10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended March 31, 2013

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

Commission file number 1-6549

AMERICAN SCIENCE AND ENGINEERING, INC.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2240991
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
829 Middlesex Turnpike, Billerica, Massachusetts	01821
(Address of principal executive offices)	(Zip Code)

(978) 262-8700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock ($.66 2/3 par value)	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:  Yes o No x

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:  Yes o No x

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 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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 10-K or any amendment to this Form 10-K. o

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.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(do not check if smaller reporting company)

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

The aggregate market value of voting stock held by non-affiliates of the registrant, computed using the closing sale price of common stock of $65.61 on September 30, 2012 was $534,220,000.

7,791,859 shares of registrant’s common stock were outstanding on May 31, 2013.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days after the registrant’s fiscal year end of March 31, 2013. Portions of such Proxy Statement are incorporated by reference in Part III.

AMERICAN SCIENCE AND ENGINEERING, INC.

FORM 10-K

FOR THE PERIOD ENDED MARCH 31, 2013

TABLE OF CONTENTS

		Page Number
PART I
ITEM 1.	Business	3
ITEM 1A.	Risk Factors	9
ITEM 1B.	Unresolved Staff Comments	16
ITEM 2.	Properties	17
ITEM 3.	Legal Proceedings	17
ITEM 4.	Mine Safety Disclosure	17
PART II
ITEM 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
ITEM 6.	Selected Financial Data	19
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	25
ITEM 8.	Financial Statements and Supplementary Data	26
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	26
ITEM 9A.	Controls and Procedures	26
ITEM 9B.	Other Information	26
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	26
ITEM 11.	Executive Compensation	27
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	27
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	27
ITEM 14.	Principal Accounting Fees and Services	27
PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	27
SIGNATURES		49
EXHIBIT INDEX		50

Z Backscatter™, ZBV®, AS&E®, Gemini®, OmniView™, Sentry®, SmartCheck®, Z Portal® and all American Science and Engineering, Inc. (“AS&E”) product names and AS&E logos are either registered trademarks or trademarks of American Science and Engineering, Inc. in the United States and/or other countries. Other product and company names mentioned herein may be the trademarks of their respective owners.

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CAUTIONARY STATEMENT

This Annual Report and the documents incorporated by reference contain forward-looking statements.  For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements.  Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects”, “intends”, “should” and similar expressions are intended to identify forward-looking statements.  The factors discussed under “Item 1A. Risk Factors”, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time.  We expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

All references in this Annual Report to “AS&E”, the “Company”, “we”, “our” and “us” means American Science and Engineering, Inc. and its subsidiaries.

PART I

ITEM 1.  BUSINESS

American Science and Engineering, Inc., (“AS&E”) a Massachusetts corporation formed in 1958, develops, manufactures, markets, and sells X-ray inspection and other detection products for homeland security, force protection and other critical defense and security applications.  AS&E provides maintenance, warranty, engineering, and training services related to these products.

The Company manufactures sophisticated X-ray inspection products that can be used to inspect parcels, baggage, vehicles, pallets, cargo containers, and people.  The Company sells its products throughout the world to a variety of customers, including:

·authorities responsible for port and border security;

·customs agencies;

·military organizations;

·critical infrastructure and high threat commercial and government facilities;

·aviation security agencies; and

·law enforcement agencies.

AS&E’s products are used by these customers to help combat terrorism, trade fraud, drug trafficking, weapons smuggling, and illegal immigration.  Our products are also used for military force protection and general facility security.

The Company’s objective is to distinguish itself from its competitors by offering innovative products which provide customers with superior threat detection and improved operating efficiencies. To achieve this objective, AS&E incorporates a variety of X-ray imaging and image processing technologies into its products.  A number of the Company’s products use our patented Z Backscatter® technology applications.  Z Backscatter is a unique X-ray imaging technique that has distinct advantages for the detection of organic, or low atomic number (Z) or “low Z” materials, such as plastic explosives, composite weapons and illegal drugs, even when concealed by complex backgrounds.

In fiscal year 2013, continued global economic uncertainties, political events, and the tightening of the U.S. defense and homeland security budgets continued to impact spending in our sector resulting in lower sales of our products and services.  While sales to the U.S. government will remain an integral part of our business, we will continue to increase our international marketing efforts in the Middle East, Latin America, Africa, the Pacific Rim, and Europe to increase our pipeline of global opportunities.  Evolving risks throughout the world create new market opportunities for our proprietary technology and for the development of new applications for existing technologies for force protection, customs and security applications to detect explosive materials, vehicle borne improvised explosive devices (VBIEDs), drugs, contraband, and other threats.

Technology

The Company’s X-ray imaging products utilize several technologies including traditional transmission X-ray technology, dual-energy transmission X-ray technology, high-energy transmission X-ray technology, Forwardscatter X-ray technology, our proprietary Z Backscatter X-ray technology, and Radioactive Threat Detection (RTD).

X-ray imaging devices contain these basic subsystems: X-ray sources, detectors and image formation/processing software.  The source generates an X-ray beam that is directed at the object to be scanned.  When the source X-rays encounter the object, they are either absorbed by the object, pass directly through the object, or scatter off the object.  Dense materials, typically

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composed of atoms having a high atomic number (Z), tend to absorb X-rays.  Materials that are less dense and that are typically composed of low Z atoms tend to scatter X-rays.  The detectors record the intensity of the transmitted or scattered X-rays.  Software is then used to interpret the signals from the detectors and to construct and display the images.

Transmission X-ray Technology:  Transmission images are created from X-rays that pass through the object that is being examined.  In transmission imaging, the detector measures the relative intensity of the X-rays that pass directly through the object.  The degree to which X-rays are transmitted through an object is dependent upon the energy of the X-ray source and the composition and quantity of the material in the path of the X-ray beam.  .

Dual-energy Transmission X-ray Technology: Dual-energy transmission technology uses the data from two X-ray energy levels to estimate the effective atomic number of the cumulative path of objects under examination, and then colorizes the image based on material type. Organic materials are displayed as orange, mixed materials are green, and metallics are blue.

High Energy X-ray Transmission Technology: For cargo systems, high-energy transmission X-rays can deeply penetrate densely loaded containers. High-energy transmission X-rays provide fine details, even while penetrating up to 400 mm of steel — and offer a reliable means of detecting threatening inorganic materials, weapons, and contraband hidden in cargo containers, tankers, and large vehicles.

Forwardscatter Technology:  Forwardscatter® technology, available on Z Backscatter systems, provides a second scatter perspective and helps reveal dense regions of scanned vehicles such as the shielding meant to conceal contraband and other metallic threats.

Z Backscatter Technology:  Many of the Company’s X-ray systems utilize Z Backscatter technology applications covered under our patents.  The term “Backscatter” refers to those X-rays that scatter back from the object under examination back toward the X-ray source.  Z Backscatter detectors capture these scattered X-rays which are then used to create easily readable, photo-like images.

Many threat items of interest are organic in nature and have correspondingly low effective atomic numbers.  Such items include drugs, explosives, composite weapons, and stowaways.  These items tend to scatter X-rays much more than inorganic materials like steel and other metals.  As a result, these organic threat items tend to stand out as bright, visible objects when scanned by a Z Backscatter imaging system.

Z Backscatter images complement transmission images and several of the Company’s products employ both technologies.  The combination of backscatter and transmission images gives the operator more information about the contents of the baggage or container by differentiating higher Z materials, such as metals, from low-Z materials such as explosives, and has the effect of de-cluttering the image from background obscuring objects.  In addition, the multiple images enable an inspector to perform a quicker and more thorough examination of the object in question.

Radioactive Threat Detection:  Radioactive Threat Detection (RTD) is a technology that is used to detect radioactive materials in vehicles, simultaneously with the creation of a Z Backscatter image, and is an option on selected AS&E detection systems.

Products and Systems

The Company’s products and services can be grouped into five different areas: Cargo Inspection Systems, Mobile Cargo Inspection Systems (formerly referred to as Z Backscatter Systems), Parcel and Personnel Screening Inspection Systems, Custom Products (formerly referred to as Contract Research and Development), and Service and Support.

Cargo Inspection Systems: The Cargo Inspection family of systems includes non-intrusive inspection systems that are primarily used for the screening of trucks, cars, cargo containers, pallets, and air cargo at locations including border crossings, seaports, military bases, airports, and cargo and transportation hubs. The Cargo Inspection systems are designed to combat trade fraud, drug trafficking, weapons smuggling, and terrorism. The Cargo Inspection systems include:

OmniView™ Gantry System:  a relocatable high-energy cargo and vehicle inspection system.  This system offers 6 MeV high-energy transmission imaging or 6/4 MeV dual-energy imaging. The OmniView Gantry System utilizes high energy X-rays that penetrate up to 400 mm (15.7 inches) of steel. Its unique design minimizes X-ray scatter in order to create a high quality, detailed X-ray image.  When combined in line with a multi-view Z Portal, the combined system provides an additional three-X-ray views for left, right, and top-side imaging of cargo. The Z Backscatter images are ideal for the detection of organic or “low Z” materials including explosives, drugs, alcohol, and tobacco that transmission X-rays alone may not detect. The system’s multiple Z Backscatter imaging views of the cargo improve detection while facilitating interpretation of the X-ray image.  The OmniView Gantry system’s scanning platform operates by moving on rails over

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vehicles and cargo.  The system is bi-directional allowing for a throughput of approximately 28 trucks per hour.  OmniView Gantry system is well-suited for contraband and threat detection at ports, borders, military bases and other security checkpoints

Z Portal® System:  a multi-view, high throughput, low dose, drive-through inspection system capable of scanning cargo and vehicles for threats and contraband.  The Z Portal system is available in two basic configurations: a large tunnel version for screening trucks, buses, and cargo containers; and a small tunnel version for scanning passenger vehicles. The relocatable Z Portal system can be installed with one, two or three Z Backscatter X-ray modules, allowing for left, right and top-side imaging of the vehicle under examination.  The images produced by the Z Portal System are ideal for the detection of organic materials including explosives, drugs, alcohol, tobacco, and stowaways.  The Z Portal system is capable of scanning 80 trucks or 120 cars per hour and is well-suited for scanning vehicles at border crossings, high threat facilities, and other vehicle entry checkpoints.

Sentry® Portal System: a high-throughput, high-penetration drive through transmission X-ray inspection system designed to screen densely loaded cargo containers for security threats and contraband. The Sentry Portal system enables high volume scanning able to penetrate 300 mm (11.8 inches) of steel. The system employs an advanced cargo sensing subsystem that begins scanning only after the cab has passed the beam plane to maintain a safe environment for vehicle drivers. This drive through system can scan up to 150 trucks per hour.

Mobile Cargo Inspection Systems:

Z Backscatter Van (“ZBV”): a mobile X-ray screening system built into a commercially available chassis.  The ZBV® system utilizes Z Backscatter X-ray technology to produce photo-like images of the contents of a vehicle or cargo container, highlighting organic materials such as plastic explosives or other anomalies. With one-sided, Backscatter-only imaging, security officials can use the ZBV system for screening vehicles, sea containers, and other cargo for terrorist threats, trade fraud, and contraband, simply by driving past the objects.   The ZBV system can be equipped with Radioactive Threat Detection (RTD) capability.  With RTD, the ZBV system can produce Z Backscatter images for general screening while simultaneously scanning the object for the presence of radioactive material.  The ZBV is available in three configurations — ZBV C-Class, ZBV R-Class, and ZBV S- Class systems — to meet the diverse needs of ZBV customers.

ZBV Military Trailer: a rugged X-ray screening system built onto a standard 5-ton military trailer. With Z Backscatter X-ray imaging, security officials can use ZBV Military Trailer for screening vehicles, containers, and other cargo for terrorist threats and contraband — simply by towing the trailer past the subjects, or by remaining stationary while vehicles drive past the trailer.  To complement the Z Backscatter imaging, the trailer can include Forwardscatter® technology to present a second scatter perspective to display dense objects in cargo, such as shielding or hidden compartments.

Parcel and Personnel Screening Inspection Systems:  Parcel Inspection Systems are designed for the non-intrusive X-ray scanning of parcels, baggage, and mail. These systems are primarily used in government facilities, airports, commercial office buildings, high-security federal facilities and convention centers.

Gemini®System:  a parcel and baggage inspection system that combines AS&E’s Z Backscatter technology with dual-energy transmission X-ray to provide enhanced detection for a wide range of threats.  Dual-energy transmission is best suited for the detection of metallic threats such as guns and knives, and for identifying wires and other components of improvised explosive devices (IEDs). Z Backscatter imaging provides enhanced detection of organic materials such as explosives and narcotics, which may be missed by transmission-only systems.  In addition, the complementary photo-like Z Backscatter image makes it easier for security officers to interpret images, thus reducing analysis time and minimizing operator fatigue. The Gemini system is offered in a range of tunnel sizes to suit a customer’s applications.

Personnel screening is a crucial part of any threat detection effort.  Today, threats can take the smallest of forms, can be made from various materials, and people may try to conceal them on their person to evade detection.  With the advent of suicide bombers, personnel screening has taken on an even more important role.  Personnel screening is also important in the effort to intercept prohibited substances, such as liquids, drugs and alcohol.

SmartCheck® System:  a personnel screening system for the effective screening for contraband and threats hidden under a person’s clothing.  The SmartCheck system simultaneously detects both metallic and non-metallic objects, such as guns and knives, plastic explosives, liquid explosives, composite weapons, drugs and other hidden threats and contraband.  The SmartCheck system creates an easily interpreted image that gives the operator an easy-to-read display of where a threat or contraband is hidden, thus eliminating the need for intrusive and time-consuming pat-down search.  The SmartCheck system employs proprietary advanced image processing algorithms to enhance privacy, showing operators only a chalk outline of the scanned individual with the shape, size and location of any concealed threat highlighted, while maintaining a high level of threat detection.  The SmartCheck system is safe for all individuals and complies with all applicable personnel scanning

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safety regulations. The SmartCheck system is also available in a high throughput dual-sided or single-sided model or a ruggedized container configuration called the SmartCheck Imaging Module (SIM) for deployment in harsh environments.

Custom Products:  AS&E engages in a variety of contracts for the development of custom products primarily for agencies of the U.S. government to develop systems that meet their unique scanning needs. We pursue those opportunities we believe may provide avenues to advance our core technologies or developing product offerings for strategic customers or markets.

Service and Support:  The AS&E service organization supports a diverse range of complex and demanding programs through its global network of Field Service Engineers (“FSE”) and Technical Support Team. Each FSE has a technical degree in electrical and/or mechanical engineering (or equivalent experience), and is trained in the operation and repair of electronics, hydraulics, pneumatics, mechanics, electrical systems, and/or computers. FSEs are available 7 days a week, 24 hours a day, and are stationed at AS&E sites in Asia, Europe, the Middle East, Africa and North and South America.  In addition, technical support is provided at the Company’s headquarters in Billerica, Massachusetts. AS&E provides comprehensive, cost-effective spare parts customized for each system.  The Company maintains an inventory of field-replaceable components in depots around the world in order to meet customer needs for spare parts.

Our instructors specialize in current threat detection techniques and employ both classroom theory and hands-on training to help clients become expert users of AS&E equipment. Our technical training informs customers about detection technologies and best practices through demonstrations and field activities that simulate real-life threat and contraband encounters.  Technical training is included with each system sale and additional training for service and maintenance training, and other customized training courses are provided aftermarket to interested customers.  Training services are provided at the customer sites, at our corporate offices in Billerica, MA or at our custom training center in Abu Dhabi.

Sales and Marketing

The Company’s products are marketed to corporate and governmental organizations through a sales force that contacts potential customers and responds to public tenders and other expressions of interest. This sales force includes Company personnel based in the United States and abroad, as well as distributors and independent representatives under contracts to sell in foreign countries.

Competition

The Company has many competitors in the homeland security X-ray detection market, including several large and well-established manufacturers of security equipment with resources greater than those of the Company. AS&E competes with at least five other companies, who compete using a variety of methods including price, warranty coverage, and product performance.  Certain X-ray security system customers select such systems based largely on price. Other customers, including some agencies of the U.S. government and certain users in countries with high levels of concern over security, tend to select systems based largely on detection capability.  Many of the Company’s systems offer premium performance and have in some cases been priced higher than competing systems. The Company believes that its patented and proprietary technology gives it a strong competitive position in the sale of security systems to customers concerned with performance and detection. The Company also believes that its strategy of concentrating on products with unique features, such as Z Backscatter and Radiation Threat Detection, place it in a strong position with regard to its sales of X-ray inspection systems. However, a number of companies have developed products that compete with the Company’s X-ray inspection products. (See “Item 1A.  Risk Factors” below).

Material Availability

Critical material and subsystems are procured from both domestic and global supply partners.  These supply sources may be single sources for certain components and the material provided can have extended lead times.  To support continuing customer needs in the global security screening market, the Company has taken steps to mitigate sourcing risks.  This includes working closely with its suppliers to ensure future material and subsystem availability to support its production plans. In some cases, the Company has chosen to stock reserve material to ensure future availability. Efforts have also included identifying and qualifying second source suppliers for critical material and a number of key subsystems in support of its product lines.

Intellectual Property

The Company relies on a combination of patent, copyright, trademark, and trade secret laws, and contractual provisions to protect its intellectual property.  In general, the Company pursues a policy of obtaining patent protection both in the United States and in selected foreign countries for subject matter we consider patentable and important to our business strategy.  The Company also has been granted patents or has pending applications in 55 countries outside of the United States. A significant number of our patents have been issued in the last five years.

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Generally, if pending on June 8, 1995, a patent issued in the United States is effective for the longer of 17 years from the date of issue or 20 years from the United States filing date of the earliest non-provisional application upon which the patent is based.  If filed after June 8, 1995, a patent is generally effective for a term of 20 years from the United States filing date of the earliest non-provisional application upon which the patent is based.  The duration of foreign patents varies in accordance with applicable local law. While the duration of our patents varies, we believe that the duration of our patents is adequate relative to the expected lives of our products.

The Company also has various trademarks registered and pending registration with the United States Patent and Trademark Office, as well as marks registered and pending registration in various jurisdictions around the world.  Company patents and trademarks are reviewed regularly, and those with no foreseeable commercial value are abandoned to eliminate costly maintenance fees.  As of March 31, 2013, the Company has 50 active patents issued by the United States Patent and Trademark Office and multiple pending applications directed to a variety of technologies.  The Company has ongoing research and development efforts and expects to seek additional intellectual property protection in the future.

Although the Company believes the ownership of such patents and trademarks, and of its copyrights, is an important factor in its business and that its success depends in part on the ownership thereof, the Company also relies on the innovative skills, technical competence, and marketing abilities of its personnel for its business success.

In addition to trademarks, copyrights, patents and pending patent applications, the Company uses trade secrets and proprietary know-how in our products. Any of our know-how or trade secrets not protected by a patent could be disclosed to, or independently developed by, a competitor.

The Company believes that its patents, proprietary technology, trade secrets, know-how, copyrights and trademarks provide substantial protection for the Company’s competitive position and the Company intends to aggressively protect its intellectual property assets, by litigation or other means, as appropriate.  We monitor the activities of other parties with respect to their use of intellectual property. In addition, we require our employees, consultants, outside collaborators, and certain distributors and suppliers to execute confidentiality and, where appropriate, non-compete agreements upon commencing employment or other relationships with us.  Nevertheless, there can be no assurances that the steps taken by the Company in this regard will be adequate to prevent misappropriation or infringement of its technology or that the Company’s competitors will not independently develop technologies that are substantially equivalent or superior to the Company’s technology.  Effective protection of intellectual property rights may be limited or unavailable in certain foreign countries.

Customers

The Company’s customer base consists of government and commercial clients from both the United States and abroad. Domestically, the Company’s primary client base is comprised of agencies of the U.S. government. Approximately 63%, 62%, and 65%, of the Company’s total sales in the fiscal year ended March 31, 2013 (“fiscal 2013”), March 31, 2012 (“fiscal 2012”), and March 31, 2011 (“fiscal 2011”), respectively, were derived from either (i) contracting directly with the U.S. government, or (ii) contracting with contractors working directly with the U.S. government. A significant number of the Company’s contracts with the U.S. government provide the U.S. government with the standard unilateral right to terminate these contracts for convenience.  In fiscal 2013, no contracts with the U.S. government were terminated for convenience. In each of the fiscal years ended March 31, 2012 and March 31, 2011, one of the Company’s contracts with the U.S. government were terminated in whole or in part for convenience by the U.S. government.  These terminations did not result in any material losses to the Company.  The Company is heavily dependent upon sales to agencies of the U.S. government and systemic reductions or delays in procurement of the Company’s systems and services by these agencies may have a material adverse effect on the Company.

International sales accounted for approximately 34%, 34%, and 32% of the Company’s total sales in fiscal 2013, 2012, and 2011, respectively, and continue to be a high priority for the Company as part of its long-term growth strategy. International sales often entail longer sales cycles and project financing requirements; however the Company continues to focus on these sales as a means of broadening its customer base. The Company manages its overseas risk in a number of ways, including actively pursuing multiple opportunities at the same time and obtaining downpayments and letters of credit to secure its international receivables. Our international contracts are primarily bid in U.S. dollars. For those contracts that are bid in other currencies, the Company considers the need to engage in hedging contracts to control foreign exchange risk, balanced against the cost of such contracts. In fiscal 2010, the Company entered into one foreign currency option contract to hedge currency risk in one region.  This hedge contract was closed in fiscal 2011 and the Company entered into no further hedges in fiscal 2011. There were no hedging activities in fiscal 2012 or 2013.

In fiscal 2013, the U.S. Army and U.S. Customs and Border Protection accounted for 24% and 17% of sales, respectively.  In fiscal 2012, the U.S Army accounted for 23% of total sales.  For the fiscal year ended March 31, 2011, the U.S. Army, the

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U.S. Department of State and Olive Group FZ, LLC comprised 30%, 12% and 11% of customer revenues respectively.  The loss of these significant customers could substantially reduce our revenues and our business and prospects could be harmed.

Sales Backlog

The Company’s sales backlog was $186,201,000, $192,571,000 and $215,228,000 at March 31, 2013, March 31, 2012, and March 31, 2011, respectively.  We define sales backlog as the value of orders for which funding is authorized, appropriated and contractually obligated by the customers, less the cumulative amount of sales recognized on such orders. We do not include negotiated contracts for which funding has not been appropriated or otherwise authorized, unexercised options or potential indefinite-delivery/ indefinite-quantity orders in our backlog.

A significant number of the Company’s contracts with the U.S. government contain clauses permitting the government to terminate the contract for convenience or make changes to the contract, upon certain terms and conditions, including payment to the Company for work performed.  This right was exercised in fiscal 2012 by one U.S. government agency and in fiscal 2011 by one other U.S. government agency.  Total contracts with U.S government agencies and subcontractors in the backlog were $92,641,000, $112,045,000, and $151,507,000 at March 31, 2013, 2012 and 2011, respectively.

We estimate that approximately 60% of all 2013 backlog will be converted to revenue within the fiscal year ending March 31, 2014.

Research and Development

The Company spent approximately $23,618,000 of its own funds for research and development during fiscal 2013, compared to $25,544,000 and $22,619,000 in fiscal 2012 and 2011, respectively. The fiscal 2013 research and development efforts were focused on new product development, researching new technologies, the development of new applications, and design modifications and enhancements to existing products.

In addition, the Company conducted government-sponsored research primarily focused on advances in X-ray systems, image analysis and integrated system development to address security inspection challenges. The Company recognized revenues of $2,124,000, $4,409,000 and $4,821,000 in fiscal 2013, 2012 and 2011, respectively, for these efforts.  Many of the Company’s government sponsored research and development contracts provide for a fixed fee or a reimbursement of allowable costs plus a fixed fee. The Company’s contracts in these areas are obtained by submitting research and development proposals to various organizations, sometimes in response to requests for such proposals.

ISO 9001 Certification

In August 2012, the Company’s Quality Management System was recertified under the ISO 9001:2008 Standard of the International Organization for Standardization.  AS&E has been an ISO 9001 registered company since 2000.  ISO 9001 is an internationally recognized quality management and assurance standard.  In qualifying, the Company met or exceeded the standards for establishing a quality management system for preventing non-conformity at every level of the product life cycle, from customer order, through development and production, to installation and support.  The Company believes that demonstrating continuous quality improvement is vital for building customer satisfaction and making business processes more efficient in order to enhance its competitive edge.

Personnel

As of March 31, 2013, the Company had 347 employees as compared to 415 employees at March 31, 2012.  It is the Company’s policy to have employees sign a non-compete and non-disclosure agreement as a condition of employment. None of the Company’s employees are represented by labor unions.

Financial Information about Foreign and Domestic Operations and Export Sales

Most export sales are transacted in U.S. dollars, and most are either secured by irrevocable letters of credit or paid in advance. The following table shows the breakdown of net sales and contract revenues to international and domestic customers based upon the customer’s country of domicile and the major regions of international activity. All assets are maintained within the United States with the exception of inventory depots, inventory in transit or awaiting installation and cash accounts maintained at foreign locations (approximately 5% of the Company’s assets at March 31, 2013).

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Net Sales and Contract Revenues

	Fiscal Year
(Dollars in thousands)	2013				2012				2011
Domestic	$	123,652	66	%	$	133,441	66	%	$	190,769	68	%
International	63,028		34	%	70,111		34	%	87,807		32	%
Net Sales and Contract Revenues	$	186,680	100	%	$	203,552	100	%	$	278,576	100	%
Percent of International Revenue by Major Region:
Middle East & Africa			54	%			63	%			84	%
Americas — Non-US			29	%			20	%			2	%
Asia / Pacific			13	%			11	%			7	%
Europe			4	%			6	%			7	%

Our foreign operations involve certain risks, as discussed under “Item 1A.  Risk Factors” under the risk factor entitled “We conduct our business worldwide, which exposes us to a number of difficulties in coordinating our international activities and dealing with multiple regulatory environments, as well as risks associated with geopolitical and economic instability.”

Available Information

The Company’s principal executive offices are located at 829 Middlesex Turnpike, Billerica, MA 01821; telephone number 978-262-8700; corporate website www.as-e.com. We are subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), and, accordingly, we file reports, proxy statements, and other information with the Securities and Exchange Commission (the “SEC”).  We make available, free of charge through our website, our annual Form 10-K, current reports on Form 10-Q and Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as practicable. In addition, our reports, proxy and information statements and other information filed with the SEC are available at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549, and are also available from the SEC’s website at www.sec.gov.  Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

ITEM 1A.  RISK FACTORS

You should carefully consider the following risk factors, in addition to other information included in this Annual Report on Form 10-K and other reports we file with the Securities and Exchange Commission.  If any of the following risks occur, our business, financial condition and operating results could be materially adversely affected.

Our reliance on a small number of customers for a large portion of our revenues could harm our business and prospects.  A number of contracts held by those customers may be terminated, or the scope and funding reduced, at the customer’s discretion.

Our business is dependent on sales to a small number of customers, which include agencies of the U.S. government.  During fiscal 2013, two customers, each a U.S. government agency, accounted for 41% of our total revenues.  During fiscal 2012, one customer, which was a U.S. government agency, accounted for 23% of our total revenues.  During fiscal 2011, three customers accounted for 53% of our total revenues.  We can provide no assurance that our existing customers will increase or maintain their level of demand for our products.

A significant number of our government contracts may be terminated at the government’s discretion. There were no terminations for convenience in fiscal year ended March 31, 2013.  In both fiscal years ended March 31, 2012 and March 31, 2011, one of our contracts with the U.S. government was terminated in whole or in part for convenience by the U.S. government.  Although these terminations did not result in material losses to us, future contract terminations could negatively impact our results of operations.  The termination of our relationship with one or more of our significant customers or the reduction or delay of orders of our systems by these customers would substantially reduce our revenues, and our business and prospects may be harmed.

Our results of operations are affected by the overall economy and governmental spending.

Our results of operations have in the recent past been, as may in the future be materially adversely affected by the conditions in the global economy, global political climate and the impact of those conditions on U.S. and foreign government spending. The global economic recession has caused extreme volatility and disruptions in the capital and credit markets, including a significant reduction in the availability of capital resources to many business enterprises. U.S. and foreign economies have experienced significant declines in employment, spending, household wealth and lending.  Businesses have faced, and may continue to face, weakened demand for their products and services, difficulty obtaining access to financing, increased funding costs, and barriers to expanding operations. U.S. and foreign government spending for programs involving products such as ours may be reduced or delayed, now or in the future, due to reduced tax revenues and other spending

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imperatives, including financial institution support and economic stimulus programs.  Government appropriations are potentially subject to changes as a result of compliance with The Budget Control Act of 2011 and the challenges associated with managing the Federal debt ceiling, either of which could harm our operations and reduce future revenues.

Our business is dependent upon governmental policies and appropriations.

Our largest customers are government agencies, in the U.S. and abroad, and demand for our products is dependent upon national priorities and governmental initiatives. These priorities and initiatives are subject to change from time to time in response to the economic and political environment.  In addition, political uprisings have created uncertainty in the continuity of certain regimes who are potential purchasers of our products and services.  We are also exposed to budget approval and appropriation decisions and processes which are driven by numerous factors, including geo-political events and macroeconomic conditions which are beyond our control.  In prior years, the war on terror had resulted in increased purchases of equipment by the Department of Defense.  With the withdrawal of troops and equipment from Iraq and Afghanistan, the level of demand for new equipment and service has declined and future demand is uncertain. Significant changes in defense spending could have long-term consequences for our size and structure. In addition, changes in government priorities and requirements could impact the funding, or the timing of funding, of our programs which could negatively impact our results of operations and financial condition.  In addition, changes to political leadership in other countries can delay or curtail our results of operation.

Our lengthy sales cycle requires us to incur significant expenses with no assurance that we will generate revenue or recover such expenses.

A substantial portion of our sales depends upon the decision by governmental agencies to upgrade or expand security at border crossing inspection sites, existing airports, seaports and other facilities. Accordingly, a portion of our product sales is subject to delays associated with the lengthy approval processes that often accompany such capital expenditures. During these approval periods, we expend significant financial and managerial resources in anticipation of future orders that may not occur. If we fail to receive an order after expending these resources, we may be unable to generate sufficient revenue to recover the costs incurred and our business and prospects may be harmed.

We use estimates in recognizing revenues and if these estimates change, our profitability may be adversely affected.

Revenues for certain of our fixed price contracts are recognized using the percentage-of-completion method based on progress towards completion, which requires estimates of total costs at completion. Estimating costs at completion on our long-term contracts, particularly due to the technical nature of the services being performed, is complex and involves significant judgment. Adjustments to original estimates are often required as work progresses and additional information becomes known, even though the scope of the work required under the contract may not change. Any adjustment as a result of a change in estimate is recognized as events become known. Cost overruns or changes in the underlying assumptions, circumstances or estimates could result in adjustments that may adversely affect future financial results.

We conduct our business worldwide, which exposes us to a number of difficulties in coordinating our international activities and dealing with multiple regulatory environments, as well as risks associated with geopolitical and economic instability.

The continued threat of terrorist activity and other acts of war or hostility have created uncertainty in the foreign markets and have significantly increased the political, economic and social instability of some of the geographic areas in which we operate.  Additional acts of terrorism could create further uncertainties and instability.  To the extent this results in disruption or delays in the sale or shipments of our products, our business, operating results and financial condition could be adversely affected.  Our revenues from international customers accounted for approximately 34%, 34% and 32% of our net revenues for the fiscal years ended March 31, 2013, March 31, 2012 and March 31, 2011, respectively, and a significant number of domestic customer orders require shipments to, and services provided in, overseas locations. In addition, we transact business internationally with a number of our key suppliers. As a result of our worldwide business operations, we are subject to various risks, including:

· international regulatory requirements and policy changes;

· lengthy sales cycles;

· longer payment cycles by foreign customers;

· difficulties in inventory management, accounts receivable collection and the management of distributors or representatives;

· difficulties in staffing and managing foreign operations;

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· geopolitical instability;

· fewer legal protections for intellectual property

· political and economic changes and disruptions;

· preference towards local suppliers;

· governmental currency controls and restrictions on repatriation of earnings;

· interruption of transportation flow for delivery of parts to us and finished goods to our customers;

· currency exchange rate fluctuations; and

· tariff regulations.

Although our international sales have been denominated primarily in U.S. dollars, changes in currency exchange rates that increase the relative value of the U.S. dollar may make it more difficult for us to compete with foreign manufacturers on price or otherwise have a material adverse effect on our sales and operating results.

We must comply with the U.S. Foreign Corrupt Practices Act and antitrust, anti-competition and similar laws in other jurisdictions and failure to do so could lead to substantial liability.  We could also face investigations by one or more government agencies that could be costly to respond to and divert the attention of key personnel from business operations.  An adverse outcome from any such investigation could subject us to fines or other penalties, which could adversely affect our business, financial condition and results of operations.

