Exhibit 99.1
Transcat Announces Fiscal 2004 Third Quarter Results
ROCHESTER, NY – January 15, 2004 – Transcat, Inc. (Nasdaq: TRNS), a leading global distributor of professional grade test, measurement, and calibration instruments and a provider of calibration and repair services, today announced financial results for its third quarter ended December 27, 2003.
Net sales for the fiscal year 2004 third quarter were $13.6 million compared with net sales of $14.6 million during the fiscal year 2003 third quarter. The net loss for the fiscal year 2004 third quarter was $0.2 million, or $0.03 per share, as compared with a net income of $1.3 million, or $0.21 per share on a fully diluted basis in the prior year fiscal quarter.
Commenting on the fiscal year 2004 third quarter results, Carl E. Sassano, Chairman of the Board, President and Chief Executive Officer, stated: “We believe that our results are in line with our strategy of executing and sustaining a consistent, profitable business model.
“We continued to work the sales and marketing fundamentals of growth and had positive results during the fiscal 2004 third quarter. For example, our master catalog mailing and end-of-year promotions increased our average order size in December. We are pleased to report that we signed two new customers for calibration services in the quarter largely due to our focus on quality; these new revenues will add to our growth going forward.
“Distribution products net sales for the fiscal 2004 third quarter were $9.3 million compared with net sales of $7.6 million in the fiscal 2004 second quarter and $10.0 million in the prior year fiscal third quarter. We experienced both a stronger order rate and increased backlog during the quarter. In keeping with our strategy to increase our market share in the $50 million process calibrator market and to enter additional market segments, we began aggressively targeting new lower margin channels of distribution during the fiscal third quarter. As a result of both targeting these new channels and aggressive promotional activities with our existing customer base, our distributed products gross profit ratio declined 5.4 points from the prior year fiscal quarter.
“Calibration services net sales for the fiscal 2004 third quarter were $4.2 million compared with net sales of $4.3 million in the fiscal 2004 second quarter and $4.5 million in the prior year fiscal third quarter. We are pleased that we have both improved and sustained a higher gross profit ratio in this segment, which increased 10.7 points over the prior year fiscal quarter. The continued improvement resulted from the consolidation in 2003 of our calibration operations into ten strategically located Centers of Excellence.”
In order to effectively analyze the fiscal year 2004 third quarter results, the Company indicated that the following factors should be taken into consideration:
• | Fiscal year 2003 third quarter results include a pre-tax gain of $1.6 million, net of transaction costs, resulting from the restructuring of the Company’s senior debt; |
• | Fiscal year 2004 third quarter results include $0.1 million in severance charges resulting from organizational restructuring; |
• | Fiscal year 2003 third quarter results include $0.3 million of severance costs resulting from organizational restructuring and calibration laboratory consolidation; and |
• | Fiscal year 2004 third quarter results include a $0.2 million charge to settle a lawsuit brought against the Company by the former CFO. |
The operating loss for the fiscal year 2004 third quarter was $0.2 million compared with an operating loss of $0.1 million during the fiscal year 2003 third quarter. Excluding the impact of the above-referenced severance and litigation settlement charges, the Company would have had operating earnings of $0.2 million for the fiscal year 2004 third quarter.
“We are disappointed that our operating profit did not offset the $0.2 million charge to settle a lawsuit brought by our former CFO, thus producing a loss for the fiscal 2004 third quarter at the operating and net income lines” commented Mr. Sassano.
For the first nine months of fiscal year 2004, net sales were $38.0 million compared with net sales of $43.3 million for the first nine months of fiscal year 2003.
Distribution products net sales for the first nine months of fiscal year 2004 were $25.0 million compared with net sales of $29.4 million in the first nine months of fiscal year 2003. Calibration services net sales for the first nine months of fiscal year 2004 were $13.1 million compared with net sales of $13.9 million in the first nine months of fiscal year 2003.
