UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-6549

AMERICAN SCIENCE AND ENGINEERING, INC.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2240991
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

829 Middlesex Turnpike, Billerica, Massachusetts	01821
(Address of principal executive offices)	(Zip Code)

(978) 262-8700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock ($.66 2/3 par value)		NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes o No x

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes o 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 o

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 (§232.405 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 o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x

Non-accelerated filer o	Smaller reporting company o
(do not check if smaller reporting company)

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

The aggregate market value of voting stock held by non-affiliates of the registrant, computed using the closing sale price of common stock of $65.61 on September 30, 2012 was $534,220,000.

7,791,859 shares of registrant’s common stock were outstanding on May 31, 2013.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of American Science and Engineering, Inc.

We have audited the accompanying consolidated balance sheets of American Science and Engineering, Inc. and subsidiaries (“the Company”) as of March 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2013. We also have audited American Science and Engineering, Inc. and subsidiaries’ internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements, 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’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting 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 financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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, and evaluating the overall financial statement presentation. 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 audits provide 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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) 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 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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Science and Engineering, Inc. and subsidiaries as of March 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2013, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, American Science and Engineering, Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ McGladrey LLP

Boston, Massachusetts

June 7, 2013

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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2013 AND 2012

(Amounts in thousands, except share and per share amounts)

	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	40,418		$	24,369
Restricted cash	12,618			11,707
Short-term investments, at fair value	108,546			170,834
Accounts receivable, net of allowances of $351 at March 31, 2013 and $255 at March 31, 2012	28,477			25,439
Unbilled costs and fees	4,875			3,206
Inventories	48,051			48,179
Prepaid expenses and other current assets	8,829			10,386
Deferred income taxes	3,155			3,329
Total current assets	254,969			297,449
Building, equipment and leasehold improvements, net	16,451			17,998
Restricted cash	899			4,183
Deferred income taxes	8,325			5,174
Other assets, net	805			61
Total assets	$	281,449		$	324,865

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,371		$	7,461
Accrued salaries and benefits	9,974			11,722
Accrued warranty costs	397			358
Accrued income taxes	2,094			—
Deferred revenue	15,770			16,731
Customer deposits	16,199			15,031
Current portion of lease financing liability	1,489			1,351
Other current liabilities	14,194			5,989
Total current liabilities	68,488			58,643
Lease financing liability, net of current portion	2,914			4,403
Deferred revenue	5,535			2,913
Other long term liabilities	267			100
Total liabilities	77,204			66,059

Commitments and contingencies (Notes 2 and 9)

Stockholders’ equity:
Preferred stock, no par value
Authorized—100,000 shares
Issued—None	—			—
Common stock, $0.662/3 par value
Authorized—20,000,000 shares
Issued and outstanding— 7,980,202 shares at March 31, 2013
and 8,942,793 shares at March 31, 2012	5,320			5,961
Capital in excess of par value	41,458			95,971
Accumulated other comprehensive income (loss), net	(4		)	16
Retained earnings	157,471			156,858
Total stockholders’ equity	204,245			258,806
Total liabilities and stockholders’ equity	$	281,449		$	324,865

The accompanying notes are an integral part of these consolidated financial statements.

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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED MARCH 31, 2013, 2012, AND 2011

(Amounts in thousands except per share amounts)

	2013			2012			2011
Net sales and contract revenues:
Net product sales and contract revenues	$	98,489		$	114,124		$	192,818
Net service revenues	88,191			89,428			85,758
Total net sales and contract revenues	186,680			203,552			278,576

Cost of sales and contracts:
Cost of product sales and contracts	68,214			65,500			104,062
Cost of service revenues	39,047			44,935			45,312
Total cost of sales and contracts	107,261			110,435			149,374
Gross profit	79,419			93,117			129,202

Operating expenses:
Selling, general and administrative expenses	29,533			35,624			42,139
Research and development expenses	23,618			25,544			22,619
Total operating expenses	53,151			61,168			64,758
Operating income	26,268			31,949			64,444

Other income (expense):
Interest and investment income, net	657			655			678
Interest expense	(65		)	(91		)	(110		)
Other, net	(414		)	(55		)	(137		)
Total other income	178			509			431

Income before provision for income taxes	26,446			32,458			64,875
Provision for income taxes	8,992			11,036			22,058
Net income	$	17,454		$	21,422		$	42,817

Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities (net of tax)	(20		)	(5		)	(12		)
Comprehensive income	$	17,434		$	21,417		$	42,805
Income per share — Basic	$	2.08		$	2.37		$	4.73
— Diluted	$	2.07		$	2.34		$	4.63
Weighted average shares — Basic	8,394			9,046			9,045
— Diluted	8,448			9,148			9,247
Dividends declared per share	$	2.00		$	1.60		$	1.20

The accompanying notes are an integral part of these consolidated financial statements.

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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED MARCH 31, 2013, 2012, AND 2011

(Amounts in thousands, except share amounts)

	Common Stock Shares		Common Stock Par Value			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comp. Income (Loss)			Total
Balance, March 31, 2010	9,013,508		$	6,008		$	97,819		$	117,908		$	33		$	221,768
Net income	—		—			—			42,817			—			42,817
Repurchase of common stock	(51,269	)	(34		)	(3,702		)	—			—			(3,736		)
Exercise of stock options	197,669		132			6,811			—			—			6,943
Issuance of stock under employee compensation plans	2,939		2			218			—			—			220
Issuances of restricted stock, net of forfeitures	7,118		5			(5		)	—			—			—
Tax benefit accrued on stock option exercises	—		—			3,730			—			—			3,730
Compensation expense on stock options	—		—			1,703			—			—			1,703
Compensation expense on restricted stock and restricted stock units	—		—			3,513			—			—			3,513
Dividends declared	—		—			—			(10,866		)	—			(10,866		)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	—		—			—			—			(12		)	(12		)
Balance, March 31, 2011	9,169,965		$	6,113		$	110,087		$	149,859		$	21		$	266,080
Net income	—		—			—			21,422			—			21,422
Repurchase of common stock	(320,207	)	(213		)	(19,838		)	—			—			(20,051		)
Exercise of stock options	75,714		50			4,237			—			—			4,287
Vesting of restricted stock units	2,341		1			(1		)	—			—			—
Issuances of restricted stock, net of forfeitures	14,980		10			(10		)	—			—			—
Reversal of tax benefit associated with stock options	—		—			(303		)	—			—			(303		)
Compensation expense on stock options	—		—			597			—			—			597
Compensation expense on restricted stock and restricted stock units	—		—			1,202			—			—			1,202
Dividends declared	—		—			—			(14,423		)	—			(14,423		)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	—		—			—			—			(5		)	(5		)
Balance, March 31, 2012	8,942,793		$	5,961		$	95,971		$	156,858		$	16		$	258,806
Net income	—		—			—			17,454			—			17,454
Repurchase of common stock	(1,013,655	)	(675		)	(56,958		)	—			—			(57,633		)
Exercise of stock options	50,505		34			2,126			—			—			2,160
Vesting of restricted stock units	1,743		1			(1		)	—			—			—
Issuances of restricted stock, net of forfeitures	(1,184	)	(1		)	1			—			—			—
Tax benefit accrued on stock option exercises	—		—			135			—			—			135
Compensation expense on stock options	—		—			(106		)	—			—			(106		)
Compensation expense on restricted stock and restricted stock units	—		—			290			—			—			290
Dividends declared	—		—			—			(16,841		)	—			(16,841		)
Net change in unrealized losses on investment securities, available-for-sale, net of tax	—		—			—			—			(20		)	(20		)
Balance, March 31, 2013	7,980,202		$	5,320		$	41,458		$	157,471		$	(4	)	$	204,245

