ESTERLINE TECHNOLOGIES CORP, 10-K405/A, 1996-01-22

ESTERLINE TECHNOLOGIES CORP
10-K405/A, 1996-01-22
INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K/A

AMENDMENT NO. 1

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

FOR THE FISCAL YEAR ENDED: OCTOBER 31, 1995 COMMISSION FILE NUMBER: 1-6357
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ESTERLINE TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)

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<S> <C>
DELAWARE 13-2595091
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

10800 NE 8TH STREET 98004
BELLEVUE, WASHINGTON (Zip code)
(Address of principal executive offices)
</TABLE>

Registrant's telephone number, including area code: (206) 453-9400

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

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common stock ($.20 par value) New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>

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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.
__X__Yes _____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. __X__

As of January 19, 1996, 6,658,560 shares of the Registrant's common stock
were outstanding. The aggregate market value of such common stock held by
non-affiliates at such date (based upon the closing sale price) was
$125,606,637.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Proxy Statement relating to the 1996 Annual Meeting of
Shareholders, to be held on March 6, 1996--Part III.

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PART I

ITEM 1. BUSINESS

(A) GENERAL DEVELOPMENT OF BUSINESS.

Esterline is a diversified manufacturing company that has strong market
positions within a variety of general manufacturing industries, including
electronic equipment, metal fabrication, commercial aerospace and defense. The
Company conducts its operations through three business segments: its Automation
Group, Aerospace and Defense Group, and Instrumentation Group. The six principal
subsidiaries of Esterline generated approximately 78% and 82% of net sales and
89% and 83% of operating earnings, (excluding restructuring charges and
corporate expenses), in fiscal 1994 and 1995, respectively. The six principal
subsidiaries are Excellon and Whitney in the Automation Group, Armtec and
Auxitrol in the Aerospace and Defense Group, and Federal and Korry in the
Instrumentation Group.

Esterline's senior management group joined the Company in 1987. In its
efforts to improve stockholder returns, management has downsized and
restructured the Company and navigated it through extended downturns in both the
electronics capital goods and commercial aerospace and defense markets. Since
October 31, 1989, senior management has reduced the Company's total debt from
$172.1 million to $50.3 million at October 31, 1995. Today, Esterline is
enjoying the benefits of its increased operating leverage as a result of its
restructuring efforts and improving capital goods markets.

(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

A summary of net sales to unaffiliated customers, operating earnings and
identifiable assets attributable to the Company's business segments for the
fiscal years ended October 31, 1995, 1994 and 1993 is incorporated herein by
reference to Note 12 to the Company's Consolidated Financial Statements filed
herewith.

The Company consists of 12 individual businesses whose results can vary
widely based on a number of factors, including domestic and foreign economic
conditions and developments affecting the specific industries and customers they
serve. The products sold by most of these businesses represent capital
investment by either the initial customer or the ultimate end user. Also, a
significant portion of the sales and profitability of some Company businesses is
derived from defense and other government contracts or the commercial aircraft
industry. Changes in general economic conditions or conditions in specific
industries, capital acquisition cycles, and government policies, collectively or
individually, can have a significant effect on the Company's results of
operations and financial condition.

Specific comments covering all of the Company's fiscal 1995 business
segments and operating units are set forth below.

AUTOMATION GROUP

The Automation Group consists of four subsidiaries of which Excellon and
Whitney are the principal subsidiaries. In fiscal 1994 and 1995, the Automation
Group accounted for 37% and 44%, respectively, of the Company's net sales.
Equipment Sales Co. and Tulon Co. comprise the remaining members of the
Automation Group.

EXCELLON

Excellon is a leading manufacturer of highly efficient automated drilling
systems for the printed circuit board manufacturing industry. Excellon has
experienced significant growth over the past two years, fueled by the growing
capacity requirements of printed circuit board manufacturers and the
proliferation of increasingly more complex boards which is helping to render
older printed circuit board drilling machines obsolete. As new electronic
applications multiply, board designers are forced to integrate increasingly more
functions into smaller packages, requiring more PCB holes, smaller holes and
much tighter tolerances between holes. Management believes that its drilling
systems enable its customers to achieve one of the lowest costs per hole, an
increasingly important consideration in the cost-conscious electronics industry.

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Excellon's high levels of research and development expenditures are key to
maintaining its important technology lead. Excellon's latest product
developments are micro-drilling machines that automatically load or unload
circuit boards in combination with fully integrated material handling systems.
These drilling equipment systems, in combination with Excellon's powerful
software, respond to customer needs for increased flexibility--smaller, shorter
production runs--in an automated production environment. These units feature a
tool management system that provides access to 600 tools per spindle, integrated
laser inspection for broken bits, and full Z-axis control for precision depth
drilling. Depending on the configuration ordered, Excellon's System 2000
machine, for example, can automatically load circuit board material onto one of
five drilling stations, drill the board to exacting pre-programmed
specifications, and then unload the finished boards. This level of automation
translates into dramatic productivity advantages for Excellon's customers. An
Excellon system can provide access to any function of the drilling machine, and
full process analysis traceability of system or operator performance and
statistical process control. Yet, its color touch-screen with easy-to-read menus
available in nine different languages provides for ease of operation.

Excellon products are sold worldwide to the PCB manufacturing industry, at
prices ranging from $100,000 to $500,000. The three largest markets for the PCB
manufacturers are the computer (35%), communications (25%) and automotive (12%)
markets. Since August 1994, AT&T Corp., one of Excellon's largest customers and
one of the world's leading producers of PCBs, has installed more than 46
Excellon drilling systems, served by fully integrated material handling
equipment.

In fiscal 1993, 1994 and 1995, printed circuit board drilling equipment
accounted for 16%, 18% and 26% respectively, of the Company's consolidated net
sales.

WHITNEY

Whitney designs and builds highly productive automated machine tool and
material handling systems for cutting and punching sheet, plate, and structural
steel for construction, transportation, agricultural and mining equipment
manufacturers and independent steel fabrication centers. Whitney produces
equipment specifically designed for mid- to heavy plate metal that enables
manufacturers to meet rigid cut quality and accuracy standards. Whitney's
computer-controlled heavy punching and cutting machines significantly reduce
setup time, decrease work-in-process time and material handling, and enable
customers to utilize just-in-time production to lower inventory and costs.
Management believes that Whitney's proprietary TRUECut-TM- oxygen plasma cutting
technology virtually eliminates rejected parts and additional finish work,
resulting in improved throughput and reduced cost per part. In its niche,
Whitney is a leading supplier in the United States, and has market positions in
both Europe and Asia. Whitney continually evaluates new approaches to metal
cutting such as laser technology, but to date has not found such technology to
be competitive with Whitney's current systems in its market niche.

OTHER

EQUIPMENT SALES CO. acts as a sales representative for various
manufacturers' products sold to the PCB assembly industry, including high-speed
assembly equipment.

TULON CO. produces tungsten carbide drill and router bits, commonly ranging
in size from 5.6mm down to .25mm -- some as small as .10mm -- for use in PCB
drilling equipment. Tulon Co. utilizes computerized equipment which
automatically inspects drill bits and provides the product consistency customers
need for higher-technology drilling. Tulon Co.'s products can be used in
drilling machines produced by other companies as well as the machines produced
by Excellon.

BACKLOG

At October 31, 1995 the backlog of the Automation Group (all of which is
expected to be filled during fiscal 1996) was $35.9 million compared with $29.9
million at October 31, 1994. The increase was primarily attributable to
strengthening markets and strong customer acceptance of Excellon's newer
products.

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AEROSPACE AND DEFENSE GROUP

The Aerospace and Defense Group consists of five subsidiaries of which
Auxitrol and Armtec are the principal subsidiaries. In fiscal 1994 and 1995, the
Aerospace and Defense Group accounted for 32% and 28% respectively, of the
Company's net sales. Hytek Finishes Co., Midcon Cables Co. and TA Mfg. Co.
comprise the remaining companies in the Aerospace and Defense Group.

ARMTEC

Armtec manufactures molded fiber cartridge cases, mortar increments, igniter
tubes and other combustible ammunition components for the United States Armed
Forces and licenses such technology to foreign defense contractors and
governments. Armtec currently is a principal U.S. producer of combustible
ordnance products utilized by the U.S. Army. These products include the 120mm
combustible case used as the main armament system on the U.S. Army's M-1A1 and
M-1A2 tanks, the 60mm, 81mm and 120mm combustible mortar increments, and the
155mm combustible case for artillery ammunition. As opposed to metal cartridge
casings, Armtec's products are part of the ammunition propulsion system and are
combusted when fired. In conjunction with the U.S. Army's development of an
improved solid propellant propulsion system for 155mm artillery, Armtec is
developing what management expects will become the next generation of
specialized modular cartridge cases.

In October 1995, the Company identified irregularities in the allocation of
certain labor charges at Armtec, and promptly disclosed these irregularities to
the Department of Defense. Armtec applied for admittance to the Department of
Defense Voluntary Disclosure Program but has not yet been advised regarding its
admittance to the Program. The outside attorneys and governmental contracting
consultant that were retained by the Company to assist in this matter are
continuing their internal investigation. At this stage of the investigation,
management believes that the eventual outcome of this issue will not have a
material adverse effect on the financial position or future operating results of
the Company. However, no assurance can be given that Armtec will be admitted to
the Program, or that Armtec will not be subject to fines, penalties, and/or
administrative sanctions (which could include suspension and debarment from
governmental contracting), which could have a material adverse effect on the
Company's financial position or future operating results.

AUXITROL

Auxitrol, headquartered in France, manufactures high precision temperature
and pressure sensing devices used primarily in aerospace and aviation
applications, liquid level measurement devices for ships and storage tanks,
pneumatic accessories (including pressure gauges and regulators) and industrial
alarms. Auxitrol's principal customers are jet engine and rocket motor
manufacturers, aerospace equipment manufacturers, shipbuilders, petroleum
companies, processors and electric utilities. Exhaust gas temperature sensing
equipment for a jet engine manufacturer constitutes a significant portion of
Auxitrol's sales. Auxitrol also distributes products manufactured by others,
including valves, temperature and pressure switches and flow gauges.

