, 2010

(In thousands, except share amounts)

	April 29, 2011		October 29, 2010
LIABILITIES AND SHAREHOLDERS’ EQUITY	(Unaudited)
Current Liabilities
Accounts payable	$	84,660	$	82,275
Accrued liabilities		233,727		215,094
Credit facilities		110,000		1,980
Current maturities of long-term debt		1,782		12,646
Deferred income tax liabilities		10,477		7,155
Federal and foreign income taxes		2,451		5,227
Total Current Liabilities		443,097		324,377
Long-Term Liabilities
Long-term debt, net of current maturities		495,719		598,972
Deferred income tax liabilities		153,660		127,081
Pension and post-retirement obligations		109,251		105,333
Other liabilities		27,568		16,476
Shareholders’ Equity
Common stock, par value $.20 per share,
authorized 60,000,000 shares, issued and outstanding 30,524,070 and 30,279,509 shares		6,105		6,056
Additional paid-in capital		543,285		528,724
Retained earnings		950,686		874,781
Accumulated other comprehensive income		82,740		3,235
Total Esterline shareholders’ equity		1,582,816		1,412,796
Noncontrolling interests		2,809		2,703
Total Shareholders’ Equity		1,585,625		1,415,499
	$	2,814,920	$	2,587,738

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ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

For the Three and Six Month Periods Ended April 29, 2011 and April 30, 2010

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Net Sales	$	435,277		$	382,492		$	806,076		$	717,802
Cost of Sales		274,330			255,856			513,007			488,495
		160,947			126,636			293,069			229,307
Expenses
Selling, general & administrative		72,409			64,067			138,501			125,362
Research, development
& engineering		21,251			18,001			40,870			34,750
Other (income) expense		0			(38	)		0			3
Total Expenses		93,660			82,030			179,371			160,115
Operating Earnings from
Continuing Operations		67,287			44,606			113,698			69,192
Interest income		(430	)		(20	)		(770	)		(403	)
Interest expense		8,958			7,348			18,095			15,309
Loss on extinguishment of debt		831			0			831			0
Income from Continuing Operations
Before Income Taxes		57,928			37,278			95,542			54,286
Income Tax Expense		11,848			8,144			19,502			12,713
Income from Continuing Operations
Including Noncontrolling Interests		46,080			29,134			76,040			41,573
Income Attributable to
Noncontrolling Interests		(129	)		(24	)		(106	)		(78	)
Income from Continuing Operations
Attributable to Esterline		45,951			29,110			75,934			41,495
Income (Loss) from Discontinued Operations
Attributable to Esterline, Net of Tax		(37	)		538			(29	)		878
Net Earnings Attributable to Esterline	$	45,914		$	29,648		$	75,905		$	42,373
Earnings Per Share Attributable to Esterline – Basic:
Continuing operations	$	1.51		$	.97		$	2.50		$	1.39
Discontinued operations		.00			.02			.00			.03
Earnings Per Share Attributable
to Esterline – Basic	$	1.51		$	.99		$	2.50		$	1.42
Earnings Per Share Attributable to Esterline – Diluted:
Continuing operations	$	1.47		$	.96		$	2.44		$	1.37
Discontinued operations		.00			.02			.00			.03
Earnings Per Share Attributable
to Esterline – Diluted	$	1.47		$	.98		$	2.44		$	1.40

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ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Month Periods Ended April 29, 2011 and April 30, 2010

(Unaudited)

(In thousands)

	Six Months Ended
	April 29, 2011			April 30, 2010
Cash Flows Provided (Used) by Operating Activities
Net earnings including noncontrolling interests	$	76,011		$	42,451
Adjustments to reconcile net earnings including
noncontrolling interests to net cash provided (used) by operating activities:
Depreciation and amortization		37,469			36,381
Deferred income taxes		(2,176	)		(8,496	)
Share-based compensation		3,847			3,431
Working capital changes, net of effect of acquisitions
Accounts receivable		20,705			(7,834	)
Inventories		(26,892	)		8,640
Prepaid expenses		(1,481	)		(1,242	)
Other current assets		(2,154	)		(2,779	)
Accounts payable		(3,396	)		(4,025	)
Accrued liabilities		(14,497	)		(9,998	)
Federal and foreign income taxes		(215	)		7,409
Other liabilities		2,982			5,188
Other, net		(758	)		2,578
		89,445			71,704
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(26,315	)		(25,585	)
Proceeds from sale of capital assets		1,343			97
Escrow deposit		(14,000	)		0
Acquisitions, net of cash acquired		(103,548	)		(768	)
		(142,520	)		(26,256	)

5

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Month Periods Ended April 29, 2011 and April 30, 2010

(Unaudited)

(In thousands)

	Six Months Ended
	April 29, 2011			April 30, 2010
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under
employee stock plans		9,357			6,413
Excess tax benefits from stock options exercised		1,406			1,328
Debt and other issuance costs		(3,504	)		0
Net change in credit facilities		110,000			(1,677	)
Repayment of long-term debt		(120,826	)		(2,153	)
Proceeds from government assistance		10,176			1,961
		6,609			5,872
Effect of Foreign Exchange Rates on Cash		15,860			(4,449	)
Net Increase (Decrease) in Cash and Cash Equivalents		(30,606	)		46,871
Cash and Cash Equivalents – Beginning of Period		422,120			176,794
Cash and Cash Equivalents – End of Period	$	391,514		$	223,665
Supplemental Cash Flow Information
Cash paid for interest	$	17,708		$	14,380
Cash paid for taxes		20,480			14,364
Supplemental Non-cash Investing and Financing Activities
Capital asset and lease obligation additions	$	0		$	8,137

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ESTERLINE TECHNOLOGIES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Month Periods Ended April 29, 2011 and April 30, 2010

1. The consolidated balance sheet as of April 29, 2011, the consolidated statement of operations for the three and six month periods ended April 29, 2011, and April 30, 2010, and the consolidated statement of cash flows for the six month periods ended April 29, 2011, and April 30, 2010, are unaudited but, in the opinion of management, all of the necessary adjustments, consisting of normal recurring accruals, have been made to present fairly the financial statements referred to above in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the above statements do not include all of the footnotes required for complete financial statements. The results of operations and cash flows for the interim periods presented are not necessarily indicative of results that can be expected for the full year.

2. The notes to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended October 29, 2010, provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q.

3. The timing of the Company’s revenues is impacted by the purchasing patterns of customers and, as a result, revenues are not generated evenly throughout the year. Moreover, the Company’s first fiscal quarter, November through January, includes significant holiday periods in both Europe and North America.

4. Basic earnings per share is computed on the basis of the weighted average number of shares outstanding during the year. Diluted earnings per share 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 244,100 and 712,570 in the second fiscal quarter of 2011 and 2010, respectively. Shares used for calculating earnings per share are disclosed in the following table.

(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011		April 30, 2010
Shares Used for Basic Earnings Per Share		30,496			29,908			30,422		29,848
Shares Used for Diluted Earnings Per Share		31,160			30,406			31,086		30,312
5.      The Company’s comprehensive income is as follows:
(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011		April 30, 2010
Net Earnings	$	45,914		$	29,648		$	75,905	$	42,373
Change in Fair Value of Derivative
Financial Instruments, Net of Tax (1)		6,534			3,716			5,045		1,889
Pension and Post-retirement
Obligations, Net of Tax (2)		(36	)		2,016			692		2,104
Foreign Currency Translation
Adjustment		73,927			(5,528	)		73,768		(24,800	)
Comprehensive Income	$	126,339		$	29,852		$	155,410	$	21,566

⁽¹⁾  Net of tax expense of $(2,794) and $(1,526) for the second fiscal quarter of 2011 and 2010, respectively. Net of tax expense of $(2,204) and $(855) for the first six months of fiscal 2011 and 2010, respectively.

⁽²⁾  Net of tax expense of $(200) and $(1,225) for the second fiscal quarter of 2011 and 2010, respectively. Net of tax expense of $(692) and $(1,026) for the first six months of fiscal 2011 and 2010, respectively.

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The Company’s accumulated other comprehensive income is comprised of the following:

(In thousands)	April 29, 2011			October 29, 2010
Net unrealized gain on derivative contracts	$	15,001		$	9,956
Pension and post-retirement obligations		(64,793	)		(65,485	)
Currency translation adjustment		132,532			58,764
Total accumulated other comprehensive income	$	82,740		$	3,235

6. On December 30, 2010, the Company acquired all of the outstanding capital stock of Eclipse Electronic Systems, Inc. (Eclipse) for approximately $120.0 million, plus the change in net assets from July 31, 2010, to the actual closing balance sheet. The $120.0 million purchase price includes cash of $14.0 million in contingent consideration, which was deposited in an escrow account and will be paid to the seller if certain performance objectives are met over the three-year period. The estimated fair value of the contingent consideration is $13.4 million. Eclipse is a designer and manufacturer of embedded communications intercept receivers for signal intelligence applications. Eclipse is included in the Avionics & Controls segment.

The following summarizes the allocation of the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The preliminary 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 recording goodwill of $65.4 million. The amount allocated to goodwill is not deductible for income tax purposes.

(In thousands)
As of December 30, 2010
Current assets	$	30,703
Property, plant and equipment		2,154
Intangible assets subject to amortization
Technology (9 year weighted average useful life)		50,100
Tradename (3 year useful life)		1,400
Goodwill		65,420
Total assets acquired		149,777
Current liabilities assumed		33,977
Long-term liabilities assumed		8,350
Net assets acquired	$	107,450

7. On September 8, 2010, the Company sold Pressure Systems, Inc., which was included in the Sensors & Systems segment, for approximately $25.0 million, resulting in an after tax gain of $10.4 million. As a result, the consolidated income statement presents Pressure Systems, Inc. as discontinued operations. Loss from discontinued operations was $29,000 in the first six months of fiscal 2011.

The operating results of the discontinued operations for the three and six months ended April 30, 2010, consisted of the following:

(In thousands)	Three Months Ended		Six Months Ended
Sales	$	5,128	$	9,178
Income from discontinued operations before income taxes		859		1,399
Income tax expense		321		521
Income from discontinued operations	$	538	$	878

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8. On May 23, 2011, the Company entered into a share purchase agreement to acquire the Souriau Group (Souriau) for 483 million euros (approximately $715 million), plus certain transaction costs of the seller, which the Company expects to finance through a combination of U.S. and non-U.S. cash, a draw on the Company’s existing secured credit facility, and a new international credit facility. In accordance with the terms of the agreement, subsequent to period end, the Company deposited $350 million in escrow as security for the purchase price. Souriau is a leading global supplier of highly engineered connectors for harsh environments serving aerospace, defense & space, power generation & rail, and industrial equipment markets. The transaction is expected to close in the middle of July 2011, subject to customary regulatory conditions.

9. The income tax rate was 20.4% and 23.4% for the first six months of fiscal 2011 and 2010, respectively. In the first six months of fiscal 2011, the Company recognized $3.3 million of discrete tax benefits principally due to the retroactive extension of the U.S. federal research and experimentation credits and the release of a valuation allowance related to a net operating loss of an acquired subsidiary. In the first six months of fiscal 2010, the Company recognized $0.5 million of discrete tax expense mainly related to tax law changes in France. The income tax rate differed from the statutory rate in the first six months of fiscal 2011 and 2010, as both years benefited from various tax credits and certain foreign interest expense deductions.

It is reasonably possible that within the next 12 months $5.9 million of tax benefits associated with research and experimentation tax credits, capital and operating losses that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of a statute of limitations.

10. As of April 29, 2011, the Company had three share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans for the first six months of fiscal 2011 and 2010 was $3.8 million and $3.4 million, respectively. During the first six months of fiscal 2011 and 2010, the Company issued 244,561 and 235,099 shares, respectively, under its employee stock plans.

Employee Stock Purchase Plan

The Company converted the ESPP to a “safe harbor” design on December 16, 2008. Under the safe harbor design, shares are purchased by participants at 95% of the market value on the purchase date and, therefore, compensation cost is not recorded under the ESPP.

Equity Incentive Plan

Under the equity incentive plan, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted 257,300 options and 355,800 options in the six month periods ended April 29, 2011, and April 30, 2010, respectively. The weighted-average grant date fair value of options granted during the six month periods ended April 29, 2011, and April 30, 2010, was $31.32 per share and $21.38 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 risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of the grant.

	Six Months Ended
	April 29,     2011		April 30,     2010
Volatility		40.8 – 42.8%		43.0 – 43.2%
Risk-free interest rate		2.02 – 3.64%		2.42 – 4.0%
Expected life (years)		4.5 – 9.5		4.5 – 9.5
Dividends		0		0

Employee Sharesave Scheme

Under the employee sharesave scheme for U.K. employees, participants are allowed the option to purchase shares at 95% of the market price of the stock as of the beginning of the offering period. The term of these

9

options is three years. The sharesave scheme is not a “safe-harbor” design, and therefore, compensation cost is recognized on this plan. Under the sharesave scheme, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted 9,956 and 10,133 options in the first six month periods ended April 29, 2011, and April 30, 2010, respectively. The weighted-average grant date fair value of options granted during the six month periods ended April 29, 2011, and April 30, 2010, was $26.14 and $18.64, respectively.

The fair value of the awards under the employee share-save scheme was estimated using a Black-Scholes pricing model which uses the assumptions noted in the following table. The risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of grant.

	Six Months Ended
	April 29,     2011		April 30,     2010
Volatility		51.10%		51.61%
Risk-free interest rate		0.98%		1.34%
Expected life (years)		3		3
Dividends		0		0

11. The Company’s pension plans principally include a U.S. pension plan maintained by Esterline and a non-U.S. plan maintained by CMC. Components of periodic pension cost consisted of the following:

(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Components of Net Periodic Pension Cost
Service cost	$	2,313		$	1,901		$	4,594		$	3,791
Interest cost		4,662			4,543			9,267			9,038
Expected return on plan assets		(5,087	)		(4,406	)		(10,111	)		(8,779	)
Amortization of prior service cost		5			5			10			10
Amortization of actuarial loss		2,009			1,871			4,007			3,697
Net Periodic Cost	$	3,902		$	3,914		$	7,767		$	7,757
The Company’s principal post-retirement plans include non-U.S. plans, which are non-contributory healthcare and life insurance plans. The components of expense of these other retirement benefits consisted of the following:
(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Components of Net Periodic
Post-Retirement Plans Cost
Service cost	$	140		$	80		$	275		$	158
Interest cost		176			176			346			350
Amortization of actuarial gain		(4	)		(19	)		(8	)		(38	)
Net Periodic Cost	$	312		$	237		$	613		$	470

12. In March 2011, the Company entered into a secured credit facility for $460 million made available through a group of banks. The credit facility is secured by substantially all of the Company’s assets and interest is based on standard inter-bank offering rates. The credit facility expires in March 2016. The spread will range from LIBOR plus 1.5% to LIBOR plus 2.25% depending on the leverage ratios at the time the funds are drawn. The Company repaid the U.S. Term Loan in March 2011 for $118.8 million. At April 29, 2011, the Company had $110.0 million outstanding under the secured credit facility at an initial interest rate of LIBOR plus 1.75% or 1.97%.

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13. On March 30, 2011, the California Attorney General’s office filed a complaint against Kirkhill-TA, a subsidiary included in the Advanced Materials segment, with the Superior Court of California, Orange County, on behalf of California and the Santa Ana Regional Water Quality Control Board (Board) regarding the discharge of industrial waste water from its Brea, California, facility into Fullerton Creek and Craig Lake.

Prior to receipt of the complaint, the Company cooperated with the Board to address the discharge. Based upon the Company’s investigation, the discharge of waste water was unintentional, and was corrected as soon as the Board notified the Company of the discharge. At the request of the Board, the Company engaged an environmental engineering company to perform certain tests of the affected water. Concentrations of pollutants were below regulatory requirements. Additionally, the facility does not have a history of discharges of industrial waste. Accordingly, prior to receiving the complaint, management did not believe any significant remediation or penalties were likely.

The California water code authorizes courts to impose penalties based on the number of days in which the violation occurred and the volume of the discharge. Utilizing this statutory formula and based on management’s calculation of the days that a violation occurred and the discharge volumes, management believes that the penalty imposed could be up to $1.8 million, although the Board has alleged that violations occurred over a longer period.

Based upon the Company’s review of the complaint, established statutory penalty factors, California’s Water Quality Enforcement Policy, a review of similar cases and the facts noted above, management believes that the possible range of penalties to be paid would be from low to high six figures. The amount of the estimated liability the Company recorded in the second quarter of fiscal 2011 as a contingent liability is not material.

14. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy of fair value measurements is described below:

Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded markets for identical assets and liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market or exchange traded market, a valuation of these instruments does not require a significant degree of judgment.

Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained from indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.

The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy at April 29, 2011, and October 29, 2010.

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(In thousands)	Level 2
	April 29, 2011		October 29, 2010
Assets:
Derivative contracts designated as hedging instruments	$	18,877	$	11,552
Derivative contracts not designated as hedging instruments	$	2,673	$	1,256
Embedded derivatives	$	20	$	23
Liabilities:
Derivative contracts designated as hedging instruments	$	106	$	950
Derivative contracts not designated as hedging instruments	$	443	$	782
Embedded derivatives	$	3,190	$	1,815
(In thousands)	Level 3
	April 29, 2011		October 29, 2010
Liabilities:
Contingent purchase obligation	$	13,350	$	0

The Company’s embedded derivatives are the result of entering into sales or purchase contracts that are denominated in a currency other than the Company’s functional currency or the supplier’s or customer’s functional currency. The fair value is determined by calculating the difference between quoted exchange rates at the time the contract was entered into and the period end exchange rate. These contracts are categorized as Level 2 in the fair value hierarchy.

The Company’s derivative contracts consist of foreign currency exchange contracts and interest rate swap agreements. These derivative contracts are over the counter and their fair value is determined using modeling techniques that include market inputs such as interest rates, yield curves, and currency exchange rates. These contracts are categorized as Level 2 in the fair value hierarchy.

The Company’s contingent purchase obligation consists of up to $14.0 million of additional consideration in connection with the acquisition of Eclipse. The contingent consideration will be paid to the seller if certain performance objectives are met over the three-year period. The value recorded on the balance sheet was derived from the estimated probability that the performance objective will be met by the end of the three-year period. The contingent purchase obligation is categorized as Level 3 in the fair value hierarchy.

15. The Company uses derivative financial instruments in the form of foreign currency forward exchange contracts and interest rate swap contracts for the purpose of minimizing exposure to changes in foreign currency exchange rates on business transactions and interest rates, respectively. The Company’s policy is to execute such instruments with banks the Company believes to be creditworthy and not to enter into derivative financial instruments for speculative purposes. These derivative financial instruments do not subject the Company to undue risk, as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities, or anticipated transactions that are being hedged.

All derivative financial instruments are recorded at fair value in the Consolidated Balance Sheet. For a derivative that has not been designated as an accounting hedge, the change in the fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the Consolidated Balance Sheet in Accumulated Other Comprehensive Income (AOCI) to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within AOCI is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.

12

The fair values of derivative instruments are presented on a gross basis, as the Company does not have any derivative contracts which are subject to master netting arrangements. The Company did not have any hedges with credit-risk-related contingent features or that required the posting of collateral as of April 29, 2011. The cash flows from derivative contracts are recorded in operating activities in the Consolidated Statement of Cash Flows.

Foreign Currency Forward Exchange Contracts

The Company transacts business in various foreign currencies which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. As of April 29, 2011, and October 29, 2010, the Company had outstanding foreign currency forward exchange contracts principally to sell U.S. dollars with notional amounts of $282.2 million and $245.5 million, respectively. These notional values consist primarily of contracts for the European euro, British pound sterling and Canadian dollar, and are stated in U.S. dollar equivalents at spot exchange rates at the respective dates.

Interest Rate Swaps

The Company manages its exposure to interest rate risk by maintaining an appropriate mix of fixed and variable rate debt, which over time should moderate the costs of debt financing. When considered necessary, the Company may use financial instruments in the form of interest rate swaps to help meet this objective. In November 2010, the Company entered into an interest rate swap agreement for $100.0 million on the $175.0 million Senior Notes due in 2017. The swap agreement exchanged the fixed interest rate of 6.625% for a variable interest rate on $100.0 million of the principal amount outstanding. The variable interest rate is based upon LIBOR plus 4.865% and was 5.138% at April 29, 2011. The fair value of the Company’s interest rate swap was a $4.6 million liability at April 29, 2011, and was estimated by discounting expected cash flows using market interest rates. The Company records interest receivable and interest payable on interest rate swaps on a net basis. In December 2010, the Company entered into an interest rate swap agreement for $75.0 million on the $175.0 million Senior Notes due in 2017. The swap agreement exchanged the fixed interest rate of 6.625% for a variable interest rate on $75.0 million of the principal amount outstanding. The variable interest rate is based upon LIBOR plus 4.470% and was 4.743% at April 29, 2011. The fair value of the Company’s interest rate swap was a $1.9 million liability at April 29, 2011, and was estimated by discounting expected cash flows using market interest rates. The Company recognized a net interest receivable of $0.4 million at April 29, 2011.

Embedded Derivative Instruments

The Company’s embedded derivatives are the result of entering into sales or purchase contracts that are denominated in a currency other than the Company’s functional currency or the supplier’s or customer’s functional currency.

Net Investment Hedge

In February 2006, the Company entered into a term loan for £57.0 million. The Company designated the term loan a hedge of the investment in a certain U.K. business unit. The term loan was fully repaid in June 2010. A cumulative foreign currency loss of $4.8 million resulting from the accounting of the term loan as a net investment hedge will remain in other comprehensive income in shareholders’ equity until the hedged investment is disposed of or sold.

13

Fair Value of Derivative Instruments

Fair values of derivative instruments in the Consolidated Balance Sheet at April 29, 2011, and October 29, 2010, consisted of:

(In thousands)		Fair Value
	Classification	April 29, 2011		October 29, 2010
Foreign currency forward
exchange contracts	Other current assets	$	18,320	$	11,218
	Other assets		3,230		1,590
	Accrued liabilities		549		1,563
	Other liabilities		0		169
Embedded derivative instruments	Other current assets	$	20	$	23
	Accrued liabilities		150		189
	Other liabilities		3,040		1,626
Interest rate swap	Accrued liabilities	$	6,501	$	0

The effect of derivative instruments on the Consolidated Statement of Operations for the three and six month periods ended April 29, 2011, and April 30, 2010, consisted of:

(In thousands)			Three Months Ended						Six Months Ended
	Location of     Gain (Loss)		April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Fair Value Hedges:
Interest rate		Interest
swap contracts		Expense	$	717		$	1,103		$	1,196		$	1,735
Embedded
derivatives		Sales	$	(1,350	)	$	(775	)	$	(1,143	)	$	(1,202	)
Cash Flow Hedges:
Foreign currency forward exchange contracts:
Amount of gain
(loss) recognized in AOCI (effec- tive portion)		AOCI	$	6,263		$	2,904		$	1,535		$	(1,583	)
Amount of gain
(loss) reclassified from AOCI into income		Sales	$	3,065		$	2,338		$	5,713		$	4,326

During the first six months of fiscal 2011 and 2010, the Company recorded a gain of $2.8 million and a loss of $1.2 million, respectively, on foreign currency forward exchange contracts that have not been designated as an accounting hedge. These foreign currency exchange losses are included in selling, general and administrative expense.

There was no significant impact to the Company’s earnings related to the ineffective portion of any hedging instruments during the first six months of fiscal 2011 and 2010. In addition, there was no significant impact to the Company’s earnings when a hedged firm commitment no longer qualified as a fair value hedge or when a hedged forecasted transaction no longer qualified as a cash flow hedge during the first six months of fiscal 2011 and 2010.

Amounts included in AOCI are reclassified into earnings when the hedged transaction settles. The Company expects to reclassify approximately $15.9 million of net gain into earnings over the next 12 months. The maximum duration of the Company’s foreign currency cash flow hedge contracts at April 29, 2011, is 23 months.

14

16. Segment information:

Business segment information for continuing operations includes the segments of Avionics & Controls, Sensors & Systems and Advanced Materials.

(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Sales
Avionics & Controls	$	231,532		$	198,719		$	423,999		$	368,976
Sensors & Systems		85,181			75,218			162,236			145,910
Advanced Materials		118,564			108,555			219,841			202,916
Total Sales	$	435,277		$	382,492		$	806,076		$	717,802
Income from Continuing Operations
Avionics & Controls	$	44,915		$	28,461		$	75,919		$	47,893
Sensors & Systems		11,595			7,834			22,566			12,390
Advanced Materials		22,979			17,127			38,247			25,857
Segment Earnings		79,489			53,422			136,732			86,140
Corporate expense		(12,202	)		(8,854	)		(23,034	)		(16,945	)
Other income (expense)		0			38			0			(3	)
Interest income		430			20			770			403
Interest expense		(8,958	)		(7,348	)		(18,095	)		(15,309	)
Loss on extinguishment of debt		(831	)		0			(831	)		0
	$	57,928		$	37,278		$	95,542		$	54,286

17. The following schedules set forth condensed consolidating financial information as required by Rule 3-10 of Securities and Exchange Commission Regulation S-X as of April 29, 2011, and October 29, 2010, and for the applicable periods ended April 29, 2011, and April 30, 2010, for (a) Esterline Technologies Corporation (the Parent); (b) on a combined basis, the current subsidiary guarantors (Guarantor Subsidiaries) of the secured credit facility, Senior Notes due 2017, and Senior Notes due 2020; and (c) on a combined basis, the subsidiaries that are not guarantors (Non-Guarantor Subsidiaries) of the secured credit facility, Senior Notes due 2017, and Senior Notes due 2020. The Guarantor Subsidiaries previously guaranteed the Senior Subordinated Notes due 2013 that were repurchased or otherwise redeemed in August 2010. The Guarantor Subsidiaries are direct and indirect wholly-owned subsidiaries of Esterline Technologies Corporation and have fully and unconditionally, jointly and severally, guaranteed the secured credit facility, Senior Notes due 2017, Senior Notes due 2020, and Senior Subordinated Notes (until such Senior Subordinated Notes were repurchased or otherwise redeemed in August 2010).

