ESTERLINE TECHNOLOGIES CORP (Form: 10-Q, Received: 02/05/2016 16:04:14)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended January 1, 2016.

¨ 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		(I.R.S. Employer
of incorporation or organization)		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 þ 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 þ 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.

Large accelerated filer	þ	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 þ

As of February 2, 2016, 29,629,812 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 January 1, 2016 and October 2, 2015

(In thousands, except share amounts)

	January 1,		October 2,
	2016		2015
	(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	200,891	$	191,355
Accounts receivable, net of allowances of $8,375 and $10,050		342,008		380,748
Inventories
Raw materials and purchased parts		171,157		169,153
Work in progress		178,242		181,187
Finished goods		97,873		96,428
		447,272		446,768

Income tax refundable		12,224		12,575
Deferred income tax benefits		42,124		41,082
Prepaid expenses		21,216		23,008
Other current assets		7,072		5,427
Current assets of businesses held for sale		25,721		27,851
Total Current Assets		1,098,528		1,128,814

Property, Plant and Equipment		732,748		729,317
Accumulated depreciation		425,162		419,918
		307,586		309,399

Other Non-Current Assets
Goodwill		1,019,506		1,041,991
Intangibles, net		429,250		452,040
Deferred income tax benefits		27,636		28,979
Other assets		14,413		14,348
Non-current assets of businesses held for sale		22,403		24,917
Total Assets	$	2,919,322	$	3,000,488

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEET

As of January 1, 2016 and October 2, 2015

(In thousands, except share amounts)

	January 1,			October 2,
	2016			2015
	(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable	$	116,025		$	117,976
Accrued liabilities		245,997			259,734
Current maturities of long-term debt		16,947			13,376
Federal and foreign income taxes		1,721			2,404
Current liabilities of businesses held for sale		18,047			17,106
Total Current Liabilities		398,737			410,596

Long-Term Liabilities
Credit facilities		150,000			160,000
Long-term debt, net of current maturities		681,358			701,457
Deferred income tax liabilities		67,920			73,849
Pension and post-retirement obligations		72,435			75,019
Other liabilities		30,910			29,367
Non-current liabilities of businesses held for sale		642			2,409

Shareholders' Equity
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued 32,450,534 and 32,378,185 shares		6,490			6,476
Additional paid-in capital		687,750			682,479
Treasury stock at cost, repurchased 2,831,350 shares		(289,780	)		(289,780	)
Retained earnings		1,452,204			1,447,120
Accumulated other comprehensive loss		(349,659	)		(308,828	)
Total Esterline Shareholders' Equity		1,507,005			1,537,467
Noncontrolling interests		10,315			10,324
Total Shareholders' Equity		1,517,320			1,547,791
Total Liabilities and Shareholders' Equity	$	2,919,322		$	3,000,488

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

For the Three Month Periods Ended January 1, 2016 and December 26, 2014

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	January 1,			December 26,
	2016			2014
				(Recast)

Net Sales	$	441,477		$	504,611
Cost of Sales		303,758			326,370
		137,719			178,241
Expenses
Selling, general & administrative		94,091			98,016
Research, development and engineering		25,575			23,531
Restructuring charges		931			3,293
Total Expenses		120,597			124,840

Operating Earnings from Continuing Operations		17,122			53,401
Interest Income		(87	)		(184	)
Interest Expense		7,216			8,082

Earnings from Continuing Operations Before Income Taxes		9,993			45,503
Income Tax Expense (Benefit)		(33	)		10,974
Earnings from Continuing Operations Including Noncontrolling Interests		10,026			34,529

Loss (Earnings) Attributable to Noncontrolling Interests		(162	)		17
Earnings from Continuing Operations Attributable to Esterline, Net of Tax		9,864			34,546

Loss from Discontinued Operations Attributable to Esterline, Net of Tax		(4,780	)		(5,947	)

Net Earnings Attributable to Esterline	$	5,084		$	28,599

Earnings (Loss) Per Share Attributable to Esterline - Basic:
Continuing operations	$	0.33		$	1.09
Discontinued operations		(0.16	)		(0.19	)
Earnings (Loss) Per Share Attributable to Esterline - Basic	$	0.17		$	0.90

Earnings (Loss) Per Share Attributable to Esterline - Diluted:
Continuing operations	$	0.33		$	1.06
Discontinued operations		(0.16	)		(0.18	)
Earnings (Loss) Per Share Attributable to Esterline - Diluted	$	0.17		$	0.88

Comprehensive Income (Loss)	$	(35,747	)	$	(37,841	)

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Three Month Periods Ended January 1, 2016 and December 26, 2014

(Unaudited)

(In thousands)

	January 1,			December 26,
	2016			2014
				(Recast)

Cash Flows Provided (Used) by Operating Activities
Net earnings including noncontrolling interests	$	5,246		$	28,582
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided (used) by operating activities:
Depreciation and amortization		24,171			29,556
Deferred income taxes		(5,902	)		(5,572	)
Share-based compensation		3,328			2,900
Loss on assets held for sale		2,517			-
Working capital changes, net of effect of acquisitions:
Accounts receivable		31,763			(14,623	)
Inventories		(8,011	)		(6,103	)
Prepaid expenses		1,489			(3,538	)
Other current assets		(2,979	)		486
Accounts payable		(491	)		13,530
Accrued liabilities		(12,888	)		10,457
Federal and foreign income taxes		(1,608	)		(424	)
Other liabilities		(488	)		2,071
Other, net		4,505			2,248
		40,652			59,570

Cash Flows Provided (Used) by Investing Activities
Purchase of capital assets		(14,862	)		(15,096	)
		(14,862	)		(15,096	)

Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		1,481			4,493
Excess tax benefits from stock option exercises		476			908
Shares repurchased		-			(48,631	)
Repayment of long-term credit facilities		(10,000	)		(10,000	)
Repayment of long-term debt		(3,192	)		(3,959	)
Proceeds from issuance of long-term credit facilities		-			35,000
		(11,235	)		(22,189	)

Effect of Foreign Exchange Rates on Cash and Cash Equivalents		(5,019	)		(8,055	)
Net Increase (Decrease) in Cash and Cash Equivalents		9,536			14,230

Cash and Cash Equivalents - Beginning of Year		191,355			213,251
Cash and Cash Equivalents - End of Period	$	200,891		$	227,481

Supplemental Cash Flow Information:
Cash paid for interest	$	10,361		$	2,521
Cash paid for taxes		5,256			13,405

ESTERLINE TECHNOLOGIES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Month Periods Ended January 1, 2016 and December 26, 2014

Note 1 – Basis of Presentation

The consolidated balance sheet as of January 1, 2016, the consolidated statement of operations and comprehensive income (loss) for the three month periods ended January 1, 2016, and December 26, 2014, and the consolidated statement of cash flows for the three month periods ended January 1, 2016, and December 26, 2014, 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.

The notes to the consolidated financial statements in the Company’s Transition Report on Form 10-K for the eleven months ended October 2, 2015, provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q.

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, October through December, includes significant holiday periods in both Europe and North America.

Note 2 – Change in Fiscal Year End

On June 5, 2014, the Company’s board of directors authorized a change in the Company’s fiscal year end to the last Friday of September from the last Friday in October. The Company reported its financial results for the 11-month transition period of November 1, 2014, through October 2, 2015, on the Transition Report on Form 10-K and thereafter will file its annual report for each 12-month period ending the last Friday of September of each year, beginning with the 12-month period ending September 30, 2016. Refer to the Transition Report on Form 10-K for the eleven months ended October 2, 2015, for additional information regarding the Company’s fiscal year change.

The prior year Consolidated Statement of Operations and Comprehensive Income (Loss) and the Consolidated Statement of Cash Flows for the three month period ended December 26, 2014, have been recast to align to the Company’s new quarter end.

Note 3 – Recent Accounting Pronouncements

In November 2015, the Financial Accounting Standards Board (FASB) issued new guidance requiring all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet instead of separating those balances into current and noncurrent amounts. The new guidance is effective for the Company in fiscal year 2018, with early adoption permitted.

In May 2014, FASB amended requirements for an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is permitted. The updated standard becomes effective for the Company in the first fiscal quarter of 2019. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on consolidated financial statements and related disclosures.

Note 4 – Earnings Per Share and Shareholders’ Equity

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 and restricted stock units. Common shares issuable from stock options excluded from the calculation of diluted earnings per share because they were anti-dilutive were 610,700 and 132,400 in the first fiscal quarter of 2016 and 2015, respectively. Shares used for calculating earnings per share are disclosed in the following table:

In Thousands	Three Months Ended
	January 1,		December 26,
	2016		2014
			(Recast)

Shares used for basic earnings per share		29,582		31,790
Shares used for diluted earnings per share		29,939		32,364

The authorized capital stock of the Company consists of 25,000 shares of preferred stock ($100 par value), 475,000 shares of serial preferred stock ($1.00 par value), each issuable in series, and 60,000,000 shares of common stock ($.20 par value). As of January 1, 2016, and October 2, 2015, there were no shares of preferred stock or serial preferred stock outstanding.

On June 19, 2014, the Company’s board of directors approved a $200 million share repurchase program. In March 2015, the Company’s board of directors approved an additional $200 million for the share repurchase program. Under the program, the Company is authorized to repurchase up to $400 million of outstanding shares of common stock from time to time, depending on market conditions, share price and other factors. Repurchases may be made in the open market or through private transactions, in accordance with SEC requirements. The Company may enter into a Rule 10(b)5-1 plan designed to facilitate the repurchase of all or a portion of the repurchase amount. The program does not require the Company to acquire a specific number of shares. Common stock repurchased can be reissued, and accordingly, the Company accounts for repurchased stock under the cost method of accounting.

The Company did not repurchase any shares under this program during the three months ended January 1, 2016. During the three months ended December 26, 2014, the Company repurchased 448,002 shares under this program at an average price paid per share of $108.55, for an aggregate purchase price of $48.6 million.

