UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FORM 10-K

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

For the fiscal year ended October 25, 2013.

OR

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

For the transition period from                    to                    

Commission file number1-6357

ESTERLINE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices)(Zip Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.       Yes  xþ     No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.       Yes  ¨     No  xþ

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  xþ     No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes  xþ     No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    xþ

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

Large accelerated filer  x                        Accelerated filer  ¨                        Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes  ¨     No  xþ

As of December 19, 2011, 30,624,33416, 2013, 31,575,039 shares of the Registrant’s common stock were outstanding. The aggregate market value of shares of common stock held by non-affiliates as of April 29, 2011,26, 2013, was $2,191,628,226$2,308,350,938 (based upon the closing sales price of $71.80$73.86 per share).

Documents Incorporated by Reference

Part III incorporates information by reference to the registrant’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended October 28, 2011.

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PART I

This Report includes a number of forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. Please refer to the section addressing forward-looking information on page 910 for further discussion. In this report, “we,” “our,” “us,” “Company,” and “Esterline” refer to Esterline Technologies Corporation and subsidiaries, unless otherwise noted or context otherwise indicates.

Item 1.  Business

(a)  General Development of Business.Business

Esterline, a Delaware corporation formed in 1967, is a leading specialized manufacturing company principally serving aerospace and defense customers. We design, manufacture and market highly engineered products and systems for application within the industries we serve.

Our strategy is to maintain a leadership position in niche markets for the development and manufacture of highly engineered products that are essential to our customers. We are concentrating our efforts to expand selectively our capabilities in these markets, to anticipate the global needs of our customers and to respond to such needs with comprehensive solutions. Our current business and strategic growth plan focuses on the continuous development of these products in three key technology segments: Avionics & Controls, Sensors & Systems, and Advanced Materials, including thermally engineered components and specialized high-performance elastomers and other complex materials, principally for aerospace and defense markets.Materials. Our products are often mission-critical equipment,mission critical, which have been designed into particular military and commercial platforms and in certain cases can only be replaced by products of other manufacturers following a formal certification process. As part of our implementation of this growth plan, we focus on among other things, expansion of our capabilities as a more comprehensive supplier to our customers. Such expansion included the February 4, 2013, acquisition of the Gamesman Group (Gamesman), which is a global supplier of input devices principally serving the gaming industry; the July 26, 2011, acquisition of the Souriau Group (Souriau), which is a leading global supplier of highly engineered connection technologies for harsh environments; and the December 30, 2010, acquisition of Eclipse Electronic Systems, Inc. (Eclipse), which develops and manufactures embedded communication intercept receivers for signal intelligence applications; and the October 15, 2010, execution of a license agreement with L-3 Avionics Systems, Inc. for the SmartDeck^® integrated cockpit technologies to enhance our integrated cockpit capabilities for both original equipment manufacturer (OEM) and retrofit opportunities. We also divested non-core businesses operating as Pressure Systems, Inc., Muirhead Aerospace and Traxsys Input Products Limited.applications. These acquisitions and divestitures are described in more detail in the “Overview” section of Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations contained in Item 7 of this report.

Our products have a long history in the aerospace and defense industry and are found on most military and commercial aircraft, helicopters, and land-based systems. For example, our products are used on the majority of active and in-production U.S. military aircraft and on every Boeing commercial aircraft platform manufactured in the past 6575 years. In addition, our products are supplied to Airbus, allmany of the major regional and business jet manufacturers, and the major aircraft engine manufacturers. We work closely with OEMs on new, highly engineered products with the objective of such products becoming designed into our customers’ platforms; this integration often results in sole-source positions for OEM production and aftermarket business. We broadly categorize our commercial and military aerospace aftermarket sales as retrofit, repair services, and spare parts. Spare parts alone made up approximately 10% of total sales in fiscal 2013. Retrofit and repair services, which represent 5% of total sales, carry higher margins than OEM sales, but lower margins than spare parts sales. In many cases, our aftermarket sales span the entire life of an aircraft.

We differentiate ourselves through our engineering and manufacturing capabilities and our reputation for safety, quality, on-time delivery, reliability, and innovation – all embodied in the Esterline Performance System, our way of approaching business that helps ensure all employees are focused on continuous improvement. Safety of our operations is a critical factor in our business, and accordingly, we incorporate applicable regulatory guidance in the design of our facilities and the training oftrain our employees using abehavior-based approach that focuses on safety-designed work habits and on-going safety audits. We work closelyOur industries are highly regulated, and compliance with OEMs on new, highly engineered product designs which often resultsapplicable regulations, including export control and anti-bribery regulations, is an important focus in our products being designed into their platforms;business. For example, we have a global code of business conduct and ethics that covers compliance with laws, and we provided training on this integration often resultscode to our worldwide employees in sole-source positions for OEM productionfiscal 2013. In addition, we maintain local ethics advisors and aftermarket business. In fiscal 2011, approximately 35% ofexport control specialists in our salesbusiness units to commercial and military aerospace customers were derived from aftermarket business. Our aftermarket sales, including retrofits, spare parts, and repair services, historically carry a higher gross margin than sales to OEMs. In many cases, aftermarket sales extend well beyond the OEM production period, supporting the platform during its entire life cycle.support our compliance efforts.

Our sales are diversified across three broad markets: defense, commercial aerospace, and general industrial. For fiscal 2011,2013, approximately 40%35% of our sales were from the defense market, 45% from the commercial aerospace market, and 15%20% from the general industrial market.

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(b)  Financial Information About Industry Segments.Segments

A summary of net sales to unaffiliated customers, operating earnings and identifiable assets attributable to our business segments for fiscal years 2011, 2010,2013, 2012, and 20092011 is reported in Note 1716 to the Company’s Consolidated Financial Statements, for the fiscal year ended October 28, 2011, and appears in Item 8 of this report.

(c)  Narrative Description of Business.Business

Avionics & Controls

Our Avionics & Controls business segment includes avionics systems, control systems, interface technologies and communication systems, and interface technologies capabilities. Avionics systems designs and develops cockpit systems integration and avionics subsystems for commercial and military applications. Control and communication systems designs and manufactures technology interface systems for military and commercial aircraft and land- andland-based as well as sea-based military vehicles. Interface technologies manufacturesAdditionally, control and develops custom control panels and input systems for medical, industrial, military and casino gaming industries. Communicationcommunication systems designs and manufactures military audio and data products for severe battlefield environments, embedded communication intercept receivers for signal intelligence applications, as well as communication control systems to enhance security and aural clarity in military applications. Interface technologies manufactures and develops custom control panels and input systems for medical, industrial, military and gaming industries. We are a market leader in global positioning systems (GPS), head-up displays, enhanced vision systems, and electronic flight management systems that are used in a broad variety of control and display applications. In addition, we develop, manufacture and market sophisticated, high reliabilityhighly reliable technology interface systems for commercial and military aircraft. These products include lighted push-button and rotary switches, keyboards, lighted indicators, panels and displays. Over the years, ourOur products have been integrated into many existing aircraft designs, including every Boeing commercial aircraft platform currently in production. Our large installed base provides us with a significant spare parts and retrofit business. We are a Tier 1 supplier on the B-787Boeing 787 program to design and manufacture all of the cockpit overhead panels and embedded software for these systems. We manufacture control sticks, grips and wheels, as well as specialized switching systems. In this area, we primarily serve commercial and military aviation, and airborne and ground-based military equipment manufacturing customers. For example, we are a leading manufacturer of pilot control grips for most types of military fighter jets and helicopters. Additionally, our software engineering center supports our customers’ needs with such applications as primary flight displays, flight management systems, air data computers and engine control systems.

Our proprietary products meet critical operational requirements and provide customers with significant technological advantages in such areas as night vision compatibility and active-matrix liquid-crystal displays (a technology enabling pilots to read display screens in a variety of light conditions as well as from extreme angles). Our products are incorporated in a wide variety of platforms ranging from military helicopters, fighters and transports, to commercial wide- and narrow-body, regional and business jets. In fiscal 2011,2013, some of our largest customers for these products included Alsalam Aircraft Company, BAE Systems, The Boeing Company, Canadian Commercial Corp., Fisco, Hawker Beechcraft, Honeywell, Thales, Lockheed Martin, Rockwell Collins, Sikorsky, Thales, and Sikorsky.

We also manufacture a full line of keyboard, switch and input technologies for specialized medical equipment, communication systems and comparable equipment for military applications. These products include custom keyboards, keypads, and input devices that integrate cursor control devices, bar-code scanners, displays, video, and voice activation. We also produce instruments that are used for point-of-use and point-of-care diagnostics. We have developed a wide variety of technologies, including plastic and vinyl membranes that protect high-use switches and fully depressible buttons, and backlit elastomer switch coverings that are resistant to exposure from harsh chemicals. These technologies now serve as the foundation for a small but growing portion of our product line. In fiscal 2011, some of our largest customers for these products included Alere, Applied Quality Communications, Dictaphone, Frymaster, General Electric, Jabil Circuit, Philips, Roche, Siemens, and WMS.Triman.

In addition, we design and manufacture ruggedized military personal communication equipment, primarily headsets. We are the sole supplier of Active Noise Reduction (ANR) headsets to the British Army’s tracked and wheeled vehicle fleets under the Bowman communication system program. In the U.S., we supply ANR headsets to the U.S. Army’s tracked and wheeled vehicle fleets under the Vehicle Intercom System (VIS) and VIS-X programs comprising over 200,000 vehicles, and we are the sole supplier to the U.S. Marine Corps for their MRAP fleet. We are also the sole ANR headset supplier to the Canadian Army. We have a long-standing relationship with armies around the world, including forces in Australia, India, Australia, Spain,Saudi Arabia, and Saudi Arabia.Spain. We design and manufacture signalssignal intelligence and communications intelligence (SIGINT/COMINT) receiver hardware for the airborne intelligence, surveillance and reconnaissance (ISR) market. These products incorporate modern, open-architecture software/firmware configurable designs, are deployed on a wide range of U.S. and foreign manned airborne platforms, and on such next generation unmanned platforms as the Northrop Grumman Global Hawk and General Atomics Reaper and Predator. In fiscal 2011,2013, some of our largest customers for these products

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included Northrop Grumman, L-3 Communications, Lockheed Martin, Simex Defense,BAE Systems, The Boeing Company, the British Ministry of Defence (MoD), L-3 Communications, Lockheed Martin, Northrop Grumman, and The Boeing Company.Sanmina.

We also manufacture a full line of keyboard, switch and input technologies for specialized medical equipment and communication systems for military applications. These products include custom keyboards, keypads, and input devices that integrate cursor control devices, barcode scanners, displays, video, and voice activation. We also produce instruments that are used for point-of-use and point-of-care diagnostics. We have developed a wide variety of technologies, including plastic and vinyl membranes that protect high-use switches and fully depressible buttons, and backlit elastomer switch coverings that are resistant to exposure from harsh chemicals. These technologies now serve as the foundation for a small but growing portion of our product line. In fiscal 2013, some of our largest customers for these products included Alere, Aristocrat Technologies, General Electric, Inspired Gaming, Merck, Nuance, Philips, Quidel, Roche, and WMS.

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Sensors & Systems

Our Sensors & Systems business segment includes power systems, connection technologies and advanced sensors capabilities. We develop and manufacture high-precision temperature, pressure and speed sensors principally for aerospace and defense customers, electrical interconnection systems for severe environments for aerospace, defense, geophysics & marine, and nuclear customers, as well as electrical power switching, control and data communication devices, and other related systems principally for aerospace and defense customers. We are the OEM sole-source and aftersales supplier of temperature probes for use on all versions of the General Electric/Snecma CFM-56 jet engine. The CFM-56 jet engine has an installed base of 22,000,25,000, is standard equipment on newthe current generation B-737Boeing 737 aircraft and was selected as the engine for approximately 50%60% of all Airbus single-aisle aircraft delivered to date. We were contractedhave a contract to design and manufacture the B-787’sBoeing 787’s sensors for the environmental control system, and provide the primary power distribution assembly for the Airbus A400M military transport. Additionally, we have secured a Tier 1 position with Rolls-Royce for the complete suite of sensors for the engines that will power the A400M and A350. We design and manufacture micro packaging, planet probe interconnectors, launcher umbilicals, and composite connectors for the B-787.Boeing 787. Unique electrical interconnection products account for about 75% of our connection technologies sales, and standard products qualified to customer standards or military specifications account for 25% of sales. The principal customers for our products in this business segment are jet engine manufacturers, airframe and industrial manufacturers. In fiscal 2011,2013, some of our largest customers for these products included Avent,Airbus, Astrium, The Boeing Company, Bombardier, Dassault, Flame, General Electric, Honeywell, Labinal, Rolls-Royce, Pratt & Whitney,SAFRAN, Sercel, and SAFRAN.UTC.

Advanced Materials

Our Advanced Materials business segment includes engineered materials and defense technologies capabilities. We develop and manufacture high-performance elastomer products used in a wide range of commercial aerospace, space, and military applications, and highly engineered thermal components for commercial aerospace and industrial applications. We also develop and manufacture combustible ordnance and countermeasures for military applications.

Specialized High-Performance Applications.  We specialize in the development of proprietary formulations for silicone rubber and other elastomer products. Our elastomer products are engineered to address specific customer requirements where superior performance in high temperature, high pressure, caustic, abrasive and other difficult environments is critical. These products include clamping devices, thermal fire barrier insulation products, sealing systems, tubing and coverings designed in custom-molded shapes. Some of the products include proprietary elastomers that are specifically designed for use on or near a jet engine. We are a leading U.S. supplier of high-performance elastomer products to the aerospace industry, with our primary customers for these products being jet and rocket engine manufacturers, commercial and military airframe manufacturers, as well as commercial airlines. In fiscal 2011,2013, some of the largest customers for these products included Alliant Techsystems, The Boeing Company, Honeywell,Goodrich, KAPCO, Lockheed Martin, Northrop Grumman, Pattonair, and Pattonair.Spirit AeroSystems. We also develop and manufacture high temperature, lightweight metallic insulation systems for aerospace and marine applications. Our commercial aerospace programs include the B-737,Boeing 737, A320, and A380 series aircraft and the V2500 and BR710 engines. Our insulation material is used on diesel engine manifolds for earthmoving and agricultural applications. In addition, we specialize in the development of thermal protection for fire, nuclear, and petro-chemical industries. We design and manufacture high temperature components for industrial and marine markets. Our manufacturing processes consist of cutting, pressing, and welding stainless steel, Inconelinconel and titanium fabrications. In fiscal 2011,2013, some of the largest customers of these products included Acktiv Nuclear, Airbus, The Boeing Company, B/E Aerospace, Goodrich, GKN Aerospace, KAPCO, Lockheed Martin, Northrop Grumman, Pattonair, Petrofac Engineering & Construction, Rolls-Royce, Short Brothers, Spirit AeroSystems, and Spirit AeroSystems.Wesco Aircraft.

Ordnance and Countermeasure Applications.  We develop and manufacture combustible ordnance and warfare countermeasure devices for military customers. We manufacture molded fiber cartridge cases, mortar increments, igniter tubes and other combustible ordnance components primarily for the U.S. Department of Defense. Safety of our operations is a critical factor in manufacturing ordnance and countermeasures, and accordingly, we incorporate applicable regulatory guidance in the design of our facilities and in the training of our employees. As part of our behavior-based approach to training, employees learn safety-designed work habits and perform on-going safety audits. We also monitor safety metrics to ensure compliance. We are currently the sole supplier of combustible casings utilized by the U.S. Armed Forces. Sales are made either directly to the U.S. Department of Defense or through prime contractors, Alliant Techsystems and General Dynamics. These products include the combustible case for the U.S. Army’s new generation 155mm Modular Artillery Charge System, the 120mm combustible case used with the main armament system on the U.S. Army and Marine Corps’ M1-A1/2 tanks, and the 60mm, 81mm and 120mm combustible mortar increments. We are one of two suppliers to the U.S.

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Army of infrared decoy flares used by aircraft to help protect against radar and infrared guided missiles. Additionally, we

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are a supplier of infrared decoy flares to the MoD and other international defense agencies. We are currently the only supplier of radar countermeasures to the U.S. Army.