15

Condensed Consolidating Balance Sheet as of April 29, 2011.

(In thousands)
	Parent		Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries		Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	100,422	$	8,044		$	283,048	$	0		$	391,514
Escrow deposit		5,000		0			0		0			5,000
Accounts receivable, net		12		140,439			167,652		0			308,103
Inventories		0		149,027			166,967		0			315,994
Income tax refundable		9,094		(2,425	)		5,398		0			12,067
Deferred income tax benefits		22,070		(1,285	)		17,447		0			38,232
Prepaid expenses		121		6,422			11,826		0			18,369
Other current assets		25		310			18,338		0			18,673
Total Current Assets		136,744		300,532			670,676		0			1,107,952
Property, Plant & Equipment, Net		998		164,149			122,795		0			287,942
Goodwill		0		311,596			523,571		0			835,167
Intangibles, Net		0		135,352			321,296		0			456,648
Debt Issuance Costs, Net		9,759		0			0		0			9,759
Deferred Income Tax Benefits		48,402		3,669			42,977		0			95,048
Other Assets		8,930		1,616			11,858		0			22,404
Amounts Due From (To) Subsidiaries		130,873		298,516			0		(429,389	)		0
Investment in Subsidiaries		1,876,841		162,469			230,361		(2,269,671	)		0
Total Assets	$	2,212,547	$	1,377,899		$	1,923,534	$	(2,699,060	)	$	2,814,920

16

(In thousands)
	Parent		Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries		Eliminations			Total
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	2,206	$	26,272		$	56,182	$	0		$	84,660
Accrued liabilities		24,172		79,044			130,511		0			233,727
Credit facilities		110,000		0			0		0			110,000
Current maturities of long-term debt		0		213			1,569		0			1,782
Deferred income tax liabilities		197		259			10,021		0			10,477
Federal and foreign income taxes		0		(24,348	)		26,799		0			2,451
Total Current Liabilities		136,575		81,440			225,082		0			443,097
Long-Term Debt, Net		418,499		44,339			32,881		0			495,719
Deferred Income Tax Liabilities		44,720		20,973			87,967		0			153,660
Pension and Post- Retirement Obligations		16,540		40,320			52,391		0			109,251
Other Liabilities		10,588		8,571			8,409		0			27,568
Amounts Due To (From) Subsidiaries		0		0			351,267		(351,267	)		0
Shareholders’ Equity		1,585,625		1,182,256			1,165,537		(2,347,793	)		1,585,625
Total Liabilities and Shareholders’ Equity	$	2,212,547	$	1,377,899		$	1,923,534	$	(2,699,060	)	$	2,814,920

17

Condensed Consolidating Statement of Operations for the three month period ended April 29, 2011.

(In thousands)

	Parent			Guarantor   Subsidiaries			Non- Guarantor   Subsidiaries			Eliminations			Total
Net Sales	$	0		$	230,031		$	206,023		$	(777	)	$	435,277
Cost of Sales		0			139,992			135,115			(777	)		274,330
		0			90,039			70,908			0			160,947
Expenses
Selling, general and administrative		0			32,901			39,508			0			72,409
Research, development and engineering		0			8,283			12,968			0			21,251
Other income		0			0			0			0			0
Total Expenses		0			41,184			52,476			0			93,660
Operating Earnings from Continuing Operations		0			48,855			18,432			0			67,287
Interest Income		(3,540	)		(634	)		(5,689	)		9,433			(430	)
Interest Expense		7,691			5,098			5,602			(9,433	)		8,958
Loss on Extinguishment of Debt		831			0			0			0			831
Income (Loss) from Continuing Operations Before Taxes		(4,982	)		44,391			18,519			0			57,928
Income Tax Expense (Benefit)		(1,204	)		7,124			5,928			0			11,848
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(3,778	)		37,267			12,591			0			46,080
Income Attributable to Noncontrolling Interests		0			0			(129	)		0			(129	)
Income (Loss) from Continuing Operations Attributable to Esterline		(3,778	)		37,267			12,462			0			45,951
Loss from Discontinued Operations Attributable to Esterline, Net of Tax		(8	)		(29	)		0			0			(37	)
Equity in Net Income of Consolidated Subsidiaries		49,700			9,003			1,320			(60,023	)		0
Net Income (Loss) Attributable to Esterline	$	45,914		$	46,241		$	13,782		$	(60,023	)	$	45,914

18

Condensed Consolidating Statement of Operations for the six month period ended April 29, 2011.

(In thousands)

	Parent			Guarantor   Subsidiaries			Non- Guarantor   Subsidiaries			Eliminations			Total
Net Sales	$	0		$	425,481		$	381,583		$	(988	)	$	806,076
Cost of Sales		0			268,505			245,490			(988	)		513,007
		0			156,976			136,093			0			293,069
Expenses
Selling, general and administrative		0			64,106			74,395			0			138,501
Research, development and engineering		0			17,918			22,952			0			40,870
Other expense		0			0			0			0			0
Total Expenses		0			82,024			97,347			0			179,371
Operating Earnings from Continuing Operations		0			74,952			38,746			0			113,698
Interest Income		(7,022	)		(1,259	)		(11,099	)		18,610			(770	)
Interest Expense		15,720			10,087			10,898			(18,610	)		18,095
Loss on Extinguishment of Debt		831			0			0			0			831
Income (Loss) from Continuing Operations Before Taxes		(9,529	)		66,124			38,947			0			95,542
Income Tax Expense (Benefit)		(2,277	)		10,995			10,784			0			19,502
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(7,252	)		55,129			28,163			0			76,040
Income Attributable to Noncontrolling Interests		0			0			(106	)		0			(106	)
Income (Loss) from Continuing Operations Attributable to Esterline		(7,252	)		55,129			28,057			0			75,934
Income from Discontinued Operations Attributable to Esterline, Net of Tax		0			(29	)		0			0			(29	)
Equity in Net Income of Consolidated Subsidiaries		83,157			12,862			2,492			(98,511	)		0
Net Income (Loss) Attributable to Esterline	$	75,905		$	67,962		$	30,549		$	(98,511	)	$	75,905

19

Condensed Consolidating Statement of Cash Flows for the six month period ended April 29, 2011.

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss) including noncontrolling interests	$	76,011		$	67,962		$	30,549		$	(98,511	)	$	76,011
Depreciation & amortization		0			17,957			19,512			0			37,469
Deferred income taxes		651			577			(3,404	)		0			(2,176	)
Share-based compensation		0			1,523			2,324			0			3,847
Working capital changes, net of effect of acquisitions
Accounts receivable		262			(744	)		21,187			0			20,705
Inventories		0			(13,787	)		(13,105	)		0			(26,892	)
Prepaid expenses		(72	)		(694	)		(715	)		0			(1,481	)
Other current assets		(25	)		(266	)		(1,863	)		0			(2,154	)
Accounts payable		1,262			(2,472	)		(2,186	)		0			(3,396	)
Accrued liabilities		5,510			(5,398	)		(14,609	)		0			(14,497	)
Federal & foreign income taxes		4,181			(3,767	)		(629	)		0			(215	)
Other liabilities		4,266			(1,989	)		705			0			2,982
Other, net		794			1,416			(2,968	)		0			(758	)
		92,840			60,318			34,798			(98,511	)		89,445
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(15	)		(12,350	)		(13,950	)		0			(26,315	)
Proceeds from sale of capital assets		0			179			1,164			0			1,343
Escrow deposit		(14,000	)		0			0			0			(14,000	)
Acquisitions, net of cash acquired		0			(103,548	)		0			0			(103,548	)
		(14,015	)		(115,719	)		(12,786	)		0			(142,520	)

20

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries		Eliminations		Total
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		9,357			0			0		0		9,357
Excess tax benefits from stock options exercised		1,406			0			0		0		1,406
Debt and other issuance costs		(3,504	)		0			0		0		(3,504	)
Net change in credit facilities		110,000			0			0		0		110,000
Repayment of long-term debt		(126,814	)		(166	)		6,154		0		(120,826	)
Proceeds from government assistance		0			0			10,176		0		10,176
Net change in intercompany financing		(173,897	)		61,299			14,087		98,511		0
		(183,452	)		61,133			30,417		98,511		6,609
Effect of foreign exchange rates on cash		(1	)		(5	)		15,866		0		15,860
Net increase (decrease) in cash and cash equivalents		(104,628	)		5,727			68,295		0		(30,606	)
Cash and cash equivalents – beginning of year		205,050			2,317			214,753		0		422,120
Cash and cash equivalents – end of year	$	100,422		$	8,044		$	283,048	$	0	$	391,514

21

Condensed Consolidating Balance Sheet as of October 29, 2010.

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries		Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	205,050		$	2,317		$	214,753	$	0		$	422,120
Accounts receivable, net		274			131,531			177,437		0			309,242
Inventories		0			118,567			143,806		0			262,373
Income tax refundable		12,548			0			5,258		0			17,806
Deferred income tax benefits		23,507			(1,627	)		15,659		0			37,539
Prepaid expenses		49			5,729			10,486		0			16,264
Other current assets		0			1			11,240		0			11,241
Total Current Assets		241,428			256,518			578,639		0			1,076,585
Property, Plant & Equipment, Net		1,249			162,407			110,114		0			273,770
Goodwill		0			246,176			493,554		0			739,730
Intangibles, Net		0			89,812			299,205		0			389,017
Debt Issuance Costs, Net		7,774			0			0		0			7,774
Deferred Income Tax Benefits		44,407			3,537			39,678		0			87,622
Other Assets		(69	)		2,004			11,305		0			13,240
Amounts Due From (To) Subsidiaries		41,529			271,345			0		(312,874	)		0
Investment in Subsidiaries		1,710,032			149,607			227,869		(2,087,508	)		0
Total Assets	$	2,046,350		$	1,181,406		$	1,760,364	$	(2,400,382	)	$	2,587,738

22

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries		Eliminations			Total
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	944		$	28,345		$	52,986	$	0		$	82,275
Accrued liabilities		18,662			73,870			122,562		0			215,094
Credit facilities		0			0			1,980		0			1,980
Current maturities of long-term debt		10,938			80			1,628		0			12,646
Deferred income tax liabilities		197			278			6,680		0			7,155
Federal and foreign income taxes		(727	)		(20,522	)		26,476		0			5,227
Total Current Liabilities		30,014			82,051			212,312		0			324,377
Long-Term Debt, Net		534,375			44,525			20,072		0			598,972
Deferred Income Tax Liabilities		40,300			123			86,658		0			127,081
Pension and Post- Retirement Obligations		16,629			42,279			46,425		0			105,333
Other Liabilities		9,533			251			6,692		0			16,476
Amounts Due To (From) Subsidiaries		0			0			310,115		(310,115	)		0
Shareholders’ Equity		1,415,499			1,012,177			1,078,090		(2,090,267	)		1,415,499
Total Liabilities and Shareholders’ Equity	$	2,046,350		$	1,181,406		$	1,760,364	$	(2,400,382	)	$	2,587,738

23

Condensed Consolidating Statement of Operations for the three month period ended April 30, 2010.

(In thousands)

	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Net Sales	$	0		$	195,231		$	187,742		$	(481	)	$	382,492
Cost of Sales		0			130,048			126,289			(481	)		255,856
		0			65,183			61,453			0			126,636
Expenses
Selling, general and administrative		0			28,098			35,969			0			64,067
Research, development and engineering		0			7,598			10,403			0			18,001
Other income		0			0			(38	)		0			(38	)
Total Expenses		0			35,696			46,334			0			82,030
Operating Earnings from Continuing Operations		0			29,487			15,119			0			44,606
Interest Income		(3,899	)		(624	)		(9,857	)		14,360			(20	)
Interest Expense		6,525			4,893			10,290			(14,360	)		7,348
Income (Loss) from Continuing Operations Before Taxes		(2,626	)		25,218			14,686			0			37,278
Income Tax Expense (Benefit)		(532	)		5,382			3,294			0			8,144
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(2,094	)		19,836			11,392			0			29,134
Income Attributable to Noncontrolling Interests		0			0			(24	)		0			(24	)
Income (Loss) from Continuing Operations Attributable to Esterline		(2,094	)		19,836			11,368			0			29,110
Income from Discontinued Operations Attributable to Esterline, Net of Tax		0			538			0			0			538
Equity in Net Income of Consolidated Subsidiaries		31,742			3,276			562			(35,580	)		0
Net Income (Loss) Attributable to Esterline	$	29,648		$	23,650		$	11,930		$	(35,580	)	$	29,648

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Condensed Consolidating Statement of Operations for the six month period ended April 30, 2010.

(In thousands)

	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Net Sales	$	0		$	363,007		$	355,276		$	(481	)	$	717,802
Cost of Sales		0			244,719			244,257			(481	)		488,495
		0			118,288			111,019			0			229,307
Expenses
Selling, general and administrative		0			57,334			68,028			0			125,362
Research, development and engineering		0			13,431			21,319			0			34,750
Other expense		0			0			3			0			3
Total Expenses		0			70,765			89,350			0			160,115
Operating Earnings from Continuing Operations		0			47,523			21,669			0			69,192
Interest Income		(7,779	)		(1,254	)		(19,970	)		28,600			(403	)
Interest Expense		13,164			9,881			20,864			(28,600	)		15,309
Income (Loss) from Continuing Operations Before Taxes		(5,385	)		38,896			20,775			0			54,286
Income Tax Expense (Benefit)		(1,234	)		8,681			5,266			0			12,713
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(4,151	)		30,215			15,509			0			41,573
Income Attributable to Noncontrolling Interests		0			0			(78	)		0			(78	)
Income (Loss) from Continuing Operations Attributable to Esterline		(4,151	)		30,215			15,431			0			41,495
Income from Discontinued Operations Atributable to Esterline, Net of Tax		0			878			0			0			878
Equity in Net Income of Consolidated Subsidiaries		46,524			6,581			304			(53,409	)		0
Net Income (Loss) Attributable to Esterline	$	42,373		$	37,674		$	15,735		$	(53,409	)	$	42,373

25

Condensed Consolidating Statement of Cash Flows for the six month period ended April 30, 2010.

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss) including noncontrolling interests	$	42,373		$	37,674		$	15,813		$	(53,409	)	$	42,451
Depreciation & amortization		0			16,163			20,218			0			36,381
Deferred income taxes		(3,074	)		43			(5,465	)		0			(8,496	)
Share-based compensation		0			1,573			1,858			0			3,431
Working capital changes, net of effect of acquisitions
Accounts receivable		(31	)		3,048			(10,851	)		0			(7,834	)
Inventories		0			27			8,613			0			8,640
Prepaid expenses		0			(1,658	)		416			0			(1,242	)
Other current assets		0			(1	)		(2,778	)		0			(2,779	)
Accounts payable		(41	)		3,124			(7,108	)		0			(4,025	)
Accrued liabilities		(3,855	)		2,069			(8,212	)		0			(9,998	)
Federal & foreign income taxes		2,069			(1,930	)		7,270			0			7,409
Other liabilities		3,866			(1,074	)		2,396			0			5,188
Other, net		(1	)		125			2,454			0			2,578
		41,306			59,183			24,624			(53,409	)		71,704
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(55	)		(8,652	)		(16,878	)		0			(25,585	)
Proceeds from sale of capital assets		0			92			5			0			97
Acquisitions, net of cash acquired		0			(360	)		(408	)		0			(768	)
		(55	)		(8,920	)		(17,281	)		0			(26,256	)

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(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations		Total
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		6,413			0			0			0		6,413
Excess tax benefits from stock options exercised		1,328			0			0			0		1,328
Net change in credit facilities		0			0			(1,677	)		0		(1,677	)
Repayment of long-term debt		(1,885	)		(200	)		(68	)		0		(2,153	)
Proceeds from government assistance		0			0			1,961			0		1,961
Net change in intercompany financing		(14,452	)		(49,345	)		10,388			53,409		0
		(8,596	)		(49,545	)		10,604			53,409		5,872
Effect of foreign exchange rates on cash		1			(4	)		(4,446	)		0		(4,449	)
Net increase (decrease) in cash and cash equivalents		32,656			714			13,501			0		46,871
Cash and cash equivalents – beginning of year		47,907			4,621			124,266			0		176,794
Cash and cash equivalents – end of year	$	80,563		$	5,335		$	137,767		$	0	$	223,665

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Item 2. Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Overview

We operate our businesses in three segments: Avionics & Controls, Sensors & Systems and Advanced Materials.

The Avionics & Controls segment includes avionics systems, control systems, interface technologies and communication systems capabilities. Avionics systems designs and develops cockpit systems integration and avionics solutions for commercial and military applications. Control systems designs and manufactures technology interface systems for military and commercial aircraft and land- and sea-based military vehicles. Interface technologies manufactures and develops custom control panels, input systems for medical, industrial, military and casino gaming industries. Communication systems designs and manufactures military audio and data products for severe battlefield environments, as well as communication control systems to enhance security and aural clarity in military applications. In addition, communication systems designs and manufactures embedded communications intercept receivers for signal intelligence applications.

The Sensors & Systems segment includes power systems and advanced sensors capabilities. Power systems develops and manufactures electrical power switching and other related systems, principally for aerospace and defense customers. Advanced sensors develops and manufactures high precision temperature and pressure sensors for aerospace and defense customers.

The Advanced Materials segment includes engineered materials and defense technologies capabilities. Engineered materials develops and manufactures thermally engineered components and high-performance elastomer products used in a wide range of commercial aerospace and military applications. Defense technologies develops and manufactures combustible ordnance components and warfare countermeasure devices for military customers. Sales in all segments include domestic, international, defense and commercial customers.

Our 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 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 strategic realignments of operations to expand our capabilities as a more comprehensive supplier to our customers across our entire product offering.

On May 23, 2011, we entered into a share purchase agreement to acquire the Souriau Group for approximately $715 million, plus certain transaction costs of the seller. Souriau is a leading global supplier of highly engineered connectors for harsh environments serving aerospace, defense & space, power generation & rail, and industrial equipment markets. The transaction is expected to close in the middle of July 2011, subject to customary closing procedures, including regulatory approval.

On December 30, 2010, we acquired all of the outstanding capital stock of Eclipse Electronic Systems, Inc. (Eclipse). Eclipse is a designer and manufacturer of embedded communications intercept receivers for signal intelligence applications. Eclipse is included in our Avionics & Controls segment.

On September 8, 2010, we sold Pressure Systems, Inc., which was included in the Sensors & Systems segment. The results of Pressure Systems, Inc. were accounted for as a discontinued operation in the consolidated financial statements.

During the first six months of fiscal 2011, our income from continuing operations was $75.9 million or $2.44 per diluted share compared to $41.5 million or $1.37 per diluted share during the prior-year period, reflecting strong sales and earnings across all our segments. During the first half of fiscal 2010, performance was weaker than the second half of the year. The strength from the second half of fiscal 2010 has continued in the first half of fiscal 2011. It is unlikely that the same year-over-year increase experienced in the first half of fiscal 2011 will continue at a comparable rate in the second half of fiscal 2011. Sales and operating earnings of Avionics & Controls increased 15% and 59%, respectively, over the prior-year period and reflected strong sales and gross margins of avionics systems and control systems. Sales and operating earnings of Sensors & Systems increased 11% and 82%, respectively, over the prior-year period reflecting robust sales of both advanced sensors and power systems and increased gross margins of advanced sensors. Sales and operating earnings of Advanced Materials increased 8%

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and 48%, respectively, over the prior-year period reflecting strong sales and gross margins of engineered materials. Income from continuing operations in the first six months of fiscal 2011 reflected an income tax rate of 20.4% compared to 23.4% in the prior-year period. The decrease in the income tax rate from the prior-year period was principally due to the retroactive extension of the U.S. federal research and experimentation credits and release of a valuation allowance related to a net operating loss of an acquired subsidiary. Income from discontinued operations for the first six months of fiscal 2010 was $0.03 per diluted share.

Net income during the first six months of fiscal 2011 was $75.9 million, or $2.44 per diluted share, compared with net income of $42.4 million, or $1.40 per diluted share, in the prior-year period.

Results of Operations

Three Month Period Ended April 29, 2011, Compared with Three Month Period Ended April 30, 2010

Sales for the second fiscal quarter increased 13.8% over the prior-year period. Sales by segment were as follows:

(In thousands)

	Incr./(Decr.) from prior     year period	Three Months Ended
		April 29, 2011		April 30, 2010
Avionics & Controls	16.5%	$	231,532	$	198,719
Sensors & Systems	13.2%		85,181		75,218
Advanced Materials	9.2%		118,564		108,555
Total Net Sales		$	435,277	$	382,492

The 16.5% increase in sales of Avionics & Controls was principally due to increased sales volumes of avionics systems of $18.4 million, control systems of $11.8 million, and a nominal increase of communication systems and interface technologies. The increase in avionics systems was principally due to strong cockpit integration and aviation products sales volumes. The increase in control systems reflected strong after-market sales and a $4.4 million retroactive price settlement due to product scope changes. Communication systems sales benefited from incremental sales from our Eclipse acquisition on December 30, 2010, partially offset by a $9.0 million decrease in certain communication systems sales for audio and data products for severe battlefield environments. The increase in interface technologies mainly reflected strong sales of input devices for medical and industrial commercial applications, partially offset by weaker demand for casino gaming applications.

The 13.2% increase in sales of Sensors & Systems reflected higher sales volume of advanced sensors of $4.2 million and power systems of $5.8 million. The increase in advanced sensors sales mainly reflected strong aftermarket demand for temperature sensors. The increase in power systems mainly reflected higher retrofit sales for commercial aviation. Sales in the second fiscal quarter of 2011 reflected a stronger pound sterling and euro relative to the U.S. dollar. The average exchange rate from the pound sterling to the U.S. dollar increased from 1.53 in the second fiscal quarter of 2010 to 1.61 in the second fiscal quarter of 2011. The average exchange rate from the euro to the U.S. dollar increased from 1.35 in the second fiscal quarter of 2010 to 1.40 in the second fiscal quarter of 2011.

The 9.2% increase in sales of Advanced Materials principally reflected decreased sales volumes of defense technologies of $3.7 million and increased sales volumes of engineered materials of $12.8 million. The decrease in defense technologies mainly reflected lower sales of flare countermeasures due to reduced demand and customer delaying shipments, partially offset by higher sales volumes of combustible ordnance. The increase in engineered materials primarily reflected strong demand for elastomer and insulation materials.

Overall, gross margin as a percentage of sales was 37.0%, compared to 33.1% in the same period a year ago. Gross profit was $160.9 million and $126.6 million for the second fiscal quarter of 2011 and 2010, respectively.

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Avionics & Controls segment gross margin was 39.6% and 34.4% for the second fiscal quarter of 2011 and 2010, respectively. Segment gross profit was $91.6 million compared to $68.3 million in the prior-year period. Over 56% of the increase in gross profit was due to strong sales volume and improved gross margin on avionics systems reflecting increased sales volumes of cockpit integration for the T-6B military trainer as well as aviation products. Approximately 43% of the increase in gross profit was due to strong after-market sales of control systems and the $4.4 million retroactive price increase referenced above.

Sensors & Systems segment gross margin was 34.7% and 34.1% for the second fiscal quarter of 2011 and 2010, respectively. Segment gross profit was $29.5 million compared to $25.6 million in the prior-year period. The increase in gross profit was mainly due to strong power systems sales for a commercial aircraft retrofit program.

Advanced Materials segment gross margin was 33.5% compared to 30.1% for the same period one year ago. Segment gross profit was $39.8 million compared to $32.7 million in the prior-year period. Approximately 78% of the increase in gross profit was principally due to higher insulation material sales for a commercial aviation retrofit program and for petrochemical applications, as well as elastomer materials for commercial aviation applications. A $1.0 million increase in gross profit in defense technologies mainly reflected strong demand and increased prices for combustible ordnance and weakness for our non-U.S. countermeasures due to lower demand and delayed shipments. Management expects that demand for countermeasures will be at reduced levels for the remainder of fiscal 2011 compared to fiscal 2010.

Selling, general and administrative expenses (which include corporate expenses) totaled $72.4 million, or 16.6% of sales, and $64.1 million, or 16.7% of sales, for the second fiscal quarter of 2011 and 2010, respectively. The increase in selling, general and administrative expense principally reflected an increase of $3.3 million of corporate expense and a $3.7 million increase in selling, general and administrative expenses at our Avionics & Controls segment. The increase in corporate expense mainly reflected higher incentive compensation expense of $1.2 million and acquisition-related expenses of $1.4 million. The increase in selling, general and administrative expense at our Avionics & Controls segment principally reflected incremental selling, general and administrative expense from the acquisition of Eclipse.

Research, development and engineering spending was $21.3 million, or 4.9% of sales, for the second fiscal quarter of 2011 compared with $18.0 million, or 4.7% of sales, for the second fiscal quarter of 2010. The increase in research, development and engineering spending principally reflects spending on avionics systems and control systems developments. Fiscal 2011 research, development and engineering spending is expected to be approximately 5.0% of sales.

Total segment earnings (operating earnings excluding corporate expenses and other income or expense) for the second fiscal quarter of 2011 were $79.5 million, or 18.3% of sales, compared with $53.4 million, or 14.0% of sales, for the second fiscal quarter of 2010.