The accompanying notes are an integral part of these consolidated financial statements.

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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2013, 2012, AND 2011

(Amounts in thousands)

	2013			2012			2011
Cash flows from operating activities:
Net income	$	17,454		$	21,422		$	42,817
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,114			5,768			4,961
Provisions for contracts, inventory, and accounts receivable reserves	5,405			2,998			1,608
Amortization of bond premium	2,700			2,689			2,057
Stock compensation expense	184			1,799			5,216
Other	(59		)	(47		)	(125		)
Deferred income taxes	(2,966		)	1,750			(2,716		)
Change in assets and liabilities:
Accounts receivable	(3,382		)	11,819			551
Unbilled costs and fees	(1,669		)	13,876			(15,004		)
Inventories	(4,933		)	(4,333		)	(3,139		)
Prepaid expenses and other assets	813			(3,609		)	3,048
Accrued income taxes	2,094			(1,936		)	(2,267		)
Accounts payable	910			(1,917		)	(1,592		)
Deferred revenue	1,661			(568		)	(2,034		)
Customer deposits	1,168			5,838			(4,521		)
Accrued expenses and other current liabilities	6,663			(4,530		)	4,344
Total adjustments	13,703			29,597			(9,613		)
Net cash provided by operating activities	31,157			51,019			33,204
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments	200,089			220,293			192,406
Purchases of short-term instruments	(140,532		)	(283,685		)	(160,422		)
Proceeds from sale of fixed assets	110			51			3
Purchases of property and equipment	(3,618		)	(5,211		)	(5,304		)
Net cash provided by (used for) investing activities	56,049			(68,552		)	26,683
Cash flows from financing activities:
Decrease (increase) in restricted cash	2,373			13,570			(29,425		)
Repurchase of shares of common stock	(57,633		)	(20,051		)	(3,736		)
Payment of common stock dividends	(16,841		)	(14,423		)	(10,866		)
Repayment of leasehold financing	(1,351		)	(1,322		)	(1,301		)
Proceeds from exercise of stock options	2,160			4,287			6,943
Reduction of (increase in) income taxes paid due to the tax benefit (expense) from employee stock option expense	135			(303		)	3,730
Net cash used for financing activities	(71,157		)	(18,242		)	(34,655		)
Net increase (decrease) in cash and cash equivalents	16,049			(35,775		)	25,232
Cash and cash equivalents at beginning of year	24,369			60,144			34,912
Cash and cash equivalents at end of year	$	40,418		$	24,369		$	60,144
Supplemental disclosures of cash flow information:
Interest paid	$	73		$	91		$	110
Income taxes paid	$	7,367		$	13,744		$	24,079
Non-cash transactions:
Issuance of stock for 401K match	$	—		$	—		$	220

The accompanying notes are an integral part of these consolidated financial statements.

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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

American Science and Engineering, Inc., a Massachusetts corporation formed in 1958, develops, manufactures, markets, and sells X-ray inspection and other detection products for homeland security, force protection and other critical defense applications.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all investments with original maturities of 90 days or less to be cash equivalents. The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits. The Company has not experienced any losses related to these balances, and management believes its risk of loss to be minimal.

Restricted Cash

Restricted cash consists of collateral for performance bonds issued related to customer contracts and certain facility lease agreements.

Short-term Investments and Cash Equivalents

Short-term investments and cash equivalents consist of investments in commercial paper, corporate debentures/bonds, treasury bills, government agency bonds, money market funds and certificates of deposit. These investments are classified as available-for-sale and are recorded at their fair values using the specific identification method. The unrealized holding gains or losses on these securities are included as a component of comprehensive income in the Consolidated Statements of Operations and Comprehensive Income.

Accounts Receivable and Unbilled Costs and Fees

Accounts receivable are recorded at the invoiced amount. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. It is the Company’s policy to write off uncollectible receivables when management determines the receivable has become uncollectible. Activity in the allowance for doubtful accounts is as follows:

						Deductions
						or Write-
	Balance at		Charged to			offs		Balance at
	Beginning		Costs and			Charged to		End of
(In thousands)	of Year		Expenses			Reserves		Year
Fiscal 2013	$	255	$	344		$	248	$	351
Fiscal 2012	$	334	$	(79	)	$	—	$	255
Fiscal 2011	$	330	$	4		$	—	$	334

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Included in accounts receivable and unbilled costs and fees at March 31, 2013 and 2012 are $12,973,000 and $13,377,000, respectively, attributable to both prime and subcontracts with federal and state governments. The Company establishes a reserve against unbilled costs and fees based on known troubled accounts or contracts, historical experience, and other currently available evidence. There was no activity in the reserve for unbilled costs and fees during fiscal 2013, 2012 and 2011.

Inventories

Inventories consist of material, labor and manufacturing overhead and are recorded at the lower of cost, using the weighted average cost method, or net realizable value. Excessive manufacturing overhead costs attributable to idle facility expenses, freight, handling costs and wasted material (spoilage) attributable to abnormally low production volumes (levels that materially differ from budgeted production plans due primarily to changes in customer demand) are excluded from inventory and recorded as an expense in the period incurred.

The components of inventories at March 31, 2013 and 2012, net of inventory reserves, were as follows:

(In thousands)	2013		2012
Raw materials, completed subassemblies and spare parts	$	21,450	$	23,689
Work-in-process	21,129		16,705
Finished goods	5,472		7,785
Total	$	48,051	$	48,179

The Company periodically reviews quantities of inventory on hand and compares these amounts to expected usage of each particular product or product line. The Company records, as a charge to cost of sales, any amounts required to reduce the carrying value to net realizable value.

