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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No ¨☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of August ~~5, 2016, 29,396,333~~1, 2017, 29,974,898 shares of the issuer’s common stock were outstanding.

	July 1,		October 2,		June 30,		September 30,
	2016		2015		2017		2016
	(Unaudited)				(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	237,845	$	191,355	$	279,398	$	258,520
Cash in escrow		1,125		-		-		1,125
Accounts receivable, net of allowances of $8,608 and $10,050		393,632		380,748
Accounts receivable, net of allowances of $17,956 and $17,028						401,479		422,073
Inventories
Raw materials and purchased parts		180,957		169,153		192,492		177,069
Work in progress		176,316		181,187		183,404		171,515
Finished goods		109,702		96,428		111,804		101,622
		466,975		446,768		487,700		450,206

Income tax refundable		4,957		12,575		5,569		5,183
Deferred income tax benefits		-		41,082
Prepaid expenses		20,611		23,008		22,371		17,909
Other current assets		5,370		5,427		9,689		5,322
Current assets of businesses held for sale		18,034		27,851		3,868		15,450
Total Current Assets		1,148,549		1,128,814		1,210,074		1,175,788

Property, Plant and Equipment		778,044		729,317		842,953		795,790
Accumulated depreciation		451,269		419,918		499,871		457,756
		326,775		309,399		343,082		338,034

Other Non-Current Assets
Goodwill		1,027,873		1,041,991		1,032,034		1,024,667
Intangibles, net		405,531		452,040		361,927		393,035
Deferred income tax benefits		69,259		28,979		75,387		75,409
Other assets		15,395		14,348		16,870		13,698
Non-current assets of businesses held for sale		10,735		24,917		10,257		11,400
Total Assets	$	3,004,117	$	3,000,488	$	3,049,631	$	3,032,031

	July 1,			October 2,			June 30,			September 30,
	2016			2015			2017			2016
	(Unaudited)						(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable	$	128,635		$	117,976		$	128,293		$	121,816
Accrued liabilities		246,967			259,734			228,742			238,163
Current maturities of long-term debt		16,340			13,376			14,215			16,774
Federal and foreign income taxes		6,322			2,404			4,561			10,932
Current liabilities of businesses held for sale		12,283			17,106			471			10,813
Total Current Liabilities		410,547			410,596			376,282			398,498

Long-Term Liabilities
Credit facilities		170,000			160,000			65,000			155,000
Long-term debt, net of current maturities		688,753			701,457			701,024			698,796
Deferred income tax liabilities		57,690			73,849			45,357			53,798
Pension and post-retirement obligations		73,653			75,019			93,347			92,520
Other liabilities		24,868			29,367			19,388			21,968
Non-current liabilities of businesses held for sale		1,222			2,409			1,685			320

Shareholders' Equity
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued 32,532,260 and 32,378,185 shares		6,506			6,476
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued 33,096,743 and 32,564,252 shares								6,619			6,513
Additional paid-in capital		700,124			682,479			734,835			702,610
Treasury stock at cost, repurchased 3,135,927 and 2,831,350 shares		(308,514	)		(289,780	)
Treasury stock at cost, repurchased 3,135,927 and 3,135,927 shares								(308,514	)		(308,514	)
Retained earnings		1,496,533			1,447,120			1,631,435			1,548,805
Accumulated other comprehensive loss		(328,101	)		(308,828	)		(328,158	)		(348,857	)
Total Esterline Shareholders' Equity		1,566,548			1,537,467			1,736,217			1,600,557
Noncontrolling interests		10,836			10,324			11,331			10,574
Total Shareholders' Equity		1,577,384			1,547,791			1,747,548			1,611,131
Total Liabilities and Shareholders' Equity	$	3,004,117		$	3,000,488		$	3,049,631		$	3,032,031

For the Three and Nine Month Periods Ended June 30, 2017, and July 1, 2016 ~~and June 26, 2015~~

		Three Months Ended						Nine Months Ended
		July 1,			June 26,			July 1,			June 26,			Three Months Ended						Nine Months Ended
		2016			2015			2016			2015			June 30,			July 1,			June 30,			July 1,
					(Recast)						(Recast)			2017			2016			2017			2016

Net Sales		$	517,092		$	484,723		$	1,448,879		$	1,457,544		$	503,753		$	517,092		$	1,470,668		$	1,448,879
Cost of Sales			343,508			319,433			981,403			963,996			333,124			343,508			980,073			981,403
			173,584			165,290			467,476			493,548			170,629			173,584			490,595			467,476
Expenses
Selling, general & administrative			96,769			92,028			293,283			289,549			93,615			96,769			286,331			293,283
Research, development and engineering			22,211			26,401			72,760			75,075			27,866			22,211			75,712			72,760
Restructuring charges			559			1,135			2,430			6,062			-			559			-			2,430
Other (income) expense			-			-			-			(12,744	)
Insurance recovery															-			-			(7,789	)		-
Total Expenses			119,539			119,564			368,473			357,942			121,481			119,539			354,254			368,473

Operating Earnings from Continuing Operations			54,045			45,726			99,003			135,606			49,148			54,045			136,341			99,003
Interest Income			(30	)		(87	)		(211	)		(406	)		(150	)		(30	)		(346	)		(211	)
Interest Expense			7,659			10,393			22,169			24,409			7,299			7,659			22,645			22,169
Loss on Extinguishment of Debt			-			329			-			329
Earnings from Continuing Operations Before Income Taxes			46,416			35,091			77,045			111,274			41,999			46,416			114,042			77,045
Income Tax Expense (Benefit)			7,975			6,744			11,358			23,430
Income Tax Expense															10,433			7,975			25,013			11,358
Earnings from Continuing Operations Including Noncontrolling Interests			38,441			28,347			65,687			87,844			31,566			38,441			89,029			65,687
Loss (Earnings) Attributable to Noncontrolling Interests			(395	)		(125	)		(781	)		(216	)
Earnings Attributable to Noncontrolling Interests															(278	)		(395	)		(1,069	)		(781	)
Earnings from Continuing Operations Attributable to Esterline, Net of Tax			38,046			28,222			64,906			87,628			31,288			38,046			87,960			64,906
Loss from Discontinued Operations Attributable to Esterline, Net of Tax			(8,690	)		(558	)		(15,493	)		(21,034	)		(815	)		(8,690	)		(6,185	)		(15,493	)
Net Earnings Attributable to Esterline		$	29,356		$	27,664		$	49,413		$	66,594		$	30,473		$	29,356		$	81,775		$	49,413

Earnings (Loss) Per Share Attributable to Esterline - Basic:	Earnings (Loss) Per Share Attributable to Esterline - Basic:													Earnings (Loss) Per Share Attributable to Esterline - Basic:
Continuing operations		$	1.30		$	0.92		$	2.19		$	2.81		$	1.05		$	1.30		$	2.96		$	2.19
Discontinued operations			(0.30	)		(0.02	)		(0.52	)		(0.67	)		(0.03	)		(0.30	)		(0.21	)		(0.52	)
Earnings (Loss) Per Share - Basic		$	1.00		$	0.90		$	1.67		$	2.14		$	1.02		$	1.00		$	2.75		$	1.67

Earnings (Loss) Per Share Attributable to Esterline - Diluted:	Earnings (Loss) Per Share Attributable to Esterline - Diluted:													Earnings (Loss) Per Share Attributable to Esterline - Diluted:
Continuing operations		$	1.28		$	0.90		$	2.18		$	2.76		$	1.04		$	1.28		$	2.94		$	2.18
Discontinued operations			(0.29	)		(0.02	)		(0.52	)		(0.66	)		(0.03	)		(0.29	)		(0.21	)		(0.52	)
Earnings (Loss) Per Share - Diluted		$	0.99		$	0.88		$	1.66		$	2.10		$	1.01		$	0.99		$	2.73		$	1.66

Net Earnings		$	29,356		$	27,664		$	49,413		$	66,594		$	30,473		$	29,356		$	81,775		$	49,413

Change in Fair Value of Derivative Financial Instruments			888			13,408			16,989			(5,339	)		11,966			888			11,271			16,989
Income Tax Expense (Benefit)			68			3,234			4,562			(2,448	)		3,575			68			3,094			4,562
			820			10,174			12,427			(2,891	)		8,391			820			8,177			12,427

Change in Pension and Post-Retirement Obligations			1,163			19			3,351			(607	)		536			1,163			4,132			3,351
Income Tax Expense (Benefit)			(47	)		137			793			(175	)		284			(47	)		1,536			793
			1,210			(118	)		2,558			(432	)		252			1,210			2,596			2,558

Currency Translation Adjustment			(26,044	)		31,598			(34,259	)		(140,998	)
Foreign Currency Translation Adjustment															46,764			(26,044	)		9,926			(34,259	)
Comprehensive Income (Loss)		$	5,342		$	69,318		$	30,139		$	(77,727	)	$	85,880		$	5,342		$	102,474		$	30,139

For the Nine Month Periods Ended June 30, 2017, and July 1, 2016 ~~and June 26, 2015~~

	July 1,			June 26,
	2016			2015			June 30,			July 1,
				(Recast)			2017			2016

Cash Flows Provided (Used) by Operating Activities
Net earnings including noncontrolling interests	$	50,194		$	66,810		$	82,844		$	50,194
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided (used) by operating activities:
Depreciation and amortization		73,272			76,118			77,005			73,272
Deferred income taxes		(17,545	)		(15,701	)		(11,303	)		(17,545	)
Share-based compensation		12,501			8,744			7,549			11,501
Gain on release of non-income tax liability		-			(15,656	)
Excess tax benefits from share-based compensation								-			(496	)
Gain on sale of discontinued operations								(793	)		-
Loss on assets held for sale		7,895			15,763			3,537			7,895
Working capital changes, net of effect of acquisitions:
Working capital changes:
Accounts receivable		(14,435	)		(731	)		22,769			(14,435	)
Inventories		(18,249	)		(14,781	)		(31,547	)		(18,249	)
Prepaid expenses		1,886			(1,055	)		(4,153	)		1,886
Other current assets		8			(587	)		(263	)		8
Accounts payable		9,554			(3,566	)		3,867			9,554
Accrued liabilities		(11,296	)		14,128			(15,911	)		(11,296	)
Federal and foreign income taxes		11,264			2,370			(6,305	)		11,264
Other liabilities		737			1,971			2,292			737
Other, net		12,826			(16,601	)		9,283			14,322
		118,612			117,226			138,871			118,612

Cash Flows Provided (Used) by Investing Activities
Purchase of capital assets		(58,547	)		(36,355	)		(42,153	)		(58,547	)
Escrow deposit		(1,125	)		-			-			(1,125	)
Proceeds from sale of discontinued operations		3,654			9,791			600			3,654
Acquisition of businesses, net of cash acquired		-			(171,070	)
		(56,018	)		(197,634	)		(41,553	)		(56,018	)

Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		4,679			15,114			26,901			4,679
Excess tax benefits from stock option exercises		496			2,459
Withholding taxes on restricted stock units vested								(1,115	)		-
Excess tax benefits from share-based compensation								-			496
Shares repurchased		(18,735	)		(185,164	)		-			(18,735	)
Repayment of long-term credit facilities		(20,000	)		(330,000	)		(95,000	)		(20,000	)
Repayment of long-term debt		(9,331	)		(169,284	)		(12,872	)		(9,331	)
Proceeds from issuance of long-term credit facilities		30,000			365,000			5,000			30,000
Proceeds from issuance of long-term debt		-			356,532
Proceeds from government assistance		-			3,239
		(12,891	)		57,896			(77,086	)		(12,891	)

Effect of Foreign Exchange Rates on Cash and Cash Equivalents		(3,213	)		(14,228	)		646			(3,213	)
Net Increase (Decrease) in Cash and Cash Equivalents		46,490			(36,740	)		20,878			46,490

Cash and Cash Equivalents - Beginning of Year		191,355			213,251			258,520			191,355
Cash and Cash Equivalents - End of Period	$	237,845		$	176,511		$	279,398		$	237,845

Supplemental Cash Flow Information:
Cash paid for interest	$	23,684		$	13,815		$	24,094		$	23,684
Cash paid for taxes		13,521			27,054			38,641			13,521

For the Three and Nine Month Periods Ended June 30, 2017, and July 1, 2016 ~~and June 26, 2015~~

The consolidated balance sheet as of ~~July 1, 2016,~~June 30, 2017, the consolidated statement of operations and comprehensive income (loss) for the three and nine month periods ended June 30, 2017, and July 1, 2016, ~~and June 26, 2015,~~ and the consolidated statement of cash flows for the nine month periods ended June 30, 2017, and July 1, 2016, ~~and June 26, 2015,~~ are unaudited but, in the opinion of management, all of the necessary adjustments, consisting of normal recurring accruals, have been made to present fairly the financial statements referred to above in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the above statements do not include all of the footnotes required for complete financial statements. The results of operations and cash flows for the interim periods presented are not necessarily indicative of results that can be expected for the full year.

