SOURCE: Transcat, Inc.

October 10, 2006 16:51 ET

Transcat Announces Fiscal Year 2007 Second Quarter and First Half Results;

Net Sales Increase by 5.2% and 7.8% Respectively

ROCHESTER, NY -- (MARKET WIRE) -- October 10, 2006 -- 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 the fiscal year 2007 second quarter and first half ended September 23, 2006.

Fiscal Year 2007 Second Quarter and First Half Overview

--  Net sales increased 5.2% to $14.9 million in the fiscal year 2007
    second quarter and 7.8% to $30.4 million in the fiscal year 2007 first
    half.
    
--  Operating income for the fiscal year 2007 second quarter was $0.5
    million, which was comparable to operating income for the fiscal year 2006
    second quarter.  For the fiscal year 2007 first half, operating income was
    $0.9 million, which was also comparable to operating income for the first
    half of fiscal year 2006.
    
--  FAS123R stock option expenses were $0.1 million for the fiscal year
    2007 second quarter and $0.2 million for the fiscal year 2007 first half.
    FAS123R was adopted at the beginning of fiscal 2007; therefore there were
    no corresponding expenses in fiscal year 2006.
    
--  Net income of $0.2 million for the fiscal year 2007 second quarter,
    which included a provision for income taxes of $0.1 million, decreased by
    $0.1 million from the fiscal year 2006 second quarter, which did not
    include a provision for income taxes.  Net income for the fiscal year 2007
    first half, which included a provision for income taxes of $0.2 million,
    was $0.4 million compared to net income of $0.5 million for the same period
    in fiscal year 2006, which did not include an income tax provision.
    
--  Earnings per share for the fiscal year 2007 second quarter were $0.03
    per diluted share compared to $0.05 per diluted share for the fiscal year
    2006 second quarter.  Earnings per share for the fiscal year 2007 first
    half were $0.05 per diluted share compared to $0.07 per diluted share for
    the fiscal year 2006 first half.
    
--  Distribution Products - Net sales increased 5.0% to $9.9 million in
    the fiscal year 2007 second quarter from $9.4 million in the fiscal year
    2006 second quarter.  Distribution Products gross profit ratio for the
    fiscal year 2007 second quarter increased 0.2 points to 24.9% from the
    fiscal year 2006 second quarter.  However, the fiscal year 2006 second
    quarter included product purchase rebates of $0.1 million in excess of what
    was recorded in the fiscal year 2007 second quarter.  For the fiscal year
    2007 first half, the gross profit ratio, excluding the impact of rebates,
    was comparable to the fiscal year 2006 first half.
    
--  Calibration Services - Net sales increased 5.8% to $5.0 million in the
    fiscal year 2007 second quarter from $4.7 million in the fiscal year 2006
    second quarter.  Calibration Services gross profit ratio decreased 5.6
    points to 21.7% from the fiscal year 2006 second quarter.  For the fiscal
    year 2007 first half, Calibration Services net sales increased 6.1% to
    $10.0 million from $9.4 million.  For the fiscal year 2007 first half,
    Calibration Services gross profit margin decreased by 5.6 points to 22.4%
    from the fiscal year 2006 first half.
    
Operations Review

Carl E. Sassano, Chairman of the Board and Chief Executive Officer, stated: "I am pleased to report continued revenue growth in both Distribution Products and Calibration Services sales in the fiscal year 2007 second quarter.

"On a year-to-date basis, our Distribution Products sales are up 8.6% over the prior year, consistent with our expectations. The Transcat 2007 Master Catalog was distributed in September and we have a number of additional marketing initiatives underway to support our Distribution Products business.

"For the first half of the fiscal year 2007, 97% of our Calibration Services sales growth and 48% of our growth in cost of services sold were attributable to the acquisition of NWCI which we acquired in the fourth quarter of fiscal 2006. Excluding NWCI, growth in our Calibration Services business continues to fall short of our expectations. Increases in our operating costs along with relatively flat revenue have had a negative impact on our Calibration Services gross profit margin. During the second quarter, we continued to make changes in our sales and marketing organizations and selling processes to improve our growth rate in this segment."

