Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant 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 (§ 229.405 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 ¨

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

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

As of January 22, 2014, the total number of outstanding shares of common stock was 9,738,647.

The results reflected in the unaudited Condensed Consolidated Statements of Operations for the three and nine month periods ended December 31, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year. The following unaudited Condensed Consolidated Financial Statements should be read in conjunction with the notes thereto, Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this report, as well as the audited financial statements and related notes thereto contained in the Company’s Annual Report on Form 10-K, filed on June 6, 2013 with the Securities and Exchange Commission (“SEC”), for the fiscal year ended March 31, 2013. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to these rules.

When the Company refers to its fiscal year in this Quarterly Report on Form 10-Q, the Company is referring to the fiscal year ended on March 31. Presently the Company is operating in its fiscal year 2014, which commenced on April 1, 2013 and will end on March 31, 2014. Unless the context expressly indicates a contrary intention, all references to years in this filing are to the Company’s fiscal years. Figures in this Quarterly Report on Form 10-Q are in thousands, except for share amounts or where expressly noted.

ASSETS	(Unaudited) December 31, 2013		(Audited) March 31, 2013
CURRENT ASSETS:
Cash	$	3,409	$	6,688
Accounts receivable (net of allowance for doubtful accounts of $305 at December 31, 2013 and $292 at March 31, 2013)		15,691		15,955
Inventories – net		23,924		17,790
Prepaid expenses and other current assets		1,447		1,506
Deferred income taxes		7,857		6,757
Total current assets		52,328		48,696
PROPERTY:
Property and equipment		19,511		18,770
Less accumulated depreciation and amortization		13,082		12,084
Property – net		6,429		6,686
OTHER ASSETS:
Deferred income taxes – net		3,099		4,289
Goodwill		402		402
Real estate held for sale		3,800		3,800
Qualification units and pre-qualification assets – net		4,258		4,350
Other		5,453		5,190
Total other assets		17,012		18,031
TOTAL ASSETS	$	75,769	$	73,413
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility	$	—	$	—
Current portion of long-term debt		—		—
Accounts payable – trade		6,310		5,526
Accrued compensation		1,969		3,325
Accrued income taxes		1,403		741
Other current liabilities		5,241		5,070
Total current liabilities		14,923		14,662
LONG-TERM DEBT, NET OF CURRENT PORTION		—		—
OTHER LONG-TERM LIABILITIES		13,754		15,679
COMMITMENTS AND CONTINGENCIES (Note 14)		—		—
TOTAL LIABILITIES		28,677		30,341
STOCKHOLDERS’ EQUITY
Preferred stock - authorized, 300,000 shares; none issued		—		—
Common stock - authorized, 100,000,000 shares of $.01 par value; issued, 10,115,563 at December 31, 2013 and 9,987,200 at March 31, 2013		101		100
Additional paid-in capital		98,306		97,113
Accumulated deficit		(44,159)		(46,985	)
Accumulated other comprehensive loss		(184)		(184	)
		54,064		50,044
Less treasury stock, at cost – 443,678 shares at December 31, 2013 and March 31, 2013, respectively		(6,972)		(6,972	)
Total stockholders’ equity		47,092		43,072
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	75,769	$	73,413

	Three Months Ended				Nine Months Ended
	December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
Net sales	$	22,628	$	20,170	$	57,660	$	58,004
Cost of sales		14,189		11,540		37,003		34,034
Gross profit		8,439		8,630		20,657		23,970
Selling, general, and administrative expenses		3,198		3,910		9,739		10,945
Engineering expense		2,516		1,733		6,245		7,713
Operating income		2,725		2,987		4,673		5,312
Interest expense		8		17		41		209
Other expense – net		23		22		74		68
Income before incomes taxes		2,694		2,948		4,558		5,035
Income tax provision		1,024		1,239		1,732		2,115
Net income	$	1,670	$	1,709	$	2,826	$	2,920
Earnings per common share:
Basic net income per share	$	0.17	$	0.18	$	0.29	$	0.31
Diluted net income per share		0.17		0.18		0.29		0.31
Weighted-average basic shares outstanding		9,667,000		9,518,000		9,625,000		9,503,000
Weighted-average diluted shares outstanding		9,797,000		9,592,000		9,733,000		9,563,000

	Nine Months Ended
	December 31, 2013			December 31, 2012
Cash flows from operating activities:
Net income	$	2,826		$	2,920
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Write-off of engineering project development qualification units		571			111
Billed qualification costs		747			—
Depreciation and amortization		1,129			1,113
Non-cash reserve accretion		256			299
Stock based compensation		517			609
Provision for losses on accounts receivable		13			13
Deferred taxes-net		90			1,851
Changes in assets and liabilities:
(Increase) decrease in accounts receivable and other receivables		251			9,386
(Increase) decrease in inventories		(6,134	)		(5,697	)
(Increase) decrease in other assets		(178	)		(848	)
Increase (decrease) in accounts payable		784			(282	)
Increase (decrease) in accrued compensation		(1,356	)		306
Increase (decrease) in accrued income taxes		662			(129	)
Increase (decrease) in other liabilities		(2,010	)		(429	)
Net cash (used in) provided by operating activities		(1,832	)		9,223
Cash flows from investing activities:
Capital expenditures		(742	)		(265	)
Capitalized qualification units and pre-qualification assets		(1,349	)		(1,170	)
Net cash used in investing activities		(2,091	)		(1,435	)
Cash flows from financing activities:
Payments on long-term debt		—			(10,679	)
Net borrowings (repayments) of other debt		—			—
Payment of debt issue costs		(33	)		—
Exercise of stock options		677			41
Net cash provided by (used in) financing activities		644			(10,638	)
Decrease in cash		(3,279	)		(2,850	)
Cash at beginning of period		6,688			12,683
Cash at end of period	$	3,409		$	9,833
Supplemental information:
Interest payments	$	33		$	83
Income tax payments		980			460
Non-cash financing activity for stock option exercise		—			122

The unaudited, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows are of Breeze-Eastern Corporation and its consolidated subsidiaries (collectively, the “Company”). These reports reflect all adjustments of a normal recurring nature which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods reflected therein. Certain prior year amounts may have been reclassified to conform to the current period presentation.

The computation of basic earnings per share is based on the weighted-average number of common shares outstanding during the period. The computation of diluted earnings per share assumes the foregoing as well as 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.

	Three Months Ended				Nine Months Ended
	December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
Basic earnings per Common Share:
Weighted-average common shares outstanding for basic earnings per share calculation		9,667,000		9,518,000		9,625,000		9,503,000
Diluted earnings per Common Share:
Weighted-average common shares outstanding		9,667,000		9,518,000		9,625,000		9,503,000
Stock options (a)		130,000		74,000		108,000		60,000
Weighted-average common shares outstanding for diluted earnings per share calculation		9,797,000		9,592,000		9,733,000		9,563,000

The Company follows guidance provided by Accounting Standards Codification (“ASC 718”), “Accounting for Stock-Based Compensation”. Compensation cost is recognized for all awards granted and modified based on the grant date fair value of the awards. Net income for the three and nine month periods ended December 31, 2013, includes stock-based compensation expense of $104 net of tax, or $0.01 per diluted share, and $320 net of tax, or $0.03 per diluted share, respectively. Net income for the three and nine month periods ended December 31, 2012, includes stock-based compensation expense of $84 net of tax, or $0.01 per diluted share, and $353 net of tax, or $0.04 per diluted share, respectively. Stock based compensation expense is included in selling, general and administrative expenses. Additional compensation cost will be recognized as new stock-based grants are awarded.