Changes in governmental regulations may reduce demand for our products or increase our expenses.

We compete in markets in which we or our customers must comply with federal, state, local and foreign regulations, such as health and safety regulations. We develop, configure and market our products to meet our customers’ needs created by these regulations. Any significant change in these regulations could reduce demand for our products or increase our costs to comply with new regulations, both of which may adversely affect our operating results.

We could be prohibited from shipping our products to certain countries if we are unable to obtain U.S. government authorization regarding the export of our products, or if current or future export laws limit or otherwise restrict our business.

We must comply with U.S. laws regulating the export of our products. In some cases, explicit authorization from the U.S. government is needed to export our products. The export regulations and the governing policies applicable to our business are subject to change. We cannot provide assurance that such export authorizations will be available for our products in the future. If we cannot obtain required government approvals under applicable regulations, we may not be able to sell our products in certain international jurisdictions.

Our business may be dependent upon our employees obtaining and maintaining required security clearances, as well as our ability to obtain security clearances for the facility in which we perform sensitive government work.

Certain of our U.S. government contracts require our employees to maintain various levels of security clearances and we are required to maintain certain facility security clearances complying with Department of Defense requirements.  Loss of a facility clearance, or an employee’s failure to obtain or maintain a security clearance, could result in a U.S. government customer terminating an existing contract or choosing not to renew a contract. If we cannot maintain or obtain the required security clearances for our facilities and our employees, or obtain these clearances in a timely manner, we may be unable to perform certain U.S. government contracts. Lack of required clearances could also impede our ability to bid on or win new government contracts, which might result in terminating current research activities. This could damage our reputation and our revenue would likely decline, which would adversely affect our business, financial condition, operating results and ability to meet our financial obligations.

Our reliance on a limited number of suppliers for some key components and subsystems for our products could harm our business and prospects.

We rely on a number of suppliers to provide materials and subsystems for our products. We are reliant on a limited number of key international supply partners for core technology products, including subsystems with complex sub-tier supply chains.

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In addition, certain material or subsystems used in our products may be available from a sole source or limited number of suppliers, increasing the risk of supply disruption. Although our products may be able to be redesigned to avoid using any sole source supplier, it would be expensive and time consuming to make such a change. If we change any of our suppliers, a qualification process would need to be completed and the affected product may require redesign, creating potential delays in product shipments.

Increases in the cost for certain commodity materials or commodity components may increase our costs of manufacturing and transporting products and may result in lower operating margins if we are unable to find ways to mitigate these increased costs.

Some of our suppliers may allocate material due to market demand for the products they produce or market constraints such as the global availability of raw materials. We have no guaranteed supply arrangements with our suppliers and there can be no assurance that our suppliers will continue to meet our requirements. Many of our competitors are much larger and may be able to obtain priority allocations from these shared suppliers, thereby limiting or making our sources of supply unreliable for these critical materials. There is also the possibility that a key single source supplier may be acquired by or form a strategic alignment with a competitor, which could impact our ability to secure required materials.  If our supply of materials is disrupted, we cannot ensure that we would be able to find another supplier on a timely basis.

We depend on our subcontractors and suppliers to deliver material that is in full compliance with critical quality and specification requirements. Quality issues may affect the reliability and performance of our products, customer confidence, and adversely impact financial performance. Any difficulty in obtaining sufficient and timely delivery of conforming material could result in delays or reductions in product shipments that could materially and adversely affect our business, financial condition and consolidated results of operations. This in turn could also damage our reputation in the market and cause us to lose market share.

New regulations related to conflict minerals may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our relationships with customers.

On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, the SEC adopted new requirements for companies that manufacture products that contain certain minerals and metals, known as conflict minerals. These rules require public companies to perform diligence and to report annually to the SEC whether such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these new requirements could adversely affect the sourcing, availability and pricing of minerals we use in the manufacture of our products. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals used in our products. Since our supply chain is complex, we may not be able to ascertain the origins for these minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We may also face difficulties in satisfying customers who may require that our products be certified as conflict mineral free, which could harm our relationships with these customers and lead to a loss of revenue. These new requirements could limit the pool of suppliers that can provide conflict-free minerals, and we may be unable to obtain conflict-free minerals at competitive prices, which could increase our costs and adversely affect our manufacturing operations and our profitability.

Early termination of client contracts or contract penalties could adversely affect results of operations.

Client contracts can change or terminate early for a variety of reasons. Change of control, financial issues, declining general economic conditions or other changes in client circumstances may cause us or the client to seek to modify or terminate a contract. Further, either we or the client may generally terminate a contract for material uncured breach by the other. If we breach a contract or fail to perform in accordance with contractual service levels, we may be required to refund money previously paid to us by the client, or to pay penalties or other damages. Even if we have not breached, we may deal with various situations from time to time which may result in the amendment or termination of a contract. These steps can result in significant current period charges and/or reductions in current or future revenue.

Fluctuations in our operating results may cause our stock price to fluctuate.

Given the nature of the markets in which we participate, we cannot reliably predict future revenue and profitability. A high proportion of our costs are fixed, due in part to our significant sales, research and development, and manufacturing costs. As a result of our fixed costs, declines in revenue could disproportionately affect our operating results and stock price at any time. Factors that may affect our quarterly operating results and the market price of our common stock include:

· demand for and market acceptance of our X-ray inspection systems;

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· lengthy sales cycles and the effect of large orders;

· termination of contracts and contractual awards at the customer’s convenience;

· changes in political agendas or national priorities;

· adverse changes in the level of economic activity in regions in which we do business;

· political unrest in the regions where we transact business;

· adverse changes in industries on which we are particularly dependent;

· competitive pressures resulting in lower selling prices for our products;

· delays or problems in the introduction of new products;

· our competitors’ announcement or introduction of new products, services or technological innovations;

· variations in our product mix;

· delays in acceptance testing by customers;

· the timing and amount of our expenditures in anticipation of future sales;

· increased costs of raw materials or supplies; and

· changes in the volume or timing of product orders.

We could incur substantial costs as a result of liability claims and adverse publicity if our X-ray inspection systems fail to detect bombs, explosives, weapons, contraband or other threats to personal safety.

If our X-ray inspection systems fail to detect the presence of bombs, explosives, weapons, contraband or other threats to personal safety, we could be subject to product and other liability claims and negative publicity, which could result in increased costs, reduced sales, and a decline in the market price of our common stock. There are many factors beyond our control that could result in the failure of our products to detect the presence of bombs, explosives, weapons, contraband or other threats to personal safety. Examples of these factors include operator error or misuse of or malfunction of our equipment. The failure of our systems to detect the presence of these dangerous materials may lead to personal injury, loss of life, and extensive property damage and may result in potential claims against us.

Our products are complex, and undetected defects may increase our costs, harm our reputation with customers, or divert our resources from other purposes.

Our products are extremely complex and must operate successfully with complex products from other vendors.  Despite testing, our new or existing products may contain defects, errors, or performance problems when first introduced, when new versions or enhancements are released, or even after these products have been used by our customers for a period of time.  These problems could result in expensive and time-consuming design modifications or warranty charges, delays in the introduction of new products or enhancements, significant increases in our service and maintenance costs, exposure to liability for damages, mandatory or voluntary recall or product upgrades, and divert the attention of personnel from our product development efforts.  Undetected errors may create customer satisfaction issues.  If we are unable to repair these problems in a timely manner, we may experience a loss of or delay in revenue and significant damage to our reputation and business prospects.

The existence of any defects, errors or failures in our products could also lead to product liability claims or lawsuits against us.  Our product liability and umbrella liability insurance may be insufficient to protect us in the event of such product liability claims. There is a risk that product liability insurance will not continue to be available to us at a reasonable cost, if at all. If liability claims exceed our current or available insurance coverage, our business and prospects may be harmed. Regardless of the adequacy of our product liability insurance protection, any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and reduced revenues.

13

We may not be able to fund our research and development activities sufficiently to maintain our competitiveness.

We generate funds for our research and development activities from operations, private sources and the government. We may be unable to generate the funds necessary to support our research and development activities if we do not generate sufficient funds from operations, other potential private sources, or the government. We may not successfully compete with other companies and research institutions for government funding and funding from other private sources. Additionally, government-funding priorities are subject to frequent changes. For example, in fiscal 2013, 2012, and 2011, we recorded $2,124,000, $4,409,000, and $4,821,000, respectively, for government-sponsored research and development. There is no guarantee that we will receive funds for government-sponsored research in the future. If we are unable to fund our research and development activities through our operations or from outside sources, we may be unable to continue to innovate or bring our innovations to market on a timely or cost effective basis, or our innovations may be surpassed by other competitors or new technologies.

Our success depends on new product development.

Our continuing research and development program is designed to develop new products and to enhance and improve our current products. We plan to expend significant resources on the development of new products. The successful development of our products and product enhancements is subject to numerous risks, both known and unknown, including:

· unanticipated delays;

· access to capital;

· budget overruns;

· technical problems; and

· other difficulties that could result in the abandonment or substantial change in the design, development and commercialization of new products and product enhancements, including for example, changes requested or required by governmental and regulatory agencies.

Given the uncertainties inherent with product development and introduction of X-ray inspection systems, we cannot assure that our product development efforts will be successful on a timely basis, or within budget, if at all. Our failure to develop new products and product enhancements on a timely basis or within budget at competitive prices would harm our business and prospects.

Our success depends upon our ability to adapt to rapid changes in technology and customer requirements.

The market for our products has been characterized by rapid technological changes, frequent product introductions and evolving industry standards and customer requirements. We believe that these trends are expected to continue into the foreseeable future. Our success will depend, in part, upon our ability to enhance our existing products, successfully develop new products that meet changing customer and regulatory requirements and gain market acceptance. If we fail to do so, our products may be rendered obsolete or noncompetitive by new industry standards or changing technology, in which case our revenue and operating results would suffer. In developing any new product, we may be required to make a substantial investment before we can determine the commercial viability of the new product. If we fail to accurately foresee our customers’ needs and future activities, we may invest heavily in research and development of products that do not lead to significant revenue.

We may not be able to compete successfully.

A number of companies have developed products that compete with our X-ray inspection products. Many of our competitors are larger and have greater financial resources. Some of our competitors have more extensive research, marketing and manufacturing capabilities and greater technical and personnel resources, and may be better positioned to continue to improve their technology in order to compete in an evolving industry. Our failure to compete successfully could decrease demand for our products or make our products obsolete.

In the inspection systems market, competition is based primarily on the following factors:

· product performance, functionality and quality;

· price;

· the overall cost of ownership of the system;

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· prior customer relationships;

· technological capabilities of the product;

· certification by government authorities;

· local market presence; and

· breadth of the sales and service organization.

To remain competitive, we must develop new products and periodically enhance our existing products in a timely manner. We recognize that we may have to adjust the prices of some of our products to stay competitive. In addition, new competitors may emerge, and entire product lines may be threatened by new technologies or market trends that reduce the value of these product lines.

Our business could be harmed if we are unable to protect our intellectual property.

We rely on a combination of trade secrets, patents, trademarks, copyrights and confidentiality procedures to protect our technology. Despite our efforts, the steps we have taken to protect our technology may be inadequate. Existing trade secret, patent, trademark and copyright laws offer only limited protection. Our patents could be invalidated or circumvented.  In addition, others may develop substantially equivalent or superseding proprietary technology, or competitors may offer equivalent products in competition with our products, thereby substantially reducing the value of our proprietary rights. The laws of some foreign countries in which our products are or may be manufactured or sold may not protect our products or intellectual property rights to the same extent as do the laws of the United States. We cannot assure that the steps we have taken to protect our intellectual property will be adequate to prevent misappropriation of our technology. Our inability to protect our intellectual property could have a negative impact on our operations and financial results.

Our business may be materially and adversely affected by infringement claims initiated by us or our competitors.

Initiating or defending against the enforcement of our intellectual property rights may result in significant, protracted, and costly litigation. We have previously been involved in various litigations involving our intellectual property and have been successful in protecting such interests to date. We expect intellectual property disputes to be an ordinary part of our business for the foreseeable future. We may initiate claims or litigation against third parties for infringement of our intellectual property rights, or to establish the validity of our property rights. There can be no assurance that we will prevail in any such action. Litigation by or against us could result in significant expense and divert the efforts of technical and management personnel, whether or not such litigation results in a favorable outcome for us. In the event of an adverse result in any such litigation, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products, expend significant resources to develop non-infringing technology, discontinue the use of certain processes, or obtain licenses for the infringing technology. If a license were required, we cannot assure that we would be able to obtain one on commercially reasonable terms, if at all. We cannot assure that we will be successful in developing non-infringing technology or that the cost or time required to develop such technology will be reasonable.

If we suffer loss to our facilities, information technology systems, or warehousing and logistical services due to a catastrophe or other natural or man-made events, our operation, our operations could be seriously harmed.

Our facilities, information technology systems, or warehousing and logistical services are subject to catastrophic loss due to fire, flood, terrorism or other natural or man-made disasters.  If any of these facilities or systems were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility.

Furthermore, we rely extensively on information technology systems to interact with our employees and our customers and to run our business effectively. These interactions include ordering and managing materials from suppliers, converting materials to finished goods, shipping product to customers, processing transactions, summarizing and reporting results of operations. Our systems could become damaged or cease to functional properly due to any number of causes, including issues caused by ongoing projects to improve our information technology systems, catastrophic events, power outages or cyber and other security threats, including computer viruses or attacks by hackers.  A disruption of our information technology systems could affect our ability to accurately manufacture and ship product, invoice customers, and timely and accurately process and report the results of our operations, financial position and cash flows.

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Our success depends on our ability to attract and retain qualified management professionals.

Our future success depends in large measure upon the continued contributions of key personnel.  We cannot guarantee that we will be able to attract and retain key personnel in sufficient numbers, with the requisite skills or on acceptable terms necessary or advisable to support our continued growth.  If we lose professionals or are unable to attract new talent, we will not be able to maintain our position in the market or grow our business.

External financing may not be available in the future.

We may require additional capital to finance continuing operations. We cannot assure that operations will continue to be profitable, that we will generate levels of revenues and cash flows sufficient to fund operations, or, if necessary, that we will be able to obtain financing on satisfactory terms, if at all. Financing arrangements may not be available or sufficient to meet our cash needs or, if available, at a cost that we believe is reasonable.

Future sales of our common stock by existing stockholders could depress the market price of our common stock.

Substantially all of our outstanding shares of common stock are freely tradable without restriction or further registration. Affiliates must sell all shares they own in compliance with the volume and other requirements of Rule 144. Nevertheless, sales of substantial amounts of common stock by our stockholders, or even the potential for such sales, may cause the market price of our common stock to decline and could impair our ability to raise capital through the sale of our equity securities.

The volatility of our stock price could adversely affect an investment in our common stock.

The market price of our common stock has been, and may continue to be, highly volatile. We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including:

· announcements of developments related to our business;

· quarterly fluctuations in our operating results and order levels;

· general conditions in the worldwide economy;

· announcements of technological innovations;

· new products or product enhancements by us or our competitors;

· developments in patents or other intellectual property rights and litigation; and

· developments in our relationships with our customers and suppliers.

In recent years the stock market in general, and the markets for shares of small capitalization and “high-tech” companies, have experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of our common stock.

Provisions in our articles of organization and our shareholder rights plan may have the effect of discouraging certain offers for our business or common stock, and limit the price that investors might be willing to pay in the future for shares of our common stock.

Provisions in our articles of organization and our shareholder rights plan may have the effect of discouraging or preventing a change in control. These provisions could limit the price that acquirers might be willing to pay in the future for shares of our common stock. Specifically, our articles of organization authorize our Board of Directors to issue up to 100,000 shares of preferred stock in one or more series, to fix certain rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued shares of preferred stock, to fix the number of shares constituting any such series, and to fix the designation of any such series, without further vote or action by our shareholders. The terms of any series of preferred stock, which may include priority claims to assets and dividends and special voting rights, could adversely affect the rights of the holders of common stock and thereby reduce the value of our common stock. We have no present plans to issue shares of preferred stock. We have in place a shareholder rights plan, which was renewed in April of 2008, under which our stockholders are entitled to purchase shares of our preferred stock under certain circumstances. These circumstances include the purchase of 15% or more of the outstanding shares of common stock by a person or group, or the announcement of a tender or exchange offer to acquire 15% or more of the outstanding common stock.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

The Company leases an 186,000 square foot facility located in Billerica, Massachusetts and serves as the Company’s executive offices, research, manufacturing and warehouse facilities.  The lease expires on February 29, 2016.The Company believes that its facilities are adequate and provide sufficient production capacity for its present intended purposes. The Company’s facilities are currently utilized primarily on a one-shift basis. The Company is able to add additional capacity by adding second and third shifts if necessary.

ITEM 3.  LEGAL PROCEEDINGS

None.

ITEM 4.  MINE SAFETY DISCLOSURE

None.

PART II

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on the NASDAQ Global Select Market under the symbol ASEI. The market price range for the common stock for the last two fiscal years as reported on the NASDAQ Global Select Market is as follows:

Fiscal Year	Quarter Ended	High		Low
2013	March 31, 2013	$	70.00	$	60.13
	December 31, 2012	$	67.35	$	58.33
	September 30, 2012	$	69.28	$	54.44
	June 30, 2012	$	69.69	$	46.30
2012	March 31, 2012	$	78.99	$	65.60
	December 31, 2011	$	75.52	$	58.13
	September 30, 2011	$	82.07	$	54.67
	June 30, 2011	$	94.79	$	74.46

Holders

As of May 31, 2013, there were approximately 458 holders of record of the Company’s common stock.

Common Stock Dividends

In May of 2007, the Company began declaring quarterly cash dividends for its common stock shareholders.  Common stock cash dividends declared during the fiscal years ended March 31, 2013 and March 31, 2012 were as follows:

Date Declared	Dividend per common share
May 14, 2012	$	0.50
August 2, 2012	0.50
November 5, 2012	0.50
February 11, 2013	0.50
Fiscal year ended March 31, 2013	$	2.00
May 9, 2011	$	0.30
August 4, 2011	0.30
November 7, 2011	0.50
February 9, 2012	0.50
Fiscal year ended March 31, 2012	$	1.60

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On May 7, 2013, the Company declared a quarterly dividend of $0.50 for holders of record on May 20, 2013 to be paid June 3, 2013.  Future dividend payments will depend on our earnings, capital requirements, financial condition and capital needs and other factors considered relevant by our Board of Directors.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information about the Company’s equity compensation plans and the common stock that may be issued upon the exercise of options and rights under all existing equity compensation plans as of March 31, 2013.

Plan Category	Number of securities to be issued upon exercise of outstanding options and rights as of March 31, 2013 (a)	Weighted average exercise price of outstanding options and rights (b)		Number of securities remaining available for future issuance under equity compensation plans as of March 31, 2013 (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders:
1999 Combination Plan	10,750	$	15.80	—
2000 Combination Plan	8,629	39.06		—
2002 Combination Plan (1)	32,536	31.33		—
2003 Stock Plan for Non-Employee Directors (2)	21,000	66.45		—
2005 Equity and Incentive Plan (3)	224,408	63.26		284,000
Equity compensation plans not approved by security holders:
1998 Non-Qualified Option Plan	17,839	42.39		—
Total	315,162	$	56.72	284,000

(1)Shares under the 2002 Combination Plan may be issued in the form of incentive stock options or non-qualified stock options.

(2)Shares under the 2003 Stock Plan for Non-Employee Directors may be issued in the form of non-qualified stock options.

(3)Shares under the 2005 Equity and Incentive Plan may be issued in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units.

Purchases of Equity Securities

In May 2012, the Board of Directors approved a Stock Repurchase Program which authorized the Company to repurchase up to $35.0 million of shares of its common stock from time to time on the open market.  This repurchase program was completed in August of 2012.  On August 2, 2012, the Board of Directors announced the approval of an additional Stock Repurchase Program which authorizes the Company to repurchase up to $35.0 million of additional shares of its common stock from time to time on the open market or in privately negotiated transactions.  During the fiscal year ended March 31, 2013, the Company repurchased 1,013,655 shares of common stock under these programs at an average price of $56.86.  As of March 31, 2013, the remaining balance available under the program to repurchase shares was $12,316,000.

On May 7, 2013, the Board of Directors announced the approval of its fifth Stock Repurchase Program which authorized the Company to repurchase up to an additional $35 million of shares of its common stock from time to time on the open market or in privately negotiated transactions.

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The following table provides information about our purchases during the quarter ended March 31, 2013 of equity securities.

Quarter ended March 31, 2013	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
January 1 – January 31	682	$	64.99	682	$	24,568,000
February 1 – February 28	76,600	63.74		76,600	$	19,681,000
March 1 – March 31	119,800	61.43		119,800	$	12,316,000
Total	197,082	$	62.34	197,082

Stock Performance Graph

The following chart graphs the performance of the cumulative total return to shareholders (stock price appreciation plus dividends, if applicable) during the previous five years in comparison to the returns of the Standard & Poor’s 500 Composite Stock Price Index (“S&P500”) and the S&P SmallCap 600 Index.  The S&P SmallCap 600 Index is a published index which measures the performance of small-cap companies which meet certain financial metrics.

Note:Assumes $100 invested at the close of trading on the last trading day preceding the first day of the fifth preceding fiscal year (and reinvestment of dividends) in the Company’s common stock, Standard & Poor’s 500 Composite Stock Price Index, and the S&P SmallCap 600 Index.

The information included under the heading “Stock Performance Graph” in Item 5 of this Annual Report on Form 10-K is “furnished” and not “filed” and shall not be deemed to be “soliciting material” or subject to Regulation 14A, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data is qualified by reference to, and should be read in conjunction with, the consolidated financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report.  The results below are not necessarily indicative of the results to be expected for any future periods.

(Dollars in thousands,	Fiscal Year
except per share amounts)	2013		2012		2011		2010		2009
Net sales and contract revenues	$	186,680	$	203,552	$	278,576	$	242,093	$	218,367
Net income	$	17,454	$	21,422	$	42,817	$	36,176	$	28,353
Income per share—diluted	$	2.07	$	2.34	$	4.63	$	3.97	$	3.18
Total assets	$	281,449	$	324,865	$	336,574	$	299,853	$	268,287
Long-term obligations	$	8,716	$	7,416	$	9,069	$	14,380	$	13,125
Stockholders’ equity	$	204,245	$	258,806	$	266,080	$	221,768	$	182,066
Dividends per common share	$	2.00	$	1.60	$	1.20	$	0.90	$	0.80

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto which appear elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements and should also be read in conjunction with the “Cautionary Statement” included at the beginning of this Annual Report on Form 10-K.

Overview     American Science and Engineering, Inc. develops and manufactures state-of-the-art X-ray inspection systems for homeland security, force protection, and other critical defense applications.  We provide maintenance, warranty, engineering, and training services related to these products.

Our primary technologies are Z Backscatter technology which is used to detect explosives, illegal drugs, and other contraband even when artfully concealed in complex backgrounds; and other technologies that expand the detection capability of our products beyond the material discrimination features of the Z Backscatter technology to include the penetration capability of high-energy transmission X-rays for dense cargos and/or other detection techniques, such as radioactive threat detection.

The following table presents net sales and contract revenues by product and service categories:

	For the fiscal year ended
(In thousands)	2013		2012		2011
Cargo Inspection Systems	$	49,925	$	33,871	$	63,638
Mobile Cargo Inspection Systems	31,558		46,874		100,230
Parcel and Personnel Screening Inspection Systems	7,825		20,419		17,585
Other product sales and contract revenue	9,181		12,960		11,365
Total net product sales and contract revenues	98,489		114,124		192,818
Net service revenues	88,191		89,428		85,758
Total net sales and contract revenues	$	186,680	$	203,552	$	278,576

Net sales and contract revenues for fiscal 2013 decreased by 8% to $186,680,000 compared to fiscal 2012 revenues of $203,552,000. We reported income before taxes of $26,446,000 in fiscal 2013 compared to income before taxes of $32,458,000 in the previous fiscal year. Net income for fiscal 2013 was $17,454,000 ($2.07 per share, on a diluted basis) as compared to a net income of $21,422,000 ($2.34 per share, on a diluted basis) in fiscal 2012. Backlog at March 31, 2013 was $186,201,000, a 3% decrease from the year-end backlog of $192,571,000 reported at March 31, 2012.

2013 Compared to 2012

Results of Operations    Total net sales and contract revenues of $186,680,000 in fiscal 2013 decreased by $16,872,000 or 8% from the previous year. Revenues related to product sales and contracts decreased by $15,635,000 or 14% due to the factors described further below.  Mobile Cargo Inspection system revenues decreased by $15,316,000 due to a decrease in number of units sold during the year as demand continues to be impacted by reduced government spending and unrest in the Middle East.  Parcel and Personnel Inspection System revenues decreased by $12,594,000 due to lower volume, as a one large multi-unit order fulfilled in the prior year was not repeated in fiscal 2013.  Custom Product revenues decreased by $2,284,000 due to the winding down of programs in progress and a reduction in backlog as government spending on these programs has slowed.  These revenue decreases were offset by an increase of $16,054,000 in Cargo Inspection system revenues from the prior year attributable primarily to the completion on numerous system installations related to one multi-unit contract received in fiscal 2012.  Service revenues decreased in fiscal 2013 by $1,237,000 or 1% to $88,191,000, due primarily to the cancellation of service contracts for certain systems taken out of service in conjunction with the withdrawal of U.S. forces from Iraq.

In both fiscal 2013 and fiscal 2012, 66% of our revenues, respectively, were from domestic customers (as determined based upon the customer’s country of domicile). In fiscal 2013, we had revenue from two customers which accounted for 41% of total sales.  In fiscal 2012, we had revenue from one customer which accounted for 23% of total sales.

Cost of sales and contracts of $107,261,000 in fiscal 2013 decreased by $3,174,000 or 3% from the previous year. Cost of product sales and contracts of $68,214,000 in fiscal 2013 increased by $2,714,000 or 4% as compared to the prior year. Cost of product sales and contracts totaled 69% of revenues in fiscal 2013, as compared to 57% of revenues in fiscal 2012. The resultant decrease in gross margin is primarily the result of the accrual of $4.1 million to settle a contractual issue in the Middle East; the incurrence of $1.3 million in severance related costs due to a force reduction; a $2.0 million increase in the expense

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for excess and obsolete inventory due primarily to the abandonment of one product development program; $1.1 million of accruals for product maintenance costs; $0.8 million in loss accruals provided for during the year on certain long-term contracts; and $0.6 million in write-downs of certain equipment to a lower of cost or net realizable value.  The cost of service revenues decreased $5,888,000 or 13% from the prior year. Cost of service revenues totaled 44% of revenues in fiscal 2013 as compared to 50% of revenues in fiscal 2012.  The resultant improvement in gross margin is due primarily to decreased third party service costs for equipment under fixed price service contracts as compared to the prior year.

Selling, general and administrative expenses in fiscal 2013 decreased by $6,091,000 to $29,533,000 as compared to $35,624,000 in fiscal 2012 and represented 16% of revenues in fiscal 2013 as compared to 18% of revenues in fiscal 2012. The decrease in selling, general and administrative expenses over the prior period was primarily the result of a decrease in incentive compensation of $4,874,000 due primarily to the cancellation of certain long-term incentive awards upon the termination of employment of certain executives during the year and a change in estimated payment dates of remaining awards; a decrease in payroll and payroll-related expenses of $483,000 due to a decrease in headcount offset by an increase in severance related costs associated with the workforce reduction; and a decrease in travel-related expenses of $652,000 from the prior year.  These expense decreases were offset in part by an increase in consulting and recruiting costs of $860,000.

Company-funded research and development spending decreased by $1,926,000 to $23,618,000 in fiscal 2013 which is an 8% decrease as compared to the $25,544,000 spent in fiscal 2012.  Research and development spending represented 13% of revenues in both fiscal 2013 and fiscal 2012. Research and development spending in fiscal 2013 focused on new product development, the development of new applications and new technologies, and design modifications and enhancements to its existing products.

Other income was $178,000 in income in fiscal 2013 as compared to $509,000 in income in fiscal 2012. The change in other income was due primarily to foreign exchange losses incurred in the current year.

We reported pre-tax income of $26,446,000 in fiscal 2013 as compared to a pre-tax income of $32,458,000 in the previous fiscal year primarily due to the items noted above. We recorded income tax expense of $8,992,000 in fiscal 2013 as compared to $11,036,000 in the prior fiscal year.  Our effective tax rate was 34.0% in both fiscal 2013 and in fiscal 2012.

We reported net income of $17,454,000 in fiscal 2013 as compared to net income of $21,422,000 in fiscal 2012.

2012 Compared to 2011

Results of Operations    Total net sales and contract revenues of $203,552,000 in fiscal 2012 decreased by $75,024,000 or 27% from the previous year. Revenues related to product sales and contracts decreased by $78,694,000 or 41% due to the factors described further below.  Mobile Cargo Inspection system revenues decreased by $53,356,000, due to a decrease in number of units sold during the year attributable to the force reduction in the Middle East and unrest due to the Arab Spring uprisings delaying procurements in other areas of the world.  Cargo Inspection System revenues decreased by $29,768,000 as compared to the prior year due to lower demand, and a fewer number of systems under construction as compared to the prior year.  Custom Products revenues decreased by $411,000 due in part to the termination for convenience of one of these contracts during fiscal 2012.  These revenue decreases were offset by an increase of $2,833,000 in Parcel Inspection system sales from the prior year attributable primarily to one large multi-system order received in fiscal 2011 and fulfilled in fiscal 2011 and fiscal 2012 and an increase in aftermarket sales of $2,007,000 due to increased spares parts volume during the year.  Service revenues increased in fiscal 2012 by $3,670,000 or 4% to $89,428,000, due primarily to service contracts entered into in the current year on the increased installed base.

In fiscal 2012 and fiscal 2011, 66% and 68% of our revenues, respectively, were from domestic customers (as determined based upon the customer’s country of domicile). In fiscal 2012, we had revenue from one customer which accounted for 23% of total sales.  In fiscal 2011, we had revenue from three customers which accounted for 53% of total sales.

Cost of sales and contracts of $110,435,000 in fiscal 2012 decreased by $38,939,000 or 26% from the previous year. Cost of product sales and contracts of $65,500,000 in fiscal 2012 decreased by $38,562,000 or 37% as compared to the prior year. Cost of product sales and contracts totaled 57% of revenues in fiscal 2012, as compared to 54% of revenues in fiscal 2011. The resultant decrease in gross margin is primarily the result of loss accruals provided for during the year on certain long-term contracts, the write-down of certain equipment to a lower of cost or net realizable value, and inventory reserves accrued for during the period for excess and obsolete inventory.  The cost of service revenues decreased $377,000 or 1% from the prior year. Cost of service revenues totaled 50% of revenues in fiscal 2012 as compared to 53% of revenues in fiscal 2011.  The resultant improvement in gross margin is due primarily to decreased material and third party service costs for equipment under fixed price service contracts as compared to the prior year.

Selling, general and administrative expenses in fiscal 2012 decreased by $6,515,000 to $35,624,000 as compared to $42,139,000 in fiscal 2011 and represented 18% of revenues in fiscal 2012 as compared to 15% of revenues in fiscal 2011. The

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decrease in selling, general and administrative expenses over the prior period was primarily the result of:  a decrease in incentive compensation of $6,244,000 as certain incentive compensation goals were not achieved in the current year; a decrease in legal fees of $859,000 from the prior year as fiscal 2011 contained expenses related to due diligence activities on a potential acquisition that was later abandoned; and a decrease in marketing costs of $597,000 related primarily to reduced trade show, conference, and demonstration related costs.  These expense decreases were offset in part by an increase in payroll and payroll related costs of $1,023,000 attributable to increased headcount

Company-funded research and development spending increased by $2,925,000 to $25,544,000 in fiscal 2012 which is a 13% increase as compared to the $22,619,000 spent in fiscal 2011.  Research and development spending represented 13% of revenues in fiscal 2012 as compared to 8% of revenues in fiscal 2011. Research and development spending increased from the prior year and the Company continued its commitment to new product development, the development of new applications and new technologies, and design modifications and enhancements to its existing products.

Other income was $509,000 in income in fiscal 2012 as compared to $431,000 in income in fiscal 2011.

We reported pre-tax income of $32,458,000 in fiscal 2012 as compared to pre-tax income of $64,875,000 in the previous fiscal year primarily due to the items noted above. We recorded income tax expense of $11,036,000 in fiscal 2012 as compared to $22,058,000 in the prior fiscal year.  Our effective tax rate was 34.0% in both fiscal 2012 and in fiscal 2011.

We reported net income of $21,422,000 in fiscal 2012 as compared to net income of $42,817,000 in fiscal 2011.