Operating income for the first nine months of fiscal year 2004 was $0.2 million compared with an operating income of $0.4 million during the first nine months of fiscal year 2003. Excluding the impact of the above-referenced severance and litigation settlement charges, the Company would have had operating earnings of $0.6 million for the first nine months of fiscal year 2004.
Net income for the first nine months of fiscal year 2004 was $0.3 million, or $0.05 per share, as compared with a net income before cumulative effect of a change in accounting principle of $1.7 million, or $0.28 per share in the first nine months of fiscal year 2003.
Mr. Sassano continued: “We believe our progress is on track. Our strategy is to focus on gaining business and market share in companies who value quality systems and operate in regulated environments. Our goals, going forward, are to achieve product growth in the low single digits and achieve calibration service growth of 10% to 15%. We will focus on reducing the rate of operating expense growth relative to increase sales growth and on achieving continued reductions in long-term debt.
“Importantly, Transcat will strive to continue to improve performance, provide quality service to our customers, and increase shareholder value. We believe we are well positioned to achieve these goals in fiscal years 2004 and 2005.”
About Transcat, Inc.
Transcat, Inc. is a leading global distributor of professional grade test, measurement and calibration instruments and an accredited provider of calibration and repair services primarily to the process, life science and manufacturing industries.
Through the Company’s distribution products segment, Transcat markets and distributes national and proprietary brand instruments to approximately 10,000 global customers. Transcat’s Master Catalog offers easy access to more than 25,000 instruments, such as: calibrators, deadweight testers, temperature devices, multimeters, oscilloscopes, pressure pumps, testers, recorders, and related accessories, from nearly 250 of the industry’s leading manufacturers including Fluke,
Hart Scientific, Agilent, Ametek, and GE-Druck. In addition, Transcat is the exclusive worldwide distributor for Altek and Transmation products. The majority of this instrumentation requires expert calibration service to ensure that it maintains the most exacting measurements.
Through the Company’s calibration services segment, Transcat offers precise, reliable, fast calibration services through ten Calibration Centers of Excellence strategically located across the United States and Canada to approximately 8,000 customers. To support the Company’s customers calibration service needs, Transcat delivers the industry’s highest quality calibration services and repairs. Each of the calibration laboratories is ISO-9000: 2000 registered with Underwriter’s Laboratories, Inc. and the scope of accreditation to ISO/IEC 17025 is the widest in the industry.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:This press release contains forward-looking statements, which are subject to various risks and uncertainties. The Company’s actual results could differ from those anticipated in such forward-looking statements as a result of numerous factors that may be beyond the Company’s control.
TRANSCAT, INC.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited) | (Unaudited) | |||||||||||||||
Third Quarter Ended | Nine Months Ended | |||||||||||||||
December | December | December | December | |||||||||||||
27, 2003 | 31, 2002 | 27, 2003 | 31, 2002 | |||||||||||||
Product Sales | $ | 9,343 | $ | 10,037 | $ | 24,975 | $ | 29,368 | ||||||||
Service Sales | 4,208 | 4,541 | 13,067 | 13,889 | ||||||||||||
Net Sales | 13,551 | 14,578 | 38,042 | 43,257 | ||||||||||||
Cost of Products Sold | 7,344 | 7,351 | 18,733 | 21,572 | ||||||||||||
Cost of Services Sold | 3,124 | 3,855 | 9,544 | 11,809 | ||||||||||||
Total Cost of Products and Services Sold | 10,468 | 11,206 | 28,277 | 33,381 | ||||||||||||
Gross Profit | 3,083 | 3,372 | 9,765 | 9,876 | ||||||||||||
Selling, Marketing, and Warehouse Expenses | 2,041 | 2,120 | 6,195 | 6,154 | ||||||||||||