The Company maintains the 1999 Long-Term Incentive Plan (the “1999 Plan”), the 2004 Long-Term Incentive Plan (the “2004 Plan”), the 2006 Long-Term Incentive Plan (the “2006 Plan”), and the 2012 Incentive Compensation Plan (the “2012 Plan” and together with the 1999 Plan, the 2004 Plan and the 2006 Plan collectively, the “Plans”).

Under the terms of the 2012 Plan, 750,000 shares of the Company’s common stock may be granted as stock options or awarded as restricted stock to officers, non-employee directors, certain employees, and other key individuals of the Company through October 2022. Under the terms of the 2006 Plan, 500,000 shares of the Company’s common stock may be granted as stock options or awarded as restricted stock to officers, non-employee directors, and certain employees of the Company through July 2016. Under the terms of the 2004 Plan, 200,000 shares of the Company’s common stock may be granted as stock options or awarded as restricted stock to officers, non-employee directors, and certain employees of the Company through September 2014. The 1999 Plan expired in July 2009, and no further grants or awards may be made under this plan. Under the 1999 Plan, unexercised options granted in fiscal years 2006 and 2008 remain outstanding.

Under each of the Plans, option exercise prices equal the fair market value of the common shares at their respective grant dates. Options granted to officers and employees expire no later than 10 years after the date of the grant. In most circumstances prior to fiscal year 2014, options granted to directors, officers, and employees generally vest ratably over three years beginning one year after the date of the grant. In certain circumstances, including a change of control of the Company (as defined in the various Plans), option vesting may be accelerated.

The Black-Scholes option-pricing model uses dividend yield, volatility, risk-free rate, expected term, and forfeiture assumptions to value stock options and was used to value 19,000 of the total 158,000 options granted in fiscal 2014 and 77,000 of the total 551,000 options granted in fiscal 2013. The Black-Scholes weighted-average value at each grant date per option granted in fiscal 2014 was $3.03 and $3.01 and in fiscal 2013 was $3.05, $3.02, $3.02 and $2.82. Expected volatilities are based on historical volatility of the Company’s common stock and other factors, and the risk-free rate for periods within the option’s contractual life is based on the U.S. Treasury yield curve at the time of the grant. The Company uses historical data to estimate the expected option term and assumed no forfeitures because of the limited number of employees at the executive and senior management levels who receive stock options, past employment history, and current stock price projections.

The Company used the following assumptions to estimate the fair value of option grants under the Black-Scholes method:

	Dividend yield		Volatility		Risk-free interest rate		Expected term of options (in years)	Forfeiture adjustment
2014 $3.03 value per option	0.0	%	31.2	%	1.3	%	7.0	0.0	%
2014 $3.01 value per option	0.0	%	31.2	%	1.3	%	7.0	0.0	%
2013 $3.05 value per option	0.0	%	34.0	%	1.2	%	7.0	0.0	%
2013 $3.02 value per option	0.0	%	35.5	%	1.2	%	7.0	0.0	%
2013 $3.02 value per option	0.0	%	34.9	%	1.1	%	7.0	0.0	%
2013 $2.82 value per option	0.0	%	30.9	%	1.3	%	7.0	0.0	%

The remaining 139,000 options granted in fiscal 2014 had a weighted-average value per option of $1.90 and $1.71. The remaining 474,000 options granted in fiscal 2013 had a weighted-average value per option of $1.86, $1.75, and $1.75 at the grant date. These valuations used a Monte Carlo simulation because the option vesting was based on service and market conditions. Expected volatilities are based on the historical volatility of the Company’s common stock and other factors, and the risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company uses the option contractual life for the expected option term and assumes a forfeiture rate using historical data for Company officers who receive stock options.

The Company used the following assumptions to estimate the fair value of option grants under the Monte Carlo simulation method:

	2014 $1.90 value per option		2014 $1.71 value per option		2013 $1.86 value per option		2013 $1.75 value per option		2013 $1.75 value per option
Dividend yield	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Volatility	34.9	%	34.9	%	34.0	%	34.9	%	30.1	%
Risk-free interest rate	1.9	%	1.9	%	1.8	%	1.1	%	1.3	%
Expected term of options (in years)	10.0		10.0		10.0		10.0		10.0
Forfeiture adjustment	1.1	%	1.8	%	0.2	%	0.2	%	0.2	%
Suboptimal behavior factor	1.7		1.7		1.9		1.9		1.9

The following table summarizes stock option activity under all Plans and other grants authorized by the Board of Directors.

	Number of Shares			Aggregate Intrinsic Value		Approximate Remaining Contractual Term (Years)		Weighted- Average Exercise Price
Outstanding at March 31, 2013		1,231,498		$	720		7	$	8.20
Granted		158,000			—		10		8.58
Exercised		(97,167	)		170		—		6.96
Canceled or expired		(329,785	)		—		—		8.32
Outstanding at December 31, 2013		962,546			1,054		8		8.34
Options exercisable at December 31, 2013		431,545			548		6		8.44
Unvested options expected to become exercisable after December 31, 2013		531,001			506		9		8.26
Shares available for future option grants at December 31, 2013 (a)		505,113

Cash received from stock option exercises during the first nine months of fiscal 2014 was approximately $677. The aggregate intrinsic value of options exercised during the first nine months of fiscal 2014 was approximately $170. The intrinsic value of stock options is the amount by which the market price of the stock on the date of exercise exceeded the market price of stock on the date of grant. There was no tax benefit generated to the Company from options granted prior to April 1, 2006 and exercised during fiscal 2014.

During the first nine months of fiscal 2014 and fiscal 2013, stock option compensation expense recorded in selling, general and administrative expenses was $362 and $468, respectively, before taxes of $138 and $196, respectively. As of December 31, 2013, there was $702 of unrecognized compensation cost related to stock options granted-but-not-yet-vested that are expected to become exercisable. This cost is expected to be recognized over a weighted-average period of approximately two years.

Except as otherwise authorized by the Board of Directors, it is the general policy of the Company that the stock underlying the option grants consists of authorized and unissued shares available for distribution under the applicable Plans. Under the Plans, the Incentive and Compensation Committee of the Board of Directors (made up of independent directors) may at any time offer to repurchase a stock option that is exercisable and has not expired.

Restricted stock awards are utilized both for director compensation and awards to officers and employees, and are distributed in a single grant of shares which are subject to forfeiture prior to vesting and have voting and dividend rights from the date of issuance. Outstanding restricted stock awards to officers and employees have forfeiture and transfer restrictions that lapse ratably over three years beginning one year after the date of the award.

Restricted stock awards granted to non-employee directors prior to fiscal 2012 contained forfeiture provisions that lapse after one year and transfer restrictions that lapse six months after the person ceases to be a director. In certain circumstances, including a change of control of the Company as defined in the various Plans, forfeiture lapses on restricted stock may be accelerated.

The fair value of restricted stock awards is based on the market price of the stock at the grant date and compensation cost is amortized to expense on a straight-line basis over the requisite service period as stated above. The Company expects no forfeitures during the

vesting period with respect to unvested restricted stock awards granted. During the first nine months of fiscal 2014 and fiscal 2013, compensation expense related to restricted stock awards recorded in selling, general and administrative expenses was $155 and $141, respectively, before taxes of $59 and $59, respectively. As of December 31, 2013, there was approximately $214 of unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a period of approximately one year.

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 eventually be scrapped. Accordingly, the Company uses these two factors in determining the amount of the reserve.

Property and equipment are recorded at cost, and equipment is depreciated on a straight-line basis over its estimated economic useful life. Leasehold improvements are amortized using the shorter of the estimated economic useful life or the term of the lease. Depreciation and amortization expense for the three and nine month periods ended December 31, 2013 was $328 and $998, respectively, and for the three and nine month periods ended December 31, 2012 was $350 and $1,033, respectively.

