General
We design, develop, manufacture, sell and service sophisticated lifting equipment for specialty aerospace and defense applications. With over 50% of the global market, we have long been recognized as the world's leading designer, manufacturer, service provider and supplier of performance-critical rescue hoists and cargo hook systems. We also manufacture weapons-handling systems, cargo winches, 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. We have three major operating segments which we aggregate into one reportable segment. The operating segments are Hoist and Winch, Cargo Hooks, and Weapons Handling. The nature of the production process (assemble, inspect, and test) is similar for each operating segment, as are the customers and the methods of distribution for the products.
All references to years in this Management's Discussion and Analysis of Financial Condition and Results of Operations refer to the fiscal year ended on or ending on March 31 of the indicated year unless otherwise specified. Results of Operations
Three Months Ended June 28, 2009 Compared with Three Months Ended June 29, 2008
(in thousands)

                                                        Three Months Ended                 Increase (decrease)
                                                    June 28,          June 29,
                                                      2009              2008               $                 %

New Equipment                                      $  5,547          $  6,279          $  ( 732 )           (11.7 )
Spare Parts                                           2,641             2,929             ( 288 )            (9.8 )
Overhaul and Repair                                   4,004             3,809               195               5.1
Engineering Services                                  1,170               951               219              23.0

Net Sales                                            13,362            13,968             ( 606 )           ( 4.3 )
Cost of Sales                                         8,128             7,946               182               2.3
Gross Profit                                          5,234             6,022             ( 788 )           (13.1 )
General, administrative and selling expenses          4,210             4,227              ( 17 )            (0.4 )
Relocation expense                                      138                 -               138             100.0
Interest expense                                        208               439             ( 231 )          ( 52.6 )
Net income                                         $    358          $    765          $  ( 407 )           (53.2 )

Net Sales. Our net sales decreased to $13.4 million in the first quarter of fiscal 2010, a decrease of $0.6 million from net sales of $14.0 million in the first quarter of fiscal 2009. The $0.7 million decrease in sales of new equipment for the first quarter of fiscal 2010 as compared to the same period last year was driven primarily by $0.5 million lower shipments in the cargo hook operating segment and $0.2 million in the hoist and winch operating segment. We had no sales of new equipment in the weapons handling operating segment during the first three months of fiscal 2010 and fiscal 2009.
In the first three months of fiscal 2010 compared to the same prior year period, sales of spare parts in the cargo hook and weapons handling operating segments decreased $0.4 million and $0.3 million, respectively. These decreases were slightly offset by an increase of $0.4 million of spare part sales in the hoist and winch operating segment.
Overhaul and repair sales in the hoist and winch operating segment increased $0.4 million in the first quarter of fiscal 2010 as compared to the same period last year, but were slightly offset by lower sales in the cargo hook operating segment of $0.2 million.

The $0.2 million increase in engineering services during the first three months of fiscal 2010 as compared to the first three months of fiscal 2009 is attributable to the weapons handling operating segment. Specifically, it is the result of a contract for the design and development of a recovery winch being developed for the U.S. Army under the Future Combat Systems (FCS) Program. The lower overall total sales volume in the first quarter of fiscal 2010 as compared to the same prior year period is due primarily to delays in receipt of customer orders that we expected to process and ship during the quarter. At the end of fiscal 2009 we saw, for the first time, some indications that the global economic slowdown was beginning to affect our markets, as certain customers have requested extensions of delivery dates for certain products and have also asked for extended payment terms. Since then we have seen some resetting of priorities that will affect shipments of certain of our products. For example, the FCS Program for which we were developing new equipment in the weapons handling operating segment was terminated. While we expect that the termination of this program will have a relatively minor impact on our fiscal 2010 operating results, the action by the U.S. Government is contributing to a degree of uncertainty.
The timing of U.S. Government awards, the availability of U.S. Government funding and product delivery schedules are among the factors that affect the period in which revenues are recorded. In recent years, our revenues in the second half of the fiscal year have generally exceeded revenues in the first half of the fiscal year. We anticipate that this trend will continue in fiscal 2010 resulting in a favorable sales comparison for the entire fiscal year. Cost of Sales. The three operating segments of hoist and winch, cargo hooks, and weapons handling equipment have generated sales in three components: new equipment, overhaul and repair, and spare parts, each of which has progressively better margins. Accordingly, cost of sales as a percentage of sales will be affected by the weighting of these components to the total sales volume. In the first quarter of fiscal 2010, the $8.1 million cost of sales as a percent of sales was approximately 61%. In the first three months of fiscal 2009, the $7.9 million cost of sales as a percentage of sales was approximately 57%. The 4% increase in cost of sales as a percentage of sales in the first quarter of fiscal 2010 as compared to the same prior year period is discussed below under "Gross Profit".
Gross Profit. As discussed in the "Cost of Sales" section above, the three components of sales in each of the operating segments have margins reflective of the market. During the last four fiscal years, the gross profit margin on new equipment has been generally in the range of 31% to 35%, with overhaul and repair ranging from 34% to 43% and spare parts ranging from 66% to 71%. The balance or mix of this activity, in turn, will have an impact on overall gross profit and overall gross profit margins. The overall gross margin was 39% for the first quarter of fiscal 2010 as compared to 43% for the first quarter of fiscal 2009. The decrease in the overall gross margin is attributable to lower sales volume and to an unfavorable mix in new production and overhaul & repair shipments. The lower overall sales volume in the first three months of fiscal 2010 as compared to the same prior year period accounted for approximately half of the overall 4% decrease in gross margin. The lower gross margin in new production during the first three months of fiscal 2010 as compared to the same prior year period is due to lower sales volume and an unfavorable performance mix in the cargo hook operating segment. Overhaul and repair sales in the hoist and winch operating segment increased in the first quarter of fiscal 2010 as compared to the first quarter of fiscal 2009, but the gross profit in the first quarter of fiscal 2010 was lower than in the same prior year period due to an unfavorable performance mix in both cost and pricing.
General, administrative and selling expenses. General, administrative and selling expenses for the first quarter of fiscal 2010, as compared to the first quarter of fiscal 2009, remained essentially unchanged. In response to the order patterns mentioned in the "New Orders" section below, we initiated certain cost cutting measures in the beginning of fiscal 2010 in an effort to improve operating results for fiscal 2010. These measures involved a net reduction in our headcount of approximately 7% of our work force. General, administrative and selling expenses for the first three months of fiscal 2010 includes a pretax charge of $0.3 million charge related to these reductions but we anticipate over $1.0 million additional cost savings by the end of fiscal 2010. The personnel reductions were carefully considered and we believe that the headcount reductions will not inhibit our ability to meet the sales volume in fiscal 2010.