Auxitrol also manufactures electrical penetration devices under license for
certain European and other foreign nuclear power plants. These penetration
devices permit electrical signals to go into and out of containment domes while
maintaining pressure integrity and signal continuity. In addition, Auxitrol has
entered into a joint venture with a Russian company to facilitate use of its
penetration devices in retrofitting the aging nuclear plants in Eastern Europe,
where growing industrialization requires new power sources.

OTHER

HYTEK FINISHES CO. provides specialized metal finishing and inspection
services, including plating, anodizing, polishing, non-destructive testing and
organic coatings, primarily to the commercial aircraft, aerospace and
electronics markets. Hytek also has an automated tin-lead plating line,
employing among the most advanced automated plating technology, to serve the
semi-conductor industry.

MIDCON CABLES CO. manufactures electronic and electrical cable assemblies
and cable harnesses for the military, government contractors and the commercial
electronics market, offering both product design

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services and assembly of product to customer specifications. Its proprietary
cable, trademarked EverFlex, uses an internally developed, patented design to
provide a unique solution to significant problems in wiring applications
involving vibration, abrasion and repetitive movement.

TA MFG. CO. designs and manufactures specialty clamps and elastomeric
compounds in custom molded shapes for wiring and tubing installations for
airframe and jet engine manufacturers as well as military and commercial airline
aftermarkets. TA's products include proprietary elastomers which are
specifically formulated for various extreme applications, including
high-temperature environments on or near a jet engine.

BACKLOG

At October 31, 1995 the backlog of the Aerospace and Defense Group (of which
$4.6 million is expected to be filled after fiscal 1996) was $36.3 million,
compared with $38.9 million at October 31, 1994.

INSTRUMENTATION GROUP

The Instrumentation Group consists of three subsidiaries of which Federal
and Korry are the principal subsidiaries. In fiscal 1994 and 1995, the Group's
net sales represented 31% and 28%, respectively, of the Company's net sales.
Angus Electronics Co. is the other company in the Instrumentation Group.

FEDERAL

Federal manufactures a broad line of high-precision analog and digital
dimensional and surface measurement and inspection instruments and systems for a
wide range of industrial quality control and scientific applications.
Manufacturers use Federal equipment for direct shop-floor inspections to reduce
costly rework at more advanced production stages. Federal's products include:
dial indicators, air gauges and other precision gauges; electronic gauges for
use where high-precision measurement is required; and custom-built and dedicated
semi-automatic and automatic gauging systems. Distributed products manufactured
by others include laser interferometer systems used primarily to check machine
tool calibrations. Federal equipment is used extensively in precision metal
working. Its markets include the automotive, farm implement, construction
equipment, aerospace, ordnance and bearing industries.

In each of fiscal years 1993, 1994 and 1995, gauge products manufactured by
Federal accounted for 13%, 13% and 12%, respectively, of the Company's
consolidated net sales.

KORRY

Korry is a market and technology leader in the manufacture of
high-reliability electro-optical components and systems, illuminated push button
switches, indicators, panels and keyboards that act as human interfaces in a
broad variety of control and display applications for the aerospace and defense
industry. Korry's products have been designed into many existing aircraft
systems, and as a result, Korry enjoys a considerable spares and retrofit
business. Korry's customers include original equipment manufacturers and the
aftermarkets (equipment operators and spare parts distributors), primarily in
the commercial aviation, military airborne, ground-based military equipment and
shipboard military equipment markets. Korry's proprietary products provide its
customers with a significant technological advantage in such areas as night
vision--a top defense priority--and in the area of active matrix liquid crystal
displays, a technology expected to have broad usage in commercial aerospace and
military applications.

OTHER

ANGUS ELECTRONICS CO. manufactures recording instruments together with other
analytical and process, and environmental monitoring instrumentation. These
include analog strip chart and digital printout recorders as well as electronic
and multi-channel microprocessor-based recording equipment. Customers of Angus
Electronics include industrial equipment manufacturers, electric utilities,
scientific laboratories, pharmaceutical manufacturers and process industries.

BACKLOG

At October 31, 1995, the backlog of the Instrumentation Group (of which $7.4
million is expected to be filled after fiscal 1996) was $31.1 million compared
with $28.0 million at October 31, 1994.

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MARKETING AND DISTRIBUTION

For most of the Company's products, the maintenance of a service capability
is an integral part of the marketing function. Each of the Company's separate
operating units maintains its own separate and distinct sales force or
distributor relationships.

Automation Group products manufactured by Excellon are marketed domestically
principally through employees and in foreign markets through employees, and
independent distributors. Whitney products are sold principally through
independent distributors and representatives.

Aerospace and Defense Group products manufactured by Armtec are marketed
domestically and abroad by employees and independent representatives. Auxitrol's
products are marketed in Europe through employees and independent
representatives.

Instrumentation Group products manufactured by Federal and Korry are
marketed domestically principally through employees, and in foreign markets
through both employees and independent representatives.

RESEARCH AND DEVELOPMENT

The Company's subsidiaries conduct product development and design programs
with approximately 175 professional engineers, technicians and support
personnel, supplemented by independent engineering and consulting firms when
needed. In fiscal 1995, approximately $16.6 million was expended for research,
development and engineering, compared with $13.7 million in 1994 and $14.0
million in 1993.

FOREIGN OPERATIONS

The Company's principal foreign operations consist of manufacturing
facilities of Auxitrol located in France and Spain, a manufacturing facility of
Tulon located in Mexico, sales and service operations of Excellon located in
England, Germany and Japan, and sales offices of TA Mfg and Korry Electronics
located in England and France, respectively. In addition, W.A. Whitney has a
small manufacturing and distribution facility in Italy. For information as to
sales, operating results and assets by geographic area and export sales,
reference is made to Item 1(b) hereto.

EMPLOYEES

The Company and its subsidiaries had 2,849 employees at October 31, 1995.
Less than 10% of these employees were members of an organized labor union.

COMPETITION AND PATENTS

The Company's subsidiaries experience varying degrees of competition with
respect to all of their products and services. Most subsidiaries are in
specialized market niches with relatively few competitors. The Company competes
in most markets it serves with numerous other companies, many of which have far
greater sales volume and financial resources than the Company. The principal
competitive factors in the commercial markets in which the Company participates
are product performance and service. Part of product performance requires
expenditures in research and development that lead to product improvement on a
rapid basis. The market for many of the Company's products maybe affected by
rapid and significant technological changes and new product introduction.
Current competitors or new entrants could introduce new products with features
that render the Company's products obsolete or less marketable. Excellon's
principal competitors are Hitachi, Ltd. and Pluritec. Whitney's principal
competitors are Mazak, Cincinnati Milacron, U.S. Amada, and Trumpf. Auxitrol's
principal competitors are Ametek and Rosemount. Federal's principal competitors
are Starrett and Mitutoyo. Korry's principal competitors are Eaton-MSC and
Ducommun Jay-El. See "Risk Factors--Competition."

The subsidiaries hold a number of patents but in general rely on technical
superiority, exclusive features in their equipment and marketing and service to
customers to meet competition. Licenses which help maintain a significant
advantage over competition include a long-term license agreement under which
Auxitrol manufactures and sells electrical penetration assemblies.

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SOURCES AND AVAILABILITY OF RAW MATERIALS AND COMPONENTS

Due to the Company's diversification, the sources and availability of raw
materials and components are not nearly as important as they would be for a
company that manufactures a single product. In general, the Company is not
dependent for its raw materials and components upon any one source of supply.
However, certain components and supplies such as air bearing spindles purchased
by Excellon and hydraulic components purchased by Whitney and certain other raw
materials and components purchased by other subsidiaries are purchased from a
single source. In such instances, ongoing efforts are conducted to develop
alternative sources or designs to help avoid the possibility of any business
impairment.

ENVIRONMENTAL MATTERS

The Company is 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 wastes, and (ii)
impose liability for the costs of cleaning up, and certain damages resulting
from, sites of past spills, disposals or other releases of hazardous substances
(together, "Environmental Laws").

The Company's various operations use certain substances and generate certain
wastes that are regulated as or may be deemed hazardous under applicable
Environmental Laws, or for which the Company has incurred cleanup obligations.
While the Company endeavors at each of its facilities to assure compliance with
Environmental Laws and regulations, from time to time, operations of the Company
have resulted or may result in certain noncompliance with applicable
requirements under Environmental Laws for which the Company has incurred cleanup
and related costs. However, the Company believes that any such noncompliance or
cleanup liability under current Environmental Laws would not have a material
adverse effect on the Company's results of operations and financial condition.

The Company has been identified as a potentially responsible party ("PRP"),
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or "Superfund"), and analogous state
Environmental Laws, for the cleanup of contamination resulting from past
disposals of hazardous wastes at certain sites to which the Company, among
others, sent wastes in the past. CERCLA requires PRPs 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 upon all persons liable for cleanup costs. As a practical matter,
however, at sites where there are multiple PRPs, the costs of cleanup typically
are allocated among the parties according to a volumetric or other standard.
Although there can be no assurance, the Company believes, based on, among other
things, a review of the data available to the Company regarding each such site,
including the minor volumes of waste which the Company is alleged to have
contributed, and a comparison of the Company's liability at each such site to
settlements previously reached by the Company in similar cases, that its
liability for such matters will not be material. Nonetheless, until the
Company's proportionate share is finally determined at each such site, there can
be no assurance that such matters, or any similar liabilities that arise in the
future, will not have a material adverse effect on the Company's results of
operations or financial condition.

(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.

See "Foreign Operations" above.