Administrative Expenses | 1,223 | 1,387 | 3,345 | 3,363 | ||||||||||||
Total Operating Expenses | 3,264 | 3,507 | 9,540 | 9,517 | ||||||||||||
Operating (Loss) Income | (181 | ) | (135 | ) | 225 | 359 | ||||||||||
Interest Expense | 76 | 128 | 219 | 511 | ||||||||||||
Other Income | (52 | ) | (1,593 | ) | (157 | ) | (1,600 | ) | ||||||||
Total Other Expense (Income) | 24 | (1,465 | ) | 62 | (1,089 | ) | ||||||||||
(Loss) Income Before Income Taxes and Cumulative Effect of a Change in Accounting Principle | (205 | ) | 1,330 | 163 | 1,448 | |||||||||||
Provision (Benefit) for Income Taxes | 15 | - | (147 | ) | (246 | ) | ||||||||||
(Loss) Income Before Cumulative Effect of a Change in Accounting Principle | (220 | ) | 1,330 | 310 | 1,694 | |||||||||||
Cumulative Effect of a Change in Accounting Principle | - | - | - | (6,472 | ) | |||||||||||
Net (Loss) Income | $ | (220 | ) | $ | 1,330 | $ | 310 | $ | (4,778 | ) | ||||||
Basic (Loss) Earnings Per Share: | ||||||||||||||||
Before Cumulative Effect of a Change in Accounting Principle | $ | (0.03 | ) | $ | 0.22 | $ | 0.05 | $ | 0.28 | |||||||
From Cumulative Effect of a Change in Accounting Principle | - | - | - | (1.06 | ) | |||||||||||
Total Basic (Loss) Earnings Per Share | $ | (0.03 | ) | $ | 0.22 | $ | 0.05 | $ | (0.78 | ) | ||||||
Average Shares Outstanding (in thousands) | 6,295 | 6,149 | 6,262 | 6,138 | ||||||||||||
Diluted (Loss) Earnings Per Share: | ||||||||||||||||
Before Cumulative Effect of a Change in Accounting Principle | $ | (0.03 | ) | $ | 0.21 | $ | 0.05 | $ | 0.28 | |||||||
From Cumulative Effect of a Change in Accounting Principle | - | - | - | (1.06 | ) | |||||||||||
Total Diluted (Loss) Earnings Per Share | $ | (0.03 | ) | $ | 0.21 | $ | 0.05 | $ | (0.78 | ) | ||||||
Average Shares Outstanding (in thousands) | 7,036 | 6,372 | 6,837 | 6,138 |
Certain reclassifications of prior year and prior quarter financial information have been made to conform to current quarter and nine month presentation.
TRANSCAT, INC.
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited) | ||||||||
December | March | |||||||
27, 2003 | 31, 2003 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 341 | $ | 114 | ||||
Accounts Receivable, less allowance for doubtful accounts of $70 and $114 as of December 27, 2003 and March 31, 2003, respectively | 6,529 | 6,879 | ||||||
Other Receivables | 208 | 159 | ||||||
Finished Goods Inventory, net | 4,930 | 2,842 | ||||||
Income Taxes Receivable | 484 | 799 | ||||||
Prepaid Expenses and Deferred Charges | 879 | 454 | ||||||
Total Current Assets | 13,371 | 11,247 | ||||||
Property, Plant and Equipment, net | 2,113 | 2,556 | ||||||
Goodwill | 2,524 | 2,524 | ||||||
Deferred Charges | 168 | 197 | ||||||
Other Assets | 244 | 234 | ||||||
Total Assets | $ | 18,420 | $ | 16,758 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Current Portion of Long-Term Debt | $ | 585 | $ | 666 | ||||
Accounts Payable | 4,708 | 3,738 | ||||||
Accrued Payrolls, Commissions and Other | 1,140 | 1,812 | ||||||
Income Taxes Payable | 100 | 100 | ||||||
Deposits | 62 | 64 | ||||||
Total Current Liabilities | 6,595 | 6,380 | ||||||
Long-Term Debt, less current portion | 6,849 | 5,916 | ||||||
Deferred Compensation | 228 | 220 | ||||||
Deferred Gain on TPG Divestiture | 1,544 | 1,544 | ||||||
Total Liabilities | 15,216 | 14,060 | ||||||
Stockholders’ Equity: | ||||||||
Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 6,307,974 and 6,296,000 shares issued as of December 27, 2003 and March 31, 2003, respectively; 6,188,616 and 6,176,642 shares outstanding as of December 27, 2003 and March 31, 2003, respectively | 3,154 | 3,148 | ||||||
Capital in Excess of Par Value | 3,102 | 3,031 | ||||||
Warrants | 518 | 518 | ||||||
Accumulated Other Comprehensive Loss | (116 | ) | (235 | ) | ||||
Retained Deficit | (3,001 | ) | (3,311 | ) | ||||
Less: Treasury Stock, at cost, 119,358 shares | (453 | ) | (453 | ) | ||||
Total Stockholders’ Equity | 3,204 | 2,698 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 18,420 | $ | 16,758 | ||||
Certain reclassifications of prior year and prior quarter financial information have been made to conform to current quarter and nine month presentation.
