UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007

                                       OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______

     COMMISSION FILE NUMBER 1-10596

                             ESCO TECHNOLOGIES INC.

             (Exact name of registrant as specified in its charter)


MISSOURI                                                        43-1554045
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                         Identification No.)

9900A CLAYTON ROAD
ST. LOUIS, MISSOURI                                             63124-1186
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (314) 213-7200

     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 X No _____

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the  Exchange  Act.  Large
accelerated filer __X_ Accelerated filer ____ Non-accelerated filer ____

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

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

                Class                            Outstanding at April 30, 2007
 --------------------------------------         ------------------------------
[Common stock, $.01 par value per share]               25,944,354 shares





PART I.  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                     ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                (Dollars in thousands, except per share amounts)

                                                   Three Months Ended
                                                       March 31,
                                                       ---------


                                                  2007           2006
                                                  ----           ----


Net sales                                       $ 129,068        122,884
Costs and expenses:
   Cost of sales                                   83,021         80,514
   Selling, general and administrative             31,432         26,703
     expenses
    Amortization of intangible assets               2,909          1,536
    Interest (income) expense, net                   (217)          (100)
    Other (income) and expenses, net                  (93)        (1,548)
                                                      ---         ------
      Total costs and expenses                    117,052        107,105

Earnings before income taxes                       12,016         15,779
Income tax expense                                  2,398          8,436
                                                    -----          -----
Net earnings                                    $   9,618          7,343
                                                =========          =====

Earnings per share:
   Basic                                        $    0.37           0.29
                                                =========           ====

   Diluted                                      $    0.36           0.28
                                                =========           ====

See accompanying notes to consolidated financial statements.







                     ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                (Dollars in thousands, except per share amounts)

                                                    Six Months Ended
                                                       March 31,
                                                       ---------


                                                   2007           2006
                                                   ----           ----

Net sales                                       $ 227,881         213,470
Costs and expenses:
    Cost of sales                                 154,366         144,501
    Selling, general and administrative            60,816          50,189
      expenses
    Amortization of intangible assets               5,046           2,049
    Interest (income) expense, net                   (555)           (817)
    Other (income) and expenses, net                 (607)         (1,926)
                                                     ----          ------
        Total costs and expenses                  219,066         193,996

Earnings before income taxes                        8,815          19,474
Income tax expense                                    578           9,926
                                                      ---           -----
Net earnings                                       $8,237           9,548
                                                   ======           =====

Earnings per share:
    Basic                                        $   0.32            0.37
                                                 ========            ====

    Diluted                                      $   0.31            0.36
                                                 ========            ====

See accompanying notes to consolidated financial statements.







                     ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

                                               March 31,     September 30,
                                                 2007            2006
                                                 ----            ----
ASSETS                                       (Unaudited)
Current assets:
    Cash and cash equivalents                  $   28,045          36,819
    Accounts receivable, net                       91,362          83,816
    Costs and estimated earnings on
      long-term contracts, less progress
      billings of $5,337 and $4,405,
      respectively                                  3,046           1,345
    Inventories                                    59,270          50,984
    Current portion of deferred tax assets         39,129          24,251
    Other current assets                           15,863          10,042
                                                   ------          ------
       Total current assets                       236,715         207,257

Property, plant and equipment, net                 71,129          68,754
Goodwill                                          144,430         143,450
Intangible assets, net                             67,366          59,202
Other assets                                        9,367          10,031
                                                    -----          ------
Total assets                                   $  529,007         488,694
                                               ==========         =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Short-term borrowings and current
      maturities of long-term debt             $        -               -
    Accounts payable                               47,421          39,496
    Advance payments on long-term
      contracts, less costs incurred of
      $18,633 and $19,532, respectively             7,035           7,367
    Accrued salaries                               12,792          13,932
    Current portion of deferred revenue            14,146           3,569
    Accrued other expenses                         11,058          11,531
                                                   ------          ------
       Total current liabilities                   92,452          75,895
Deferred revenue                                    3,761           7,458
Pension obligations                                13,113          13,143
Deferred tax liabilities                           18,361           3,750
Other liabilities                                  11,953          12,014
Long-term debt                                          -               -
                                                  -------         -------
       Total liabilities                          139,640         112,260
Shareholders' equity:
    Preferred stock, par value $.01 per
      share, authorized 10,000,000 shares               -               -
    Common stock, par value $.01 per
      share, authorized 50,000,000 shares,
      issued 29,063,694 and 29,030,995
      shares, respectively                            291             290
    Additional paid-in capital                    239,381         236,390
    Retained earnings                             201,283         193,046
    Accumulated other comprehensive loss             (490)         (2,070)
                                                     ----          ------
                                                  440,465         427,656
    Less treasury stock, at cost:
      3,158,366 and 3,166,026 common
      shares, respectively                        (51,098)        (51,222)
                                                  -------         -------
       Total shareholders' equity                 389,367         376,434
                                                  -------         -------
Total liabilities and shareholders' equity     $  529,007         488,694
                                               ==========         =======

See accompanying notes to consolidated financial statements.






                     ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Dollars in thousands)

                                                   Six Months Ended
                                                       March 31,
                                                       ---------

                                                 2007            2006
                                                 ----            ----
Cash flows from operating activities:
    Net earnings                                $  8,237             9,548
    Adjustments  to reconcile  net earnings
      to  net  cash   provided  by  operating
      activities:
       Depreciation and amortization              10,571             7,219
       Stock compensation expense                  2,932             2,643
       Changes in operating working capital      (10,097)            7,624
       Effect of deferred taxes                     (267)           (1,563)
       Change  in   deferred   revenue  and
       costs, net                                  2,982               915
       Other                                         (25)             (197)
                                                  ------            ------
          Net cash  provided  by  operating
          activities                              14,333            26,189
Cash flows from investing activities:
    Acquisition  of  businesses,  less cash
      acquired                                    (1,250)          (90,862)
    Capital expenditures                          (7,180)           (4,296)
    Additions to capitalized software            (15,320)          (18,095)
                                                 -------           -------
          Net   cash   used  by   investing
          activities                             (23,750)         (113,253)
Cash flows from financing activities:
    Borrowings from long-term debt                     -            47,000
    Principal payments on long-term debt               -           (47,000)
    Excess tax benefit  from stock  options
    exercised                                         73               880
    Proceeds from exercise of stock options          706             1,526
    Other                                           (136)            1,117
                                                    ----             -----
          Net cash  provided  by  financing
          activities                                 643             3,523
                                                     ---             -----

Net decrease in cash and cash equivalents         (8,774)          (83,541)
Cash and  cash  equivalents,  beginning  of
period                                            36,819           104,484
                                                  ------           -------

Cash and cash equivalents, end of period        $ 28,045            20,943
                                                ========            ======


See accompanying notes to consolidated financial statements.






                     ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   BASIS OF PRESENTATION

     The  accompanying  consolidated  financial  statements,  in the  opinion of
     management,  include all  adjustments,  consisting only of normal recurring
     accruals,  necessary for a fair presentation of the results for the interim
     periods presented.  The consolidated  financial statements are presented in
     accordance  with the  requirements  of Form  10-Q and  consequently  do not
     include all the  disclosures  required by accounting  principles  generally
     accepted in the United States of America  (GAAP).  For further  information
     refer to the consolidated  financial  statements and related notes included
     in the  Company's  Annual  Report on Form 10-K for the  fiscal  year  ended
     September 30, 2006.  Certain 2006 amounts have been reclassified to conform
     with the 2007 presentation.

