**FORM        10-Q**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | QUARTERLY                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                  ACT OF                  1934  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                        |
|  x                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | For                  the quarterly period ended                                                                                             | March                  24, 2007 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                        |
| OR                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | TRANSITION                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                  ACT OF                  1934 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                        |
|  o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | For                  the transition period from                                                                                             |   | to |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Commission                  file number                                                                                                     | 1-367 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| **THE                  L. S. STARRETT COMPANY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (Exact                  name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| MASSACHUSETTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                        | 04-1866480 |
| (State                  or other jurisdiction of incorporation or organization)                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                        | (I.R.S.                  Employer Identification No.) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 121                  CRESCENT STREET, ATHOL, MASSACHUSETTS                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 01331-1915                                                                                                                                  |
| (Address                  of principal executive offices)                                                                                                                                                                                                                                                                                                                                                                                                                                                          | (Zip                  Code)                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Registrant's                  telephone number, including area code                                                                                                                                                                                                                                                                                                                                                                                                                                                | 978-249-3551                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Former                  name, address and fiscal year, if changed since last                  report                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Indicate                  by check mark whether the registrant: (1) has filed all reports                  required                  to be filed by Section 13 or 15(d) of the Securities Exchange Act                  of 1934                  during the preceding 12 months (or for such shorter period that                  the                  registrant was required to file such reports), and (2) has been                  subject to                  such filing requirements for the past 90 days. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| YES                  x   NO                  o                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Indicate                  by check mark whether the registrant is a large accelerated filer,                  an                  accelerated filer, or a non-accelerated filer. See definition of                  “accelerated filer and large accelerated filer” in Rule 12b-2 of the                  Exchange Act, (Check One):                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Large                  Accelerated Filer o    Accelerated                  Filer x    Non-Accelerated                  Filer o                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Indicate                  by check mark whether the registrant is a shell company (as defined                  in                  Rule 12b-2 of the Exchange Act).                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| YES                  o NO                  x                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Common                  Shares outstanding as of                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | April                  30, 2007                                                                                                             |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                        |
| Class                  A Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 5,646,929                                                                                                                                   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                        |
| Class                  B Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 975,815                                                                                                                                     |   |

----

|                                                                                                                                                                                                 |   | Page                  No. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|
|                                                                                                                                                                                                 |   |                      |
| Part                  I. Financial                  Information:                                                                                                                                |   |                      |
|                                                                                                                                                                                                 |   |                      |
| Item                  1. Financial                  Statements                                                                                                                                  |   |                      |
|                                                                                                                                                                                                 |   |                      |
| Consolidated                  Statements of Operations - thirteen                  weeks and thirty-nine weeks ended March 24, 2007 and March 25,                  2006                  (unaudited) |   | 3                         |
|                                                                                                                                                                                                 |   |                      |
| Consolidated                  Statements of Cash Flows - thirteen                  and thirty-nine weeks ended March 24, 2007 and March 25, 2006                  (unaudited)                        |   | 4                         |
|                                                                                                                                                                                                 |   |                      |
| Consolidated                  Balance Sheets - March                  24, 2007 (unaudited) and June 24, 2006                                                                                         |   | 5                         |
|                                                                                                                                                                                                 |   |                      |
| Consolidated                  Statements of Stockholders' Equity - thirty-nine                  weeks ended March 24, 2007 and March 25, 2006 (unaudited)                                            |   | 6                         |
|                                                                                                                                                                                                 |   |                      |
| Notes                  to Consolidated Financial Statements                                                                                                                                          |   | 7-9                       |
|                                                                                                                                                                                                 |   |                      |
| Item                  2. Management's                  Discussion and Analysis of Financial Condition and Results of                  Operations                                                |   | 10-15                     |
|                                                                                                                                                                                                 |   |                      |
| Item                  3. Quantitative                  and Qualitative Disclosures About Market Risk                                                                                            |   | 15                        |
|                                                                                                                                                                                                 |   |                      |
| Item                  4. Controls                  and Procedures                                                                                                                               |   | 15                        |
|                                                                                                                                                                                                 |   |                      |
| Part                  II. Other information:                                                                                                                                                         |   |                      |
|                                                                                                                                                                                                 |   |                      |
| Item                  2. Unregistered                  Sales of Equity Securities and Use of Proceeds                                                                                           |   | 15                        |
|                                                                                                                                                                                                 |   |                      |
| Item                  6. Exhibits                                                                                                                                                               |   | 16                        |
|                                                                                                                                                                                                 |   |                      |
| SIGNATURES                                                                                                                                                                                           |   | 16                        |

