UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

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

For the fiscal year ended September 30, 2010

OR

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

For the transition period from            to           

ESCO Technologies Inc.

Missouri (State or other jurisdiction of incorporation or organization)		43-1554045 (I.R.S. Employer Identification No.)
9900A Clayton Road St. Louis, Missouri (Address of principal executive offices)		63124-1186 (Zip Code)

Registrant’s telephone number, including area code:

(314) 213-7200

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

		Name of each
		exchange on
Title of each class		which registered
Common Stock, par value $0.01 per share		New York Stock Exchange, Inc.
Preferred Stock Purchase Rights		New York Stock Exchange, Inc.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o

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 o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form l0-K or any amendment to this Form l0-K. þ

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Aggregate market value of the Common Stock held by non-affiliates of the registrant as of the close of trading on March 31, 2010: $825,932,685*

Number of shares of Common Stock outstanding at November 22, 2010: 26,539,285.

DOCUMENTS INCORPORATED BY REFERENCE:

 

 

ESCO TECHNOLOGIES INC.
INDEX TO ANNUAL REPORT ON FORM 10-K

Item				Description		Page
Part I
1.				Business			1
				The Company			1
				Products			2
				Marketing and Sales			3
				Intellectual Property			4
				Backlog			4
				Purchased Components and Raw Materials			5
				Competition			5
				Research and Development			6
				Environmental Matters			6
				Government Contracts			6
				Employees			6
				Financing			6
				History of the Business			7
				Available Information			7
1A.				Risk Factors			7
				Forward-Looking Information			12
1B.				Unresolved Staff Comments			12
2.				Properties			12
3.				Legal Proceedings			14
4.				(Removed and Reserved)			14
Executive Officers of the Registrant							14
Part II
5.				Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			15
6.				Selected Financial Data			15
7.				Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
7A.				Quantitative and Qualitative Disclosures About Market Risk			15
8.				Financial Statements and Supplementary Data			15

Item				Description		Page
9.				Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			16
9A.				Controls and Procedures			16
9B.				Other Information			16
Part III
10.				Directors, Executive Officers and Corporate Governance			16
11.				Executive Compensation			16
12.				Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			17
				Equity Compensation Plan Information			17
13.				Certain Relationships and Related Transactions, and Director Independence			18
14.				Principal Accounting Fees and Services			19
Part IV
15.				Exhibits, Financial Statement Schedules			19
SIGNATURE							28
INDEX TO EXHIBITS							29

PART I

Item 1. Business

THE COMPANY

     ESCO Technologies Inc. (“ESCO”) is a producer of engineered products and systems sold to customers worldwide, primarily for utility, industrial, aerospace and commercial applications. ESCO operates in three operating segments which, together with the primary operating subsidiaries within each segment, are as follows:

Utility Solutions Group (“Utility Solutions”):
Aclara Power-Line Systems Inc. (“Aclara PLS”)
Aclara RF Systems Inc. (“Aclara RF”)
Aclara Software Inc.
Doble Engineering Company
Doble Lemke AG
Doble Lemke GmbH
Doble PowerTest Limited
Doble TransiNor AS

RF Shielding and Test (“Test”):
Beijing Lindgren ElectronMagnetic Technology Co., Ltd.
ETS Lindgren Engineering India Private Limited
ETS Lindgren Japan, Inc.
ETS Lindgren Limited
ETS-Lindgren L.P.
ETS-Lindgren OY
Lindgren R.F. Enclosures, Inc.

Filtration/Fluid Flow (“Filtration”):
Crissair, Inc.
PTI Technologies Inc. (“PTI”)
TekPackaging LLC
VACCO Industries (“VACCO”)

     The Aclara entities listed above are hereinafter collectively referred to as “Aclara”. The Doble entities listed above are hereinafter collectively referred to as “Doble”. All of the Test segment entities listed above are hereinafter collectively referred to as “ETS-Lindgren”.

     The above operating subsidiaries are engaged primarily in the research, development, manufacture, sale and support of the products and systems described below, and are subsidiaries of ESCO Technologies Holding Inc., a wholly-owned direct subsidiary of ESCO. ESCO and its direct and indirect subsidiaries are hereinafter collectively referred to as the “Company”. The Company’s businesses are subject to a number of risks and uncertainties, including without limitation those discussed in Item 1A. below. See also “Management’s Discussion and Analysis” appearing in the 2010 Annual Report, which is herein incorporated by reference, and “Forward-Looking Information” below.

     Effective July 31, 2010, the Company acquired the capital stock of Crissair, Inc. for a purchase price of approximately $27 million, net of cash acquired. Crissair, Inc., headquartered in Palmdale, California, is a manufacturer of high-quality hydraulic, fuel and pneumatic system components for the aerospace industry.

     On September 3, 2010, the Company acquired the capital stock of Xtensible Solutions, Inc., headquartered in Greenwood Village, Colorado, for a purchase price of approximately $4 million in cash plus contingent consideration in the form of an earnout. Xtensible is a provider of enterprise information management and integration services to the utility industry worldwide, and operates as a part of Aclara.

PRODUCTS

     The Company’s products are described below. See Note 15 of the Notes to Consolidated Financial Statements in the 2010 Annual Report for financial information regarding segments, which Note is herein incorporated by reference.

UTILITY SOLUTIONS

     The Utility Solutions segment accounted for approximately 57%, 60% and 57% of the Company’s total revenue in fiscal years 2010, 2009 and 2008, respectively.

     Aclara PLS is a leading manufacturer of two-way power line communication systems for the electric utility industry (the “TWACS^® systems”), which are composed of equipment (primarily meter modules and equipment for central stations and substations), software and support services. The TWACS^® systems provide electric utilities with a proprietary communication technology for automatic meter reading, load control, interval data, outage assessment/restoration monitoring, remote service disconnect/connect, time-of-use data for critical peak pricing, tamper/theft detection and pre-paid metering. Revenue from the TWACS^® systems, which may be considered a class of similar products, accounted for approximately 22%, 19% and 25% of the Company’s total revenue in fiscal years 2010, 2009 and 2008, respectively.

     Aclara RF provides, through its STAR^® network, wireless radio frequency (“RF”) data communications systems to gas, water and electric utilities for advanced metering infrastructure (“AMI”) applications. The STAR^® network provides accurate and timely billing, high/low consumption reporting, and non-revenue water loss detection. In November 2005, Aclara RF entered into a contract with Pacific Gas & Electric Company (“PG&E”) to provide its communications system for the gas meter portion of PG&E’s AMI project, and also gave PG&E the option to purchase Aclara RF’s fixed network systems for the electric portion of the Project. In fiscal 2010, total revenue received by the Company from PG&E for all sales was $55.9 million, representing 9.2% of the Company’s consolidated revenue. Of this amount, $53.5 million was attributable to the 2005 gas meter contract. Total revenue of $244 million from this contract had been recorded through September 30, 2010. Sales under this contract are currently nearing completion. Revenue from STAR^® network products, which may be considered a class of similar products, accounted for approximately 17%, 25% and 17% of the Company’s total revenue in fiscal years 2010, 2009 and 2008, respectively.

     Aclara Software Inc. provides utilities with software systems for energy and water information, delivering a scalable meter data management system (“MDMS”), comprehensive AMI/meter device records and asset management, proven business applications addressing areas such as revenue assurance and distribution asset analysis, and the industry’s leading customer presentment and analysis applications. Aclara’s analytics-based software applications are used by over 100 major energy organizations worldwide.

     Doble provides electric utility customers with products and services intended to achieve the reliability and sustainability of electric power infrastructure. It combines three core elements for customers — diagnostic test instruments, expert consulting and testing services — and provides access to its large reserve of related knowledge. It has been operating for over 80 years, and serves over 5,500 companies in 100 countries. Revenue from Doble’s products and services, which may be considered a class of similar products and services, accounted for approximately 15%, 14% and 12% of the Company’s total revenue in fiscal years 2010, 2009 and 2008, respectively.

TEST

     The Test segment accounted for approximately 23%, 22% and 24% of the Company’s total revenue in fiscal years 2010, 2009 and 2008, respectively.

     ETS-Lindgren designs and manufactures products to measure and contain magnetic, electromagnetic and acoustic energy. It supplies customers with a broad range of isolated environments including RF test enclosures, acoustic test enclosures, RF and magnetically shielded rooms, secure communication facilities and broadcast and recording studios. Many of these facilities include proprietary features such as shielded doors and windows. ETS-Lindgren also provides the design, program management, installation and integration

services required to successfully complete these types of facilities.

     ETS-Lindgren also supplies customers with a broad range of components including RF absorptive materials, RF filters, active compensation systems, antennas, antenna masts, turntables and electric and magnetic probes, RF test cells, proprietary measurement software and other test accessories required to perform a variety of tests. ETS-Lindgren also offers a variety of services including calibration for antennas and field probes, chamber certification, field surveys, customer training and a variety of product tests. ETS-Lindgren operates the following accredited test labs: American Association for Laboratory Accreditation (“A2LA”), National Voluntary Laboratory Accreditation Program (“NAVLAP”) and CATL (CTIA-The Wireless Association (“CTIA”) Accredited Test Lab). ETS-Lindgren serves the acoustics, medical, health and safety, electronics, wireless communications, automotive and defense markets.

FILTRATION

     The Filtration segment accounted for approximately 20%, 17% and 19% of the Company’s total revenue in fiscal years 2010, 2009 and 2008, respectively.

     PTI is a leading supplier of filtration products serving the commercial aerospace, military aerospace and various industrial markets. The industrial markets include chemical processing, automotive and mobile equipment. Products include filter elements, assemblies, modules, indicators and other related components. All products must meet stringent quality requirements and withstand severe operating conditions. Product applications include aircraft, helicopters and mobile equipment hydraulic systems, aircraft engines and plant equipment. PTI supplies products worldwide to original equipment manufacturers and the U.S. government under long term contracts, and to the commercial aftermarkets through distribution channels.

     VACCO supplies flow control products, valves and premium filters to the space, defense and commercial industries for use in aircraft, satellite propulsion systems, satellite launch vehicles and other space transportation systems such as the Space Shuttle and its successor. VACCO also uses its etched disc technology to produce quiet valves and manifolds for U.S. Navy applications.

     Crissair, Inc. supplies a wide variety of custom and standard valves and other various components to the aerospace, defense and commercial industries. Platform applications include fixed and rotary wing aircraft, air transport and business jets, and defense systems.

     TekPackaging LLC produces highly engineered thermoformed products and packaging materials for medical, retail, food and electronic applications.

MARKETING AND SALES

     The Filtration and Test segments’ products, as well as Doble’s products, generally are distributed to customers through a domestic and foreign network of distributors, sales representatives and in-house salespersons. Aclara’s sales to investor-owned utilities are made directly to the utilities through its sales team. Aclara utilizes distributors and direct sales representatives to sell its systems to the electric utility cooperative and municipal markets, and to non investor-owned gas, water and combination utilities. Aclara’s software products are marketed utilizing its in-house sales force.

     The Company’s international sales accounted for approximately 23%, 18% and 21% of the Company’s total revenue in the fiscal years ended September 30, 2010, 2009 and 2008, respectively. See Note 15 of the Notes to Consolidated Financial Statements in the 2010 Annual Report for financial information regarding geographic areas, which Note is herein incorporated by reference. See also Item 1A. Risk Factors for a discussion of risks of the Company’s international operations.

     Some of the Company’s products are sold directly or indirectly to the U.S. Government under contracts with the Army, Navy and Air Force and subcontracts with prime contractors of such entities. Direct and indirect sales to the U.S. Government, primarily related to the Filtration segment, accounted for approximately 8%, 5% and 6% of the Company’s total revenue in the fiscal years ended September 30, 2010, 2009 and 2008, respectively.

INTELLECTUAL PROPERTY

     The Company owns or has other rights in various forms of intellectual property (i.e., patents, trademarks, service marks, copyrights, mask works, trade secrets and other items). As a major supplier of engineered products to industrial and commercial markets, the Company emphasizes developing intellectual property and protecting its rights therein. However, the scope of protection afforded by intellectual property rights, including those of the Company, is often uncertain and involves complex legal and factual issues. Some intellectual property rights, such as patents, have only a limited term. Also, there can be no assurance that third parties will not infringe or design around the Company’s intellectual property. Policing unauthorized use of intellectual property is difficult, and copyright infringement is a persistent problem for many companies, particularly in some international markets. In addition, the Company may not elect to pursue an unauthorized user due to the high costs and uncertainties associated with litigation. Further, there can be no assurance that courts will ultimately hold issued patents valid and enforceable. See Item 1A. Risk Factors.

     In the Utility Solutions segment, many of the products are based on patented or otherwise proprietary technology, including the Company’s TWACS^® technology. The TWACS^® systems are protected primarily by a number of patents expiring on various dates ending in 2017. Patents covering significant aspects of the TWACS^® technology expired in 2010 for outbound signal reception and will expire in 2017 for inbound signal generation. The expiration of the foregoing patents is not expected to have a material effect on the Company’s operations. Other patents covering inbound and outbound signal detection expired in 2007. The Utility Solutions segment policy is to seek patent and/or other forms of intellectual property protection on new and improved products, components of products and methods of operation for its businesses, as such developments are made. The Company protects the TWACS NG™ software code as a trade secret, although certain discrete features and functionality have been or may be patented. The Company holds two significant patents which cover the operation of its STAR^® network communications systems. These will expire in 2015 and 2016. Doble holds an extensive library of apparatus performance information useful to Doble employees and to entities that generate, distribute or consume electric energy. Doble makes part of this library available to registered users via an Internet portal.

     In the Test segment, patent protection has been sought for significant inventions. Examples of such inventions include novel designs for window and door assemblies used in shielded enclosures and anechoic chambers, improved acoustic techniques for sound isolation and a variety of unique antennas.

     With respect to the Filtration segment, a number of products are based on patented or otherwise proprietary technology that sets them apart from the competition. VACCO’s proprietary quieting technology, which it protects as trade secrets, is a significant differentiator for products supplied to the U.S. Navy submarine fleet.

     The Company considers its patent and other intellectual property to be of significant value in each of its segments. The Utility Solutions segment owns intellectual property, including its TWACS^® technology, which it deems necessary or desirable for the manufacture, use or sale of its products. No other segment is materially dependent on any single patent, group of patents or other intellectual property.

BACKLOG

     Total Company backlog at September 30, 2010 was $360.6 million, representing an increase of $61.2 million (20.4%) from the beginning of the fiscal year backlog of $299.4 million. The backlog of firm orders at September 30, 2010 and September 30, 2009, respectively, was: $153.5 million and $132.4 million for Utility Solutions; $74.3 million and $54.2 million for Test; and $132.8 million and $112.8 million for Filtration. As of September 30, 2010, it is estimated that domestic customers accounted for approximately 75% of the Company’s total firm orders, and international customers accounted for approximately 25%. Of the Company’s total backlog of orders at September 30, 2010, approximately 88% is expected to be completed in the fiscal year ending September 30, 2011.

