##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 29, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-7872
 BREEZE-EASTERN CORPORATION
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    95-4062211
(I.R.S. employer
identification no.)700 Liberty Avenue 
Union, New Jersey
(Address of principal executive offices)
    
    07083
(Zip Code)
  þ o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



INDEX
 Page
No.PART 1
    
    Financial InformationItem 1.
    
    Condensed Financial Statements (Unaudited)
    
    3Condensed Statements of Consolidated Operations Three Month Periods Ended June 29, 2008 and July 1, 2007 (Unaudited)
    
    4Condensed Consolidated Balance Sheets June 29, 2008 (Unaudited) and March 31, 2008
    
    5Condensed Statements of Consolidated Cash Flows Three Month Periods Ended June 29, 2008 and July 1, 2007 (Unaudited)
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    716Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    1625Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    25Item 4.
    
    Controls and Procedures
    
    25PART II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    26Item 1A.
    
    Risk Factors
    
    26Item 2.
    
    Unregistered Sale of Equity Securities and Use of Proceeds
    
    26Item 6.
    
    Exhibits
    
    26SIGNATURES
    
    
    
    26EX-10.36: AMENDMENT TO EMPLOYMENT AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
   3




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BREEZE-EASTERN CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(In Thousands of Dollars, Except Share and Per Share Data)
 Three Months EndedJune 29, 2008
    
    July 1, 2007Net sales
    
    $
    13,968
    
    
    $
    16,255Cost of sales
    
    
    7,946
    
    
    
    9,838Gross profit
    
    
    6,022
    
    
    
    6,417General, administrative and selling expenses
    
    
    4,227
    
    
    
    4,402Interest expense
    
    
    439
    
    
    
    932Other expense  net
    
    
    37
    
    
    
    14Income before income taxes
    
    
    1,319
    
    
    
    1,069Income tax provision
    
    
    554
    
    
    
    428Net income
    
    $
    765
    
    
    $
    641Earnings per share:Basic:Net income per share:
    
    $
    0.08
    
    
    $
    0.07Diluted:Net income per share:
    
    $
    0.08
    
    
    $
    0.07Weighted  average basic shares outstanding
    
    
    9,340,000
    
    
    
    9,286,000Weighted  average diluted shares outstanding
    
    
    9,409,000
    
    
    
    9,376,000
 See notes to consolidated financial statements.
 4




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##### Table of Contents



BREEZE-EASTERN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
  (Unaudited)June 29, 2008
    
    March 31, 2008ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,801
    
    
    $
    1,876Accounts receivable (net of allowance for doubtful accounts of
$102 at June 29, 2008 and $101 at March 31, 2008)
    
    
    13,775
    
    
    
    19,733Inventories
    
    
    21,059
    
    
    
    18,227Prepaid expenses and other current assets
    
    
    425
    
    
    
    410Deferred income taxes
    
    
    7,403
    
    
    
    7,545Total current assets
    
    
    44,463
    
    
    
    47,791PROPERTY:Property, plant and equipment
    
    
    13,759
    
    
    
    13,226Less accumulated depreciation and amortization
    
    
    9,696
    
    
    
    9,393Property, plant and equipment  net
    
    
    4,063
    
    
    
    3,833OTHER ASSETS:Deferred income taxes
    
    
    13,523
    
    
    
    13,819Goodwill
    
    
    402
    
    
    
    402Real estate held for sale
    
    
    4,000
    
    
    
    4,000Other
    
    
    6,401
    
    
    
    6,345Total other assets
    
    
    24,326
    
    
    
    24,566TOTAL
    
    $
    72,852
    
    
    $
    76,190LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Revolving credit facility
    
    $
    
    
    
    $
    2,920Current portion of long-term debt
    
    
    3,057
    
    
    
    3,057Accounts payable  trade
    
    
    5,021
    
    
    
    3,934Accrued compensation
    
    
    2,089
    
    
    
    2,952Accrued income taxes
    
    
    130
    
    
    
    353Accrued interest
    
    
    106
    
    
    
    136Other current liabilities
    
    
    5,494
    
    
    
    5,895Total current liabilities
    
    
    15,897
    
    
    
    19,247LONG-TERM DEBT PAYABLE TO BANKS
    
    
    19,085
    
    
    
    19,849OTHER LONG-TERM LIABILITIES
    
    
    10,046
    
    
    