Changes in issued and outstanding common shares are summarized as follows:

	Three Months Ended			Year Ended
	January 1,			October 2,
	2016			2015
Shares Issued:
Balance, beginning of year		32,378,185			32,123,717
Shares issued under share-based compensation plans		72,349			254,468
Balance, end of current period		32,450,534			32,378,185

Treasury Stock:
Balance, beginning of year		(2,831,350	)		(269,228	)
Shares purchased		-			(2,562,122	)
Balance, end of current period		(2,831,350	)		(2,831,350	)

Shares outstanding, end of period		29,619,184			29,546,835

The components of Accumulated Other Comprehensive Gain (Loss):

In Thousands	January 1,			October 2,
	2016			2015

Unrealized gain (loss) on derivative contracts	$	(27,114	)	$	(22,941	)
Tax effect		7,321			6,036
		(19,793	)		(16,905	)

Pension and post-retirement obligations		(97,448	)		(99,724	)
Tax effect		33,017			33,775
		(64,431	)		(65,949	)

Currency translation adjustment		(265,435	)		(225,974	)
Accumulated other comprehensive gain (loss)	$	(349,659	)	$	(308,828	)

Note 5 – Retirement Benefits

The Company’s pension plans principally include a U.S. pension plan maintained by Esterline and a non-U.S. plan maintained by CMC Electronics, Inc. (CMC). The Company also sponsors a number of other non-U.S. defined benefit pension plans, primarily in Belgium, France and Germany. In fiscal 2014, the Company offered vested terminated participants of its U.S. pension plan a one-time opportunity to elect a lump-sum payment from the plan in lieu of a lifetime annuity. In the first fiscal quarter of 2015, the Company made a $16.6 million lump-sum payment to vested terminated pension plan participants from the plan, which resulted in an actuarial settlement charge of $3.0 million. The charge was recorded in selling, general and administrative expenses. Components of periodic pension cost consisted of the following:

In Thousands	Three Months Ended
	January 1,			December 26,
	2016			2014
				(Recast)
Components of Net Periodic Cost
Service cost	$	2,956		$	2,702
Interest cost		4,393			4,364
Expected return on plan assets		(5,911	)		(6,467	)
Settlement		-			2,991
Amortization of prior service cost		115			18
Amortization of actuarial (gain) loss		1,476			1,211
Net periodic cost (benefit)	$	3,029		$	4,819

The Company amortizes prior service cost and actuarial gains and losses from accumulated other comprehensive income to expense over the remaining service period.

Note 6 – Fair Value Measurements

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’s 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 an d liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy at January 1, 2016 , and October 2, 2015 .

In Thousands	Level 2
	January 1,		October 2,
	2016		2015
Assets:
Derivative contracts designated as hedging instruments	$	242	$	1,386
Derivative contracts not designated as hedging instruments		173		189
Embedded derivatives		5,120		3,992

Liabilities:
Derivative contracts designated as hedging instruments	$	27,672	$	24,660
Derivative contracts not designated as hedging instruments		4,022		2,324
Embedded derivatives		466		380

In Thousands	Level 3
	January 1,		October 2,
	2016		2015
Liabilities:
Contingent purchase obligation	$	3,750	$	3,750

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.

From time to time, 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 additional contingent consideration in connection with the acquisition of Sunbank Family of Companies, LLC (Sunbank) of $3.75 million as of January 1, 2016, and as of October 2, 2015. The contingent consideration will be payable to the sellers if certain performance objectives are met following the acquisition in accordance with the terms of the purchase agreement. The values recorded on the balance sheet were derived from the estimated probability that the performance objectives will be met. The contingent purchase obligation is categorized as Level 3 in the fair value hierarchy.

Note 7 – Derivative Financial Instruments

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 value of derivative instruments is presented on a gross basis, as the Company does not have any derivative contracts which are subject to master netting arrangements. At January 1, 2016, and October 2, 2015, the Company did not have any hedges with

credit-risk-related contingent features or that required the posting of collateral. 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. At January 1, 2016, and October 2, 2015, the Company had outstanding foreign currency forward exchange contracts principally to sell U.S. dollars with notional amounts of $394.3 million and $402.9 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.

Embedded Derivative Instruments

Net Investment Hedge

In April 2015, the Company issued €330.0 million in 3.625% Senior Notes due April 2023 (2023 Notes) and requiring semi-annual interest payments in April and October each year until maturity. The Company designated the 2023 Notes and accrued interest as a hedge of the investment of certain foreign business units. The foreign currency gain or loss that is effective as a hedge is reported as a component of other comprehensive income (loss) in shareholders’ equity. To the extent that this hedge is ineffective, the foreign currency gain or loss is recorded in earnings. There was no ineffectiveness of the hedge since inception.

Fair Value of Derivative Instruments

Fair value of derivative instruments in the Consolidated Balance Sheet at January 1, 2016, and October 2, 2015, consisted of:

In Thousands		Fair Value
		January 1,		October 2,
	Classification	2016		2015
Foreign Currency Forward Exchange Contracts:
	Other current assets	$	345	$	1,527
	Other assets		70		48
	Accrued liabilities		23,995		20,688
	Other liabilities		7,699		6,296

Embedded Derivative Instruments:
	Other current assets	$	3,881	$	2,913
	Other assets		1,239		1,079
	Accrued liabilities		400		351
	Other liabilities		66		29

The effect of derivative instruments on the Consolidated Statement of Operations and Comprehensive Income (Loss) for the three month periods ended January 1, 2016, and December 26, 2014, consisted of:

Fair Value Hedges and Embedded Derivatives

We recognized the following gains (losses) on contracts designated as fair value hedges and embedded derivatives:

In Thousands	Three Months Ended
Gain (Loss)	January 1,		December 26,
	2016		2014
			(Recast)
Embedded derivatives:
Recognized in sales	$	1,154	$	1,501

Cash Flow Hedges

We recognized the following gains (losses) on contracts designated as cash flow hedges:

In Thousands	Three Months Ended
Gain (Loss)	January 1,			December 26,
	2016			2014
				(Recast)
Foreign currency forward exchange contracts:
Recognized in AOCI (effective portion)	$	2,901		$	(1,703	)
Reclassified from AOCI into sales		(7,074	)		(4,377	)

Net Investment Hedges

We recognized the following gains (losses) on contracts designated as net investment hedges:

In Thousands	Three Months Ended
Gain (Loss)	January 1,		December 26,
	2016		2014
			(Recast)
2023 Notes and Accrued Interest:
Recognized in AOCI	$	11,533	$	-

During the first three months of fiscal 2016 and 2015, the Company recorded losses of $2.4 million and $6.7 million, respectively, on foreign currency forward exchange contracts that have not been designated as accounting hedges. 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 three months of fiscal 2016 and 2015. 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 three months of fiscal 2016 and 2015.

Amounts included in AOCI are reclassified into earnings when the hedged transaction settles. The Company expects to reclassify approximately $21.5 million of net loss into earnings over the next 12 months. The maximum duration of the Company’s foreign currency cash flow hedge contracts at January 1, 2016, is 24 months.

Note 8 – Income Taxes

The income tax rate was a 0.3% benefit compared with a 24.1% expense in the first fiscal quarter of 2016 and 2015, respectively. In the first fiscal quarter of 2016, the Company recognized $1.9 million of discrete tax benefits principally related to three items. The first was approximately $1.3 million reduction of net deferred income tax liabilities as a result of the enactment of tax laws reducing the U.K. statutory income tax rate. The second was approximately $1.3 million of discrete tax benefit due to the retroactive extension of the U.S. federal research and experimentation credits. The third was a $0.7 million tax expense due to income tax return to provision adjustments. In the first fiscal quarter of 2015, the Company recognized $0.7 million of discrete tax benefits due to income tax return to provision adjustments. The income tax rate differed from the statutory rate in the first fiscal quarters of 2016 and 2015, as both years benefited from various tax credits and certain foreign interest expense deductions.

It is reasonably possible that within the next twelve months approximately $1.1 million of tax benefits that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of applicable statutes of limitations.

Note 9 – Debt

U.S. Credit Facility

On April 9, 2015, the Company amended its secured credit facility to extend the maturity to April 9, 2020, increase the amount available for borrowing under the secured revolving credit facility to $500 million, and provide for a delayed-draw term loan facility of $250 million (U.S. Term Loan, due 2020). The Company recorded $2.3 million in debt issuance costs. The credit facility is secured by substantially all the Company’s assets and interest is based on standard inter-bank offering rates. The interest rate ranges from LIBOR plus 1.25% to LIBOR plus 2.00%, depending on the leverage ratios at the time the funds are drawn. At January 1, 2016, the Company had $150.0 million outstanding under the secured credit facility at an interest rate of LIBOR plus 1.50%, which ranged from 1.77% to 1.92%.

U.S. Term Loan, due July 2016

In April 2013, the Company amended the secured credit facility to provide for a $175.0 million term loan (U.S. Term Loan, due 2016). On April 8, 2015, the Company paid off the $175 million U.S. Term Loan, due 2016. In connection with the repayment, the Company wrote off $0.3 million in unamortized debt issuance costs as a loss on extinguishment of debt in the third fiscal quarter of 2015.

U.S. Term Loan, due April 2020

On August 3, 2015, the Company borrowed $250 million under the U.S. Term Loan, due 2020 provided for under the amended secured credit facility. The interest rate on the U.S. Term Loan, due 2020, ranges from LIBOR plus 1.25% to LIBOR plus 2.00%, depending on the leverage ratios at the time the funds are drawn. At January 1, 2016, the interest rate was LIBOR plus 1.5%, which equaled 1.93%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2020, with the remaining balance due in April 2020.

7% Senior Notes, due August 2020

In August 2010, the Company issued $250.0 million in 7% Senior Notes, due August 2020 (2020 Notes) and which require semi-annual interest payments in March and September of each year until maturity.

On August 4, 2015, the proceeds from the U.S. Term Loan, due 2020 were used to redeem all of the 7% Senior Notes due 2020. As part of the redemption, the Company incurred an $8.75 million redemption premium and wrote off $2.4 million in unamortized debt issuance costs as a loss on extinguishment of debt in the fourth fiscal quarter of 2015.

3.625% Senior Notes, due April 2023

In April 2015, the Company issued €330.0 million in 3.625% 2023 Notes requiring semi-annual interest payments in April and October of each year until maturity. The net proceeds from the sale of the notes, after deducting $5.9 million of debt issuance costs, were $350.8 million. The 2023 Notes are general unsecured senior obligations of the Company. The 2023 Notes are unconditionally guaranteed on a senior basis by the Company and certain subsidiaries of the Company that are guarantors under the Company’s existing secured credit facility. The 2023 Notes are subject to redemption at the option of the Company at any time prior to April 15, 2018, at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. The Company may also redeem up to 35% of the 2023 Notes before April 15, 2018, with the net cash proceeds from equity offerings. The 2023 Notes are also subject to redemption at the option of the Company, in whole or in part, on or after April 15, 2018, at redemption prices starting at 102.719% of the principal amount plus accrued interest during the period beginning April 15, 2018, and declining annually to 100% of principal and accrued interest on or after April 15, 2021.

Based on quoted market prices, the fair value of the Company’s 2023 Notes was $348.5 million as of January 1, 2016 and $347.7 million as of October 2, 2015. The carrying amount of the secured credit facility and the U.S. Term Loan, due 2020, approximate fair value. The estimate of fair value for the 2023 Notes are based on Level 2 inputs as defined in the fair value hierarchy described.

Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The requirement to repay this advance is solely based on year-over-year commercial aviation revenue growth at CMC beginning in 2014. Imputed interest on the advance was 3.832% at January 1, 2016. The debt recognized was $41.5 million and $43.3 million as of January 1, 2016, and October 2, 2015, respectively.