PURCHASED COMPONENTS AND RAW MATERIALS

     The Company’s products require a wide variety of components and materials. Although the Company has multiple sources of supply for most of its materials requirements, certain components and raw materials are supplied by sole-source vendors, and the Company’s ability to perform certain contracts depends on their performance. In the past, these required raw materials and various purchased components generally have been available in sufficient quantities. However, in each of the Company’s segments, there are instances of some risk of shortages of materials or components due to reliance on sole or limited sources of supply. See Item 1A. Risk Factors.

     In the Utility Solutions segment, in addition to its internal manufacturing of RF end-products, Aclara RF has contracts with three independent manufacturers which produce and supply a significant amount of such end-products, as well as contracts with several of the suppliers of the raw materials that are incorporated into such end-products. Aclara PLS has arrangements with three independent manufacturers which produce and supply substantially all of Aclara PLS’s power-line end-products. Two of these manufacturers are industry leaders with worldwide operations. Each of these manufacturers is directed by Aclara PLS to purchase certain unique raw material components from suppliers designated by Aclara PLS. Aclara PLS also has contracts with certain of the raw material suppliers, directing them to supply such raw materials to Aclara PLS’s manufacturers. The Company believes that the above-described manufacturers and suppliers will be reliable sources for Aclara’s end-products for the foreseeable future.

     The Test segment is a vertically integrated supplier of electro-magnetic (“EM”) shielding products, producing most of its critical RF components. However, this segment purchases significant quantities of raw materials such as steel, copper, nickel and wood. Accordingly, the segment is subject to price fluctuations in the worldwide raw materials markets, although ETS-Lindgren has contracts with three suppliers of certain raw materials.

     The Filtration segment purchases supplies from a wide array of vendors. In most instances, multiple vendors of raw materials are screened during a qualification process to ensure that there will not be an interruption of supply should one of them discontinue operations. Nonetheless, in some situations, there is a risk of shortages due to reliance on a limited number of suppliers or because of price fluctuations due to the nature of the raw materials. For example, aerospace-grade titanium, an important raw material for VACCO and PTI, may continue to sometimes be in short supply.

COMPETITION

     Competition in the Company’s major markets is broadly based and global in scope. The Company faces intense competition from a large number of companies for nearly all of its products. Competition can be particularly intense during periods of economic slowdown, and this has been experienced in some of the Filtration markets. Although the Company is a leading supplier in several of the markets it serves, it maintains a relatively small share of the business in many of the other markets it serves. Individual competitors range in size from annual revenues of less than $1 million to billion dollar enterprises. Because of the specialized nature of the Company’s products, its competitive position with respect to its products cannot be precisely stated. However, Aclara is believed to be a leading supplier in the fixed network segment of the AMI market. This fixed network segment comprises a substantial part of the total AMI market for utilities. Substantial efforts are required in order to maintain existing business levels. In the Company’s major served markets, competition is driven primarily by quality, technology, price and delivery performance. See Item 1A. Risk Factors.

     Primary competitors of Aclara in the utility communications market include Itron, Inc., Silver Spring Networks, Landis+Gyr, Cannon Technologies Inc., Sensus Metering Systems Inc., Trilliant Inc., Elster Electricity, L.L.C., Comverge, Inc., Neptune Technology Group, e-Meter Corporation, Oracle Corporation, APOGEE Interactive Inc., Opower, Inc., Ecologic Analytics, LLC, SmartSynch, Inc. and Tantalus Systems Corp. OMICRON Electronics Corp. USA has for some time been a primary competitor of Doble in the international market, and has recently increased competition in the North America market. OMICRON has the ability to heavily fund research and development. In addition, Megger Group Limited has recently emerged as a significant competitor to Doble.

     The Test segment is the global leader in the EM shielding market. Significant competitors in this served market include TDK RF Solutions Inc., Albatross GmbH, IMEDCO AG and Cuming Corporation.

     Primary competitors of the Filtration segment include Pall Corporation, Moog, Inc., SoFrance and Clarcor Inc.

RESEARCH AND DEVELOPMENT

     Research and development and the Company’s technological expertise are important factors in the Company’s business. Research and development programs are designed to develop technology for new products or to extend or upgrade the capability of existing products, and to enhance their commercial potential.

     The Company performs research and development at its own expense, and also engages in research and development funded by customers. For the fiscal years ended September 30, 2010, 2009 and 2008, total Company-sponsored research and development expenses were approximately $32.2 million, $32.0 million and $33.0 million, respectively. Total customer-sponsored research and development expenses were approximately $4.0 million, $2.9 million and $5.3 million for the fiscal years ended September 30, 2010, 2009 and 2008, respectively. All of the foregoing expense amounts exclude certain engineering costs primarily associated with product line extensions, modifications and maintenance, which amounted to approximately $13.3 million, $14.4 million and $8.6 million for the fiscal years ended September 30, 2010, 2009 and 2008, respectively.

ENVIRONMENTAL MATTERS

     The Company is involved in various stages of investigation and cleanup relating to environmental matters. It is very difficult to estimate the potential costs of such matters and the possible impact of these costs on the Company at this time due in part to: the uncertainty regarding the extent of pollution; the complexity of Government laws and regulations and their interpretations; the varying costs and effectiveness of alternative cleanup technologies and methods; the uncertain level of insurance or other types of cost recovery; and in the case of off-site waste disposal facilities, the uncertain level of the Company’s relative involvement and the possibility of joint and several liability with other contributors under applicable law. Based on information currently available, the Company does not believe that the aggregate costs involved in the resolution of any of its environmental matters will have a material adverse effect on the Company’s financial condition or results of operations.

GOVERNMENT CONTRACTS

     The Company’s contracts with the U.S. Government and subcontracts with prime contractors of the U.S. Government are primarily firm fixed-price contracts under which work is performed and paid for at a fixed amount without adjustment for the actual costs experienced in connection with the contracts. Therefore, unless the customer actually or constructively alters or impedes the work performed, all risk of loss due to cost overruns is borne by the Company. All Government prime contracts and virtually all of the Company’s subcontracts provide that they may be terminated at the convenience of the Government. Upon such termination, the Company is normally entitled to receive equitable compensation from the customer. See “Marketing and Sales” in this Item 1, and Item 1A. Risk Factors for additional information regarding Government contracts.

EMPLOYEES

     As of October 31, 2010, the Company employed approximately 2,290 persons.

FINANCING

     The Company maintains a $330 million five-year revolving credit facility with a $50 million increase option. The facility is available for direct borrowings and/or the issuance of letters of credit, and is provided by a group of sixteen banks, led by PNC Bank (successor to National City Bank) as agent, with a maturity of November 30, 2012. The facility is secured by the unlimited guaranty of the Company’s material domestic

subsidiaries and a 65% pledge of the material foreign subsidiaries’ share equity. The Company’s ability to access the $50 million increase option of the facility is subject to acceptance by the participating banks or other outside banks. See “Management’s Discussion and Analysis — Bank Credit Facility” in the 2010 Annual Report, and Note 9 of the Notes to Consolidated Financial Statements in the 2010 Annual Report, which information is herein incorporated by reference.

HISTORY OF THE BUSINESS

     ESCO was incorporated in Missouri in August 1990 as a wholly owned subsidiary of Emerson Electric Co. (“Emerson”) to be the indirect holding company for several Emerson subsidiaries, which were primarily in the defense business. Ownership of ESCO and its subsidiaries was distributed on October 19, 1990 by Emerson to its shareholders through a special distribution. Since that time, through a series of acquisitions and divestitures, the Company has shifted its primary focus from defense contracting to the production and supply of engineered products and systems marketed to utility, industrial, aerospace and commercial users. Effective July 10, 2000, ESCO changed its name from ESCO Electronics Corporation to ESCO Technologies Inc. In fiscal year 2008, ESCO acquired Doble Engineering Company, and sold the filtration business of Filtertek, Inc. In fiscal year 2006, ESCO acquired Aclara RF Systems Inc. (formerly Hexagram, Inc.) and Aclara Software Inc. (formerly Nexus Energy Software, Inc.) See Notes 2 and 3 of the Notes to Consolidated Financial Statements in the 2010 Annual Report, which Notes are herein incorporated by reference.

AVAILABLE INFORMATION

     The Company makes available free of charge on or through its Internet website, www.escotechnologies.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

Item 1A. Risk Factors

     This Form 10-K, including Item 1 “Business,” Item 2 “Properties”, Item 3 “Legal Proceedings” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (incorporated by reference to “Management’s Discussion and Analysis” appearing in the 2010 Annual Report), contains “forward-looking statements” within the meaning of the safe harbor provisions of the federal securities laws. In addition to the risks and uncertainties discussed elsewhere in this Form 10-K, the following are important risk factors which could cause actual results and events to differ materially from those contained in any forward-looking statements.

MOST UTILITY SOLUTIONS SEGMENT SALES ARE TO OR FOR THE UTILITY INDUSTRY, KNOWN FOR LONG SALES CYCLES AND UNCERTAINTY, WHICH COULD AFFECT THE TIMING OF REVENUE.

     Most of the Utility Solutions segment’s sales are to or for the utility industry, where sales cycles are long and often unpredictable due to budgeting, purchasing and regulatory approval processes that can take up to several years to complete. Most Aclara sales involve large dollar amounts, and are marked by extended and complex competitive procurements. These factors often cause delays in the timing of sales, and such delays could result in order postponement, reduction in size or cancellation, thereby reducing or delaying the Company’s future revenue. In addition, delays in the receipt of grants by certain utility customers under the American Recovery and Reinvestment Act of 2009 may cause delays in the placement of orders with Aclara. Also, these customers’ selection of vendors may be influenced by the specific terms of such grants, such as buy-American requirements, which may prohibit the supply by Aclara of products produced outside the U.S.

NEGATIVE WORLDWIDE ECONOMIC CONDITIONS AND RELATED CREDIT SHORTAGES COULD RESULT IN A DECREASE IN THE COMPANY’S SALES AND AN INCREASE IN ITS OPERATING COSTS, WHICH COULD ADVERSELY AFFECT ITS BUSINESS AND OPERATING RESULTS.

     If there is a worsening of current global and U.S. economic and financial market conditions and

additional tightening of global credit markets, many of the Company’s customers may further delay or reduce their purchases of its products. The current uncertainties in the global economy may cause the utility industry to experience shortages in available credit, which could limit capital spending. To the extent this problem affects customers of the Utility Solutions segment, the sales and profits of this segment could be adversely affected. Likewise, if the Company’s suppliers face challenges in obtaining credit, they may have to increase their prices or become unable to continue to offer the products and services the Company uses to manufacture its products, which could have an adverse effect on its business, results of operations and financial condition.

A SIGNIFICANT PORTION OF THE UTILITY SOLUTIONS SEGMENT REVENUES MAY BE GENERATED BY A LIMITED NUMBER OF LARGE CONTRACTS.

     A significant portion of the Utility Solutions segment’s business may be dependent on several large contracts with customers. The loss of revenue which would result from such a customer’s selection of other suppliers, cancellations, delays, reductions, regulatory actions or the Company’s failure to perform in connection with such a contract could have a material adverse effect on the Company’s business, results of operations and financial condition. For example, if the anticipated Aclara contract for the AMI project for Southern California Gas Co. fails to materialize, the Company would suffer a significant loss of expected revenue.

THE COMPANY’S QUARTERLY RESULTS MAY FLUCTUATE SUBSTANTIALLY.

     The Company has experienced variability in quarterly results and believes its quarterly results will continue to fluctuate as a result of many factors, including the size and timing of customer orders, Federal Communications Commission or other governmental actions, changes in existing taxation rules or practices, the gain or loss of significant customers, timing and levels of new product developments, shifts in product or sales channel mix, increased competition and pricing pressure, and general economic conditions affecting enterprise spending for the utility industry.

FAILURE OR DELAY IN NEW PRODUCT DEVELOPMENT COULD REDUCE THE COMPANY’S FUTURE SALES.

     Much of the Company’s business is dependent on the continuous development of new products and technologies to meet the changing needs of the Company’s markets on a cost-effective basis. Many of these markets are highly technical from an engineering standpoint, and the relevant technologies are subject to rapid change.

     If the Company fails to timely enhance existing products or develop new products, sales opportunities could be lost, which would adversely affect business. In addition, in some existing contracts with customers, the Company has made commitments to develop and deliver new products. If the Company fails to meet these commitments, the default could result in the imposition of contractual penalties including termination. The inability to enhance existing products in a timely manner could make the products less competitive, while the inability to successfully develop new products may limit growth opportunities. Delays in product development may also require greater investment in research and development. Increased costs associated with new product development and product enhancements could adversely affect operating results. The costs of new product development may not be recoverable if demand for the products is not as anticipated.

A SIGNIFICANT PORTION OF THE COMPANY’S CAPITALIZED SOFTWARE IS SUBJECT TO IMPAIRMENT RISK BASED ON THE ABILITY TO MARKET THE SOFTWARE.

     A significant portion of the Company’s capitalized software value is contingent on the future sales of TWACS NG™ software. Failure to generate sufficient sales to recoup costs could result in the impairment of the capitalized software costs.

CERTAIN MANUFACTURING OPERATIONS ARE DEPENDENT ON A SMALL NUMBER OF THIRD-PARTY SUPPLIERS

     A significant part of the Utility Solutions segment’s manufacturing operations relies on a small number of third-party manufacturers to supply the segment’s products. For example, Aclara has arrangements with four manufacturers which produce and supply substantially all of Aclara’s end-products. Two of these suppliers produce these end-products in Mexico. A significant disruption (for example, a strike) in the supply of those products could negatively affect the timely delivery of Aclara’s products to customers and future sales. Also, most of Doble’s manufacturing operations rely on third-party manufacturers to supply its products. Disruption in the supply of critical components such as integrated circuit components could have an adverse impact on business by, among other things, increasing costs and reducing margins.

     Certain of the Company’s other businesses are dependent upon sole source or a limited number of third-party manufacturers of parts and components. Many of these suppliers are small businesses. Since alternative supply sources are limited, there is an increased risk of adverse impacts on the Company’s production schedules and profits if the Company’s suppliers were to default in fulfilling their price, quality or delivery obligations.

PRODUCT DEFECTS COULD RESULT IN COSTLY FIXES, LITIGATION AND DAMAGES.

     If there are claims related to defective products (under warranty or otherwise), particularly in a product recall situation, the Company could be faced with significant expenses in replacing or repairing the product. For example, the Aclara meter modules are installed in thousands of residences and other buildings. The replacement/repair costs for such products, if defective, could have a material adverse effect on the Company’s financial condition. Also, the Filtration segment obtains raw materials, machined parts and other product components from suppliers who provide certifications of quality which are relied on by the Company. Should these product components be defective and pass undetected into finished products, there could be significant costs to the Company for repairs, re-work or replacement.

     In addition, if a dispute over product claims cannot be settled, arbitration or litigation may result, involving attorneys’ fees and the potential of damage awards against the Company.