A summary of product lines contributing sales of 10% or more of total sales for fiscal years 2011, 2010,2013, 2012, and 20092011 is reported in Note 1716 to the Consolidated Financial Statements for the fiscal year ended October 28, 2011, and appears inunder Item 8 of this report.

Marketing and Distribution

We believe that a key to continued success is our ability to meet customer requirements both domestically and internationally. We have and will continue to improve our world-wide sales and distribution channels in order to provide wider market coverage and to improve the effectiveness of our customers’ supply chain. For example, our medical device assembly operation in Shanghai, China, serves our global medical customers, our service center in Singapore improves our capabilities in Asia for our temperature sensor customers, our marketing representative office in Bangalore, India, facilitates marketing opportunities in India, and our marketing representative office in Beijing, China, facilitates marketing opportunities in China. Other enhancements include combining sales and marketing forces of our operating units where appropriate, cross-training our sales representatives on multiple product lines, and cross-stocking our spares and components.

In the technical and highly engineered product segments in which we compete, relationship selling is particularly appropriate in targeted marketing segments where customer and supplier design and engineering inputs need to be tightly integrated. Participation in industry trade shows is an effective method of meeting customers, introducing new products, and exchanging technical specifications. In addition to technical and industry conferences, our products are supported through direct internal international sales efforts, as well as through manufacturer representatives and selected distributors. As of October 28, 2011, 37625, 2013, 398 sales people, 290324 representatives, and 259340 distributors supportsupported our operations internationally.

Backlog

Backlog was $1.3 billion at October 28, 2011, compared with $1.1 billion at the end of25, 2013, and October 29, 2010.26, 2012. We estimate that approximately $352.8$332 million of backlog is scheduled to be shipped after fiscal 2012.2014.

Backlog is subject to cancellation until delivered, and therefore, we cannot assure that our backlog will be converted into revenue in any particular period or at all. Backlog does not include the total contract value of cost-plus reimbursable contracts, which are funded as we incur the costs. Except for the released portion, backlog also does not include fixed-price multi-year contracts.

Competition

Our products and services are affected by varying degrees of competition. We compete with other companies in most markets we serve, manyserve. Many of whichthese companies have far greater sales volumes and financial resources.resources than we do. Some of our competitors are also our customers on certain programs. The principal competitive factors in the commercial markets in which we participate are product performance, on-time delivery, service and price. Part of product performance requires expenditures in research and development that lead to product improvement. The market for many of our products may be affected by rapid and significant technological changes and new product introductions. Our principal competitors include Astronautics, BAE, Bose, ELBIT,Eaton, Elbit, EMS, Eaton, GE Aerospace, Honeywell, IAI, L-3, Otto Controls, RAFI, Rockwell Collins, SELEX, Telephonics, Thales, Ultra Electronics, Universal Avionics Systems Corporation, and Zodiac in our Avionics & Controls segment; Ametek, Amphenol, Eaton, Goodrich, Hamilton Sundstrand, MPC Products, Meggitt, STPI-Deutsch, Tyco,TE Connectivity, and Zodiac in our Sensors & Systems segment; and Chemring, Doncasters, Hitemp,Hi-Temp, J&M, JPR Hutchinson, Kmass, Meggitt (including Dunlop Standard Aerospace Group), Rheinmetall, Trelleborg, ULVA, UMPCO, and UMPCOWoodward Products in our Advanced Materials segment.

Research and Development

Our product development and design programs utilize an extensive base of professional engineers, technicians and support personnel, supplemented by outside engineering and consulting firms when needed. In fiscal 2011,2013, we expended approximately $94.5$95.7 million for research, development and engineering, compared with $69.8$107.7 million in fiscal 20102012 and $64.5$94.5 million in fiscal 2009.2011. Research and development expense has averaged 5.2% of sales for the three years ended October 25, 2013. We believe continued product development is key to our long-term growth, and consequently, we consistently invest in research and development. Examples include research and development projects relating to advanced vision systems, SmartDeck^® integrated flight control and display system, avionics control panels, A350

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engine sensors, high temperature, low observable material for military applications,

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and spectral countermeasure flares for military applications. We actively participate in customer-funded research and development programs, including applications on C-130 cockpit upgrades, P-8 aircraft and power systems for the HH-47 Chinook helicopter and A400M.

Foreign Operations

Our principal foreign operations consist of manufacturing facilities located in Canada, China, the Dominican Republic, France, Germany, Canada,India, Japan, Mexico, Morocco, and the United Kingdom, India, Morocco, the Dominican Republic, Mexico and China, and include sales and service operations located in Brazil, Singapore,China, and China.Singapore. For further information regarding foreign operations, see Note 1716 to the Consolidated Financial Statements under Item 8 of this report.

U.S. Government Contracts and Subcontracts

As a contractor and subcontractor to the U.S. government (primarily the U.S. Department of Defense), we are subject to various laws and regulations that are more restrictive than those applicable to private sector contractors. Approximately 10%6% of our sales werewas made directly to the U.S. government in fiscal 2011.2013. In addition, we estimate that our subcontracting activities to contractors for the U.S. government accounted for approximately 20%17% of sales during fiscal 2011.2013. In total, we estimate that approximately 30%23% of our sales during the fiscal year werewas subject to U.S. government contracting regulations. Such contracts may be subject to termination, reduction or modification in the event of changes in government requirements, reductions in federal spending, and other factors.

Historically, our U.S. government contracts and subcontracts have been predominately fixed-price contracts. Generally, fixed-price contracts offer higher margins than cost-plus contracts in return for accepting the risk that increased or unexpected costs may reduce anticipated profits or cause us to sustain losses on the contracts. The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. government under both cost-plus and fixed-price contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. Department of Defense. The contracts and subcontracts to which we are a party are also subject to profit and cost controls and standard provisions for termination at the convenience of the U.S. government. Upon termination, other than for our default, we will normally be entitled to reimbursement for allowable costs and to an allowance for profit. To date, none of our material fixed-price contracts have been terminated.

We are subject to U.S. export laws and regulations, including the International Traffic in Arms Regulations (ITAR), that generally restrict the export of defense products, technical data, and defense services. We recorded a $10 million charge as of July 26, 2013, for penalties proposed by the DDTC Office of Compliance associated with our earlier handling of ITAR-controlled transactions and related compliance errors, as described further in this report under “Item 3 – Legal Proceedings.” Our failure to comply with applicable regulations could result in penalties, loss, or suspension of contracts or other consequences, and the costs to maintain compliance with these regulations may be higher than we anticipate. Any of these consequences could adversely affect our operations or financial condition.

Patents and Licenses

Although we hold a number of patents and licenses, we do not believe that our operations are dependent on our patents and licenses. In general, we rely on technical superiority, continual product improvement, exclusive product features, lean manufacturing and operational excellence, including superior lead-time, on-time delivery performance and quality, and customer relationships to maintain competitive advantage.

Seasonality

The timing of our revenues is impacted by the purchasing patterns of our customers, and as a result we do not generate revenues evenly throughout the year. Moreover, our first fiscal quarter, November through January, includes significant holiday vacation periods in both Europe and North America. This leads to decreased order and shipment activity; consequently, first quarter results are typically weaker than other quarters and not necessarily indicative of our performance in subsequent quarters.

Sources and Availability of Raw Materials and Components

The sources and availability of certain raw materials and components are not as critical as they would be for manufacturers of a single product line, due to our vertical integration and diversification. However, certain components, supplies and raw materials for our operations are purchased from single sources. In such instances, we strive to develop alternative sources and design modifications to minimize the effect of business interruptions.

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Environmental Matters

We are subject to federal, state, local and foreign laws, regulations and ordinances that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and water, as well as handling and disposal practices for solid and hazardous waste, and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites or past spills, disposals or other releases of hazardous substances.

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At various times we have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and analogous state environmental laws, for the cleanup of contamination resulting from past disposals of hazardous wastes at certain sites to which we, among others, sent wastes in the past. CERCLA requires potentially responsible persons to pay for cleanup of sites from which there has been a release or threatened release of hazardous substances. Courts have interpreted CERCLA to impose strict, joint and several liability on all persons liable for cleanup costs. As a practical matter, however, at sites where there are multiple potentially responsible persons, the costs of cleanup typically are allocated among the parties according to a volumetric or other standard.

We have accrued liabilities for environmental remediation costs expected to be incurred by our operating facilities.incurred. Environmental exposures are provided for at the time they are known to exist or are considered reasonably probable and estimable.

Employees

We had 12,11412,049 employees at October 28, 2011,25, 2013, of which 5,3584,982 were based in the United States, 4,1104,174 in Europe, 1,0911,026 in Canada, 600632 in Mexico, 443584 in Asia, 347516 in Morocco and 165135 in the Dominican Republic. Approximately 12% of the U.S.-based employees were represented by a labor union. Our European operations are subject to national trade union agreements and to local regulations governing employment.

(d)  Financial Information About Foreign and Domestic Operations and Export Sales.Sales

See risk factor below entitled “Political and economic changes in foreign countries and markets, including foreign currency fluctuations, may have a material effect on our operating results” under Item 1A of this report and Note 1716 to the Consolidated Financial Statements under Item 8 of this report.

(e)  Available Information ofAbout the Registrant.Registrant

You can access financial and other information on our Web site,www.esterline.com. We make available through our Web site, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission (SEC). The SEC also maintains a Web site atwww.sec.gov, which contains reports, proxy and information statements, and other information regarding public companies, including Esterline. Any reports filed with the SEC may also be obtained from the SEC’s Reference Room at 100 F Street, NE, Washington, DC 20549. Our Corporate Governance Guidelines and charters for our board committees are available on our Web site,www.esterline.com on the Corporate Governance tab, and our Code of Business Conduct and Ethics, which includes a code of ethics applicable to our accounting and financial employees, including our Chief Executive Officer and Chief Financial Officer, is available on our Web site atwww.esterline.com on the Corporate Governance tab. Each of these documents is also available in print (at no charge) to any shareholder upon request. Our Web site and the information contained therein or connected thereto are not incorporated by reference into this Form 10-K.

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Executive Officers of the Registrant

The names and ages of all executive officers of the Company and the positions and offices held by such persons as of December 12, 2011,20, 2013, are as follows:

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Mr. Lawrence has been Executive Chairman since September 2013. Previously, he was Chairman, Chief Executive Officer and President since March 2012. In addition, he served as President and Chief Executive Officer since November 2009. Prior to that time, he was2009, President and Chief Operating Officer since July 2009, and Group Vice President since January 2007. From September 2002 to January 2007, he was President of Advanced Input Systems, a subsidiary of the Company. Mr. Lawrence has an M.B.A. from the University of Pittsburgh and a B.S. degree in Business Administration from Pennsylvania State University.

Mr. Reusser has been President and Chief Executive Officer since October 2013. Previously, he was President, Aircraft Systems of UTC Aerospace Systems for United Technologies Corporation, a provider of a broad range of high-technology products and services to the global aerospace and building systems industries, from July 2012 to October 2013. Prior to that time, he was President of the Electronic Systems segment of Goodrich Corporation, an aerospace and defense company that was acquired by UTC in July 2012, from January 2008 to July 2012. Mr. Reusser has a B.S. degree in Industrial and Mechanical Engineering from the University of Washington and a Certificate in Business Management from the University of San Diego.

Mr. George has been Chief Financial Officer, Vice President, and Corporate Development since October 2012. From July 2011 to October 2012, he was Vice President, Chief Financial Officer, Corporate Development and Secretary since July 2011.Secretary. Prior to that time, he was Vice President, Chief Financial Officer, Secretary and Treasurer since July 1999. Mr. George has an M.B.A. from the Fuqua School of Business at Duke University and a B.A. degree in Economics from Drew University.

Mr. Durand has been Group Vice President since June 2011. Prior to that time, he was President of the Advanced Sensors business platform from May 2007 to June 2011. From July 2004 to May 2007, he was President of Auxitrol Technologies, a subsidiary of the Company. Mr. Durand has an M.B.A. from Ecole Supérieure de Commerce in Reims, France, and a Mechanical Engineering degree from Ecole Catholique d’Arts et Métiers in Lyons,Lyon, France.

Mr. Heine has been Vice President, Human Resources since August 2012. Prior to that time, he was Vice President, Leadership and Organizational Development since March 2007. He has an M.P.A. in Human Resource Management from the University of Colorado and a B.S. degree in English from Eastern Michigan University.

Mr. Houston has been Senior Group Vice President since December 2009. Prior to that time, he was Group Vice President since March 2005. Mr. Houston has an M.B.A. from the University of Washington and a B.A. degree in Political Science from Seattle Pacific University.

Mr. Larson has been Vice President, Strategy & Technology since January 2000. Mr. Larson has an M.B.A. from the University of Chicago and a B.S. degree in Electrical Engineering from Northwestern University.

Ms. Mason has been Vice President and General Counsel since September 2013. Prior to that time she was General Counsel and Vice President, Administration from August 2012 to September 2013, and Vice President, Human Resources sincefrom March 1993.1993 to July 2012. Ms. Mason has a J.D. degree from Northwestern University School of Law and a B.A. degree in Political Science from Portland State University.

Mr. Yost has been Group Vice President and Treasurer since November 2009 and July 2011. Prior to that time, he was Group Vice President since November 2009.2011, respectively. Previously, he was President of Advanced Input Systems, a subsidiary of the Company from January 2007, and held management responsibilities for Esterline’s Interface Technologies business platform from May 2007. From April 2002 to April 2007, he was Director of Finance for Advanced Input Systems. Mr. Yost has an M.B.A. from Utah State University and a B.A. degree in Economics from Brigham Young University.

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Forward-Looking Statements

This annual report on Form 10-K includes forward-looking statements. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this report under the headings “Risks Relating to Our Business and Our Industry,” “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” and “Business” are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this report under the headings “Risks Relating to Our Business and Our Industry,” “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” and “Business” may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations are:

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.

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Item 1A.  Risk Factors

Risks Relating to Our Business and Our Industry

A recurrent global recession mayReductions in defense spending could adversely affect our accessbusiness.

Approximately 35% of our business is dependent on defense spending. The defense industry is dependent upon the level of equipment expenditures by the armed forces of countries throughout the world, and especially those of the United States, which represents a significant portion of world-wide defense expenditures. In August 2011, Congress enacted the Budget Control Act of 2011 (BCA), which resulted in substantial, automatic reductions in both defense and discretionary spending. The automatic across-the-board budget cuts, or sequestration, are incremental to capital, cost of capital, and business operations.

Ifspending reductions already included in the global recession recurs, our future cost of debt and equity capital could be adversely affected. Any inability to obtain adequate financing from debt and equity sources could force us to self fund strategic initiatives or even forgo some opportunities, potentially harmingdefense funding over a ten-year period. These spending cuts impacted our financial position, results in fiscal 2013, and could have significant future consequences to our business and industry, including disruption of programs and personnel reductions that could impact our manufacturing operations and liquidity.engineering capabilities.

Economic conditions may impairThe loss of a significant customer or defense program could have a material adverse effect on our customers’ businessoperating results.

Some of our operations are dependent on a relatively small number of customers and markets,aerospace and defense programs, which change from time to time. Significant customers in fiscal 2013 included The Boeing Company, Flame, General Electric, Hawker Beechcraft, Honeywell, Lockheed Martin, Northrop Grumman, Rolls-Royce, Sikorsky, and the U.S. Department of Defense. There can be no assurance that our current significant customers will continue to buy our products at current levels. The loss of a significant customer or the cancellation of orders related to a sole-source defense program could have a material adverse effect on our operating results if we were unable to replace the related sales.

We are subject to numerous regulatory requirements, which could adversely affect our business.

Among other things, we are subject to the Foreign Corrupt Practices Act, or FCPA, and the U.K. Bribery Act, which generally prohibit companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment. In particular, we may be held liable for actions taken by our strategic or local partners even though our partners are not subject to the FCPA or the U.K. Bribery Act. Any determination that we have violated the FCPA or the U.K. Bribery Act could result in sanctions that could have a material adverse effect on our business, financial condition and results of operations.