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected historical financial and operating
data of the Company and its subsidiaries. The selected historical financial
operating and balance sheet data as of and for each of the five fiscal years in
the period ended October 31, 1995 were derived from the audited consolidated
financial statements of the Company and its subsidiaries. The selected
historical financial data should also be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition."

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<CAPTION>
YEAR ENDED OCTOBER 31,
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1991 1992 1993 1994 1995
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales............................................... $ 350,934 $ 304,827 $ 285,152 $ 294,044 $ 351,897
Cost of sales........................................... 214,415 187,235 175,568 178,397 210,834
Selling, general and administrative expense............. 111,858 102,202 100,669 100,845 112,213
Restructuring provision (credit)........................ -- -- 40,626(1) -- (2,067)(2)
Interest expense, net................................... 12,709 7,246 6,324 5,985 4,442(3)
Earnings (loss) before income taxes..................... 11,952 8,144 (38,035) 8,817 26,475
Income tax expense (benefit)............................ 4,637 3,050 (12,400) 1,254(4) 9,094
Net earnings (loss)..................................... $ 7,315 $ 5,094 $ (25,635)(1) $ 7,563(4) $ 17,381(2)
Net earnings (loss) per share........................... $ 1.12 $ 0.76 $ (3.90)(1) $ 1.15(4) $ 2.53(2)
Weighted average numbers of shares outstanding.......... 6,543 6,667 6,579 6,571 6,870

BUSINESS SEGMENT DATA
Net sales
Automation............................................ $ 125,263 $ 91,449 $ 94,460 $ 108,642 $ 156,116
Aerospace and Defense................................. 113,335 111,077 99,071 93,370 98,027
Instrumentation....................................... 112,336 102,301 91,621 92,032 97,754

BALANCE SHEET DATA (AT PERIOD END)
Working capital......................................... $ 20,377 $ 21,721 $ 9,064 $ 8,993 $ 35,741
Total assets............................................ 256,384 232,024 205,672 217,524 225,714
Total debt.............................................. 109,302 81,784 74,486 62,360 50,294
Shareholders' equity.................................... 77,377 82,622 55,323 65,491 83,706

OTHER DATA
Gross margin percentage................................. 38.9% 38.6% 38.4% 39.3% 40.1%
Research, development and related engineering costs as a
percentage of sales (5)................................ 4.7% 4.4% 4.9% 4.7% 4.7%
Total number of employees (at period end)............... 3,499 3,109 2,809 2,804 2,849
</TABLE>

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(1) In the fourth quarter of fiscal 1993, the Company recorded a $40.6 million
restructuring charge ($27.2 million, or $4.14 per share, net of income tax
effect). Without this restructuring charge net earnings in 1993 would have
been $1.6 million, or $.24 per share.

(2) Net earnings in 1995 reflect nonrecurring items including a pre-tax
restructuring credit of $2.1 million, or $.20 per share on an after-tax
basis, and a pre-tax patent infringement settlement credit of $1.3 million,
or $.12 per share on an after-tax basis, both of which were recorded in the
third quarter of fiscal 1995. Without these credits, net earnings in 1995
would have been $15.2 million, or $2.21 per share.

(3) Interest expense in 1995 is net of $1.2 million of interest income.

(4) Net earnings in 1994 reflect a $2.0 million, or $.30 per share, tax benefit
recorded in the fourth quarter of fiscal 1994 as a result of a settlement
with the Internal Revenue Service. Net earnings in 1994 would have been
$5.6 million, or $.85 per share, without this credit.

(5) Research, development and related engineering costs are included in
selling, general and administrative expense.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

GENERAL

The Company consists of 12 individual businesses divided into three
operating business segments: Automation, Aerospace/Defense, and Instrumentation.
These three operating business segments consist of six principal businesses. The
Automation Group's principal businesses are Excellon and Whitney. The
Aerospace/Defense Group's principal businesses are Armtec and Auxitrol. The
Instrumentation Group's principal businesses are Federal and Korry. These six
principal businesses of Esterline generated approximately 78% and 82% of the
Company's net sales and 89% and 83% of operating earnings in fiscal 1994 and
1995, respectively.

The Company's business is susceptible to economic cycles and its results can
vary widely based on a number of factors, including domestic and foreign
economic conditions and developments affecting the specific industries and
customers they serve. The products sold by most of these businesses represent
capital investment or support for capital investment by either the initial
customer or the ultimate end user. Also, a significant portion of the sales and
profitability of some Company businesses is derived from defense and other
government contracts or the commercial aircraft industry. Changes in general
economic conditions or conditions in specific industries, capital acquisition
cycles, and government policies, collectively or individually, can have a
significant effect on the Company's results of operations and financial
condition.

In the fourth quarter of fiscal 1993, the Company recorded a $40.6 million
restructuring charge ($27.2 million, or $4.14 per share, net of income tax
effect). The restructuring plan provided for the sale or shutdown of certain
small operations, the write-off of intangible assets, anticipated losses on the
sale of vacant facilities and product lines, employees' severance and
consolidation of facilities and product lines for increased efficiency. The
objective of the plan was to strengthen the Company for long-term growth and to
permit management to focus on operations with strong market positions. The
estimated costs represented the Company's best assessment of the plan, although
the Company expected that some cost elements of the original plan could change.
During the third quarter of fiscal 1995, several remaining restructuring actions
were completed and the Company comprehensively reviewed all of the actions as
they were originally contemplated. Asset accounts, including intangibles and
accrued liabilities associated with the plan, were adjusted such that the total
restructuring costs were lowered to $38.5 million. As a result, the Company took
a restructuring credit in the third quarter of fiscal 1995 of $2.1 million ($1.4
million, or $.20 per share, net of income tax), or approximately 5% of the
original charge. No other amounts related to the restructuring plan were charged
or credited to earnings since the inception of the plan. Cash impacts of actions
taken during this period were not significant nor materially different than
originally anticipated. The Company's restructuring action is now substantially
complete.

RESULTS OF OPERATIONS

YEAR ENDED OCTOBER 31, 1995 COMPARED TO YEAR ENDED OCTOBER 31, 1994

Net sales in 1995 were $351.9 million compared with $294 million in 1994.
The sales improvement was primarily attributable to the Automation Group, where
sales increased $47.5 million, or 44%, to $156.1 million. The Automation Group
benefited from a strong market for automated manufacturing equipment,
particularly at Excellon where the growing capacity requirements of circuit
board manufacturers and the proliferation of increasingly smaller holes is
helping to drive replacement of older drilling machines. Sales in the Company's
two other groups, Aerospace/Defense and Instrumentation, also improved in 1995.
In the Aerospace/Defense Group, sales for 1995 were $98 million, compared with
$93.4 million in the prior year.

8
<PAGE>

This increase was primarily due to a strengthening in the aerospace markets.
Instrumentation Group sales for 1995 were $97.8 million, versus $92 million in
1994. This increase was primarily a result of new product introductions and
expanded sales efforts at Federal. Including export sales by domestic
operations, sales to foreign buyers totaled $124.1 million and $91 million in
1995 and 1994, respectively and accounted for 35% and 31% of the Company's total
sales in each year, respectively.

Cost of sales increased to $210.8 million in 1995 from $178.4 million in the
prior year primarily due to the increased sales volume discussed above. Gross
margin as a percentage of sales improved slightly to 40% in 1995 from 39% in
1994 primarily due to the operating leverage of increased sales in all three
groups. Gross margin percentages by business segment increased in 1995 in both
the Automation and Instrumentation Groups, and declined in the Aerospace/Defense
Group. This latter decline was due to a decrease in sales at a partially owned
Russian distributorship and expenses related to the Armtec investigation. By
group, gross margins ranged from 39% to 41% in 1995, compared with 39% to 42% in
the prior year.

Selling, general and administrative expenses (which includes corporate
expenses, and research, development and related engineering costs but excludes
the restructuring credit) for 1995 increased to $112.2 million compared with
$100.8 million in 1994. As a percent of sales, however, they decreased from 34%
in 1994 to 32% in 1995 because of cost containment and operating leverage the
Company is experiencing due to increased sales volumes. Research, development
and related engineering costs for 1995 increased to $16.6 million, versus $13.7
million in 1994, reflecting the Company's continuing commitment to invest in
strategic product development programs.

Operating earnings (excluding corporate expenses and the restructuring
credit) increased from $23.3 million in 1994 to $37.3 million in 1995. The
improvement was primarily attributable to the Automation Group where earnings
more than doubled to $24.2 million in 1995 from $11.9 million in 1994. The
Automation Group's earnings improvement is due to the operating leverage of
increased sales. The earnings of the Instrumentation Group also increased
sharply from $1.5 million to $6.6 million due to favorable product mix of sales
and receipt of a patent infringement settlement of $1.3 million. The
Aerospace/Defense Group's earnings decreased to $6.5 million in 1995 from $9.8
million in the prior year. This decrease was primarily due to the above
referenced decline in gross margins.

Interest income for 1995 was $1.2 million compared with $0.1 million in 1994
due to increases in cash and equivalents which were generated primarily from
operations.

Interest expense for 1995 was $5.6 million compared with $6.1 million in
1994 due primarily to reduced debt levels.

The effective income tax rate for 1995 was 34% compared with 14% in 1994.
The low effective 1994 rate was primarily due to a $2.0 million benefit recorded
in 1994 from a settlement with the Internal Revenue Service of audits of certain
federal income tax returns.

Net earnings for 1995, were $17.4 million, or $2.53 per share, compared with
net earnings of $7.6 million, or $1.15 per share in the prior year period.
Earnings in the current year period include $.20 per share and $.12 per share,
respectively, from the restructuring credit and patent infringement settlement
discussed above.

Orders for 1995, were $358.3 million, compared with $319.4 million a year
earlier. The increase was primarily attributable to the Automation Group and its
improved markets as discussed above. Backlog at October 31, 1995 was $103.2
million, compared with $96.8 million a year earlier. Approximately $11.9 million
of Companywide backlog was scheduled to be delivered after 1996. Orders in
backlog are subject to cancellation.

