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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition 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 Act). Yes ¨ No x

The aggregate market value of the voting common equity held by non-affiliates of the registrant on September 30, 2013 (the last business day of the registrant’s most recently completed second fiscal quarter), based on the closing price of the registrant’s common stock on the NYSE MKT (formerly NYSE Amex) on such date, was $25,802,151. Shares of common stock held by executive officers and directors have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not a determination for any other purpose.

As of May 27, 2014, the registrant had 9,703,877 shares of common stock outstanding.

The registrant’s Proxy Statement for the 2014 Annual Meeting of Stockholders is incorporated by reference into Part III of this Annual Report on Form 10-K. With the exception of those portions that are specifically incorporated by reference in this Annual Report on Form 10-K, such Proxy Statement shall not be deemed filed as part of this Report or incorporated by reference herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended March 31, 2014.

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, or 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, or 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” beginning on page 6 of this report and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 16 of 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, as they speak only as of the date made. Except as required by law, we assume no duty to update or revise our forward-looking statements.

Breeze-Eastern Corporation, a Delaware corporation, designs, develops, manufactures, sells and services sophisticated engineered mission equipment for specialty aerospace and defense applications. We were originally organized in 1962 as a California corporation and reincorporated in Delaware in 1986. Unless the context otherwise requires, references to the “Company,” the “Registrant,” “Breeze-Eastern,” “we” or “us” refer to Breeze-Eastern Corporation and its consolidated subsidiaries. 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.

Our core business is aerospace and defense products. We have long been recognized as a leading global 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 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.

Products include new equipment and spare parts sales and represented approximately 72%, 75%, and 76% of our total revenues in fiscal 2014, fiscal 2013, and fiscal 2012, respectively.

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, King Stallion, Bell-Boeing V-22 Osprey, Boeing CH-47 Chinook, Eurocopter Ecureuil, Dolphin, EH-101 Merlin/Cormorant, Changhe Z-11, 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. Sales of hoist and winch products accounted for approximately 55%, 54%, and 56% of our total revenues in fiscal 2014, fiscal 2013, and fiscal 2012, respectively.

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. Sales of cargo hook products accounted for approximately 15%, 16%, and 14% of our total revenues in fiscal 2014, fiscal 2013, and fiscal 2012, respectively.

We make static-line retrieval and cargo winches for military cargo aircraft including the Boeing C-17, Alenia C-27J, CASA CN-235, CASA C-295, and Airbus A400M.

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. Sales of weapons handling products accounted for approximately 2%, 5%, and 6% of our total revenues in fiscal 2014, fiscal 2013, and fiscal 2012, respectively.

Services include overhaul and repair and engineering sales and represented 28%, 25%, and 24% of our total revenues in fiscal 2014, fiscal 2013, and fiscal 2012, respectively.

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 service centers around the world to perform these services. Overhaul and repair represented 25%, 24%, and 23% of our total revenues in fiscal 2014, fiscal 2013, and fiscal 2012, respectively.

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.

We discuss segment information in Note 14 of our “Notes to Consolidated Financial Statements” contained elsewhere in this report.

We have three major customers: the U.S. Government, United Technologies Corporation, and Finmeccanica SpA, which accounted for 30%, 14%, and 13%, respectively, of the total consolidated net sales for fiscal 2014.

Our direct sales to the U.S. Government and sales for U.S. Government and foreign government end use represented 81%, 66%, and 76% of consolidated revenue during fiscal 2014, fiscal 2013, and fiscal 2012, respectively. U.S. Government sales, both direct and indirect, are generally procured using standard government fixed price or cost reimbursable contracts. As a U.S. Government contractor, we are subject to routine audits by U.S. Government agencies.

In accordance with normal practice, contracts and orders with the U.S. Government are subject to partial or complete termination at any time, at the option of the customer. In the event of a termination for convenience by the government, there generally are provisions for recovery of our allowable incurred costs and a proportionate share of the profit or fee on the work completed, consistent with U.S. Government regulations.

We measure backlog by the amount of products or services that customers committed by contract to purchase as of a given date. Backlog at March 31, 2014 was $119,464 as compared with $115,102 at March 31, 2013 as new orders exceeded shipments in fiscal 2014. Approximately $76,454 of our backlog at March 31, 2014 is not scheduled for shipment during the next twelve months. For additional discussion on our backlog, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The various component parts and, to some extent, assembly of components and subsystems by subcontractors used by us to produce our products are generally available from more than one source. In those instances where only a single source for any material or part is available, such items can generally be redesigned to accommodate materials or parts made by other suppliers, although this may lead to lengthy delays and higher costs in meeting customer requirements. In some cases, we stock an adequate supply of the single source materials or parts for use until a new supplier can be approved.

In recent years, our revenues in the second half of our fiscal year have generally exceeded revenues in the first half. The timing of U.S. Government awards, availability of U.S. Government funding, and product deliveries are among the factors affecting the periods in which revenues are recorded. Management expects this trend to continue in fiscal 2015.

As of March 31, 2014, we had 181 salaried and hourly employees, and the United Auto Workers (UAW) represented 60 hourly employees at our facility. We reached a three-year collective bargaining agreement with the UAW effective October 1, 2013. We consider our relations, with both our union and non-union employees, to be generally satisfactory.

We currently have no operations based outside of the United States. We had export sales of $37,101, $28,936, and $31,212 in fiscal 2014, fiscal 2013, and fiscal 2012, respectively, representing 43%, 36%, and 37% of our consolidated net sales in each of those years. The risks and profitability of international sales are generally comparable with similar products sold by us in the United States. Net export sales by geographic area and customer domicile are set forth in Note 14 of our consolidated financial statements contained elsewhere in this report.

We compete in some markets with the hoist and winch business unit of the Goodrich Corporation, which was acquired by United Technologies in calendar 2012, and is part of a larger corporation that has substantially greater financial and technical resources than us. United Technologies is also our second-largest customer. We also compete in some markets for cargo hooks with Onboard Systems. Generally, competitive factors include design capabilities, product performance, delivery, and price. Our ability to compete successfully in these markets depends on our ability to develop and apply technological innovations and to expand our customer base and product lines. Technological innovation, development, and application requires significant investment and capital expenditures. While we make each investment with the intent of getting a good financial return, in some cases we may not fully recover the full investment through future sales of products or services.

We conduct extensive research and development activities, primarily for developing new or improved products, under customer-sponsored contracts and for our own investment. Research and development costs, which are charged to Engineering expense when incurred, amounted to $6,916, $7,664, and $14,702 for the years ended March 31, 2014, 2013, and 2012, respectively. Customer-sponsored research and development costs are charged to cost of sales when the associated revenue is recognized and were $1,472, $2,119, and $1,744 in fiscal 2014, fiscal 2013, and fiscal 2012, respectively.

We have been one of the market leaders since the initial development of rescue hoists for use on helicopters and have continually designed and manufactured rescue hoists since the 1940’s. Our intellectual property product knowledge enables us to continually evolve mission-critical products to meet our customers’ evolving needs. We generally retain the intellectual property rights to products we develop which typically lasts for the life of the product.

In the United States, our commercial aircraft products are required to comply with Federal Aviation Administration regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety. Internationally, similar requirements exist for airworthiness, installation and operational approvals. These requirements are generally administered by the national aviation authorities of each country and, in the case of Europe, coordinated by the European Aviation Safety Agency (EASA).

We maintain compliance with federal, state, and local laws and regulations relating to materials used in production and to the discharge of wastes, and other laws and regulations relating to the protection of the environment. The costs of such compliance at our Whippany, New Jersey facility are not material to our operations.

We are subject to federal and state requirements for protection of the environment, including those for the remediation of contaminated sites relating to predecessor entities and previously-owned subsidiaries. At various times, we have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and analogous state environmental laws, for the cleanup of contamination resulting from past disposals of hazardous wastes at certain former facilities and at sites to which we, among others, sent wastes in the past. CERCLA requires potentially responsible persons to pay for the cleanup of sites from which there has been a release or threatened release of hazardous substances. Courts have interpreted CERCLA to impose strict joint and several liability on all persons liable for cleanup costs. As a practical matter, however, at sites where there are multiple potentially responsible persons, the costs of cleanup typically are allocated among the parties according to a volumetric or other standard.

Where appropriate, we have sought contribution to remediation costs from other potentially responsible parties and made claims under available insurance policies. We also periodically assess the amount of reserves held for environmental liabilities for these sites based upon current information. While there is an inherent uncertainty in assessing the potential total cost to investigate and remediate a given site, we make a determination as to the reasonable cost of investigation and remediation of each site based upon the information available to us at that time. Furthermore, the remediation efforts for a particular site may take place over a number of years and therefore a significant portion of the expenses represented by these reserves may not be incurred for some time. Factors that affect the actual liability for these sites include changes in federal and state environmental laws resulting in more stringent remediation requirements and actual operating results from remediation efforts which vary from estimated results.

Information concerning our specific environmental liabilities and reserves is contained in Note 13 of our “Notes to Consolidated Financial Statements” contained elsewhere in this report.

We maintain a website at http://www.breeze-eastern.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, which we file with the Securities and Exchange Commission (SEC) are available on our web site, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Information that can be accessed through our website is not incorporated by reference in this Report and, accordingly, readers should not consider such information to be part of this Report. The reports noted above may also be obtained at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. The SEC also maintains a web site at www.sec.gov that contains reports, proxy statements, and information regarding SEC registrants, including Breeze-Eastern.

An investment in our common stock involves risk. You should carefully consider the following risk factors in addition to other information in this Annual Report on Form 10-K before purchasing our common stock. The risks and uncertainties described below are those that we currently deem to be material and that we believe are specific to our company and our industry. In addition to these risks, our business may be subject to risks currently unknown to us. If any of these or other risks actually occurs, our business may be adversely affected, the trading price of our common stock may decline and you may lose all or part of your investment.

A substantial amount of our revenue is derived from the U.S. Government, United Technologies Corporation, and Finmeccanica SpA. A termination or reduction in the volume of business with any of these customers would have a material adverse effect on our revenue and profits.

Approximately 30%, 14%, and 13% of our consolidated net sales in fiscal 2014 were to the U.S. Government (direct), United Technologies Corporation, and Finmeccanica SpA. Other than sales to Finmeccanica SpA, these sales are made principally for the benefit of the military services of the U.S. Department of Defense and defense organizations of other countries and are affected by, among other things, budget authorization and appropriation processes. In the event that defense expenditures are reduced for products we manufacture or services we provide and are not offset by revenues from additional foreign sales, new programs, or products or services that we currently manufacture or provide, we may experience a reduction in our revenues and earnings and a material adverse effect on our business, financial condition, and results of operations. Further, there can be no assurance that our significant customers will continue to buy our products and services at current or increased levels. Specifically, United Technologies Corporation recently acquired Goodrich Corporation which has a hoist & winch business unit, which might potentially have an impact on our sales to United Technology Corporation.