In April 2015, FASB amended requirements related to the presentation of debt issuance costs. The updated standard requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. The recognition and measurement of debt issuance costs are not affected by this amendment. The Company adopted this updated standard during the quarter resulting in the reclassification of $6.3 million of debt issuance costs from other non-current assets to a reduction of the Company’s current maturities of long-term debt of $0.2 million and a reduction of the Company’s long-term debt of $6.1 million as of January 1, 2016. The Company reclassified $6.5 million of debt issuance costs from other non-current assets to a reduction of the Company’s current maturities of long-term debt of $0.2 million and a reduction of the Company’s long-term debt of $6.3 million as of October 2, 2015.

Note 10 – Commitments and Contingencies

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

As of January 1, 2016, and October 2, 2015, the Company had a liability of $1.3 million and $1.6 million, respectively, related to environmental remediation at a previously sold business for which the Company provided indemnification.

On March 5, 2014, the Company entered into a Consent Agreement with the U.S. Department of State’s Directorate of Defense Trade Controls Office of Defense Trade Controls Compliance (DTCC) to resolve alleged International Traffic in Arms Regulations (ITAR) civil violations . The Consent Agreement settled the pending ITAR compliance matter with the DTCC previously reported by the Co mpany that resulted from voluntary reports the Company filed with DTCC that disclosed possible technical and administrative violations of the ITAR. The Consent Agreement ha s a three-year term and provided for: (i) a payment of $20 million, $10 million of which is suspended and eligible for offset credit based on verified expenditures for past and future remedial compliance measures; (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and the ITA R; (iii) two external audits of the Company’s ITAR compliance program; and (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedur es, and training .

The settlement amount in the Consent Agreement was consistent with the amount proposed by DTCC in August 2013, for which the Company estimated and recorded a $10 million charge in the third fiscal quarter ended July 26, 2013. The $10 million portion of the settlement that is not subject to suspension will be paid in installments, with $4 million paid in March 2014, $2 million paid in February 2015, and $2 million to be paid in each of March 2016 and 2017. The Company expects some part of recent investments made in its ITAR compliance program will be eligible for credit against the suspended portion of the settlement amount, which include: additional staffing, ongoing implementation of a new software system, employee training, and establishment of a regular compliance audit program and corrective action process. The Company expects recent and future investments in remedial compliance measures will be sufficient to cover the $10 million suspended payment.

Note 11 – Employee Stock Plans

As of January 1, 2016, the Company had three share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans was $3.3 million and $2.9 million for the first three months of fiscal 2016 and 2015, respectively. During the first three months of fiscal 2016 and 2015, the Company issued 72,349 and 119,278 shares, respectively, under its share-based compensation plans.

Employee Stock Purchase Plan (ESPP)

The ESPP is a “safe-harbor” designed plan whereby shares are purchased by participants at a discount of 5% of the market value on the purchase date and, therefore, compensation cost is not recorded.

Employee Sharesave Scheme

The Company offers shares under its employee sharesave scheme for U.K. employees. This plan allows participants the option to purchase shares at a 5% discount 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. No options were granted during the first fiscal quarter of 2016 or 2015.

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 217,200 and 50,800 options to purchase shares in the three month periods ended January 1, 2016, and December 26, 2014, respectively. The weighted-average grant date fair value of options granted during the three month periods ended January 1, 2016, and December 26, 2014, was $35.87 and $54.08 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.

	Three Months Ended
	January 1,	December 26,
	2016	2014

Volatility	33.06 - 40.52%	40.73 - 41.89%
Risk-free interest rate	1.61 - 2.24%	1.43 - 2.00%
Expected life (years)	5 - 9	5 - 9
Dividends	0	0

The Company granted 33,400 and 13,500 restricted stock units in the three month periods ended January 1, 2016, and December 26, 2014, respectively. The weighted-average grant date fair value of restricted stock units granted during the three month periods ended

January 1, 2016 , an d December 26 , 2014 , was $ 86.29 and $ 117.53 per share, respectively. The fair value of each restricted stock unit granted by the Company is equal to the fair market value of the Company’s common stock on the date of grant.

Note 12 – Acquisitions

On January 31, 2015, the Company acquired the defense, aerospace and training display (DAT) business of Belgium-based Barco N.V. (Barco) for €150 million, or approximately $171 million, in cash before a working capital adjustment of approximately $15 million. The Company incurred a $2.9 million foreign currency exchange loss in the funding of the acquisition in fiscal 2015. Acquisition related costs of $3.4 million were recognized as selling, general and administrative expense in fiscal 2015. The Company financed the acquisition primarily using international cash reserves, with the balance funded by borrowings under its existing credit facility. The DAT business develops and manufactures visualization solutions for a variety of demanding defense and commercial aerospace applications and is included in our 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 fair value adjustment for inventory was $7.0 million, which was recognized as cost of goods sold over eight months, the estimated inventory turnover. The fair value of acquired programs represented the value of visualization solutions sold under long-term supply agreements with aerospace companies, military contractors, and OEM manufacturers using similar technology. The valuation of the program included the values of program-specific technology, the backlog of contracts, and the relationship with customers which lead to potential future contracts. The valuation of the programs was based upon the discounted cash flow at a market-based discount rate. The purchase price includes the value of existing technologies, the introduction of new technologies, and the addition of new customers. These factors resulted in recording goodwill of $48.5 million. A substantial portion of the amount allocated to goodwill is not deductible for income tax purposes.

In Thousands
As of January 31, 2015

Current assets	$	80,400
Property, plant and equipment		6,206
Intangible assets subject to amortization
Programs (15 year average useful life)		56,455
Programs (3 year average useful life)		677
Trade name (3 year average useful life)		226
Goodwill		48,537
Other assets		3,401
Total assets acquired		195,902

Current liabilities assumed		34,006
Long-term liabilities assumed		5,921
Net assets acquired	$	155,975

To take advantage of synergies across the Company, DAT will be further integrated with existing businesses. As a result of these integration activities, the company incurred $3.6 million of integration expenses in the first fiscal quarter of 2016.

Note 13 – Comprehensive Income (Loss)

The Company’s comprehensive income (loss) is as follows:

In Thousands	Three Months Ended
	January 1,			December 26,
	2016			2014
				(Recast)

Net earnings	$	5,084		$	28,599
Change in fair value of derivative financial instruments, net of tax ⁽¹⁾		(2,888	)		(3,938	)
Change in pension and post-retirement obligations, net of tax ⁽²⁾		1,518			(6,504	)
Currency translation adjustment		(39,461	)		(55,998	)
Comprehensive Income (Loss)	$	(35,747	)	$	(37,841	)

¹	Net of tax benefit of $1,285 and $2,142 for the first fiscal quarter of 2016 and 2015, respectively.

²	Net of tax benefit (expense) of $(758) and $3,317 for the first fiscal quarter of 2016 and 2015, respectively.

Note 14 – Restructuring

On December 5, 2013, the Company announced the acceleration of its plans to consolidate certain facilities and create cost efficiencies through shared services in sales, general and administrative and support functions. The costs are for exit and relocation of facilities, losses on the write off of certain property, plant and equipment, and severance. In the first three months of fiscal 2016, restructuring expense totaled $1.4 million.

In the recast first three months of fiscal 2015, restructuring expense totaled $5.5 million, as more fully described in the following table:

In Thousands			Write Off of
	Exit &		Property,
	Relocation		Plant &
	of Facilities		Equipment		Severance		Total

Cost of sales	$	2,090	$	135	$	-	$	2,225
Restructuring charges		2,065		361		867		3,293
Total	$	4,155	$	496	$	867	$	5,518

The Company has recorded an accrued liability of $4.8 million and $5.2 million for these activities as of January 1, 2016, and October 2, 2015, respectively.

Note 15 – Discontinued Operations

The Company’s board of directors previously approved the plan to sell certain non-core business units including Eclipse Electronic Systems, Inc. (Eclipse), a manufacturer of embedded communication intercept receivers for signal intelligence applications; Wallop Defence Systems, Ltd. (Wallop), a manufacturer of flare countermeasure devices; Pacific Aerospace and Electronics Inc. (PA&E), a manufacturer of hermetically sealed electrical connectors; a small distribution business; and a small manufacturing business.

On June 5, 2015, the Company sold Eclipse for $7.9 million and retained ownership of the land, building and building improvements, which are held for sale. In addition, on July 20, 2015, the Company sold PA&E for $22.3 million.

During the first fiscal quarter of 2016 and 2015, the Company incurred a loss of $4.8 million and $5.9 million, respectively, on discontinued operations. For the first three months of fiscal 2016, a $2.2 million loss on assets held for sale at Advanced Materials was principally due the reduction of Wallop’s estimated selling price based upon lower expectations of earnings for the business and continuing negotiations with the buyer. Principal assumptions used in measuring the estimated loss on assets held for sale included estimated selling price of the discontinued business, discount rates, industry growth rates, and pricing of comparable transactions in the market.

During the first three months of fiscal 2015, the Company recorded a $0.5 million increase in a liability related to environmental remediation at a previously sold business for which the Company provided indemnification. A loss of $0.3 million, net of tax, is reflected in discontinued operations.

The operating results of the discontinued operations for the three month period ended January 1, 2016, consisted of the following:

In Thousands	Avionics &			Sensors &			Advanced
	Controls			Systems			Materials			Other			Total

Net Sales	$	5,582		$	-		$	2,484		$	-		$	8,066

Operating earnings (loss)		1,167			(156	)		(3,746	)		(4	)		(2,739	)
Gain (loss) on net assets held for sale		(270	)		-			(2,247	)		-			(2,517	)
Tax expense (benefit)		413			-			(889	)		-			(476	)
Income (loss) from discontinued operations	$	484		$	(156	)	$	(5,104	)	$	(4	)	$	(4,780	)

The operating results of the discontinued operations for the recast three month perio d ended December 26 , 2014, consisted of the following:

In Thousands	Avionics &			Sensors &		Advanced
	Controls			Systems		Materials			Other			Total

Net Sales	$	14,162		$	5,928	$	3,441		$	-		$	23,531

Operating earnings (loss)		(845	)		300		(6,985	)		(508	)		(8,038	)
Gain (loss) on net assets held for sale		-			-		-			-			-
Tax expense (benefit)		(407	)		148		(1,656	)		(176	)		(2,091	)
Income (loss) from discontinued operations	$	(438	)	$	152	$	(5,329	)	$	(332	)	$	(5,947	)

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at January 1, 2016, are comprised of the following:

In Thousands	Avionics &			Sensors &		Advanced
	Controls			Systems		Materials		Total

Accounts receivable, net	$	3,799		$	-	$	2,287	$	6,086
Inventories		12,436			-		6,918		19,354
Prepaid expenses		104			-		177		281
Current Assets of Businesses Held for Sale	$	16,339		$	-	$	9,382	$	25,721

Net property, plant and equipment	$	5,413		$	-	$	10,618	$	16,031
Intangibles, net		-			-		4,268		4,268
Deferred income tax benefits		(147	)		-		777		630
Other assets		-			-		1,474		1,474
Non-Current Assets of Businesses Held for Sale	$	5,266		$	-	$	17,137	$	22,403