Looking Ahead

Mr. Sassano continued: "For fiscal year 2007, we expect to build on the solid foundation that has been established over the previous four years, with continued growth in revenues. We expect the business overall will experience growth in fiscal year 2007 similar to that of fiscal year 2006.

"We are focused on maximizing gross margin from our Distribution Products sales while maintaining sales growth in the high single digits in fiscal year 2007. A core strategy for Distribution Products growth is to identify customers who have a high potential demand for Calibration Services.

"We are also focused on growth in our Calibration Services business in fiscal year 2007 to leverage the investments we have made and improve our gross margin. We continue to believe that bundling our Distribution Products sales and Calibration Services provides significant value to our customers and gives us both competitive advantages and operating efficiencies.

"In fiscal year 2002, we divested Transmation Products Group and were precluded from recognizing the gain for accounting purposes until certain conditions were met. We anticipate that those conditions will be met in the third quarter of the fiscal year 2007, and therefore we expect to recognize a non-cash gain of $1.5 million in that quarter."

Fiscal Year 2007 Second Quarter Financial Summary

For the fiscal year 2007 second quarter, net sales were $14.9 million, an increase of $0.7 million or 5.2%, compared with net sales of $14.1 million for the fiscal year 2006 second quarter. Distribution Products net sales for the fiscal year 2007 second quarter were $9.9 million, an increase of $0.5 million or 5.0%, compared with net sales of $9.4 million for the fiscal year 2006 second quarter. Calibration Services net sales for the fiscal year 2007 second quarter were $5.0 million, an increase of $0.3 million or 5.8%, compared with net sales of $4.7 million for the fiscal year 2006 second quarter.

For the fiscal year 2007 first half, net sales were $30.4 million, an increase of $2.2 million or 7.8%, compared with net sales of $28.2 million for the fiscal year 2006 first half. Distribution Products net sales for the fiscal year 2007 first half were $20.4 million, an increase of $1.6 million or 8.6%, compared with net sales of $18.8 million for the fiscal year 2006 first half. Calibration Services net sales for the fiscal year 2007 first half were $10.0 million, an increase of $0.6 million or 6.1%, compared with net sales of $9.4 million for the fiscal year 2006 first half.

In evaluating the Company's results for the fiscal year 2007 second quarter and first half, the following factors should be taken into account. First, product purchase rebates received in the prior year quarter were approximately $100,000 higher than those received in the current quarter. Second, the Company adopted SFAS 123R, which requires the expensing of stock options, at the beginning of the fiscal year 2007. Approximately $100,000 of stock option expense was recorded in the current quarter and $240,000 has been recorded year to date. Third, results for the fiscal year 2007 second quarter include a $137,000 provision for income taxes and $189,000 has been recorded year to date. In the fiscal year 2006 second quarter and first half, the provisions for income taxes were offset by an equal reduction in the Company's deferred tax asset valuation allowance with no impact on net income. A large portion of the Company's deferred tax asset valuation allowance was reversed in the fiscal year 2006 fourth quarter.

Net income for the fiscal year 2007 second quarter decreased by $0.1 million to $0.2 million, or $0.03 per diluted share, compared to $0.05 per diluted share, in the fiscal year 2006 second quarter. Net income for the fiscal year 2007 first half was $0.4 million, or $0.05 per diluted share, compared to $0.5 million, or $0.07 per diluted share for the fiscal year 2006 first half.

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 Calibration Services segment, Transcat offers precise, reliable, fast calibration services through twelve 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-9001: 2000 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.

- Statistical Tables Follow -

                              TRANSCAT, INC.
                  Consolidated Statements of Operations
                              (In Thousands)


                                       (Unaudited)           (Unaudited)
                                  Second Quarter Ended    Six Months Ended
                                 September  September  September  September
                                      23,        24,        23,         24,
                                     2006       2005       2006        2005

Product Sales                     $  9,880   $  9,412   $ 20,417   $ 18,797
Service Sales                        4,980      4,707      9,963      9,387
  Net Sales                         14,860     14,119     30,380     28,184