The Company classified as real estate held for sale on the condensed consolidated balance sheets a property owned in Glen Head, New York that is subject to a sales agreement. The closing of the sale agreement for the property is subject to the buyer receiving development approvals and the Company completing environmental obligations and reviews. Presently, the Company anticipates that the net sale proceeds will be $3,800. See Note 14 for a discussion of environmental matters related to this site.

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 for the nine month period ended December 31, 2013 are summarized as follows:

Income taxes for the nine month period ended December 31, 2013 was computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management.

At December 31, 2013, the Company has available an Alternative Minimum Tax Credit of approximately $500 to reduce future federal taxes. A valuation allowance of $318 exists for the Company’s state deferred tax assets, as required under ASC 740. This occurred because of favorable changes in the New Jersey tax law that will significantly reduce the Company’s New Jersey income tax apportionment factor and the overall state effective tax rate in future periods. A valuation allowance of $265 exists relating to other items, as it is management’s belief that it is more likely than not that a portion of this deferred asset is not realizable.

At December 31, 2013, the Company had no unrecognized tax benefits for uncertain tax positions and the Company does not expect the liability for uncertain tax positions to increase during the fiscal year.

Revolving Credit Facility – On August 26, 2013 the Company refinanced the Former Senior Credit Facility (as defined below) with a new five-year Revolving Credit Facility (the “Revolving Credit Facility” or “Facility”),which provides the Company with a $20,000 unsecured revolving line of credit with an accordion feature that may increase the amount to 2.5 times EBITDA (as defined in the Facility) to a maximum of $35,000. The term of the Facility is through August 26, 2018.

The Company has the option, subject to bank approval, during the five-year term of the Revolving Credit Facility, to convert the Facility to a secured credit facility which increases the borrowing limit to 3.5 times EBITDA (as defined in the Facility) up to a maximum of $35,000. As of December 31, 2013, the Company has not exercised this option.

Amounts outstanding under the Revolving Credit Facility generally accrue interest at a floating rate, adjusted monthly. The floating rate is the then-current London Interbank Offered Rate (“LIBOR”) monthly floating rate plus an applicable margin based on the Company’s ratio of funded debt to EBITDA. The Company also must pay a quarterly unused commitment fee of 0.125%. Amounts outstanding under the Revolving Credit Facility are generally due and payable on the expiration date of the Facility (August 26, 2018), and the Company can elect to prepay some or all of the outstanding balance from time to time without penalty. Up to $8,000 of the available funds can be used to support the issuance of letters of credit. During the first nine months of fiscal 2014, the Revolving Credit Facility had a blended interest rate of approximately 0.132%, which mainly represents a commitment fee on the average daily unused portion of the Facility.

The Revolving Credit Facility includes customary representations and warranties and requires the Company to comply with customary covenants, including, among other things, the following financial covenants: maintain at least a specified minimum level of tangible net worth; maintain a ratio of funded debt to EBITDA not exceeding a specified amount; and maintain a ratio of EBIT (as defined in the Facility) to cash interest expense not below a specified amount.

The Revolving Credit Facility does not restrict the Company’s ability to pay cash dividends on shares of its common stock, subject to maintaining $5,000 available under the Facility after the dividend payment and complying with the financial covenants included in the Facility. In addition, the Revolving Credit Facility does not restrict the Company’s ability to acquire or purchase other businesses or their assets provided that the businesses or assets are in a line of business which is substantially similar to the Company’s current business.

As of December 31, 2013, there were no outstanding borrowings under the Facility, $202 in outstanding (standby) letters of credit, and $19,798 in unsecured revolving line of credit availability. As of December 31, 2013, the Company was in compliance with the covenant provisions of the Facility.

Former Senior Credit Facility – Prior to August 26, 2013, the Company had a five-year, $33,000 senior credit facility consisting of a $10,000 revolving line of credit and, at the inception of the credit agreement in August 2008, a term loan totaling $23,000 (the “Former Senior Credit Facility”). In June 2012, the Company paid in full the term loan.

The Former Senior Credit Facility contained certain financial covenants which required a minimum fixed charge coverage and leverage ratios. The Former Senior Credit Facility bore interest at the “Base Rate” or LIBOR plus applicable margins based on the Company’s leverage ratio. During fiscal 2014, the Former Senior Credit Facility had a blended interest rate of approximately 0.375%, which represents a commitment fee on the average daily unused portion of the revolving line of credit. The Former Senior Credit Facility was secured by all of the Company’s assets and allowed the Company to issue letters of credit against the total borrowing capacity of the Former Senior Credit Facility.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company develops unobservable inputs based on the best information and analysis available. The source of this information may include internal Company functional experts and external sources. The analysis includes internal valuation inputs and judgments and determining the significance of any unobservable inputs and data.

The carrying amount reported in the condensed consolidated balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximates fair value because of the short-term maturity of those instruments. The carrying amount for borrowings under the Revolving Credit Facility, if applicable, would approximate fair value because of the variable market interest rate charged to the Company for these borrowings.

The Company has a defined contribution plan covering all eligible employees. Contributions are based on certain percentages of an employee’s eligible compensation. Expenses related to this plan were $234 and $760, respectively, for the three and nine month periods ended December 31, 2013 and $222 and $632, respectively, for the three and nine month periods ended December 31, 2012.

The Company provides postretirement benefits to certain union employees. The Company funds these benefits on a pay-as-you-go basis. The measurement date is March 31.

In February 2002, the Company’s subsidiary, Seeger-Orbis GmbH & Co. OHG, now known as TransTechnology Germany GmbH (the “Selling Company”), sold its retaining ring business in Germany to Barnes Group Inc. (“Barnes”). German law prohibits the transfer of unfunded pension obligations which have vested for retired and former employees, so the legal responsibility for the pension plan that related to the business (the “Pension Plan”) remained with the Selling Company. At the time of the sale and

subsequent to the sale, that pension liability was recorded based on the projected benefit obligation since future compensation levels will not affect the level of pension benefits. The relevant information for the Pension Plan is shown below under the caption Pension Plan. The measurement date is December 31. Barnes has entered into an agreement with the Company whereby Barnes is obligated to administer and discharge the pension obligation as well as indemnify and hold the Selling Company and the Company harmless from these pension obligations. Accordingly, the Company has recorded an asset equal to the benefit obligation for the Pension Plan of $3,507 and $3,266 as of December 31, 2013 and March 31, 2013, respectively. This asset is included in other long-term assets and it is restricted in use to satisfy the legal liability associated with the Pension Plan.

The net periodic pension cost is based on estimated values provided by independent actuaries.

The Company is subject to concentration of credit risk primarily with its cash and accounts receivable. At times, the Company maintains its cash in bank deposit accounts in excess of the FDIC insured amount, which effective January 1, 2013 is $250,000. The Company grants credit to certain customers who meet pre-established credit requirements, and generally requires no collateral from its customers. Estimates of potential credit losses are provided for in the Company’s condensed consolidated financial statements and are within management’s expectations. As of December 31, 2013, the Company had no other significant concentrations of credit risk.

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. U.S. GAAP does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this guidance state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this guidance are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application 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.

In February 2013, the FASB issued 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 did not have a material impact on the Company’s financial position, results of operations, or cash flows.