Liquidity and Capital Resources

Cash and cash equivalents at year-end increased by $16,049,000 to $40,418,000 at March 31, 2013 as compared to $24,369,000 at March 31, 2012.  In addition, we had $108,546,000 and $170,834,000 of short-term investments at March 31, 2013 and March 31, 2012, respectively.

Cash flow provided by operations of $31,157,000 resulted from the following:

· Reported net income of $17,454,000 adjusted for the following non-cash items:

· Depreciation and amortization of $5,114,000;

· The provision for contracts, inventory and accounts receivable reserves of $5,405,000;

· Increases in deferred income taxes of $2,966,000;

· The amortization of bond premiums of $2,700,000; and

· Stock compensation expense of $184,000.  Stock compensation expense has decreased from prior years due to incentive compensation awards in recent years being granted in cash as well as the cancellation of certain outstanding stock awards upon termination of employment of certain Company executives.

·An increase of $6,663,000 in accrued expenses and other liabilities attributable primarily to the accrual of costs related to the resolution of a contractual issue with one customer;

·An increase of $2,094,000 in accrued income taxes.

These cash contributors were offset by:

·An increase in gross inventories of $4,933,000 due primarily to an increase in systems under construction pending installation as compared to the prior year; and

·An increase of $3,382,000 in accounts receivable due to the timing of certain contract milestone invoices at year end;

Net cash of $56,049,000 was provided by investing activities in fiscal 2013. We had sales and maturities of short-term investments of $200,089,000 and purchased $140,532,000 in short-term investments during the year.  Net fiscal 2013 capital expenditures totaled $3,508,000 versus $5,160,000 for fiscal 2012.  Investments in fixed assets were comprised primarily of information technology expenditures and demo and test equipment.

At March 31, 2013, short-term investments and cash equivalents were invested primarily in corporate debentures/bonds, commercial paper, money market funds and certificates of deposit.  Although management believes our investment policy is conservative in nature, certain short-term investments in commercial paper can be exposed to the credit risk of the underlying companies to which they relate and interest earned on these investments is subject to interest rate fluctuations. The weighted average days to maturity for investments held at March 31, 2013 was 189 days.

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Net cash used for financing activities was $71,157,000 in fiscal 2013.  The Company approved two stock repurchase programs during the fiscal year for $35,000,000 each and repurchased 1,013,655 shares of common stock for $57,633,000 under these programs.  In addition, we made quarterly dividend payments totaling $16,841,000.  Offsetting these outflows, we received proceeds of $2,160,000 from exercises of employee stock options and reduced our restricted cash needed to collateralize outstanding letters of credit by $2,373,000 from the prior year.

In the normal course of business, we may provide certain customers and potential customers with performance guarantees, which are generally backed by standby letters of credit. In general, we would only be liable for the amount of these guarantees in the event of default in the performance of its obligations, the probability of which is remote in management’s opinion.  At March 31, 2013, we had outstanding $25,437,000 in standby letters of credit. These outstanding standby letters of credit are cash-secured at amounts ranging from 52% to 66% of the value of outstanding letters of credit. This collateral requirement resulted in a restricted cash balance of $13,517,000 at March 31, 2013, of which $899,000 was considered long-term restricted cash due to the expiration date of the underlying letters of credit.

As of March 31, 2013, $496,000 of our cash was held offshore, and while we do not currently believe there are any material limitations or restrictions on our ability to repatriate profits there may be tax consequence or changes in statutory rules which would affect our ability to do so without incurring a significant tax burden.

In recent years, we have funded our operations and capital expenditures with cash generated by operations, including deposits from customers on long-term projects and from proceeds received from option exercises. We currently have no line of credit facility and believe that our cash flows from operations, and cash and investments on hand are sufficient to meet the current and foreseeable operating requirements of our business.

Contractual Obligations:  We lease certain facilities under non-cancelable leases. In addition, in the normal course of business, we enter into purchase orders with our vendors for the purchase of materials or services to meet our production needs. The following table summarizes our contractual obligations as of March 31, 2013.

	Payment due by period
(In thousands)	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
Recorded Contractual Obligations:
Lease financing liability	$	4,403	$	1,489	$	2,914	$	—	$	—
Other long-term obligations	77		9		17		17		34
Operating leases	1,175		647		528		—		—
Purchase commitments	27,241		25,660		1,581		—		—
Total contractual obligations	$	32,896	$	27,805	$	5,040	$	17	$	34

Inflation:  We do not believe that inflation has had a material effect on our results of operations in each of fiscal 2013, 2012 and 2011. There can be no assurance, however, that our business will not be affected by inflation in the future.

Off-Balance Sheet Arrangements:  During the fiscal year ended March 31, 2013 we did not have any material off-balance sheet arrangements.

Critical Accounting Policies

We consider certain accounting policies related to revenue recognition, inventories and related allowances for obsolete and excess inventory, and income taxes to be critical policies due to the estimation processes involved in each.

Revenue Recognition:  We recognize certain Cargo Inspection, Mobile Cargo Inspection, Parcel and Personnel Screening System, and after-market part sales, in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 605-10, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.

Infrequently, the Company receives requests from customers to hold product being purchased from us for a valid business purpose. We recognize revenue for such arrangements provided the transaction meets, at a minimum, the following criteria: a valid business purpose for the arrangement exists; risk of ownership of the purchased product has been transferred to the buyer; there is a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the product is ready for shipment; the Company has no continuing performance obligation in regards to the product and the products have been

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segregated from our inventories and cannot be used to fill other orders received.  There were no products being held under these arrangements at March 31, 2013, March 31, 2012 or March 31, 2011.

Certain of our contracts are multiple-element arrangements, which include standard products, custom-built systems or contract engineering projects, services (such as training), and service and maintenance contracts. In accordance with FASB ASC 605-25, Revenue Recognition — Multiple Element Arrangements as amended by Accounting Standards Update No. 2009-13 adopted retroactively to April 1, 2009, revenue arrangements that include multiple elements are analyzed to determine whether the deliverables can be divided into separate units of accounting or treated as a single unit of accounting. The consideration we receive is allocated among the separate units of accounting based on their relative selling prices determined based on prices of these elements as sold on a stand-alone basis, and the applicable revenue recognition criteria are applied to each of the separate units. Generally, there is no customer right of return provision in the Company’s sales agreements.  Revenues are allocated to a delivered product or service when all of the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; and (2) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in our control.

Revenues for certain long-term, custom-built systems or contract engineering projects are recognized on a percentage of completion basis. The lengths of these contracts typically range from one to four years from order to delivery and acceptance. Percentages-of-completion are determined by relating the actual costs of work performed to date for each contract to our estimated final costs. Revisions in costs and profit estimates are reflected in the period in which the facts causing the revision become known.

We recognize sales for our systems that are produced in a standard manufacturing operation, have minimal customer site installation requirements and have shorter order to delivery cycles when title passes and when other revenue recognition criteria are met. Management believes the customer’s post-delivery acceptance provisions and installation requirements on certain of these systems are perfunctory and inconsequential and the costs of installation at the customer’s site are accrued at the time of revenue recognition.  We have demonstrated a history of customer acceptance subsequent to shipment and installation of these systems.  For systems which entail more significant installation efforts and site work and/or have non-standard customer acceptance provisions, revenue recognition is deferred until installation is complete and customer acceptance has occurred.

Service revenues are recognized on time and materials engagements as the services are provided. Service contract revenues are recognized as service is performed over the length of the contract which reasonably approximates the period service revenues are earned.

Training and service contracts deliverables are accounted for separately from the delivered product elements as our undelivered products have value to our customers on a stand-alone basis. Accordingly, service revenue is deferred and recognized as such services are performed.

For all fixed price and long-term contracts, if a loss is anticipated on the contract, a provision is made in the period in which such losses are determined.

We record billed shipping and handling fees and billed out-of-pocket expenses as revenue and the associated costs as cost of goods sold in the accompanying consolidated statements of operations.

Certain contracts require payments from the customer upon execution of the agreement that are included in customer deposits. Individual customer deposits are reduced by the amount of revenue recognized on the contract until a zero balance is reached. Revenue recognized in excess of billings under the contracts is included in unbilled costs and fees in the accompanying balance sheet. Of the amounts in unbilled costs and fees at March 31, 2013, $4,839,000 (99%) is expected to be billed and collected during fiscal 2014.

Under the terms of certain of our cost reimbursement contracts, we are not permitted to bill customers a specified portion of the contract value until completion. Such retainages (approximately $80,000 and $87,000 at March 31, 2013 and March 31, 2012, respectively) result from both commercial contract retentions and government contract withholdings generally for up to 15% of fees, as well as the difference between the actual and provisional indirect cost billing rates. Retainages are included in the accompanying consolidated balance sheets as components of unbilled costs and fees. The accuracy and appropriateness of our direct and indirect costs and expenses under these cost reimbursement contracts and our accounts receivable recorded pursuant to such contracts, are subject to regulation and audit, including by the U.S. Defense Contract Audit Agency (“DCAA”) or by other appropriate agencies of the U.S. government.  Such agencies have the right to challenge the Company’s cost estimates or allocations with respect to any government contract.  Additionally, a portion of the payments to the Company under government contracts are provisional payments that are subject to potential adjustment upon audit by such agencies.  Historically, such audits have not resulted in any significant disallowed costs.  Although we can give no assurances, in the opinion of management, any adjustments likely to result from inquiries or audits of our contracts will not have a material adverse impact on our financial condition or results of operations.

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Inventories and Related Allowance for Obsolete and Excess Inventory:  Inventories consist of material, labor and manufacturing overhead and are recorded at the lower of cost or net realizable value. Excessive manufacturing overhead costs such as idle facility expense, freight, handling costs and wasted material (spoilage) attributable to abnormally low volumes (levels that materially differ from budgeted production plans due primarily to changes in customer demand) are excluded from inventory and recorded as an expense in the period incurred. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on the estimated forecast of product demand over the next twelve to eighteen months. Demand for products can fluctuate significantly. A significant increase in the demand for our products could result in a short-term increase in inventory balances, while a significant decrease in demand could result in an increase in the amount of excess inventory quantities on hand. Additionally, inventory reserves require estimates of future product demand, which may materially impact the provision required for excess and obsolete inventory. In the future, if inventory were determined to be overvalued, we would be required to recognize such costs in our cost of goods sold at the time of such determination. Likewise, if inventory is determined to be undervalued, we may have over-reported costs of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale. Therefore, although we make every effort to ensure the accuracy of forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and reported operating results.

Income Taxes:  We account for income taxes in accordance with FASB ASC 740, Income Taxes. Accordingly, we recognize deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. We evaluate the need for a valuation allowance against our net deferred tax assets at year end based upon our three year cumulative income and our projections of future income, and record a valuation allowance against any net deferred tax assets if it is more likely than not that they will not be realized.

New Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which changes the existing guidance on the presentation of comprehensive income. Entities have the option of presenting the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders’ equity. ASU No. 2011-05 was effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2011, which for the Company was the first quarter of fiscal 2013. In December 2011, with the issuance of ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” the FASB announced that it has deferred certain aspects of ASU 2011-05. In February 2013, the FASB issued ASU 2013-2, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” with the stated objective of improving the reporting of reclassifications out of accumulated other comprehensive income. The amendments in ASU 2013-2 are effective during interim and annual periods beginning after December 31, 2012. The adoption of ASU 2011-05, 2011-12 and 2013-2 regarding comprehensive income have not had a significant impact on the accounting or disclosures in our financial statements.

ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The cash accounts for our operations in Hong Kong, England, the Netherlands, Saudi Arabia, Brazil and Abu Dhabi are maintained in Hong Kong dollars, British pounds sterling, Euros, Saudi riyals, Brazilian reals, and United Arab Emirates dirham, respectively. The gains and losses from foreign currency transactions are included in the consolidated statements of operations for the period and were not significant. In the fourth quarter of fiscal 2011, we purchased a foreign currency put option which provided us with the option to exchange Euros for U.S. dollars at a fixed exchange rate such that, if the Euro were to depreciate against the U.S. dollar to predetermined levels as set by the contract, we could exercise our option and mitigate our foreign currency exchange losses. This put option was sold during the quarter ended September 30, 2010 at a price near cost resulting in no material gain or loss.  A hypothetical 10 percent change in foreign currency rates would not have a material impact on our results of operations or financial condition.

As of March 31, 2013, we held short-term investments and cash equivalents consisting of commercial paper, corporate debentures/bonds, money market funds and certificates of deposit. Our primary objective with our investment portfolio is to invest available cash while preserving principal and meeting liquidity needs. These investments have an average interest rate of approximately 0.56% and are subject to interest rate risk. As a result of the average maturity and conservative nature of the investment portfolio, a sudden change in interest rates would not have a material adverse effect on the value of these investments.  To minimize this risk, we maintain a significant portion of our cash balances in money market funds.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary financial information listed in the Index to Consolidated Financial Statements on page 28 are filed as part of this Annual Report on Form 10-K and are incorporated into this item by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the Company reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2013 to ensure that information required to be disclosed by the Company in the reports filed and submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.  Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation under the criteria established in “Internal Control — Integrated Framework”, our management concluded that the Company’s internal control over financial reporting was effective as of March 31, 2013.  McGladrey LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of March 31, 2013, and has issued their report thereon which is included in this Annual Report on Form 10-K and incorporated herein by reference.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during the quarter ended March 31, 2013 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

Code of Conduct

The Company has adopted a Code of Business Conduct and Ethics that applies to our Board of Directors, Chief Executive Officer, Chief Financial Officer, and all employees of the Company. The Company’s Code of Business Conduct and Ethics is posted on our website at www.as-e.com and may be accessed in the Corporate Governance section of the Investor Information page. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K, regarding an amendment to, or waiver from, our Code of Conduct, by posting such information on our website at the location specified above.

The other information called for by this item is hereby incorporated by reference from our Definitive Proxy Statement relating to the 2013 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about July 29, 2013.

26

ITEM 11. EXECUTIVE COMPENSATION

The information called for by this item is hereby incorporated by reference from our Definitive Proxy Statement relating to the 2013 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about July 29, 2013.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by this item is hereby incorporated by reference from our Definitive Proxy Statement relating to the 2013 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about July 29, 2013.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information called for by this item is hereby incorporated by reference from our Definitive Proxy Statement relating to the 2013 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about July 29, 2013.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by this item is hereby incorporated by reference from our Definitive Proxy Statement relating to the 2013 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about July 29, 2013.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The financial statements listed in the Index to Consolidated Financial Statements on page 28 are filed as part of this report, and such Index is incorporated in this item by reference.

The exhibits listed in the Exhibit Index on page 50 are filed as part of this report, and such Index is incorporated in this item by reference.

27

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

(Submitted in answer to Item 8, Item 9A and Item 15 of Form 10-K, Securities and Exchange Commission)

	PAGE
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm	29
Consolidated Balance Sheets—March 31, 2013 and 2012	30
Consolidated Statements of Operations and Comprehensive Income for the Years Ended March 31, 2013, 2012 and 2011	31
Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 2013, 2012 and 2011	32
Consolidated Statements of Cash Flows for the Years Ended March 31, 2013, 2012 and 2011	33
Notes to Consolidated Financial Statements	34
CONSOLIDATED SUPPLEMENTARY FINANCIAL INFORMATION
Unaudited Quarterly Consolidated Financial Data for the Years Ended March 31, 2013 and 2012	48

Financial statement schedules have been omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.

28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of American Science and Engineering, Inc.

We have audited the accompanying consolidated balance sheets of American Science and Engineering, Inc. and subsidiaries (“the Company”) as of March 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the three years ended March 31, 2013. We also have audited American Science and Engineering, Inc. and subsidiaries’ internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audit also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Science and Engineering, Inc. and subsidiaries as of March 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2013, in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, American Science and Engineering, Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ McGladrey LLP

Boston, Massachusetts

June 7, 2013

29

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2013 AND 2012

(Amounts in thousands, except share and per share amounts)

	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	40,418		$	24,369
Restricted cash	12,618			11,707
Short-term investments, at fair value	108,546			170,834
Accounts receivable, net of allowances of $351 at March 31, 2013 and $255 at March 31, 2012	28,477			25,439
Unbilled costs and fees	4,875			3,206
Inventories	48,051			48,179
Prepaid expenses and other current assets	8,829			10,386
Deferred income taxes	3,155			3,329
Total current assets	254,969			297,449
Building, equipment and leasehold improvements, net	16,451			17,998
Restricted cash	899			4,183
Deferred income taxes	8,325			5,174
Other assets, net	805			61
Total assets	$	281,449		$	324,865
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,371		$	7,461
Accrued salaries and benefits	9,974			11,722
Accrued warranty costs	397			358
Accrued income taxes	2,094			—
Deferred revenue	15,770			16,731
Customer deposits	16,199			15,031
Current portion of lease financing liability	1,489			1,351
Other current liabilities	14,194			5,989
Total current liabilities	68,488			58,643
Lease financing liability, net of current portion	2,914			4,403
Deferred revenue	5,535			2,913
Other long term liabilities	267			100
Total liabilities	77,204			66,059
Commitments and contingencies (Notes 2 and 9)
Stockholders’ equity:
Preferred stock, no par value Authorized—100,000 shares Issued—None	—			—
Common stock, $0.662/3 par value Authorized—20,000,000 shares Issued and outstanding— 7,980,202 shares at March 31, 2013 and 8,942,793 shares at March 31, 2012	5,320			5,961
Capital in excess of par value	41,458			95,971
Accumulated other comprehensive income (loss), net	(4		)	16
Retained earnings	157,471			156,858
Total stockholders’ equity	204,245			258,806
Total liabilities and stockholders’ equity	$	281,449		$	324,865

The accompanying notes are an integral part of these consolidated financial statements.

30

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED MARCH 31, 2013, 2012, AND 2011

(Amounts in thousands except per share amounts)

		2013			2012			2011
Net sales and contract revenues:
Net product sales and contract revenues		$	98,489		$	114,124		$	192,818
Net service revenues		88,191			89,428			85,758
Total net sales and contract revenues		186,680			203,552			278,576
Cost of sales and contracts:
Cost of product sales and contracts		68,214			65,500			104,062
Cost of service revenues		39,047			44,935			45,312
Total cost of sales and contracts		107,261			110,435			149,374
Gross profit		79,419			93,117			129,202
Operating expenses:
Selling, general and administrative expenses		29,533			35,624			42,139
Research and development expenses		23,618			25,544			22,619
Total operating expenses		53,151			61,168			64,758
Operating income		26,268			31,949			64,444
Other income (expense):
Interest and investment income, net		657			655			678
Interest expense		(65		)	(91		)	(110		)
Other, net		(414		)	(55		)	(137		)
Total other income		178			509			431
Income before provision for income taxes		26,446			32,458			64,875
Provision for income taxes		8,992			11,036			22,058
Net income		$	17,454		$	21,422		$	42,817
Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities (net of tax)		(20		)	(5		)	(12		)
Comprehensive income		$	17,434		$	21,417		$	42,805
Income per share	— Basic	$	2.08		$	2.37		$	4.73
	— Diluted	$	2.07		$	2.34		$	4.63
Weighted average shares	— Basic	8,394			9,046			9,045
	— Diluted	8,448			9,148			9,247
Dividends declared per share		$	2.00		$	1.60		$	1.20

The accompanying notes are an integral part of these consolidated financial statements.

31

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED MARCH 31, 2013, 2012, AND 2011

(Amounts in thousands, except share amounts)

	Common Stock Shares		Common Stock Par Value			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comp. Income (Loss)			Total
Balance, March 31, 2010	9,013,508		$	6,008		$	97,819		$	117,908		$	33		$	221,768
Net income	—		—			—			42,817			—			42,817
Repurchase of common stock	(51,269	)	(34		)	(3,702		)	—			—			(3,736		)
Exercise of stock options	197,669		132			6,811			—			—			6,943
Issuance of stock under employee compensation plans	2,939		2			218			—			—			220
Issuances of restricted stock, net of forfeitures	7,118		5			(5		)	—			—			—
Tax benefit accrued on stock option exercises	—		—			3,730			—			—			3,730
Compensation expense on stock options	—		—			1,703			—			—			1,703
Compensation expense on restricted stock and restricted stock units	—		—			3,513			—			—			3,513
Dividends declared	—		—			—			(10,866		)	—			(10,866		)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	—		—			—			—			(12		)	(12		)
Balance, March 31, 2011	9,169,965		$	6,113		$	110,087		$	149,859		$	21		$	266,080
Net income	—		—			—			21,422			—			21,422
Repurchase of common stock	(320,207	)	(213		)	(19,838		)	—			—			(20,051		)
Exercise of stock options	75,714		50			4,237			—			—			4,287
Vesting of restricted stock units	2,341		1			(1		)	—			—			—
Issuances of restricted stock, net of forfeitures	14,980		10			(10		)	—			—			—
Reversal of tax benefit associated with stock options	—		—			(303		)	—			—			(303		)
Compensation expense on stock options	—		—			597			—			—			597
Compensation expense on restricted stock and restricted stock units	—		—			1,202			—			—			1,202
Dividends declared	—		—			—			(14,423		)	—			(14,423		)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	—		—			—			—			(5		)	(5		)
Balance, March 31, 2012	8,942,793		$	5,961		$	95,971		$	156,858		$	16		$	258,806
Net income	—		—			—			17,454			—			17,454
Repurchase of common stock	(1,013,655	)	(675		)	(56,958		)	—			—			(57,633		)
Exercise of stock options	50,505		34			2,126			—			—			2,160
Vesting of restricted stock units	1,743		1			(1		)	—			—			—
Issuances of restricted stock, net of forfeitures	(1,184	)	(1		)	1			—			—			—
Tax benefit accrued on stock option exercises	—		—			135			—			—			135
Compensation expense on stock options	—		—			(106		)	—			—			(106		)
Compensation expense on restricted stock and restricted stock units	—		—			290			—			—			290
Dividends declared	—		—			—			(16,841		)	—			(16,841		)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	—		—			—			—			(20		)	(20		)
Balance, March 31, 2013	7,980,202		$	5,320		$	41,458		$	157,471		$	(4	)	$	204,245

The accompanying notes are an integral part of these consolidated financial statements.

32

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2013, 2012, AND 2011

(Amounts in thousands)

	2013			2012			2011
Cash flows from operating activities:
Net income	$	17,454		$	21,422		$	42,817
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,114			5,768			4,961
Provisions for contracts, inventory, and accounts receivable reserves	5,405			2,998			1,608
Amortization of bond premium	2,700			2,689			2,057
Stock compensation expense	184			1,799			5,216
Other	(59		)	(47		)	(125		)
Deferred income taxes	(2,966		)	1,750			(2,716		)
Change in assets and liabilities:
Accounts receivable	(3,382		)	11,819			551
Unbilled costs and fees	(1,669		)	13,876			(15,004		)
Inventories	(4,933		)	(4,333		)	(3,139		)
Prepaid expenses and other assets	813			(3,609		)	3,048
Accrued income taxes	2,094			(1,936		)	(2,267		)
Accounts payable	910			(1,917		)	(1,592		)
Deferred revenue	1,661			(568		)	(2,034		)
Customer deposits	1,168			5,838			(4,521		)
Accrued expenses and other current liabilities	6,663			(4,530		)	4,344
Total adjustments	13,703			29,597			(9,613		)
Net cash provided by operating activities	31,157			51,019			33,204
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments	200,089			220,293			192,406
Purchases of short-term instruments	(140,532		)	(283,685		)	(160,422		)
Proceeds from sale of fixed assets	110			51			3
Purchases of property and equipment	(3,618		)	(5,211		)	(5,304		)
Net cash provided by (used for) investing activities	56,049			(68,552		)	26,683
Cash flows from financing activities:
Decrease (increase) in restricted cash	2,373			13,570			(29,425		)
Repurchase of shares of common stock	(57,633		)	(20,051		)	(3,736		)
Payment of common stock dividends	(16,841		)	(14,423		)	(10,866		)
Repayment of leasehold financing	(1,351		)	(1,322		)	(1,301		)
Proceeds from exercise of stock options	2,160			4,287			6,943
Reduction of (increase in) income taxes paid due to the tax benefit (expense) from employee stock option expense	135			(303		)	3,730
Net cash used for financing activities	(71,157		)	(18,242		)	(34,655		)
Net increase (decrease) in cash and cash equivalents	16,049			(35,775		)	25,232
Cash and cash equivalents at beginning of year	24,369			60,144			34,912
Cash and cash equivalents at end of year	$	40,418		$	24,369		$	60,144
Supplemental disclosures of cash flow information:
Interest paid	$	73		$	91		$	110
Income taxes paid	$	7,367		$	13,744		$	24,079
Non-cash transactions:
Issuance of stock for 401K match	$	—		$	—		$	220

The accompanying notes are an integral part of these consolidated financial statements.

33

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

American Science and Engineering, Inc., a Massachusetts corporation formed in 1958, develops, manufactures, markets, and sells X-ray inspection and other detection products for homeland security, force protection and other critical defense applications.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all investments with original maturities of 90 days or less to be cash equivalents.  The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits.  The Company has not experienced any losses related to these balances, and management believes its risk of loss to be minimal.

Restricted Cash

Restricted cash consists of collateral for performance bonds issued related to customer contracts and certain facility lease agreements.

Short-term Investments and Cash Equivalents

Short-term investments and cash equivalents consist of investments in commercial paper, corporate debentures/bonds, treasury bills, government agency bonds, money market funds and certificates of deposit. These investments are classified as available-for-sale and are recorded at their fair values using the specific identification method. The unrealized holding gains or losses on these securities are included as a component of comprehensive income in the Consolidated Statements of Operations and Comprehensive Income.

Accounts Receivable and Unbilled Costs and Fees

Accounts receivable are recorded at the invoiced amount. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.  It is the Company’s policy to write off uncollectible receivables when management determines the receivable has become uncollectible. Activity in the allowance for doubtful accounts is as follows:

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses			Deductions or Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	255	$	344		$	248	$	351
Fiscal 2012	$	334	$	(79	)	$	—	$	255
Fiscal 2011	$	330	$	4		$	—	$	334

34

Included in accounts receivable and unbilled costs and fees at March 31, 2013 and 2012 are $12,973,000 and $13,377,000, respectively, attributable to both prime and subcontracts with federal and state governments. The Company establishes a reserve against unbilled costs and fees based on known troubled accounts or contracts, historical experience, and other currently available evidence. There was no activity in the reserve for unbilled costs and fees during fiscal 2013, 2012 and 2011.

Inventories

Inventories consist of material, labor and manufacturing overhead and are recorded at the lower of cost, using the weighted average cost method, or net realizable value. Excessive manufacturing overhead costs attributable to idle facility expenses, freight, handling costs and wasted material (spoilage) attributable to abnormally low production volumes (levels that materially differ from budgeted production plans due primarily to changes in customer demand) are excluded from inventory and recorded as an expense in the period incurred.

The components of inventories at March 31, 2013 and 2012, net of inventory reserves, were as follows:

(In thousands)	2013		2012
Raw materials, completed subassemblies and spare parts	$	21,450	$	23,689
Work-in-process	21,129		16,705
Finished goods	5,472		7,785
Total	$	48,051	$	48,179

The Company periodically reviews quantities of inventory on hand and compares these amounts to expected usage of each particular product or product line. The Company records, as a charge to cost of sales, any amounts required to reduce the carrying value to net realizable value.

Activity in the reserve for excess or obsolete inventory is as follows:

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions / Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	6,210	$	5,061	$	219	$	11,052
Fiscal 2012	$	4,882	$	3,076	$	1,748	$	6,210
Fiscal 2011	$	3,982	$	1,604	$	704	$	4,882

Building, Equipment and Leasehold Improvements

The Company provides for depreciation and amortization of its fixed assets on a straight-line basis over estimated useful lives of 1-25 years or remaining lease terms. Expenditures for normal maintenance and repairs are charged to expense as incurred. Significant additions, renewals or betterments that extend the useful lives of the assets are capitalized at cost. The cost and accumulated depreciation applicable to equipment and leasehold improvements sold, or otherwise disposed of, are removed from the accounts, and any resulting gain or loss is included in the consolidated statements of operations.

Building, equipment and leasehold improvements consisted of the following at March 31, 2013 and 2012.

(In thousands)	Estimated Useful Lives	2013			2012
Building and leasehold improvements	Lesser of 25 years or remaining lease term	$	21,245		$	20,761
Equipment and tooling	5-10 years	5,284			5,110
Computer equipment and software	3-5 years	23,135			21,491
Furniture and fixtures	5-7 years	2,553			2,515
Demo and test equipment	2-5 years	7,579			6,576
Leased equipment	1-2 years or life of lease	63			63
Motor vehicles	3-5 years	72			72
Total		59,931			56,588
Less accumulated depreciation and amortization		(43,480		)	(38,590		)
Building, equipment and leasehold improvements, net		$	16,451		$	17,998

35

Revenue Recognition

The Company recognizes certain Cargo Inspection, Mobile Cargo Inpection, Parcel and Personnel Screening systems, and after-market part sales, in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 605-10, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.

Infrequently, the Company receives requests from customers to hold product being purchased for a valid business purpose. The Company recognizes revenue for such arrangements provided the transaction meets, at a minimum, the following criteria: a valid business purpose for the arrangement exists; risk of ownership of the purchased product has transferred to the buyer; there is a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the product is ready for shipment; the Company has no continuing performance obligation in regards to the product and the products have been segregated from its inventories and cannot be used to fill other orders received.  There was no product being held under these arrangements at March 31, 2013 or March 31, 2012.

Certain of the Company’s contracts are multiple-element arrangements, which include standard products, custom-built systems or contract engineering projects, services (such as training), and service and maintenance contracts. In accordance with FASB ASC 605-25, Revenue Recognition — Multiple Element Arrangements, revenue arrangements that include multiple elements are analyzed to determine whether the deliverables can be divided into separate units of accounting or treated as a single unit of accounting. The consideration received is allocated among the separate units of accounting based on their relative selling prices determined based on prices of these elements as sold on a stand-alone basis, and the applicable revenue recognition criteria are applied to each of the separate units. Generally, there is no customer right of return provision in the Company’s sales agreements.  Revenues are allocated to a delivered product or service when the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; and (2) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in our control.

Revenues for certain long-term, custom-built systems or contract engineering projects are recognized on a percentage of completion basis. The lengths of these contracts typically range from one to four years from order to delivery and acceptance. Percentages-of-completion are determined by relating the actual costs of work performed to date for each contract to its estimated final costs. Revisions in costs and profit estimates are reflected in the period in which the facts causing the revision become known.

For all fixed price and long-term contracts, if a loss is anticipated on the contract, a provision is made in the period in which such losses are determined.

The Company recognizes sales for its systems that are produced in a standard manufacturing operation, have minimal customer site installation requirements and have shorter order to delivery cycles, when title passes and when other revenue recognition criteria are met. Management believes the customer’s post-delivery acceptance provisions and installation requirements on certain of these systems are perfunctory and inconsequential and the costs of installation at the customer’s site are accrued at the time of revenue recognition.  The Company has demonstrated a history of customer acceptance subsequent to shipment and installation of these systems.  For systems which entail more significant installation efforts and site work and/or have non-standard customer acceptance provisions, revenue recognition is deferred until installation is complete and customer acceptance has occurred.

Service revenues are recognized on time and materials engagements as the services are provided. Service contract revenues are recognized as service is performed over the length of the contract which reasonably approximates the period service revenues are earned.

The Company records billed shipping and handling fees and billed out-of-pocket expenses as revenue and the associated costs as cost of goods sold in the accompanying consolidated statements of operations.

Training and service contracts deliverables are accounted for separately from the delivered product elements as the Company’s undelivered products have value to its customers on a stand-alone basis. Accordingly, this service revenue is deferred and recognized as such services are performed.

Certain contracts require payments from the customer upon execution of the agreement that are included in customer deposits. Individual customer deposits are reduced by the amount of revenue recognized on the contract until a zero balance is reached. Revenue recognized in excess of billings under the contracts is included in unbilled costs and fees in the accompanying consolidated balance sheets. Of the amounts in unbilled costs and fees at March 31, 2013, $4,839,000 (99%) is expected to be billed and collected during fiscal 2014.

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Under the terms of certain cost reimbursement contracts, the Company is not permitted to bill customers a specified portion of the contract value until completion. Such retainages (approximately $80,000 and $87,000 at March 31, 2013 and March 31, 2012, respectively) result from both commercial contract retentions and government contract withholdings generally for up to 15% of fees, as well as the difference between the actual and provisional indirect cost billing rates. Retainages are included in the accompanying consolidated balance sheets as components of unbilled costs and fees. The accuracy and appropriateness of the Company’s direct and indirect costs and expenses under these cost reimbursement contracts and its accounts receivable recorded pursuant to such contracts, are subject to regulation and audit, including by the U.S. Defense Contract Audit Agency (“DCAA”) or by other appropriate agencies of the U.S. government.  Such agencies  have the right to  challenge  the  Company’s  cost  estimates  or allocations  with  respect  to any  government  contract.  Additionally, a portion of the payments to the Company under government contracts are provisional payments that are subject to potential adjustment upon audit by such agencies.  Historically, such audits have not resulted in any significant disallowed costs.  Although the Company can give no assurances, in the opinion of management, any adjustments likely to result from inquiries or audits of its contracts will not have a material adverse impact on the Company’s financial condition or results of operations.