    10,202COMMITMENTS AND CONTINGENCIES (Note 10)STOCKHOLDERS EQUITYPreferred stock  authorized, 300,000 shares; none issued
    
    
    
    
    
    
    Common stock  authorized, 14,700,000 shares of $.01 par value; issued,
9,758,098 at June 29, 2008 and 9,751,315 shares at March 31, 2008
    
    
    97
    
    
    
    97Additional paid-in capital
    
    
    93,262
    
    
    
    93,090Accumulated deficit
    
    
    (58,815
    )
    
    
    (59,580
    )Accumulated other comprehensive loss
    
    
    (16
    )
    
    
    (16
    )34,528
    
    
    
    33,591Less treasury stock, at cost  412,731 at June 29, 2008 and 412,323 shares at
March 31, 2008
    
    
    (6,704
    )
    
    
    (6,699
    )Total stockholders equity
    
    
    27,824
    
    
    
    26,892TOTAL
    
    $
    72,852
    
    
    $
    76,190
 See notes to consolidated financial statements.
 5




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BREEZE-EASTERN CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
 Three Months EndedJune 29, 2008
    
    July 1, 2007Cash flows from operating activities:Net income
    
    $
    765
    
    
    $
    641Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    328
    
    
    
    292Noncash interest expense, net
    
    
    21
    
    
    
    26Stock based compensation
    
    
    160
    
    
    
    163Provision for losses on accounts receivable
    
    
    1
    
    
    
    13Deferred taxes-net
    
    
    438
    
    
    
    428Changes in assets and liabilities :Decrease in accounts receivable and other receivables
    
    
    5,957
    
    
    
    3,048Increase in inventories
    
    
    (2,832
    )
    
    
    (2,081
    )Decrease in other assets
    
    
    113
    
    
    
    47Increase in accounts payable
    
    
    1,200
    
    
    
    1,367Decrease in accrued compensation
    
    
    (863
    )
    
    
    (1,487
    )Decrease in income taxes payable
    
    
    (223
    )
    
    
    (72
    )Decrease in other liabilities
    
    
    (611
    )
    
    
    (249
    )Net cash provided by operating activities
    
    
    4,454
    
    
    
    2,136Cash flows from investing activities:Capital expenditures
    
    
    (677
    )
    
    
    (80
    )Capitalized project costs
    
    
    (175
    )
    
    
    Decrease in restricted cash
    
    
    
    
    
    
    4Net cash used in investing activities
    
    
    (852
    )
    
    
    (76
    )Cash flows from financing activities:Payments on long-term debt
    
    
    (764
    )
    
    
    (1,052
    )Repayments of other debt
    
    
    (2,920
    )
    
    
    (2,184
    )Expenses related to the private placement of common stock
    
    
    
    
    
    
    (5
    )Exercise of stock options
    
    
    7
    
    
    
    57Net cash used in financing activities
    
    
    (3,677
    )
    
    
    (3,184
    )Decrease in cash
    
    
    (75
    )
    
    
    (1,124
    )Cash at beginning of period
    
    
    1,876
    
    
    
    2,127Cash at end of period
    
    $
    1,801
    
    
    $
    1,003Supplemental information:Interest payments
    
    $
    444
    
    
    $
    925Income tax payments
    
    $
    343
    
    
    $
    73Non-cash financing activity for stock option exercise
    
    $
    
    
    
    $
    210Non-cash investing activity for additions to capitalized project costs
    
    $
    31
    
    
    $
    Non-cash investing activity for additions to property plant and equipment
    
    $
    30
    
    
    $
    14
 See notes to consolidated financial statements.
 6




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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Earnings Per Share
   Three Months EndedJune 29,
    
    
    July 1,2008
    
    
    2007Basic Earnings per
Common Share:Weighted-average common
stock outstanding for basic
earnings per share calculation
    
    
    9,340,000
    
    
    
    9,286,000Diluted Earnings per
Common Share:Weighted-average common
shares outstanding
    
    
    9,340,000
    
    
    
    9,286,000Stock options*
    
    
    69,000
    
    
    
    90,000Weighted-average common
stock outstanding for diluted
earnings per share calculation
    
    
    9,409,000
    
    
    
    9,376,000
 
 *
    
    During the three month periods ended June 29, 2008 and July 1, 2007, options to purchase
165,000 and 101,000 shares of common stock, respectively, were not included in the computation
of diluted earnings per share because the exercise prices of the options were greater than the
average market price of the common share. Stock-Based Compensation
    7