Interest expense. The refinancing of our Former Senior Credit Facility was completed in the second quarter of fiscal 2009 (see Senior Credit Facility section below). The decline in the interest rates due to the refinancing coupled with the reduction of our Senior Credit Facility due to required principal payments caused the $0.2 million decrease in interest expense to $0.2 million in the first quarter of fiscal 2010 as compared to $0.4 million in the first quarter of fiscal 2010.
Net Income. We reported net income of $0.4 million in the first quarter of fiscal 2010, which included a pretax charge of $0.1 million related to the scheduled relocation of our facility to Whippany New Jersey, as compared to net income of $0.8 million in the first quarter of fiscal 2009. This decrease in net income resulted from the reasons discussed above. Net income for the first three months of fiscal 2010 includes a pretax charge of $0.3 million related to the reduction in force described in "General, administrative and selling expenses" section above, and we anticipate over $1.0 million additional costs savings by the end of fiscal 2010.
We expect to initiate the relocation to a more efficient facility in Whippany, New Jersey. in the third quarter, and complete it in the fourth quarter, of fiscal 2010. Aside from the actual cost of the physical move to the new location which is estimated to be $0.8 million, we expect the additional costs related to the occupancy of the new facility to be approximately $0.4 million in fiscal 2010.
New orders. New orders received during the first quarter of fiscal 2010 totaled $15.6 million, as compared with $23.0 million in the first quarter of fiscal 2009. Orders for new equipment in the hoist and winch operating segment decreased $3.8 million despite orders we received during the first three months of fiscal 2010 totaling $2.4 million for the system design and development of a recovery winch for a fixed wing aircraft being developed for the U.S. Army and Air Force under the Joint Cargo Aircraft Program, and $2.9 million in orders for new equipment in the hoist and winch operating segment for the A109, A119 and AW139 Programs. Orders for new equipment in the cargo hook operating segment decreased $4.1 million for the first three months of fiscal 2010 as compared to the same prior year period.
Orders for spare parts in the hoist and winch operating segment increased $0.5 million in the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, but were partially offset by a decrease of approximately $0.3 million and $0.4 million in the cargo hook and weapons handling operating segments, respectively.
New orders for overhaul and repair in the cargo hook operating segment increased $1.4 million in the first quarter of fiscal 2010 as compared to the same period last year. Orders for overhaul and repair in both the hoist and winch and weapons handling operating segments remained essentially unchanged for the first quarter of fiscal 2010 as compared to the first quarter of fiscal 2009. Orders for engineering services decreased $0.5 million in the first quarter of fiscal 2010 as compared to the same period last year.
Backlog. Backlog at June 28, 2009 was $133.3 million, an increase of $2.3 million from the $131.0 million at March 31, 2009. Increases in backlog are mainly attributable to a $2.4 million contract for the system design and development of a recovery winch for a fixed wing aircraft being developed for the U.S. Army and Air Force under the Joint Cargo Aircraft Program, and $2.9 million in orders for new equipment in the hoist and winch operating segment for the A109, A119 and AW139 Programs. The offsetting decrease is attributable to previously scheduled shipments. The backlog at June 28, 2009 includes approximately $65.0 million relating to the Airbus A400M military transport aircraft, which per our contract with Airbus is scheduled to commence shipping in late calendar 2009 and continue through 2020. There have been recent reports by analysts that there is a delay in the production schedule for the Airbus A400M military transport aircraft. Notwithstanding these reports, we have not to date received notification from Airbus that there is a significant delay in delivering our equipment for this program.
The product backlog varies substantially from time to time due to the size and timing of orders. We measure backlog by the amount of products or services that our customers have committed by contract to purchase from us as of a given date. Approximately $38.6 million of backlog at June 28, 2009 is scheduled for shipment during the next twelve months. The book-to-bill ratio is computed by dividing the new orders received during the period by the sales for the period. A book-to-bill ratio in excess of 1.0 is potentially indicative of continued overall growth in our