The notes to the consolidated financial statements in the Company’s ~~Transition~~Annual Report on Form 10-K for the ~~eleven months~~fiscal year ended ~~October 2, 2015,~~September 30, 2016, provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q.

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

~~Note 2 – Change~~America, resulting in ~~Fiscal Year End~~fewer business days.

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

The prior year Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and nine month period ended June 26, 2015, and the Consolidated Statement of Cash Flows for the nine month period ended June 26, 2015, have been recast to align to the Company’s new quarter end.

In March ~~2016,~~2017, the Financial Accounting Standards Board (FASB) issued new guidance on the presentation of the net periodic cost of postretirement benefit programs. The new standard requires sponsors of defined benefit postretirement plans to present the non-service cost components of net periodic benefit cost separate from the service cost component on the income statement. The new standard also requires that the non-service cost components of net periodic benefit cost no longer be capitalized within assets. The Company is evaluating the effects the standard will have on the Company’s consolidated financial statements and related disclosures beyond the change in income statement presentation. This new standard is effective for the Company in fiscal year 2019, with early adoption permitted.

In January 2017, FASB issued new guidance regarding the goodwill impairment test. The new guidance eliminates the Step 2 valuation test when evaluating goodwill for impairment. The new guidance requires that an entity performs its annual or interim goodwill test by comparing the fair value of the reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The guidance will be effective for the Company in fiscal year 2021, with early adoption permitted.

In October 2016, FASB issued new guidance regarding income taxes. The new guidance will require the tax effects of intercompany transactions, other than sales of inventory, to be recognized currently, eliminating an exception under current Generally Accepted Accounting Principles (GAAP) in which the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The guidance will be effective for the Company in fiscal year 2019, with early adoption permitted.

In August 2016, the FASB issued new guidance addressing how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The guidance will be effective for the Company in fiscal year 2019, with early adoption permitted.

In June 2016, the FASB issued a new standard on the measurement of credit losses, which will impact the Company’s measurement of trade receivables. The new standard replaces the current incurred loss model with a forward-looking expected loss model that is likely to result in earlier recognition of losses. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The new standard is effective for the Company in fiscal year 2021, with early adoption permitted, but not earlier than in fiscal year 2020.

In March 2016, the FASB issued new guidance simplifying certain aspects of accounting for share-based payments. The key provision of the new standard requires that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than in equity. The Company ~~is evaluating~~adopted the ~~effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The~~ new guidance ~~is effective~~during the first nine months of fiscal 2017, which

resulted in a $2.3 million benefit to income tax expense and a favorable impact to operating cash flows of $2.3 million. The Company has also elected to account for ~~the Company~~forfeitures as they occur, rather than estimate expected forfeitures, which resulted in ~~fiscal year 2018, with early adoption permitted.~~a positive cumulative effect on retained earnings of $0.9 million and a reduction of additional paid-in capital of $0.9 million.

In February 2016, the FASB issued a new lease accounting standard, which provides revised guidance on accounting for lease arrangements by both lessors and lessees. The central requirement of the new standard is that lessees must recognize lease related assets and liabilities for all leases with a term longer than 12 months. The Company is evaluating the effect the standard will have on the ~~Company’~~sCompany’s consolidated financial statements and related disclosures. The new standard is effective for the Company in fiscal year 2020, with early adoption permitted.

In November 2015, the FASB issued new guidance requiring all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet instead of separating those balances into current and noncurrent amounts. The new guidance is effective for the Company in fiscal year 2018, with early adoption permitted. The Company adopted this guidance prospectively on April 1, 2016, and reclassified the current portion of net deferred tax assets and liabilities to net noncurrent deferred tax assets and liabilities. No prior periods were retrospectively adjusted.

In May 2014, the FASB amended requirements for an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective, and permits the use of either the retrospective or cumulative effect transition method. ~~Early adoption~~The Company is ~~permitted.~~evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The updated standard becomes effective for the Company in the first ~~fiscal~~ quarter of ~~2019.~~ fiscal 2019, with early adoption permitted.

Anticipated changes under the new standard include accounting for development costs and associated customer funding related to certain contracts and increased use of over-time revenue recognition based on costs incurred for certain contracts. The new standard also significantly enhances required disclosures regarding revenue and related assets and liabilities. The Company ~~has not yet selected a transition method,~~is in the process of evaluating changes to business processes, systems and ~~is currently evaluating~~internal controls required to implement the ~~effect that the updated standard will have on consolidated financial statements and related disclosures.~~new accounting standard.

Basic earnings per share is computed on the basis of the weighted average number of shares outstanding during the year. Diluted earnings per share includes the dilutive effect of stock options, restricted stock units and share units related to the Company’s performance share plan to the extent that performance share plan objectives are met. Common shares issuable from stock options excluded from the calculation of diluted earnings per share because they were anti-dilutive were ~~858,000~~605,725 and ~~745,067~~690,475 in the three and nine month periods ending ~~July 1, 2016, respectively.~~June 30, 2017. Common shares issuable from stock options excluded from the calculation of diluted earnings per share because they were anti-dilutive were ~~261,150~~858,000 and ~~218,633~~745,067 in the three and nine month periods ending ~~June 26, 2015, respectively.~~July 1, 2016. Shares used for calculating earnings per share are disclosed in the following table:

In Thousands	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	July 1,		June 26,		July 1,		June 26,
	2016		2015		2016		2015		June 30,		July 1,		June 30,		July 1,
			(Recast)				(Recast)		2017		2016		2017		2016

Shares used for basic earnings per share		29,381		30,831		29,517		31,183		29,830		29,381		29,698		29,517
Shares used for diluted earnings per share		29,601		31,322		29,788		31,702		30,068		29,601		29,953		29,788

The authorized capital stock of the Company consists of 25,000 shares of preferred stock ($100 par value), 475,000 shares of serial preferred stock ($1.00 par value), each issuable in series, and 60,000,000 shares of common stock ($.20 par value). As of ~~July 1,~~June 30, 2017, and September 30, 2016, ~~and October 2, 2015,~~ there were no shares of preferred stock or serial preferred stock outstanding.

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

~~During~~There were no shares repurchased during the three months ended July 1, 2016, the Company repurchased 102,267 shares under this program at an average price per share of $65.10, for an aggregate purchase price of $6.7 million. During the threenine months ended June ~~26, 2015, the Company~~30, 2017. There were 304,577 shares repurchased ~~581,977 shares under this program at an average price per share of $99.22, for an aggregate purchase price of $57.7 million. During~~during the nine months ended July 1, 2016, the Company repurchased 304,577 shares under this program at an average price paid per share of $61.51, for an aggregate purchase price of $18.7 million. During the nine months ended June 26, 2015, the Company repurchased 1,749,709 shares under this program at an average price paid per share of $105.83, for an aggregate purchase price of $185.2 million.2016. Since the program began, the Company has repurchased 3,135,927 shares for an aggregate purchase price of $308.5 million, ~~leaving~~with $91.5 million in shares remaining available for ~~shares to be repurchased~~repurchase in the future.

	Nine Months Ended			Year Ended			Nine Months Ended			Year Ended
	July 1,			October 2,			June 30,			September 30,
	2016			2015			2017			2016
Shares Issued:
Balance, beginning of year		32,378,185			32,123,717			32,564,252			32,378,185
Shares issued under share-based compensation plans		154,075			254,468			532,491			186,067
Balance, end of current period		32,532,260			32,378,185			33,096,743			32,564,252

Treasury Stock:
Balance, beginning of year		(2,831,350	)		(269,228	)		(3,135,927	)		(2,831,350	)
Shares purchased		(304,577	)		(2,562,122	)		-			(304,577	)
Balance, end of current period		(3,135,927	)		(2,831,350	)		(3,135,927	)		(3,135,927	)

Shares outstanding, end of period		29,396,333			29,546,835			29,960,816			29,428,325

In Thousands	July 1,			October 2,			June 30,			September 30,
	2016			2015			2017			2016

Unrealized gain (loss) on derivative contracts	$	(5,952	)	$	(22,941	)	$	6,724		$	(4,547	)
Tax effect		1,474			6,036			(2,017	)		1,077
		(4,478	)		(16,905	)		4,707			(3,470	)

Pension and post-retirement obligations		(96,373	)		(99,724	)		(112,214	)		(116,346	)
Tax effect		32,982			33,775			38,268			39,804
		(63,391	)		(65,949	)		(73,946	)		(76,542	)

Currency translation adjustment		(260,232	)		(225,974	)
Accumulated other comprehensive gain (loss)	$	(328,101	)	$	(308,828	)
Foreign currency translation adjustment								(258,919	)		(268,845	)
Accumulated other comprehensive income (loss)							$	(328,158	)	$	(348,857	)

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

In Thousands		Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
		July 1,			June 26,			July 1,			June 26,			June 30,			July 1,			June 30,			July 1,
		2016			2015			2016			2015			2017			2016			2017			2016
					(Recast)						(Recast)
Components of Net Periodic Cost	Components of Net Periodic Cost													Components of Net Periodic Cost
Service cost		$	2,871		$	2,841		$	8,773		$	8,286		$	3,287		$	2,871		$	10,012		$	8,773
Interest cost			4,412			4,192			13,052			12,643			3,838			4,412			11,293			13,052
Expected return on plan assets			(6,060	)		(6,407	)		(17,964	)		(19,123	)		(6,241	)		(6,060	)		(18,796	)		(17,964	)
Settlement			-			-			-			2,991
Amortization of prior service cost			119			17			345			51			114			119			343			345
Amortization of actuarial (gain) loss			1,580			1,135			4,639			3,451			1,996			1,580			5,397			4,639
Net periodic cost (benefit)		$	2,922		$	1,778		$	8,845		$	8,299		$	2,994		$	2,922		$	8,249		$	8,845

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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established that prioritizes the inputs to valuation

techniques used to measure fair value. An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy of fair value measurements is described below:

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

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

Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are not observable and therefore obtained from indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.

The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy at ~~July 1, 2016,~~June 30, 2017, and ~~October 2, 2015.~~September 30, 2016.

In Thousands	Level 2				Level 2
	July 1,		October 2,		June 30,		September 30,
	2016		2015		2017		2016
Assets:
Derivative contracts designated as hedging instruments	$	3,882	$	1,386	$	7,400	$	2,948
Derivative contracts not designated as hedging instruments		67		189		515		143
Embedded derivatives		2,035		3,992		1,009		2,485

Liabilities:
Derivative contracts designated as hedging instruments	$	10,173	$	24,660	$	676	$	7,828
Derivative contracts not designated as hedging instruments		7,699		2,324		3,840		6,720
Embedded derivatives		2,116		380		1,287		985

In Thousands	Level 3				Level 3
	July 1,		October 2,		June 30,		September 30,
	2016		2015		2017		2016
Assets:
Estimated value of assets held for sale					$	14,125	$	26,850

Liabilities:
Contingent purchase obligation	$	-	$	3,750
Estimated value of liabilities held for sale					$	2,156	$	11,133

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

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

~~The~~In fiscal 2014, the Company’s ~~contingent purchase obligation consisted~~board of ~~additional contingent consideration~~directors approved the plan to sell certain non-core business units. Based upon the estimated fair values, the Company adjusted the carrying value of the assets and liabilities of the businesses to fair value. Principle assumptions used in ~~connection with~~measuring the ~~acquisition~~estimated value of ~~Sunbank Family~~assets and liabilities held for sale included estimated selling price of ~~Companies, LLC (Sunbank)~~the discontinued business, discount rates, industry growth rates, and pricing of ~~$3.75 million as of October 2, 2015, which was paid~~comparable transactions in the ~~second fiscal quarter~~market. The change in the estimated value of ~~2016 upon achievement~~assets and liabilities held for sale is due to disposing of a business with assets held for sale of $10.5 million and liabilities held for sale of $7.4 million at September 30, 2016. In addition, the estimated selling price of the ~~performance objectives.~~remaining business held for sale was reduced by $3.5 million during fiscal year 2017. The ~~value recorded on the balance sheet at October 2, 2015, was derived from the estimated probability that the performance objectives will be met. The contingent purchase obligation was~~valuations are categorized as Level 3 in the fair value hierarchy.