We depend heavily on government contracts that may not be fully funded or may be terminated, and the failure to receive funding or the termination of one or more of these contracts could reduce our sales and increase our costs.

Sales to the U.S. Government and its prime contractors and subcontractors represent a significant portion of our business. In fiscal 2014, sales under U.S. Government contracts represented approximately 53% of our total sales, while sales to foreign governments represented approximately 28% of our total sales. We expect that the percentage of our revenues from government contracts will continue to be substantial in the future. Government programs can be structured into a series of individual contracts. The funding of these programs is generally subject to annual congressional appropriations, and congressional priorities are subject to change. In addition, Congress may reduce expenditures for defense programs or terminate such programs at any time. A decline in government expenditures or redirection of government funding may result in a reduction in the volume of contracts awarded to us. We have resources applied to specific government contracts and if any of those contracts were terminated, we may incur substantial costs redeploying those resources.

As a U.S. Government contractor, we are subject to a number of procurement rules and regulations and any non-compliance could subject us to fines, penalties or debarment.

We must comply with and are affected by laws and regulations relating to the award, administration, and performance of U.S. Government contracts. Government contract laws and regulations affect how we conduct business with our customers and, in some instances, impose added costs on our business. A violation of specific laws and regulations could result in fines and penalties, contract termination, or debarment from bidding on future contracts. These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks, or filing false claims. We have been, and expect to continue to be, subjected to audits by government agencies. The failure to comply with the terms of government contracts could harm our business reputation and could also result in progress payments being withheld.

Our business could be adversely affected by a negative audit by the U.S. Government.

As a U.S. Government contractor, we are subject to routine audits by U.S. Government agencies, such as the Defense Contract Audit Agency (DCAA). These agencies review a contractor’s performance under its contracts, cost structure, and compliance with applicable laws, regulations, and standards. The DCAA also reviews the adequacy of a contractor’s compliance with its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation, and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed or must be refunded if already reimbursed. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties as well as administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibition from doing business with the U.S. Government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.

The U.S. Government has the right to terminate or not renew any contract with us at any time and without notice. Any such action would have a material adverse effect on our results of operations.

In some instances, laws and regulations impose terms or rights that are more favorable to the government than those typically available to commercial parties in negotiated transactions. For example, the U.S. Government may terminate any government contract and, in general, subcontracts, at its convenience as well as for default based on performance. Upon termination for convenience of a fixed-price type contract, we normally are entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process, and an allowance for profit on the contract or adjustment for loss if contract completion would have resulted in a loss. Upon termination for convenience of a cost-reimbursement contract, we normally are entitled to reimbursement of allowable costs plus a portion of the fee. Such allowable costs would normally include the cost to terminate agreements with our suppliers and subcontractors. The amount of the fee recovered, if any, is related to the portion of the work accomplished prior to termination and is determined by negotiation.

A termination arising from default could expose us to liability and have a material adverse effect on our ability to compete for future contracts and orders. In addition, on those contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could terminate a prime contract under which we are a subcontractor, irrespective of the quality of our services as a subcontractor.

In addition, our U.S. Government contracts typically span one or more base years and multiple option years. The U.S. Government generally has the right to not exercise option periods and may not exercise an option period if the U.S. Government is not satisfied with our performance on the contract.

The aircraft manufacturing industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.

Governmental agencies throughout the world, including the U.S. Federal Aviation Administration, or the FAA, prescribe standards and qualification requirements for aircraft components, including virtually all aviation products. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. We include, with some of the products we sell to our aircraft manufacturing customers, documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries. In order to sell our products, we and the products we manufacture must also be certified by our individual OEM customers. If any of the material authorizations or approvals qualifying us to supply our products is revoked or suspended, then the sale of the subject product would be prohibited by law, which would have an adverse effect on our business, financial condition, and results of operations.

From time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations, which are usually more stringent than existing regulations. If these proposed regulations are adopted and enacted, we may incur significant additional costs to achieve compliance, which could have a material adverse effect on our business, financial condition, and results of operations.

Cancellations, reductions, or delays in customer orders, contracts and anticipated contracts may adversely affect our results of operations.

Our overall operating results are affected by many factors, including the timing of orders from large customers and the timing of expenditures to manufacture parts and purchase inventory in anticipation of future sales of products and services. A large portion of our operating expenses are relatively fixed. Cancellations, reductions, or delays in customer orders, contracts and anticipated contracts could have a material adverse effect on our business, financial condition, and results of operations.

We may be required to recognize a loss contract at a future date if certain events that we currently estimate are likely to occur do not, in fact, occur.

As more fully discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Critical Accounting Policies” and in the notes to our consolidated financial statements, the earnings or losses recognized on individual contracts and the timing thereof are based on multiple estimates, including the probability of negotiating future contracts, revenues from existing contracts, costs and profitability. Although we update these estimates regularly, estimates are inherently uncertain, and our ultimate profitability on a contract may not be fully known until completion. We recognize estimated contract losses when determined, regardless of where we are in the contract cycle, and adjust contract profit estimates based on ongoing contract profitability reviews. If the estimates noted above were to change significantly, requiring us to recognize unforeseen losses, our financial condition and results of operations could be materially adversely affected.

During a period in which a contract loss is first recognized, or in a period when estimated contract profits become lower than previous estimates, income recorded on that contract in prior periods would be reversed. This could cause the profit or loss contribution from any given contract to fluctuate significantly from quarter to quarter.

Engineering product development delays or customer engineering product development contract cancellations may adversely affect our results of operations.

Our new product development requires up-front engineering research & development expenditures that impact current income and qualification units that are capitalized as intangible assets on the consolidated balance sheets if there is an existing contract or anticipated contract under a program. These engineering research & development expenditures may not result in future revenue-generating products or may not become technically viable as a result of pre-production qualification testing. These research & development expenditures are generally incurred as a part of awarded new product development for customers’ aerospace platforms. If the product being designed does not meet customer technical specifications or timely delivery needs, we may need to write-off capitalized qualification units and reimburse customers for their costs that result from our product delivery delay.

Our backlog is subject to reduction and cancellation at any time without notice, which could negatively impact our future revenues and results of operations.

Backlog represents products or services that our customers have committed by contract to purchase from us. Backlog as of March 31, 2014 was $119,464. Backlog is subject to fluctuations and is not necessarily indicative of future sales. The U.S. Government may unilaterally modify or cancel its contracts with us. In addition, under certain of our commercial contracts, our customers may unilaterally modify or terminate their orders at any time for their convenience. Accordingly, certain portions of our backlog can be cancelled or reduced at the option of the U.S. Government and commercial customers. Our failure to replace cancelled or reduced backlog could negatively impact our revenues and results of operations.

We are subject to competition from entities which could have a substantial impact on our business.

We compete in some markets with entities that are larger and have substantially greater financial and technical resources than us. Generally, competitive factors include design capabilities, product performance, delivery, and price. Our ability to compete successfully in such markets will depend on our ability to develop and apply technological innovations and to expand our customer base and product lines. In addition, the development and application of technological innovations may mandate an expenditure of significant capital which may not be recovered through future sales of products or services. There can be no assurance that we will continue to successfully compete in any or all of the businesses discussed above. Our failure to compete successfully or to invest in technology where there is no recovery through product sales could have a materially adverse effect on our profitability.

Our business and facilities are subject to numerous federal, state, and local laws and regulations relating to the use, manufacture, storage, handling, and disposal of hazardous materials and other waste products. Environmental laws generally impose liability for investigation, remediation, and removal of hazardous materials and other waste products on property owners and those who dispose of materials at waste sites whether or not the waste was disposed of legally at the time in question. We are currently addressing environmental remediation at certain former facilities, and we have been named as a potentially responsible party along with other organizations in a number of environmental clean-up sites and may be named in connection with future sites. We are required to contribute to the costs of the investigation and remediation and have taken reserves in our financial statements for future costs deemed probable and estimable for these costs. Although we have estimated and reserved for future environmental investigation and remediation costs, the final resolution of these liabilities may significantly vary from our estimates and could potentially have an adverse effect on our results of operations and financial position. Our contingencies associated with environmental matters are described in Note 13 of “Notes to Consolidated Financial Statements” which is included elsewhere in this report.

Our sales to foreign countries expose us to risks and adverse changes in local legal, tax, and regulatory schemes.

In fiscal 2014, 43% of our consolidated sales were to customers outside the United States. We expect international export sales to continue to contribute to our earnings for the foreseeable future. The export sales are subject in varying degrees to risks inherent in doing business outside the United States. Such risks include, without limitation:

Government regulations could limit our ability to sell our products outside the United States and otherwise adversely affect our business.

In fiscal 2014, approximately 35% of our sales were subject to compliance with the United States Export Administration regulations. Our failure to obtain the requisite licenses, meet registration standards or comply with other government export regulations would hinder our ability to generate revenues from the sale of our products outside the United States. Compliance with these government regulations may also subject us to additional fees and operating costs. The absence of comparable restrictions on competitors in other countries may adversely affect our competitive position. In order to sell our products in European Union countries, we must satisfy certain technical requirements. If we are unable to comply with those requirements with respect to a significant quantity of our products, our sales in Europe would be restricted. Doing business internationally also subjects us to numerous U.S. and foreign laws and regulations, including, without limitation, regulations relating to import-export control, technology transfer restrictions, foreign corrupt practices and anti-boycott provisions. Failure by us or our sales representatives or consultants to comply with these laws and regulations could result in administrative, civil or criminal liabilities and could, in the extreme case, result in suspension or debarment from government contracts or suspension of our export privileges, which would have a material adverse effect on us.

While we believe our control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.

We continue to take action to assure compliance with the internal controls, disclosure controls, and other requirements of the Sarbanes-Oxley Act of 2002. Our management, including our Chief Executive Officer and Chief Financial Officer, cannot guarantee that our internal controls and disclosure controls will prevent all possible errors or all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

The terms of our credit agreement may restrict our current and future operating and financial flexibility.

The credit agreement that is in effect with respect to our debt includes covenants that, among other things, restrict our ability to:

We may be unable to comply with the covenants under our credit agreement in the future. A failure to comply with the covenants under our credit agreement could result in an event of default. In the event of a default our lender could elect to declare all borrowings,

accrued and unpaid interest and other fees outstanding, due and payable, and require us to apply all of our available cash to repay these borrowings.