INCREASES IN RAW MATERIAL PRICES AND DECREASED AVAILABILITY OF RAW MATERIALS COULD ADVERSELY AFFECT THE COMPANY’S BUSINESS.

     The cost of raw materials is a major element of the total cost of many of the Company’s products. For example, the Test segment’s critical components rely on purchases of raw materials from third parties. Increases in the prices of raw materials (such as steel, copper, nickel, zinc, wood and petrochemical products) could have an adverse impact on business by, among other things, increasing costs and reducing margins.

     In addition, the Company’s reliance on sole or limited sources of supply of raw materials in each of its segments could adversely affect the business. Weather-created disruptions in supply, in addition to affecting costs, could impact the Company’s ability to procure an adequate supply of these raw materials and delay or prevent deliveries of products to customers.

ECONOMIC, POLITICAL AND OTHER RISKS OF THE COMPANY’S INTERNATIONAL OPERATIONS COULD ADVERSELY AFFECT BUSINESS.

     In fiscal 2010, approximately 23% of the Company’s sales were made to international customers. An economic downturn or an adverse change in the political situation in certain foreign countries in which the Company does business could cause a decline in revenues and adversely affect the Company’s financial condition. For example, the Test segment does significant business in Asia and Europe. Changes in the Asian political climate or political changes in specific Asian countries could negatively affect the Company’s business. Weakness in the European economy could have a significant adverse effect on the Company’s European revenues. For example, several Doble and ETS-Lindgren companies are based in Europe, and could be negatively impacted by weakness in the European economy.

     The Company’s international sales are also subject to other risks inherent in foreign commerce, including currency fluctuations and devaluations, the risk of war and terrorism, differences in foreign laws, uncertainties as to enforcement of contract rights, and difficulties in negotiating and resolving disputes with

foreign customers.

     The U.S. International Traffic in Arms Regulations (“ITAR”), which impose certain restrictions on the U.S. export of defense articles and services, may be viewed as too restrictive by international customers, who may develop their own domestic products or elect to procure products from other international suppliers, which are not subject to such export restrictions.

SALES OF GOVERNMENT PRODUCTS DEPEND UPON CONTINUED GOVERNMENT FUNDING.

     During the past three fiscal years, from 5% to 8% of the Company’s revenues have been generated from sales to the U.S. Government or its contractors. These sales are dependent on continuous government funding of its programs. There could be reductions or terminations of the government funding on programs which are applicable to the Company or its customers. These funding effects could adversely affect the Company’s sales and profit, and could bring about a restructuring of Company operations, which could result in an adverse effect on its financial condition or results of operations.

     For example, a significant part of VACCO’s sales involve major U.S. Government defense and space programs. Government reduction in spending on these programs could have a significant adverse impact on Company financial results.

THE END OF CUSTOMER PRODUCT LIFE CYCLES COULD NEGATIVELY AFFECT FILTRATION SEGMENT RESULTS.

     Many of the Company’s filtration products are sold to be components in the customers’ end-products. If a customer discontinues a certain end-product line, the ability of the Company to continue to sell those components will be reduced or eliminated. The result could be a significant decrease in Company sales.

     For example, a substantial portion of PTI’s revenue is generated from commercial aviation aftermarket sales. As certain aircraft are retired and replaced by newer aircraft, there could be a corresponding decrease in sales associated with the Company’s current products. Such a decrease could adversely affect the Company’s operating results. In addition, if the Government cuts back the space program (for example, the Space Shuttle), VACCO’s sales of space products would be reduced, and its revenues could be adversely affected.

ACQUISITIONS OF OTHER COMPANIES CARRY RISK.

     Acquisitions of other companies involve numerous risks, including difficulties in the integration of the operations, technologies and products of the acquired companies, the potential exposure to unanticipated and undisclosed liabilities, the potential that expected benefits or synergies are not realized and that operating costs increase, the potential loss of key personnel, suppliers or customers of acquired businesses and the diversion of management’s time and attention from other business concerns. Although management will attempt to identify and evaluate the risks inherent in any future transaction, the Company may not properly ascertain all such risks.

CREDIT SHORTAGES COULD AFFECT THE PRICING OF THE COMPANY’S CREDIT FACILITY INCREASE OPTION.

     Tightening of the global credit markets could cause an increase in the pricing or fees related to the Company’s overall credit facility if the Company exercises its $50 million increase option.

DESPITE ITS EFFORTS, THE COMPANY MAY BE UNABLE TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY.

     Despite the Company’s efforts to protect its intellectual property, unauthorized parties or competitors may copy or otherwise obtain and use the Company’s products and technology, particularly in foreign countries where the laws may not protect the Company’s proprietary rights as fully as in the United States. Current and future actions to enforce the Company’s proprietary rights may result in substantial costs and

diversion of resources, and may not be successful. In addition, the Company may not elect to pursue an unauthorized user due to the high costs and uncertainties associated with litigation. The Company may also face exposure to claims by others challenging its intellectual property rights.

CHANGES IN TEST STANDARDS COULD ADVERSELY IMPACT TEST SEGMENT SALES.

     A significant portion of the Test segment’s business involves sales to technology customers, which results from these customers needing to meet specific international and domestic test standards. If demand for product testing from these customers decreases, the Company’s business could be adversely affected. Likewise, if regulatory agencies eliminate or reduce certain domestic or international test standards, the Company’s sales could be adversely affected. For example, if it were determined that there is no need to include Wi-Fi technology in mobile phones, there may be no need for certain testing on mobile phones. Also, if a regulatory authority relaxes the test standards for certain electronic devices because they do not interfere with the broadcast spectrum, sales of certain Test products could be reduced.

DISPUTES WITH CONTRACTORS COULD ADVERSELY AFFECT THE TEST SEGMENT’S COSTS.

     A major portion of the Test segment’s business involves working in conjunction with general contractors to produce end-products, such as electronic test chambers, secure communication rooms, MRI facilities, etc. If there are performance problems caused by either the Company or a contractor, these often result in cost overruns and may lead to a dispute as to which party is responsible. The resolution of such disputes can result in arbitration or litigation, and could involve significant expense including attorneys’ fees. In addition, these disputes may result in reduction in revenue, a loss on a particular project, or even a significant damages award against the Company.

THE LOSS OF SPECIALIZED KEY EMPLOYEES COULD AFFECT PERFORMANCE AND REVENUES.

     There is a risk of the Company’s losing key employees having engineering and technical expertise to other employers. For example, the Utility Solutions segment relies heavily on engineers with significant experience and reputation in the utility industry to furnish expert consulting services and support to customers. There is a current trend of a shortage of these qualified engineers because of hiring competition from other companies in the industry. Loss of these employees to other employers could reduce the segment’s ability to provide services and affect revenues negatively.

ENVIRONMENTAL OR REGULATORY REQUIREMENTS COULD INCREASE EXPENSES AND ADVERSELY AFFECT PROFITABILITY.

     The Company’s operations and properties are subject to U.S. and foreign environmental laws and regulations governing, among other things, the generation, storage, emission, discharge, transportation, treatment and disposal of hazardous materials and the clean up of contaminated properties. These regulations, and changes therein, could increase the cost of compliance. Failure to comply could result in the imposition of significant fines, suspension of production, alteration of product processes, cessation of operations or other actions, which could materially and adversely affect the Company’s business, financial condition and results of operations. For example, the Company is currently involved as a responsible party in several on-going investigations and remediations of contaminated properties, both Company-owned and off-site. Future costs associated with these situations are difficult to quantify. These and any future costs associated with environmental issues currently unknown could have a significant effect on the Company’s financial condition. See Item 1, Business-Environmental Matters for a discussion of these factors.

COMPETITION IS BROADLY BASED AND GLOBAL IN SCOPE.

     The Company faces competition from a large number of manufacturers and distributors for nearly all of its products. Some of the Company’s competitors are larger, more diversified corporations, global in scope, with greater financial, marketing, production and research and development resources. If the Company cannot compete successfully against current or future competitors, it could have a material adverse effect on the Company’s business, financial condition and results of operations.

FORWARD-LOOKING INFORMATION

     Statements contained in this Form 10-K regarding future events and the Company’s future results that are based on current expectations, estimates, forecasts and projections about the Company’s performance and the industries in which the Company operates, 2011 revenues, EBIT, adequacy of the Company’s credit facilities and future cash flows, the likelihood, size and timing of an AMI contract with SoCalGas, estimates of anticipated contract costs and revenues, anticipated future product deliveries by Aclara RF to PG&E, the timing of completion of the CFE and EMCALI AMI deployments, and the likelihood, timing and amount of any follow-on orders from CFE and EMCALI the anticipated timing of deliveries by Aclara RF to Toho and the city of Toronto, the anticipated timing of deliveries by VACCO for the U.S. Navy’s Virginia Class submarine program and the anticipated timing and value of deliveries for the U.S. Army’s T-700 valve program, the anticipated total value of TekPackaging’s five year production contract, the outcome of current litigation, claims and charges, the anticipated timing and amount of lost deferred tax assets, continued reinvestment of foreign earnings, the timing, total value and period of performance of contracts awarded to the Company, the accuracy of the Company’s estimates utilized in software revenue recognition, the accuracy of the Company’s estimates utilized to project costs at completion in the Test segment and Filtration segment, income tax liabilities, the effective tax rate, the amount, timing and ability to use net research tax credits, the timing and amount of the reduction of unrecognized tax benefits, repayment of debt within the next twelve months, the recognition of costs related to share-based compensation arrangements, future costs relating to environmental matters, share repurchases, investments, sustained performance improvement, performance improvement initiatives, growth opportunities, new product development, the Company’s ability to increase shareholder value, acquisitions, and the beliefs and assumptions of Management contained in the letter “To Our Shareholders”, and “Management’s Discussion and Analysis” in the 2010 Annual Report, and other statements contained herein which are not strictly historical are considered “forward-looking statements” within the meaning of the safe harbor provisions of the Federal securities laws. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, estimates, variations of such words, and similar expressions are intended to identify such forward-looking statements. Investors are cautioned that such statements are only predictions, speak only as of the date of this report, and the Company undertakes no duty to update. 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 those described herein under “Item 1A. Risk Factors” and the following: the success of negotiations and the ultimate terms and timing of any contract with SoCalGas; changes in requirements or financial constraints impacting SoCalGas; the receipt of necessary regulatory approvals pertaining to SoCalGas’ project; the timing and content of future customer orders; termination for convenience of customer contracts; timing and magnitude of future contract awards; weakening of economic conditions in served markets; the success of the Company’s competitors; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; the availability of selected acquisitions; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs of certain raw materials; labor disputes; changes in laws and regulations including but not limited to 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 1B. Unresolved Staff Comments

     None

Item 2. Properties

     The Company’s principal buildings contain approximately 1,121,458 square feet of floor space. Approximately 682,900 square feet are owned by the Company and approximately 438,558 square feet are leased. See Note 7 of the Notes to Consolidated Financial Statements in the 2010 Annual Report, which information is herein incorporated by reference. The principal plants and offices are as follows:

						Lease Expiration		Principal Use
Location		Size (Sq. Ft.)		Owned/Leased		Date		(Operating Segment)
Oxnard, CA		127,400		Owned				Management,
								Engineering and
								Manufacturing
								(Filtration)
Cedar Park, TX		118,000		Owned				Management,
								Engineering and
								Manufacturing
								(Test)
Cleveland, OH		111,258		Leased		9-1-2019		Management,
						(two 5-year renewal		Engineering and
						options)		Manufacturing
								(Utility Solutions)
South El Monte, CA		100,100		Owned				Management,
								Engineering and
								Manufacturing
								(Filtration)
Durant, OK		100,000		Owned				Manufacturing (Test)
Huntley, IL		85,000		Owned				Management and
								Manufacturing
								(Filtration)
Watertown, MA		78,500		Owned				Management,
								Engineering and
								Manufacturing
								(Utility Solutions)
St. Louis, MO		71,600		Leased		3-31-2013		Management and
						(one 5-year renewal		Engineering
						option)		(Utility Solutions)
Glendale Heights, IL		59,400		Leased		3-31-2015		Management,
						(one 5-year		Engineering and
						renewal option)		Manufacturing
								(Test)
Beijing, China		50,600		Leased		December, 2011		Manufacturing (Test)
Eura, Finland		40,900		Owned				Management,
								Engineering and
								Manufacturing
								(Test)
Palmdale, CA		39,100		Leased		7-31-2015		Management,
						(five 1-year		Engineering and
						renewal options)		Manufacturing
								(Filtration)
St. Louis, MO		33,000		Owned				Management and
								Engineering
								(Utility Solutions)
Minocqua, WI		30,200		Leased		3-31-2013		Engineering and
						(two 3-year renewal		Manufacturing
						options)		(Test)
St. Louis, MO		20,500		Leased		8-31-2015		ESCO Headquarters
						(one 5-year renewal
						option)
Wellesley, MA		18,500		Leased		9-30-2012		Management and
								Engineering
								(Utility Solutions)
Morrisville, NC		16,700		Leased		3-31-2014		Management (Utility
						(one 3-year renewal		Solutions)
						option)
Stevenage, England		12,200		Leased		8-11-2017		Management,
						(option to		Engineering and
						terminate in 2012)		Manufacturing
								(Test)
Kesselsdorf, Germany		8,500		Leased		5-31-2012		Management,
								Engineering and
								Manufacturing
								(Utility Solutions)

     The Company believes its buildings, machinery and equipment have been generally well maintained, are in good operating condition and are adequate for the Company’s current production requirements and other needs.

Item 3. Legal Proceedings

     As a normal incident of the businesses in which the Company is engaged, various claims, charges and litigation are asserted or commenced from time to time against the Company. With respect to claims and litigation asserted or commenced against the Company, it is the opinion of management that final judgments, if any, which might be rendered against the Company are adequately reserved or covered by insurance, and are not likely to have a material adverse effect on its financial condition or results of operation.

Item 4. (Removed and Reserved)

Executive Officers of the Registrant

     The following sets forth certain information as of November 24, 2010 with respect to ESCO’s executive officers. These officers have been elected to terms which expire at the first meeting of the Board of Directors after the next annual meeting of Stockholders.

Name		Age				Position(s)
Victor L. Richey, Jr.*			53			Chairman, President and Chief Executive Officer
Gary E. Muenster			50			Executive Vice President and Chief Financial Officer
Alyson S. Barclay			51			Senior Vice President, Secretary and General Counsel

     There are no family relationships among any of the executive officers and directors.

     Since April 2003, Mr. Richey has been Chairman and Chief Executive Officer of ESCO. Since October 2006, he has also been President.

     Mr. Muenster was Senior Vice President and Chief Financial Officer of ESCO from November 2005 until February 2008. Since the latter date, he has been Executive Vice President and Chief Financial Officer.

     Ms. Barclay was Vice President, Secretary and General Counsel of ESCO from October 1999 until November 2008. Since the latter date, she has been Senior Vice President, Secretary and General Counsel.

