##### 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 July 1, 2007
 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) 
700 Liberty Avenue 
Union, New Jersey
(Address of principal executive offices)
    
    95-4062211
(I.R.S. employer
identification no.)
07083
(Zip Code)
  þ o
  o þ 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 Period
Ended July 1, 2007 and July 2, 2006 (Unaudited)
    
    
    4Condensed Consolidated Balance Sheets
July 1, 2007 (Unaudited) and March 31, 2007
    
    
    5Condensed Statements of Consolidated Cash Flows
    Three Month Periods Ended July 1, 2007 and July 2, 2006 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7 - 16Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16 - 23Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4.
    
    Controls and Procedures
    
    
    24PART II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    24Item 1A.
    
    Risk Factors
    
    
    24Item 2.
    
    Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    24Item 6.
    
    Exhibits
    
    
    24SIGNATURES
    
    
    
    
    25EXHIBIT 31.1
    
    
    
    
    26EXHIBIT 31.2
    
    
    
    
    27EXHIBIT 32
    
    
    
    
    28EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
  2




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##### Table of Contents



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




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##### Table of Contents



BREEZE-EASTERN CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(In Thousands of Dollars, Except Share and Per Share Data)
 Three Months EndedJuly 1, 2007
    
    July 2, 2006Net sales
    
    $
    16,255
    
    
    $
    16,242Cost of sales
    
    
    9,838
    
    
    
    8,817Gross profit
    
    
    6,417
    
    
    
    7,425General, administrative and selling expenses
    
    
    4,402
    
    
    
    4,746Interest expense
    
    
    932
    
    
    
    1,269Other expense  net
    
    
    14
    
    
    
    49Loss on extinguishment of debt
    
    
    
    
    
    
    1,331Income before income taxes
    
    
    1,069
    
    
    
    30Income tax provision
    
    
    428
    
    
    
    12Net income
    
    $
    641
    
    
    $
    18Earnings per share:Basic:Net income per share:
    
    $
    0.07
    
    
    $
    0.00Diluted:Net income per share:
    
    $
    0.07
    
    
    $
    0.00Weighted  average basic shares outstanding
    
    
    9,286,000
    
    
    
    9,230,000Weighted  average diluted shares outstanding
    
    
    9,376,000
    
    
    
    9,314,000
 See notes to consolidated financial statements.




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BREEZE-EASTERN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)July 1, 2007
    
    March 31, 2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,003
    
    
    $
    2,127Accounts receivable (net of allowance for doubtful accounts of
$83 at July 1, 2007 and $72 at March 31, 2007)
    
    
    11,700
    
    
    
    14,761Inventories
    
    
    22,598
    
    
    
    20,517Prepaid expenses and other current assets
    
    
    388
    
    
    
    369Deferred income taxes
    
    
    7,071
    
    
    
    7,181Total current assets
    
    
    42,760
    
    
    
    44,955PROPERTY:Property, plant and equipment
    
    
    17,363
    
    
    
    17,274Less accumulated depreciation and amortization
    
    
    12,763
    
    
    
    12,495Property, plant and equipment  net
    
    
    4,600
    
    
    
    4,779OTHER ASSETS:Deferred income taxes
    
    
    20,490
    
    
    
    20,808Goodwill
    
    
    402
    
    
    
    402Real estate held for sale
    
    
    4,000
    
    
    
    4,000Other
    
    
    5,435
    
    
    
    5,527Total other assets
    
    
    30,327
    
    
    
    30,737TOTAL
    
    $
    77,687
    
    
    $
    80,471LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Revolving credit facility
    
    $
    1,105
    
    
    $
    3,289Current portion of long-term debt
    
    
    5,060
    
    
    
    5,057Accounts payable  trade
    
    
    6,364
    
    
    
    4,989Accrued compensation
    
    
    1,999
    
    
    
    3,486Accrued income taxes
    
    
    105
    
    
    
    447Accrued interest
    
    
    247
    
    
    
    295Other current liabilities
    
    
    4,478
    
    
    
    4,252Total current liabilities
    
    
    19,358
    
    
    
    21,815LONG-TERM DEBT PAYABLE TO BANKS
    
    
    31,695
    
    
    