YEAR ENDED OCTOBER 31, 1994 COMPARED TO YEAR ENDED OCTOBER 31, 1993

Net sales in 1994 were $294.0 million, compared with $285.2 million in 1993.
The 1994 sales improvement was attributable to the Automation Group, where sales
increased $14.2 million or 15% to $108.6 million. Strengthening of domestic
markets coupled with strong customer acceptance of newer products, principally
at Excellon, contributed to the sales growth. This sales increase in the
Automation Group was

9
<PAGE>

primarily attributable to sales increases at Excellon and at Whitney.
Instrumentation Group sales stabilized and were virtually level with the prior
year at $92.0 million, while sales in the Aerospace/Defense Group decreased $5.7
million or 6% to $93.4 million. The sale of Republic Electronics Co. in the
second quarter of 1994 accounted for approximately two-thirds of this decrease.
Including export sales by domestic operations, sales to foreign buyers totaled
$91.0 million and $89.3 million in 1994 and 1993, respectively, and accounted
for 31% of the Company's total sales in each year.

Cost of sales increased to $178.4 million in 1994 from $175.6 million in
1993. This increase was primarily attributable to the increase in net sales
discussed above. Gross margin as a percentage of sales increased slightly to 39%
in 1994 from 38% in 1993. Gross margin percentages by business segment increased
in 1994 in both the Aerospace and Defense and Instrumentation Groups, and were
approximately level in the Automation Group. In 1994, group margins ranged from
38% to 42%, compared with 37% to 40% in the prior year.

Selling, general and administrative expenses in 1994 were level with the
prior year at $100.8 million. However, they decreased slightly as a percent of
sales from 35% to 34%. The costs related to the corporate expenses portion of
selling, general and administrative expenses amount to $8.5 million in 1994,
compared with $7.2 million in 1993. This increase was primarily attributable to
additional performance-based compensation being awarded to senior management as
a result of the Company's improved earnings in 1994. The research, development
and related engineering costs portion of selling, general and administrative
expenses amounted to $13.7 million in 1994, compared with $14.0 million in 1993,
reflecting the Company's continuing commitment to invest in strategic product
development programs.

Operating earnings (excluding corporate expenses and restructuring charges)
in 1994 improved in all three of the Company's business segments and totaled
$23.3 million, compared with $16.1 million in the prior year. The improvement
was primarily attributable to the Automation Group where earnings advanced $4.0
million over the prior year primarily as a result of the earnings improvement at
Excellon and Whitney. Overall, operating earnings reflect a $2.6 million
reduction in depreciation and amortization expense as a result of the 1993
restructuring, and continued cost containment measures.

Net interest expense decreased from $6.3 million in 1993 to $6.0 million in
1994 due to reduced debt levels, offset by increases in interest rates.

Income tax expense in 1994 was $1.3 million, reflecting a $2.0 million
benefit recorded in the fourth quarter of 1994 resulting from a settlement with
the Internal Revenue Service of audits of certain federal income tax returns
compared with an income tax benefit of $12.4 million recorded in 1993.

Net earnings in 1994 were $7.6 million, or $1.15 per share on sales of
$294.0 million, compared with a net loss of $25.6 million, or $3.90 per share on
sales of $285.2 million in 1993. Net earnings in 1994 reflect the $2.0 million
tax benefit recorded in the fourth quarter resulting from the settlement with
the Internal Revenue Service. Net earnings in 1993 included a $27.2 million
after tax ($40.6 million before tax) restructuring provision. Without the
restructuring charge, 1993 net earnings would have been $1.6 million, or $.24
per share.

Orders for the year ended October 31, 1994 totaled $319.0 million, up more
than 20% from the prior year. Companywide backlog at the end of 1994 was $97.0
million compared with $74.0 million a year earlier. The increases were primarily
attributable to the Automation Group, where year end backlog levels of $30.0
million were more than triple the prior year amount, reflecting strengthening
markets and the introduction of new products in 1993. Backlog at the Company's
two other groups were relatively consistent with prior year levels.
Approximately $11.0 million of 1994's Companywide backlog was scheduled to be
shipped after fiscal 1995. Orders in backlog are subject to cancellation.

LIQUIDITY AND CAPITAL RESOURCES

Total debt at October 31, 1995 was $50.3 million, $12.1 million less than at
October 31, 1994. This debt reduction primarily reflects early redemption of
$20.0 million principal amount of 8.25% Convertible

10
<PAGE>

Debentures which was effected in May 1995 using available cash. Cash and
equivalents on hand at October 31, 1995 totalled $22.1 million, an increase of
$13.0 million from October 31, 1994. Working capital increased to $35.7 million
at October 31, 1995 from $9.0 million at October 31, 1994 primarily due to cash
generated from operations, and to reductions in accrued liabilities related to
the 1993 restructuring.

Of the total debt outstanding at October 31, 1995, $40.0 million was
outstanding under the Company's 8.75% Senior Notes, nothing was outstanding
under the Company's bank credit facility, and $10.3 million was outstanding
under the various bank credit facilities and other debt agreements, primarily
those related to Auxitrol. The Company's financing arrangements contain various
restrictions, including maintenance of net worth, various cash flow, leverage
and fixed charge coverage ratios, and limitations on capital expenditures,
disposition of assets and securities proceeds, payment of dividends, and
additional borrowings.

Capital expenditures, consisting primarily of machinery, equipment and
computers, are anticipated to be approximately $18.0 million during fiscal 1996,
compared with $11.5 million in fiscal 1995. In addition, the Company is required
to prepay $5.7 million principal amount of the Senior Notes on July 30, 1996 and
each year thereafter until the Senior Notes mature on July 30, 2002. Management
believes cash on hand, funds generated from operations, and available bank
credit lines of approximately $37.9 million will adequately service cash
requirements through fiscal 1996.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is
effective for fiscal years beginning after December 15, 1995. This Statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. In
addition, this Statement requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The adoption of this Statement is not
expected to have any material impact on the consolidated financial statements of
the Company.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which is effective for fiscal years beginning after December 15,
1995. This Statement defines and prescribes a fair value based method of
accounting for stock-based compensation plans in which compensation cost is
computed at the option grant date and expensed over a service period. While full
adoption of this statement is encouraged, companies will be permitted to
continue accounting for stock-based compensation under the current guidance of
APB Opinion No. 25; provided that certain pro forma disclosures of the impact of
full implementation are made. The Company does not plan to adopt the accounting
provisions of this standard and accordingly will continue applying the
provisions of APB Opinion No. 25.

In December 1994, the American Institute of Certified Public Accountants
issued Statement of Position 94-6 "Disclosure of Certain Significant Risks and
Uncertainties," which is effective for fiscal years ending after December 15,
1995. This Statement of Position requires additional disclosures about certain
risks and uncertainties relating to the nature of operations, the use of
estimates, and vulnerability due to certain concentrations. The adoption of this
Statement of Position is not expected to have any material impact on the
consolidated financial statements of the Company.

11
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A)(1) FINANCIAL STATEMENTS.

The following consolidated financial statements, together with the report
thereon of Deloitte & Touche LLP, dated December 11, 1995, are hereby filed as
part of this Report.

PAGE
NUMBER
------
Report of Independent Auditors................................... F-2
Consolidated Statement of Operations--Years ended
October 31, 1995, 1994 and 1993................................. F-3
Consolidated Balance Sheet--October 31, 1995 and 1994............ F-4
Consolidated Statement of Cash Flows--Years ended
October 31, 1995, 1994 and 1993................................. F-5
Consolidated Statement of Shareholders' Equity--Years ended
October 31, 1995, 1994 and 1993................................. F-6
Notes to Consolidated Financial Statements....................... F-7

(A)(2) FINANCIAL STATEMENT SCHEDULE.

The following additional financial data should be read in conjunction with
the consolidated financial statements filed herein.