PART II

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

     The information required by this item is incorporated herein by reference to Notes 10 and 11 of the Notes to Consolidated Financial Statements, “Common Stock Market Price” and “Shareholders’ Summary—Capital Stock Information” appearing in the 2010 Annual Report. As of November 10, 2010, there were approximately 2,360 record holders of Common Stock (including Company employees holding shares under the Employee Stock Purchase Plan). No cash dividends on ESCO’s common stock were paid for fiscal years 2008 or 2009. However, the Board of Directors, on November 12, 2009, adopted a resolution to initiate quarterly cash dividends payable at an annual rate of $0.32 per share on the common stock. The first quarterly dividend of $0.08 per share was paid on January 19, 2010 to stockholders of record as of January 4, 2010. Like quarterly dividends have been, and will be, paid each quarter thereafter until such time as the Board of Directors may terminate or amend the dividend declaration.

ISSUER PURCHASES OF EQUITY SECURITIES*:

Approximate Dollar

Total Number of

Value of Shares that

Shares Purchased

May Yet Be

as Part of Publicly

Purchased Under

Total Number of

Average Price Paid

Announced Plans or

the Plans or

Period

Shares Purchased

per Share

Programs

Programs

July 1-31, 2010

0

N.A.

0

$30 Million

August 1-31, 2010

0

N.A.

0

$30 Million

Sep. 1-30, 2010

0

N.A.

0

$30 Million

Total

0

N.A.

0

$30 Million

Item 6. Selected Financial Data

     The information required by this item is incorporated herein by reference to “Five-Year Financial Summary” and Notes 2 and 3 of the Notes to Consolidated Financial Statements appearing in the 2010 Annual Report.

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

     The information required by this item is incorporated herein by reference to “Management’s Discussion and Analysis” appearing in the 2010 Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     The information required by this item is incorporated herein by reference to “Market Risk Analysis” and “Quantitative And Qualitative Disclosures About Market Risk” in “Management’s Discussion and Analysis” appearing in the 2010 Annual Report.

Item 8. Financial Statements and Supplementary Data

     The information required by this item is incorporated herein by reference to the Consolidated Financial Statements of the Company on pages 21 through 42 and the report thereon of KPMG LLP, an independent

registered public accounting firm, appearing on page 45 of the 2010 Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     Not Applicable.

Item 9A. Controls and Procedures

     The Company carried out an evaluation, under the supervision and with the participation of the Company’s 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 defined in Rules 13a-15(e) and 15d—15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 September 30, 2010. 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 Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

     Management’s Report on Internal Control Over Financial Reporting and the attestation report thereon of KPMG LLP are incorporated herein by reference to pages 44 and 45, respectively, in the 2010 Annual Report.

     There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

     None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

     Information regarding nominees and directors appearing under “Nominees and Continuing Directors” in the 2011 Proxy Statement is hereby incorporated by reference. Information regarding executive officers is set forth in Part I of this Form 10-K. Information regarding the Audit and Finance Committee and its members appearing under “Board of Directors and Committees” and under the separate section “Committees” in the 2011 Proxy Statement is hereby incorporated by reference.

     Information appearing under “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2011 Proxy Statement is hereby incorporated by reference.

     The Company has adopted codes of ethics which apply to its chief executive officer, chief financial officer, principal accounting officer, controller and all other senior executives, as well as all Company employees. The following documents are available free of charge through the Company’s internet website at www.escotechnologies.com and in print to any person who requests them: Corporate Governance Guidelines; Charters of the Audit and Finance Committee, Human Resources and Compensation Committee, and Nominating and Corporate Governance Committee; Code of Business Conduct and Ethics; and Code of Ethics for Senior Financial Officers. Direct your request for printed documents to Director of Investor Relations, ESCO Technologies Inc., 9900A Clayton Road, St. Louis, MO 63124.

Item 11. Executive Compensation

     Information appearing under “Board of Directors and Committees,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the 2011 Proxy Statement is hereby incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     The information regarding beneficial ownership of shares of common stock by nominees and directors, by executive officers, by directors and executive officers as a group and by any known five percent stockholders appearing under “Security Ownership of Directors and Executive Officers” and “Security Ownership of Certain Beneficial Owners” in the 2011 Proxy Statement is hereby incorporated by reference.

Equity Compensation Plan Information:

     The following table summarizes certain information regarding Common Shares that may be issued by the Company pursuant to its equity compensation plans existing as of September 30, 2010.

Number of securities

remaining available for

future issuance under

Number of securities to

Weighted-average

equity compensation

be issued upon exercise

exercise price of

plans (excluding

of outstanding options,

outstanding options,

securities reflected in

Plan Category

warrants and rights(1)

warrants and rights

column (a))(1)

(a)

(b)

(c)

Equity compensation plans approved by security holders (2)

1,066,107(3)

$

35.15(4)

1,585,918(5)(6)

Equity compensation plans not approved by security holders

0

N/A

178,718(7)

Total

1,066,107

$

35.15

1,764,636

Item 13. Certain Relationships and Related Transactions and Director Independence

     Information regarding the Company’s directors, nominees for directors and members of the committees of the board of directors, and their status of independence appearing under “Board of Directors and Committees” in the 2011 Proxy Statement is hereby incorporated by reference.

     There was no transaction since the beginning of the Company’s last fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest.

     The Company has implemented a written policy to ensure that all “Interested Transactions” with “Related Parties” will be at arm’s length and on terms generally available to an unaffiliated third-party under the same or similar circumstances. Interested Transactions are any Company transactions in which any Related Party has or will have a direct or indirect interest. Related Parties are executive officers, directors, director nominees and persons owning more than 5% of Company common stock, or any immediate family member of such parties. The policy contains procedures requiring Related Parties to notify the Company of potential Interested Transactions and for the Nominating and Corporate Governance Committee (“Committee”) to

review and approve or disapprove of such transaction. The Committee will consider whether the Interested Transaction with a Related Party is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances. If advance Committee approval is not feasible or is not obtained, the policy requires submission of the transaction to the Committee after the fact, and the Committee is empowered to approve, ratify, amend, rescind or terminate the transaction. In such event, the Committee will also request the General Counsel to evaluate the Company’s controls and procedures to ascertain whether any changes to the policy are recommended.

Item 14. Principal Accounting Fees and Services

     Information regarding the Company’s independent registered public accounting firm, its fees and services, and the Company’s Audit and Finance Committee’s pre-approval policies and procedures regarding such fees and services appearing under “Independent Registered Public Accounting Firm Services And Fees” in the 2011 Proxy Statement is hereby incorporated by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules

     (a) Documents filed as a part of this report:

	1.		The Consolidated Financial Statements of the Company on pages 21 through 42 and the Report of Independent Registered Public Accounting Firm thereon of KPMG LLP appearing on page 45 of the 2010 Annual Report.
	2.		Financial statement schedules have been omitted because the subject matter is disclosed elsewhere in the financial statements and notes thereto, not required or not applicable, or the amounts are not sufficient to require submission.

3.

Exhibits:

				Filed Herewith or Incorporated by
Exhibit				Reference to Document Indicated By
Number		Description		Footnote
3.1		Restated Articles of Incorporation		Incorporated by Reference, Exhibit 3(a)[1]
3.2		Amended Certificate of Designation, Preferences and Rights of Series A Participating Cumulative Preferred Stock of the Registrant		Incorporated by Reference, Exhibit 4(e)[2]
3.3		Articles of Merger effective July 10, 2000		Incorporated by Reference, Exhibit 3(c)[3]
3.4		Bylaws, as amended and restated		Incorporated by Reference, Exhibit 3.4[4]
3.5		Amendment to Bylaws effective February 2, 2007		Incorporated by Reference, Exhibit 3.5[30]
3.6		Amendment to Bylaws effective November 9, 2007		Incorporated by Reference, Exhibit 3.1[23]
4.1		Specimen revised Common Stock Certificate		Incorporated by Reference, Exhibit 4.1[34]
4.2		Credit Agreement dated as of November 30, 2007 among the Registrant, National City Bank and the lenders from time to time parties thereto.		Incorporated by Reference, Exhibit 4.1[31]
4.3		Amendment No. 1 to the Agreement listed at 4.2 above, with retroactive effect to November 12, 2009 among the Registrant, the lenders from time to time parties thereto, and PNC Bank, National Association (successor to National City Bank)		Incorporated by Reference, Exhibit 4.1[32]
10.1		Form of Indemnification Agreement with each of ESCO’s directors		Incorporated by Reference, Exhibit 10(k)[7]
10.2		Supplemental Executive Retirement Plan as amended and restated as of August 2, 1993*		Incorporated by Reference, Exhibit 10(n)[8]
10.3		Second Amendment to Supplemental Executive Retirement Plan effective May 1, 2001*		Incorporated by Reference, Exhibit 10.4[9]
10.4		Directors’ Extended Compensation Plan*		Incorporated by Reference, Exhibit 10(o)[8]

				Filed Herewith or Incorporated by
Exhibit				Reference to Document Indicated By
Number		Description		Footnote
10.5		First Amendment to Directors’ Extended Compensation Plan effective January 1, 2000*		Incorporated by Reference, Exhibit 10.11[10]
10.6		Second Amendment to Directors’ Extended Compensation Plan effective April 1, 2001*		Incorporated by Reference, Exhibit 10.7[9]
10.7		1994 Stock Option Plan (as amended and restated effective October 16, 2000)*		Incorporated by Reference, Exhibit 10.1[11]
10.8		Amendment to 1994 Stock Option Plan effective July 18, 2002*		Incorporated by Reference, Exhibit 10(b)[12]
10.9		Form of Incentive Stock Option Agreement*		Incorporated by Reference, Exhibit 10.15[10]
10.10		Severance Plan adopted as of August 10, 1995 (as restated February 5, 2002)*		Incorporated by Reference, Exhibit 10[13]
10.11		Amendment to 1994 Stock Option Plan effective August 7, 2003*		Incorporated by Reference, Exhibit 10.12[4]
10.12		1999 Stock Option Plan (as amended and restated effective October 16, 2000)*		Incorporated by Reference, Exhibit 10.2[11]
10.13		Form of Incentive Stock Option Agreement*		Incorporated by Reference, Exhibit 10.3[11]
10.14		Amendment to 1999 Stock Option Plan effective August 7, 2003*		Incorporated by Reference, Exhibit 10.15[4]
10.15		Employment Agreement with Executive Officer*[14]		Incorporated by Reference, Exhibit 10(bb)[1]
10.16		Amendment to Employment Agreement with Executive Officer*[15]		Incorporated by Reference, Exhibit 10.18[9]
10.17		Executive Stock Purchase Plan*		Incorporated by Reference, Exhibit 10.24[10]
10.18		Compensation Plan For Non-Employee Directors*		Incorporated by Reference, Exhibit 10.22[9]
10.19		2001 Stock Incentive Plan*		Incorporated by Reference, Exhibit B[16]
10.20		Form of Incentive Stock Option Agreement*		Incorporated by Reference, Exhibit 10.24[17]
10.21		Form of Non-qualified Stock Option Agreement*		Incorporated by Reference, Exhibit 10.25[17]
10.22		Form of Notice of Award—Performance— Accelerated Restricted Stock*		Incorporated by Reference, Exhibit 10.26[17]
10.23		Form of Supplemental Executive Retirement Plan Agreement*		Incorporated by Reference, Exhibit 10.28[17]

				Filed Herewith or Incorporated by
Exhibit				Reference to Document Indicated By
Number		Description		Footnote
10.24		Amendment to 2001 Stock Incentive Plan effective August 7, 2003*		Incorporated by Reference, Exhibit 10.29[4]
10.25		Sixth Amendment and Restatement of Employee Stock Purchase Plan effective as of October 15, 2003*		Incorporated by Reference, Appendix C[18]
10.26		Second Amendment to Employment Agreement with V.L. Richey, Jr. *		Incorporated by Reference, Exhibit 10.1[19]
10.27		Second Amendment to Employment Agreement with G.E. Muenster (identical document with A.S. Barclay)*		Incorporated by Reference, Exhibit 10.2[19]
10.28		2004 Incentive Compensation Plan*		Incorporated by Reference, Appendix B[18]
10.29		Fourth Amendment to Employment Agreement with A.S. Barclay*		Incorporated by Reference, Exhibit 10.1[21]
10.30		Performance Compensation Plan Amended and Restated as of November 25, 2002*		Incorporated by Reference, Exhibit 10.2[20]
10.31		Fourth Amendment to Incentive Compensation Plan for Executive Officers*
10.32		Eighth Amendment to Performance Compensation Plan*
10.33		Form of Incentive Stock Option Agreement under 2004 Incentive Compensation Plan*		Incorporated by Reference, Exhibit 10.6[20]
10.34		Form of Non-qualified Stock Option Agreement under 2004 Incentive Compensation Plan*		Incorporated by Reference, Exhibit 10.7[20]
10.35		Form of Incentive Stock Option Agreement under 2001 Stock Incentive Plan*		Incorporated by Reference, Exhibit 10.8[20]
10.36		Form of Non-qualified Stock Option Agreement under 2001 Stock Incentive Plan*		Incorporated by Reference, Exhibit 10.9[20]
10.37		Second Amendment to 2001 Stock Incentive Plan effective August 3, 2006*		Incorporated by Reference, Exhibit 10.39[22]
10.38		First Amendment to 2004 Incentive Compensation Plan effective August 3, 2006*		Incorporated by Reference, Exhibit 10.40[22]
10.39		Employment Agreement with C.J. Kretschmer effective October 1, 2006*		Incorporated by Reference, Exhibit 10.41[22]
10.40		Form of Exhibits (“Non-Compete” and “Change of Control”) to Option Agreements listed as 10.33 and 10.34, above*		Incorporated by Reference, Exhibit 10.42[24]