----

|                                                                                                        |   | 13                  Weeks Ended |    | 39                  Weeks Ended |   |
|-------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|---------------------------------|--------|
|                                                                                                        |   | 3/24/07                         |    | 3/25/06                         |   | 3/24/07 |   | 3/25/06 |   |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |
| Net                  sales                                                                                  |   | $                               | 54,448  |                            | $      | 49,359 |   | $ | 162,650 |   | $ | 148,501 |   |
| Cost                  of goods sold                                                                         |   |                            | (38,329 | )                               |   | (37,319 | ) |   | (116,658 | ) |   | (115,179 | ) |
| Selling                  and general expense                                                                |   |                            | (13,782 | )                               |   | (12,455 | ) |   | (41,083 | ) |   | (37,859 | ) |
| Other                  income (expense)                                                                     |   |                            | (460    | )                               |   | 137 |   |   | (942 | ) |   | (288 | ) |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
| Earnings                  (loss) before income taxes                                                        |   |                            | 1,877   |                            |   | (278 | ) |   | 3,967 |   |   | (4,825 | ) |
| Income                  tax (benefit) expense                                                               |   |                            | 563     |                            |   | (53 | ) |   | 1,190 |   |   | (1,760 | ) |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
| Net                  earnings (loss)                                                                        |   | $                               | 1,314   |                            | $      | (225 | ) | $ | 2,777 |   | $ | (3,065 | ) |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
| Basic                  and diluted earnings (loss) per share                                                |   | $                               | 0.20    |                            | $      | (0.03 | ) | $ | 0.42 |   | $ | (0.46 | ) |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
| Average                  outstanding shares used in per share calculations (in                  thousands): |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
|     Basic                                                                               |   |                            | 6,680   |                            |   | 6,666 |   |   | 6,677 |   |   | 6,663 |   |
|     Diluted                                                                             |   |                            | 6,690   |                            |   | 6,666 |   |   | 6,685 |   |   | 6,663 |   |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |
| Dividends                  per share                                                                        |   | $                               | 0.10    |                            | $      | 0.10 |   | $ | 0.30 |   | $ | 0.30 |   |
|                                                                                                        |   |                            |    |                            |   |   |   |   |   |   |   |   |   |

