August 1,

October 25,

2003

2002

ASSETS

(Unaudited)

Current Assets

    Cash and cash equivalents

$

120,522 

$

22,511 

    Cash in escrow

4,598 

3,500 

    Accounts receivable, net of allowances

        of $2,882 and $2,700

85,534 

79,474 

    Inventories

        Raw materials and purchased parts

40,715 

36,152 

        Work in process

31,849 

24,931 

        Finished goods

11,112 

10,222 

83,676 

71,305 

    Income tax refundable

4,806 

6,180 

    Deferred income tax benefits

17,003 

25,069 

    Prepaid expenses

6,107 

6,193 

        Total Current Assets

322,246 

214,232 

Property, Plant and Equipment

221,321 

195,318 

    Accumulated depreciation

(106,147)

(94,324)

115,174 

100,994 

Net Assets of Discontinued Operations

- 

13,576 

Other Non-Current Assets

    Goodwill

183,283 

158,006 

    Intangibles, net

115,997 

61,497 

    Debt issuance costs, net

7,350 

- 

    Other assets

24,242 

22,650 

$

768,292 

$

570,955 

August 1,

October 25,

2003

2002

LIABILITIES AND SHAREHOLDERS' EQUITY

(Unaudited)

Current Liabilities

    Accounts payable

$

20,902 

$

28,018 

    Accrued liabilities

68,380 

64,026 

    Credit facilities

2,630 

424 

    Current maturities of long-term debt

30,403 

435 

    Federal and foreign income taxes

865 

92 

        Total Current Liabilities

123,180 

92,995 

Long-Term Liabilities

    Long-term debt, net of current maturities

247,173 

102,133 

    Deferred income taxes

20,669 

21,386 

Commitments and Contingencies

- 

- 

Net Liabilities of Discontinued Operations

32 

- 

Shareholders' Equity

    Common stock, par value $.20 per share,

        authorized 60,000,000 shares, issued and

        outstanding 21,012,469 and 20,783,068 shares

4,202 

4,157 

    Additional paid-in capital

116,253 

113,537 

    Retained earnings

257,185 

242,667 

    Accumulated other comprehensive loss

(402)

(5,920)

        Total Shareholders' Equity

377,238 

354,441 

$

768,292 

$

570,955 

Three Months Ended

Nine Months Ended

August 1,

July 26,

August 1,

July 26,

2003

2002

2003

2002

Net Sales

$

140,518 

$

112,423 

$

402,128 

$

309,922 

Cost of Sales

94,812 

76,070 

277,179 

208,788 

45,706 

36,353 

124,949 

101,134 

Expenses

    Selling, general & administrative

26,056 

19,849 

77,704 

55,550 

    Research, development &

        engineering

6,185 

4,440 

14,342 

10,720 

            Total Expenses

32,241 

24,289 

92,046 

66,270 

Operating Earnings From

    Continuing Operations

13,465 

12,064 

32,903 

34,864 

    Interest income

(299)

(245)

(565)

(1,368)

    Interest expense

3,887 

1,806 

7,388 

5,406 

    Loss (gain) on derivative

        financial instruments

(2,696)

- 

(2,622)

1 

    Loss on sale of product line

929 

- 

66 

- 

    Other expense

64 

- 

62 

- 

Other Expense, Net

1,885 

1,561 

4,329 

4,039 

Income From Continuing

    Operations Before Income Taxes

11,580 

10,503 

28,574 

30,825 

Income Tax Expense

3,136 

3,577 

8,245 

10,046 

Income From Continuing

    Operations

8,444 

6,926 

20,329 

20,779 

Loss From Discontinued

    Operations, Net of Tax

- 

(17,529)

(5,808)

(22,114)

Earnings (Loss) Before Cumulative

    Effect of a Change in

    Accounting Principle

8,444 

(10,603)

14,521 

(1,335)