The Company is involved in environmental proceedings and potential proceedings relating to soil and groundwater contamination and other environmental matters at several former facilities that were never required for its current operations. These facilities were part of businesses disposed of by TransTechnology Corporation, the former parent Company. Environmental cleanup activities usually span many years, which make estimating liabilities a matter of judgment because of various factors, including changing remediation technologies, assessments of the extent of contamination, and continually evolving regulatory environmental standards. The Company considers these and other factors as well as studies and reports by external environmental consultants to estimate the amount and timing of any future costs that may be required for remediation actions. The Company follows ASC 450 in recording and disclosing environmental liabilities and records a liability for its best estimate of remediation costs. Because the Company believes it has a more-definitive best estimate of the environmental liability, the Company does not calculate a range in accordance with ASC 450.

At December 31, 2013 and March 31, 2013, the aggregate environmental liability was $10,694 and $12,684, respectively, included in other current liabilities and other long term liabilities on the balance sheets, before cost-sharing of approximately $1,419 and $1,472 at December 31, 2013 and March 31, 2013, respectfully, that is classified mostly as a non-current asset.

In the first nine months of fiscal 2014 and fiscal 2013, the Company spent $1,039 and $939, respectively, on environmental costs, and for the entire fiscal 2013, the Company spent $1,245. The Company has a detailed plan by property to manage its environmental exposure. These costs will be charged against the environmental liability reserve and will not impact income. The Company performs quarterly reviews of its environmental sites and the related liabilities.

The Company continues to participate in environmental assessments and remediation work at ten locations, including certain former facilities. Due to the nature of environmental remediation and monitoring work, such activities can extend for up to thirty years, depending upon the nature of the work, the substances involved, and the regulatory requirements associated with each site. The Company does not discount the recorded liabilities.

Although the Company takes great care in developing these risk assessments and future cost estimates, the actual amount of remediation costs may be different from those estimated as a result of a number of factors including but not limited to the following: changes to federal and state environmental regulations or laws; changes in local construction costs and the availability of personnel and materials; unforeseen remediation requirements that are not apparent until the work actually commences; and actual remediation expenses that differ from those estimated. The Company does not include any unasserted claims that it might have against others in determining its potential liability for such costs, and, except as noted with specific cost sharing arrangements, has no such arrangements, nor has it taken into consideration any future claims against insurance carriers that the Company may have in determining its environmental liabilities. In those situations where the Company is considered a de minimis participant in a remediation claim, the failure of the larger participants to meet their obligations could result in an increase in the Company’s liability at such a site.

There are a number of former operating facilities that the Company is monitoring or investigating for potential future remediation. In some cases, although a loss may be probable, it is not possible at this time to reasonably estimate the amount of any obligation for remediation activities because of uncertainties assessing the extent of the contamination or the applicable regulatory standard.

In addition, and as disclosed below, the Company is also pursuing claims for contribution to site investigation and cleanup costs against other potentially responsible parties (PRPs), including the U.S. Government.

In the first quarter of fiscal 2003, the Company entered into a consent order for a former facility in Glen Head, New York, which is currently subject to a contract for sale, pursuant to which the Company developed a remediation plan for review and approval by the New York Department of Environmental Conservation (“NYDEC”). The Company was advised in fiscal 2010 that the NYDEC required additional offsite groundwater delineation studies. Based upon the characterization work performed to date and this latest request, the Company’s reserve is $3,157 for the Glen Head site at December 31, 2013. The amounts and timing of payments are subject to the approved remediation plan and additional discussions with NYDEC.

The property is classified as “held for sale” for $3,800 after allowing for certain costs. In July 2001, the Company entered into a sales contract for the Glen Head, New York property for $4,000. The property’s appraised value was $3,300 in July 2001 and was $4,200 in 2005, the date of the last appraisal. These appraisals did not reflect the Company’s estimated remediation costs.

Neither the consent order nor the remediation plan affect the buyer’s obligation to close under the sales contract. The contract does not include a price adjustment clause and, although there are conditions precedent to the buyer’s obligation to close, the contract does not allow for termination. Thus, the buyer cannot unilaterally terminate the contract without liability, a buy-out, or some other settlement negotiated with the Company. There is no set date for closing, and the Company must provide the buyer with a funded remediation plan and environmental insurance prior to the buyer’s obligation to close. The buyer indicated its intent to build residential housing on this former industrial site and has been engaged in the lengthy process of securing the necessary municipal approvals.

The Company sold the business previously operated at the property owned in Saltzburg, Pennsylvania. The Company presented an environmental cleanup plan during the fourth quarter of fiscal 2000 for a portion of Federal Labs site pursuant to a consent order and agreement with the Pennsylvania Department of Environmental Protection (“PaDEP”) in fiscal 1999 (“1999 Consent Order”). PaDEP approved the plan during the third quarter of fiscal 2004, and the Company paid $200 for past costs, future oversight expenses, and in full settlement of claims made by PaDEP related to the environmental remediation of the site with an additional $200 paid subsequently.

The Company concluded a second consent order with PaDEP in the third quarter of fiscal 2001 for a second portion of the Federal Labs site (“2001 Consent Order”), and concluded a third Consent Order for the remainder of the Federal Labs site in the third quarter of fiscal 2003 (“2003 Consent Order”). The Company submitted an environmental cleanup plan for the portion of the Federal Labs site covered by the 2003 Consent Order during the second quarter of fiscal 2004.

In the second quarter of fiscal 2014, the Company and the PaDEP executed a first amendment to the 2003 Consent Order for additional remediation work within the site covered by the 2003 Consent Order. The Company submitted an environmental cleanup plan for this additional remediation work during the second quarter of fiscal 2014.

The Company is administering a settlement, concluded in the first quarter of fiscal 2000, under which the U.S. Government pays 50% of the ongoing direct and indirect environmental costs for the Federal Labs site subject to the 1999 Consent Order. The U.S. Government cost-sharing receivable is classified primarily as other assets on the condensed consolidated balance sheets. The Company also concluded an agreement in the first quarter of fiscal 2006, under which the U.S. Government paid an amount equal to 45% of the estimated environmental response costs for the Federal Labs site subject to the 2001 Consent Order. No future payments are due under this second agreement.

The Company is currently party to a tolling agreement with the Federal Government with the remainder of the Federal Labs site while negotiating a cost-sharing arrangement subject to the 2003 Consent Order. There can be no assurance the Company will be successful in these negotiations or any litigation seeking to enforce its rights to contribution or indemnification from the U.S. Government. The Company’s environmental liability reserves are not reduced for any potential cost-sharing payments.

At December 31, 2013, the environmental liability reserve at Federal Labs was $5,236. The Company expects that remediation at this site, which is subject to the oversight of the Pennsylvania authorities, will not be completed for several years, and that monitoring costs, although expected to be incurred over twenty years, could extend for up to thirty years.

The Company successfully implemented a soil remediation project and provided final investigation and cleanup reports to the Illinois Environmental Protection Agency (“IEPA”) at its formerly-owned property in Wyoming, Illinois. The IEPA issued a No Further Remediation Letter to the Company approving the remedial action and releasing the Company from further obligations associated with the known contamination at the property.

The Company has no other known environmental obligations with respect to the Wyoming Illinois site. Accordingly, the Company reduced the remaining environmental liability for this site by $1,207, reflected in SG&A expense.

There are other properties that have a combined environmental liability of $2,301 at December 31, 2013.

The Company is also engaged in various other legal proceedings incidental to its business. It is the opinion of management that, after taking into consideration information furnished by its counsel, these matters will have no material effect on the Company’s financial position or the results of operations or cash flows in future periods.

Our products and related services aggregate into one reportable segment—sophisticated mission equipment for specialty aerospace and defense applications. The nature of the production process (assemble, inspect, and test) is similar for all products, as are the customers and distribution methods.