Warranty Costs

The Company generally provides on certain of its products a one year parts and labor warranty with the purchase of domestic equipment, and a one year parts only or parts and labor warranty on international equipment. The anticipated cost for this one year warranty is accrued for at the time of the sale based upon historical experience and management’s estimates of future liabilities and is recorded as accrued warranty costs (See Note 5).

Deferred Revenue

The Company offers to its customers extended warranty and service contracts. These contracts typically have a coverage period of one to five years, and include advance payments that are recorded as deferred revenue. Revenue is recognized as service is performed over the life of the contract, which represents the period over which these revenues are earned. Costs associated with these extended warranty and service contracts are expensed to cost of goods sold as incurred.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Impairment is assessed by comparing the estimated undiscounted cash flows over the asset’s remaining life to the carrying amount of the asset. If the estimated cash flows are insufficient to recover the asset, an impairment loss is recognized based on the difference between the carrying value of the asset and the fair value of the asset less any costs of disposal.  No impairment costs were recorded in the fiscal years ended March 31, 2013, 2012 and 2011.

Accrued Salaries and Benefits

Accrued salaries and benefits at March 31, 2013 and March 31, 2012 include the following:

(In thousands)	2013		2012
Accrued payroll and payroll related taxes	$	1,995	$	2,140
Accrued incentive compensation	4,633		7,486
Accrued vacation	1,739		2,096
Accrued severance	1,607		—
Total accrued salaries and benefits	$	9,974	$	11,722

Customer Deposits

For most international orders, the Company generally includes, as part of its terms and conditions, an advance deposit with order acceptance. For long-term international contracts, the Company will generally include milestone payments tied to a specific event and/or passage of time. These deposit amounts are recorded as a liability under Customer Deposits until reduced by revenue recognized against the specific contract.

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Other Current Liabilities

Other current liabilities at March 31, 2013 and March 31, 2012 include the following:

(In thousands)	2013		2012
Accrued accounts payable and other expenses	$	4,213	$	999
Accrued contract related costs	7,596		2,808
Accrued audit and legal fees	375		523
Accrued sales commissions	2,010		1,659
Total other current liabilities	$	14,194	$	5,989

Research and Development

Internally funded research and development costs including direct labor, material, subcontractor expenses and related overheads are expensed as incurred. Internally funded research and development costs were $23,618,000, $25,544,000 and $22,619,000, in fiscal 2013, 2012, and 2011, respectively.  In addition, the Company recognized revenues of $2,124,000, $4,409,000 and $4,821,000, in fiscal 2013, 2012, and 2011, respectively related to government-sponsored research and development earned primarily on a cost reimbursement and fee basis as discussed above.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, unbilled costs and fees, accounts payable and letters of credit. The recorded amounts of these instruments approximate their fair value (see Note 8).

Income per Common and Potential Common Shares

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share include the dilutive impact of options, warrants, restricted stock and restricted stock units using the average share price of the Company’s common stock for the period. For the years ended March 31, 2013, 2012, and 2011, respectively, common stock equivalents of approximately 182,000, 64,000, and 35,000 are excluded from diluted earnings per share, as their effect is anti-dilutive.

(In thousands except per share amounts)	March 31, 2013		March 31, 2012		March 31, 2011
Earnings per Share — Basic:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Income per share — basic	$	2.08	$	2.37	$	4.73
Earnings per Share — Diluted:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Assumed exercise of stock options, warrants, restricted stock and restricted stock units, using the treasury stock method	54		102		202
Weighted average number of common and potential common shares outstanding — diluted	8,448		9,148		9,247
Income per share — diluted	$	2.07	$	2.34	$	4.63

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Accordingly, the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. The Company records a valuation allowance against any net deferred tax assets if it is more likely than not that they will not be realized.  The Company recognizes interest and penalties related to income tax matters in other income and expenses.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, restricted cash, short-term investments and accounts and unbilled receivables.  The Company maintains cash balances in excess of insured limits. The Company maintains its cash and cash equivalents with major financial institutions.

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The Company’s credit risk is managed by investing its cash in high quality money market funds, commercial paper, investment grade corporate bonds, treasury bills, government agency bonds, and certificates of deposit.

Two customers, one agency of the U.S. government and one international customer, accounted for 51% of the accounts receivable balance at March 31, 2013.  The Company generally requires letters of credit and/or deposits or prepayments from international customers.  The Company has not experienced any significant losses from uncollectible accounts.

Common Stock Dividends

In May of 2007, the Company began declaring quarterly cash dividends for its common stock shareholders.   Common stock cash dividends declared during the fiscal year ended March 31, 2013 were as follows:

Date Declared	Dividend per common share
May 14, 2012	$	0.50
August 2, 2012	0.50
November 5, 2012	0.50
February 11, 2013	0.50
Fiscal year ended March 31, 2013	$	2.00

On May 7, 2013, the Company declared a quarterly dividend of $0.50 for holders of record on May 20, 2013 to be paid June 3, 2013.

Stock-Based Compensation

Compensation expense for the fair value of stock based awards made to employees and the Board of Directors is recognized over the requisite service period for awards expected to vest. The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option pricing model. The Black-Scholes method of valuation requires several assumptions: (1) the expected term of the stock award, (2) the expected future stock volatility over the expected term, (3) the expected dividend yield and (4) risk-free interest rate. The expected term represents the expected period of time the Company believes the options will be outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company’s common stock.  The expected dividend yield was based on the expectation we would continue paying dividends on our common stock at the same rate for the foreseeable future.  The risk free interest rate is based on the U.S. Zero-Bond rate.

The Company recognized $184,000, $1,799,000 and $5,216,000 of stock-based compensation costs in the consolidated statements of operations for the year ended March 31, 2013, 2012 and 2011, respectively. The income tax benefit related to such compensation for the years ended March 31, 2013, 2012 and 2011 was approximately $63,000, $612,000 and $1,770,000, respectively.

The following table summarizes share-based compensation costs included in the Company’s consolidated statements of operations.  The credit for the year ended March 31, 2013 in selling, general and administrative expenses is attributable to the reversal of certain incentive compensation plan costs previously accrued for, which were terminated as a result of the announced retirement of the Company’s former Chief Executive Officer in September of 2012.

	Fiscal Year Ended
(In thousands)	March 31, 2013			March 31, 2012		March 31, 2011
Cost of revenues	$	188		$	438	$	797
Selling, general and administrative	(4		)	1,361		4,419
Total share-based compensation expense before tax	$	184		$	1,799	$	5,216

The fair value of options at date of grant was estimated with the following assumptions:

	March 31, 2011
Assumptions:
Expected life	5 years
Risk-free interest rate	1.60%
Stock volatility	44%
Dividend yield	1.6%

There were no options granted in the fiscal years ended March 31, 2013 and 2012.

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New Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which changes the existing guidance on the presentation of comprehensive income. Entities have the option of presenting the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders’ equity. ASU No. 2011-05 was effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2011, which for the Company was the first quarter of fiscal 2013. In December 2011, with the issuance of ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” the FASB announced that it has deferred certain aspects of ASU 2011-05. In February 2013, the FASB issued ASU 2013-2, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” with the stated objective of improving the reporting of reclassifications out of accumulated other comprehensive income. The amendments in ASU 2013-2 are effective during interim and annual periods beginning after December 31, 2012. The adoption of ASU 2011-05, 2011-12 and 2013-2 regarding comprehensive income have not had a significant impact on the accounting or disclosures in our financial statements.

2. LEASE AGREEMENTS

The Company leases certain facilities under non-cancelable operating leases with various renewal options. For operating leases which contain fixed escalations in rental payments, the Company records the total rent payable on a straight-line basis over the original lease term. The Company incurred $787,000, $730,000 and $670,000 of operating rent expense in the fiscal years ended March 31, 2013, 2012, and 2011, respectively.   In conjunction with the Company’s lease for its headquarters, the Company has issued security in the form of a standby letter of credit in the amount of $300,000 with an original expiration date of March 1, 2006 which contains automatic extensions through April 15, 2016.

In March 2005, the Company renewed its lease agreement for its corporate headquarters and manufacturing facilities in Billerica, Massachusetts.  As part of the lease agreement, the Company’s landlord agreed to certain renovations to the Billerica facility including the construction of additional high bay manufacturing space.  The Company was responsible for a portion of the construction costs and was deemed to be the owner of the building during the construction period. In January 2007, the Company amended this lease agreement to expand its lease to include the remaining available space in the building.  During the fiscal year ended March 31, 2007, the Company capitalized $2,029,000 to record the facility on its books with an offsetting amount to the Lease Financing Liability.  In addition, amounts paid for construction were recorded as construction in progress and the landlord construction allowances of $367,000 in 2008 were recorded as additional lease financing liability.

At the completion of the construction of the initial renovations in February 2006, the lease was reviewed for potential sale-leaseback treatment in accordance with ASC 840 Leases.  Based on this review, it was determined that the lease did not qualify for sale-leaseback treatment.  As a result, building and tenant improvements and associated lease financing liabilities remained on the Company’s financial statements.  The Lease Financing Liability is being amortized over the lease term based on the payments designated in the agreement, and the building and tenant improvement assets are being depreciated on a straight line basis over the remaining lease term.

Future minimum rental payments under the Company’s non-cancelable leases, excluding real estate taxes, insurance and operating costs paid by the Company, required over the initial terms of the leases are as follows (in thousands):

Year Ending March 31,	Operating Leases		Capital Leases
2014	$	647	$	1,542
2015	303		1,542
2016	225		1,413
Total payments	$	1,175	4,497
Imputed interest			(94		)
Lease financing liability			4,403
Less:  Current portion of lease financing liability			1,489
Lease financing liability, net of current portion			$	2,914

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3. LETTERS OF CREDIT

In the normal course of business, the Company may provide certain customers and potential customers with performance guarantees, which are generally backed by standby letters of credit. In general, the Company would only be liable for the amount of these guarantees in the event of default in the performance of its obligations, the probability of which is remote in management’s opinion.  At March 31, 2013, the Company had outstanding $25,437,000 in standby letters of credit.  These outstanding standby letters of credit are cash-secured at amounts ranging from 52% to 66% of the outstanding letters of credit.   This resulted in a restricted cash balance of $13,517,000 at March 31, 2013 of which $899,000 was considered long-term restricted cash due to the expiration date of the underlying letters of credit.

4. INCOME TAXES

The provision (benefit) for income taxes for the years ended March 31, 2013, 2012, and 2011 consisted of the following:

(In thousands)	2013			2012			2011
Current:
Federal	$	11,339		$	9,082		$	24,080
State	595			197			636
Foreign	22			7			22
	11,956			9,286			24,738
Deferred:
Federal	(2,743		)	1,610			(2,354		)
State	(375		)	212			(640		)
Change in valuation allowance	154			(72		)	314
	(2,964		)	1,750			(2,680		)
Provision for income taxes	$	8,992		$	11,036		$	22,058

The difference between the total expected provision for income taxes computed by applying the statutory federal income tax rate to income before provision for income taxes and the recorded provision for income taxes for the three years in the period ended March 31, 2013 is as follows:

(In thousands)	2013			2012			2011
Provision for income taxes at statutory rate	$	9,253		$	11,360		$	22,706
State tax provision (benefit) net of federal effect	143			265			(2		)
Stock based compensation	(60		)	107			616
Research tax credits	(589		)	(289		)	(432		)
Qualifying manufacturing credits	(154		)	(315		)	(1,346		)
Change in valuation allowance	154			(72		)	314
Other	245			(20		)	202
Provision for income taxes	$	8,992		$	11,036		$	22,058

The significant components of the net deferred tax assets at March 31, 2013 and 2012 are as follows:

	March 31, 2013					March 31, 2012
(In thousands)	Current		Non-current			Current		Non-current
Deferred tax assets (liabilities):
Accounts receivable and unbilled costs and fees	$	—	$	125		$	—	$	91
Inventory	248		3,935			219		2,199
Deferred revenue	—		1,778			—		1,192
Accrued vacation	558		—			668		—
Accrued warranty costs	141		—			126		—
Depreciation	—		(495		)	—		(922		)
Unearned compensation	1,738		2,573			1,836		2,577
State credit carryforwards	—		944			—		1,098
Other	470		409			480		37
Deferred income tax assets	3,155		9,269			3,329		6,272
Valuation allowance	—		(944		)	—		(1,098		)
Net deferred income taxes	$	3,155	$	8,325		$	3,329	$	5,174

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As of March 31, 2013 and March 31, 2012, the Company has $1,452,000 and $1,690,000 of state credit carryforwards, respectively.   Of these amounts, approximately $201,000 and $492,000 at March 31, 2013 and March 31, 2012, respectively, have unlimited carryforward and the remaining balances expire in various years through 2028.

At March 31, 2013 and March 31, 2012, the Company had a deferred tax valuation allowance of $944,000 and $1,098,000, respectively, on state credit carryforwards and other deferred tax assets for which management believes it is more-likely-than-not that realization of these assets will not occur.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending March 31, 2010 through 2012 and for various state taxing authorities for the years ending March 31, 2007 through 2012.  The Company is currently under examination for tax year ended March 31, 2011.  Management does not believe that the examination will have a material impact on the Company’s financial position or results of operations.

In April 2013, the Company settled an outstanding refund receivable with the Massachusetts Department of Revenue for tax years ending March 31, 2006 through 2008 related to sales apportionment methodology.  The Company received proceeds of $1,500,000 related to this settlement which is included in prepaid expenses and other current assets at March 31, 2013.

5. WARRANTY OBLIGATIONS

Certain of the Company’s products carry a one-year warranty, the costs of which are accrued for at time of shipment or delivery. Accrual rates are based upon historical experience over the preceding twelve months and management’s judgment of future exposure. Warranty experience for the years ended March 31, 2013 and 2012 is as follows:

(In thousands)	2013			2012
Warranty accrual at beginning of period	$	358		$	1,225
Accruals for warranties issued during the period	548			632
Adjustment of preexisting accrual estimates	152			(63		)
Warranty costs incurred during period	(661		)	(1,436		)
Warranty accrual at end of period	$	397		$	358

6. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company’s articles of organization authorize its Board of Directors to issue up to 100,000 shares of preferred stock in one or more series, to determine and fix certain relative rights and preferences of the shares of any series, to fix the number of shares constituting any such series, and to fix the designation of any such series, without further vote or action by its shareholders. The Company has no present plans to issue shares of preferred stock. In 1998, the Company designated a series of Preferred Stock (the “Series A Preferred Stock”) to be issued upon the exercise of Rights issued under the Company’s Shareholder Rights Plan. Under the Shareholder Rights Plan, adopted in 1998 and reissued upon its expiration in April 2008, its stockholders are entitled to purchase shares of its Series A Preferred Stock under certain circumstances. These circumstances include the purchase of 15% or more of the outstanding shares of common stock by a person or group, or the announcement of a tender or exchange offer to acquire 15% or more of the outstanding common stock.

Stock Repurchase Program

On May 14, 2012, the Board of Directors announced the approval of its third Stock Repurchase Program which authorized the Company to repurchase up to $35 million of shares of its common stock from time to time on the open market or in privately negotiated transactions.  This program was completed in August of 2012.  On August 2, 2012, the Board of Directors announced the approval of an additional Stock Repurchase Program which authorized the Company to repurchase up to $35 million of additional shares of its common stock from time to time on the open market or in privately negotiated transactions.

During the fiscal year ended March 31, 2013, the Company repurchased 1,013,655 shares of common stock under this Program at an average price of $56.86.  As of March 31, 2013, the remaining balance available under the program to repurchase shares was $12,316,000.

On May 7, 2013, the Board of Directors announced the approval of its fifth Stock Repurchase Program which authorized the Company to repurchase up to an additional $35 million of shares of its common stock from time to time on the open market or in privately negotiated transactions.

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Stock Option and Other Compensation Plans

The Company has various stock option and other compensation plans for directors, officers, and employees. The Company had the following stock option plans outstanding as of March 31, 2013: the 1998 Non-Qualified Option Plan, the 1999 Combination Plan, the 2000 Combination Plan, the 2002 Combination Plan, the 2003 Stock Plan for Non-Employee Directors and the 2005 Equity and Incentive Plan. There are 3,480,000 shares authorized under these plans. Vesting periods are at the discretion of the Board of Directors and typically range from one to three years. Certain of the options granted vest upon the achievement of certain performance based goals as well as service time incurred.  Options under these plans are granted at fair market value and have a term of ten years from the date of grant.

Stock Options:    A summary of the Company’s stock option activity is as follows:

	2013				2012				2011
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Options outstanding, beginning of year	376,331		$	55.10	472,446		$	55.77	613,934		$	47.37
Options granted	—		—		—		—		56,181		74.87
Options exercised	(50,505	)	42.75		(75,714	)	56.63		(197,669	)	35.12
Options canceled or expired	(10,664	)	65.72		(20,401	)	65.01		—		—
Options outstanding, end of year	315,162		$	56.72	376,331		$	55.10	472,446		$	55.77
Options exercisable, end of year	312,895		$	56.68	370,400		$	55.00	397,592		$	53.06
Options available for grant	284,000				292,000				301,732
Weighted average fair value per share of options granted during the year			$	—			$	—			$	26.21

The following summarizes certain data for options outstanding and exercisable at March 31, 2013:

	Number of Shares	Range of Exercise Prices	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Options outstanding:	15,925	$11.58-$20.00	$	14.43	0.88
	14,400	$20.01-$30.00	28.50		1.46
	14,629	$30.01-$40.00	39.06		1.09
	38,800	$40.01-$50.00	44.73		1.61
	47,278	$50.01-$60.00	53.36		2.71
	127,949	$60.01-$70.00	64.08		4.89
	56,181	$70.01-$75.82	74.87		7.42
	315,162	$11.58-$75.82	$	56.72	4.08
Options exercisable:	15,925	$11.58-$20.00	$	14.43
	14,400	$20.01-$30.00	28.50
	14,629	$30.01-$40.00	39.06
	38,800	$40.01-$50.00	44.73
	47,278	$50.01-$60.00	53.36
	125,682	$60.01-$70.00	64.13
	56,181	$70.01-$75.82	74.87
	312,895	$11.58-$75.82	$	56.68

The total intrinsic value, representing the difference between market value on the date of exercise and the option price, of stock options exercised during fiscal 2013, 2012 and 2011 was $986,000, $1,815,000 and $10,121,000, respectively.   Non-vested stock option awards are subject to the risk of forfeiture until the fulfillment of specified conditions. As of March 31, 2013, there was no unrecognized compensation cost related to non-vested stock option awards granted under the Company’s stock plans.

The Company realizes a tax deduction upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options due to the recognition of compensation expense in the calculation of its taxable income. The amount of the compensation recognized for tax purposes is based on the difference between the market value of the common stock and the

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option price at the date the options are exercised and/or sold. The Company receives an additional tax deduction when restricted stock vests at a higher value than the value used to recognize compensation expense at the date of grant.  These tax benefits are credited to additional paid-in capital if it is considered more likely than not that they will be realized. During fiscal 2013, 2012 and 2011, a tax benefit (expense) of $135,000, ($303,000), and $3,730,000, respectively, was recorded to additional paid-in capital for exercises and/or sales of stock options or stock.

Restricted Stock and Restricted Stock Units:  The Company has instituted long term incentive plans for certain key employees. These plans call for the issuance of restricted stock, stock options, and/or cash awards which vest upon the achievement of certain performance based goals as well as service time incurred. In fiscal years 2013, 2012 and 2011, the Company opted to issue this long term incentive plan with only a cash award which resulted in fewer restricted stock awards and stock options being granted.

Restricted stock and restricted stock units may also be granted to other employees with vesting periods that range from one to three years.  In addition, annually the Board of Directors is granted restricted stock. These restricted stock shares vest on a pro-rata basis on service time performed over a one year period.  The fair values of these restricted stock awards are equal to the market price per share of the Company’s common stock on the date of grant.

Non-vested restricted stock and stock unit awards are subject to the risk of forfeiture until the fulfillment of specified conditions. As of March 31, 2013 there was $894,000 of total unrecognized compensation cost related to non-vested restricted stock and stock unit awards granted under the Company’s stock plans. This cost is expected to be recognized over a weighted average of 1.1 years.

A summary of the Company’s restricted stock and stock unit activity is as follows:

	2013				2012				2011
	Number of Shares		Weighted Average Exercise  Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Unvested restricted stock and units outstanding, beginning of year	40,599		$	68.63	32,882		$	65.03	97,240		$	60.78
Granted	19,657		61.00		24,006		73.03		5,106		83.79
Vested	(17,463	)	68.08		(12,523	)	68.70		(69,464	)	60.45
Forfeited	(14,684	)	63.71		(3,766	)	65.07		—		—
Unvested restricted stock and units outstanding, end of year	28,109		$	66.20	40,599		$	68.63	32,882		$	65.03

7. BUSINESS SEGMENT INFORMATION

In accordance with the provisions of FASB ASC 280-10, Segment Reporting, the Company has determined that it has only one operating segment, the X-ray product segment. This includes X-ray detection and imaging products used primarily for the detection of illegal drugs, weapons and explosives, and smuggled goods. The equipment is purchased by sophisticated government and commercial clients focused on the detection of organic material in complex backgrounds and the ability to see the contents of containers with precision.

Geographical Data

All of the Company’s export sales originate from the United States.  At March 31, 2013, approximately 5% of the Company’s assets were in foreign countries.  The foreign assets were comprised of cash in foreign banks, and inventory in international depots for field replacements or systems shipped internationally but not accepted by fiscal year end.

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The following table shows the breakdown of net sales and contract revenues to international and domestic customers based upon customer’s country of domicile and the major regions of international activity:

Net Sales and Contract Revenues

	Fiscal Year
(Dollars in thousands)	2013				2012				2011
Domestic	$	123,652	66	%	$	133,441	66	%	$	190,769	68	%
International	63,028		34	%	70,111		34	%	87,807		32	%
Net Sales and Contract Revenues	$	186,680	100	%	$	203,552	100	%	$	278,576	100	%
Middle East & Africa			54	%			63	%			84	%
Americas — Non-US			29	%			20	%			2	%
Asia / Pacific			13	%			11	%			7	%
Europe			4	%			6	%			7	%

In fiscal 2012, the Company had international sales to one country which accounted for 11% of the total sales of the Company.  In fiscal 2013, international sales to one individual country did not exceed 10% of total sales.

Major Customers:  Sales to major customers (representing in excess of 10% of consolidated revenues) consisted of the following:

Fiscal 2013:   $44,850,000 and $30,874,000, respectively, to two customers.

Fiscal 2012:   $46,167,000 to one customer.

Fiscal 2011:   $82,634,000, $32,316,000 and $31,072,000, respectively, to three customers.

Domestically, the Company’s primary client base is comprised of agencies of the U.S. government. Approximately 63%, 62% and 65% of the Company’s sales in fiscal 2013, 2012, and 2011 respectively, were derived from either (i) contracting directly with the U.S. government, or (ii) contracting with contractors working directly with the U.S. government. Certain of the Company’s contracts with the U.S. government provide the U.S. government with the standard unilateral right to terminate these contracts for convenience.   In each of the fiscal years ended March 31, 2012 and March 31, 2011, one of the Company’s contracts with the U.S. government was terminated in whole or in part for convenience by the U.S. government.  These terminations did not result in any material losses to the Company.  There were no terminations for convenience in the fiscal year ended March 31, 2013.

8. FAIR VALUE MEASUREMENTS

FASB ASC 820, Fair Value Measurements and Disclosures, defines and establishes a framework for measuring fair value and expands disclosures about fair value measurements. In accordance with ASC 820, we have categorized our financial assets, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets recorded on the Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1 - Financial assets whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives, and most U.S. government and agency securities).

Level 2 - Financial assets whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.  Level 2 inputs include the following:

·    Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently);

·    Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and

·    Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities and derivatives).

Level 3 - Financial assets whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability. The Company currently does not have any Level 3 financial assets or liabilities.

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The following table presents the financial assets and liabilities we measure at fair value on a recurring basis, based on the fair value hierarchy as of March 31, 2013 and March 31, 2012:

(In thousands)	March 31, 2013		March 31, 2012
Level 1 — Financial Assets
U.S. Treasury bills	$	—	$	20,018
Money market funds	16,549		—
Total Level 1 Financial Assets	16,549		20,018
Level 2 — Financial Assets
Corporate debentures/bonds	75,572		78,169
Commercial paper	28,974		40,334
Government agency bonds	—		26,582
Money market funds	—		13,698
Certificates of deposit	4,000		5,731
Total Level 2 Financial Assets	108,546		164,514
Total cash equivalents and short-term investments	$	125,095	$	184,532

These investments are classified as available-for-sale and are recorded at their fair market values using the specific identification method. The unrealized holding gains or losses on these securities are included as a component of comprehensive income in the Consolidated Statements of Stockholders’ Equity and Comprehensive Income.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2013:
Short-term investments:
Corporate debentures/bonds	$	75,578	$	14	$	(20	)	$	75,572
Commercial paper	28,974		—		—			28,974
Certificates of deposit	4,000		—		—			4,000
Total short-term investments	$	108,552	$	14	$	(20	)	$	108,546
Cash equivalents:
Money market funds	16,549		—		—			16,549
Total cash equivalents	$	16,549	$	—	$	—		$	16,549

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2012:
Short-term investments:
Corporate debentures/bonds	$	78,176	$	21	$	(28	)	$	78,169
Commercial paper	40,331		3		—			40,334
Government agency bonds	26,573		9		—			26,582
Treasury bills	20,000		18		—			20,018
Certificates of deposit	5,729		2		—			5,731
Total short-term investments	$	170,809	$	53	$	(28	)	$	170,834
Cash equivalents:
Money market funds	13,698		—		—			13,698
Total cash equivalents	$	13,698	$	—	$	—		$	13,698

9. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

In the normal course of business, the Company enters into purchase orders with its vendors for the purchase of materials or services to meet its production needs. At March 31, 2013, the Company had $27,241,000 of open purchase orders which are expected to be substantially fulfilled within the next two years. Certain single source vendors, or vendors producing custom material, require significant lead times from order to delivery of their material. Should the demand for the Company’s products decline significantly, or should there be a significant shift in the mix of products being demanded, the Company may incur

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cancellation charges related to these commitments, that could be material to the Company’s results of operations. To date, the Company has not experienced any material losses related to cancellation penalties.

Employment Agreements

On March 13, 2013, the Company signed an offer of employment with Charles P. Dougherty for the position of President and Chief Executive Officer.  Mr. Dougherty commenced employment on April 8, 2013.  Under the terms of this agreement, Mr. Dougherty is entitled to receive base compensation in the amount of $550,000 per year, a performance-based annual incentive bonus equal to 100% of his base compensation per year (guaranteed for the fiscal year ended March 31, 2014), and to participate in the long-term incentive program with awards equal to 200% of base compensation upon achievement of certain long-term strategic goals.  These awards may be comprised of restricted stock, stock options and/or cash as determined by the Compensation Committee of the Board of Directors.

Retirement Savings Plan

The Company maintains a 401(k) Retirement Savings Plan (the “Plan”) for all employees.   Employees are eligible to participate on the first of the month following date of employment.  The Plan is funded by elective employee contributions of up to 100% of their compensation up to IRS limits. Under the Plan the Company at its discretion matches 50% of the first 6% of employee contributions for each participant in the form of Company common stock or cash. In fiscal 2011, the Company began matching employee’s contributions in cash instead of Company common stock as it had in prior years.  Expenses under the Plan, consisting of Company contributions which were made in Company stock or cash and Plan administrative expenses paid by the Company, totaled $1,091,000, $1,152,000 and $1,139,000, in 2013, 2012, and 2011 respectively.

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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA

FOR THE YEARS ENDED MARCH 31, 2013 AND MARCH 31, 2012

(In thousands, except per share amounts)

	2013 by quarter								2012 by quarter
	1st		2nd		3rd		4th		1st		2nd		3rd		4th
Net sales and contract revenues	$	47,344	$	46,253	$	50,803	$	42,280	$	51,103	$	54,778	$	57,907	$	39,764
Gross profit	$	21,473	$	20,997	$	22,700	$	14,249	$	23,902	$	25,121	$	26,445	$	17,649
Operating income	$	6,360	$	9,597	$	9,178	$	1,133	$	8,567	$	10,205	$	11,241	$	1,936
Net income	$	4,202	$	6,399	$	6,093	$	760	$	5,693	$	6,851	$	7,535	$	1,343
Net income per share
— Basic	$	0.47	$	0.77	$	0.74	$	0.09	$	0.62	$	0.75	$	0.84	$	0.15
— Diluted	$	0.47	$	0.76	$	0.73	$	0.09	$	0.61	$	0.74	$	0.84	$	0.15

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AMERICAN SCIENCE AND ENGINEERING, INC.
DATED: June 7, 2013	By:	/s/ CHARLES P. DOUGHERTY
		Charles P. Dougherty
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ CHARLES P. DOUGHERTY	Director and President and Chief Executive Officer (Principal Executive Officer)	June 7, 2013
Charles P. Dougherty
/s/ KENNETH J. GALAZNIK	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	June 7, 2013
Kenneth J. Galaznik
/s/ DENIS R. BROWN	Chairman of the Board, Director	June 7, 2013
Denis R. Brown
/s/ JOHN A. GORDON	Director	June 7, 2013
John A. Gordon
/s/ HAMILTON W. HELMER	Director	June 7, 2013
Hamilton W. Helmer
/s/ DON R. KANIA	Director	June 7, 2013
Don R. Kania
/s/ MARK S. THOMPSON	Director	June 7, 2013
Mark S. Thompson
/s/ JENNIFER L. VOGEL	Director	June 7, 2013
Jennifer L. Vogel
/s/ CARL W. VOGT	Director	June 7, 2013
Carl W. Vogt

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EXHIBIT INDEX

Exhibit Number		Description of Exhibit (and Statement of Incorporation by Reference, If Applicable)
3.1		Restated Articles of Organization of the Company, as amended, including Certificate of Designation, Preferences, and Rights of Preferred Stock of the Company, dated April 16, 2008 (filed as Exhibit 3.1 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
3.5	†	Amended and Restated By-laws of the Company
4.2		Rights Agreement, dated April 17, 2008, between the Company and American Stock Transfer & Trust Company (filed as Exhibit 4.1 to the Company’s filing on Form 8-A12B filed on April 18, 2008 and incorporated herein by reference)
10.1	*	1998 Non-Qualified Stock Option Plan (filed as Exhibit (10)(b)(xiii) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 and incorporated herein by reference)
10.2		Lease of Billerica property (filed as Exhibit 10(c) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1995 and incorporated herein by reference)
10.3		Amendment to Lease of Billerica property (filed as Exhibit 10(c)(ii) to the Company’s Annual Report on Form 10-K for the year ended March 28, 1997 and incorporated herein by reference)
10.4	*	1999 Combination Stock Option Plan (filed as Exhibit 99 to the Company’s Registration Statement on Form S-8, File No. 333-91801, filed on November 30, 1999 and incorporated herein by reference)
10.5	*	2000 Combination Stock Option Plan (filed as Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on August 18, 2000 and incorporated herein by reference)
10.6	*	2002 Combination Stock Option Plan (filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8, No. 333-102338, filed on January 3, 2003 and incorporated herein by reference)
10.7		Second Amendment of Lease of 829 Middlesex Turnpike, Billerica, Massachusetts (filed as Exhibit 10(c)(vii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 and incorporated herein by reference)
10.8	*	Amendment of 2002 Combination Stock Option Plan (filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8, No. 333-102338, filed on January 3, 2003 and incorporated herein by reference)
10.9	*	2003 Stock Plan for Non-Employee Directors (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8, File No. 333-117843, filed on July 30, 2004 and incorporated herein by reference)
10.10	*	Amendment to 2003 Stock Plan for Non-Employee Directors (filed as Exhibit 10(c)(xx) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2005 and incorporated herein by reference)
10.14	*	2005 Equity and Incentive Plan (filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8, No. 333-162291, filed on October 2, 2009 and incorporated herein by reference)
10.11	*	Form of Stock Option Agreement (ISO) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10(c)(xxvi) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2006 and incorporated herein by reference)
10.12	*	Form of Stock Option Agreement (NQ) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10(c)(xxvi) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2006 and incorporated herein by reference)
10.13		Third Amendment of Lease of 829 Middlesex Turnpike, Billerica, Massachusetts (filed as Exhibit 10(c)(xxviii) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2007 and incorporated herein by reference)
10.14	*	Form of Restricted Stock Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference)
10.15	*	Form of Incentive Stock Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference)
10.16	*	Form of Long-Term Incentive Plan Agreement — Cash Component (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference)
10.17		American Science and Engineering, Inc. 401(k) and Profit Sharing Plan (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 dated July 25, 2008 and incorporated herein by reference)
10.18	*	Form of Restricted Stock Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.41 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.19	*	Form of Nonstatutory Stock Option Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.42 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.20	*	Form of Long-Term Incentive Plan Agreement — Cash Component (filed as Exhibit 10.43 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.21		Form of Non-Employee Director Restricted Stock Award Agreement under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.44 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.22		Form of Non-Statutory Stock Option Agreement For Directors under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.45 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)

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10.23	*	Form of Indemnification Agreement between the Company and each of its directors and executive officers (filed as Exhibit 10.1 to the Company’s Report on Form 8-K dated September 8, 2010 and incorporated herein by reference)
10.24	*	Form of Restricted Stock Agreement (Time Vesting) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012 and incorporated herein by reference)
10.25		Fourth Amendment of Lease of 829 Middlesex Turnpike, Billerica, Massachusetts dated January 18, 2011 (filed as Exhibit 10.48 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012 and incorporated herein by reference)
10.26	*	Form of Short Term Incentive Bonus Plan Documents for fiscal year 2013 (filed as Exhibit 10.1 to the Company’s filing on Form 10-Q dated November 7, 2012 and incorporated herein by reference)
10.27	*	Amendment to Employment Agreement between the Company and Anthony Fabiano dated September 17, 2012 (filed as Exhibit 10.2 to the Company’s filing on Form 10-Q dated November 7, 2012 and incorporated herein by reference)
10.28	*	Offer Letter, dated March 13, 2013, between American Science and Engineering, Inc. and Charles P. Dougherty (filed as Exhibit 10.1 to the Company’s Report on Form 8-K dated March 13, 2013 and incorporated herein by reference)
10.29	*	Change in Control & Severance Agreement for Chief Executive Officer (filed as Exhibit 10.2 to the Company’s Report on Form 8-K dated March 13, 2013 and incorporated herein by reference)
10.30	*	Form of Change in Control & Severance Benefit Agreement, as Amended and Restated, effective April 1, 2013 (filed as Exhibit 10.1 to the Company’s Report on Form 8-K dated April 4, 2013 and incorporated herein by reference)
21.1	†	Subsidiaries of Registrant
23.1	†	Consent of Independent Registered Public Accounting Firm
31.1	†	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
31.2	†	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
32.1	†	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	†	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following materials from the Annual Report on Form 10-K of American Science and Engineering, Inc. for the year ended March 31, 2013, filed on June 7, 2013, formatted in eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income, (iii) Consolidated Statement of Changes in Stockholders’ Equity (iv) Consolidated Statements of Cash Flows, and (v) related notes to these financial statements.