     The Company's  business is typically not impacted by seasonality,  however,
     the results for the three and  six-month  periods  ended March 31, 2007 are
     not necessarily indicative of the results for the entire 2007 fiscal year.


2.   EARNINGS PER SHARE (EPS)

     Basic EPS is calculated  using the weighted average number of common shares
     outstanding during the period. Diluted EPS is calculated using the weighted
     average number of common shares  outstanding  during the period plus shares
     issuable  upon the assumed  exercise of dilutive  common share  options and
     vesting of performance-accelerated restricted shares (restricted shares) by
     using  the  treasury  stock  method.  The  number  of  shares  used  in the
     calculation  of earnings per share for each period  presented is as follows
     (in thousands):

                                Three Months Ended      Six Months Ended
                                     March 31,              March 31,
                                     ---------              ---------

                                 2007        2006        2007        2006
                                 ----        ----        ----        ----
     Weighted Average Shares
     Outstanding - Basic
                                 25,895      25,659      25,885      25,620
     Dilutive Options and
     Restricted Shares              596         789         592         782
                                    ---         ---         ---         ---
     Adjusted Shares- Diluted
                                 26,491      26,448      26,477      26,402
                                 ======      ======      ======      ======


     Options to purchase  582,322  shares of common stock at prices ranging from
     $42.10 - $54.88 and options to purchase  282,069  shares of common stock at
     prices ranging from $42.99 - $50.26 were outstanding during the three month
     periods ended March 31, 2007 and 2006, respectively,  but were not included
     in the computation of diluted EPS because the options' exercise prices were
     greater  than the average  market price of the common  shares.  The options
     expire at various  periods  through 2013.  Approximately  26,000 and 19,000
     restricted  shares were excluded from the  computation of diluted EPS based
     upon the  application  of the  treasury  stock  method for the  three-month
     period ended March 31, 2007 and 2006, respectively.

3.   SHARE-BASED COMPENSATION

     The Company provides  compensation  benefits to certain key employees under
     several  share-based  plans  providing for employee  stock  options  and/or
     performance-accelerated  restricted  shares  (restricted  shares),  and  to
     non-employee directors under a non-employee directors compensation plan.

     Stock Option Plans

     The Company's  stock option awards are generally  subject to graded vesting
     over a three year service period.  All outstanding  options were granted at
     prices equal to fair market value at the date of grant. The options granted
     prior to September 30, 2003 have a ten-year  contractual  life from date of
     issuance,  expiring in various  periods  through 2013.  Beginning in fiscal
     2004, the options  granted have a five-year  contractual  life from date of
     issuance.  Beginning  with  fiscal  2006  awards,  the  Company  recognizes
     compensation  cost on a  straight-line  basis  over the  requisite  service
     period for the entire award.  Prior to fiscal 2006, the Company  calculated
     the pro forma compensation cost using the graded vesting method.

     The fair value of each option  award is  estimated  as of the date of grant
     using  a  Black-Scholes   option  pricing  model.   The  weighted   average
     assumptions for the periods indicated are noted below.  Expected volatility
     is based on  historical  volatility  of ESCO's  stock  calculated  over the
     expected term of the option. The expected term was calculated in accordance
     with Staff  Accounting  Bulletin  No. 107 using the  simplified  method for
     "plain-vanilla"  options.  The risk-free  rate for the expected term of the
     option is based on the U.S.  Treasury  yield curve in effect at the date of
     grant.


     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option-pricing model with the following weighted-average
     assumptions  used for grants in the three month period ended March 31, 2007
     and 2006,  respectively:  expected  dividend  yield of 0% in both  periods;
     expected  volatility of 28.0% in both periods;  risk-free  interest rate of
     4.9% and 4.5%;  and  expected  term of 3.5 years in both  periods.  Pre-tax
     compensation  expense  related to the stock option  awards was $0.7 million
     and $1.5 million for the three and six-month  periods ended March 31, 2007,
     respectively,  and $0.6 million and $1.1 million for the  respective  prior
     year periods.

     Information  regarding  stock options  awarded under the option plans is as
     follows:



                                                      Aggregate     Weighted-
                                                      Intrinsic      Average
                                          Weighted     Value         Remaining
                                             Avg.      (in          Contractual
                                 Shares     Price     millions)        Life

     Outstanding at October     1,387,348
     1, 2006                                 $26.60
     Granted                      289,280    $45.75
     Exercised                    (33,790)   $22.67      $   0.8
     Cancelled                    (10,670)   $35.79
                                  -------    ------
     Outstanding at March 31,
     2007                       1,632,168    $30.02      $  24.9    3.5 years
                                ---------    ------

     Exercisable at March 31,
     2007                         978,391    $21.35      $  23.0
                                  =======    ======


     The  weighted-average  grant-date  fair value of options granted during the
     six-month  period  ended  March 31,  2007 and 2006 was $12.25  and  $11.73,
     respectively.

     Performance-accelerated Restricted Share Awards

     The performance-accelerated restricted shares (restricted shares) vest over
     five years with  accelerated  vesting if certain  performance  targets  are
     achieved.  In these cases, if it is probable that the performance condition
     will be met, the Company  recognizes  compensation  cost on a straight-line
     basis over the shorter  performance  period;  otherwise,  it will recognize
     compensation cost over the longer service period. Compensation cost for all
     outstanding  restricted  share awards is being  recognized over the shorter
     performance period as it is probable the performance condition will be met.
     The  restricted  share  award  grants were valued at the stock price on the
     date of grant. Pre-tax compensation expense related to the restricted share
     awards  was $0.5  million  and $1.0  million  for the three  and  six-month
     periods  ended  March 31,  2007,  respectively  and $0.6  million  and $1.1
     million for the respective prior year periods.

     The following summary presents information regarding outstanding restricted
     share awards as of March 31, 2007 and changes  during the six-month  period
     then ended:



                                                                   Weighted
                                                   Shares         Avg. Price
                                                   ------         ----------

     Nonvested at October 1, 2006                     155,730      $   34.33
     Granted                                           62,030      $   45.69
     Vested                                           (51,200)     $   24.60
                                                      -------      ---------
     Nonvested at March 31, 2007                      166,560      $   41.55
                                                      =======      =========


     Non-Employee Directors Plan

     Pursuant to the non-employee directors compensation plan, each non-employee
     director  receives a retainer  of 800 common  shares per  quarter.  Pre-tax
     compensation  expense related to the non-employee  director grants was $0.2
     million and $0.4 million for the three and  six-month  periods  ended March
     31, 2007, respectively and $0.2 million and $0.5 million for the respective
     prior year periods.

     The total share-based compensation cost that has been recognized in results
     of  operations  and included  within SG&A was $1.4 million and $2.9 million
     for the three and six-month periods ended March 31, 2007, respectively, and
     $1.4 million and $2.6 million for the three and  six-months  periods  ended
     March 31,  2006.  The total  income tax  benefit  recognized  in results of
     operations for share-based  compensation  arrangements was $0.4 million and
     $0.7  million  for the three and  six-month  periods  ended  March 31, 2007
     respectively, and $0.3 million and $0.7 million for the three and six-month
     periods ended March 31, 2006. As of March 31, 2007, there was $11.7 million
     of total unrecognized compensation cost related to share-based compensation
     arrangements.   That   cost   is   expected   to  be   recognized   over  a
     weighted-average period of 3.4 years.