In

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We are also subject to a variety of international laws, as well as U.S. export laws and regulations, such as the eventInternational Traffic in Arms Regulations (ITAR), which generally restrict the export of defense products, technical data and defense services. We have filed voluntary reports that disclosed certain technical and administrative violations of the ITAR with the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) Office of Defense Trade Controls Compliance (DDTC Office of Compliance). As further described in this report under “Item 3 – Legal Proceedings,” we recorded a recurrent global recession in$10 million charge as of July 26, 2013, for penalties proposed by the United StatesDDTC Office of Compliance associated with our earlier handling of ITAR-controlled transactions, including the substance of our prior voluntary disclosures and other partsaspects of the world, customers may chooseITAR compliance errors. Our failure to delaycomply with these regulations could result in penalties, loss, or postpone purchases from us until the economy and their businesses strengthen. Decisions by currentsuspension of contracts or future customers to forgo or defer purchases and/or our customers’ inability to pay us for our products mayother consequences. Any of these could adversely affect our earningsoperations and financial condition.

We may be unable to realize expected benefits from our business integration efforts and our profitability may be hurt or our business otherwise might be adversely affected.

We recently announced that we are accelerating plans to consolidate certain facilities and to create greater cost efficiencies through shared services in sales, general administration and support functions across our segments. We have never before pursued integration initiatives to this extent, and there is no assurance that our efforts will be successful. These plans are intended to generate operating expense savings through direct and indirect overhead expense reductions as well as other savings. These integration activities are complex. If we do not successfully manage our current integration activities, or any other similar activities that we may undertake in the future, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted. Risks associated with these actions include inability to or delay in the planned transfer of business activities to other locations due to dependency on third party agreements or certification of projects affected by the transfer, unanticipated costs in implementing the initiatives, delays in implementation of anticipated workforce reductions, adverse effects on employee morale, creation of customer or supplier uncertainty that may impact our business and the failure to meet operational targets due to the loss of employees. If any of these risks are realized, our ability to achieve anticipated cost reductions may be impaired or our business may otherwise be harmed, which could have a material adverse effect on our competitive position, results of operations, cash flow.flows or financial condition.

Implementing our acquisition strategy involves risks, and our failure to successfully implement this strategy could have a material adverse effect on our business.

One of our key strategies is to grow our business by selectively pursuing acquisitions. Since 1996 we have completed over 30 acquisitions, and we are continuing to actively pursue additional acquisition opportunities, some of which may be material to our business and financial performance. Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for a number of reasons, including:

In addition, there are potential risks associated with growing our business through acquisitions, including the failure to successfully integrate and realize the expected benefits of an acquisition. For example, with any past or future acquisition, there is the possibility that:

Failure to continue implementing our acquisition strategy, including successfully integrating acquired businesses, could have a material adverse effect on our business, financial condition and results of operations.

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Our future financial results could be adversely impacted by asset impairment charges.

We are required to test both acquired goodwill and other indefinite-lived intangible assets for impairment on an annual basis based upon a fair value approach, rather than amortizing them over time. We have chosen to perform our annual impairment reviews of goodwill and other indefinite-lived intangible assets during the fourth quarter of each fiscal year. We also are required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. If the fair market value is less than the book value of goodwill, we could be required to record an impairment charge. The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life cycles. In making these judgments, we evaluate the financial health of the business, including such factors as industry performance, changes in technology and operating cash flows.

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As we have grown through acquisitions, we have accumulated $1.2$1.1 billion of goodwill, and have $48.8$47.2 million of indefinite-lived intangible assets, out of total assets of $3.4$3.3 billion at October 28, 2011.25, 2013. As a result, the amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken. For example, we recorded an impairment charge of $3.5 million in fiscal 2013, and an impairment charge of $52.2 million in fiscal 2012 at Racal Acoustics, Inc. (Racal Acoustics). In addition, we may incur additional charges.

We performed our annual impairment review for fiscal 20112013 as of July 30, 2011,27, 2013, and our Step One analysis indicates that no impairment of goodwill andor other indefinite-lived assets exists at any of our other reporting units. Our Souriau reporting unit’s margin in passing the Step One analysis was approximately 12%, mainly reflecting lower market valuation assumptions in 2013. Management expects that continued improvements in operations will result in favorable actual results compared with our original plan. It is possible, however, that as a result of events or circumstances, we could conclude at a later date that goodwill of $347.6 million at Souriau may be considered impaired. We also may be required to record an earnings charge or incur unanticipated expenses if, due to a change in strategy or other reasons, we determined the value of other assets has been impaired. These other assets include trade names of $33.7 million and intangible assets of $181.7 million.

A long-lived asset to be disposed of is reported at the lower of its carrying amount or fair value less cost to sell. An asset (other than goodwill and indefinite-lived intangible assets) is considered impaired when estimated future undiscounted cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not deemed recoverable, the asset is adjusted to its estimated fair value. Fair value is generally determined based upon estimated discounted future cash flows. As we have grown through acquisitions, we have accumulated $645.1$533.8 million of definite-lived intangible assets. As a result, the amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken.

The amount of debt we have outstanding, as well as any debt we may incur in the future, could have an adverse effect on our operational and financial flexibility.

As of October 28, 2011,25, 2013, we had approximately $1.0 billion$689.1 million of long-term debt outstanding, which is long-term debt.outstanding. Under our existing secured credit facility, we have a $460 million revolving line of credit, and a €125an €18.0 million term loan (Euro Term Loan). Up to $100.0, and a $170.6 million in letters of credit may be drawn in U.K. pounds or euros in addition to U.S. dollars.term loan (U.S. Term Loan). The credit facility is secured by substantially all of the Company’s assets and interest is based on standard inter-bank offering rates. In addition, we have unsecured foreign currency credit facilities that have been extended by foreign banks for up to $32.5$66.2 million. Available credit under the above credit facilities was $122.4$363.5 million at October 28, 2011,25, 2013, reflecting bank borrowings of $365.0$130.0 million and letters of credit of $5.1$32.7 million.

We also have outstanding $175.0 million 6.625% senior notes due in March 2017 and $250.0 million 7.0% senior notesSenior Notes due in August 2020.2020 (2020 Notes). The indentures governing those notes and other debt agreements limit, but do not prohibit, us from incurring additional debt in the future. Our level of debt could have significant consequences to our business, including the following:

The loss of a significant customer or defense program could have a material adverse effect on our operating results.debt, thereby reducing funds available for our acquisition strategy, capital expenditures or other purposes;

Our revenues are subject to fluctuations that may cause our operating results to decline.

Our business is susceptible to seasonality and economic cycles, and as a result, our operating results have fluctuated widely in the past and are likely to continue to do so. Our revenue tends to fluctuate based on a number of factors, including domestic and foreign economic conditions and developments affecting the specific industries and customers we serve. For example, it is possible that thea global recession could recuroccur and result in a more severe downturn in commercial aviation and

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defense. It is also possible that in the future our operating results in a particular quarter or quarters will not meet the expectations of securities analysts or investors, causing the market price of our common stock or senior notes to decline. We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance and should not be relied upon to predict our future performance.

A global recession may adversely affect our business operations and results, capital, and cost of capital.

In the event of a global recession, our customers may choose to delay or postpone purchases from us until the economy and their business strengthen. Decisions by current or future customers to forgo or defer purchases and/or our customers’ inability to pay for our products may adversely affect our earnings and cash flow. A recession could also adversely affect our future cost of debt and equity. Any inability to obtain adequate financing from debt and equity sources could force us to self-fund strategic initiatives or even forgo some opportunities, potentially harming our financial position, results of operations, and liquidity.

Our operations depend on our production facilities throughout the world. These production facilities are subject to physical and other risks that could disrupt production.

Our production facilities could be damaged or disrupted by a natural disaster, labor strike, war, political unrest, terrorist activity or a pandemic. Several of our production facilities are located in California, and thus are in areas with above average seismic activity and may also be at risk of damage in wildfires. Although we have obtained property damage and business interruption insurance for our production facilities, a major catastrophe such as an earthquake or other natural disaster at any of our sites, or significant labor strikes, work stoppage, political unrest, war or terrorist activities in any of the areas where we conduct operations, could result in a prolonged interruption of our business. Any disruption resulting from these events could cause significant delays in shipments of products and the loss of sales and customers. We cannot assure you that we will have insurance to adequately compensate us for any of these events.

Political and economic changes in foreign countries and markets, including foreign currency fluctuations, may have a material effect on our operating results.

Foreign sales originating from non-U.S. locations were approximately 45%50% of our total sales in fiscal 2011,2013, and we have manufacturing facilities in a number of foreign countries. A substantial portion of our Avionics & Controls operations is based in Canada and the U.K., and a substantial portion of our Sensors & Systems operations is based in the U.K. and France. We also have manufacturing operations in China, the Dominican Republic, Germany, India, Japan, Mexico, China, and Morocco. Doing business in foreign countries is subject to numerous risks, including political and economic instability, restrictive trade policies of foreign governments, economic conditions in local markets, health concerns, inconsistent product regulation or unexpected changes in regulatory and other legal requirements by foreign agencies or governments, the imposition of product tariffs and the burdens of complying with a wide variety of international and U.S. export laws and differing regulatory requirements. To the extent that foreign sales are transacted in a foreign currency, we are subject to the risk of losses due to foreign currency fluctuations. In addition, we have substantial assets denominated in foreign currencies, primarily the Canadian dollar, U.K. pound and euro, that are not offset by liabilities denominated in those foreign currencies. These net foreign currency investments are subject to material changes in the event of fluctuations in foreign currencies against the U.S. dollar.

We are subject to numerous regulatory requirements, which could adversely affect our business.

Among other things, we are subject to the Foreign Corrupt Practices Act, or FCPA, and the U.K. Bribery Act which generally prohibit companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment. In particular, we may be held liable for actions taken by our strategic or local partners even though our partners are not subject to the FCPA or the U.K. Bribery Act. Any determination that we have violated the FCPA or the U.K. Bribery Act could result in sanctions that could have a material adverse effect on our business, financial condition and results of operations.

We are also subject to a variety of international laws, as well as U.S. export laws and regulations, such as the International Traffic in Arms Regulations (ITAR), which generally restrict the export of defense products, technical data and defense services. We have filed voluntary disclosure reports in fiscal 2011 at certain U.S. operating units and voluntarily reported certain technical violations of U.S. export laws and regulations. We are enhancing our internal and external auditing compliance program. While management believes that this increased oversight is adequate to address the technical violations, the impact of filing these voluntary disclosure statements covering technical violations, as well as compliance with these laws and regulations and any changes thereto, are difficult to predict. The costs of compliance including penalties, any failure to comply, and any changes to such laws and regulations could adversely affect our operations in the future.

A downturn in the aircraft market could adversely affect our business.

The aerospace industry is cyclical in nature and affected by periodic downturns that are beyond our control. The principal customers for manufacturers of commercial aircraft are the commercial and regional airlines, which can be adversely affected by a number of factors, including a recession, increasing fuel and labor costs, intense price competition, outbreak

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of infectious disease and terrorist attacks, as well as economic cycles, all of which can be unpredictable and are outside our control. Any decrease in demand resulting from a downturn in the market could adversely affect our business, financial condition and results of operations.

Reductions in defense spending could adversely affect our business.

Approximately 40% of our business is dependent on defense spending. The defense industry is dependent upon the level of equipment expenditures by the armed forces of countries throughout the world, and especially those of the United States, which represents a significant portion of world-wide defense expenditures. The war on terror has increased the level of equipment expenditures by the U.S. armed forces. This level of spending may not be sustainable in light of government spending priorities by the U.S. and the winding down of U.S. armed forces operations in Iraq and Afghanistan. In addition, as a result of the failure of the Joint Select Committee on Deficit Reduction (Super Committee) to agree on a deficit reduction plan, mandatory reductions in defense are required under the Budget Control Act. The extent and scope of these cuts is difficult to assess at this time. Any decrease in demand for new aircraft and equipment or use of existing aircraft and equipment will likely result in a decrease in demand of our products and services, and correspondingly, our revenues, thereby adversely affecting our business, financial condition and results of operations.

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We may not be able to compete effectively.

Our products and services are affected by varying degrees of competition. We compete with other companies and divisions and units of larger companies in most markets we serve, many of which have greater sales volumes or financial, technological or marketing resources than we do. Our principal competitors include: Astronautics, BAE, Bose, Eaton, ECE, ELBIT,Elbit, EMS, Eaton, GE Aerospace, Honeywell, IAI, L-3, Otto Controls, RAFI, Rockwell Collins, SELEX, Telephonics, Thales, Ultra Electronics, and Universal Avionics Systems Corporation in our Avionics & Controls segment; Ametek, Amphenol, Eaton, ECE, Goodrich, Hamilton Sundstrand, MPC Products, Meggitt, STPI-Deutsch, and TycoTE Connectivity in our Sensors & Systems segment; and Chemring, Doncasters, Hitemp,Hi-Temp, J&M, JPR Hutchinson, Kmass, Meggitt (including Dunlop Standard Aerospace Group), Rheinmetall, Trelleborg, ULVA, and UMPCO in our Advanced Materials segment. The principal competitive factors in the commercial markets in which we participate are product performance, service and price. Maintaining product performance requires expenditures in research and development that lead to product improvement and new product introduction. Companies with more substantial financial resources may have a better ability to make such expenditures. We cannot assure that we will be able to continue to successfully compete in our markets, which could adversely affect our business, financial condition and results of operations.

Our backlog is subject to modification or termination, which may reduce our sales in future periods.

We currently have a backlog of orders based on our contracts with customers. Under many of our contracts, our customers may unilaterally modify or terminate their orders at any time. In addition, the maximum contract value specified under a government contract awarded to us is not necessarily indicative of the sales that we will realize under that contract. For example, we are a sole-source prime contractor for many different military programs with the U.S. Department of Defense. We depend heavily on the government contracts underlying these programs. Over its lifetime, a program may be implemented by the award of many different individual contracts and subcontracts. The funding of government programs is subject to congressional appropriation.

Changes in defense procurement models may make it more difficult for us to successfully bid on projects as a prime contractor and limit sole-source opportunities available to us.

In recent years, the trend in combat system design and development appears to be evolving toward the technological integration of various battlefield components, including combat vehicles, command and control network communications, advanced technology artillery systems and robotics. If the U.S. military procurement approach continues to require this kind of overall battlefield combat system integration, we expect to be subject to increased competition from aerospace and defense companies which have significantly greater resources than we do. This trend could create a role for a prime contractor with broader capabilities that would be responsible for integrating various battlefield component systems and potentially eliminating or reducing the role of sole-source providers or prime contractors of component weapon systems.

We may lose money or generate less than expected profits on our fixed-price contracts.

Our customers set demanding specifications for product performance, reliability and cost. Some of our government contracts and subcontracts provide for a predetermined, fixed price for the products we make regardless of the costs we incur. Therefore, we must absorb cost overruns, notwithstanding the difficulty of estimating all of the costs we will incur in performing these contracts and in projecting the ultimate level of sales that we may achieve. Our failure to anticipate technical problems, estimate costs accurately, integrate technical processes effectively or control costs during performance of a fixed-price contract may reduce the profitability of a fixed-price contract or cause a loss. While we believe that we have recorded adequate provisions in our financial statements for losses on our fixed-price contracts as required under GAAP, we cannot assure that our contract loss provisions will be adequate to cover all actual future losses. Therefore, we may incur losses on fixed-price contracts that we had expected to be profitable, or such contracts may be less profitable than expected.

The market for our products may be affected by our ability to adapt to technological change.

The rapid change of technology is a key feature of all of the markets in which our businesses operate. To succeed in the future, we will need to design, develop, manufacture, assemble, test, market, and support new products and enhancements to our existing products in a timely and cost-effective manner. Historically, our technology has been developed through internal research and development expenditures, as well as customer-sponsored research and development programs. There is no guarantee that we will continue to maintain, or benefit from, comparable levels of research and development in the14

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future. In addition, our competitors may develop technologies and products that are more effective than those we develop or that render our technology and products obsolete or noncompetitive. Furthermore, our products could become unmarketable if new industry standards emerge. We cannot assure that our existing products will not require significant modifications in the future to remain competitive or that new products we introduce will be accepted by our customers, nor can we assure that we will successfully identify new opportunities and continue to have the needed financial resources to develop new products in a timely or cost-effective manner.