----

|                                                                   |   | 13                  Weeks Ended |   | 39                  Weeks Ended |   |
|------------------------------------------------------------------------|--------|---------------------------------|--------|---------------------------------|--------|
|                                                                   |   | 3/24/07                         |   | 3/25/06                         |   | 3/24/07 |   | 3/25/06 |   |
|                                                                   |   |                            |   |                            |   |   |   |   |   |
| Cash                  flows from operating activities:                 |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Net                  earnings (loss)                                   |   | $                               | 1,314  |                            | $      | (225 | ) | $ | 2,777 |   | $ | (3,065 | ) |
| Non-cash                  items included:                              |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Gain                  from sale of real estate                         |   |                            | -      |                            |   | - |   |   | (299 | ) |   | - |   |
| Depreciation                                                           |   |                            | 2,001  |                            |   | 2,576 |   |   | 7,332 |   |   | 7,678 |   |
| Amortization                                                           |   |                            | 265    |                            |   | - |   |   | 838 |   |   | - |   |
| Deferred                  taxes                                        |   |                            | 784    |                            |   | 51 |   |   | 708 |   |   | (344 | ) |
| Unrealized                  transaction (gains) losses                 |   |                            | (59    | )                               |   | (71 | ) |   | (202 | ) |   | (266 | ) |
| Retirement                  benefits                                   |   |                            | (380   | )                               |   | (65 | ) |   | (1,144 | ) |   | (196 | ) |
| Working                  capital changes:                              |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Receivables                                                            |   |                            | 2,704  |                            |   | 2,335 |   |   | (716 | ) |   | (392 | ) |
| Inventories                                                            |   |                            | 693    |                            |   | 1,651 |   |   | 3,121 |   |   | 1,471 |   |
| Other                  current assets                                  |   |                            | (407   | )                               |   | (228 | ) |   | 230 |   |   | (531 | ) |
| Other                  current liabilities                             |   |                            | (1,886 | )                               |   | (1,822 | ) |   | (3,579 | ) |   | (1,092 | ) |
| Prepaid                  pension cost and other                        |   |                            | 311    |                            |   | (794 | ) |   | 281 |   |   | (510 | ) |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Net                  cash from operating activities                    |   |                            | 5,340  |                            |   | 3,408 |   |   | 9,347 |   |   | 2,753 |   |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Cash                  flows from investing activities:                 |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Additions                  to plant and equipment                      |   |                            | (834   | )                               |   | (1,421 | ) |   | (3,356 | ) |   | (4,632 | ) |
| Proceeds                  from sale of real estate                     |   |                            | -      |                            |   | - |   |   | 394 |   |   |   |   |
| (Increase)                  decrease in investments                    |   |                            | (1,677 | )                               |   | 946 |   |   | (585 | ) |   | 5,508 |   |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Net                  cash provided from investing activities           |   |                            | (2,511 | )                               |   | (475 | ) |   | (3,547 | ) |   | 876 |   |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Cash                  flows from financing activities:                 |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Proceeds                  from short-term borrowings                   |   |                            | 2,115  |                            |   | - |   |   | 3,443 |   |   | 1,220 |   |
| Short-term                  debt repayments                            |   |                            | (1,048 | )                               |   | (810 | ) |   | (3,585 | ) |   | (2,114 | ) |
| Proceeds                  from long-term debt borrowings               |   |                            | 157    |                            |   | 121 |   |   | 578 |   |   | 192 |   |
| Long-term                  debt repayments                             |   |                            | -      |                            |   | (291 | ) |   | - |   |   | (605 | ) |
| Common                  stock issued                                   |   |                            | 77     |                            |   | 80 |   |   | 331 |   |   | 219 |   |
| Treasury                  shares purchased                             |   |                            | (484   | )                               |   | (78 | ) |   | (519 | ) |   | (248 | ) |
| Dividends                                                              |   |                            | (666   | )                               |   | (668 | ) |   | (2,003 | ) |   | (2,000 | ) |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Net                  cash provided from (used in) financing activities |   |                            | 151    |                            |   | (1,646 | ) |   | (1,755 | ) |   | (3,336 | ) |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Effect                  of exchange rate changes on cash               |   |                            | (21    | )                               |   | 45 |   |   | 156 |   |   | 81 |   |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |
| Net                  increase in cash                                  |   |                            | 2,959  |                            |   | 1,332 |   |   | 4,201 |   |   | 374 |   |
| Cash,                  beginning of period                             |   |                            | 5,218  |                            |   | 3,521 |   |   | 3,976 |   |   | 4,479 |   |
| Cash,                  end of period                                   |   | $                               | 8,177  |                            | $      | 4,853 |   | $ | 8,177 |   | $ | 4,853 |   |
|                                                                   |   |                            |   |                            |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                                                     |   | March                  242007(unaudited) |    | June                  24 2006 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|-------------------------------|--------|
|                                                                                                                                                                     |   |                                     |    |                          |   |
| ASSETS                                                                                                                                                                   |   |                                     |    |                          |   |   |   |
| Current                  assets:                                                                                                                                         |   |                                     |    |                          |   |   |   |
| Cash                                                                                                                                                                     |   | $                                        | 8,177   |                          | $      | 3,976 |   |
| Investments                                                                                                                                                              |   |                                     | 20,333  |                          |   | 19,424 |   |
| Accounts                  receivable (less allowance for doubtful accounts of $1,758 and                  $1,417)                                                        |   |                                     | 34,072  |                          |   | 31,768 |   |
| Inventories:                                                                                                                                                             |   |                                     |    |                          |   |   |   |
| Raw                  materials and supplies                                                                                                                              |   |                                     | 14,158  |                          |   | 13,902 |   |