4.    INVENTORIES

     Inventories consist of the following (in thousands):

                                                     March 31,   September 30,
                                                      2007          2006
                                                      ----          ----

     Finished goods                                    $  16,395       12,834
     Work in process, including long- term                15,818       13,211
     contracts
     Raw materials                                        27,057       24,939
                                                          ------       ------
          Total inventories                            $  59,270       50,984
                                                       =========       ======


5.   COMPREHENSIVE INCOME

     Comprehensive  income for the three-month  periods ended March 31, 2007 and
     2006 was $10.2 million and $8.4 million, respectively. Comprehensive income
     for the  six-month  periods  ended March 31, 2007 and 2006 was $9.8 million
     and $9.9 million,  respectively.  For the three and six-month periods ended
     March 31, 2007, the Company's  comprehensive income was positively impacted
     by  foreign  currency  translation  adjustments  of $0.6  million  and $1.6
     million,  respectively. For the three and six-month periods ended March 31,
     2006, the Company's comprehensive income was positively impacted by foreign
     currency  translation   adjustments  of  $1.1  million  and  $0.3  million,
     respectively.


6.   BUSINESS SEGMENT INFORMATION

     The Company is organized based on the products and services that it offers.
     Under  this  organizational   structure,  the  Company  operates  in  three
     segments: Communications, Filtration/Fluid Flow and Test. The components of
     the Filtration/Fluid Flow segment are presented separately due to differing
     long-term economics.

     Management evaluates and measures the performance of its operating segments
     based on "Net Sales" and  "EBIT",  which are  detailed in the table  below.
     EBIT is defined as earnings before interest and taxes.

       ($ in thousands)         Three Months ended             Six Months ended
                                    March 31,                      March 31,
                                    ---------                      ---------

      NET SALES                2007         2006             2007        2006
      ---------                ----         ----             ----        ----
      Communications        $ 49,226       43,239        $  79,260       62,372

      PTI                     13,116       11,711           24,735       22,408
      VACCO                    8,460        8,325           15,141       16,379
      Filtertek               24,340       25,012           46,617       47,707
                              ------       ------           ------       ------
      Filtration/Fluid        45,916       45,048           86,493       86,494
      Flow

      Test                    33,926       34,597           62,128       64,604
                              ------       ------           ------       ------
      Consolidated
      totals                $129,068      122,884         $227,881      213,470
                            ========      =======         ========      =======


      EBIT
      Communications           6,109        9,728            3,327        8,844

      PTI                      2,608        1,583            3,711        2,782
      VACCO                    2,254        1,441            2,592        3,332
      Filtertek                1,492        1,699            1,868        2,696
                               -----        -----            -----        -----
      Filtration/Fluid         6,354         4,723           8,171        8,810
      Flow

      Test                     4,061        4,338            6,204        7,254

      Corporate               (4,725)      (3,110)          (9,442)      (6,251)
                              ------       ------           ------       ------
      Consolidated EBIT
                              11,799       15,679            8,260       18,657
      Add: Interest
      income                     217          100              555          817
                                 ---          ---              ---          ---
      Earnings before
      income taxes          $ 12,016       15,779        $   8,815       19,474
                            ========       ======        =========       ======






7.   RETIREMENT AND OTHER BENEFIT PLANS

     A summary of net periodic benefit expense for the Company's defined benefit
     plans and  postretirement  healthcare  and other benefits for the three and
     six-month  periods ended March 31, 2007 and 2006 are shown in the following
     tables. Net periodic benefit cost for each period presented is comprised of
     the following:

                                   Three Months Ended      Six Months Ended
                                       March 31,              March 31,
                                       ---------              ---------
     (Dollars in thousands)         2007       2006        2007        2006
                                    ----       ----        ----        ----
     Defined benefit plans
          Interest cost            $   688        650     $ 1,375       1,300
          Expected return on
          assets                      (700)      (675)     (1,400)     (1,350)
     Amortization of:
             Prior service cost          2          -           5           -
          Actuarial loss                73        125         170         250
                                        --        ---         ---         ---
     Net periodic benefit cost     $    63        100       $ 150         200
                                   =======        ===       =====         ===



     Net periodic  postretirement (retiree medical) benefit cost for each period
     presented is comprised of the following:

                                    Three Months Ended        Six Months Ended
                                        March 31,                March 31,
     (Dollars in thousands)       2007            2006       2007         2006

     Service cost                 $ 10              9        $ 20           18

     Interest cost                  12             10          25           20

     Prior service cost             (1)            (2)         (3)          (2)

     Amortization of actuarial gain (2)             2         (13)          (7)
                                    --              -         ---           --

     Net periodic postretirement
     benefit cost                 $ 19             19        $ 29           29
                                  ====             ==        ====           ==



8.   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
     Financial  Assets  and  Financial  Liabilities"  (SFAS  159).  SFAS No. 159
     permits  companies to choose to measure certain  financial  instruments and
     certain other items at fair value.  The standard  requires that  unrealized
     gains and losses on items for which the fair value  option has been elected
     be reported in earnings.  SFAS 159 is  effective as of the  beginning of an
     entity's  first fiscal year that begins after  November 15, 2007.  SFAS No.
     159 is effective  for the company  beginning in the first quarter of fiscal
     year 2009, although earlier adoption is permitted. The adoption of SFAS 159
     is not  expected  to have a  material  impact  to the  Company's  financial
     position or results of operations.

     In September 2006, the FASB issued SFAS No. 157, "Fair Value  Measurements"
     (SFAS 157). The purpose of SFAS No. 157 is to define fair value,  establish
     a framework for measuring fair value,  and enhance  disclosures  about fair
     value measurements.  SFAS 157 is effective for financial  statements issued
     for fiscal years  beginning  after November 15, 2007,  and interim  periods
     within those fiscal years. The measurement and disclosure  requirements are
     effective  for the Company in the first  quarter of fiscal  year 2009.  The
     adoption  of SFAS 157 is not  expected  to have a  material  impact  to the
     Company's financial position or results of operations.

     In September 2006, the FASB issued SFAS No. 158, "Employer's Accounting for
     Defined Benefit Pension and Other  Postretirement  Plans" (SFAS 158), which
     amends SFAS 87 and SFAS 106 to require  recognition  of the  overfunded  or
     underfunded status of pension and other postretirement benefit plans on the
     balance sheet.  Under SFAS 158,  gains and losses,  prior service costs and
     credits,  and any remaining  transition  amounts under SFAS 87 and SFAS 106
     that have not yet been recognized through net periodic benefit cost will be
     recognized in accumulated other  comprehensive  income, net of tax effects.
     The  measurement  date - the date at which the benefit  obligation and plan
     assets are  measured - is required  to be the  Company's  fiscal  year-end,
     which is the date the Company  currently  uses.  SFAS 158 is effective  for
     publicly-held  companies  for fiscal years ending after  December 15, 2006.
     The adoption of SFAS 158 is not  expected to have a material  impact to the
     Company's financial position or results of operations.