All of our operations are conducted at our Whippany, New Jersey facility. Substantial impairment of this facility as a consequence of a natural disaster, work stoppage, or other event could have a material adverse effect on our operations.

We depend on component availability, subcontractor performance, and key suppliers to manufacture and deliver our products and services.

We depend upon suppliers to deliver component parts and, to some extent, to assemble components and subsystems to manufacture our products in a timely and satisfactory manner and to remain in full compliance with applicable customer terms and conditions. We are generally subject to specific procurement requirements, which may limit the suppliers and subcontractors we may utilize. In some instances, we are dependent on sole-source suppliers. If any of these suppliers or subcontractors fails to meet our needs, developing alternatives could cause delays and increase costs in meeting customer requirements. While we may enter into long-term or volume purchase agreements with certain suppliers and take other actions to ensure the availability of needed materials, components, and subsystems, we cannot be sure that such items will be available in the quantities we require, if at all. If we experience a material supplier or subcontractor problem, the ability to satisfactorily and timely meet customer obligations could be negatively impacted, which could result in reduced sales, termination of contracts, and damage to our reputation and customer relationships. We could also incur additional costs in addressing such a problem. Any of these events could have a negative impact on our results of operations and financial condition.

Our operating results and financial condition may be adversely impacted by the current worldwide economic conditions.

We currently generate operating cash flows, which combined with access to the credit markets, provides discretionary funding capacity. However, current uncertainty in the global economic conditions could impact customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors. If economic conditions deteriorate significantly, our business could be negatively impacted from reduced demand for our products or supplier or customer disruptions.

Our success depends on our senior management personnel and our ability to attract and retain other highly qualified management personnel. We face competition for management from other companies and organizations, and therefore may not be able to retain our existing management personnel or fill new management positions or vacancies created by expansion or turnover at existing compensation levels. We have entered into employment agreements with some members of senior management and have made efforts to reduce the effect of the loss of senior management personnel through management succession planning. The loss of senior managers could have a material and adverse effect on our business. In addition, competition for qualified technical personnel in our industry is intense, and management believes that our future growth and success will depend upon the ability to attract, train, and retain such personnel.

Our profitability could be negatively affected if we fail to maintain satisfactory labor relations.

Approximately 33% of our workforce is employed under a collective bargaining agreement with the United Auto Workers (UAW), which from time to time is subject to renewal and negotiation. Although we have historically enjoyed satisfactory relations with both our unionized and non-unionized employees, if we are subject to labor actions, including work stoppages or slowdowns, we may experience an adverse impact on our operating results.

Our failure to adequately protect our intellectual property could have an adverse effect on our business.

Intellectual property is important to our success. We rely upon confidentiality procedures and contractual provisions to protect our business and proprietary technology. Our general policy is to enter into confidentiality agreements with our employees and consultants, and nondisclosure agreements with all other parties to whom we disclose confidential information. We may apply for legal protection for certain of our other intellectual property in the future. These patents, trademarks and any additional legal protection we may obtain in the future may be challenged by others or invalidated through administrative process or litigation. As a result, our means of protecting our proprietary technology and brands may be inadequate. Furthermore, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. Any such infringement or misappropriation could have a material adverse effect on our business, financial condition and results of operations.

Our business could be negatively impacted by security threats, including cyber security threats, and other disruptions.

As a defense contractor, we face various security threats, including cyber security threats to gain unauthorized access to sensitive information; threats to the security of our facility and infrastructure; and threats from terrorist acts. Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing. If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities, essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows.

Cyber security attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. These events could damage our reputation and lead to financial losses from remedial actions, loss of business or potential liability.

We use estimates when competing for contracts. Variances between actual and estimates could affect our profitability and overall financial position.

The competitive bidding process requires judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions for schedule and technical risks. Due to the size and nature of many of our contracts, the estimation of total revenues and costs at completion is complicated and subject to many variables. For example, assumptions have to be made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. Similarly, assumptions have to be made regarding the future impact of efficiency initiatives and cost reduction efforts. Incentives, awards, price escalations, or penalties related to performance on contracts are considered in estimating revenue and profit rates and are recorded when there is sufficient information to assess anticipated performance. Because of the significance of the judgments and estimation processes described above, it is possible that materially different amounts could be obtained if different assumptions were used or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances, or estimates may have a material adverse effect upon future period financial reporting and performance.

Although our common stock is traded on the NYSE MKT, it may remain relatively illiquid, or “thinly traded,” which can increase share price volatility and make it difficult for investors to buy or sell shares in the public market without materially affecting the quoted share price. Investors may be unable to buy or sell a certain quantity of our shares in the public market within one or more trading days. If limited trading in our stock continues, it may be difficult for holders to sell their shares in the public market at any given time at prevailing prices.

The prevailing market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including the following:

Our directors, officers, and principal stockholders, and certain of their affiliates, beneficially own approximately 80% of our common stock and will continue to have significant influence over the outcome of all matters submitted to the stockholders for approval, including the election of our directors.

We have adopted a shareholder rights plan which could make it more difficult for a third-party to acquire the Company.

We adopted a shareholders rights plan intended to protect us from efforts to obtain control of the Company that are inconsistent with the best interests of the Company and its stockholders. The rights will be exercisable ten days following the earlier of the public announcement that a stockholder has acquired 15% or more of our common stock without Board approval or the announcement of a tender offer which results in the ownership of 15% or more of our common stock. The rights also become exercisable if a person or group that already owns 15% or more of the Company’s common stock acquires any additional shares (other than pursuant to the Company’s employee benefit plans) without Board of Directors approval. If the rights become exercisable, all rights holders (other than the person/entity triggering the rights) will be entitled to acquire Company securities at a substantial discount. The rights may substantially dilute the stock ownership of a person or group attempting to take over the Company without the approval of the Board of Directors, the rights plan could make it more difficult for a third-party to acquire the Company or a significant percentage of the outstanding capital stock, without first negotiating with the Board of Directors. The shareholder rights plan expires July 18, 2014.

Cash dividend payments in the future may depend upon our earnings (if any), financial condition, and capital requirements. We do not have plans at this time to pay dividends.

The following table sets forth certain information concerning our sole operating facility as of March 31, 2014:

In May, 2009, we executed a 10-year lease, at market terms, for our facility in Whippany, New Jersey.

Our current business is only conducted at our Whippany, New Jersey facility. Properties owned in Saltzburg, Pennsylvania; Glen Head, New York; and Irvington, New Jersey were operated by one or more of our predecessor affiliates or parent company, TransTechnology Corporation, and are not used in our operations. The Saltzburg and Irvington properties have a zero book value. Our contingencies associated with environmental liabilities are discussed in Note 13 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

The Glen Head, New York property is subject to a sale agreement at a price of $4,000. This property is carried on our books as an asset held for sale for $3,800, which includes estimated disposal costs. Closing on the property is subject to the buyer receiving development approvals and us completing environmental obligations and reviews. The buyer has indicated to us its intent to build residential housing on the property and has been engaged in the lengthy process of securing the municipal approvals necessary to redevelop this industrial site for residential use.

We are engaged in various legal proceedings incidental to our business. Our management, after taking into consideration information provided by our legal counsel, believes that these matters will have no material effect on our consolidated financial position or the results of operations or cash flows in future periods.

We are subject to federal and state requirements for protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites. As a result, we are a party to or have our former property subject to various lawsuits or proceedings involving environmental protection matters. Due in part to their complexity and pervasiveness, such requirements have resulted in us being involved with related legal proceedings, claims, and remediation obligations. The extent of our financial exposure cannot in all cases be reasonably estimated at this time. For information regarding these matters, including current estimates of the amounts that we believe are required for remediation or clean-up to the extent estimable, see Note 13 in the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

Our common stock, par value $0.01, is listed for trading on the NYSE MKT under the trading symbol BZC. The following table sets forth the range of high and low sale prices of our common stock as reported on the NYSE MKT for the periods indicated.

As of May 27, 2014, the number of stockholders of record of the Company’s common stock was 1,258. On May 27, 2014, the closing sales price of a share of common stock was $9.58 per share.

We have not paid any cash dividends on our common stock since fiscal 2001. We currently intend to retain earnings, if any, to fund our operations. The payment of future cash dividends, if any, will be reviewed periodically by our Board of Directors and will depend upon the results of operations, financial condition, contractual and legal restrictions and other factors the Board of Directors deem relevant.

The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates such information by reference into such filing.

This stock performance graph compares the Company’s total cumulative stockholder return on its common stock during the period from April 1, 2009 through March 31, 2014, with the cumulative return on a Peer Issuer Group Index. The graph assumes a $100 investment on March 31, 2009.

The following table sets forth selected financial data for the most recent five year period ended March 31, 2014. This financial data should be read together with our consolidated financial statements and related notes, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other financial data appearing elsewhere in this report.

	Years ended March 31,
	2014		2013		2012		2011		2010
Results from Operations
Net sales	$	85,933	$	79,956	$	84,942	$	78,200	$	69,027
Gross profit		31,131		32,813		35,214		30,952		20,651
Operating income (loss)		9,089		8,190		7,022		9,457		(6,723	)
Interest expense		49		227		396		694		891
Net income (loss)		5,641		4,076		3,776		5,026		(6,043	)
Net income (loss) per share:
Basic	$	0.58	$	0.43	$	0.40	$	0.53	$	(0.64	)
Diluted		0.58		0.43		0.39		0.53		(0.64	)
Approximate Shares outstanding at year-end		9,704,000		9,544,000		9,490,000		9,429,000		9,397,000
Financial Position
Total assets	$	79,793	$	73,413	$	79,851	$	78,148	$	76,108
Working capital		39,708		34,034		39,148		32,376		25,188
Long-term debt		—		—		8,215		11,500		14,786
Stockholders’ equity		50,484		43,072		38,152		33,433		27,820
Book value per share at year end		5.20		4.51		4.02		3.55		2.96
Ratios
Current ratio		3.50		3.32		3.37		3.11		2.72

This Management’s Discussion and Analysis of Financial Condition and Results of Operation and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Annual Report on Form 10-K are based on information available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the caption “Risk Factors” beginning on page 6 of this report and elsewhere herein. The following should be read in conjunction with our annual consolidated financial statements, including the notes thereto, contained elsewhere in this report. All references to years in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to the fiscal year ended March 31 of the indicated year unless otherwise specified.

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 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 relatively high 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 engineering expense in fiscal 2012 was reported net of reimbursements from Airbus, and we received no reimbursements in fiscal 2013 and fiscal 2014.