| Goods                  in process and finished parts                                                                                                                     |   |                                     | 19,018  |                          |   | 18,336 |   |
| Finished                  goods                                                                                                                                          |   |                                     | 21,541  |                          |   | 23,740 |   |
|                                                                                                                                                                     |   |                                     | 54,717  |                          |   | 55,978 |   |
| Current                  deferred income tax asset                                                                                                                       |   |                                     | 4,708   |                          |   | 4,518 |   |
| Prepaid                  expenses, other current assets                                                                                                                  |   |                                     | 3,749   |                          |   | 3,720 |   |
| Total                  current assets                                                                                                                                    |   |                                     | 125,756 |                          |   | 119,384 |   |
|                                                                                                                                                                     |   |                                     |    |                          |   |   |   |
| Property,                  plant and equipment, at cost (less accumulated depreciation of                  $121,047                  and $114,843)                       |   |                                     | 60,046  |                          |   | 60,924 |   |
| Intangible                  assets (less accumulated amortization of $972 and $134)                                                                                      |   |                                     | 4,328   |                          |   | 3,882 |   |
| Goodwill                                                                                                                                                                 |   |                                     | 5,260   |                          |   | 8,580 |   |
| Prepaid                  pension cost                                                                                                                                    |   |                                     | 35,000  |                          |   | 34,551 |   |
| Other                  assets                                                                                                                                            |   |                                     | 919     |                          |   | 761 |   |
|                                                                                                                                                                     |   | $                                        | 231,309 |                          | $      | 228,082 |   |
|                                                                                                                                                                     |   |                                     |    |                          |   |   |   |
|                                                                                                                                                                     |   |                                     |    |                          |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS' EQUITY                                                                                                                    |   |                                     |    |                          |   |   |   |
| Current                  liabilities:                                                                                                                                    |   |                                     |    |                          |   |   |   |
| Notes                  payable and current maturities                                                                                                                    |   | $                                        | 7,078   |                          | $      | 5,119 |   |
| Accounts                  payable and accrued expenses                                                                                                                   |   |                                     | 15,398  |                          |   | 15,744 |   |
| Accrued                  current income tax                                                                                                                              |   |                                     | 5,399   |                          |   | 5,436 |   |
| Accrued                  salaries and wages                                                                                                                              |   |                                     | 3,987   |                          |   | 4,849 |   |
| Total                  current liabilities                                                                                                                               |   |                                     | 31,862  |                          |   | 31,148 |   |
|                                                                                                                                                                     |   |                                     |    |                          |   |   |   |
| Deferred                  income taxes                                                                                                                                   |   |                                     | 3,464   |                          |   | 2,627 |   |
| Long-term                  debt                                                                                                                                          |   |                                     | 10,888  |                          |   | 13,054 |   |
| Accumulated                  postretirement benefit obligation                                                                                                           |   |                                     | 15,552  |                          |   | 16,011 |   |
| Total                  liabilities                                                                                                                                       |   |                                     | 61,766  |                          |   | 62,840 |   |
|                                                                                                                                                                     |   |                                     |    |                          |   |   |   |
| Stockholders'                  equity:                                                                                                                                   |   |                                     |    |                          |   |   |   |
| Class                  A Common $1 par (20,000,000 shrs. authorized) 5,680,679                  outstanding on 3/24/07,5,628,642                  outstanding on 6/24/06 |   |                                     | 5,681   |                          |   | 5,629 |   |
| Class                  B Common $1 par (10,000,000 shrs. authorized) 982,065                  outstanding on 3/24/07,1,040,215                  outstanding on 6/24/06   |   |                                     | 982     |                          |   | 1,040 |   |
| Additional                  paid-in capital                                                                                                                              |   |                                     | 50,433  |                          |   | 50,569 |   |
| Retained                  earnings reinvested and employed in the business                                                                                               |   |                                     | 124,687 |                          |   | 123,913 |   |
| Accumulated                  other comprehensive loss                                                                                                                    |   |                                     | (12,240 | )                             |   | (15,909 | ) |
| Total                  stockholders' equity                                                                                                                              |   |                                     | 169,543 |                          |   | 165,242 |   |
|                                                                                                                                                                     |   | $                                        | 231,309 |                          | $      | 228,082 |   |

