UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-Q
[✓] | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended: December 23, 2017June 30, 2018
or
[ ] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from _______________ to _______________
Commission File Number: 000-03905
TRANSCAT, INC.
(Exact name of registrant as specified in its charter)
Ohio | 16-0874418 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
35 Vantage Point Drive, Rochester, New York 14624
(Address of principal executive offices) (Zip Code)
(585) 352-7777
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrantregistrant: (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 [✓] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [✓] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and emerging“emerging growth companycompany” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer | |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company | |
Emerging growth company [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [✓]
The number of shares of common stock, par value $0.50 per share, of the registrant outstanding as of FebruaryAugust 1, 2018 was 7,152,764.7,199,947.
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited) | (Unaudited) | |||||||||||
Third Quarter Ended | Nine Months Ended | |||||||||||
December 23, | December 24, | December 23, | December 24, | |||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Service Revenue | $ | 18,769 | $ | 17,455 | $ | 55,490 | $ | 51,577 | ||||
Distribution Sales | 21,714 | 20,358 | 57,199 | 53,868 | ||||||||
Total Revenue | 40,483 | 37,813 | 112,689 | 105,445 | ||||||||
Cost of Service Revenue | 14,070 | 13,149 | 41,835 | 38,402 | ||||||||
Cost of Distribution Sales | 16,712 | 15,749 | 44,308 | 41,855 | ||||||||
Total Cost of Revenue | 30,782 | 28,898 | 86,143 | 80,257 | ||||||||
Gross Profit | 9,701 | 8,915 | 26,546 | 25,188 | ||||||||
Selling, Marketing and Warehouse Expenses | 4,150 | 4,159 | 12,247 | 12,612 | ||||||||
General and Administrative Expenses | 2,897 | 2,403 | 8,776 | 7,207 | ||||||||
Total Operating Expenses | 7,047 | 6,562 | 21,023 | 19,819 | ||||||||
Operating Income | 2,654 | 2,353 | 5,523 | 5,369 | ||||||||
Interest and Other Expense, net | 311 | 188 | 854 | 547 | ||||||||
Income Before Income Taxes | 2,343 | 2,165 | 4,669 | 4,822 | ||||||||
Provision for Income Taxes | 512 | 895 | 1,201 | 1,729 | ||||||||
Net Income | $ | 1,831 | $ | 1,270 | $ | 3,468 | $ | 3,093 | ||||
Basic Earnings Per Share | $ | 0.26 | $ | 0.18 | $ | 0.49 | $ | 0.44 | ||||
Average Shares Outstanding | 7,142 | 7,010 | 7,115 | 6,984 | ||||||||
Diluted Earnings Per Share | $ | 0.25 | $ | 0.18 | $ | 0.48 | $ | 0.43 | ||||
Average Shares Outstanding | 7,319 | 7,204 | 7,273 | 7,161 |
See accompanying notes to consolidated financial statements.
TRANSCAT, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands)
(Unaudited) | (Unaudited) | ||||||||||||||
Third Quarter Ended | Nine Months Ended | ||||||||||||||
December 23, | December 24, | December 23, | December 24, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 1,831 | $ | 1,270 | $ | 3,468 | $ | 3,093 | |||||||
Other Comprehensive Income (Loss): | |||||||||||||||
Currency Translation Adjustment | (151 | ) | (114 | ) | 227 | (88 | ) | ||||||||
Other, net of tax effects of $(28) and $(13) for the third quarters ended December 23, 2017 and December 24, 2016, respectively; and $(44) and $(27) for the nine months ended December 23, 2017 and December 24, 2016, respectively. | 1 | 21 | 26 | 43 | |||||||||||
Total Other Comprehensive (Loss) Income | (150 | ) | (93 | ) | 253 | (45 | ) | ||||||||
Comprehensive Income | $ | 1,681 | $ | 1,177 | $ | 3,721 | $ | 3,048 |
(Unaudited) | ||||||
First Quarter Ended | ||||||
June 30, | June 24, | |||||
2018 | 2017 | |||||
Service Revenue | $ | 19,325 | $ | 18,482 | ||
Distribution Sales | 17,333 | 17,797 | ||||
Total Revenue | 36,658 | 36,279 | ||||
Cost of Service Revenue | 14,406 | 13,846 | ||||
Cost of Distribution Sales | 13,139 | 13,742 | ||||
Total Cost of Revenue | 27,545 | 27,588 | ||||
Gross Profit | 9,113 | 8,691 | ||||
Selling, Marketing and Warehouse Expenses | 4,032 | 4,092 | ||||
General and Administrative Expenses | 3,056 | 3,188 | ||||
Total Operating Expenses | 7,088 | 7,280 | ||||
Operating Income | 2,025 | 1,411 | ||||
Interest and Other Expense, net | 225 | 272 | ||||
Income Before Income Taxes | 1,800 | 1,139 | ||||
Provision for Income Taxes | 372 | 283 | ||||
Net Income | $ | 1,428 | $ | 856 | ||
Basic Earnings Per Share | $ | 0.20 | $ | 0.12 | ||
Average Shares Outstanding | 7,177 | 7,079 | ||||
Diluted Earnings Per Share | $ | 0.19 | $ | 0.12 | ||
Average Shares Outstanding | 7,438 | 7,200 |
See accompanying notes to consolidated financial statements.
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited) | |||||||
First Quarter Ended | |||||||
June 30, | June 24, | ||||||
2018 | 2017 | ||||||
Net Income | $ | 1,428 | $ | 856 | |||
Other Comprehensive (Loss) Income: | |||||||
Currency Translation Adjustment | (95 | ) | 41 | ||||
Other, net of tax effects of $(1) and $(5) for the first quarters ended June 30, 2018 and June 24, 2017, respectively | 2 | 8 | |||||
Total Other Comprehensive (Loss) Income | (93 | ) | 49 | ||||
Comprehensive Income | $ | 1,335 | $ | 905 |
See accompanying notes to consolidated financial statements.
TRANSCAT, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)
(Unaudited) | (Audited) | (Unaudited) | (Audited) | |||||||||||||
December 23, | March 25, | June 30, | March 31, | |||||||||||||
2017 | 2017 | 2018 | 2018 | |||||||||||||
ASSETS | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash | $ | 504 | $ | 842 | $ | 486 | $ | 577 | ||||||||
Accounts Receivable, less allowance for doubtful accounts of $270 and $210 as of December 23, 2017 and March 25, 2017, respectively | 22,700 | 22,049 | ||||||||||||||
Accounts Receivable, less allowance for doubtful accounts of $296 as of each of June 30, 2018 and March 31, 2018 | 21,875 | 24,684 | ||||||||||||||
Other Receivables | 1,535 | 1,227 | 1,105 | 1,361 | ||||||||||||
Inventory, net | 11,144 | 10,278 | 13,310 | 12,651 | ||||||||||||
Prepaid Expenses and Other Current Assets | 988 | 1,193 | 1,240 | 1,240 | ||||||||||||
Total Current Assets | 36,871 | 35,589 | 38,016 | 40,513 | ||||||||||||
Property and Equipment, net | 17,478 | 15,568 | 17,691 | 17,091 | ||||||||||||
Goodwill | 32,823 | 32,520 | 32,739 | 32,740 | ||||||||||||
Intangible Assets, net | 5,984 | 7,519 | 5,115 | 5,505 | ||||||||||||
Other Assets | 1,079 | 901 | 949 | 973 | ||||||||||||
Total Assets | $ | 94,235 | $ | 92,097 | $ | 94,510 | $ | 96,822 | ||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts Payable | $ | 11,478 | $ | 11,615 | $ | 12,303 | $ | 13,535 | ||||||||
Accrued Compensation and Other Liabilities | 4,524 | 5,907 | 3,757 | 5,240 | ||||||||||||
Income Taxes Payable | 468 | 805 | 411 | 232 | ||||||||||||
Current Portion of Long-Term Debt | 2,143 | 1,429 | 2,143 | 2,143 | ||||||||||||
Total Current Liabilities | 18,613 | 19,756 | 18,614 | 21,150 | ||||||||||||
Long-Term Debt | 24,103 | 25,883 | 19,402 | 20,707 | ||||||||||||
Deferred Tax Liabilities | 955 | 1,134 | 1,704 | 1,709 | ||||||||||||
Other Liabilities | 1,960 | 1,923 | 1,919 | 1,908 | ||||||||||||
Total Liabilities | 45,631 | 48,696 | 41,639 | 45,474 | ||||||||||||
Shareholders' Equity: | ||||||||||||||||
Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,144,475 and 7,043,754 shares issued and outstanding as of December 23, 2017 and March 25, 2017, respectively | 3,572 | 3,522 | ||||||||||||||
Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,198,513 and 7,155,050 shares issued and outstanding as of June 30, 2018 and March 31, 2018, respectively | 3,599 | 3,578 | ||||||||||||||
Capital in Excess of Par Value | 14,553 | 12,996 | 15,197 | 14,965 | ||||||||||||
Accumulated Other Comprehensive Loss | (161 | ) | (414 | ) | (376 | ) | (281 | ) | ||||||||
Retained Earnings | 30,640 | 27,297 | 34,451 | 33,086 | ||||||||||||
Total Shareholders' Equity | 48,604 | 43,401 | 52,871 | 51,348 | ||||||||||||
Total Liabilities and Shareholders' Equity | $ | 94,235 | $ | 92,097 | $ | 94,510 | $ | 96,822 |
See accompanying notes to consolidated financial statements.