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

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

The fair value of derivative instruments is presented on a gross basis, as the Company does not have any derivative contracts which are subject to master netting arrangements. ~~At July 1, 2016, and October 2, 2015, the~~The Company did not have any hedges with credit-risk-related contingent features or that required the posting of ~~collateral.~~collateral as of June 30, 2017, and September 30, 2016. The cash flows from derivative contracts are recorded in operating activities in the Consolidated Statement of Cash Flows.

The Company transacts business in various foreign currencies, which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. At ~~July 1,~~June 30, 2017, and September 30, 2016, ~~and October 2, 2015,~~ the Company had outstanding foreign currency forward exchange contracts principally to sell U.S. dollars with notional amounts of ~~$449.9~~$379.4 million and ~~$402.9~~$450.9 million, respectively. These notional values consist primarily of contracts for the European euro, British pound sterling and Canadian dollar, and are stated in U.S. dollar equivalents at spot exchange rates at the respective dates.

The Company manages its exposure to interest rate risk by maintaining an appropriate mix of fixed and variable rate debt, which over time should moderate the costs of debt financing. When considered necessary, the Company may use financial instruments in the form of interest rate swaps to help meet this objective.

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

Fair value of derivative instruments in the Consolidated Balance Sheet at ~~July 1,~~June 30, 2017, and September 30, 2016, ~~and October 2, 2015,~~ consisted of:

In Thousands		Fair Value					Fair Value
		July 1,		October 2,			June 30,		September 30,
	Classification	2016		2015		Classification	2017		2016
Foreign Currency Forward Exchange Contracts:
	Other current assets	$	1,586	$	1,527	Other current assets	$	6,221	$	1,757
	Other assets		2,363		48	Other assets		1,694		1,334
	Accrued liabilities		13,968		20,688	Accrued liabilities		3,811		11,168
	Other liabilities		3,904		6,296	Other liabilities		705		3,380

Embedded Derivative Instruments:
	Other current assets	$	1,589	$	2,913	Other current assets	$	858	$	1,864
	Other assets		446		1,079	Other assets		151		621
	Accrued liabilities		1,694		351	Accrued liabilities		1,108		866
	Other liabilities		422		29	Other liabilities		179		119

The effect of derivative instruments on the Consolidated Statement of Operations and Comprehensive Income (Loss) for the ~~three and~~ nine month periods ended June 30, 2017, and July 1, 2016, ~~and June 26, 2015,~~ consisted of:

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

In Thousands	Three Months Ended					Nine Months Ended					Three Months Ended					Nine Months Ended
Gain (Loss)	July 1,		June 26,			July 1,			June 26,		June 30,			July 1,		June 30,			July 1,
	2016		2015			2016			2015		2017			2016		2017			2016
			(Recast)						(Recast)
Embedded derivatives:
Recognized in sales	$	818	$	(3,928	)	$	(2,858	)	$	1,715	$	(952	)	$	818	$	(1,169	)	$	(2,858	)

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

In Thousands	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
Gain (Loss)	July 1,			June 26,			July 1,			June 26,			June 30,			July 1,			June 30,			July 1,
	2016			2015			2016			2015
				(Recast)						(Recast)			2017			2016			2017			2016
Foreign currency forward exchange contracts:
Recognized in AOCI (effective portion)	$	3,528		$	19,238		$	32,212		$	11,835		$	14,250		$	3,528		$	21,425		$	32,212
Reclassified from AOCI into sales		(2,640	)		(5,830	)		(15,223	)		(17,174	)		(2,284	)		(2,640	)		(10,154	)		(15,223	)

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

In Thousands	Three Months Ended					Nine Months Ended					Three Months Ended					Nine Months Ended
Gain (Loss)	July 1,		June 26,			July 1,		June 26,			June 30,			July 1,		June 30,			July 1,
	2016		2015			2016		2015			2017			2016		2017			2016
			(Recast)					(Recast)
2023 Notes and Accrued Interest:
Recognized in AOCI	$	8,336	$	(11,991	)	$	2,084	$	(11,991	)	$	(25,512	)	$	8,336	$	(6,133	)	$	2,084

During the third quarter of fiscal 2017 and 2016, the Company recorded a gain of $3.4 million and a loss of $3.4 million, respectively, on foreign currency forward exchange contracts that have not been designated as accounting hedges. During the first nine months of fiscal ~~2016~~2017 and ~~2015,~~2016, the Company recorded a ~~loss~~gain of ~~$7.6~~$3.1 million and a ~~gain~~loss of ~~$0.1~~$7.6 million, respectively, on foreign currency forward exchange contracts that have not been designated as accounting hedges. These foreign currency exchange gains and losses are included in selling, general and administrative expense.

There was no significant impact to the Company’s earnings related to the ineffective portion of any hedging instruments during the first nine months of fiscal ~~2016~~2017 and ~~2015.~~2016. In addition, there was no significant impact to the Company’s earnings when a hedged firm commitment no longer qualified as a fair value hedge or when a hedged forecasted transaction no longer qualified as a cash flow hedge during the first nine months of fiscal ~~2016~~2017 and ~~2015.~~2016.

Amounts included in AOCI are reclassified into earnings when the hedged transaction settles. The Company expects to reclassify approximately ~~$8.0~~$5.1 million of net ~~loss~~gain into earnings over the next 12 months. The maximum duration of the Company’s foreign currency cash flow hedge contracts at ~~July 1, 2016, is~~June 30, 2017, was 24 months.

The ~~effective~~income tax ~~rates~~rate was 24.8% in the third quarter of fiscal 2017 compared with 17.2% in the prior-year period. The income tax rate for the ~~three and nine months ended July 1, 2016, were 17.2% and 14.7%, respectively.~~third quarter of fiscal 2017 was higher due to the U.K. tax law changes limiting interest expense deductions, partially offset by excess tax benefits related to employee share-based payments. The ~~effective~~income tax ~~rates for~~rate differed from the ~~three and nine months ended June 26, 2015, were 19.2% and 21.1%, respectively. The effective tax rates were lower than the U.S. federal~~ statutory rate ~~due to~~in the third quarter of fiscal 2017 and 2016, as both years benefited from various tax credits and certain foreign interest expense ~~deductions and lower~~deductions.

rate was 21.9% and 14.7% for the first nine months of fiscal 2017 and 2016, respectively. The ~~decrease~~income tax rate in the ~~three and nine months ended July 1, 2016, effective tax rate compared to prior year periods~~current period was higher primarily due to ~~an adjustment for non-deductible~~U.K. limitations on interest expense from the Consent Agreement with DDTC. As noted in Note 10 – Commitments and Contingencies, the Consent Agreement required a payment of $20 million, $10 million of which was suspended and eligible for offset credit based on verified expenditures for past and future remedial compliance measures. The $10 million penalty and qualifying expenditures up to $10 million were non-deductible for income tax purposes.deductions. In the ~~three~~first nine months ~~ended June 26, 2015,~~of 2017, the Company recognized ~~a $0.7~~$7.1 million of discrete tax ~~expense~~benefits primarily related to ~~non-deductible compliance expense.~~a reduction of the income tax rate in France for fiscal year 2020 and beyond and the early adoption of the accounting standard update for employee share-based payment awards. In the first nine months ~~ended June 26, 2015,~~of 2016, the Company recognized ~~a $2.0~~approximately $1.7 million of discrete tax ~~expense~~benefits principally related to ~~non-deductible compliance expense and a return to provision adjustment~~the enactment of ~~$1.6 million expense.~~tax laws reducing the U.K. statutory income tax rate.

ItDuring the next 12 months, it is reasonably possible that ~~within the next twelve months~~ approximately ~~$2.7~~$1.4 million of tax benefits that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of applicable statutes of limitations. The ~~release is not expected~~Company recognizes interest related to ~~have a material impact on the statement of financial position or operations.~~unrecognized tax benefits in income tax expense.

Long-term debt at June 30, 2017 and September 30, 2016, consisted of the following:

On April 9, 2015, the Company amended its secured credit facility to extend the maturity to April 9, 2020, increase the amount available for borrowing under the secured revolving credit facility to $500 million, and provide for a delayed-draw term loan facility of $250 ~~million (U.S. Term Loan, due 2020).~~million. The Company recorded $2.3 million in debt issuance costs. The credit facility is secured by substantially all the Company’s assets, and interest is based on standard inter-bank offering rates. The interest rate ranges

from LIBOR plus 1.25% to LIBOR plus 2.00%. depending on leverage ratios at the time the funds are drawn. At ~~July 1, 2016,~~June 30, 2017, the Company had ~~$165.0~~$65.0 million outstanding under the secured credit facility at an interest rate of LIBOR plus 1.75%, which was ~~2.2%~~2.71%. Additionally, the Company had $5.0 million outstanding under the secured credit facility at an initial interest rate of prime plus 0.75%, which was 4.25%. Subsequent to July 1, 2016, the interest rate on the $5.0 million borrowing was reduced to LIBOR plus 1.75%.

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

On August 3, 2015, the Company borrowed $250 million under the U.S. Term Loan, due 2020, provided for under the amended secured credit ~~facility.~~facility (U.S. Term Loan, due 2020). The interest rate on the U.S. Term Loan, due 2020, ranges from LIBOR plus 1.25% to LIBOR plus 2.00%. At ~~July 1, 2016,~~June 30, 2017, the interest rate was LIBOR plus ~~1.75%~~1.50%, which equaled ~~2.2%~~2.73%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2020, with the remaining balance due in April 2020.

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

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

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

offerings. The 2023 Notes are also subject to redemption at the option of the Company, in whole or in part, on or after April 15, 2018, at redemption prices starting at 102.719% of the principal amount plus accrued interest during the period beginning April 15, 2018, and declining annually to 100% of principal and accrued interest on or after April 15, 2021.

Based on quoted market prices, the fair value of the Company’s 2023 Notes was ~~$346.5~~$389.4 million and $365.3 million as of ~~July 1,~~June 30, 2017, and September 30, 2016, ~~and $347.7 million as of October 2, 2015.~~respectively. The carrying amount of the secured credit facility and the U.S. Term Loan, due 2020, approximate fair value. The estimate of fair value for the 2023 Notes is based on Level 2 inputs as defined in the fair value hierarchy ~~described.~~described in Note 5.

Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The requirement to repay this advance is solely based on year-over-year commercial aviation revenue growth at CMC beginning in 2014. Imputed interest on the advance was ~~3.7%~~2.4% at ~~July 1, 2016.~~June 30, 2017. The debt recognized was ~~$45.3~~$43.5 million and ~~$43.3~~$45.0 million as of ~~July 1,~~June 30, 2017, and September 30, 2016, ~~and October 2, 2015,~~ respectively.

~~In April 2015, FASB amended requirements related to the presentation of debt issuance costs.~~ Obligation Under Capital Lease

The ~~updated standard requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount~~Company leases building and equipment under capital leases. The present value of the related debt liability instead of being presented as an asset. The recognition and measurement of debt issuance costs are not affected by this amendment. The Company adopted this updated standard during the first fiscal quarter of 2016. The Company reclassified $6.5 million of debt issuance costs from other non-current assets to a reductionminimum capital lease payments, net of the ~~Company’s~~ current ~~maturities of long-term debt of $0.2~~portion, totaled $69.4 million and ~~a reduction of the Company’s long-term debt of $6.3~~$66.2 million as of ~~October 2, 2015.~~June 30, 2017, and September 30, 2016, respectively.