Avionics & Controls segment earnings were $44.9 million, or 19.4% of sales, in the second fiscal quarter of 2011 and $28.5 million, or 14.3% of sales, in the second fiscal quarter of 2010, mainly reflecting an $8.0 million increase in avionics systems, a $10.0 million increase in control systems, and a $1.6 million decrease in communication systems. Avionics systems benefited from increased gross profit, partially offset by a $3.3 million increase in research, development and engineering and a $1.9 million increase in selling, general and administrative expense. Control systems benefited from increased gross profit and a $1.1 million recovery of non-recurring engineering upon settlement with the customer. The decrease in communication systems earnings mainly reflected decreased gross profit from lower sales of certain communication systems for audio and data products for severe battlefield environments, resulting in a $3.0 million decrease in communication system earnings, partially offset by incremental income from the Eclipse acquisition.

Sensors & Systems segment earnings were $11.6 million, or 13.6% of sales, for the second fiscal quarter of 2011 compared with $7.8 million, or 10.4% of sales, for the second fiscal quarter of 2010, reflecting the increase in power systems earnings principally from increased gross profit.

Advanced Materials segment earnings were $23.0 million, or 19.4% of sales, for the second fiscal quarter of 2011 compared with $17.1 million, or 15.8% of sales, for the second fiscal quarter of 2010, primarily reflecting a

30

$6.6 million increase in engineered materials and a $1.2 million decrease in defense technologies. Defense technologies reflected a $2.4 million increase in combustible ordnance gross profit and a $1.3 million decrease in countermeasures gross profit, a $2.2 million increase in selling, general and administrative expenses and research, development and engineering expense. The increase in selling, general and administrative expenses reflected $1.3 million in severance costs due to a reduction in force at our non-U.S. flare countermeasure unit. The prior-year period benefited from a $0.6 million insurance recovery. The increase in engineering materials mainly reflected increased gross profit for elastomer and insulation materials.

Interest expense for the second fiscal quarter of 2011 was $9.0 million compared with $7.3 million for the second fiscal quarter of 2010, reflecting increased borrowings. During the second fiscal quarter of 2011, in connection with executing a new credit facility, the Company repaid its $118.8 million U.S. Term Loan and recorded a loss on extinguishment of debt of $0.8 million.

The income tax rate was 20.5% compared with 21.8% for the second fiscal quarter of 2011 and 2010, respectively. In the second fiscal quarter of 2011, we recognized $1.9 million of discrete tax benefits principally due to the release of a valuation allowance related to a net operating loss of an acquired subsidiary. In the second fiscal quarter of 2010, we recognized $0.2 million of discrete tax expense associated with the accrual of interest on tax reserves. The income tax rate differed from the statutory rate in the second fiscal quarter of 2011 and 2010, as both years benefited from various tax credits and certain foreign interest expense deductions.

To the extent that sales are transacted in a currency other than the functional currency of the operating unit, we are subject to foreign currency fluctuation risk. We use forward contracts to hedge our foreign currency exchange risk. To the extent that these hedges qualify under U.S. GAAP, the amount of gain or loss is deferred in Accumulated Other Comprehensive Income (AOCI) until the related sale occurs. Also, we are subject to foreign currency gains or losses from embedded derivatives on backlog denominated in a currency other than the functional currency of our operating companies or its customer. Gains and losses on forward contracts, embedded derivatives, and revaluation of assets and liabilities denominated in a currency other than the functional currency of the Company for the three month period ended April 29, 2011, and April 30, 2010, are as follows:

(In thousands)		Three Months Ended
		April 29, 2011			April 30, 2010
Forward foreign currency contracts – gain (loss)		$	2,434		$	(796	)
Forward foreign currency contracts – reclassified from AOCI			3,065			2,338
Embedded derivatives – (loss)			(1,350	)		(775	)
Revaluation of monetary assets/liabilities – gain (loss)			(3,695	)		534
Total		$	454		$	1,301
Six Month Period Ended April 29, 2011, Compared with Six Month Period Ended April 30, 2010 Sales for the first six months increased 12.3% over the prior-year period. Sales by segment were as follows: (In thousands)
	Incr./(Decr.) from prior     year period	Six Months Ended
		April 29, 2011			April 30, 2010
Avionics & Controls	14.9%	$	423,999		$	368,976
Sensors & Systems	11.2%		162,236			145,910
Advanced Materials	8.3%		219,841			202,916
Total Net Sales		$	806,076		$	717,802

The 14.9% increase in sales of Avionics & Controls reflected increased sales volumes of avionics systems of $32.4 million, control systems of $16.2 million, and communication systems and interface technologies of

31

approximately $6.4 million. The increase in avionics systems was principally due to strong cockpit integration and aviation products sales volumes. The increase in communication systems mainly reflected the acquisition of Eclipse on December 30, 2010, partially offset by a $12.2 million decrease in sales of certain communication systems for audio and data products for severe battlefield environments. The increase in control systems was principally due to strong aftermarket demand for commercial aviation applications and the $4.4 million retroactive price settlement due to product scope changes as referenced above. The increase in interface technologies mainly reflected strong sales of input devices for medical and industrial commercial applications, partially offset by weaker demand for casino gaming applications.

The 11.2% increase in sales of Sensors & Systems reflected an increase sales volume of advanced sensors of $8.5 million and an increase of $7.8 million of power systems. The increase in advanced sensors sales mainly reflected higher OEM sales of pressure sensors and strong aftermarket demand. The increase in power systems mainly reflected higher retrofit sales for commercial aviation. Sales in the first three months of fiscal 2011 reflected a weaker pound sterling and euro relative to the U.S. dollar, while sales in the second three months of fiscal 2011 reflected a stronger pound sterling and euro relative to the U.S. dollar.

The 8.3% increase in sales of Advanced Materials principally reflected decreased sales volumes of defense technologies of $5.8 million and increased sales volumes of engineered materials of $21.1 million. The decrease in defense technologies mainly reflected lower sales of non-U.S. flare countermeasures due to reduced demand and customer delaying shipments, partially offset by higher sales volumes of combustible ordnance. The increase in engineered materials primarily reflected strong demand for elastomer and insulation materials.

Overall, gross margin as a percentage of sales was 36.4% and 31.9% for the first six months of fiscal 2011 and 2010, respectively. Gross profit was $293.1 million and $229.3 million for the first six months of fiscal of 2011 and 2010, respectively.

Avionics & Controls segment gross margin was 39.2% and 33.8% for the first six months of fiscal 2011 and 2010, respectively. Segment gross profit was $166.2 million compared to $124.9 million in the prior-year period. Approximately 65% of the increase in gross profit was due to strong sales volume and improved gross margin on avionics systems reflecting increased sales volumes of cockpit integrations for the T-6B military trainer, as well as aviation products. Approximately 28% of the increase in gross profit was due to strong after-market sales of control systems and the $4.4 million retroactive price increase referenced above.

Sensors & Systems segment gross margin was 35.1% and 33.0% for the first six months of fiscal 2011 and 2010, respectively. Segment gross profit was $56.9 million compared to $48.1 million in the prior-year period. Approximately 73% of the increase in gross profit reflected strong demand for advanced sensors for the aftermarket, as well as new OEM requirements. Approximately 27% of the increase in gross profit was due to strong power systems sales for a commercial aircraft retrofit program.

Advanced Materials segment gross margin was 31.8% for the first six months of fiscal 2011 compared to 27.8% for the same period one year ago. Segment gross profit was $69.9 million compared to $56.4 million in the prior-year period. Approximately 71% of the increase in gross profit was principally due to higher insulation material sales for a commercial aviation retrofit program and for petrochemical applications, as well as elastomer materials for commercial aviation applications. A $3.1 million increase in gross profit on defense technologies reflected strong demand and increased prices for combustible ordnance, which was partially offset by lower gross profit on non-U.S. flare countermeasures due to decreased demand and delayed shipments.

Selling, general and administrative expenses (which include corporate expenses) totaled $138.5 million, or 17.2% of sales, and $125.4 million, or 17.5% of sales, for the first six months of fiscal 2011 and 2010, respectively. The increase in selling, general and administrative expense principally reflected an increase of $6.1 million of corporate expense and a $6.6 million increase in selling, general and administrative expenses at our Avionics & Controls segment. The increase in corporate expense mainly reflected higher incentive compensation expense of $2.8 million and increased acquisition expenses of $1.5 million. The increase in selling, general and administrative expense at Avionics & Controls reflected $2.8 million in incremental selling, general and administrative expense from the acquisition of Eclipse and increased selling, general and administrative expenses at avionics systems.

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Research, development and engineering spending was $40.9 million, or 5.1% of sales, for the first six months of fiscal 2011 compared with $34.8 million, or 4.8% of sales, for the first six months of 2010. The increase in research, development and engineering spending principally reflects spending on avionics systems, control systems, and defense technologies developments. Fiscal 2011 research, development and engineering spending is expected to be approximately 5.0% of sales.

Total segment earnings (operating earnings excluding corporate expenses and other income or expense) for the first six months of fiscal 2011 totaled $136.7 million, or 17.0% of sales, compared with $86.1 million, or 12.0% of sales, for the first six months in fiscal 2010.

Avionics & Controls segment earnings were $75.9 million, or 17.9% of sales, in the first six months of fiscal 2011 and $47.9 million, or 13.0% of sales, in the first six months of fiscal 2010, mainly reflecting an $18.7 million increase in avionics systems, a $10.2 million increase in control systems, and a nominal decrease in communication systems. Avionics systems benefited from increased gross profit, partially offset by a $4.5 million increase in research, development and engineering expense and a $3.9 million increase in selling, general and administrative expense. Control systems benefited from increased gross profit and a $1.1 million recovery of non-recurring engineering upon settlement with the customer. Additionally, the prior-year period was impacted by $1.3 million in lease termination costs resulting from a facilities move. Control systems current year earnings were impacted by increased selling, general and administrative expenses of $2.0 million and increased research, development and engineering expense of $1.8 million. The decrease in communication systems earnings mainly reflected decreased gross profit from lower sales of certain communication systems for audio and data products for severe battlefield environments, resulting in a $3.1 million decrease in communication systems earnings, partially offset by incremental income from the Eclipse acquisition.

Sensors & Systems segment earnings were $22.6 million, or 13.9% of sales, for the first six months of fiscal 2011 compared with $12.4 million, or 8.5% of sales, for the first six months of fiscal 2010, reflecting a $6.4 million increase in advanced sensors and a $3.8 million increase in power systems. Both advanced sensors and power systems benefited from increased gross profit. Power systems earnings were also enhanced by higher customer funding of non-recurring engineering expenses related to the A400M program.

Advanced Materials segment earnings were $38.2 million, or 17.4% of sales, for the first six months of fiscal 2011 compared with $25.9 million, or 12.7% of sales, for the first six months of fiscal 2010, primarily reflecting a $10.8 million increase in engineering materials and a $0.8 million increase in defense technologies. Defense technologies principally reflected a $5.7 million increase in combustible ordnance gross profit, a $2.5 million decrease in countermeasures gross profit, a $1.3 million increase in severance costs due to a reduction in force at our non-U.S. flare countermeasure unit, increased research, engineering and development of $1.5 million, and a $0.6 million insurance recovery in the prior-year period. The increase in engineering materials mainly reflected increased gross profit for elastomer and insulation materials.

On December 30, 2010, we acquired all of the outstanding capital stock of Eclipse Electronic Systems, Inc. (Eclipse). Eclipse is a designer and manufacturer of embedded communications intercept receivers for signal intelligence applications. Eclipse is included in our Avionics & Controls segment.

Interest expense for the first six months of fiscal 2011 was $18.1 million compared with $15.3 million for the first six months of fiscal 2010, reflecting higher borrowings during most of the first six months of fiscal 2011.

The income tax rate was 20.4% compared with 23.4% for the first six months of fiscal 2011 and 2010, respectively. In the first six months of fiscal 2011, we recognized $3.3 million of discrete tax benefits principally due to the retroactive extension of the U.S. federal research and experimentation credits and release of a valuation allowance related to a net operating loss of an acquired subsidiary. In the first six months of fiscal 2010, we recognized $0.5 million of discrete tax expense mainly due to tax law changes in France. The income tax rate differed from the statutory rate in the first six months of fiscal 2011 and 2010, as both years benefited from various tax credits and certain foreign interest expense deductions.

33

It is reasonably possible that within the next 12 months $5.9 million of benefits associated with research and experimentation tax credits, capital and operating losses that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of a statute of limitations.

To the extent that sales are transacted in a currency other than the functional currency of the operating unit, we are subject to foreign currency fluctuation risk. We use forward contracts to hedge our foreign currency exchange risk. To the extent that these hedges qualify under U.S. GAAP, the amount of gain or loss is deferred in Accumulated Other Comprehensive Income (AOCI) until the related sale occurs. Also, we are subject to foreign currency gains or losses from embedded derivatives on backlog denominated in a currency other than the functional currency of our operating companies or its customer. Gains and losses on forward contracts, embedded derivatives, and revaluation of assets and liabilities denominated in currency other than the functional currency of the Company for the six month period ended April 29, 2011, and April 30, 2010, are as follows:

(In thousands)	Six Months Ended
	April 29, 2011			April 30, 2010
Forward foreign currency contracts – gain (loss)	$	2,785		$	(1,197	)
Forward foreign currency contracts – reclassified from AOCI		5,713			4,326
Embedded derivatives – (loss)		(1,143	)		(1,202	)
Revaluation of monetary assets/liabilities – (loss)		(4,534	)		(256	)
Total	$	2,821		$	1,671

New orders for the first six months of fiscal 2011 were $862.1 million compared with $733.5 million for the same period in 2010. The increase in new orders principally reflects increased orders for Avionics & Controls of $47.5 million, including the acquired backlog of Eclipse, Sensors & Systems of $55.9 million, and Advanced Materials of $25.2 million. The increase in Avionics & Controls orders reflects a $20.2 million decrease in avionics systems, reflecting a delay in orders for cockpit integration for military transport aircraft. The increase in Advanced Materials orders reflects an increase in orders for engineered materials, partially offset by a $57.7 million decrease in orders for defense technologies, due to the timing of receiving orders. Backlog was $1.2 billion at April 29, 2011, compared to $1.1 billion at April 30, 2010, and at October 29, 2010.

Liquidity and Capital Resources

Cash and cash equivalents at April 29, 2011, totaled $391.5 million, a decrease of $30.6 million from October 29, 2010. Net working capital decreased to $664.9 million at April 29, 2011, from $752.2 million at October 29, 2010. Sources and uses of cash flows from operating activities principally consist of cash received from the sale of products and cash payments for material, labor and operating expenses. Cash flows provided by operating activities were $89.4 million and $71.7 million in the first six months of fiscal 2011 and 2010, respectively, reflecting increased income from continuing operations and increased cash receipts, partially offset by increased payments for inventory and income taxes.

Cash flows used by investing activities were $142.5 million and $26.3 million in the first six months of fiscal 2011 and 2010, respectively. Cash flows used by investing activities in the first six months of fiscal 2011 primarily reflected cash paid for acquisitions of $103.5 million and capital expenditures of $26.3 million. Cash flows used by investing activities in the first six months of fiscal 2010 primarily reflected cash paid for capital expenditures.

Cash flows provided by financing activities were $6.6 million and $5.9 million in the first six months of fiscal 2011 and 2010, respectively. Cash flows provided by financing activities in the first six months of fiscal 2011 primarily reflected proceeds from our new credit facility of $110.0 million and repayment of our U.S. Term Loan for $118.8 million.

On December 30, 2010, we acquired all of the outstanding capital stock of Eclipse for approximately $120.0 million, plus the change in net assets from July 31, 2010, to the actual closing balance sheet. The $120.0 million purchase price also includes cash of $14.0 million in contingent consideration, which was deposited in an escrow account and will be paid to the seller if certain performance objectives are met over a three-year period. The estimated fair value of the contingent consideration is $13.4 million. Eclipse is a designer and manufacturer of embedded communications intercept receivers for signal intelligence applications.

34

Capital expenditures, consisting of machinery, equipment and computers, are anticipated to be approximately $55 million to $65 million during fiscal 2011, compared to $53.7 million expended in fiscal 2010. Capital expenditures for fiscal 2010 included $8.1 million under capitalized lease obligations for our newly constructed avionics controls facility and facility expansion noted above.

In March 2011, we entered into a secured credit facility for $460 million made available through a group of banks. The credit facility is secured by substantially all of our assets and interest is based on standard inter-bank offering rates. The spread will range from LIBOR plus 1.5% to LIBOR plus 2.25% depending on the leverage ratios at the time the funds are drawn. At April 29, 2011, we had $110.0 million outstanding under the secured credit facility at an initial interest rate of LIBOR plus 1.75% or 1.97%.

Total debt at April 29, 2011, was $607.5 million and consisted of $168.5 million of Senior Notes due in 2017, $250.0 million of Senior Notes due in 2020, $44.4 million under capital lease obligations and $144.6 million in borrowings under our secured credit facility and various foreign currency debt agreements and other debt agreements.

On May 23, 2011, we entered into a share purchase agreement to acquire Souriau for 483.0 million euros (approximately $715 million), plus certain transaction cost of the seller, which we expect to finance through a combination of U.S. and non-U.S. cash, a draw on our existing secured credit facility, and a new international credit facility. In accordance with the terms of the agreement, subsequent to period end, we deposited $350 million in escrow as security for the purchase price. Souriau is a leading global supplier of highly engineered connectors for harsh environments serving aerospace, defense & space, power generation & rail, and industrial equipment markets. The transaction is expected to close in mid-July 2011, subject to customary closing procedures, including regulatory approvals.

Our non-U.S. subsidiaries had $283.0 million in cash and cash equivalents at April 29, 2011. Cash and cash equivalents at our U.S. parent and subsidiaries aggregated $108.5 million at April 29, 2011, and cash flow from these operations is sufficient to fund working capital, capital expenditures, acquisitions and debt repayments of our domestic operations. The earnings of our non-U.S. subsidiaries are considered to be indefinitely invested, and accordingly, no provision for federal income taxes has been made on accumulated earnings of foreign subsidiaries. The amount of unrecognized deferred income 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 potential for tax credits.

We believe cash on hand and funds generated from operations are adequate to service operating cash requirements and capital expenditures through the next twelve months.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements. 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 statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risk factors set forth in “Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 29, 2010, that may cause our or the industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included or incorporated by reference into this report are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.

35

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in our exposure to market risk during the first six months of fiscal 2011. A discussion of our exposure to market risk is provided in the Company’s Annual Report on Form 10-K for the fiscal year ended October 29, 2010.

Item 4. Controls and Procedures

Our principal executive and financial officers evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of April 29, 2011. Based upon that evaluation, they concluded as of April 29, 2011, that our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in Securities and Exchange Commission rules and forms. In addition, our principal executive and financial officers concluded as of April 29, 2011, that our disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During the time period covered by this report, there were no significant changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

On March 30, 2011, the California Attorney General’s office filed a complaint against Kirkhill-TA, a subsidiary included in our Advanced Materials segment, with the Superior Court of California, Orange County, on behalf of California and the Santa Ana Regional Water Quality Control Board (Board) regarding the discharge of industrial waste water from its Brea, California, facility into Fullerton Creek and Craig Lake.

Prior to receipt of the complaint, management cooperated with the Board to address the discharge. Based upon our investigation, the discharge of waste water was unintentional, and was corrected as soon as the Board notified the Company of the discharge. At the request of the Board, we engaged an environmental engineering company to perform certain tests of the affected water. Concentrations of pollutants were below regulatory requirements. Additionally, our facility does not have a history of discharges of industrial waste. Accordingly, prior to receiving the complaint, management did not believe any significant remediation or penalties were likely.

The California water code authorizes courts to impose penalties based on the number of days in which the violation occurred and the volume of discharge. Utilizing this statutory formula and based on our calculations of the number of days that a violation occurred and the discharge volumes, management believes that the penalty imposed could be up to $1.8 million, although the Board has alleged that violations occurred over a longer period.

Based upon our review of the complaint, established statutory penalty factors, California’s Water Quality Enforcement Policy, a review of similar cases and the facts noted above, management believes that the possible range of penalties to be paid would be from low to high six figures. The amount of the estimated liability the Company recorded in the second quarter of fiscal 2011 as a contingent liability is not material.

From time to time we are involved in legal proceedings arising in the ordinary course of business. We believe that adequate reserves for these liabilities have been made and that there is no litigation pending that could have a material adverse effect on our results of operations and financial condition.

36

Item 6. Exhibits

10.1	Share Purchase Agreement between FCPR Sagard, FCPR Sagard Connecteurs, Individuals, The Mezzanine Sellers as Sellers and Esterline Technologies Corporation as Buyer, dated May 23, 2011.
11	Schedule setting forth computation of basic and diluted earnings per common share for the three and six month periods ended April 29, 2011, and April 30, 2010.
31.1	Certification of Chief Executive Officer.
31.2	Certification of Chief Financial Officer.
32.1	Certification (of R. Bradley Lawrence) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification (of Robert D. George) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.XML	XBRL Instance Document
101.XSD	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

37

SIGNATURES

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

	ESTERLINE TECHNOLOGIES CORPORATION
	(Registrant)
Dated:  June 3, 2011	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer,
		Secretary and Treasurer
		(Principal Financial Officer)

38

EX-10.1

EXHIBIT 10.1

SHARE PURCHASE AGREEMENT

FCPR SAGARD

FCPR SAGARD CONNECTEURS

INDIVIDUALS

THE MEZZANINE SELLERS

as Sellers

and

ESTERLINE TECHNOLOGIES CORPORATION

as Buyer

May 23, 2011

TABLE OF CONTENTS

				PAGE
CLAUSE
1.	DEFINITIONS AND INTERPRETATION				6
	1.1	DEFINITIONS			6
2.	SALE AND PURCHASE OF THE SOLD SECURITIES				10
3.	PRICE				10
4.	CONDITIONS PRECEDENT				11
	4.1	CONDITIONS PRECEDENT			11
	4.2	RESPONSIBILITY FOR SATISFACTION			12
	4.3	NOTIFICATIONS WITH THE DDTC			13
	4.4	COSTS AND EXPENSES			13
5.	PRE-CLOSING COVENANTS				13
	5.1	MANAGEMENT UP TO THE CLOSING DATE			13
	5.2	UNDERTAKINGS OF THE SELLERS RELATING TO THE SOLD SECURITIES			15
	5.3	REPAYMENT OF THE EXISTING FACILITIES			15
	5.4	CLOSING NOTICE			15
	5.5	COOPERATION BY THE STH SELLERS AND THE JUPITER SELLERS (WITH THE EXCEPTION OF MR. SCOTT CHARLES ROLAND)			16
6.	LOCKED BOX ARRANGEMENTS				16
7.	CLOSING				16
	7.1	CLOSING DATE			16
	7.2	ACTIONS TO BE TAKEN ON THE CLOSING DATE			17
8.	POST-CLOSING COVENANTS				19
	8.1	ACCESS TO RECORDS			19
	8.2	COOPERATION			19
	8.3	FORMER DIRECTORS OF THE GROUP COMPANIES			20
9.	REPRESENTATIONS AND WARRANTIES				20
	9.1	REPRESENTATIONS AND WARRANTIES OF THE BUYER			20
		9.1.1	Existence - Authorization		20
		9.1.2	No Bankruptcy		21
		9.1.3	Absence of violation		21
		9.1.4	Broker		21
		9.1.5	Financing– Break-up Fee		21
	9.2	REPRESENTATIONS AND WARRANTIES OF THE SELLERS			22
		9.2.1	General representations by each Seller individually		22
		9.2.2	Specific representations by the Representing Sellers on a several basis		22
		9.2.3	Buyer’s acknowledgements		23
		9.2.4	Indemnification by the Sellers		24

i

10.	CONFIDENTIALITY – ANNOUNCEMENT		29
11.	SELLERS’ AGENT		29
12.	NOTICES		30
13.	SUBSTITUTION - ASSIGNMENT		31
14.	TAXES - OTHER COSTS AND EXPENSES		32
15.	MISCELLANEOUS		33
	15.1	INTRA-GROUP AGREEMENTS	33
	15.2	INTERPRETATION	33
	15.3	CALCULATION OF TIME PERIODS	33
	15.4	AMENDMENT - WAIVER	34
	15.5	INVALIDITY – ENTIRE AGREEMENT	34
16.	GOVERNING LAW - DISPUTES		34
SCHEDULE 1			37
	LIST OF THE JUPITER SELLERS
SCHEDULE 2			38
	LIST OF THE FJ SELLERS
SCHEDULE 3			41
	LIST OF THE MEZZANINE SELLERS
SCHEDULE 4			42
	STH SHAREHOLDING
SCHEDULE 5			43
	SUBSIDIARIES
SCHEDULE 6			45
	ALLOCATION OF THE SOLD SECURITIES AMONG THE SELLERS
SCHEDULE 7			49
	EXISTING FACILITIES
SCHEDULE 8			49
	EXISTING LIENS
SCHEDULE 9			49
	DATA ROOM INDEX
SCHEDULE 10			49
	PHYSICAL DATA ROOM INDEX
SCHEDULE 11			49
	LIST OF OFFICERS WHO WILL RESIGN AT CLOSING

ii

SCHEDULE 12		49
	MANAGERS RESIGNATION LETTERS
SCHEDULE 13		49
	LIST OF AGREEMENTS WITH SELLERS TO BE TERMINATED AT CLOSING
SCHEDULE 14		49
	CORPORATE BODIES APPROVALS
SCHEDULE 15		49
	SECURITIES
SCHEDULE 16		49
	CLOSING NOTICE
SCHEDULE 17		49
	REPRESENTING SELLERS LIABILITY UNDER CLAUSE 9.2.4(A)(II) ALLOCATION PERCENTAGE

iii

AGREEMENT dated May 23, 2011

AMONG

(1) Esterline Technologies Corporation, a corporation organized under the laws of the State of Delaware,

(the “Buyer”)

(2) FCPR Sagard, a French Fonds Commun de Placement à Risques governed by Clauses L.214-36 et seq. of the French Financial and Monetary Code, represented by its managing company Sagard (“Sagard SAS”), a French société par actions simplifiée with a share capital of €4,000,000, whose registered office is at 24, rue Jean Goujon – 75008 Paris, registered with the Commerce and Companies Registry under number 439 725 524 RCS Paris, represented by Frédéric Stolar, duly authorized,

(hereinafter referred to as “Sagard”)

(3) FCPR Sagard Connecteurs, a French Fonds Commun de Placement à Risques governed by Clauses L.214-36 et seq. of the French Financial and Monetary Code, represented by its managing company Sagard (“Sagard SAS”), a French société par actions simplifiée with a share capital of €4,000,000, whose registered office is at 24, rue Jean Goujon – 75008 Paris, registered with the Commerce and Companies Registry under number 439 725 524 RCS Paris, represented by Frédéric Stolar, duly authorized,

(hereinafter referred to as “Sagard Connecteurs”)

Sagard and Sagard Connecteurs are acting together (conjointement) but not jointly nor severally (non solidairement) for the purpose of this Agreement and are together hereinafter referred to as the “STH Sellers” and individually as a “STH Seller,”

(4) Each of the persons whose names are set out in Schedule 1 (List of the Jupiter Sellers), duly represented for the purpose hereof,

(acting together (conjointement) but not jointly nor severally (non solidairement) hereinafter referred to individually as a “Jupiter Seller” and collectively as the as the “Jupiter Sellers”)

(5) Each of the persons whose names are set out in Schedule 2 (List of the FJ Sellers), duly represented for the purpose hereof,

(acting together (conjointement) but not jointly nor severally (non solidairement) hereinafter referred to individually as a “FJ Seller” and collectively as the “FJ Sellers”)

(6) Each of the share warrants holders whose names are set out in Schedule 3 (List of the Mezzanine Sellers), duly represented for the purpose hereof,

(acting together (conjointement) but not jointly nor severally (non solidairement) hereinafter referred to individually as a “Mezzanine Seller” and collectively as the “Mezzanine Sellers”)

(the above parties from (2) to (6) being hereinafter referred to individually as a “Seller” and collectively as the “Sellers”)

4

The Buyer and the Sellers are hereinafter referred to individually as a “Party” and collectively as the “Parties”.