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited) | (Unaudited) | |||||||||||||||
Nine Months Ended | First Quarter Ended | |||||||||||||||
December 23, | December 24, | June 30, | June 24, | |||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net Income | $ | 3,468 | $ | 3,093 | $ | 1,428 | $ | 856 | ||||||||
Adjustments to Reconcile Net Income to Net Cash | ||||||||||||||||
Provided by Operating Activities: | ||||||||||||||||
Provided by (Used in) Operating Activities: | ||||||||||||||||
Net Loss on Disposal of Property and Equipment | 57 | 6 | 29 | 1 | ||||||||||||
Deferred Income Taxes | 11 | 121 | (5 | ) | 3 | |||||||||||
Depreciation and Amortization | 4,527 | 4,667 | 1,567 | 1,487 | ||||||||||||
Provision for Accounts Receivable and Inventory Reserves | 341 | 243 | 39 | 21 | ||||||||||||
Stock-Based Compensation | 1,095 | 316 | ||||||||||||||
Stock-Based Compensation Expense | 268 | 499 | ||||||||||||||
Changes in Assets and Liabilities: | ||||||||||||||||
Accounts Receivable and Other Receivables | (1,009 | ) | (3,168 | ) | 2,937 | 1,486 | ||||||||||
Inventory | (612 | ) | (3,967 | ) | (614 | ) | (1,373 | ) | ||||||||
Prepaid Expenses and Other Assets | (29 | ) | (341 | ) | 4 | (246 | ) | |||||||||
Accounts Payable | (137 | ) | 3,378 | (1,300 | ) | (3,329 | ) | |||||||||
Accrued Compensation and Other Liabilities | (1,325 | ) | (454 | ) | (1,470 | ) | (2,359 | ) | ||||||||
Income Taxes Payable | (570 | ) | (20 | ) | 179 | 72 | ||||||||||
Net Cash Provided by Operating Activities | 5,817 | 3,874 | ||||||||||||||
Net Cash Provided by (Used in) Operating Activities | 3,062 | (2,882 | ) | |||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Purchases of Property and Equipment | (5,084 | ) | (4,104 | ) | ||||||||||||
Proceeds from Sale of Property and Equipment | 11 | 29 | ||||||||||||||
Business Acquisitions | - | (6,977 | ) | |||||||||||||
Purchases of Property and Equipment, net | (1,918 | ) | (2,128 | ) | ||||||||||||
Net Cash Used in Investing Activities | (5,073 | ) | (11,052 | ) | (1,918 | ) | (2,128 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Repayment of Revolving Credit Facility, net | (7,018 | ) | (1,924 | ) | ||||||||||||
Proceeds from Term Loan | 7,143 | 10,000 | ||||||||||||||
(Repayment of) Proceeds from Revolving Credit Facility, net | (770 | ) | 5,007 | |||||||||||||
Repayment of Term Loan | (1,190 | ) | (952 | ) | (536 | ) | (357 | ) | ||||||||
Payment of Contingent Consideration and Holdbacks Related to Business Acquisitions | - | (339 | ) | |||||||||||||
Issuance of Common Stock | 821 | 384 | 66 | 610 | ||||||||||||
Repurchase of Common Stock | (344 | ) | (98 | ) | (143 | ) | (344 | ) | ||||||||
Stock Option Redemption | (90 | ) | (137 | ) | - | (90 | ) | |||||||||
Net Cash (Used in) Provided by Financing Activities | (678 | ) | 6,934 | (1,383 | ) | 4,826 | ||||||||||
Effect of Exchange Rate Changes on Cash | (404 | ) | 162 | 148 | (57 | ) | ||||||||||
Net Decrease in Cash | (338 | ) | (82 | ) | (91 | ) | (241 | ) | ||||||||
Cash at Beginning of Period | 842 | 641 | 577 | 842 | ||||||||||||
Cash at End of Period | $ | 504 | $ | 559 | $ | 486 | $ | 601 | ||||||||
Supplemental Disclosure of Cash Flow Activity: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | $ | 765 | $ | 488 | $ | 221 | $ | 230 | ||||||||
Income Taxes, net | $ | 1,783 | $ | 1,595 | $ | 194 | $ | 221 | ||||||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||||||||||
Holdback Amounts Related to Business Acquisitions | $ | - | $ | 735 |
See accompanying notes to consolidated financial statements.
TRANSCAT, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In Thousands, Except Par Value Amounts)
(Unaudited)
Capital | Capital | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock | In | Accumulated | Common Stock | In | Accumulated | |||||||||||||||||||||||||||||||||||||||||
Issued | Excess | Other | Issued | Excess | Other | |||||||||||||||||||||||||||||||||||||||||
$0.50 Par Value | of Par | Comprehensive | Retained | $0.50 Par Value | of Par | Comprehensive | Retained | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Value | (Loss) | Earnings | Total | Shares | Amount | Value | Loss | Earnings | Total | |||||||||||||||||||||||||||||||||||
Balance as of March 25, 2017 | 7,044 | $ | 3,522 | $ | 12,996 | $ | (414 | ) | $ | 27,297 | $ | 43,401 | ||||||||||||||||||||||||||||||||||
Balance as of March 31, 2018 | 7,155 | $ | 3,578 | $ | 14,965 | $ | (281 | ) | $ | 33,086 | $ | 51,348 | ||||||||||||||||||||||||||||||||||
Issuance of Common Stock | 102 | 51 | 770 | - | - | 821 | 4 | 2 | 64 | - | - | 66 | ||||||||||||||||||||||||||||||||||
Repurchase of Common Stock | (27 | ) | (14 | ) | (205 | ) | - | (125 | ) | (344 | ) | (8 | ) | (4 | ) | (77 | ) | - | (63 | ) | (144 | ) | ||||||||||||||||||||||||
Stock-Based Compensation | 25 | 13 | 1,082 | - | - | 1,095 | 48 | 23 | 245 | - | - | 268 | ||||||||||||||||||||||||||||||||||
Redemption of Stock Options | - | - | (90 | ) | - | - | (90 | ) | ||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income | - | - | - | 253 | - | 253 | ||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Loss | - | - | - | (95 | ) | - | (95 | ) | ||||||||||||||||||||||||||||||||||||||
Net Income | - | - | - | - | 3,468 | 3,468 | - | - | - | - | 1,428 | 1,428 | ||||||||||||||||||||||||||||||||||
Balance as of December 23, 2017 | 7,144 | $ | 3,572 | $ | 14,553 | $ | (161 | ) | $ | 30,640 | $ | 48,604 | ||||||||||||||||||||||||||||||||||
Balance as of June 30, 2018 | 7,199 | $ | 3,599 | $ | 15,197 | $ | (376 | ) | $ | 34,451 | $ | 52,871 |
See accompanying notes to consolidated financial statements.
TRANSCAT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share and Per Unit Amounts)
(Unaudited)
NOTE 1 – GENERAL
Description of Business:Transcat, Inc. (“Transcat” or the “Company”) is a leading provider of accredited calibration and laboratory instrument services and a value-added distributor of professional grade test, measurement and control instrumentation. The Company is focused on providing services and products to highly regulated industries, particularly the life science industry, which includes pharmaceutical, biotechnology, medical device and other FDA-regulated businesses. Additional industries served include industrial manufacturing; energy and utilities, including oil and gas; chemical manufacturing; FAA-regulated businesses, including aerospace and defense and other industries that require accuracy in their processes, confirmation of the capabilities of their equipment and have a high costfor which the risk of failure.failure is very costly.
Basis of Presentation:Transcat’s unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8-03 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, the Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. The results for the interim periods are not necessarily indicative of what the results will be for the fiscal year. The accompanying Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements as of and for the fiscal year ended March 25, 201731, 2018 (“fiscal year 2017”2018”) contained in the Company’s 20172018 Annual Report on Form 10-K filed with the SEC.
Revenue Recognition:Distribution sales are recorded when an order’sthe product’s title and risk of loss transfers to the customer. The Company recognizes the majority of its Service revenue based upon when the calibration or other activity is performed and then shipped and/or delivered to the customer. Some Service revenue is generated from managing customers’ calibration programs in which the Company recognizes revenue over time. The majority of the Company’s revenue generating activities have a single performance obligation and are recognized at the point in equal amounts at fixed intervals.time when control transfers and/or our obligation has been fulfilled. Revenue is measured as the amount of consideration it expects to receive in exchange for product shipped or services performed. Sales taxes and other taxes billed and collected from customers are excluded from revenue. The Company generally invoices its customers for freight, shipping, and handling charges. Provisions for customer returns are provided for in the period the related revenue is recorded based upon historical data.
Revenue recognized from prior period performance obligations for the first quarter of fiscal year 2019 was immaterial. As of June 30, 2018, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606 (defined below), the Company applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations. Deferred revenue, unbilled revenue and deferred contract costs recorded on our Consolidated Balance Sheets as of June 30, 2018 and March 31, 2018 were immaterial. Payment terms are generally 30 to 45 days. See Note 4 for disaggregated revenue information.
In 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which established principles to provide specific guidance on how entities should recognizereport useful information to financial statement users about the nature, timing and uncertainty of revenue derived from contracts with customers. ASU No. 2014-09 along with various related amendments comprise Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”), and provide guidance that is applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Transcat is required to adopt ASU 2014-09 inadopted the new standard for its fiscal year ending March 30, 2019 (“fiscal year 2019”). This new standard supercedes previous guidance, which began April 1, 2018 using the modified retrospective approach to each prior reporting period presented. Based on revenue recognition and requiresour analysis, the use of more estimates and judgments than the present standards. It also requires additional disclosures. We are continuing to evaluate certain contracts to determine their treatment under ASU 2014—09. The Company does not expectconcluded that the adoption of this ASU tothe amended guidance did not have a material impact on its net revenue recognition. The cumulative effect adjustment upon adoption of the Consolidated Financial Statements.ASU in the first quarter of fiscal year 2019 was immaterial.
Fair Value of Financial Instruments:Transcat has determined the fair value of debt and other financial instruments using a valuation hierarchy. The hierarchy, which prioritizes the inputs used in measuring fair value, consists of three levels. Level 1 uses observable inputs such as quoted prices in active markets; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, which is defined as unobservable inputs in which little or no market data exists, requires the Company to develop its own assumptions. The carrying amount of debt on the Consolidated Balance Sheets approximates fair value due to variable interest rate pricing, and the carrying amounts for cash, accounts receivable and accounts payable approximate fair value due to their short-term nature. Investment assets, which fund the Company’s non-qualified deferred compensation plan, consist of mutual funds and are valued based on Level 1 inputs. At December 23, 2017each of June 30, 2018 and March 25, 2017,31, 2018, investment assets totaled $0.8 million and $0.7 million respectively and are included as a component of other assets (non-current) on the Consolidated Balance Sheets.
Stock-Based Compensation:The Company measures the cost of services received in exchange for all equity awards granted, including stock options and restricted stock units, based on the fair market value of the award as of the grant date. The Company records compensation expense related to unvested equity awards by recognizing, on a straight-line basis, the unamortized grant date fair value over the remaining service period of each award. In 2016, FASB issued ASU 2016-09 to simplify certain aspects of the accounting for share-based payment transactions to employees. The Company elected to early adopt this ASU in the fourth quarter of fiscal year 2017. Upon adoption, excessExcess tax benefits for share-based award activity are reflected in the statement of income as a component of the provision for income taxes. Excess tax benefits are realized benefits from tax deductions for exercised awards in excess of the deferred tax asset attributable to stock-based compensation costs for such awards. The Company did not capitalize any stock-based compensation costs as part of an asset. The Company estimates forfeiture rates based on its historical experience. During the first nine monthsquarter of the fiscal year ending March 31, 2018 (“fiscal year 2018”)2019 and fiscal year 2017,2018, the Company recorded non-cash stock-based compensation expense of $1.1$0.3 million and $0.3$0.5 million, respectively, in the Consolidated Statements of Income.
Foreign Currency Translation and Transactions:The accounts of Transcat Canada Inc., a wholly-owned subsidiary of the Company, are maintained in the local currency (Canadian dollars) and have been translated to U.S. dollars. Accordingly, the amounts representing assets and liabilities have been translated at the period-end rates of exchange and related revenue and expense accounts have been translated at an average rate of exchange during the period. Gains and losses arising from translation of Transcat Canada Inc.’s financial statements into U.S. dollars are recorded directly to the accumulated other comprehensive loss component of shareholders’ equity.