Our business is subject to government contracting regulations, and our failure to comply with such laws and regulations could harm our operating results and prospects.

We estimate that approximately 30%23% of our sales in fiscal 20112013 were attributable to contracts in which we were either the prime contractor to, or a subcontractor to a prime contractor to, the U.S. government. As a contractor and subcontractor to the U.S. government, we must comply with laws and regulations relating to the formation, administration and performance of federal government contracts that affect how we do business with our customers and may impose added costs to our business. For example, these regulations and laws include provisions that contracts we have been awarded are subject to:

The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. government under both cost-plus and fixed-price contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. Department of Defense. Responding to governmental audits, inquiries or investigations may involve significant expense and divert management attention. Our failure to comply with these or other laws and regulations could result in contract termination, suspension or debarment from contracting with the federal government, civil fines and damages, and criminal prosecution and penalties, any of which could have a material adverse effect on our operating results.

A significant portion of our business depends on U.S. government contracts, which are often subject to competitive bidding, and a failure to compete effectively or accurately anticipate the success of future projects could adversely affect our business.

We obtain many of our U.S. government contracts through a competitive bidding process that subjects us to risks associated with:

In addition, in order to win the award of developmental programs, we must be able to align our research and development and product offerings with the government’s changing concepts of national defense and defense systems. The government’s termination of, or failure to fully fund, one or more of the contracts for our programs would have a negative impact on our operating results and financial condition. Furthermore, we serve as a subcontractor on several military programs that, in large part, involve the same risks as prime contracts.

Overall, we rely on key contracts with U.S. government entities for a significant portion of our sales and business. A substantial reduction in these contracts would materially adversely affect our operating results and financial position.

The market for our products may be affected by our ability to adapt to technological change.

The rapid change of technology is a key feature of all of the markets in which our businesses operate. To succeed in the future, we will need to design, develop, manufacture, assemble, test, market, and support new products and enhancements to our existing products in a timely and cost-effective manner. Historically, our technology has been developed through internal research and development expenditures, as well as customer-sponsored research and development programs. There is no guarantee that we will continue to maintain, or benefit from, comparable levels of research and development in the future. In addition, our competitors may develop technologies and products that are more effective than those we develop or that render our technology and products obsolete or noncompetitive. Furthermore, our products could become unmarketable if new industry standards emerge. We cannot assure that our existing products will not require significant modifications in the future to remain competitive or that new products we introduce will be accepted by our customers, nor can we assure that we will successfully identify new opportunities and continue to have the needed financial resources to develop new products in a timely or cost-effective manner.

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The airline industry is heavily regulated and if we fail to comply with applicable requirements, our results of operations could suffer.

Governmental agencies throughout the world, including the U.S. Federal Aviation Administration or the FAA,(FAA), prescribe standards and qualification requirements for aircraft components, including virtually all commercial airline and general aviation products, as well as regulations regarding the repair and overhaul of aircraft engines. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. We include, with the replacement parts that we sell to our customers, documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries. In order to sell our products, we and the products we manufacture must also be certified by our individual OEM customers. If any of the material authorizations or approvals qualifying us to supply our products is revoked or suspended, then the sale of the subject product would be prohibited by law, which would have an adverse effect on our business, financial condition and results of operations.

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From time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations, which are usually more stringent than existing regulations. If these proposed regulations are adopted and enacted, we may incur significant additional costs to achieve compliance, which could have a material adverse effect on our business, financial condition and results of operations.

We depend on the continued contributions of our executive officers and other key management, each of whom would be difficult to replace.

Our future success depends to a significant degree upon the continued contributions of our senior management and our ability to attract and retain other highly qualified management personnel. We face competition for management from other companies and organizations. Therefore, we may not be able to retain our existing management personnel or fill new management positions or vacancies created by expansion or turnover at our existing compensation levels. Although we have entered into change of control agreements with some members of senior management, we do not have employment contracts with our key executives, nor have we purchased “key-person” insurance on the lives of any of our key officers or management personnel to reduce the impact to our company that the loss of any of them would cause. Specifically, the loss of any of our executive officers would disrupt our operations and divert the time and attention of our remaining officers. Additionally, failure to attract and retain highly qualified management personnel would damage our business prospects.

If we are unable to protect our intellectual property rights adequately, the value of our products could be diminished.

Our success is dependent in part on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietary rights of others. While we take precautionary steps to protect our technological advantages and intellectual property and rely in part on patent, trademark, trade secret and copyright laws, we cannot assure that the precautionary steps we have taken will completely protect our intellectual property rights. Because patent applications in the United States are maintained in secrecy until either the patent application is published or a patent is issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our products that may block our use of our intellectual property or may be used in third-party products that compete with our products and processes. In the event a competitor successfully challenges our products, processes, patents or licenses or claims that we have infringed upon their intellectual property, we could incur substantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual property at issue, any of which could have a material adverse effect on our business, operating results and financial condition.

In addition to our patent rights, we also rely on unpatented technology, trade secrets and confidential information. Others may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We may not be able to protect our rights in unpatented technology, trade secrets and confidential information effectively. We require each of our employees and consultants to execute a confidentiality agreement at the commencement of an employment or consulting relationship with us. However, these agreements may not provide effective protection of our information or, in the event of unauthorized use of disclosure, they may not provide adequate remedies.

Future asbestos claims could harm our business.

We are subject to potential liabilities relating to certain products we manufactured containing asbestos. To date, our insurance has covered claims against us relating to those products. Commencing November 1, 2003, insurance coverage for asbestos claims has been unavailable. However, we continue to have some insurance coverage for exposure to asbestos contained in our products prior to that date.

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As a result of the endtermination of the NASA Space Shuttle program, manufacturing of rocket engine insulation material containing asbestos ceased in July 2010. In December 2011, we dismantled our facility used to manufacture the asbestos-based insulation for the Space Shuttle program. We have an agreement with the customer for indemnification for certain losses we may incur as a result of asbestos claims relating to a product we previously manufactured, but we cannot assure that this indemnification agreement will fully protect us from losses arising from asbestos claims.

To the extent we are not insured or indemnified for losses from asbestos claims relating to our products, asbestos claims could adversely affect our operating results and our financial condition.

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Environmental laws and regulations may subject us to significant liability.

Our business and our facilities are subject to a number of federal, state, local and foreign laws, regulations and ordinances governing, among other things, the use, manufacture, storage, handling and disposal of hazardous materials and certain waste products. Among these environmental laws are rules by which a current or previous owner or operator of land may be liable for the costs of investigation, removal or remediation of hazardous materials at such property. In addition, these laws typically impose liability regardless of whether the owner or operator knew of, or was responsible for, the presence of any hazardous materials. Persons who arrange for the disposal or treatment of hazardous materials may be liable for the costs of investigation, removal or remediation of such substances at the disposal or treatment site, regardless of whether the affected site is owned or operated by them.

The California Attorney General’s office filed a complaint against Kirkhill-TA, a subsidiary included in our Advanced Materials segment, with the Superior Court of California, Orange County, on behalf of California and the Santa Ana Regional Water Quality Control Board (Board) regarding discharge of industrial waste water from its Brea, California, facility into Fullerton Creek and Craig Lake. The Company reached a settlement with the Board of $1.9 million, including legal costs, in 2011. The full amount is recorded on the balance sheet as an accrued liability.

Because we own and operate, and previously owned and operated, a number of facilities that use, manufacture, store, handle or arrange for the disposal of various hazardous materials, we may incur costs for investigation, removal and remediation, as well as capital costs, associated with compliance with environmental laws. At the time of our asset acquisition of the Electronic Warfare Passive Expendables Division of BAE Systems North America (BAE), certain environmental remedial activities were required under a Part B Permit issued to the infrared decoy flare facility by the Arkansas Department of Environmental Quality under the Federal Resource Conservation and Recovery Act. The Part B Permit was transferred to our subsidiary, Armtec, along with the remedial obligations. Under the terms of the asset purchase agreement, BAE Systems agreed to perform and pay for these remedial obligations at the infrared decoy flare facility up to a maximum amount of $25.0 million. BAE is currently conducting monitoring activities as required under the asset purchase agreement. Although environmental costs have not been material in the past, we cannot assure that these matters, or any similar liabilities that arise in the future, will not exceed our resources, nor can we completely eliminate the risk of accidental contamination or injury from these materials.

An accident at our combustible ordnance or flare countermeasure operations could harm our business.

We are subject to potential liabilities in the event of an accident at our combustible ordnance and flare countermeasure operations. Our products are highly flammable during certain phases of the manufacturing process. Accordingly, our facilities are designed to isolate these operations from direct contact with employees. Our overall safety infrastructure is compliant with regulatory guidelines. In addition, we utilize hazard detection and intervention systems. Our employees receive safety training and participate in internal safety demonstrations. We continuously track safety effectiveness in relation to the U.S. Bureau of Labor Statistics, OSHA, and the HSE in the U.K. to help ensure performance is within industry standards. In addition, we perform on-going process safety hazards analysis,hazard analyses, which isare conducted by trained safety teams to identify risk areas that arise. We monitor progress through review of safety action reports that are produced as part of our operations. Although we believe our safety programs are robust and our compliance with our programs is high, it is possible for an accident to occur. For example, an explosion occurred in 2006 at our Wallop facility in the U.K. (causing a fatality, several minor injuries, and extensive damage to the facility). We are insured in excess of our deductible on losses from property, loss of business, and for personal liability claims from an accident. Weaccident; however, we may not be able to maintain insurance coverage in the future at an acceptable cost. Significant losses not covered by insurance could have a material adverse effect on our business, financial condition, and results of operations.

We may be required to defend lawsuits or pay damages in connection with the alleged or actual harm caused by our products.

We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in harm to others or to property. For example, our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft component that has been designed, manufactured or serviced by us. We may incur significant liability if product liability lawsuits against us are successful. While we believe our current general liability and product liability insurance is adequate to protect us from future product liability claims, we cannot assure that coverage will be adequate to cover all claims that may arise. Additionally, we may not be able to maintain insurance coverage in the future at an acceptable cost. Significant losses not covered by insurance or for which third-party indemnification is not available could have a material adverse effect on our business, financial condition and results of operations.

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Our financial performance may be adversely affected by information technology business disruptions.

Our business may be impacted by information technology attacks or failures. Cybersecurity attacks, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. We have experienced cybersecurity attacks in the past and may experience them in the future, potentially with more frequency. We have taken measures to mitigate potential risks to our technology and our operations from these information technology-related potential disruptions. For example, we utilized third-party software and tools at many domestic operating locations to scan incoming email for viruses and other harmful content and to scan networks maintained by certain of our domestic operating units that exclusively perform U.S. defense work. However, given the unpredictability of the timing, nature and scope of such disruptions, we could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, or other manipulation or improper use of our systems or networks. We may also experience financial losses from remedial actions, loss of business or potential liability under contracts or pursuant to regulations that require us to maintain confidential and other data securely, and/or damage to our reputation. Any of these consequences could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

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Item 2.  Properties

The following table summarizes our properties that are greater than 100,000 square feet or related to a principal operation, including identification of the business segment, as of October 28, 2011:25, 2013:

*  The building is located on a parcel of land covering 16.1 acres that is leased by the Company.

In total, we own approximately 2,100,0002,300,000 square feet and lease approximately 2,100,0002,000,000 square feet of manufacturing facilities and properties.

Item 3.  Legal Proceedings

From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe we have adequately reservedadequate 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.

We are subject to U.S. export laws and regulations, including the International Traffic in Arms Regulations (ITAR), that generally restrict the export of defense products, technical data, and defense services. We have filed voluntary reports that disclosed certain technical and administrative violations of the ITAR with the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) Office of Defense Trade Controls Compliance (DDTC Office of Compliance). To address these problems, we have made a number of investments in our export compliance functions, including: additional staffing, ongoing implementation of a new software system, employee training, and establishment of a regular compliance audit program and corrective action process. The DDTC Office of Compliance acknowledged our progress and continuing improvements, but nevertheless informed us that it intends to impose civil monetary fines and administrative sanctions based on the information it had concerning our earlier history in handling ITAR-controlled transactions, including the substance of our prior voluntary disclosures and other aspects of ITAR compliance errors. Management has been in discussions with the agency and provided supplemental information with the intent of reaching a settlement. On August 15, 2013, the DDTC Office of Compliance proposed a total penalty of $20 million, with $10 million suspended and eligible for offset credit based on verified expenditures for past and future remedial compliance measures. Based on this proposal, we estimated and recorded a $10 million charge as of July 26, 2013, for this matter. We have continued discussions with the DDTC Office of Compliance on final settlement terms, and the final settlement is subject to approval by the agency. While we cannot be certain of the outcome, management believes that the final resolution of this matter will not be materially different from our estimated accrual.

Item 4.  Submission of Matters to a Vote of Security HoldersMine Safety Disclosures

No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year ended October 28, 2011.

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PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of               Equity Securities

Market Price of Esterline Common Stock

In Dollars

Principal Market – New York Stock Exchange

At the end of fiscal 2011,2013, there were approximately 369295 holders of record of the Company’s common stock. On December 19, 2011,16, 2013, there were 359294 holders of record of our common stock.

No cash dividends were paid during fiscal 20112013 and 2010.2012. We are restricted from paying dividends under our current secured credit facility, and we do not anticipate paying any dividends in the foreseeable future.

The following graph shows the performance of the Company’s common stock compared to the S&P 500 Index, the S&P MidCap 400 Index, and the S&P 400 Aerospace & Defense Index for a $100 investment made on October 27, 2006.

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Item 6.  Selected Financial Data

Selected Financial Data

In Thousands, Except Per Share Amounts

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Selected Financial Data

In Thousands, Except Per Share Amounts

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Selected Financial Data

In Thousands, Except Per Share Amounts

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Our management and certain financial creditors use EBITDA as one measure of our leverage capacity and debt servicing ability, and is shown here with respect to Esterline for comparative purposes. EBITDA is not necessarily indicative of amounts that may be available for discretionary uses by us. EBITDA includes goodwill impairment charges of $3,454 and $52,169 in fiscal 2013 and 2012, respectively. The following table reconciles operating earnings from continuing operations to EBITDA from continuing operations:

In Thousands

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes in Item 8 of this report. This discussion and analysis contains forward-looking statements and estimates that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed in the “Forward-Looking Statements” section in Item 1 of this report and the “Risk Factors” section in Item 1A of this report.

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 systems, interface technologies 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. Interface technologies manufacturesAdditionally, control and develops custom control panels and input systems for medical, industrial, military and casino gaming industries. Communicationcommunication systems designs and manufactures military audio and data products for severe battlefield environments, embedded communication intercept receivers for signal intelligence applications, as well as communication control systems to enhance security and aural clarity in military applications. Interface technologies manufactures and develops custom control panels and 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 Technologiestechnologies develops and manufactures highly engineered connectors for harsh environments and serves the aerospace, defense & space, power generation, rail and industrial equipment markets. Advanced Sensorssensors develops and manufactures high precision temperature and pressure sensors for aerospace and defense customers.

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

Our current business and strategic plan focuses on the continued development of our products principally for aerospace and defense markets. We are concentrating our efforts to expand our capabilities in these markets and to anticipate the global needs of our customers and respond to such needs with comprehensive solutions. These efforts focus on continuous research and new product development, acquisitions and strategic realignments of operations to expand our capabilities as a more comprehensive supplier to our customers across our entire product offering.