				Filed Herewith or Incorporated by
Exhibit				Reference to Document Indicated By
Number		Description		Footnote
10.41		Third Amendment to Directors’ Extended Compensation Plan effective October 3, 2007*		Incorporated by Reference, Exhibit 10.43[24]
10.42		Second Amendment to 2004 Incentive Compensation Plan effective October 3, 2007*		Incorporated by Reference, Exhibit 10.44[24]
10.43		Third Amendment to 2001 Stock Incentive Plan effective October 3, 2007*		Incorporated by Reference, Exhibit 10.45[24]
10.44		First Amendment to Incentive Compensation Plan for Executive Officers effective October 3, 2007*		Incorporated by Reference, Exhibit 10.46[24]
10.45		Amendment to 1999 Stock Option Plan effective October 3, 2007*		Incorporated by Reference, Exhibit 10.47[24]
10.46		Amendment to Severance Plan effective October 3, 2007*		Incorporated by Reference, Exhibit 10.48[24]
10.47		Amendment to Performance Compensation Plan effective October 3, 2007*		Incorporated by Reference, Exhibit 10.49[24]
10.48		Amendment to Compensation Plan for Non-Employee Directors effective October 3, 2007*		Incorporated by Reference, Exhibit 10.50[24]
10.49		Form of Notice of Award (2009) — Performance Accelerated Restricted Stock under 2001 Stock Incentive Plan*		Incorporated by Reference, Exhibit 10.51[29]
10.50		Third Amendment to Employment Agreement with V.L. Richey, Jr. *[25]		Incorporated by Reference, Exhibit 10.1[26]
10.51		Fourth Amendment to Employment Agreement with G.E. Muenster*		Incorporated by Reference, Exhibit 10.1[27]
10.52		Third Amendment to 2004 Incentive Compensation Plan effective October 1, 2007*		Incorporated by Reference, Appendix A[28]
10.53		Fourth Amendment to 2001 Stock Incentive Plan effective October 1, 2007*		Incorporated by Reference, Appendix B[28]
10.54		Amendment to 1999 Stock Option Plan effective October 3, 2007*		Incorporated by Reference, Appendix C[28]
10.55		Second Amendment to Incentive Compensation Plan for Executive Officers effective November 12, 2009*		Incorporated by Reference, Exhibit 10.55[6]
10.56		Board Committee Resolutions Regarding Interpretation of 1999, 2001 and 2004 Compensation Plans*		Incorporated by Reference, Exhibit 10.1[5]

				Filed Herewith or Incorporated by
Exhibit				Reference to Document Indicated By
Number		Description		Footnote
10.57		Fifth Amendment to 1999 Stock Option Plan *		Incorporated by Reference, Exhibit 10.2[5]
10.58		Fifth Amendment to 2001 Stock Incentive Plan*		Incorporated by Reference, Exhibit 10.3[5]
10.59		Fourth amendment to 2004 Incentive Compensation Plan*		Incorporated by Reference, Exhibit 10.4[5]
10.60		Sixth Amendment to 2001 Stock Incentive Plan*		Incorporated by Reference, Exhibit 10.5[5]
10.61		Compensation Recovery Policy*		Incorporated by Reference, Exhibit 10.6[5]
10.62		Form of Notice of Award —Performance-Accelerated Restricted Stock under 2001 Stock Incentive Plan*		Incorporated by Reference, Exhibit 10.7[5]
10.63		Form of Exhibits (“Non-Compete”, “Compensation Recovery Policy” and “Clawback”) to Incentive Stock Option Agreements and Non-qualified Stock Option Agreements under 2001 Stock Incentive Plan and 2004 Incentive Compensation Plan*		Incorporated by Reference, Exhibit 10.8[5]
10.64		Seventh Amendment to Performance Compensation Plan*		Incorporated by Reference, Exhibit 10.9[5]
10.65		Third Amendment to Incentive Compensation Plan for Executive Officers*		Incorporated by Reference, Exhibit 10.10[5]
13		The following-listed sections of the Annual Report to Stockholders for the year ended September 30, 2010:
		•   Management’s Discussion and Analysis (pgs. 10-20)
		•   Consolidated Financial Statements (pgs. 21-42)
		•   Management’s Report on Internal Control over Financial Reporting (p. 44)
		•   Report of Independent Registered Public Accounting Firm (p. 45)
		•   Five-year Financial Summary (p. 46)
		•   Common Stock Market Price (p. 46)
		•   Shareholders’ Summary—Capital Stock Information (p. 48)

				Filed Herewith or Incorporated by
Exhibit				Reference to Document Indicated By
Number		Description		Footnote
21		Subsidiaries of ESCO
23		Consent of Independent Registered Public Accounting Firm
31.1		Certification of Chief Executive Officer
31.2		Certification of Chief Financial Officer
32		Certification of Chief Executive Officer and Chief Financial Officer
101.INS		XBRL Instance Document		Incorporated by Reference, Exhibit 101.INS[33]
101.SCH		XBRL Schema Document		Incorporated by Reference, Exhibit 101.SCH[33]
101.CAL		XBRL Calculation Linkbase Document		Incorporated by Reference, Exhibit 101.CAL[33]
101.LAB		XBRL Label Linkbase Document		Incorporated by Reference, Exhibit 101.LAB[33]
101.PRE		XBRL Presentation Linkbase Document		Incorporated by Reference, Exhibit 101.PRE[33]
101.DEF		XBRL Definition Linkbase Document		Incorporated by Reference, Exhibit 101.DEF[33]

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). Users of this data are advised pursuant to Rule 406T of Regulation S-T that the interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise not subject to liability under these sections.

     (b) Exhibits: Reference is made to the list of exhibits in this Part IV, Item 15(a)3 above.

     (c) Financial Statement Schedules: Reference is made to Part IV, Item 15(a)2 above.

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on November 29, 2010, by the following persons on behalf of the registrant and in the capacities indicated.

SIGNATURE		TITLE
/s/ V.L. Richey, Jr.   V.L. Richey, Jr.		Chairman, President, Chief Executive Officer and Director
/s/ G.E. Muenster   G.E. Muenster		Executive Vice President and Chief Financial Officer, Principal Accounting Officer
/s/ J.M. McConnell   J.M. McConnell		Director
/s/ L.W. Solley   L.W. Solley		Director
/s/ J.M. Stolze   J.M. Stolze		Director
/s/ D.C. Trauscht   D.C. Trauscht		Director
/s/ J.D. Woods   J.D. Woods		Director

INDEX TO EXHIBITS

Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K.

Exhibit No.		Exhibit
10.31		Fourth Amendment to Incentive Compensation Plan for Executive Officers
10.32		Eighth Amendment to Performance Compensation Plan
13		The following-listed sections of the Annual Report to Stockholders for the year ended September 30, 2010:
		•   Management’s Discussion and Analysis (pgs. 10-20)
		•   Consolidated Financial Statements (pgs. 21-42)
		•   Management’s Report on Internal Control over Financial Reporting (p. 44)
		•   Report of Independent Registered Public Accounting Firm (p. 45)
		•   Five-year Financial Summary (p. 46)
		•   Common Stock Market Price (p. 46)
		•   Shareholders’ Summary—Capital Stock Information (p. 48)
21		Subsidiaries of ESCO
23		Consent of Independent Registered Public Accounting Firm
31.1		Certification of Chief Executive Officer
31.2		Certification of Chief Financial Officer
32		Certification of Chief Executive Officer and Chief Financial Officer

     See Item 15(a)3 for a list of exhibits incorporated by reference.

EXHIBIT 10.31

FOURTH AMENDMENT TO THE ESCO TECHNOLOGIES INC.
INCENTIVE COMPENSATION PLAN FOR EXECUTIVE OFFICERS

WHEREAS, ESCO Technologies Inc. (“Company”) adopted the ESCO Technologies Inc. Incentive Compensation Plan for Executive Officers (“Plan”); and

WHEREAS, pursuant to Section IX, the Plan may be amended by action of the Human Resources and Compensation Committee (“Committee”) of the Board of Directors of the Company; and

WHEREAS, the Committee desires to amend the Plan in accordance with the Compensation Recovery Policy adopted by the Committee;

NOW, THEREFORE, effective as of November 11, 2010, the Plan is amended by adding the following new Section XII at the end thereof:

XII. Covenants.

     In the event a Participant, during the period commencing with the payment of any Incentive Compensation Award and ending two (2) years after receipt of such payment but in any event at all times during the term of employment:

     (a) as an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, carries on any business or becomes involved in any business activity, which is (i) competitive with the business of the Company (or any affiliate of the Company), as presently conducted and as said business may evolve in the ordinary course, and (ii) a business or business activity in which the Participant is engaged in the course of the Participant’s employment with the Company (or any affiliate of the Company);

     (b) as an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, recruits, solicits or hires, or assists anyone else in recruiting, soliciting or hiring, any employee of the Company (or any affiliate of the Company), for employment with any competitor of the Company;

     (c) induces or attempts to induce, or assists anyone else to induce or attempt to induce, any customer of the Company (or any affiliate of the Company), to discontinue its business with the Company (or with any affiliate of the Company);

     (d) engages in the unauthorized use or disclosure of confidential information or trade secrets of the Company or its affiliates resulting in harm to the Company or its affiliates; or;

     (e) engages in intentional misconduct resulting in a financial restatement or in an increase in the Participant’s incentive or equity compensation (such conduct described in a-e above referred to herein as “Misconduct”).

The Company shall be entitled to recover from the Participant any Incentive Compensation Awards paid to the Participant during any period for which restatement of the Company’s financials is required in the event of Misconduct described in e above but not to exceed three years and for a three-year period preceding such Misconduct or preceding the Company’s discovery of such Misconduct in the case of Misconduct described in a-d above. The Committee shall have sole discretion in determining the amount that shall be recovered from the Participant under this Section XII provided that to the extent Incentive Compensation Awards have been recovered by the Company under the Company’s Dodd Frank Act Recovery Policy such amounts shall not be recoverable pursuant to this Policy.

IN WITNESS WHEREOF, the foregoing Amendment was adopted on the 11^th day of November 2010.

EXHIBIT 10.32

EIGHTH AMENDMENT TO THE ESCO TECHNOLOGIES INC.
PERFORMANCE COMPENSATION PLAN FOR CORPORATE, SUBSIDIARY
AND DIVISION OFFICERS AND KEY MANAGERS

WHEREAS, ESCO Technologies Inc. (“Company”) adopted the ESCO Technologies Inc. Performance Compensation Plan for Corporate, Subsidiary and Division Officers and Key Managers (“Plan”); and

WHEREAS, pursuant to Section X, the Plan may be amended by action of the Human Resources and Compensation Committee (“Committee”) of the Board of Directors of the Company; and

WHEREAS, the Committee desires to amend the Plan in accordance with the Compensation Recovery Policy adopted by the Committee;

NOW, THEREFORE, effective as of November 11, 2010, the Plan is amended by adding the following new Section XII at the end thereof:

     XII. Covenants.

     In the event a Participant, during the period commencing with the payment of any Performance Compensation Award and ending two (2) years after receipt of such payment but in any event at all times during the term of employment:

     (a) as an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, carries on any business or becomes involved in any business activity, which is (i) competitive with the business of the Company (or any affiliate of the Company), as presently conducted and as said business may evolve in the ordinary course, and (ii) a business or business activity in which the Participant is engaged in the course of the Participant’s employment with the Company (or any affiliate of the Company);

     (b) as an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, recruits, solicits or hires, or assists anyone else in recruiting, soliciting or hiring, any employee of the Company (or any affiliate of the Company), for employment with any competitor of the Company;

     (c) induces or attempts to induce, or assists anyone else to induce or attempt to induce, any customer of the Company (or any affiliate of the Company), to discontinue its business with the Company (or with any affiliate of the Company),

     (d) engages in the unauthorized use or disclosure of confidential information or trade secrets of the Company or its affiliates resulting in harm to the Company or its affiliates; or

     (e) engages in intentional misconduct resulting in a financial restatement or in an increase in the Participant’s incentive or equity compensation (such

conduct described in a-e above referred to herein as “Misconduct”).

The Company shall be entitled to recover from the Participant any Performance Compensation Awards paid to the Participant during any period for which restatement of the Company’s financials is required in the event of Misconduct described in e above but not to exceed three years and for a three-year period preceding such Misconduct or preceding the Company’s discovery of such Misconduct in the case of Misconduct described in a-d above. The Committee shall have sole discretion in determining the amount that shall be recovered from the Participant under this Section XII provided that to the extent Performance Compensation Awards have been recovered by the Company under the Company’s Dodd Frank Act Recovery Policy such amounts shall not be recoverable pursuant to this Policy.

IN WITNESS WHEREOF, the foregoing Amendment was adopted on the 11th day of November, 2010.

Exhibit 13

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto. The years 2010, 2009 and 2008 represent the fiscal years ended September 30, 2010, 2009 and 2008, respectively, and are used throughout the document.

Introduction

ESCO Technologies Inc. and its wholly owned subsidiaries (ESCO, the Company) are organized into three reportable operating segments: Utility Solutions Group (USG), RF Shielding and Test (Test), and Filtration/Fluid Flow (Filtration). The Company’s business segments are comprised of the following primary operating entities:

•		USG: Aclara Power-Line Systems Inc. (Aclara PLS), Aclara RF Systems Inc. (Aclara RF), Aclara Software Inc., including Xtensible Solutions, Inc. (Aclara Software), collectively (Aclara), and Doble Engineering Company (Doble),
•		Test: EMC Group companies consisting primarily of ETS-Lindgren L.P. (ETS) and Lindgren R.F. Enclosures, Inc. (Lindgren), and
•		Filtration: PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair) and TekPackaging LLC (TekPack).

USG: Aclara is a proven supplier of special purpose fixed-network communications systems for electric, gas and water utilities, including hardware and software to support advanced metering applications. Aclara’s STAR^® Network system and TWACS^® technology provide advanced radio-frequency (RF) and power-line (PLS) based fixed-network technologies proven to meet the wide-ranging data communications requirements of utilities worldwide. Aclara Software applications add value across the utility enterprise, addressing meter and energy data management, distribution planning and operations, customer service, revenue management and integration solutions. Doble provides high-end, intelligent diagnostic test solutions for the electric power delivery industry and is a leading supplier of power factor and partial discharge testing instruments used to assess the integrity of high-voltage power delivery equipment.

Test: The EMC Group is an industry leader in providing its customers with the ability to identify, measure and contain magnetic, electromagnetic and acoustic energy.

Filtration: The companies within this segment primarily design and manufacture specialty filtration products including hydraulic filter elements used in commercial aerospace applications, unique filter mechanisms used in micro-propulsion devices for satellites and custom designed filters for manned and unmanned aircraft.

ESCO continues to operate with meaningful growth prospects in its primary served markets and with considerable financial flexibility. The Company continues to focus on new products that incorporate proprietary design and process technologies. Management is committed to delivering shareholder value through internal growth, ongoing performance improvement initiatives, and selective acquisitions.