Transcat records foreign currency gains and losses on its Canadian business transactions. The net foreign currency loss was less than $0.1 million duringin each of the first nine months of eachquarters of fiscal years 20182019 and 2017.2018. The Company continually utilizes short-term foreign exchange forward contracts to reduce the risk that its earnings will be adversely affected by changes in currency exchange rates. The Company does not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a loss of $0.1 million during the first nine monthsquarter of each of fiscal yearyears 2019 and 2018, and a gain of $0.1 million during the first nine months of fiscal year 2017, was recognized as a component of other expense in the Consolidated Statements of Income. The change in the fair value of the contracts is offset by the change in fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On December 23, 2017,June 30, 2018, the Company had a foreign exchange contract, which matured in JanuaryJuly 2018, outstanding in the notional amount of $5.4$4.9 million. The foreign exchange contract was renewed in JanuaryJuly 2018 and continues to be in place. The Company does not use hedging arrangements for speculative purposes.
Earnings Per Share:Basic earnings per share of common stock are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock reflect the assumed conversion of stock options and unvested restricted stock units using the treasury stock method in periods in which they have a dilutive effect. In computing the per share effect of assumed conversion, funds which would have been received from the exercise of options and unvested restricted stock units and the related tax benefits are considered to have been used to purchase shares of common stock at the average market prices during the period, and the resulting net additional shares of common stock are included in the calculation of average shares of common stock outstanding.
For the thirdfirst quarter of fiscal year 20182019, the net additional common stock equivalents had a $0.01 effect on the calculation of diluted earnings per share. For the thirdfirst quarter of fiscal year 2017,2018, the net additional common stock equivalents had no effect on the calculation of dilutive earnings per share. For each of the first nine months of fiscal year 2018 and fiscal year 2017, the net additional common stock equivalents had a $0.01 effect on the calculation of diluted earnings per share. The average shares outstanding used to compute basic and diluted earnings per share are as follows:
Third Quarter Ended | Nine Months Ended | First Quarter Ended | ||||||||||
December 23, | December 24, | December 23, | December 24, | June 30, | June 24, | |||||||
2017 | 2016 | 2017 | 2016 | 2018 | 2017 | |||||||
Average Shares Outstanding – Basic | 7,142 | 7,010 | 7,115 | 6,984 | 7,177 | 7,079 | ||||||
Effect of Dilutive Common Stock Equivalents | 177 | 194 | 158 | 177 | 261 | 121 | ||||||
Average Shares Outstanding – Diluted | 7,319 | 7,204 | 7,273 | 7,161 | 7,438 | 7,200 | ||||||
Anti-dilutive Common Stock Equivalents | - | - | - | - | - | - |
Recently Issued Accounting Pronouncements:In May 2017,June 2018, the FASB issued ASU 2017-09, Scope of Modification Accounting, Compensation—2018-07, Compensation – Stock Compensation, (Topic 718). Thiswhich simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under this ASU, provides clarity and reduces both diversity in practice and cost and complexity when applyingmost of the guidance in Topic 718on such payments to a changenonemployees would be aligned with the requirements for share-based payments granted to the terms or conditions of a share-based payment award.employees. This ASU is effective for annual reporting periods beginning after December 15, 2017 and should be applied prospectively.2018. Early adoption of this ASU is permitted. The Company does not expect adoption of this ASU to have a material impact on its Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC Topic 842), which requires lessees to recognize substantially all leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right of use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
The new standard is effective for annual and interim periods beginning after December 15, 2018. ASU 2016-02 requires entities to adopt a modified retrospective transition method for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements.
The Company continues to evaluate the impact that adopting ASU 2016-02 will have on its financial statements, but the most significant impact will be to increase assets and liabilities on the consolidated balance sheet by the present value of the Company’s leasing obligations, which are primarily related to facility and vehicle leases, as well as additional disclosures required.
NOTE 2 – LONG-TERM DEBT
Description:On October 30, 2017, the Company entered into an Amended and Restated Credit Agreement (the “2017“Credit Agreement”), which amended and restated our prior credit facility agreement. The 2017Credit Agreement extended the term of the Company’s $30.0 million revolving credit facility (the “Revolving Credit Facility”) to October 29, 2021. As of December 23, 2017,June 30, 2018, $30.0 million was available under the Revolving Credit Facility, of which $11.6$8.0 million was outstanding and included in long-term debt on the Consolidated Balance Sheet.Sheets. The 2017Credit Agreement also increased the amount of the Company’s outstanding term loan to $15.0 million (the “2017 Term Loan”), replacing the previous term loan. As of December 23, 2017, $14.6June 30, 2018, $13.6 million was outstanding on the 2017 Term Loan, of which $2.1 million was included in current liabilities on the Consolidated Balance SheetSheets with the remainder included in long-term debt. The 2017 Term Loan requires principal repayments of $0.2 million per month plus interest through September 2022 with a $4.3 million repayment required on October 29, 2022. Under the 2017Credit Agreement, borrowings that may be used for business acquisitions are limited to $20.0 million per fiscal year. During the first nine months of fiscal year 2018, no borrowings were used for business acquisitions.
The allowable leverage ratio under the 2017Credit Agreement remains at a maximum multiple of 3.0 of total debt outstanding compared to earnings before income taxes, depreciation and amortization, and non-cash stock-based compensation expense for the preceding four consecutive fiscal quarters. The excess funds of the 2017 Term Loan over the previous term loan were used to repay amounts outstanding under the Revolving Credit Facility.
Previously, on March 31, 2016, the Company entered into Amendment 3 (“Amendment 3”) to the prior credit agreement. Under Amendment 3, borrowings that could be used for business acquisitions were limited to $15.0 million in fiscal years 2018 and 2019. Amendment 3 also provided the Company with a $10.0 million term loan. The term loan required principal repayments of $0.1 million per month plus interest. Total annual repayment amounts of $1.4 million were required in fiscal years 2017 through 2021 with a $3.0 million repayment required in fiscal year 2022. Amendment 3 also increased the allowable leverage ratio to a maximum of 3.0 from 2.75. As described above, in the third quarter of fiscal year 2018, we entered into the 2017 Agreement that amended and restated the prior credit agreement, including Amendment 3.
Interest and Other Costs:Interest on outstanding borrowings of the Revolving Credit Facility and term loan accrue,2017 Term Loan accrues, at Transcat’s election, at either the variable one-month London Interbank Offered Rate (“LIBOR”) or a fixed rate for a designated period at the LIBOR corresponding to such period, in each case, plus a margin. Commitment fees accrue based on the average daily amount of unused credit available on the Revolving Credit Facility. Interest rate margins and commitment fees are determined on a quarterly basis based upon the Company’s calculated leverage ratio, as defined in the 2017Credit Agreement. The one-month LIBOR at December 23, 2017as of June 30, 2018 was 1.6%2.1%. The Company’s interest rate for the first nine monthsquarter of fiscal year 20182019 ranged from 3.2% to 3.4%3.6%.
Covenants:The 2017Credit Agreement has certain covenants with which the Company has tomust comply, including a fixed charge coverage ratio covenant and a leverage ratio covenant. The Company was in compliance with all loan covenants and requirements during the thirdfirst quarter of fiscal year 2019. Our leverage ratio, as defined in the Credit Agreement, was 1.28 at June 30, 2018, compared with 1.40 at the end of fiscal year 2018.
Other Terms:The Company has pledged all of its U.S. tangible and intangible personal property, the equity interests of its U.S.-based subsidiaries, and a majority of the common stock of Transcat Canada Inc. as collateral security for the loans made under the Revolving Credit Facility.
NOTE 3 – STOCK-BASED COMPENSATION
The Transcat, Inc. 2003 Incentive Plan, as Amended and Restated (the “2003 Plan”), provides for, among other awards, grants of restricted stock units and stock options to directors, officers and key employees at the fair market value at the date of grant. At December 23, 2017, 1.1 millionJune 30, 2018, the number of shares were available for future grant under the 2003 Plan.Plan totaled 1.1 million.
Restricted Stock Units:The Company generally grants performance-based restricted stock units as a primary component of executive compensation. TheIn previous fiscal years, the units generally vestvested following the third fiscal year from the date of grant subject to certain cumulative diluted earnings per share growth targets over the eligible period. The restricted stock units granted in June 2017 and April 2018 were time vested. Beginning with the restricted stock units granted in May 2018, 50% of the units will vest subject to certain cumulative diluted earnings per share growth targets over the eligible period and 50% of the restricted stock units will be time vested over a three-year period. Compensation cost ultimately recognized for performance-based restricted stock units will equal the grant date fair market value of the unit that coincides with the actual outcome of the performance conditions. On an interim basis, the Company records compensation cost based on the estimated level of achievement of the performance conditions. The expense relating to the time vested restricted stock units is recognized on a straight-line basis over the requisite service period for the entire award.
The Company achieved 50% of the target level for the performance-based restricted stock units granted in the fiscal year ended March 28, 201526, 2016 and as a result, issued 2532 shares of common stock to executive officers and certain key employees during the first quarter of fiscal year 2018.2019. The following table summarizes the non-vested performance-based restricted stock units outstanding as of December 23, 2017:June 30, 2018:
Grant | ||||||||||||||||||
Total | Grant Date | Estimated | Total | Date | Estimated | |||||||||||||
Number | Fair | Level of | Number | Fair | Level of | |||||||||||||
Date | Measurement | of Units | Value | Achievement at | Measurement | of Units | Value | Achievement at | ||||||||||
Granted | Period | Granted | Per Unit | December 23, 2017 | Period | Outstanding | Per Unit | June 30, 2018 | ||||||||||
April 2015 | April 2015 - March 2018 | 63 | $ | 9.59 | 50% of target level | |||||||||||||
April 2016 | April 2016 - March 2019 | 84 | $ | 10.13 | 115% of target level | April 2016 - March 2019 | 82 | $ | 10.13 | 125% of target level | ||||||||
April 2017 | April 2017 – March 2020 | 77 | $ | 12.90 | 100% of target level | April 2017 – March 2020 | 75 | $ | 12.90 | 100% of target level | ||||||||
June 2017 | July 2017 – June 2020 | 3 | $ | 12.00 | Time Vested | July 2017 – June 2020 | 3 | $ | 12.00 | Time Vested | ||||||||
April 2018 | April 2018 – March 2020 | 2 | $ | 15.65 | Time Vested | |||||||||||||
May 2018 | April 2018 – March 2020 | 60 | $ | 15.30 | 100% of target level |
Total expense relating to performance-based restricted stock units, based on grant date fair value and the achievement criteria, was $0.6 million and $0.2 million respectively in each of the first nine monthsquarter of fiscal years 2018year 2019 and 2017. Total expense relating to time vested restricted stock units was less than $0.1 million for the first nine months of fiscal year 2018. As of December 23, 2017,June 30, 2018, unearned compensation, to be recognized over the grants’ respective service periods, totaled $1.2$1.7 million.
Stock Options:Options vest either immediately or over a period of up to four years using a straight-line basis and expire either five years or ten years from the date of grant. The expense relating to options is recognized on a straight-line basis over the requisite service period for the entire award.