sales. Our book to bill ratio for the first quarter of fiscal 2010 was 1.2 as compared to 1.6 for the first quarter of fiscal 2009. The decrease in the book to bill ratio was directly related to the lower order intake during the first quarter of fiscal 2010, as compared to the first quarter of fiscal 2009. 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 our backlog. Therefore, our backlog information may not represent the actual amount of shipments or sales for any future period.
Liquidity and Capital Resources
Our principal sources of liquidity are cash on hand, cash generated from operations, and our Senior Credit Facility, as defined below. Our liquidity requirements depend on a number of factors, many of which are beyond our control, including the timing of production under our 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, as our sales are generally made on the basis of individual purchase orders, our liquidity requirements vary based on the timing and volume of orders. Cash to be used in fiscal 2010 for capital expenditures, our relocation to a new facility and capitalized project costs for engineering are expected to be approximately $8.0 million to $9.0 million. Based on cash on hand, future cash expected to be generated from operations and the Senior Credit Facility, we expect to have sufficient cash to meet our requirements for at least the next twelve months. During the second quarter of fiscal 2009, we refinanced and paid in full the Former Senior Credit Facility with a new 60 month, $33.0 million Senior Credit Facility consisting of a $10.0 million revolving line of credit and term loans totaling $23.0 million. At June 28, 2009, there were no outstanding borrowings, $1.0 million in outstanding (standby) letters of credit, and $9.0 million in availability under the revolving portion of the Senior Credit Facility. At June 28, 2009, we were in compliance with the provisions of the Senior Credit Facility.
In February, 2008, we completed the sale of our headquarters facility and plant in Union, New Jersey. The sales price for the facility was $10.5 million and net proceeds at closing from the sale of the facility of $9.8 million were applied to reduce our former senior credit facility. The agreement of sale permits us to lease the facility for up to two years after closing, pending our relocation to a new site.
In May, 2009 we executed a 10 year lease for a facility in Whippany, New Jersey, which will be better suited to our current and expected needs, and we expect to initiate the relocation to the new site during the third quarter, and complete it in the fourth quarter, of fiscal 2010. The lease agreement calls for monthly rental payments of approximately $67 thousand commencing January 2010 through the fifth anniversary of the fixed rent commencement date and approximately $77 thousand per month from January 2015 through the end of the lease term. While the relocation will require a cash outlay of approximately $5.0 million to outfit the new facility, we expect to continue our debt reduction program with a targeted principal reduction of our Senior Credit Facility in the area of $5.0 million to $6.0 million in fiscal 2010. Aside from the actual cost of the physical move to the new location which is estimated to be $0.8 million, we expect the additional costs related to the occupancy of the new facility to be approximately $0.4 million in fiscal 2010 as compared to occupancy costs expensed in fiscal 2009. The occupancy costs associated with the new facility is expected to increase approximately $0.7 million in fiscal 2011 as compared to fiscal 2010.
Our common stock is listed on the NYSE Amex (former American Stock Exchange) under the trading symbol BZC.
Working Capital
Our working capital at June 28, 2009 was $31.9 million, as compared to $32.3 million at March 31, 2009. The ratio of current assets to current liabilities was 2.8 to 1 at both June 28, 2009 and March 31, 2009. The major working capital changes during the first three months of fiscal 2010 resulted from a decrease in accounts receivable of $5.1 million, an increase in inventory of $4.7 million, an increase in prepaid and other current assets of