Activity in the reserve for excess or obsolete inventory is as follows:

					Deductions
					/ Write-
	Balance at		Charged to		offs		Balance at
	Beginning		Costs and		Charged to		End of
(In thousands)	of Year		Expenses		Reserves		Year
Fiscal 2013	$	6,210	$	5,061	$	219	$	11,052
Fiscal 2012	$	4,882	$	3,076	$	1,748	$	6,210
Fiscal 2011	$	3,982	$	1,604	$	704	$	4,882

Building, Equipment and Leasehold Improvements

The Company provides for depreciation and amortization of its fixed assets on a straight-line basis over estimated useful lives of 1-25 years or remaining lease terms. Expenditures for normal maintenance and repairs are charged to expense as incurred. Significant additions, renewals or betterments that extend the useful lives of the assets are capitalized at cost. The cost and accumulated depreciation applicable to equipment and leasehold improvements sold, or otherwise disposed of, are removed from the accounts, and any resulting gain or loss is included in the consolidated statements of operations.

Building, equipment and leasehold improvements consisted of the following at March 31, 2013 and 2012.

(In thousands)	Estimated Useful Lives	2013			2012
Building and leasehold improvements	Lesser of 25 years or remaining lease term	$	21,245		$	20,761
Equipment and tooling	5-10 years	5,284			5,110
Computer equipment and software	3-5 years	23,135			21,491
Furniture and fixtures	5-7 years	2,553			2,515
Demo and test equipment	2-5 years	7,579			6,576
Leased equipment	1-2 years or life of lease	63			63
Motor vehicles	3-5 years	72			72
Total		59,931			56,588
Less accumulated depreciation and amortization		(43,480		)	(38,590		)
Building, equipment and leasehold improvements, net		$	16,451		$	17,998

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Revenue Recognition

The Company recognizes certain Cargo Inspection, Mobile Cargo Inpection, Parcel and Personnel Screening systems, and after-market part sales, in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 605-10, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.

Infrequently, the Company receives requests from customers to hold product being purchased for a valid business purpose. The Company recognizes revenue for such arrangements provided the transaction meets, at a minimum, the following criteria: a valid business purpose for the arrangement exists; risk of ownership of the purchased product has transferred to the buyer; there is a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the product is ready for shipment; the Company has no continuing performance obligation in regards to the product and the products have been segregated from its inventories and cannot be used to fill other orders received. There was no product being held under these arrangements at March 31, 2013 or March 31, 2012.

Certain of the Company’s contracts are multiple-element arrangements, which include standard products, custom-built systems or contract engineering projects, services (such as training), and service and maintenance contracts. In accordance with FASB ASC 605-25, Revenue Recognition — Multiple Element Arrangements, revenue arrangements that include multiple elements are analyzed to determine whether the deliverables can be divided into separate units of accounting or treated as a single unit of accounting. The consideration received is allocated among the separate units of accounting based on their relative selling prices determined based on prices of these elements as sold on a stand-alone basis, and the applicable revenue recognition criteria are applied to each of the separate units. Generally, there is no customer right of return provision in the Company’s sales agreements. Revenues are allocated to a delivered product or service when the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; and (2) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in our control.

Revenues for certain long-term, custom-built systems or contract engineering projects are recognized on a percentage of completion basis. The lengths of these contracts typically range from one to four years from order to delivery and acceptance. Percentages-of-completion are determined by relating the actual costs of work performed to date for each contract to its estimated final costs. Revisions in costs and profit estimates are reflected in the period in which the facts causing the revision become known.

For all fixed price and long-term contracts, if a loss is anticipated on the contract, a provision is made in the period in which such losses are determined.

The Company recognizes sales for its systems that are produced in a standard manufacturing operation, have minimal customer site installation requirements and have shorter order to delivery cycles, when title passes and when other revenue recognition criteria are met. Management believes the customer’s post-delivery acceptance provisions and installation requirements on certain of these systems are perfunctory and inconsequential and the costs of installation at the customer’s site are accrued at the time of revenue recognition. The Company has demonstrated a history of customer acceptance subsequent to shipment and installation of these systems. For systems which entail more significant installation efforts and site work and/or have non-standard customer acceptance provisions, revenue recognition is deferred until installation is complete and customer acceptance has occurred.

Service revenues are recognized on time and materials engagements as the services are provided. Service contract revenues are recognized as service is performed over the length of the contract which reasonably approximates the period service revenues are earned.

The Company records billed shipping and handling fees and billed out-of-pocket expenses as revenue and the associated costs as cost of goods sold in the accompanying consolidated statements of operations.

Training and service contracts deliverables are accounted for separately from the delivered product elements as the Company’s undelivered products have value to its customers on a stand-alone basis. Accordingly, this service revenue is deferred and recognized as such services are performed.

Certain contracts require payments from the customer upon execution of the agreement that are included in customer deposits. Individual customer deposits are reduced by the amount of revenue recognized on the contract until a zero balance is reached. Revenue recognized in excess of billings under the contracts is included in unbilled costs and fees in the accompanying consolidated balance sheets. Of the amounts in unbilled costs and fees at March 31, 2013, $4,839,000 (99%) is expected to be billed and collected during fiscal 2014.

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Under the terms of certain cost reimbursement contracts, the Company is not permitted to bill customers a specified portion of the contract value until completion. Such retainages (approximately $80,000 and $87,000 at March 31, 2013 and March 31, 2012, respectively) result from both commercial contract retentions and government contract withholdings generally for up to 15% of fees, as well as the difference between the actual and provisional indirect cost billing rates. Retainages are included in the accompanying consolidated balance sheets as components of unbilled costs and fees. The accuracy and appropriateness of the Company’s direct and indirect costs and expenses under these cost reimbursement contracts and its accounts receivable recorded pursuant to such contracts, are subject to regulation and audit, including by the U.S. Defense Contract Audit Agency (“DCAA”) or by other appropriate agencies of the U.S. government. Such agencies have the right to challenge the Company’s cost estimates or allocations with respect to any government contract. Additionally, a portion of the payments to the Company under government contracts are provisional payments that are subject to potential adjustment upon audit by such agencies. Historically, such audits have not resulted in any significant disallowed costs. Although the Company can give no assurances, in the opinion of management, any adjustments likely to result from inquiries or audits of its contracts will not have a material adverse impact on the Company’s financial condition or results of operations.

Warranty Costs

The Company generally provides on certain of its products a one year parts and labor warranty with the purchase of domestic equipment, and a one year parts only or parts and labor warranty on international equipment. The anticipated cost for this one year warranty is accrued for at the time of the sale based upon historical experience and management’s estimates of future liabilities and is recorded as accrued warranty costs (See Note 5).