Accounts payable	$	1,124		$	-	$	4,598	$	5,722
Accrued liabilities		7,183			-		5,142		12,325
Current Liabilities of Businesses Held for Sale	$	8,307		$	-	$	9,740	$	18,047

Other liabilities		642			-		-		642
Non-Current Liabilities of Businesses Held for Sale	$	642		$	-	$	-	$	642

Net Assets of Businesses Held for Sale	$	12,656		$	-	$	16,779	$	29,435

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at October 2, 2015 , were comprised of the following:

In Thousands	Avionics &			Sensors &		Advanced
	Controls			Systems		Materials		Total

Accounts receivable, net	$	5,360		$	-	$	1,546	$	6,906
Inventories		14,763			-		5,841		20,604
Prepaid expenses		156			-		185		341
Current Assets of Businesses Held for Sale	$	20,279		$	-	$	7,572	$	27,851

Net property, plant and equipment	$	5,474		$	-	$	12,199	$	17,673
Intangibles, net		945			-		4,928		5,873
Deferred income tax benefits		(147	)		-		-		(147	)
Other assets		-			-		1,518		1,518
Non-Current Assets of Businesses Held for Sale	$	6,272		$	-	$	18,645	$	24,917

Accounts payable	$	1,878		$	-	$	4,837	$	6,715
Accrued liabilities		8,340			-		2,051		10,391
Current Liabilities of Businesses Held for Sale	$	10,218		$	-	$	6,888	$	17,106

Deferred income tax liabilities	$	-		$	-	$	194	$	194
Other liabilities		2,215			-		-		2,215
Non-Current Liabilities of Businesses Held for Sale	$	2,215		$	-	$	194	$	2,409

Net Assets of Businesses Held for Sale	$	14,118		$	-	$	19,135	$	33,253

Note 16 – Business Segment Information

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

In Thousands	Three Months Ended
	January 1,			December 26,
	2016			2014
				(Recast)
Sales
Avionics & Controls	$	186,245		$	206,617
Sensors & Systems		152,430			182,894
Advanced Materials		102,802			115,100
	$	441,477		$	504,611

Earnings from Continuing Operations Before Income Taxes
Avionics & Controls	$	9,413		$	37,399
Sensors & Systems		12,784			17,458
Advanced Materials		12,990			21,555
Segment Earnings		35,187			76,412

Corporate expense		(18,065	)		(23,011	)
Interest income		87			184
Interest expense		(7,216	)		(8,082	)
	$	9,993		$	45,503

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

On June 5, 2014, we changed the Company’s fiscal year end to the last Friday of September from the last Friday in October. We reported our financial results for the 11-month transition period of November 1, 2014, through October 2, 2015, on our Transition Report on Form 10-K, and thereafter we will file our annual report for the 12-month period ending the last Friday of September of each year, beginning with the 12-month period ending September 30, 2016. Prior year results have been recast on a calendar quarter basis. Refer to the Transition Report on Form 10-K for the eleven months ended October 2, 2015, for additional information regarding our fiscal year change.

Overview

We operate our businesses in three segments: Avionics & Controls, Sensors & Systems and Advanced Materials. Our segments are structured around our technical capabilities. Sales in all segments include domestic, international, defense and commercial customers.

The Avionics & Controls segment includes avionics systems, control and communication systems, and interface technologies capabilities. Avionics systems designs and develops cockpit systems integration and avionics solutions for commercial and military applications. Control and communication systems designs and manufactures technology interface systems for military and commercial aircraft and land- and sea-based military vehicles. Additionally, control and communication systems designs and manufactures military audio and data products for severe battlefield environments and communication control systems to enhance security and aural clarity in military applications. Our defense, aerospace and training display (DAT) business, which we acquired in January 2015 and will be integrated into our avionics systems and control and communication systems capabilities, develops and manufactures visualization solutions for a variety of demanding defense and commercial aerospace applications. Interface technologies manufactures and develops custom control panels, input systems for medical, industrial, military and gaming industries.

The Sensors & Systems segment includes power systems, connection technologies and advanced sensors capabilities. Power systems develops and manufactures electrical power switching and other related systems, principally for aerospace and defense customers. Connection technologies develops and manufactures highly engineered connectors for harsh environments and serves the aerospace, defense & space, power generation, rail and industrial equipment markets. 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.

Our current business and strategic plan focuses on the continued development of our products principally for aerospace and defense markets. We are concentrating our efforts to expand our capabilities in these markets, to anticipate the global needs of our customers and to 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 January 31, 2015, we acquired the DAT business from Belgium-based Barco N.V. (Barco) for €150 million net of acquired cash, or approximately $171 million in cash. A working capital adjustment of approximately $15 million was received from Barco in September 2015. We financed the acquisition primarily using international cash reserves, with the balance funded by borrowings under our existing credit facility. We incurred a $2.9 million foreign currency exchange loss in funding the acquisition at the end of the first fiscal quarter of 2015. DAT employs roughly 600 people in Belgium, France, Israel, Singapore and the U.S., and the display business is included in our Avionics & Controls segment.

In September 2014, our board of directors approved a plan to sell certain non-core business units including Eclipse Electronic Systems, Inc. (Eclipse), a manufacturer of embedded communication intercept receivers for signal intelligence applications; Wallop Defence Systems, Ltd. (Wallop), a manufacturer of flare countermeasure devices; Pacific Aerospace and Electronics Inc. (PA&E), a manufacturer of hermetically sealed electrical connectors; and a small distribution business. These business units are reported as discontinued operations for all periods presented. Based upon the estimated fair values, we incurred an estimated after-tax loss of $49.5 million in the fourth quarter of fiscal 2014 on the assets held for sale in discontinued operations. During fiscal 2015, we approved a plan to sell a small manufacturing business included in our Avionics & Controls segment, which is reported as discontinued operations in all periods presented. Loss on discontinued operations was $4.8 million and $5.9 million in the first fiscal quarter of 2016 and 2015, respectively.

On June 5, 2015, we sold Eclipse for $7.9 million. We retained ownership of the land, building and building improvements, which are being held for sale. In addition, on July 20, 2015, we sold PA&E for $22.3 million, and we sold the distribution business in the first fiscal quarter of 2016.

On June 19, 2014, our board of directors approved a share repurchase program and authorized the repurchase of up to $200 million of outstanding shares of common stock. In March 2015, our board of directors authorized an additional $200 million for repurch ase of outstanding shares of common stock under the program. Under the program, the Company is authorized to repurchase up to $400 million of the outstanding shares of common stock from time to time, depending on market conditions, share price and other f actors. Since inception, we have repurchased 2,831,350 shares under this program at an average price paid per share of $102.35, for an aggregate purchase price of $289.8 million. There were no shares repurchased in the first quarter of fiscal 2016.

In March 2014, we entered into a Consent Agreement with the U.S. Department of State’s Directorate of Defense Trade Controls Office of Defense Trade Controls Compliance (DDTC) to resolve alleged International Traffic in Arms Regulations (ITAR) civil violations. Among other things, the Consent Agreement required us to pay a $20 million penalty, of which $10 million was suspended and eligible for offset credit based upon verified expenditures for past and future remedial actions, and to continue to implement ongoing remedial measures related to ITAR compliance activities. Compliance expense associated with these measures was $3.5 million in the first fiscal quarter of 2016 and 2015. More information about the Consent Agreement is set forth in Note 10 to the Consolidated Financial Statements included in Part 1, Item 1 of this report.

On December 5, 2013, we announced the acceleration of our plans to consolidate certain facilities and create cost efficiencies through shared services in sales, general and administrative and support functions. Restructuring expenses were $11.7 million and $17.4 million in fiscal 2015 and 2014, respectively and $1.4 million and $5.5 million in the first fiscal quarter of 2016 and 2015, respectively.

For further explanation about changes in sales and gross margin in the first fiscal quarter of 2016 over the prior year period, please see the table at the end of the Overview section for a roll forward presentation of sales and gross margin.

Total sales for the first fiscal quarter of 2016 decreased by $63.1 million, or 12.5%, over the prior-year period to $441.5 million, mainly reflecting lower sales volumes across all segments due to lower demand, delayed shipments and the effect of weakening foreign currencies to the U.S. dollar. Avionics & Controls sales volume decreased by $58 million, or 28%, Sensors & Systems decreased by $18 million, or 10%, and Advanced Materials decreased by $11 million, or 10%. The decline in sales also included a $15 million decrease due to the effect of a weakening Canadian dollar, U.K. pound and euro compared with the prior-year period. Additionally, sales decreased $3 million due the impact of the settlement of forward foreign currency contracts qualifying under hedge accounting. Partially offsetting these decreases was $43 million in incremental sales from the DAT acquisition.

Consolidated gross margin was $137.7 million or 31.2% of sales in the first fiscal quarter of 2016 compared with $178.2 million, or 35.3% of sales, in the prior-year period. Gross margin in the first quarter of fiscal 2016 was mainly impacted by lower sales volume and mix, partially offset by incremental gross margin of $18 million from the DAT acquisition. The impact of the decrease in sales volume on gross margin was principally due to the decline in sales of Avionics & Controls.

Selling, general and administrative expense decreased by $3.9 million compared with the prior-year period to $94.1 million. The decrease in selling, general and administrative expense reflected the favorable effects of foreign currencies and lower segment and corporate expense. These decreases were partially offset by incremental selling, general and administrative expenses from the acquisition of DAT of $8 million and DAT integration expenses of $3 million.

Research, development and engineering spending increased by $2.0 million over the prior-year period to 5.8% of sales due to incremental research, development and engineering expenses from the acquisition of DAT, partially offset by lower spending for Avionics & Controls and Sensors & Systems research, development and engineering.

The income tax rate was a 0.3% benefit in the first fiscal quarter of 2016 compared with a 24.1% expense in the prior-year period, mainly reflecting certain discrete tax benefits and lower income from continuing income before income taxes.

Earnings from continuing operations in the first fiscal quarter of 2016 were $9.9 million, or $0.33 per diluted share, compared with $34.5 million, or $1.06 per diluted share, in the prior-year period. Loss from discontinued operations in the first fiscal quarter of 2016 was $4.8 million, or $0.16 per diluted share, compared with $5.9 million, or $0.18 per diluted share, in the prior-year period. Net income in the first fiscal quarter of 2016 was $5.1 million, or $0.17 per diluted share, compared with $28.6 million, or $0.88 per diluted share, in the prior-year period.

Cash flows from operating activities were $40.7 million in the first three months of fiscal 2016 compared with $59.6 million in the prior-year period. The decrease in cash flow from operating activities reflected lower net earnings.

Our sales, gross margin and earnings results for the three month period ended January 1, 2016, compared with the three month period ended December 26, 2014, included a number of significant items which are summarized in the tables below.