$0.3 million, and a decrease in other current liabilities of $0.3 million. In addition, cash and cash equivalents decreased by $0.5 million.
The decrease in accounts receivable reflects collection of amounts due from customers related to the heavy shipments that occurred late in the fourth quarter of fiscal 2009. The increase in inventory is due to delays in new orders, mentioned above, and a focus on having certain common sub-assemblies on hand in anticipation of our relocation to our new facility in Whippany, New Jersey, which we expect to initiate during the third quarter, and complete it in the fourth quarter, of fiscal 2010. We do not foresee the relocation to have any impact on meeting the shipping demands of our customers.
The increase in prepaid and other current assets of $0.3 million is mainly attributable to the prepayment of certain maintenance agreements. The decrease in other current liabilities is mainly attributable to the amortization of the deferred gain related to the sale of our Union, New Jersey facility in February 2008.
The number of days that sales were outstanding in accounts receivable increased to 73.8 days at June 28, 2009 from 69.7 days at March 31, 2009. We have received notice from several of our customers regarding their new company policies for extending payment terms to suppliers. This has attributed to the increased number of days sales that were outstanding in accounts receivable at June 28, 2009 compared to March 31, 2009. Inventory turnover decreased to 1.48 turns at June 28, 2009 versus 1.62 turns at June 29, 2008. The decrease in inventory turns is reflective of the reasons discussed above. Capital Expenditures
Cash paid for our additions to property and equipment was approximately $0.7 million for both the first three months of fiscal 2010 and fiscal 2009. The majority of the additions to property and equipment for the first three months of fiscal 2010 represent amounts related to the fit-out of the Company's new facility (See "Liquidity and Capital Resources" above).
Cash paid for capitalized project costs, representing qualification and proto-type units on several programs, were approximately $0.1 million for the first three months of fiscal 2010 and $0.2 million for the first three months of fiscal 2009. Capitalized project costs will be amortized on a per unit basis based on the shipping schedule. Capitalized project costs budgeted in fiscal 2010 total approximately $2.3 million.
Senior Credit Facility
On August 28, 2008, we refinanced and paid in full our Former Senior Credit Facility (as defined below) with a new 60 month, $33.0 million senior credit facility consisting of a $10.0 million revolving line of credit and term loans totaling $23.0 million (the "Senior Credit Facility"). As a result of this refinancing, in the second quarter of fiscal 2009, we recorded a pre-tax charge of $0.6 million consisting of $0.2 million for the write-off of unamortized debt issue costs and $0.4 million for the payment of a pre-payment premium. The term loan requires quarterly principal payments of approximately $0.8 million over the term of the loan with the remainder of the term loan due at maturity. Accordingly, the balance sheet reflects $3.3 million of current maturities due under the term loan of the Senior Credit Facility as of June 28, 2009. The Senior Credit Facility bears interest at either the "Base Rate" or the London Interbank Offered Rate ("LIBOR") plus, in each case, applicable margins based on our leverage ratio, which is equal to our consolidated total debt, calculated at the end of each fiscal quarter, to consolidated EBITDA (the sum of net income, depreciation, amortization, other non-cash charges to net income, interest expense and income tax expense minus charges related to the refinancing of debt minus non-cash credits to net income) calculated at the end of such quarter for the four quarters then ended. The Base Rate is the higher of the Prime Rate or the Federal Funds Open Rate plus .50%. The applicable margins for the Base Rate based borrowings are between 0% and .75%. The applicable margins for LIBOR based borrowings are between 1.25% and 2.25%. At June 28, 2009 the Senior Credit Facility had a blended interest rate of 3.5%, all tied to LIBOR, except for $0.1 million which was tied to the Prime Rate. In addition, we

are required to pay a commitment fee of .375% on the average daily unused portion of the revolving portion of the Senior Credit Facility. The Senior Credit Facility requires us to enter into an interest rate swap for a term of at least three years in an amount not less than 50% for the first two years and 35% for the third year of the aggregate amount of the term loan, which is discussed below.
The Senior Credit Facility is secured by all our assets and allows us to issue letters of credit against the total borrowing capacity of the facility. At June 28, 2009, under the revolving portion of the Senior Credit Facility, there were no outstanding borrowings, $1.0 million in outstanding (standby) letters of credit, and $9.0 million in availability. At June 28, 2009, we were in compliance with the provisions of the Senior Credit Facility.
Interest Rate Swap- The Senior Credit Facility requires us to enter into an interest rate swap for a term of at least three years in an amount not less than 50% for the first two years and 35% for the third year in each case, of the aggregate amount of the term loan. The interest rate swap, a type of derivative financial instrument, is used to manage interest costs and minimize the effects of interest rate fluctuations on cash flows associated with the term portion of the Senior Credit Facility. We do not use derivatives for trading or speculative purposes. In September 2008, we entered into a three year interest rate swap to exchange floating rate for fixed rate interest payments to hedge against interest rate changes on the term portion of our Senior Credit Facility, as required by the loan agreement executed as part of the Senior Credit Facility. . . .