Our consolidated financial statement preparation conforms to accounting principles generally accepted in the United States of America and requires us to make estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available at the time that they are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. To the extent that there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements will be affected. We believe the following critical accounting policies are affected by significant estimates, assumptions, and judgments used in preparing our consolidated financial statements.

Inventory. We purchase parts and materials to assemble and manufacture components for use in our products and for use by our engineering and repair and overhaul departments. The decision to purchase a set quantity of a particular material is influenced by several factors including current and projected cost, future estimated availability, production lead time, existing and projected contracts to produce certain items, and the estimated needs for our overhaul and repair business.

We value inventories using the lower of cost or market on a first-in, first-out (FIFO) basis. We reduce the carrying amount of these inventories to net realizable value based on our assessment of inventory that is considered excess or obsolete based on the historical usage. Since all of our products are produced to meet specific customer requirements, the reserve focus is on purchased and manufactured parts.

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. Therefore, each $1,000 of inventory purchased will result in an increase of $11 in inventory reserves. Management periodically reviews this methodology to ensure it is reasonably accurate and will make future adjustments as necessary through current earnings. In fiscal 2014, 2013, and 2012, we increased the inventory obsolescence reserve by $291, $540, and $496, respectively.

Inventories are discussed further in Notes 1 and 2 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

Qualification Units and Analysis of Contract Profitability. We capitalize as intangible assets engineering qualification units, which are pre-production product assets that are tested as part of qualifying production units for use on an aircraft. Prior to qualification testing, the pre-qualification units (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.

We review 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. We test 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, we analyze 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 we would accrue any additional losses on the contract.

In assessing anticipated production contracts, we evaluate 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. We 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 our negotiating either future production contracts or future sales price increases. If we determine 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 recognized at the time such determination is made which could significantly affect our results from operations.

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 we are reimbursed for costs incurred plus an agreed upon profit are recorded as costs are invoiced.

Environmental Reserves. We provide for a best estimate of environmental liability reserves when, after consultation with internal and external counsel and other environmental consultants, we determine that a liability is both probable and estimable. In many cases, we do 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 resulting in more stringent requirements, a change in the estimate of future costs that will be incurred to remediate the site, and changes in technology related to environmental remediation. Current estimated exposures related to environmental claims are discussed further in Note 13 of our “Notes to Consolidated Financial Statements” contained elsewhere in this report.

Deferred Tax Asset. See Note 5 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

Stock-Based Compensation. See Note 9 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

	Fiscal Year Ended						Increase/ (Decrease)
	March 31, 2014			March 31, 2013			$			%
Products	$	62,234		$	59,765		$	2,469			4.1	%
Services		23,699			20,191			3,508			17.4
Net sales		85,933			79,956			5,977			7.5
Products		39,585			34,255			5,330			15.6
Services		15,217			12,888			2,329			18.1
Cost of sales		54,802			47,143			7,659			16.2
Gross profit		31,131			32,813			(1,682	)		(5.1	)
As a % of net sales		36.2	%		41.0	%		N/A			(4.8	)%Pt.
Selling, general, and administrative expenses		13,880			15,246			(1,366	)		(9.0	)
Engineering expense		8,162			9,377			(1,215	)		(13.0	)
Operating income		9,089			8,190			899			11.0
Interest expense		49			227			(178	)		(78.4	)
Income tax provision		3,310			3,794			(484)			(12.8)
Effective tax rate		37.0	%		48.2	%		N/A			(11.2)	%Pt.
Net income	$	5,641		$	4,076		$	1,565			38.4	%

Net Sales. Fiscal 2014 net sales of $85,933 increased by $5,977, or 7.5%, from net sales of $79,956 in fiscal 2013.

Product sales in fiscal 2014 were $62,234, an increase of $2,469, or 4.1%, from $59,765 in fiscal 2013. The increase was primarily due to higher new equipment volume for hoists & winches to international OEMs, as we began shipping product for the Airbus

A400M in the third quarter of the 2014 fiscal year. This was partly offset by lower spare parts revenue due to terminating the services of a distributor which resulted in sales returns totaling $1,538 of spare parts. Excluding this sales return, spare parts volume increased.

Service sales in fiscal 2014 were $23,699, an increase of $3,508, or 17.4%, from $20,191 in fiscal 2013. The increase was due to higher overhaul & repair volume of hoists & winches for the U.S. Military and higher billable engineering services.

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. Recent years reported revenues in the second half of the fiscal year exceeding revenues in the first half of the fiscal year. Fiscal 2014 continued that pattern.

Cost of Sales. Products cost of sales of $39,585 in fiscal 2014 increased 15.6% from $34,255 in the prior fiscal year primarily due to greater new equipment sales. Services costs of sales of $15,217 in fiscal 2014 were $2,329 above the prior fiscal year due to greater billable engineering services costs and to higher O&R volume.

Gross profit. Gross profit of $31,131 in fiscal 2014 was $1,682, or 5.1%, lower than $32,813 in the prior fiscal year. The reduced gross profit was due to losses on billable engineering; terminating services of a distributor, as noted above, which resulted in sales returns and related reduction in gross profit of $1,033; and a greater proportion of sales of new equipment sold to large domestic and international OEMs.

As a percent of sales, the gross profit margin was 36.2% for fiscal 2014 compared with 41.0% for fiscal 2013. Product gross profit as a percent of sales declined primarily due to a greater proportion of sales of new equipment to large OEM’s and some newly-developed products which have lower profitability. Spare parts had slightly lower margins. Services gross profit as a percent of sales declined from losses on billable engineering and a greater proportion of U.S. government volume in overhaul & repair.

Operating Expenses. Total operating expenses were $22,042 or 25.7% of net sales, in fiscal 2014 compared with $24,623, or 30.8% of net sales in the prior fiscal year. The $2,581 decrease was primarily due to $1,215 in lower engineering costs and a $1,207 environmental liability reduction in the first fiscal quarter from ending our involvement with a previously-owned property in Wyoming, Illinois.

Selling, general, and administrative (“SG&A”) expenses were $13,880 in fiscal 2014 compared with $15,246 in fiscal 2013, a decrease of $1,366. The decrease was primarily due to the environmental liability reduction in the fiscal first quarter and other general reductions. Lower general and administrative costs were partly offset by spending investments in customer service and marketing and higher medical benefits costs. As a percent of sales, SG&A was 16.2% in fiscal 2014 versus 19.1% in fiscal 2013. The environmental liability reduction accounted for 1.4% of sales.

Engineering expenses were $8,162 in fiscal 2014 compared with $9,377 in fiscal 2013. The $1,215 decrease was due to lower spending on product programs that are nearing the end of their development stage such as the Sikorsky CH-53K and Airbus A400M.

Interest Expense. Interest expense was $49 in fiscal 2014 versus $227 in fiscal 2013. Prior-year interest included expensing deferred debt acquisition costs after pre-paying our term loan early in fiscal 2013.

Income tax provision. Income tax expense was $3,310 in fiscal 2014 versus $3,794 in fiscal 2013. The decrease was due to a lower effective tax rate, partly offset by higher pre-tax income from lower general & administrative and engineering expenses. Our effective tax rate decreased to 37.0% in fiscal 2014 from 48.2% in fiscal 2013. The effective tax rate in fiscal 2013 was higher due to an increase in the valuation allowance for state deferred tax assets resulting from a lower state tax rate in New Jersey. Income taxes for fiscal 2014 and fiscal 2013 were computed using the effective tax rate estimated to be applicable for the full fiscal year. Income taxes and income tax rates are discussed further in Note 5 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

Net Income. Net income was $5,641, or $0.58 per diluted share, in fiscal 2014 compared with $4,076, or $0.43 per diluted share, in fiscal 2013. The increase resulted primarily from higher pre-tax income from lower general & administrative and engineering expenses and a lower effective tax rate.

New Orders. New products and services orders received during fiscal 2014 increased 7.7% to $90,295 compared with $83,874 during fiscal 2013. The increase was due primarily to new equipment orders, partly offset by lower spare parts orders.

Orders for new equipment increased by $13,174. Significant orders received in fiscal 2014 included renegotiating the Airbus A400M military transport aircraft contract and hoist & winch for international customers.

Backlog. Backlog at March 31, 2014 was $119,464 compared with $115,102 at March 31, 2013 as new orders exceeded shipments by $4,362. Significant new orders are discussed in “New Orders” above. The backlog at March 31, 2014 and 2013 includes approximately $70,853 and $71,070, respectively, for the Airbus A400M military transport aircraft which commenced shipping in the third quarter of fiscal 2014.

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 $43,010 at March 31, 2014 is scheduled for shipment during fiscal 2015.

The book-to-bill ratio equals new orders received during a period divided by sales for the same period. 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.

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 1.1 for fiscal 2014 and 1.0 for fiscal 2013.

	Fiscal Year Ended						Increase/ (Decrease)
	March 31, 2013			March 31, 2012			$			%
Products	$	59,765		$	64,147		$	(4,382	)		(6.8	)%
Services		20,191			20,795			(604	)		(2.9	)
Net sales		79,956			84,942			(4,986	)		(5.9	)
Products		34,255			36,488			(2,233	)		(6.1	)
Services		12,888			13,240			(352	)		(2.7	)
Cost of sales		47,143			49,728			(2,585	)		(5.2	)
Gross profit		32,813			35,214			(2,401	)		(6.8	)
As a % of net sales		41.0	%		41.5	%		N/A			(0.5	)%Pt.
Selling, general, and administrative expenses		15,246			15,661			(415	)		(2.6	)
Engineering expense		9,377			12,531			(3,154	)		(25.2	)
Operating income		8,190			7,022			1,168			16.6
Interest expense		227			396			(169	)		(42.7	)
Income tax provision		3,794			2,741			1,053			38.4
Effective tax rate		48.2	%		42.1	%		N/A			6.1	%Pt.
Net income	$	4,076		$	3,776		$	300			7.9	%

Net Sales. Fiscal 2013 net sales of $79,956 decreased by $4,986, or 5.9%, from net sales of $84,942 in fiscal 2012.

Product sales in fiscal 2013 were $59,765, a decrease of $4,382, or 6.8%, from $64,147 in fiscal 2012. The decrease was primarily due to lower new equipment and spare parts volume for hoists & winches and weapons handling, partly offset by higher cargo hook volume. The decreased volume was the result of lower orders booked in the prior fiscal year because the prior fiscal year had record sales volume and included some large infrequent U.S. Government and international purchases that were not replicated in fiscal 2013.