On December 5, 2013, we announced the acceleration of our plans to consolidate certain facilities and create cost-efficiency through shared services in sales, general and administrative and support functions. We are currently launching integration activities in each segment and expect to record charges and expenses of approximately $40 million. We expect to incur costs of $25 million to $30 million in fiscal 2014 to support these efforts, with the balance to be incurred in fiscal 2015. The costs are mainly for severance, relocation of facilities and long-lived asset impairment losses. Expense savings on short-cycle activities will commence in fiscal 2014, with substantially more savings expected in fiscal 2015. We expect these projects to build to anticipated savings in excess of $15 million annually starting in fiscal 2016. The projects have payback periods of approximately two years.

On February 4, 2013, we acquired the Gamesman Group (Gamesman). Gamesman is a global supplier of input devices principally serving the gaming industry. Gamesman is included in the Avionics & Controls segment.

On July 26, 2011, the Companywe acquired the Souriau Group (Souriau). Souriau is a leading global supplier of highly engineered connection technologies for harsh environments. Souriau is included in our Sensors & Systems segment.

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

On September 8, 2010, we sold Pressure Systems, Inc. (PSI), which was included in the Sensors & Systems segment. The results of PSI are accounted for as discontinued operations in the consolidated statement of operations. On November 3, 2008, we sold Muirhead Aerospace (Muirhead) and Traxsys Input Products Limited (Traxsys). Muirhead and Traxsys were included in the Sensors & Systems segment. The results of Muirhead and Traxsys are accounted for as discontinued operations in the consolidated statement of operations.

During the fourth fiscal quarter of 2011, income2013, earnings from continuing operations was $19.4were $66.2 million, or $0.62$2.07 per diluted share, compared with $49.3$61.7 million, or $1.60$1.97 per diluted share, in the prior-year period. The decrease in income from continuing operations reflected reduced operating earnings from Avionics & Controls and Sensors & Systems, increased operating earnings from Advanced Materials and the effect of Souriau acquisition-related expenses. The decrease in operating earnings of Avionics & Controls reflected lower sales and earnings of avionics systems and communication systems due to

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reduced requirements from defense customers, as well asSales during the timingfourth fiscal quarter of receiving orders and increased research, engineering and development expense. The decrease at Sensors & Systems reflected an operating loss at Souriau of $21.62013 were $534.2 million due primarily to the purchase accounting requirement to recognize the fair value of acquired inventory as expense over the first inventory turn. The increase at Advanced Materials reflected strong earnings from our engineered materials operations and a gain on sale of a facility, partially offset by decreased earnings of our defense technologies operations due to lower demand from countermeasures. Income from continuing operations was also impacted by higher interest expense and benefited from a lower income tax rate of 11.8% compared to 17.4%with $530.7 million in the prior-year period. Avionics & Controls segment sales increased 2.3% to $225.4 million from the prior-year period, mainly reflecting the Gamesman acquisition. Sensors & Systems sales increased 1.6% to $177.3 million and Advanced Materials sales decreased 3.2% to $131.5 million. Total sales were impacted by reductions in defense spending mainly due to the continued uncertainty of U.S. congressional budget cuts, or sequestration, on defense spending. The decreaseimpact of sequestration is yet to be fully determined, and additional reductions in defense spending over the income tax rate mainly reflected income tax benefits associated with the acquisition of Souriau and lower earningsnext decade could occur.

Gross margin in the fourth fiscal quarter of 2011.

During fiscal 2011, income from continuing operations2013 was $133.1 million or $4.27 per diluted share38.4% of sales compared with $130.0 million or $4.27 per diluted share during fiscal 2010, reflecting improved sales and earnings from Avionics & Controls and Advanced Materials and weaker results from Sensors & Systems. Sales and operating earnings were strong the first half of the year compared to38.5% in the prior-year periodperiod. Research, development and weaker in the second half of the year, principally reflecting reduced sales and earnings from our defense focused business operations and the operating loss of Souriau due to the inventory fair value adjustment noted above. Avionics & Controls reflected strong sales and earnings of avionics systems and control systems and weaker sales and earnings of communication systems and interface technologies. Sensors & Systems reflected improved sales and earnings of power systems and advanced sensors, partially offset by the operating loss of Souriau. Advanced Materials results reflected strong sales and earnings from engineered materials and weak performance from defense technologies, primarily due toengineering decreased demand for countermeasures.

The income tax rate for fiscal 2011 was 15.7% compared with 15.8% for fiscal 2010.

Net income in fiscal 2011 was $133.0$1.7 million or $4.27 per diluted share, compared with net income of $141.9 million or $4.66 per diluted share in fiscal 2010. Fiscal 2010 included income from discontinued operations of $0.39 per diluted share in fiscal 2010, reflecting the gain on the sale of PSI in September 2010.

Results of Continuing Operations

Fiscal 2011 Compared with Fiscal 2010

Sales for fiscal 2011 increased 12.5% over the prior year. Sales by segment were as follows:

The $51.9 million or 6.6% increase in Avionics & Controls mainly reflected increased sales volumes of avionics systems of $25 million, control systems of $25 million, and communication systems of $6 million, mostly offset by decreased sales volumes of interface technologies systems. The increase in avionics systems principally reflected strong sales volumes of avionics products of $18.2 million. The increase in control systems reflected strong OEM and after-market sales and a $4.4 million retroactive price settlement due to product scope changes. The first six months of fiscal 2011 benefited from higher demand for after-market spares due to restocking of depleted inventory by our customers. During the second six months, demand levels for spares declined and more closely reflected the underlying activity of the flying fleet. Our after-market spares sales volume level for fiscal 2012 is forecasted to continue this trend. The increased sales of communication systems principally reflected $37.6 million in incremental sales from the Eclipse acquisition completed in the first fiscal quarter of 2011, partially offset by decreased sales of hearing protection headset devices due to uncertainty over the U.S. and U.K. military budgets. Avionics & Controls segment sales are expected to increase modestly to about $850 million in fiscal 2012, reflecting a strong commercial aerospace market, improved requirements for headsets and embedded communication intercept receivers for signal intelligence applications, higher requirements for input devices for medical applications, and partially offset by lower sales of avionics systems due to delayed orders for retrofits of military transport aircraft.

The $116.1 million or 38.9% increase in Sensors & Systems mainly reflected incremental sales from the Souriau acquisition in the third quarter of fiscal 2011 of $78 million and increased sales volumes of advanced sensors of $16 million and power systems of $22 million. The increase in advanced sensors sales mainly reflected strong aftermarket demand for

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temperature and pressure sensors. The increase in power systems mainly reflected higher OEM and retrofit sales for commercial aviation. Induring the fourth fiscal quarter of 2011, Souriau’s sales were impacted by lower demand for industrial applications, which is expected2013 to continue in the first fiscal quarter4.3% of 2012sales. Selling, general and improve over the remaining three fiscal quarters of 2012 as sales for defense, nuclear, and other industrial applications increase. Segment sales in the second, third and fourth quarters of fiscal 2011 reflected a stronger pound sterling and euro compared to the U.S. dollar compared to the prior-year period, while sales in the first quarter of fiscal 2011 reflected a weaker pound sterling and euro relative to the U.S. dollar relative to the prior-year period. Sensors & Systems sales in fiscal 2012 are expected to be nearly $730administrative expense decreased $4.9 million in fiscal 2012, reflecting a full year of Souriau’s sales.

The $23.4 million or 5.3% increase in sales of Advanced Materials principally reflected a $33 million decrease in sales volumes of defense technologies and a $54 million increase in sales of engineered materials. The decrease in sales of defense technologies mainly reflected lower sales volumes of countermeasures, principally due to lower requirements from our non-U.S. customers. The increase in sales of engineered materials reflected strong demand for elastomer and insulation materials for commercial aerospace applications. Advanced Materials segment sales are expected to be nearly $480 million in fiscal 2012, reflecting strong commercial aerospace and energy markets and improved demand for non-U.S. flare countermeasures.

Foreign sales, including export sales by domestic operations, totaled $971.0 million and $860.0 million, and accounted for 56.5% and 56.3% of our sales in fiscal 2011 and 2010, respectively.

Overall, gross margin as a percentage of sales was 34.3% and 33.8% in fiscal 2011 and 2010, respectively. Gross profit was $589.7 million and $516.2 million in fiscal 2011 and 2010, respectively.

Avionics & Controls segment gross margin was 38.8% and 35.7% for fiscal 2011 and 2010, respectively. Segment gross profit was $326.5 million compared to $282.4 million in the prior-year period. About 70% of the net $44 million increase in segment gross profit was due to strong sales volume and improved gross margin on avionics systems. This reflects increased sales volumes of aviation products and higher gross margin on cockpit integration sales. Nearly 35% of the increase in segment gross profit reflected robust sales of control systems due to strong aftermarket demand and the $4.4 million retroactive price increase referenced above. Control systems gross profit was impacted by a $2.0 million charge induring the fourth fiscal quarter of 2011 for engineering costs not probable2013 to 17.3% of recovery from the customer. Eclipse’s gross profit was impacted by purchase accounting requirements resulting insales, mainly reflecting a $5.4 million inventory fair value adjustment and recognizing the adjustment as expense over the first inventory turn; approximately $2.0 million was recorded as an expense in the fourth fiscal quarterfavorable settlement of 2011. Interface technologies gross profit decreased by approximately $3.5 million, principally due to lower demand and gross margin for interface devices for casino gaming applications.

Sensors & Systems segment gross margin was 28.3% and 34.6% for fiscal 2011 and 2010, respectively. Segment gross profit was $117.4 million and $103.2 million for fiscal 2011 and 2010, respectively. Connection technologies reported only minimal gross profit, net of a $27.9 million inventory fair value adjustment, principally recognized in the fourth fiscal quarter of 2011. An additional $12.6 million in fair value adjustments will be recognized in the first fiscal quarter of 2012. Approximately 55% of the increase in segment gross profit was due to increased sales volumes of pressure sensors for OEM and aftermarket requirements. About 45% of the increase in segment gross profit was due to improved gross margin on power systems reflecting increased retrofit and OEM sales.

Advanced Materials segment gross margin was 31.6% and 29.8% for fiscal 2011 and 2010, respectively. Segment gross profit was $145.8 million and $130.6 million for fiscal 2011 and 2010, respectively. A $26 million increase in engineered materials gross profit was partially offset by a decrease in gross profit at our defense technologies operations. The increase in engineered materials gross profit was principally due to increased sales volumes of elastomer and insulation material for commercial aerospace applications. The decrease in gross profit of defense technologies mainly reflected lower sales volumes of countermeasures.

Selling, general and administrative expenses (which include corporate expenses) increased to $304.2 million in fiscal 2011 compared with $258.3 million in fiscal 2010. The $45.9 million increase reflected an increase of $9 million of corporate expense, $14 million at our Avionics & Controls segment, and $23 million at our Sensors & Systems segment. The $9 million increase at corporate primarily reflects Souriau acquisition-related expenses; approximately $1.4 million was incurred in the fourth fiscal quarter of 2011. The $14 million increase at Avionics & Controls reflects $8 million in incremental selling, general and administrative expenses related to the Eclipse acquisition. The $23 million increase at Sensors & Systems reflects $20 million in incremental selling, general and administrative expenses related to the Souriau acquisition. Selling, general and administrative expenses at Advanced Materials increased slightly compared to the prior-year period reflecting $1.9 million for an estimated liability for an environmental issue, $2.0 million in severance at our defense technologies operations and a $1.3 million expense principally related to the write-off of accounts receivable. These increases were principally offset by a $3.2 million gain on a sale of a facility and an insurance recovery in fiscal 2010.

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Research, development and related engineering spending increased to $94.5 million, or 5.5% of sales, in fiscal 2011 compared with $69.8 million, or 4.6% of sales, in fiscal 2010. The $24.8 million increase in research, development and related engineering expense principally reflects $14 million in higher spending on avionics systems, $4 million on control systems and $4 million on communication systems.

In fiscal 2011 we benefited from $6.3 million in foreign currency exchange gains associated with funding the acquisition of Souriau.claim.

Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the fourth quarter of fiscal 2011 were $45.1totaled $101.2 million, or 9.0%19.0% of sales, compared with $83.2$90.3 million, or 19.3%17.0% of sales, forin the prior-year period. The $38.1increase in segment earnings reflected improved operating earnings from Sensors & Systems and Advanced Materials, while Avionics & Controls earnings were even compared to the prior-year period. Avionics & Controls earnings in the fourth fiscal quarter of 2013 benefited from a gain on sale of a product line and recognition of previously deferred revenue. Operating earnings of Sensors & Systems increased due to improved gross margin and lower research, development and engineering expense. Advanced Materials earnings compared favorably to the prior-year period mainly reflecting a favorable settlement of an environmental claim and a recovery of non-recurring engineering expense from a customer. The income tax rate for the fourth fiscal quarter of 2013 was 20.4% compared to 13.0% in the prior-year period. Our income tax rate in the fourth fiscal quarter of 2012 was favorably impacted by a $1.4 million decreaserelease of valuation allowance related to foreign tax credits as a result of a tax examination.

Loss from discontinued operations for the fourth fiscal quarter of 2013 was $0.3 million or $0.01 per diluted share. There was no income or loss from discontinued operations in the prior-year period.

Net income for the fourth fiscal quarter of 2013 was $65.9 million, or $2.06 per diluted share, compared with $61.7 million, or $1.97 per diluted share, in the fourth fiscal quarter of 2012.

During fiscal 2013, earnings mainly reflectedfrom continuing operations was $166.0 million, or $5.23 per diluted share, compared with $112.5 million, or $3.60 per diluted share, during fiscal 2012. In fiscal 2013 we recorded a $3.5 million, or $0.11 per diluted share, impairment charge against goodwill of Racal Acoustics, Inc. (Racal Acoustics), our military headset business, which is included in our Avionics & Controls segment, due to continued weakness in Racal Acoustics’ fiscal 2013 and five-year forecast resulting from further delays and reductions in global defense programs. The results for fiscal 2013 also were impacted by a $10 million charge, or $0.32 per diluted share, related to our pending matter with the operating lossDDTC, as more fully discussed below. In the prior-year period, we recorded a $52.2 million, or $1.67 per diluted share, impairment charge against goodwill of SouriauRacal Acoustics. In fiscal 2012, all contingencies relating to a dispute between CMC Electronics, Inc. (CMC) and a former parent company were resolved, and accordingly, we recorded a gain of $21.6approximately $11.9 million principallyor $9.5 million after tax.

During fiscal 2013, sales declined 1.1% to $1.97 billion. Gross margin increased to 36.9%. Research, development and engineering decreased $12.0 million across all segments to 4.9% of sales. Selling, general and administrative expense increased $8.3 million to 19.9% of sales, mainly due to the fair value inventory adjustment noted above$10.0 million charge for the DDTC matter.

We are subject to U.S. export laws and partiallyregulations, including the International Traffic in Arms Regulations (ITAR), that generally restrict the export of defense products, technical data, and defense services. We have filed voluntary disclosure reports concerning certain technical and administrative violations of the ITAR with the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) Office of Defense Trade Controls Compliance (DDTC Office of Compliance). To address these problems, we have made a number of investments in our export compliance functions, including: additional staffing, ongoing implementation of a new software system, employee training, and establishment of a regular compliance audit program and corrective action process. The DDTC Office of Compliance acknowledged our progress and continuing improvements, but nevertheless informed us that it intends to impose civil monetary fines and administrative sanctions based on the information it had concerning our earlier history in handling ITAR-controlled transactions, including the substance of our prior voluntary disclosures and other aspects of ITAR compliance errors. Management has been in discussions with the agency and provided supplemental information with the intent of reaching a settlement. On August 15, 2013, the DDTC Office of Compliance proposed a total penalty of $20 million, with $10 million suspended and eligible for offset credit based on verified expenditures for past and future remedial compliance measures. Based on this proposal, we estimated and recorded a $10 million charge in fiscal 2013. We have continued discussions with the DDTC Office of Compliance on final settlement terms, and the final settlement is subject to approval by incremental earningsthe

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agency. While we cannot be certain of Eclipsethe outcome, management believes that the final resolution of $2.3 million. this matter will not be materially different from our estimated accrual. Management believes that the additional expense associated with improving our compliance program will increase compliance cost about $10 million in fiscal 2014 compared to the prior-year period.

