Summary of Significant Accounting Policies (Policies)

12 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Business

Business — Breeze-Eastern Corporation (the “Company”) has one manufacturing facility located in the United States, and it designs, develops, manufactures, sells, and services a complete line of sophisticated lifting and restraining products, principally mission-critical helicopter rescue hoist and cargo hook systems, winches, and hoists for aircraft and weapons systems.

The Company has a fiscal year ending March 31. Accordingly, all references to years in the Notes to Consolidated Financial Statements refer to the fiscal year ended March 31 of the indicated year unless otherwise specified.

Reclassifications

Reclassifications — The classifications of certain prior period items in the consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows, have been changed to conform to the classification used in the current period. These reclassifications had no effect on total net income or retained earnings as previously reported.

Use of Estimates

Use of Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates, judgments, and assumptions. The Company believes that the estimates, judgments, and assumptions upon which it relies are reasonable based upon the information available to the Company at the time they are made. These estimates, judgments, and assumptions are based on historical experience and information that is available to management about current events and actions the Company may take in the future. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods presented. Significant items subject to estimates and assumptions include estimated revenue from unpriced change orders used to access potential losses on production contracts, the carrying value of long-lived assets; valuation allowances for receivables, inventories, and deferred tax assets; environmental liabilities; litigation contingencies; and obligations related to employee benefit plans. To the extent there are material differences between these estimates, judgments, and assumptions and actual results, the Company’s consolidated financial statements will be affected.

Principles of Consolidation

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances and transactions are eliminated in consolidation. The consolidated financial statements include seven inactive subsidiaries which include TTERUSA, Inc., TT Connecticut Corporation, Rancho TransTechnology Corporation, Retainers, Inc., SSP Industries, TransTechnology International Corporation, and TransTechnology Germany GmbH.

Revenue Recognition

Revenue Recognition — Revenue related to equipment sales is recognized when title and risk of loss have been transferred, collectability is reasonably assured, and pricing is fixed or determinable. Revenue related to repair and overhaul sales is recognized when the related repairs or overhaul are complete and the unit is shipped to the customer. Revenue related to contracts in which the Company is reimbursed for costs incurred plus an agreed upon profit are recorded as costs are invoiced.

Cash

Cash — Cash includes all cash balances and highly liquid short-term investments which mature within three months of purchase. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk with cash.

Allowance for doubtful accounts

Allowance for doubtful accounts — The allowance for doubtful accounts is based on our assessment of the collectability of customer accounts. The allowance is determined by considering factors such as historical experience, credit quality, age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.

Inventories

Inventories — Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Cost includes material, labor, and manufacturing overhead costs.

Inventory obsolescence is determined by identifying specific items based on the age of inventory and by establishing a general reserve based on annual purchases. Analyzing inventory by age showed little movement once items have aged five years, and historical trends showed that 1.1% of purchases would have the potential to eventually be scrapped. Accordingly, the Company uses these two factors in determining the amount of the reserve.

Property and Related Depreciation

Property and Related Depreciation — Property is recorded at cost. Provisions for depreciation are made on a straight-line basis over the estimated useful lives of depreciable assets. Depreciation expense for the years ended March 31, 2013, 2012, and 2011 was $1,392, $1,457, and $1,910, respectively.

Average useful lives for property are as follows:

Machinery and equipment	3 to 10 years
Furniture and fixtures	3 to 10 years
Computer hardware and software	3 to 5 years
Leasehold improvements	10 years

The Company classified as real estate held for sale on the consolidated balance sheets a property currently under sales contract owned in Glen Head, New York. The sale of the property is expected to be concluded upon completion of municipal approvals and soil remediation pursuant to the remediation plan approved by the New York Department of Environmental Conservation. The net sale proceeds are expected to be $3,800. See Note 13 for a discussion of environmental matters related to this site.