The following table summarizes the Company’s options as of and for the first nine months of fiscal yearquarter ended June 30, 2018:
Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||||||
Number | Exercise | Remaining | Aggregate | Number | Exercise | Remaining | Aggregate | ||||||||||||||||
Of | Price Per | Contractual | Intrinsic | of | Price Per | Contractual | Intrinsic | ||||||||||||||||
Shares | Share | Term (in years) | Value | Shares | Share | Term (in years) | Value | ||||||||||||||||
Outstanding as of March 25, 2017 | 241 | $ | 7.48 | ||||||||||||||||||||
Outstanding as of March 31, 2018 | 272 | $ | 10.27 | ||||||||||||||||||||
Granted | 165 | 12.00 | - | - | |||||||||||||||||||
Exercised | (89 | ) | 7.29 | - | - | ||||||||||||||||||
Forfeited | (15 | ) | 7.36 | (4 | ) | $ | 6.75 | ||||||||||||||||
Redeemed | (20 | ) | 7.72 | - | - | ||||||||||||||||||
Outstanding as of December 23, 2017 | 282 | $ | 10.17 | 5 | $ | 1,167 | |||||||||||||||||
Exercisable as of December 23, 2017 | 282 | $ | 10.17 | 5 | $ | 1,167 | |||||||||||||||||
Outstanding as of June 30, 2018 | 268 | $ | 10.33 | 4 | $ | 2,296 | |||||||||||||||||
Exercisable as of June 30, 2018 | 268 | $ | 10.33 | 4 | $ | 2,296 |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the thirdfirst quarter of fiscal year 20182019 and the exercise price, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all holders exercised their options on December 23, 2017.June 30, 2018. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common stock.
There was no expense related to stock options during the first quarter of fiscal year 2019. Total expense related to stock options was $0.4 million and $0.1$0.3 million during each of the first nine monthsquarter of fiscal years 2018 and 2017, respectively.year 2018. There was no unrecognized compensation cost related to non-vested stock options as of December 23, 2017. The aggregate intrinsic value ofJune 30, 2018. There were no stock options exercised induring the first nine monthsquarter of fiscal year 2018 was $0.6 million. Cash received from the exercise of options in the first nine months of fiscal year 2018 was $0.6 million.2019.
NOTE 4 – SEGMENT INFORMATION
Transcat has two reportable segments: Distribution and Service. The Company has no inter-segment sales. The following table presents segment information for the thirdfirst quarter and first nine months of fiscal years 2018year 2019 and 2017:fiscal year 2018:
Third Quarter Ended | Nine Months Ended | First Quarter Ended | ||||||||||||||||
December 23, | December 24, | December 23, | December 24, | June 30, | June 24, | |||||||||||||
2017 | 2016 | 2017 | 2016 | 2018 | 2017 | |||||||||||||
Revenue: | ||||||||||||||||||
Service | $ | 18,769 | $ | 17,455 | $ | 55,490 | $ | 51,577 | ||||||||||
Distribution | 21,714 | 20,358 | 57,199 | 53,868 | ||||||||||||||
Service Revenue | $ | 19,325 | $ | 18,482 | ||||||||||||||
Distribution Sales | 17,333 | 17,797 | ||||||||||||||||
Total | 40,483 | 37,813 | 112,689 | 105,445 | 36,658 | 36,279 | ||||||||||||
Gross Profit: | ||||||||||||||||||
Service | 4,699 | 4,306 | 13,655 | 13,175 | 4,919 | 4,636 | ||||||||||||
Distribution | 5,002 | 4,609 | 12,891 | 12,013 | 4,194 | 4,055 | ||||||||||||
Total | 9,701 | 8,915 | 26,546 | 25,188 | 9,113 | 8,691 | ||||||||||||
Operating Expenses: | ||||||||||||||||||
Service (1) | 3,636 | 3,365 | 10,917 | 10,399 | 3,851 | 3,751 | ||||||||||||
Distribution (1) | 3,411 | 3,197 | 10,106 | 9,420 | 3,237 | 3,529 | ||||||||||||
Total | 7,047 | 6,562 | 21,023 | 19,819 | 7,088 | 7,280 | ||||||||||||
Operating Income: | ||||||||||||||||||
Service | 1,063 | 941 | 2,738 | 2,776 | ||||||||||||||
Distribution | 1,591 | 1,412 | 2,785 | 2,593 | ||||||||||||||
Service(1) | 1,068 | 885 | ||||||||||||||||
Distribution(1) | 957 | 526 | ||||||||||||||||
Total | 2,654 | 2,353 | 5,523 | 5,369 | 2,025 | 1,411 | ||||||||||||
Unallocated Amounts: | ||||||||||||||||||
Interest and Other Expense, net | 311 | 188 | 854 | 547 | 225 | 272 | ||||||||||||
Provision for Income Taxes | 512 | 895 | 1,201 | 1,729 | 372 | 283 | ||||||||||||
Total | 823 | 1,083 | 2,055 | 2,276 | 597 | 555 | ||||||||||||
Net Income | $ | 1,831 | $ | 1,270 | $ | 3,468 | $ | 3,093 | $ | 1,428 | $ | 856 |
(1) | Operating expense allocations between segments were based on actual amounts, a percentage of revenues, headcount, and management’sestimates. |
NOTE 5 – BUSINESS ACQUISITIONSASSET PURCHASE
During the first quarter of fiscal year 2017,2019, Transcat acquired substantially all of the assets of Excalibur Engineering,NBS Calibration, Inc. (“Excalibur”NBS”), a California-basedan Arizona-based provider of calibration services, new and used test equipment sales, and equipment rentals.
services. This transaction aligned with the Company’s acquisition strategy of targeting businesses that expand the Company’s geographic reach and leverage its infrastructure while also increasing the depth and breadth of the Company’s service capabilities. In addition, Excalibur provided an established equipment rental and used equipment business, which are complimentaryDue to the Company’s traditional Distribution segment sales.
The Company applies the acquisition methodimmaterial amount of accounting for business acquisitions. Under the acquisition method, the purchase price of an acquisition is assigned to the underlying tangible and intangibleNBS assets, acquired and liabilities assumed based on their respective fair values at the date of acquisition. The Company uses a valuation hierarchy, as further described under Fair Value of Financial Instruments in Note 1 above, and typically utilizes independent third-party valuation specialists to determine the fair values used in this allocation. Purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Intangible assets related to the Excalibur acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to 10 years and are deductible for tax purposes.
The total purchase price paid for the assets of Excalibur was approximately $7.6 million, net of less than $0.1 million cash acquired. The following is a summary of the purchase price allocation,it has been included in the aggregate, topurchases of property and equipment, net in the fair value, basedconsolidated statement of cash flows.
As of June 30, 2018 and March 31, 2018, no contingent consideration or other holdback amounts were unpaid and included on Level 3 inputs, of assets and liabilities acquired during the period presented:Consolidated Balance Sheets.
FY 2017 | |||||
Goodwill | $ | 3,455 | |||
Intangible Assets – Customer Base | 1,990 | ||||
Intangible Assets – Covenant Not to Compete | 100 | ||||
5,545 | |||||
Plus: | Current Assets | 973 | |||
Non-Current Assets | 1,652 | ||||
Less: | Current Liabilities | (606 | ) | ||
Total Purchase Price | $ | 7,564 |
Certain of the Company’s acquisition agreements have included provisions for contingent consideration and other holdback amounts. The Company accrues for contingent consideration and holdback provisions based on their estimated fair value atthe date of acquisition. As of December 23, 2017 and March 25, 2017, no contingent consideration or other holdback amounts were outstanding.
The results of the acquired businesses are included in Transcat’s consolidated operating results as of the dates the businesses were acquired. The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of Excalibur had occurred at the beginning of fiscal year 2017. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transaction had occurred at the beginning of the period presented or what the Company’s operating results will be in future periods.
(Unaudited) | |||
Nine Months | |||
Ended | |||
December 24, | |||
2016 | |||
Total Revenue | $ | 105,595 | |
Net Income | $ | 3,013 | |
Basic Earnings Per Share | $ | 0.43 | |
Diluted Earnings Per Share | $ | 0.42 |
During each of the first nine months of fiscal years 2018 and 2017, acquisition costs of less than $0.1 million were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income.
NOTE 6 – INCOME TAXES
On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1), the tax reform bill (the "Act"), was signed into law. The Act includes numerous changes to existing tax law, including a permanent reduction in the federal corporate income tax rate from 35% to 21%. Since the Company is a fiscal year taxpayer, the lower corporate income tax rate will be phased in and the U.S. federal tax rate recorded is a blended rate of the old rates and the new rates for fiscal year 2018. The result was a $0.1 million reduction of the Company’s provision for income taxes in the third quarter of fiscal year 2018.
The Company has concluded that the Act will cause the Company’s U.S. deferred tax assets and liabilities to be revalued. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported basis in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are revalued and any change is adjusted through the provision for income tax expense in the reporting period of the enactment. The Act required the Company to do such a revaluation and record a reduction in its net deferred tax liability of approximately $0.2 million, which reduced the provision for income taxes during the third quarter of fiscal year 2018.
In addition, the Act provides for a one-time “deemed repatriation” of accumulated foreign earnings. The Company has estimated the additional provision for income tax expense on the repatriation to be less than $0.1 million. The Company will pay any amounts owed over eight years.
The reduction in the Company’s provision for income taxes due to the Act in the third quarter of fiscal year 2018 was approximately $0.3 million or $0.04 per share.
The impact of the Act may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of the Act.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements.This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, estimates, beliefs, assumptions and predictions of future events and are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “projects,” “intends,” “could,” “may”“may,” and other similar words. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or those expressed in such forward-looking statements. You should evaluate forward-looking statements in light of important risk factors and uncertainties that may affect our operating and financial results and our ability to achieve our financial objectives. These factors include, but are not limited to, our reliance on one vendor to supply a significant amount of inventory purchases, the risks related to current and future indebtedness, the relatively low trading volume of our common stock, risks related to our acquisition strategy and the integration of the businesses we acquire, the impact of economic conditions, risks related to the accuracy of the estimates and assumptions we use to revalue our U.S. deferred tax assets and liabilities in accordance with the Tax Cuts and Jobs Act of 2017, volatility in the oil and gas industry, the highly competitive nature of our two business segments, foreign currency rate fluctuations and cybersecurity risks. These risk factors and uncertainties are more fully described by us under the heading “Risk Factors” in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 25, 2017.31, 2018. You should not place undue reliance on our forward-looking statements. Except as required by law, we undertake no obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes to our critical accounting policies and estimates from the information provided in our Annual Report on Form 10-K for the fiscal year ended March 25, 2017.31, 2018.
RESULTS OF OPERATIONS
We achieved recordDuring our first quarter of fiscal year 2019, we had consolidated revenue of $40.5$36.7 million. This represented an increase of $2.7$0.4 million or 7.1%1.0% versus the thirdfirst quarter of fiscal year 2017.2018. Revenue growth was led bydue to our Service segment, which increased 7.5%4.6% to $18.8$19.3 million. Sales growthThere was a 2.6% sales decline in our Distribution segment was 6.7% to $21.7 million, a record quarter for that segment.$17.3 million. The sales growth achieved in both segmentsthe Service segment was all organic.