     In June 2006, the FASB issued FASB  Interpretation  No. 48, "Accounting for
     Uncertainty in Income Taxes, an  Interpretation of FASB Statement No. 109."
     This Interpretation is effective for the Company beginning October 1, 2007.
     This  Interpretation  prescribes a recognition  threshold  and  measurement
     process for the financial  statement  recognition  and measurement of a tax
     position  taken or  expected  to be taken in a tax  return.  The Company is
     currently  evaluating  the  adoption  of this  Interpretation  and does not
     currently  have an  estimate  of the impact on the  consolidated  financial
     statements.

     In June 2006,  the FASB issued EITF Issue No.  06-3,  "How Taxes  Collected
     from Customers and Remitted to Governmental Authorities Should Be Presented
     in the Income  Statement  (That Is, Gross versus Net  Presentation)".  This
     EITF Issue is effective for periods  beginning  after December 15, 2006 and
     requires  disclosure  of the  accounting  policy for any tax  assessed by a
     governmental  authority  that is  directly  imposed on a  revenue-producing
     transaction  on a gross  (include in revenues  and costs) or net  (excluded
     from revenues)  basis. The Company's  accounting  policy is to record taxes
     assessed  by  a  governmental  authority  that  is  directly  imposed  on a
     revenue-producing transaction on a net basis.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     The following  discussion  refers to the Company's  results from continuing
     operations,  except where noted.  References to the second quarters of 2007
     and 2006  represent  the fiscal  quarters  ended  March 31,  2007 and 2006,
     respectively.

NET SALES

Net sales  increased  $6.2 million,  or 5.0%,  to $129.1  million for the second
quarter of 2007 from $122.9  million  for the second  quarter of 2006 due to the
2006  acquisitions of Hexagram and Nexus. Net sales increased $14.4 million,  or
6.7% to  $227.9  million  for the first six  months of fiscal  2007 from  $213.5
million for the first six months of fiscal 2006 due to the 2006  acquisitions of
Hexagram and Nexus.  Favorable foreign currency values resulted in approximately
$1.3  million and $2.4  million of the sales  increase in the second  quarter of
2007 and in the first six months of fiscal 2007, respectively.

-Communications

Net sales  increased  $6.0  million,  or 13.9% to $49.2  million  for the second
quarter of 2007 from $43.2  million  for the second  quarter of 2006.  Net sales
increased  $16.9 million,  or 27.1% to $79.3 million for the first six months of
fiscal 2007 from $62.4 million in the prior year period.  The sales  increase in
the second  quarter of 2007 as compared to the prior year quarter was due to: an
increase in sales of $8.1  million from  Hexagram  including  advanced  metering
projects in Kansas  City,  and at PG & E; an  increase in sales of $0.9  million
from  Nexus;  and a $3.0  million  decrease in sales of DCSI's  automatic  meter
reading (AMR) products due to lower sales to TXU Electric Delivery Company (TXU)
and Puerto Rico Power Authority  (PREPA) partially offset by additional sales to
Duke Energy and Florida Power & Light (FPL).

The sales  increase  in the first six months of fiscal  2007 as  compared to the
prior  year  period  was due to:  an  increase  in sales of $15.7  million  from
Hexagram (full six months of sales compared to two months  included in the prior
year period) in addition to the items  mentioned  above; an increase in sales of
$3.3  million  from Nexus  (full six  months of sales  compared  to four  months
included in the prior year period);  partially offset by a $2.2 million decrease
in sales of DCSI's AMR products.

The  decrease in sales of DCSI's AMR  products of $2.2  million in the first six
months of 2007 as  compared  to the  prior  year  period  was  mainly  due to: a
decrease  in sales to TXU of $9.6  million  and a decrease  in sales to PREPA of
$1.7 million,  partially offset by an increase in sales to other  investor-owned
utilities  (IOUs),  such as Duke Energy and FPL, of $6.2 million and an increase
in sales to COOP  customers  of $3.4  million.  In the first six months of 2007,
DCSI's sales to COOP and public power  (Municipal)  customers were $35.4 million
compared to $32.0 million in the prior year period.

Sales of Comtrak's  SecurVision  products  were $0.4 million each for the second
quarters  of 2007 and 2006 and $3.0  million for the first six months of 2007 as
compared to $2.9 million in the prior year six-month period.

-Filtration/Fluid Flow

Net sales  increased  $0.9  million,  or 2.0%,  to $45.9  million for the second
quarter of 2007 from $45.0  million  for the second  quarter of 2006.  Net sales
decreased  $0.1  million to $86.4  million for the first six months of 2007 from
$86.5 million for the first six months of 2006.  The sales  increase  during the
fiscal  quarter  ended March 31, 2007 as compared to the prior year  quarter was
mainly due to: a $1.4 million increase in commercial  aerospace shipments at PTI
of $1.4 million and a sales increase of $0.2 million at VACCO;  partially offset
by a net sales decrease at Filtertek of $0.7 million driven by lower  automotive
shipments.  Sales in the first six months of 2007 were consistent with the prior
year  period  mainly due to: a $2.3  million  increase in  commercial  aerospace
shipments at PTI; a decrease in defense  spares and T-700  shipments at VACCO of
$1.2 million;  and a net sales  decrease at Filtertek of $1.1 million  driven by
lower automotive shipments.

-Test

For the second quarter of 2007, net sales of $34.0 million were $0.6 million, or
1.7% lower than the $34.6 million of net sales recorded in the second quarter of
2006. Net sales decreased $2.4 million,  or 3.7%, to $62.2 million for the first
six months of 2007 from  $64.6  million  for the first six  months of 2006.  The
sales  decrease  in the  second  quarter of 2007 as  compared  to the prior year
quarter  was  mainly  due to: a $2.5  million  decrease  in net  sales  from the
Company's  U.S.  operations  driven by the timing of sales of test  chambers and
components;  partially  offset by a $1.7 million  increase in net sales from the
Company's Asian  operations due to several chamber  projects in Japan. The sales
decrease for the first six months of 2007  compared to the prior year period was
due to: a $3.5 million decrease in net sales from the Company's U.S.  operations
driven by the timing of sales of test  chambers and  components;  a $1.3 million
decrease in net sales from the Company's  European  operations due to the timing
of test chamber sales;  partially offset by a $2.4 million increase in net sales
from the Company's Asian operations due to several chamber projects in Japan.

ORDERS AND BACKLOG

Backlog was $307.7  million at March 31, 2007  compared  with $253.4  million at
September 30, 2006. The Company  received new orders  totaling $135.8 million in
the second  quarter of 2007 compared to $128.7 million in the prior year quarter
(including  $6.0  million of  Hexagram  acquired  backlog).  New orders of $44.4
million were  received in the second  quarter of 2007 related to  Communications
products,  $54.7 million related to  Filtration/Fluid  Flow products,  and $36.7
million related to Test products.  Hexagram received a $13.5 million order for a
water AMR project in Kansas City, Missouri, during the second quarter of 2007.

The Company  received new orders totaling $282.1 million in the first six months
of 2007  compared to $254.8  million in the prior year period  (including  $15.0
million of Hexagram and Nexus  acquired  backlog).  New orders of $106.2 million
were  received  in the  first  six  months  of 2007  related  to  Communications
products,  $100.0 million related to Filtration/Fluid  Flow products,  and $75.9
million related to Test products.  New orders of $114.6 million were received in
the first six months of 2006 related to Communications products (including $15.0
million of  Hexagram  and Nexus  acquired  backlog),  $84.4  million  related to
Filtration/Fluid Flow products and $55.8 million related to Test products.