Service sales in fiscal 2013 were $20,191, a decrease of $604, or 2.9%, from $20,795 in fiscal 2012. The decrease was due to lower engineering weapons handling services, partly offset by higher overhaul & repair volume.

Cost of Sales. Products cost of sales of $34,255 in the fiscal 2013 declined 6.1% from $36,488 in the prior fiscal year primarily due to lower product sales. Cost of services provided of $12,888 in fiscal 2013 was $352 lower than the prior fiscal year due to decreased engineering services.

Gross profit. Gross profit of $32,813 in fiscal 2013 was $2,401, or 6.8%, lower from $35,214 in the prior fiscal year. The reduced gross profit reflects the lower sales volume. As a percent of sales, the gross profit margin was 41.0% for fiscal 2013 compared with 41.5% for fiscal 2012. Gross profit as a percent of sales declined primarily due to a greater proportion of sales of new equipment, partially offset by improved spare parts margins.

Operating Expenses. Total operating expenses were $24,623, or 30.8% of net sales, in fiscal 2013 compared with $28,192, or 33.2% of net sales in the prior fiscal year. The decrease was primarily due to lower engineering costs.

Selling, general, and administrative (“SG&A”) expenses were $15,246 in fiscal 2013 compared with $15,661 in fiscal 2012, a decrease of $415. The decrease was primarily due to business strategy development costs incurred during the first quarter of fiscal 2012 that were not incurred during fiscal 2013, lower medical costs, and lower information technology costs from last year’s insourcing transition. These decreases were partly offset by CEO transition costs in fiscal 2013. As a percent of sales, SG&A was 19.1% in fiscal 2013 versus 18.4% in fiscal 2012.

Engineering expenses were $9,377 in fiscal 2013 compared with $12,531 in fiscal 2012. The $3,154 decrease was due to not repeating fiscal 2012’s $4,429 for product development discontinuance and qualification unit obsolescence costs and lower spending on development programs that ended since last year, partly offset by higher Sikorsky CH53K product development spending and by not receiving any Airbus cost reimbursement this year. Reimbursements from Airbus reduced engineering expenses in fiscal 2012 by $3,366; thus before reimbursement engineering expenses were $15,897 in fiscal 2012.

The dollar level of engineering expenses reflects continued new product development for awarded aerospace platforms, primarily the Airbus A400M and Sikorsky CH-53K.

Interest Expense. Interest expense was $227 in fiscal 2013 versus $396 in fiscal 2012. 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. Amortization of original debt acquisition costs was $55 during fiscal 2013.

Income tax provision. Income tax expense was $3,794 in fiscal 2013 versus $2,741 in fiscal 2012. The increase was due to higher pre-tax income due primarily to lower engineering expenses more than offsetting lower gross profit. Our effective tax rate increased primarily from establishing a valuation allowance for state deferred tax assets. Income taxes for fiscal 2013 and fiscal 2012 were computed using the effective tax rate estimated to be applicable for the full fiscal year. Income taxes and income tax rates are discussed further in Note 5 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

Net Income. Net income was $4,076, or $0.43 per diluted share, in fiscal 2013 compared with $3,776, or $0.39 per diluted share, in fiscal 2012. The increase resulted primarily from lower engineering expenses more than offsetting lower gross profit.

New Orders. New products and services orders received during fiscal 2013 increased 29.1% to $83,874 compared with $64,975 during fiscal 2012. The increase was due primarily to new equipment from booking H-60 Multi-Year VIII from Sikorsky as well as Boeing and U.S. Military orders plus increases in overhaul & repair, spare parts, and engineering.

Orders for new equipment increased by $14,972. Significant orders received in fiscal 2013 included $25,400 from the U.S. Government, $12,500 for Sikorsky hoist and winch equipment and spare parts as well as cargo hooks, and $8,000 for Transaero hoist and winch spare parts and equipment.

Backlog. Backlog at March 31, 2013 was $115,102 compared with $111,184 at March 31, 2012 as new orders exceeded shipments by $3,918. Significant new orders are discussed in “New Orders” above. The backlog at March 31, 2013 and 2012 includes approximately $71,070 and $71,343, respectively, for the Airbus A400M military transport aircraft that began shipping in calendar 2013.

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 $35,824 at March 31, 2013 was scheduled for shipment during fiscal 2014.

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 1.0 for fiscal 2013 and 0.8 for fiscal 2012.

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 31, 2013 is $250.

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 6 of the “Notes to 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 several of our former parent company’s facilities that were never required for our current operations. In fiscal 2015, we anticipate spending approximately $1,673 on environmental characterization and remediation costs. These costs will be charged against our environmental liability reserve and will not impact income.

Working capital at March 31, 2014 was $39,708, an increase of $5,674 from $34,034 at March 31, 2013. The ratio of current assets to current liabilities was 3.5:1.0 at March 31, 2014 compared with 3.3:1.0 at the beginning of fiscal 2014. The increased working capital primarily resulted from higher accounts receivable of $8,236 due to fiscal fourth quarter sales being $6,321 higher than the prior-year fiscal fourth quarter. This was partially offset by a $2,149 net utilization and reclassification to long term of the current deferred tax asset.

Accounts receivable days outstanding were 60.4 days at March 31, 2014 and 51.1 days at March 31, 2013. Inventory turnover was 3.2 turns in fiscal 2014 and 2.7 turns in fiscal 2013. These accounts receivables and inventory velocity measures are based on fiscal fourth quarter averages.

Fiscal 2014 and fiscal 2013 capital expenditures-operations were $997 and $458, respectively. Spending for fiscal 2014 was primarily for production test equipment and trade show equipment, and spending for fiscal 2013 was primarily for production test equipment and information technology. Capitalized qualification units and pre-qualification assets spending in fiscal 2014 and 2013 were $1,520 and $2,513, respectively. The decrease reflects us nearing the end of some significant new product development programs.

The Revolving Credit Facility is discussed in Note 6 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

The Interest Rate Swap is discussed in Note 6 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

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

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 March 31, 2014 and March 31, 2013, the aggregate environmental liability was $10,323 and $12,684, respectively. The liability is classified in other current liabilities and other long-term liabilities on the consolidated balance sheets. Separately, environmental cost-sharing with third parties of approximately $1,918 and $1,472 at March 31, 2014 and March 31, 2013, respectfully, is included in other current assets and other long term assets, net of fees to be paid to a third party relating to this arrangement. The Company’s environmental liability reserves are not reduced for any potential cost-sharing reimbursements.

In fiscal 2014 and fiscal 2013, we spent $1,487 and $1,245, respectively, on environmental costs. We have a detailed plan to manage our environmental exposure on each of our properties. Based on this plan, we anticipate spending approximately $1,673 on environmental matters in fiscal 2015. 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.

In March 2014, we reached an agreement in principle with the U.S. Government with respect to environmental response costs for the Fed Labs site subject to the 2003 Consent Order. Under the agreement, which was formally executed in the first quarter of fiscal 2015, the U.S. Government will pay an amount equal to approximately 26% of the environmental response costs incurred prior to December 31, 2012 and 33.5% of the ongoing environmental response costs incurred thereafter. The U.S. Government cost-sharing receivable of $1,152, net of fees to be paid to a third party relating to this arrangement, recorded in March 2014, increased other current assets and other long term assets by $793 and $359, respectively, on the consolidated balance sheets.

Environmental matters are discussed in Note 13 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

Litigation – Litigation is discussed in Note 13 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

The recent accounting pronouncements are discussed in Note 1 of the “Notes to Consolidated Financial Statements” contained elsewhere in this report.

As of March 31, 2014, 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 March 31, 2014, we had no borrowings under our Revolving Credit Facility.

At times we maintain our cash in bank deposit accounts in excess of the FDIC insured amount, which effective January 31, 2013 was $250.

We have audited the accompanying consolidated balance sheets of Breeze-Eastern Corporation (the “Company”) as of March 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, cash flows and stockholders’ equity for each of the years in the three-year period ended March 31, 2014. Our audits also included the financial statement schedule as of and for the years listed in the index at Item 15(a) 2 on page 54. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Breeze-Eastern Corporation as of March 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Breeze-Eastern Corporation’s internal control over financial reporting as of March 31, 2014, based on the criteria established in the 1992 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 5, 2014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We have audited Breeze-Eastern Corporation’s (the “Company”) internal control over financial reporting as of March 31, 2014, based on criteria established in the 1992 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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

In our opinion, Breeze-Eastern Corporation maintained, in all material aspects, effective internal control over financial reporting as of March 31, 2014, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of March 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, cash flows and stockholders’ equity, and the related financial statement schedule for each of the years in the three-year period ended March 31, 2014 of the Company, and our report dated June 5, 2014 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

	MARCH 31,
ASSETS	2014			2013
CURRENT ASSETS:
Cash	$	6,021		$	6,688
Accounts receivable (net of allowance for doubtful accounts of $323 and $292 in 2014 and 2013, respectively)		24,191			15,955
Inventories-net		18,909			17,790
Prepaid expenses and other current assets		1,868			1,506
Deferred income taxes		4,608			6,757
Total current assets		55,597			48,696
PROPERTY:
Machinery and equipment		5,749			4,967
Furniture, fixtures and information systems		8,008			7,978
Leasehold improvements		5,709			5,644
Construction in progress		301			181
Total		19,767			18,770
Less accumulated depreciation and amortization		13,435			12,084
Property – net		6,332			6,686
OTHER ASSETS:
Deferred income taxes		4,197			4,289
Goodwill		402			402
Real estate held for sale		3,800			3,800
Qualification units and pre-qualification assets – net		4,385			4,350
Other		5,080			5,190
Total other assets		17,864			18,031
TOTAL	$	79,793		$	73,413
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITES:
Revolving credit facility	$	—		$	—
Current portion of long-term debt		—			—
Accounts payable – trade		7,442			5,526
Accrued compensation		2,875			3,325
Accrued income taxes		358			741
Other current liabilities		5,214			5,070
Total current liabilities		15,889			14,662
LONG-TERM DEBT PAYABLE TO BANKS		—			—
OTHER LONG-TERM LIABILITIES		13,420			15,679
COMMITMENTS AND CONTINGENCIES (Notes 12 and 13)		—			—
TOTAL LIABILITIES		29,309			30,341
STOCKHOLDERS’ EQUITY
Preferred stock – authorized, 300,000 shares; none issued		—			—
Common stock – authorized, 100,000,000 shares of $.01 par value; issued, 10,148,944 and 9,987,200 shares in 2014 and 2013, respectively		101			100
Additional paid-in capital		98,707			97,113
Accumulated deficit		(41,344	)		(46,985	)
Accumulated other comprehensive income (loss)		3			(184	)
		57,467			50,044
Less treasury stock, at cost – 445,067 and 443,678 shares in 2014 and 2013, respectively		(6,983	)		(6,972	)
Total stockholders’ equity		50,484			43,072
TOTAL	$	79,793		$	73,413