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2008Dividend yield
    
    
    0.0
    %Volatility
    
    
    48.9
    %Risk-free interest rate
    
    
    4.7
    %Expected term of options (in years)
    
    
    7.0
  Aggregate
    
    Approximate
    
    Weighted-Intrinsic
    
    Remaining
    
    AverageNumber
    
    Value
    
    Contractual
    
    Exerciseof Shares
    
    (in thousands)
    
    Term (Years)
    
    PriceOutstanding at March 31, 2008
    
    
    380,911
    
    
    $
    738
    
    
    
    6
    
    
    $
    9.90Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (1,000
    )
    
    $
    4
    
    
    
    
    
    
    $
    7.05Canceled or expired
    
    
    ( 5,667
    )
    
    
    
    
    
    
    
    
    
    $
    11.90Outstanding at June 29, 2008
    
    
    374,244
    
    
    $
    735
    
    
    
    6
    
    
    $
    9.88Options exercisable at June 29, 2008
    
    
    282,579
    
    
    $
    735
    
    
    
    5
    
    
    $
    9.24Unvested options expected to become
exercisable after June 29, 2008
    
    
    91,665
    
    
    $
    0
    
    
    
    8
    
    
    $
    11.85Shares available for future option
grants at June 29, 2008 (a)
    
    
    642,688
 
 (a)
    
    May be decreased by restricted stock grants. 8




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WeightedAverage GrantDateNumber of Shares
    
    Fair ValueNon-vested at March 31, 2008
    
    
    26,899
    
    
    $
    12.17Granted
    
    
    5,783
    
    
    $
    11.07Vested
    
    
    (3,702
    )
    
    $
    11.27Cancelled
    
    
    (  408
    )
    
    $
    12.04Non-vested at June 29, 2008
    
    
    28,572
    
    
    $
    12.06
   9




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Inventories
  June 29,
    
    March 31,2008
    
    2008Finished goods
    
    $
    
    
    
    $
    Work in process
    
    
    4,353
    
    
    
    3,782Purchased and manufactured parts
    
    
    16,706
    
    
    
    14,445Total
    
    $
    21,059
    
    
    $
    18,227
 Property and Related Depreciation
   Buildings
    
    10 to 33 yearsMachinery and equipment
    
    3 to 10 yearsFurniture and fixtures
    
    3 to 10 yearsComputer hardware and software
    
    3 to 5 years
 Product Warranty Costs
  Balance at March 31, 2008
    
    $
    397Warranty costs incurred
    
    
    (39
    )Change in estimates to pre-existing warranties
    
    
    (116
    )Product warranty accrual
    
    
    56Balance at June 29, 2008
    
    $
    298
 Income Taxes
   10




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Debt
  June 29, 2008
    
    
    March 31, 2008Senior Credit Facility
    
    $
    22,142
    
    
    $
    25,826Less current maturities
    
    
    3,057
    
    
    
    5,977Total long-term debt
    
    $
    19,085
    
    
    $
    19,849
 Senior Credit Facility 
  11




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Employee Benefit Plans
     PostretirementBenefits
    
    
    Pension PlanThree Months Ended
    
    
    Three Months EndedJune 29,
    
    
    July 1,
    
    
    June 29,
    
    
    July 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest cost
    
    $
    11
    
    
    $
    13
    
    
    $
    55
    
    
    $
    44Amortization of net (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic cost
    
    $
    11
    
    
    $
    13
    
    
    $
    55
    
    
    $
    44
 12




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New Accounting Standards
      13




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Contingencies
 Environmental Matters
  14




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Litigation
 Segment, Geographic Location and Customer Information
  15




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Three Months EndedJune 29, 2008
    
    
    July 1, 2007Hoist and Winch
    
    $
    8,559
    
    
    $
    11,744Cargo Hooks
    
    
    3,791
    
    
    
    2,625Weapons Handling
    
    
    538
    
    
    
    1,548Other Sales
    
    
    1,080
    
    
    
    338Total
    
    $
    13,968
    
    
    $
    16,255
   Three Months EndedJune 29, 2008
    
    
    July 1, 2007Location:United States
    
    $
    9,221
    
    
    $
    8,672England
    
    
    382
    
    
    
    1,315Italy
    
    
    1,262
    
    
    