The following is a roll forward of sales and gross margin from the recast three month period ending December 26 , 2014 , to the three month period ending January 1 , 2016 :

In Thousands	Avionics &			Sensors &			Advanced
	Controls			Systems			Materials			Total
Sales:
Three month period ended December 26, 2014	$	206,617		$	182,894		$	115,100		$	504,611
Foreign Currency Gain (Loss)		(2,442	)		(11,713	)		(1,217	)		(15,372	)
Forward Contract Gain (Loss)		(2,585	)		(605	)		-			(3,190	)
Acquired DAT Business		43,125			-			-			43,125
Sales Volume		(57,930	)		(17,887	)		(11,018	)		(86,835	)
Other		(540	)		(259	)		(63	)		(862	)
Three month period ended January 1, 2016	$	186,245		$	152,430		$	102,802		$	441,477

Gross Margin:
Three month period ended December 26, 2014		78,788			62,902			36,551			178,241
Foreign Currency Gain (Loss)		101			(1,939	)		(261	)		(2,099	)
Forward Contract Gain (Loss)		(2,567	)		(605	)		-			(3,172	)
Acquired DAT Business		18,049			-			-			18,049
Volume/Mix		(29,052	)		(9,759	)		(5,278	)		(44,089	)
Manufacturing Costs		(2,757	)		(1,494	)		(3,679	)		(7,930	)
Cost Initiatives		124			1,130			484			1,738
Factory Layout Costs (Kaikaku)		(1,917	)		-			-			(1,917	)
DAT Integration		(1,102	)		-			-			(1,102	)
Three month period ended January 1, 2016	$	59,667		$	50,235		$	27,817		$	137,719

Results of Operations

For further explanation, please see the roll forward table of sales and gross margin at the end of the Overview section.

Three Month Period Ended January 1, 2016, Compared with Three Month Period Ended December 26, 2014

Total sales for the first fiscal quarter decreased by $63.1 million, or 12.5%, over the prior-year period. Sales by segment were as follows:

		Three Months Ended
	Increase (Decrease)	January 1,		December 26,
In Thousands	From Prior Year	2016		2014
				(Recast)

Avionics & Controls	(9.9)%	$	186,245	$	206,617
Sensors & Systems	(16.7)%		152,430		182,894
Advanced Materials	(10.7)%		102,802		115,100
Total Net Sales		$	441,477	$	504,611

The $20.4 million, or 9.9%, decrease in Avionics & Controls sales over the prior-year period mainly reflected lower sales volumes of avionics systems of $30 million, control and communications of $23 million, and interface technologies of $4 million. The decrease in avionics systems reflected lower demand for avionics component products. The decrease in control and communication systems mainly reflected lower sales of headset communication devices of $16 million and lower sales of cockpit control devices mainly due to higher sales of delinquent orders in the prior-year period. The decrease in interface technologies reflected lower demand for medical applications. The effect of weakening foreign currencies and settlement of forward contracts decreased sales by approximately $5 million. These decreases were partially offset by incremental sales from the DAT acquisition of $43 million.

The $30.5 million, or 16.7%, decrease in Sensors & Systems sales over the prior-year period reflected lower sales volumes of $18 million and weakening foreign currencies. The decrease in sales volume reflected lower sales of advanced sensors of $6 million, power systems of $8 million, and connection technologies of $3 million. Advanced sensors sales decrease reflected a $5 million decrease in OEM and an additional decrease in aftermarket sales. The decrease in power systems sales reflected delays in shipments due to export control requirements. The decrease in connection technologies sales reflected lower demand from defense and industrial

customers including oil and gas and nuclear. The effect of weakening foreign currencies and settlement of forward contracts decreased sales by approximately $12 million.

The $12.3 million, or 10.7%, decrease in Advanced Materials sales over the prior-year period mainly reflected lower sales volumes of engineered materials under long-term defense contracts for metal insulation applications of $11 million.

Overall, gross margin was 31.2% and 35.3% for the first fiscal quarter of 2016 and 2015, respectively. Gross profit was $137.7 million and $178.2 million for the first fiscal quarter of 2016 and 2015, respectively. Gross profit was impacted by $0.5 million and $2.2 million in restructuring expense in the first fiscal quarter of 2016 and 2015, respectively.

Avionics & Controls segment gross margin was 32.0% and 38.1% for the first fiscal quarter of 2016 and 2015, respectively. Segment gross profit was $59.7 million compared with $78.8 million in the prior-year period. The decrease in gross margin reflected the impact of lower sales volumes of $26 million, sales mix of $3 million, and an increase in other expenses of $6 million. The decrease due to sales volume mainly reflected a $15 million impact on lower sales of avionics systems and a $10 million impact on decreased sales of control and communications. These lower sales volumes resulted in a lower recovery of fixed costs. The higher other expenses included DAT integration costs of $1 million, the cost of a major factory layout event (Kaikaku) of $2 million, and other manufacturing expenses of $3 million due to inefficiencies. Additionally, gross margin was impacted by the effect of weakening foreign currencies and settlement of forward contracts of $2 million. These decreases were partially offset by incremental gross profit from the DAT acquisition of $18 million.

Sensors & Systems segment gross margin was 33.0% and 34.4% for the first fiscal quarter of 2016 and 2015, respectively. Segment gross profit was $50.2 million compared with $62.9 million in the prior-year period, primarily reflecting the impact of lower sales volumes across all platforms. Gross margin was impacted by the effects of weakening foreign currencies and settlement of forward contracts of $3 million.

Advanced Materials segment gross margin was 27.1% and 31.8% for the first fiscal quarter of 2016 and 2015, respectively. Segment gross profit was $27.8 million compared with $36.6 million in the prior-year period. The decrease in gross profit reflected the impact of lower sales volumes of $5 million and higher manufacturing costs of $4 million, mainly due to engineered materials manufacturing inefficiencies.

Selling, general and administrative expenses (which include corporate expenses) totaled $94.1 million, or 21.3% of sales, and $98.0 million, or 19.4% of sales, for the first fiscal quarter of 2016 and 2015, respectively. The decrease in selling, general and administrative expenses reflected the favorable effect of translating selling, general and administrative expenses denominated in non-U.S. functional currencies to the U.S. dollar and foreign currency gains on monetary assets and forward contracts of $6 million. Segment selling, general and administrative expense decreased $4 million, mainly in Avionics & Controls and Sensors & Systems. Corporate expenses decreased by $5 million principally due to a $3 million pension settlement in the prior-year quarter, decreased acquisition expenses of $2 million, and lower incentive compensation expense. These decreases were partially offset by incremental selling, general and administrative expenses from the DAT acquisition of $8 million and $3 million in DAT integration expense.

Research, development and engineering spending was $25.6 million, or 5.8% of sales, for the first fiscal quarter of 2016 compared with $23.5 million, or 4.7% of sales, for the first fiscal quarter of 2015. The increase in research, development and engineering spending principally reflected incremental research, development and engineering from the DAT acquisition of $5 million, partially offset by lower spending on avionics systems and power systems development.

Total restructuring expenses were $1.4 million, or 0.3% of sales, in the first fiscal quarter of 2016, of which $0.9 million is reported separately as restructuring expenses and $0.5 million is included in cost of goods sold. Total restructuring expenses were $5.5 million, or 1.1% of sales, in the first fiscal quarter of 2015, of which $3.3 million is reported separately as restructuring expenses and $2.2 million is included in cost of goods sold.

Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the first fiscal quarter of 2016 totaled $35.2 million, or 8.0% of sales, compared with $76.4 million, or 15.1% of sales, for the first fiscal quarter in 2015.

Avionics & Controls segment earnings were $9.4 million, or 5.1% of sales, in the first fiscal quarter of 2016 and $37.4 million, or 18.1% of sales, in the first fiscal quarter of 2015, mainly reflecting a $19 million decrease in gross margin and increased selling, general and administrative expenses and research, development and engineering expenses of $9 million. This increase reflects incremental selling, general and administrative expenses and research, development and engineering from the DAT acquisition of $14 million and $3 million in DAT integration expense. These increases were partially offset by the favorable impact of translating selling, general and administrative expenses and research, development and engineering expenses denominated in non-U.S. functional currencies to the U.S. dollar, foreign currency gains on monetary assets and embedded derivatives of $2 million, and lower selling, general and administrative expenses.

Sens ors & Systems segment earnings were $12.8 million, or 8.4% of sales, for the first fiscal quarter of 2016 compared with $17.5 million, or 9.5% of sales, for the first fiscal quarter of 2015, mainly reflecting a $13 million decrease in gross margin, partial ly offset by lower selling, general and administrative expenses mainly due to translating selling, general and administrative expenses denominated in non-U.S. functional currencies to the U.S. dollar and foreign currency gains on monetary assets of $5 mill ion. In addition, restructuring expenses were $0.5 million and $2.9 million in the first fiscal quarter of 2016 and 2015, respectively.

Advanced Materials segment earnings were $13.0 million, or 12.6% of sales, for the first fiscal quarter of 2016 compared with $21.6 million, or 18.7% of sales, for the first fiscal quarter of 2015, primarily reflecting the impact of lower sales volumes of engineered materials and higher manufacturing costs. Restructuring expenses were $0.3 million and $1.4 million in the first fiscal quarter of 2016 and 2015, respectively.

Interest expense for the first fiscal quarter of 2016 was $7.2 million compared with $8.1 million for the first fiscal quarter of 2015, reflecting the refinancing of our credit facility with a lower interest rate, partially offset by the impact of higher borrowings compared to the prior-year period.

The income tax rate was a 0.3% benefit compared with a 24.1% expense in the first fiscal quarter of 2016 and 2015, respectively. In the first fiscal quarter of 2016, we recognized $1.9 million of discrete tax benefits principally related to the three items. The first was approximately $1.3 million reduction of net deferred income tax liabilities as a result of the enactment of tax laws reducing the U.K. statutory income tax rate. The second was approximately $1.3 million of discrete tax benefit due to the retroactive extension of the U.S. federal research and experimentation credits. The third was a $0.7 million tax expense due to income tax return to provision adjustments. In the first fiscal quarter of 2015, we recognized $0.7 million of discrete tax benefits due to income tax return to provision adjustments. The income tax rate differed from the statutory rate in the first fiscal quarters of 2016 and 2015, 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.

New orders for the first fiscal quarter of 2016 were $496.3 million compared with $466.2 million in the prior-year period, reflecting an increase in Avionics & Controls orders, partially offset by a decline in orders for Sensors & Systems and Advanced Materials orders. Backlog was $1.3 billion at January 1, 2016, $1.2 billion at December 26, 2014, and $1.2 billion at October 2, 2015.