GrossFirst quarter gross profit was $9.7improved 4.9% or $0.4 million an increase of $0.8 million or 8.8% versus the thirdfirst quarter of fiscal year 2017.2018. Gross margin increased 40was 24.9%, an increase of 90 basis points, versus the first quarter of fiscal year 2018. This increase was due to improved productivity in the Service segment and changes in the Distribution segment sales mix with more rental revenues and opportunistic strategic pricing being applied to our core industrial customer base.in the Distribution segment.
Operating expenses were $7.0decreased $0.2 million an increase of $0.5 million or 7.4% aswhen compared to the thirdprior year first quarter, of fiscal year 2017. Generaldriven by decreased general and administrative expenses increased as we continued to invest in our technology infrastructure and operational excellence initiatives. This was partially offset byfiscal year 2018 first quarter included a decrease in selling, marketing and warehouse expenses which was a result of reduced acquired customer amortization$0.3 million one-off non-cash stock-based compensation expense. Operating expenses asAs a percentage of total revenue, operating expenses were 17.4%19.3%, the same asdown from 20.1% in the thirdfirst quarter of fiscal year 2017.2018. As a result of the gross margin improvement and cost discipline, operating income grew 43.5% or $0.6 million and operating margin expanded by 160 basis points.
Net income was $1.8$1.4 million for the thirdfirst quarter of fiscal year 20182019 for the reasons stated above, up from $1.3$0.9 million in the thirdfirst quarter of fiscal year 2017.2018. The Company also benefitted from reduced provision for income taxes of $0.3 milliontax rates due to the Act.Tax Cuts and Jobs Act of 2017 (the “Tax Act”).
The following table presents, for the thirdfirst quarter and first nine months of fiscal yearsyear 2019 and fiscal year 2018, and 2017, the components of our Consolidated Statements of Income:
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
Third Quarter Ended | Nine Months Ended | First Quarter Ended | ||||||||||||
December 23, | December 24, | December 23, | December 24, | June 30, | June 24, | |||||||||
2017 | 2016 | 2017 | 2016 | 2018 | 2017 | |||||||||
As a Percentage of Total Revenue: | ||||||||||||||
Service Revenue | 46.4% | 46.2% | 49.2% | 48.9% | 52.7 | % | 50.9 | % | ||||||
Distribution Sales | 53.6% | 53.8% | 50.8% | 51.1% | 47.3 | % | 49.1 | % | ||||||
Total Revenue | 100.0% | 100.0% | 100.0% | 100.0% | 100.0 | % | 100.0 | % | ||||||
Gross Profit Percentage: | ||||||||||||||
Service Gross Profit | 25.0% | 24.7% | 24.6% | 25.5% | 25.5 | % | 25.1 | % | ||||||
Distribution Gross Profit | 23.0% | 22.6% | 22.5% | 22.3% | 24.2 | % | 22.8 | % | ||||||
Total Gross Profit | 24.0% | 23.6% | 23.6% | 23.9% | 24.9 | % | 24.0 | % | ||||||
Selling, Marketing and Warehouse Expenses | 10.2% | 11.0% | 10.9% | 12.0% | 11.0 | % | 11.3 | % | ||||||
General and Administrative Expenses | 7.2% | 6.4% | 7.8% | 6.8% | 8.3 | % | 8.8 | % | ||||||
Total Operating Expenses | 17.4% | 17.4% | 18.7% | 18.8% | 19.3 | % | 20.1 | % | ||||||
Operating Income | 6.6% | 6.2% | 4.9% | 5.1% | 5.5 | % | 3.9 | % | ||||||
Interest and Other Expense, net | 0.8% | 0.5% | 0.8% | 0.5% | 0.6 | % | 0.8 | % | ||||||
Income Before Income Taxes | 5.8% | 5.7% | 4.1% | 4.6% | 4.9 | % | 3.1 | % | ||||||
Provision for Income Taxes | 1.3% | 2.3% | 1.0% | 1.6% | 1.0 | % | 0.7 | % | ||||||
Net Income | 4.5% | 3.4% | 3.1% | 2.9% | 3.9 | % | 2.4 | % |
THIRDFIRST QUARTER ENDED DECEMBER 23, 2017JUNE 30, 2018 COMPARED TO THIRDFIRST QUARTER ENDED DECEMBERJUNE 24, 20162017(dollars in thousands):
Revenue:
Third Quarter Ended | Change | First Quarter Ended | Change | ||||||||||||||||||||||
December 23, | December 24, | June 30, | June 24, | ||||||||||||||||||||||
2017 | 2016 | $ | % | 2018 | 2017 | $ | % | ||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Service | $ | 18,769 | $ | 17,455 | $ | 1,314 | 7.5% | $ | 19,325 | $ | 18,482 | $ | 843 | 4.6 | % | ||||||||||
Distribution | 21,714 | 20,358 | 1,356 | 6.7% | 17,333 | 17,797 | (464 | ) | (2.6 | )% | |||||||||||||||
Total | $ | 40,483 | $ | 37,813 | $ | 2,670 | 7.1% | $ | 36,658 | $ | 36,279 | $ | 379 | �� 1.0 | % |
Total revenue was $40.5 million, an increase of $2.7increased $0.4 million, or 7.1%1.0%, in our fiscal year 2018 third2019 first quarter compared to the prior year thirdfirst quarter. This year-over-year growth was purely organic.
Service revenue, which accounted for 46.4%52.7% and 46.2%50.9% of our total revenue in the thirdfirst quarter of fiscal years 20182019 and 2017,2018, respectively, increased 7.5%4.6% from the thirdfirst quarter of fiscal year 20172018 to the thirdfirst quarter of fiscal year 2018.2019. This year-over-year increase in Service revenue was comprisedthe result of new business from the life sciencesciences market and growth in general industrial manufacturing customers, which includes the defense and aerospace market.manufacturing.
Our fiscal years 20182019 and 2017 quarterly2018 Service revenue growth, in relation to prior fiscal year quarter comparisons, was as follows:
FY 2018 | FY 2017 | ||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||
Service Revenue Growth | 7.5% | 7.6% | 7.6% | 11.2% | 25.4% | 19.4% | 26.9% |
FY 2019 | FY 2018 | ||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | |||||||
Service Revenue Growth | 4.6% | 12.4% | 7.5% | 7.6% | 7.6% |
FiscalThe fiscal year 20172019 and 2018 quarterly growth comparisons include organic and acquisition related growthfor the Service segment was all organic.
Within any year, while we add new customers, we also have customers from the first, second, and third quarters ofprior fiscal year whose service orders may not repeat for any number of factors. Among those factors are variations in the timing of periodic calibrations and other services, customer capital expenditures and customer outsourcing decisions. Because the timing of Service segment orders can vary on a quarter-to-quarter basis, we believe trailing twelve-month information provides a better indication of the progress of this segment. The following table presents the trailing twelve-month Service segment revenue for each quarter in fiscal years 2019 and 2018 include no acquisition related growth. Our goal is to deliver mid-to-high single digit organic Serviceas well as the trailing twelve-month revenue growth each quarter overas a comparison to that of the same quarter prior year.fiscal year period:
FY 2019 | FY 2018 | ||||||||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||
Trailing Twelve-Month: | |||||||||||||||||||||
Service Revenue | $ | 78,288 | $ | 77,445 | $ | 75,016 | $ | 73,702 | $ | 72,410 | |||||||||||
Service Revenue Growth | 8.1 | % | 8.9 | % | 8.5 | % | 12.4 | % | 15.2 | % |
Our strategy has been to focus our investments in the core electrical, temperature, pressure, physical/dimensional and radio frequency/microwave calibration disciplines. We expect to subcontract approximately 13% to 15% of our Service revenue to third-party vendors for calibration beyond our chosen scope of capabilities. We continually evaluate our outsourcing needs and make capital investments, as deemed necessary, to add more in-house capabilities and reduce the need for third-party vendors. Capability expansion through business acquisitions is another way that we seek to reduce the need for outsourcing. The following table presents the source of our Service revenue and the percentage of Service revenue derived from each source for each quarter during fiscal years 20182019 and 2017:2018:
FY 2018 | FY 2017 | FY 2019 | FY 2018 | ||||||||||||||||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||
Percent of Service Revenue: | |||||||||||||||||||||||||||||||
In-House | 83.9% | 83.6% | 83.5% | 85.1% | 84.3% | 83.6% | 84.3% | 84.4 | % | 84.2 | % | 83.9 | % | 83.6 | % | 83.5 | % | ||||||||||||||
Outsourced | 14.4% | 14.7% | 14.7% | 13.0% | 13.9% | 14.6% | 13.8% | 14.0 | % | 14.2 | % | 14.4 | % | 14.7 | % | 14.7 | % | ||||||||||||||
Freight Billed to Customers | 1.7% | 1.7% | 1.8% | 1.9% | 1.8% | 1.8% | 1.9% | 1.6 | % | 1.6 | % | 1.7 | % | 1.7 | % | 1.8 | % | ||||||||||||||
100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Our Distribution sales accounted for 53.6%47.3% of our total revenue in the thirdfirst quarter of fiscal year 20182019 and 53.8%49.1% of our total revenue in the thirdfirst quarter of fiscal year 2017.2018. During the thirdfirst quarter of fiscal year 2018,2019, Distribution segment sales growthshowed a decline of 2.6% to $17.3 million. These results reflected highera mix of products sold within the quarter. There was a decrease in certain low-margin products offset by solid core distribution demand from industrial customers, especially those sold through our independent sales representative network,and increased rental business and web-based sales. Rental revenue of 24% to $0.9 million. In addition, there was $1.0 million and $0.7 million insome sales disruption toward the third quartersend of the first quarter of fiscal years 2018 and 2017, respectively.year 2019 as we consolidated our Irvine, CA operations with our Los Angeles, CA location as part of the final integration of the Excalibur Engineering, Inc. (“Excalibur”) acquisition made in fiscal year 2017.
Our fiscal years 20182019 and 20172018 Distribution sales (decline) growth, (decline), in relation to prior fiscal year quarter comparisons, was as follows. follows:
FY 2019 | FY 2018 | |||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||
Distribution Sales (Decline) Growth | (2.6 | %) | 8.3 | % | 6.7 | % | 0.9 | % | 11.4 | % |
The sales growth in fiscal year 2017 over fiscal year 2016 reflects the recovery of2019 and 2018 quarterly sales results in the oil and gas market whichDistribution segment were severely impacted by oil price drops and the ripple effects to that sector in fiscal year 2016.all organic.