----

|                                                                                             |   | Common                      Stock Outstanding ($1 Par) |   | Additional                      Paid-in Capital |   | Retained                      Earnings |   | Accumulated                      Other Comprehensive Loss |    | Total  |   |
|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|-------------------------------------------------|--------|----------------------------------------|--------|-----------------------------------------------------------|---------|--------|--------|
|                                                                                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |
| Balance                      June 25, 2005                                                       |   | $                                                      | 6,664  |                                            | $      | 50,466                                 |   | $                                                         | 130,361 |   | $      | (19,065 | ) | $ | 168,426 |   |
| Comprehensive                      income (loss):                                                |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Net                      loss                                                                    |   |                                                   |   |                                            |   |                                   |   |                                                      | (3,065  | )      |   |   |   |   | (3,065 | ) |
| Unrealized                      net gain (loss) on  investments                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   | (70 | ) |   | (70 | ) |
| Translation                      gain, net                                                       |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   | 2,342 |   |   | 2,342 |   |
| Total                      comprehensive loss                                                    |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   | (793 | ) |
| Dividends                      ($.30 per share)                                                  |   |                                                   |   |                                            |   |                                   |   |                                                      | (2,000  | )      |   |   |   |   | (2,000 | ) |
| Treasury                      shares:                                                            |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Purchased                                                                                        |   |                                                   | (15    | )                                               |   | (233                                   | )      |                                                      |    |   |   |   |   |   | (248 | ) |
| Issued                                                                                           |   |                                                   | 9      |                                            |   | 163                                    |   |                                                      |    |   |   |   |   |   | 172 |   |
| Stock                      purchase plan                                                         |   |                                                   | 4      |                                            |   | 88                                     |   |                                                      |    |   |   |   |   |   | 92 |   |
|                                                                                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Balance                      March 25, 2006                                                      |   | $                                                      | 6,662  |                                            | $      | 50,484                                 |   | $                                                         | 125,296 |   | $      | (16,793 | ) | $ | 165,649 |   |
|                                                                                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
|                                                                                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Balance                      June 24, 2006                                                       |   | $                                                      | 6,669  |                                            | $      | 50,569                                 |   | $                                                         | 123,913 |   | $      | (15,909 | ) | $ | 165,242 |   |
| Comprehensive                      income (loss):                                                |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Net                      earnings                                                                |   |                                                   |   |                                            |   |                                   |   |                                                      | 2,777   |   |   |   |   |   | 2,777 |   |
| Unrealized                      net gain (loss) on  investments                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   | (52 | ) |   | (52 | ) |
| Translation                      gain, net                                                       |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   | 3,721 |   |   | 3,721 |   |
| Total                      comprehensive income                                                  |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   | 6,446 |   |
| Dividends                      ($.30 per share)                                                  |   |                                                   |   |                                            |   |                                   |   |                                                      | (2,003  | )      |   |   |   |   | (2,003 | ) |
| Treasury                      shares:                                                            |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Purchased                                                                                        |   |                                                   | (29    | )                                               |   | (490                                   | )      |                                                      |    |   |   |   |   |   | (519 | ) |
| Issued                                                                                           |   |                                                   | 18     |                                            |   | 246                                    |   |                                                      |    |   |   |   |   |   | 264 |   |
| Stock                      purchase plan                                                         |   |                                                   | 5      |                                            |   | 108                                    |   |                                                      |    |   |   |   |   |   | 113 |   |
|                                                                                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Balance                      March 24, 2007                                                      |   | $                                                      | 6,663  |                                            | $      | 50,433                                 |   | $                                                         | 124,687 |   | $      | (12,240 | ) | $ | 169,543 |   |
|                                                                                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
| Cumulative                      Balance:                                                         |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   |   |   |   |   |   |
|     Translation                      loss                                    |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   | $      | (9,684 | ) |   |   |   |
|     Unrealized                      loss                      on investments |   |                                                   |   |                                            |   |                                   |   | (96                                                       | )       |   |   |   |
|     Minimum                      pension liability                           |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   |   | (2,460 | ) |   |   |   |
|                                                                                             |   |                                                   |   |                                            |   |                                   |   |                                                      |    |   | $      | (12,240 | ) |   |   |   |