Highlights of 2010 Operations

•		Sales, net earnings and diluted earnings per share were $607.5 million, $44.8 million and $1.68 per share, respectively.
•		Net cash provided by operating activities was $67 million.
•		At September 30, 2010, cash on hand was $26.5 million; outstanding debt was $154 million, for a net debt position of $127.5 million.
•		Entered orders were $668.8 million resulting in a book-to-bill ratio of 1.1x. Backlog at September 30, 2010, was $360.6 million representing an increase of $61.2 million, or 20.4% from September 30, 2009.
•		In July 2010, the Company announced that Southern California Gas Co. (SoCalGas), a subsidiary of Sempra Energy, has selected Aclara RF and its STAR® Network for negotiation of a definitive agreement for SoCalGas’ AMI project. This contract is expected to be signed in mid-fiscal 2011 with deployment beginning in late 2011.
•		Aclara PLS received a $21 million order to supply products to Mexico’s electric utility Federal Commission of Electricity (CFE) related to CFE’s electric AMI deployment. The Company expects to receive a $20 million follow-on order in 2011.
•		Aclara PLS received a $5 million order from Colombia’s utility EMCALI EICE ESE (EMCALI) for its electric AMI project. The Company expects to receive a $5 million follow-on order in 2011.
•		The Company received $52 million of orders in 2010 and recorded $53.5 million in sales to Pacific Gas & Electric Company (PG&E) related to its gas AMI deployment. Cumulative-to-date orders from PG&E for the gas AMI deployment total 4.5 million units and $251 million through September 30, 2010.
•		The Company received $28 million in orders and recorded $29.7 million in sales to New York City related to the fixed-network water AMI project. Cumulative-to-date orders total 869,000 units and $67.1 million through September 30, 2010.
•		Effective July 31, 2010, the Company acquired Crissair for approximately $27 million in cash. Crissair is a leading supplier of fluid control components for the aerospace industry.
•		On September 3, 2010, the Company acquired Xtensible Solutions, Inc. (Xtensible). Xtensible is a provider of information management and integration solutions to the utility industry worldwide.
•		The Company initiated a quarterly cash dividend payable at an annual rate of $0.32 per share. The Company declared dividend payments of $8.4 million, with $6.3 million paid during 2010.

10		ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Results of Continuing Operations

NET SALES

														Change				Change
		Fiscal year ended												2010				2009
(Dollars in millions)		2010				2009				2008				vs. 2009				vs. 2008
USG		$	348.3				374.0				352.7				(6.9	)%			6.0	%
Test			138.4				138.4				144.8				—				(4.4	)%
Filtration			120.8				106.7				116.1				13.2	%			(8.1	)%
Total		$	607.5				619.1				613.6				(1.9	)%			0.9	%

USG

The net sales decrease of 6.9%, or $25.7 million in 2010 as compared to the prior year was due to: a $50.4 million decrease in net sales from Aclara RF due to lower Advanced Metering Infrastructure (AMI) gas and electric product deliveries at PG&E as the gas project nears completion; partially offset by an $18.2 million increase in net sales from Aclara PLS due to higher shipments to CFE, EMCALI and the Puerto Rico Electric Power Authority (PREPA); and a $6.7 million increase in net sales from Doble driven by an increase in service and product revenues.

The Company’s total sales to PG&E were $55.9 million in 2010 (representing approximately 9% of the Company’s consolidated net sales), $106.2 million in 2009 (representing approximately 17% of the Company’s consolidated net sales) and $110.2 million in 2008 (representing approximately 18% of the Company’s consolidated net sales).

The 6%, or $21.3 million increase in net sales in 2009 as compared to 2008 was due to: a $48.8 million increase in net sales from Aclara RF primarily due to higher gas product AMI deliveries at PG&E and the shipment of water AMI products for the New York City water project; a $9.9 million increase in net sales from Doble reflecting the impact of a full twelve months of operations versus ten months in 2008; a $3.9 million increase in net sales at Aclara Software; partially offset by a $41.3 million decrease in net sales at Aclara PLS, mainly driven by a $31.9 million decrease in sales to PG&E for the electric AMI deployment.

Test

Net sales for the segment were consistent in 2010 and 2009. However, there was a $4.1 million increase in net sales from the segment’s European operations due to an improvement in the European medical business and the shipment of a large military project; a $2.9 million increase in net sales from the segment’s Asian operations due to higher chamber shipments; partially offset by a $6.9 million decrease in net sales from the segment’s U.S. operations driven by a decrease in small test and measurement projects domestically.

The net sales decrease of $6.4 million, or 4.4% in 2009 as compared to the prior year was mainly due to: a $7.2 million decrease in net sales from the segment’s European operations due to the timing of large chamber deliveries to the international wireless and electronics end-markets; a decrease in component shipments and unfavorable foreign currency impacts; and a $3.2 million decrease in net sales from the segment’s Asian operations due to a decrease in large chamber deliveries. This decrease was partially offset by a $4 million increase in net sales from the segment’s U.S. operations driven by an increase in domestic chamber deliveries.

Filtration

The 13.2%, or $14.1 million increase in net sales in 2010 as compared to the prior year was due to: a $5 million increase in net sales at PTI due to higher shipments of aerospace assemblies and elements; the acquisition of Crissair with a net sales contribution of $4 million (representing two months of sales); a $2.8 million increase in net sales at VACCO driven by higher shipments of space products; and a $2.3 million increase at TekPack due to higher sales to commercial customers.

Net sales in 2009 decreased $9.4 million, or 8.1%, compared to 2008 primarily due to: a $12.4 million decrease in net sales at PTI due to lower commercial aerospace shipments; a $2.1 million decrease in net sales at TekPack due to lower sales to commercial customers; partially offset by a $5.1 million increase in net sales at VACCO driven by higher military/defense aircraft product shipments.

ORDERS AND BACKLOG

New orders received in 2010 were $668.8 million as compared to $634 million in 2009, resulting in order backlog of $360.6 million at September 30, 2010, as compared to order backlog of $299.4 million at September 30, 2009. In 2010, the Company recorded $369.4 million of orders related to USG products, $158.5 million related to Test products, and $140.9 million related to Filtration products (including $15.3 million related to the Crissair acquisition). Orders are entered into backlog as firm purchase order commitments are received.

In 2009, the Company recorded $363.2 million of orders related to USG products, $122.8 million related to Test products, and $148 million related to Filtration products.

The Company received orders from PG&E for gas and electric AMI products of $54 million, $80 million and $111.8 million during 2010, 2009 and 2008, respectively. Cumulative-to-date orders from PG&E for the gas AMI deployment total 4.5 million units and $251 million through September 30, 2010.

Aclara RF received $28 million in orders from the City of New York for its fixed-network AMI water project in 2010.

In December 2009, Aclara PLS received a $21 million order to supply products to Mexico’s electric utility CFE related to its electric AMI deployment and a $5 million order from Colombia’s utility EMCALI for its electric AMI project. These deployments are expected to be completed in the first half of fiscal 2011. The Company is anticipating a $20 million follow-on order from CFE and a $5 million follow-on order from EMCALI in 2011.

ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT		11

MANAGEMENT’S DISCUSSION AND ANALYSIS

In January 2010, Aclara RF received a contract from the Toho Water Authority of Kissimmee, Florida, (Toho) related to its AMI water project with orders expected to total $9 million over a five-year deployment period. In addition, Aclara RF received a contract from Neptune Technology Group Ltd. to supply products for the City of Toronto, Canada’s, AMI water project with orders anticipated to total $34 million over a six-year deployment period. The Company also received a $13 million order from the San Francisco Public Utilities Commission related to its AMI water project.

In July 2010, VACCO finalized a $41 million contract to provide the next seven ship-sets of valves and manifolds for the U.S. Navy’s Virginia Class submarine program with product deliveries from 2010 through 2014.

In July 2010, the Company announced that Southern California Gas Co. (SoCalGas), a subsidiary of Sempra Energy, has selected Aclara RF and its STAR^® Network for negotiation of a definitive agreement for SoCalGas’ AMI project.

In August 2010, VACCO was awarded a five-year contract with orders anticipated to be valued at up to $35 million to supply T-700 anti-icing valves for use on U.S. Army UH-60 series Black Hawk helicopters with product deliveries expected to begin in fiscal 2011.

2009

Aclara RF received $37.4 million in orders from the City of New York for its fixed-network AMI water project during 2009.

Aclara PLS recorded $12.4 million in orders from Idaho Power Company during 2009 for its electric AMI project.

Aclara PLS recorded $10.2 million and $22.4 million in orders from PREPA during 2009 and 2008, respectively.

Aclara Software received an order for approximately $5 million from the City of Tallahassee, Florida, for a system-wide implementation of its Meter Data Management System (MDMS) and ENERGYprism^® AMI software applications.

TekPackaging LLC was awarded a five-year production contract with an initial purchase order received for $11.7 million. The total value of purchase orders anticipated under this contract is between $40 million to $50 million.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses (SG&A) were $157.3 million, or 26% of net sales in 2010, $152.4 million, or 24.6% of net sales in 2009, and $147.3 million, or 24% of net sales in 2008.

The increase in SG&A expenses in 2010 as compared to the prior year was due to increases in new product development, marketing and engineering expenses at Doble; an increase in SG&A within the Test segment to support the international marketplace expansion; and an increase within the Filtration segment due to higher engineering expenses.

The increase in SG&A expenses in 2009 as compared to the prior year was primarily due to a $5 million increase related to Doble, reflecting a full year versus ten months in the prior year.

AMORTIZATION OF INTANGIBLE ASSETS

Amortization of intangible assets was $11.6 million in 2010, $19.2 million in 2009 and $17 million in 2008. The Company recorded $4.5 million, $12.2 million and $11 million in 2010, 2009 and 2008, respectively, related to Aclara PLS’s TWACS NG capitalized software. Amortization of intangible assets included $4.8 million, $4.7 million and $4.2 million of amortization of acquired intangible assets related to the Company’s acquisitions in 2010, 2009 and 2008, respectively. The amortization of acquired intangible assets related to the Company’s acquisitions is included in the Corporate operating segment’s results. The remaining amortization expenses consist of other identifiable intangible assets (primarily software, patents and licenses).

During 2010, the Company re-evaluated the economic useful life of its TWACS NG capitalized software as a result of the successful acceptance in the international markets and concluded the remaining TWACS NG asset value has an expected remaining useful life of ten years (compared to its previous useful life of seven years).

OTHER EXPENSES, NET

Other expenses, net, were $2.9 million, $4.5 million and $0.2 million in 2010, 2009 and 2008, respectively. The principal item included in other expenses, net, in 2010 consisted of approximately $1.5 million of severance expenses. The principal item included in other expenses, net, in 2009 consisted of $2.3 million of facility exit/relocation charges incurred in connection with the move of the Aclara RF facility consisting of leasehold improvement write-offs, lease contract termination costs and physical move costs. There were no other individually significant items included in other expenses, net, in 2010, 2009 or 2008.

EARNINGS BEFORE INTEREST AND TAXES (EBIT)

The Company evaluates the performance of its operating segments based on EBIT, which the Company defines as earnings before interest and taxes. EBIT is not a defined GAAP measure. However, the Company believes that EBIT provides investors and Management with a valuable and alternative method for assessing the Company’s operating results. 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

12		ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

consolidated basis. EBIT is also one of the measures Management uses to determine resource allocations and incentive compensation.

EBIT

														Change				Change
		Fiscal year ended												2010				2009
(Dollars in millions)		2010				2009				2008				vs. 2009				vs. 2008
USG		$	67.4				62.5				66.6				7.8	%			(6.2	)%
% of net sales			19.4	%			16.7	%			18.9	%			2.7	%			(2.2	)%
Test			12.2				14.1				13.9				(13.5	)%			1.4	%
% of net sales			8.8	%			10.2	%			9.6	%			(1.4	)%			0.6	%
Filtration			19.5				18.1				21.2				7.7	%			(14.6	)%
% of net sales			16.1	%			17.0	%			18.3	%			(0.9	)%			(1.3	)%
Corporate			(25.5	)			(24.1	)			(20.6	)			5.8	%			17.0	%
Total		$	73.6				70.6				81.1				4.2	%			(12.9	)%
% of net sales			12.1	%			11.4	%			13.2	%			0.7	%			(1.8	)%

The reconciliation of EBIT to a GAAP financial measure is as follows:

(Dollars in millions)		2010				2009				2008
EBIT		$	73.6				70.6				81.1
Less: Interest expense			(4.0	)			(7.4	)			(9.8	)
Less: Income taxes			(24.8	)			(13.9	)			(23.7	)
Net earnings from continuing operations		$	44.8				49.3				47.6

USG

The $4.9 million increase in EBIT in 2010 as compared to 2009 was due to: a $3 million increase in EBIT from Aclara primarily due to increased sales volumes at Aclara PLS along with a decrease in amortization for the TWACS NG capitalized software; and a $1.9 million increase in EBIT from Doble related to the increased sales volumes.

The $4.1 million decrease in EBIT in 2009 as compared to 2008 was due to: a decrease in EBIT from Aclara due to lower margins on product sales; a $2.3 million charge related to the Aclara RF facility relocation, mentioned in other expenses, net, above; and an increase in amortization for the TWACS NG capitalized software. Additionally, 2008 included $15 million of EBIT associated with the PG&E/Aclara PLS deferred revenue recognized in 2008.

Test

The $1.9 million decrease in EBIT in 2010 as compared to the prior year was due to: a decrease in EBIT from the Company’s U.S. operations due to changes in product mix; higher SG&A expenses to support the international marketplace expansion; partially offset by a $1.4 million increase in EBIT from the Company’s European and Asian operations related to the increased sales volumes.

The $0.2 million increase in EBIT in 2009 as compared to the prior year was due to a reduction of the segment’s SG&A expenses.

Filtration

EBIT increased $1.4 million in 2010 as compared to 2009 primarily due to increased sales volumes and favorable overhead absorption at VACCO.

EBIT decreased $3.1 million in 2009 as compared to 2008 due to: lower commercial aerospace shipments at PTI; and an increase in research and development costs and higher bid and proposal costs incurred in the pursuit of a significant number of Space-related projects at VACCO.

Corporate

Corporate operating charges included in consolidated EBIT increased $1.4 million in 2010 as compared to 2009 primarily due to transaction costs related to acquisition activity, including professional fees.

Corporate operating charges included in consolidated EBIT increased by $3.5 million in 2009 as compared to 2008 primarily due to: a $0.9 million increase in share-based compensation expense; and a $0.5 million increase in amortization of acquired intangible assets.

The “Reconciliation to Consolidated Totals (Corporate)” in Note 15 to the Consolidated Financial Statements represents Corporate office operating charges.

INTEREST EXPENSE, NET

Interest expense was $4 million in 2010 compared to $7.4 million in 2009 and $9.8 million in 2008, respectively. The decrease in interest expense in 2010 as compared to the prior years was due to lower average interest rates (1.9% vs. 3.3%) and lower average outstanding borrowings ($171 million vs. $211 million) under the revolving credit facility.

INCOME TAX EXPENSE

The 2010 effective tax rate from continuing operations was 35.6% compared to 22% in 2009 and 33.3% in 2008. The increase in the 2010 effective tax rate as compared to the prior year was due primarily to the absence of certain non-recurring items, such as the decrease in the tax liabilities related to uncertain tax positions recorded in 2009 for the fiscal years 2003 through 2007, of which $3.5 million, or 5.5% was the result of the closing of a U.S. taxing authority’s examination of the Company’s research credit claims; and $5 million, or 7.9% was the result of the confirmation of the Company’s tax position for the deduction of losses realized on the disposition of the MicroSep business in 2004. The overall decrease in uncertain tax positions reduced 2009 income tax expense by $8.6 million and the effective tax rate by 13.6%.

The decrease in the 2009 effective tax rate as compared to 2008 was also due primarily to the decrease in uncertain tax positions (tax liabilities) recorded in 2009 for the fiscal years 2003 through 2007. In addition, the impact of an export incentive reduced 2008 income tax expense by $1.6 million and the effective tax rate by 2.2%.

ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT		13

MANAGEMENT’S DISCUSSION AND ANALYSIS

Capital Resources and Liquidity

Working capital (current assets less current liabilities) decreased to $109.4 million at September 30, 2010 from $116.2 million at September 30, 2009, due to lower cash balances on hand and higher payables.

The $32.5 million increase in accounts receivable at September 30, 2010, is mainly due to: $18.4 million related to the USG segment and $7.8 million related to the Test segment, both driven by timing and volume of sales; and $3.1 million related to the Crissair acquisition. The $11.9 million increase in accounts payable at September 30, 2010, is mainly due to $7.7 million related to the Test segment due to timing of payments.

Net cash provided by operating activities from continuing operations was $67 million, $77.5 million and $77.1 million in 2010, 2009 and 2008, respectively. The decrease in 2010 as compared to prior years is related to changes in operating working capital requirements.

Capital expenditures were $13.4 million, $9.3 million and $16.7 million in 2010, 2009 and 2008, respectively. The increase in 2010 as compared to 2009 was due to approximately $4.5 million for manufacturing equipment and ERP software within the Filtration segment. The decrease in 2009 as compared to 2008 was primarily due to the ETS Austin, Texas, facility expansion that occurred during 2008 within the Test segment and lower facility expansion costs at Aclara PLS. There were no commitments outstanding that were considered material for capital expenditures at September 30, 2010. In addition, the Company incurred expenditures for capitalized software of $8.8 million, $5 million and $10.5 million in 2010, 2009 and 2008, respectively.

ACQUISITIONS

2010

Effective July 31, 2010, the Company acquired the capital stock of Crissair, Inc. (Crissair) for a purchase price of approximately $27 million, net of cash acquired. Crissair, headquartered in Palmdale, California, is a manufacturer of high-quality hydraulic, fuel and pneumatic system components for the aerospace industry. The operating results for Crissair, since the date of acquisition, are included within the Filtration segment. The Company recorded approximately $9 million of goodwill as a result of the transaction, $4.3 million of trade names and $7.4 million of amortizable identifiable intangible assets consisting of customer relationships.

On September 3, 2010, the Company acquired the capital stock of Xtensible Solutions, Inc. (Xtensible) for a purchase price of approximately $4 million in cash plus contingent consideration valued at approximately $12 million. Xtensible is a provider of information management and integration solutions to the utility industry worldwide and its operating results, since the date of acquisition, are included within Aclara Software in the USG segment. The agreement includes contingent consideration to be paid out over the next three and one-half years based on target revenues. The Company recorded approximately $15 million of goodwill as a result of the transaction.

2009

On September 21, 2009, the Company acquired a minority interest in Firetide, Inc. for $4 million in cash. Firetide, Inc. is a provider of wireless infrastructure mesh network management systems which will enable communications with other Smart Grid assets and this technology will be used in Aclara’s Acendant Network solution. This investment is accounted for under the cost method and is included in Other assets on the Company’s Consolidated Balance Sheet as of September 30, 2010.

On July 2, 2009, the Company acquired certain assets of Complus Systems Pvt Ltd. (Complus) in India for approximately $1.2 million in cash and formed a new Indian entity. The entity operates as ETS-India and its operating results, since the date of acquisition, are included within the Test segment.

2008

On November 30, 2007, the Company acquired the capital stock of Doble for a purchase price of approximately $328 million, net of cash acquired. Doble, headquartered in Watertown, Massachusetts, is a worldwide leader in providing high-end intelligent diagnostic test solutions for the electric utility industry. The operating results for Doble, since the date of acquisition, are included within the USG segment.

On July 31, 2008, the Company acquired the capital stock of Doble Lemke GmbH and Doble Lemke AG (collectively “Lemke”, formerly named “LDIC”) for a purchase price of approximately $13 million, net of cash acquired. Lemke is a manufacturer of partial discharge diagnostic testing instruments and systems serving the international electric utility industry. The operating results for Lemke, since the date of acquisition, are included within Doble in the USG segment.

All of the Company’s acquisitions have been accounted for using the purchase method of accounting, and accordingly, the respective purchase prices were allocated to the assets (including intangible assets) acquired and liabilities assumed based on estimated fair values at the date of acquisition. The financial results from these acquisitions have been included in the Company’s financial statements from the date of acquisition.

DIVESTITURES

2009

On March 13, 2009, the Company completed the sale of the business and most of the assets of Comtrak for $3.1 million, net, of cash. This business is reflected as a discontinued operation in the financial statements and related notes for all periods presented.

14		ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Comtrak’s operations were previously included within the Company’s USG segment. A pretax loss of $1.2 million related to the sale and its 2009 results of operations are reflected in the Company’s fiscal 2009 results in discontinued operations.

2008

On November 25, 2007, the Company completed the sale of the filtration portion of Filtertek Inc. (Filtertek) to Illinois Tool Works Inc. for $74.4 million, net. The Filtertek businesses are accounted for as discontinued operations in the financial statements and related notes for all periods presented. A pretax loss of $0.2 million related to Filtertek is reflected in the Company’s fiscal 2008 results in discontinued operations. Filtertek’s operations were included within the Company’s Filtration segment prior to divestiture.

BANK CREDIT FACILITY

At September 30, 2010, the Company had approximately $163 million available to borrow under its credit facility, plus a $50 million increase option, in addition to $26.5 million cash on hand. At September 30, 2010, the Company had outstanding borrowings of $154 million, and outstanding letters of credit of $13 million. The Company classified $50 million as the current portion on long-term debt as of September 30, 2010, as the Company intends to repay this amount within the next twelve months; however, the Company has no contractual obligation to repay such amount during the next twelve months. The Company’s ability to access the additional $50 million increase option of the credit facility is subject to acceptance by participating or other outside banks.

Cash flow from operations and borrowings under the bank credit facility are expected to provide adequate resources to meet the Company’s capital requirements and operational needs for the foreseeable future.

The credit facility requires, as determined by certain financial ratios, a facility fee ranging from 15 to 25 basis points per annum on the unused portion. The terms of the facility provide that interest on borrowings may be calculated at a spread over the LIBOR or based on the prime rate, at the Company’s election. The credit facility is secured by the unlimited guaranty of the Company’s material domestic subsidiaries and a 65% pledge of the material foreign subsidiaries’ share equity. The financial covenants of the credit facility include a leverage ratio and an interest coverage ratio. As of September 30, 2010, the Company was in compliance with all bank covenants.

DIVIDENDS

During 2010, the Company initiated a quarterly cash dividend payable at an annual rate of $0.32 per share. The Company declared dividend payments of $8.4 million, with $6.3 million paid during 2010.

OUTLOOK — 2011

Management expects 2011 consolidated revenues and EPS to increase approximately ten to fifteen percent compared to 2010. In addition, the 2011 effective tax rate is projected to be approximately 37%. During 2011, the Company anticipates gas AMI product deliveries to PG&E will be significantly lower than the quantities delivered in 2010 as the contract is entering the later stages of deployment. The current outlook for 2011 PG&E gas product sales is expected to decrease approximately $30 million in 2011 as compared to 2010. The Company is expected to sign a definitive agreement for the SoCalGas AMI project during mid-fiscal 2011. On a quarterly basis, Management expects 2011 revenues and EPS to be second-half weighted, but not as severely as during 2010.

CONTRACTUAL OBLIGATIONS

The following table shows the Company’s contractual obligations as of September 30, 2010:

(Dollars in millions)		Payments due by period
						Less												More
Contractual						than				1 to 3				3 to 5				than
Obligations		Total				1 year				years				years				5 years
Long-Term Debt Obligation		$	154.0				50.0				104.0				—				—
Estimated Interest Payments(1)			6.8				2.2				4.1				0.5				—
Operating Lease Obligations			27.3				7.0				10.8				5.6				3.9
Purchase Obligations(2)			5.4				5.4				—				—				—
Total		$	193.5				64.6				118.9				6.1				3.9

As of September 30, 2010, the Company had $3.2 million of liabilities for uncertain tax positions. The unrecognized tax benefits have been excluded from the table above due to uncertainty as to the amounts and timing of settlement with taxing authorities.

The Company has no off-balance-sheet arrangements outstanding at September 30, 2010.

ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT		15

MANAGEMENT’S DISCUSSION AND ANALYSIS

SHARE REPURCHASES

In July 2010, the Company’s Board of Directors extended its previously authorized open market common stock repurchase program of the Company’s shares at a value not to exceed $30 million, subject to market conditions and other factors which covers the period through September 30, 2012. There were no stock repurchases during 2010, 2009 or 2008.

PENSION FUNDING REQUIREMENTS

The minimum cash funding requirements related to the Company’s defined benefit pension plans are approximately $3 million in 2011, approximately $3.5 million in 2012 and approximately $3 million in 2013.

OTHER

Management believes that, for the periods presented, inflation has not had a material effect on the Company’s results of operations.

The Company is currently involved in various stages of investigation and remediation relating to environmental matters. Based on current information available, Management does not believe the aggregate costs involved in the resolution of these matters will have a material adverse effect on the Company’s operating results, capital expenditures or competitive position.

Market Risk Analysis

MARKET RISK EXPOSURE

Market risks relating to the Company’s operations result primarily from changes in interest rates and changes in foreign currency exchange rates. The Company is exposed to market risk related to changes in interest rates and selectively uses derivative financial instruments, including forward contracts and swaps, to manage these risks. During 2009, the Company entered into two $40 million one-year forward interest rate swaps effective October 5, 2009, to hedge some of its exposure to variability in future LIBOR-based interest payments on variable rate debt. During 2010, the Company entered into a $60 million one-year amortizing forward interest rate swap effective October 5, 2010. All derivative instruments are reported on the balance sheet at fair value. The derivative instrument is designated as a cash flow hedge and the gain or loss on the derivative is deferred in accumulated other comprehensive income until recognized in earnings with the underlying hedged item. Based on the interest rate swaps outstanding, the interest rates on approximately 50% of the Company’s total borrowings were effectively fixed as of September 30, 2010. The Company has determined that the market risk related to interest rates with respect to its variable debt that is not hedged is not material. The Company estimates that if market interest rates averaged one percentage point higher, the effect would have been less than 2% of net earnings for the year ended September 30, 2010. The following is a summary of the notional transaction amounts and fair values for the Company’s outstanding derivative financial instruments by risk category and instrument type, as of September 30, 2010.

(Dollars in thousands)		Notional				Average				Average				Fair
		Amount				Rec Rate				Pay Rate				Value
Interest rate swaps		$	80,000				0.26	%			1.52	%		$	(13	)
Interest rate swap*		$	60,000				N/A				1.10	%		$	(469	)

The Company is also subject to foreign currency exchange rate risk inherent in its sales commitments, anticipated sales, anticipated purchases and assets and liabilities denominated in currencies other than the U.S. dollar. The foreign currency most significant to the Company’s operations is the Euro. Net sales to customers outside of the United States were $141.4 million, $110.7 million, and $130.9 million in 2010, 2009 and 2008, respectively. The Company hedges certain foreign currency commitments by purchasing foreign currency forward contracts. The estimated fair value of open forward contracts at September 30, 2010 was not material. The Company does not have material foreign currency market risk (e.g. net foreign currency transaction gain/loss was less than 2% of net earnings for fiscal years 2010, 2009 and 2008).

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires Management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements. In preparing these financial statements, Management has made its best estimates and judgments of certain amounts included in the Consolidated Financial Statements, giving due consideration to materiality. The Company does not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. The Company’s senior Management discusses the critical accounting policies described below with the Audit and Finance Committee of the Company’s Board of Directors on a periodic basis.

The following discussion of critical accounting policies is intended to bring to the attention of readers those accounting policies which Management believes are critical to the Consolidated Financial Statements and other financial disclosure. It is not intended to be a comprehensive list of all significant accounting policies that are more fully described in Note 1 of Notes to Consolidated Financial Statements.

16		ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

REVENUE RECOGNITION

USG Segment: Within the USG segment, approximately 96% of the segment’s revenue arrangements (approximately 60% of consolidated revenues) contain software components. Revenue under these arrangements is recognized in accordance with FASB ASC Subtopic 985-605, Software — Revenue Recognition. The application of software revenue recognition requires judgment, including the determination of whether a software arrangement includes multiple elements and estimates of the fair value of the elements, or vendor-specific objective evidence of fair value (“VSOE”). Changes to the elements in a software arrangement, and the ability to identify VSOE for those elements could materially impact the amount of earned and/or deferred revenue. There have been no material changes to these estimates for the financial statement periods presented and the Company believes that these estimates generally should not be subject to significant variation in the future. The remaining 4% of the segment’s revenues represent products sold under a single element arrangement and are recognized when services are performed for unaffiliated customers or when products are delivered (when title and risk of ownership transfers).

Test Segment: Within the Test segment, approximately 40% of revenues (approximately 10% of consolidated revenues) are recognized when products are delivered (when title and risk of ownership transfers) or when services are performed for unaffiliated customers. Certain arrangements contain multiple elements which are accounted for under the provisions of FASB ASC Subtopic 605-25, Revenue Recognition: Multiple-Element Arrangements. The application of the applicable guidance requires judgment as to whether the deliverables can be divided into more than one unit of accounting and whether the separate units of accounting have value to the customer on a stand-alone basis. Changes to these elements could affect the timing of revenue recognition. There have been no material changes to these elements for the financial statement periods presented.

Approximately 60% of the segment’s revenues (approximately 15% of consolidated revenues) are recorded under the percentage-of-completion provisions of FASB ASC Subtopic 605-35, Revenue Recognition: Construction-Type and Production-Type Contracts due to the complex nature of the enclosures that are designed and produced under these contracts. As discussed above, this method of accounting involves the use of various estimating techniques to project costs at completion, which are based on Management’s judgment and the Company’s substantial experience in developing these types of estimates. Changes in underlying assumptions/estimates may adversely or positively affect financial performance. Due to the nature of these contracts and the operating unit’s cost estimating process, the Company believes that these estimates generally should not be subject to significant variation in the future. There have been no material changes to these estimates for the financial statement periods presented. The Company regularly reviews its contract estimates to assess revisions in contract values and estimated costs at completion.

Filtration Segment: Within the Filtration segment, approximately 60% of segment revenues (approximately 10% of consolidated revenues) are recognized when products are delivered (when title and risk of ownership transfers) or when services are performed for unaffiliated customers.