†   Filed herewith

*   Management contract or compensatory plan

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EX-3.5

Exhibit 3.5

AMENDED AND RESTATED BYLAWS

of

AMERICAN SCIENCE AND ENGINEERING, INC.

(Effective as of March 1, 2013)

SECTION 1.  ARTICLES OF ORGANIZATION

The name and purposes of the corporation shall be as set forth in the articles of organization. These bylaws, the powers of the corporation and of its directors and stockholders, or of any class of stockholders if there shall be more than one class of stock, and all matters concerning the conduct and regulation of the business and affairs of the corporation shall be subject to such provisions in regard thereto, if any, as are set forth in the articles of organization as from time to time in effect.

SECTION 2.  STOCKHOLDERS

2.1.  ANNUAL MEETING.  The annual meeting of stockholders of the corporation for the election of directors and the transaction of such other business as may properly come before the meeting shall be held on such date and at such time as shall be determined by the board of directors each year, which date and time may subsequently be changed at any time, including the year any such determination occurs.

2.2.  SPECIAL MEETINGS.  Except as may be provided in the articles of organization with respect to the ability of holders of preferred stock to call a special meeting in certain circumstances, special meetings of the stockholders may be called by the president at the direction of the chairman of the board or by a majority of the directors, and shall be called by the clerk, or in case of the death, absence, incapacity or refusal of the clerk, by any other officer, upon the written application of stockholders who hold eighty-five percent (85%) (or such lesser percentage as may be required by law) in interest of the capital stock of the corporation entitled to be voted at the proposed meeting.  Such request shall state the purpose or purposes of the proposed meeting and may designate the place, date and hour of such meeting; provided, however, that no such request shall designate a date not a full business day or an hour not within normal business hours as the date or hour of such meeting.  In the case of any special meeting of the stockholders called upon written application of stockholders, such meeting shall be called not less than sixty (60) nor more than ninety (90) days after such application is received by the corporation.

As used in these bylaws, the expression “business day” means a day other than a day which, at a particular place, is a public holiday or a day other than a day on which banking institutions at such place are allowed or required, by law or otherwise, to remain closed.

2.3.  PLACE OF MEETING; ADJOURNMENT.  Meetings of the stockholders may be held at the principal office of the corporation in the Commonwealth of Massachusetts, or at such places within or without the Commonwealth of Massachusetts as may be specified in the notice of any such meetings; provided, that, when any meeting is convened, the chairman of the board or other presiding officer may adjourn the meeting for a period of time not to exceed 30 days if (a) no quorum is present for the transaction of business or (b) the chairman of the board or other presiding officer determines that adjournment is necessary or appropriate to enable the stockholders (i) to consider fully information which such officer determines has not been made sufficiently or timely available to stockholders or (ii) otherwise to exercise effectively their voting rights. The chairman of the board or other presiding officer in such event shall announce the adjournment and date, time and place of reconvening and shall cause notice thereof to be posted at the place of meeting designated in the notice which was sent to the stockholders, and if such date is more than 10 days after the original date of the meeting, the clerk shall give notice thereof in the manner provided in Section 2.4.

2.4.  NOTICE OF MEETINGS.  A written or electronic notice of each meeting of stockholders, stating the place, date and hour and the purposes of the meeting, shall be given at least seven days before the meeting to each stockholder entitled to vote thereat and to each stockholder who, by law, by the articles of organization or by these bylaws, is entitled to notice, by leaving such notice with such stockholder or at such stockholder’s residence or usual place of business, by mailing it, postage prepaid, addressed to such stockholder at such stockholder’s address as it appears in the records of the corporation or by sending such notice electronically to such stockholder’s e-mail address as it appears in the records of the corporation.  Such notice shall be given by the clerk or an assistant clerk or by an officer designated by the directors. Whenever notice of a meeting is required to be given to a stockholder under any provision of the Business Corporation Law of the Commonwealth of Massachusetts or of the articles of organization or these bylaws, a written waiver thereof, executed before or after the meeting by such stockholder or such stockholder’s attorney thereunto authorized and filed with the records of the meeting, shall be deemed equivalent to such notice.

No business may be transacted at a meeting of stockholders except that (a) specified in the notice thereof, or in a supplemental notice given also in compliance with the provisions hereof, (b) brought before the meeting by or at the direction of the board of directors or the presiding officer, or (c) properly brought before the meeting by or on behalf of any stockholder who shall have been a stockholder of record at the time of giving of notice provided for in this Section 2.4 and who shall continue to be entitled to vote thereat and who complies with the notice procedures set forth in this Section 2.4 or, with respect to the election of directors, Section 3.2 of these bylaws. In addition to any other applicable requirements, for business to be properly brought before a meeting by a stockholder (other than a stockholder proposal included in the corporation’s proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), the stockholder must have given timely notice thereof in writing to the clerk of the corporation. In order to be timely given, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation (a) not less than 95 nor more than 125 days prior to the anniversary date of the immediately preceding annual meeting of stockholders of the corporation or (b) in the case of a special meeting or if the annual meeting is called for a date (including any change in a date determined by the board pursuant to Section 2.1) not within 30 days before or after such anniversary date, not later than

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the close of business on the 10th day following the day on which notice of the date of such meeting was mailed or public disclosure of the date of such meeting was made, whichever first occurs. Such stockholder’s notice to the clerk shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of capital stock of the corporation held of record, owned beneficially and represented by proxy by such stockholder as of the record date for the meeting (if such date shall then have been made publicly available) and as of the date of such notice by the stockholder, (d) any material interest of the stockholder in such matter and (e) all other information which would be required to be included in a proxy statement or other filings required to be filed with the Securities and Exchange Commission if, with respect to any such item of business, such stockholder were a participant in a solicitation subject to Regulation 14A under the Exchange Act (the “Proxy Rules”).

Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any meeting of stockholders except in accordance with the procedures set forth in this Section 2.4; PROVIDED, HOWEVER, that nothing in this Section 2.4 shall be deemed to preclude discussion by any stockholder of any business properly brought before such meeting.

The chairman of the board or other presiding officer of the meeting may, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the foregoing procedures, and if such officer should so determine, such officer shall so declare to the meeting and that business shall be disregarded.

2.5.  QUORUM OF STOCKHOLDERS.  At any meeting of stockholders, a quorum shall consist of a majority in interest of all stock issued and outstanding and entitled to vote at the meeting, except when a larger quorum is required by law, by the articles of organization or by these bylaws. Stock owned directly or indirectly by the corporation, if any, shall not be deemed outstanding for this purpose. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.

2.6.  ACTION BY VOTE.

(a)  Except as otherwise provided in these bylaws, at any meeting for the election of directors at which a quorum is present, each director shall be elected by the vote of the majority of the votes cast with respect to that director’s election; provided, that if as of the fourteenth (14th) day preceding the date the corporation files with the Securities and Exchange Commission for such meeting its definitive proxy statement (regardless of whether or not thereafter revised or supplemented) the number of nominees exceeds the number of directors to be elected (a “Contested Election”),  directors shall be elected at such meeting by the vote of a plurality of the votes cast. For purposes of this paragraph, a “majority of the votes cast” shall mean that the number of shares voted “for” a director’s election exceeds the number of votes cast “against” or “withheld” from voting for that director’s election.  Broker non-votes and abstentions shall not be counted as votes cast in the election of directors.

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(b)  In order for any person to be nominated for election to the board of directors, such person must submit to the corporation an irrevocable resignation as a member of the board of directors contingent on (x) that person not receiving a majority of the votes cast in an election that is not a Contested Election, and (y) acceptance of that resignation by the board of directors. In the event an incumbent director fails to receive a majority of the votes cast in an election that is not a Contested Election, the nominating and corporate governance committee shall make a recommendation to the board of directors as to whether to accept or reject the tendered resignation, or whether other action should be taken. The board of directors shall act on the tendered resignation, taking into account the recommendation of the nominating and corporate governance committee, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within ninety (90) days from the date of the certification of the election results. The nominating and corporate governance committee in making its recommendation, and the board of directors in making its decision whether to accept a resignation, may each consider any factors or other information that they consider appropriate and relevant. Any director who fails to receive a majority of the votes cast in an election that is not a Contested Election shall not participate in the recommendation of the nominating and corporate governance committee or the decision of the board of directors with respect to his or her resignation.

(c)  If a director’s resignation is accepted by the board of directors pursuant to this Section 2.6, or if a nominee for director is not elected and the nominee is not an incumbent director, then the board of directors may fill the resulting vacancy pursuant to the provisions of Section 3.5 or may decrease the size of the board of directors pursuant to the provisions of Section 3.1.

(d)  No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election.

(e)  A majority of the votes properly cast at any meeting at which a quorum is present upon any question other than the election of directors shall decide the question, except when a larger vote is required by law, by the articles of organization or by these bylaws.

2.7.  VOTING.  Stockholders entitled to vote shall have one vote for each share of stock entitled to vote held by them of record according to the records of the corporation, unless otherwise provided by the articles of organization. The corporation shall not, directly or indirectly, vote any share of its own stock.

2.8.  ACTION BY WRITING.  Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of the meetings of stockholders. Such consents shall be treated for all purposes as a vote at a meeting.

2.9.  PROXIES.  To the extent permitted by law, stockholders entitled to vote may vote either in person or by proxy (which proxy may be authorized in writing, by telephone or by electronic means). No proxy dated more than six months before the meeting named therein shall

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be valid. Unless otherwise specifically limited by their terms, such proxies shall entitle the holders thereof to vote at any adjournment of such meeting but shall not be valid after the final adjournment of such meeting.

SECTION 3.  BOARD OF DIRECTORS

3.1.  NUMBER; CHAIRMAN.  The number of directors shall be fixed at any time or from time to time only by the affirmative vote of a majority of the directors then in office, but shall be not less than three, except that whenever there shall be only two stockholders the number of directors shall be not less than two and whenever there shall be only one stockholder there shall be at least one director; no decrease in the number of directors shall shorten the term of any incumbent director. No director need be a stockholder of the corporation.  The directors may appoint a chairman of the board who, unless otherwise determined by the directors, shall, when present, preside at all meetings of the directors and shall have such other powers and duties as customarily belong to the office of chairman of the board or as may be designated from time to time by the directors.

3.2.  NOMINATIONS FOR DIRECTOR.  Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors, except as may be provided in the articles of organization with respect to nominations by holders of preferred stock in certain circumstances. Nominations of persons for election to the board of directors at the annual meeting of stockholders may be made at such annual meeting (a) by or at the direction of the board of directors by any nominating committee or person appointed by the board or (b) by any stockholder of record at the time of giving of notice provided for in this Section 3.2 and who shall continue to be entitled to vote thereat and who complies with the notice procedures set forth in this Section 3.2. Nominations by stockholders shall be made only after giving timely notice in writing to the clerk of the corporation. In order to be timely given, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the corporation (a) not less than 95 nor more than 125 days prior to the anniversary date of the immediately preceding annual meeting of stockholders of the corporation or (b) if the annual meeting is called for a date (including any change in a date determined by the board pursuant to Section 2.1) not within 30 days before or after such anniversary date, not later than the close of business on the 10th day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever first occurs. Such stockholder’s notice to the clerk shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the corporation, if any, which are beneficially owned by the person, (iv) any other information regarding the nominee as would be required to be included in a proxy statement or other filings required to be filed pursuant to the Proxy Rules, and (v) the consent of each nominee to serve as a director of the corporation if so elected; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class and number of shares of capital stock of the corporation which are beneficially owned by the stockholder as of the record date for the meeting (if such date shall then have been made publicly available) and as of the date of such notice, (iii) a representation that the stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iv) a representation that the stockholder (and any party

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on whose behalf such stockholder is acting) is qualified at the time of giving such notice to have such individual serve as the nominee of such stockholder (and any party on whose behalf such stockholder is acting) if such individual is elected, accompanied by copies of any notifications or filings with, or orders or other actions by, and governmental authority which are required in order for such stockholder (and any party on whose behalf such stockholder is acting) to be so qualified, (v) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder, and (vi) such other information regarding such stockholder as would be required to be included in a proxy statement or other filings required to be filed pursuant to the Proxy Rules. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as director. No person shall be eligible for election as a director unless nominated in accordance with the provisions set forth herein.

The chairman of the board or other presiding officer of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and if such officer should so determine, such officer shall so declare to the meeting and the defective nomination shall be disregarded.

3.3.  POWERS.  Except as reserved to the stockholders by law, by the articles of organization or by these bylaws, the business of the corporation shall be managed by the directors who shall have and may exercise all the powers of the corporation. In particular, and without limiting the generality of the foregoing, the directors may at any time issue all or from time to time any part of the unissued capital stock of the corporation from time to time authorized under the articles of organization and may determine, subject to any requirements of law, the consideration for which stock is to be issued and the manner of allocating such consideration between capital and surplus.

3.4.  RESIGNATION AND REMOVAL.  Any director may resign at any time by delivering a resignation in writing to the president, the treasurer or the clerk or to a meeting of the directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time. Any director or directors or the entire board of directors may be removed from office (a) only for Cause (as defined in Section 50A of the Business Corporation Law of the Commonwealth of Massachusetts) by the affirmative vote of a majority of the shares entitled to vote at an election of directors and (b) only after reasonable notice and an opportunity to be heard by the stockholders. No director resigning, and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the corporation) no director removed, shall have the right to any compensation as such director for any period following such director’s removal, or any right to damages on account of such removal, whether such director’s compensation be by the month or by the year or otherwise, unless in the case of a resignation, the directors, or in case of a removal, the stockholders, shall in their discretion provide for compensation.

3.5.  VACANCIES.  Vacancies and newly created directorships, whether resulting from an increase in the size of the board of directors, the death, resignation, disqualification or removal of a director or otherwise, shall be filled solely by the affirmative vote of a majority of

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the remaining directors then in office, even though less than a quorum of the board of directors. Any director elected in accordance with this Section 3.5 shall hold office for the remainder of the full term of the class, if any, of directors in which the vacancy occurred or the new directorship was created or otherwise until the next annual meeting of stockholders and, in any case, until such director’s successor shall have been elected and qualified.

3.6.  COMMITTEES.  The directors may elect from their number an executive committee and other committees and delegate to any such committee or committees some or all of the power of the directors except those which by law, by the articles of organization or by these bylaws they are prohibited from delegating. Except as the directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the directors or such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these bylaws for the conduct of business by the directors.

3.7.  REGULAR MEETINGS.  Regular meetings of the directors may be held without call or notice at such places and at such times as the directors may from time to time determine, provided that reasonable notice of the first regular meeting following any such determination shall be given to absent directors. A regular meeting of the directors may be held without call or notice immediately after and at the same place as the annual meeting of the stockholders.

3.8.  SPECIAL MEETINGS.  Special meetings of the directors may be held at any time and at any place designated in the call of the meeting, when called by the president or the treasurer or by two or more directors, reasonable notice thereof being given to each director by the secretary or an assistant secretary, or, if there be none, by the clerk or an assistant clerk, or by the officer or one of the directors calling the meeting.

3.9.  NOTICE.  It shall be sufficient notice to a director to send notice by mail or express overnight courier at least forty-eight hours or by facsimile at least twenty-four hours before the meeting addressed to a director at such director’s usual or last known business or residence address or to give notice to a director in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any director if a written waiver of notice, executed by such director before or after the meeting, is filed with the records of the meeting, or to any director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to such director. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting.

3.10.  QUORUM.  At any meeting of the directors a majority of the directors then in office shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.

3.11.  ACTION BY VOTE.  When a quorum is present at any meeting, a majority of the directors present may take any action, except when a larger vote is required by law, by the articles of organization or by these bylaws.

3.12.  ACTION BY WRITING.  Unless the articles of organization otherwise provide, any action required or permitted to be taken at any meeting of the directors may be taken without

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a meeting if all the directors consent to the action in writing and the written consents are filed with the records of the meetings of the directors. Such consents shall be treated for all purposes as a vote taken at a meeting.

3.13.  PRESENCE THROUGH COMMUNICATIONS EQUIPMENT.  Unless otherwise provided by law or by the articles of organization, members of the board of directors may participate in a meeting of such board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting.

SECTION 4.  OFFICERS AND AGENTS

4.1.  ENUMERATION; QUALIFICATION.  The officers to the corporation shall be a president, a treasurer, a clerk, and such other officers, if any, as the directors from time to time may in their discretion elect or appoint.  The corporation may also have such agents, if any, as the directors from time to time may in their discretion appoint. Any officer may be but none need be a director or stockholder of the corporation. The clerk shall be a resident of The Commonwealth of Massachusetts unless the corporation has a resident agent appointed for the purpose of service of process. Any two or more offices may be held by the same person. Any officer may be required by the directors to give bond for the faithful performance of such officer’s duties to the corporation in such amount and with such sureties as the directors may determine.

4.2.  POWERS.  Subject to law, to the articles of organization and to these bylaws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to such individual’s office and such duties and powers as the directors may from time to time designate.

4.3.  ELECTION.  The president, the treasurer and the clerk shall be elected annually by the directors at their first meeting following the annual meeting of the stockholders. Other officers, if any, may be elected or appointed by the board of directors at said meeting or at any other time.

4.4.  TENURE.  Except as otherwise provided by law, by the articles of organization or by these bylaws, the president, the treasurer and the clerk shall hold office until the first meeting of the board of directors following the next annual meeting of the stockholders and until their respective successors are chosen and qualified or until such officer dies, resigns, is removed (whether or not such individual remains in a different capacity within the corporation (either as an officer or employee)) or becomes disqualified, and each other officer shall hold office until such officer dies, resigns, is removed or becomes disqualified unless a shorter period shall have been specified by the terms of such officer’s election or appointment. Each agent shall retain authority as an agent at the pleasure of the directors.

4.5.  RESIGNATION AND REMOVAL.  Any officer may resign at any time by delivering a resignation in writing to the president, the treasurer or the clerk or to a meeting of the directors. Such resignation shall be effective upon receipt unless specified to be effective at

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some other time. The directors may remove (whether or not such individual remains in a different capacity within the corporation (either as an officer or employee)) any officer elected by them with or without cause by the vote of the majority of the directors then in office. An officer may be removed for cause only after reasonable notice and an opportunity to be heard before the directors. No officer resigning, and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the corporation) no officer removed, shall have the right to any compensation as such officer for any period following such removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless the directors in their discretion provide for compensation.

4.6.  VACANCIES.  If the office of any officer becomes vacant, the directors may elect or appoint a successor by vote of a majority of the directors present. Each such successor shall hold office for the unexpired term, and in the case of the president, the treasurer and the clerk, until such individual’s successor is chosen and qualified, or in each case until the successor sooner dies, resigns, is removed (whether or not such individual remains in a different capacity within the corporation (either as an officer or an employee)) or becomes disqualified.

4.7.  CHIEF EXECUTIVE OFFICER.  The chief executive officer of the corporation shall be the president or such other officer as is designated by the directors and shall, subject to the control of the directors, have general charge and supervision of the business of the corporation and, except as the directors shall otherwise determine, preside at all meetings of the stockholders and of the directors. If no such designation is made, the president shall be the chief executive officer.

4.8.  PRESIDENT AND VICE PRESIDENT.  The president shall have the duties and powers specified in these bylaws and shall have such other duties and powers as may be determined by the directors.

Any vice presidents shall have such duties and powers as shall be designated from time to time by the directors.

4.9.  TREASURER AND ASSISTANT TREASURERS.  Except as the directors shall otherwise determine, the treasurer shall be the chief financial and accounting officer of the corporation and shall be in charge of its funds and valuable papers, books of account and accounting records, and shall have such other duties and powers as may be designated from time to time by the directors.

Any assistant treasurers shall have such duties and powers as shall be designated from time to time by the directors.

4.10.  CLERK AND ASSISTANT CLERKS.  The clerk shall record all proceedings of the stockholders in a book or series of books to be kept therefor, which book or books shall be kept at the principal office of the corporation or at the office of its transfer agent or of its clerk and shall be open at all reasonable times to the inspection of any stockholder. In the absence of the clerk from any meeting of stockholders, an assistant clerk, or if there be none or such assistant clerk is absent, a temporary clerk or temporary secretary chosen at the meeting, shall

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record the proceedings thereof in the aforesaid book. Unless a transfer agent has been appointed, the clerk shall keep or cause to be kept the stock and transfer records of the corporation, which shall contain the names and record addresses of all stockholders and the amount of stock held by each. The clerk shall keep a true record of the proceedings of all meetings of the directors and in the clerk’s absence from any such meeting an assistant clerk, or if there be none or such assistant clerk is absent, a temporary clerk or temporary secretary chosen at the meeting, shall record the proceedings thereof.

Any assistant clerks shall have such other duties and powers as shall be designated from time to time by the directors.

4.11.  SECRETARY AND ASSISTANT SECRETARIES.  If a secretary or assistant secretary is elected, such individual shall have the authority to keep a true record of the proceedings of the directors and stockholders, and shall have such other duties and powers as shall be designated from time to time by the directors.

SECTION 5.  CAPITAL STOCK

5.1.  NUMBER AND PAR VALUE.  The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue shall be as stated in the articles of organization.

5.2.  STOCK CERTIFICATES.  Each stockholder shall be entitled to a certificate stating the number and the class and the designation of the series, if any, of the shares held by such stockholder, in such form as shall, in conformity to law, be prescribed from time to time by the directors. Such certificate shall be signed by the president or a vice president and by the treasurer or an assistant treasurer. Such signatures may be facsimiles if the certificate is signed by a transfer agent, or by a registrar, other than a director, officer or employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if such individual were such officer at the time of its issue.

5.3.  LOSS OF CERTIFICATES. In the case of the alleged loss or destruction or the mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such conditions as the directors may prescribe.

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SECTION 6.  TRANSFER OF SHARES OF STOCK

6.1.  TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the directors or the transfer agent of the corporation may reasonably require. Except as may otherwise be required by law, by the articles of organization or by these bylaws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to receive notice and to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these bylaws. It shall be the duty of each stockholder to notify the corporation of such stockholder’s address.

6.2.  RECORD DATE AND CLOSING TRANSFER BOOKS.  The directors may fix in advance a time, which shall not be more than sixty days before the date of any meeting of stockholders or the date for the payment of any dividend or making of any distribution to stockholders or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such consent or dissent, and in such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date; or without fixing such record date the directors may for any of such purposes close the transfer books for all or any part of such period. If no record date is fixed and the transfer books are not closed:

(1)  The record date for determining stockholders having the right to notice of and to vote at a meeting of stockholders shall be at the close of business on the date next preceding the date on which notice is given; and

(2)  The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors acts with respect thereto.

SECTION 7.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

Any person serving or who has served as a director or officer of the corporation, or at its request as a director, trustee or officer of any corporation, association, trust or firm in which the corporation is interested or of which it shall be a creditor, shall be indemnified by the corporation to the extent provided herein against expenses actually incurred by him in connection with any civil action, suite or proceeding to which such person may be made a party, or with which such personal shall be threatened, by reason of any alleged act or failure to act in his present or former capacity as a director or officer of the corporation or as a director, trustee or officer of such affiliated corporation, association, trust or firm.  For this purpose, the term “expenses” shall include the amount of any judgment, decree, or settlement for which he may have become liable and all expenses incurred by him including reasonable attorney’s fees, in connection with the

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defense or reasonable settlement of such action, suit or proceeding or any appeal therein.  No such person shall have the right to indemnification, however, in relation to any matter as to which such person shall have been finally adjudged in any legal proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation.  In the event of any settlement of any action, suit or proceeding the right to such indemnification shall be limited to matters as to which the corporation is advised by independent counsel (who may be regular counsel for the corporation) that such settlement is reasonable and that such person has acted in good faith in the reasonable belief that his action was in the best interests of the corporation.  The right of indemnification contained in this Article shall not be deemed exclusive, shall be in addition to any other right which such person may have or obtain, and shall accrue to the estate of such person.

SECTION 8.  CORPORATE SEAL

The seal of the corporation shall, subject to alteration by the directors, consist of a flat-faced circular die with the word “Massachusetts”, together with the name of the corporation and the year of its organization, cut or engraved thereon.

SECTION 9.  EXECUTION OF PAPERS

Except as the directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the corporation shall be signed by the president or by one of the vice presidents or by the treasurer.

SECTION 10.  FISCAL YEAR

The fiscal year of the corporation shall end on March 31.

SECTION 11.  AMENDMENTS

These bylaws may also be altered, amended or repealed by a vote of a majority of the members of the board of directors then in office, except that the directors shall not take any action which provides for indemnification of directors nor any action to amend this Section 11, and except that the directors shall not take any action unless permitted by law.  Any bylaw so altered, amended or repealed by the directors may be further altered as amended or reinstated by the stockholders in the manner described hereinabove.

SECTION 12.  MASSACHUSETTS CONTROL SHARE ACQUISITIONS ACT

The provisions of Chapter 110D shall not apply to control share acquisitions of the corporation.

SECTION 13.  MASSACHUSETTS BUSINESS COMBINATION ACT

The provisions of Chapter 110F of the Massachusetts General Laws shall not apply to “business combinations” (as defined therein) involving the corporation.

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EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

The following are the subsidiaries of American Science and Engineering, Inc. as of March 31, 2013 and the states or jurisdictions in which they are organized.

	State or Jurisdiction
Name	of Entity
AS&E Global, Inc.	Massachusetts
AS&E Mexico Detection Systems S de RL de CV	Mexico
AS&E Brasil Sistemas de Deteccao e Segurancca LTDA	Brazil
AS&E Europe, B.V.	Netherlands
Global International Holding, Inc.	Delaware
AS&E (Hong Kong) Limited	Hong Kong
AS&E Detection Systems Pte. Ltd.	Singapore
American Science and Engineering Global de Mexico S de RL de CV	Mexico

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements (Nos. 333-13259, 333-69717, 333-91801, 333-53842, 333-102338, 333-117843, 333-117844, 333-129851, 333-152541, 333-155215 and 333-162291 ) on Form S-8 and (Nos. 033-61903, 333-09151 and 333-89836) on Form S-3 of American Science and Engineering, Inc. and subsidiaries of our report dated June 7, 2013, relating to our audit of the consolidated financial statement as of and for the years ended March 31, 2013 and 2012  and internal control over financial reporting as of March 31, 2013, which appear in this Annual Report on Form 10-K of American Science and Engineering, Inc. and subsidiaries for the year ending March 31, 2013.