Cumulative Effect of a Change in

    Accounting Principle, Net of Tax

- 

- 

- 

(7,574)

Net Earnings (Loss)

$

8,444 

$

(10,603)

$

14,521 

$

(8,909)

Three Months Ended

Nine Months Ended

August 1,

July 26,

August 1,

July 26,

2003

2002

2003

2002

Earnings (Loss) Per Share - Basic:

    Continuing operations

$

.40 

$

.33 

$

.97 

$

1.00 

    Discontinued operations

- 

(.84)

(.27)

(1.06)

    Earnings (loss) per share before

        cumulative effect of a change

        in accounting principle

.40 

(.51)

.70 

(.06)

    Cumulative effect of a change in

        accounting principle

- 

- 

- 

(.37)

    Earnings (loss) per share - basic

$

.40 

$

(.51)

$

.70 

$

(.43)

Earnings (Loss) Per Share - Diluted:

    Continuing operations

$

.40 

$

.33 

$

.97 

$

.99 

    Discontinued operations

- 

(.83)

(.28)

(1.05)

    Earnings (loss) per share before

        cumulative effect of a change

        in accounting principle

.40 

(.50)

.69 

(.06)

    Cumulative effect of a change in

         accounting principle

- 

- 

- 

(.36)

Earnings (loss) per share - diluted

$

.40 

$

(.50)

$

.69 

$

(.42)

Nine Months Ended

August 1,

July 26,

2003

2002

Cash Flows Provided (Used) by Operating Activities

Income from continuing operations, before income taxes

$

28,574 

$

30,825 

    Adjustments to reconcile pretax income from continuing

        operations to net cash provided by continuing operations:

        Depreciation and amortization

17,544 

8,870 

        Loss on sale of product line

66 

- 

        Working capital changes, net of effect of acquisitions

            Accounts receivable

5,455 

11,855 

            Inventories

10,964 

1,962 

            Prepaid expenses

1,178 

526 

            Accounts payable

(6,440)

(4,664)

            Accrued liabilities

(15,552)

(4,117)

        Other, net

(813)

(857)

40,976 

44,400 

Loss from discontinued operations, before income taxes

(9,282)

(34,562)

    Adjustments to reconcile pretax income from discontinued

        operations to net cash provided by discontinued

        operations:

        Loss on disposal and holding period loss

581 

18,219 

        Depreciation and amortization

1,481 

2,128 

        Working capital changes

            Accounts receivable

1,670 

4,273 

            Inventories

1,765 

6,044 

            Prepaid expenses

(70)

(73)

            Accounts payable

(131)

(279)

            Accrued liabilities

(614)

767 

        Other, net

2,378 

391 

(2,222)

(3,092)

Federal and foreign income taxes paid

(919)

(5,180)

37,835 

36,128 

Nine Months Ended

August 1,

July 26,

2003

2002

Cash Flows Provided (Used) by Investing Activities

    Purchases of capital assets

$

(11,320)

$

(12,173)

    Proceeds from sale of business

9,390 

- 

    Escrow deposit

(1,098)

- 

    Capital dispositions

3,002 

1,700 

    Acquisitions of businesses, net of cash acquired

(111,729)

(58,241)

(111,755)

(68,714)

Cash Flows Provided (Used) by Financing Activities

    Net change in credit facilities

2,616 

184 

    Repayment of long-term obligations

(346)

(505)

    Debt issuance costs

(7,460)

- 

    Proceeds from note issuance

175,000 

- 

169,810 

(321)

Effect of Foreign Exchange Rates on Cash

2,121 

1,296 

Net Increase (Decrease) in Cash and Cash Equivalents

98,011 

(31,611)

Cash and Cash Equivalents - Beginning of Period

22,511 

119,940 

Cash and Cash Equivalents - End of Period

$

120,522 

$

88,329 

Supplemental Cash Flow Information

    Cash Paid for Interest

$

6,989 

$

6,885 

ESTERLINE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Month Periods Ended August 1, 2003 and July 26, 2002

1.