FY 2018 | FY 2017 | |||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||
Distribution Sales Growth (Decline) | 6.7% | 0.9% | 11.4% | 23.7% | 25.4% | 14.7% | (1.0%) |
Distribution sales orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock. Pending product shipments are primarily backorders, but also include products that are requested to be calibrated in our service centers prior to shipment, orders required by the customer to be shipped complete or at a future date, and other orders awaiting final credit or management review prior to shipment. Our total pending product shipments at the end of the thirdfirst quarter of fiscal year 20182019 were $3.9$3.5 million, a decrease of $0.1 million from $4.0 million atconsistent with the end of the thirdfirst quarter of fiscal year 2017.2018. The following table presents our total pending product shipments and the percentage of total pending product shipments that were backorders at the end of each quarter of fiscal years 20182019 and 2017:2018:
FY 2018 | FY 2017 | FY 2019 | FY 2018 | ||||||||||||||||||||||||||||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||||||||||||
Total Pending Product Shipments | $ | 3,929 | $ | 3,940 | $ | 3,513 | $ | 3,662 | $ | 3,989 | $ | 3,530 | $ | 3,469 | $ | 3,486 | $ | 2,965 | $ | 3,929 | $ | 3,940 | $ | 3,513 | |||||||||||||||||||
% of Pending Product Shipments that were Backorders | 71.4% | 74.2% | 69.6% | 73.5% | 66.1% | 74.9% | 69.8% | ||||||||||||||||||||||||||||||||||||
% of Pending Product | |||||||||||||||||||||||||||||||||||||||||||
Shipments that were Backorders | 70.2 | % | 71.3 | % | 71.4 | % | 74.2 | % | 69.6 | % |
Gross Profit:
Third Quarter Ended | Change | First Quarter Ended | Change | ||||||||||||||||||||
December 23, | December 24 | June 30, | June 24, | ||||||||||||||||||||
2017 | 2016 | $ | % | 2018 | 2017 | $ | % | ||||||||||||||||
Gross Profit: | |||||||||||||||||||||||
Service | $ | 4,699 | $ | 4,306 | $ | 393 | 9.1% | $ | 4,919 | $ | 4,636 | $ | 283 | 6.1 | % | ||||||||
Distribution | 5,002 | 4,609 | 393 | 8.5% | 4,194 | 4,055 | 139 | 3.4 | % | ||||||||||||||
Total | $ | 9,701 | $ | 8,915 | $ | 786 | 8.8% | $ | 9,113 | $ | 8,691 | $ | 422 | 4.9 | % |
Total gross profit for the thirdfirst quarter of fiscal year 20182019 was $9.7$9.1 million, an increase of $0.8$0.4 million or 8.8%4.9% versus the thirdfirst quarter of fiscal year 2017.2018. Total gross margin was 24.9% in the first quarter of fiscal year 2019, up from 24.0% in the thirdfirst quarter of fiscal year 2018, a 4090 basis point increase versus the third quarter of fiscal year 2017.improvement.
Service gross profit in the thirdfirst quarter of fiscal year 20182019 increased $0.4$0.3 million, or 9.1%6.1%, from the thirdfirst quarter of fiscal year 2017.2018. Service gross margin was 25.0%25.5% in the thirdfirst quarter of fiscal year 2018,2019, a 3040 basis point increaseimprovement versus the thirdfirst quarter of fiscal year 2017.2018. This improved marginincrease was largely due to the inherent operating leverage in the segment combined with early operational excellence initiatives that drove productivity improvements, including the ramp-up productivity from service technicians hired earlier in fiscal year 2018.improvements.
The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue:
FY 2018 | FY 2017 | |||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||
Service Gross Margin | 25.0% | 23.7% | 25.1% | 30.0% | 24.7% | 24.4% | 27.5% |
FY 2019 | FY 2018 | |||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||
Service Gross Margin | 25.5 | % | 28.5 | % | 25.0 | % | 23.7 | % | 25.1 | % |
Our Distribution gross margin includes net sales less the direct cost of inventory sold and the direct costs of equipment rental revenues, primarily depreciation expense for the fixed assets in our rental equipment pool, as well as the impact of rebates and cooperative advertising income we receive from vendors, freight billed to customers, freight expenses and direct shipping costs. In general, our Distribution gross margin can vary based upon the mix of products sold, price discounting, and the timing of periodic vendor rebates offered and cooperative advertising programs from suppliers.
The following table reflects the quarterly historical trend of our Distribution gross margin as a percent of Distribution sales:
FY 2018 | FY 2017 | ||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||
Total Distribution Gross Margin | 23.0% | 21.7% | 22.8% | 20.7% | 22.6% | 22.2% | 22.0% |
FY 2019 | FY 2018 | |||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||
Distribution Gross Margin | 24.2 | % | 22.6 | % | 23.0 | % | 21.7 | % | 22.8 | % |
Distribution segment gross margin was 23.0%24.2% in the thirdfirst quarter of fiscal year 2019 versus 22.8% in the first quarter of fiscal year 2018, a 40140 basis point increase versus the third quarter of fiscal year 2017.improvement. The increase in segment gross margin was driven bydue to the sales mix which offset a decrease in volume-based vendor rebates.of products sold, inventory management, and pricing initiatives that were implemented as part of the Company’s ongoing operational excellence program.
Operating Expenses:
Third Quarter Ended | Change | First Quarter Ended | Change | ||||||||||||||||||||||
December 23, | December 24, | June 30, | June 24, | ||||||||||||||||||||||
2017 | 2016 | $ | % | 2018 | 2017 | $ | % | ||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||
Selling, Marketing and Warehouse | $ | 4,150 | $ | 4,159 | $ | (9 | ) | (0.2% | ) | $ | 4,032 | $ | 4,092 | $ | (60 | ) | (1.5 | %) | |||||||
General and | |||||||||||||||||||||||||
Administrative | 2,897 | 2,403 | 494 | 20.6% | |||||||||||||||||||||
General and Administrative | 3,056 | 3,188 | (132 | ) | (4.1 | %) | |||||||||||||||||||
Total | $ | 7,047 | $ | 6,562 | $ | 485 | 7.4% | $ | 7,088 | $ | 7,280 | $ | (192 | ) | (2.6 | %) |
Total operating expenses were $7.1 million in the first quarter of fiscal year 2019 versus $7.3 million during the first quarter of fiscal year 2018. The year-over-year increasechange in operating expenses was primarily due to some incremental general and administrative expenses related to our continued investment in technologythe Company’s operating infrastructure improvements and operational excellence initiatives. The year-over-year decrease in selling, marketing and warehouse expenses is due to reduced acquisition related amortization expense.initiatives offset by a $0.3 million one-off non-cash stock-based compensation expense incurred within the first quarter of fiscal year 2018. As a percentage of total revenue, operating expenses were 17.4%19.3% in the thirdfirst quarter of fiscal year 2018, the same as2019 and 20.1% in the thirdfirst quarter of fiscal year 2017.2018.
Provision for Income Taxes:
Third Quarter Ended | Change | |||||||||||
December 23, | December 24, | |||||||||||
2017 | 2016 | $ | % | |||||||||
Provision for Income Taxes | $ | 512 | $ | 895 | $ | (383 | ) | (42.8% | ) |
First Quarter Ended | Change | |||||||||||
June 30, | June 24, | |||||||||||
2018 | 2017 | $ | % | |||||||||
Provision for Income Taxes | $ | 372 | $ | 283 | $ | 89 | 31.4 | % |
Our effective tax rates for the thirdfirst quarter of fiscal years 2019 and 2018 were 20.7% and 2017 were 21.9% and 41.3%24.8%, respectively. The year-over-year decrease in the tax rate largely reflects the enactment of the Tax Act which was signed into law on December 22, 2017. The Act required a reduction in our U.S. net deferred tax liability of approximately $0.2 million, which reduced the provision for income taxes during the third quarter of fiscal year 2018. The Act also required us to use a blended U.S. federal tax rate ofalso reflects the old ratestax benefit from stock-based compensation awards. We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed necessary, our effective tax rate given changes in facts and circumstances expected for the new rates because we are aentire fiscal year taxpayer and, as a result, we will phase in the lower corporate income tax rate. This use of a blended rate reduced the provision for income taxes during the third quarter of fiscal year 2018 by $0.1 million. Due to the Act, we nowyear. We expect our total fiscal year 20182019 effective tax rate to be approximately 28.0%25.0% to 29.0%27.0%. The impact of the Act may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued and actions we may take as a result of the Act.
Net Income:
Third Quarter Ended | Change | |||||||||
December 23, | December 24, | |||||||||
2017 | 2016 | $ | % | |||||||
Net Income | $ | 1,831 | $ | 1,270 | $ | 561 | 44.2% |
First Quarter Ended | Change | |||||||||||
June 30, | June 24, | |||||||||||
2018 | 2017 | $ | % | |||||||||
Net Income | $ | 1,428 | $ | 856 | $ | 572 | 66.8 | % |
Net income for the thirdfirst quarter of fiscal year 2019 increased 66.8% from the first quarter of fiscal year 2018 was up 44.2% from the third quarter of fiscal year 2017 for the reasons stated above.
Adjusted EBITDA:
In addition to reporting net income, a U.S. GAAP measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, and non-cash stock compensation expense), which is a non-GAAP measure. Our management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and others to evaluate and compare the performance of our core operations from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, and stock-based compensation expense, which is not always commensurate with the reporting period in which it is included. As such, our management uses Adjusted EBITDA as a measure of performance when evaluating our business segments and as a basis for planning and forecasting. Adjusted EBITDA is also commonly used by rating agencies, lenders and other parties to evaluate our credit worthiness.
Adjusted EBITDA is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of operating income or net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.
Third Quarter Ended | First Quarter Ended | ||||||||||||||
December 23, | December 24, | June 30, | June 24, | ||||||||||||
2017 | 2016 | 2018 | 2017 | ||||||||||||
Net Income | $ | 1,831 | $ | 1,270 | $ | 1,428 | $ | 856 | |||||||
+ Interest Expense | 250 | 184 | 206 | 236 | |||||||||||
+ Other Expense | 61 | 4 | |||||||||||||
+ Other Expense / (Income) | 19 | 36 | |||||||||||||
+ Tax Provision | 512 | 895 | 372 | 283 | |||||||||||
Operating Income | $ | 2,654 | $ | 2,353 | $ | 2,025 | $ | 1,411 | |||||||
+ Depreciation & Amortization | 1,543 | 1,562 | 1,567 | 1,487 | |||||||||||
+ Other Expense | (61 | ) | (4 | ) | |||||||||||
+ Other (Expense) / Income | (19 | ) | (36 | ) | |||||||||||
+ Noncash Stock Compensation | 264 | (10 | ) | 269 | 499 | ||||||||||
Adjusted EBITDA | $ | 4,400 | $ | 3,901 | $ | 3,842 | $ | 3,361 |
AdjustedTotal adjusted EBITDA for the thirdfirst quarter of fiscal year 20182019 was $4.4$3.8 million, a $0.5 million or 12.8%14.3% increase versus the thirdfirst quarter of fiscal year 2017.2018. As a percentage of revenue, Adjusted EBITDA was 10.9%10.5% for the thirdfirst quarter of fiscal year 20182019 and 10.3%9.3% for the thirdfirst quarter of fiscal year 2017.2018. The difference between the increase in Adjusted EBITDA and the increase in net income during the thirdfirst quarter of fiscal year 2018 is primarily driven by increasedthe decrease from the one-off non-cash stock compensation expense and the impact of the Act on our tax provision.