PREAMBLE

(a) Jupiter is a French société par actions simplifiée with a share capital of €4,500,000, whose registered office is located at 9, rue de la porte de Buc, 78000 Versailles (France), registered with the Registry of Commerce and Companies under number 487 496 523 RCS Versailles (“Jupiter”).

(b) Jupiter owns 66.2% of the share capital of Financière Jupiter, a French société par actions simplifiée with a share capital of €7,000,000, whose registered office is located at 9, rue de la porte de Buc, 78000 Versailles (France), registered with the Registry of Commerce and Companies under number 487 605 719 RCS Versailles (“FJ”).

(c) FJ, the STH Sellers and the Mezzanine Sellers own and will own on the Closing Date, all the securities issued by Souriau Technologies Holding, a French société par actions simplifiée with a share capital of €31,818,180, whose registered office is located at 9, rue de la porte de Buc, 78000 Versailles (France), registered with the Registry of Commerce and Companies under number 484 853 908 RCS Versailles (“STH”) as described in Schedule 4 (STH Shareholding).

(d) STH fully controls and will fully control, on the Closing Date, directly or indirectly, the share capital of the entities identified in Schedule 5 (Subsidiaries).

(e) The Buyer wishes to acquire and the Sellers wish to sell to the Buyer, the Group (as defined hereinafter) so that, on the Closing Date, the Buyer will acquire from the Sellers:

(i) 100% of the outstanding share capital of Jupiter (the “Jupiter Shares”);

(ii) 100% of the part of the outstanding share capital of FJ which is not held by Jupiter (the “FJ Sold Shares”);

(iii) 100% of the part of the outstanding share capital of STH which is not held by FJ (the “STH Sold Shares”);

(iv) all the 37,245,457 convertible bonds issued by STH on January 30, 2006 (the “Convertible Bonds”);

(v) the 566,000 mezzanine share warrants of class 1 issued by STH on January 30, 2006 (the “Mezzanine 1 Warrants”); and

(vi) the 66,000 mezzanine share warrants of class 2 issued by STH on January 30, 2006 (the “Mezzanine 2 Warrants”);

(hereinafter together referred to as the “Sold Securities”)

subject to and in accordance with the terms and conditions of this Agreement.

(f) The Sold Securities are set out in Schedule 6 (Allocation of the Sold Securities among the Sellers).

(g) The Buyer wishes to acquire the Sold Securities and the Sellers wish to sell the Sold Securities to the Buyer under the terms and conditions of this Agreement.

5

THE PARTIES AGREE AS FOLLOWS

1. DEFINITIONS AND INTERPRETATION

1.1 DEFINITIONS

For the purpose of this Agreement, the following capitalized terms shall have the following meanings which shall be equally applicable to the singular or plural forms of such terms and be interpreted, as appropriate, to include the masculine and feminine genders. Any French term in this Agreement shall supersede its English translation.

“Acquisition” means the acquisition of the Sold Securities by the Buyer from the Sellers upon the terms and conditions set forth in this Agreement.

“Advisors’ Costs” means the advisory fees, costs and expenses (including VAT, if applicable) incurred in connection with the Acquisition as will be notified by the Sellers’ Agent to the Buyer in the Closing Notice.

“Affiliate” means, in relation to any specified Person a company that, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, where the term “control” has the meaning given to it by article L.233-3 of the French Commercial Code, it being further specified that the managing company or general partner of a fund (including a French FCPR) shall be deemed to have control over such fund.

“Agreement” means this share purchase agreement and each of its Schedules.

“Business Day” means any day (other than a Saturday or a Sunday) on which banks and financial markets are open in France.

“Buyer” has the meaning given to such term in the above description of the Parties.

“Claim” has the meaning given to such term in Clause 9.2.4(g)(i).

“Claim Notice” has the meaning given to such term in Clause 9.2.4(g)(i).

“Closing” means the consummation of the Acquisition of the Sold Securities by the Buyer from the Sellers by delivery of the documents and completion of the transactions referred to in Clause 7.2 (Actions to be taken on the Closing Date) and the payment of the Total Purchase Price.

“Closing Date” means the date referred to in Clause 7.1 (Closing Date) on which the Closing shall occur.

“Closing Notice” has the meaning given to such term in Clause 5.4.

“Confidentiality Agreement” means the confidentiality letter executed by the Buyer and Morgan Stanley on January 7, 2011.

“Convertible Bonds” has the meaning given to such term in paragraph (e) of the Preamble hereto.

“Convertible Bonds Purchase Price” has the meaning given to such term in Clause 3(b).

“Due Diligence Reports” means (i) the report issued by AON dated December 21, 2010 and covering insurance matters, (ii) the report issued by Latham & Watkins dated March 3, 2011 and covering legal matters, (iii) the report issued by Arthur D. Little dated December 23, 2010 and covering strategic

6

matters, (iv) the report issued by PricewaterhouseCoopers Audit divided into volumes dated November 23, 2010, January 25, 2011, February 9, 2011 and February 24, 2011, covering financial and accounting matters, tax matters and employment matters and (v) the 11 reports issued by URS dated December 10, 2010 (Technocontact - Cluses), December 17, 2010 (Souriau – Marolles-en-Brie), December 8, 2010 (Champagné), December 10, 2010 (Souriau – La Ferté), December 17, 2010 (Souriau – York), December 17, 2010 (PA&E – Wetnatchee), December 17, 2010 (PA&E – Sequim), December 17, 2010 (Dominican Republic), December 28, 2010 (India), December 17, 2010 (Morocco) and January 14, 2011 and covering environmental matters.

“Escrow Agreement” means the escrow agreement entered into on May 23, 2011, between the Buyer, the Sellers’ Agent and Oddo et Cie;

“Existing Facilities” means the facilities agreement identified in Schedule 7 (Existing Facilities).

“Existing Indebtedness” means all outstanding and unpaid amounts owing as at the Closing Date (in principal, interest, penalties and any other sums) due by the Group Companies pursuant to, or in connection with, the Existing Facilities (including, without limitation, all breakage costs due in connection with the voluntary or mandatory prepayment of the Existing Facilities) as determined in accordance with the terms of the Existing Facilities.

“Existing Liens” means those Liens and guarantees taken as a security for the Existing Facilities including those identified in Schedule 8 (Existing Liens).

“Expiry Date” has the meaning given to such term in Clause 9.2.4(f)(i).

“Family Holding” means a company, incorporated under the laws of France, that is owned by the relevant Jupiter Seller or a Person or Persons connected with such Jupiter Seller and is controlled by the relevant Jupiter Seller. For purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by”) has the meaning given to it by article L. 233-3 of the French Commercial Code.

“FJ Sellers” has the meaning given to such term in the Parties section of this Agreement.

“FJ Sold Shares” has the meaning given to such term in paragraph (e) of the Preamble hereto.

“French Foreign Investment Clearance” has the meaning given to such term in Clause 4.1(b).

“Governmental Authority” means any international, European, national, state, regional, departmental, municipal or local body with executive, legislative, judicial, regulatory, or administrative authority including any ministry, department, agency, office, organization or other subdivision thereof and any Person having received delegated authority from any of the above, as well as any judicial authority of competent jurisdiction.

“Governmental Authorization” means any license, certificate, approval, consent, permit, ruling, visa, qualification, exemption, waiver or other authorization, whether express or implied (including the lapse of a prescribed time at the end of which without an objection having been made the authorization will be deemed granted) granted or issued by or under the authority of any Governmental Authority.

“Group” means Jupiter, FJ, STH and the Subsidiaries, taken as a whole.

“Group Company” means any of Jupiter, FJ, STH and the Subsidiaries.

7

“Information” means the documents, material, information of any nature whatsoever, oral or written, relating to the Group Companies and the Sellers disclosed to the Buyer, its advisors, representatives or employees in the online data room opened by Merrill Data Site from March 8, 2011 to April 15, 2011, an index of which is attached in Schedule 9 (Data Room Index), in the physical data room opened in the offices of Latham & Watkins located at 53 quai d’Orsay, 75007 Paris from March 14, 2011 to April 14, 2011, an index of which is attached in Schedule 10 (Physical Data Room Index), in the written answers to written questions, during site visits, in the Due Diligence Reports, during expert sessions held on March 16, 24, 25, 28, 29, 30, 31 and on April 4, 6, 8, 11, 12, and 15, 2011 with Due Diligence Reports providers and key Group Company managers, through management presentations and in the course of the discussions held prior to the Closing Date among the Buyer and the Sellers, any of the Group Companies or any of their respective advisors, representatives or employees.

“Jupiter Sellers” has the meaning given to such term in the Parties section of this Agreement.

“Jupiter Shares” has the meaning given to such term in paragraph (e) of the Preamble hereto.

“Law” means any treaty, directive, law, statute, decree, regulation, order, code, rule, ordinance, or judgment, of any Governmental Authority (including any judicial or administrative interpretation thereof) implemented and enforceable as of the date hereof.

“Lien” means any security interest, mortgage, lien, pledge, easement of way, encumbrance, charge or any right restricting the full use, ownership or transferability of any asset or any third party preferential right over any asset.

“Long Stop Date” means September 30, 2011.

“Loss” means any loss, damage, cost, levy, fine, out of pocket payment, or other expense (including without limitation reasonable legal expenses and costs of defense of third party claims and including interest and penalties).

“Merger Control Clearance” means: the fact that, in accordance with the Merger Control Regulations, any Governmental Authority having jurisdiction thereon,

(a) authorizes the concentration resulting from the Acquisition, or

(b) does not prevent such concentration within the applicable waiting period which is deemed to be an official waiver from such Governmental Authority under the applicable Merger Control Regulations, or

(c) decides that such concentration falls outside the scope of the Merger Control Regulations.

“Merger Control Regulations” means any applicable merger control Laws pursuant to which the relevant Governmental Authority under the applicable Merger Control Regulations will be required to control the concentration resulting from the Acquisition by the Buyer in terms of its effect on the structure of the competition on the relevant markets.

“Mezzanine Sellers” has the meaning given to such terms in the Parties section of this Agreement.

“Mezzanine Warrants” means the Mezzanine 1 Warrants and the Mezzanine 2 Warrants together.

“Mezzanine 1 Warrants” has the meaning given to such term in paragraph (e) of the Preamble hereto.

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“Mezzanine 2 Warrants” has the meaning given to such term in paragraph (e) of the Preamble hereto.

“Notice” has the meaning given to such term in Clause 12 (Notices).

“PA&E” means Pacific Aerospace & Electronics, Inc., a company incorporated under the laws of the State of Washington (U.S.A.), having its registered office located at 434 Olds station Road, Wenachee, Washington, 98801 (U.S.A.), registered under number 601286664.

“Parties” has the meaning given to such terms in the Parties section of this Agreement.

“Person” means any present or future individual or any corporation, association, partnership, joint venture, limited liability, joint stock or other company, trust, organization, business or government or any governmental agency or political subdivision thereof.

“Purchase Price” has the meaning set forth in Clause 3(a).

“Records” means any and all contracts, books, registers, minutes, accounts, or other written documents or written data relating to the Group Companies or to the Sellers.

“Refund” has the meaning given to such term in Clause 9.2.4(c).

“Regulatory Clearances” means the Merger Control Clearance, the French Foreign Investment Clearance and the US Directorate of Defense Trade Controls (DDTC) Clearance together.

“Representing Sellers” means the STH Sellers and the Jupiter Sellers (with the exception of Mr. Scott Charles Roland).

“Sagard” has the meaning given to such terms in the Parties section of this Agreement.

“Sagard Connecteurs” has the meaning given to such terms in the Parties section of this Agreement.

“Schedule(s)” means the Schedule(s) attached hereto and any attachment(s) thereto.

“Securities” has the meaning given to such term in Clause 9.2.2(a).

“Sellers” has the meaning given to such terms in the Parties section of this Agreement.

“Sellers’ Agent” has the meaning given to such term in Clause 11 (Sellers’ Agent).

“Sold Securities” has the meaning given to such term in paragraph (e) of the Preamble hereto.

“Souriau SAS” means Souriau SAS, a société par actions simplifiée incorporated under the laws of France, with a share capital of EUR 4,352,544, having its registered office located at 9, rue de la Porte de Buc, 78000 Versailles (France), registered with the Trade and Companies Registry under number 421 320 268 R.C.S. Versailles.

“Souriau USA” means Souriau USA, Inc., a company incorporated under the laws of the State of Delaware (U.S.A.), having its registered office located at 1711 Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808 (U.S.A.).

“STH Sellers” has the meaning given to such term in the Parties section of this Agreement.

“STH Sold Shares” has the meaning given to such term in paragraph (e) of the Preamble hereto.

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“Subsidiaries” means the companies identified in Schedule 5 (Subsidiaries).

“Taxes” means all direct or indirect taxes, including, corporate income tax, value added tax, employment or other social security charges, including any interest thereon, and penalties, fines or additional amounts in relation, or attributable, thereto, and any payment made in or in relation thereto, imposed by any Governmental Authority.

“Third Party” means any Person that is not a Party to this Agreement and excluding any Group Company or any Affiliate of the Buyer.

“Third Party Claim” has the meaning given to such term in Clause 9.2.4(g)(ii)(A).

“Total Purchase Price” means the aggregate of the Purchase Price and the Convertible Bonds Purchase Price.

“Transaction Costs” means the (i) costs, fees, expenses and other charges (including VAT, if due) incurred by the Sellers in relation with the Due Diligence Reports and (ii) the Advisors Costs, which are to be paid by the Buyer on the Closing Date pursuant to Clause 14(e), for an amount of €7,100,000 (VAT included), the Sellers being exclusively responsible for their own costs, fees, expenses and other charges in excess of such amount, being specified that no Transaction Costs will be incurred by the Group Companies.

2. SALE AND PURCHASE OF THE SOLD SECURITIES

(a) In accordance with the terms and subject to the conditions of this Agreement, the Buyer shall purchase from each of the Sellers, and each Seller shall sell to the Buyer, on the Closing Date, all of its portion of the Sold Securities as set forth opposite its name in Schedule 6 (Allocation of the Sold Securities among the Sellers), free and clear of any Lien, for the Total Purchase Price specified in Clause 3 (Price).

(b) As of the Closing Date, the Buyer shall have the full ownership of the Sold Securities together with all the rights attached thereto. In that respect, the Parties undertake to notify the Acquisition to the relevant Group Companies on the Closing Date in order to enable them to proceed with the registration of the Acquisition in their shareholders’ accounts on the Closing Date.

3. PRICE

(a) The total and aggregate purchase price to be paid by the Buyer to the Sellers for the sale and purchase of the Sold Securities (with the exception of the Convertible Bonds) shall be equal to €298,800,000 (two hundred ninety eight million eight hundred thousand Euros) (the “Purchase Price”).

(b) The total purchase price to be paid by the Buyer to the Sellers for the sale and purchase of the Convertible Bonds shall be equal to the amounts of the principal and the interests due on the Closing Date under the Convertible Bonds terms and conditions, such total purchase price for all the Convertible Bonds (the “Convertible Bonds Purchase Price”) shall be set out in the Closing Notice.

(c) The Total Purchase Price shall be paid as set out in Clause 7.2(c) of this Agreement.

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(d) The Parties expressly agree that the Total Purchase Price is not subject to any post-Closing adjustment nor any adjustment whatsoever, except for the adjustments provided in paragraph (b) above in connection with the interests due on the Convertible Bonds on the Closing Date, paragraph (e) below as regards the Purchase Price and Clause 9.2.4(a) as regards indemnity payments.

(e) In the event that the Closing does not occur on or prior to June 30, 2011, the Buyer shall also pay to the Sellers an interest of 0.5% per month calculated prorata temporis on the Purchase Price for the period starting on June 30, 2011, ending on the Closing Date and allocated between the Sellers as will be set out in the Closing Notice.

(f) The Sellers’ Agent shall be responsible for the allocation of the Purchase Price and the Convertible Bonds Purchase Price between the Sellers, which allocation will be set out in the Closing Notice. The payment of the Purchase Price and of the Convertible Bonds Purchase Price to the Sellers’ Agent in accordance with the Closing Notice will be a good and sufficient discharge to the Buyer who shall not be further liable as to said allocation, the Sellers holding harmless the Buyer against it.

(g) It being specified that:

(i) the Mezzanine 1 Warrants will be sold non exercised and the price of each Mezzanine 1 Warrant will be equal to the price of the 1 new STH share to which exercise of each such Mezzanine 1 Warrant would give right pursuant to the Mezzanine 1 Warrants terms and conditions, reduced by the exercise price of 1 Euro to be paid upon exercise of each such Mezzanine 1 Warrant, and

(ii) the price of each Mezzanine 2 Warrant will be equal to 0 Euro on Closing Date as they will not be exercisable on such date.

(h) The Sellers hereby further agree (i) that the amount of their respective portion of the Purchase Price and of the Convertible Bonds Purchase Price as will be set out in the Closing Notice will be the final and definitive amount to be paid to each relevant Seller for the sale of its portion of the Sold Securities and (ii) to waive and release any and all claims that they may have against each other relating to the calculation and/or allocation of the Purchase Price and that arise out of any such agreement (including shareholders agreements and terms and conditions of the relevant Sold Securities).

(i) On the Closing Date, the Buyer shall pay to the Sellers’ Agent on behalf of each of the Sellers an amount equal to their respective portion of the Purchase Price and of the Convertible Bonds Purchase Price as will be set out in the Closing Notice in immediately available funds by bank wire transfers to such bank accounts of each of the Sellers as mentioned in such Closing Notice.

4. CONDITIONS PRECEDENT

4.1 CONDITIONS PRECEDENT

The obligation of the Parties to consummate the Acquisition is subject to the satisfaction of the following conditions precedent:

(a) any Merger Control Clearance, for which a filing is required prior to the completion of the Acquisition and for which applicable Merger Control Regulation provides for a stand-still obligation of the Acquisition until such Merger Control Clearance has been obtained, shall have been obtained and shall be in full force and effect; and

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(b) the Buyer shall have obtained the authorization from the French Ministry of Economy required for the completion of the Acquisition under French foreign investment regulation (the “French Foreign Investment Clearance”).

4.2 RESPONSIBILITY FOR SATISFACTION

(a) The Buyer agrees to, as promptly as possible, and at its own expense make full and accurate necessary or appropriate filings and/ or pre filings and contacts with the relevant Governmental Authorities as soon as practicable after the date of this Agreement, and in any event within three (3) Business Days as from the date of this Agreement, in order to obtain the relevant Regulatory Clearance and as quickly as possible and in any event within any term provided by the applicable Laws:

(i) supply promptly any additional information and documents that may be requested by the relevant Governmental Authorities,

(ii) keep the Sellers’ Agent regularly informed of the status of the relevant filings and inform promptly the Sellers’ Agent if it becomes aware of anything that could result in the relevant Regulatory Clearance being delayed or denied,

(iii) provide the Sellers’ Agent with a draft of each notification, submission, response or other communication (excluding communication of an administrative nature) which it proposes to submit to the relevant Governmental Authorities in due time to enable the Sellers’ Agent to review and comment on the same, it being agreed that any such document shall not be handed to the relevant Governmental Authorities without the prior written approval of the Sellers’ Agent,

(iv) provide, without delay, the Sellers’ Agent with all documents and information filed with or requested by the relevant Governmental Authorities in connection with such filings,

(v) invite the Sellers’ Agent and its advisors to participate in any meetings or telephone conversations with the relevant Governmental Authorities and submit any document to be handed to the relevant Governmental Authorities to the Sellers’ Agent for its prior approval,

(vi) give notice to the Sellers’ Agent, within two (2) Business Days of becoming aware of the same, of the satisfaction of the conditions precedent referred to in Clause 4.1 above (including copies of the French Foreign Investment Clearance and of any Merger Control Clearance as soon as received from the relevant Governmental Authorities),

(vii) comply with any requirements and agree to any undertakings and conditions imposed by the relevant Governmental Authorities in connection with the granting of the Regulatory Clearances; provided, however, that such undertakings and conditions do not include any divestiture of assets or operations by the Buyer other than such divestiture of assets or operations with a fair market value of €5,000,000 or less which will be complied with by the Buyer,

(viii) more generally, make its best efforts to ensure the satisfaction of the conditions precedent referred to in Clause 4.1.

(b) The Sellers agree to fully co-operate and do all their reasonable endeavors, as far as legally possible, to cause the relevant Group Companies to co-operate with the Buyer, upon its request, in providing to the Buyer such assistance as is reasonably necessary for the Buyer to

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make the relevant filings under Clause 4.1 above. The Sellers will make or cause the relevant Group Companies to make such filings as may be required for the Regulatory Clearances. It being agreed that the satisfaction of the conditions precedent referred to in Clause 4.1 shall be the final responsibility and obligation of the Buyer except for filings which are the responsibility of the relevant Group Companies.

(c) The conditions set out in Clause 4.1 are for the benefit of the Buyer and of the Sellers. The Buyer and the Sellers’ Agent acting on behalf of the Sellers may (to the extent permitted by Law) waive these conditions in whole or in part, by mutual written consent.

4.3 NOTIFICATIONS WITH THE DDTC

(a) The Buyer acknowledges that Souriau SAS, Souriau USA and PA&E will, in accordance with the International Traffic in Arms Regulation (ITAR), notify the US Directorate of Defense Trade Controls (DDTC) of the contemplated change of ownership of the Group and indirectly of Souriau SAS, Souriau USA and PA&E and shall assist Souriau SAS, Souriau USA and PA&E in connection with such a filing. It is hereby acknowledged and agreed by the Buyer that the consent of the DDTC to the contemplated change of ownership is not a condition precedent to this Agreement and that the Buyer shall bear all risks and liabilities in connection therewith. The Sellers and the Buyer shall reasonably cooperate with one another to coordinate their respective required notifications to the DDTC and shall provide one another with reasonably needed information to prepare and submit such notifications in a timely manner, provided, upon prior review and approval by the Buyer, the Sellers shall submit the initial notification to the DDTC of the contemplated change in ownership of the Group.

4.4 COSTS AND EXPENSES

(a) All costs and expenses incurred by the Parties in relation to the satisfaction of the conditions precedent set out in Clause 4.1 above and with the DDTC filing referred to in Clause 4.3 above (including, for the avoidance of doubt, any and all costs incurred by the Sellers to assist the Buyer in connection with any necessary filings) shall be borne by the Buyer.