Deferred Revenue

The Company offers to its customers extended warranty and service contracts. These contracts typically have a coverage period of one to five years, and include advance payments that are recorded as deferred revenue. Revenue is recognized as service is performed over the life of the contract, which represents the period over which these revenues are earned. Costs associated with these extended warranty and service contracts are expensed to cost of goods sold as incurred.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Impairment is assessed by comparing the estimated undiscounted cash flows over the asset’s remaining life to the carrying amount of the asset. If the estimated cash flows are insufficient to recover the asset, an impairment loss is recognized based on the difference between the carrying value of the asset and the fair value of the asset less any costs of disposal. No impairment costs were recorded in the fiscal years ended March 31, 2013, 2012 and 2011.

Accrued Salaries and Benefits

Accrued salaries and benefits at March 31, 2013 and March 31, 2012 include the following:

(In thousands)	2013		2012
Accrued payroll and payroll related taxes	$	1,995	$	2,140
Accrued incentive compensation	4,633		7,486
Accrued vacation	1,739		2,096
Accrued severance	1,607		—
Total accrued salaries and benefits	$	9,974	$	11,722

Customer Deposits

For most international orders, the Company generally includes, as part of its terms and conditions, an advance deposit with order acceptance. For long-term international contracts, the Company will generally include milestone payments tied to a specific event and/or passage of time. These deposit amounts are recorded as a liability under Customer Deposits until reduced by revenue recognized against the specific contract.

Other Current Liabilities

Other current liabilities at March 31, 2013 and March 31, 2012 include the following:

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(In thousands)	2013		2012
Accrued accounts payable and other expenses	$	4,213	$	999
Accrued contract related costs	7,596		2,808
Accrued audit and legal fees	375		523
Accrued sales commissions	2,010		1,659
Total other current liabilities	$	14,194	$	5,989

Research and Development

Internally funded research and development costs including direct labor, material, subcontractor expenses and related overheads are expensed as incurred. Internally funded research and development costs were $23,618,000, $25,544,000 and $22,619,000, in fiscal 2013, 2012, and 2011, respectively. In addition, the Company recognized revenues of $2,124,000, $4,409,000 and $4,821,000, in fiscal 2013, 2012, and 2011, respectively related to government-sponsored research and development earned primarily on a cost reimbursement and fee basis as discussed above.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, unbilled costs and fees, accounts payable and letters of credit. The recorded amounts of these instruments approximate their fair value (see Note 8).

Income per Common and Potential Common Shares

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share include the dilutive impact of options, warrants, restricted stock and restricted stock units using the average share price of the Company’s common stock for the period. For the years ended March 31, 2013, 2012, and 2011, respectively, common stock equivalents of approximately 182,000, 64,000, and 35,000 are excluded from diluted earnings per share, as their effect is anti-dilutive.

	March 31,		March 31,		March 31,
(In thousands except per share amounts)	2013		2012		2011
Earnings per Share — Basic:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Income per share — basic	$	2.08	$	2.37	$	4.73

Earnings per Share — Diluted:
Net income	$	17,454	$	21,422	$	42,817
Weighted average number of common shares outstanding — basic	8,394		9,046		9,045
Assumed exercise of stock options, warrants, restricted stock and restricted stock units, using the treasury stock method	54		102		202
Weighted average number of common and potential common shares outstanding — diluted	8,448		9,148		9,247
Income per share — diluted	$	2.07	$	2.34	$	4.63

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Accordingly, the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. The Company records a valuation allowance against any net deferred tax assets if it is more likely than not that they will not be realized. The Company recognizes interest and penalties related to income tax matters in other income and expenses.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, restricted cash, short-term investments and accounts and unbilled receivables. The Company maintains cash balances in excess of insured limits. The Company maintains its cash and cash equivalents with major financial institutions.

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The Company’s credit risk is managed by investing its cash in high quality money market funds, commercial paper, investment grade corporate bonds, treasury bills, government agency bonds, and certificates of deposit.

Two customers, one agency of the U.S. government and one international customer, accounted for 51% of the accounts receivable balance at March 31, 2013. The Company generally requires letters of credit and/or deposits or prepayments from international customers. The Company has not experienced any significant losses from uncollectible accounts.

Common Stock Dividends

In May of 2007, the Company began declaring quarterly cash dividends for its common stock shareholders. Common stock cash dividends declared during the fiscal year ended March 31, 2013 were as follows:

Date Declared	Dividend per common share
May 14, 2012	$	0.50
August 2, 2012	0.50
November 5, 2012	0.50
February 11, 2013	0.50
Fiscal year ended March 31, 2013	$	2.00

On May 7, 2013, the Company declared a quarterly dividend of $0.50 for holders of record on May 20, 2013 to be paid June 3, 2013.

Stock-Based Compensation

Compensation expense for the fair value of stock based awards made to employees and the Board of Directors is recognized over the requisite service period for awards expected to vest. The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option pricing model. The Black-Scholes method of valuation requires several assumptions: (1) the expected term of the stock award, (2) the expected future stock volatility over the expected term, (3) the expected dividend yield and (4) risk-free interest rate. The expected term represents the expected period of time the Company believes the options will be outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company’s common stock. The expected dividend yield was based on the expectation we would continue paying dividends on our common stock at the same rate for the foreseeable future. The risk free interest rate is based on the U.S. Zero-Bond rate.

The Company recognized $184,000, $1,799,000 and $5,216,000 of stock-based compensation costs in the consolidated statements of operations for the year ended March 31, 2013, 2012 and 2011, respectively. The income tax benefit related to such compensation for the years ended March 31, 2013, 2012 and 2011 was approximately $63,000, $612,000 and $1,770,000, respectively.

The following table summarizes share-based compensation costs included in the Company’s consolidated statements of operations. The credit for the year ended March 31, 2013 in selling, general and administrative expenses is attributable to the reversal of certain incentive compensation plan costs previously accrued for, which were terminated as a result of the announced retirement of the Company’s former Chief Executive Officer in September of 2012.

	Fiscal Year Ended
	March 31,			March 31,		March 31,
(In thousands)	2013			2012		2011
Cost of revenues	$	188		$	438	$	797
Selling, general and administrative	(4		)	1,361		4,419
Total share-based compensation expense before tax	$	184		$	1,799	$	5,216

The fair value of options at date of grant was estimated with the following assumptions:

	March 31,
	2011
Assumptions:
Expected life	5 years
Risk-free interest rate	1.60	%
Stock volatility	44	%
Dividend yield	1.6	%

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There were no options granted in the fiscal years ended March 31, 2013 and 2012.

New Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which changes the existing guidance on the presentation of comprehensive income. Entities have the option of presenting the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders’ equity. ASU No. 2011-05 was effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2011, which for the Company was the first quarter of fiscal 2013. In December 2011, with the issuance of ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” the FASB announced that it has deferred certain aspects of ASU 2011-05. In February 2013, the FASB issued ASU 2013-2, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” with the stated objective of improving the reporting of reclassifications out of accumulated other comprehensive income. The amendments in ASU 2013-2 are effective during interim and annual periods beginning after December 31, 2012. The adoption of ASU 2011-05, 2011-12 and 2013-2 regarding comprehensive income have not had a significant impact on the accounting or disclosures in our financial statements.

2. LEASE AGREEMENTS

The Company leases certain facilities under non-cancelable operating leases with various renewal options. For operating leases which contain fixed escalations in rental payments, the Company records the total rent payable on a straight-line basis over the original lease term. The Company incurred $787,000, $730,000 and $670,000 of operating rent expense in the fiscal years ended March 31, 2013, 2012, and 2011, respectively. In conjunction with the Company’s lease for its headquarters, the Company has issued security in the form of a standby letter of credit in the amount of $300,000 with an original expiration date of March 1, 2006 which contains automatic extensions through April 15, 2016.

In March 2005, the Company renewed its lease agreement for its corporate headquarters and manufacturing facilities in Billerica, Massachusetts. As part of the lease agreement, the Company’s landlord agreed to certain renovations to the Billerica facility including the construction of additional high bay manufacturing space. The Company was responsible for a portion of the construction costs and was deemed to be the owner of the building during the construction period. In January 2007, the Company amended this lease agreement to expand its lease to include the remaining available space in the building. During the fiscal year ended March 31, 2007, the Company capitalized $2,029,000 to record the facility on its books with an offsetting amount to the Lease Financing Liability. In addition, amounts paid for construction were recorded as construction in progress and the landlord construction allowances of $367,000 in 2008 were recorded as additional lease financing liability.

At the completion of the construction of the initial renovations in February 2006, the lease was reviewed for potential sale-leaseback treatment in accordance with ASC 840 Leases. Based on this review, it was determined that the lease did not qualify for sale-leaseback treatment. As a result, building and tenant improvements and associated lease financing liabilities remained on the Company’s financial statements. The Lease Financing Liability is being amortized over the lease term based on the payments designated in the agreement, and the building and tenant improvement assets are being depreciated on a straight line basis over the remaining lease term.

Future minimum rental payments under the Company’s non-cancelable leases, excluding real estate taxes, insurance and operating costs paid by the Company, required over the initial terms of the leases are as follows (in thousands):

Year Ending March 31,	Operating Leases		Capital Leases
2014	$	647	$	1,542
2015	303		1,542
2016	225		1,413
Total payments	$	1,175	4,497
Imputed interest			(94		)
Lease financing liability			4,403
Less: Current portion of lease financing liability			1,489
Lease financing liability, net of current portion			$	2,914

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3. LETTERS OF CREDIT

In the normal course of business, the Company may provide certain customers and potential customers with performance guarantees, which are generally backed by standby letters of credit. In general, the Company would only be liable for the amount of these guarantees in the event of default in the performance of its obligations, the probability of which is remote in management’s opinion. At March 31, 2013, the Company had outstanding $25,437,000 in standby letters of credit. These outstanding standby letters of credit are cash-secured at amounts ranging from 52% to 66% of the outstanding letters of credit. This resulted in a restricted cash balance of $13,517,000 at March 31, 2013 of which $899,000 was considered long-term restricted cash due to the expiration date of the underlying letters of credit.

4. INCOME TAXES

The provision (benefit) for income taxes for the years ended March 31, 2013, 2012, and 2011 consisted of the following:

(In thousands)	2013			2012			2011
Current:
Federal	$	11,339		$	9,082		$	24,080
State	595			197			636
Foreign	22			7			22
	11,956			9,286			24,738
Deferred:
Federal	(2,743		)	1,610			(2,354		)
State	(375		)	212			(640		)
Change in valuation allowance	154			(72		)	314
	(2,964		)	1,750			(2,680		)
Provision for income taxes	$	8,992		$	11,036		$	22,058

The difference between the total expected provision for income taxes computed by applying the statutory federal income tax rate to income before provision for income taxes and the recorded provision for income taxes for the three years in the period ended March 31, 2013 is as follows:

(In thousands)	2013			2012			2011
Provision for income taxes at statutory rate	$	9,253		$	11,360		$	22,706
State tax provision (benefit) net of federal effect	143			265			(2		)
Stock based compensation	(60		)	107			616
Research tax credits	(589		)	(289		)	(432		)
Qualifying manufacturing credits	(154		)	(315		)	(1,346		)
Change in valuation allowance	154			(72		)	314
Other	245			(20		)	202
Provision for income taxes	$	8,992		$	11,036		$	22,058

The significant components of the net deferred tax assets at March 31, 2013 and 2012 are as follows:

	March 31, 2013					March 31, 2012
(In thousands)	Current		Non-current			Current		Non-current
Deferred tax assets (liabilities):
Accounts receivable and unbilled costs and fees	$	—	$	125		$	—	$	91
Inventory	248		3,935			219		2,199
Deferred revenue	—		1,778			—		1,192
Accrued vacation	558		—			668		—
Accrued warranty costs	141		—			126		—
Depreciation	—		(495		)	—		(922		)
Unearned compensation	1,738		2,573			1,836		2,577
State credit carryforwards	—		944			—		1,098
Other	470		409			480		37
Deferred income tax assets	3,155		9,269			3,329		6,272
Valuation allowance	—		(944		)	—		(1,098		)
Net deferred income taxes	$	3,155	$	8,325		$	3,329	$	5,174

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As of March 31, 2013 and March 31, 2012, the Company has $1,452,000 and $1,690,000 of state credit carryforwards, respectively. Of these amounts, approximately $201,000 and $492,000 at March 31, 2013 and March 31, 2012, respectively, have unlimited carryforward and the remaining balances expire in various years through 2028.

At March 31, 2013 and March 31, 2012, the Company had a deferred tax valuation allowance of $944,000 and $1,098,000, respectively, on state credit carryforwards and other deferred tax assets for which management believes it is more-likely-than-not that realization of these assets will not occur.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending March 31, 2010 through 2012 and for various state taxing authorities for the years ending March 31, 2007 through 2012. The Company is currently under examination for tax year ended March 31, 2011. Management does not believe that the examination will have a material impact on the Company’s financial position or results of operations.

In April 2013, the Company settled an outstanding refund receivable with the Massachusetts Department of Revenue for tax years ending March 31, 2006 through 2008 related to sales apportionment methodology. The Company received proceeds of $1,500,000 related to this settlement which is included in prepaid expenses and other current assets at March 31, 2013.