    32,750OTHER LONG-TERM LIABILITIES
    
    
    9,129
    
    
    
    9,007COMMITMENTS 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,
9,721,641 at July 1, 2007 and 9,670,566 shares at March 31, 2007
    
    
    97
    
    
    
    97Additional paid-in capital
    
    
    92,535
    
    
    
    92,111Accumulated deficit
    
    
    (68,380
    )
    
    
    (68,772
    )Accumulated other comprehensive loss
    
    
    (48
    )
    
    
    (48
    )24,204
    
    
    
    23,388Less treasury stock, at cost  412,323 at July 1, 2007 and 395,135 shares at
March 31, 2007
    
    
    (6,699
    )
    
    
    (6,489
    )Total stockholders equity
    
    
    17,505
    
    
    
    16,899TOTAL
    
    $
    77,687
    
    
    $
    80,471
 See notes to consolidated financial statements.




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BREEZE-EASTERN CORPORATION
 
 CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
 (UNAUDITED)
 Three months endedJuly 1, 2007
    
    July 2, 2006Cash flows from operating activities:Net income
    
    $
    641
    
    
    $
    18Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Write off of unamortized loan fees
    
    
    
    
    
    
    944Depreciation and amortization
    
    
    292
    
    
    
    345Noncash interest expense, net
    
    
    26
    
    
    
    23Stock based compensation
    
    
    163
    
    
    
    59Provision for losses on accounts receivable
    
    
    13
    
    
    
    1Deferred taxes-net
    
    
    428
    
    
    
    6Changes in assets and liabilities :Decrease in accounts receivable and other receivables
    
    
    3,048
    
    
    
    4,655Increase in inventories
    
    
    (2,081
    )
    
    
    (1,753
    )Decrease (increase) in other assets
    
    
    47
    
    
    
    (208
    )Increase (decrease) in accounts payable
    
    
    1,367
    
    
    
    (2,267
    )Decrease in accrued compensation
    
    
    (1,487
    )
    
    
    (1,686
    )Decrease in income taxes payable
    
    
    (72
    )
    
    
    (42
    )Decrease in other liabilities
    
    
    (249
    )
    
    
    (264
    )Net cash provided by (used in) operating activities
    
    
    2,136
    
    
    
    (169
    )Cash flows from investing activities:Capital expenditures
    
    
    (80
    )
    
    
    (204
    )Decrease (increase) in restricted cash
    
    
    4
    
    
    
    (1
    )Net cash used in investing activities
    
    
    (76
    )
    
    
    (205
    )Cash flows from financing activities:Payments on long-term debt
    
    
    (1,052
    )
    
    
    (41,913
    )Proceeds from long-term debt and borrowings
    
    
    
    
    
    
    40,000(Repayments) borrowings of other debt
    
    
    (2,184
    )
    
    
    2,739Payment of debt issue costs
    
    
    
    
    
    
    (406
    )Expenses related to the private placement of common stock
    
    
    (5
    )
    
    
    Exercise of stock options
    
    
    57
    
    
    
    18Excess tax benefit from stock based compensation
    
    
    
    
    
    
    6Net cash (used in) provided by financing activities
    
    
    (3,184
    )
    
    
    444(Decrease) increase in cash
    
    
    (1,124
    )
    
    
    70Cash at beginning of period
    
    
    2,127
    
    
    
    161Cash at end of period
    
    $
    1,003
    
    
    $
    231Supplemental information:Interest payments
    
    $
    925
    
    
    $
    1,538Income tax payments
    
    $
    73
    
    
    $
    42Increase in senior subordinated note and term loans for paid-in-kind
interest expense
    
    $
    
    
    
    $
    66Non-cash financing activity for stock option exercise
    
    $
    210
    
    
    $
    Non-cash investing activity for additions to property plant and equipment
    
    $
    14
    
    
    $
    33
 See notes to consolidated financial statements.