	Years ended March 31,
	2014		2013		2012
Net sales	$	85,933	$	79,956	$	84,942
Cost of sales		54,802		47,143		49,728
Gross profit		31,131		32,813		35,214
Selling, general and administrative expenses		13,880		15,246		15,661
Engineering expense		8,162		9,377		12,531
Operating income		9,089		8,190		7,022
Interest expense		49		227		396
Other expense – net		89		93		109
Income before income taxes		8,951		7,870		6,517
Income tax provision		3,310		3,794		2,741
Net income	$	5,641	$	4,076	$	3,776
Earnings per common share:
Basic net income per share:	$	0.58	$	0.43	$	0.40
Diluted net income per share:	$	0.58	$	0.43	$	0.39
Weighted-average basic shares outstanding		9,643,000		9,511,000		9,473,000
Weighted-average diluted shares outstanding		9,757,000		9,573,000		9,593,000

	Years ended March 31,
	2014			2013			2012
Cash flows from operating activities:
Net income	$	5,641		$	4,076		$	3,776
Adjustments to reconcile net income to net cash provided by operating activities:
Write-off of engineering project development qualification units		399			398			4,429
Shipped qualification assets		747			124			—
Depreciation and amortization		1,699			1,475			1,709
Non-cash interest expense		333			393			419
Stock based compensation		672			813			675
Provision for losses on accounts receivable		31			17			62
Deferred taxes-net		2,127			2,462			2,654
Changes in assets and liabilities:
(Increase) decrease in accounts receivable and other receivables		(8,267)			3,431			(943	)
(Increase) decrease in inventories		(1,119)			(3,816	)		430
(Increase) decrease in other assets		(228)			(597	)		511
Increase (decrease) in accounts payable		1,916			(253	)		(2,262	)
Increase (decrease) in other liabilities		(2,980)			(1,029	)		(1,151	)
Net cash provided by operating activities		971			7,494			10,309
Cash flows from investing activities:
Capital expenditures		(997	)		(458	)		(726	)
Capitalized qualification units and pre-qualification assets		(1,520	)		(2,513	)		(2,654	)
Net cash used in investing activities		(2,517	)		(2,971	)		(3,380	)
Cash flows from financing activities:
Payments on long-term debt		—			(10,679	)		(821	)
Net borrowings (repayments) of other debt		—			—			—
Payment of debt issue costs		(33)			—			—
Exercise of stock options		912			161			194
Net cash provided by (used in) financing activities		879			(10,518	)		(627	)
(Decrease) increase in cash		(667	)		(5,995	)		6,302
Cash at beginning of year		6,688			12,683			6,381
Cash at end of year	$	6,021		$	6,688		$	12,683
Supplemental information:
Interest payments	$	39		$	92		$	305
Income tax payments		1,909			806			176
Non-cash financing activity for stock option exercise		—			122			82

	Common Stock				Treasury Stock						Additional Paid-In		Accumulated			Accumulated Other Comprehensive Income
	Shares		Amount		Shares			Amount			Capital		Deficit			(Loss)			Total
BALANCE, MARCH 31, 2011		9,846,003	$	98		(416,967	)	$	(6,749	)	$	95,068	$	(54,837	)	$	(147	)	$	33,433
Net income		—		—		—			—			—		3,776			—			3,776
Issuance of stock under stock option plan		37,500		1		(9,592	)		(82	)		276		—			—			195
Issuance of stock under compensation and bonus plan		33,352		—		(145	)		—			—		—			—			—
Stock based compensation expense		—		—		—			—			675		—			—			675
Other comprehensive income		—		—		—			—			—		—			73			73
BALANCE, MARCH 31, 2012		9,916,855		99		(426,704	)		(6,831	)		96,019		(51,061	)		(74	)		38,152
Net income		—		—		—			—			—		4,076			—			4,076
Issuance of stock under stock option plan		46,411		1		(14,739	)		(123	)		281		—			—			159

Issuance of stock under compensation and bonus plan		23,934		—		(2,235	)		(18	)		—		—			—			(18	)
Stock based compensation expense		—		—		—			—			813		—			—			813
Other comprehensive loss		—		—		—			—			—		—			(110	)		(110	)
BALANCE, MARCH 31, 2013		9,987,200		100		(443,678	)		(6,972	)		97,113		(46,985	)		(184	)		43,072
Net income		—		—		—			—			—		5,641			—			5,641
Issuance of stock under stock option plan		130,548		1		—			—			911		—			—			912
Issuance of stock under compensation and bonus plan		31,196		—		(1,389	)		(11	)		11		—			—			—
Stock based compensation expense		—		—		—			—			672		—			—			672
Other comprehensive income		—		—		—			—			—		—			187			187
BALANCE, MARCH 31, 2014		10,148,944	$	101		(445,067	)	$	(6,983)		$	98,707	$	(41,344)		$	3		$	50,484

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 – 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 – 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, judgments, and assumptions include estimated revenue from unpriced change orders and costs to complete used to assess potential losses on 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 – 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 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 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 – 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 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.

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, 2014, 2013, and 2012 was $1,351, $1,392, and $1,457, respectively.

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 – 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, 2014, the Company tested its goodwill for impairment and determined that it did not have an impairment.

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, 2014, 2013, and 2012 was $339, $73, and $243, 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.

During fiscal 2014, fiscal 2013 and fiscal 2012, the Company expensed $399, $106 and $3,165, respectively, of costs for impairment of qualification units that became technically obsolete (Level 3 valuation see Note 7). These amounts are included in operating expenses on the consolidated statements of operations.

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 generally 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.

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 – 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”) – 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:

During the years ended March 31, 2014, 2013 and 2012, options to purchase 169,000 shares, 733,000 shares and 285,000 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 – 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, 2014 and 2013 are summarized as follows:

Research, Development, and Engineering Costs – Research and development costs, which are charged to engineering expense when incurred, amounted to $6,916, $7,664, and $14,702 for the years ended March 31, 2014, 2013, and 2012, respectively.

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, 2014, 2013 and 2012 were $266, $202, and $194, respectively.

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.

New Accounting Standards – 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 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

The consolidated effective tax rates differ from the federal statutory rates as follows:

	2014			2013
Assets:
Current:
Bad debts	$	127		$	—
Employee benefit accruals		251			279
Environmental reserves		(125)			1,571
Inventory		1,158			1,231
State taxes		1,812			1,744
Alternative minimum tax credit carryforward		130			847
Other		1,255			1,085
Total current		4,608			6,757
Noncurrent:
Bad debts		1,062			1,177
Employee benefit accruals		396			494
Environmental reserves		3,352			1,753
Property		(348	)		1,448
Valuation allowance		(265	)		(583	)
Total noncurrent		4,197			4,289
Total net assets	$	8,805		$	11,046

The Company has an Alternative Minimum Tax Credit of approximately $130 and is available to reduce future federal taxes. A valuation allowance of $265 was established in a prior year 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.

In fiscal 2013 the Company’s effective tax rate increased primarily due to establishing a valuation allowance 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. In fiscal 2014 the valuation allowance was reduced as a result of the movement of state deferred taxes and the impact from various state tax rate adjustments.

At March 31, 2014, the Company had no unrecognized tax benefits, and the Company does not expect the liability for uncertain tax positions to increase during the next fiscal year.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company’s tax years for fiscal 2011 through the present are subject to examination by the tax authorities. With few exceptions, the Company is no longer subject to United States federal, state, local or foreign examinations by tax authorities for years before fiscal 2011.

The Company policy is to recognize interest and penalties, related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties, if incurred, are included within the related tax liability line in the consolidated balance sheets.

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 March 31, 2014, 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 fiscal 2014, the Revolving Credit Facility had a blended interest rate of approximately 0.129%, 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 March 31, 2014, 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. At March 31, 2014, the Company was in compliance with the covenant provisions of the Facility.

Amortization of loan origination fees on the Revolving Credit Facility and the Former Senior Credit Facility (see below) amounted to $19, $150, and $116 for the fiscal years ended March 31, 2014, 2013 and 2012, respectively, and is included in interest expense.

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.

Interest Rate Swap – The Former Senior Credit Facility required the Company to enter into an interest rate swap for at least three years in an amount not less than 50% of the term loan for the first two years and 35% of the term loan for the third year. An interest rate swap, a type of derivative financial instrument, is used to minimize the effects of interest rate fluctuations on cash flows. The Company does not use derivatives for trading or speculative purposes. In September 2008, the Company entered into a three year interest rate swap to exchange floating rate for fixed rate interest payments on the term loan as required by the Company’s Senior Credit Facility. The swap’s net effect of the spread between the floating rate (30 day LIBOR) and the fixed rate (3.25%), was settled monthly, and was reflected as an adjustment to interest expense in the period incurred. The adjustment to record the swap at its fair value was included in accumulated other comprehensive loss, net of tax. The Company reduced its existing unrealized loss on the interest rate swap during fiscal 2012. The interest rate swap expired in August 2011.

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 input and judgments and the significance of any unobservable inputs and data.

The carrying amount reported in the 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 follows guidance issued by 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 each of the periods ended March 31, 2014, 2013, and 2012, includes $424, $446, and $392, respectively, net of tax, of stock-based compensation expense. Stock-based compensation expense is recorded in selling, general and administrative expense. Additional compensation cost will be recognized as new options are awarded. The Company has not made any material modifications to its stock-based compensation plans.

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 year 2006 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.

Pursuant to the terms of an employment agreement, effective May 22, 2012, between the Company and Brad Pedersen, President and Chief Executive Officer of the Company, the Company granted to Mr. Pedersen an option to purchase 400,000 shares, which option has an exercise price of $8.10.