5. WARRANTY OBLIGATIONS

Certain of the Company’s products carry a one-year warranty, the costs of which are accrued for at time of shipment or delivery. Accrual rates are based upon historical experience over the preceding twelve months and management’s judgment of future exposure. Warranty experience for the years ended March 31, 2013 and 2012 is as follows:

(In thousands)	2013			2012
Warranty accrual at beginning of period	$	358		$	1,225
Accruals for warranties issued during the period	548			632
Adjustment of preexisting accrual estimates	152			(63		)
Warranty costs incurred during period	(661		)	(1,436		)
Warranty accrual at end of period	$	397		$	358

6. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company’s articles of organization authorize its Board of Directors to issue up to 100,000 shares of preferred stock in one or more series, to determine and fix certain relative rights and preferences of the shares of any series, to fix the number of shares constituting any such series, and to fix the designation of any such series, without further vote or action by its shareholders. The Company has no present plans to issue shares of preferred stock. In 1998, the Company designated a series of Preferred Stock (the “Series A Preferred Stock”) to be issued upon the exercise of Rights issued under the Company’s Shareholder Rights Plan. Under the Shareholder Rights Plan, adopted in 1998 and reissued upon its expiration in April 2008, its stockholders are entitled to purchase shares of its Series A Preferred Stock under certain circumstances. These circumstances include the purchase of 15% or more of the outstanding shares of common stock by a person or group, or the announcement of a tender or exchange offer to acquire 15% or more of the outstanding common stock.

Stock Repurchase Program

On May 14, 2012, the Board of Directors announced the approval of its third Stock Repurchase Program which authorized the Company to repurchase up to $35 million of shares of its common stock from time to time on the open market or in privately negotiated transactions. This program was completed in August of 2012. On August 2, 2012, the Board of Directors announced the approval of an additional Stock Repurchase Program which authorized the Company to repurchase up to $35 million of additional shares of its common stock from time to time on the open market or in privately negotiated transactions.

During the fiscal year ended March 31, 2013, the Company repurchased 1,013,655 shares of common stock under this Program at an average price of $56.86. As of March 31, 2013, the remaining balance available under the program to repurchase shares was $12,316,000.

On May 7, 2013, the Board of Directors announced the approval of its fifth Stock Repurchase Program which authorized the Company to repurchase up to an additional $35 million of shares of its common stock from time to time on the open market or in privately negotiated transactions.

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Stock Option and Other Compensation Plans

The Company has various stock option and other compensation plans for directors, officers, and employees. The Company had the following stock option plans outstanding as of March 31, 2013: the 1998 Non-Qualified Option Plan, the 1999 Combination Plan, the 2000 Combination Plan, the 2002 Combination Plan, the 2003 Stock Plan for Non-Employee Directors and the 2005 Equity and Incentive Plan. There are 3,480,000 shares authorized under these plans. Vesting periods are at the discretion of the Board of Directors and typically range from one to three years. Certain of the options granted vest upon the achievement of certain performance based goals as well as service time incurred. Options under these plans are granted at fair market value and have a term of ten years from the date of grant.

Stock Options: A summary of the Company’s stock option activity is as follows:

	2013				2012				2011
			Weighted				Weighted				Weighted
			Average				Average				Average
	Number		Exercise		Number		Exercise		Number		Exercise
	of Shares		Price		of Shares		Price		of Shares		Price
Options outstanding, beginning of year	376,331		$	55.10	472,446		$	55.77	613,934		$	47.37
Options granted	—		—		—		—		56,181		74.87
Options exercised	(50,505	)	42.75		(75,714	)	56.63		(197,669	)	35.12
Options canceled or expired	(10,664	)	65.72		(20,401	)	65.01		—		—
Options outstanding, end of year	315,162		$	56.72	376,331		$	55.10	472,446		$	55.77
Options exercisable, end of year	312,895		$	56.68	370,400		$	55.00	397,592		$	53.06
Options available for grant	284,000				292,000				301,732
Weighted average fair value per share of options granted during the year			$	—			$	—			$	26.21

The following summarizes certain data for options outstanding and exercisable at March 31, 2013:

						Weighted
				Weighted		Average
	Number of	Range of Exercise		Average		Remaining
	Shares	Prices		Exercise Price		Contractual Life
Options outstanding:	15,925	$	11.58-$20.00	$	14.43	0.88
	14,400	$	20.01-$30.00	28.50		1.46
	14,629	$	30.01-$40.00	39.06		1.09
	38,800	$	40.01-$50.00	44.73		1.61
	47,278	$	50.01-$60.00	53.36		2.71
	127,949	$	60.01-$70.00	64.08		4.89
	56,181	$	70.01-$75.82	74.87		7.42
	315,162	$	11.58-$75.82	$	56.72	4.08

Options exercisable:	15,925	$	11.58-$20.00	$	14.43
	14,400	$	20.01-$30.00	28.50
	14,629	$	30.01-$40.00	39.06
	38,800	$	40.01-$50.00	44.73
	47,278	$	50.01-$60.00	53.36
	125,682	$	60.01-$70.00	64.13
	56,181	$	70.01-$75.82	74.87
	312,895	$	11.58-$75.82	$	56.68

The total intrinsic value, representing the difference between market value on the date of exercise and the option price, of stock options exercised during fiscal 2013, 2012 and 2011 was $986,000, $1,815,000 and $10,121,000, respectively. Non-vested stock option awards are subject to the risk of forfeiture until the fulfillment of specified conditions. As of March 31, 2013, there was no unrecognized compensation cost related to non-vested stock option awards granted under the Company’s stock plans.

The Company realizes a tax deduction upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options due to the recognition of compensation expense in the calculation of its taxable income. The amount of the compensation recognized for tax purposes is based on the difference between the market value of the common stock and the

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option price at the date the options are exercised and/or sold. The Company receives an additional tax deduction when restricted stock vests at a higher value than the value used to recognize compensation expense at the date of grant. These tax benefits are credited to additional paid-in capital if it is considered more likely than not that they will be realized. During fiscal 2013, 2012 and 2011, a tax benefit (expense) of $135,000, ($303,000), and $3,730,000, respectively, was recorded to additional paid-in capital for exercises and/or sales of stock options or stock.

Restricted Stock and Restricted Stock Units: The Company has instituted long term incentive plans for certain key employees. These plans call for the issuance of restricted stock, stock options, and/or cash awards which vest upon the achievement of certain performance based goals as well as service time incurred. In fiscal years 2013, 2012 and 2011, the Company opted to issue this long term incentive plan with only a cash award which resulted in fewer restricted stock awards and stock options being granted.