Impairment of Goodwill and Other Long-Lived Assets

Impairment of Goodwill and Other Long-Lived Assets — Long-lived assets and certain identifiable intangibles to be held and used are reviewed by the Company for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment reviews for goodwill are performed by comparing the fair value to the reported carrying amount. If the carrying amount exceeds fair value, an impairment loss is recognized. Fair value is determined using quoted market prices when available or present value techniques. At March 31, 2013, the Company tested its goodwill for impairment and determined that it did not have an impairment.

Qualification Units

Qualification Units and Analysis of Contract Profitability — The Company capitalizes as intangible assets engineering qualification units, which are pre-production product units that are tested as part of qualifying production units for use on an aircraft. Prior to qualification testing, the pre-qualification assets (materials and external testing costs) are also classified with qualification units. Engineering qualification units are ultimately expensed, as the Company amortizes qualification unit costs to expense over future equipment unit shipments. Qualification unit amortization for the years ended March 31, 2013, 2012, and 2011 was $73, $243, and $352, respectively.

The Company reviews qualification units and pre-qualification assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company tests qualification units and pre-qualification assets for impairment two ways. The first test is for technical obsolescence. If product development or product testing results in a design or technical change, qualification units and pre-qualification assets that become obsolete are expensed in the current period.

Secondly, the Company analyzes contracts to ensure their profitability, comparing undiscounted future cash flows of existing and anticipated production contracts to the ultimate cost of production and development, including qualification units and pre-qualification assets. If the test indicates a contract was not going to produce sufficient profits to cover the cost of qualification units and pre-qualification assets, these assets would become impaired. This impairment loss would reduce the carrying amount of the related assets and the Company would accrue any additional losses on the contract.

In assessing anticipated production contracts, the Company evaluates undiscounted future cash flows that may include revenue from anticipated price increases of un-priced change orders. These revenues are included when price recovery is probable, which is based on the likelihood that the customer will qualify the unit for production, and the related production costs are identifiable and reasonable. The Company may also estimate the number of production units in continuing long-term production for delivery under existing or anticipated contracts.

As indicated above, the process of analyzing contracts may involve an assessment of the likelihood of the Company negotiating either future production contracts or future sales price increases. If the Company determines that it is probable such events will occur, the related production volume or increased pricing is included in the contract analysis. If the probable event were ultimately not to occur, a loss would be required to be recognized at the time such determination is made which could significantly affect the results from operations.

During fiscal 2013 and fiscal 2012, the Company expensed $106 and $3,165, (Level 3 valuation see Note 7) respectively, of costs for impairment of qualification units that became technically obsolete. These amounts are included in operating expenses on the consolidated statements of operations.

Accounting for Contingencies

Accounting for Contingencies — We accrue for contingencies in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 450-20, “Loss Contingencies”, when it is probable that a liability or loss has been incurred and the amount can be reasonably estimated. Contingencies by their nature relate to uncertainties that require judgment both in assessing whether or not a liability or loss has been incurred and in estimating the amount of the probable loss.

Environmental Reserve

Environmental Reserve — The Company provides for a best estimate of environmental liability reserves upon a determination that a liability is both probable and estimable. In many cases, the Company does not fix or cap the liability for a particular site when first recorded. Factors that affect the recorded amount of the liability in future years include our participation percentage due to a settlement by, or bankruptcy of, other potentially responsible parties, a change in the environmental laws, a change in the estimate of future costs that will be incurred to remediate the site, and changes in technology related to environmental remediation.

Earnings Per Share ("EPS")

Earnings Per Share (“EPS”) — The computation of basic EPS is based on the weighted-average number of common shares outstanding during the period. The computation of diluted earnings per share assumes the foregoing and, in addition, the exercise of all dilutive stock options using the treasury stock method.

The components of the denominator for basic earnings per common share and diluted earnings per common share are reconciled as follows:

	2013		2012		2011
Basic earnings per common share:
Weighted-average common shares outstanding		9,511,000		9,473,000		9,414,000
Diluted earnings per common share:
Weighted-average common shares outstanding		9,511,000		9,473,000		9,414,000
Stock options		62,000		120,000		29,000
Denominator for diluted earnings per common share		9,573,000		9,593,000		9,443,000

During the years ended March 31, 2013, 2012 and 2011, options to purchase 733,000 shares, 285,000 shares and 320,620 shares of common stock, respectively, were not included in the computation of diluted EPS because the options’ exercise prices were greater than the average market price of the common shares.