NINE MONTHS ENDED DECEMBER 23, 2017 COMPARED TO NINE MONTHS ENDED DECEMBER 24, 2016(dollars in thousands):
Revenue:
Nine Months Ended | Change | |||||||||
December 23, | December 24, | |||||||||
2017 | 2016 | $ | % | |||||||
Revenue: | ||||||||||
Service | $ | 55,490 | $ | 51,577 | $ | 3,913 | 7.6% | |||
Distribution | 57,199 | 53,868 | 3,331 | 6.2% | ||||||
Total | $ | 112,689 | $ | 105,445 | $ | 7,244 | 6.9% |
Service revenue, which accounted for 49.2% of our total revenue during the first nine months of fiscal year 2018 and 48.9% of our total revenue during the first nine months of fiscal year 2017, increased $4.0 million, or 7.6%, from the first nine months of fiscal year 2017 to the first nine months of fiscal year 2018. The year-over-year increase was all organic as we took market share in the life science sector and general industrial manufacturing sector which includes both the defense and aerospace markets and raised prices where appropriate.
Our Distribution sales accounted for 50.8% and 51.1% of our total revenue in the first nine months of fiscal years 2018 and 2017, respectively. For the first nine months of fiscal year 2018, Distribution sales increased $3.3 million, or 6.2%, compared to the first nine months of fiscal year 2017. This year-over-year increase in sales reflects higher demand from industrial customers, including those sold through our independent representative network and increased rental revenues.
Gross Profit:
Nine Months Ended | Change | |||||||||
December 23, | December 24, | |||||||||
2017 | 2016 | $ | % | |||||||
Gross Profit: | ||||||||||
Service | $ | 13,655 | $ | 13,175 | $ | 480 | 3.6% | |||
Distribution | 12,891 | 12,013 | 878 | 7.3% | ||||||
Total | $ | 26,546 | $ | 25,188 | $ | 1,358 | 5.4% |
Total gross profit increased $1.4 million or 5.4% for the first nine months of fiscal year 2018 versus the first nine months of fiscal year 2017. Total gross margin was 23.6%, a 30 basis points reduction compared to 23.9% in the first nine months of fiscal year 2017. This year-over-year decline was primarily due to Service segment technician productivity challenges earlier in fiscal year 2018.
Operating Expenses:
Nine Months Ended | Change | |||||||||||
December 23, | December 24, | |||||||||||
2017 | 2016 | $ | % | |||||||||
Operating Expenses: | ||||||||||||
Selling, Marketing and Warehouse | $ | 12,247 | $ | 12,612 | $ | (365 | ) | (2.9% | ) | |||
General and Administrative | 8,776 | 7,207 | 1,569 | 21.8% | ||||||||
Total | $ | 21,023 | $ | 19,819 | $ | 1,204 | 6.1% |
The year-over-year increase in operating expenses was primarily due to incremental general and administrative expenses related to our continued investment in technology infrastructure improvements and operational excellence initiatives. The year-over-year decrease in selling, marketing and warehouse expenses is due to reduced acquisition related amortization expense. As a percentage of total revenue, operating expenses during the first nine months of fiscal year 2018 were 18.7%, compared to 18.8% in the first nine months of fiscal year 2017.
Provision for Income Taxes:
Nine Months Ended | Change | |||||||||
December 23, | December 24, | |||||||||
2017 | 2016 | $ | % | |||||||
Provision for Income Taxes | $ | 1,201 | $ | 1,729 | $ | (528) | (30.5%) |
Our effective tax rates for the first nine months of fiscal years 2018 and 2017 were 25.7% and 35.9%, respectively. The year-over-year decrease largely reflects the enactment of the Act which was signed into law on December 22, 2017. The Act required a reduction in our net U.S. deferred tax liability of approximately $0.2 million, which reduced the provision for income taxes during the third quarter of fiscal year 2018. The Act also required us to use a blended U.S. federal tax rate of the old rates and the new rates because we are a fiscal year taxpayer and, as a result, we will phase in the lower corporate income tax rate. This use of a blended rate reduced the provision for income taxes during the third quarter of fiscal year 2018 by $0.1 million. Due to the Act, we now expect our total fiscal year 2018 effective tax rate to be approximately 28.0% to 29.0%. The impact of the Act may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued and actions we may take as a result of the Act.
Net Income:
Nine Months Ended | Change | |||||||||
December 23, | December 24, | |||||||||
2017 | 2016 | $ | % | |||||||
Net Income | $ | 3,468 | $ | 3,093 | $ | 375 | 12.1% |
Net income for the first nine months of fiscal year 2018 was up 12.1% from the first nine months of fiscal year 2017 as increased interest and other expense more than offset a lower provision for income taxes.
Adjusted EBITDA:
In addition to reporting net income, a GAAP measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, and non-cash stock compensation expense), which is a non-GAAP measure. Our management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and others to evaluate and compare the performance of its core operations from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, and stock-based compensation expense, which is not always commensurate with the reporting period in which it is included. As such, our management uses Adjusted EBITDA as a measure of performance when evaluating our business segments and as a basis for planning and forecasting. Adjusted EBITDA is also commonly used by rating agencies, lenders and other parties to evaluate our credit worthiness.
Adjusted EBITDA is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of operating income or net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.
Nine Months Ended | |||||||
December 23, | December 24, | ||||||
2017 | 2016 | ||||||
Net Income | $ | 3,468 | $ | 3,093 | |||
+ Interest Expense | 767 | 501 | |||||
+ Other Expense | 87 | 46 | |||||
+ Tax Provision | 1,201 | 1,729 | |||||
Operating Income | $ | 5,523 | $ | 5,369 | |||
+ Depreciation & Amortization | 4,527 | 4,667 | |||||
+ Other Expense | (87 | ) | (46 | ) | |||
+ Noncash Stock Compensation | 1,095 | 316 | |||||
Adjusted EBITDA | $ | 11,058 | $ | 10,306 |
During the first nine months of fiscal year 2018, Adjusted EBITDA was $11.1 million, an increase of $0.8 million or 7.3% versus the first nine months of fiscal year 2017. As a percentage of revenue, Adjusted EBITDA was 9.8% for each of the first nine months of fiscal year 2018 and 2017. The difference between the increase in Adjusted EBITDA and increase in net income during the first nine months of fiscal year 2018 is primarily driven by increased non-cash stock compensation expense and the impact of the Act on our tax provision.
LIQUIDITY AND CAPITAL RESOURCES
On October 30, 2017, the Companywe entered into an Amended and Restated Credit Agreement (the “2017“Credit Agreement”), which amended and restated our prior credit facility agreement. The 2017Credit Agreement extended the term of the Company’sour $30.0 million revolving credit facility (the “Revolving Credit Facility”) to October 29, 2021. As of December 23, 2017,June 30, 2018, $30.0 million was available under the Revolving Credit Facility, of which $11.6$8.0 million was outstanding and included in long-term debt on the Consolidated Balance Sheet.
Sheets. The 2017Credit Agreement also increased the amount of the Company’sour outstanding term loan to $15.0 million (the “2017 Term Loan”), replacing the previous term loan. As of December 23, 2017, $14.6June 30, 2018, $13.6 million was outstanding on the 2017 Term Loan, of which $2.1 million was included in current liabilities on the Consolidated Balance SheetSheets with the remainder included in long-term debt. The 2017 Term Loan requires principal repayments of $0.2 million per month plus interest through September 2022 with a $4.3 million repayment required on October 29, 2022. Under the 2017Credit Agreement, borrowings that may be used for business acquisitions are limited to $20.0 million per fiscal year. During the first nine months of fiscal year 2018, no borrowings were used for business acquisitions.
The allowable leverage ratio under the 2017Credit Agreement remains at a maximum multiple of 3.0 of total debt outstanding compared to earnings before income taxes, depreciation and amortization, and non-cash stock-based compensation expense for the preceding four consecutive fiscal quarters. The excess funds of the 2017 Term Loan over the previous term loan were used to repay amounts outstanding under the Revolving Credit Facility.
Previously, on March 31, 2016, the Company entered into Amendment 3 (“Amendment 3”) to the prior credit agreement. Under Amendment 3, borrowings that could be used for business acquisitions were limited to $15.0 million in fiscal years 2018 and 2019. Amendment 3 also provided the Company with a $10.0 million term loan. The term loan required principal repayments of $0.1 million per month plus interest. Total annual repayment amounts of $1.4 million were required in fiscal years 2017 through 2021 with a $3.0 million repayment required in fiscal year 2022. Amendment 3 also increased the allowable leverage ratio to a maximum of 3.0 from 2.75. As described above, in the third quarter of fiscal year 2018, we entered into the 2017 Agreement that amended and restated the prior credit agreement, including Amendment 3.
The 2017Credit Agreement has certain covenants with which we must comply, including a fixed charge ratio covenant and a leverage ratio covenant. We were in compliance with all loan covenants and requirements during the thirdfirst quarter of fiscal year 2018.2019. Our leverage ratio, as defined in the 2017Credit Agreement, was 1.721.28 at December 23, 2017,June 30, 2018, compared with 1.881.40 at the end of fiscal 2017 year-end.year 2018.
Interest on the 2017 AgreementRevolving Credit Facility and 2017 Term Loan continues to accrue, at our election, at either the variable one-month London Interbank Offered Rate (“LIBOR”) or a fixed rate for a designated period at the LIBOR corresponding to such period, in each case, plus a margin. Commitment fees accrue based on the average daily amount of unused credit available under the 2017Credit Agreement. Interest rate margins and commitment fees are determined on a quarterly basis based upon our calculated leverage ratio, as defined in the 2017Credit Agreement.