Liquidity and Capital Resources

Cash and cash equivalents at January 1, 2016, totaled $200.9 million, an increase of $9.5 million from October 2, 2015. Net working capital decreased to $699.8 million at January 1, 2016, from $718.2 million at October 2, 2015. Sources and uses of cash flows from operating activities principally consisted of cash received from the sale of products and cash payments for material, labor and operating expenses. Cash flows provided by operating activities were $40.7 million and $59.6 million in the first three months of fiscal 2016 and 2015, respectively. The decrease in cash flow from operating activities reflected lower net earnings.

Cash flows used by investing activities were $14.9 million and $15.1 million in the first three months of fiscal 2016 and 2015, respectively, and were for capital expenditures.

Cash flows used by financing activities were $11.2 million in the first three months of fiscal 2016 and mainly reflected $10.0 million repayment of long-term credit facilities and $3.2 million repayment of long-term debt, partially offset by proceeds of $1.5 million from the issuance of common stock under our employee stock plans. Cash flows used by financing activities were $22.2 million in the first three months of fiscal 2015 and mainly reflected $48.6 million in shares repurchased, $10.0 million repayment of long-term credit facilities, $4.0 million repayment of long-term debt, partially offset by $35.0 million in proceeds from our credit facilities and $4.5 million from the issuance of common stock under our employee stock plans.

Capital expenditures, consisting of machinery, equipment and computers, are anticipated to be approximately $70 million during fiscal 2016, compared with $49.3 million expended in eleven-month fiscal 2015 (excluding acquisitions).

Total debt at January 1, 2016, was $848.3 million and consisted of $246.0 million of the U.S. Term Loan, due 2020, $353.0 million (€330.0 million) of the 2023 Notes, $150.0 million in borrowings under our secured credit facility, $41.5 million in government refundable advances, $57.6 million under capital lease obligations, and $0.2 million under our various foreign currency debt agreements and other debt agreements.

We believe cash on hand and funds generated from operations and borrowing capacity available under our debt facilities are sufficient to fund 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 Transition Report on Form 10-K for the fiscal year ended October 2, 2015, 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in our exposure to market risk during the first three months of fiscal 2016. A discussion of our exposure to market risk is provided in the Company’s Transition Report on Form 10-K for the fiscal year ended October 2, 2015.

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 January 1, 2016. Based upon that evaluation, they concluded as of January 1, 2016, 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 January 1, 2016, 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 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

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.

See Note 10 to the Consolidated Financial Statements included in Part 1, Item 1 of this report for information regarding legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)	Not applicable.

(b)	Not applicable.

(c)	Not applicable.

Item 6. Exhibits

Exhibit
Number		Exhibit Index

10.1	*	Esterline Technologies Corporation Fiscal Year 2016 Annual Incentive Compensation Plan.

10.2	*	Esterline Technologies Corporation Long-Term Incentive Performance Share Plan for fiscal years 2016-2018.

10.3	*	Offer Letter from Esterline Technologies Corporation to Paul Benson, dated November 6, 2014.

11		Schedule setting forth computation of basic and diluted earnings per share for the three month periods ended January 1, 2016, and December 26, 2014.

31.1		Certification of Chief Executive Officer.

31.2		Certification of Chief Financial Officer.

32.1		Certification (of Curtis C. Reusser) 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.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

* Indicates management contract or compensatory plan or arrangement.

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: February 5, 2016	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer, and
		Corporate Development
		(Principal Financial Officer)

Exhibit 10.1

Esterline Technologies Corporation

FY16 Annual Incentive Compensation Plan

for Corporate Office Participants

Purpose. Esterline Technologies Corporation (“Esterline” or the “Company”) has established this Annual Incentive Compensation Plan (“Corporate IC Plan” or the “Plan”) to reward its officers and other Corporate staff for effective work that leads and supports our operations in achieving expected and superior results for shareholders this fiscal year.

Corporate IC Terms. The Company established this Plan pursuant to its 2013 Equity Incentive Plan (“2013 Plan”). The terms of the appointment letter, this Plan, and the 2013 Plan together constitute the “Corporate IC Terms.” Notwithstanding any other provision of the Plan to the contrary, the Plan shall be administered and its provisions interpreted so that payments made to individuals who are “covered employees” qualify as “performance-based compensation,” in each case, within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code”).

3.	Participation. All Company officers and other employees who hold regular full-time or part-time job assignments, and who report to one of the Company’s corporate offices are eligible to participate in this Plan (“Participants”).

Appointments . Eligible employees become Participants upon receipt of an appointment letter for a single fiscal year. Appointment letters will establish a target award for each Participant, expressed as a percentage of the Participant’s base salary in effect on the last day of the fiscal year (“Target Award”). If appointed after the first fiscal quarter, Participants will receive a pro-rata award for the portion of the fiscal year following their appointment, calculated as provided in section 6 below. Appointment as a Participant in one or more fiscal years does not entitle employees to subsequent appointments.

Board Approval. Plan appointments for Company officers and any other senior manager who reports directly to the CEO require approval by the Company’s Board of Directors (“Board”).

4.	Performance Goals. The Plan has the following performance goals for the fiscal year (“Plan Goals”):

EBIT. Earnings before interest and taxes (“EBIT”), weighted at 50%;

ROS. Return on sales (“ROS”), weighted at 30%; and

Strategic Objectives. The Strategic Objectives together are weighted at a total of 20%.

The numerical values for the EBIT and ROS goals, and the details and metrics for the Strategic Objectives will be determined by the Board and stated in Participant appointment letters.

Notwithstanding anything to the contrary contained herein, for Participants who are “covered employees” within the meaning of Section 162(m) of the Code, payment of awards under the Plan is expressly conditioned on achievement by the Company of a specified level of earnings from continuing operations before income taxes, as reported in the Company’s consolidated financial statements, as determined by the Committee within the first ninety (90) days of the applicable fiscal year (“Umbrella Goal”), in which case the maximum amount available for payout under a Plan award to each such Participant will be as determined the Committee.

Plan Awards. Participants will earn 100% of their Target Award for achievement of Plan Goals. Participants’ actual awards will vary from their Target Awards if performance is above or below Plan Goals. Participants will receive no award if results fall short of certain minimum threshold levels. If performance results reach such minimum thresholds, Participants will earn 25% of their Target Award. Participants will receive up to a maximum

FY16 Corporate IC Plan

Revised January 2016

Page 1

of 200% of their Target Award i f performance exceeds Plan Goals and reaches certain maximum performance levels. Between the Plan’s minimum threshold and maximum performance levels, Participants’ awards will increase or decrease from their Target Award amount in proportion to incremental achievement of Plan Goals.

6.	Calculations.

Performance Goals. Esterline will calculate EBIT as total profit from continuing operations before interest and tax expense, and excluding non-recurring and/or unusual items. ROS will be calculated as total EBIT from continuing operations, divided by total sales from continuing operations. Calculations of both EBIT and ROS will be adjusted to remove the effects of acquisitions, divestitures, or corporate-designated integration projects, if any. Achievement of Strategic Objectives will be measured as stated in Participant appointment letters.

Pro-rata Awards. Pro-rata award calculations will be based on performance results for the full fiscal year, with actual awards pro-rated for the time during which an employee participated in the Plan. Participants who are appointed any time during the first fiscal quarter will be eligible to receive an award for the full fiscal year. For those appointed after the first fiscal quarter, participation will be measured in full-month increments, rounded up for months in which a Participant was actively employed under the Plan for 15 days or more, and rounded down for active employment under the Plan of 14 days or less. The pro-rata factor will be a fraction, the numerator of which will be the number of months of participation, and the denominator of which will be 12.

Adjustments. The Board may exercise its discretion to ensure Participants receive an equitable award by adjusting: (a) Plan Goals; (b) Plan calculations to include or exclude non-recurring and/or unusual items, in whole or in part; (c) an individual Participant’s actual award; or (d) the factors used to calculate Plan awards. Such adjustments may be made if unanticipated and material events occur, or unusual business conditions develop after the beginning of a fiscal year. Notwithstanding the foregoing, the Board may not adjust the Umbrella Goal in such a manner that would increase the amount of compensation otherwise payable to a “covered employee” within the meaning of Section 162(m) of the Code. The Committee will seek and consider advice from an independent executive compensation expert and from the General Counsel before deciding whether to recommend an adjustment under this section for Board action.

Payment. Subject to other Corporate IC Terms, the Company will pay Plan awards within 60 days following fiscal year-end, if and only if: Company auditors have issued an opinion consistent with the calculations; the Committee and Board have approved the awards. If these conditions delay award payments beyond the usual 60 days, such awards must be paid no later than 75 days following fiscal year end.

Continuous Employment. To be eligible for payment, Participants must be actively employed by the Company through the end of the fiscal year, and through the date on which Plan awards are paid, except as might otherwise be provided in Corporate IC Terms. Appointments will end automatically for Participants who do not satisfy these conditions and no Plan awards will be earned or due. The Company considers approved leaves of absence to be active employment, provided they do not exceed the amount of leave to which a Participant is entitled under applicable Company policies, and under disability, family and medical leave laws. For approved leaves that exceed such limits, payment of Plan awards, if any, is subject to CEO, Committee, and Board discretion, as applicable.

10.	Employment Status Changes. Except as otherwise determined by the CEO, Committee, or Board, consistent with the levels of authority outlined in section 3.a. above; or as might be provided in other Corporate IC Terms, the following provisions will apply to employment status changes:

Transfers . If during the fiscal year a Participant transfers employment to a Company Platform or business unit, his/her Plan award will be pro-rated proportionately, as provided section in 6 above.

Suspension, Resignation, or Discharge. All Participant rights under this Plan will be suspended during any period of suspension from employment. A Participant’s appointment will automatically end when s/he leaves employment with the Company for any reason other than Retirement, Disability, or death. The Committee may

FY16 Corporate IC Plan

Revised January 2016

Page 2

immediately cancel a Participant’s appointment and recover any awards made if it discover s facts that, if known earlier, would have constituted grounds for termination of employment for cause .

Retirement, Disability, or Death. If a Participant leaves employment before the Plan payment date due to Retirement, Disability, or death, the Company will pay a pro-rata amount, as defined in Section 6 above. Such payments will be made in the normal course, as provided in Section 8 above.

11.

Change of Control. In the event of a Change in Control as defined in the 2013 Plan, this Corporate IC Plan will automatically terminate and Participants will receive payment within 60 days in an amount equal to the Participant’s target award, pro-rated as defined in section 6 above. Provided, however, that this Section does not apply to the Company’s executive and non-executive officers, or to any other Participant who is party to a Company Termination Protection Agreement.

12.

Employment Terms. Participants’ terms of employment remain unchanged by appointment to this Plan, except as specifically provided in the Corporate IC Terms. Nothing in the appointment process or in the Corporate IC Terms guarantees continued employment. Participants remain subject to usual Company policies and practices, and to any other employment agreements, service terms, appointments, or mandates to which they are otherwise subject.

13.