The income tax rate for fiscal 2013 was 15.2% compared with 20.9% for fiscal 2012, mainly reflecting the impact of fiscal 2012 expense associated with the Racal Acoustics impairment, which was not deductible for income tax purposes.

Loss from discontinued operations for fiscal 2013 was $1.3 million or $0.04 per diluted share. There was no income or loss from discontinued operations in the prior-year period.

Net income for fiscal 2013 was $164.7 million, or $5.19 per diluted share, compared with $112.5 million, or $3.60 per diluted share, for fiscal 2012.

Cash flows from operating activities were $250.8 million in fiscal 2013 compared to $194.2 million in the prior-year period.

Results of Operations

Fiscal 2013 Compared with Fiscal 2012

Sales for fiscal 2013 decreased 1.1% over the prior year. Sales by segment were as follows:

The $18.4 million, or 2.3% decrease alsoin Avionics & Controls mainly reflected weaker operating earnings at ourdecreased sales volumes of avionics systems and communications headset operations totaling $15of $12 million and defense technologies countermeasure operations totaling $8control and communication systems of $41 million, partially offset by stronger operating results at our engineered materials operationsan increase in sales volumes of $11 million. Avionicsinterface technologies. The decrease in avionics systems earnings in the fourth quarter were impacted by higher research and development expense andwas principally due to lower shipments of the integrated cockpit integration sales volumes for the T-6B military trainer compared to the same periods last year. The decrease at communication systems and defense technologies was due to lower demandretrofits for headsets and flare countermeasures, respectively, which reflect slower than expected order releases from our defense customers. Engineered materials operations benefited from strong demand for elastomer and insulation materials for commercial aerospace.military transport aircraft. The decrease in segment earnings alsocontrol and communication sales mainly reflected a $2.0$28 million write-offdecrease in sales of engineering costs at controls systems, a $1.1 million inventory and accounts receivable write-off at advanced sensors, a $2.0 million write-off of accounts receivable and inventory at defense technologies,communication intercept receivers for signal intelligence applications and a $0.6 million late delivery penalty at engineering materials, partially offset by a $3.2 million gain on the sale of an engineered material facility.

Segment earnings for fiscal 2011 were $240.0 million, or 14.0% of sales, compared with $228.6 million, or 15.0% of sales, for fiscal 2010. Avionics & Controls segment earnings were $135.2 million or 16.1% of sales in fiscal 2011 compared with $125.9 million or 15.9% of sales in fiscal 2010, mainly reflecting a $12 million increase in avionics systems, a $9 million increase in control systems, a $10.0$7 million decrease in communication systems to enhance security and a $2aural clarity in military communication applications. The increase in interface technologies was principally due to incremental sales from the Gamesman acquisition.

Sensors & Systems sales were even with the prior-year period. A $6 million decrease in interface technologies. sales of advanced sensors was offset by an equal increase in power systems sales. The decrease in advanced sensors sales reflected lower OEM and aftermarket sales. The increase in power systems sales principally reflected retrofit sales. Connection technologies sales were even with the prior-year period reflecting a weaker euro relative to the U.S. dollar compared to the prior-year period. Strong sales of connection technologies for commercial aviation were offset by weaker sales for industrial equipment and defense applications.

The $3.7 million, or 0.7% decrease, in sales of Advanced Materials principally reflected lower sales volumes of combustible ordnance reflecting the impact from sequestration, partially offset by higher international sales of flare countermeasures.

Foreign sales originating from non-U.S. locations, including export sales by domestic operations, totaled $1.2 billion in both fiscal 2013 and 2012, and accounted for 59.5% and 59.2% of our sales in fiscal 2013 and 2012, respectively.

Overall, gross margin as a percentage of sales was 36.9% and 36.1% in fiscal 2013 and 2012, respectively. Gross profit was $726.0 million and $719.0 million in fiscal 2013 and 2012, respectively.

Avionics & Controls segment gross margin was 38.5% and 39.5% for fiscal 2013 and 2012, respectively. Segment gross profit was $296.9 million compared to $311.7 million in the prior-year period. The decrease in gross profit mainly reflected lower sales of communication intercept receivers for signal intelligence applications and communication systems to enhance security and aural clarity in military communication applications.

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Sensors & Systems segment gross margin was 37.4% and 34.8% for fiscal 2013 and 2012, respectively. Segment gross profit was $262.8 million and $244.6 million for fiscal 2013 and 2012, respectively. The increase in gross profit was mainly due to increased gross profit in connection technologies, reflecting a $12 million charge recorded in the first quarter of fiscal 2012 due to recording Souriau’s acquired inventory at its fair value. Segment gross profit also benefited from strong retrofit sales of power systems.

Advanced Materials segment gross margin was 33.5% and 32.5% for fiscal 2013 and 2012, respectively. Segment gross profit partially offset by a $14was $166.2 million and $162.7 million for fiscal 2013 and 2012, respectively. The increase in research, developmentgross profit was principally due to higher sales of elastomer materials primarily for defense applications.

Selling, general and engineering expense and a $5.0administrative expenses (which include corporate expenses) increased to $391.2 million, or 19.9% of sales, in fiscal 2013 compared with $382.9 million, or 19.2% of sales, in fiscal 2012. The $8.3 million increase in selling, general and administrative expenses reflecting increased bid and proposal expense and incentive compensation. Control systems benefited from increased gross profit, partially offset byreflects a $4$19 million increase in research, engineeringcorporate expense, a $5.1 million reduction in Avionics & Controls and development, net of a $1.1an $8.7 million recovery of non-recurring engineeringreduction in Advanced Materials expense. The increase in corporate expense upon settlement withwas mainly due to the customer.$10 million loss contingency related to the DDTC matter, professional fees for regulatory compliance and expenses related to our European headquarters. The decrease in Avionics & Controls expense reflected a $1 million reduction of our allowance for doubtful accounts for Hawker Beechcraft; in addition, the prior-year period reflected bad debt expense of $2.3 million due to the bankruptcy of Hawker Beechcraft. The $8.7 million decrease in Advanced Materials mainly reflected recovery of a prior-year $2.4 million estimated liability for an environmental claim. The claim was settled in fiscal 2013 for $0.5 million and fully indemnified by the prior owner of the business. Advanced Materials selling, general and administrative expenses were also lower due to decreased legal, bad debt and severance expenses.

Research, development and related engineering spending decreased to $95.7 million, or 4.9% of sales, in fiscal 2013 compared with $107.7 million, or 5.4% of sales, in fiscal 2012. The decrease in research, development and engineering spending principally reflects lower spending on avionics systems.

Segment earnings for fiscal 2013 were $300.1 million, or 15.2% of sales, compared with $219.4 million, or 11.0% of sales, for fiscal 2012. The increase in segment earnings reflects the $52.2 million impairment charge against goodwill of Racal Acoustics in fiscal 2012. We also recorded an impairment charge of $3.5 million against goodwill of Racal Acoustics in the third fiscal quarter of 2013. If the impairment charges in each period in fiscal 2013 and 2012 are excluded, segment earnings totaled $303.5 million, or 15.4% of sales, and $271.5 million, or 13.6% of sales, for fiscal 2013 and 2012, respectively.

Avionics & Controls segment earnings were $103.2 million, or 13.4% of sales, in fiscal 2013 compared with $54.9 million, or 7.0% of sales, in fiscal 2012. Excluding the impairment charges in both fiscal 2013 and 2012 referred to above, segment earnings were $106.7 million, or 13.8% of sales, and $107.1 million, or 13.6% of sales, in fiscal 2013 and 2012, respectively. Control and communication systems earnings decreased $12 million mainly reflecteddue to decreased gross profit from lower sales of certain communication systems for audio and data products for severe battlefield environments, resulting in a $14 million decrease in communication systems earnings, partially offset by incremental income from the Eclipse acquisition. We expect that segment operating earnings will be about 16% of sales on sales of $850 million for fiscal 2012, reflecting a strong commercial aerospace market and improved sales and profits from sales of headset devices and embedded communication intercept receivers for signal intelligence applications. Avionics systems earnings increased from the prior period reflecting decreased research, development and engineering expense of $7 million. Segment earnings also benefited from a $2.3 million gain on sale of a product line and certain contractual recoveries of non-recurring engineering expense.

Sensors & Systems segment earnings were $22.5$89.7 million, or 5.4%12.8% of sales, in fiscal 20112013 compared with $33.9$70.9 million, or 11.4%10.1% of sales, in fiscal 2010, principally2012, reflecting a $6.6the $12.0 million increasecharge in advanced sensors and a $4.5 million increase in2012 due to recording Souriau’s acquired inventory at its fair value. Sensors & Systems earnings also benefited from increased earnings of power systems both operations benefiting from increasedimproved gross profit. Souriau incurred an operating loss of $22.4 million, principally reflecting the inventory fair value adjustment referenced above. As noted above, Souriau’s operating results will be impacted by a $12.6 million fair value inventory adjustment in the first fiscal quarter of 2012. We expect that segment earnings will be nearly 10% of sales on sales of $730.0 million, reflecting a strong commercial aerospace market, stronger demand for connectors for industrial applications in the second half of the fiscal year and fully recognizing the fair value inventory adjustment related to the Souriau acquisition in the first fiscal quarter of 2012.margin.

Advanced Materials segment earnings were $82.3$107.2 million, or 17.8%21.6% of sales, in fiscal 20112013 compared with $68.8$93.5 million, or 15.7%18.7% of sales, in fiscal 2010,2012, primarily reflecting increased earnings from sales of engineered materials of $7 million, partially offset by a $15 million decrease inweaker earnings from sales of defense technologies. The increase in engineered materials principallyearnings reflected the increase in gross profit, a $3.2 million gain on sale of a facility, partially offset by a $1.9 million increase in an estimated liability for an environmental issue. Defense technologies principally reflected a $19 million decrease in earnings for countermeasures operations and increased earnings of combustible ordnance. The decrease in earnings for countermeasures mainly reflected the decrease in gross profit and certain charges inprofit.

In the fourth fiscal quarter of 2011 totaling $2.0fiscal 2013, we sold a product line in our Avionics & Controls segment and realized a $2.3 million consisting principally of a write-off of an accounts receivable of $0.8 million and $0.5 million in inventory. Also, $2.0 million in severance was recorded ingain.

In the third fiscalsecond quarter of 2011. We expect that segment earnings will be nearly 18%fiscal 2012, all contingencies relating to a dispute between CMC and a former parent company were resolved, and accordingly, we recorded a gain of sales on sales of about $480approximately $11.9 million reflecting a strong commercial aerospace market and improved sales and profitability from sales of international flare countermeasures.or $9.5 million after tax.

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Interest expense increaseddecreased to $40.2$39.7 million during fiscal 20112013 compared with $33.2$46.2 million in the prior year, reflecting higherlower borrowings.

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The income tax rate for fiscal 20112013 was 15.7%15.2% compared with 15.8%20.9% in fiscal 2010.2012. The tax rate was lower than the statutory rate, as both years benefited from various tax credits and certain foreign interest expense deductions. During fiscal 2011,2013, we recognized $11.4$12.7 million of discrete income tax benefits as a result ofprincipally related to the following items: $3.1items. The first item was approximately $1.5 million of income tax benefits due to the retroactive extension of the U.S. federal research and experimentation credits and the releasecredits. The second item was approximately $2.5 million of a valuation allowancetax benefits related to a net operating lossthe settlement of an acquired subsidiary; $5.6 million of incomeU.S. and foreign tax benefits associated with net operating losses of an acquired subsidiary as a result of concluding a tax examination; $3.5 million of net reduction of deferred income tax liabilities as a result of enactment of income tax laws reducing the U.K. statutory income tax rate; and $0.8 million of income tax expense as a result of reconciling the prior-year’s income tax returns to the prior year’s provision for income tax. We expect the income tax rate to be approximately 20% in fiscal 2012.

In fiscal 2010, we recognized $11.0 million in net discrete tax benefits.examinations. The $11.0 million discrete tax benefits were the result of four events. The first eventthird item was a $7.6$4.9 million tax benefit as a result ofrelated to the release of tax reserves for uncertain tax positions mainly associated with losses on the disposition of assets. This release of tax reserves resulted fromdue to the expiration of a statute of limitations. The second eventfourth item was a $1.7$3.8 million net reduction inof net deferred income tax liabilities which was theas a result of the enactment of tax laws reducing the U.K. statutory income tax rate. The third event was a $0.8

In fiscal 2012, we recognized $8.7 million tax expense related to tax liabilities associated with an examination of the U.S. federal and statediscrete income tax returns. The fourth event was a $2.5 million reduction of valuation allowances related to acquired net operating losses and foreign tax credits that were generated in prior years.

The income tax rate differed from the statutory rate in fiscal 2011 and 2010, as both years benefited from various tax credits and certain foreign interest expense deductions.

It is reasonably possible that within the next 12 months approximately $0.8 million of tax benefits associated with research and experimentation tax credits, capital and operating losses that are currently unrecognized could be recognized as a result of the following items. The first item was a $2.3 million tax benefit due to a change in French tax laws associated with the holding company structure and the financing of the Souriau acquisition. The second item was a $2.9 million reduction of the U.K. statutory income tax rate. The third item was a $2.1 million tax benefit as a result of reconciling the prior-year’s income tax return to the U.S. income tax provision and settlement of examinations and/or the expirationtax examinations. The fourth item was a $1.4 million release of a statutevaluation allowance related to foreign tax credits as a result of limitations.a tax examination.

We expect the income tax rate to be in the range of 21% to 22% in fiscal 2014.

To the extent that sales are transacted in a currency other than the functional currency of the operating unit, we are subject to foreign currency fluctuation risk.

We use forward contracts to hedge our foreign currency exchange risk. To the extent that these hedges qualify under U.S. GAAP, the amount of gain or loss is deferred in Accumulated Other Comprehensive Income (AOCI) until the related sale occurs. Also, we are subject to foreign currency gains or losses from embedded derivatives on backlog denominated in a currency other than the functional currency of our operating companies or its customers. Gains and losses on forward contracts, embedded derivatives, and revaluation of assets and liabilities denominated in a currency other than the functional currency of the Company for fiscal 20112013 and 2010 are2012 were as follows:

(In thousands)Thousands

Gain (Loss)

New orders for fiscal 20112013 were $1.9 billion compared with $1.6$2.1 billion for fiscal 2010.2012. Orders by segment for fiscal 2013 decreased for our Avionics & Controls and Advanced Materials segments compared to the prior-year period and increased across allfor Sensors & Systems compared to the prior-year period. The decrease in orders for Avionics & Controls and Advanced Materials was mainly due to the effects of our segments, principally reflecting the acquired backlog of Eclipse and Souriau and partially offset by order declines for avionics systems, certain communication systems and defense technologies.sequestration. Backlog at the end of fiscal 20112013 and 2012 was $1.3 billion compared with $1.1 billion at the end of the prior year.billion. Approximately $352.8$332 million is scheduled to be delivered after fiscal 2012.2014. Backlog is subject to cancellation until delivery.

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Fiscal 20102012 Compared with Fiscal 20092011

Sales for fiscal 20102012 increased 8.5%16.0% over the prior year. Sales by segment were as follows:

The 17.4% increase$51.9 million, or 6.2% decrease, in Avionics & Controls mainly reflected increaseddecreased sales volumes of avionics systems of $71.9 million, interface technologies systems of $27.0$64 million and communication systems offset by an increase in sales volumes of $22.2 million.control systems. The decrease in avionics systems was principally due to lower cockpit integration sales volumes for the T-6B military trainer and retrofits for military transport aircraft. The decrease in sales for the T-6B was due the bankruptcy filing of Hawker Beechcraft. The decrease in segment sales also reflected a $16 million decrease in sales of hearing protection headsets due to reduced demand and order delays, of which about 50% was offset by higher sales of communication intercept receivers for signal intelligence applications. The increase in avionicscontrol systems principally reflected strong cockpit integration sales volumes.was mainly due to higher sales to OEM customers. The prior-year period benefited from a $4.4 million retroactive price settlement due to product scope changes.