    2,176Other European Countries
    
    
    966
    
    
    
    1,664Pacific and Far East
    
    
    498
    
    
    
    631Other non-United States
    
    
    1,639
    
    
    
    1,797Total
    
    $
    13,968
    
    
    $
    16,255
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 and Section 21E of
the Securities Exchange Act of 1934:
  Forward Looking Statements
   16




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General
   Results of Operations
 Three Months Ended June 29, 2008 Compared with Three Months Ended July 1, 2007 (in thousands)
 Three Months Ended
    
    
    Increase (decrease)June 29,
    
    
    July 1,2008
    
    
    2007
    
    
    $
    
    
    %New Equipment
    
    $
    6,279
    
    
    $
    8,550
    
    
    $
    (2,271
    )
    
    
    (26.6
    )Spare Parts
    
    
    2,929
    
    
    
    3,789
    
    
    
    (860
    )
    
    
    (22.7
    )Overhaul and Repair
    
    
    3,809
    
    
    
    3,647
    
    
    
    162
    
    
    
    4.4Engineering Services
    
    
    951
    
    
    
    269
    
    
    
    682
    
    
    
    253.5Net Sales
    
    
    13,968
    
    
    
    16,255
    
    
    
    (2,287
    )
    
    
    (14.1
    )Cost of Sales
    
    
    7,946
    
    
    
    9,838
    
    
    
    (1,892
    )
    
    
    (19.2
    )Gross Profit
    
    
    6,022
    
    
    
    6,417
    
    
    
    (395
    )
    
    
    (6.2
    )General,
administrative and
selling expenses
    
    
    4,227
    
    
    
    4,402
    
    
    
    (175
    )
    
    
    (4.0
    )Interest expense
    
    
    439
    
    
    
    932
    
    
    
    (493
    )
    
    
    (52.9
    )Net income
    
    $
    765
    
    
    $
    641
    
    
    $
    124
    
    
    
    19.3
 17




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Net Sales
 Cost of Sales.
 Gross Profit
 General, administrative and selling expenses
 Interest expense
 18




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Net Income
 New orders
 Backlog
 Liquidity and Capital Resources
   19




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Working Capital
     Capital Expenditures
   Senior Credit Facility
 Senior Credit Facility 
 20




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Tax Benefits from Net Operating Losses
    21




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Summary Disclosure About Contractual Obligations and Commercial Commitments
   Less Than
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsDebt principal
repayments (a)
    
    $
    22,142
    
    
    $
    3,057
    
    
    $
    19,085
    
    
    $
    
    
    
    $
    Estimated interest
payments on
long-term debt (b)
    
    
    3,516
    
    
    
    1,370
    
    
    
    2,146
    
    
    
    
    
    
    
    Operating leases
    
    
    951
    
    
    
    736
    
    
    
    212
    
    
    
    3
    
    
    
    FIN48 obligations,
including interest
and penalties (c)
    
    
    350
    
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    26,959
    
    
    $
    5,513
    
    
    $
    21,443
    
    
    $
    3
    
    
    $
    
 
 (a)
    
    Obligations for long-term debt reflect the requirements of the term loans under the Senior
Credit Facility See Note 7 of Notes to Unaudited Consolidated Financial Statements included
elsewhere in this Report.(b)
    
    Estimated interest payments on long-term debt reflect the scheduled interest payments of the
term loans under the Senior Credit Facility and assume an effective weighted average interest
rate of 6.6%, the Companys estimated blended interest rate at June 29, 2008.(c)
    
    The FIN 48 obligations shown in the table above represents unrecognized tax benefits. See
Note 6 of Notes to Unaudited Consolidated Financial Statements included elsewhere in this
Report. Inflation
  Environmental Matters
  22




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23




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Litigation
  Recently Issued Accounting Standards
      24




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
    25




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 6. Exhibits
 10.36
    
    Amendment dated as of April 1, 2008, to Employment Agreement dated as of January 19, 2006,
by and between Joseph F. Spanier and the Company.31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 SIGNATURES
  BREEZE-EASTERN CORPORATION
                    (Registrant)Dated:  August 1, 2008
    By:
    /s/  Joseph F. SpanierJoseph F. Spanier, Executive Vice President,Chief Financial Officer and Treasurer * 
 *
    
    On behalf of the Registrant and as Principal Financial and Accounting Officer. 26