In  November  2005,  DCSI  signed an  agreement  with  PG&E with an  anticipated
contract value of up to  approximately  $310 million covering up to five million
electric  endpoints over a five year deployment period beginning in fiscal 2007.
Also, in November 2005, Hexagram entered into an agreement to provide equipment,
software  and  services to PG&E in support of the gas utility  portion of PG&E's
Advanced Metering  Infrastructure  (AMI) project. The total anticipated contract
revenue  from  commencement  through  the  five-year  full  deployment  for this
Hexagram  contract is  expected  to be up to  approximately  $225  million.  The
Company  received orders totaling $2.8 million and $18.3 million from PG&E under
these agreements  during the second quarter and first six months of fiscal 2007,
respectively.

AMORTIZATION OF INTANGIBLE ASSETS

Amortization  of  intangible  assets was $2.9  million and $5.0  million for the
three and six-month periods ended March 31, 2007, respectively, compared to $1.5
million and $2.0 million for the respective prior year periods.  Amortization of
intangible  assets for the three and  six-month  periods  ended  March 31,  2007
included  $0.6  million  and $1.2  million,  respectively,  of  amortization  of
acquired  intangible  assets  related  to the  Nexus and  Hexagram  acquisitions
compared to $0.8 million and $0.9 million for the respective prior year periods.
The amortization of acquired intangible assets related to Nexus and Hexagram are
included in Corporate's operating results, see "EBIT - Corporate". The remaining
amortization expenses consist of other identifiable intangible assets (primarily
software,  patents and licenses).  During the three and six-month  periods ended
March  31,  2007,   the  Company   recorded   $1.8  million  and  $2.7  million,
respectively,  of  amortization  related  to  DCSI's  TNG  capitalized  software
compared to $0.3 million for each of the respective prior year periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and  administrative  (SG&A) expenses for the second quarter of
2007 were $31.4 million (24.3% of net sales), compared with $26.7 million (21.7%
of net sales) for the prior year quarter. For the first six months of 2007, SG&A
expenses  were $60.8  million  (26.7% of net sales)  compared with $50.2 million
(23.5% of net sales) for the prior year period. The increase in SG&A spending in
the fiscal  quarter  ended March 31, 2007 as compared to the prior year  quarter
was  primarily  due to: an increase of $1.7  million of SG&A related to Hexagram
(due to a full quarter of SG&A expenses  compared to two months  included in the
prior year quarter); an increase of $0.8 million in SG&A expenses at DCSI due to
an increase in headcount; an increase of $0.5 million in SG&A expenses at Nexus;
and an increase of $0.8 million of sales and marketing  expenses incurred in the
Test segment to support growth opportunities, primarily in Asia.

The increase in SG&A spending in the first six months of 2007 as compared to the
prior year period was  primarily  due to: an  increase  of $4.4  million of SG&A
related to Hexagram (due to a full six months of SG&A  expenses  compared to two
months  included in the prior year period);  an increase of $2.4 million in SG&A
expenses  at Nexus (due to a full six months of SG&A  expenses  compared to four
months  included in the prior year period);  an increase of $1.5 million related
to the Test segment including expenses to further expand its Asian presence;  an
increase  of  $0.9  million  in SG&A  expenses  at DCSI  due to an  increase  in
headcount;  and a $0.6  million  increase  at  Corporate  due to an  increase in
professional fees incurred to support a research tax credit project.

OTHER (INCOME) AND EXPENSES, NET

Other income,  net, was $0.1 million for the second  quarter of 2007 compared to
$1.5 million for the prior year quarter. Other income, net, was $0.6 million for
the first six months of 2007 compared to $1.9 million for the prior year period.
The principal  components of other income, net, for the first six months of 2007
included $1.0 million of royalty income.

Principal  components  of other  income,  net,  for the first six months of 2006
included the  following  items:  $1.8 million  non-cash  gain  representing  the
release of reserve  related to an  indemnification  obligation with respect to a
previously divested subsidiary; $1.1 million of royalty income; partially offset
by a $0.2  million  write-off  of assets  related  to a  terminated  subcontract
manufacturer.

EBIT

The Company  evaluates the performance of its operating  segments based on EBIT,
defined  below.  EBIT was $11.8  million  (9.1 % of net  sales)  for the  second
quarter of 2007 and $15.7 million (12.8% of net sales) for the second quarter of
2006.  For the first six months of fiscal 2007,  EBIT was $8.3 million  (3.6% of
net  sales)  and $18.7  million  (8.7% of net sales) for the first six months of
2006.  The decrease in EBIT for the second  quarter of 2007 and first six months
of 2007 as compared to the prior year periods is  primarily  due to the decrease
in margins in the Communications segment described below.

This Form 10-Q contains the financial measure "EBIT", which is not calculated in
accordance with generally accepted accounting principles in the United States of
America  (GAAP).  EBIT provides  investors and  Management  with an  alternative
method for assessing the Company's operating results. The Company defines "EBIT"
as earnings from continuing  operations  before  interest and taxes.  Management
evaluates the  performance of its operating  segments based on EBIT and believes
that EBIT is useful to investors to demonstrate the operational profitability of
the  Company's  business  segments by excluding  interest  and taxes,  which are
generally  accounted for across the entire Company on a consolidated basis. EBIT
is also one of the measures  Management uses to determine  resource  allocations
within the Company and incentive  compensation.  The following  table presents a
reconciliation of EBIT to net earnings.

                         Three Months ended          Six Months ended
($ in thousands)              March 31,                  March 31,
                              ---------                  ---------
                            2007        2006           2007      2006
                            ----        ----           ----      ----
Consolidated EBIT         $11,799     15,679        $ 8,260    18,657
Add: Interest income          217        100            555       817
Less: Income taxes          2,398      8,436            578     9,926
                            -----      -----            ---     -----
Net earnings              $ 9,618      7,343        $ 8,237     9,548
                          =======      =====        =======     =====


-Communications

EBIT in the  second  quarter  of 2007  was $6.1  million  (12.4%  of net  sales)
compared to $9.7 million (22.5% of net sales) in the prior year quarter. For the
first six months of 2007,  EBIT was $3.3 million (4.2% of net sales) compared to
$8.8 million (14.1% of net sales) in the prior year period. The decrease in EBIT
in the second  quarter of 2007 was due to: a $4.6  million  decrease  in EBIT at
DCSI resulting from lower sales mentioned above,  the  amortization  expenses of
its TNG software and PG&E related program support costs;  partially offset by an
$0.8 million  increase at Hexagram  resulting from increased  sales;  and a $0.2
million increase at Nexus. The decrease in EBIT for the first six months of 2007
compared to the prior year period was due to: a $6.4 million decrease in EBIT at
DCSI  resulting  lower sales  mentioned  above,  an increase of $2.4  million in
amortization  expenses of its TNG  software  and PG&E  related  program  support
costs;  partially offset by a $0.6 million  increase at Hexagram  resulting from
increased  sales;  and a $0.3  million  increase  at  Comtrak  due to lower SG&A
spending.

During the second quarter of 2007,  Hexagram  entered into a contract with a new
supplier for its manufactured  products. The new supplier offers a broader range
of capabilities as well as an opportunity for cost reductions.