5. PRE-CLOSING COVENANTS

5.1 MANAGEMENT UP TO THE CLOSING DATE

(a) From the date hereof until the Closing Date, to the extent legally possible under their respective powers as shareholders or, as the case may be, managers, directors or members of the management or supervising boards of the relevant Group Companies, the Sellers have and shall endeavor to cause the Group Companies not to take or commit to take any of the following actions:

(i) acquire or sell shares, material assets or any material interest in a company (excluding short-term investments in liquid shares of publicly traded limited liability entities made solely for cash management purposes);

(ii) increase, redeem or decrease the share capital, issue any other securities or make any other amendment to the by-laws of any Group Company except for any share capital increase subscribed by a Group Company in another Group Company;

(iii) declare or pay a dividend or an interim dividend (other than a dividend declared or paid from a Group Company to another Group Company);

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(iv) enter into or amend the terms of any contract with any of the Sellers or their Affiliates or make any payment to the Sellers or their Affiliates other than (i) salaries or other management remuneration paid in the ordinary course of business or other payments consistent with past practices or imposed by Law, the collective agreements or employment contracts in force at the date of this Agreement and (ii) any interest, penalty, fee, other amounts due or principal amount repaid to the Mezzanine Sellers;

(v) approve a winding-up, merger, split-up, contribution or sale of business as a whole or of any divisions (branche d’activité) of the Group (it being specified that Souriau Sweden AB is currently in the process of being liquidated and that such liquidation is hereby authorized);

(vi) enter into any joint-venture, partnership or other similar arrangement;

(vii) operate the business of the Group Companies outside the ordinary course of business or inconsistent with past practices;

(viii) make any material changes to its accounting methods, policies or practices or to any existing tax election;

(ix) take any action with respect to a material contract that would result in a material default or breach thereof or enter into or terminate any material contracts or make any material change in or amendment of, any such material contract outside the ordinary course of business;

(x) commence or threaten to commence any proceedings or settle any proceedings or claim or waive a right in relation to any proceedings in an amount exceeding €250,000 without prior notice to the Buyer;

(xi) establish any new pension or other employee benefits scheme or materially amend any existing employee benefits scheme or pay any benefits under an existing employee benefits scheme other than in accordance with the terms of the documents governing such scheme;

(xii) give, create or incur or agree to give, create or incur any guarantees, indemnities or other agreement to secure performance or payment, other than in the ordinary course of business;

(xiii) create, or agree to create, an encumbrance over any of the Sold Securities;

(xiv) enter into any material borrowing, factoring or other financing or any lending commitments; and

(xv) enter into any binding commitment to do any of the above.

(b) Notwithstanding the provisions of Clause 5.1(a), the Sellers and the Group Companies may undertake any action:

(i) contemplated by this Agreement, required by any applicable Laws, or

(ii) to which the Buyer will have consented.

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(c) For the purpose of any consent which shall be requested from Buyer pursuant to Clause 5.1(b) above, it is specifically agreed that:

(i) consent of the Buyer shall in no event be unreasonably withheld or delayed, having due consideration for the interests of the Group Companies;

(ii) if, at the end of a period of five (5) Business Days from the receipt by the Buyer of any such request for consent, the Buyer has not notified the Sellers’ Agent of its objection to the proposed action, the Buyer shall be deemed to have consented to such proposed action.

5.2 UNDERTAKINGS OF THE SELLERS RELATING TO THE SOLD SECURITIES

Each Seller individually shall not, without the Buyer’s prior consent (such consent not to be unreasonably withheld or delayed), proceed to a voluntary transfer of any of the Sold Securities it owns at the date hereof other than to (i) another Seller party to this Agreement, who shall automatically benefit from, and be bound by, all the rights and obligations benefiting to and binding the Seller having transferred him the relevant Sold Securities under this Agreement, in connection with such Sold Securities or (ii) in the case of a Jupiter Seller to a Family Holding provided that such Jupiter Seller transfers all or part of its Sold Securities to the Family Holding and that the Family Holding, prior to such transfer, agrees to benefit from, and be bound by, all the terms and conditions of this Agreement in connection with the transferred Sold Securities and be considered as a Seller of such Sold Securities for the purposes of this Agreement, and the relevant Seller shall notify the transfer to the Buyer together with the amended allocable portion of the Sold Securities.

5.3 REPAYMENT OF THE EXISTING FACILITIES

The Buyer shall ensure that on the Closing Date it will pay, or make available to the relevant Group Companies, or repay in full on behalf of the relevant Group Companies, the Existing Indebtedness owing as at the Closing Date as shall have been notified by the Sellers’ Agent to the Buyer in the Closing Notice.

5.4 CLOSING NOTICE

No later than two (2) Business Days prior to the Closing Date, the Sellers’ Agent shall deliver to the Buyer a statement (the “Closing Notice”) substantially in the form set out in Schedule 16. Such Closing Notice shall set out (i) the amount of the Existing Indebtedness and the details of the bank accounts into which the corresponding amounts shall be paid in immediately available funds by bank wire transfers on the Closing Date, (ii) the total number of Sold Securities to be sold on Closing by each Seller and the allocation of such Sold Securities between the Sellers, updated to take into account any authorized pre Closing transfer of Sold Securities that may occur pursuant to Clause 5.2, (iii) the amount of the Purchase Price (as may be increased pursuant to the provisions of Clause 3(e)) and the amount of the portion of the Purchase Price to be paid according to Clause 11 to the Sellers’ Agent on behalf of each relevant Seller and the detailed unit purchase price per Sold Security (other then the Convertible bonds), together with the details of the bank account into which the corresponding amounts shall be paid in immediately available funds by bank wire transfer on the Closing Date, (iv) the amount of the Convertible Bonds Purchase Price (equal to the amounts of the principal of the Convertible Bonds increased by the interests due and accrued on the Closing Date) and the allocation of this amount between the Sellers, together with the details of the bank account into which the corresponding amounts shall be paid according to Clause 11 in immediately available funds by bank wire transfer on the Closing Date and (v) the total amount and details of the Transaction Costs, together with the details of the bank account into which the corresponding amounts shall be paid according to Clause 11 in immediately available funds by bank wire transfers on the Closing Date.

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5.5 COOPERATION BY THE STH SELLERS AND THE JUPITER SELLERS (WITH THE EXCEPTION OF MR. SCOTT CHARLES ROLAND)

The STH Sellers and the Jupiter Sellers (with the exception of Mr. Scott Charles Roland) shall cooperate with the Buyer and shall cause the Group Companies to cooperate with the Buyer to obtain the relevant Regulatory Clearance, provide the Buyer and make such filings or reports, upon request and to the extent reasonably practicable, with such assistance and information relating to the Group Companies, which is reasonably necessary in relation to any accounting or regulatory matter, including the preparation of any financial statements, any audit, or any action or investigation initiated or threatened by any third party, including any Governmental Authority

6. LOCKED BOX ARRANGEMENTS

(a) Each Seller represents and warrants to the Buyer, for its own account, that during the period commencing on June 30, 2010 and ending on (and until Closing occurs, including) the Closing Date, no forgiveness of indebtedness has or will be received by such Seller or any Affiliate thereof, and no payment or sum whatsoever has been paid or will be paid (whether in cash or in kind) to such Seller or any Affiliate thereof (being specified that with regards to Sagard the term Affiliate shall not include any Group Company) by any of the Group Companies except for (i) salaries or other management remunerations paid in the ordinary course of business or other payments consistent with past practices or imposed by Law, the collective agreements or employment contracts in force at the date of this Agreement and (ii) any interest, penalty, fee or other amounts due or principal amount repaid to the Mezzanine Sellers.

(b) Each Seller shall indemnify the Buyer on a euro for euro basis exclusively in respect of any breach by such Seller of the representations or covenants set out in Clause 6(a). Each Seller’s liability under this Clause 6(a) shall in no event exceed the amount received in breach of the representations or covenants set out in Clause 6(a), together with any collection costs incurred by the Buyer in connection therewith.

7. CLOSING

7.1 CLOSING DATE

(a) The Closing shall take place at the offices of Latham & Watkins, 53 Quai d’Orsay, 75007 Paris, at the latest on the sixth Business Day following the satisfaction or waiver of the conditions referred to in Clauses 4.1(a) and 4.1(b) above (the “Closing Date”), or on any other date or location as mutually agreed upon by the Buyer and the Sellers’ Agent.

(b) If the Closing does not occur by the Long Stop Date, the Sellers’ Agent, at its sole discretion, shall be entitled to either:

(i) terminate this Agreement with no liability whatsoever (it being provided that the obligations set forth in Clauses 9 (Representations and Warranties), 14 (Taxes - Other Costs and Expenses), 16 (Governing Law - Disputes) as well as in this Clause 7.1 shall survive such termination, and that neither Party shall have any claim against the other Party under this Agreement save for any claim arising from a breach by the Buyer of its undertakings under Clause 4; or

(ii) postpone the Closing Date referred to above, it being specified that the Buyer shall remain bound by the provisions of this Agreement until such postponed Closing Date.

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(c) If the Closing does not occur by the Long Stop Date, and the Sellers’ Agent is not entitled to extend the Closing Date pursuant to Clause 7.1(b)(ii), the Buyer, at its sole discretion shall be entitled to terminate this Agreement with no liability whatsoever(it being provided that the obligations set forth in Clauses 9 (Representations and Warranties), 14 (Taxes - Other Costs and Expenses), 16 (Governing Law - Disputes) as well as in this Clause 7.1 shall survive such termination, and that neither Party shall have any claim against the other Party under this Agreement save for any claim arising from a breach by the Buyer of its undertakings under Clause 4.

7.2 ACTIONS TO BE TAKEN ON THE CLOSING DATE

(a) On the Closing Date, all of the actions required for Closing, including the actions listed below shall be carried out by the relevant Parties. Each action will be conditional upon the occurrence of all of the others, so that if one of these actions is not taken by the relevant Party, each other Party shall be entitled to refuse to proceed with the Closing and shall incur no liability vis-à-vis the other Parties in connection with such refusal, without prejudice to its right to seek and obtain from the defaulting Party any other remedy that may be available under applicable Law.

(b) The Sellers’ Agent shall deliver to the Buyer, or ensure the delivery to the Buyer of:

(i) the share transfer forms (ordres de mouvement) in favor of the Buyer for all the Sold Securities, duly executed by each Seller,

(ii) the tax transfer forms (formulaire cerfa n°2759 DGI) for all the Jupiter Shares, the FJ Sold Shares and the STH Sold Shares, duly executed by each Seller,

(iii) the share transfer books (registre des mouvements de titres) and the shareholders’ individual accounts (comptes d’actionnaires) of Jupiter, FJ, STH, Souriau Holding SAS, Souriau SAS and Technocontact SA,

(iv) the share transfer forms (ordres de mouvement) in favor of Souriau SAS for the shares held in Technocontact SA by Mr François Calvarin (one share), Mr Thierry Quillet (one share) and Mr Luc Brouard (one share) duly executed by each of them,

(v) the tax transfer forms (formulaire cerfa n°2759 DGI) for the shares held in Technocontact SA by Mr François Calvarin (one share), Mr Thierry Quillet (one share) and Mr Luc Brouard (one share) duly executed by each of them,

(vi) originals of the share loan agreements (prêt de consommation d’action) for the loan of shares of Technocontact SA granted by Souriau SAS to Mr François Calvarin (one share) Mr Thierry Quillet (one share) and Mr Luc Brouard (one share),

(vii) originals of the resignation letters of the corporate officers of the Group Companies identified in Schedule 11 (List of Officers who will resign at Closing) effective as of the Closing Date, substantially in the form set out in Schedule 12 (Managers Resignation letters),

(viii) evidence of the express prior written consent of the President of Jupiter to the transfer of the Jupiter Shares;

(ix) evidence of the express prior written consent of the President of FJ to the transfer of the FJ Sold Shares;

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(x) evidence (in the form of certified copies of the relevant minutes) that the transfer of the STH Sold Shares, of the Mezzanine Warrants and of the Convertible Bonds contemplated under this Agreement have received the prior approval of the supervisory board of STH;

(xi) evidence of the termination of the agreements identified in Schedule 13 (List of Agreements with Sellers to be terminated at Closing);

(xii) evidence of the release of all the Existing Liens subject to repayment of the Existing Indebtedness.

(c) The Buyer shall:

(i) pay the Purchase Price and the Convertible Bonds Purchase Price to the Sellers’ Agent in immediately available funds by bank wire transfer to such bank account as shall have been notified in the Closing Notice and with value date on the Closing Date,

(ii) pay, or make available to the relevant Group Companies, or repay in full on behalf of the relevant Group Companies, the Existing Indebtedness as shall have been notified in the Closing Notice, in immediately available funds by bank wire transfers to the bank accounts indicated in the Closing Notice and with value date on the Closing Date; and

(iii) pay to the Sellers’ Agent the amount of the Transaction Costs that were identified in the Closing Notice in immediately available funds by bank wire transfer to such bank account as shall have been identified in the Closing Notice.

(d) Breach of Closing obligations

(i) If the Buyer fails to comply with any obligation in paragraph (c) above, the Sellers’ Agent shall be entitled (in addition to and without prejudice to all other rights or remedies available) by written notice to the Buyer served on the Closing Date, to terminate this Agreement without liability on its part or on the part of those on whose behalf such notice is served.

(ii) If the Sellers’ Agent fails to comply with any obligation set out in paragraphs (b)(iii), (b)(viii), (b)(ix), (b)(x) or (b)(xii) above, the Buyer shall be entitled (in addition to and without prejudice to all other rights or remedies available) by written notice to the Sellers’ Agent served on the Closing Date, to terminate this Agreement without liability on its part.

(iii) Notwithstanding the mandate given in Clause 11 to the Seller’s Agent, if one or several Sellers fail to deliver to the Buyer (i) duly completed, executed and dated ordres de mouvement (share transfer forms) in respect of the Sold Securities they will own on the Closing Date, pursuant to paragraph (b)(i) above, or (ii) duly completed, executed and dated tax transfer forms (formulaires cerfa n°2759 DGI) in respect of the Jupiter Shares, the FJ Sold Shares or the STH Sold Shares they will own on the Closing Date, pursuant to paragraph (b)(ii) above, the Buyer shall be entitled (in addition to and without prejudice to all other rights or remedies available), by written notice to the Sellers’ Agent served on the Closing Date, to terminate this Agreement on the Closing Date (and on that date only) without liability on its part, provided, however, that such Buyer’s termination right shall apply only in the case where the total number of ordres de mouvement and tax transfer forms effectively delivered to the Buyer on the Closing Date, directly or indirectly, represent together less than 99

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% of share capital and voting rights of STH on a fully diluted basis. If the Buyer proceeds with Closing, notwithstanding that less than 100% of share capital and voting rights of STH on a fully diluted basis has been delivered, the Sellers that have not delivered their Sold Securities at Closing waive any rights to oppose the forced execution (execution forcée) of the transfer of their Sold Securities by the Buyer on the basis of Article 1142 of the French Civil Code and shall also be liable to indemnify the Buyer in respect of its costs incurred in connection therewith.

(e) Each of the Parties shall further execute all other necessary documents and take all necessary measures which any of the Parties may reasonably require of the other Parties in order to implement the Closing and the other transactions contemplated in this Agreement. In particular, the Parties shall execute and/or provide the other Parties with all the documents or take all the actions which will be necessary in connection with the granting of the Regulatory Clearances and any other regulatory procedures with Governmental Authorities likely to be applicable for the implementation of the Closing.

8. POST-CLOSING COVENANTS

8.1 ACCESS TO RECORDS

(a) The Buyer will give, and will cause the Group Companies to give, each Seller and its advisors reasonable access (including the right to take copies and staff assistance), during normal business hours, to the Records relating to the Group Companies, as may be necessary for such Seller or any of its Affiliates to prepare its tax returns and financial statements and to handle any claims or proceedings, of any nature whatsoever, or any investigations by any Governmental Authority.

(b) The Buyer will not, and will ensure that the Group Companies do not, destroy or otherwise dispose of such Records (and any copies of such Records) without the prior written consent of the Sellers’ Agent (which shall have the opportunity to remove and retain any of such Records at its own costs).

(c) The undertakings contained in Clauses 8.1(a) and 8.1(b) above will survive until the later of:

(i) the expiration of a period of ten (10) years as from the Closing Date (plus, for each given relevant Group Company, any additional time during which such Group Company is subject to an on-going litigation or investigation by any Governmental Authority with respect to any period prior to the Closing Date, or such period is otherwise open to assessment or investigation by such Governmental Authority); or

(ii) the expiration of the period required by any applicable Law to retain the Records.

8.2 COOPERATION

The Parties shall cooperate with each other, provide each other and make such filings or reports, after the Closing Date, upon request and to the extent reasonably practicable, with such assistance and information relating to the Group Companies, which is reasonably necessary in relation to any accounting or regulatory matter, including the preparation of any financial statements, any audit, or any action or investigation initiated or threatened by any third party, including any Governmental Authority.

In this framework, the Buyer expressly undertakes, without any request from the Sellers, to deliver to the Sellers’ Agent or cause to be delivered to the Sellers’ Agent, promptly after Closing, the tax

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transfer forms (formulaire cerfa n°2759 DGI) for all the Jupiter Shares, the FJ Sold Shares and the STH Sold Shares duly executed by the Buyer and bearing the stamp of the French tax authorities within 30 days as from the Closing Date.

8.3 FORMER DIRECTORS OF THE GROUP COMPANIES

(a) The Buyer shall not, and shall cause its Affiliates and the Group Companies not to, claim against any former or current director, manager or officer or employee of the Group Companies (including those resigning on the Closing Date) with respect to any management decisions adopted by any of the Group Companies prior to the Closing Date or otherwise seek the liability of any such director, manager or officer in that respect and, to the extent any such claim is made or liability is sought, shall indemnify and hold any such a director, manager or officer, harmless against the consequences of any such claim or liability. The Buyer shall also procure that the formalities relating to such resignations be carried out as soon as possible after the Closing Date.

9. REPRESENTATIONS AND WARRANTIES

9.1 REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents and warrants to the Sellers that the statements contained in this Clause 9.1 are true and correct as at the date hereof and will be true and correct as at the Closing Date:

9.1.1 Existence - Authorization

(a) The Buyer is duly organized and validly incorporated under the Laws of the State of Delaware, and has all requisite corporate power and authority to own its assets and conduct its business as now being conducted.

(b) The Buyer has all requisite corporate capacity and right to enter into this Agreement and any other agreement and document to be entered into pursuant to this Agreement, to perform its obligations hereunder or thereunder and to consummate the transactions contemplated hereby.

(c) This Agreement has been duly authorized by any and all relevant corporate bodies of the Buyer (and, to the extent required, of Affiliates of the Buyer), copies of the minutes of such corporate bodies meetings are attached in Schedule 14 (Corporate Bodies Approvals), and duly executed and delivered by the Buyer and constitutes and shall constitute the legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms.

(d) Save the Regulatory Clearances, no Governmental Authorization is required to be obtained by the Buyer or any of its Affiliates prior to the Closing Date in connection with the signing of this Agreement or the consummation of any of the transactions contemplated by this Agreement.

(e) The Buyer knows of no fact as to itself or any Affiliates of the Buyer that would be reasonably likely to result in a delay in the receipt of any Regulatory Clearances.

(f) The execution of this Agreement by the Buyer and the performance of its obligations thereunder do not, and will not, conflict with, or constitute a breach of any Law, agreement, or other obligation to which the Buyer is subject.

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9.1.2 No Bankruptcy

(a) The Buyer is not insolvent (en état de cessation de paiements).

(b) The Buyer is not subject to any bankruptcy or similar proceedings under any applicable Laws.

9.1.3 Absence of violation

The execution of this Agreement by the Buyer and the performance of its obligations hereunder do not, and will not, conflict with, or constitute a breach of any Law, agreement, by-laws or other obligation to which the Buyer is subject.

9.1.4 Broker

Except for Rothschild, no broker, finder, investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Buyer.

9.1.5 Financing – Break-up Fee

(a) Financing

The Buyer has obtained all necessary financing and funding to have, on the Closing Date (but prior to Closing), sufficient immediately available funds to pay, in full, the Total Purchase Price, the Existing Indebtedness and, more generally, to ensure that all amounts payable or that may become payable pursuant to this Agreement are paid on the date they become due and payable and to carry out the transactions contemplated in this Agreement in accordance with the terms and conditions as set out hereunder.

(b) Break-up Fee

(i) Notwithstanding the above, if no Closing has occurred by the Long Stop Date, or any other later date that may be mutually agreed between the Sellers’ Agent and the Buyer, for any reason other than the non fulfillment of the conditions precedent set out in Clause 4.1 or any breach of the Sellers’ Agent under Clause 7.2(d)(ii) and (ii), the Buyer shall pay to the Sellers’ Agent a break-up fee in an amount of €50,000,000.

(ii) Such break-up fee shall also be due in the event where the non fulfillment of the conditions precedent set out in Clause 4.1 is principally due to the breach by the Buyer of its obligations under Clause 4.2.

(iii) The amount of such break-up fee will be paid to the Sellers’ Agent pursuant to the Escrow Agreement provisions and will be allocated between the Sellers by the Sellers’ Agent in proportion to the respective portion of the Purchase Price that would have been allocated to each Seller, would the Closing have occurred.

(iv) This break-up fee shall be the exclusive remedy with respect to a failure of the Buyer to close the transaction as described in Clause 9.1.5(b)(i) above but is without prejudice to any other rights or remedies that the Sellers’ Agent and/or the Sellers may have against the Buyer (or any Affiliate of the Buyer) with respect to any other breach by the Buyer (or any Affiliate of the Buyer) hereunder.

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9.2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS

9.2.1 General representations by each Seller individually

(a) Each Seller that is not an individual is an entity duly incorporated, validly existing under its laws of incorporation.

(b) Each Seller has full power and authority to enter into this Agreement and any other agreement or document entered into pursuant to this Agreement and to perform the obligations to which it is bound under this Agreement and has obtained all necessary consents and authorizations required to be obtained by it to perform this Agreement (subject, prior to Closing, to the Merger Control Clearances).

(c) The execution of this Agreement by each Seller and the performance of its obligations there under do not, and will not, conflict with, or constitute a breach of any Law, agreement, or other obligation to which each Seller is subject, provided that the Regulatory Clearances are obtained and that the agreements identified in Schedule 13 (List of Agreements with Sellers to be terminated at Closing), are terminated on the Closing Date and that any prior approval right under the constitutional documents of Jupiter, FJ and STH are obtained on or before the Closing Date.

(d) Each Seller will be the sole owner of the Sold Securities that it will sell on Closing to the Buyer as allocated in Schedule 6 (Allocation of the Sold Securities among the Sellers), subject to the transfers of securities authorized under clause 5.2. Such Sold Securities will, on the Closing Date, be free from any Lien.

The representations of this paragraph 9.2.1 are made by each Seller for its own account, and only with respect to the Sold Securities that it will sell to the Buyer. Each Seller’s liability under this paragraph 9.2.1 shall in no event exceed the portion of the Purchase Price effectively paid to such Seller.

9.2.2 Specific representations by the Representing Sellers on a several basis

(a) The Representing Sellers represent (i) that the securities listed in Schedule 15 (Securities) (the “Securities“) represent, together with the Sold Securities, 100% of the share capital and voting rights of the Group Companies on a fully diluted basis and (ii) that there are no outstanding options, warrants, convertible or exchangeable securities or other rights that would obligate any Group Company to issue share of its capital stock or other equity securities, including in respect of shares of the FCPE Souriau Développement. Except the agreements identified in Schedule 13 (List of Agreements with Sellers to be terminated at Closing) and the prior approval clauses contained in the by-laws of some of the Group Companies, there are no agreements, written or oral, to which any Group Company is a party relating to the acquisition, disposition, voting or registration under applicable Laws of any equity securities of any Group Company or the voting rights of the Group Companies, other than the Securities and the Sold Securities.

(b) The Representing Sellers represent (i) that the Securities are, and will on the Closing Date be, owned by the Group entities mentioned as respective owner of the relevant Securities in Schedule 15 (Securities) (except for Souriau SAS in which FCPE Souriau Développement (employee mutual investment fund) holds 0.93% of the share capital) and (ii) that the Securities will be free and clear of any Lien on the Closing Date upon repayment of the Existing Indebtedness.

(c) The Representing Sellers further represent (i) that there are no commitments providing for the issuance of additional shares or other securities and (ii) that the Group Companies do not

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directly or indirectly hold any shares in any companies or entities (other than short-term investments in liquid shares of publicly traded limited liability entities made solely for cash management purposes) or as otherwise indicated in such Schedule 15 (Securities).

The representations of this Clause 9.2.2 are made by the Representing Sellers on a several basis (conjointement) and not jointly and severally (non solidairement).

The Buyer acknowledges that neither the Sellers nor any of their Affiliates, general partners, agents, directors, employees, representatives, auditors or advisers makes any representations or warranty, whether express or implied, of any kind with respect to the Group Companies, other than the representations made by the Sellers individually in Clause 9.2.1 or made by the Representing Sellers on a several basis (conjointement) and not jointly and severally (non solidairement) in Clauses 9.2.2 and 9.2.4(a)(ii).

9.2.3 Buyer’s acknowledgements

(a) The Buyer has performed an extensive due diligence review of the Group Companies and their operations. In this context, the Sellers have disclosed to the Buyer as well as to its advisors, the Information which includes, among others, legal, environmental, insurance, tax, financial, accounting and commercial matters regarding the Group Companies and their operations. In that respect, the Sellers have given to the Buyer the opportunity to make site visits, to attend meetings with and to ask questions to the respective representatives, employees and advisors of the Group Companies and of the Sellers.

(b) In connection with the Buyer’s investigation of the Group Companies and their operations, the Buyer may have received from the Sellers, the Group Companies and their representatives certain projections, estimates and other forecasts and certain business plan information on the Group Companies and their operations. The Buyer acknowledges that: (i) there are uncertainties inherent in attempting to make such projections, estimates and other forecasts and plans; (ii) the Buyer is familiar with such uncertainties; (iii) the Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections, estimates and other forecasts and plans so furnished to it and any use of or reliance by the Buyer on such projections, estimates and other forecasts and plans shall be at its sole risk, and without limiting any other provisions herein; (iv) the Buyer shall have no claim against anyone with respect thereto. Accordingly, the Buyer acknowledges that the Sellers, the Group Companies and each of their respective Affiliates, officers, directors, employees, agents, advisers and representatives, do not make any representation or warranty to the Buyer, express or implied with respect to such projections, estimates, forecasts or plans.