Schedule VIII--Valuation and Qualifying Accounts and Reserves

(A)(3) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- --------------------------------------------------------------------
<S> <C>
3.1 Composite Restated Certificate of Incorporation of the Company as
amended by Certificate of Amendment dated March 14, 1990.
(Incorporated by reference to Exhibit 19 to 10-Q Report for the
quarter ended June 31, 1990.)
3.2 By-laws of the Company, as amended and restated December 15, 1988.
(Incorporated by reference to Exhibit 3.2 to 10-K Report for the
fiscal year ended October 31, 1988.)
4.1 Form of Rights Agreement, dated as of December 9, 1992, between the
Company and Chemical Bank, which includes as Exhibit A thereto the
form of Certificate of Designation, Preferences and Rights of
Series A Serial Preferred Stock and as Exhibit B thereto the form
of Rights Certificate (Incorporated by reference to Exhibit 1 to
the Registration Statement to Form 8-A filed December 17, 1992.)
10.1 Amendment of Lease and Agreement, dated March 11, 1959, between the
City of Torrance, California, and Longren Aircraft Company, Inc.,
as original lessee; Lease, dated July 1, 1959, between the City of
Torrance and Aeronca Manufacturing Corporation, as original lessee;
and Assignment of Ground Lease, dated September 26, 1985, from
Robert G. Harris, as successor Lessee under the foregoing leases,
to Excellon Industries, Inc., relating to principal manufacturing
facility of Excellon at 24751 Crenshaw Boulevard, Torrance,
California. (Incorporated by reference to Exhibit 10.1 to 10-K
Report for fiscal year ended October 31, 1986.)
10.4 Industrial Lease dated July 17, 1984 between 901 Dexter Associates
and Korry Electronics Co., First Amendment to Lease dated May 10,
1985, Second Amendment to Lease dated June 20, 1986, Third
Amendment to Lease dated September 1, 1987, and Notification of
Option Exercise dated January 7, 1991, relating to the
manufacturing
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- --------------------------------------------------------------------
<S> <C>
facility of Korry Electronics at 901 Dexter Avenue N., Seattle,
Washington. (Incorporated by reference to Exhibit 10.4 to 10-K
Report for the fiscal year ended October 31, 1991.)
10.4a Fourth Amendment dated July 27, 1994 to Industrial Lease dated July
17, 1984 between Houg Family Partnership, as successor to 901
Dexter Associates, and Korry Electronics Co. (Incorporated by
reference to Exhibit 10.4a to 10-K Report for the fiscal year ended
October 31, 1994).
10.5 Industrial Lease dated July 17, 1984 between 801 Dexter Associates
and Korry Electronics Co., First Amendment to Lease dated May 10,
1985, Second Amendment to Lease dated June 20, 1986, Third
Amendment to Lease dated September 1, 1987, and Notification of
Option Exercise dated January 7, 1991, relating to the
manufacturing facility of Korry Electronics at 801 Dexter Avenue
N., Seattle Washington. (Incorporated by reference to Exhibit 10.5
to 10-K Report for the fiscal year ended October 31, 1991.)
10.5a Fourth Amendment dated March 28, 1994 to Industrial Lease dated July
17, 1984 between Michael Maloney and the Bancroft & Maloney general
partnership, as successor to 801 Dexter Associates, and Korry
Electronics Co. (Incorporated by reference to Exhibit 10.5a to 10-K
Report for the fiscal year ended October 31, 1994).
10.7 Amended and Restated Credit Agreement executed as of January 91
dated and effective as of September 18, 1989 between Esterline
Corporation, certain of its subsidiaries, various financial
institutions and Continental Bank N.A. as Agent. (Incorporated by
reference to Exhibit 10.7 to 10-K Report for the fiscal year ended
October 31, 1990.)
10.8 Amendment, dated as of August 6, 1992, among Esterline Technologies
Corporation, certain of its subsidiaries, various financial
institutions and Continental Bank N.A., as agent, to that certain
Amended and Restated Credit Agreement, executed as of January 25,
1991 and dated and effective as of September 18, 1989, among
Esterline Corporation, certain of its subsidiaries, certain
financial institutions and Continental Bank N.A., as agent.
(Incorporated by reference to Exhibit 10.8 to 10-Q Report for the
quarter ended July 31, 1992.)
10.8a Amendment, dated as of October 31, 1993, among Esterline
Technologies Corporation, certain of its subsidiaries, various
financial institutions and Continental Bank N.A., as agent, to that
certain Amended and Restated Credit Agreement, executed as of
January 25, 1991 and dated and effective as of September 18, 1989
and amended August 6, 1992, among Esterline Corporation, certain of
its subsidiaries, certain financial institutions and Continental
Bank N.A., as agent. (Incorporated by reference to Exhibit 10.8a to
10-K Report for the fiscal year ended October 31, 1993.)
10.9 Note Agreement, dated as of July 15, 1992, among Esterline
Technologies Corporation, certain of its subsidiaries, The
Northwestern Mutual Life Insurance Company and New England Mutual
Life Insurance Company relating to 8.75% Senior Notes due July 30,
2002 of Esterline Technologies Corporation and certain of its
subsidiaries. (Incorporated by reference to Exhibit 10.9 to 10-Q
Report for the quarter ended July 31, 1992.)
10.9a Amendment to Note Agreement, executed as of October 31, 1993, to
that certain Note Agreement, dated and effective as of July 15,
1992, among Esterline Technologies Corporation, certain of its
subsidiaries, The Northwestern Mutual Life Insurance Company and
New England Mutual Life Insurance Company relating to 8.75% Senior
Notes due July 30, 2002 of Esterline Technologies Corporation and
certain of its subsidiaries. (Incorporated by reference to Exhibit
10.9a to 10-K Report for the fiscal year ended October 31, 1993.)
</TABLE>

13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER -
- -------
<S> <C>
10.10 Compensation of Directors. (Incorporated by reference to first
paragraph under "Other Information as to Directors" in the
definitive form of the Company's Proxy Statement, relating to its
1995 Annual Meeting of Shareholders to be held on March 8, 1995,
filed with the Securities and Exchange Commission and the New York
Stock Exchange on January 13, 1995.)
10.14 Stock Option Plan for Carroll M. Martenson. (Incorporated by
reference to Exhibit B to the Company's Proxy Statement dated
February 9, 1988.)
10.14a Certificate of Grant of Option pursuant to Stock Option Plan for
Carroll M. Martenson. (Incorporated by reference to Exhibit 10.14a
to 10-K Report for the fiscal year ended October 31, 1991.)
10.14b Amendment to Certificate of Grant of Option pursuant to Stock Option
Plan for Carroll M. Martenson. (Incorporated by reference to
Exhibit 10.14b to 10-K Report for the fiscal year ended October 31,
1991.)
11 Schedule setting forth computation of earnings per share for the
five fiscal years ended October 31, 1995.
13 Annual Report to Shareholders for the fiscal year ended October 31,
1995. (Not filed as part of this Report except for those portions
thereof incorporated by reference herein.)
21 List of subsidiaries.

MANAGEMENT CONTRACTS OR COMPENSATORY PLANS OR ARRANGEMENTS
--------------------------------------------------------------------
<S> <C>
10.13 Amended and Restated 1987 Stock Option Plan. (Incorporated by
reference to Exhibit 10.13 to 10-Q Report for the quarter ended
January 31, 1992.)

10.15 Esterline Corporation Supplemental Retirement Income Plan for Key
Executives. (Incorporated by reference to Exhibit 10.15 to 10-K
Report for the fiscal year ended October 31, 1989.)

10.16b Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal
Years 1992 through 1995. (Incorporated by reference to Exhibit
10.16b to 10-K Report for the fiscal year ended October 31, 1992.)

10.16c Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal
Years 1993 through 1996 (Incorporated by reference to Exhibit
10.16c to 10-K Report for the fiscal year ended October 31, 1993.)

10.16d Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal
Years 1994 through 1997. (Incorporated by reference to Exhibit
10.16d to 10-K Report for the fiscal year ended October 31, 1994).

10.19 Executive Officer Termination Protection Agreement. (Incorporated by
reference to
Exhibit 10.19 to 10-K Report for fiscal year ended October 31,
1992.)

10.20b Esterline Technologies Corporation Corporate Management Incentive
Compensation Plan for the fiscal year 1994. (Incorporated by
reference to Exhibit 10.20(b) to 10-K Report for the fiscal year
ended October 31, 1994).
</TABLE>

(B) REPORTS ON FORM 8-K.

1. Report on Form 8-K, dated October 18, 1995 reporting the suspension of
the Company's Public Offering.

14
<PAGE>

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Amendment No. 1 to the
Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ESTERLINE TECHNOLOGIES CORPORATION
(Registrant)

By /s/ ROBERT W. STEVENSON

------------------------------------
Robert W. Stevenson,
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, SECRETARY
AND TREASURER (PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)

Dated: January 22, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 1 to the Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.

<TABLE>
<C> <S> <C>
Director, Chairman,
/s/ WENDELL P. HURLBUT President and Chief
- ----------------------------------- Executive Officer January 22, 1996
(Wendell P. Hurlbut) (Principal Executive
Officer)

Executive Vice President
and Chief Financial
/s/ ROBERT W. STEVENSON Officer, Secretary and
- ----------------------------------- Treasurer (Principal January 22, 1996
(Robert W. Stevenson) Financial and Accounting
Officer)

/s/ GILBERT W. ANDERSON
- ----------------------------------- Director January 22, 1996
(Gilbert W. Anderson)

/s/ JOHN F. CLEARMAN
- ----------------------------------- Director January 22, 1996
(John F. Clearman)

/s/ EDWIN I. COLODNY
- ----------------------------------- Director January 22, 1996
(Edwin I. Colodny)

/s/ E. JOHN FINN
- ----------------------------------- Director January 22, 1996
(E. John Finn)
</TABLE>

15
<PAGE>

<TABLE>
<C> <S> <C>
/s/ ROBERT F. GOLDHAMMER
- ----------------------------------- Director January 22, 1996
(Robert F. Goldhammer)

/s/ JEROME J. MEYER
- ----------------------------------- Director January 22, 1996
(Jerome J. Meyer)

/s/ PAUL G. SCHLOEMER
- ----------------------------------- Director January 22, 1996
(Paul G. Schloemer)

/s/ MALCOLM T. STAMPER
- ----------------------------------- Director January 22, 1996
(Malcolm T. Stamper)
</TABLE>

16
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.................................................... F-2
Consolidated Statement of Operations for the years ended October 31, 1993, 1994
and 1995....................................................................... F-3
Consolidated Balance Sheet as of October 31, 1994 and 1995...................... F-4
Consolidated Statement of Cash Flows for the years ended October 31, 1993, 1994
and 1995....................................................................... F-5
Consolidated Statement of Shareholders' Equity for the years ended October 31,
1993, 1994 and 1995............................................................ F-6
Notes to Consolidated Financial Statements...................................... F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Shareholders and the Board of Directors
Esterline Technologies Corporation
Bellevue, Washington

We have audited the accompanying consolidated balance sheets of Esterline
Technologies Corporation and its subsidiaries as of October 31, 1995 and 1994,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended October 31, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Esterline Technologies
Corporation and its subsidiaries as of October 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1995 in conformity with generally accepted
accounting principles. Also, in our opinion the financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Seattle, Washington
December 11, 1995

F-2
<PAGE>

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net Sales................................................... $285,152 $294,044 $351,897
-------- -------- --------
Costs and Expenses
Cost of sales............................................. 175,568 178,397 210,834
Selling, general and administrative....................... 100,669 100,845 112,213
Restructuring provision (credit).......................... 40,626 -- (2,067)
Interest income........................................... (122) (113) (1,156)
Interest expense.......................................... 6,446 6,098 5,598
-------- -------- --------
323,187 285,227 325,422
-------- -------- --------
Earnings (Loss) Before Income Taxes......................... (38,035) 8,817 26,475
Income Tax Expense (Benefit)................................ (12,400) 1,254 9,094
-------- -------- --------
Net Earnings (Loss)......................................... $(25,635) $ 7,563 $ 17,381
-------- -------- --------
-------- -------- --------
Net Earnings (Loss) Per Share............................... $ (3.90) $ 1.15 $ 2.53
-------- -------- --------
-------- -------- --------
</TABLE>