/s/ McGladrey LLP

Boston, Massachusetts
June 7, 2013

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Section 302 Certification

I, Charles P. Dougherty, certify that:

1.I have reviewed this Annual Report on Form 10-K of American Science and Engineering, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 7, 2013
	/s/ CHARLES P. DOUGHERTY
	Charles P. Dougherty
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Section 302 Certification

I, Kenneth J. Galaznik, certify that:

1.I have reviewed this Annual Report on Form 10-K of American Science and Engineering, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 7, 2013
	/s/ KENNETH J. GALAZNIK
	Kenneth J. Galaznik
	Senior Vice President. Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, the President and Chief Executive Officer of American Science and Engineering, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1.the Company’s Annual Report on Form 10-K for the year ended March 31, 2013 (“10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Company’s 10-K being filed fairly presents, in all material respects, the financial condition and results of operation of the Company

Date: June 7, 2013
	/s/ CHARLES P. DOUGHERTY
	Charles P. Dougherty
	President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to American Science and Engineering, Inc. and will be retained by American Science and Engineering, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, the Senior Vice President, Chief Financial Officer and Treasurer of American Science and Engineering, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1.the Company’s Annual Report on Form 10-K for the year ended March 31, 2013 (“10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Company’s 10-K being filed fairly presents, in all material respects, the financial condition and results of operation of the Company

Date: June 7, 2013
	/s/ KENNETH J. GALAZNIK
	Kenneth J. Galaznik
	Senior Vice President, Chief Financial Officer and Treasurer

A signed original of this written statement required by Section 906 has been provided to American Science and Engineering, Inc. and will be retained by American Science and Engineering, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Mar. 31, 2013

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of activity in the allowance for doubtful accounts

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses			Deductions or Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	255	$	344		$	248	$	351
Fiscal 2012	$	334	$	(79	)	$	—	$	255
Fiscal 2011	$	330	$	4		$	—	$	334

Schedule of components of inventories, net of inventory reserves

(In thousands)	2013		2012
Raw materials, completed subassemblies and spare parts	$	21,450	$	23,689
Work-in-process	21,129		16,705
Finished goods	5,472		7,785
Total	$	48,051	$	48,179

Schedule of activity in the reserve for excess or obsolete inventory

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions / Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	6,210	$	5,061	$	219	$	11,052
Fiscal 2012	$	4,882	$	3,076	$	1,748	$	6,210
Fiscal 2011	$	3,982	$	1,604	$	704	$	4,882

Schedule of building, equipment and leasehold improvements

(In thousands)	Estimated Useful Lives	2013			2012
Building and leasehold improvements	Lesser of 25 years or remaining lease term	$	21,245		$	20,761
Equipment and tooling	5-10 years	5,284			5,110
Computer equipment and software	3-5 years	23,135			21,491
Furniture and fixtures	5-7 years	2,553			2,515
Demo and test equipment	2-5 years	7,579			6,576
Leased equipment	1-2 years or life of lease	63			63
Motor vehicles	3-5 years	72			72
Total		59,931			56,588
Less accumulated depreciation and amortization		(43,480		)	(38,590		)
Building, equipment and leasehold improvements, net		$	16,451		$	17,998

Schedule of accrued salaries and benefits

(In thousands)	2013		2012
Accrued payroll and payroll related taxes	$	1,995	$	2,140
Accrued incentive compensation	4,633		7,486
Accrued vacation	1,739		2,096
Accrued severance	1,607		—
Total accrued salaries and benefits	$	9,974	$	11,722

Schedule of other current liabilities

(In thousands)	2013		2012
Accrued accounts payable and other expenses	$	4,213	$	999
Accrued contract related costs	7,596		2,808
Accrued audit and legal fees	375		523
Accrued sales commissions	2,010		1,659
Total other current liabilities	$	14,194	$	5,989

Schedule of calculation of basic and diluted earnings per share

(In thousands except per share amounts)	March 31, 2013		March 31, 2012		March 31, 2011
Earnings per Share — Basic:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Income per share — basic	$	2.08	$	2.37	$	4.73
Earnings per Share — Diluted:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Assumed exercise of stock options, warrants, restricted stock and restricted stock units, using the treasury stock method	54		102		202
Weighted average number of common and potential common shares outstanding — diluted	8,448		9,148		9,247
Income per share — diluted	$	2.07	$	2.34	$	4.63

Schedule of common stock cash dividends declared

Date Declared	Dividend per common share
May 14, 2012	$	0.50
August 2, 2012	0.50
November 5, 2012	0.50
February 11, 2013	0.50
Fiscal year ended March 31, 2013	$	2.00

Summary of share-based compensation costs included in the consolidated statements of operations

	Fiscal Year Ended
(In thousands)	March 31, 2013			March 31, 2012		March 31, 2011
Cost of revenues	$	188		$	438	$	797
Selling, general and administrative	(4		)	1,361		4,419
Total share-based compensation expense before tax	$	184		$	1,799	$	5,216

Schedule of estimation of the fair value of options at date of grant

	March 31, 2011
Assumptions:
Expected life	5 years
Risk-free interest rate	1.60%
Stock volatility	44%
Dividend yield	1.6%

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Net sales and contract revenues:
Net product sales and contract revenues	$ 98,489	$ 114,124	$ 192,818
Net service revenues	88,191	89,428	85,758
Total net sales and contract revenues	186,680	203,552	278,576
Cost of sales and contracts:
Cost of product sales and contracts	68,214	65,500	104,062
Cost of service revenues	39,047	44,935	45,312
Total cost of sales and contracts	107,261	110,435	149,374
Gross profit	79,419	93,117	129,202
Operating expenses:
Selling, general and administrative expenses	29,533	35,624	42,139
Research and development expenses	23,618	25,544	22,619
Total operating expenses	53,151	61,168	64,758
Operating income	26,268	31,949	64,444
Other income (expense):
Interest and investment income, net	657	655	678
Interest expense	(65)	(91)	(110)
Other, net	(414)	(55)	(137)
Total other income	178	509	431
Income before provision for income taxes	26,446	32,458	64,875
Provision for income taxes	8,992	11,036	22,058
Net income	17,454	21,422	42,817
Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities (net of tax)	(20)	(5)	(12)
Comprehensive income	$ 17,434	$ 21,417	$ 42,805
Income per share - Basic (in dollars per share)	$ 2.08	$ 2.37	$ 4.73
Income per share - Diluted (in dollars per share)	$ 2.07	$ 2.34	$ 4.63
Weighted average shares - Basic (in shares)	8,394	9,046	9,045
Weighted average shares - Diluted (in shares)	8,448	9,148	9,247
Dividends declared per share (in dollars per share)	$ 2.00	$ 1.60	$ 1.20

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INCOME TAXES

12 Months Ended

Mar. 31, 2013

INCOME TAXES

INCOME TAXES

4. INCOME TAXES

The provision (benefit) for income taxes for the years ended March 31, 2013, 2012, and 2011 consisted of the following:

(In thousands)	2013			2012			2011
Current:
Federal	$	11,339		$	9,082		$	24,080
State	595			197			636
Foreign	22			7			22
	11,956			9,286			24,738
Deferred:
Federal	(2,743		)	1,610			(2,354		)
State	(375		)	212			(640		)
Change in valuation allowance	154			(72		)	314
	(2,964		)	1,750			(2,680		)
Provision for income taxes	$	8,992		$	11,036		$	22,058

The difference between the total expected provision for income taxes computed by applying the statutory federal income tax rate to income before provision for income taxes and the recorded provision for income taxes for the three years in the period ended March 31, 2013 is as follows:

(In thousands)	2013			2012			2011
Provision for income taxes at statutory rate	$	9,253		$	11,360		$	22,706
State tax provision (benefit) net of federal effect	143			265			(2		)
Stock based compensation	(60		)	107			616
Research tax credits	(589		)	(289		)	(432		)
Qualifying manufacturing credits	(154		)	(315		)	(1,346		)
Change in valuation allowance	154			(72		)	314
Other	245			(20		)	202
Provision for income taxes	$	8,992		$	11,036		$	22,058

The significant components of the net deferred tax assets at March 31, 2013 and 2012 are as follows:

	March 31, 2013					March 31, 2012
(In thousands)	Current		Non-current			Current		Non-current
Deferred tax assets (liabilities):
Accounts receivable and unbilled costs and fees	$	—	$	125		$	—	$	91
Inventory	248		3,935			219		2,199
Deferred revenue	—		1,778			—		1,192
Accrued vacation	558		—			668		—
Accrued warranty costs	141		—			126		—
Depreciation	—		(495		)	—		(922		)
Unearned compensation	1,738		2,573			1,836		2,577
State credit carryforwards	—		944			—		1,098
Other	470		409			480		37
Deferred income tax assets	3,155		9,269			3,329		6,272
Valuation allowance	—		(944		)	—		(1,098		)
Net deferred income taxes	$	3,155	$	8,325		$	3,329	$	5,174

As of March 31, 2013 and March 31, 2012, the Company has $1,452,000 and $1,690,000 of state credit carryforwards, respectively.   Of these amounts, approximately $201,000 and $492,000 at March 31, 2013 and March 31, 2012, respectively, have unlimited carryforward and the remaining balances expire in various years through 2028.

At March 31, 2013 and March 31, 2012, the Company had a deferred tax valuation allowance of $944,000 and $1,098,000, respectively, on state credit carryforwards and other deferred tax assets for which management believes it is more-likely-than-not that realization of these assets will not occur.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending March 31, 2010 through 2012 and for various state taxing authorities for the years ending March 31, 2007 through 2012.  The Company is currently under examination for tax year ended March 31, 2011.  Management does not believe that the examination will have a material impact on the Company’s financial position or results of operations.

In April 2013, the Company settled an outstanding refund receivable with the Massachusetts Department of Revenue for tax years ending March 31, 2006 through 2008 related to sales apportionment methodology.  The Company received proceeds of $1,500,000 related to this settlement which is included in prepaid expenses and other current assets at March 31, 2013.

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Accounts Receivable and Unbilled Costs and Fees
Accounts receivable and unbilled costs and fees attributable to both prime and subcontracts with federal and state governments	$ 12,973,000	$ 13,377,000
Inventories
Raw materials, completed sub-assemblies, and spare parts	21,450,000	23,689,000
Work-in-process	21,129,000	16,705,000
Finished goods	5,472,000	7,785,000
Total	48,051,000	48,179,000
Allowance for doubtful accounts
Activity
Balance at Beginning of Year	255,000	334,000	330,000
Charged to Costs and Expenses	344,000	(79,000)	4,000
Deductions or Write-offs Charged to Reserves	248,000
Balance at End of Year	351,000	255,000	334,000
Reserve for excess or obsolete inventory
Activity
Balance at Beginning of Year	6,210,000	4,882,000	3,982,000
Charged to Costs and Expenses	5,061,000	3,076,000	1,604,000
Deductions or Write-offs Charged to Reserves	219,000	1,748,000	704,000
Balance at End of Year	$ 11,052,000	$ 6,210,000	$ 4,882,000

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LEASE AGREEMENTS (Tables)

12 Months Ended

Mar. 31, 2013

LEASE AGREEMENTS

Schedule of future minimum rental payments under the Company's non-cancelable leases, excluding real estate taxes, insurance and operating costs paid by the entity, required over the initial terms of the leases

Future minimum rental payments under the Company’s non-cancelable leases, excluding real estate taxes, insurance and operating costs paid by the Company, required over the initial terms of the leases are as follows (in thousands):

Year Ending March 31,	Operating Leases		Capital Leases
2014	$	647	$	1,542
2015	303		1,542
2016	225		1,413
Total payments	$	1,175	4,497
Imputed interest			(94		)
Lease financing liability			4,403
Less:  Current portion of lease financing liability			1,489
Lease financing liability, net of current portion			$	2,914

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STOCKHOLDERS' EQUITY (Details 4) (USD $)	12 Months Ended
	Mar. 31, 2013
$11.58 - $20.00
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 11.58
Exercise price, high end of range (in dollars per share)	$ 20.00
Options outstanding:
Number of Shares	15,925
Weighted Average Exercise Price (in dollars per share)	$ 14.43
Weighted Average Remaining Contractual Life	10 months 17 days
Options exercisable:
Number of Shares	15,925
Weighted Average Exercise Price (in dollars per share)	$ 14.43
$20.01 - $30.00
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 20.01
Exercise price, high end of range (in dollars per share)	$ 30.00
Options outstanding:
Number of Shares	14,400
Weighted Average Exercise Price (in dollars per share)	$ 28.50
Weighted Average Remaining Contractual Life	1 year 5 months 16 days
Options exercisable:
Number of Shares	14,400
Weighted Average Exercise Price (in dollars per share)	$ 28.50
$30.01 - $40.00
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 30.01
Exercise price, high end of range (in dollars per share)	$ 40.00
Options outstanding:
Number of Shares	14,629
Weighted Average Exercise Price (in dollars per share)	$ 39.06
Weighted Average Remaining Contractual Life	1 year 1 month 2 days
Options exercisable:
Number of Shares	14,629
Weighted Average Exercise Price (in dollars per share)	$ 39.06
$40.01 - $50.00
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 40.01
Exercise price, high end of range (in dollars per share)	$ 50.00
Options outstanding:
Number of Shares	38,800
Weighted Average Exercise Price (in dollars per share)	$ 44.73
Weighted Average Remaining Contractual Life	1 year 7 months 10 days
Options exercisable:
Number of Shares	38,800
Weighted Average Exercise Price (in dollars per share)	$ 44.73
$50.01 - $60.00
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 50.01
Exercise price, high end of range (in dollars per share)	$ 60.00
Options outstanding:
Number of Shares	47,278
Weighted Average Exercise Price (in dollars per share)	$ 53.36
Weighted Average Remaining Contractual Life	2 years 8 months 16 days
Options exercisable:
Number of Shares	47,278
Weighted Average Exercise Price (in dollars per share)	$ 53.36
$60.01 - $70.00
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 60.01
Exercise price, high end of range (in dollars per share)	$ 70.00
Options outstanding:
Number of Shares	127,949
Weighted Average Exercise Price (in dollars per share)	$ 64.08
Weighted Average Remaining Contractual Life	4 years 10 months 20 days
Options exercisable:
Number of Shares	125,682
Weighted Average Exercise Price (in dollars per share)	$ 64.13
$70.01 - $75.82
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 70.01
Exercise price, high end of range (in dollars per share)	$ 75.82
Options outstanding:
Number of Shares	56,181
Weighted Average Exercise Price (in dollars per share)	$ 74.87
Weighted Average Remaining Contractual Life	7 years 5 months 1 day
Options exercisable:
Number of Shares	56,181
Weighted Average Exercise Price (in dollars per share)	$ 74.87
$11.58 - $75.82
Data for options outstanding and exercisable
Exercise price, low end of range (in dollars per share)	$ 11.58
Exercise price, high end of range (in dollars per share)	$ 75.82
Options outstanding:
Number of Shares	315,162
Weighted Average Exercise Price (in dollars per share)	$ 56.72
Weighted Average Remaining Contractual Life	4 years 29 days
Options exercisable:
Number of Shares	312,895
Weighted Average Exercise Price (in dollars per share)	$ 56.68

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) (USD $)	0 Months Ended					12 Months Ended
	May 07, 2013	Feb. 11, 2013	Nov. 05, 2012	Aug. 02, 2012	May 14, 2012	Mar. 31, 2013 Customer	Mar. 31, 2012 Customer	Mar. 31, 2011 Customer
Concentrations of credit risk
Number of major customers						2	1	3
Common Stock Dividends
Dividends declared per common share (in dollars per share)	$ 0.50	$ 0.50	$ 0.50	$ 0.50	$ 0.50	$ 2.00	$ 1.60	$ 1.20
Credit risk
Concentrations of credit risk
Number of major customers						2
Credit risk | U.S. government
Concentrations of credit risk
Number of major customers						1
Credit risk | International customer
Concentrations of credit risk
Number of major customers						1
Accounts receivable | Credit risk
Concentrations of credit risk
Percentage of concentration risk						51.00%

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Revenue Recognition
Unbilled costs and fees expected to be billed and collected during fiscal 2013	$ 4,839,000
Percentage of unbilled costs and fees expected to be billed and collected during fiscal 2013	99.00%
Retainages	80,000	87,000
Commercial contract retentions and government contract withholdings as a percent of fees	15.00%
Warranty Costs
Parts and labor warranty period for certain of the company's products with purchase of domestic equipment	1 year
Warranty period for certain products	1 year
Deferred Revenue
Minimum period covered under extended warranty and service contracts	1 year
Maximum period covered under extended warranty and service contracts	5 years
Impairment of Long-Lived Assets
Impairment costs	0	0	0
Accrued Salaries and Benefits
Accrued payroll and payroll related taxes	1,995,000	2,140,000
Accrued incentive compensation	4,633,000	7,486,000
Accrued vacation	1,739,000	2,096,000
Accrued severance	1,607,000
Total accrued salaries and benefits	9,974,000	11,722,000
Other Current Liabilities
Accrued accounts payable and other expenses	4,213,000	999,000
Accrued contract related costs	7,596,000	2,808,000
Accrued audit and legal fees	375,000	523,000
Accrued sales commissions	2,010,000	1,659,000
Total other current liabilities	14,194,000	5,989,000
Research and Development
Research and development costs	23,618,000	25,544,000	22,619,000
Revenue recognized related to government-sponsored research and development	2,124,000	4,409,000	4,821,000
Common stock equivalents excluded from diluted earnings per share as their effect is anti-dilutive (in shares)	182,000	64,000	35,000
Earnings Per Share - Basic:
Net income	17,454,000	21,422,000	42,817,000
Weighted average number of common shares outstanding - basic	8,394,000	9,046,000	9,045,000
Income per share - basic (in dollars per share)	$ 2.08	$ 2.37	$ 4.73
Earnings Per Share - Diluted:
Net income	$ 17,454,000	$ 21,422,000	$ 42,817,000
Weighted average number of common shares outstanding - basic	8,394,000	9,046,000	9,045,000
Assumed exercise of stock options, warrants, restricted stock and restricted stock units, using the treasury stock method (in shares)	54,000	102,000	202,000
Weighted average number of common and potential common shares outstanding - diluted	8,448,000	9,148,000	9,247,000
Income per share - diluted (in dollars per share)	$ 2.07	$ 2.34	$ 4.63
Minimum
Revenue Recognition
Period of certain long-term, custom-built systems or contract engineering projects	1 year
Maximum
Revenue Recognition
Period of certain long-term, custom-built systems or contract engineering projects	4 years
Parts only or parts and labor warranty period for certain of the products with purchase of international equipment	1 year

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	12 Months Ended	1 Months Ended
	Mar. 31, 2013	Mar. 31, 2013 Employment agreement with Charles P. Dougherty
COMMITMENTS AND CONTINGENCIES
Amount of open purchase orders	$ 27,241,000
Expected period for fulfillment of open purchase orders	2 years
Employment Agreements
Base compensation payable per year		$ 550,000
Performance-based annual incentive bonus as a percentage of base compensation per year		100.00%
Long-term incentive program with awards as a percentage of base compensation upon achievement of certain long-term strategic goals		200.00%

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WARRANTY OBLIGATIONS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
WARRANTY OBLIGATIONS
Warranty period for certain products	1 year
Historical experience trailing period based on how product warranty accrual rates are determined	12 months
Warranty Experience
Warranty accrual at beginning of period	$ 358	$ 1,225
Accruals for warranties issued during the period	548	632
Adjustment of preexisting accrual estimates	152	(63)
Warranty costs incurred during the period	(661)	(1,436)
Warranty accrual at end of period	$ 397	$ 358

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STOCKHOLDERS' EQUITY (Details 6) (USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Minimum
Stockholder's equity
Vesting period for awards granted under the plans	1 year
Maximum
Stockholder's equity
Vesting period for awards granted under the plans	3 years
Restricted Stock and Restricted Stock Units
Stockholder's equity
Unrecognized compensation costs	$ 894,000
Expected period to recognize unrecognized compensation costs	1 year 1 month 6 days
Number of Shares
Unvested restricted stock and units outstanding, beginning of year (in shares)	40,599	32,882	97,240
Granted (in shares)	19,657	24,006	5,106
Vested (in shares)	(17,463)	(12,523)	(69,464)
Forfeited (in shares)	(14,684)	(3,766)
Unvested restricted stock and units outstanding, end of year (in shares)	28,109	40,599	32,882
Weighted Average Exercise Price
Unvested restricted stock and units outstanding, beginning of year (in dollars per share)	$ 68.63	$ 65.03	$ 60.78
Granted (in dollars per share)	$ 61.00	$ 73.03	$ 83.79
Vested (in dollars per share)	$ 68.08	$ 68.70	$ 60.45
Forfeited (in dollars per share)	$ 63.71	$ 65.07
Unvested restricted stock and units outstanding, end of year (in dollars per share)	$ 66.20	$ 68.63	$ 65.03
Restricted Stock and Restricted Stock Units | Employees | Minimum
Stockholder's equity
Vesting period for awards granted under the plans	1 year
Restricted Stock and Restricted Stock Units | Employees | Maximum
Stockholder's equity
Vesting period for awards granted under the plans	3 years
Restricted Stock | Board of Directors
Stockholder's equity
Vesting period for awards granted under the plans	1 year

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INCOME TAXES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Current:
Federal	$ 11,339	$ 9,082	$ 24,080
State	595	197	636
Foreign	22	7	22
Total	11,956	9,286	24,738
Deferred:
Federal	(2,743)	1,610	(2,354)
State	(375)	212	(640)
Change in valuation allowance	154	(72)	314
Total	(2,964)	1,750	(2,680)
Provision for income taxes	$ 8,992	$ 11,036	$ 22,058

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BUSINESS SEGMENT INFORMATION (Details 3) (USD $)	12 Months Ended
	Mar. 31, 2013 Customer	Mar. 31, 2012 Customer	Mar. 31, 2011 Customer
Major Customers
Number of major customers	2	1	3
Major customer - one customer
Major Customers
Major customers amount		46,167,000
Major customer - two customer A
Major Customers
Major customers amount	44,850,000
Major customer - two customer B
Major Customers
Major customers amount	30,874,000
Major customer - three customer A
Major Customers
Major customers amount			82,634,000
Major customer - three customer B
Major Customers
Major customers amount			32,316,000
Major customer - three customer C
Major Customers
Major customers amount			31,072,000
Agencies of the U.S. government
Major Customers
Major customers percentage	63.00%	62.00%	65.00%
Number of contracts terminated	0	1	1

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) In Thousands, unless otherwise specified			12 Months Ended				12 Months Ended			12 Months Ended				12 Months Ended				12 Months Ended				12 Months Ended				12 Months Ended				12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013 Minimum	Mar. 31, 2013 Maximum	Mar. 31, 2013 Building and leasehold improvements	Mar. 31, 2012 Building and leasehold improvements	Mar. 31, 2013 Building and leasehold improvements Maximum	Mar. 31, 2013 Equipment and tooling	Mar. 31, 2012 Equipment and tooling	Mar. 31, 2013 Equipment and tooling Minimum	Mar. 31, 2013 Equipment and tooling Maximum	Mar. 31, 2013 Computer equipment and software	Mar. 31, 2012 Computer equipment and software	Mar. 31, 2013 Computer equipment and software Minimum	Mar. 31, 2013 Computer equipment and software Maximum	Mar. 31, 2013 Furniture and fixtures	Mar. 31, 2012 Furniture and fixtures	Mar. 31, 2013 Furniture and fixtures Minimum	Mar. 31, 2013 Furniture and fixtures Maximum	Mar. 31, 2013 Demo and test equipment	Mar. 31, 2012 Demo and test equipment	Mar. 31, 2013 Demo and test equipment Minimum	Mar. 31, 2013 Demo and test equipment Maximum	Mar. 31, 2013 Leased equipment	Mar. 31, 2012 Leased equipment	Mar. 31, 2013 Leased equipment Minimum	Mar. 31, 2013 Leased equipment Maximum	Mar. 31, 2013 Motor vehicles	Mar. 31, 2012 Motor vehicles	Mar. 31, 2013 Motor vehicles Minimum	Mar. 31, 2013 Motor vehicles Maximum
Building, Equipment and Leasehold Improvements
Estimated Useful Lives			1 year	25 years			25 years			5 years	10 years			3 years	5 years			5 years	7 years			2 years	5 years			1 year	2 years			3 years	5 years
Total	$ 59,931	$ 56,588			$ 21,245	$ 20,761		$ 5,284	$ 5,110			$ 23,135	$ 21,491			$ 2,553	$ 2,515			$ 7,579	$ 6,576			$ 63	$ 63			$ 72	$ 72
Less accumulated depreciation and amortization	(43,480)	(38,590)
Building, equipment and leasehold improvements, net	$ 16,451	$ 17,998

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net income	$ 17,454	$ 21,422	$ 42,817
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,114	5,768	4,961
Provisions for contracts, inventory, and accounts receivable reserves	5,405	2,998	1,608
Amortization of bond premium	2,700	2,689	2,057
Stock compensation expense	184	1,799	5,216
Other	(59)	(47)	(125)
Deferred income taxes	(2,966)	1,750	(2,716)
Change in assets and liabilities:
Accounts receivable	(3,382)	11,819	551
Unbilled costs and fees	(1,669)	13,876	(15,004)
Inventories	(4,933)	(4,333)	(3,139)
Prepaid expenses and other assets	813	(3,609)	3,048
Accrued income taxes	2,094	(1,936)	(2,267)
Accounts payable	910	(1,917)	(1,592)
Deferred revenue	1,661	(568)	(2,034)
Customer deposits	1,168	5,838	(4,521)
Accrued expenses and other current liabilities	6,663	(4,530)	4,344
Total adjustments	13,703	29,597	(9,613)
Net cash provided by operating activities	31,157	51,019	33,204
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments	200,089	220,293	192,406
Purchases of short-term instruments	(140,532)	(283,685)	(160,422)
Proceeds from sale of fixed assets	110	51	3
Purchases of property and equipment	(3,618)	(5,211)	(5,304)
Net cash provided by (used for) investing activities	56,049	(68,552)	26,683
Cash flows from financing activities:
Decrease (increase) in restricted cash	2,373	13,570	(29,425)
Repurchase of shares of common stock	(57,633)	(20,051)	(3,736)
Payment of common stock dividends	(16,841)	(14,423)	(10,866)
Repayment of leasehold financing	(1,351)	(1,322)	(1,301)
Proceeds from exercise of stock options	2,160	4,287	6,943
Reduction of (increase in) income taxes paid due to the tax benefit (expense) from employee stock option expense	135	(303)	3,730
Net cash used for financing activities	(71,157)	(18,242)	(34,655)
Net increase (decrease) in cash and cash equivalents	16,049	(35,775)	25,232
Cash and cash equivalents at beginning of year	24,369	60,144	34,912
Cash and cash equivalents at end of year	40,418	24,369	60,144
Supplemental disclosures of cash flow information:
Interest paid	73	91	110
Income taxes paid	7,367	13,744	24,079
Non-cash transactions:
Issuance of stock for 401K match			$ 220

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LEASE AGREEMENTS

12 Months Ended

Mar. 31, 2013

LEASE AGREEMENTS

LEASE AGREEMENTS

2. LEASE AGREEMENTS

The Company leases certain facilities under non-cancelable operating leases with various renewal options. For operating leases which contain fixed escalations in rental payments, the Company records the total rent payable on a straight-line basis over the original lease term. The Company incurred $787,000, $730,000 and $670,000 of operating rent expense in the fiscal years ended March 31, 2013, 2012, and 2011, respectively.   In conjunction with the Company’s lease for its headquarters, the Company has issued security in the form of a standby letter of credit in the amount of $300,000 with an original expiration date of March 1, 2006 which contains automatic extensions through April 15, 2016.

In March 2005, the Company renewed its lease agreement for its corporate headquarters and manufacturing facilities in Billerica, Massachusetts.  As part of the lease agreement, the Company’s landlord agreed to certain renovations to the Billerica facility including the construction of additional high bay manufacturing space.  The Company was responsible for a portion of the construction costs and was deemed to be the owner of the building during the construction period. In January 2007, the Company amended this lease agreement to expand its lease to include the remaining available space in the building.  During the fiscal year ended March 31, 2007, the Company capitalized $2,029,000 to record the facility on its books with an offsetting amount to the Lease Financing Liability.  In addition, amounts paid for construction were recorded as construction in progress and the landlord construction allowances of $367,000 in 2008 were recorded as additional lease financing liability.

At the completion of the construction of the initial renovations in February 2006, the lease was reviewed for potential sale-leaseback treatment in accordance with ASC 840 Leases.  Based on this review, it was determined that the lease did not qualify for sale-leaseback treatment.  As a result, building and tenant improvements and associated lease financing liabilities remained on the Company’s financial statements.  The Lease Financing Liability is being amortized over the lease term based on the payments designated in the agreement, and the building and tenant improvement assets are being depreciated on a straight line basis over the remaining lease term.

Future minimum rental payments under the Company’s non-cancelable leases, excluding real estate taxes, insurance and operating costs paid by the Company, required over the initial terms of the leases are as follows (in thousands):

Year Ending March 31,	Operating Leases		Capital Leases
2014	$	647	$	1,542
2015	303		1,542
2016	225		1,413
Total payments	$	1,175	4,497
Imputed interest			(94		)
Lease financing liability			4,403
Less:  Current portion of lease financing liability			1,489
Lease financing liability, net of current portion			$	2,914

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WARRANTY OBLIGATIONS

12 Months Ended

Mar. 31, 2013

WARRANTY OBLIGATIONS

WARRANTY OBLIGATIONS

5. WARRANTY OBLIGATIONS

Certain of the Company’s products carry a one-year warranty, the costs of which are accrued for at time of shipment or delivery. Accrual rates are based upon historical experience over the preceding twelve months and management’s judgment of future exposure. Warranty experience for the years ended March 31, 2013 and 2012 is as follows:

(In thousands)	2013			2012
Warranty accrual at beginning of period	$	358		$	1,225
Accruals for warranties issued during the period	548			632
Adjustment of preexisting accrual estimates	152			(63		)
Warranty costs incurred during period	(661		)	(1,436		)
Warranty accrual at end of period	$	397		$	358

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LETTERS OF CREDIT

12 Months Ended

Mar. 31, 2013

LETTERS OF CREDIT

LETTERS OF CREDIT

3. LETTERS OF CREDIT

In the normal course of business, the Company may provide certain customers and potential customers with performance guarantees, which are generally backed by standby letters of credit. In general, the Company would only be liable for the amount of these guarantees in the event of default in the performance of its obligations, the probability of which is remote in management’s opinion.  At March 31, 2013, the Company had outstanding $25,437,000 in standby letters of credit.  These outstanding standby letters of credit are cash-secured at amounts ranging from 52% to 66% of the outstanding letters of credit.   This resulted in a restricted cash balance of $13,517,000 at March 31, 2013 of which $899,000 was considered long-term restricted cash due to the expiration date of the underlying letters of credit.

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BUSINESS SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Mar. 31, 2013 item	Mar. 31, 2012	Mar. 31, 2011
BUSINESS SEGMENT INFORMATION
Number of operating segments	1
Net Sales and Contract Revenues
Percentage of assets in foreign countries	5.00%
Net Sales and Contract Revenues	$ 186,680	$ 203,552	$ 278,576
Percentage of net sales and contract revenues	100.00%	100.00%	100.00%
Domestic
Net Sales and Contract Revenues
Net Sales and Contract Revenues	123,652	133,441	190,769
Percentage of net sales and contract revenues	66.00%	66.00%	68.00%
International
Net Sales and Contract Revenues
Net Sales and Contract Revenues	$ 63,028	$ 70,111	$ 87,807
Percentage of net sales and contract revenues	34.00%	34.00%	32.00%
Middle East & Africa
Net Sales and Contract Revenues
Percentage of net sales and contract revenues	54.00%	63.00%	84.00%
Americas - Non-US
Net Sales and Contract Revenues
Percentage of net sales and contract revenues	29.00%	20.00%	2.00%
Asia / Pacific
Net Sales and Contract Revenues
Percentage of net sales and contract revenues	13.00%	11.00%	7.00%
Europe
Net Sales and Contract Revenues
Percentage of net sales and contract revenues	4.00%	6.00%	7.00%

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) (USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Stock-Based Compensation
Total share-based compensation expense before tax	$ 184,000	$ 1,799,000	$ 5,216,000
Income tax benefit recognized related to the compensation	63,000	612,000	1,770,000
Estimated fair value of options at date of grant with few assumptions
Expected life			5 years
Risk-free interest rate (as a percent)			1.60%
Stock volatility (as a percent)			44.00%
Dividend yield (as a percent)			1.60%
Options granted (in shares)	0	0
Cost of revenues
Stock-Based Compensation
Total share-based compensation expense before tax	188,000	438,000	797,000
Selling, general and administrative
Stock-Based Compensation
Total share-based compensation expense before tax	$ (4,000)	$ 1,361,000	$ 4,419,000

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INCOME TAXES (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
INCOME TAXES
Provision for income taxes at statutory rate	$ 9,253	$ 11,360	$ 22,706
State tax provision (benefit) net of federal effect	143	265	(2)
Stock based compensation	(60)	107	616
Research tax credits	(589)	(289)	(432)
Qualifying manufacturing credits	(154)	(315)	(1,346)
Change in valuation allowance	154	(72)	314
Other	245	(20)	202
Provision for income taxes	$ 8,992	$ 11,036	$ 22,058

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STOCKHOLDERS' EQUITY (Details 3) (USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Stock Option and Other Compensation Plans
Number of shares authorized under the plans	3,480,000
Number of Shares
Options granted (in shares)	0	0
Minimum
Stock Option and Other Compensation Plans
Vesting period for awards granted under the plans	1 year
Maximum
Stock Option and Other Compensation Plans
Vesting period for awards granted under the plans	3 years
Stock options
Stock Option and Other Compensation Plans
Term of awards from the date of grant	10 years
Number of Shares
Options outstanding, beginning of year (in shares)	376,331	472,446	613,934
Options granted (in shares)			56,181
Options exercised (in shares)	(50,505)	(75,714)	(197,669)
Options canceled or expired (in shares)	(10,664)	(20,401)
Options outstanding, end of year (in shares)	315,162	376,331	472,446
Options exercisable, end of year (in shares)	312,895	370,400	397,592
Options available for grant (in shares)	284,000	292,000	301,732
Weighted Average Exercise Price
Options outstanding, beginning of year (in dollars per share)	$ 55.10	$ 55.77	$ 47.37
Options granted (in dollars per share)			$ 74.87
Options exercised (in dollars per share)	$ 42.75	$ 56.63	$ 35.12
Options canceled or expired (in dollars per share)	$ 65.72	$ 65.01
Options outstanding, end of year (in dollars per share)	$ 56.72	$ 55.10	$ 55.77
Options exercisable, end of year (in dollars per share)	$ 56.68	$ 55.00	$ 53.06
Weighted average fair value per share of options granted during the year (in dollars per share)			$ 26.21

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FAIR VALUE MEASUREMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Mar. 31, 2012
Short-term investments
Available-for-sale securities
Amortized Cost	$ 108,552	$ 170,809
Gross Unrealized Gains	14	53
Gross Unrealized Losses	(20)	(28)
Fair Value	108,546	170,834
Short-term investments | Corporate debentures/bonds
Available-for-sale securities
Amortized Cost	75,578	78,176
Gross Unrealized Gains	14	21
Gross Unrealized Losses	(20)	(28)
Fair Value	75,572	78,169
Short-term investments | Commercial paper
Available-for-sale securities
Amortized Cost	28,974	40,331
Gross Unrealized Gains		3
Fair Value	28,974	40,334
Short-term investments | Government agency bonds
Available-for-sale securities
Amortized Cost		26,573
Gross Unrealized Gains		9
Fair Value		26,582
Short-term investments | U.S. Treasury bills
Available-for-sale securities
Amortized Cost		20,000
Gross Unrealized Gains		18
Fair Value		20,018
Short-term investments | Certificates of deposit
Available-for-sale securities
Amortized Cost	4,000	5,729
Gross Unrealized Gains		2
Fair Value	4,000	5,731
Cash equivalents
Available-for-sale securities
Amortized Cost	16,549	13,698
Fair Value	16,549	13,698
Cash equivalents | Money market funds
Available-for-sale securities
Amortized Cost	16,549	13,698
Fair Value	$ 16,549	$ 13,698

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Mar. 31, 2012
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowances (in dollars)	$ 351	$ 255
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, Authorized shares	100,000	100,000
Preferred stock, Issued shares	0	0
Common stock, par value (in dollars per share)	$ 0.6666	$ 0.6666
Common stock, Authorized shares	20,000,000	20,000,000
Common stock, Issued shares	7,980,202	8,942,793
Common stock, outstanding shares	7,980,202	8,942,793

XML

FAIR VALUE MEASUREMENTS

12 Months Ended

Mar. 31, 2013

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

8. FAIR VALUE MEASUREMENTS

FASB ASC 820, Fair Value Measurements and Disclosures, defines and establishes a framework for measuring fair value and expands disclosures about fair value measurements. In accordance with ASC 820, we have categorized our financial assets, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets recorded on the Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1 - Financial assets whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives, and most U.S. government and agency securities).