Net sales of 10% or more of total revenues derived from customers for the three and nine month periods ended December 31, 2013 and 2012 are summarized as follows:

As of December 31, 2013, 23%, 19% and 18% of net accounts receivable were derived from three major customers, respectively. As of March 31, 2013, 17%, 14% and 11% of net accounts receivable were derived from three major customers, respectively.

Net sales below show the geographic location of customers for the three and nine month periods ended December 31, 2013 and December 31, 2012:

	Three Months Ended					Nine Months Ended
Location	December 31, 2013			December 31, 2012		December 31, 2013		December 31, 2012
United States	$	17,163		$	14,730	$	39,352	$	37,792
England		654			1,230		2,643		3,798
Italy		2,128			966		6,987		4,594
Other European countries		1,790			1,117		3,132		3,037
Pacific and Far East		468			603		1,615		2,161
Other international		425			1,524		3,931		6,622
Total	$	22,628	,	$	20,170	$	57,660	$	58,004

Management has evaluated all events occurring through the date that the Condensed Consolidated Financial Statements have been issued, and has determined that all such events that are material to the Condensed Consolidated Financial Statements have been fully disclosed.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Unless otherwise indicated or the context otherwise requires, all references in this report to the “Company,” the “registrant” “we,” “us” or “our” and similar terms refer to Breeze-Eastern Corporation and its subsidiaries. All dollar amounts stated herein are in thousands except per share amounts. All references to years in this report refer to the fiscal year ended March 31 of the indicated year unless otherwise specified. This report reflects all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for fair presentation of the results of operations for the periods reflected. Certain prior fiscal year amounts may have been reclassified to conform to the current fiscal year presentation.

This report contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: changes in business conditions, changes in applicable laws, rules and regulations affecting us in locations in which we conduct business, interest rate trends, a decline or redirection of the United States (“U.S.”) defense budget, the failure of Congress to approve a budget or continuing resolution, continuation of the current sequestration, the termination of any contracts with the U.S. Government, changes in our sales strategy and product development plans, changes in the marketplace, developments in environmental proceedings that we are involved in, continued services of our executive management team, competitive pricing pressures, security breaches, market acceptance of our products under development, delays in the development of products, changes in spending allocation or the termination, postponement, failure to fund one or more significant contracts by the U.S. Government or other customers, determination by us to dispose of or acquire additional assets, events impacting the U.S. and world financial markets and economies, and such other factors that may be identified from time to time in our Securities and Exchange Commission (“SEC”) filings and other public announcements including those set forth under “Item 1A. Risk Factors” contained in the Company’s Annual Report on Form 10-K filed with the SEC on June 6, 2013 for the fiscal year ended March 31, 2013, and under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Readers are cautioned not to place undue reliance on our forward-looking statements. Except as required by law, we assume no duty to update or revise our forward-looking statements.

We design, develop, manufacture, sell, and service sophisticated engineered mission equipment for specialty aerospace and defense applications. We have long been recognized as a leading global designer, manufacturer, service provider, and supplier of mission-critical rescue hoists. We also manufacture weapons-handling systems, cargo winches, cargo hook systems and tie-down equipment. Our products are designed to be efficient and reliable in extreme operating conditions and are used to complete rescue operations and military insertion/extraction operations, move and transport cargo, and load weapons onto aircraft and ground-based launching systems.

Our primary strategy is to continue to expand our position as a market leader in the design, development, and service of sophisticated mission equipment for specialty aerospace and defense applications. We intend to maintain our position by continuing to focus on our principal customers and on geographic areas where we have developed our reputation as a premier provider of aircraft hoist and lift equipment, and by expanding both our customer base and product lines. We believe that continued spending on research and development to improve the quality of our product offerings and remaining on the leading edge of technological advances in our chosen markets is also crucial to our business. In this regard, we will continue to commit resources to product research and development.

Our business is affected by global economic and geo-political conditions. As U.S. military activity in Iraq and Afghanistan declines, United States defense spending reductions and redirections could have a material impact on our revenues and earnings in future periods. Similarly, European government military and spending reductions could have a material impact on revenues and earnings in

Management’s Discussion and Analysis of Financial Condition and Results of Operations

future periods. However, we believe that the primary military missions that drive procurement and the use of our equipment (search and rescue, special operations, and cargo delivery) will continue to get a funding priority.

We have experienced product development schedule delays and increased investment due to OEM customer extended development timetables and due to our own product development progress. The Airbus A400M military transport aircraft development has taken longer than originally anticipated, but we commenced shipping in the third quarter of fiscal 2014 and we expect to complete engineering qualification in the next several months.

Our core business is aerospace and defense products. We believe we are a leading designer, manufacturer, service provider, and supplier of mission-critical rescue hoists and cargo hook systems. We also manufacture weapons handling systems, cargo winches, and tie-down equipment. These products are sold primarily to military and civilian agencies and to aerospace contractors. Our emphasis is on the engineering, assembly, testing, service, and support of our products.

Our products and related services aggregate into one reportable segment. The nature of the production process (assemble, inspect, and test), customers, and product distribution are similar for all products. We sell our products through internal marketing representatives and independent sales representatives and distributors.

As a pioneer of helicopter rescue hoist technology, we continue to develop sophisticated helicopter hoist and winch systems, including systems for the current generation of Sikorsky H-60 Blackhawk and Naval Hawk, CH-53K Super Stallion, Bell-Boeing V-22 Osprey, Boeing CH-47 Chinook, Eurocopter Ecureuil, Dolphin, EH-101 Merlin/Cormorant, Changhe Z-11, and Agusta Westland A-W109, AW119 and AW139 helicopters. We also design, market, sell and service a broad line of hydraulic and electric aircraft cargo winch systems with capacities from 900 pounds to over 7,000 pounds.

Our external cargo hook systems are original equipment on leading military medium and heavy lift helicopters. These hook systems range from smaller 1,000-pound capacity models up to the largest 36,000-pound capacity hooks employed on the Sikorsky CH-53 Super Stallion helicopter. Our latest designs incorporate load sensing and display technology and automatic load release features. We also manufacture cargo and aircraft tie-downs which are included in this product line.

We make static-line retrieval and cargo winches for military cargo aircraft including the Boeing C-17, Alenia C-27J, CASA CN-235, and CASA C-295. In addition, we have a contract with Airbus to develop and produce products for the new cargo winch and retrieval winch systems for the A400M cargo aircraft and expect to be the sole supplier of these products.

Once our products are qualified and approved for use with a particular aircraft model, sales of products and services generally continue for the life of the aircraft model, which can be for decades. It is expensive and difficult for a second supplier’s product to become qualified and approved on the same aircraft.

Our weapons handling systems include weapons handling equipment for land-based rocket launchers and munitions hoists for loading missiles and other loads using electric power or exchangeable battery packs. We supply this equipment for the United States, Japanese, and European Multiple-Launch Rocket Systems (MLRS) and the United States High Mobility Artillery Rocket System (HIMARS). We also provide actuators and specialty gear boxes for specialty weapons applications.

We perform overhaul, repair, and maintenance services for all of our products. Most of these services are performed at our Whippany, New Jersey facility. We have also licensed third-party vendors around the world to perform these services.

In addition to performing research and development to design new products, improve existing products, and add new features to our product line, we also provide engineering services to adapt our products to customer specific needs and aircraft models on a fee-for-service basis.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We discuss segment information in Note 15 of our “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Item 1 of Part I of this report.

For information regarding our critical accounting policies, please refer to the discussion provided in our Annual Report on Form 10-K for our fiscal year ended March 31, 2013, as filed with the SEC on June 6, 2013, under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” and our Notes to Unaudited Consolidated Financial Statements included therein.