See Notes to Consolidated Financial Statements

F-3
<PAGE>

CONSOLIDATED BALANCE SHEET
ASSETS

<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current Assets
Cash and equivalents................................................ $ 9,076 $ 22,097
Accounts receivable, net of allowances of $2,201 and $4,117 for
doubtful accounts.................................................. 63,685 63,825
Inventories......................................................... 31,673 39,963
Deferred income taxes............................................... 13,002 14,122
Prepaid expenses.................................................... 1,876 2,199
--------- ---------
Total Current Assets.............................................. 119,312 142,206
Property, Plant and Equipment
Land................................................................ 3,901 3,913
Buildings........................................................... 43,137 43,669
Machinery and equipment............................................. 98,635 99,076
--------- ---------
145,673 146,658
Accumulated depreciation............................................ 94,070 97,426
--------- ---------
51,603 49,232
Intangibles, net and Other Assets..................................... 46,609 34,276
--------- ---------
Total Assets...................................................... $217,524 $ 225,714
--------- ---------
--------- ---------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable.................................................... $ 18,927 $ 23,143
Accrued liabilities................................................. 69,426 66,363
Credit facilities................................................... 58 7,721
Current maturities of long-term debt................................ 20,588 7,030
Federal and foreign income taxes.................................... 1,320 2,208
--------- ---------
Total Current Liabilities......................................... 110,319 106,465
Long-Term Debt, net of current maturities............................. 41,714 35,543
Commitments and Contingencies (Notes 7 and 8)
Shareholders' Equity
Common stock, par value $.20 per share, authorized 30,000,000 shares
issued and outstanding 6,513,057 and 6,645,780 shares.............. 1,302 1,328
Capital in excess of par value...................................... 10,482 10,390
Retained earnings................................................... 54,951 72,332
Cumulative translation adjustment................................... (1,244) (344)
--------- ---------
Total Shareholders' Equity........................................ 65,491 83,706
--------- ---------
Total Liabilities and Shareholders' Equity........................ $217,524 $ 225,714
--------- ---------
--------- ---------
</TABLE>

See Notes to Consolidated Financial Statements

F-4
<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
Net earnings (loss)....................................... $(25,635) $ 7,563 $ 17,381
Restructuring provision (credit).......................... 40,626 -- (2,067)
Depreciation and amortization............................. 19,259 16,414 16,599
Deferred income taxes..................................... (16,558) (1,303) (2,969)
Working capital changes
Accounts receivable..................................... 1,779 (15,625) 280
Inventories............................................. 1,250 7,590 (9,496)
Prepaid expenses........................................ (202) 38 (176)
Accounts payable........................................ (1,959) 3,564 4,121
Accrued liabilities..................................... 2,040 6,910 7,196
Federal and foreign income taxes........................ (1,750) 144 897
Other, net................................................ (1,994) 92 882
-------- -------- --------
16,856 25,387 32,648
-------- -------- --------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Capital expenditures...................................... (9,566) (11,288) (11,461)
Capital dispositions...................................... -- 3,945 3,773
-------- -------- --------
(9,566) (7,343) (7,688)
-------- -------- --------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Net change in credit facilities........................... 2,462 (5,218) 7,483
Repayment of long-term debt............................... (9,382) (7,290) (19,837)
-------- -------- --------
(6,920) (12,508) (12,354)
-------- -------- --------
Effect of Exchange Rates.................................... (269) 322 415
-------- -------- --------
Net Increase in Cash and Equivalents........................ 101 5,858 13,021
Cash and Equivalents--Beginning of Year..................... 3,117 3,218 9,076
-------- -------- --------
Cash and Equivalents--End of Year........................... $ 3,218 $ 9,076 $ 22,097
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for.............................
Interest expense........................................ $ 6,271 $ 6,033 $ 4,577
Income taxes............................................ 2,264 2,212 10,452
</TABLE>

See Notes to Consolidated Financial Statements

F-5
<PAGE>

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1993 1994 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Common Stock, par value $.20 per share
Beginning of year......................................... $ 1,301 $ 1,302 $ 1,302
Stock issued under stock option plans..................... 1 -- 26
-------- ------- -------
End of year............................................... 1,302 1,302 1,328
-------- ------- -------
Capital in Excess of Par Value
Beginning of year......................................... 10,480 10,482 10,482
Stock issued under stock option plans..................... 2 -- (92)
-------- ------- -------
End of year............................................... 10,482 10,482 10,390
-------- ------- -------
Retained Earnings
Beginning of year......................................... 73,023 47,388 54,951
Net earnings (loss)....................................... (25,635) 7,563 17,381
-------- ------- -------
End of year............................................... 47,388 54,951 72,332
-------- ------- -------
Cumulative Foreign Currency Translation Adjustment
Beginning of year......................................... (2,182) (3,849) (1,244)
Aggregate adjustment resulting from foreign currency
translation.............................................. (1,667) 2,605 900
-------- ------- -------
End of year............................................... (3,849) (1,244) (344)
-------- ------- -------
Shareholders' Equity........................................ $ 55,323 $65,491 $83,706
-------- ------- -------
-------- ------- -------
</TABLE>

See Notes to Consolidated Financial Statements

F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Esterline Technologies Corporation and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Classifications have been changed for certain amounts in the preceding period to
conform with the current year's financial presentation.

FOREIGN CURRENCY TRANSLATION: Foreign currency assets and liabilities are
translated into their U.S. dollar equivalents based on year-end exchange rates.
Revenue and expense accounts are generally translated at average exchange rates.
Aggregate exchange gains and losses arising from the translation of foreign
assets and liabilities are included in shareholders' equity. Transaction gains
and losses are included in income and have not been significant in amount.

INVENTORIES: Most inventories are stated at the lower of cost (first in,
first out) or market. Two subsidiaries state their inventories at the lower of
cost (last in, first out) or market. Inventory cost includes material, labor and
factory overhead.

RESEARCH, DEVELOPMENT AND RELATED ENGINEERING COSTS: Research, development
and related engineering costs approximated $14,007,000, $13,711,000 and
$16,638,000 in 1993, 1994 and 1995, respectively, and are generally expensed as
incurred.

PROPERTY, PLANT AND EQUIPMENT, AND DEPRECIATION: Property, plant and
equipment is carried at cost and includes expenditures for major improvements
which increase useful lives. Depreciation is provided generally on the
straight-line method. For income tax purposes, depreciation is computed using
various accelerated methods.

INTANGIBLE ASSETS: Intangible assets arise primarily from business
acquisitions and include intangibles and the cost of purchased businesses in
excess of amounts assigned to tangible and intangible assets. Intangible assets
are being amortized over estimated lives of up to 40 years.

ASSET VALUATION: The carrying amount of long-life assets is reviewed
periodically. If the asset carrying amount is not recoverable, the asset is
considered to be impaired and the value is adjusted.

MANAGEMENT ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.

ENVIRONMENTAL: Environmental exposures are provided for in total at the
time they are known to exist or are considered reasonably probable.

EARNINGS PER SHARE: Earnings per share are computed using the average
number of common and common equivalent shares outstanding during each year
(6,579,000 shares in 1993, 6,571,000 shares in 1994 and 6,870,000 shares in
1995).

CASH EQUIVALENTS: Investments maturing in three months or less are
classified as cash equivalents.

FINANCIAL INSTRUMENTS: The Company's financial instruments include cash and
equivalents, accounts receivable and accounts payable, for which the fair value
approximates carrying value, and credit facilities and long-term debt. The fair
values of credit facilities and long-term debt (see Note 4) were estimated using
interest rates that are currently available to the Company for issuance of debt
with similar terms and remaining maturities.

CONCENTRATIONS OF CREDIT RISK: Concentrations of credit risk with respect
to accounts receivable are generally diversified due to the large number of
entities comprising the Company's customer base and their dispersion across many
different industries and geographies. The Company performs ongoing credit
evaluations of its customer's financial condition and, in certain circumstances,
utilizes letters of credit and bank guarantees to minimize risk.

F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. INVENTORIES
Inventories consisted of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1994 1995
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and purchased parts........................... $ 8,770 $ 11,422
Work in process............................................. 16,887 22,052
Finished goods.............................................. 6,016 6,489
----------- ---------
$ 31,673 $ 39,963
----------- ---------
----------- ---------
</TABLE>

At October 31, 1994 and 1995, $8,500,000 and $10,000,000, respectively, of
the Company's total inventories were stated under the last in, first out
inventory method. Had the first in, first out method been used, these
inventories would have been $3,386,000 and $3,896,000 higher than reported at
October 31, 1994 and 1995, respectively.

3. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Payroll and other compensation............................ $ 18,905 $ 19,971
Self-insurance provisions................................. 7,886 7,151
Interest.................................................. 2,770 2,453
Warranties................................................ 3,495 10,202
State and other tax accruals.............................. 7,048 6,912
Accrued restructuring cost................................ 13,698 --
Other..................................................... 15,624 19,674
--------- ---------
$ 69,426 $ 66,363
--------- ---------
--------- ---------
</TABLE>

4. DEBT
Long-term debt consisted of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1994 1995
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
8.75% senior notes, due 2002............................ $ 40,000 $ 40,000
8.25% convertible subordinated debentures, due 1995..... 20,000 --
Other................................................... 2,302 2,573
----------- ---------
62,302 42,573
Less current maturities............................. 20,588 7,030
----------- ---------
$ 41,714 $ 35,543
----------- ---------
----------- ---------
</TABLE>

The 8.75% senior notes are unsecured and payable in equal annual
installments beginning in fiscal 1996. Interest is payable semi-annually in
January and July of each year.