-Filtration/Fluid Flow

EBIT was $6.4 million (13.9% of net sales) and $4.7 million (10.4% of net sales)
in the second quarters of 2007 and 2006, respectively, and $8.2 million (9.4% of
net sales) and $8.8 million (10.2% of net sales) in the first six months of 2007
and 2006, respectively.  For the second quarter of 2007 as compared to the prior
year quarter, EBIT increased $1.7 million due to: a $1.0 million increase at PTI
due to higher commercial aerospace shipments;  an $0.8 million increase at VACCO
resulting  from an  improved  sales mix  resulting  in more  favorable  overhead
absorption;  partially  offset by a $0.2 million  decrease at  Filtertek  due to
lower automotive sales volumes.  For the first six months of 2007 as compared to
the prior year  period,  EBIT  decreased  $0.6  million due to: an $0.8  million
decrease at Filtertek due to lower sales volumes and higher raw material  costs;
a $0.7  million  decrease at VACCO due to lower  defense  spares  shipments  and
additional  engineering costs on new Space programs;  partially offset by a $0.9
million increase at PTI due to higher commercial aerospace shipments.

-Test

EBIT in the  second  quarter  of 2007 was $4.1  million  (12.1% of net sales) as
compared to $4.3 million (12.4% of net sales) in the prior year quarter. For the
first six months of 2007, EBIT was $6.2 million (10.0% of net sales) as compared
to $7.3 million  (11.2% of net sales) in the prior year period.  EBIT  decreased
$0.2 million and $1.1 million over the prior year quarter and six month  period,
respectively,  due to the timing of sales,  and  additional  sales and marketing
costs to support near-term sales growth opportunities, primarily in Asia.

-Corporate

Corporate  costs  included in EBIT were $4.7  million  and $9.4  million for the
three and six-month periods ended March 31, 2007, respectively, compared to $3.1
million and $6.2 million for the respective prior year periods.  The increase in
Corporate  costs in the  second  quarter of 2007 as  compared  to the prior year
quarter was due to a $1.8 million  non-cash gain recorded in the second  quarter
of 2006 related to an  indemnification  obligation  with respect to a previously
divested subsidiary.  The increase in Corporate costs in the first six months of
2007 as compared to the prior year  period was due to: a $1.8  million  non-cash
gain recorded in the second  quarter of 2006  mentioned  above;  $0.4 million of
additional pre-tax  amortization of acquired  intangible assets related to Nexus
and Hexagram; $0.4 million of additional professional fees incurred to support a
research tax credit project;  and $0.3 million of additional  expense related to
stock  compensation.  In the first six months of 2007,  Corporate costs included
$2.9 million of pre-tax stock  compensation  expense and $1.2 million of pre-tax
amortization of acquired intangible assets related to Nexus and Hexagram.

INTEREST INCOME, NET

Interest  income,  net,  was $0.2  million  and $0.6  million  for the three and
six-month  periods  ended  March 31,  2007,  respectively,  compared to interest
income,  net, of $0.1  million and $0.8  million for the  respective  prior year
periods.  The  decrease  in  interest  income in the first six months of 2007 as
compared  to the prior year  period was due to lower  average  cash  balances on
hand.

INCOME TAX EXPENSE

The second quarter 2007 effective income tax rate was 20.0% compared to 53.5% in
the  second  quarter  of 2006.  The  effective  income tax rate in the first six
months of 2007 was 6.6% compared to 51.0% in the prior year period. The decrease
in the effective  income tax rate in the second  quarter and first six months of
2007 as compared to the prior year periods was due to the favorable  impact of a
research  tax credit in 2007.  The second  quarter  2007  income tax expense was
favorably  impacted by a $2.2  million  research  tax credit,  reducing the 2007
second quarter effective income tax rate by 18.7%. The income tax expense in the
first six months of 2007 was favorably  impacted by a $3.1 million  research tax
credit,  reducing  the rate for the  first  six  months  of 2007 by  35.6%.  The
effective income tax rate in the second quarter and first six months of 2006 was
adversely  impacted by the repatriation of $28.7 million of cash held by foreign
subsidiaries  into the United  States under the tax  provisions  of the American
Jobs  Creation  Act of 2004 which  increased  the  fiscal  2006  second  quarter
effective income tax rate by 10.9% and the first six months of 2006 by 8.9%. Due
to the tax research credits  favorably  impacting the tax rate in the first half
of 2007, the Company estimates the fiscal 2007 tax rate to be approximately 35%.

In December 2006, the President  signed into law the "Tax Relief and Health Care
Act of 2006" (The Act).  The Act extended the  expiration  date for the research
tax credit  from  December  31,  2005 to December  31,  2007.  During the second
quarter of 2007,  the  Company  completed  its  analysis of  available  research
credits for fiscal  years 2000  through  2006 and has  recorded  total  research
credit  claims,  net,  of $5.6  million.  The Company  expects the net  research
credits related to fiscal year 2007 to be approximately $1.6 million.

CAPITAL RESOURCES AND LIQUIDITY

Working capital  (current assets less current  liabilities)  increased to $144.3
million at March 31, 2007 from $131.4  million at September  30, 2006.  Accounts
receivable  increased by $7.5 million in the first six months of 2007,  of which
$7.0  million  related to DCSI due to the  timing and volume of sales.  The $8.3
million  increase  in  inventories  at March 31,  2007 is  mainly  due to a $4.0
million increase within the  Communications  segment and a $2.6 million increase
within the  Filtration/Fluid  Flow  segment to support  near term sales  growth.
Accounts  payable  increased by $7.9 million in the first six months of 2007, of
which $3.1 million related to DCSI due to timing of vendor invoicing.

Net cash  provided by operating  activities  was $14.3 million and $26.2 million
for the  six-month  periods  ended  March 31, 2007 and 2006,  respectively.  The
decrease is due to an increase in operating working capital requirements.

Capital  expenditures were $7.2 million and $4.3 million in the first six months
of fiscal 2007 and 2006, respectively.  Major expenditures in the current period
included  equipment  used  in  the  Filtration/Fluid   Flow  and  Communications
businesses.

At March 31, 2007,  intangible  assets,  net, of $67.4  million  included  $54.7
million of capitalized software.  Approximately $48.1 million of the capitalized
software  balance  represents  software  development  costs on the TNG  software
within the  Communications  segment to further penetrate the IOU market.  TNG is
being deployed to efficiently  handle the  additional  levels of  communications
dictated by the size of the utility  service  territories  and the  frequency of
meter  reads that are  required  under  time-of-use  or  critical  peak  pricing
scenarios to meet the requirements of large IOUs. At March 31, 2007, the Company
had  approximately  $9 million of commitments  related to the development of TNG
versions  2.0 and 3.0 which is  expected  to be spent over the next six  months.
Amortization  of TNG  expense is on a  straight-line  basis over seven years and
began in March  2006.  The Company  recorded  $1.8  million and $2.7  million in
amortization  expense  related to TNG in the  second  quarter of 2007 and in the
first six months of 2007, respectively.

The closure and  relocation of the Filtertek  Puerto Rico facility was completed
in March 2004. The Puerto Rico facility is included in other current assets with
a  carrying  value of $3.6  million at March 31,  2007.  The  facility  is being
marketed for sale.