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, 77,000 of the total 551,000 options granted in fiscal 2013 and all of the options granted in fiscal 2012. 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. In fiscal 2012, the Black-Scholes weighted average values per option granted were $2.75, $2.58, $2.72, $2.81, and $2.13. 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	%
2012 $2.75 value per option		0.0	%		25.6	%		1.5	%		7.0		0.0	%
2012 $2.58 value per option		0.0	%		25.8	%		1.6	%		7.0		0.0	%
2012 $2.72 value per option		0.0	%		25.8	%		1.6	%		7.0		0.0	%
2012 $2.81 value per option		0.0	%		25.4	%		1.9	%		7.0		0.0	%
2012 $2.13 value per option		0.0	%		25.3	%		1.9	%		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:

	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

	Number Of Shares			Aggregate Intrinsic Value		Approximate Remaining Contractual Term (Years)		Weighted- Average Exercise Price
Outstanding at March 31, 2011		674,911		$	934		6	$	8.03
Granted		184,000			—		10	$	8.64
Exercised		(37,500	)	$	78		—	$	7.36
Canceled or expired		(61,834	)		—		—	$	8.54
Outstanding at March 31, 2012		759,577		$	800		7	$	8.17
Granted		551,000			—		10	$	8.07
Exercised		(46,411	)	$	35		—	$	6.07
Canceled or expired		(32,668	)		—		—	$	8.51
Outstanding at March 31, 2013		1,231,498		$	720		7	$	8.20
Granted		158,000			—		10	$	8.58
Exercised		(130,548	)	$	253		—	$	6.98
Canceled or expired		(407,785	)		—		—	$	8.84
Outstanding at March 31, 2014		851,165		$	1,516		8	$	8.15
Options exercisable at March 31, 2014		389,832		$	779		7	$	7.99
Unvested options expected to become exercisable after March 31, 2014		461,333		$	737		9	$	8.28
Shares available for future option grants at March 31, 2014 (a)		558,113

There were 158,000 and 551,000 options granted during fiscal 2014 and fiscal 2013, respectively. The weighted average grant date fair value of options issued during the year ended March 31, 2014 and 2013 was $8.58 and $8.07, respectively.

Cash received from stock option exercises during the fiscal 2014 and fiscal 2013 was approximately $912 and $161, respectively. In lieu of a cash payment for stock option exercises, the Company received 14,739 shares of common stock in fiscal 2013 which were retired into treasury, valued at the price of the common stock at the transaction date. The aggregate intrinsic value of options exercised during fiscal 2014 was approximately $253. 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 fiscal 2014, 2013, and 2012, compensation expense associated with stock options was $468, $626, and $330, respectively, before taxes of $173, $283 and $138, respectively, and was recorded in selling, general, and administrative expense. As of March 31, 2014, there was approximately $597 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 one year.

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. Other than the restricted stock granted in fiscal 2012 and fiscal 2013, 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 officers and employees in fiscal 2012 contain forfeiture and transfer restrictions that lapse after six months.

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 fiscal 2014, 2013, and 2012, compensation expense related to restricted stock awards recorded in selling, general and administrative expenses was $204, $187, and $345, respectively, before taxes of $76, $84, and $145, respectively. As of March 31, 2014, there was approximately $152 of unrecognized compensation cost related to non-vested restricted stock awards. This cost is expected to be recognized over a period of approximately one year.

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 $824, $741, and $707 in 2014, 2013, and 2012, respectively.

The Company provides postretirement benefits to certain union employees from a previous plan that existed a number of years ago. The primary cost is for 8 people with medical benefits. 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 and its subsidiary, the Selling 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 $3,479 and $3,266 as of March 31, 2014 and 2013, respectively. See Notes 3 and 8. 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 following table sets forth the Pension Plan’s funded status and amounts recognized related to the Pension Plan and the postretirement benefit plan in the consolidated financial statements as of March 31:

	Postretirement Benefits						Pension Plan
	2014			2013			2014			2013
Change in benefit obligation
Benefit obligation at beginning of year	$	948		$	759		$	3,266		$	3,207
Service cost		—			—			—			—
Interest cost		30			34			115			140
Actuarial (gain)/loss		(271)			197			153			316
Foreign currency exchange rate changes		—			—			236			(126	)
Benefits paid		(33	)		(42	)		(291	)		(271	)
Benefit obligation at end of year		674			948			3,479			3,266
Change in plan assets
Fair value of plan assets at beginning of year		—			—			—			—
Employer contributions		33			42			—			—
Benefits paid		(33	)		(42	)		—			—
Fair value of plan assets at end of year		—			—			—			—
Under funded status at end of year	$	(674	)	$	(948	)	$	(3,479	)	$	(3,266	)

The accumulated benefit obligation for the postretirement benefit plan was $674 and $948 at March 31, 2014 and 2013, respectively.

The estimated net loss, prior service cost, and transition obligation for the postretirement benefit plan that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year are $0, $0, and $0, respectively.

Assumed health care cost trend rates for the postretirement benefit plan at March 31:

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on the postretirement benefit plan:

The Company expects to contribute $23 to its postretirement benefit plan in fiscal 2015.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

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. 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 consolidated financial statements and are within management’s expectations. As of March 31, 2014, the Company had no other significant concentrations of credit risk.

The Company conducts all of its operations from a leased facility, which lease expires in fiscal 2020. In addition, the Company leases various office equipment under operating leases, which expire at various dates through fiscal 2017. All operating leases may include renewals and escalations.

The following is a summary of rent expense under operating leases for the years ended March 31:

At March 31, 2014, the Company and its subsidiaries have minimum rental commitments under non-cancelable operating leases as follows:

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 March 31, 2014 and 2013, the aggregate environmental liability was $10,323 and $12,684, respectively, included in other current liabilities and other long term liabilities on the consolidated balance sheets, before cost-sharing of approximately $1,918 and $1,472 at March 31, 2014 and March 31, 2013, respectfully, that is included in other current assets and other long term assets, net of fees to be paid to a third party relating to this arrangement. The Company’s environmental liability reserves are not reduced for any potential cost-sharing reimbursements.

In fiscal 2014 and fiscal 2013, the Company spent $1,487 and $1,245, respectively, on environmental costs. These costs are charged against the environmental liability reserve and will not impact net 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 eight 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 $3,154 for the Glen Head site at March 31, 2014. 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.

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 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.

In March 2014, the Company reached an agreement in principle with the U.S. Government with respect to environmental response costs for the Fed Labs site subject to the 2003 Consent Order. Under the agreement, which was formally executed in the first quarter of fiscal 2015, the U.S. Government will pay an amount equal to approximately 26% of the environmental response costs incurred prior to December 31, 2012 and 33.5% of the ongoing environmental response costs incurred thereafter. The U.S. Government cost-sharing receivable of $1,152, net of fees to be paid to a third party relating to this arrangement, recorded in March 2014, increased other current assets and other long term assets by $793 and $359, respectively, on the consolidated balance sheets.

At March 31, 2014, the environmental liability reserve at Federal Labs was $4,954. 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.

During fiscal 2014, 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 $2,215 at March 31, 2014.

Certain other claims, suits, and complaints arising in the ordinary course of business have been filed or are pending against us. We believe, after consultation with legal counsel handling these specific matters, all such matters are reserved for or adequately covered by insurance or, if not so covered, are without merit or are of such kind, or involve such amounts, as would not be expected to have a material effect on our financial position or results of operations if determined adversely against us.

The Company’s 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 greater than 10% of total revenues derived from one customer are summarized as follows:

Amounts derived from one customer greater than 10% of total accounts receivable are summarized as follows:

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

	First Quarter			Second Quarter			Third Quarter		Fourth Quarter			Total
2014
Net sales	$	19,568		$	15,464		$	22,628	$	28,273	(b)	$	85,933
Gross profit		6,805			5,413			8,439		10,474	(b)		31,131
Operating income (loss)		2,253	(a)		(305	)		2,725		4,416			9,089
Net income (loss)		1,373			(217	)		1,670		2,815			5,641
Basic earnings (loss) per share:	$	0.14		$	(0.02	)	$	0.17	$	0.29		$	0.58
Diluted earnings (loss) per share:	$	0.14		$	(0.02	)	$	0.17	$	0.29		$	0.58

	First Quarter			Second Quarter		Third Quarter		Fourth Quarter		Total
2013
Net sales	$	14,413		$	23,421	$	20,170	$	21,952	$	79,956
Gross profit		5,511			9,829		8,630		8,843		32,813
Operating income (loss)		(1,230	)		3,555		2,987		2,878		8,190
Net income (loss)		(828	)		2,039		1,709		1,156		4,076
Basic earnings (loss) per share:	$	(0.09	)	$	0.21	$	0.18	$	0.12	$	0.43
Diluted earnings (loss) per share:	$	(0.09	)	$	0.21	$	0.18	$	0.12	$	0.43

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 Rules 13a-15(e) or 15(d)-15(e)) as of the end of the period covered by this report pursuant to Rule 13a-15(b). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2014, 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 Securities Exchange Act of 1934 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.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and that our receipts and expenditures are being made only in accordance with authorization of management and our Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material adverse effect on the consolidated financial statements.

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

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2014 using criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in the 1992 Internal Control-Integrated Framework. Our management has concluded that our internal control over financial reporting was effective as of March 31, 2014. In addition, our independent registered public accounting firm of Marcum LLP has issued an attestation report on our internal control over financial reporting, which is included herein.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The information required by this item will be set forth in our definitive proxy statement with respect to our 2014 annual meeting of stockholders to be filed not later than 120 days after March 31, 2014 and is incorporated herein by this reference.

Consolidated Statements of Operations for the years ended March 31, 2014, 2013, and 2012

Consolidated Statements of Comprehensive Income for the years ended March 31, 2014, 2013, and 2012

Consolidated Statements of Cash Flows for the years ended March 31, 2014, 2013, and 2012

Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2014, 2013, and 2012

Schedule II — Consolidated Valuation and Qualifying Accounts for the years ended March 31, 2014, 2013, and 2012.

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

	Balance		Charged		Charged				Balance
	At		to		to				At
	Beginning of		Costs and		Other				End of
Description	Period		Expenses		Accounts		Deductions		Period
2014
Allowances for doubtful accounts	$	292	$	31	$	—	$	—	$	323
Inventory reserves		3,116		291		—		478		2,929
Environmental reserves		12,684		333		—		2,694		10,323
Allowance for tax loss valuation		583		—		—		318		265
2013
Allowances for doubtful accounts	$	283	$	17	$	—	$	8	$	292
Inventory reserves		2,694		540		—		118		3,116
Environmental reserves		13,535		394		—		1,245		12,684
Allowance for tax loss valuation		265		318		—		—		583
2012
Allowances for doubtful accounts	$	235	$	62	$	—	$	14	$	283
Inventory reserves		2,611		496		—		413		2,694
Environmental reserves		14,293		419		—		1,177		13,535
Allowance for tax loss valuation		265		—		—		—		265

The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.