The 8.25% convertible debentures were issued by Esterline International
Finance N.V., a subsidiary of the Company, and were retired in 1995.

F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. DEBT (CONTINUED)

The Company has a $35,000,000 unsecured line of credit with a group of
banks. Alternative interest rates are available based on LIBOR, or the lead
bank's prime rate, at the Company's option. There were no amounts borrowed under
the line of credit as of October 31, 1994 and 1995.

The unsecured line of credit contains various restrictions, including
maintenance of net worth, payment of dividends, interest coverage, and
limitations on additional borrowings.

The fair value of the Company's notes payable and long-term debt was
estimated at $61,088,000 and $41,587,000 at October 31, 1994 and 1995,
respectively.

Maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996.............................................. $ 7,030
1997.............................................. 6,444
1998.............................................. 6,161
1999.............................................. 5,786
2000.............................................. 5,722
2001 and thereafter............................... 11,430
-------
$42,573
-------
-------
</TABLE>

The Company had lines of credit with domestic and foreign banks as follows:

<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Outstanding Balance
Domestic.............................................................. $ -- $ --
Foreign............................................................... 58 7,721
--------- ---------
$ 58 $ 7,721
--------- ---------
--------- ---------
Credit Lines
Domestic.............................................................. $ 35,000 $ 35,000
Foreign............................................................... 10,000 10,000
Average Borrowings during the year
Domestic.............................................................. 500 --
Foreign............................................................... 4,500 6,000
Average Interest Rates during the year
Domestic.............................................................. 6.8% --
Foreign............................................................... 7.5% 7.7%
</TABLE>

Letters of credit are considered borrowed funds under the Company's line of
credit. Borrowing capacity under the credit line shown above was reduced by the
outstanding letters of credit of approximately $7,093,000 at October 31, 1995.

5. RETIREMENT BENEFITS
Pension benefits are provided for substantially all U.S. employees under
contributory and non-contributory pension and other plans, and are based on
years of service and five-year average compensation. The Company makes
actuarially computed contributions as necessary to adequately fund benefits. The
actuarial computations assumed discount rates on benefit obligations and
expected long-term rates of return on plan assets of 7.5% and annual
compensation increases of 5%. Investments of the plans primarily consist of U.S.
Government obligations, publicly traded common stocks, mutual funds and
insurance contracts.

F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. RETIREMENT BENEFITS (CONTINUED)
Pension expense consisted of the following:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------
1993 1994 1995
---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the year................ $ 2,106 $ 2,322 $ 2,316
Interest cost on projected benefit obligation............... 4,248 4,457 4,698
Actual return on plan assets-investment gains............... (10,467) (2,827) (13,189)
Net amortization and deferral............................... 4,487 (3,515) 7,292
---------- --------- ----------
Net pension expense......................................... $ 374 $ 437 $ 1,117
---------- --------- ----------
---------- --------- ----------
</TABLE>

Combined funded status of the plans was as follows:

<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair market value........................................ $ 75,457 $ 83,815
Projected benefit obligation for service rendered to date............... 60,836 62,223
--------- ---------
Plan assets in excess of projected benefit obligation................... 14,621 21,592
Unrecognized net (gain) loss............................................ 552 (7,514)
Unrecognized net asset at November 1, 1985.............................. (2,887) (2,406)
--------- ---------
Prepaid pension expense, included in other assets....................... $ 12,286 $ 11,672
--------- ---------
--------- ---------
Actuarial present value of accumulated benefit obligation, including
vested benefits of $51,489 and $51,716................................. $ 52,602 $ 51,978
--------- ---------
--------- ---------
</TABLE>

The Company has a supplemental retirement plan for key executives providing
for periodic payments upon retirement. The long-term liability under this plan
was $1,549,000 and $2,046,000 as of October 31, 1994 and 1995, respectively.

Provision for all retirement benefits consisted of the following:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Pension plans...................................................... $ 464 $ 1,232 $ 2,016
Profit-sharing and other plans..................................... 72 -- --
--------- --------- ---------
$ 536 $ 1,232 $ 2,016
--------- --------- ---------
--------- --------- ---------
</TABLE>

6. INCOME TAXES
During 1993, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." The cumulative effect of the change was
not material.

During 1994, the Internal Revenue Service completed an examination of
certain federal income tax returns and reached agreement with the Company on
various filing positions. As a result, the Company recorded a $2,000,000 tax
benefit in the fourth quarter of 1994.

F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES (CONTINUED)
Income tax expense (benefit) consisted of the following:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1993 1994 1995
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current..................................................... $ 1,695 $ 2,557 $ 12,063
Deferred.................................................... (14,095) (1,303) (2,969)
---------- --------- ---------
$ (12,400) $ 1,254 $ 9,094
---------- --------- ---------
---------- --------- ---------
</TABLE>

Primary components of the Company's deferred tax assets and liabilities
resulted from temporary tax differences associated with the following:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Reserves and liabilities................................................ $ 10,660 $ 15,797
Employee benefits....................................................... 5,357 4,039
Tax credits............................................................. 751 --
Foreign tax loss carryforward........................................... -- 1,627
Restructuring accruals.................................................. 4,863 --
-------- --------
Total deferred tax assets............................................. 21,631 21,463
-------- --------
Depreciation and amortization........................................... (4,110) (1,412)
Retirement benefits..................................................... (3,856) (3,417)
-------- --------
Total deferred tax liabilities........................................ (7,966) (4,829)
-------- --------
$ 13,665 $ 16,634
-------- --------
-------- --------
</TABLE>

A valuation allowance was not required due to the nature of and
circumstances associated with the temporary tax differences.

A reconciliation of the United States federal statutory income tax rate to
the effective income tax rate was as follows:

<TABLE>
<CAPTION>
1993 1994 1995
----- ----- ----
<S> <C> <C> <C>
U.S. statutory income tax rate.............................. (34.0)% 34.0 % 35.0%
State income taxes.......................................... (1.1 ) 6.6 3.5
Foreign tax rates........................................... .7 2.5 (1.5)
Foreign sales corporation................................... (.8 ) (3.5 ) (1.7)
Tax settlement.............................................. -- (22.7) --
Other, net.................................................. 2.6 (2.7 ) (1.0)
----- ----- ----
Effective income tax rate................................... (32.6)% 14.2 % 34.3%
----- ----- ----
----- ----- ----
</TABLE>

No provision for federal income taxes has been made on accumulated earnings
of foreign subsidiaries, since such earnings have either been permanently
reinvested or would be substantially offset by foreign tax credits.

7. CONTINGENCIES
In October 1995, the Company identified irregularities in the allocation of
certain labor charges at Armtec, and promptly disclosed these irregularities to
the Department of Defense. Armtec applied for admittance to the Department of
Defense Voluntary Disclosure Program but has not yet been advised

F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. CONTINGENCIES (CONTINUED)
regarding its admittance to the Program. The outside attorneys and governmental
contracting consultant that were retained by the Company to assist in this
matter are continuing their internal investigation. At this stage of the
investigation, management believes that the eventual outcome of this issue will
not have a material adverse effect on the financial position or future operating
results of the Company.

The Company has various lawsuits and claims, both offensive and defensive,
and contingent liabilities arising from the conduct of business, including those
associated with government contracting activities, none of which, in the opinion
of management, is expected to have a material effect on the Company's financial
position or results of operations. Liabilities have been accrued for
environmental remediation costs expected to be incurred in the disposition of
manufacturing facilities. No provision has been recorded for environmental
remediation costs which could result from changes in laws or other circumstances
currently not contemplated by the Company.

8. OPERATING LEASES
Net rental expense for operating leases amounted to approximately
$3,241,000, $3,170,000 and $3,103,000 in 1993, 1994 and 1995, respectively.

The Company's rental commitments for noncancelable operating leases with a
duration in excess of one year are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996........................................................ $ 2,739
1997........................................................ 2,413
1998........................................................ 2,375
1999........................................................ 2,118
2000........................................................ 1,926
2001 and thereafter......................................... 1,449
-------
$ 13,020
-------
-------
</TABLE>

9. STOCK OPTION PLANS
At October 31, 1995, the Company had 973,250 shares of common stock reserved
for issuance to officers, directors and key employees under its stock option
plans, of which 218,625 shares were available for future grant. Options granted
under the plans are exercisable over a period of four years following the date
of grant and expire not later than the tenth anniversary of the grant. The
option exercise prices are equal to the fair market value of the Company's
common stock on the date of grant.

F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTION PLANS (CONTINUED)
The following summarizes the changes in outstanding options granted under
the Company's stock option plans:

<TABLE>
<CAPTION>
OPTION PRICES
SHARES PER SHARE
---------- --------------
<S> <C> <C>
Balance -- October 31, 1992...................................... 911,625 $ 8.00-11.25
Granted...................................................... 117,500 7.63- 9.38
Canceled..................................................... (25,625) 8.00-11.25
Exercised.................................................... (25,000) 8.00
---------- --------------
Balance -- October 31, 1993...................................... 978,500 7.63-11.25
Granted...................................................... 119,000 7.38- 9.88
Canceled..................................................... (54,000) 7.38-11.25
Exercised.................................................... (5,000) 9.00
---------- --------------
Balance -- October 31, 1994...................................... 1,038,500 7.38-11.25
Granted...................................................... 105,000 12.88-17.75
Cancelled.................................................... (7,500) 7.38-11.25
Exercised.................................................... (381,375) 7.38- 9.50
---------- --------------
Balance -- October 31, 1995...................................... 754,625 $ 7.38-17.75
---------- --------------
---------- --------------
Exercisable at October 31, 1995.................................. 470,375 $ 7.38-11.25
---------- --------------
---------- --------------
</TABLE>

10. CAPITAL STOCK
The authorized capital stock of the Company consists of 500,000 shares of
preferred stock, including 25,000 shares ($100 par value) and 475,000 shares
($1.00 par value) issuable in series, and 30,000,000 shares of common stock
($.20 par value). At October 31, 1995, there were no shares of preferred stock
outstanding, 973,250 shares of common stock were reserved for issuance under the
Company's stock option plans.