TRANSCAT, INC.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited) | ||||||||
Nine Months Ended | ||||||||
December | December | |||||||
27, 2003 | 31, 2002 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income (Loss) | $ | 310 | $ | (4,778 | ) | |||
Cumulative Effect of a Change in Accounting Principle | - | 6,472 | ||||||
Net Income Before Cumulative Effect of a Change in Accounting Principle | 310 | 1,694 | ||||||
Adjustments to Reconcile Net Income Before Cumulative Effect of a Change in Accounting Principle to Net Cash Provided by Operating Activities: | ||||||||
Gain on Extinguishment of Debt | - | (1,593 | ) | |||||
Depreciation and Amortization | 1,160 | 1,550 | ||||||
Provision for Doubtful Accounts Receivable and Returns | (122 | ) | - | |||||
Common Stock Expense | 77 | 36 | ||||||
Deferred Revenue — MAC | - | (161 | ) | |||||
Other | - | (10 | ) | |||||
Changes in Assets and Liabilities: | ||||||||
Accounts Receivable and Other Receivables | 423 | 1,863 | ||||||
MAC Escrow and Holdback | - | 218 | ||||||
Inventories | (2,088 | ) | (441 | ) | ||||
Income Taxes Receivable / Payable | 315 | (163 | ) | |||||
Prepaid Expenses, Deferred Charges, and Other | (854 | ) | (453 | ) | ||||
Accounts Payable | 970 | (705 | ) | |||||
Accrued Payrolls, Commissions, and Other | (687 | ) | (751 | ) | ||||
Deposits | (2 | ) | (376 | ) | ||||
Deferred Compensation | 8 | (42 | ) | |||||
Net Cash (Used in) Provided by Operating Activities | (490 | ) | 666 | |||||
Cash Flows from Investing Activities: | ||||||||
Purchase of Property, Plant and Equipment | (254 | ) | (249 | ) | ||||
Net Cash Used in Investing Activities | (254 | ) | (249 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Revolving Line of Credit, net | 1,352 | 408 | ||||||
Payments on Long-Term Borrowings | (500 | ) | (8,207 | ) | ||||
Proceeds from Long-Term Borrowings | - | 7,113 | ||||||
Net Cash Provided by (Used in) Financing Activities | 852 | (686 | ) | |||||
Effect of Exchange Rate Changes on Cash | 119 | (9 | ) | |||||
Net Increase (Decrease) in Cash | 227 | (278 | ) | |||||
Cash at Beginning of Period | 114 | 508 | ||||||
Cash at End of Period | $ | 341 | $ | 230 | ||||
Supplemental Disclosure of Non-Cash Financing Activity | ||||||||
Issuance of Warrants for Debt Retirement | $ | - | $ | 518 |
Certain reclassifications of prior year and prior quarter financial information have been made to conform to current quarter and nine month presentation.