Plan Administration & Interpretation. The Committee administers this Plan. As such it shall consider and decide any issues arising under the Plan, and shall oversee and approve actual award calculations and payments. The Committee’s decisions concerning Plan administration and interpretation are final and binding, except as they might relate to the CEO or to other executive officers, in which case the Board has final decision-making authority. Definitions in the 2013 Plan apply to terms used in this Plan unless otherwise defined here. All references to the “Company” include a “Related Company,” as that term is defined in the 2013 Plan.

14.	Modification and Termination. The Committee or the Board, in its sole discretion, may modify or terminate this Plan at any time.

15.

Section 409A. The Company intends that this Plan and the payments provided hereunder comply with the requirements of Section 409A of the Code and the Treasury Regulations thereunder. Notwithstanding any provision in this Plan, the 2013 Plan or any other agreement to the contrary: (a) this Plan shall be interpreted, operated, and administered in a manner consistent with such intentions; and (b) in the event that the payment of an award is subject to acceleration upon a change in control or similar event with respect to the Company, such acceleration shall only occur to the extent that such change in control or similar event constitutes a change in control event with respect to the Company within the meaning of Section 409A of the Code and the Treasury Regulations thereunder.

16.	Reimbursement. Plan participation and awards are subject to the Board’s Policy on Reimbursement of Incentive Awards, as it might change from time to time.

Approved by the Committee & Board, and issued on their behalf,

/s/ Curtis C. Reusser

Curtis C. Reusser

Chairman, President & CEO

January 22, 2016

FY16 Corporate IC Plan

Revised January 2016

Page 3

Exhibit 10.2

Esterline Technologies Corporation

LONG-TERM INCENTIVE PERFORMANCE SHARE PLAN

Purpose. Esterline Technologies Corporation (“Esterline” or the “Company”) has established this Long-Term Incentive Performance Share Plan (“PSP” “PSP Plan”, or “the Plan”) to reward its officers and selected senior managers for effective leadership that achieves expected and superior results for shareholders over the long term.

PSP Terms. The Company established this PSP pursuant to its 2013 Equity Incentive Plan, as amended (“2013 Plan”). The terms of the PSP Appointment, the Award Table, this PSP Plan, and the 2013 Plan together constitute the “PSP Terms.” Notwithstanding any other provision of the Plan to the contrary, the Plan shall be administered and its provisions interpreted so that payments made to Participants who are “covered employees” qualify as “performance-based compensation,” in each case, within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code”).

3.	Participation.

Selection. The Company’s officers and other senior managers employed by the Company’s corporate office or by a Company subsidiary are eligible to participate in this PSP. Appointments require recommendation by an executive officer and approval by Esterline’s Board of Directors Compensation Committee (hereafter “Board” and “Committee”). In addition, Board approval is also required for appointments of the Chief Executive Officer (“CEO”) and of all other executive officers. The CEO, acting independently, also has authority to make PSP appointments, provided such appointments comply with the Company’s Equity Grant Guidelines, and do not appoint employees who report directly to the CEO. Employees who are appointed to the PSP are hereafter referred to as “Participant(s).”

Appointment. Each Participant will receive a written appointment in the form attached (“PSP Appointment”). Participants are usually appointed to the PSP in the first fiscal quarter of a performance period. Nevertheless, Participants may be appointed at any time. Participants appointed after the first fiscal quarter will receive a pro-rata award for the portion of the performance period following their appointment, calculated as provided in Section 7 below. Appointment as a Participant in one or more PSP performance periods does not entitle employees to appointment in subsequent periods.

Performance Periods. PSP performance periods will be three years in duration, beginning on the first day of a Company fiscal year and ending on the last day of the third consecutive fiscal year thereafter. A new three-year performance period will start with each new fiscal year, such that there will be three overlapping PSP performance periods open at any given time, as illustrated below. The Committee may establish shorter performance periods as it determines are reasonable.

Performance Share Plan

Fiscal Years 2016 – 2018

Page 1

Performance Goals. The PSP has two performance goals : (a) average return on invested capital (“ROIC”); and (b) earnings per share (“EPS”) (t ogether referred to as “ PSP Goals” ) . At the beginning of each performance period, the Board will : (c ) establish minimum threshold, target , and maximum PSP Goals ; (d ) determine their respective weighting ; and (e) correlate performance achievement levels to potential award levels for Participants . Such decisions will be recorded and communicated to Participants in a n Award Table , in the form attached .

Notwithstanding anything to the contrary contained herein, for Participants who are “covered employees” within the meaning of Section 162(m) of the Code, payment of awards under the Plan is expressly conditioned on achievement by the Company of a specified level of [net earnings from continuing operations attributable to Esterline, as reported in the Company’s consolidated financial statements], as determined by the Committee within the first ninety (90) days of the applicable performance period (“Umbrella Goal”), in which case the maximum number of shares of Company Stock available for issuance under a PSP award to each such Participant will be as determined by the Committee.

Plan Awards. The Board, Committee, or CEO will establish a target award for each Participant in the form of Performance Share Units (“Target Award”), the value of which will be based on a percentage of the Participant’s base pay at the time of appointment. The value of Participants’ actual awards will vary from their Target Award if the Company performs above or below target PSP Goals. Participants will receive no award for performance less than established minimum threshold performance as shown on the Award Table. Actual awards for superior performance are subject to a maximum of 300% of a Participant’s Target Award.

7.	Calculations. The Company will use the following formulas to determine Company performance on PSP Goals, and to calculate actual awards:

Average Return

on Invested Capital (ROIC) =

Net Income (before non-recurring and/or unusual items) + Tax-Adjusted Interest Expense

Short-term Debt + Long Term Debt – Cash + Shareholders’ Equity

averaged over the applicable performance period, and expressed as a percentage. The Company will use a long-term planning “most likely” tax rate of 25% in such ROIC calculations.

Earnings Per Share (EPS) =

Fully-diluted earnings per share (net income before non-recurring and/or unusual items, divided by the monthly average of total common shares and share equivalents outstanding) (“EPS”), measured as the EPS achieved in the final fiscal year of the performance period.

Pro-Rata Awards:

Pro-rata award calculations will be based on results for the full performance period, pro-rated for the time during which an employee participated in the PSP Plan. Participation will be measured in full-month increments, rounded up for months in which a Participant was actively employed under the Plan for 15 days or more, and rounded down for active employment under the Plan of 14 days or less. The pro-rata factor will be a fraction, the numerator of which will be the number of months of participation, and the denominator of which will be 36.

Adjustments. The Board may exercise its discretion to ensure Participants receive an equitable award, by adjusting: (a) PSP Goals; (b) Plan calculations to include or exclude non-recurring and/or unusual items, in whole or in part; or (c) the factors used to calculate Plan awards. Such adjustments may be made if unanticipated events occur, or unusual business conditions develop after the beginning of a performance period that materially alter earnings or returns. Notwithstanding the foregoing, the Board may not adjust the Umbrella Goal in such a manner that would increase the amount of compensation otherwise payable to a “covered employee” within the meaning of Section 162(m) of the Code. The Committee will seek and consider advice from an independent executive compensation expert and from the Company’s General Counsel before deciding whether to recommend an adjustment under this Section for Board action.

Performance Share Plan

Fiscal Years 2016 – 2018

Page 2

Settlement of Awards. Each Performance Share Unit earned will be settled in one share of fully-vested Company Stock, except as cash settlements are provided in Sections 11 and 15 below. Subject to other PSP Terms, the Company will settle PSP awards in January of the calendar year immediately following the conclusion of the performance period, if and only if: Company auditors have issued an opinion consistent with the calculations; and the Committee and Board have approved the awards. If these conditions delay settlement of awards beyond January, such awards must be settled on the earlier of (i) the date that is 30 days following the satisfaction of these conditions or (ii) December 31 of the calendar year immediately following the conclusion of the performance period.

10.

Continuous Employment. To be eligible for payment, Participants must be actively employed by the Company through the end of the performance period and through the date on which the Company settles PSP awards, except as might otherwise be provided in PSP Terms. Subject to other PSP Terms, appointments will end automatically for Participants who do not satisfy these conditions and no PSP awards will be earned or due. The Company considers approved leaves of absence to be active employment, provided they do not exceed the amount of leave to which a Participant might be entitled under applicable Company policies, and under disability, family and medical leave laws. For approved leaves that exceed such limits, payment of PSP awards, if any, is subject to Committee discretion.

11.	Employment Status Changes. Except as otherwise determined by the Board, Committee, or CEO (as appropriate), the following provisions will apply to employment status changes:

Transfers. If during a performance period a Participant transfers within the Company to a position that is not eligible for PSP participation, his/her Plan award will be pro-rated for the time in which s/he was a Participant, as provided in Section 7 above.

Suspension, Resignation, or Discharge. A Participant’s appointment will automatically end when s/he leaves employment with the Company for any reason, except as otherwise provided in PSP Terms. All Participant rights under this Plan will be suspended during any period of suspension from employment. The Board may immediately cancel a Participant’s appointment and recover any awards made if it discovers facts that, if known earlier, would have constituted grounds for termination of employment for cause.

Retirement, Disability, or Death. If a Participant leaves employment with the Company due to Retirement, Disability, or death, the Company will settle the Participant’s award for the full performance period in the normal course based on actual achievement of PSP Goals, provided the Participant completed at least one year of continuous, active employment during the performance period. If a Participant does not complete this minimum employment period, his/her appointment will automatically end, and no PSP award will be earned or due.

Subsidiary Divestiture. In the event a Participant is terminated from employment due to a sale, transfer, assignment, or other form of transaction by which Esterline conveys a controlling interest in the shares or in substantially all the assets of a subsidiary that employs the Participant, the Company will settle PSP awards in cash, within 60 days following completion of the transaction, and on a pro rata basis, calculated as follows:

Cash settlement value = (# of Performance Share Units at Target) (closing price of Company Stock on the day the transaction is complete)(a pro rata factor, as defined in Section 7 above).

12.

Employment Terms. Participants’ terms of employment remain unchanged by appointment to this PSP, except as specifically provided in the PSP Terms. Nothing in the appointment process or in the PSP Terms guarantees continued employment. Participants remain subject to usual, applicable Company and business unit policies and practices, and to any other employment agreements, service terms, appointments, or mandates to which they are otherwise subject.

13.	No Rights as Stockholder. Participants will not have voting or other rights as a stockholder of the Company with respect to a PSP award until the award is settled and the Participant receives shares of Company Stock.

14.

Plan Administration & Interpretation. The Committee administers this Plan. As such, it shall consider and decide any issues arising under the Plan, and shall oversee and approve actual award calculations and settlement. The Committee’s decisions concerning PSP administration and interpretation are final and binding, except as they

Performance Share Plan

Fiscal Years 2016 – 2018

Page 3

might relate to the CEO and other executive officers , in which case the Board has final decision-making authority . Definitions in the 2013 Plan apply to terms used in this PSP unless otherwise defined here. All references to the “Company” include a “Related Company , ” as that term is defined in the 2013 Plan.

15.	Plan Modification and Termination. The Board may modify or terminate this PSP at any time in its sole discretion.

16.