(c) Subject to the terms and conditions of this Agreement, the Buyer having reviewed the information and documents provided to it and having conducted its own researches and investigations, the Buyer confirms that it is capable of evaluating the merits and risks of its purchase of the Sold Securities and the consummation of the transactions contemplated under this Agreement and any other agreement entered into or to be entered into pursuant to this Agreement.

(d) The Buyer acknowledges that neither the Sellers nor any of their Affiliates, agents, directors, employees, representatives, auditors or advisers make any representations or warranty, whether express or implied, of any kind with respect to the Group Companies, other than the representations and warranties made by the Sellers in Clause 9.2 (Representations and warranties of the Sellers) and that the representations and warranties contained in Clause 9.2 (Representations and warranties of the Sellers) are the only representations and warranties on behalf of the Sellers on which the Buyer may rely, or has relied, in entering into this Agreement.

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9.2.4 Indemnification by the Sellers

(a) Allocation of liability among the Sellers

(i) Liabilities of each Seller individually

Each Seller undertakes to indemnify the Buyer for any Loss incurred by the Buyer and/or any of the Group Companies and which is the direct consequence of any inaccuracy in the representations made by each such Seller in Clause 9.2.1 or any breach of its obligations hereunder.

(ii) Liabilities of the Representing Sellers on a several basis

The Representing Sellers undertake to indemnify the Buyer and/or any of the Group Companies, in accordance with the allocation rules set forth in Clause 9.2.4(f)(iv) below, for any Loss incurred by the Buyer and/or any of the Group Companies and which is the direct consequence of any of the following:

(A) any inaccuracy in the representations made by the Representing Sellers in Clause 9.2.2;

(B) any non-compliance with applicable French Tax Laws involving the FJ Sellers or the Jupiter Sellers provided that the indemnifiable Losses under this paragraph will be capped to an aggregate amount of €5,000,000, it being specified that (i) any Loss in relation to corporate income tax will be capped to an aggregate amount of €1,000,000, (ii) any Loss in relation to value added tax will be capped to an aggregate amount of €500,000 and (iii) any Loss in relation to social security taxes will be capped to an aggregate amount of €5,000,000; and

(C) the open directed disclosure DDTC action in respect of the York facility, together with any Losses associated with any directed audit, fine, penalty or other enforcement action, but only to the extent the aggregate Losses exceeds €500,000 and provided further that the indemnifiable Losses under this paragraph (C) will be capped to an aggregate amount of €2,000,000.

For the avoidance of doubt, where the Buyer is limited with a threshold and cap with respect to a specific indemnity set out in paragraphs (B) and (C) above, the Buyer will be responsible for Losses up to the threshold amount, the Sellers will be responsible for Losses in excess of the threshold (it being agreed that a series of Losses arising from common origins shall be aggregated and treated as a single Loss) until they have paid up to the cap amount, and then the Buyer will again be responsible for all the remaining Losses.

(b) It is acknowledged that an amount shall be deemed to be due and payable by a Seller under this Agreement only following an agreement between the Buyer and the relevant Seller on the related claim, or a settlement agreement concluded between the relevant Parties, or a legal decision (after all recourses have been exhausted) being made in relation to the subject matter of the notified Claim.

(c) Any sums relating to a Loss due by the Sellers pursuant to Clause 9.2.4(a) shall be treated as a reduction in the Purchase Price (a “Refund”).

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(d) Calculation

(i) In calculating the amount of a Refund relating to a Loss, the following amounts shall be deducted:

(A) any Tax saving or benefit relating to such Loss available to the Buyer or any Group Company (including any Tax reduction, credit or loss carry-back or carry-forward);

(B) any sum actually paid to the Buyer or any Group Company (whether as indemnity or otherwise) by a third party in relation to such Loss, including any insurance proceeds actually paid to the Buyer or any Group Company in relation to such Loss;

(C) If any Sellers pay a Refund to the Buyer in respect of a Loss and the Buyer or any of the Group Companies subsequently recovers all or part of the amount of such Refund from a third party (including insurance companies or tax authorities), the Buyer, within thirty days of receipt, shall pay, or cause the Group Companies to pay, to the relevant Sellers the amount thereby recovered up to the amount paid by the relevant Sellers;

(D) Any Refund due by the Sellers shall be based on the amount of the Loss actually suffered by the Buyer or the relevant Group Company;

(E) If a Claim is based upon a liability which is contingent only, no Refund shall be payable unless and until such liability has actually been paid by the Buyer and/or any Group Company.

(ii) The Buyer hereby undertakes to promptly inform, and to cause the Group Companies to promptly inform, the Sellers’ Agent of the occurrence of any element which may be taken into account for purposes of Clause 9.2.4(a). The Sellers shall only pay a Refund to the Buyer for the net amount of any Loss calculated after deduction of the items referred to in Clause 9.2.4(d)(i).

(iii) The amount of any Refund shall be assessed on an aggregated basis for the Group (i.e., any Loss suffered by a Subsidiary shall be taken into account at the level of STH) but shall be counted only once.

(e) Exclusions

(i) The Sellers shall have no obligations to pay a Refund under this Agreement in respect of any Loss which shall occur as a result of:

(A) any action of any Sellers’ Affiliate or any of the Group Companies made pursuant to this Agreement, or at the request in writing or with the approval in writing of the Buyer; provided, however that this provision may not be used to excuse the Representing Sellers from providing indemnification under Clause 9.2.4(a)(ii) if such Losses are triggered by the Closing of the transaction contemplated by this Agreement;

(B) any action or omission of the Buyer or any Affiliate of the Buyer (including any Group Company), other than imposed by applicable Law, that has occurred after the Closing Date;

(C) the entry into force of, or any change in, after the Closing Date, any Law;

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(D) Notwithstanding the fact that a Loss may result from a breach or inaccuracy of more than one of the representations, warranties or covenants of the Sellers hereunder, the Sellers’ liability may only be sought once in respect of such Loss.

(E) Any Tax reassessment triggered by a voluntary disclosure carried out by the Buyer or any Group Company to any Governmental Authority, unless required by applicable Law.

(ii) The Sellers shall have no obligation to pay a Refund to the extent the relevant Loss may be attributed to any failure to take reasonable actions to mitigate damages on the part of the Buyer and/or any Group Company after the Closing Date.

(f) Limitation

(i) No Claim shall give rise to an indemnification obligation if notice of such claim is made after a period of two (2) years from the Closing Date with respect to a breach of a specific representation set forth in Clause 9.2.2 or a specific indemnity set forth in Clause 9.2.4(a)(ii) (the “Expiry Date”). For the avoidance of doubt, no time limitation shall apply with respect to the representations set forth in Clause 9.2.1 and the indemnity provided in Clause 9.2.4 (a)(i).

(ii) The aggregate amount of the Refund for which a Seller may be liable under Clauses 9.2.1, 9.2.2, 9.2.4 and pursuant to any other obligations under this Agreement shall in no event exceed the portion of the Purchase Price effectively paid to such Seller; provided further that the Sellers’ aggregate liability under the Agreement shall in no event exceed the Purchase Price and that the aggregate liability of the Representing Sellers under Clause 9.2.4 (a)(ii), shall in no event exceed an aggregate amount of €7,000,000.

(iii) The payment of a Refund provided for in this Agreement shall be the exclusive remedy of the Buyer in respect of any inaccuracy or breach of representation, warranty or covenant of any of the Sellers herein and more generally in respect of any claim relating to the Acquisition. To the fullest extent permitted by applicable Law, the Buyer hereby irrevocably waives the benefit of any warranties generally available to purchasers under applicable Law, including under Articles 1641 and 1643 of the French Civil Code.

(iv) It is further agreed that any amount which is due by the Representing Sellers under Clause 9.2.4 (a)(ii) shall be borne by each of the Representing Sellers up to the percentage set opposite their respective name under column B in Schedule 17 (Representing Sellers liability under Clause 9.2.4(a)(ii) allocation).

(g) Claim Notices

(i) In the event that the Buyer estimates in good faith that it has a claim to receive a Refund from the Sellers under this Agreement (a “Claim”), then the Buyer shall send to the Sellers’ Agent a written notice (a “Claim Notice”) which shall specify:

(A) which of the Buyer or any of the Group Companies has paid or suffered, the Loss in respect of which the Claim is brought;

(B) the good faith estimated amount of the Loss and of the Refund claimed;

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(C) the nature of the misrepresentation or breach of warranty resulting in such Loss;

(D) and such other available supporting evidence as may reasonably be required to assess the merits of the Claim and the computation of the Refund or estimate of such Loss; and

(E) No Claim may be made against any of the STH Sellers or the Jupiter Sellers in respect of Clause 9.2.2 unless it is made and pursued against both the STH Sellers and the Jupiter Sellers (with the exception of MR. Scott Charles Roland).

(ii) The Claim Notice shall be sent by the Buyer to the Sellers’ Agent:

(A) if the Claim arises in connection with any claims, verifications or judicial or administrative proceedings by any Third Party (a “Third Party Claim”); within ten (10) Business Days of receipt by the relevant Group Company of actual notice of such Third Party Claim or, if required by the circumstances (e.g.; in the case of emergency proceedings or when a response to notification must be given within a time period in order to avoid a forfeiture of rights), within a shorter period sufficient to enable the Sellers’ Agent to exercise its rights hereunder to participate in the defense of the relevant Group Company’s interests;

(B) for any other Claims, no later than twenty (20) Business Days after the Buyer or the relevant Group Company suffers the Loss.

(iii) Failure to give notice within such period shall not affect the rights of the Buyer except to the extent such failure increases the amount of the Loss suffered.

(iv) The Sellers’ Agent may object in writing to a Claim at any time after receipt of the corresponding Claim Notice. In such case (except if the objections concern a Third Party Claim), the Sellers’ Agent and the Buyer shall attempt in good faith to reach an agreement with respect to the validity of such Claim and the amount of the corresponding Refund. If no such agreement can be reached after good faith negotiations within a period of thirty (30) Business Days following the receipt by the Buyer of the written objection of the Sellers’ Agent relating to the corresponding Claim Notice, the dispute shall be settled in accordance with the provisions of Clause 16 hereafter.

(h) Claims Involving Third Parties

(i) With respect to any Third Party Claim, the Sellers’ Agent may notify the Buyer of its decision to participate in the defense of the Buyer or of the relevant Group Company’s interests. With no such notification from the Sellers’ Agent within twenty (20) Business Days of the receipt by the Sellers’ Agent of the Claim Notice, the Sellers shall be deemed to have waived such option.

(ii) In the event that the Sellers’ Agent gives notice of its intent to participate in the defense of a Third Party Claim, the Sellers’ Agent shall have the right (but not the obligation) to take control of the defense of such Third Party Claim and to select (at the Sellers’ expense) counsel of its choice to represent the Buyer or the relevant Group Company (provided such choice is reasonably acceptable to the Buyer). Sellers’ Agent will not be permitted to assume the defense of Third Party Claims brought by Tax authorities, unless the Third Party Claim primarily involves social security Taxes.

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(iii) The Buyer shall take (and shall cause the relevant Group Company to take) such actions as the Sellers’ Agent shall consider reasonably necessary or appropriate under the circumstances to defend such Third Party Claim, including:

(A) grant to the Sellers’ Agent all necessary powers to represent the Buyer or the relevant Group Company in connection with such Third Party Claim,

(B) furnish to the Sellers’ Agent all necessary information and documentation concerning the Buyer or the relevant Group Company and such Third Party Claim, and

(C) take into consideration any reasonable instructions of the Sellers’ Agent issued in connection with the defense of such Third Party Claim.

(iv) In the event the Sellers’ Agent takes control of a Third Party Claim:

(A) the Sellers’ Agent shall keep the Buyer and/or the relevant Group Company duly informed of the litigation and of its developments and shall provide promptly to the Buyer and/or the relevant Group Company any document, evidence or other pleadings issued or received, and give full access to the Buyer and/or the relevant Group Company to all documents necessary to ensure that the proceedings will be properly conducted,

(B) a representative appointed by the Buyer and/or the relevant Group Company shall have the right to attend any meeting or telephone call arranged by the Sellers’ Agent with a representative of the relevant Tax authority, and

(C) the Sellers’ Agent shall not conclude any settlements, compromises, agreements or withdrawals nor make any voluntary payments with respect to any Third Party Claim without the prior written consent of the Buyer and/or the relevant Group Company, which consent shall not be unreasonably withheld or delayed.

(v) The conduct of the defense of a Third Party Claim by the Sellers’ Agent shall not be deemed to constitute an admission by the Sellers of their liability to pay a Refund to the Buyer in respect of any Loss resulting from such Third Party Claim.

(vi) In any event, should the Sellers’ Agent participate in the defense of the Third Party Claim or not:

(A) the Buyer or any Group Company concerned shall keep the Sellers’ Agent duly informed of the litigation and of its developments and shall provide promptly to the Sellers’ Agent any document, evidence or other pleadings issued or received, and give reasonable access to the Sellers’ Agent to all documents necessary to ensure that the proceedings will be properly conducted,

(B) a representative appointed by the Sellers’s Agent shall have the right to attend any meeting or telephone call arranged by the Buyer and/or the relevant Group Company with a representative of the relevant Tax authority, and

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(C) none of the Buyer or any relevant Group Companies shall conclude any settlements, compromises, agreements or withdrawals nor make any voluntary payments with respect to any Third Party Claim without the prior written consent of the Sellers’ Agent, which consent shall not be unreasonably withheld or delayed.

(vii) Should the Buyer or any of the relevant Group Companies not allow the Sellers’ Agent to participate in the defense against a Third Party Claim or otherwise breaches in any material respect the provisions of this Clause 9.2.4(h), the Buyer shall not be entitled to receive a Refund from the Sellers in respect of any Loss resulting from such Third Party Claim.

The rights of the Sellers’ Agent under this Clause 9.2.4(h) may be exercised by the relevant Seller(s) if only one Seller or certain Sellers but not all are involved in the Claim.

10. CONFIDENTIALITY – ANNOUNCEMENT

(a) The existence, purpose and content of this Agreement are confidential. Consequently, each Party undertakes not to disclose to a third party any information relating to the Acquisition, the terms and conditions of this Agreement or the transactions contemplated hereby and each Party shall take all appropriate actions to keep such information confidential. Such obligations shall remain in force during a period of two (2) years from the date of the Agreement.

(b) Pending Closing, the Buyer agrees that it shall not disclose to any Third Party, any information relating to any Group Company, except:

(i) as required for the purpose of fulfilling the condition precedent set forth in Clause 4.1 (Conditions precedent);

(ii) to the extent strictly necessary to allow the Buyer to comply with any disclosure requirement imposed by applicable Laws, rules of securities exchanges or by internal rules, in particular relating to the disclosure of information to its labor representatives or committees or to the limited partners or investors of its shareholders; or

(iii) with the express prior written approval of the Sellers’ Agent.

(c) Pending Closing, and for a period of two (2) years from the date of this Agreement, no publicity, public announcement, press release, or disclosure regarding this Agreement or the transactions contemplated herein shall be made without the prior written consent of the Buyer and the Sellers’ Agent on the time, form and content of such public announcement, release or disclosure, which consent shall not be unreasonably withheld or delayed.

(d) The Confidentiality Agreement shall remain in full force and effect and terminate on the Closing Date, provided that should the Closing not take place, the Confidentiality Agreement shall remain in full force and effect in accordance with its terms.

11. SELLERS’ AGENT

(a) For the purposes of this Agreement, each Seller shall hereby appoint Sagard SAS (the “Sellers’ Agent”), who accepts, as its representative, in its name and on its behalf, under the circumstances provided in this Agreement, to sign and negotiate all documents required for the completion of the Acquisition as well as any amendment to this Agreement entered

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into in accordance with Clause 15.4 (Amendment - Waiver) to make and receive all notices and to make all communications or declarations, to contest and settle any and all claims for indemnification pursuant to Clause 9, to resolve any other disputes hereunder or thereunder, to receive all payments which are to be made pursuant to this Agreement or as a consequence thereof, to, or on behalf of, the Sellers, act as agent for service of process and representative before any court or tribunal.

For the purposes of this Agreement, each Seller shall hereby also appoint the Sellers’ Agent, who accepts as its representative, in its name and on its behalf, under the circumstances provided in this Agreement to receive the Purchase Price, the Convertible Bonds Purchase Price as well as allocate among the Sellers any and all payments to be made by the Buyer pursuant to Clause 3.

(b) Any notification to the Sellers’ Agent shall thus be deemed to have been made to each of the Sellers.

(c) The Sellers’ Agent shall promptly keep informed the Sellers or, as the case may be, their true and lawful attorney, of any information regarding the Acquisition and more generally, of any action performed to their benefit and on their behalf to the effect of carrying out the Acquisition and to promptly deliver them all documents necessary for their personal needs and administrative, tax or banking issues.

(d) The Sellers’ Agent shall not bear any liability whatsoever to the Sellers, in its capacity as agent of the Sellers under this Agreement.

(e) Should Sagard SAS be unable to perform its duties to act as the Sellers’ Agent, for any reason whatsoever, the Sellers’ Agent will be appointed among the Sellers by the Sellers. If the Sellers do not reach an agreement within 30 (thirty) days of the date Sagard SAS has ceased to perform its duties as Sellers’ Agent, then the Sellers’ Agent shall be appointed among the Sellers by the President of the Commercial Court of Paris ruling in summary form (statuant en référé), such ruling being unchallengeable in appeal.

12. NOTICES

(a) Except when specifically stipulated as otherwise in this Agreement, any notice, demand, consent, agreement or other communication to be served under the Agreement or referred to therein (a “Notice”) will be valid only if made in accordance with the provisions of this Clause 12. Any such Notice shall be made in writing, drafted in French or English, and made by registered letter with acknowledgment of receipt (or any equivalent for any notice sent outside France), by overnight courier, hand delivery or facsimile transmission to the Party to be served.

(b) A Notice will be deemed to have been received:

(i) when sent by registered letter with acknowledgment of receipt, on the date of first presentation;

(ii) when personally received by hand delivery or overnight courier; and

(iii) when sent by facsimile, on the date of receipt set forth on the facsimile transmission.

(c) A Notice received on a non-Business Day or after business hours in the place of receipt will be deemed to have been given on the next Business Day.

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(d) Notices shall be sent to the following addresses:

(i) If to the Buyer, to:

Esterline Technologies Corporation
Address:	500 108th Avenue NE, Suite 1500, Bellevue, WA 98004
Fax:	+1 425 453 2916
Attn:	Stephen R. Larson
with a copy to:
Perkins Coie LLP
Address:	1201 Third Avenue, Suite 4800 Seattle, WA 98101-3099
Fax:	206.359.7356
Attn:	Troy Hickman
with a copy to:
Taylor Wessing
Address:	42, avenue Montaigne 75008 Paris
Fax:	+33 1 72 74 03 34
Attn:	Gilles Amsallem

(ii) If to the Sellers, to:

Sagard SAS
Address:	24, rue Jean Goujon – 75008 Paris
Fax:	+33 1 53 83 30 30
Attn:	Frédéric Stolar
with a copy to:
Latham & Watkins
Address:	53, quai d’Orsay – 75007 Paris
Fax:	+33 1 40 62 20 62
Attn:	Thomas Forschbach and Alexander Benedetti
with a copy to:
SarrauThomasCouderc
Address:	171, boulevard Haussmann – 75008 Paris
Fax:	+33 1 53 53 30 53
Attn:	Jean-Bernard Thomas

or to such other addresses as a Party may provide to the other Parties in accordance with this Clause 12, with five (5) Business Days’ prior Notice.

13. SUBSTITUTION - ASSIGNMENT

(a) The Buyer may not assign, directly or indirectly, through a sale, a contribution, a donation or otherwise, the benefit of any provision of this Agreement to any other Person without the prior written consent of the Sellers’ Agent, except that the Buyer shall be authorized to transfer or assign before the Closing Date all of its rights and obligations under this Agreement to an Affiliate, provided however that (i) the Buyer shall give written notice of such transfer or assignment to the Sellers’ Agent at the latest five (5) Business Days prior to Closing and (ii) the Buyer shall remain jointly and severally liable with the transferee or assignee under this Agreement.

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(b) The Buyer acknowledges and agrees that in the event of a disposal or a restructuring involving the Buyer or any Group Company (including through a merger, contribution, split, sale of shares, dissolution or other transaction) and resulting in a direct or indirect change of control of the Buyer or of any Group Company, then, the obligations of the Sellers under this Agreement shall automatically terminate in respect of the Buyer and the Group Company(ies) concerned.

(c) Nothing expressed or referred to in this Agreement will be construed to give any Person any right, remedy or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all its provisions are for the sole and exclusive benefit of the Parties to this Agreement and their successors and permitted assignees.

14. TAXES - OTHER COSTS AND EXPENSES

(a) Any transfer or stamp duty or similar levies that may become payable as a result of the signing of this Agreement or the transfer of the Sold Securities to the Buyer shall be borne by the Buyer exclusively. Such transfer Tax payment obligation will not include any Taxes on the Sellers’ gain or any required withholding Taxes associated with this transaction. The Sellers will cooperate with the Buyer in minimizing such transfer Taxes, to the extent reasonably practicable and subject to any applicable Law.

(b) The Buyer shall take all necessary steps to fulfill any and all formalities relating thereto on a timely-basis, in order to ensure that the liability of the Sellers or of one Seller may not be sought with respect to any amount due under paragraph (a) above. The Sellers will cooperate with the Buyer by providing requested information and making such filings as may be required in connection with such Taxes. The Buyer irrevocably undertakes to indemnify the Seller(s) upon first request from any and all Losses suffered as a result of the breach by the Buyer of its obligations under this Clause 14.

(c) The Buyer shall provide the Sellers’ Agent with evidence of the payment of any such taxes or levies promptly upon request of the Sellers’ Agent in writing.

(d) Except as otherwise specifically provided in this Agreement specifically in Clause 14(e) hereunder, whether or not the transactions contemplated by this Agreement are consummated, each of the Sellers and/or the Group Companies, on the one hand, and the Buyer, on the other hand, shall bear its own costs and expenses, including fees of legal and other counsel, investment banking and broker fees, incurred in connection with the negotiation, preparation, execution and implementation of this Agreement and the consummation of the transactions contemplated hereby.

(e) The Parties acknowledge and agree that in addition to the payment of the Total Purchase Price to the Sellers, the Buyer shall pay the Transaction Costs on the Closing Date. The payment of the Transaction Costs shall be made by wire transfer in immediately available funds to such bank accounts as shall have been identified in the Closing Notice.

32

15. MISCELLANEOUS

15.1 INTRA-GROUP AGREEMENTS

The Buyer undertakes to and covenants with the Sellers (for itself and on behalf of the Group Companies) that it, and shall procure that the Group Companies, (i) will not challenge the validity of any agreement disclosed in the Data Room entered into before the date of this Agreement between any of the Sellers and any of the Group Companies, or between the Group Companies, and (ii) will indemnify the Sellers and their respective directors, officers and employees against the consequences of any demand made or proceedings initiated by any of the Group Companies or the Buyer after the Closing Date as against any of the Sellers and their respective directors, officers or employees for the purpose of challenging the validity of such agreements.

15.2 INTERPRETATION

(a) The recitals and Schedules (as well as any attachment thereto) in this Agreement are incorporated herein by reference and form an integral part hereof.

(b) Unless the context otherwise require, all references herein to “Clauses”, “Paragraphs” and “Schedules” shall be deemed references to clauses, paragraphs and Schedules to this Agreement. The descriptive headings to Clauses, Paragraphs and Schedules are inserted for convenience only and shall have no legal effect.

(c) Except when used with the word “either”, the word “or” shall have a disjunctive and not alternative meaning (i.e. where two items or qualities are separated by the word “or”, the existence of one item or quality shall not be deemed to be exclusive of the existence of the other and the word “or” shall be deemed to include the word “and”).

(d) Whenever used in this Agreement the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.

(e) Whenever used in this Agreement the words “hereof”, “herein” and similar words shall be construed as references to this Agreement as a whole and not just to the particular section or subsection in which the reference appears.

(f) Wherever in this Agreement provision is made for payment by one Party to another, such payment shall be made in Euros only and be effected by crediting by wire transfer and in immediately available funds the account specified hereunder on or before the due date of payment.

(g) To the fullest extent permitted by applicable Law, each of the Parties hereby expressly waives the benefits of Article 1602 of the French Civil Code.

15.3 CALCULATION OF TIME PERIODS

The provisions of Articles 640 to 642 of the French Civil Procedure Code shall be applied to calculate any period of time under this Agreement, provided that the references in Article 642 to “un jour férié ou chômé” and “premier jour ouvrable” shall be interpreted by reference to the definition of “Business Day” appearing herein.

33

15.4 AMENDMENT - WAIVER

(a) No terms of this Agreement may be altered, modified, amended or supplemented or terminated except by an instrument in writing duly signed by the Buyer and the Sellers’ Agent.

(b) A waiver of any term, provision or condition of, or consent granted under this Agreement shall be effective only if given in writing and signed by the waiving or consenting Party, and then only in the instance and for the purpose for which it is given, it being specified that the Sellers’ Agent is entitled to give such waiver or consent on behalf of all Sellers.

(c) No failure or delay on the part of any Party in exercising any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right except as specifically set forth herein.

(d) No breach by any Party of any provision of this Agreement shall be waived or discharged except with the express written consent of the other Parties, it being specified that the Sellers’ Agent is entitled to give such waiver or discharge on behalf of all Sellers.