The consolidated balance sheet as of August 1, 2003, the consolidated statement of operations for the three and nine month periods ended August 1, 2003 and July 26, 2002, and the consolidated statement of cash flows for the nine month periods ended August 1, 2003 and July 26, 2002 are unaudited, but in the opinion of management, all of the necessary adjustments, consisting of normal recurring accruals, have been made to present fairly the financial statements referred to above in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the above statements do not include all of the footnotes required for complete financial statements. The results of operations and cash flows for the interim periods presented are not necessarily indicative of results that can be expected for the full year.

2.

The notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended October 25, 2002 provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q.

3.

The timing of the Company's revenues is impacted by the purchasing patterns of customers and, as a result, revenues are not generated evenly throughout the year. The Company's first fiscal quarter, November through January, includes significant holiday vacation periods in both Europe and North America. Moreover, the first quarter of fiscal 2003 included fourteen weeks, while the first quarter of fiscal 2002 included thirteen weeks.

4.

The Company's comprehensive income is as follows:

(In thousands)

Three Months Ended

Nine Months Ended

August 1,

July 26,

August 1,

July 26,

2003

2002

2003

2002

Net Earnings (Loss)

$

8,444 

$

(10,603)

$

14,521 

$

(8,909)

Change in Fair Value of

    Derivative Financial

    Instruments, Net of Tax

(300)

319 

(83)

420 

    Foreign Currency

        Translation Adj.

(310)

4,759 

5,601 

5,421 

    Comprehensive Income (Loss)

$

7,834 

$

(5,525)

$

20,039 

$

(3,068)

5.

On July 25, 2002, the Company's Board of Directors adopted a formal plan for the sale of the assets and operations of its Automation segment. As a result, the consolidated financial statements present the Automation segment as a discontinued operation in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The Company recorded a $5.8 million

loss, net of a $3.5 million tax benefit, in the second quarter of fiscal 2003 for losses in its discontinued operations in excess of earlier estimates precipitated by the prolonged weakness in electronics, telecommunications and heavy equipment markets. On July 23, 2003, the Company sold its Excellon Automation subsidiary. Management believes the Company's discontinued operations' loss reserves are adequate to cover the holding cost and the loss on disposal of the remainder of the segment. At August 1, 2003, net liabilities of discontinued operations were $32,000, including estimated losses from August 2, 2003 to the anticipated disposal date and an estimated loss on disposal. For the three and nine month periods ended August 1, 2003, actual holding losses before tax benefit were $2,384,000 and $8,343,000, respectively. These losses were charged against the estimated accrued liability for operating losses to be incurred until disposal. Sales in the Automa tion segment were $4,256,000 and $7,992,000 for the three month periods ended August 1, 2003 and July 26, 2002, respectively, and $19,838,000 and $24,533,000 for the nine month periods ended August 1, 2003 and July 26, 2002, respectively.

6.

The effective tax rate for the first nine months of 2003 was 28.9% compared with 32.6% for the first nine months of 2002. The decrease in the effective tax rate reflected increased income before income taxes in lower tax rate jurisdictions and higher tax credits.

7.

The Company follows Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," to account for stock option and employee stock purchase plans, which does not require income statement recognition of options granted at the market price on the date of issuance. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (Statement No. 123):

(In thousands, except per share amounts)

Three Months Ended

Nine Months Ended

August 1,

July 26,

August 1,

July 26,

2003

2002

2003

2002

Net earnings (loss), as reported

$

8,444 

$

(10,603)

$

14,521 

$

(8,909)

Deduct: Total stock-based

    employee compensation

    expense determined under

    fair value based method

    for all awards, net of tax

(596)

(411)

(1,221)

(1,198)

Pro forma net earnings (loss)

$

7,848 

$

(11,014)

$

13,300 

$

(10,107)