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

As of July 1, 2016, and October 2, 2015, the Company had a liability of $0.7 million and $1.6 million, respectively, related to environmental remediation at a previously sold business for which the Company provided indemnification.

On March 5, 2014, the Company entered into a Consent Agreement with the U.S. Department of State’s Directorate of Defense Trade Controls Office of Defense Trade Controls Compliance (DTCC) to resolve alleged International Traffic in Arms Regulations (ITAR) civil violations. The Consent Agreement settled the pending ITAR compliance matter with the DTCC previously reported by the Company that resulted from voluntary reports the Company filed with DTCC that disclosed possible technical and administrative violations of the ITAR. The Consent Agreement has a three-year term and ~~provided~~provides for: (i) a payment of $20 million, $10 million of which is suspended and eligible for offset credit based on verified expenditures for past and future remedial compliance measures; (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and the ITAR; (iii) two external audits of the Company’s ITAR compliance program; and (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedures and training. The Company expects to be released from the Consent Agreement in fiscal 2017, depending upon the Company’s satisfactory completion of the remaining requirements under the agreement and the timing of final approval by the DTCC. The $10 million portion of the settlement that iswas not subject to suspension ~~is to be~~was paid in installments, with $8 million ~~already~~ paid over fiscal years 2014, 2015 and ~~2016, and the~~2016. The remaining $2 million ~~to be~~was paid in ~~March~~February 2017. ~~As of the quarter ended July 1,~~In fiscal 2016, the DTCC approved costs ~~incurred by~~ the Company ~~for the remedial~~incurred to implement compliance measures to fully offset the $10 million suspended payment.

During the first nine months of fiscal 2017, the Company received a $7.8 million insurance recovery relating to an energetic incident at one of its countermeasure operations, which occurred in the third quarter of fiscal 2016. We also received $5 million in fiscal 2016. The Company does not anticipate additional insurance recoveries arising from this matter.

As of ~~July 1, 2016,~~June 30, 2017, the Company had three share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans was ~~$12.5~~$7.5 million and ~~$8.7~~$11.5 million for the first nine months of fiscal ~~2016~~2017 and ~~2015,~~2016, respectively. During the first nine months of fiscal ~~2016~~2017 and ~~2015,~~2016, the Company issued ~~154,075~~532,491 and ~~300,235~~154,075 shares, respectively, under its share-based compensation plans. ~~During the third fiscal quarter of 2016 and 2015, the Company issued 50,446 and 69,235 shares, respectively.~~

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

The Company offers shares under its employee sharesave scheme for U.K. employees. This plan allows participants the option to purchase shares at a 5% discount of the market price of the stock as of the beginning of the offering period. The term of these options is three years. The sharesave scheme is not a “safe-harbor” design, and therefore, compensation cost is recognized on this plan. Under the sharesave scheme, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted ~~70,673~~11,338 and ~~25,984~~70,673 options in the nine month periods ended June 30, 2017, and July 1, 2016, ~~and June 26, 2015,~~

respectively. The weighted-average grant date fair value of options granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $24.61 and ~~June 26, 2015, was~~ $16.65 ~~and $24.31~~ per share, respectively.

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

	Nine Months Ended						Nine Months Ended
	July 1,			June 26,			June 30,			July 1,
	2016			2015			2017			2016

Volatility		33.21	%		25.80	%		35.58	%		33.21	%
Risk-free interest rate		1.19	%		0.93	%		1.75	%		1.19	%
Expected life (years)	3			3			3			3
Dividends	0			0			0			0

Under the equity incentive plan, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted ~~221,200~~237,200 and ~~192,700~~221,200 options to purchase shares in the nine month periods ended June 30, 2017, and July 1, 2016, ~~and June 26, 2015,~~ respectively. The weighted-average grant date fair value of options granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $32.66 and ~~June 26, 2015, was~~ $35.69 ~~and $48.48~~ per share, respectively.

The fair value of each option granted by the Company was estimated using a Black-Scholes pricing model, which uses the assumptions noted in the following table. The Company uses historical data to estimate volatility of the Company’s common stock and option exercise and employee termination assumptions. The risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of the grant.

	Nine Months Ended		Nine Months Ended
	July 1,	June 26,	June 30,	July 1,
	2016	2015	2017	2016

Volatility	33.06 - 40.52%	40.73 - 41.89%	34.97 - 35.42%	33.06 - 40.52%
Risk-free interest rate	1.61 - 2.24%	1.43 - 2.00%	1.98 - 2.51%	1.61 - 2.24%
Expected life (years)	5 - 9	5 - 9	5 - 9	5 - 9
Dividends	0	0	0	0

The Company granted ~~36,000~~37,100 and ~~22,000~~36,000 restricted stock units in the nine month periods ended June 30, 2017, and July 1, 2016, ~~and June 26, 2015,~~ respectively. The weighted-average grant date fair value of restricted stock units granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $76.83 and ~~June 26, 2015, was~~ $85.33 ~~and $112.53~~ per share, respectively. The fair value of each restricted stock unit granted by the Company is equal to the fair market value of the Company’s common stock on the date of grant.

The Company granted ~~56,200~~43,650 and ~~34,000~~56,200 performance share plan (PSP) shares in the nine month periods ended June 30, 2017, and July 1, 2016, ~~and June 26, 2015,~~ respectively. PSP shares will be paid out in shares of Esterline common stock at the end of the three year performance period. The ~~total~~PSP shares granted in each period equaled the number of shares participants would receive if the Company achieves target performance over the relevant period. The actual number of shares that will be paid out upon completion of the performance period is based on actual performance and ~~is therefore at risk if the Company does not achieve~~may range from 0% to 300% of the target ~~level~~number of the performance. The grant date fair value of performance share plan shares granted during the nine month periods ended July 1, 2016, and June 26, 2015, was $79.31 and $117.53, respectively. The fair value of each performance share plan share granted by the Company is equal to the fair market value of the Company’s common stock on the date of grant.shares.

On January 31, 2015, the Company acquired the defense, aerospace and training display (DAT) business of Belgium-based Barco N.V. (Barco) for €150 million, or approximately $171 million, in cash before a working capital adjustment of approximately $15 million. The Company incurred a $2.9 million foreign currency exchange loss in the funding of the acquisition in fiscal 2015. Acquisition related costs of $3.4 million were recognized as selling, general and administrative expense in fiscal 2015. The Company financed the acquisition primarily using international cash reserves, with the balance funded by borrowings under its existing credit facility. The DAT business develops and manufactures visualization solutions for a variety of demanding defense and commercial aerospace applications and is included in our Avionics & Controls segment.

The following summarizes the allocation of the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The fair value adjustment for inventory was $7.0 million, which was recognized as cost of goods sold over eight months, the estimated inventory turnover. The fair value of acquired programs represented the value of visualization solutions sold under long-term supply agreements with aerospace companies, military contractors, and OEM manufacturers using similar technology. The valuation of the program included the values of program-specific technology, the backlog of contracts, and the relationship with customers which lead to potential future contracts. The valuation of the programs was based upon the discounted cash flow at a market-based discount rate. The purchase price includes the value of existing technologies, the introduction of new technologies, and the addition of new customers. These factors resulted in recording goodwill of $46.6 million. A substantial portion of the amount allocated to goodwill is not deductible for income tax purposes.

To take advantage of synergies across the Company, DAT will be further integrated with existing businesses. As a result of these integration activities, the Company incurred $2.8 million and $10.5 million of integration expenses in the three and nine months ended July 1, 2016, respectively.

On December 5, 2013, the Company announced the acceleration of its plans to consolidate certain facilities and create cost efficiencies through shared services in sales, general and administrative and support functions. The costs are for exit and relocation of facilities, losses on the write off of certain property, plant and equipment, and severance.

In the third fiscal quarter of 2016, restructuring expense totaled $1.5 million. In the first nine months of fiscal 2016, restructuring expense totaled $4.9 million, as more fully described in the following table:

In the recast third fiscal quarter of 2015, restructuring expense totaled $2.5 million. In the recast first nine months of fiscal 2015, restructuring expense totaled $11.7 million, as more fully described in the following table:

~~The Company has recorded an accrued liability of $5.8 million and $5.2 million for these activities as of July 1, 2016, and October 2, 2015, respectively.~~

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

On ~~June 5, 2015,~~May 4, 2016, the Company sold ~~Eclipse~~certain assets of Wallop for ~~$7.9~~2.5 million British pounds and ~~retained ownership~~contingent consideration of up to a maximum payment of 9 million British pounds. The contingent consideration is payable based upon receipt of acceptable orders during a three year period ending May 3, 2019, and is equal to the amount of the ~~land, building and building improvements, which are held for sale. In addition, on July 20, 2015,~~acceptable order multiplied by a specified percentage ranging from 26.5% to 31%. The contingent consideration amount was estimated to be 5.7 million British pounds at June 30, 2017. On June 2, 2017, the Company sold ~~PA&E~~additional assets of Wallop for ~~$23.4 million. Under~~0.7 million euros to be collected in the ~~terms~~fourth quarter of fiscal 2017.

On March 28, 2017, the Company sold a small manufacturing business for $0.6 million and a note receivable of $2.4 million, resulting in a gain on sale of the ~~stock purchase agreements for the sale~~business of ~~Eclipse and PA&E, the~~$0.8 million. The note receivable is due March 28, 2021, with an interest rate of 2.05%.

The Company ~~agreed to indemnify the buyer for certain breaches of the Company’s representations and warranties and certain other items for up to $2.8~~incurred a $0.8 million ~~and $3.9 million, respectively. An escrow account~~loss from discontinued operations in the ~~amount~~third quarter of ~~$1.1~~fiscal 2017 compared to $8.7 million ~~was established at closing of the sale of PA&E to partially cover the Company’s indemnification obligations.~~ ~~A claim against the escrow amount, if paid, would result in a corresponding decrease~~loss from discontinued operations in the ~~purchase price for the sale~~third quarter of ~~PA&E.~~

fiscal 2016. During the ~~third~~first nine months of fiscal ~~quarter of~~2017 and 2016, ~~and 2015,~~ the Company incurred a loss from discontinued operations of ~~$8.7~~$6.2 million and ~~$0.6~~$15.5 million, ~~respectively, on discontinued operations.~~respectively. Included in the loss of ~~$8.7~~$6.2 million for the ~~third~~first nine months of fiscal ~~quarter of 2016 is~~2017 was a $3.6 million loss on Wallop’s assets held for sale, ~~at Avionics & Controls and Advanced Materials of $2.4 million and $1.9 million, respectively. The loss at Avionics & Controls was~~ principally due to a reduction ofin the estimated ~~selling price. The loss at Advanced Materials was principally due to~~sale price and the effect of changes in foreign currency exchange ~~rates on~~rates. There was no significant change to the estimated sale price ~~and Wallop’s assets held for sale. Principal assumptions used~~ in ~~measuring~~ the ~~estimated loss on assets held for sale included estimated selling price~~third quarter of fiscal 2017.

~~During the first nine months of fiscal 2016 and 2015, the Company incurred a loss of $15.5 million and $21.0 million, respectively. Included in the loss of $15.5 million~~operations for the ~~first nine months~~three month period ended June 30, 2017, consisted of ~~fiscal 2016 is a loss on assets held for sale at Advanced Materials and Avionics & Controls of $5.5 million and $2.4 million, respectively.~~ the following:

The loss at Advanced Materials was principally due to the effect of changes in foreign currency exchange rates on the estimated sale price and Wallop’s assets held for sale. The loss at Avionics & Controls was principally due to a reduction of estimated selling price. Principal assumptions used in measuring the estimated loss on assets held for sale included estimated selling priceoperating results of the discontinued ~~business and discount rates.~~operations for the nine month period ended June 30, 2017, consisted of the following:

During the first nine months of fiscal 2015, the Company recorded a $1.7 million increase in a liability related to environmental remediation at a previously sold business for which the Company provided indemnification. A loss of $1.1 million, net of tax, is reflected in discontinued operations.