15.5 INVALIDITY – ENTIRE AGREEMENT

(a) If any term or provision herein is held to be void, unenforceable, invalid, illegal or inapplicable, the legality, enforceability, validity and applicability of the other provisions of this Agreement shall not be affected or impaired thereby. In such case the Parties shall negotiate in good faith a lawful substitute provision to replace the void, unenforceability, invalid, illegal or inapplicable provision or term that shall be consistent with the intent and object of the original provision.

(b) This Agreement (including the Schedules hereto and the documents referred to herein) constitutes the entire agreement among the Parties and supersedes all prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof.

16. GOVERNING LAW - DISPUTES

(a) This Agreement and any contractual or non-contractual obligation arising out of or in connection with this Agreement shall be governed by, and construed in accordance with, French Law without application of its conflict of laws rules.

(b) All disputes arising out of or in connection with this Agreement (including without limitation with respect to its signature, validity, performance, interpretation, termination and post-termination obligations hereof) shall be submitted to the exclusive jurisdiction of the Commercial Court of Paris.

Signed on the date specified above, in six (6) originals:

• one (1) original for the STH Sellers who expressly declare having the same interest as defined under Article 1325 alinéa 2 of the French Civil Code,

• one (1) original for the Jupiter Sellers who expressly declare having the same interest as defined under Article 1325 alinéa 2 of the French Civil Code,

34

• one (1) original for the FJ Sellers who expressly declare having the same interest as defined under Article 1325 alinéa 2 of the French Civil Code,

• one (1) original for Intermediate Capital GP 2003 n°1 Limited, Intermediate Capital GP 2003 Limited, Intermediate Capital Group Plc and Intermediate Finance II plc, who expressly declare having the same interest as defined under Article 1325 alinéa 2 of the French Civil Code,

• one (1) original for Société Générale,

• one (1) original for Esterline Technologies Corporation.

35

The STH Sellers
Sagard
/s/ Frédéric Stolar
By: Frédéric Stolar
For each of the Jupiter Sellers	For each of the FJ Sellers
/s/ François Calvarin	/s/ François Calvarin
By: François Calvarin	By: François Calvarin
The Mezzanine Sellers
/s/ Lydie Ayme
By: Lydie Ayme
For Société Générale
/s/ Damien Scaillierez
By: Damien Scaillierez
For Intermediate Capital GP 2003 n°1 Limited, Intermediate Capital GP 2003 Limited, Intermediate Capital Group Plc and Intermediate Finance II Plc.

36

The Buyer

ESTERLINE TECHNOLOGIES CORPORATION

/s/ R. Bradley Lawrence

By: R. Bradley Lawrence

37

EX-11

EXHIBIT 11

ESTERLINE TECHNOLOGIES CORPORATION

Computation of Basic and Diluted Earnings Per Common Share

For the Three and Six Month Periods Ended April 29, 2011 and April 30, 2010

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended					Six Months Ended
	April 29,     2011			April 30,     2010		April 29,     2011			April 30,     2010
Net Sales	$	435,277		$	382,492	$	806,076		$	717,802
Gross Margin		160,947			126,636		293,069			229,307
Net Earnings from Continuing Operations Attributable to Esterline	$	45,951		$	29,110	$	75,934		$	41,495
Net Earnings (Loss) from Discontinued Operations Attributable to Esterline		(37	)		538		(29	)		878
Net Earnings Attributable to Esterline	$	45,914		$	29,648	$	75,905		$	42,373
Basic
Weighted Average Number of Shares Outstanding		30,496			29,908		30,422			29,848
Earnings Per Share Attributable to Esterline – Basic:
Continuing Operations	$	1.51		$	.97	$	2.50		$	1.39
Discontinued Operations		.00			.02		.00			.03
Earnings Per Share Attributable to Esterline – Basic	$	1.51		$	.99	$	2.50		$	1.42
Diluted
Weighted Average Number of Shares Outstanding		30,496			29,908		30,422			29,848
Net Shares Assumed to be Issued for Stock Options		664			498		664			464
Weighted Average Number of Shares and Equivalent Shares Outstanding – Diluted		31,160			30,406		31,086			30,312
Earnings Per Share Attributable to Esterline – Diluted:
Continuing Operations	$	1.47		$	.96	$	2.44		$	1.37
Discontinued Operations		.00			.02		.00			.03
Earnings Per Share Attributable to Esterline – Diluted	$	1.47		$	.98	$	2.44		$	1.40

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, R. Bradley Lawrence, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Esterline Technologies Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  June 3, 2011	By:	/s/ R. Bradley Lawrence
		R. Bradley Lawrence
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Robert D. George, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Esterline Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: June 3, 2011	By:	/s/  Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer,
		Secretary and Treasurer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Esterline Technologies Corporation (the “Company”) on Form 10-Q for the period ended April 29, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, R. Bradley Lawrence, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)        The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)        The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: June 3, 2011	By:	/s/ R. Bradley Lawrence
		R. Bradley Lawrence
		President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Esterline Technologies Corporation (the “Company”) on Form 10-Q for the period ended April 29, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Robert D. George, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)        The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)        The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: June 3, 2011	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer,
		Secretary and Treasurer

XML



Consolidated Balance Sheet (Parenthetical) (USD $) In Thousands, except Share data	Apr. 29, 2011	Oct. 29, 2010
Consolidated Balance Sheet
Accounts receivable, allowances	$ 4,692	$ 4,865
Debt issuance costs, accumulated amortization	$ 1,780	$ 4,536
Common stock, par value	$ 0.2	$ 0.2
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	30,524,070	30,279,509
Common stock, shares outstanding	30,524,070	30,279,509

XML



Consolidated Statement of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Apr. 29, 2011	Apr. 30, 2010	Apr. 29, 2011	Apr. 30, 2010
Consolidated Statement of Operations
Net Sales	$ 435,277	$ 382,492	$ 806,076	$ 717,802
Cost of Sales	274,330	255,856	513,007	488,495
Gross Profit	160,947	126,636	293,069	229,307
Expenses
Selling, general & administrative	72,409	64,067	138,501	125,362
Research, development & engineering	21,251	18,001	40,870	34,750
Other (income) expense	0	(38)	0	3
Total Expenses	93,660	82,030	179,371	160,115
Operating Earnings from Continuing Operations	67,287	44,606	113,698	69,192
Interest income	(430)	(20)	(770)	(403)
Interest expense	8,958	7,348	18,095	15,309
Loss on extinguishment of debt	831	0	831	0
Income from Continuing Operations Before Income Taxes	57,928	37,278	95,542	54,286
Income Tax Expense	11,848	8,144	19,502	12,713
Income from Continuing Operations Including Noncontrolling Interests	46,080	29,134	76,040	41,573
Income Attributable to Noncontrolling Interests	(129)	(24)	(106)	(78)
Income from Continuing Operations Attributable to Esterline	45,951	29,110	75,934	41,495
Income (Loss) from Discontinued Operations Attributable to Esterline, Net of Tax	(37)	538	(29)	878
Net Earnings Attributable to Esterline	$ 45,914	$ 29,648	$ 75,905	$ 42,373
Earnings Per Share Attributable to Esterline - Basic:
Continuing operations	$ 1.51	$ 0.97	$ 2.50	$ 1.39
Discontinued operations	$ 0.00	$ 0.02	$ 0.00	$ 0.03
Earnings Per Share Attributable to Esterline - Basic	$ 1.51	$ 0.99	$ 2.50	$ 1.42
Earnings Per Share Attributable to Esterline - Diluted:
Continuing operations	$ 1.47	$ 0.96	$ 2.44	$ 1.37
Discontinued operations	$ 0.00	$ 0.02	$ 0.00	$ 0.03
Earnings Per Share Attributable to Esterline - Diluted	$ 1.47	$ 0.98	$ 2.44	$ 1.40

XML



Document and Entity Information	6 Months Ended
	Apr. 29, 2011	May 31, 2011
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 29, 2011
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2011
Entity Registrant Name	ESTERLINE TECHNOLOGIES CORP
Entity Central Index Key	0000033619
Current Fiscal Year End Date	--10-28
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		30,555,518

XML



Discontinued Operations

6 Months Ended

Apr. 29, 2011

Discontinued Operations

Discontinued Operations

7. On September 8, 2010, the Company sold Pressure Systems, Inc., which was included in the Sensors & Systems segment, for approximately $25.0 million, resulting in an after tax gain of $10.4 million. As a result, the consolidated income statement presents Pressure Systems, Inc. as discontinued operations. Loss from discontinued operations was $29,000 in the first six months of fiscal 2011.

The operating results of the discontinued operations for the three and six months ended April 30, 2010, consisted of the following:

(In thousands)	Three Months Ended		Six Months Ended
Sales	$	5,128	$	9,178
Income from discontinued operations before income taxes		859		1,399
Income tax expense		321		521
Income from discontinued operations	$	538	$	878

XML



Credit Facilities

6 Months Ended

Apr. 29, 2011

Credit Facilities

Credit Facilities

12. In March 2011, the Company entered into a secured credit facility for $460 million made available through a group of banks. The credit facility is secured by substantially all of the Company's assets and interest is based on standard inter-bank offering rates. The credit facility expires in March 2016. The spread will range from LIBOR plus 1.5% to LIBOR plus 2.25% depending on the leverage ratios at the time the funds are drawn. The Company repaid the U.S. Term Loan in March 2011 for $118.8 million. At April 29, 2011, the Company had $110.0 million outstanding under the secured credit facility at an initial interest rate of LIBOR plus 1.75% or 1.97%.

XML



Revenue Pattern

6 Months Ended

Apr. 29, 2011

Revenue Pattern

Revenue Pattern

3. The timing of the Company's revenues is impacted by the purchasing patterns of customers and, as a result, revenues are not generated evenly throughout the year. Moreover, the Company's first fiscal quarter, November through January, includes significant holiday periods in both Europe and North America.

XML



Income Taxes

6 Months Ended

Apr. 29, 2011

Income Taxes

Income Taxes

9. The income tax rate was 20.4% and 23.4% for the first six months of fiscal 2011 and 2010, respectively. In the first six months of fiscal 2011, the Company recognized $3.3 million of discrete tax benefits principally due to the retroactive extension of the U.S. federal research and experimentation credits and the release of a valuation allowance related to a net operating loss of an acquired subsidiary. In the first six months of fiscal 2010, the Company recognized $0.5 million of discrete tax expense mainly related to tax law changes in France. The income tax rate differed from the statutory rate in the first six months of fiscal 2011 and 2010, as both years benefited from various tax credits and certain foreign interest expense deductions.

It is reasonably possible that within the next 12 months $5.9 million of tax benefits associated with research and experimentation tax credits, capital and operating losses that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of a statute of limitations.

XML



Fair Value Measurements

6 Months Ended

Apr. 29, 2011

Fair Value Measurements

Fair Value Measurements

14. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. An asset or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy of fair value measurements is described below:

Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded markets for identical assets and liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market or exchange traded market, a valuation of these instruments does not require a significant degree of judgment.

Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained from indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.

The following table sets forth the Company's financial assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy at April 29, 2011, and October 29, 2010.

(In thousands)	Level 2
	April 29, 2011		October 29, 2010
Assets:
Derivative contracts designated as hedging instruments	$	18,877	$	11,552
Derivative contracts not designated as hedging instruments	$	2,673	$	1,256
Embedded derivatives	$	20	$	23
Liabilities:
Derivative contracts designated as hedging instruments	$	106	$	950
Derivative contracts not designated as hedging instruments	$	443	$	782
Embedded derivatives	$	3,190	$	1,815
(In thousands)	Level 3
	April 29, 2011		October 29, 2010
Liabilities:
Contingent purchase obligation	$	13,350	$	0

The Company's embedded derivatives are the result of entering into sales or purchase contracts that are denominated in a currency other than the Company's functional currency or the supplier's or customer's functional currency. The fair value is determined by calculating the difference between quoted exchange rates at the time the contract was entered into and the period end exchange rate. These contracts are categorized as Level 2 in the fair value hierarchy.

The Company's derivative contracts consist of foreign currency exchange contracts and interest rate swap agreements. These derivative contracts are over the counter and their fair value is determined using modeling techniques that include market inputs such as interest rates, yield curves, and currency exchange rates. These contracts are categorized as Level 2 in the fair value hierarchy.

The Company's contingent purchase obligation consists of up to $14.0 million of additional consideration in connection with the acquisition of Eclipse. The contingent consideration will be paid to the seller if certain performance objectives are met over the three-year period. The value recorded on the balance sheet was derived from the estimated probability that the performance objective will be met by the end of the three-year period. The contingent purchase obligation is categorized as Level 3 in the fair value hierarchy.

XML



Employee Stock Plans

6 Months Ended

Apr. 29, 2011

Employee Stock Plans

Employee Stock Plans

10. As of April 29, 2011, the Company had three share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans for the first six months of fiscal 2011 and 2010 was $3.8 million and $3.4 million, respectively. During the first six months of fiscal 2011 and 2010, the Company issued 244,561 and 235,099 shares, respectively, under its employee stock plans.

Employee Stock Purchase Plan

The Company converted the ESPP to a "safe harbor" design on December 16, 2008. Under the safe harbor design, shares are purchased by participants at 95% of the market value on the purchase date and, therefore, compensation cost is not recorded under the ESPP.

Equity Incentive Plan

Under the equity incentive plan, option exercise prices are equal to the fair market value of the Company's common stock on the date of grant. The Company granted 257,300 options and 355,800 options in the six month periods ended April 29, 2011, and April 30, 2010, respectively. The weighted-average grant date fair value of options granted during the six month periods ended April 29, 2011, and April 30, 2010, was $31.32 per share and $21.38 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 risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of the grant.

	Six Months Ended
	April 29,     2011		April 30,     2010
Volatility		40.8 – 42.8%		43.0 – 43.2%
Risk-free interest rate		2.02 – 3.64%		2.42 – 4.0%
Expected life (years)		4.5 – 9.5		4.5 – 9.5
Dividends		0		0

Employee Sharesave Scheme

Under the employee sharesave scheme for U.K. employees, participants are allowed the option to purchase shares at 95% of the market price of the stock as of the beginning of the offering period. The term of these options is three years. The sharesave scheme is not a "safe-harbor" design, and therefore, compensation cost is recognized on this plan. Under the sharesave scheme, option exercise prices are equal to the fair market value of the Company's common stock on the date of grant. The Company granted 9,956 and 10,133 options in the first six month periods ended April 29, 2011, and April 30, 2010, respectively. The weighted-average grant date fair value of options granted during the six month periods ended April 29, 2011, and April 30, 2010, was $26.14 and $18.64, respectively.

The fair value of the awards under the employee share-save scheme was estimated using a Black-Scholes pricing model which uses the assumptions noted in the following table. The risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of grant.

	Six Months Ended
	April 29,     2011		April 30,     2010
Volatility		51.10%		51.61%
Risk-free interest rate		0.98%		1.34%
Expected life (years)		3		3
Dividends		0		0

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Subsequent Events

6 Months Ended

Apr. 29, 2011

Subsequent Events

Subsequent Events

8. On May 23, 2011, the Company entered into a share purchase agreement to acquire the Souriau Group (Souriau) for 483 million euros (approximately $715 million), plus certain transaction costs of the seller, which the Company expects to finance through a combination of U.S. and non-U.S. cash, a draw on the Company's existing secured credit facility, and a new international credit facility. In accordance with the terms of the agreement, subsequent to period end, the Company deposited $350 million in escrow as security for the purchase price. Souriau is a leading global supplier of highly engineered connectors for harsh environments serving aerospace, defense & space, power generation & rail, and industrial equipment markets. The transaction is expected to close in the middle of July 2011, subject to customary regulatory conditions.

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Basis of Presentation

6 Months Ended

Apr. 29, 2011

Basis of Presentation

Basis of Presentation

1. The consolidated balance sheet as of April 29, 2011, the consolidated statement of operations for the three and six month periods ended April 29, 2011, and April 30, 2010, and the consolidated statement of cash flows for the six month periods ended April 29, 2011, and April 30, 2010, are unaudited but, in the opinion of management, all of the necessary adjustments, consisting of normal recurring accruals, have been made to present fairly the financial statements referred to above in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the above statements do not include all of the footnotes required for complete financial statements. The results of operations and cash flows for the interim periods presented are not necessarily indicative of results that can be expected for the full year.

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Earnings Per Share

6 Months Ended

Apr. 29, 2011

Earnings Per Share

Earnings Per Share

4. Basic earnings per share is computed on the basis of the weighted average number of shares outstanding during the year. Diluted earnings per share 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 244,100 and 712,570 in the second fiscal quarter of 2011 and 2010, respectively. Shares used for calculating earnings per share are disclosed in the following table.

(In thousands)	Three Months Ended				Six Months Ended
	April 29, 2011		April 30, 2010		April 29, 2011		April 30, 2010
Shares Used for Basic Earnings Per Share		30,496		29,908		30,422		29,848
Shares Used for Diluted Earnings Per Share		31,160		30,406		31,086		30,312

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Comprehensive Income (Loss)

6 Months Ended

Apr. 29, 2011

Comprehensive Income (Loss)

Comprehensive Income (Loss)

5.      The Company's comprehensive income is as follows:
(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011		April 30, 2010
Net Earnings	$	45,914		$	29,648		$	75,905	$	42,373
Change in Fair Value of Derivative
Financial Instruments, Net of Tax (1)		6,534			3,716			5,045		1,889
Pension and Post-retirement
Obligations, Net of Tax (2)		(36	)		2,016			692		2,104
Foreign Currency Translation
Adjustment		73,927			(5,528	)		73,768		(24,800	)
Comprehensive Income	$	126,339		$	29,852		$	155,410	$	21,566

⁽¹⁾  Net of tax expense of $(2,794) and $(1,526) for the second fiscal quarter of 2011 and 2010, respectively. Net of tax expense of $(2,204) and $(855) for the first six months of fiscal 2011 and 2010, respectively.

⁽²⁾  Net of tax expense of $(200) and $(1,225) for the second fiscal quarter of 2011 and 2010, respectively. Net of tax expense of $(692) and $(1,026) for the first six months of fiscal 2011 and 2010, respectively.

The Company's accumulated other comprehensive income is comprised of the following:

(In thousands)	April 29, 2011			October 29, 2010
Net unrealized gain on derivative contracts	$	15,001		$	9,956
Pension and post-retirement obligations		(64,793	)		(65,485	)
Currency translation adjustment		132,532			58,764
Total accumulated other comprehensive income	$	82,740		$	3,235

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Commitments and Contingencies

6 Months Ended

Apr. 29, 2011

Commitments and Contingencies

Commitments and Contingencies

13. On March 30, 2011, the California Attorney General's office filed a complaint against Kirkhill-TA, a subsidiary included in the Advanced Materials segment, with the Superior Court of California, Orange County, on behalf of California and the Santa Ana Regional Water Quality Control Board (Board) regarding the discharge of industrial waste water from its Brea, California, facility into Fullerton Creek and Craig Lake.

Prior to receipt of the complaint, the Company cooperated with the Board to address the discharge. Based upon the Company's investigation, the discharge of waste water was unintentional, and was corrected as soon as the Board notified the Company of the discharge. At the request of the Board, the Company engaged an environmental engineering company to perform certain tests of the affected water. Concentrations of pollutants were below regulatory requirements. Additionally, the facility does not have a history of discharges of industrial waste. Accordingly, prior to receiving the complaint, management did not believe any significant remediation or penalties were likely.

The California water code authorizes courts to impose penalties based on the number of days in which the violation occurred and the volume of the discharge. Utilizing this statutory formula and based on management's calculation of the days that a violation occurred and the discharge volumes, management believes that the penalty imposed could be up to $1.8 million, although the Board has alleged that violations occurred over a longer period.

Based upon the Company's review of the complaint, established statutory penalty factors, California's Water Quality Enforcement Policy, a review of similar cases and the facts noted above, management believes that the possible range of penalties to be paid would be from low to high six figures. The amount of the estimated liability the Company recorded in the second quarter of fiscal 2011 as a contingent liability is not material.

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Acquisitions

6 Months Ended

Apr. 29, 2011

Acquisitions

Acquisitions

6. On December 30, 2010, the Company acquired all of the outstanding capital stock of Eclipse Electronic Systems, Inc. (Eclipse) for approximately $120.0 million, plus the change in net assets from July 31, 2010, to the actual closing balance sheet. The $120.0 million purchase price includes cash of $14.0 million in contingent consideration, which was deposited in an escrow account and will be paid to the seller if certain performance objectives are met over the three-year period. The estimated fair value of the contingent consideration is $13.4 million. Eclipse is a designer and manufacturer of embedded communications intercept receivers for signal intelligence applications. Eclipse is included in the Avionics & Controls segment.

The following summarizes the allocation of the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The preliminary 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 recording goodwill of $65.4 million. The amount allocated to goodwill is not deductible for income tax purposes.

(In thousands)
As of December 30, 2010
Current assets	$	30,703
Property, plant and equipment		2,154
Intangible assets subject to amortization
Technology (9 year weighted average useful life)		50,100
Tradename (3 year useful life)		1,400
Goodwill		65,420
Total assets acquired		149,777
Current liabilities assumed		33,977
Long-term liabilities assumed		8,350
Net assets acquired	$	107,450

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Segment Information

6 Months Ended

Apr. 29, 2011

Segment Information

Segment Information

16. Segment information:

Business segment information for continuing operations includes the segments of Avionics & Controls, Sensors & Systems and Advanced Materials.

(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Sales
Avionics & Controls	$	231,532		$	198,719		$	423,999		$	368,976
Sensors & Systems		85,181			75,218			162,236			145,910
Advanced Materials		118,564			108,555			219,841			202,916
Total Sales	$	435,277		$	382,492		$	806,076		$	717,802
Income from Continuing Operations
Avionics & Controls	$	44,915		$	28,461		$	75,919		$	47,893
Sensors & Systems		11,595			7,834			22,566			12,390
Advanced Materials		22,979			17,127			38,247			25,857
Segment Earnings		79,489			53,422			136,732			86,140
Corporate expense		(12,202	)		(8,854	)		(23,034	)		(16,945	)
Other income (expense)		0			38			0			(3	)
Interest income		430			20			770			403
Interest expense		(8,958	)		(7,348	)		(18,095	)		(15,309	)
Loss on extinguishment of debt		(831	)		0			(831	)		0
	$	57,928		$	37,278		$	95,542		$	54,286

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Consolidated Statement of Cash Flows (USD $) In Thousands	6 Months Ended
	Apr. 29, 2011	Apr. 30, 2010
Cash Flows Provided (Used) by Operating Activities
Net earnings including noncontrolling interests	$ 76,011	$ 42,451
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided (used) by operating activities:
Depreciation and amortization	37,469	36,381
Deferred income taxes	(2,176)	(8,496)
Share-based compensation	3,847	3,431
Working capital changes, net of effect of acquisitions
Accounts receivable	20,705	(7,834)
Inventories	(26,892)	8,640
Prepaid expenses	(1,481)	(1,242)
Other current assets	(2,154)	(2,779)
Accounts payable	(3,396)	(4,025)
Accrued liabilities	(14,497)	(9,998)
Federal and foreign income taxes	(215)	7,409
Other liabilities	2,982	5,188
Other, net	(758)	2,578
Net Cash Provided (Used) by Operating Activities	89,445	71,704
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets	(26,315)	(25,585)
Proceeds from sale of capital assets	1,343	97
Escrow deposit	(14,000)	0
Acquisitions, net of cash acquired	(103,548)	(768)
Net Cash Provided (Used) by Investing Activities	(142,520)	(26,256)
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans	9,357	6,413
Excess tax benefits from stock options exercised	1,406	1,328
Debt and other issuance costs	(3,504)	0
Net change in credit facilities	110,000	(1,677)
Repayment of long-term debt	(120,826)	(2,153)
Proceeds from government assistance	10,176	1,961
Net Cash Provided (Used) by Financing Activities	6,609	5,872
Effect of Foreign Exchange Rates on Cash	15,860	(4,449)
Net Increase (Decrease) in Cash and Cash Equivalents	(30,606)	46,871
Cash and Cash Equivalents - Beginning of Period	422,120	176,794
Cash and Cash Equivalents - End of Period	391,514	223,665
Supplemental Cash Flow Information
Cash paid for interest	17,708	14,380
Cash paid for taxes	20,480	14,364
Supplemental Non-cash Investing and Financing Activities
Capital asset and lease obligation additions	$ 0	$ 8,137

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Schedule of Condensed Financial Statements

6 Months Ended

Apr. 29, 2011

Schedule of Condensed Financial Statements

Schedule of Condensed Financial Statements

17. The following schedules set forth condensed consolidating financial information as required by Rule 3-10 of Securities and Exchange Commission Regulation S-X as of April 29, 2011, and October 29, 2010, and for the applicable periods ended April 29, 2011, and April 30, 2010, for (a) Esterline Technologies Corporation (the Parent); (b) on a combined basis, the current subsidiary guarantors (Guarantor Subsidiaries) of the secured credit facility, Senior Notes due 2017, and Senior Notes due 2020; and (c) on a combined basis, the subsidiaries that are not guarantors (Non-Guarantor Subsidiaries) of the secured credit facility, Senior Notes due 2017, and Senior Notes due 2020. The Guarantor Subsidiaries previously guaranteed the Senior Subordinated Notes due 2013 that were repurchased or otherwise redeemed in August 2010. The Guarantor Subsidiaries are direct and indirect wholly-owned subsidiaries of Esterline Technologies Corporation and have fully and unconditionally, jointly and severally, guaranteed the secured credit facility, Senior Notes due 2017, Senior Notes due 2020, and Senior Subordinated Notes (until such Senior Subordinated Notes were repurchased or otherwise redeemed in August 2010).