The $287.8 million, or 69.4% increase, in interface technologies systems mainly reflected increased sales volumes of input devices for casino gaming and medical applications. The increased sales of communication systemsSensors & Systems principally reflected $16.9 million in incremental sales from the Racal AcousticsSouriau acquisition completed in the first fiscal quarter of 2009. These increases were partially offset by lower$250 million and increased sales volumes of control systems of $4.1 million, principally cockpit controls for commercial and military applications.

The 7.2% decrease in Sensors & Systems mainly reflected decreased sales volumesvolume of advanced sensors of $10.3 million and power systems of $12.9$36 million. The decreaseAbout 60% of the increase in advanced sensors principally reflected lower OEM sales volumes of temperature and pressure sensors due to the downturn in commercial aviation and in particular business jets. Additionally, fiscal 2009 benefited from a $1.8 million retroactive price adjustment and settlement with certain customers. The decrease in power systems sales wasreflected increased sales of power systems due to the downturn inhigher demand for commercial aviation and was partially offset by a $3.7 millionproducts. The increase in retrofitadvanced sensors reflected higher OEM sales and strong aftermarket demand for commercial aviation.aerospace and industrial customers. Sales in the first six months of fiscal 20102012 reflected a stronger pound sterling andweaker euro relative to the U.S. dollar and a weaker pound sterling and euro relative tocompared with the U.S. dollar during the second six months of the fiscal year.prior-year period.

The 6.1%$38.5 million, or 8.3% increase, in sales of Advanced Materials principally reflected an increase inincreased sales volumes of engineered materials of $40 million, partially offset by decreased sales volumes of defense technologies. The increase in engineered materials primarily reflected strong demand for elastomer and insulation materials for commercial aviation products. The decrease in defense technologies andprincipally reflected a decrease in sales of engineered materials. The increase in sales of defense technologies mainly reflected higher sales volumes of countermeasures of $36.5 million, principally related to low sales volume in the prior-year periodnon-U.S. countermeasure flares due to thereduced demand and order delays in the processing of and scheduling shipments of our international customers. The $10.9 million decrease in sales of engineered materials reflectedas well as lower demand for elastomer materials due to the downturn in commercial aviation and industrial commercial markets.combustible ordnance.

Foreign sales originating from non-U.S. locations, including export sales by domestic operations, totaled $860.0 million$1.2 billion and $788.8$971.0 million, and accounted for 56.3%59.2% and 56.0%56.5% of our sales in fiscal 20102012 and 2009,2011, respectively.

Overall, gross margin as a percentage of sales was 33.8%36.1% and 32.2%34.3% in fiscal 20102012 and 2009,2011, respectively. Gross profit was $516.2$719.0 million and $453.3$589.7 million in fiscal 20102012 and 2009,2011, respectively.

Avionics & Controls segment gross margin was 35.7%39.5% and 35.4%38.8% for fiscal 20102012 and 2009,2011, respectively. Segment gross profit was $282.4$311.7 million compared to $238.5$326.5 million in the prior-year period. About 60% of the increaseThe decrease in segment gross profit was mainly due to stronglower sales of avionics systems, reflecting increased sales volumes of cockpit integration for the T-6B military trainer cockpit and aretrofits of military transport cockpit retrofit program. The remaining 40% increase in segment gross profit reflected strong sales volumes of interface technologies systems and communication systems,aircraft, partially offset by an $8.7 million decrease in control systems. The increase in interface technologiesincreased gross profit is due to higher sales volumes of input devices for casino gaming applications and higher sales volumes for medical applications. The increase in communication systems gross profit mainly reflects incremental gross profit from the acquisition of Racal Acoustics in the first fiscal quarter of 2009. The decrease in gross profit on control systems is mainly due to weaker gross margin of controls for commercial and military applications, as well as higher operating costs from our new control systems facility.avionics software testing business.

Sensors & Systems segment gross margin was 34.6%34.8% and 32.3%28.3% for fiscal 20102012 and 2009,2011, respectively. Segment gross profit was $103.2$244.6 million and $104.0$117.4 million for fiscal 20102012 and 2009,2011, respectively. The declineApproximately 10% of the increase in gross profit is principally due toreflected strong demand for power systems for commercial aviation applications. Approximately 85% of the effect of a decrease in advanced sensors sales volume in fiscal 2010, partially offset by an increase in gross margin. The increase in gross marginprofit was mainly due to incremental gross profit from the Souriau acquisition. Souriau’s gross profit was impacted by a $1.2$12 million charge in the first fiscal quarter of 2012 due to recording Souriau’s acquired inventory at its fair value. The prior-year period included a $27.9 million inventory write-offfair value adjustment, recognized principally in the fourth fiscal 2009. Power systems gross profit improved slightly due to retrofits for commercial aviation applications and strong cost control, partially offset by lower sales volumes.quarter of 2011.

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Advanced Materials segment gross margin was 29.8%32.5% and 26.9%31.6% for fiscal 20102012 and 2009,2011, respectively. Segment gross profit was $130.6$162.7 million and $110.9$145.8 million for fiscal 20102012 and 2009, respectively,2011, respectively. The increase in gross profit was principally due to higher sales of elastomer materials and insulation materials primarily for commercial aviation applications. Gross profit on defense technologies increased slightly, principally reflecting an increase in defense technologies offset by a small decrease in engineered materials. The increased gross profit and margin on defense technologies reflected a $23.5 million increase onflare countermeasures, partially offset by decreasedlower gross profit on combustible ordnance. The increase in gross profit on countermeasures was principallyordnance due to decreased sales volume with additional benefits from improved sales mix and efficiency from longer production runs. Fiscal 2009 countermeasures gross profit was impacted by delays in the processing of and scheduling shipments of our international customers. The decrease in gross profit on engineered materials principally reflected $2.3 million in costs associated with closing a facility.volumes.

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Selling, general and administrative expenses (which include corporate expenses) increased to $258.3$382.9 million, or 19.2% of sales, in fiscal 20102012 compared with $235.5$304.2 million, or 17.7% of sales, in fiscal 2009.2011. The increase in selling, general and administrative expense principally reflected a $65.1 million increase in selling, general and administrative expense at our Sensors & Systems segment due to incremental selling, general and administrative expense from the acquisition of Racal AcousticsSouriau acquisition. Selling, general and NMC of $5.8administrative expense increased $19.4 million at Avionics & Controls and Advanced Materials. This increase reflects a $9.1$2.8 million increase in corporate expense mainlybad debt due to incentive compensation and professional fees, and the effectbankruptcy filing of exchange rates on operating expenses at our non-U.S. operations of $4.7 million. As a percentage of sales,Hawker Beechcraft, $5 million in incremental selling, general and administrative expenses were 16.9%expense from the Eclipse acquisition, and 16.7%$4.3 million in severance costs. Corporate expense decreased $5.8 million from fiscal 2010 and 2009, respectively.2011, principally reflecting lower acquisition-related expenses.

Research, development and related engineering spending increased to $69.8$107.7 million, or 4.6%5.4% of sales, in fiscal 20102012 compared with $64.5$94.5 million, or 4.6%5.5% of sales, in fiscal 2009.2011. The $13.2 million increase in research, development and related engineering expense principally reflects $2.4 million in higherthe incremental spending on communication systems and $2.1of $9 million on controlconnection technologies reflecting a full-year impact due to the acquisition of Souriau and $6 million on power systems.

Segment earnings (which exclude corporate expenses and other income and expense) increased 23.8% duringfor fiscal 2010 to $228.62012 were $219.4 million, compared to $184.7 million in the prior year. Segment earnings as a percentor 11.0% of sales, were 15.0% and 13.1%compared with $240.0 million, or 14.0% of sales, for fiscal 2011. The decrease in segment earnings reflects the $52.2 million impairment charge against goodwill of Racal Acoustics. If the impairment charge is excluded, segment earnings totaled $271.5 million, or 13.6% of sales, for fiscal 2010 and 2009, respectively.2012.

Avionics & Controls segment earnings were $125.9$54.9 million, or 15.9%7.0% of sales, in fiscal 20102012 compared with $99.3$135.2 million, or 14.8%16.1% of sales, in fiscal 2009, principally reflecting2011. Excluding the $52.2 million impairment charge, segment earnings were $107.1 million, or 13.6% of sales, in fiscal 2012. The decrease in segment earnings from the prior-year period reflects a $20.3$22 million increasedecrease in avionics systems. Avionics systems benefited from strong gross profit, partially offset byearnings and a $4.7 million increase in selling, general and administrative expenses, principally due to the effects of foreign currency exchange rates. Segment earnings also benefited from increased earnings of interface technologies systems and communication systems of $15.3 million and were partially offset by a $9.0$5 million decrease in control systems. Interface technologies benefited from strong gross profit from sales of input devices for casino gaming and medical applications. The increase in communication systems earnings was due to incremental earnings from the Racal Acoustics acquisition of $1.5 million and improved gross margin. Controlearnings. Avionics systems earnings were impacted by decreased gross profit and $4.1a $2.3 million bad debt expense due to the bankruptcy of Hawker Beechcraft, partially offset by a decrease in increasedspending on research, development costs.and engineering. Control systems earnings were impacted by an increase in research, development and engineering expense. Additionally, the second fiscal quarter of 2011 benefited from a $1.1 million recovery of non-recurring engineering expense upon settlement with a customer of control systems.

Sensors & Systems segment earnings were $33.9$70.9 million, or 11.4%10.1% of sales, in fiscal 20102012 compared with $31.7$22.5 million, or 9.9%5.4% of sales, in fiscal 2009, mainly2011, principally reflecting a $1.2$40 million decrease in incremental earnings from the Souriau acquisition and increases in sales in both power systems and advanced sensorssensors. Souriau incurred an operating loss of $22.4 million in fiscal 2011 principally reflecting the inventory fair value adjustment referenced above. Power systems benefited from increased gross profit,profits, partially offset by decreased selling, generalhigher research, development and administrative expenses, principallyengineering spending. Advanced sensors benefited from increased gross profits mainly due to the $3.0higher aftermarket demand and a $1.9 million impairmentrecovery of non-recurring engineering and higher French tax credits on a subsidiary trade name recorded in fiscal 2009.research, development and engineering expense.

Advanced Materials segment earnings were $68.8$93.5 million, or 15.7%18.7% of sales, in fiscal 20102012 compared with $53.6$82.3 million, or 13.0%17.8% of sales, in fiscal 2009,2011, primarily reflecting a $21.4 million increase in defense technologies, partially offset by decreasedincreased earnings from sales of engineered materials. Defensematerials of $9 million and improved earnings from sales of defense technologies. The increase in engineered materials earnings reflected the increase in gross profit. The prior-year period benefited from a $3.2 million gain on sale of a facility, partially offset by a $1.7 million increase in an estimated liability for an environmental issue, which was paid in fiscal 2012. The improvement in results for defense technologies principally reflected a $24.6 millionan increase in earnings for countermeasures operations andpartially offset by decreased earnings of combustible ordnance.ordnance of $3 million.

Prior to our March 2007 acquisition of CMC, CMC was involved in a transaction in which CMC shareholders had a limited amount of time in which to tender their shares in exchange for cash. In May 2008, after the prescribed time period had expired, CAD $11.8 million remained unclaimed. As a result, the paying agent returned the unclaimed amount to CMC in accordance with Canadian law. In December 2008, CMC’s former parent company instituted a legal action against the paying agent, alleging negligence and breached contract terms by returning the funds to CMC. The increaseplaintiff lost at trial and appealed. In the second quarter of fiscal 2012, CMC received notice that the plaintiff abandoned its appeal. In addition, CMC and the paying agent settled all remaining issues. All contingencies relating to this matter were resolved, and accordingly, the Company recorded a gain of approximately CAD $11.8 million or $11.9 million, or $9.5 million after tax, in countermeasures earnings reflected strong gross profit and a turnaround from a $6.0 million operating loss incurred inthe second fiscal 2009. The decrease in combustible ordnance is due to decreased gross profit. The reduction in engineered materials earnings reflected $3.6 million in costs associated with closing a facility and a $1.8 million decrease in foreign currency exchange gains, principally on forward contracts which are marked to market each period.quarter of 2012.

Interest expense increased to $33.2$46.2 million during fiscal 20102012 compared with $28.7$40.2 million in the prior year, reflecting increased senior debt and higher borrowings under capitalized lease obligations.borrowings.

During the fourth quarter of fiscal 2010, we paid off $175.0 million in senior subordinated debt and incurred a loss of $1.2 million due to the extinguishment of debt.

On January 26, 2009, we acquired Racal Acoustics for £122.6 million or $171.3 million. Racal Acoustics develops and manufactures high technology ruggedized personal communication equipment for the defense market segment. The acquisition was funded with cash proceeds from the sale of U.K.-based Muirhead and Traxsys and our line of credit. To facilitate the acquisition of Racal Acoustics, we executed a $159.7 million U.S.-dollar denominated intercompany loan with a wholly-owned subsidiary, for which its functional currency is the pound sterling. Due to our holding of pounds sterling to fund the acquisition during a period of foreign exchange volatility, we incurred a $7.9 million foreign currency transaction loss in January 2009, which was recorded in other expense.

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The income tax rate for fiscal 20102012 was 15.8%20.9% compared with 10.6%15.7% in fiscal 2009.2011. The tax rate was lower than the statutory rate, as both years benefited from various tax credits and certain foreign interest expense deductions. The tax rate for During

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fiscal 2009 was significantly lower due to enhanced tax benefits associated with specific foreign exchange losses and higher R&D tax credits. In fiscal 2010,2012, we recognized $11.0$8.7 million in netof discrete tax benefits. The $11.0 million discreteincome tax benefits were the result of four events. The first event was a $7.6 million benefit as a result of the release offollowing items: The first item was a $2.3 million tax reserves for uncertainbenefit due to a change in French tax positions mainlylaws associated with losses on dispositionthe holding company structure and the financing of assets. This release of tax reserves resulted from the expiration of a statute of limitations.Souriau acquisition. The second eventitem was a $1.7$2.9 million net reduction in deferred income tax liabilities, which was the result of the enactment of tax laws reducing the U.K. statutory income tax rate. The third eventitem was a $0.8$2.1 million tax expense related to tax liabilities associated with an examination of the U.S. federal and state income tax returns. The fourth event was a $2.5 million reduction of valuation allowances related to net operating losses and foreign tax credits that were generated in prior years.

In fiscal 2009, we recognized $5.0 million in net discrete tax benefits. The $5.0 million discrete tax benefits were the result of five events. The first event was a $2.0 million tax benefit for the reduction of previously recorded withholding tax liabilities as a result of the enactment of a U.S.-Canadian tax treaty. The second event was a $0.6 million expense resulting from the reversal of previously recorded tax benefits associated with the implementation of CMC’s SADI program. The third event was a $1.5 million tax benefit associated with the reconciliation ofreconciling the prior year’s U.S. income tax return to the U.S. income tax provision.provision and settlement of tax examinations. The fourth eventitem was an adjustment that resulted in a reclassification$1.4 million release of $3.4valuation allowance related to foreign tax credits as a result of a tax examination.

In fiscal 2011, we recognized $11.4 million of discrete income tax benefits from discontinued operationsas result of the following items. The first item was $3.1 million of income tax benefits due to continued operations offset by a $1.0 million tax expense to establishthe retroactive extension of the U.S. federal research and experimentation credits and the release of a valuation allowance for U.S. foreignrelated to a net operating loss of an acquired subsidiary. The second item was $5.6 million of income tax credits that are not expected tobenefits associated with net operating losses of an acquired subsidiary as a result inof concluding a current or futuretax examination. The third item was $3.5 million of net reduction of deferred income tax liabilities as a result of a reduction in U.S.the U.K. statutory income taxes.tax rate. The fifth eventfourth item was a $0.3$0.8 million of income tax expense associated withas a result of reconciling the reconciliation of the prior year’s foreignprior-year’s income tax returns to the foreignprior year’s provision for income tax provisions.tax.

To the extent that sales are transacted in a currency other than the functional currency of the operating unit, we are subject to foreign currency fluctuation risk.