Level 2 - Financial assets whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.  Level 2 inputs include the following:

·    Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently);

·    Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and

·    Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities and derivatives).

Level 3 - Financial assets whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability. The Company currently does not have any Level 3 financial assets or liabilities.

The following table presents the financial assets and liabilities we measure at fair value on a recurring basis, based on the fair value hierarchy as of March 31, 2013 and March 31, 2012:

(In thousands)	March 31, 2013		March 31, 2012
Level 1 — Financial Assets
U.S. Treasury bills	$	—	$	20,018
Money market funds	16,549		—
Total Level 1 Financial Assets	16,549		20,018
Level 2 — Financial Assets
Corporate debentures/bonds	75,572		78,169
Commercial paper	28,974		40,334
Government agency bonds	—		26,582
Money market funds	—		13,698
Certificates of deposit	4,000		5,731
Total Level 2 Financial Assets	108,546		164,514
Total cash equivalents and short-term investments	$	125,095	$	184,532

These investments are classified as available-for-sale and are recorded at their fair market values using the specific identification method. The unrealized holding gains or losses on these securities are included as a component of comprehensive income in the Consolidated Statements of Stockholders’ Equity and Comprehensive Income.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2013:
Short-term investments:
Corporate debentures/bonds	$	75,578	$	14	$	(20	)	$	75,572
Commercial paper	28,974		—		—			28,974
Certificates of deposit	4,000		—		—			4,000
Total short-term investments	$	108,552	$	14	$	(20	)	$	108,546
Cash equivalents:
Money market funds	16,549		—		—			16,549
Total cash equivalents	$	16,549	$	—	$	—		$	16,549

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2012:
Short-term investments:
Corporate debentures/bonds	$	78,176	$	21	$	(28	)	$	78,169
Commercial paper	40,331		3		—			40,334
Government agency bonds	26,573		9		—			26,582
Treasury bills	20,000		18		—			20,018
Certificates of deposit	5,729		2		—			5,731
Total short-term investments	$	170,809	$	53	$	(28	)	$	170,834
Cash equivalents:
Money market funds	13,698		—		—			13,698
Total cash equivalents	$	13,698	$	—	$	—		$	13,698

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comp. Income (Loss)
Balance at Mar. 31, 2010	$ 221,768	$ 6,008	$ 97,819	$ 117,908	$ 33
Balance (in shares) at Mar. 31, 2010		9,013,508
Increase (decrease) in stockholders' equity
Net income	42,817			42,817
Repurchase of common stock	(3,736)	(34)	(3,702)
Repurchase of common stock (in shares)		(51,269)
Exercise of stock options	6,943	132	6,811
Exercise of stock options (in shares)		197,669
Issuance of stock under employee compensation plans	220	2	218
Issuance of stock under employee compensation plans (in shares)		2,939
Issuances of restricted stock, net of forfeitures		5	(5)
Issuances of restricted stock, net of forfeitures (in shares)		7,118
Tax benefit accrued on stock option exercises / (reversal) associated with stock options	3,730		3,730
Compensation expense on stock options	1,703		1,703
Compensation expense on restricted stock and restricted stock units	3,513		3,513
Dividends declared	(10,866)			(10,866)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	(12)				(12)
Balance at Mar. 31, 2011	266,080	6,113	110,087	149,859	21
Balance (in shares) at Mar. 31, 2011		9,169,965
Increase (decrease) in stockholders' equity
Net income	21,422			21,422
Repurchase of common stock	(20,051)	(213)	(19,838)
Repurchase of common stock (in shares)		(320,207)
Exercise of stock options	4,287	50	4,237
Exercise of stock options (in shares)		75,714
Vesting of restricted stock units		1	(1)
Vesting of restricted stock units (in shares)		2,341
Issuances of restricted stock, net of forfeitures		10	(10)
Issuances of restricted stock, net of forfeitures (in shares)		14,980
Tax benefit accrued on stock option exercises / (reversal) associated with stock options	(303)		(303)
Compensation expense on stock options	597		597
Compensation expense on restricted stock and restricted stock units	1,202		1,202
Dividends declared	(14,423)			(14,423)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	(5)				(5)
Balance at Mar. 31, 2012	258,806	5,961	95,971	156,858	16
Balance (in shares) at Mar. 31, 2012	8,942,793	8,942,793
Increase (decrease) in stockholders' equity
Net income	17,454			17,454
Repurchase of common stock	(57,633)	(675)	(56,958)
Repurchase of common stock (in shares)		(1,013,655)
Exercise of stock options	2,160	34	2,126
Exercise of stock options (in shares)		50,505
Vesting of restricted stock units		1	(1)
Vesting of restricted stock units (in shares)		1,743
Issuances of restricted stock, net of forfeitures		(1)	1
Issuances of restricted stock, net of forfeitures (in shares)		(1,184)
Tax benefit accrued on stock option exercises / (reversal) associated with stock options	135		135
Compensation expense on stock options	(106)		(106)
Compensation expense on restricted stock and restricted stock units	290		290
Dividends declared	(16,841)			(16,841)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	(20)				(20)
Balance at Mar. 31, 2013	$ 204,245	$ 5,320	$ 41,458	$ 157,471	$ (4)
Balance (in shares) at Mar. 31, 2013	7,980,202	7,980,202

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Mar. 31, 2012
Current assets:
Cash and cash equivalents	$ 40,418	$ 24,369
Restricted cash	12,618	11,707
Short-term investments, at fair value	108,546	170,834
Accounts receivable, net of allowances of $351 at March 31, 2013 and $255 at March 31, 2012	28,477	25,439
Unbilled costs and fees	4,875	3,206
Inventories	48,051	48,179
Prepaid expenses and other current assets	8,829	10,386
Deferred income taxes	3,155	3,329
Total current assets	254,969	297,449
Building, equipment and leasehold improvements, net	16,451	17,998
Restricted cash	899	4,183
Deferred income taxes	8,325	5,174
Other assets, net	805	61
Total assets	281,449	324,865
Current liabilities:
Accounts payable	8,371	7,461
Accrued salaries and benefits	9,974	11,722
Accrued warranty costs	397	358
Accrued income taxes	2,094
Deferred revenue	15,770	16,731
Customer deposits	16,199	15,031
Current portion of lease financing liability	1,489	1,351
Other current liabilities	14,194	5,989
Total current liabilities	68,488	58,643
Lease financing liability, net of current portion	2,914	4,403
Deferred revenue	5,535	2,913
Other long term liabilities	267	100
Total liabilities	77,204	66,059
Commitments and contingencies (Notes 2 and 9)
Stockholders' equity:
Preferred stock, no par value Authorized-100,000 shares Issued-None
Common stock, $0.66 2/3 par value Authorized-20,000,000 shares Issued and outstanding- 7,980,202 shares at March 31, 2013 and 8,942,793 shares at March 31, 2012	5,320	5,961
Capital in excess of par value	41,458	95,971
Accumulated other comprehensive income (loss), net	(4)	16
Retained earnings	157,471	156,858
Total stockholders' equity	204,245	258,806
Total liabilities and stockholders' equity	$ 281,449	$ 324,865

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LEASE AGREEMENTS (Details) (USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2008	Mar. 31, 2007
LEASE AGREEMENTS
Operating lease, rent expense	$ 787,000	$ 730,000	$ 670,000
Letter of credit issued as security for lease	300,000
Amount capitalized					2,029,000
Landlord construction allowances recorded as additional lease financing liability				367,000
Operating Leases
2014	647,000
2015	303,000
2016	225,000
Total payments	1,175,000
Capital Leases
2014	1,542,000
2015	1,542,000
2016	1,413,000
Total payments	4,497,000
Imputed interest	(94,000)
Lease financing liability	4,403,000
Less: Current portion of lease financing liability	1,489,000	1,351,000
Lease financing liability, net of current portion	$ 2,914,000	$ 4,403,000

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FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Mar. 31, 2013

FAIR VALUE MEASUREMENTS

Schedule of financial assets and liabilities measured at fair value on recurring basis, based on the fair value hierarchy

(In thousands)	March 31, 2013		March 31, 2012
Level 1 — Financial Assets
U.S. Treasury bills	$	—	$	20,018
Money market funds	16,549		—
Total Level 1 Financial Assets	16,549		20,018
Level 2 — Financial Assets
Corporate debentures/bonds	75,572		78,169
Commercial paper	28,974		40,334
Government agency bonds	—		26,582
Money market funds	—		13,698
Certificates of deposit	4,000		5,731
Total Level 2 Financial Assets	108,546		164,514
Total cash equivalents and short-term investments	$	125,095	$	184,532

Schedule of available-for-sale securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2013:
Short-term investments:
Corporate debentures/bonds	$	75,578	$	14	$	(20	)	$	75,572
Commercial paper	28,974		—		—			28,974
Certificates of deposit	4,000		—		—			4,000
Total short-term investments	$	108,552	$	14	$	(20	)	$	108,546
Cash equivalents:
Money market funds	16,549		—		—			16,549
Total cash equivalents	$	16,549	$	—	$	—		$	16,549

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2012:
Short-term investments:
Corporate debentures/bonds	$	78,176	$	21	$	(28	)	$	78,169
Commercial paper	40,331		3		—			40,334
Government agency bonds	26,573		9		—			26,582
Treasury bills	20,000		18		—			20,018
Certificates of deposit	5,729		2		—			5,731
Total short-term investments	$	170,809	$	53	$	(28	)	$	170,834
Cash equivalents:
Money market funds	13,698		—		—			13,698
Total cash equivalents	$	13,698	$	—	$	—		$	13,698

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FAIR VALUE MEASUREMENTS (Details) (Recurring basis, USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Mar. 31, 2012
Level 1
Financial Assets
Total cash equivalents and short-term investments	$ 16,549	$ 20,018
Level 1 | U.S. Treasury bills
Financial Assets
Total cash equivalents and short-term investments		20,018
Level 1 | Money market funds
Financial Assets
Total cash equivalents and short-term investments	16,549
Level 2
Financial Assets
Total cash equivalents and short-term investments	108,546	164,514
Level 2 | Corporate debentures/bonds
Financial Assets
Total cash equivalents and short-term investments	75,572	78,169
Level 2 | Commercial paper
Financial Assets
Total cash equivalents and short-term investments	28,974	40,334
Level 2 | Government agency bonds
Financial Assets
Total cash equivalents and short-term investments		26,582
Level 2 | Money market funds
Financial Assets
Total cash equivalents and short-term investments		13,698
Level 2 | Certificates of deposit
Financial Assets
Total cash equivalents and short-term investments	4,000	5,731
Total fair value
Financial Assets
Total cash equivalents and short-term investments	$ 125,095	$ 184,532

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STOCKHOLDERS' EQUITY (Details 5) (Stock options, USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Stock options
Stockholder's equity
Total intrinsic value of stock options exercised (in dollars)	$ 986,000	$ 1,815,000	$ 10,121,000
Unrecognized compensation costs	0
Tax benefit (expense) recorded to additional paid-in capital for exercises and/or sales of stock options or stock	$ 135,000	$ (303,000)	$ 3,730,000

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STOCKHOLDERS' EQUITY (Details)			12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013 Minimum item	Mar. 31, 2013 Series A Preferred Stock Minimum
Preferred Stock
Preferred stock, shares authorized	100,000	100,000
Number of series in which preferred stock authorized is to be issued			1
Percentage of common stock that need to be purchased by a person or group or acquired under the announcement of a tender or exchange offer				15.00%

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STOCKHOLDERS' EQUITY (Details 2) (USD $)	0 Months Ended		12 Months Ended	0 Months Ended
	May 14, 2012 Third Stock Repurchase Program Maximum	Aug. 02, 2012 Additional Stock Repurchase Program Maximum	Mar. 31, 2013 Stock Repurchase Program	May 07, 2013 Fifth Stock Repurchase Program Maximum Subsequent Event
Stock Repurchase Program
Authorized amount of repurchase of common stock	$ 35,000,000	$ 35,000,000		$ 35,000,000
Number of shares repurchased under the stock repurchase program			1,013,655
Average price of repurchased shares of stock (in dollars per share)			$ 56.86
Remaining balance available under the program to repurchase shares			$ 12,316,000

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BUSINESS SEGMENT INFORMATION

12 Months Ended

Mar. 31, 2013

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

7. BUSINESS SEGMENT INFORMATION

In accordance with the provisions of FASB ASC 280-10, Segment Reporting, the Company has determined that it has only one operating segment, the X-ray product segment. This includes X-ray detection and imaging products used primarily for the detection of illegal drugs, weapons and explosives, and smuggled goods. The equipment is purchased by sophisticated government and commercial clients focused on the detection of organic material in complex backgrounds and the ability to see the contents of containers with precision.

Geographical Data

All of the Company’s export sales originate from the United States.  At March 31, 2013, approximately 5% of the Company’s assets were in foreign countries.  The foreign assets were comprised of cash in foreign banks, and inventory in international depots for field replacements or systems shipped internationally but not accepted by fiscal year end.

The following table shows the breakdown of net sales and contract revenues to international and domestic customers based upon customer’s country of domicile and the major regions of international activity:

Net Sales and Contract Revenues

	Fiscal Year
(Dollars in thousands)	2013				2012				2011
Domestic	$	123,652	66	%	$	133,441	66	%	$	190,769	68	%
International	63,028		34	%	70,111		34	%	87,807		32	%
Net Sales and Contract Revenues	$	186,680	100	%	$	203,552	100	%	$	278,576	100	%
Middle East & Africa			54	%			63	%			84	%
Americas — Non-US			29	%			20	%			2	%
Asia / Pacific			13	%			11	%			7	%
Europe			4	%			6	%			7	%

In fiscal 2012, the Company had international sales to one country which accounted for 11% of the total sales of the Company.  In fiscal 2013, international sales to one individual country did not exceed 10% of total sales.

Major Customers:  Sales to major customers (representing in excess of 10% of consolidated revenues) consisted of the following:

Fiscal 2013:   $44,850,000 and $30,874,000, respectively, to two customers.

Fiscal 2012:   $46,167,000 to one customer.

Fiscal 2011:   $82,634,000, $32,316,000 and $31,072,000, respectively, to three customers.

Domestically, the Company’s primary client base is comprised of agencies of the U.S. government. Approximately 63%, 62% and 65% of the Company’s sales in fiscal 2013, 2012, and 2011 respectively, were derived from either (i) contracting directly with the U.S. government, or (ii) contracting with contractors working directly with the U.S. government. Certain of the Company’s contracts with the U.S. government provide the U.S. government with the standard unilateral right to terminate these contracts for convenience.   In each of the fiscal years ended March 31, 2012 and March 31, 2011, one of the Company’s contracts with the U.S. government was terminated in whole or in part for convenience by the U.S. government.  These terminations did not result in any material losses to the Company.  There were no terminations for convenience in the fiscal year ended March 31, 2013.

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LETTERS OF CREDIT (Details) (USD $)	Mar. 31, 2013	Mar. 31, 2012
Credit facilities
Long-term restricted cash, as determined by the expiration date of the underlying letters of credit	$ 899,000	$ 4,183,000
Standby letters of credit
Credit facilities
Outstanding Amount	25,437,000
Restricted cash balance	13,517,000
Long-term restricted cash, as determined by the expiration date of the underlying letters of credit	$ 899,000
Standby letters of credit | Minimum
Credit facilities
Percentage of outstanding amount that is cash secured	52.00%
Standby letters of credit | Maximum
Credit facilities
Percentage of outstanding amount that is cash secured	66.00%

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BUSINESS SEGMENT INFORMATION (Details 2) (Sales, Total sales, One individual country)	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2013 Maximum
Concentrations of credit risk
Percentage of concentration risk	11.00%	10.00%

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Mar. 31, 2013

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

Nature of Operations and Basis of Presentation

American Science and Engineering, Inc., a Massachusetts corporation formed in 1958, develops, manufactures, markets, and sells X-ray inspection and other detection products for homeland security, force protection and other critical defense applications.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all investments with original maturities of 90 days or less to be cash equivalents.  The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits.  The Company has not experienced any losses related to these balances, and management believes its risk of loss to be minimal.

Restricted Cash

Restricted Cash

Restricted cash consists of collateral for performance bonds issued related to customer contracts and certain facility lease agreements.

Short-term Investments and Cash Equivalents

Short-term Investments and Cash Equivalents

Short-term investments and cash equivalents consist of investments in commercial paper, corporate debentures/bonds, treasury bills, government agency bonds, money market funds and certificates of deposit. These investments are classified as available-for-sale and are recorded at their fair values using the specific identification method. The unrealized holding gains or losses on these securities are included as a component of comprehensive income in the Consolidated Statements of Operations and Comprehensive Income.

Accounts Receivable and Unbilled Costs and Fees

Accounts Receivable and Unbilled Costs and Fees

Accounts receivable are recorded at the invoiced amount. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.  It is the Company’s policy to write off uncollectible receivables when management determines the receivable has become uncollectible. Activity in the allowance for doubtful accounts is as follows:

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses			Deductions or Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	255	$	344		$	248	$	351
Fiscal 2012	$	334	$	(79	)	$	—	$	255
Fiscal 2011	$	330	$	4		$	—	$	334

Included in accounts receivable and unbilled costs and fees at March 31, 2013 and 2012 are $12,973,000 and $13,377,000, respectively, attributable to both prime and subcontracts with federal and state governments. The Company establishes a reserve against unbilled costs and fees based on known troubled accounts or contracts, historical experience, and other currently available evidence. There was no activity in the reserve for unbilled costs and fees during fiscal 2013, 2012 and 2011.

Inventories

Inventories

Inventories consist of material, labor and manufacturing overhead and are recorded at the lower of cost, using the weighted average cost method, or net realizable value. Excessive manufacturing overhead costs attributable to idle facility expenses, freight, handling costs and wasted material (spoilage) attributable to abnormally low production volumes (levels that materially differ from budgeted production plans due primarily to changes in customer demand) are excluded from inventory and recorded as an expense in the period incurred.

The components of inventories at March 31, 2013 and 2012, net of inventory reserves, were as follows:

(In thousands)	2013		2012
Raw materials, completed subassemblies and spare parts	$	21,450	$	23,689
Work-in-process	21,129		16,705
Finished goods	5,472		7,785
Total	$	48,051	$	48,179

The Company periodically reviews quantities of inventory on hand and compares these amounts to expected usage of each particular product or product line. The Company records, as a charge to cost of sales, any amounts required to reduce the carrying value to net realizable value.

Activity in the reserve for excess or obsolete inventory is as follows:

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions / Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	6,210	$	5,061	$	219	$	11,052
Fiscal 2012	$	4,882	$	3,076	$	1,748	$	6,210
Fiscal 2011	$	3,982	$	1,604	$	704	$	4,882

Building, Equipment and Leasehold Improvements

Building, Equipment and Leasehold Improvements

The Company provides for depreciation and amortization of its fixed assets on a straight-line basis over estimated useful lives of 1-25 years or remaining lease terms. Expenditures for normal maintenance and repairs are charged to expense as incurred. Significant additions, renewals or betterments that extend the useful lives of the assets are capitalized at cost. The cost and accumulated depreciation applicable to equipment and leasehold improvements sold, or otherwise disposed of, are removed from the accounts, and any resulting gain or loss is included in the consolidated statements of operations.

Building, equipment and leasehold improvements consisted of the following at March 31, 2013 and 2012.

(In thousands)	Estimated Useful Lives	2013			2012
Building and leasehold improvements	Lesser of 25 years or remaining lease term	$	21,245		$	20,761
Equipment and tooling	5-10 years	5,284			5,110
Computer equipment and software	3-5 years	23,135			21,491
Furniture and fixtures	5-7 years	2,553			2,515
Demo and test equipment	2-5 years	7,579			6,576
Leased equipment	1-2 years or life of lease	63			63
Motor vehicles	3-5 years	72			72
Total		59,931			56,588
Less accumulated depreciation and amortization		(43,480		)	(38,590		)
Building, equipment and leasehold improvements, net		$	16,451		$	17,998

Revenue Recognition

Revenue Recognition

The Company recognizes certain Cargo Inspection, Mobile Cargo Inpection, Parcel and Personnel Screening systems, and after-market part sales, in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 605-10, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.

Infrequently, the Company receives requests from customers to hold product being purchased for a valid business purpose. The Company recognizes revenue for such arrangements provided the transaction meets, at a minimum, the following criteria: a valid business purpose for the arrangement exists; risk of ownership of the purchased product has transferred to the buyer; there is a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the product is ready for shipment; the Company has no continuing performance obligation in regards to the product and the products have been segregated from its inventories and cannot be used to fill other orders received.  There was no product being held under these arrangements at March 31, 2013 or March 31, 2012.

Certain of the Company’s contracts are multiple-element arrangements, which include standard products, custom-built systems or contract engineering projects, services (such as training), and service and maintenance contracts. In accordance with FASB ASC 605-25, Revenue Recognition — Multiple Element Arrangements, revenue arrangements that include multiple elements are analyzed to determine whether the deliverables can be divided into separate units of accounting or treated as a single unit of accounting. The consideration received is allocated among the separate units of accounting based on their relative selling prices determined based on prices of these elements as sold on a stand-alone basis, and the applicable revenue recognition criteria are applied to each of the separate units. Generally, there is no customer right of return provision in the Company’s sales agreements.  Revenues are allocated to a delivered product or service when the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; and (2) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in our control.

Revenues for certain long-term, custom-built systems or contract engineering projects are recognized on a percentage of completion basis. The lengths of these contracts typically range from one to four years from order to delivery and acceptance. Percentages-of-completion are determined by relating the actual costs of work performed to date for each contract to its estimated final costs. Revisions in costs and profit estimates are reflected in the period in which the facts causing the revision become known.

For all fixed price and long-term contracts, if a loss is anticipated on the contract, a provision is made in the period in which such losses are determined.

The Company recognizes sales for its systems that are produced in a standard manufacturing operation, have minimal customer site installation requirements and have shorter order to delivery cycles, when title passes and when other revenue recognition criteria are met. Management believes the customer’s post-delivery acceptance provisions and installation requirements on certain of these systems are perfunctory and inconsequential and the costs of installation at the customer’s site are accrued at the time of revenue recognition.  The Company has demonstrated a history of customer acceptance subsequent to shipment and installation of these systems.  For systems which entail more significant installation efforts and site work and/or have non-standard customer acceptance provisions, revenue recognition is deferred until installation is complete and customer acceptance has occurred.

Service revenues are recognized on time and materials engagements as the services are provided. Service contract revenues are recognized as service is performed over the length of the contract which reasonably approximates the period service revenues are earned.

The Company records billed shipping and handling fees and billed out-of-pocket expenses as revenue and the associated costs as cost of goods sold in the accompanying consolidated statements of operations.

Training and service contracts deliverables are accounted for separately from the delivered product elements as the Company’s undelivered products have value to its customers on a stand-alone basis. Accordingly, this service revenue is deferred and recognized as such services are performed.

Certain contracts require payments from the customer upon execution of the agreement that are included in customer deposits. Individual customer deposits are reduced by the amount of revenue recognized on the contract until a zero balance is reached. Revenue recognized in excess of billings under the contracts is included in unbilled costs and fees in the accompanying consolidated balance sheets. Of the amounts in unbilled costs and fees at March 31, 2013, $4,839,000 (99%) is expected to be billed and collected during fiscal 2014.

Under the terms of certain cost reimbursement contracts, the Company is not permitted to bill customers a specified portion of the contract value until completion. Such retainages (approximately $80,000 and $87,000 at March 31, 2013 and March 31, 2012, respectively) result from both commercial contract retentions and government contract withholdings generally for up to 15% of fees, as well as the difference between the actual and provisional indirect cost billing rates. Retainages are included in the accompanying consolidated balance sheets as components of unbilled costs and fees. The accuracy and appropriateness of the Company’s direct and indirect costs and expenses under these cost reimbursement contracts and its accounts receivable recorded pursuant to such contracts, are subject to regulation and audit, including by the U.S. Defense Contract Audit Agency (“DCAA”) or by other appropriate agencies of the U.S. government.  Such agencies  have the right to  challenge  the  Company’s  cost  estimates  or allocations  with  respect  to any  government  contract.  Additionally, a portion of the payments to the Company under government contracts are provisional payments that are subject to potential adjustment upon audit by such agencies.  Historically, such audits have not resulted in any significant disallowed costs.  Although the Company can give no assurances, in the opinion of management, any adjustments likely to result from inquiries or audits of its contracts will not have a material adverse impact on the Company’s financial condition or results of operations.

Warranty Costs

Warranty Costs

The Company generally provides on certain of its products a one year parts and labor warranty with the purchase of domestic equipment, and a one year parts only or parts and labor warranty on international equipment. The anticipated cost for this one year warranty is accrued for at the time of the sale based upon historical experience and management’s estimates of future liabilities and is recorded as accrued warranty costs (See Note 5).

Deferred Revenue

Deferred Revenue

The Company offers to its customers extended warranty and service contracts. These contracts typically have a coverage period of one to five years, and include advance payments that are recorded as deferred revenue. Revenue is recognized as service is performed over the life of the contract, which represents the period over which these revenues are earned. Costs associated with these extended warranty and service contracts are expensed to cost of goods sold as incurred.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Impairment is assessed by comparing the estimated undiscounted cash flows over the asset’s remaining life to the carrying amount of the asset. If the estimated cash flows are insufficient to recover the asset, an impairment loss is recognized based on the difference between the carrying value of the asset and the fair value of the asset less any costs of disposal.  No impairment costs were recorded in the fiscal years ended March 31, 2013, 2012 and 2011.

Accrued Salaries and Benefits

Accrued Salaries and Benefits

Accrued salaries and benefits at March 31, 2013 and March 31, 2012 include the following:

(In thousands)	2013		2012
Accrued payroll and payroll related taxes	$	1,995	$	2,140
Accrued incentive compensation	4,633		7,486
Accrued vacation	1,739		2,096
Accrued severance	1,607		—
Total accrued salaries and benefits	$	9,974	$	11,722

Customer Deposits

Customer Deposits

For most international orders, the Company generally includes, as part of its terms and conditions, an advance deposit with order acceptance. For long-term international contracts, the Company will generally include milestone payments tied to a specific event and/or passage of time. These deposit amounts are recorded as a liability under Customer Deposits until reduced by revenue recognized against the specific contract.

Research and Development

Research and Development

Internally funded research and development costs including direct labor, material, subcontractor expenses and related overheads are expensed as incurred. Internally funded research and development costs were $23,618,000, $25,544,000 and $22,619,000, in fiscal 2013, 2012, and 2011, respectively.  In addition, the Company recognized revenues of $2,124,000, $4,409,000 and $4,821,000, in fiscal 2013, 2012, and 2011, respectively related to government-sponsored research and development earned primarily on a cost reimbursement and fee basis as discussed above.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, unbilled costs and fees, accounts payable and letters of credit. The recorded amounts of these instruments approximate their fair value (see Note 8).

Income per Common and Potential Common Shares

Income per Common and Potential Common Shares

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share include the dilutive impact of options, warrants, restricted stock and restricted stock units using the average share price of the Company’s common stock for the period. For the years ended March 31, 2013, 2012, and 2011, respectively, common stock equivalents of approximately 182,000, 64,000, and 35,000 are excluded from diluted earnings per share, as their effect is anti-dilutive.

(In thousands except per share amounts)	March 31, 2013		March 31, 2012		March 31, 2011
Earnings per Share — Basic:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Income per share — basic	$	2.08	$	2.37	$	4.73
Earnings per Share — Diluted:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Assumed exercise of stock options, warrants, restricted stock and restricted stock units, using the treasury stock method	54		102		202
Weighted average number of common and potential common shares outstanding — diluted	8,448		9,148		9,247
Income per share — diluted	$	2.07	$	2.34	$	4.63

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Accordingly, the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. The Company records a valuation allowance against any net deferred tax assets if it is more likely than not that they will not be realized.  The Company recognizes interest and penalties related to income tax matters in other income and expenses.

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, restricted cash, short-term investments and accounts and unbilled receivables.  The Company maintains cash balances in excess of insured limits. The Company maintains its cash and cash equivalents with major financial institutions. The Company’s credit risk is managed by investing its cash in high quality money market funds, commercial paper, investment grade corporate bonds, treasury bills, government agency bonds, and certificates of deposit.

Two customers, one agency of the U.S. government and one international customer, accounted for 51% of the accounts receivable balance at March 31, 2013.  The Company generally requires letters of credit and/or deposits or prepayments from international customers.  The Company has not experienced any significant losses from uncollectible accounts.

Common Stock Dividends

Common Stock Dividends

In May of 2007, the Company began declaring quarterly cash dividends for its common stock shareholders.   Common stock cash dividends declared during the fiscal year ended March 31, 2013 were as follows:

Date Declared	Dividend per common share
May 14, 2012	$	0.50
August 2, 2012	0.50
November 5, 2012	0.50
February 11, 2013	0.50
Fiscal year ended March 31, 2013	$	2.00

On May 7, 2013, the Company declared a quarterly dividend of $0.50 for holders of record on May 20, 2013 to be paid June 3, 2013.

Stock-Based Compensation

Stock-Based Compensation

Compensation expense for the fair value of stock based awards made to employees and the Board of Directors is recognized over the requisite service period for awards expected to vest. The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option pricing model. The Black-Scholes method of valuation requires several assumptions: (1) the expected term of the stock award, (2) the expected future stock volatility over the expected term, (3) the expected dividend yield and (4) risk-free interest rate. The expected term represents the expected period of time the Company believes the options will be outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company’s common stock.  The expected dividend yield was based on the expectation we would continue paying dividends on our common stock at the same rate for the foreseeable future.  The risk free interest rate is based on the U.S. Zero-Bond rate.

The Company recognized $184,000, $1,799,000 and $5,216,000 of stock-based compensation costs in the consolidated statements of operations for the year ended March 31, 2013, 2012 and 2011, respectively. The income tax benefit related to such compensation for the years ended March 31, 2013, 2012 and 2011 was approximately $63,000, $612,000 and $1,770,000, respectively.

The following table summarizes share-based compensation costs included in the Company’s consolidated statements of operations.  The credit for the year ended March 31, 2013 in selling, general and administrative expenses is attributable to the reversal of certain incentive compensation plan costs previously accrued for, which were terminated as a result of the announced retirement of the Company’s former Chief Executive Officer in September of 2012.

	Fiscal Year Ended
(In thousands)	March 31, 2013			March 31, 2012		March 31, 2011
Cost of revenues	$	188		$	438	$	797
Selling, general and administrative	(4		)	1,361		4,419
Total share-based compensation expense before tax	$	184		$	1,799	$	5,216

The fair value of options at date of grant was estimated with the following assumptions:

	March 31, 2011
Assumptions:
Expected life	5 years
Risk-free interest rate	1.60%
Stock volatility	44%
Dividend yield	1.6%

There were no options granted in the fiscal years ended March 31, 2013 and 2012.

New Accounting Pronouncements

New Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which changes the existing guidance on the presentation of comprehensive income. Entities have the option of presenting the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders’ equity. ASU No. 2011-05 was effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2011, which for the Company was the first quarter of fiscal 2013. In December 2011, with the issuance of ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” the FASB announced that it has deferred certain aspects of ASU 2011-05. In February 2013, the FASB issued ASU 2013-2, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” with the stated objective of improving the reporting of reclassifications out of accumulated other comprehensive income. The amendments in ASU 2013-2 are effective during interim and annual periods beginning after December 31, 2012. The adoption of ASU 2011-05, 2011-12 and 2013-2 regarding comprehensive income have not had a significant impact on the accounting or disclosures in our financial statements.

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STOCKHOLDERS' EQUITY

12 Months Ended

Mar. 31, 2013

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

6. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company’s articles of organization authorize its Board of Directors to issue up to 100,000 shares of preferred stock in one or more series, to determine and fix certain relative rights and preferences of the shares of any series, to fix the number of shares constituting any such series, and to fix the designation of any such series, without further vote or action by its shareholders. The Company has no present plans to issue shares of preferred stock. In 1998, the Company designated a series of Preferred Stock (the “Series A Preferred Stock”) to be issued upon the exercise of Rights issued under the Company’s Shareholder Rights Plan. Under the Shareholder Rights Plan, adopted in 1998 and reissued upon its expiration in April 2008, its stockholders are entitled to purchase shares of its Series A Preferred Stock under certain circumstances. These circumstances include the purchase of 15% or more of the outstanding shares of common stock by a person or group, or the announcement of a tender or exchange offer to acquire 15% or more of the outstanding common stock.