Product Warranty Costs

Product Warranty Costs — Equipment has a one year warranty for which a reserve is established using historical averages and specific program contingencies when considered necessary. Changes in the carrying amount of accrued product warranty costs included in the accompanying Consolidated Balance Sheets as of March 31, 2013 and 2012 are summarized as follows:

Balance at March 31, 2011	$	255
Warranty costs incurred		(349	)
Change in estimate to pre-existing warranties		(25	)
Product warranty accrual		437
Balance at March 31, 2012		318
Warranty costs incurred		(235	)
Change in estimate to pre-existing warranties		(9	)
Product warranty accrual		147
Balance at March 31, 2013	$	221

Research, Development, and Engineering Costs

Research, Development, and Engineering Costs — Research and development costs, which are charged to engineering expense when incurred, amounted to $7,664, $14,702, and $6,244 for the years ended March 31, 2013, 2012, and 2011, respectively

Shipping and Handling Costs

Shipping and Handling Costs — Costs for shipping and handling incurred by the Company for third party shippers are included in selling, general and administrative expense. These expenses for the years ended March 31, 2013, 2012 and 2011 were $202, $194, and $173, respectively.

Income Taxes

Income Taxes — The Company applies guidance issued by the FASB under ASC 740, “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company periodically assesses recoverability of deferred tax assets and provisions for valuation allowances are made as required.

ASC 740 requires recognizing the financial statement benefit of a tax position only after determining that the relevant tax authority more-likely-than-not would sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Stock-Based Compensation

Stock-Based Compensation — See Note 9.

Other Comprehensive Income

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, Other Comprehensive Income. The amendments in this Update supersede and replace the presentation requirements for reclassifications out of accumulated other comprehensive income in ASUs 2011-05 (issued in June 2011) and 2011-12 (issued in December 2011) for all public and private organizations. The objective of this Update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this Update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles (GAAP) to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period. The guidance provided by this update becomes effective prospectively for reporting periods beginning after December 15, 2012.Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.

Technical Corrections and Improvements

In October 2012, the FASB issued ASU No. 2012-04, Technical Corrections and Improvements. In November 2010, the FASB Chairman added a standing project to the FASB’s agenda to address feedback received from stakeholders on the Codification and to make other incremental improvements to U.S. GAAP. This perpetual project will facilitate Codification updates for technical corrections, clarifications, and improvements, and should eliminate the need for periodic agenda requests for narrow and incremental items. These amendments are referred to as Technical Corrections and Improvements. This ASU also includes amendments that identify when the use of fair value should be linked to the definition of fair value in Topic 820, Fair Value Measurement, and contains conforming amendments to the Codification to reflect the measurement and disclosure requirements of Topic 820. These amendments are referred to as Conforming Amendments. In addition, this ASU deletes the second glossary definition of fair value that originated from AICPA Statement of Position 92-6, Accounting and Reporting by Health and Welfare Benefit Plans. The first definition originating from FASB Statement No. 123 (revised 2004), Share-Based Payment, and the third definition originating from FASB Statement No. 157, Fair Value Measurements, remain.

The Conforming Amendments to U.S. GAAP included in this ASU are generally non-substantive in nature. Many of the amendments conform wording to be consistent with the terminology in Topic 820 (e.g., revising market value and current market value to fair value, or mark-to-market to subsequently measure at fair value). The FASB does not anticipate that the amendments in this ASU will result in pervasive changes to current practice. However, certain amendments may result in a change to existing practice. For those amendments which the FASB deemed to be more substantive, transition guidance and a delayed effective date accompany them.

The amendments in this ASU that will not have transition guidance will be effective upon issuance. The amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. The adoption of this guidance is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.