----

|                                                     |   | Thirteen                  Weeks Ended                  March |   | Thirty-nine                  Weeks Ended                  March |   |
|----------------------------------------------------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|
|                                                     |   | 2007                                                         |   | 2006                                                            |   | 2007 |   | 2006 |   |
|                                                     |   |                                                         |   |                                                            |   |   |   |   |   |
| Interest                  income                         |   | $                                                            | 331    |                                                            | $      | 306 |   | $ | 913 |   | $ | 840 |   |
| Interest                  expense and commitment fees    |   |                                                         | (528   | )                                                               |   | (238 | ) |   | (1,398 | ) |   | (890 | ) |
| Realized                  and unrealized exchange losses |   |                                                         | (204   | )                                                               |   | 181 |   |   | (288 | ) |   | (102 | ) |
| Gain                  on sale of real estate             |   |                                                         | -      |                                                            |   | - |   |   | 299 |   |   | - |   |
| Other                                                    |   |                                                         | (59    | )                                                               |   | (112 | ) |   | (468 | ) |   | (136 | ) |
|                                                     |   | $                                                            | (460   | )                                                               | $      | 137 |   | $ | (942 | ) | $ | (288 | ) |
|                                                     |   |                                                         |   |                                                            |   |   |   |   |   |   |   |   |   |

|                                             |   | Thirteen                  Weeks Ended                  March |   | Thirty-nine                  Weeks Ended                  March |   |
|--------------------------------------------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|
|                                             |   | 2007                                                         |   | 2006                                                            |   | 2007 |   | 2006 |   |
|                                             |   |                                                         |   |                                                            |   |   |   |   |   |
| Service                  cost                    |   | $                                                            | 597    |                                                            | $      | 957 |   | $ | 1,960 |   | $ | 2,871 |   |
| Interest                  cost                   |   |                                                         | 1,680  |                                                            |   | 1,624 |   |   | 5,062 |   |   | 4,872 |   |
| Expected                  return on plan assets  |   |                                                         | (2,580 | )                                                               |   | (2,614 | ) |   | (7,745 | ) |   | (7,840 | ) |
| Amort.                  of transition obligation |   |                                                         | -      |                                                            |   | (1 | ) |   | - |   |   | (3 | ) |
| Amort.                  of prior service cost    |   |                                                         | 109    |                                                            |   | 107 |   |   | 326 |   |   | 321 |   |
| Amort.                  of unrecognized loss     |   |                                                         | 36     |                                                            |   | 79 |   |   | 111 |   |   | 238 |   |
|                                             |   | $                                                            | (158   | )                                                               | $      | 152 |   | $ | (286 | ) | $ | 459 |   |
|                                             |   |                                                         |   |                                                            |   |   |   |   |   |   |   |   |   |

----

|                                          |   | Thirteen                  Weeks Ended                  March |   | Thirty-nine                  Weeks Ended                  March |   |
|-----------------------------------------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|
|                                          |   | 2007                                                         |   | 2006                                                            |   | 2007 |   | 2006 |   |
|                                          |   |                                                         |   |                                                            |   |   |   |   |   |
| Service                  cost                 |   | $                                                            | 88     |                                                            | $      | 139 |   | $ | 278 |   | $ | 415 |   |
| Interest                  cost                |   |                                                         | 187    |                                                            |   | 206 |   |   | 551 |   |   | 618 |   |
| Amort.                  of prior service cost |   |                                                         | (233   | )                                                               |   | (119 | ) |   | (680 | ) |   | (357 | ) |
| Amort.                  of unrecognized loss  |   |                                                         | 39     |                                                            |   | 32 |   |   | 89 |   |   | 96 |   |
|                                          |   | $                                                            | 81     |                                                            | $      | 258 |   | $ | 238 |   | $ | 772 |   |
|                                          |   |                                                         |   |                                                            |   |   |   |   |   |   |   |   |   |

|                                                                                                                                         | March2007     |   | June2006      |
|----------------------------------------------------------------------------------------------------------------------------------------------|---------------|--------|---------------|
|                                                                                                                                         |          |   |          |
|     Reducing                  revolver                                                                                   | $ 12,000 |   | $ 12,000 |
|     Capitalized                  lease obligations payable in Brazilian currency due 2007-2011,                  14%-23% | 3,117         |   | 4,282         |
|     Less                  current portion                                                                                | (4,229)       |   | (3,228)       |
|                                                                                                                                         | $ 10,888 |   | $ 13,054 |
|                                                                                                                                         |          |   |          |