We use forward contracts to hedge our foreign currency exchange risk. To the extent that these hedges qualify under U.S. GAAP, the amount of gain or loss is deferred in Accumulated Other Comprehensive Income (AOCI) until the related sale occurs. Also, we are subject to foreign currency gains or losses from embedded derivatives on backlog denominated in a currency other than the functional currency of our operating companies or its customers. Gains and losses on forward contracts, embedded derivatives, and revaluation of assets and liabilities denominated in a currency other than the functional currency of the Company for fiscal 20102012 and 2009 are2011 were as follows:

(In thousands)

New orders for fiscal 20102012 were $1.6$2.1 billion compared with $1.4$1.9 billion forin fiscal 2009.2011. Orders increased across all our segments. Backlog at our Avionics & Controlsthe end of fiscal 2012 and Advanced Materials and declined at Sensors & Systems due to the downturn in commercial aviation.2011 was $1.3 billion.

Liquidity and Capital Resources

Working Capital and Statement of Cash Flows

Cash and cash equivalents at the end of fiscal 20112013 totaled $185.0$179.2 million, a decreasean increase of $237.1$18.5 million from the prior year. Net working capital decreasedincreased to $621.0$683.6 million at the end of fiscal 20112013 from $752.2$639.3 million at the end of the prior year.

Cash flows from operating activities were $250.8 million and $194.2 million in fiscal 2013 and 2012, respectively. The increase principally reflected higher net earnings. Sources and uses of cash flows from operating activities principally consistconsisted of cash received from the sale of products offset byand cash payments for material, labor and operating expenses.expense.

Cash flows from operating activities were $192.4 million and $179.8 million in fiscal 2011 and 2010, respectively. The increase principally reflected higher cash collections from customers, lower cash payments for income taxes, and partially offset by higher cash contributions to our defined benefit pension plans and payments for inventory and interest.

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Cash flows used by investing activities were $869.0$93.7 million and $20.7$48.5 million in fiscal 20112013 and 2010,2012, respectively. Cash flows used by investing activities in fiscal 20112013 principally reflected the usecash paid for acquisitions of $40.7 million, net of cash for acquisition of businesses of $814.9 millionacquired, and capital assetsexpenditures of $49.5$55.3 million. Cash flows used by investing activities in fiscal 20102012 principally reflected the use of cash for the purchase of capital assets of $45.5 million, partially offset by cash proceeds from the sale of Pressure Systems, Inc. of $25.0$49.4 million.

Cash flows providedused by financing activities were $436.4$141.0 million and $167.8 million in fiscal 20112013 and cash flows provided by financing activities were $84.3 million in fiscal 2010.2012, respectively. Cash flows providedused by financing activities in fiscal 20112013 primarily reflected a $400.0 million increase inproceeds from our new credit facility $176.9of $175.0 million in proceeds for the issuanceand repayment of long-term debt and $164.9 million in cash repaymentscredit facilities of long-term debt.$345.4 million. Cash flows providedused by financing activities in fiscal 2010 principally2012 primarily reflected proceeds from the issuance of $250.0 million in senior notes, partially offset by the repaymentcash repayments of our $175.0 million senior subordinatedlong-term debt due in 2013.and credit facilities of $223.1 million.

Capital Expenditures

Net property, plant and equipment was $368.4$371.2 million at the end of fiscal 20112013 compared with $273.8$356.4 million at the end of the prior year. Capital expenditures for fiscal 20112013 and 20102012 were $49.5$55.3 million and $53.7$49.4 million, respectively (excluding

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acquisitions), and included facilities, machinery, equipment and enhancements to information technology systems. Capital expenditures for fiscal 2010 included $8.1 million under a capitalized lease obligation related to a new facility for an avionics controls operation and a facility expansion for an interface technologies facility. Capital expenditures are anticipated to approximate $65.0$75.0 million for fiscal 2012.2014. We will continue to support expansion through investments in infrastructure including machinery, equipment, and information systems.

Acquisitions

On December 20, 2013, we acquired Sunbank Family of Companies, LLC (Sunbank) for approximately $45 million and up to $5 million in contingent consideration based upon achievement of certain sales levels over a two-year period. Sunbank is a manufacturer of electrical cable accessories, connectors and flexible conduit systems. Sunbank is included in the Sensors & Systems segment. The acquisition was funded under our credit facility and available cash.

On February 4, 2013, we acquired the Gamesman Group (Gamesman) for $40.8 million. Gamesman is a global supplier of input devices principally serving the gaming industry. Gamesman is included in our Avionics & Controls segment.

On July 26, 2011, we acquired the Souriau Group (Souriau) for $726.7 million, net of acquired cash. Souriau is a leading global supplier of highly engineered connectors for harsh environments serving aerospace, defense & space, power generation, rail, and industrial equipment markets. Souriau is included in our Sensors & Systems segment.

On December 30, 2010, the Companywe acquired Eclipse Electronic Systems, Inc. (Eclipse) for $123.8 million. Eclipse is a designer and manufacturer of embedded communication intercept receivers for signal intelligence applications. Eclipse is included in our Avionics & Controls segment.

On July 26, 2011, the Company acquired the Souriau Group (Souriau) for approximately $726.7 million, net of acquired cash. Souriau is a leading global supplier of highly engineered connection technologies for harsh environments. Souriau is included in our Sensors & Systems segment.

Debt Financing

Total debt increased $423.0decreased $159.5 million from the prior year to approximately $1.0 billion$689.1 million at the end of fiscal 2011.2013. Total debt outstanding at the end of fiscal 20112013 consisted of $250.0 million Seniorof 2020 Notes, due in 2020, $176.4$170.6 million of Senior Notes due in 2017, $162.7the U.S. Term Loan, $24.8 million (€115.018.0 million) under our Euro Term Loan, $360.0$130.0 million in borrowings under our secured credit facility, $45.2$56.9 million government refundable advances, $56.2 million under capital lease obligations, and $42.3$0.5 million in various foreign currency debt agreements and other debt agreements.

In April 2013, we amended the secured credit facility to provide for $175.0 million term loan (U.S. Term Loan). The interest rate on the U.S. Term Loan ranges from LIBOR plus 1.5% to LIBOR plus 2.25%, depending on the leverage ratios at the time the funds are drawn. At October 25, 2013, we had $170.6 million outstanding under the U.S. Term Loan at an interest rate of LIBOR plus 1.75%, which is currently 1.93%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2016, with the remaining balance due in July 2016.

In July 2011, we amended the secured credit facility to provide for a new €125.0 million term loan (Euro Term Loan). The interest rate on the Euro Term Loan ranges from euro LIBOR plus 1.5% to euro LIBOR plus 2.25%, depending on the leverage ratios at the time the funds are drawn. At October 25, 2013, we had €18.0 million outstanding or $24.8 million under the Euro Term Loan at an interest rate of euro LIBOR plus 1.75%, which is currently 1.84%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2016, with the remaining balance due in July 2016.

In March 2011, we entered into a secured credit facility for $460.0 million made available through a group of banks. The credit facility is secured by substantially all of our assets and interest is based on standard inter-bank offering rates. The credit facility expires in July 2016. The interest rate will rangeranges from LIBOR plus 1.5% to LIBOR plus 2.25%, depending on the leverage ratios at the time the funds are drawn. At October 28, 2011,25, 2013, we had $360.0$130.0 million outstanding under the secured credit facility at an initial interest rate of LIBOR plus 1.75% or 2.0%, which is currently 1.93%.

In July 2011, we amended the secured An additional $66.2 million of unsecured foreign currency credit facility to providefacilities have been extended by foreign banks for a new €125.0total of $526.2 million term loan (Euro Term Loan). The interest rate on the Euro Term Loan will range from Euro LIBOR plus 1.5% to Euro LIBOR plus 2.25% depending on the leverage ratios at the time the funds are drawn. At October 28, 2011, the Company had €115.0 million outstanding or $162.7 millionavailable companywide. Available credit under the Euro Term Loanabove credit facilities was $363.5 million at an interest ratefiscal 2013 year end, when reduced by outstanding borrowings of Euro LIBOR plus 1.75% or 3.06%. The loan amortizes at 1.25%$130.0 million and letters of the original principal balance quarterly through March 2016, with the remaining balance due in July 2016.credit of $32.7 million.

On August 2, 2010, the Companywe issued $250.0 million in 7% Seniorof 2020 Notes due 2020 requiring semi-annual interest payments in March and September of each year until maturity. The net proceeds from the sale of the notes, after deducting $4.4 million of debt issuance cost, were $245.6 million. The Senior2020 Notes are general unsecured senior obligations of the Company.company. The Senior2020 Notes are guaranteed, jointly and severally on a senior basis, by all the existing and future domestic subsidiaries of the Companycompany unless designated as an “unrestricted subsidiary,” and those foreign subsidiaries that executed related subsidiary guarantees under the indenture covering the Senior2020 Notes. The Senior2020 Notes are subject to redemption at the option of the Companycompany at any time prior to August 1, 2015, at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. In addition, before August 1, 2013, the Company

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may redeem up to 35% of the principal amount at 107.000% plus accrued interest with proceeds of one or more Public Equity Offerings. The Senior2020 Notes are also subject to redemption at the option of the Company,company, in whole or in part, on or after August 1, 2015, at redemption prices starting at 103.500% of the principal amount plus accrued interest during the period beginning August 1, 2015, and declining annually to 100% of principal and accrued interest on or after August 1, 2018.

The Company also has

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In April 2013, we redeemed the $175.0 million outstanding of6.625% Senior Notes due March 2017 (2017 Notes). In connection with the redemption, we wrote off $1.3 million in 2017, with anunamortized debt issuance costs as a charge against interest expense. In addition, we incurred a $3.9 million redemption premium and received proceeds of $2.9 million from the termination of its $175.0 million interest rate of 6.625%. The Senior Notes are general unsecured senior obligationsswap agreements. As a result, the redemption of the Company. The Senior2017 Notes are guaranteed, jointly and severallyresulted in a net loss of $0.9 million on a senior basis, by all the existing and future domestic subsidiariesextinguishment of the Company unless designated as an “unrestricted subsidiary,” and those foreign subsidiaries that executed related subsidiary guarantees under the indenture covering the Senior Notes. The Senior Notes are subject to redemption at the option of the Company at any time prior to March 1, 2012, at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. The Senior Notes are also subject to redemption at the option of the Company, in whole or in part, on or after March 1, 2012, at redemption prices starting at 103.3125% of the principal amount plus accrued interest during the period beginning March 1, 2007, and declining annually to 100% of principal and accrued interest on or after March 1, 2015.debt.

We believe cash on hand, funds generated from operations and other available debt facilities are sufficient to fund operating cash requirements and capital expenditures through fiscal 2012. Current conditions in the capital markets are uncertain; however, we2014. We believe we will have adequate access to capital markets to fund future acquisitions.

Permanent Investment of Undistributed Earnings of Foreign Subsidiaries

Our non-U.S. subsidiaries had $130.2have $167.2 million in cash and cash equivalents at October 28, 2011.25, 2013. Cash and cash equivalents at our U.S. parent and subsidiaries aggregated $54.8$12.0 million ofat October 28, 2011,25, 2013, and cash flow from these operations is sufficient to fund working capital, capital expenditures, acquisitions and debt repayments of our domestic operations. We have available credit to our U.S. parent and subsidiaries of $330.0 million on our U.S. secured credit facility. The earnings of our non-U.S. subsidiaries are considered to be indefinitely invested, and accordingly, no provision for federal income taxes has been made on accumulated earnings of foreign subsidiaries. The amount of the unrecognized deferred income tax liability for temporary differences related to investments in foreign subsidiaries is not practical to determine because of the complexities regarding the calculation of unremitted earnings and the potential for tax credits.

Government Refundable Advances

Government refundable advances consist of payments received from the Canadian government to assist in the research and development related to commercial aviation. These advances totaled $56.9 million and $51.8 million at October 25, 2013, and October 26, 2012, respectively. The repayment of the advances is based on year-over-year commercial aviation revenue growth at CMC beginning in 2014. Imputed interest on the advances was 4.61% at October 25, 2013.

Pension and Other Post-Retirement Benefit Obligations

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

We account for pension expense using the end of the fiscal year as our measurement date, and we make actuarially computed contributions to our pension plans as necessary to adequately fund benefits. Our funding policy is consistent with the minimum funding requirements of ERISA. In fiscal 20112013 and 2010,2012, operating cash flow included $32.5$27.0 million and $20.0$27.3 million, respectively, of cash funding to these pension plans. We expect pension funding requirements for the plans maintained by Esterline and CMC to be approximately $21.2$12.0 million and $8.1$10.6 million, respectively, in fiscal 2012.2014. The rate of increase in future compensation levels is consistent with our historical experience and salary administration policies. The expected long-term rate of return on plan assets is based on long-term target asset allocations of 70% equity and 30% fixed income. We periodically review allocations of plan assets by investment type and evaluate external sources of information regarding long-term historical returns and expected future returns for each investment type, and accordingly, believe a 7.5 and6.34% to 7.0% assumed long-term rate of return on plan assets is appropriate for both the Esterline and CMC plan, respectively.plans. Current allocations are consistent with the long-term targets.

We made the following assumptions with respect to our Esterline pension obligation in 2011fiscal 2013 and 2010:2012:

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We made the following assumptions with respect to our CMC pension obligation in 2011fiscal 2013 and 2010:2012:

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We use a discount rate for expected returns that is a spot rate developed from a yield curve established from high-quality corporate bonds and matched to plan-specific projected benefit payments. Although future changes to the discount rate are unknown, had the discount rate increased or decreased by 25 basis points in 2011,fiscal 2013, pension liabilities in total would have decreased $9.4$11.8 million or increased $11.3$12.3 million, respectively. If all other assumptions are held constant, the estimated effect on fiscal 20112013 pension expense from a hypothetical 25 basis points increase or decrease in both the discount rate and expected long-term rate of return on plan assets would not have a material effect on our pension expense.

We made the following assumptions with respect to our Esterline post-retirement obligation in 2011fiscal 2013 and 2010:2012:

We made the following assumptions with respect to our CMC post-retirement obligation in 2011fiscal 2013 and 2010:2012:

The assumed health care trend rate has a significant impact on our post-retirement benefit obligations. Our health care trend rate was based on the experience of our plan and expectations for the future. A 100 basis points increase in the health care trend rate would increase our post-retirement benefit obligation by $1.0$1.9 million at October 28, 2011.25, 2013. A 100 basis points decrease in the health care trend rate would decrease our post-retirement benefit obligation by $0.9$0.5 million at October 28, 2011.25, 2013. Assuming all other assumptions are held constant, the estimated effect on fiscal 20112013 post-retirement benefit expense from a hypothetical 100 basis points increase or decrease in the health care trend rate would not have a material effect on our post-retirement benefit expense.

Research and Development Expense

For the three years ended October 28, 2011,25, 2013, research and development expense has averaged 4.9%5.2% of sales. We estimate that research and development expense in fiscal 20122014 will be about 5.5%5% of sales for the full year.

Contractual Obligations

The following table summarizes our outstanding contractual obligations as of fiscal year end. Liabilities for income taxes were excluded from the table, as we are not able to make a reasonably reliable estimate of the amount and period of related future payments.

In Thousands

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Seasonality

The timing of our revenues is impacted by the purchasing patterns of our customers and, as a result, we do not generate revenues evenly throughout the year. Moreover, our first fiscal quarter, November through January, includes significant holiday vacation periods in both Europe and North America. This leads to decreased order and shipment activity; consequently, first quarter results are typically weaker than other quarters and not necessarily indicative of our performance in subsequent quarters.

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Disclosures About Market Risk

Interest Rate Risks

Our debt includes fixed rate and variable rate obligations at October 28, 2011.25, 2013. We are not subject to interest rate risk on the fixed rate obligations. We are subject to interest rate risk on the euro term loan, interest rate swap agreements,Euro Term Loan, U.S. Term Loan, and U.S. credit facility. For long-term debt, the table presents principal cash flows and the related weighted-average interest rates by contractual maturities.

A hypothetical 10% increase or decrease in average market rates would not have a material effect on our pretax income.

In Thousands