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

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

Net Sales		$	3,577		$	-		$	456		$	-		$	4,033		$	3,577		$	-		$	456		$	-		$	4,033

Operating earnings (loss)			(1,184	)		(71	)		(5,908	)		(251	)		(7,414	)		(1,184	)		(71	)		(5,908	)		(251	)		(7,414	)
Tax expense (benefit)			570			(83	)		876			(87	)		1,276			570			(83	)		876			(87	)		1,276
Income (loss) from discontinued operations		$	(1,754	)	$	12		$	(6,784	)	$	(164	)	$	(8,690	)	$	(1,754	)	$	12		$	(6,784	)	$	(164	)	$	(8,690	)

Included in Operating Earnings (Loss):	Included in Operating Earnings (Loss):																Included in Operating Earnings (Loss):
Loss on net assets held for sale		$	(2,411	)	$	-		$	(1,912	)	$	-		$	(4,323	)
Gain (loss) on net assets held for sale																	$	(2,411	)	$	-		$	(1,912	)	$	-		$	(4,323	)

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

~~The operating results of the discontinued operations for the recast three month period ended June 26, 2015, consisted of the following:~~

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

Net Sales		$	11,248		$	7,577		$	2,583		$	-	$	21,408		$	13,638		$	-		$	5,229		$	-		$	18,867

Operating earnings (loss)			(1,196	)		1,352			(1,687	)		9		(1,522	)		785			(378	)		(14,775	)		(262	)		(14,630	)
Tax expense (benefit)			(869	)		(56	)		(39	)		-		(964	)		1,256			(83	)		(223	)		(87	)		863
Income (loss) from discontinued operations		$	(327	)	$	1,408		$	(1,648	)	$	9	$	(558	)	$	(471	)	$	(295	)	$	(14,552	)	$	(175	)	$	(15,493	)

Included in Operating Earnings (Loss):	Included in Operating Earnings (Loss):															Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale		$	323		$	(622	)	$	(1,017	)	$	-	$	(1,316	)	$	(2,355	)	$	-		$	(5,540	)	$	-		$	(7,895	)

~~The operating results of the discontinued operations for the recast nine month period ended June 26, 2015, consisted of the following:~~

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at ~~July 1, 2016,~~June 30, 2017, are comprised of the following:

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

Accounts receivable, net		$	3,032		$	-		$	4,309	$	7,341
Inventories			8,956			-			295		9,251
Prepaid expenses			145			-			202		347
Deferred income tax benefits			-			-			-		-
Income tax refundable			-			-	��		1,095		1,095
Other current assets														$	-	$	-	$	3,868	$	3,868
Current Assets of Businesses Held for Sale	Current Assets of Businesses Held for Sale		12,133			-			5,901		18,034		Current Assets of Businesses Held for Sale		-		-		3,868		3,868

Net property, plant and equipment			5,349			-			2,689		8,038				5,262		-		-		5,262
Intangibles, net			-			-			1,759		1,759
Deferred income tax benefits			(392	)		-			-		(392	)
Other assets			-			-			1,330		1,330				-		-		4,995		4,995
Non-Current Assets of Businesses Held for Sale	Non-Current Assets of Businesses Held for Sale		4,957			-			5,778		10,735		Non-Current Assets of Businesses Held for Sale		5,262		-		4,995		10,257

Accounts payable			251			-			1,486		1,737				-		-		385		385
Accrued liabilities			7,666			-			2,880		10,546				-		-		86		86
Current Liabilities of Businesses Held for Sale	Current Liabilities of Businesses Held for Sale		7,917			-			4,366		12,283		Current Liabilities of Businesses Held for Sale		-		-		471		471

Deferred income tax liabilities			-			-			902		902				-		-		1,365		1,365
Other liabilities			-			-			320		320				-		-		320		320
Non-Current Liabilities of Businesses Held for Sale	Non-Current Liabilities of Businesses Held for Sale		-			-			1,222		1,222		Non-Current Liabilities of Businesses Held for Sale		-		-		1,685		1,685

Net Assets of Businesses Held for Sale	Net Assets of Businesses Held for Sale	$	9,173		$	-		$	6,091	$	15,264		Net Assets of Businesses Held for Sale	$	5,262	$	-	$	6,707	$	11,969

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at ~~October 2, 2015,~~September 30, 2016, were comprised of the following:

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

Accounts receivable, net		$	5,360		$	-	$	1,546	$	6,906			$	2,588		$	-	$	4,093	$	6,681
Inventories			14,763			-		5,841		20,604				8,070			-		398		8,468
Prepaid expenses			156			-		185		341				127			-		103		230
Income tax refundable														-			-		71		71
Current Assets of Businesses Held for Sale	Current Assets of Businesses Held for Sale		20,279			-		7,572		27,851		Current Assets of Businesses Held for Sale		10,785			-		4,665		15,450

Net property, plant and equipment			5,474			-		12,199		17,673				5,368			-		2,869		8,237
Intangibles, net			945			-		4,928		5,873				-			-		1,856		1,856
Deferred income tax benefits			(147	)		-		-		(147	)			(392	)		-		400		8
Other assets			-			-		1,518		1,518				-			-		1,299		1,299
Non-Current Assets of Businesses Held for Sale	Non-Current Assets of Businesses Held for Sale		6,272			-		18,645		24,917		Non-Current Assets of Businesses Held for Sale		4,976			-		6,424		11,400

Accounts payable			1,878			-		4,837		6,715				441			-		1,463		1,904
Accrued liabilities			8,340			-		2,051		10,391				7,000			-		1,909		8,909
Current Liabilities of Businesses Held for Sale	Current Liabilities of Businesses Held for Sale		10,218			-		6,888		17,106		Current Liabilities of Businesses Held for Sale		7,441			-		3,372		10,813

Deferred income tax liabilities			-			-		194		194
Other liabilities			2,215			-		-		2,215				-			-		320		320
Non-Current Liabilities of Businesses Held for Sale	Non-Current Liabilities of Businesses Held for Sale		2,215			-		194		2,409		Non-Current Liabilities of Businesses Held for Sale		-			-		320		320

Net Assets of Businesses Held for Sale	Net Assets of Businesses Held for Sale	$	14,118		$	-	$	19,135	$	33,253		Net Assets of Businesses Held for Sale	$	8,320		$	-	$	7,397	$	15,717

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

In Thousands		Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
		July 1,			June 26,			July 1,			June 26,
		2016			2015			2016			2015			June 30,			July 1,			June 30,			July 1,
					(Recast)						(Recast)			2017			2016			2017			2016
Sales
Avionics & Controls		$	222,583		$	200,078		$	607,493		$	594,025		$	209,168		$	222,583		$	615,443		$	607,493
Sensors & Systems			186,337			175,544			514,836			529,976			184,450			186,337			534,001			514,836
Advanced Materials			108,172			109,101			326,550			333,543			110,135			108,172			321,224			326,550
		$	517,092		$	484,723		$	1,448,879		$	1,457,544		$	503,753		$	517,092		$	1,470,668		$	1,448,879

Earnings from Continuing Operations Before Income Taxes	Earnings from Continuing Operations Before Income Taxes													Earnings from Continuing Operations Before Income Taxes
Avionics & Controls		$	28,517		$	16,836		$	40,579		$	62,096		$	22,495		$	28,517		$	62,173		$	40,579
Sensors & Systems			27,942			22,968			61,670			56,682			24,842			27,942			71,944			61,670
Advanced Materials			15,512			24,514			51,710			65,538			17,780			15,512			55,982			51,710
Segment Earnings			71,971			64,318			153,959			184,316			65,117			71,971			190,099			153,959

Corporate expense			(17,926	)		(18,592	)		(54,956	)		(61,454	)		(15,969	)		(17,926	)		(53,758	)		(54,956	)
Other income			-			-			-			12,744
Interest income			30			87			211			406			150			30			346			211
Interest expense			(7,659	)		(10,393	)		(22,169	)		(24,409	)		(7,299	)		(7,659	)		(22,645	)		(22,169	)
Loss on extinguishment of debt			-			(329	)		-			(329	)
		$	46,416		$	35,091		$	77,045		$	111,274		$	41,999		$	46,416		$	114,042		$	77,045

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

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

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

The Avionics & Controls segment includes avionics systems, control and communication systems, and interface technologies capabilities. The Sensors & Systems segment includes power systems, connection technologies and advanced sensors capabilities. The Advanced Materials segment includes engineered materials and defense technologies capabilities.

Our current business and strategic plan focuses on the continued development and enhancement of our products principally for aerospace and defense ~~markets and operational excellence.~~markets. We are concentrating our efforts to expand our capabilities in these markets, to anticipate the global needs of our customers, and to continually improve our operational performance. These efforts focus on continuous research and new product development, acquisitions and strategic realignments of operations to offer more comprehensive solutions across our product offerings, and the implementation of the principles of our operating system to become a supplier of choice for our customers.

In March 2014, we entered into a Consent Agreement with the U.S. Department of State’s Directorate of Defense Trade Controls Office of Defense Trade Controls Compliance (DDTC) to resolve alleged International Traffic in Arms Regulations (ITAR) civil violations. Among other things, the Consent Agreement required us to pay a $20 million penalty, of which $10 million was suspended and eligible for offset credit. ~~Compliance expense associated with these measures was $8.2 million in the first nine months of~~In fiscal ~~2016 and $11.3 million in the prior-year period. As of the quarter ended July 1,~~ 2016, the DTCC approved costs we incurred to implement compliance measures to fully offset the $10 million suspended payment. More information about the Consent Agreement is set forth in Note 109 to the Consolidated Financial Statements included in Part 1, Item 1 of this report.

~~Total sales~~Sales for the third ~~fiscal~~ quarter of fiscal 2017 decreased $13.3 million to $503.8 million over the prior-year period due mainly to lower sales of Avionics & Controls segment products.

Gross margin was 33.9% in the third quarter of fiscal 2017 compared with 33.6% in the prior-year period. Gross profit was $170.6 million and $173.6 million for the third quarter of fiscal 2017 and 2016, ~~increased~~respectively. For further explanation about changes in sales and gross profit in the third quarter of fiscal 2017 over the prior-year period, refer to the table at the end of this Overview section for a roll forward presentation of sales and gross profit.

Selling, general and administrative expenses decreased by ~~$32.4~~$3.2 million ~~or 6.7%,~~in the third quarter of fiscal 2017 over the prior-year period to ~~$517.1~~$93.6 million, ~~mainly~~principally reflecting ~~higher sales volume of Avionics & Controls~~lower integration expense and ~~Sensors & Systems due to higher demand~~share-based compensation.

Research, development and ~~the favorable effect of changes in foreign currency exchange rates relative to the U.S. dollar. Avionics & Controls sales volume~~engineering expense increased by ~~$18~~$5.7 million to $27.9 million, or ~~9%, Sensors & Systems increased by $8 million or 4%, and Advanced Materials~~5.5% of sales, ~~were even with~~in the third quarter of fiscal 2017 from the prior-year period. The ~~favorable effect~~increase reflects higher expense across all three segments.

The income tax rate was 24.8% in the third quarter of ~~changes in foreign currency exchange rates relative to the U.S. dollar~~fiscal 2017 compared with 17.2% in the prior-year ~~period was $6 million.~~period. The increase in the income tax rate is a result of U.K. limitations on interest expense deductions.

Earnings from continuing operations in the third ~~fiscal~~ quarter of ~~2016~~fiscal 2017 were $31.3 million, or $1.04 per diluted share, compared with $38.0 million, or $1.28 per diluted share, ~~compared with $28.2 million, or $0.90 per diluted share,~~ in the prior-year period.

As explained in Note 11 to the Consolidated Financial Statements included in Part 1, Item 1 of this report, in fiscal 2014, our board of directors previously approved the plan to sell certain non-core business units including Wallop Defence Systems, Ltd. (Wallop), a manufacturer of flare countermeasure devices; a small distribution business; and a small manufacturing business. On March 28, 2017, we sold a small manufacturing business for $0.6 million and a note receivable of $2.4 million, resulting in a gain on sale of the business of $0.8 million. In May 2016, we sold certain assets of Wallop and in June 2016 entered into an agreement to sell Wallop’s naval business. On June 2, 2017, we sold additional assets of Wallop for 0.7 million euros to be collected in the fourth quarter of fiscal 2017. These businesses are reported as discontinued operations.