Three Months Ended December 31, 2013 Compared with Three Months Ended December 31, 2012

	Three Months Ended						Increase/(Decrease)
	December 31, 2013			December 31, 2012			$			%
Products	$	17,058		$	15,494		$	1,564			10.1	%
Services		5,570			4,676			894			19.1
Net sales		22,628			20,170			2,458			12.2
Products		10,726			9,027			1,699			18.8
Services		3,463			2,513			950			37.8
Cost of sales		14,189			11,540			2,649			23.0
Gross profit		8,439			8,630			(191	)		(2.2	)
As a % of net sales		37.3	%		42.8	%		N/A			(5.5	)% Pt
Selling, general, and administrative expenses		3,198			3,910			(712)			(18.2)	%
Engineering expense		2,516			1,733			783			45.2
Operating income		2,725			2,987			(262	)		(8.8	)
Interest expense		8			17			(9	)		(52.9	)
Income tax provision		1,024			1,239			(215	)		(17.4	)
Effective tax rate		38.0	%		42.0	%		N/A			(4.0	)% Pt
Net income	$	1,670		$	1,709		$	(39	)		(2.3	)%

Net Sales. Fiscal 2014 third quarter net sales of $22,628 were $2,458, or 12.2%, above net sales of $20,170 in the fiscal 2013 third quarter. Fiscal 2014 third quarter products sales of $17,058 were $1,564, or 10.1%, above prior year primarily due to higher new equipment hoist & winch volume to international OEMs.

Fiscal 2014 third quarter services sales of $5,570 were higher by $894, or 19.1%, compared with the prior year due to higher overhaul & repair volume for the U.S. military and in billable engineering.

The timing of U.S. Government awards, availability of U.S. Government funding, and product delivery schedules are among the factors that affect the period of recording revenues. Over the past several years, revenues in the second half of the fiscal year exceeded revenues in the first half of the fiscal year. We expect fiscal 2014 revenues will be consistent with this historical pattern.

Cost of Sales. Products cost of sales of $10,726 in the fiscal 2014 third quarter were $1,699, or 18.8%, higher than the same period in fiscal 2013 primarily due to increased new production volume. Cost of services provided of $3,463 in the fiscal 2014 third quarter was $950, or 37.8%, higher than the prior year due primarily to higher overhaul & repair volume and to higher billable engineering costs.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

In the fiscal 2014 third quarter, manufacturing overhead absorption did not have a significant impact. In the prior year quarter, over-absorbed overhead positively impacted profit by $201, or 1.0% of sales. The absorption split between products and services was 40% and 60%, respectively.

Gross profit. Gross profit of $8,439 in the fiscal 2014 third quarter was $191, or 2.2%, below the same period in fiscal 2013. The decrease is primarily due to spare parts and billable engineering. Spare parts profitability was lower, and engineering profitability decreased from overspending on billable engineering projects. Lower profitability for new production was mostly offset by higher volume. The lower new equipment profitability was due to an unfavorable customer mix from higher volume to large domestic and international OEMs. As a percent of sales, the gross profit margin was 37.3% for the fiscal 2014 third quarter compared with 42.8% for the prior year quarter. Gross profit as a percent of sales declined in new production, overhaul & repair, spare parts, and billable engineering.

Operating Expenses. Total operating expenses were $5,714, or 25.3% of net sales, in the third quarter of fiscal 2014 compared with $5,643, or 28.0% of net sales in the comparable prior year period. Selling, general, and administrative (“SG&A”) expenses of $3,198 in the fiscal 2014 third quarter were $712 lower than $3,910 in the third quarter of fiscal 2013, due to lower incentive compensation and lower spending. As a percent of sales, SG&A was 14.1% in the fiscal 2014 third quarter versus 19.4% in the comparable period last year. The decrease as a percent of sales is due to the higher sales in the current-year fiscal third quarter.

Engineering expenses were $2,516 in the third quarter of fiscal 2014 compared with $1,733 in the third quarter of fiscal 2013. The increase reflects higher product development engineering spending for awarded aerospace platforms as these programs are undergoing qualification testing. We anticipate total engineering costs to be lower for the full year of fiscal 2014.

Interest Expense. Interest expense was $8 during the third quarter of fiscal 2014 versus $17 in the third quarter of fiscal 2013. Interest costs are amortization of debt origination costs and the unused commitment fee.

Income tax provision. Income tax provision was $1,024 in the third quarter of fiscal 2014, compared with $1,239 in the third quarter of fiscal 2013. The effective tax rates used to compute income taxes for the three month periods ended December 31, 2013 and December 31, 2012 were 38.0% and 42.0%, respectively. The effective tax rate to be applicable for the full fiscal year is 38.0%, which is subject to ongoing review and evaluation. The lower effective tax rate in fiscal 2014 is primarily due to a lower New Jersey state tax rate. Income taxes and income tax rates are discussed further in Note 8 of the “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Part I, Item 1 of this report.

Net Income. Net income was $1,670, or $0.17 per diluted share, in the third quarter of fiscal 2014, compared with net income of $1,709, or $0.18 per diluted share, in the fiscal 2013 third quarter. The decrease is due to the lower gross profit resulting from lower margins, partly offset by lower SG&A costs.

New Orders. New products and services orders received during the three months ended December 31, 2013 increased by 55.5% to $32,826 compared with $21,109 during the three months ended December 31, 2012. The increase was due primarily to an increase in unit pricing for the Airbus A400M military transport aircraft program and also to higher hoist & winch orders from the U.S Government for new production.

Backlog. We measure backlog by the amount of products or services that customers committed by contract to purchase as of a given date. Backlog may vary substantially over time due to the size and timing of orders. Backlog of approximately $47,562 at December 31, 2013 is scheduled for shipment during the next twelve months. Although significant cancellations of purchase orders or substantial reductions of product quantities in existing contracts seldom occur, such cancellations or reductions could substantially and materially reduce backlog. Therefore, backlog information may not represent the actual amount of shipments or sales for any future period.

Backlog at December 31, 2013 was $128,038, compared with $115,102 at March 31, 2013, and $119,691 at December 31, 2012. These figures include $78,065, $71,070, and $71,238, respectively, for the Airbus A400M military transport aircraft which commenced shipping in the third quarter of fiscal 2014. In the third quarter of fiscal 2014, we reached agreement with Airbus for revised unit pricing which resulted in a net increase to backlog of $8,454 for the Airbus A400M military aircraft program. The agreement also focused the remaining contract scope on the cargo winch and retrieval winch systems.

The book-to-bill ratio is computed by dividing the new orders received during a period by the sales for the same period. A book-to-bill ratio in excess of 1.0 is potentially indicative of continued overall growth in sales. The book to bill ratio was 1.5 for the fiscal 2014 third quarter and 1.0 for the fiscal 2013 third quarter. Excluding the impact of the revised Airbus contract, the book-to-bill ratio would have been 1.1.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Nine Months Ended December 31, 2013 Compared with Nine Months Ended December 31, 2012

	Nine Months Ended						Increase/(Decrease)
	December 31, 2013			December 31, 2012			$			%
Products	$	40,486		$	44,648		$	(4,162	)		(9.3	)%
Services		17,174			13,356			3,818			28.6
Net sales		57,660			58,004			(344	)		(0.6	)
Products		25,527			26,961			(1,434	)		(5.3	)
Services		11,476			7,073			4,403			62.3
Cost of sales		37,003			34,034			2,969			8.7
Gross profit		20,657			23,970			(3,313	)		(13.8	)
As a % of net sales		35.8	%		41.3	%		N/A			(5.5	)% Pt
Selling, general, and administrative expenses		9,739			10,945			(1,206	)		(11.0	)%
Engineering expense		6,245			7,713			(1,468	)		(19.0	)
Operating income		4,673			5,312			(639	)		(12.0	)
Interest expense		41			209			(168	)		(80.4	)
Income tax provision		1,732			2,115			(383	)		(18.1	)
Effective tax rate		38.0	%		42.0	%		N/A			(4.0	)% Pt
Net income	$	2,826		$	2,920		$	(94	)		(3.2	)%

Net Sales. Fiscal 2014 first nine months net sales of $57,660 decreased by $344, or 0.6%, from net sales of $58,004 in the first nine months of fiscal 2013.