----

| 1.   | Evaluate                the position for recognition: an enterprise should recognize the                financial                statement benefit of a tax position only after determining that the                relevant tax authority would more-likely-than-not sustain the position                following an audit. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.   | Measure                the benefit amount for a tax position that meets the more-likely-than-not                threshold: The amount recognized in the financial statements should                be the                largest benefit that has a greater than 50 percent likelihood of                being                realized upon ultimate settlement with the relevant tax                authority. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.   | A                decision not to file a tax return in a                jurisdiction; |
|----------------|--------------------------------------------------------------------------------------|
| 2.   | The                allocation of income between                jurisdictions; |
|----------------|-------------------------------------------------------------------------------|
| 3.   | The                characterization of income in the tax                return; |
|----------------|---------------------------------------------------------------------------------|
| 4.   | A                decision to exclude taxable income in the tax return;                and |
|----------------|-------------------------------------------------------------------------------------------|
| 5.   | A                decision to classify a transaction, entity, or other position as                tax-exempt in the tax return. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------|

----

----

| Cash                  flows (in thousands)                         |   | 13                  Weeks Ended |   | 39                  Weeks Ended |   |
|--------------------------------------------------------------------|--------|---------------------------------|--------|---------------------------------|--------|
|                                                               |   | 3/24/07                         |   | 3/25/06                         |   | 3/24/07 |   | 3/25/06 |   |
|                                                               |   |                            |   |                            |   |   |   |   |   |
| Cash                  provided by operations                       |   | $                               | 5,340  |                            | $      | 3,408 |   | $ | 9,347 |   | $ | 2,753 |   |
| Cash                  (used in) provided from investing activities |   |                            | (2,511 | )                               |   | (475 | ) |   | (3,547 | ) |   | 876 |   |
| Cash                  provided from (used in) financing activities |   |                            | 151    |                            |   | (1,646 | ) |   | (1,755 | ) |   | (3,336 | ) |
|                                                               |   |                            |   |                            |   |   |   |   |   |   |   |   |   |

----

----

**SAFE        HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF        1995**

**Risks        Related to Reorganization:**

----

**Risks        Related to **
**Technology**
**:**

**Risks        Related to **
**Foreign**
**        Operations:**

**Risks        Related to Manufacturing Sector:**

**Risks        Related **
**to**
**        Competition:**

**Risks        Related to Customer Concentration:**

**Risks        Related to **
**Insurance**
**        Coverage:**

**Risks        Related to Raw **
**Material**
**        and Energy Costs:**

**Risks        Related to Stock Market Performance:**

----

**Risks        Related to Acquisitions: **

----

| ISSUER                  PURCHASES OF EQUITY SECURITIES |
|--------------------------------------------------------|
| Period                                                 | Shares                  Purchased | Average                  Price | Shares                  Purchased Under Announced Programs | Shares                  yet to be Purchased Under Announced Programs |
| 12/23/2006                  - 1/27/2007                | none | - | - | none |
| 1/28/2007                  - 2/24/2007                 | 15,100 | $17.65 | none | none |
| 2/25/2007                  - 3/24/2007                 | 12,000 | 18.22 | none | none |

|   |                         |   | THE                  L. S. STARRETT COMPANY(Registrant)                                      |
|--------|------------------------------|--------|----------------------------------------------------------------------------------------------|
|   |                         |   |                                                                                         |
|   |                         |   |                                                                                         |
| Date   | May                  3, 2007 |   | S/R.                  J. Hylek                                                               |
|   |                         |   | R.                  J. Hylek (Treasurer and Chief Financial Officer)                         |
|   |                         |   |                                                                                         |
| Date   | May                  3, 2007 |   | S/S.                  R.J. Simkevich                                                         |
|   |                         |   | R.J.                  Simkevich (Corp. Controller/Chief Accounting                  Officer) |

----