Section 409A. The Company intends that this PSP and the payments provided hereunder comply with the requirements of Section 409A of the Code and the Treasury Regulations thereunder. Notwithstanding any provision in this PSP, the 2013 Plan or any other agreement to the contrary: (a) this PSP shall be interpreted, operated, and administered in a manner consistent with such intentions; and (b) in the event that the settlement of any PSP award is subject to acceleration upon a change in control or similar event with respect to the Company, such acceleration shall only occur to the extent that such change in control or similar event constitutes a change in control event with respect to the Company within the meaning of Section 409A of the Code and the Treasury Regulations thereunder.

17.	Reimbursement. PSP participation and awards are subject to the Board’s Policy on Reimbursement of Incentive Awards, as it might change from time to time.

Approved by the Committee & Board, and issued on their behalf,

Curtis C. Reusser

Chairman, President & CEO

November 18, 2015

Attachment:

PSP Appointment

Performance Share Plan

Fiscal Years 2016 – 2018

Page 4

Exhibit 10.3

November 6, 2014

Paul Benson

105 Finchley Lane

Folsom, CA 95630

Dear Paul,

It is my pleasure to confirm our offer to you for the position of Senior Director, Human Resources effective November 19, 2014. This will be an interim position until Esterline’s Board of Directors has an opportunity to meet in December to consider your nomination as a corporate officer with the title of Vice President Human Resources. We expect their approval will be forthcoming. For this interim period you will report directly to me. Once you have been formally elected to the Vice President Human Resources position, you will report to our CEO, Curtis Reusser.

Your compensation and terms of employment will be comprised of several components, as follows:

Base Salary – Your annual base salary rate will be $265,000.00 effective on your first day of work.

Annual Incentive Compensation – We will recommend to the Board that you participate in Esterline’s Annual Incentive Compensation Plan for fiscal year 2015 (“AIC Plan”). Your target award will be 40% of your base salary, consistent with competitive market benchmarks. The actual award will vary, of course, depending on the Company’s 2015 financial performance. The AIC Plan’s performance goals will be achievement of (1) budgeted earnings (EBIT); (2) budgeted return-on-sales; and (3) selected strategic objectives. In December the Board will approve FY15 executive incentive plans in final form and we will provide you a copy then.

Your participation in the AIC Plan is subject to its usual terms including a requirement that you continue employment through the date on which AIC Plan payments are made. The AIC Plan is re-evaluated each year, such that the performance goals, formula, total funding, and your target award could vary from year to year.

Long-Term Incentive Compensation – We will also recommend to the Board that you be appointed to Esterline’s Long Term Incentive Program with a total target value of $132,500 (0.5 times your starting annual base salary). Currently, the total target value is allocated among Esterline’s three, long-term incentive compensation vehicles, as follows:

Paul Benson

November 6, 2014

Page 2



LTI Program	Allocation	Target Value
1.LTI Performance Plan	40%	$53,000
2.Option Grant	35%	$46,375
3.Restricted Stock Units (RSU’s)	25%	$33,125

LTI Performance Plan – The FY15 LTI Performance Plan design will also be determined by the Board in December. We expect the performance goals will be achievement of our 3-year strategic plan targets for: (1) earnings per share; and (2) return-on-investment. Actual LTI Plan awards will be denominated and paid in shares of company stock.

As a new participant, your initial appointments will be pro-rated and phased-in with one-, two-, and three-year cycles so you will have an opportunity to earn an LTIP award at the end of fiscal years 2015, 2016, and 2017, depending on the corporation’s performance, as follows:


LTI Plan Cycle	Pro-Rated Target Value	Factor
FY13-FY15	$13,118	1/3 ^rd of full target
FY14-FY16	$26,513	2/3 ^rd ^s of full target
FY15-FY17	$39,750	Full target

As with the Annual IC Plan, LTI Plan goals and plan design may change in the future at the discretion of Esterline’s Board of Directors.

Option Grant – Our option grants vest ratably over a four-year period on the anniversary dates of the original grant.

Restricted Stock Units (RSU) – Our RSU grants vest 100% on the third anniversary of the grant (“3-year cliff vesting”).

Special, New Hire Equity Grants – Effective with your election as a corporate officer, you will receive two special equity grants. One is a stock option grant of 5,500 shares priced at the closing price that day as reported in the Wall Street Journal on the following day. The other is a grant of 1,800 Restricted Stock Units.

Retirement and Other Fringe Benefits – You will be eligible to participate in the Esterline Voluntary Savings Plan (401(k)) and in the Esterline Retirement Plan (pension). In the 401(k) plan, Esterline matches 50% of the first 6% of employee contributions, subject to certain IRS limits. The pension plan is a cash balance formula with age-based annual credits + annual interest. Annual credits increase with age from 2% for employees under age 30 to 6% for employees age 60+.

Effective with your election as a corporate officer, you will also be eligible to participate in two types of Esterline Supplemental Executive Retirement Programs (SERPs). The “defined benefit” SERP corresponds to the pension plan and allows executives to earn pension benefits on income that exceeds IRS limits that apply to the underlying tax-qualified plan. The other “defined contribution” SERP corresponds to the 401(k) plan and similarly allows continuation of employee contributions and company matching on compensation that exceeds IRS limits. If you have any questions or require further clarification on pension benefits, we would be happy to arrange an information session with our benefits advisors.

Paul Benson

November 6, 2014

Page 3

You will earn paid vacation at the rate of four weeks per year. In addition, we will award you an additional five days of vacation to start that will be available for use immediately. Health, retirement, and other fringe benefits will be available to you in accordance with Esterline Bellevue office’s usual benefit program, which changes from time to time. See the enclosed summary of current benefits for further information.

Because our health benefits plan requires an initial waiting period, we will reimburse you for any COBRA costs you might incur before you become eligible for Esterline health care benefits. Please bring us a copy of your COBRA payment to verify this expense.

Relocation – You have agreed to relocate from Folsom, California to the Bellevue/Seattle, Washington area. As such, you will be eligible for Esterline’s relocation benefits that are administered by an outside vendor, Cartus Corporation. Standard, comprehensive U.S. relocation benefits include company purchase of your home if it does not sell within 90 days

When you are ready, and before you take any steps to list your house or make other moving arrangements, please contact Robin King in our office who can introduce you to Cartus and help you get all the detailed information you will need.

Car Allowance – Effective with your election as a corporate officer, you will be eligible for a car allowance under Esterline’s Vehicle Allowance Policy. The allowance is intended to cover usual purchase, operating, maintenance, and insurance costs for cars in your new residential zip code. The allowance will be approximately $800/month before taxes.

Other Terms – Also effective with your election as a corporate officer, Esterline will also provide the following forms of compensation, briefly described here:

Change in control agreement – at the standard executive level of 3 years’ average total cash compensation

Financial advisory services – will be reimbursed up to $8,000 per year.

Requirements and Administrative Matters – This offer is contingent upon the following:

Satisfactorily completion of a pre-employment physical examination and drug screen

Passing a background check

This physical examination is an annual requirement for all corporate executives. Please schedule an appointment at your earliest convenience and have your doctor return the form to Robin King. The Executive Physical Examination form and the Chain of Custody form have been mailed to your home address.

With respect to the background check, you will receive an email from our vendor, HireRight, within one to two business days of offer acceptance asking for some information and requiring an electronic signature.

These final conditions must be complete before you can begin work. In addition, please read, sign, and return the following to Robin:

A signed copy of this letter

Confidential Information & Inventions Assignment Agreement

Summary of Outside Business Interests

Paul Benson

November 6, 2014

Page 4

Except as specifically provided in this letter, other aspects of your employment will be the same as those that a pply to other corporate staff. We are all employed at-will, and the officers serve at the pleasure of the Board for one-year terms, subject to Company by-laws and Board action.

Paul, you have earned the confidence and strong support of the entire management staff here. We look forward to your success leading the Human Resources function at Esterline Technologies, and to your contributions to the corporation overall in this key position. Again, this offer is for an interim position. We expect your election as an Esterline corporate officer to be forthcoming at the December Board of Directors meeting.

To accept this offer, please sign the enclosed copy of this letter and return it to me. Please also read, complete, and return the other forms enclosed here.

If you have any questions at all, please contact me. I look forward to working with you.

Congratulations and best regards,

/s/ TOM HEINE

Tom Heine

Vice President, Human Resources

I accept this offer as outlined above.

/s/ PAUL BENSON 11/10/14

Signature Date

Attachments:

Copy of letter, for signature

Confidential Information & Inventions Assignment Agreement

Summary of Outside Business Interests

EXHIBIT 11

ESTERLINE TECHNOLOGIES CORPORATION

Computation of Basic and Diluted Earnings Per Common Share

For the Three Month Periods Ended January 1, 2016 and December 26, 2014

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	January 1,			December 26,
	2016			2014
				(Recast)

Net Sales	$	441,477		$	504,611
Gross Margin		137,719			178,241

Net Earnings from Continuing Operations Attributable to Esterline, Net of Tax		9,864			34,546
Loss from Discontinued Operations Attributable to Esterline, Net of Tax		(4,780	)		(5,947	)
Net Earnings Attributable to Esterline	$	5,084		$	28,599

Basic

Weighted Average Number of Shares Outstanding		29,582			31,790

Earnings (Loss) Per Share Attributable to Esterline - Basic:
Continuing Operations	$	0.33		$	1.09
Discontinued Operations		(0.16	)		(0.19	)
Earnings (Loss) Per Share Attributable to Esterline - Basic	$	0.17		$	0.90

Diluted

Weighted Average Number of Shares Outstanding		29,582			31,790
Net Shares Assumed to be Issued for Stock Options and RSUs		357			574
Weighted Average Number of Shares and Equivalent Shares Outstanding - Diluted		29,939			32,364

Earnings (Loss) Per Share Attributable to Esterline - Diluted:
Continuing Operations	$	0.33		$	1.06
Discontinued Operations		(0.16	)		(0.18	)
Earnings (Loss) Per Share Attributable to Esterline - Diluted	$	0.17		$	0.88

EXHIBIT 31.1

CERTIFICATIONS

I, Curtis C. Reusser, 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:

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;

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;

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

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 the registrant’s board of directors (or persons performing the equivalent function):

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

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: February 5, 2016	By:	/s/ Curtis C. Reusser
		Curtis C. Reusser
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

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;

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: February 5, 2016	By:	/s/ Robert D. George
		Robert D. George
		Chief Financial Officer, Vice President, and
		Corporate Development (Principal Financial Officer)

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 January 1, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “ Form 10-Q ”), I, Curtis C. Reusser, 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: February 5, 2016	By:	/s/ Curtis C. Reusser
		Curtis C. Reusser
		Chairman, President and Chief Executive Officer

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 January 1, 2016, 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: February 5, 2016

By:

/s/ Robert D. George

Robert D. George

Chief Financial Officer, Vice President, and

Corporate Development