Product sales in the first nine months of fiscal 2014 were $40,486, a decrease of $4,162, or 9.3%, from $44,648 in the corresponding prior-year period. The decrease is primarily due to lower new equipment hoist & winch volume to the U.S. military.

Service sales in the first nine months of fiscal 2014 were $17,174, an increase of $3,818, or 28.6%, from $13,356 in the corresponding prior-year period due to higher overhaul & repair hoist & winch volume to the U.S. Government and to higher engineering billing.

The timing of U.S. Government awards, availability of U.S. Government funding, and product delivery schedules are among the factors that affect the period of recording revenues. Fiscal 2013 was consistent with recent years with revenues in the second half of the fiscal year exceeding revenues in the first half of the fiscal year; we believe fiscal 2014 revenues will be consistent with this historical pattern.

Cost of Sales. Products cost of sales of $25,527 in the fiscal 2014 first nine months were 5.3% below the corresponding prior-year period primarily due to lower new equipment. Cost of services provided of $11,476 in the fiscal 2014 first nine months were 62.3% higher than the corresponding prior-year period due to higher overhaul & repair volume and higher engineering billing.

Manufacturing overhead was favorably over-absorbed by $769, or 1.3% of sales, in the first nine months of fiscal 2014. This over-absorption was approximately split between products and services of 81% and 19%, respectively. The prior-year period included under-absorbed overhead of $56, or 0.1% of sales. This under-absorption was approximately split between products and services of 63% and 37%, respectively.

Gross profit. Gross profit of $20,657 in the fiscal 2014 first nine months was $3,313, or 13.8%, lower than the same period in fiscal 2013. Gross profit dollars declined from an unfavorable new equipment mix due to higher volume to large domestic and international OEMs and lower engineering profitability from shipping new product qualification items at a loss and overspending on other billable engineering projects. Lower overhaul & repair profitability from a greater mix of U.S. Government volume was more than offset by higher volume. As a percent of sales, the gross profit margin was 35.8% for the fiscal 2014 first nine months compared with 41.3% for the prior year. Gross profit as a percent of sales declined primarily due to new production, overhaul & repair, and billable engineering.

Operating Expenses. Total operating expenses were $15,984, or 27.7% of net sales, in the first nine months of fiscal 2014 compared with $18,658, or 32.2% of net sales, in the comparable prior-year period. Selling, general, and administrative (“SG&A”) expenses were $9,739 in the fiscal 2014 first nine months compared with $10,945 in the first nine months of fiscal 2013, a decrease of $1,206. The decrease is due to a $1,207 environmental liability reduction in the first fiscal quarter because of lower remediation costs and ending our involvement for a previously-owned property in Wyoming, Illinois. Excluding the benefit from the environmental accrual

Management’s Discussion and Analysis of Financial Condition and Results of Operations

reduction, SG&A was even with the prior year as lower general & administrative costs offset spending investments in customer service and marketing. As a percent of sales, SG&A was 16.9% (19.0% excluding the accrual benefit) in the fiscal 2014 first nine months versus 18.9% in the comparable period last year.

Engineering expenses were $6,245 in the first nine months of fiscal 2014 compared with $7,713 in the first nine months of fiscal 2013. The decrease is primarily due to lower new product development costs for awarded aerospace platforms, primarily the Airbus A400M and Sikorsky CH-53K. We anticipate total engineering costs to be lower for fiscal 2014.

Interest Expense. Interest expense was $41 in the fiscal 2014 first nine months versus $209 in fiscal 2013. Interest costs in fiscal 2014 are for amortization of debt origination costs and the unused commitment fee. We pre-paid our $10,679 term loan in full during the fiscal 2013 first quarter which resulted in expensing $95 of deferred debt acquisition costs in the fiscal 2013 first quarter.

Income tax provision. Income tax expense was $1,732 in the first nine months of fiscal 2014 versus $2,115 in the first nine months of fiscal 2013. The decrease is due to lower pre-tax income due primarily to lower gross profit, partly offset by lower engineering costs and the fiscal first quarter environmental benefit. The effective tax rates used to compute income taxes for the nine month periods ended December 31, 2013 and December 31, 2012 were 38.0% and 42.0%, respectively. The effective tax rate to be applicable for the full fiscal year is 38.0%, which is subject to ongoing review and evaluation. The lower effective tax rate in fiscal 2014 is primarily due to a lower New Jersey state tax rate. Income taxes and income tax rates are discussed further in Note 8 of the “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Part I, Item 1 of this report.

Net Income. Net income was $2,826, or $0.29 per diluted share, in the fiscal 2014 first nine months compared with $2,920, or $0.31 per diluted share, in the same period in fiscal 2013. The decrease is due to the lower gross profit resulting from lower sales and lower margins, partly offset by lower engineering costs and the fiscal first quarter environmental benefit.

New Orders. New products and services orders received during the nine months ended December 31, 2013 increased 6.1% to $70,596 compared with $66,511 during the nine months ended December 31, 2012. The increase was due primarily to renegotiating the Airbus A400M military transport aircraft contract, partly offset by lower spare parts and new production weapons handling orders.

The book to bill ratio for the first nine months of fiscal 2014 was 1.2 compared with 1.1 for the first nine months of fiscal 2013. Excluding the impact of the revised Airbus contract, the book-to-bill ratio would have been 1.1. Cancellations of purchase orders or reductions of product quantities in existing contracts, although seldom occurring, could substantially and materially reduce our backlog. Therefore, the backlog may not represent the actual amount of shipments or sales for any future period.

In the third quarter of fiscal 2014, we reached agreement with Airbus for revised unit pricing which resulted in a net increase to backlog of $8,454 for the Airbus A400M military aircraft program. The agreement also focused the remaining contract scope on the cargo winch and retrieval winch systems.

Our principal sources of liquidity are cash on hand, cash generated from operations, and our Revolving Credit Facility. At times, we maintain our cash in bank deposit accounts in excess of the FDIC insured amount, which effective January 1, 2013 is $250,000.

Our liquidity requirements depend on a number of factors, many of which are beyond our control, including the timing of production under contracts with the U.S. Government. Our working capital needs fluctuate between periods as a result of changes in program status and the timing of payments by program. Additionally, because sales are generally made on the basis of individual purchase orders, liquidity requirements vary based on the timing and volume of orders. Based on cash on hand, future cash expected to be generated from operations, and the Revolving Credit Facility, we expect to have sufficient cash to meet liquidity requirements for the next twelve months. The Revolving Credit Facility is discussed in Note 9 of the “Notes to Unaudited Condensed Consolidated Financial Statements” contained elsewhere in this report.

On August 26, 2013, we refinanced the Former Senior Credit Facility with a new five-year Revolving Credit Facility. The Revolving Credit Facility provides us with a $20,000 unsecured revolving line of credit with an accordion feature that, under certain conditions and circumstances may increase to $35,000. We believe we have adequate cash flow and debt availability to meet our operating needs.