Approximately 40% of segment revenues (approximately 5% of consolidated revenues) are recorded under the percentage-of-completion provisions of FASB ASC Subtopic 605-35, Revenue Recognition: Construction-Type and Production-Type Contracts because the Company manufactures complex products for aerospace and military customers under production contracts. The percentage-of-completion method of accounting involves the use of various estimating techniques to project costs at completion. These estimates involve various assumptions and projections relative to the outcome of future events over a period of several years, including future labor productivity and availability, the nature and complexity of the work to be performed, availability of materials, the impact of delayed performance, and the timing of product deliveries. These estimates are based on Management’s judgment and the Company’s substantial experience in developing these types of estimates. Changes in underlying assumptions/estimates may adversely affect financial performance if they increase estimated project costs at completion, or positively affect financial performance if they decrease estimated project costs at completion. Due to the nature of these contracts and the operating unit’s cost estimating process, the Company believes that these estimates generally should not be subject to significant variation in the future. There have been no material changes to these estimates for the financial statement periods presented. The Company regularly reviews its estimates to assess revisions in contract values and estimated costs at completion.

INVENTORY

Inventories are valued at the lower of cost (first-in, first-out) or market value. Management regularly reviews inventories on hand compared to historical usage and estimated future usage and sales. Inventories under long-term contracts reflect accumulated production costs, factory overhead, initial tooling and other related costs less the portion of such costs charged to cost of sales and any unliquidated progress payments. In accordance with industry practice, costs incurred on contracts in progress include amounts relating to programs having production cycles longer than one year, and a portion thereof may not be realized within one year.

ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT		17

MANAGEMENT’S DISCUSSION AND ANALYSIS

INCOME TAXES

The Company operates in numerous taxing jurisdictions and is subject to examination by various U.S. Federal, state and foreign jurisdictions for various tax periods. Additionally, the Company has retained tax liabilities and the rights to tax refunds in connection with various divestitures of businesses in prior years. The Company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which the Company does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions, as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, Management’s estimates of income tax liabilities may differ from actual payments or assessments.

Management regularly assesses the Company’s position with regard to tax exposures and records liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of FASB ASC Topic 740, Income Taxes (ASC 740). The Company has recorded an accrual that reflects the recognition and measurement process for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return based upon ASC 740. Additional future income tax expense or benefit may be recognized once the positions are effectively settled. It is the Company’s policy to follow FASB ASC 740-10-45-20 and record the tax effects of changes in the opening balance of unrecognized tax benefits in net earnings from continuing operations.

At the end of each interim reporting period, Management estimates the effective tax rate expected to apply to the full fiscal year. The estimated effective tax rate contemplates the expected jurisdiction where income is earned, as well as tax planning strategies. Current and projected growth in income in higher tax jurisdictions may result in an increasing effective tax rate over time. If the actual results differ from Management’s estimates, Management may have to adjust the effective tax rate in the interim period if such determination is made.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets may be reduced by a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance when Management believes it is more likely than not such assets will not be recovered, taking into consideration historical operating results, expectations of future earnings, tax planning strategies, and the expected timing of the reversals of existing temporary differences.

GOODWILL AND OTHER LONG-LIVED ASSETS

In accordance with FASB ASC Topic 350, Intangibles — Goodwill and Other (ASC 350), Management annually reviews goodwill and other long-lived assets with indefinite useful lives for impairment or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. If the Company determines that the carrying value of the long-lived asset may not be recoverable, a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Fair value is measured based on a discounted cash flow method using a discount rate determined by Management to be commensurate with the risk inherent in the Company’s current business model. The estimates of cash flows and discount rate are subject to change due to the economic environment, including such factors as interest rates, expected market returns and volatility of markets served. Management believes that the estimates of future cash flows and fair value are reasonable; however, changes in estimates could result in impairment charges. At September 30, 2010, the Company has determined that no reporting units are at risk of material goodwill impairment as the fair value of all reporting units substantially exceeded its carrying value. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed annually for impairment.

PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS

The measurement of liabilities related to pension plans and other postretirement benefit plans is based on Management’s assumptions related to future events including interest rates, return on pension plan assets, rate of compensation increases, and health care cost trend rates. Actual pension plan asset performance will either decrease or increase unamortized pension losses that will affect net earnings in future years. Depending upon the performance of the equity and bond markets in 2011, the Company could be required to record a charge to equity. In addition, if the discount rate was decreased by 25 basis points from 5% to 4.75%, the projected benefit obligation for the defined benefit plan would increase by approximately $2.4 million and result in an additional after-tax charge to shareholders’ equity of approximately $1.5 million. The discount rate used in measuring the Company’s pension and postretirement welfare obligations was developed by matching yields of actual high-quality corporate bonds to expected future pension plan cash flows (benefit payments). Over 400 Aa-rated, non-callable bonds with a wide range of maturities were used in the analysis. After using the bond yields to determine the present value of the plan cash flows, a single representative rate that resulted in the same present value was developed.

18		ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 are adequately reserved, covered by insurance, or otherwise are not likely to have a material adverse effect on its financial condition or results of operation.

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. The Company is exposed to market risk related to changes in interest rates and selectively uses derivative financial instruments, including forward contracts and swaps, to manage these risks. During 2009, the Company entered into two $40 million one-year forward interest rate swaps effective October 5, 2009, to hedge some of its exposure to variability in future LIBOR-based interest payments on variable rate debt. During 2010, the Company entered into a $60 million one-year amortizing forward interest rate swap effective October 5, 2010. All derivative instruments are reported on the balance sheet at fair value. The derivative instrument is designated as a cash flow hedge and the gain or loss on the derivative is deferred in accumulated other comprehensive income until recognized in earnings with the underlying hedged item. See further discussion in “Management’s Discussion and Analysis — Market Risk Analysis” regarding the Company’s market risks.

CONTROLS AND PROCEDURES

The Company carried out an evaluation under the supervision of 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 are effective. 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 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no significant changes in the Company’s internal controls or in other factors during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

New Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued Update No. 2009-13, Multiple-Deliverable Revenue Arrangements (ASU 2009-13) and Update No. 2009-14, Certain Revenue Arrangements That Include Software Elements (ASU 2009-14) — Consensuses of the FASB Emerging Issues Task Force. ASU 2009-13 applies to multiple-deliverable revenue arrangements that are currently within the scope of Subtopic 605-25 and provides two significant changes: (i) requires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price and (ii) eliminates the residual method to allocate the arrangement consideration. The consensus also expands the disclosure requirements for multiple-deliverable revenue arrangements. ASU 2009-14 removes tangible products from the scope of the software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are within the scope of the software revenue guidance. These consensuses are to be applied on a prospective basis for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The adoption of these consensuses is not expected to have a material impact on the Company’s financial position or results of operations.

Forward-Looking Information

Statements regarding future events and the Company’s future results that are based on current expectations, estimates, forecasts and projections about the Company’s performance and the industries in which the Company operates, 2011 revenues, EBIT, adequacy of the Company’s credit facilities and future cash flows, the likelihood, size and timing of an AMI contract with SoCalGas, estimates of anticipated contract costs and revenues, anticipated future product deliveries by Aclara RF to PG&E, the timing of completion of the CFE and EMCALI AMI deployments, the likelihood, timing and amounts of any follow-on orders from CFE and EMCALI, the anticipated value and timing of deliveries by Aclara RF to Toho and the city of Toronto, the anticipated timing of deliveries by VACCO for the U.S. Navy’s Virginia Class submarine program and the anticipated timing and value of deliveries for the U.S. Army’s T-700 valve program, the anticipated total value of TekPackaging’s five year production contract, the outcome of current litigation, claims and charges, the anticipated timing and amount of lost deferred tax assets, continued reinvestment of foreign earnings, the timing, total value and period of performance of contracts awarded to the Company, the accuracy of the Company’s estimates utilized in software revenue recognition, the accuracy of the Company’s estimates utilized to project costs at completion in the Test segment and Filtration segment, income tax liabilities, the effective tax rate, the amount, timing and ability to use net research tax

ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT		19

MANAGEMENT’S DISCUSSION AND ANALYSIS

credits, the timing and amount of the reduction of unrecognized tax benefits, repayment of debt within the next twelve months, the recognition of costs related to share-based compensation arrangements, future costs relating to environmental matters, share repurchases, investments, sustained performance improvement, performance improvement initiatives, growth opportunities, new product development, the Company’s ability to increase shareholder value, acquisitions, and the beliefs and assumptions of Management contained in the letter To Our Shareholders (pages 1-3), and Management’s Discussion and Analysis and other statements contained herein which are not strictly historical are considered “forward-looking statements” within the meaning of the safe harbor provisions of the Federal securities laws. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, estimates, variations of such words, and similar expressions are intended to identify such forward-looking statements. Investors are cautioned that such statements are only predictions, speak only as of the date of this report, and the Company undertakes no duty to update. 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 those described under “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2010, and the following: the success of negotiations and the ultimate terms and timing of any contract with SoCalGas; changes in requirements or financial constraints impacting SoCalGas; the receipt of necessary regulatory approvals pertaining to SoCalGas’ project; the timing and content of future customer orders; termination for convenience of customer contracts; timing and magnitude of future contract awards; weakening of economic conditions in served markets; the success of the Company’s competitors; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; the availability of selected acquisitions; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs of certain raw materials; labor disputes; changes in laws and regulations including but not limited to changes in accounting standards and taxation requirements; costs relating to environmental matters; litigation uncertainty; and the Company’s successful execution of internal operating plans.

20		ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)
Years ended September 30,		2010				2009				2008
Net sales		$	607,493				619,064				613,566
Costs and expenses:
Cost of sales			361,942				372,351				367,951
Selling, general and administrative expenses			157,348				152,397				147,324
Amortization of intangible assets			11,633				19,214				17,044
Interest expense, net			3,977				7,450				9,808
Other expenses, net			2,928				4,480				161
Total costs and expenses			537,828				555,892				542,288
Earnings before income tax			69,665				63,172				71,278
Income tax expense			24,819				13,867				23,709
Net earnings from continuing operations		$	44,846				49,305				47,569
Earnings (loss) from discontinued operations, net of tax of $568 and $229 in 2009 and 2008, respectively			—				135				(282	)
Loss on sale of discontinued operations, net of tax of $905 and $157 in 2009 and 2008, respectively			—				(32	)			(576	)
Net earnings (loss) from discontinued operations			—				103				(858	)
Net earnings		$	44,846				49,408				46,711
Earnings (loss) per share:
Basic:
Continuing operations		$	1.70				1.88				1.84
Discontinued operations			—				—				(0.04	)
Net earnings		$	1.70				1.88				1.80
Diluted:
Continuing operations			1.68				1.86				1.81
Discontinued operations			—				—				(0.03	)
Net earnings		$	1.68				1.86				1.78
Average common shares outstanding (in thousands):
Basic			26,450				26,216				25,909
Diluted			26,738				26,560				26,315

See accompanying Notes to Consolidated Financial Statements.

ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT		21

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)
Years ended September 30,		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	26,508				44,630
Accounts receivable, less allowance for doubtful accounts of $1,885 and $1,457 in 2010 and 2009, respectively			141,098				108,620
Costs and estimated earnings on long-term contracts, less progress billings of $12,189 and $19,861 in 2010 and 2009, respectively			12,743				10,758
Inventories			83,034				82,020
Current portion of deferred tax assets			15,809				20,417
Other current assets			17,169				13,750
Total current assets			296,361				280,195
Property, plant and equipment:
Land and land improvements			4,986				4,996
Buildings and leasehold improvements			50,318				49,181
Machinery and equipment			75,721				71,773
Construction in progress			5,970				2,290
			136,995				128,240
Less accumulated depreciation and amortization			64,432				58,697
Net property, plant and equipment			72,563				69,543
Goodwill			355,656				330,719
Intangible assets, net			229,736				221,600
Other assets			19,975				21,630
Total Assets		$	974,291				923,687

See accompanying Notes to Consolidated Financial Statements.

22		ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)
Years ended September 30,		2010				2009
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt		$	50,000				50,000
Accounts payable			59,088				47,218
Advance payments on long-term contracts, less costs incurred of $19,547 and $17,484 in 2010 and 2009, respectively			5,729				2,840
Accrued salaries			23,762				20,465
Current portion of deferred revenue			21,907				20,215
Accrued other expenses			26,494				23,247
Total current liabilities			186,980				163,985
Pension obligations			29,980				27,483
Deferred tax liabilities			79,388				78,471
Other liabilities			17,961				5,941
Long-term debt			104,000				130,467
Total liabilities			418,309				406,347
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 29,839,343 and 29,771,103 shares in 2010 and 2009, respectively			298				298
Additional paid-in capital			270,943				265,794
Retained earnings			359,274				322,878
Accumulated other comprehensive loss, net of tax			(14,793	)			(11,598	)
			615,722				577,372
Less treasury stock, at cost (3,338,986 and 3,357,046 common shares in 2010 and 2009, respectively)			(59,740	)			(60,032	)
Total shareholders’ equity			555,982				517,340
Total Liabilities and Shareholders’ Equity		$	974,291				923,687

See accompanying Notes to Consolidated Financial Statements.

ESCO TECHNOLOGIES INC. 2010 ANNUAL REPORT		23

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

																		Accumulated
										Additional								Other
		Common Stock								Paid-In				Retained				Comprehensive				Treasury
(In thousands)		Shares				Amount				Capital				Earnings				Income (Loss)				Stock				Total
Balance, September 30, 2007			29,160			$	292				243,131				226,759				6,303				(61,002	)			415,483
Comprehensive income:
Net earnings			—				—				—				46,711				—				—				46,711
Translation adjustments			—				—				—				—				(869	)			—				(869	)
Net unrecognized actuarial loss, net of tax of $2,506			—				—				—				—				(4,043	)			—				(4,043	)
Interest rate swap, net of tax of $512			—				—				—				—				(835	)			—				(835	)
Comprehensive income																											40,964
Stock options and stock compensation plans, net of tax benefit of $(845)			305				3				11,109				—				—				678				11,790
Balance, September 30, 2008			29,465				295				254,240				273,470				556				(60,324	)			468,237
Comprehensive income:
Net earnings			—				—				—				49,408				—				—				49,408
Translation adjustments			—				—				—				—				(707	)			—				(707	)
Net unrecognized actuarial loss, net of tax of $7,488			—				—				—				—				(11,393	)			—				(11,393	)
Interest rate swap, net of tax of $62			—				—				—				—				(54	)			—				(54	)
Comprehensive income																											37,254
Stock options and stock compensation plans, net of tax benefit of $(325)			306				3				11,554				—				—				292				11,849
Balance, September 30, 2009			29,771				298				265,794				322,878				(11,598	)			(60,032	)			517,340
Comprehensive income:
Net earnings			—				—				—				44,846				—				—				44,846
Translation adjustments			—				—				—				—				(1,557	)			—				(1,557	)
Net unrecognized actuarial loss, net of tax of $1,422			—				—				—				—				(2,234	)			—				(2,234	)
Interest rate swap, net of tax of $(385)			—				—				—				—				596				—				596
Comprehensive income																											41,651
Cash dividends declared($0.32 per share)			—				—				—				(8,450	)			—				—				(8,450	)
Stock options and stock compensation plans, net of tax benefit of $(105)			68				—				5,149				—				—				292				5,441
Balance, September 30, 2010			29,839			$	298				270,943				359,274				(14,793	)			(59,740	)			555,982