Loss from discontinued operations in the third ~~fiscal~~ quarter of ~~2016~~fiscal 2017 was ~~$8.7~~$0.8 million, or ~~$0.29~~$0.03 per diluted share, compared with ~~$0.6~~a loss of $8.7 million, or ~~$0.02 per diluted share, in the prior-year period. Net income in the third fiscal quarter of 2016 was $29.4 million, or $0.99 per diluted share, compared with $27.7 million, or $0.88~~$0.29 per diluted share, in the prior-year period.

~~Total sales~~Net income in the third quarter of fiscal 2017 was $30.5 million, or $1.01 per diluted share, compared with $29.4 million, or $0.99 per diluted share, in the prior-year period.

Sales for the first nine months of fiscal ~~2016 of $1.5~~2017 increased $21.8 million to $1.47 billion ~~were flat compared with~~over the prior-year ~~period. Incremental~~period due to strong sales ~~from the DAT acquisition~~ of ~~$52 million were offset by lower sales volumes at Avionics & Controls and~~ Sensors & Systems ~~and~~segment products, partially offset by the effect of changes in foreign currency ~~exchange rates relative to~~rates.

Gross margin was 33.4% in the ~~U.S. dollar. Avionics & Controls~~first nine months of fiscal 2017 compared with 32.3% in the prior-year period. Gross profit was $490.6 million and $467.5 million for the first nine months of fiscal 2017 and 2016, respectively. Gross profit mainly benefited from higher sales ~~volumes decreased by $30 million or 5%,~~volume and favorable product mix of Sensors & Systems segment products.

For further explanation regarding changes in sales and gross profit in the first nine months of fiscal 2017 over the prior-year period, please refer to the table at the end of this Overview section for a roll forward presentation of sales and gross profit.

Selling, general and administrative expenses decreased by $6$7.0 million ~~or 1%, and Advanced Materials sales volumes were even with~~in the first nine months of fiscal 2017 over the prior-year ~~period. Additionally, the~~period to $286.3 million, principally reflecting decreased integration expense and favorable effect of changes in foreign currency ~~exchange rates~~rates.

Research, development and engineering expense increased by $3.0 million to $75.7 million, or 5.1% of sales, in the first nine months of fiscal 2017 from the prior-year period. The increase mainly reflects higher spending in our Sensors & Systems and Advanced Materials segments.

During the first nine months of fiscal 2017, we received a $7.8 million insurance recovery resulting from an energetic incident at one of our countermeasure operations, which occurred in the third quarter of fiscal 2016. We also received a $5.0 million insurance recovery in the fourth quarter of fiscal 2016. The insurance recovery is reported as a separate line item on the Consolidated Statement of Operations and Comprehensive Income (Loss) and is included in Advanced Materials segment earnings. Sales and gross margin of our countermeasure operations business continued to be impacted by the controlled restart of operations following the incident through the first half of fiscal 2017. In the third quarter of fiscal 2017, the factory achieved planned production levels. We do not anticipate additional insurance recoveries arising from this matter.

We adopted the new guidance on accounting for share-based payments during the first quarter of fiscal 2017. The new guidance simplifies certain aspects of accounting for share-based payments. The key provision of the new standard requires that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than in additional paid-in capital. Adoption of the new guidance during the first nine months of fiscal 2017 resulted in a $2.3 million decrease in income tax expense.

The income tax rate was 21.9% in the first nine months of fiscal 2017 compared with 14.7% in the prior-year ~~period reduced sales by $22 million.~~period. The increase in the income tax rate is a result of U.K. limitations on interest expense deductions. We expect our fiscal 2017 income tax rate will be approximately 24% to 25%. We expect our income tax rate will be approximately 27% to 28% in the fourth quarter of fiscal 2017.

Earnings from continuing operations in the first nine months of fiscal ~~2016~~2017 were $88.0 million, or $2.94 per diluted share, compared with $64.9 million, or $2.18 per diluted share, ~~compared with $87.6 million, or $2.76 per diluted share,~~ in the prior-year period.

Loss from discontinued operations in the first nine months of fiscal ~~2016~~2017 was $6.2 million, or $0.21 per diluted share, compared with $15.5 million, or $0.52 per diluted share, ~~compared with $21.0 million, or $0.66 per diluted share,~~ in the prior-year period.

Net income in the first nine months of fiscal ~~2016~~2017 was ~~$49.4~~$81.8 million, or ~~$1.66~~$2.73 per diluted share, compared with ~~$66.6~~$49.4 million, or ~~$2.10~~$1.66 per diluted share, in the prior-year period.

Cash flows from operating activities were ~~$118.6~~$138.9 million in the first nine months of fiscal ~~2016~~2017 compared with ~~$117.2~~$118.6 million in the prior-year period. The increase in cash flows from operating activities is primarily from improved earnings.

Our sales, gross margin and earnings results for the ~~three and nine month period ended July 1, 2016,~~third quarter of fiscal 2017 compared with the prior-year period included a number of significant items which are summarized in the tables below.

The following is a roll forward of sales and gross margin from the ~~recast~~ three month period ended ~~June 26, 2015,~~July 1, 2016, to the three month period ended ~~July 1, 2016:~~June 30, 2017:

In Thousands	Avionics &			Sensors &			Advanced						Avionics &			Sensors &			Advanced
	Controls			Systems			Materials			Total			Controls			Systems			Materials			Total
Sales:
Three month period ended June 26, 2015	$	200,078		$	175,544		$	109,101		$	484,723
Three month period ended July 1, 2016													$	222,583		$	186,337		$	108,172		$	517,092
Foreign currency gain (loss)		2,134			993			(1,584	)		1,543			(1,332	)		(2,381	)		(2,697	)		(6,410	)
Forward contract gain (loss)		2,210			2,051			-			4,261			1,376			(986	)		-			390
Sales volume		18,161			7,749			655			26,565			(12,377	)		985			2,587			(8,805	)
Three month period ended July 1, 2016	$	222,583		$	186,337		$	108,172		$	517,092
Other														(1,082	)		495			2,073			1,486
Three month period ended June 30, 2017													$	209,168		$	184,450		$	110,135		$	503,753

Gross Margin:
Three month period ended June 26, 2015		65,154			64,310			35,826			165,290
Three month period ended July 1, 2016														74,535			67,933			31,116			173,584
Foreign currency gain (loss)		2,670			(78	)		(308	)		2,284			(399	)		(804	)		(694	)		(1,897	)
Forward contract gain (loss)		2,146			2,051			-			4,197			1,449			(986	)		-			463
DAT purchase accounting adjustment		2,721			-						2,721
DAT integration		(1,291	)		-			-			(1,291	)
Volume/mix		(341	)		5,040			146			4,845			2,530			(202	)		1,462			3,790
Lower (higher) manufacturing costs		198			(4,244	)		(2,631	)		(6,677	)		(5,471	)		(319	)		577			(5,213	)
Cost initiatives		-			674			(336	)		338
Business integration														1,308			-			-			1,308
Inventory cost and EAC adjustment		3,278			180			-			3,458			(2,900	)		614			-			(2,286	)
Defense Technologies energetic incident		-			-			(1,581	)		(1,581	)
Three month period ended July 1, 2016	$	74,535		$	67,933		$	31,116		$	173,584
Other														135			191			554			880
Three month period ended June 30, 2017													$	71,187		$	66,427		$	33,015		$	170,629

The following is a roll forward of sales and gross margin from the ~~recast~~ nine month period ~~ending June 26, 2015,~~ended July 1, 2016, to the nine month period ended ~~July 1, 2016:~~June 30, 2017:

In Thousands	Avionics &			Sensors &			Advanced						Avionics &			Sensors &			Advanced
	Controls			Systems			Materials			Total			Controls			Systems			Materials			Total
Sales:
Nine month period ended June 26, 2015	$	594,025		$	529,976		$	333,543		$	1,457,544
Nine month period ended July 1, 2016													$	607,493		$	514,836		$	326,550		$	1,448,879
Foreign currency gain (loss)		(8,139	)		(11,655	)		(5,021	)		(24,815	)		(2,914	)		(7,560	)		(10,281	)		(20,755	)
Forward contract gain (loss)		157			2,286			-			2,443			6,683			(1,534	)		-			5,149
DAT incremental		51,734			-			-			51,734
Sales volume		(30,284	)		(5,771	)		(1,972	)		(38,027	)		4,795			26,784			339			31,918
Nine month period ended July 1, 2016	$	607,493		$	514,836		$	326,550		$	1,448,879
Other														(614	)		1,475			4,616			5,477
Nine month period ended June 30, 2017													$	615,443		$	534,001		$	321,224		$	1,470,668

Gross Margin:
Nine month period ended June 26, 2015		199,901			187,295			106,352			493,548
Nine month period ended July 1, 2016														190,722			179,443			97,311			467,476
Foreign currency gain (loss)		(3,461	)		(1,654	)		(1,162	)		(6,277	)		181			(689	)		(2,520	)		(3,028	)
Forward contract gain (loss)		(16	)		2,286			-			2,270			6,817			(1,534	)		-			5,283
DAT purchase accounting adjustment		4,536									4,536
DAT incremental		20,962			-			-			20,962
DAT integration		(3,420	)		-			-			(3,420	)
Volume/mix		(23,145	)		(4,228	)		2,925			(24,448	)		3,989			16,306			606			20,901
Lower (higher) manufacturing costs		(6,926	)		(7,632	)		(9,346	)		(23,904	)		(7,594	)		(1,947	)		(854	)		(10,395	)
Cost initiatives		67			3,376			123			3,566
Factory layout costs (Kaikaku)														1,940			-			-			1,940
Business integration														3,107			-			-			3,107
Inventory cost and EAC adjustment		2,224			-			-			2,224			1,917			614			-			2,531
Defense Technologies energetic incident		-			-			(1,581	)		(1,581	)
Nine month period ended July 1, 2016	$	190,722		$	179,443		$	97,311		$	467,476
Other														1,539			197			1,044			2,780
Nine month period ended June 30, 2017													$	202,618		$	192,390		$	95,587		$	490,595

The following table shows the average foreign exchange rates for the ~~U.K.~~British pound, Canadian dollar and euro relative to the U.S. dollar for the three and nine month periods ended June 30, 2017, and July 1, ~~2016, and June 26, 2015.~~2016.

	Three Months Ended					Nine Months Ended					Three Months Ended					Nine Months Ended
	July 1,		June 26,			July 1,		June 26,			June 30,		July 1,			June 30,		July 1,
	2016			2015	Change	2016			2015	Change	2017			2016	Change	2017		2016		Change

GBP to USD		1.4329		1.5249	(6.0)%		1.4556		1.5446	(5.8)%		1.2847		1.4329	(10.3)%		1.2591		1.4556	(13.5)%
CAD to USD		0.7786		0.8093	(3.8)%		0.7545		0.8312	(9.2)%		0.7457		0.7786	(4.2)%		0.7497		0.7545	(0.6)%
EUR to USD		1.1277		1.1074	1.8%		1.1040		1.1628	(5.1)%		1.1040		1.1277	(2.1)%		1.0825		1.1040	(1.9)%

The following ~~tables show~~table shows the impact of changes in the foreign currency exchange rates for the ~~U.K.~~British pound, Canadian dollar and euro relative to the U.S. dollar on operating earnings during the three month period ended ~~July 1, 2016,~~June 30, 2017, compared with the prior-year period.

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

Foreign currency gain (loss)	$	3,541	$	1,236	$	1,651		$	6,428		$	(727	)	$	(2,423	)	$	(3,557	)	$	(6,707	)
Forward contract gain (loss)		1,723		1,510		(5,290	)		(2,057	)		2,374			(282	)		5,129			7,221
Impact on Operating Earnings (Loss)	$	5,264	$	2,746	$	(3,639	)	$	4,371		$	1,647		$	(2,705	)	$	1,572		$	514

The following ~~tables show~~table shows the impact of changes in the foreign currency exchange rates for the ~~U.K.~~British pound, Canadian dollar and euro relative to the U.S. dollar on operating earnings during the nine month period ended ~~July 1, 2016,~~June 30, 2017, compared with the prior-year period.