On December 9, 1992, the Board of Directors adopted a Stockholder Rights
Plan providing for the distribution of one Preferred Stock Purchase Right for
each share of common stock held on December 23, 1992. Each Right entitles the
holder to purchase one-one hundredth of a share of Series A Serial Preferred
Stock at an exercise price of $56. The Rights expire December 23, 2002.

The Rights will be exercisable and transferrable apart from the common stock
only if a person or group acquires beneficial ownership of 10% or more of the
Company's common stock or commences a tender offer or exchange offer which would
result in a person or group beneficially owning 10% or more of the Company's
common stock. The Rights will be redeemable by the Company for $.01 each at any
time prior to the tenth day after an announcement that a person or group
beneficially owns 10% or more of the common stock.

Upon the occurrence of certain events, the holder of a Right can purchase,
for the then current exercise price of the Right, shares of common stock of the
Company (or under certain circumstances, as determined by the Board of
Directors, cash, other securities or property) having a value of twice the
Right's exercise price. Upon the occurrence of certain other events, the holder
of each Right would be entitled to purchase, at the exercise price of the Right,
shares of common stock of a corporation or other entity acquiring the Company or
engaging in certain transactions involving the Company, that has a market value
of twice the Right's exercise price.

11. RESTRUCTURING PROVISION

In the fourth quarter of 1993, the Company recorded a $40.6 million
restructuring charge ($27.2 million net of income tax effect), based on
management's estimate of the effects of the contemplated actions. The

F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. RESTRUCTURING PROVISION (CONTINUED)

provision provided for sale or shutdown of certain small operating companies,
employees' severance, write-off of intangible assets, anticipated losses on the
sale of vacant facilities and product lines, and consolidation of facilities and
product lines for increased efficiency. The charges reduced 1993 earnings per
share by $4.14.

During the third quarter of fiscal 1995, several remaining restructuring
actions were completed. The restructuring plan was comprehensively reviewed and
the total restructuring costs were lowered to $38.5 million. As a result, the
Company took a restructuring credit in the third quarter of fiscal 1995 of $2.1
million ($1.4 million, or $.20 per share, net of income tax), or approximately
5% of the original charge. The Company believes the restructuring action is now
substantially complete.

F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. BUSINESS SEGMENT INFORMATION
Details of the Company's operations by business segment for the years ended
October 31 were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales
Automation....................................................... $ 94,460 $ 108,642 $ 156,116
Aerospace and Defense............................................ 99,071 93,370 98,027
Instrumentation.................................................. 91,621 92,032 97,754
---------- ---------- ----------
285,152 $ 294,044 $ 351,897
---------- ---------- ----------
---------- ---------- ----------
Earnings (Loss) Before Income Taxes
Automation....................................................... $ 7,887 $ 11,913 $ 24,215
Aerospace and Defense............................................ 7,259 9,809 6,493
Instrumentation.................................................. 935 1,537 6,627
---------- ---------- ----------
Operating Earnings............................................. 16,081 23,259 37,335
---------- ---------- ----------
Corporate expense................................................ (7,166) (8,457) (8,485)
Restructuring (provision) credit................................. (40,626) -- 2,067
Interest income.................................................. 122 113 1,156
Interest expense................................................. (6,446) (6,098) (5,598)
---------- ---------- ----------
$ (38,035) $ 8,817 $ 26,475
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets
Automation....................................................... $ 41,752 $ 49,540 $ 57,849
Aerospace and Defense............................................ 77,419 76,681 68,785
Instrumentation.................................................. 55,744 49,822 45,412
Corporate (1).................................................... 30,757 41,481 53,668
---------- ---------- ----------
$ 205,672 $ 217,524 $ 225,714
---------- ---------- ----------
---------- ---------- ----------
Capital Expenditures
Automation....................................................... $ 2,402 $ 4,214 $ 5,848
Aerospace and Defense............................................ 4,125 3,158 2,750
Instrumentation.................................................. 2,935 3,847 2,833
Corporate........................................................ 94 69 30
---------- ---------- ----------
$ 9,556 $ 11,288 $ 11,461
---------- ---------- ----------
---------- ---------- ----------
Depreciation and Amortization
Automation....................................................... $ 3,982 $ 3,546 $ 4,388
Aerospace and Defense............................................ 7,829 6,128 6,002
Instrumentation.................................................. 7,158 6,257 5,754
Corporate........................................................ 290 483 455
---------- ---------- ----------
$ 19,259 $ 16,414 $ 16,599
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

- ------------------------
(1) Primarily cash, net deferred tax assets (See Note 6), and prepaid pension
expense (See Note 5).

F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. BUSINESS SEGMENT INFORMATION (CONTINUED)
The Company's principal foreign operations consist of manufacturing
facilities located in France, Spain, Mexico and Italy, and include sales and
service operations located in England, Germany, Japan and France.

Details of the Company's operations by geographic area for the years ended
October 31 were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
SALES
Domestic
Unaffiliated customers -- U.S........................... $195,808 $203,010 $227,810
Unaffiliated customers -- export........................ 33,163 34,248 61,051
Intercompany............................................ 4,163 6,231 11,132
-------- -------- --------
$233,134 $243,489 $299,993
-------- -------- --------
Foreign
Unaffiliated customers.................................. $ 56,181 $ 56,786 $ 63,036
Intercompany............................................ 29 628 1,073
-------- -------- --------
$ 56,210 $ 57,414 $ 64,109
-------- -------- --------
Eliminations.............................................. $ (4,192) $ (6,859) $(12,205)
-------- -------- --------
Net Sales................................................. $285,152 $294,044 $351,897
-------- -------- --------
-------- -------- --------
OPERATING EARNINGS (LOSS) (1)
Domestic.................................................. $ 13,042 $ 20,449 $ 38,238
Foreign................................................... 2,833 2,994 (80)
Eliminations.............................................. 206 (184) (823)
-------- -------- --------
$ 16,081 $ 23,259 $ 37,335
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS (2)
Domestic.................................................. $142,644 $133,200 $134,897
Foreign................................................... 33,604 42,843 37,149
-------- -------- --------
$176,248 $176,043 $172,046
-------- -------- --------
-------- -------- --------
</TABLE>

- ------------------------
(1) Before restructuring (provision) credit, shown on page F-15.

(2) Excludes Corporate, shown on page F-15.

The above sales are based upon geographic origin of sale. Intercompany sales
are made at selling prices comparable to those to unaffiliated customers. Sales
to any single customer or government entity did not exceed 10% of consolidated
sales. Operating earnings are net sales less operating expenses.

F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. BUSINESS SEGMENT INFORMATION (CONTINUED)
Product lines contributing more than 10% of total sales in any of the years
ended October 31 were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Printed circuit board drilling equipment.................... 16% 18% 26%
Gauge products.............................................. 13% 13% 12%
</TABLE>

13. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial information:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31, 1994
Net sales................................................... $ 57,872 $ 70,867 $ 71,676 $ 93,629
Gross margin................................................ 21,725 27,867 28,496 37,559
Net earnings (loss)......................................... (404) 1,154 1,515 5,298(1)
Net earnings (loss) per share............................... $ (.06) $ .18 $ .23 $ .80(1)
YEAR ENDED OCTOBER 31, 1995
Net sales................................................... $ 83,332 $ 84,812 $ 87,318 $ 96,435
Gross margin................................................ 33,394 34,593 36,034 37,042
Net earnings................................................ 2,198 3,051 6,589(2) 5,543
Net earnings per share...................................... $ .32 $ .44 $ .93(2) $ .84
</TABLE>

- ------------------------

(1) Net earnings in the fourth quarter of 1994 reflect a $2.0 million or $.30
per share, tax benefit recorded as a result of a settlement with the
Internal Revenue Service. Without this credit, net earnings would have been
$3.3 million or $.50 per share.

(2) Net earnings in the third quarter of 1995 reflect nonrecurring items
including a pre-tax restructuring credit of $2.1 million, or $.20 per share
on an after-tax basis, and a pre-tax patent infringement settlement credit
of $1.3 million, or $.12 per share on an after-tax basis. Without these
credits, net earnings would have been $4.2 million, or $.61 per share.

F-17
<PAGE>

ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
DEDUCTION FOR
BALANCE AT ADDITIONS PURPOSE FOR BALANCE
BEGINNING CHARGED WHICH RESERVE AT END
DESCRIPTION OF YEAR TO INCOME WAS CREATED OF YEAR
- ------------------------------------------------------------ ---------- --------- ------------- -------

<S> <C> <C> <C> <C>
Reserve for doubtful accounts receivable

YEAR ENDED OCTOBER 31
1993........................................................ $2,314 $ 668 $ (565) $ 2,417
---------- --------- ------------- -------
---------- --------- ------------- -------
1994........................................................ $2,417 $ 117 $ (333) $ 2,201
---------- --------- ------------- -------
---------- --------- ------------- -------
1995........................................................ $2,201 $2,095 $ (179) $ 4,117
---------- --------- ------------- -------
---------- --------- ------------- -------

Restructuring reserves related to accounts receivable and
inventory

YEAR ENDED OCTOBER 31
1993........................................................ $-- $3,890 $-- $ 3,890
---------- --------- ------------- -------
---------- --------- ------------- -------
1994........................................................ $3,890 $-- $ (344) $ 3,546
---------- --------- ------------- -------
---------- --------- ------------- -------
1995........................................................ $3,546 $-- $(2,351) $ 1,195
---------- --------- ------------- -------
---------- --------- ------------- -------
</TABLE>

F-18