Exhibit No.		Description

3.1		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2005)

3.2		Certificate of Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed with the SEC on October 13, 2006)

3.3		Certificate of Designation, Rights, Preferences of Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K, filed with the SEC on July 19, 2011)

3.4		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2008)

3.5		Amendment No. 1 to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K, filed with the SEC on February 2, 2012)

4.1		Rights Agreement, dated as of July 14, 2011 effective as of July 18, 2011 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 July 19, 2011)

4.2		Amendment No. 1 to Rights Agreement, dated January 14, 2013 between Breeze-Eastern Corporation and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K, filed with the SEC on January 14, 2013)

4.3		Amendment No. 2 to Rights Agreement, dated October 29, 2013 between Breeze-Eastern Corporation and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K, filed with the SEC on October 31, 2013)

10.1*		1999 Long Term Incentive Plan (incorporated by reference to Exhibit 10.23 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 1999)

10.2*		2004 Long Term Incentive Plan (incorporated by reference to Annex A to the Company’s definitive proxy statement for its 2004 annual meeting of stockholders)

10.3*		Form of Stock Option Agreement used under the 2004 Long Term Incentive Plan (incorporated by reference to Exhibit 10.17 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2006)

10.4*		Form of Restricted Stock Award Agreement used under the 2004 Long Term Incentive Plan (incorporated by reference to Exhibit 10.18 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2006)

10.5*		2006 Long Term Incentive Plan of the Company (incorporated by reference to Annex A to the Company’s definitive proxy statement for its 2006 annual meeting of stockholders)

10.6*		Form of Stock Option Agreement under the 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 10.34 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2007)

10.7*		Form of Restricted Stock Award Agreement under the 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 10.35 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2007)

10.8		Credit Agreement by and among the Company, as Borrower, the Guarantors that are signatories thereto, as the Guarantors, T.D. Bank, N.A, as a Lender, PNC Bank, National Association, as a Lender and the Administrative Agent for the Lenders, and PNC Capital Markets, LLC, as Arranger, dated as of August 28, 2008 and expired August 26, 2013 (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K, filed with the SEC on August 29, 2008)

10.9		Net Lease Agreement between the Company and 35 Melanie Lane, L.L.C., dated as of May 13, 2009 (incorporated by reference to Exhibit 10.34 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2009)

10.10		First Amendment to Credit Agreement by and among the Company, as Borrower, the Guarantors that are parties thereto, the Lenders that are Parties thereto, as the Lenders, and PNC Bank, National Association, as Administrative Agent, dated as of August 5, 2009 and expired August 26, 2013 (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K, filed with the SEC on August 7, 2009)

Exhibit No.		Description

10.11*		Employment Agreement between the Company and Mark D. Mishler, dated December 10, 2009 (incorporated by reference to Exhibit 10.38 to the Company’s current report on Form 8-K, filed with the SEC on January 7, 2010)

10.12*		Stock Option Agreement between the Company and Mark D. Mishler, dated January 6, 2010 (incorporated by reference to Exhibit 10.21 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2010)

10.13*		Form of Restricted Stock Award Agreement under the 2006 Long Term Incentive Plan between the Company and the Board of Directors (incorporated by reference to Exhibit 10.22 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2011)

10.14*		2012 Incentive Compensation Plan (incorporated by reference to Appendix C to the Company’s definitive proxy statement for its 2012 annual meeting of stockholders)

10.15*		Employment Agreement, effective as of May 22, 2012, between the Company and Brad Pedersen (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, filed with the SEC on May 24, 2012)

10.16*		Options to purchase Common Stock of the Company, issued to Brad Pedersen on May 22, 2012 (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K, filed with the SEC on May 24, 2012)

10.17*		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q for the quarter ended December 31, 2012)

10.18		Revolving Credit Loan Agreement by and among the Company, as Borrower, and Bank of America, N.A., as Lender dated as of August 26, 2013 (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K, filed with the SEC on August 28, 2013)

21.1		Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2010)

23.1**		Consent of Independent Registered Public Accounting Firm

31.1**		Certification of Chief Executive Officer pursuant to Sarbanes-Oxley Act of 2002 Section 302

31.2**		Certification of Chief Financial Officer pursuant to Sarbanes-Oxley Act of 2002 Section 302

32.1**		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Sarbanes Oxley Act of 2002 Section 906

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

*** The following financial information from this Annual Report on Form 10-K for the fiscal year ended March 31, 2014, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) Consolidated Statements of Operations for the years ended March 31, 2014, 2013, and 2012 (ii) Consolidated Statements of Comprehensive Income for the years ended March 31, 2014, 2013, and 2012, (iii) Consolidated Balance Sheets at March 31, 2014, and 2013, (iv) Consolidated Statements of Cash Flows for the years ended March 31, 2014, 2013, and 2012, (v) Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2014, 2013, and 2012 and (vi) the Notes to the Consolidated Financial Statements

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

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

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)

Common Stock, par value $0.01		NYSE MKT
(Title of class)		(Name of Exchange on Which Registered)

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	x

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	13
Item 2.	Properties	13
Item 3.	Legal Proceedings	13
Item 4.	Mine Safety Disclosures	14
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	15
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	51
Item 9A.	Disclosure Controls and Procedures	51
Item 9B.	Other Information	52
PART III
Item 10.	Directors and Executive Officers of the Registrant	53
Item 11.	Executive Compensation	53
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
Item 13.	Certain Relationships and Related Transactions; Director Independence	53
Item 14.	Principal Accountant Fees and Services	53
PART IV
Item 15.	Exhibits and Financial Statement Schedules	54

Location		Use of Premises		Owned or Leased		Sq. Ft
Whippany, New Jersey		Executive offices and manufacturing plant		Leased		115,335

	High		Low
Fiscal 2013
First Quarter	$	8.55	$	6.03
Second Quarter		7.90		6.41
Third Quarter		8.35		7.50
Fourth Quarter		8.26		7.90
Fiscal 2014
First Quarter	$	9.30	$	8.13
Second Quarter		9.92		8.65
Third Quarter		9.88		9.00
Fourth Quarter		9.90		9.16

	Years Ended March 31,
	2009		2010		2011		2012		2013		2014
Breeze-Eastern Corporation	$	100.00	$	104.70	$	129.99	$	127.27	$	124.99	$	149.68
Russell Microcap Index		100.00		165.14		206.95		202.68		237.00		315.77
Russell 2000 Index		100.00		162.76		204.75		204.37		237.69		296.87
Dow Jones Select Microcap Index		100.00		159.80		200.18		188.98		214.20		276.79

	Payments Due By Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Operating leases	$	5,556	$	1,093	$	1,922	$	1,848	$	693
Purchase obligations (a)		—		—		—		—		—
Total	$	5,556	$	1,093	$	1,922	$	1,848	$	693

Financial Statements:
Reports of Independent Registered Public Accounting Firm		27
Consolidated Balance Sheets		29
Consolidated Statements of Operations		30
Consolidated Statements of Comprehensive Income		31
Consolidated Statements of Cash Flows		32
Consolidated Statements of Stockholders’ Equity		33
Notes to the Consolidated Financial Statements		34

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, 2012	$	318
Warranty costs incurred		(235	)
Change in estimate to pre-existing warranties		(9	)
Product warranty accrual		147
Balance at March 31, 2013		221
Warranty costs incurred		(202	)
Change in estimate to pre-existing warranties		—
Product warranty accrual		265
Balance at March 31, 2014	$	284

	2014			2013
Finished goods	$	2,751		$	1,024
Work in process		5,932			7,350
Purchased and manufactured parts		13,155			12,532
		21,838			20,906
Reserve for slow moving and obsolescence		(2,929	)		(3,116	)
Total	$	18,909		$	17,790

	2014		2013
Obligation due from divestiture (a)	$	3,479	$	3,266
Environmental receivable-net		1,033		1,289
Other		568		635
Total	$	5,080	$	5,190

	2014		2013
Engineering project reserves	$	1,530	$	1,530
Environmental reserves-Note 13		1,673		1,890
Accrued medical benefits cost		621		640
Accrued commissions		618		126
Other		772		884
Total	$	5,214	$	5,070

	Number of Shares			Weighted – Average Grant Date Fair Value
Non-vested at March 31, 2011		33,752		$	6.95
Granted		33,352		$	9.69
Vested		(46,010	)	$	8.21
Cancelled		—		$	—
Non-vested at March 31, 2012		21,094		$	8.54
Granted		23,934		$	7.52
Vested		(20,903	)	$	8.56
Cancelled		—		$	—
Non-vested at March 31, 2013		24,125		$	7.51
Granted		31,196		$	8.91
Vested		(24,125	)	$	7.51
Cancelled		(1,389)		$	8.35
Non-vested at March 31, 2014		29,807		$	8.93

	2014			2013
Health care cost trend rate assumed for next year		10.0	%		10.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		6.0	%		6.0	%
Year that the rate reaches the ultimate trend rate		2024			2023

	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total of service and interest cost	$	3	$	2
Effect on postretirement benefit obligation	$	53	$	46

	Postretirement Benefits		Pension Plan
2015	$	82	$	298
2016		76		294
2017		70		286
2018		64		276
2019		58		268
Years 2020-2024		217		1,164

Balance at March 31, 2011	$	14,293
Environmental costs incurred		(1,177	)
Interest accretion		419
Balance at March 31, 2012		13,535
Environmental costs incurred		(1,245	)
Interest accretion		394
Balance at March 31, 2013		12,684
Environmental costs incurred		(1,487	)
Interest accretion		333
Reduction of environmental reserve-Wyoming Illinois		(1,207)
Balance at March 31, 2014	$	10,323

	2014		2013
Customer 1	$	4,146		*
Customer 2	$	2,940		*
Customer 3		*	$	1,711
Customer 4		*	$	2,730
Customer 5		*	$	2,201

		BREEZE-EASTERN CORPORATION

Date: June 5, 2014	By:	/s/ Brad Pedersen
		Brad Pedersen
		President and Chief Executive Officer

		/s/ Mark D. Mishler
		Mark D. Mishler
		Senior Vice President, Chief Financial Officer and
		Treasurer,

Signature	Title	Date

/s/ Robert J. Kelly	Chairman of the Board of Directors	June 5, 2014
Robert J. Kelly

/s/ Mark D. Mishler	Senior Vice President,	June 5, 2014
Mark D. Mishler	Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)

/s/ Brad Pedersen	President & Chief Executive Officer	June 5, 2014
Brad Pedersen	(Principal Executive Officer) Director

/s/ Nelson Obus	Director	June 5, 2014
Nelson Obus

/s/ William J. Recker	Director	June 5, 2014
William J. Recker

/s/ William M. Shockley	Director	June 5, 2014
William M. Shockley

/s/ Charles A. Vehlow	Director	June 5, 2014
Charles A. Vehlow

/s/ Frederick Wasserman	Director	June 5, 2014
Frederick Wasserman