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

Foreign currency gain (loss)	$	(3,386	)	$	1,275	$	1,166		$	(945	)	$	3,775	$	104		$	(7,418	)	$	(3,539	)
Forward contract gain (loss)		(545	)		7,836		(4,653	)		2,638			7,609		(1,333	)		8,671			14,947
Impact on Operating Earnings (Loss)	$	(3,931	)	$	9,111	$	(3,487	)	$	1,693		$	11,384	$	(1,229	)	$	1,253		$	11,408

~~For further explanation, please see the roll forward table of sales, gross margin and the analysis of the impact of changes in foreign currency exchange rates at the end of the Overview section.~~

Three Month Period Ended June 30, 2017, Compared with Three Month Period Ended July 1, 2016 ~~Compared with Three Month Period Ended June 26, 2015~~

Total sales for the third fiscal quarter ~~increased~~decreased by ~~$32.4~~$13.3 million, or ~~6.7%~~2.6%, over the prior-year period. Sales by segment were as follows:

In Thousands		Three Months Ended					Three Months Ended
	Increase (Decrease)	July 1,		June 26,		Increase (Decrease)	June 30,		July 1,
	From Prior Year	2016		2015		From Prior Year	2017		2016
				(Recast)

Avionics & Controls	11.2%	$	222,583	$	200,078	(6.0)%	$	209,168	$	222,583
Sensors & Systems	6.1%		186,337		175,544	(1.0)%		184,450		186,337
Advanced Materials	(0.9)%		108,172		109,101	1.8%		110,135		108,172
Total Net Sales		$	517,092	$	484,723		$	503,753	$	517,092

The $13 million decrease in Avionics & Controls sales over the prior-year period mainly reflected the following:

The ~~$22.5~~$2 million decrease in Sensor & Systems sales over the prior-year period principally reflected unfavorable effect of changes in foreign currency exchange rates.

The $2 million increase in sales in Advanced Materials over the prior-year period mainly reflected higher sales of countermeasure flare devices of $6 million, partially offset by an unfavorable effect of changes in foreign currency rates.

Overall, gross margin was 33.9% and 33.6% for the third quarter of fiscal 2017 and 2016, respectively. Gross profit was $170.6 million and $173.6 million for the third quarter of fiscal 2017 and 2016, respectively. Gross profit and gross margin percentage by segment were as follows:

The $3 million decrease in Avionics & Controls gross profit was mainly due to the following:

The $2 million decrease in Sensors & Systems gross profit principally reflected an unfavorable effect of foreign currency rates.

The $2 million increase in Advanced Materials gross profit principally reflected an increase in gross margin on sales of defense technologies due to higher sales volumes of countermeasures and an increase in fixed overhead recovery due to the return of full production following the May 2016 incident noted in the Overview section.

Selling, general and administrative expenses (which include corporate expenses) totaled $93.6 million, or 18.6% of sales, and $96.8 million, or 18.7% of sales, for the third quarter of fiscal 2017 and 2016, respectively. The decrease in selling, general and administrative expense mainly reflected a $2 million decrease in integration expenses and a decrease in share-based compensation.

Research, development and engineering spending was $27.9 million, or 5.5% of sales, for the third quarter of fiscal 2017 compared with $22.2 million, or 4.3% of sales, for the third quarter of fiscal 2016. The $5.7 million increase in research, development and engineering reflected higher spending in all three segments.

Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the third quarter of fiscal 2017 totaled $65.1 million, or 12.9% of sales, compared with $72.0 million, or 13.9% of sales, for the third quarter in fiscal 2016. Segment earnings by segment were as follows:

The $6 million decrease in Avionics & Controls segment earnings mainly reflected a decrease in gross profit of $3 million, and an increase in research, engineering and development expense.

The $3 million decrease in Sensors & Systems segment earnings principally reflected a decrease in gross profit and higher research and development expense.

A $2 million increase in Advanced Materials segment earnings principally reflected an increase in gross profit.

Interest expense for the third quarter of fiscal 2017 was $7.3 million compared with $7.7 million for the third quarter of fiscal 2016. The decrease in interest expense mainly reflected lower borrowings, partially offset by a higher interest rate.

The income tax rate was 24.8% in the third fiscal quarter of fiscal 2017 compared with 17.2% in the prior-year period. The income tax rate for the third quarter of fiscal 2017 was higher due to the U.K. tax law changes limiting interest expense deductions, partially offset by excess tax benefits related to employee share-based payments. The income tax rate differed from the statutory rate in the third quarter of fiscal 2017 and 2016, as both years benefited from various tax credits and certain foreign interest expense deductions. We expect our income tax rate will be approximately 27% to 28% in the fourth quarter of fiscal 2017.

Nine Month Period Ended June 30, 2017, Compared with Nine Month Period Ended July 1, 2016

Total sales for the first nine months of fiscal 2017 increased by $21.8 million, or 1.5%, over the prior-year period. Sales by segment were as follows:

The $8 million increase in Avionics & Controls sales over the prior-year period mainly reflected the following:

The ~~$10.8~~$19 million increase in Sensor & Systems sales over the prior-year period principally reflected the following:

The ~~$0.9~~$5 million decrease in sales in Advanced Materials over the prior-year period mainly reflected ~~flat sales~~the following:

Overall, gross margin was ~~33.6%~~33.4% and ~~34.1%~~32.3% for the ~~third~~first nine months of fiscal ~~quarter of~~2017 and 2016, ~~and 2015,~~ respectively. Gross profit was ~~$173.6~~$490.6 million and ~~$165.3~~$467.5 million for the ~~third~~first nine months of fiscal ~~quarter of~~2017 and 2016, ~~and 2015, respectively. Gross profit was impacted by $1.0 million and $1.3 million in restructuring expense in the third fiscal quarter of 2016 and 2015,~~ respectively. Gross profit and gross margin percentage by segment were as follows:

In Thousands		Three Months Ended							Nine Months Ended
	Increase (Decrease)	July 1,			June 26,
	From Prior Year	2016			2015			Increase (Decrease)	June 30,			July 1,
					(Recast)			From Prior Year	2017			2016

Avionics & Controls	14.4%	$	74,535		$	65,154		6.2%	$	202,618		$	190,722
Sensors & Systems	5.6%		67,933			64,310		7.2%		192,390			179,443
Advanced Materials	(13.1)%		31,116			35,826		(1.8)%		95,587			97,311
Total Gross Profit		$	173,584		$	165,290			$	490,595		$	467,476

Avionics & Controls	0.9%		33.5	%		32.6	%	1.5%		32.9	%		31.4	%
Sensors & Systems	(0.1)%		36.5	%		36.6	%	1.1%		36.0	%		34.9	%
Advanced Materials	(4.0)%		28.8	%		32.8	%	0.0%		29.8	%		29.8	%
Gross Margin Percentage			33.6	%		34.1	%			33.4	%		32.3	%

The $12 million increase in Avionics & Controls ~~segment gross margin was 33.5% and 32.6% for the third fiscal quarter of 2016 and 2015, respectively. Segment~~ gross profit ~~was $74.5~~is mainly from the following:

At July 1, 2016, our avionics systems business has $6.7 million in outstanding accounts receivable on a long-term contract to upgrade avionics on a military transport aircraft. The final payment is due upon contract completion requiring a solution to a radio frequency tuning anomaly which is being tested on the aircraft. During the third quarter of fiscal 2016, testing was inconclusive. Management believes a satisfactory solution to the anomaly will be achieved and the outstanding receivable is probable of collection.

Sensors & Systems segment gross margin was 36.5% and 36.6% for the third fiscal quarter of 2016 and 2015, respectively. Segment gross profit was $67.9 million compared with $64.3 million in the prior-year period. The $4 million increase in gross profit principally reflected ~~the following:~~

~~Advanced Materials segment gross margin was 28.8%~~increased sales volume and ~~32.8% for the third fiscal quarter~~favorable product mix, partially offset by higher program costs of ~~2016 and 2015, respectively. Segment gross profit was $31.1 million compared with $35.8 million in the prior-year period.~~ $2 million.

The $5$2 million decrease in Advanced Materials gross profit principally reflected a decrease in gross margin on lower sales of defense technologies due to the ~~following:~~controlled ramp up of manufacturing following the May 2016 incident at one of our countermeasure operations and higher expenses from the introduction of new countermeasure devices.

Selling, general and administrative expenses (which include corporate expenses) totaled ~~$96.8~~$286.3 million, or ~~18.7%~~19.5% of sales, and ~~$92.0~~$293.3 million, or ~~19.0%~~20.2% of sales, for the ~~third~~first nine months of fiscal ~~quarter of~~2017 and 2016, ~~and 2015,~~ respectively. The ~~$5 million increase~~decrease in selling, general and administrative expense mainly reflected the following:

Research, development and engineering spending was ~~$22.2~~$75.7 million, or 4.3% of sales, for the third fiscal quarter of 2016 compared with $26.4 million, or 5.4% of sales, for the third fiscal quarter of 2015. The $4 million decrease in research, development and engineering principally reflected the following:

Total restructuring expenses were $1.5 million, or 0.3% of sales, in the third fiscal quarter of 2016, of which $0.6 million is reported separately as restructuring expenses and $0.9 million is included in cost of goods sold. Total restructuring expenses were $2.5 million, or 0.5% of sales, in the third fiscal quarter of 2015, of which $1.1 million is reported separately as restructuring expenses and $1.4 million is included in cost of goods sold.

Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the third fiscal quarter of 2016 totaled $72 million, or 13.9% of sales, compared with $64.3 million, or 13.3% of sales, for the third fiscal quarter in 2015. Segment earnings by segment were as follows:

Avionics & Controls segment earnings were $28.5 million, or 12.8% of sales, in the third fiscal quarter of 2016 and $16.8 million, or 8.4% of sales, in the third fiscal quarter of 2015. The $12 million increase in Avionics & Controls segment earnings mainly reflected the following:

Sensors & Systems segment earnings were $27.9 million, or 15.0% of sales, for the third fiscal quarter of 2016 compared with $23.0 million, or 13.1% of sales, for the third fiscal quarter of 2015. The $5 million increase in Sensors & Systems segment earnings principally reflected the following:

Advanced Materials segment earnings were $15.5 million, or 14.3% of sales, for the third fiscal quarter of 2016 compared with $24.5 million, or 22.5% of sales, for the third fiscal quarter of 2015. The $9 million decrease in Advanced Materials segment earnings mainly reflected the following:

Interest expense for the third fiscal quarter of 2016 was $7.7 million compared with $10.4 million for the third fiscal quarter of 2015. The decrease in interest expense reflected lower interest from our refinancing in April 2015 of our $250 million 7% Senior Notes with our €330 million 3.625% Senior Notes.