Restricted stock and restricted stock units may also be granted to other employees with vesting periods that range from one to three years. In addition, annually the Board of Directors is granted restricted stock. These restricted stock shares vest on a pro-rata basis on service time performed over a one year period. The fair values of these restricted stock awards are equal to the market price per share of the Company’s common stock on the date of grant.

Non-vested restricted stock and stock unit awards are subject to the risk of forfeiture until the fulfillment of specified conditions. As of March 31, 2013 there was $894,000 of total unrecognized compensation cost related to non-vested restricted stock and stock unit awards granted under the Company’s stock plans. This cost is expected to be recognized over a weighted average of 1.1 years.

A summary of the Company’s restricted stock and stock unit activity is as follows:

	2013				2012				2011
			Weighted				Weighted				Weighted
			Average				Average				Average
	Number		Exercise		Number		Exercise		Number		Exercise
	of Shares		Price		of Shares		Price		of Shares		Price
Unvested restricted stock and units outstanding, beginning of year	40,599		$	68.63	32,882		$	65.03	97,240		$	60.78
Granted	19,657		61.00		24,006		73.03		5,106		83.79
Vested	(17,463	)	68.08		(12,523	)	68.70		(69,464	)	60.45
Forfeited	(14,684	)	63.71		(3,766	)	65.07		—		—
Unvested restricted stock and units outstanding, end of year	28,109		$	66.20	40,599		$	68.63	32,882		$	65.03

7. BUSINESS SEGMENT INFORMATION

In accordance with the provisions of FASB ASC 280-10, Segment Reporting, the Company has determined that it has only one operating segment, the X-ray product segment. This includes X-ray detection and imaging products used primarily for the detection of illegal drugs, weapons and explosives, and smuggled goods. The equipment is purchased by sophisticated government and commercial clients focused on the detection of organic material in complex backgrounds and the ability to see the contents of containers with precision.

Geographical Data

All of the Company’s export sales originate from the United States. At March 31, 2013, approximately 5% of the Company’s assets were in foreign countries. The foreign assets were comprised of cash in foreign banks, and inventory in international depots for field replacements or systems shipped internationally but not accepted by fiscal year end.

The following table shows the breakdown of net sales and contract revenues to international and domestic customers based upon customer’s country of domicile and the major regions of international activity:

Net Sales and Contract Revenues

	Fiscal Year
(Dollars in thousands)	2013				2012				2011
Domestic	$	123,652	66	%	$	133,441	66	%	$	190,769	68	%
International	63,028		34	%	70,111		34	%	87,807		32	%
Net Sales and Contract Revenues	$	186,680	100	%	$	203,552	100	%	$	278,576	100	%

Middle East & Africa			54	%			63	%			84	%
Americas — Non-US			29	%			20	%			2	%
Asia / Pacific			13	%			11	%			7	%
Europe			4	%			6	%			7	%

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The following table presents the financial assets and liabilities we measure at fair value on a recurring basis, based on the fair value hierarchy as of March 31, 2013 and March 31, 2012:

	March 31,		March 31,
(In thousands)	2013		2012
Level 1 — Financial Assets
U.S. Treasury bills	$	—	$	20,018
Money market funds	16,549		—
Total Level 1 Financial Assets	16,549		20,018
Level 2 — Financial Assets
Corporate debentures/bonds	75,572		78,169
Commercial paper	28,974		40,334
Government agency bonds	—		26,582
Money market funds	—		13,698
Certificates of deposit	4,000		5,731
Total Level 2 Financial Assets	108,546		164,514
Total cash equivalents and short-term investments	$	125,095	$	184,532

These investments are classified as available-for-sale and are recorded at their fair market values using the specific identification method. The unrealized holding gains or losses on these securities are included as a component of comprehensive income in the Consolidated Statements of Stockholders’ Equity and Comprehensive Income.

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
2013:
Short-term investments:
Corporate debentures/bonds	$	75,578	$	14	$	(20	)	$	75,572
Commercial paper	28,974		—		—			28,974
Certificates of deposit	4,000		—		—			4,000
Total short-term investments	$	108,552	$	14	$	(20	)	$	108,546
Cash equivalents:
Money market funds	16,549		—		—			16,549
Total cash equivalents	$	16,549	$	—	$	—		$	16,549

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
2012:
Short-term investments:
Corporate debentures/bonds	$	78,176	$	21	$	(28	)	$	78,169
Commercial paper	40,331		3		—			40,334
Government agency bonds	26,573		9		—			26,582
Treasury bills	20,000		18		—			20,018
Certificates of deposit	5,729		2		—			5,731
Total short-term investments	$	170,809	$	53	$	(28	)	$	170,834
Cash equivalents:
Money market funds	13,698		—		—			13,698
Total cash equivalents	$	13,698	$	—	$	—		$	13,698

9. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

In the normal course of business, the Company enters into purchase orders with its vendors for the purchase of materials or services to meet its production needs. At March 31, 2013, the Company had $27,241,000 of open purchase orders which are expected to be substantially fulfilled within the next two years. Certain single source vendors, or vendors producing custom material, require significant lead times from order to delivery of their material. Should the demand for the Company’s products decline significantly, or should there be a significant shift in the mix of products being demanded, the Company may incur

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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARIES

UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA

FOR THE YEARS ENDED MARCH 31, 2013 AND MARCH 31, 2012

(In thousands, except per share amounts)

	2013 by quarter								2012 by quarter
	1st		2nd		3rd		4th		1st		2nd		3rd		4th
Net sales and contract revenues	$	47,344	$	46,253	$	50,803	$	42,280	$	51,103	$	54,778	$	57,907	$	39,764
Gross profit	$	21,473	$	20,997	$	22,700	$	14,249	$	23,902	$	25,121	$	26,445	$	17,649
Operating income	$	6,360	$	9,597	$	9,178	$	1,133	$	8,567	$	10,205	$	11,241	$	1,936
Net income	$	4,202	$	6,399	$	6,093	$	760	$	5,693	$	6,851	$	7,535	$	1,343
Net income per share
— Basic	$	0.47	$	0.77	$	0.74	$	0.09	$	0.62	$	0.75	$	0.84	$	0.15
— Diluted	$	0.47	$	0.76	$	0.73	$	0.09	$	0.61	$	0.74	$	0.84	$	0.15

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EXHIBIT INDEX

Exhibit Number		Description of Exhibit (and Statement of Incorporation by Reference, If Applicable)