Condensed Consolidating Balance Sheet as of April 29, 2011.

(In thousands)
	Parent		Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries		Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	100,422	$	8,044		$	283,048	$	0		$	391,514
Escrow deposit		5,000		0			0		0			5,000
Accounts receivable, net		12		140,439			167,652		0			308,103
Inventories		0		149,027			166,967		0			315,994
Income tax refundable		9,094		(2,425	)		5,398		0			12,067
Deferred income tax benefits		22,070		(1,285	)		17,447		0			38,232
Prepaid expenses		121		6,422			11,826		0			18,369
Other current assets		25		310			18,338		0			18,673
Total Current Assets		136,744		300,532			670,676		0			1,107,952
Property, Plant & Equipment, Net		998		164,149			122,795		0			287,942
Goodwill		0		311,596			523,571		0			835,167
Intangibles, Net		0		135,352			321,296		0			456,648
Debt Issuance Costs, Net		9,759		0			0		0			9,759
Deferred Income Tax Benefits		48,402		3,669			42,977		0			95,048
Other Assets		8,930		1,616			11,858		0			22,404
Amounts Due From (To) Subsidiaries		130,873		298,516			0		(429,389	)		0
Investment in Subsidiaries		1,876,841		162,469			230,361		(2,269,671	)		0
Total Assets	$	2,212,547	$	1,377,899		$	1,923,534	$	(2,699,060	)	$	2,814,920
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable	$	2,206	$	26,272		$	56,182	$	0		$	84,660
Accrued liabilities		24,172		79,044			130,511		0			233,727
Credit facilities		110,000		0			0		0			110,000
Current maturities of long-term debt		0		213			1,569		0			1,782
Deferred income tax liabilities		197		259			10,021		0			10,477
Federal and foreign income taxes		0		(24,348	)		26,799		0			2,451
Total Current Liabilities		136,575		81,440			225,082		0			443,097
Long-Term Debt, Net		418,499		44,339			32,881		0			495,719
Deferred Income Tax Liabilities		44,720		20,973			87,967		0			153,660
Pension and Post- Retirement Obligations		16,540		40,320			52,391		0			109,251
Other Liabilities		10,588		8,571			8,409		0			27,568
Amounts Due To (From) Subsidiaries		0		0			351,267		(351,267	)		0
Shareholders' Equity		1,585,625		1,182,256			1,165,537		(2,347,793	)		1,585,625
Total Liabilities and Shareholders' Equity	$	2,212,547	$	1,377,899		$	1,923,534	$	(2,699,060	)	$	2,814,920

Condensed Consolidating Statement of Operations for the three month period ended April 29, 2011.

(In thousands)

	Parent			Guarantor   Subsidiaries			Non- Guarantor   Subsidiaries			Eliminations			Total
Net Sales	$	0		$	230,031		$	206,023		$	(777	)	$	435,277
Cost of Sales		0			139,992			135,115			(777	)		274,330
		0			90,039			70,908			0			160,947
Expenses
Selling, general and administrative		0			32,901			39,508			0			72,409
Research, development and engineering		0			8,283			12,968			0			21,251
Other income		0			0			0			0			0
Total Expenses		0			41,184			52,476			0			93,660
Operating Earnings from Continuing Operations		0			48,855			18,432			0			67,287
Interest Income		(3,540	)		(634	)		(5,689	)		9,433			(430	)
Interest Expense		7,691			5,098			5,602			(9,433	)		8,958
Loss on Extinguishment of Debt		831			0			0			0			831
Income (Loss) from Continuing Operations Before Taxes		(4,982	)		44,391			18,519			0			57,928
Income Tax Expense (Benefit)		(1,204	)		7,124			5,928			0			11,848
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(3,778	)		37,267			12,591			0			46,080
Income Attributable to Noncontrolling Interests		0			0			(129	)		0			(129	)
Income (Loss) from Continuing Operations Attributable to Esterline		(3,778	)		37,267			12,462			0			45,951
Loss from Discontinued Operations Attributable to Esterline, Net of Tax		(8	)		(29	)		0			0			(37	)
Equity in Net Income of Consolidated Subsidiaries		49,700			9,003			1,320			(60,023	)		0
Net Income (Loss) Attributable to Esterline	$	45,914		$	46,241		$	13,782		$	(60,023	)	$	45,914

Condensed Consolidating Statement of Operations for the six month period ended April 29, 2011.

(In thousands)

	Parent			Guarantor   Subsidiaries			Non- Guarantor   Subsidiaries			Eliminations			Total
Net Sales	$	0		$	425,481		$	381,583		$	(988	)	$	806,076
Cost of Sales		0			268,505			245,490			(988	)		513,007
		0			156,976			136,093			0			293,069
Expenses
Selling, general and administrative		0			64,106			74,395			0			138,501
Research, development and engineering		0			17,918			22,952			0			40,870
Other expense		0			0			0			0			0
Total Expenses		0			82,024			97,347			0			179,371
Operating Earnings from Continuing Operations		0			74,952			38,746			0			113,698
Interest Income		(7,022	)		(1,259	)		(11,099	)		18,610			(770	)
Interest Expense		15,720			10,087			10,898			(18,610	)		18,095
Loss on Extinguishment of Debt		831			0			0			0			831
Income (Loss) from Continuing Operations Before Taxes		(9,529	)		66,124			38,947			0			95,542
Income Tax Expense (Benefit)		(2,277	)		10,995			10,784			0			19,502
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(7,252	)		55,129			28,163			0			76,040
Income Attributable to Noncontrolling Interests		0			0			(106	)		0			(106	)
Income (Loss) from Continuing Operations Attributable to Esterline		(7,252	)		55,129			28,057			0			75,934
Income from Discontinued Operations Attributable to Esterline, Net of Tax		0			(29	)		0			0			(29	)
Equity in Net Income of Consolidated Subsidiaries		83,157			12,862			2,492			(98,511	)		0
Net Income (Loss) Attributable to Esterline	$	75,905		$	67,962		$	30,549		$	(98,511	)	$	75,905

Condensed Consolidating Statement of Cash Flows for the six month period ended April 29, 2011.

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss) including noncontrolling interests	$	76,011		$	67,962		$	30,549		$	(98,511	)	$	76,011
Depreciation & amortization		0			17,957			19,512			0			37,469
Deferred income taxes		651			577			(3,404	)		0			(2,176	)
Share-based compensation		0			1,523			2,324			0			3,847
Working capital changes, net of effect of acquisitions
Accounts receivable		262			(744	)		21,187			0			20,705
Inventories		0			(13,787	)		(13,105	)		0			(26,892	)
Prepaid expenses		(72	)		(694	)		(715	)		0			(1,481	)
Other current assets		(25	)		(266	)		(1,863	)		0			(2,154	)
Accounts payable		1,262			(2,472	)		(2,186	)		0			(3,396	)
Accrued liabilities		5,510			(5,398	)		(14,609	)		0			(14,497	)
Federal & foreign income taxes		4,181			(3,767	)		(629	)		0			(215	)
Other liabilities		4,266			(1,989	)		705			0			2,982
Other, net		794			1,416			(2,968	)		0			(758	)
		92,840			60,318			34,798			(98,511	)		89,445
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(15	)		(12,350	)		(13,950	)		0			(26,315	)
Proceeds from sale of capital assets		0			179			1,164			0			1,343
Escrow deposit		(14,000	)		0			0			0			(14,000	)
Acquisitions, net of cash acquired		0			(103,548	)		0			0			(103,548	)
		(14,015	)		(115,719	)		(12,786	)		0			(142,520	)
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		9,357			0			0			0			9,357
Excess tax benefits from stock options exercised		1,406			0			0			0			1,406
Debt and other issuance costs		(3,504	)		0			0			0			(3,504	)
Net change in credit facilities		110,000			0			0			0			110,000
Repayment of long-term debt		(126,814	)		(166	)		6,154			0			(120,826	)
Proceeds from government assistance		0			0			10,176			0			10,176
Net change in intercompany financing		(173,897	)		61,299			14,087			98,511			0
		(183,452	)		61,133			30,417			98,511			6,609
Effect of foreign exchange rates on cash		(1	)		(5	)		15,866			0			15,860
Net increase (decrease) in cash and cash equivalents		(104,628	)		5,727			68,295			0			(30,606	)
Cash and cash equivalents – beginning of year		205,050			2,317			214,753			0			422,120
Cash and cash equivalents – end of year	$	100,422		$	8,044		$	283,048		$	0		$	391,514

Condensed Consolidating Balance Sheet as of October 29, 2010.

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries		Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	205,050		$	2,317		$	214,753	$	0		$	422,120
Accounts receivable, net		274			131,531			177,437		0			309,242
Inventories		0			118,567			143,806		0			262,373
Income tax refundable		12,548			0			5,258		0			17,806
Deferred income tax benefits		23,507			(1,627	)		15,659		0			37,539
Prepaid expenses		49			5,729			10,486		0			16,264
Other current assets		0			1			11,240		0			11,241
Total Current Assets		241,428			256,518			578,639		0			1,076,585
Property, Plant & Equipment, Net		1,249			162,407			110,114		0			273,770
Goodwill		0			246,176			493,554		0			739,730
Intangibles, Net		0			89,812			299,205		0			389,017
Debt Issuance Costs, Net		7,774			0			0		0			7,774
Deferred Income Tax Benefits		44,407			3,537			39,678		0			87,622
Other Assets		(69	)		2,004			11,305		0			13,240
Amounts Due From (To) Subsidiaries		41,529			271,345			0		(312,874	)		0
Investment in Subsidiaries		1,710,032			149,607			227,869		(2,087,508	)		0
Total Assets	$	2,046,350		$	1,181,406		$	1,760,364	$	(2,400,382	)	$	2,587,738
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable	$	944		$	28,345		$	52,986	$	0		$	82,275
Accrued liabilities		18,662			73,870			122,562		0			215,094
Credit facilities		0			0			1,980		0			1,980
Current maturities of long-term debt		10,938			80			1,628		0			12,646
Deferred income tax liabilities		197			278			6,680		0			7,155
Federal and foreign income taxes		(727	)		(20,522	)		26,476		0			5,227
Total Current Liabilities		30,014			82,051			212,312		0			324,377
Long-Term Debt, Net		534,375			44,525			20,072		0			598,972
Deferred Income Tax Liabilities		40,300			123			86,658		0			127,081
Pension and Post- Retirement Obligations		16,629			42,279			46,425		0			105,333
Other Liabilities		9,533			251			6,692		0			16,476
Amounts Due To (From) Subsidiaries		0			0			310,115		(310,115	)		0
Shareholders' Equity		1,415,499			1,012,177			1,078,090		(2,090,267	)		1,415,499
Total Liabilities and Shareholders' Equity	$	2,046,350		$	1,181,406		$	1,760,364	$	(2,400,382	)	$	2,587,738

Condensed Consolidating Statement of Operations for the three month period ended April 30, 2010.

(In thousands)

	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Net Sales	$	0		$	195,231		$	187,742		$	(481	)	$	382,492
Cost of Sales		0			130,048			126,289			(481	)		255,856
		0			65,183			61,453			0			126,636
Expenses
Selling, general and administrative		0			28,098			35,969			0			64,067
Research, development and engineering		0			7,598			10,403			0			18,001
Other income		0			0			(38	)		0			(38	)
Total Expenses		0			35,696			46,334			0			82,030
Operating Earnings from Continuing Operations		0			29,487			15,119			0			44,606
Interest Income		(3,899	)		(624	)		(9,857	)		14,360			(20	)
Interest Expense		6,525			4,893			10,290			(14,360	)		7,348
Income (Loss) from Continuing Operations Before Taxes		(2,626	)		25,218			14,686			0			37,278
Income Tax Expense (Benefit)		(532	)		5,382			3,294			0			8,144
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(2,094	)		19,836			11,392			0			29,134
Income Attributable to Noncontrolling Interests		0			0			(24	)		0			(24	)
Income (Loss) from Continuing Operations Attributable to Esterline		(2,094	)		19,836			11,368			0			29,110
Income from Discontinued Operations Attributable to Esterline, Net of Tax		0			538			0			0			538
Equity in Net Income of Consolidated Subsidiaries		31,742			3,276			562			(35,580	)		0
Net Income (Loss) Attributable to Esterline	$	29,648		$	23,650		$	11,930		$	(35,580	)	$	29,648

Condensed Consolidating Statement of Operations for the six month period ended April 30, 2010.

(In thousands)

	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Net Sales	$	0		$	363,007		$	355,276		$	(481	)	$	717,802
Cost of Sales		0			244,719			244,257			(481	)		488,495
		0			118,288			111,019			0			229,307
Expenses
Selling, general and administrative		0			57,334			68,028			0			125,362
Research, development and engineering		0			13,431			21,319			0			34,750
Other expense		0			0			3			0			3
Total Expenses		0			70,765			89,350			0			160,115
Operating Earnings from Continuing Operations		0			47,523			21,669			0			69,192
Interest Income		(7,779	)		(1,254	)		(19,970	)		28,600			(403	)
Interest Expense		13,164			9,881			20,864			(28,600	)		15,309
Income (Loss) from Continuing Operations Before Taxes		(5,385	)		38,896			20,775			0			54,286
Income Tax Expense (Benefit)		(1,234	)		8,681			5,266			0			12,713
Income (Loss) from Continuing Operations Including Noncontrolling Interests		(4,151	)		30,215			15,509			0			41,573
Income Attributable to Noncontrolling Interests		0			0			(78	)		0			(78	)
Income (Loss) from Continuing Operations Attributable to Esterline		(4,151	)		30,215			15,431			0			41,495
Income from Discontinued Operations Atributable to Esterline, Net of Tax		0			878			0			0			878
Equity in Net Income of Consolidated Subsidiaries		46,524			6,581			304			(53,409	)		0
Net Income (Loss) Attributable to Esterline	$	42,373		$	37,674		$	15,735		$	(53,409	)	$	42,373

Condensed Consolidating Statement of Cash Flows for the six month period ended April 30, 2010.

(In thousands)
	Parent			Guarantor     Subsidiaries			Non- Guarantor     Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss) including noncontrolling interests	$	42,373		$	37,674		$	15,813		$	(53,409	)	$	42,451
Depreciation & amortization		0			16,163			20,218			0			36,381
Deferred income taxes		(3,074	)		43			(5,465	)		0			(8,496	)
Share-based compensation		0			1,573			1,858			0			3,431
Working capital changes, net of effect of acquisitions
Accounts receivable		(31	)		3,048			(10,851	)		0			(7,834	)
Inventories		0			27			8,613			0			8,640
Prepaid expenses		0			(1,658	)		416			0			(1,242	)
Other current assets		0			(1	)		(2,778	)		0			(2,779	)
Accounts payable		(41	)		3,124			(7,108	)		0			(4,025	)
Accrued liabilities		(3,855	)		2,069			(8,212	)		0			(9,998	)
Federal & foreign income taxes		2,069			(1,930	)		7,270			0			7,409
Other liabilities		3,866			(1,074	)		2,396			0			5,188
Other, net		(1	)		125			2,454			0			2,578
		41,306			59,183			24,624			(53,409	)		71,704
Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(55	)		(8,652	)		(16,878	)		0			(25,585	)
Proceeds from sale of capital assets		0			92			5			0			97
Acquisitions, net of cash acquired		0			(360	)		(408	)		0			(768	)
		(55	)		(8,920	)		(17,281	)		0			(26,256	)
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		6,413			0			0			0			6,413
Excess tax benefits from stock options exercised		1,328			0			0			0			1,328
Net change in credit facilities		0			0			(1,677	)		0			(1,677	)
Repayment of long-term debt		(1,885	)		(200	)		(68	)		0			(2,153	)
Proceeds from government assistance		0			0			1,961			0			1,961
Net change in intercompany financing		(14,452	)		(49,345	)		10,388			53,409			0
		(8,596	)		(49,545	)		10,604			53,409			5,872
Effect of foreign exchange rates on cash		1			(4	)		(4,446	)		0			(4,449	)
Net increase (decrease) in cash and cash equivalents		32,656			714			13,501			0			46,871
Cash and cash equivalents – beginning of year		47,907			4,621			124,266			0			176,794
Cash and cash equivalents – end of year	$	80,563		$	5,335		$	137,767		$	0		$	223,665

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Accounting Policies

6 Months Ended

Apr. 29, 2011

Accounting Policies

Accounting Policies

2. The notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended October 29, 2010, provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q.

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Employee Benefit Plans

6 Months Ended

Apr. 29, 2011

Employee Benefit Plans

Employee Benefit Plans

11. The Company's pension plans principally include a U.S. pension plan maintained by Esterline and a non-U.S. plan maintained by CMC. Components of periodic pension cost consisted of the following:

(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Components of Net Periodic Pension Cost
Service cost	$	2,313		$	1,901		$	4,594		$	3,791
Interest cost		4,662			4,543			9,267			9,038
Expected return on plan assets		(5,087	)		(4,406	)		(10,111	)		(8,779	)
Amortization of prior service cost		5			5			10			10
Amortization of actuarial loss		2,009			1,871			4,007			3,697
Net Periodic Cost	$	3,902		$	3,914		$	7,767		$	7,757
The Company's principal post-retirement plans include non-U.S. plans, which are non-contributory healthcare and life insurance plans. The components of expense of these other retirement benefits consisted of the following:
(In thousands)	Three Months Ended						Six Months Ended
	April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Components of Net Periodic
Post-Retirement Plans Cost
Service cost	$	140		$	80		$	275		$	158
Interest cost		176			176			346			350
Amortization of actuarial gain		(4	)		(19	)		(8	)		(38	)
Net Periodic Cost	$	312		$	237		$	613		$	470

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Derivative Financial Instruments

6 Months Ended

Apr. 29, 2011

Derivative Financial Instruments

Derivative Financial Instruments

15. The Company uses derivative financial instruments in the form of foreign currency forward exchange contracts and interest rate swap contracts for the purpose of minimizing exposure to changes in foreign currency exchange rates on business transactions and interest rates, respectively. The Company's policy is to execute such instruments with banks the Company believes to be creditworthy and not to enter into derivative financial instruments for speculative purposes. These derivative financial instruments do not subject the Company to undue risk, as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities, or anticipated transactions that are being hedged.

All derivative financial instruments are recorded at fair value in the Consolidated Balance Sheet. For a derivative that has not been designated as an accounting hedge, the change in the fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the Consolidated Balance Sheet in Accumulated Other Comprehensive Income (AOCI) to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within AOCI is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.

The fair values of derivative instruments are presented on a gross basis, as the Company does not have any derivative contracts which are subject to master netting arrangements. The Company did not have any hedges with credit-risk-related contingent features or that required the posting of collateral as of April 29, 2011. The cash flows from derivative contracts are recorded in operating activities in the Consolidated Statement of Cash Flows.

Foreign Currency Forward Exchange Contracts

The Company transacts business in various foreign currencies which subjects the Company's cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. As of April 29, 2011, and October 29, 2010, the Company had outstanding foreign currency forward exchange contracts principally to sell U.S. dollars with notional amounts of $282.2 million and $245.5 million, respectively. These notional values consist primarily of contracts for the European euro, British pound sterling and Canadian dollar, and are stated in U.S. dollar equivalents at spot exchange rates at the respective dates.

Interest Rate Swaps

The Company manages its exposure to interest rate risk by maintaining an appropriate mix of fixed and variable rate debt, which over time should moderate the costs of debt financing. When considered necessary, the Company may use financial instruments in the form of interest rate swaps to help meet this objective. In November 2010, the Company entered into an interest rate swap agreement for $100.0 million on the $175.0 million Senior Notes due in 2017. The swap agreement exchanged the fixed interest rate of 6.625% for a variable interest rate on $100.0 million of the principal amount outstanding. The variable interest rate is based upon LIBOR plus 4.865% and was 5.138% at April 29, 2011. The fair value of the Company's interest rate swap was a $4.6 million liability at April 29, 2011, and was estimated by discounting expected cash flows using market interest rates. The Company records interest receivable and interest payable on interest rate swaps on a net basis. In December 2010, the Company entered into an interest rate swap agreement for $75.0 million on the $175.0 million Senior Notes due in 2017. The swap agreement exchanged the fixed interest rate of 6.625% for a variable interest rate on $75.0 million of the principal amount outstanding. The variable interest rate is based upon LIBOR plus 4.470% and was 4.743% at April 29, 2011. The fair value of the Company's interest rate swap was a $1.9 million liability at April 29, 2011, and was estimated by discounting expected cash flows using market interest rates. The Company recognized a net interest receivable of $0.4 million at April 29, 2011.

Embedded Derivative Instruments

The Company's embedded derivatives are the result of entering into sales or purchase contracts that are denominated in a currency other than the Company's functional currency or the supplier's or customer's functional currency.

Net Investment Hedge

In February 2006, the Company entered into a term loan for £57.0 million. The Company designated the term loan a hedge of the investment in a certain U.K. business unit. The term loan was fully repaid in June 2010. A cumulative foreign currency loss of $4.8 million resulting from the accounting of the term loan as a net investment hedge will remain in other comprehensive income in shareholders' equity until the hedged investment is disposed of or sold.

Fair Value of Derivative Instruments

Fair values of derivative instruments in the Consolidated Balance Sheet at April 29, 2011, and October 29, 2010, consisted of:

(In thousands)		Fair Value
	Classification	April 29, 2011		October 29, 2010
Foreign currency forward
exchange contracts	Other current assets	$	18,320	$	11,218
	Other assets		3,230		1,590
	Accrued liabilities		549		1,563
	Other liabilities		0		169
Embedded derivative instruments	Other current assets	$	20	$	23
	Accrued liabilities		150		189
	Other liabilities		3,040		1,626
Interest rate swap	Accrued liabilities	$	6,501	$	0

The effect of derivative instruments on the Consolidated Statement of Operations for the three and six month periods ended April 29, 2011, and April 30, 2010, consisted of:

(In thousands)			Three Months Ended						Six Months Ended
	Location of     Gain (Loss)		April 29, 2011			April 30, 2010			April 29, 2011			April 30, 2010
Fair Value Hedges:
Interest rate		Interest
swap contracts		Expense	$	717		$	1,103		$	1,196		$	1,735
Embedded
derivatives		Sales	$	(1,350	)	$	(775	)	$	(1,143	)	$	(1,202	)
Cash Flow Hedges:
Foreign currency forward exchange contracts:
Amount of gain
(loss) recognized in AOCI (effec- tive portion)		AOCI	$	6,263		$	2,904		$	1,535		$	(1,583	)
Amount of gain
(loss) reclassified from AOCI into income		Sales	$	3,065		$	2,338		$	5,713		$	4,326

During the first six months of fiscal 2011 and 2010, the Company recorded a gain of $2.8 million and a loss of $1.2 million, respectively, on foreign currency forward exchange contracts that have not been designated as an accounting hedge. These foreign currency exchange losses are included in selling, general and administrative expense.

There was no significant impact to the Company's earnings related to the ineffective portion of any hedging instruments during the first six months of fiscal 2011 and 2010. In addition, there was no significant impact to the Company's earnings when a hedged firm commitment no longer qualified as a fair value hedge or when a hedged forecasted transaction no longer qualified as a cash flow hedge during the first six months of fiscal 2011 and 2010.

Amounts included in AOCI are reclassified into earnings when the hedged transaction settles. The Company expects to reclassify approximately $15.9 million of net gain into earnings over the next 12 months. The maximum duration of the Company's foreign currency cash flow hedge contracts at April 29, 2011, is 23 months.

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Consolidated Balance Sheet (USD $) In Thousands	Apr. 29, 2011	Oct. 29, 2010
ASSETS
Cash and cash equivalents	$ 391,514	$ 422,120
Cash in escrow	5,000	0
Accounts receivable, net of allowances of $4,692 and $4,865	308,103	309,242
Inventories
Raw materials and purchased parts	126,862	109,595
Work in process	124,269	99,592
Finished goods	64,863	53,186
Total Inventories	315,994	262,373
Income tax refundable	12,067	17,806
Deferred income tax benefits	38,232	37,539
Prepaid expenses	18,369	16,264
Other current assets	18,673	11,241
Total Current Assets	1,107,952	1,076,585
Property, Plant and Equipment	578,266	546,004
Accumulated depreciation	290,324	272,234
Total Property, Plant and Equipment	287,942	273,770
Other Non-Current Assets
Goodwill	835,167	739,730
Intangibles, net	456,648	389,017
Debt issuance costs, net of accumulated amortization of $1,780 and $4,536	9,759	7,774
Deferred income tax benefits	95,048	87,622
Other assets	22,404	13,240
Total Assets	2,814,920	2,587,738
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	84,660	82,275
Accrued liabilities	233,727	215,094
Credit facilities	110,000	1,980
Current maturities of long-term debt	1,782	12,646
Deferred income tax liabilities	10,477	7,155
Federal and foreign income taxes	2,451	5,227
Total Current Liabilities	443,097	324,377
Long-Term Liabilities
Long-term debt, net of current maturities	495,719	598,972
Deferred income tax liabilities	153,660	127,081
Pension and post-retirement obligations	109,251	105,333
Other liabilities	27,568	16,476
Shareholders' Equity
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued and outstanding 30,524,070 and 30,279,509 shares	6,105	6,056
Additional paid-in capital	543,285	528,724
Retained earnings	950,686	874,781
Accumulated other comprehensive income	82,740	3,235
Total Esterline shareholders' equity	1,582,816	1,412,796
Noncontrolling interests	2,809	2,703
Total Shareholders' Equity	1,585,625	1,415,499
Total Liabilities and Shareholders' Equity	$ 2,814,920	$ 2,587,738