The income tax rate was 17.2% in the third fiscal quarter of 2016 compared with 19.2% in the prior-year period. The decrease in the income tax rate over the prior-year period principally reflected the following:

~~Nine Month Period Ended July 1, 2016, Compared with Nine Month Period Ended June 26, 2015~~

~~Total sales for the first nine months of fiscal 2016 decreased by $8.7 million, or 0.6%, over the prior-year period. Sales by segment were as follows:~~

~~The $13.5 million increase in Avionics & Controls sales over the prior-year period mainly reflected the following:~~

~~The $15 million decrease in Sensors & Systems sales over the prior-year period principally reflected the following:~~

~~The $7 million decrease in Advanced Materials sales over the prior-year period mainly reflected the following:~~

Overall, gross margin was 32.3% and 33.9% for the first nine months of fiscal 2016 and 2015, respectively. Gross profit was $467.5 million and $493.5 million for the first nine months of fiscal 2016 and 2015, respectively. Gross profit was impacted by $2.4 million and $5.7 million in restructuring expense in the first nine months of fiscal 2016 and 2015, respectively. Gross margin by segment was as follows:

Avionics & Controls segment gross margin was 31.4% and 33.7% for the first nine months of fiscal 2016 and 2015, respectively. Segment gross profit was $190.7 million compared with $199.9 million in the prior-year period. The $9 million decrease in Avionics & Controls segment gross profit principally reflected the following:

Sensors & Systems segment gross margin was 34.9% and 35.3% for the first nine months of fiscal 2016 and 2015, respectively. Segment gross profit was $179.4 million compared with $187.3 million in the prior-year period. The $8 million decrease in Sensors & Systems segment gross profit mainly reflected the following:

Advanced Materials segment gross margin was 29.8% and 31.9% for the first nine months of fiscal 2016 and 2015, respectively. Segment gross profit was $97.3 million compared with $106.4 million in the prior-year period. The $9 million decrease in Advanced Materials segment gross profit principally reflected the following:

~~Selling, general and administrative expenses (which include corporate expenses) totaled $293.3 million, or 20.2% of sales, and $289.5 million, or 19.9%~~5.1% of sales, for the first nine months of fiscal ~~2016 and 2015, respectively. The $4 million increase in selling, general and administrative expense mainly reflected the following:~~

~~Research, development and engineering spending was~~2017 compared with $72.8 million, or 5.0% of sales, for the first nine months of fiscal ~~2016 compared with $75.1~~2016. The $3.0 million ~~or 5.2% of sales, for the prior-year period. The $2.3 million decrease~~increase in research, development and engineering principally reflected higher spending in the ~~following:~~

~~Total restructuring expenses were $4.9 million, or 0.3% of sales,~~Sensors & Systems and Advanced Materials segments in the first nine months of ~~2016,~~fiscal 2017. Management expects that the full year research, development and engineering expense will be approximately 5.1% of which $2.4 million is reported separately as restructuring expenses and $2.5 million is included in cost of goods sold. Total restructuring expenses were $11.7 million, or 0.8% of sales, in the first nine months of 2015, of which $6.1 million is reported separately as restructuring expenses and $5.6 million is included in cost of goods sold.sales.

Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the first nine months of fiscal ~~2016~~2017 totaled $190.0 million, or 12.9% of sales, compared with $154.0 million, or 10.6% ~~of sales, compared with $184.3 million, or 12.6%~~ of sales, for the first nine months ~~of 2015.~~in fiscal 2016. Segment earnings by segment were as follows:

In Thousands		Nine Months Ended							Nine Months Ended
	Increase (Decrease)	July 1,			June 26,			Increase (Decrease)	June 30,			July 1,
	From Prior Year	2016			2015			From Prior Year	2017			2016
					(Recast)

Avionics & Controls	(34.7)%	$	40,579		$	62,096		53.2%	$	62,173		$	40,579
Sensors & Systems	8.8%		61,670			56,682		16.7%		71,944			61,670
Advanced Materials	(21.1)%		51,710			65,538		8.3%		55,982			51,710
Total Segment Earnings		$	153,959		$	184,316			$	190,099		$	153,959

Avionics & Controls	(3.8)%		6.7	%		10.5	%	3.4%		10.1	%		6.7	%
Sensors & Systems	1.3%		12.0	%		10.7	%	1.5%		13.5	%		12.0	%
Advanced Materials	(3.8)%		15.8	%		19.6	%	1.6%		17.4	%		15.8	%
Segment Earnings Percentage			10.6	%		12.6	%			12.9	%		10.6	%

~~Avionics & Controls segment earnings were $40.6 million, or 6.7% of sales, in the first nine months of fiscal 2016 and $62.1 million, or 10.5% of sales, in the first nine months of 2015.~~ The $22 million ~~decrease~~increase in Avionics & Controls segment earnings mainly reflected the following:

~~Sensors & Systems segment earnings were $61.7 million, or 12.0% of sales, for the first nine months of fiscal 2016 compared with $56.7 million, or 10.7% of sales, for the first nine months of 2015.~~ The $5$10 million increase in Sensors & Systems segment earnings principally reflected the ~~following:~~increase in gross profit on higher sales volumes and improved product mix, partially offset by higher research, development and engineering and selling general and administrative expenses.

~~Advanced Materials segment earnings were $51.7~~ million ~~or 15.8% of sales, for the first nine months of fiscal 2016 compared with $65.5 million, or 19.6% of sales, for the first nine months of 2015. The $13.8 million decrease~~increase in Advanced Materials segment earnings mainly reflected ~~the following:~~a $7.8 million insurance recovery noted above, partially offset by a $2 million decrease in gross profit and higher research, development and engineering expense.

Interest expense for the first nine months of fiscal ~~2016~~2017 was ~~$22.2~~$22.6 million compared with ~~$24.4~~$22.2 million for the first nine months of ~~2015.~~fiscal 2016. The ~~decrease~~increase in interest expense mainly reflected a higher interest rate partially offset by lower ~~interest from our refinancing in April 2015 of our $250 million 7% Senior Notes with our €330 million 3.625% Senior Notes.~~borrowings.

The income tax ~~rates were~~rate was 21.9% and 14.7% ~~and 21.1%~~ for the first nine months of fiscal ~~2016~~2017 and ~~2015,~~2016, respectively. The ~~decrease~~income tax rate in the current period was higher primarily due to U.K. limitations on interest expense deductions. In the first nine months of 2017, we recognized $7.1 million of discrete tax benefits primarily related to a reduction of the income tax rate in France for fiscal year 2020 and beyond and the early adoption of the accounting standard update for employee share-based payment awards. In the first nine months of 2016, we recognized approximately $1.7 million of discrete tax benefits principally ~~reflected~~related to the ~~following:~~enactment of tax laws reducing the U.K. statutory income tax rate.

ItIf enacted, recent proposals to lower the U.S. corporate income tax rate from the current Federal statutory income tax rate of 35% would require us to reduce our net deferred tax assets primarily related to our U.S. post-retirement benefit plan, resulting in a one-time, non-cash increase in income tax expense in the year of enactment. In subsequent years, our income tax expense would be materially reduced.

During the next 12 months, it is reasonably possible that ~~within the next twelve months~~ approximately ~~$2.7~~$1.4 million of tax benefits that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of applicable statutes of limitations. We recognize interest related to unrecognized tax benefits in income tax expense.

Backlog was $1.2 billion at June 30, 2017, $1.3 billion at September 30, 2016, and $1.4 billion at July 1, 2016. New orders for the first nine months of fiscal ~~2016~~2017 were ~~$1.6~~approximately $1.4 billion compared with ~~$1.5~~$1.6 billion in the prior-year period, ~~reflecting~~mainly due to a $137 million decrease in Avionics & Controls orders. The decline in Avionics & Controls orders reflected the following:

Cash and cash equivalents at ~~July 1, 2016,~~June 30, 2017, totaled ~~$237.8~~$279.4 million, an increase of ~~$46.5~~$20.9 million from ~~October 2, 2015.~~September 30, 2016. Net working capital increased to ~~$738.0~~$833.8 million at ~~July 1, 2016,~~June 30, 2017, from ~~$718.2~~$777.3 million at ~~October 2, 2015.~~September 30, 2016. Sources and uses of cash flows from operating activities principally consisted of cash received from the sale of products and cash payments for material, labor and operating expenses.

Cash flows provided by operating activities were ~~$118.6~~$138.9 million and ~~$117.2~~$118.6 million in the first nine months of fiscal 2017 and 2016, ~~and 2015,~~ respectively. The increase in cash flows from operating activities is primarily from improved earnings.

Cash flows used by investing activities were ~~$56.0~~$41.6 million and ~~$197.6~~$56.0 million in the first nine months of fiscal 2017 and 2016, respectively, and ~~2015, respectively.~~were primarily for capital expenditures, including the purchase of a building for our Esterline Advanced Displays (EAD) operation in the prior year.

Cash flows used by financing activities were $77.1 million in the first nine months of fiscal 2017, mainly reflecting:

Cash flows used by financing activities were $12.9 million in the first nine months of fiscal 2016 ~~mainly reflecting:~~

~~Cash flows provided by financing activities were $57.9 million in the first nine months of fiscal 2015~~ and mainly reflected:

Capital expenditures, consisting of building, machinery, equipment and computers, are anticipated to be approximately ~~$70~~$60 million during fiscal ~~2016, including the purchase of a building for our DAT operation,~~2017, compared with ~~$49.3~~$68.5 million expended in ~~the eleven-month~~ fiscal ~~2015 (excluding acquisitions).~~2016. Capital expenditures in fiscal ~~2016~~2017 are ~~higher~~lower compared with the prior year due to the purchase of a building for our ~~DAT operation.~~EAD operation in the prior year.

Total debt at ~~July 1, 2016,~~June 30, 2017, was ~~$875.1~~$780.2 million and consisted of ~~$239.8~~$228.1 million of the U.S. Term Loan, due 2020, ~~$362.6~~$377.1 million (€330.0 million) of the 2023 Notes, ~~$170.0~~$65.0 million in borrowings under our secured credit facility, ~~$45.3~~$71.4 million under capital lease obligations, $43.5 million in government refundable advances ~~$57.2 million under capital lease obligations,~~ and ~~$0.2 million under our various foreign currency~~net of debt ~~agreements and other debt agreements.~~issuance costs of $4.9 million.

We believe cash on hand and funds generated from operations and borrowing capacity available under our debt facilities are sufficient to fund operating cash requirements and capital expenditures through the next twelve months.

This quarterly report on Form 10-Q contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will” or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risk factors set forth in “Forward-Looking Statements” and “Risk Factors” in our ~~Transition~~ Report on Form 10-K for the fiscal year ended ~~October 2, 2015,~~September 30, 2016, that may cause our or the industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included or incorporated by reference into this report are made only as of the date hereof. We do not

undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.

There have been no significant changes in our exposure to market risk during the first ~~three~~nine months of fiscal ~~2016.~~2017. A discussion of our exposure to market risk is provided in the Company’s ~~Transition~~ Report on Form 10-K for the fiscal year ended ~~October 2, 2015.~~September 30, 2016.

Our principal executive and financial officers evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~July 1, 2016.~~June 30, 2017. Based upon that evaluation, they concluded as of ~~July 1, 2016,~~June 30, 2017, that our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in Securities and Exchange Commission rules and forms. In addition, our principal executive and financial officers concluded as of ~~July 1, 2016,~~June 30, 2017, that our disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

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

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

See Note 109 to the Consolidated Financial Statements included in Part 1, Item 1 of this report for information regarding legal proceedings.

On June 19, 2014, our board of directors authorized a share repurchase program for the repurchase of up to an aggregate of $200 million of the Company’s outstanding common stock. On March 11, 2015, our board of directors authorized an additional $200 million for the repurchase of the Company’s outstanding common stock. All of the repurchases in the table above were made through that program.

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

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

In Thousands	June 30,			September 30,
	2017			2016

U.S. credit facility	$	65,000		$	155,000
U.S. Term Loan, due April 2020		228,125			237,500
3.625% Senior Notes, due April 2023		377,091			370,920
Government refundable advances		43,545			44,994
Obligation under capital leases		71,368			67,765
Debt issuance costs		(4,890	)		(5,609	)
		780,239			870,570
Less current maturities		14,215			16,774
Carrying amount of long-term debt	$	766,024		$	853,796

In Thousands
As of January 31, 2015

Current assets	$	82,319
Property, plant and equipment		6,206
Intangible assets subject to amortization
Programs (15 year average useful life)		56,455
Programs (3 year average useful life)		677
Trade name (3 year average useful life)		226
Goodwill		46,618
Other assets		3,401
Total assets acquired		195,902

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

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

Cost of sales	$	4,359	$	791	$	529	$	5,679
Restructuring charges		4,255		43		1,764		6,062
Total	$	8,614	$	834	$	2,293	$	11,741

Exhibit
Number		Exhibit Index

11		Schedule setting forth computation of basic and diluted earnings per share for the three and nine month periods ended June 30, 2017, and July 1, ~~2016, and June 26, 2015.~~2016.

31.1		Certification of Chief Executive Officer.

31.2		Certification of Chief Financial Officer.

32.1		Certification (of Curtis C. Reusser) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification (of Robert D. George) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

Dated: August ~~9, 2016~~4, 2017	By:	/s/ Robert D. George
		Robert D. George
		Executive Vice President, Chief Financial Officer, and
		Corporate Development
		(Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨☐ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company