We are involved in environmental proceedings and potential proceedings relating to soil and groundwater contamination and other environmental matters at some of our former parent company’s facilities that were never required for our current operations. In fiscal

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2014, we anticipate spending approximately $1,890 on environmental characterization and remediation costs. These costs will be charged against our environmental liability reserve.

Net working capital at December 31, 2013 was $37,405, an increase of $3,371, versus $34,034 at March 31, 2013. The ratio of current assets to current liabilities was 3.5:1.0 at December 31, 2013 compared with 3.3:1.0 at the beginning of fiscal 2014. We generated increased working capital from earnings and from long-term deferred tax assets maturing to current assets. We used this working capital and cash of $3,279 to purchase inventory, as reflected in the $6,134 inventory increase. The increased inventory is for anticipated shipments in the last quarter of the fiscal year and to improve customer service with better overhaul & repair turnaround time and product delivery.

The accounts receivable days outstanding increased to 62.7 days at December 31, 2013, from 46.7 days at December 31, 2012. Inventory turnover decreased to 2.3 turns at December 31, 2013 versus 2.4 turns at December 31, 2012. Inventory turns are lower due to increased inventory.

Capital expenditures for the nine months ended December 31, 2013 and 2012 were $742 and $265, respectively. Spending for the first nine months of fiscal 2014 was mainly for production test equipment. Spending for the first nine months of fiscal 2013 was for production test equipment and information technology capital. Capitalized qualification units and pre-qualification assets for the nine months ended December 31, 2013 and 2012 were $1,349 and $1,170, respectively. The higher spending in fiscal 2014 reflects product development schedule delays and increased investment due to OEM customer extended development timetables and due to our own product development progress.

The Revolving Credit Facility is discussed in Note 9 of the “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Part I, Item 1 of this report.

The following table summarizes our contractual obligations in future fiscal years.

			Payments Due By Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Operating leases	$	5,822	$	1,065	$	1,985	$	1,848	$	924
Purchase obligations (a)		—		—		—		—		—
Total	$	5,822	$	1,065	$	1,985	$	1,848	$	924

Neither inflation nor deflation has had, and we do not expect it to have, a material impact upon operating results. We cannot be certain that our business will not be affected by inflation or deflation in the future.

Environmental matters – At December 31, 2013 and March 31, 2013 the aggregate environmental liability was $10,694 and $12,684, respectively, included in other current liabilities and other long term liabilities on the balance sheets, before cost-sharing of approximately $1,419 at December 31, 2013 and $1,472 at March 31, 2013, respectfully, that is classified mostly as a non-current asset.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

In the first nine months of fiscal 2014 and fiscal 2013, we spent $1,039 and $939, respectively, on environmental costs, and for the entire fiscal 2013, we spent $1,245. We have a detailed plan by property to manage our environmental exposure. Based on this plan, we anticipate spending $1,890 on environmental matters in fiscal 2014. These costs will be charged against the environmental liability reserve and will not impact income. We perform quarterly reviews of our environmental sites and the related liabilities.

The aggregate environmental liability reduction was primarily due to implementing a more cost-effective solution at our previously-owned property in Wyoming, Illinois. In the fiscal first quarter of 2014, the Illinois Environmental Protection Agency issued a No Further Remediation Letter releasing us from further obligations associated with the known contamination at the property. We have no known environmental obligations with respect to the former Wyoming Illinois site. Accordingly, we reduced the remaining environmental liability for this site by $1,207 in the first quarter of fiscal 2014, as reflected in SG&A expense.

Environmental matters are discussed in Note 14 of the “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Part 1, Item 1 of this report.

Litigation – Litigation is discussed in Note 14 of the “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Part 1, Item 1 of this report.

The recent accounting pronouncements are discussed in Note 13 of the “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Part 1, Item 1 of this report.

As of December 31, 2013, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or variable interest entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

We are exposed to various market risks, primarily changes in interest rates associated with our Debt Facility. At December 31, 2013, we had no borrowings under our Debt Facility.

At times we maintain our cash in bank deposit accounts in excess of the FDIC insured amount, which effective January 1, 2013 is $250,000.

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) as of the end of the period covered by this report pursuant to Exchange Act Rule 13a-15(b). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2013, our disclosure controls and procedures were effective to ensure (i) that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in order to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) during the first nine months of fiscal 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are engaged in various other legal proceedings incidental to the Company’s business. Management believes that, after taking into consideration information furnished by its counsel, these matters will not have a material effect on the financial position, results of operations, or cash flows in future periods.

In addition to the other information set forth in this report, the user/reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, as filed with the SEC on June 6, 2013, and incorporated herein by reference, which factors could materially affect our business, financial condition, financial results or future performance.

* We have attached the following documents formatted in XBRL (Extensible Business Reporting Language) as Exhibit 101 to this report: (i) the Condensed Consolidated Statements of Operations for the three and nine month periods ended December 31, 2013, and December 31, 2012, respectively; (ii) the Condensed Consolidated Balance Sheets at December 31, 2013, and March 31, 2013; and (iii) the Condensed Consolidated Statements of Cash Flows for the nine month periods ended December 31, 2013, and December 31, 2012, respectively.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware		95-4062211
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

35 Melanie Lane Whippany, New Jersey		07981
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

		Page No.
PART I.	Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets December 31, 2013 (Unaudited) and March 31, 2013	4
	Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended December 31, 2013 and December 31, 2012 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended December 31, 2013 and December 31. 2012 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7-17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures	26

PART II.	Other Information	27

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
SIGNATURES		28
EXHIBITS

	Number of Shares			Weighted – Average Grant Date Fair Value
Non-vested at March 31, 2013		24,125		$	7.51
Granted		31,196			8.91
Vested		(24,125	)		7.51
Cancelled		—			—
Non-vested at December 31, 2013		31,196			8.91

	December 31, 2013		March 31, 2013
Finished goods	$	54	$	1,024
Work in process		9,112		7,350
Purchased and manufactured parts		18,539		12,532
		27,705		20,906
Reserve for slow moving and obsolescence		(3,781)		(3,116	)
Total	$	23,924	$	17,790

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


Balance at March 31, 2013	$	221
Warranty costs incurred		(141	)
Change in estimates to pre-existing warranties		-
Product warranty accrual		115
Balance at December 31, 2013	$	195

	December 31, 2013		March 31, 2013
Engineering project reserves	$	1,530	$	1,530
Environmental reserves – Note 14		2,068		1,890
Accrued medical benefits cost		510		640
Accrued commissions		343		126
Other		790		884
Total	$	5,241	$	5,070

	Postretirement Benefits
	Three Months Ended				Nine Months Ended
	December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
Interest cost	$	7	$	8	$	22	$	25
Amortization of net (gain) loss		8		1		23		5
Net periodic cost	$	15	$	9	$	45	$	30

	Pension Plan
	Three Months Ended				Nine Months Ended
	December 31, 2013		December 31, 2012		December 31 2013		December 31, 2012
Interest cost	$	29	$	36	$	85	$	105
Amortization of net (gain) loss		—		—		—		—
Net periodic cost	$	29	$	36	$	85	$	105

Balance at March 31, 2013	$	12,684
Environmental costs incurred		(1,039	)
Interest accretion		256
Reduction of environmental reserve-Wyoming Illinois		(1,207	)
Balance at December 31, 2013	$	10,694

4.1		Amendment No. 2 to Rights Agreement, dated October 30, 2013 between Breeze-Eastern Corporation and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the current report On Form 8-k, filed with the SEC on October 31, 2013).

31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

		BREEZE-EASTERN CORPORATION (Registrant)
Dated: January 30, 2014	By:	/s/ Mark D. Mishler
		Mark D. Mishler
		Senior Vice President, Chief Financial Officer and Treasurer*