Stock Repurchase Program

On May 14, 2012, the Board of Directors announced the approval of its third Stock Repurchase Program which authorized the Company to repurchase up to $35 million of shares of its common stock from time to time on the open market or in privately negotiated transactions.  This program was completed in August of 2012.  On August 2, 2012, the Board of Directors announced the approval of an additional Stock Repurchase Program which authorized the Company to repurchase up to $35 million of additional shares of its common stock from time to time on the open market or in privately negotiated transactions.

During the fiscal year ended March 31, 2013, the Company repurchased 1,013,655 shares of common stock under this Program at an average price of $56.86.  As of March 31, 2013, the remaining balance available under the program to repurchase shares was $12,316,000.

On May 7, 2013, the Board of Directors announced the approval of its fifth Stock Repurchase Program which authorized the Company to repurchase up to an additional $35 million of shares of its common stock from time to time on the open market or in privately negotiated transactions.

Stock Option and Other Compensation Plans

The Company has various stock option and other compensation plans for directors, officers, and employees. The Company had the following stock option plans outstanding as of March 31, 2013: the 1998 Non-Qualified Option Plan, the 1999 Combination Plan, the 2000 Combination Plan, the 2002 Combination Plan, the 2003 Stock Plan for Non-Employee Directors and the 2005 Equity and Incentive Plan. There are 3,480,000 shares authorized under these plans. Vesting periods are at the discretion of the Board of Directors and typically range from one to three years. Certain of the options granted vest upon the achievement of certain performance based goals as well as service time incurred.  Options under these plans are granted at fair market value and have a term of ten years from the date of grant.

Stock Options:    A summary of the Company’s stock option activity is as follows:

	2013				2012				2011
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Options outstanding, beginning of year	376,331		$	55.10	472,446		$	55.77	613,934		$	47.37
Options granted	—		—		—		—		56,181		74.87
Options exercised	(50,505	)	42.75		(75,714	)	56.63		(197,669	)	35.12
Options canceled or expired	(10,664	)	65.72		(20,401	)	65.01		—		—
Options outstanding, end of year	315,162		$	56.72	376,331		$	55.10	472,446		$	55.77
Options exercisable, end of year	312,895		$	56.68	370,400		$	55.00	397,592		$	53.06
Options available for grant	284,000				292,000				301,732
Weighted average fair value per share of options granted during the year			$	—			$	—			$	26.21

The following summarizes certain data for options outstanding and exercisable at March 31, 2013:

	Number of Shares	Range of Exercise Prices	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Options outstanding:	15,925	$11.58-$20.00	$	14.43	0.88
	14,400	$20.01-$30.00	28.50		1.46
	14,629	$30.01-$40.00	39.06		1.09
	38,800	$40.01-$50.00	44.73		1.61
	47,278	$50.01-$60.00	53.36		2.71
	127,949	$60.01-$70.00	64.08		4.89
	56,181	$70.01-$75.82	74.87		7.42
	315,162	$11.58-$75.82	$	56.72	4.08
Options exercisable:	15,925	$11.58-$20.00	$	14.43
	14,400	$20.01-$30.00	28.50
	14,629	$30.01-$40.00	39.06
	38,800	$40.01-$50.00	44.73
	47,278	$50.01-$60.00	53.36
	125,682	$60.01-$70.00	64.13
	56,181	$70.01-$75.82	74.87
	312,895	$11.58-$75.82	$	56.68

The total intrinsic value, representing the difference between market value on the date of exercise and the option price, of stock options exercised during fiscal 2013, 2012 and 2011 was $986,000, $1,815,000 and $10,121,000, respectively.   Non-vested stock option awards are subject to the risk of forfeiture until the fulfillment of specified conditions. As of March 31, 2013, there was no unrecognized compensation cost related to non-vested stock option awards granted under the Company’s stock plans.

The Company realizes a tax deduction upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options due to the recognition of compensation expense in the calculation of its taxable income. The amount of the compensation recognized for tax purposes is based on the difference between the market value of the common stock and the option price at the date the options are exercised and/or sold. The Company receives an additional tax deduction when restricted stock vests at a higher value than the value used to recognize compensation expense at the date of grant.  These tax benefits are credited to additional paid-in capital if it is considered more likely than not that they will be realized. During fiscal 2013, 2012 and 2011, a tax benefit (expense) of $135,000, ($303,000), and $3,730,000, respectively, was recorded to additional paid-in capital for exercises and/or sales of stock options or stock.

Restricted Stock and Restricted Stock Units:  The Company has instituted long term incentive plans for certain key employees. These plans call for the issuance of restricted stock, stock options, and/or cash awards which vest upon the achievement of certain performance based goals as well as service time incurred. In fiscal years 2013, 2012 and 2011, the Company opted to issue this long term incentive plan with only a cash award which resulted in fewer restricted stock awards and stock options being granted.

Restricted stock and restricted stock units may also be granted to other employees with vesting periods that range from one to three years.  In addition, annually the Board of Directors is granted restricted stock. These restricted stock shares vest on a pro-rata basis on service time performed over a one year period.  The fair values of these restricted stock awards are equal to the market price per share of the Company’s common stock on the date of grant.

Non-vested restricted stock and stock unit awards are subject to the risk of forfeiture until the fulfillment of specified conditions. As of March 31, 2013 there was $894,000 of total unrecognized compensation cost related to non-vested restricted stock and stock unit awards granted under the Company’s stock plans. This cost is expected to be recognized over a weighted average of 1.1 years.

A summary of the Company’s restricted stock and stock unit activity is as follows:

	2013				2012				2011
	Number of Shares		Weighted Average Exercise  Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Unvested restricted stock and units outstanding, beginning of year	40,599		$	68.63	32,882		$	65.03	97,240		$	60.78
Granted	19,657		61.00		24,006		73.03		5,106		83.79
Vested	(17,463	)	68.08		(12,523	)	68.70		(69,464	)	60.45
Forfeited	(14,684	)	63.71		(3,766	)	65.07		—		—
Unvested restricted stock and units outstanding, end of year	28,109		$	66.20	40,599		$	68.63	32,882		$	65.03

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Mar. 31, 2013

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

American Science and Engineering, Inc., a Massachusetts corporation formed in 1958, develops, manufactures, markets, and sells X-ray inspection and other detection products for homeland security, force protection and other critical defense applications.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all investments with original maturities of 90 days or less to be cash equivalents.  The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits.  The Company has not experienced any losses related to these balances, and management believes its risk of loss to be minimal.

Restricted Cash

Restricted cash consists of collateral for performance bonds issued related to customer contracts and certain facility lease agreements.

Short-term Investments and Cash Equivalents

Short-term investments and cash equivalents consist of investments in commercial paper, corporate debentures/bonds, treasury bills, government agency bonds, money market funds and certificates of deposit. These investments are classified as available-for-sale and are recorded at their fair values using the specific identification method. The unrealized holding gains or losses on these securities are included as a component of comprehensive income in the Consolidated Statements of Operations and Comprehensive Income.

Accounts Receivable and Unbilled Costs and Fees

Accounts receivable are recorded at the invoiced amount. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.  It is the Company’s policy to write off uncollectible receivables when management determines the receivable has become uncollectible. Activity in the allowance for doubtful accounts is as follows:

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses			Deductions or Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	255	$	344		$	248	$	351
Fiscal 2012	$	334	$	(79	)	$	—	$	255
Fiscal 2011	$	330	$	4		$	—	$	334

Included in accounts receivable and unbilled costs and fees at March 31, 2013 and 2012 are $12,973,000 and $13,377,000, respectively, attributable to both prime and subcontracts with federal and state governments. The Company establishes a reserve against unbilled costs and fees based on known troubled accounts or contracts, historical experience, and other currently available evidence. There was no activity in the reserve for unbilled costs and fees during fiscal 2013, 2012 and 2011.

Inventories

Inventories consist of material, labor and manufacturing overhead and are recorded at the lower of cost, using the weighted average cost method, or net realizable value. Excessive manufacturing overhead costs attributable to idle facility expenses, freight, handling costs and wasted material (spoilage) attributable to abnormally low production volumes (levels that materially differ from budgeted production plans due primarily to changes in customer demand) are excluded from inventory and recorded as an expense in the period incurred.

The components of inventories at March 31, 2013 and 2012, net of inventory reserves, were as follows:

(In thousands)	2013		2012
Raw materials, completed subassemblies and spare parts	$	21,450	$	23,689
Work-in-process	21,129		16,705
Finished goods	5,472		7,785
Total	$	48,051	$	48,179

The Company periodically reviews quantities of inventory on hand and compares these amounts to expected usage of each particular product or product line. The Company records, as a charge to cost of sales, any amounts required to reduce the carrying value to net realizable value.

Activity in the reserve for excess or obsolete inventory is as follows:

(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions / Write- offs Charged to Reserves		Balance at End of Year
Fiscal 2013	$	6,210	$	5,061	$	219	$	11,052
Fiscal 2012	$	4,882	$	3,076	$	1,748	$	6,210
Fiscal 2011	$	3,982	$	1,604	$	704	$	4,882

Building, Equipment and Leasehold Improvements

The Company provides for depreciation and amortization of its fixed assets on a straight-line basis over estimated useful lives of 1-25 years or remaining lease terms. Expenditures for normal maintenance and repairs are charged to expense as incurred. Significant additions, renewals or betterments that extend the useful lives of the assets are capitalized at cost. The cost and accumulated depreciation applicable to equipment and leasehold improvements sold, or otherwise disposed of, are removed from the accounts, and any resulting gain or loss is included in the consolidated statements of operations.

Building, equipment and leasehold improvements consisted of the following at March 31, 2013 and 2012.

(In thousands)	Estimated Useful Lives	2013			2012
Building and leasehold improvements	Lesser of 25 years or remaining lease term	$	21,245		$	20,761
Equipment and tooling	5-10 years	5,284			5,110
Computer equipment and software	3-5 years	23,135			21,491
Furniture and fixtures	5-7 years	2,553			2,515
Demo and test equipment	2-5 years	7,579			6,576
Leased equipment	1-2 years or life of lease	63			63
Motor vehicles	3-5 years	72			72
Total		59,931			56,588
Less accumulated depreciation and amortization		(43,480		)	(38,590		)
Building, equipment and leasehold improvements, net		$	16,451		$	17,998

Revenue Recognition

The Company recognizes certain Cargo Inspection, Mobile Cargo Inpection, Parcel and Personnel Screening systems, and after-market part sales, in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 605-10, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.

Infrequently, the Company receives requests from customers to hold product being purchased for a valid business purpose. The Company recognizes revenue for such arrangements provided the transaction meets, at a minimum, the following criteria: a valid business purpose for the arrangement exists; risk of ownership of the purchased product has transferred to the buyer; there is a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the product is ready for shipment; the Company has no continuing performance obligation in regards to the product and the products have been segregated from its inventories and cannot be used to fill other orders received.  There was no product being held under these arrangements at March 31, 2013 or March 31, 2012.

Certain of the Company’s contracts are multiple-element arrangements, which include standard products, custom-built systems or contract engineering projects, services (such as training), and service and maintenance contracts. In accordance with FASB ASC 605-25, Revenue Recognition — Multiple Element Arrangements, revenue arrangements that include multiple elements are analyzed to determine whether the deliverables can be divided into separate units of accounting or treated as a single unit of accounting. The consideration received is allocated among the separate units of accounting based on their relative selling prices determined based on prices of these elements as sold on a stand-alone basis, and the applicable revenue recognition criteria are applied to each of the separate units. Generally, there is no customer right of return provision in the Company’s sales agreements.  Revenues are allocated to a delivered product or service when the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; and (2) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in our control.

Revenues for certain long-term, custom-built systems or contract engineering projects are recognized on a percentage of completion basis. The lengths of these contracts typically range from one to four years from order to delivery and acceptance. Percentages-of-completion are determined by relating the actual costs of work performed to date for each contract to its estimated final costs. Revisions in costs and profit estimates are reflected in the period in which the facts causing the revision become known.

For all fixed price and long-term contracts, if a loss is anticipated on the contract, a provision is made in the period in which such losses are determined.

The Company recognizes sales for its systems that are produced in a standard manufacturing operation, have minimal customer site installation requirements and have shorter order to delivery cycles, when title passes and when other revenue recognition criteria are met. Management believes the customer’s post-delivery acceptance provisions and installation requirements on certain of these systems are perfunctory and inconsequential and the costs of installation at the customer’s site are accrued at the time of revenue recognition.  The Company has demonstrated a history of customer acceptance subsequent to shipment and installation of these systems.  For systems which entail more significant installation efforts and site work and/or have non-standard customer acceptance provisions, revenue recognition is deferred until installation is complete and customer acceptance has occurred.

Service revenues are recognized on time and materials engagements as the services are provided. Service contract revenues are recognized as service is performed over the length of the contract which reasonably approximates the period service revenues are earned.

The Company records billed shipping and handling fees and billed out-of-pocket expenses as revenue and the associated costs as cost of goods sold in the accompanying consolidated statements of operations.

Training and service contracts deliverables are accounted for separately from the delivered product elements as the Company’s undelivered products have value to its customers on a stand-alone basis. Accordingly, this service revenue is deferred and recognized as such services are performed.

Certain contracts require payments from the customer upon execution of the agreement that are included in customer deposits. Individual customer deposits are reduced by the amount of revenue recognized on the contract until a zero balance is reached. Revenue recognized in excess of billings under the contracts is included in unbilled costs and fees in the accompanying consolidated balance sheets. Of the amounts in unbilled costs and fees at March 31, 2013, $4,839,000 (99%) is expected to be billed and collected during fiscal 2014.

Under the terms of certain cost reimbursement contracts, the Company is not permitted to bill customers a specified portion of the contract value until completion. Such retainages (approximately $80,000 and $87,000 at March 31, 2013 and March 31, 2012, respectively) result from both commercial contract retentions and government contract withholdings generally for up to 15% of fees, as well as the difference between the actual and provisional indirect cost billing rates. Retainages are included in the accompanying consolidated balance sheets as components of unbilled costs and fees. The accuracy and appropriateness of the Company’s direct and indirect costs and expenses under these cost reimbursement contracts and its accounts receivable recorded pursuant to such contracts, are subject to regulation and audit, including by the U.S. Defense Contract Audit Agency (“DCAA”) or by other appropriate agencies of the U.S. government.  Such agencies  have the right to  challenge  the  Company’s  cost  estimates  or allocations  with  respect  to any  government  contract.  Additionally, a portion of the payments to the Company under government contracts are provisional payments that are subject to potential adjustment upon audit by such agencies.  Historically, such audits have not resulted in any significant disallowed costs.  Although the Company can give no assurances, in the opinion of management, any adjustments likely to result from inquiries or audits of its contracts will not have a material adverse impact on the Company’s financial condition or results of operations.

Warranty Costs

The Company generally provides on certain of its products a one year parts and labor warranty with the purchase of domestic equipment, and a one year parts only or parts and labor warranty on international equipment. The anticipated cost for this one year warranty is accrued for at the time of the sale based upon historical experience and management’s estimates of future liabilities and is recorded as accrued warranty costs (See Note 5).

Deferred Revenue

The Company offers to its customers extended warranty and service contracts. These contracts typically have a coverage period of one to five years, and include advance payments that are recorded as deferred revenue. Revenue is recognized as service is performed over the life of the contract, which represents the period over which these revenues are earned. Costs associated with these extended warranty and service contracts are expensed to cost of goods sold as incurred.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Impairment is assessed by comparing the estimated undiscounted cash flows over the asset’s remaining life to the carrying amount of the asset. If the estimated cash flows are insufficient to recover the asset, an impairment loss is recognized based on the difference between the carrying value of the asset and the fair value of the asset less any costs of disposal.  No impairment costs were recorded in the fiscal years ended March 31, 2013, 2012 and 2011.

Accrued Salaries and Benefits

Accrued salaries and benefits at March 31, 2013 and March 31, 2012 include the following:

(In thousands)	2013		2012
Accrued payroll and payroll related taxes	$	1,995	$	2,140
Accrued incentive compensation	4,633		7,486
Accrued vacation	1,739		2,096
Accrued severance	1,607		—
Total accrued salaries and benefits	$	9,974	$	11,722

Customer Deposits

For most international orders, the Company generally includes, as part of its terms and conditions, an advance deposit with order acceptance. For long-term international contracts, the Company will generally include milestone payments tied to a specific event and/or passage of time. These deposit amounts are recorded as a liability under Customer Deposits until reduced by revenue recognized against the specific contract.

Other Current Liabilities

Other current liabilities at March 31, 2013 and March 31, 2012 include the following:

(In thousands)	2013		2012
Accrued accounts payable and other expenses	$	4,213	$	999
Accrued contract related costs	7,596		2,808
Accrued audit and legal fees	375		523
Accrued sales commissions	2,010		1,659
Total other current liabilities	$	14,194	$	5,989

Research and Development

Internally funded research and development costs including direct labor, material, subcontractor expenses and related overheads are expensed as incurred. Internally funded research and development costs were $23,618,000, $25,544,000 and $22,619,000, in fiscal 2013, 2012, and 2011, respectively.  In addition, the Company recognized revenues of $2,124,000, $4,409,000 and $4,821,000, in fiscal 2013, 2012, and 2011, respectively related to government-sponsored research and development earned primarily on a cost reimbursement and fee basis as discussed above.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, unbilled costs and fees, accounts payable and letters of credit. The recorded amounts of these instruments approximate their fair value (see Note 8).

Income per Common and Potential Common Shares

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share include the dilutive impact of options, warrants, restricted stock and restricted stock units using the average share price of the Company’s common stock for the period. For the years ended March 31, 2013, 2012, and 2011, respectively, common stock equivalents of approximately 182,000, 64,000, and 35,000 are excluded from diluted earnings per share, as their effect is anti-dilutive.

(In thousands except per share amounts)	March 31, 2013		March 31, 2012		March 31, 2011
Earnings per Share — Basic:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Income per share — basic	$	2.08	$	2.37	$	4.73
Earnings per Share — Diluted:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Assumed exercise of stock options, warrants, restricted stock and restricted stock units, using the treasury stock method	54		102		202
Weighted average number of common and potential common shares outstanding — diluted	8,448		9,148		9,247
Income per share — diluted	$	2.07	$	2.34	$	4.63

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Accordingly, the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. The Company records a valuation allowance against any net deferred tax assets if it is more likely than not that they will not be realized.  The Company recognizes interest and penalties related to income tax matters in other income and expenses.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, restricted cash, short-term investments and accounts and unbilled receivables.  The Company maintains cash balances in excess of insured limits. The Company maintains its cash and cash equivalents with major financial institutions. The Company’s credit risk is managed by investing its cash in high quality money market funds, commercial paper, investment grade corporate bonds, treasury bills, government agency bonds, and certificates of deposit.

Two customers, one agency of the U.S. government and one international customer, accounted for 51% of the accounts receivable balance at March 31, 2013.  The Company generally requires letters of credit and/or deposits or prepayments from international customers.  The Company has not experienced any significant losses from uncollectible accounts.

Common Stock Dividends

In May of 2007, the Company began declaring quarterly cash dividends for its common stock shareholders.   Common stock cash dividends declared during the fiscal year ended March 31, 2013 were as follows:

Date Declared	Dividend per common share
May 14, 2012	$	0.50
August 2, 2012	0.50
November 5, 2012	0.50
February 11, 2013	0.50
Fiscal year ended March 31, 2013	$	2.00

On May 7, 2013, the Company declared a quarterly dividend of $0.50 for holders of record on May 20, 2013 to be paid June 3, 2013.

Stock-Based Compensation

Compensation expense for the fair value of stock based awards made to employees and the Board of Directors is recognized over the requisite service period for awards expected to vest. The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option pricing model. The Black-Scholes method of valuation requires several assumptions: (1) the expected term of the stock award, (2) the expected future stock volatility over the expected term, (3) the expected dividend yield and (4) risk-free interest rate. The expected term represents the expected period of time the Company believes the options will be outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company’s common stock.  The expected dividend yield was based on the expectation we would continue paying dividends on our common stock at the same rate for the foreseeable future.  The risk free interest rate is based on the U.S. Zero-Bond rate.

The Company recognized $184,000, $1,799,000 and $5,216,000 of stock-based compensation costs in the consolidated statements of operations for the year ended March 31, 2013, 2012 and 2011, respectively. The income tax benefit related to such compensation for the years ended March 31, 2013, 2012 and 2011 was approximately $63,000, $612,000 and $1,770,000, respectively.

The following table summarizes share-based compensation costs included in the Company’s consolidated statements of operations.  The credit for the year ended March 31, 2013 in selling, general and administrative expenses is attributable to the reversal of certain incentive compensation plan costs previously accrued for, which were terminated as a result of the announced retirement of the Company’s former Chief Executive Officer in September of 2012.

	Fiscal Year Ended
(In thousands)	March 31, 2013			March 31, 2012		March 31, 2011
Cost of revenues	$	188		$	438	$	797
Selling, general and administrative	(4		)	1,361		4,419
Total share-based compensation expense before tax	$	184		$	1,799	$	5,216

The fair value of options at date of grant was estimated with the following assumptions:

	March 31, 2011
Assumptions:
Expected life	5 years
Risk-free interest rate	1.60%
Stock volatility	44%
Dividend yield	1.6%

There were no options granted in the fiscal years ended March 31, 2013 and 2012.

New Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which changes the existing guidance on the presentation of comprehensive income. Entities have the option of presenting the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders’ equity. ASU No. 2011-05 was effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2011, which for the Company was the first quarter of fiscal 2013. In December 2011, with the issuance of ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” the FASB announced that it has deferred certain aspects of ASU 2011-05. In February 2013, the FASB issued ASU 2013-2, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” with the stated objective of improving the reporting of reclassifications out of accumulated other comprehensive income. The amendments in ASU 2013-2 are effective during interim and annual periods beginning after December 31, 2012. The adoption of ASU 2011-05, 2011-12 and 2013-2 regarding comprehensive income have not had a significant impact on the accounting or disclosures in our financial statements.

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COMMITMENTS AND CONTINGENCIES (Details 2) (USD $)	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
401(k) Retirement Savings Plan
Maximum employee contribution (as a percent)	100.00%
Employer matching contribution as a percentage of first 6% of employee contributions	50.00%
Percentage of employee contributions, matched 50% by employer	6.00%
Expenses under the Plan, consisting of employer contributions and Plan administrative expenses	$ 1,091,000	$ 1,152,000	$ 1,139,000

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INCOME TAXES (Details 3) (USD $)	Mar. 31, 2013	Mar. 31, 2012
Current
Inventory	$ 248,000	$ 219,000
Accrued vacation	558,000	668,000
Accrued warranty costs	141,000	126,000
Unearned compensation	1,738,000	1,836,000
Other	470,000	480,000
Deferred income tax assets	3,155,000	3,329,000
Net deferred income taxes	3,155,000	3,329,000
Non-current
Accounts receivable and unbilled costs and fees	125,000	91,000
Inventory	3,935,000	2,199,000
Deferred revenue	1,778,000	1,192,000
Depreciation	(495,000)	(922,000)
Unearned compensation	2,573,000	2,577,000
State credit carryforwards	944,000	1,098,000
Other	409,000	37,000
Deferred income tax assets	9,269,000	6,272,000
Valuation allowance	(944,000)	(1,098,000)
Net deferred income taxes	8,325,000	5,174,000
Tax credit carryforwards
Proceeds receivable related to settlement with Massachusetts Department of Revenue	1,500,000
State and local jurisdiction
Tax credit carryforwards
State credit carryforwards	1,452,000	1,690,000
Unlimited carryforwards amount	$ 201,000	$ 492,000

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INCOME TAXES (Tables)

12 Months Ended

Mar. 31, 2013

INCOME TAXES

Schedule of components of provision (benefit) for income taxes

(In thousands)	2013			2012			2011
Current:
Federal	$	11,339		$	9,082		$	24,080
State	595			197			636
Foreign	22			7			22
	11,956			9,286			24,738
Deferred:
Federal	(2,743		)	1,610			(2,354		)
State	(375		)	212			(640		)
Change in valuation allowance	154			(72		)	314
	(2,964		)	1,750			(2,680		)
Provision for income taxes	$	8,992		$	11,036		$	22,058

Schedule of the difference between the total expected provision for income taxes computed by applying the statutory federal income tax rate to income before provision for income taxes and the recorded provision for income taxes

(In thousands)	2013			2012			2011
Provision for income taxes at statutory rate	$	9,253		$	11,360		$	22,706
State tax provision (benefit) net of federal effect	143			265			(2		)
Stock based compensation	(60		)	107			616
Research tax credits	(589		)	(289		)	(432		)
Qualifying manufacturing credits	(154		)	(315		)	(1,346		)
Change in valuation allowance	154			(72		)	314
Other	245			(20		)	202
Provision for income taxes	$	8,992		$	11,036		$	22,058

Schedule of the significant components of the net deferred tax assets

	March 31, 2013					March 31, 2012
(In thousands)	Current		Non-current			Current		Non-current
Deferred tax assets (liabilities):
Accounts receivable and unbilled costs and fees	$	—	$	125		$	—	$	91
Inventory	248		3,935			219		2,199
Deferred revenue	—		1,778			—		1,192
Accrued vacation	558		—			668		—
Accrued warranty costs	141		—			126		—
Depreciation	—		(495		)	—		(922		)
Unearned compensation	1,738		2,573			1,836		2,577
State credit carryforwards	—		944			—		1,098
Other	470		409			480		37
Deferred income tax assets	3,155		9,269			3,329		6,272
Valuation allowance	—		(944		)	—		(1,098		)
Net deferred income taxes	$	3,155	$	8,325		$	3,329	$	5,174

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Mar. 31, 2013

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

9. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

In the normal course of business, the Company enters into purchase orders with its vendors for the purchase of materials or services to meet its production needs. At March 31, 2013, the Company had $27,241,000 of open purchase orders which are expected to be substantially fulfilled within the next two years. Certain single source vendors, or vendors producing custom material, require significant lead times from order to delivery of their material. Should the demand for the Company’s products decline significantly, or should there be a significant shift in the mix of products being demanded, the Company may incur cancellation charges related to these commitments, that could be material to the Company’s results of operations. To date, the Company has not experienced any material losses related to cancellation penalties.

Employment Agreements

On March 13, 2013, the Company signed an offer of employment with Charles P. Dougherty for the position of President and Chief Executive Officer.  Mr. Dougherty commenced employment on April 8, 2013.  Under the terms of this agreement, Mr. Dougherty is entitled to receive base compensation in the amount of $550,000 per year, a performance-based annual incentive bonus equal to 100% of his base compensation per year (guaranteed for the fiscal year ended March 31, 2014), and to participate in the long-term incentive program with awards equal to 200% of base compensation upon achievement of certain long-term strategic goals.  These awards may be comprised of restricted stock, stock options and/or cash as determined by the Compensation Committee of the Board of Directors.

Retirement Savings Plan

The Company maintains a 401(k) Retirement Savings Plan (the “Plan”) for all employees.   Employees are eligible to participate on the first of the month following date of employment.  The Plan is funded by elective employee contributions of up to 100% of their compensation up to IRS limits. Under the Plan the Company at its discretion matches 50% of the first 6% of employee contributions for each participant in the form of Company common stock or cash. In fiscal 2011, the Company began matching employee’s contributions in cash instead of Company common stock as it had in prior years.  Expenses under the Plan, consisting of Company contributions which were made in Company stock or cash and Plan administrative expenses paid by the Company, totaled $1,091,000, $1,152,000 and $1,139,000, in 2013, 2012, and 2011 respectively.

AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA

FOR THE YEARS ENDED MARCH 31, 2013 AND MARCH 31, 2012

(In thousands, except per share amounts)

	2013 by quarter								2012 by quarter
	1st		2nd		3rd		4th		1st		2nd		3rd		4th
Net sales and contract revenues	$	47,344	$	46,253	$	50,803	$	42,280	$	51,103	$	54,778	$	57,907	$	39,764
Gross profit	$	21,473	$	20,997	$	22,700	$	14,249	$	23,902	$	25,121	$	26,445	$	17,649
Operating income	$	6,360	$	9,597	$	9,178	$	1,133	$	8,567	$	10,205	$	11,241	$	1,936
Net income	$	4,202	$	6,399	$	6,093	$	760	$	5,693	$	6,851	$	7,535	$	1,343
Net income per share
— Basic	$	0.47	$	0.77	$	0.74	$	0.09	$	0.62	$	0.75	$	0.84	$	0.15
— Diluted	$	0.47	$	0.76	$	0.73	$	0.09	$	0.61	$	0.74	$	0.84	$	0.15

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BUSINESS SEGMENT INFORMATION (Tables)

12 Months Ended

Mar. 31, 2013

BUSINESS SEGMENT INFORMATION

Schedule of breakdown of net sales and contract revenues to international and domestic customers based upon customer's country of domicile and the major regions of international activity

	Fiscal Year
(Dollars in thousands)	2013				2012				2011
Domestic	$	123,652	66	%	$	133,441	66	%	$	190,769	68	%
International	63,028		34	%	70,111		34	%	87,807		32	%
Net Sales and Contract Revenues	$	186,680	100	%	$	203,552	100	%	$	278,576	100	%
Middle East & Africa			54	%			63	%			84	%
Americas — Non-US			29	%			20	%			2	%
Asia / Pacific			13	%			11	%			7	%
Europe			4	%			6	%			7	%

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WARRANTY OBLIGATIONS (Tables)

12 Months Ended

Mar. 31, 2013

WARRANTY OBLIGATIONS

Schedule of warranty experience

(In thousands)	2013			2012
Warranty accrual at beginning of period	$	358		$	1,225
Accruals for warranties issued during the period	548			632
Adjustment of preexisting accrual estimates	152			(63		)
Warranty costs incurred during period	(661		)	(1,436		)
Warranty accrual at end of period	$	397		$	358

XML

Document and Entity Information (USD $)	12 Months Ended
	Mar. 31, 2013	May 31, 2013	Sep. 30, 2012
Document and Entity Information
Entity Registrant Name	AMERICAN SCIENCE & ENGINEERING, INC.
Entity Central Index Key	0000005768
Document Type	10-K
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 534,220,000
Entity Common Stock, Shares Outstanding		7,791,859
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

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STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Mar. 31, 2013

STOCKHOLDERS' EQUITY

Summary of stock option activity

	2013				2012				2011
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Options outstanding, beginning of year	376,331		$	55.10	472,446		$	55.77	613,934		$	47.37
Options granted	—		—		—		—		56,181		74.87
Options exercised	(50,505	)	42.75		(75,714	)	56.63		(197,669	)	35.12
Options canceled or expired	(10,664	)	65.72		(20,401	)	65.01		—		—
Options outstanding, end of year	315,162		$	56.72	376,331		$	55.10	472,446		$	55.77
Options exercisable, end of year	312,895		$	56.68	370,400		$	55.00	397,592		$	53.06
Options available for grant	284,000				292,000				301,732
Weighted average fair value per share of options granted during the year			$	—			$	—			$	26.21

Summary of certain data for options outstanding and exercisable by exercise price range

The following summarizes certain data for options outstanding and exercisable at March 31, 2013:

	Number of Shares	Range of Exercise Prices	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Options outstanding:	15,925	$11.58-$20.00	$	14.43	0.88
	14,400	$20.01-$30.00	28.50		1.46
	14,629	$30.01-$40.00	39.06		1.09
	38,800	$40.01-$50.00	44.73		1.61
	47,278	$50.01-$60.00	53.36		2.71
	127,949	$60.01-$70.00	64.08		4.89
	56,181	$70.01-$75.82	74.87		7.42
	315,162	$11.58-$75.82	$	56.72	4.08
Options exercisable:	15,925	$11.58-$20.00	$	14.43
	14,400	$20.01-$30.00	28.50
	14,629	$30.01-$40.00	39.06
	38,800	$40.01-$50.00	44.73
	47,278	$50.01-$60.00	53.36
	125,682	$60.01-$70.00	64.13
	56,181	$70.01-$75.82	74.87
	312,895	$11.58-$75.82	$	56.68

Summary of the restricted stock and stock unit activity

	2013				2012				2011
	Number of Shares		Weighted Average Exercise  Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Unvested restricted stock and units outstanding, beginning of year	40,599		$	68.63	32,882		$	65.03	97,240		$	60.78
Granted	19,657		61.00		24,006		73.03		5,106		83.79
Vested	(17,463	)	68.08		(12,523	)	68.70		(69,464	)	60.45
Forfeited	(14,684	)	63.71		(3,766	)	65.07		—		—
Unvested restricted stock and units outstanding, end of year	28,109		$	66.20	40,599		$	68.63	32,882		$	65.03