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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Earnings Per Share
   Three Months EndedJuly 1,
    
    July 2,2007
    
    2006Basic Earnings per
Common Share:Weighted-average common
stock outstanding for basic
earnings per share calculation
    
    
    9,286,000
    
    
    
    9,230,000Diluted Earnings per
Common Share:Weighted-average common
shares outstanding
    
    
    9,286,000
    
    
    
    9,230,000Stock options*
    
    
    90,000
    
    
    
    84,000Weighted-average common
stock outstanding for diluted
earnings per share calculation
    
    
    9,376,000
    
    
    
    9,314,000
 
 *
    
    During the three month periods ended July 1, 2007 and July 2, 2006, options to purchase
101,000 and 26,000 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 shares. Stock-Based Compensation


7



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2008
    
    2007Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    48.9
    %
    
    
    51.0
    %Risk-free interest rate
    
    
    4.7
    %
    
    
    5.1
    %Expected term of options (in years)
    
    
    7.0
    
    
    
    7.0
  Aggregate
    
    Approximate
    
    Weighted-Intrinsic
    
    Remaining
    
    AverageNumber
    
    Value
    
    Contractual
    
    Exerciseof Shares
    
    (in thousands)
    
    Term (Years)
    
    PriceOutstanding at March 31, 2007
    
    
    364,996
    
    
    $
    814
    
    
    
    7
    
    
    $
    8.91Granted
    
    
    75,000
    
    
    
    
    
    
    
    
    
    
    $
    12.04Exercised
    
    
    (43,085
    )
    
    $
    260
    
    
    
    
    
    
    $
    6.20Canceled or expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at July 1, 2007
    
    
    396,911
    
    
    $
    1,958
    
    
    
    7
    
    
    $
    9.79Options exercisable at July 1, 2007
    
    
    214,173
    
    
    $
    1,318
    
    
    
    5
    
    
    $
    8.85Unvested options expected to become
exercisable after July 1, 2007
    
    
    182,738
    
    
    $
    641
    
    
    
    9
    
    
    $
    10.90Shares available for future option grants at
July 1, 2007 (a)
    
    
    656,478
 
 (a)
    
    May be decreased by restricted stock grants.


8



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Weighted Average GrantDateNumber of Shares
    
    Fair ValueNon-vested at March 31, 2007
    
    
    24,305
    
    
    $
    10.93Granted
    
    
    7,990
    
    
    $
    11.96Vested
    
    
    (1,284
    )
    
    $
    10.00Cancelled
    
    
    
    
    
    
    Non-vested at July 1, 2007
    
    
    31,011
    
    
    $
    11.23
   9




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Inventories
  July 1, 2007
    
    March 31, 2006Finished goods
    
    $
    
    
    
    $
    Work in process
    
    
    3,490
    
    
    
    2,139Purchased and manufactured parts
    
    
    19,108
    
    
    
    18,378Total
    
    $
    22,598
    
    
    $
    20,517
 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, 2007
    
    $
    475Warranty costs incurred
    
    
    (122
    )Change in estimates to pre-existing warranties
    
    
    Product warranty accrual
    
    
    160Balance at July 1, 2007
    
    $
    513
 Income Taxes
   10




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Debt
  July 1, 2007
    
    
    March 31, 2007Senior Credit Facility
    
    $
    37,860
    
    
    $
    41,096Less current maturities
    
    
    6,165
    
    
    
    8,346Total long-term debt
    
    $
    31,695
    
    
    $
    32,750
 Credit Facility 
 11




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Former Senior Credit Facility
 Employee Benefit Plans
    12




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##### Table of Contents



PostretirementBenefits
    
    
    Pension PlanThree Months Ended
    
    
    Three Months EndedJuly 1,
    
    
    July 2,
    
    
    July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest cost
    
    
    $
    13
    
    
    
    $
    10
    
    
    
    $
    44
    
    
    
    $
    30Amortization of net (gain) loss
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    1Net periodic cost
    
    
    $
    13
    
    
    
    $
    
    
    
    
    $
    44
    
    
    
    $
    31
 New Accounting Standards
     13




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Contingencies
 Environmental Matters
    14




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##### Table of Contents



Litigation
 Segment, Geographic Location and Customer Information
   Three Months EndedJuly 1, 2007
    
    
    July 2, 2006Hoist and Winch
    
    $
    11,744
    
    
    $
    11,870Cargo Hooks
    
    
    2,625
    
    
    