3.1		Restated Articles of Organization of the Company, as amended, including Certificate of Designation, Preferences, and Rights of Preferred Stock of the Company, dated April 16, 2008 (filed as Exhibit 3.1 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
3.5	†	Amended and Restated By-laws of the Company
4.2		Rights Agreement, dated April 17, 2008, between the Company and American Stock Transfer & Trust Company (filed as Exhibit 4.1 to the Company’s filing on Form 8-A12B filed on April 18, 2008 and incorporated herein by reference)
10.1	*	1998 Non-Qualified Stock Option Plan (filed as Exhibit (10)(b)(xiii) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 and incorporated herein by reference)
10.2		Lease of Billerica property (filed as Exhibit 10(c) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1995 and incorporated herein by reference)
10.3		Amendment to Lease of Billerica property (filed as Exhibit 10(c)(ii) to the Company’s Annual Report on Form 10-K for the year ended March 28, 1997 and incorporated herein by reference)
10.4	*	1999 Combination Stock Option Plan (filed as Exhibit 99 to the Company’s Registration Statement on Form S-8, File No. 333-91801, filed on November 30, 1999 and incorporated herein by reference)
10.5	*	2000 Combination Stock Option Plan (filed as Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on August 18, 2000 and incorporated herein by reference)
10.6	*	2002 Combination Stock Option Plan (filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8, No. 333-102338, filed on January 3, 2003 and incorporated herein by reference)
10.7		Second Amendment of Lease of 829 Middlesex Turnpike, Billerica, Massachusetts (filed as Exhibit 10(c)(vii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 and incorporated herein by reference)
10.8	*	Amendment of 2002 Combination Stock Option Plan (filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8, No. 333-102338, filed on January 3, 2003 and incorporated herein by reference)
10.9	*	2003 Stock Plan for Non-Employee Directors (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8, File No. 333-117843, filed on July 30, 2004 and incorporated herein by reference)
10.10	*	Amendment to 2003 Stock Plan for Non-Employee Directors (filed as Exhibit 10(c)(xx) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2005 and incorporated herein by reference)
10.14	*	2005 Equity and Incentive Plan (filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8, No. 333-162291, filed on October 2, 2009 and incorporated herein by reference)
10.11	*	Form of Stock Option Agreement (ISO) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10(c)(xxvi) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2006 and incorporated herein by reference)
10.12	*	Form of Stock Option Agreement (NQ) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10(c)(xxvi) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2006 and incorporated herein by reference)
10.13		Third Amendment of Lease of 829 Middlesex Turnpike, Billerica, Massachusetts (filed as Exhibit 10(c)(xxviii) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2007 and incorporated herein by reference)
10.14	*	Form of Restricted Stock Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference)
10.15	*	Form of Incentive Stock Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference)
10.16	*	Form of Long-Term Incentive Plan Agreement — Cash Component (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference)
10.17		American Science and Engineering, Inc. 401(k) and Profit Sharing Plan (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 dated July 25, 2008 and incorporated herein by reference)
10.18	*	Form of Restricted Stock Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.41 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.19	*	Form of Nonstatutory Stock Option Agreement (Performance) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.42 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.20	*	Form of Long-Term Incentive Plan Agreement — Cash Component (filed as Exhibit 10.43 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.21		Form of Non-Employee Director Restricted Stock Award Agreement under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.44 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)
10.22		Form of Non-Statutory Stock Option Agreement For Directors under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.45 to the Company’s filing on Form 10-K dated June 9, 2010 and incorporated herein by reference)

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10.23	*	Form of Indemnification Agreement between the Company and each of its directors and executive officers (filed as Exhibit 10.1 to the Company’s Report on Form 8-K dated September 8, 2010 and incorporated herein by reference)
10.24	*	Form of Restricted Stock Agreement (Time Vesting) under the Company’s 2005 Equity and Incentive Plan (filed as Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012 and incorporated herein by reference)
10.25		Fourth Amendment of Lease of 829 Middlesex Turnpike, Billerica, Massachusetts dated January 18, 2011 (filed as Exhibit 10.48 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012 and incorporated herein by reference)
10.26	*	Form of Short Term Incentive Bonus Plan Documents for fiscal year 2013 (filed as Exhibit 10.1 to the Company’s filing on Form 10-Q dated November 7, 2012 and incorporated herein by reference)
10.27	*	Amendment to Employment Agreement between the Company and Anthony Fabiano dated September 17, 2012 (filed as Exhibit 10.2 to the Company’s filing on Form 10-Q dated November 7, 2012 and incorporated herein by reference)
10.28	*	Offer Letter, dated March 13, 2013, between American Science and Engineering, Inc. and Charles P. Dougherty (filed as Exhibit 10.1 to the Company’s Report on Form 8-K dated March 13, 2013 and incorporated herein by reference)
10.29	*	Change in Control & Severance Agreement for Chief Executive Officer (filed as Exhibit 10.2 to the Company’s Report on Form 8-K dated March 13, 2013 and incorporated herein by reference)
10.30	*	Form of Change in Control & Severance Benefit Agreement, as Amended and Restated, effective April 1, 2013 (filed as Exhibit 10.1 to the Company’s Report on Form 8-K dated April 4, 2013 and incorporated herein by reference)
21.1		Subsidiaries of Registrant (filed as Exhibit 21.1 to the Company’s Report on Form 10-K dated June 7, 2013 and incorporated herein by reference)
23.1	†	Consent of Independent Registered Public Accounting Firm
31.1	†	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
31.2	†	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
32.1	†	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	†	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following materials from the Annual Report on Form 10-K/A of American Science and Engineering, Inc. for the year ended March 31, 2013, filed on February 4, 2014 formatted in eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income, (iii) Consolidated Statement of Changes in Stockholders’ Equity (iv) Consolidated Statements of Cash Flows, and (v) related notes to these financial statements.

† Filed herewith

* Management contract or compensatory plan

		Page Number
PART II
ITEM 8.	Financial Statements and Supplementary Data	3

PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	3
SIGNATURE		25
EXHIBIT INDEX		26

		PAGE

CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm		5
Consolidated Balance Sheets—March 31, 2013 and 2012		6
Consolidated Statements of Operations and Comprehensive Income for the Years Ended March 31, 2013, 2012 and 2011		7
Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 2013, 2012 and 2011		8
Consolidated Statements of Cash Flows for the Years Ended March 31, 2013, 2012 and 2011		9
Notes to Consolidated Financial Statements		10

CONSOLIDATED SUPPLEMENTARY FINANCIAL INFORMATION
Unaudited Quarterly Consolidated Financial Data for the Years Ended March 31, 2013 and 2012		24

	AMERICAN SCIENCE AND ENGINEERING, INC.

DATED: February 4, 2014	By:	/s/ Kenneth Galaznik

		Kenneth J. Galaznik
		Senior Vice President, Chief Financial Officer and Treasurer