In October 2004,  the Company  entered into a $100 million  five-year  revolving
bank  credit  facility  with a $50  million  increase  option  that  has a final
maturity and expiration  date of October 6, 2009. At March 31, 2007, the Company
had approximately $99.2 million available to borrow under the credit facility in
addition to $28.0  million cash on hand.  At March 31, 2007,  the Company had no
borrowings,  and  outstanding  letters of credit of $3.6 million  ($0.8  million
outstanding under the credit facility). Cash flow from operations and borrowings
under the  Company's  bank credit  facility are  expected to meet the  Company's
capital requirements and operational needs for the foreseeable future.

Pacific Gas & Electric

In November 2005,  DCSI entered into a contract to provide  equipment,  software
and services to Pacific Gas & Electric (PG&E) in support of the electric portion
of PG&E's AMI project. PG&E's current AMI project plan calls for the purchase of
TWACS  communication  equipment for up to  approximately  five million electric
customers over a five-year period after the commencement of full deployment. The
total anticipated  contract value from  commencement  through the five-year full
deployment period is expected to be up to approximately $310 million.  PG&E also
has the right to purchase additional  equipment and services to support existing
and new customers  through the twenty year term of the contract.  Equipment will
be  purchased  by PG&E  only  upon  issuance  of  purchase  orders  and  release
authorizations.  PG&E will  continue to have the right to  purchase  products or
services from other  suppliers for the electric  portion of the AMI project.  On
July 20, 2006, the California  Public Utilities  Commission  approved PG&E's AMI
project.  DCSI has agreed to deliver to PG&E versions of its newly developed TNG
software as they become available and are tested.  Delivery of the final version
for which DCSI has committed is currently  anticipated  in the fourth quarter of
fiscal 2007. In accordance with U.S.  generally accepted  accounting  standards,
the Company  will defer all revenue  related to the DCSI  arrangement  until all
software is  delivered  and  acceptance  criteria  have been met.  The  contract
provides  for  liquidated  damages in the event that  DCSI's  late  delivery  of
hardware or software  causes a delay to PG&E's AMI master project plan or delays
PG&E's   realization   of  its  business   case   benefits  and  also   includes
indemnification and other customary  provisions.  The contract may be terminated
by PG&E for default,  for its  convenience  and in the event of a force  majeure
lasting  beyond  certain  prescribed  periods.  The Company has  guaranteed  the
obligations of DCSI under the contract.  If PG&E terminates the contract for its
convenience, DCSI will be entitled to recover certain costs.

In  November  2005,  Hexagram  entered  into a contract  to  provide  equipment,
software  and  services to PG&E in support of the gas utility  portion of PG&E's
AMI project.  The total anticipated  contract revenue from commencement  through
the  five-year  full  deployment  is  expected  to be up to  approximately  $225
million.  As with DCSI's  contract with PG&E,  equipment  will be purchased only
upon  issuance of  purchase  orders and  release  authorizations,  and PG&E will
continue to have the right to purchase products or services from other suppliers
for the gas utility portion of the AMI project. On July 20, 2006, the California
Public Utilities  Commission approved PG&E's AMI project.  The contract provides
for liquidated damages in the event of late deliveries, includes indemnification
and other customary  provisions,  and may be terminated by PG&E for default, for
its  convenience  and in the event of a force  majeure  lasting  beyond  certain
prescribed  periods.  The Company has guaranteed the performance of the contract
by Hexagram.

CRITICAL ACCOUNTING POLICIES

Management has evaluated the accounting  policies used in the preparation of the
Company's financial  statements and related notes and believes those policies to
be reasonable and appropriate.  Certain of these accounting policies require the
application  of  significant  judgment by  Management  in selecting  appropriate
assumptions  for  calculating  financial  estimates.   By  their  nature,  these
judgments are subject to an inherent degree of uncertainty.  These judgments are
based on historical experience, trends in the industry,  information provided by
customers and information  available from other outside sources, as appropriate.
The most significant areas involving  Management  judgments and estimates may be
found in the Critical Accounting Policies section of Management's Discussion and
Analysis and in Note 1 to the Consolidated Financial Statements contained in the
Company's  Annual  Report on Form 10-K for the fiscal year ended  September  30,
2006 at Exhibit 13.

OTHER MATTERS

Contingencies

As a normal incident of the businesses in which the Company is engaged,  various
claims, charges and litigation are asserted or commenced against the Company. In
the opinion of  Management,  final  judgments,  if any,  which might be rendered
against the Company in current  litigation are adequately  reserved,  covered by
insurance,  or  would  not  have a  material  adverse  effect  on its  financial
statements.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and Financial  Liabilities"  (SFAS 159).  SFAS No. 159 permits
companies to choose to measure certain  financial  instruments and certain other
items at fair value.  The standard  requires that unrealized gains and losses on
items for which the fair value  option has been elected be reported in earnings.
SFAS 159 is effective as of the beginning of an entity's  first fiscal year that
begins  after  November  15,  2007.  SFAS No. 159 is  effective  for the company
beginning in the first quarter of fiscal year 2009, although earlier adoption is
permitted. The adoption of SFAS 159 is not expected to have a material impact to
the Company's financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157). The purpose of SFAS No. 157 is to define fair value, establish a framework
for measuring fair value, and enhance disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning
after  November 15, 2007,  and interim  periods  within those fiscal years.  The
measurement  and  disclosure  requirements  are effective for the Company in the
first  quarter of fiscal year 2009.  The adoption of SFAS 157 is not expected to
have a  material  impact to the  Company's  financial  position  or  results  of
operations.

In September  2006,  the FASB issued SFAS No. 158,  "Employer's  Accounting  for
Defined Benefit Pension and Other Postretirement Plans" (SFAS 158), which amends
SFAS 87 and SFAS 106 to require  recognition  of the  overfunded or  underfunded
status of pension and other  postretirement  benefit plans on the balance sheet.
Under SFAS 158,  gains and losses,  prior  service  costs and  credits,  and any
remaining  transition  amounts under SFAS 87 and SFAS 106 that have not yet been
recognized  through net periodic  benefit cost will be recognized in accumulated
other comprehensive  income, net of tax effects. The measurement date - the date
at which the benefit obligation and plan assets are measured - is required to be
the Company's  fiscal  year-end,  which is the date the Company  currently uses.
SFAS 158 is effective for publicly-held  companies for fiscal years ending after
December 15,  2006.  The adoption of SFAS 158 is not expected to have a material
impact to the Company's financial position or results of operations.

In June 2006,  the FASB  issued  FASB  Interpretation  No. 48,  "Accounting  for
Uncertainty in Income Taxes, an  Interpretation of FASB Statement No. 109." This
Interpretation  is effective  for the Company  beginning  October 1, 2007.  This
Interpretation  prescribes a recognition  threshold and measurement  process for
the financial  statement  recognition and measurement of a tax position taken or
expected to be taken in a tax return.  The Company is currently  evaluating  the
adoption of this  Interpretation  and does not currently have an estimate of the
impact on the consolidated financial statements.

In June 2006,  the FASB issued EITF Issue No. 06-3,  "How Taxes  Collected  from
Customers and Remitted to  Governmental  Authorities  Should Be Presented in the
Income Statement (That Is, Gross versus Net  Presentation)".  This EITF Issue is
effective for periods beginning after December 15, 2006 and requires  disclosure
of the accounting  policy for any tax assessed by a governmental  authority that
is directly  imposed on a  revenue-producing  transaction on a gross (include in
revenues  and  costs) or net  (excluded  from  revenues)  basis.  The  Company's
accounting  policy is to record taxes assessed by a governmental  authority that
is directly imposed on a revenue-producing transaction on a net basis.


