Note 1 - General | 9 Months Ended |
Dec. 28, 2013 |
Disclosure Text Block [Abstract] | ' |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | ' |
NOTE 1 – GENERAL |
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Description of Business: Transcat, Inc. (“Transcat” or the “Company”) is a leading provider of accredited calibration, repair, inspection and compliance services and distributor of professional grade handheld test, measurement and control instrumentation primarily for the life science, biotechnology, medical device, pharmaceutical and other FDA-regulated industries, industrial manufacturing, energy and utilities, chemical manufacturing, and other industries. |
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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 10 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 30, 2013 (“fiscal year 2013”) contained in the Company’s 2013 Annual Report on Form 10-K filed with the SEC. |
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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 28, 2013 and March 30, 2013, investment assets totaled $0.7 million and $0.6 million, respectively, and are included as a component of other assets (non-current) on the Consolidated Balance Sheets. |
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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 cost 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. Excess tax benefits from the exercise of equity awards are presented in the Consolidated Statements of Cash Flows as a financing activity. 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 months of the fiscal year ending March 29, 2014 (“fiscal year 2014”) and the first nine months of fiscal year 2013, the Company recorded non-cash stock-based compensation cost of $0.4 million and $0.2 million, respectively, in the Consolidated Statements of Income. |
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The estimated fair value of options granted in the first nine months of fiscal year 2014 were calculated using the Black-Scholes-Merton pricing model (“Black-Scholes”), which produced a weighted average fair value of $4.23 per option. During fiscal year 2013, the Company did not grant any stock options. |
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The following are the weighted average assumptions used in the Black-Scholes model: |
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| FY 2014 | | | | | | | | | | | | | | | |
Expected term (in years) | 6 | | | | | | | | | | | | | | | |
Annualized volatility rate | 59.20% | | | | | | | | | | | | | | | |
Risk-free rate of return | 1.70% | | | | | | | | | | | | | | | |
Dividend rate | 0.00% | | | | | | | | | | | | | | | |
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The Black-Scholes model incorporates assumptions to value stock-based awards. The risk-free rate of return for periods within the contractual life of the award was based on a zero-coupon U.S. government instrument over the contractual term of the equity instrument. Expected volatility was based on historical volatility of the Company’s stock. The expected option term represented the period that stock-based awards are expected to be outstanding based on the simplified method, which averages an award's weighted-average vesting period and expected term for "plain vanilla" share options. Options are considered to be "plain vanilla" if they have the following basic characteristics: granted "at-the-money"; exercisability is conditioned upon service through the vesting date; termination of service prior to vesting results in forfeiture; limited exercise period following termination of service; and options are non-transferable and non-hedgeable. The Company will continue to use the simplified method until it has the historical data necessary to provide a reasonable estimate of expected life. |
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Foreign Currency Translation and Transactions: The accounts of Transmation (Canada) Inc., a wholly-owned subsidiary of the Company, are maintained in the local currency 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 Transmation (Canada) Inc.’s balance sheets into U.S. dollars are recorded directly to the accumulated other comprehensive income component of shareholders’ equity. |
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Transcat records foreign currency gains and losses on Canadian business transactions. The net foreign currency loss was less than $0.1 million in the first nine months of fiscal years 2014 and 2013. The Company utilizes 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; therefore, the change in the fair value of the contracts, which totaled a gain of $0.3 million during the first nine months of fiscal year 2014 and a loss of less than $0.1 million during the first nine months of fiscal year 2013, was recognized in 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 28, 2013, the Company had two foreign exchange contracts, which mature in January 2014, outstanding for an aggregate notional amount of $5.2 million. The Company does not use hedging arrangements for speculative purposes. |
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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. The resulting net additional shares of common stock are included in the calculation of average shares of common stock outstanding. |
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The average shares outstanding used to compute basic and diluted earnings per share are as follows: |
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| | Third Quarter Ended | | | Nine Months Ended | |
| | December 28, | | | December 29, | | | December 28, | | | December 29, | |
2013 | 2012 | 2013 | 2012 |
Average Shares Outstanding – Basic | | | 6,856 | | | | 7,417 | | | | 7,192 | | | | 7,399 | |
Effect of Dilutive Common Stock Equivalents | | | 269 | | | | 145 | | | | 229 | | | | 176 | |
Average Shares Outstanding – Diluted | | | 7,125 | | | | 7,562 | | | | 7,421 | | | | 7,575 | |
Anti-dilutive Common Stock Equivalents | | | - | | | | 509 | | | | 225 | | | | 477 | |
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Shareholders’ Equity: During the third quarter of fiscal year 2014, the Company repurchased and subsequently retired 0.7 million shares of its common stock from an unaffiliated shareholder in a privately-negotiated transaction for $5.6 million. |
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