Cash Flows:The following table is a summary of our Consolidated Statements of Cash Flows:Flows (dollars in thousands):
Nine Months Ended | First Quarter Ended | |||||||||||||||
December 23, | December 24, | June 30, | June 24, | |||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Cash (Used in) Provided by: | ||||||||||||||||
Cash Provided by (Used in): | ||||||||||||||||
Operating Activities | $ | 5,817 | $ | 3,874 | $ | 3,062 | $ | (2,882 | ) | |||||||
Investing Activities | $ | (5,073 | ) | $ | (11,052 | ) | $ | (1,918 | ) | $ | (2,128 | ) | ||||
Financing Activities | $ | (678 | ) | $ | 6,934 | $ | (1,383 | ) | $ | 4,826 |
Operating Activities: Net cash provided by operating activitiesoperations was $5.8$3.1 million during the first nine monthsquarter of fiscal year 20182019 compared to $3.9$2.9 million of net cash used in operating activities during the first nine monthsquarter of fiscal year 2017.2018. The year-over-year increase in cash provided by operations is primarily the result of changes in net working capital (defined as current assets less current liabilities). The significant working capital fluctuations were as follows:
● | Receivables: Accounts receivable |
December 23, | December 24, | |||||
2017 | 2016 | |||||
Net Sales, for the last two fiscal months | $ | 27,428 | $ | 25,952 | ||
Accounts Receivable, net | $ | 22,700 | $ | 19,967 | ||
Days Sales Outstanding | 49 | 46 |
June 30, | June 24, | |||||
2018 | 2017 | |||||
Net Sales, for the last two fiscal months | $ | 25,992 | $ | 25,033 | ||
Accounts Receivable, net | $ | 21,875 | $ | 20,411 | ||
Days Sales Outstanding | 50 | 49 |
● | Inventory: Our inventory strategy includes making appropriate large quantity, high dollar purchases with key manufacturers for various reasons, including maximizing on-hand availability of key products, expanding the number of SKU’s stocked in anticipation of customer demand, reducing backorders for products with long lead times and optimizing vendor |
● | Accounts Payable: Changes in accounts payable may or may not correlate with changes in inventory balances |
● | Accrued Compensation and Other Liabilities: Accrued |
● | Income Taxes Payable: In any given period, net working capital may be affected by the timing and amount of income tax payments. During the first |
Investing Activities:During the first nine monthsquarter of fiscal year 2019, we invested $1.9 million in capital expenditures that was used primarily for assets for the Company’s rental business and customer-driven expansion of Service segment capabilities. During the first quarter of fiscal year 2018, we invested $5.1$2.1 million in capital expenditures, including $1.0 million spent for expanded Service segment capabilities, specifically for our mobile calibration truck fleet and radio-frequency asset capabilities, and $1.5$0.4 million spent for rental assets. During the first nine monthsquarter of fiscal year 2017, we invested $4.1 million in capital expenditures, primarily for additional Service segment capabilitiesyears 2019 and rental assets. During the first nine months of fiscal year 2018, we had no business acquisitions. DuringThe purchase of assets from NBS during the first nine monthsquarter of fiscal year 2017, we used $7.0 million for a business acquisition. We generally fund2019 are included in our capital expenditures with cash flow from operations and our Revolving Credit Facility.above.
Financing Activities:During the first nine monthsquarter of fiscal year 2019, we used $0.8 million to repay our Revolving Credit Facility, $0.5 million for repayment of our term loan and $0.1 million to repurchase shares of our common stock. During the first quarter of fiscal year 2018, we received $7.1$5.0 million in net proceeds from the proceeds of the 2017 Term Loanour Revolving Credit Facility and $0.8$0.6 million in cash was generated from the issuance of common stock. In addition, we used $7.0 million to repay our Revolving Credit Facility, we used $1.2$0.4 million in cash for repayment of our term loan and $0.3 million to repurchase shares of our common stock. During the first nine months of fiscal year 2017, we received $9.0 million in net proceeds from a term loan and used approximately $1.9 million in cash for repayment of our Revolving Credit Facility. In addition, we used $0.3 million in cash for payment of holdbacks related to a business acquisition. Commencing in fiscal year 2018, we have revised our non-employee director performance-based compensation program such that any compensation earned under that program will be paid in Company stock awards, rather than in cash. The achievement criteria and the payment parameters (target payment of $20,000 per non-employee director with a maximum payment of $30,000), have not changed.changed for fiscal year 2019.
On December 20, 2017, we filed a universal shelf registration statement on Form S-3 with the SEC.Securities and Exchange Commission. Under the shelf registration statement, we may from time to time in one or more future offerings, issue various types of securities up to an aggregate amount of $50 million. We have no immediate plans to use this registration statement. The SECSecurities and Exchange Commission declared the shelf registration statement effective on January 5, 2018.
OUTLOOK
The fourth quarter ofWe are pleased with our sales and operating momentum and expect to deliver solid fiscal year is an important one as we usually generate approximately one third of our annual operating income2019 results. Our strong and unique value proposition continues to resonate in the fourth quarter. We believe we are well positionedmarket, and on track for a record yearrecent new business wins in fiscal 2018. Although still early, we believe our multi-year technology infrastructure and operational excellence initiatives are starting to gain early traction and are positively impacting both segments. Our Service segment continuessupport our confidence level. The Distribution business is also expected to strengthen its market position, particularlycontinue to generate significant cash, provide differentiation in the life science space where we believe our value proposition resonates the most,market and where regulation and the high cost of failure drive recurring revenue streams. We will continue tofoster Service growth opportunities. And, with a continued focus on investment in people, improving processes, and leveraging technology as a competitive advantageadvantage. We believe we can drive higher margins in both segments. We believe we have executed the early stages of our operational excellence initiatives well, but there remains a significant amount of work to do over the next 12 to 24 months to position us to achieve our goals.
Acquisitions will continue to be incremental to our overall growth expectations. Our small tuck-in purchase of the assets of NBS near the end of the first quarter of fiscal year 2019 both leverages our existing infrastructure and adds a drivercapability in liquid and gas flow meter calibrations to our offerings. In addition to purchasing the assets of increased margins.NBS, our current acquisition pipeline is active and we believe we have a strong balance sheet to execute our growth strategy.
Given the changes to the federal corporate income tax rate, Transcat expects its blended income tax rate for fiscal year 2018 to range between 28% and 29%. For fiscal year 2019, the Company expects its effective income tax rate to be approximately 26%. The Company expects to invest any windfall fromrange between 25% and 27% for full year fiscal 2019.
Having spent $1.9 million in the Act in its people, processes and technology.
The Company tightened itsfirst quarter of fiscal year 2019, we still expect capital expenditures expectations for the full fiscal year fiscal 20182019 to a range of $6.0be in the $7.0 million to $6.3$7.5 million which is being usedrange. Capital investments will be primarily forfocused on technology infrastructure investments to drive operational excellence specific customer-opportunity driven Service capabilities and additional assetsorganic growth opportunities within both operating segments, and for the Company’s growing rental business.pool assets.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATES
Our exposure to changes in interest rates results from our borrowing activities. In the event interest rates were to move by 1%, our yearly interest expense would increase or decrease by approximately $0.3$0.2 million assuming our average borrowing levels remained constant. As of December 23, 2017,June 30, 2018, $30.0 million was available under our Revolving Credit Facility, of which $11.6$8.0 million was outstanding and included in long-term debt on the Consolidated Balance Sheets. As described above under “Liquidity and Capital Resources,” we also hadhave a $15.0 million (original principal) term loan during the third quarter of fiscal year 2018.loan. The term loan is considered a LIBOR loan. As of December 23, 2017, $14.6June 30, 2018, $13.6 million was outstanding on the term loan and was included in long-term debt and current portion of long-term debt on the Consolidated Balance Sheet. The term loan requires principal repayments of $0.2 million per month plus interest.
At our option, we borrow from our Revolving Credit Facility and term loan2017 Term Loan at the variable one-month LIBOR or at a fixed rate for a designated period at the LIBOR corresponding to such period, in each case, plus a margin. Our interest rate margin is determined on a quarterly basis based upon our calculated leverage ratio. As of December 23, 2017,June 30, 2018, the one-month LIBOR was 1.6%2.1%. Our interest rate for the first nine monthsquarter of fiscal year 20182019 ranged from 3.2% to 3.4%3.6%. On December 23, 2017,June 30, 2018, we had no hedging arrangements in place to limit our exposure to upward movements in interest rates.
FOREIGN CURRENCY
Approximately 90% of our total revenues for each of the first nine monthsquarters of fiscal yearsyear 2019 and 2018 and 2017 were denominated in U.S. dollars, with the remainder denominated in Canadian dollars. A 10% change in the value of the Canadian dollar to the U.S. dollar would impact our revenue by approximately 1%. We monitor the relationship between the U.S. and Canadian currencies on a monthly basis and adjust sales prices for products and services sold in Canadian dollars as we believe to be appropriate.
We continually utilize short-term foreign exchange forward contracts to reduce the risk that future earnings would be adversely affected by changes in currency exchange rates. We do not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a loss of $0.1 million during the first nine monthsquarter of each of the fiscal yearyears 2019 and 2018, and a gain of $0.1 million for the first nine months of fiscal year 2017, was recognized as a component of other expense in the Consolidated Statements of Income. The change in the fair value of the contracts is offset by the change in the fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On December 23, 2017,June 30, 2018, we had a foreign exchange contract, which matured in JanuaryJuly 2018, outstanding in the notional amount of $5.4$4.9 million. The foreign exchange contract was renewed in JanuaryJuly 2018 and continues to be in place. We do not use hedging arrangements for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures.Our principal executive officer and our principal financial officer evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of such date.
Changes in Internal Control over Financial Reporting.There has been no change in our internal control over financial reporting that occurred during the last fiscal quarter covered by this quarterly report (our thirdfirst fiscal quarter of fiscal year 2018)2019) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
(a) | (b) | (c) | (d) | ||||||||||
Total Number of | Maximum Number (or | ||||||||||||
Total | Weighted | Shares Purchased as | Approximate Dollar Value) | ||||||||||
Number of | Average | Part of Publicly | of Shares that May Yet Be | ||||||||||
Shares | Price Paid | Announced Plans or | Purchased Under the Plans | ||||||||||
Period | Purchased | per Share | Programs(1) | or Programs(1) | |||||||||
04/01/2018 - 04/28/2018 | - | - | - | - | |||||||||
04/29/2018 - 05/26/2018 | 8,484 | (2) | $ | 16.90 | (2) | - | - | ||||||
05/27/2018 - 06/30/2018 | - | - | - | - | |||||||||
Total | 8,484 | $ | 16.90 | - | - |
(1) | We have a Share Repurchase Plan (the “Plan”), announced on October 31, 2011, which allows us to repurchase shares of our common stock from certain of our executive officers, directors and key employees, subject to certain conditions and limitations. The purchase price is determined by the weighted average closing price per share of our common stock on The NASDAQ Global Market over the twenty (20) trading days following our acceptance of the repurchase request and may not be more than 15% higher than the closing price on the last day of the twenty (20) trading day period. We may purchase shares of our common stock pursuant to the Plan on a continuous basis, but we may not expend more than $1.0 million in any fiscal year to repurchase the shares. Our board of directors may terminate the Plan at any time. No shares were repurchased under the Plan during the first quarter of fiscal year 2019. |
(2) | Shares withheld pursuant to the Transcat, Inc. 2003 Incentive Plan, as Amended and Restated, to cover tax-withholding obligations upon vesting of restricted stock unit awards that vested in the first quarter of fiscal year 2019. |
Index to ExhibitsINDEX TO EXHIBITS
(31) | Rule 13a-14(a)/15d-14(a) Certifications | ||
31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
(32) | Section 1350 Certifications | ||
32.1* Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(101) Interactive Data File | |||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Exhibit filed with this report. | |
# | Management contract or compensatory plan or arrangement. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TRANSCAT, INC. | ||
Date: | ||
Lee D. Rudow | ||
President and Chief Executive Officer | ||
Date: | ||
Michael J. Tschiderer | ||
Vice President of Finance and Chief Financial Officer | ||
2321