    3,404Weapons Handling
    
    
    1,548
    
    
    
    610Other Sales
    
    
    338
    
    
    
    358Total
    
    $
    16,255
    
    
    $
    16,242
  15




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##### Table of Contents



Three Months EndedJuly 1, 2007
    
    
    July 2, 2006Location:United States
    
    $
    8,672
    
    
    $
    8,829England
    
    
    1,315
    
    
    
    731Italy
    
    
    2,176
    
    
    
    2,868Other European Countries
    
    
    1,664
    
    
    
    1,608Pacific and Far East
    
    
    631
    
    
    
    1,371Other non-United States
    
    
    1,797
    
    
    
    835Total
    
    $
    16,255
    
    
    $
    16,242
 
 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
     General
  16




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Results of Operations
 Three Months Ended July 1, 2007 Compared with Three Months Ended July 2, 2006 (in thousands)
 Three Months Ended
    
    
    Increase (decrease)July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    $
    
    
    %New Equipment
    
    
    $
    8,550
    
    
    
    $
    6,890
    
    
    
    $
    1,660
    
    
    
    
    24.1Spare Parts
    
    
    
    3,789
    
    
    
    
    5,035
    
    
    
    
    (1,246
    )
    
    
    
    (24.7
    )Overhaul and Repair
    
    
    
    3,647
    
    
    
    
    4,191
    
    
    
    
    (544
    )
    
    
    
    (13.0
    )Engineering Services
    
    
    
    269
    
    
    
    
    126
    
    
    
    
    143
    
    
    
    
    113.5Net Sales
    
    
    
    16,255
    
    
    
    
    16,242
    
    
    
    
    13
    
    
    
    
    0.1Cost of Sales
    
    
    
    9,838
    
    
    
    
    8,817
    
    
    
    
    1,021
    
    
    
    
    11.6Gross Profit
    
    
    
    6,417
    
    
    
    
    7,425
    
    
    
    
    (1,008
    )
    
    
    
    (13.6
    )General, administrative and selling expenses
    
    
    
    4,402
    
    
    
    
    4,746
    
    
    
    
    (344
    )
    
    
    
    (7.2
    )Interest expense
    
    
    
    932
    
    
    
    
    1,269
    
    
    
    
    (337
    )
    
    
    
    (26.6
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    1,331
    
    
    
    
    (1,331
    )
    
    
    
    (100.0
    )Net income
    
    
    $
    641
    
    
    
    $
    18
    
    
    
    $
    623
    
    
    
    
    3,461.1
 Net Sales
 Cost of Sales.
 Gross Profit
 17




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General, administrative and selling expenses
 Interest expense
 Loss on Extinguishment of Debt.
 Net Income
 New orders
 Backlog
 18




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Liquidity and Capital Resources
    Working Capital
     Capital Expenditures
  19




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##### Table of Contents



Senior Credit Facility
 Senior Credit Facility 
   Tax Benefits from Net Operating Losses
   20




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Summary Disclosure About Contractual Obligations and Commercial Commitments
  Payments Due By PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsDebt principal repayments (a)
    
    
    $
    36,755
    
    
    
    $
    5,060
    
    
    
    $
    6,115
    
    
    
    $
    25,580
    
    
    
    $
    Estimated interest payments
on long-term debt (b)
    
    
    
    9,339
    
    
    
    
    2,854
    
    
    
    
    4,917
    
    
    
    
    1,568
    
    
    
    
    Operating leases
    
    
    
    250
    
    
    
    
    71
    
    
    
    
    126
    
    
    
    
    53
    
    
    
    
    Total
    
    
    $
    46,344
    
    
    
    $
    7,985
    
    
    
    $
    11,158
    
    
    
    $
    27,201
    
    
    
    $
    
 
 (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 8.5%, the Companys estimated blended interest rate. Inflation
  Environmental Matters
  21




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22




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Litigation
  Recently Issued Accounting Standards
     23




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
    
 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
 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.
 24




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SIGNATURES
  BREEZE-EASTERN CORPORATION
(Registrant)Dated: August 9, 2007
    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. 25