FORWARD LOOKING STATEMENTS

Statements in this report that are not strictly historical are "forward looking"
statements  within the  meaning of the safe  harbor  provisions  of the  federal
securities laws. Forward looking statements include, but are not limited to, the
risk factors  described in Item 1A of the  Company's  Annual Report on Form 10-K
for the fiscal year ended September 30, 2006, those relating to the estimates or
projections made in connection with the Company's accounting policies, SFAS 158,
FASB  Interpretation  No. 48, annual  effective tax rate,  research tax credits,
timing and  amounts of  Communications  segment  commitments  and  expenditures,
outcome of current claims and litigation, future cash flow, capital requirements
and operational needs for the foreseeable future, the ultimate values and timing
of revenues under the DCSI / PG&E contract and the Hexagram / PG&E contract, the
future  delivery  and  acceptance  of the TNG  software  by PG&E,  and timing of
spending for TNG  commitments.  Investors are cautioned that such statements are
only  predictions,  and speak only as of the date of this report.  The Company's
actual results in the future may differ  materially  from those projected in the
forward-looking  statements  due to risks and  uncertainties  that  exist in the
Company's  operations and business  environment  including,  but not limited to:
actions by PG&E's Board of Directors and PG&E's management  impacting PG&E's AMI
projects;  the timing and success of DCSI's software  development  efforts;  the
timing and  content of purchase  order  releases  under  PG&E's  contracts;  the
Company's successful performance under the PG&E contracts; weakening of economic
conditions  in  served  markets;   changes  in  customer   demands  or  customer
insolvencies; competition; intellectual property rights; successful execution of
the planned sale of the Company's Puerto Rico facility;  material changes in the
costs of certain raw  materials  including  steel,  copper and  petroleum  based
resins; delivery delays or defaults by customers; termination for convenience of
customer contracts;  timing and magnitude of future contract awards; performance
issues with key suppliers,  customers and subcontractors;  collective bargaining
and  labor  disputes;  changes  in laws and  regulations  including  changes  in
accounting standards and taxation requirements;  costs relating to environmental
matters;  litigation  uncertainty;  and the  Company's  successful  execution of
internal operating plans.





ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company's  operations result primarily from changes
in interest rates and changes in foreign currency exchange rates. There has been
no material change to the Company's market risks since September 30, 2006. Refer
to the Company's  Annual Report on Form 10-K for the fiscal year ended September
30, 2006 for further discussion about market risk.

ITEM 4.       CONTROLS AND PROCEDURES

The  Company  carried  out an  evaluation,  under the  supervision  and with the
participation of Management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the period covered
by this  report.  Based upon that  evaluation,  the  Company's  Chief  Executive
Officer and Chief  Financial  Officer  concluded  that the Company's  disclosure
controls and procedures were effective as of that date.  Disclosure controls and
procedures  are  controls  and  procedures  that are  designed  to  ensure  that
information required to be disclosed in Company reports filed or submitted under
the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed,
summarized and reported within the time periods  specified in the Securities and
Exchange Commission's rules and forms. There has been no change in the Company's
internal  control over financial  reporting (as defined in Rule 13a-15(f)  under
the Exchange Act) during the period  covered by this report that has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

                            PART II OTHER INFORMATION




ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In August  2006,  the  Company's  Board of Directors  authorized  an open market
common  stock  repurchase  program  for up to 1.2  million  shares,  subject  to
marketconditions  and other factors,  which covers the period through  September
30, 2008.  There were no stock  repurchases  during the three month period ended
March 31, 2007.



ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of the Company's shareholders was held on Friday, February 2,
2007. The voting for directors was as follows:


                         For       Withheld           Broker Non-Votes
V. L. Richey, Jr.    21,912,876     932,366                   0
J. M. Stolze         22,395,204     450,038                   0

The terms of W.S. Antle III, J.M.  McConnell,  L.W. Solley,  D.C. Trauscht,  and
J.D. Woods as directors continued after the meeting.

The voting to ratify the Company's selection of KPMG LLP as independent auditors
for the fiscal year ending September 30, 2007 was as follows:


             For       Against            Abstain             Broker Non-Votes
         22,686,596    144,768            13,878                     0



ITEM 6.       EXHIBITS

a)   Exhibits
     Exhibit
     Number

        3.1      Restated Articles of        Incorporated by reference to
                 Incorporation               Form 10-K for the fiscal
                                             year ended September 30,
                                             1999, at Exhibit 3(a)

        3.2      Amended Certificate of      Incorporated by reference to
                 Designation Preferences     Form 10-Q for the fiscal
                 and Rights of Series A      quarter ended March 31,
                 Participating               2000, at Exhibit 4(e)
                 Cumulative Preferred
                 Stock of the Registrant

        3.3      Articles of Merger          Incorporated by reference to
                 effective July 10, 2000     Form 10-Q for the fiscal
                                             quarter ended June 30, 2000,
                                             at Exhibit 3(c)

        3.4      Bylaws, as amended and      Incorporated by reference to
                 restated as of July 10,     Form 10-K for the fiscal
                 2000.                       year ended September 30,
                                             2003, at Exhibit 3.4

        3.5      Amendment to Bylaws         Incorporated by reference to
                 effective as of             Form 10-Q for the fiscal
                 February 2, 2007.           quarter ended December 31,
                                             2006, at Exhibit 3.5

        4.1      Specimen Common Stock       Incorporated by reference to
                 Certificate                 Form 10-Q for the fiscal
                                             quarter ended June 30, 2000,
                                             at Exhibit 4(a)

        4.2      Specimen Rights             Incorporated by reference to
                 Certificate                 Current Report on Form 8-K
                                             dated February 3, 2000, at
                                             Exhibit B to Exhibit 4.1

        4.3      Rights Agreement dated      Incorporated by reference to
                 as of September 24,         Current Report on Form 8-K
                 1990 (as amended and        dated February 3, 2000, at
                 Restated as of February     Exhibit 4.1
                 3, 2000) between the
                 Registrant and
                 Registrar and Transfer
                 Company, as successor
                 Rights Agent

        4.4       Credit Agreement dated     Incorporated by reference to
                  as of October 6, 2004      Form10-K for the fiscal year
                  among the Registrant,      ended September 30, 2004, at
                  Wells Fargo Bank,          Exhibit 4.4
                  N.A., as agent, and
                  the lenders listed
                  therein

        4.5       Consent and waiver to      Incorporated by reference to
                  Credit Agreement           Current Report on Form 8-K
                  (listed as 4.4, above)     dated February 2, 2006 at
                  dated as of January        Exhibit 4.1
                  20, 2006

        31.1      Certification of Chief
                  Executive Officer
                  relating to Form 10-Q
                  for period ended March
                  31, 2007

        31.2      Certification of Chief
                  Financial Officer
                  relating to Form 10-Q
                  for period ended March
                  31, 2007

         32       Certification of Chief
                  Executive Officer and
                  Chief Financial
                  Officer relating to
                  Form 10-Q for period
                  ended March 31, 2007

SIGNATURE

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 thereunto duly authorized.


                      ESCO TECHNOLOGIES INC.

                      /s/ Gary E. Muenster
                      Gary E. Muenster
                      Senior Vice President and Chief Financial Officer
                      (As duly authorized officer and principal accounting
                      officer of the registrant)





Dated:   May 9, 2007