Cost of Products Sold                7,415      7,087     15,244     14,213
Cost of Services Sold                3,897      3,423      7,728      6,757
  Total Cost of Products and
   Services Sold                    11,312     10,510     22,972     20,970

Gross Profit                         3,548      3,609      7,408      7,214

Selling, Marketing, and Warehouse
 Expenses                            1,807      1,850      3,942      3,943
Administrative Expenses              1,222      1,247      2,610      2,429
  Total Operating Expenses           3,029      3,097      6,552      6,372

Operating Income                       519        512        856        842

Interest Expense                        90        109        184        223
Other Expense                           46         54        120         96
  Total Other Expense                  136        163        304        319

Income Before Income Taxes             383        349        552        523
Provision for Income Taxes             137          -        189          -

Net Income                        $    246   $    349   $    363   $    523

Basic Earnings Per Share          $   0.04   $   0.05   $   0.05   $   0.08
Average Shares Outstanding (in
 thousands)                          6,902      6,618      6,864      6,574

Diluted Earnings Per Share        $   0.03   $   0.05   $   0.05   $   0.07
Average Shares Outstanding (in
 thousands)                          7,425      7,315      7,377      7,269



                              TRANSCAT, INC.
                        CONSOLIDATED BALANCE SHEETS
            (In Thousands, Except Share and Per Share Amounts)



                                                (Unaudited)
                                                September 23,   March 25,
                                                    2006          2006
                                                ------------  ------------
ASSETS
Current Assets:
  Cash                                          $         97  $        115
  Accounts Receivable, less allowance for
   doubtful accounts of $79
   and $63 as of September 23, 2006 and March
   25, 2006, respectively                              7,138         7,989
  Other Receivables                                      378             -
  Finished Goods Inventory, net                        4,003         3,952
  Prepaid Expenses and Deferred Charges                  818           732
  Deferred Tax Asset                                   1,069         1,038
                                                ------------  ------------
    Total Current Assets                              13,503        13,826
Property, Plant and Equipment, net                     2,598         2,637
Assets Under Capital Leases, net                          17            50
Goodwill                                               2,967         2,967
Prepaid Expenses and Deferred Charges                     58           113
Deferred Tax Asset                                     1,445         1,624
Other Assets                                             277           271
                                                ------------  ------------
  Total Assets                                  $     20,865  $     21,488
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts Payable                              $      3,811  $      4,219
  Accrued Payrolls, Commissions, and Other             1,606         2,530
  Income Taxes Payable                                    61           102
  Current Portion of Term Loan                           604           667
  Capital Lease Obligations                               21            56
  Revolving Line of Credit                             3,475         3,252
                                                ------------  ------------
    Total Current Liabilities                          9,578        10,826
Term Loan, less current portion                           83           353
Deferred Compensation                                    125           118
Deferred Gain on TPG Divestiture                       1,544         1,544
                                                ------------  ------------
  Total Liabilities                                   11,330        12,841
                                                ------------  ------------

Stockholders' Equity:
  Common Stock, par value $0.50 per share,
   30,000,000 shares authorized;
   7,174,689 and 7,048,028 shares issued as of
   September 23, 2006 and March 25, 2006,
   respectively; 6,908,341 and
   6,791,240 shares outstanding as of
   September 23, 2006 and
   March 25, 2006, respectively                        3,587         3,524
  Capital in Excess of Par Value                       5,091         4,641
  Warrants                                               329           329
  Unearned Compensation                                  (47)          (15)
  Accumulated Other Comprehensive Gain                   275           181
  Retained Earnings                                    1,238           875
  Less:  Treasury Stock, at cost, 266,348 and
   256,788 shares as of
   September 23, 2006 and March 25, 2006,
   respectively                                         (938)         (888)
                                                ------------  ------------
    Total Stockholders' Equity                         9,535         8,647
                                                ------------  ------------
    Total Liabilities and Stockholders' Equity  $     20,865  $     21,488
                                                ============  ============



                              TRANSCAT, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In Thousands)


                                                      (Unaudited)
                                                   Six Months Ended
                                            ------------------------------
                                            September 23,   September 24,
                                                 2006            2005
                                            --------------  --------------
Cash Flows from Operating Activities:
    Net Income                              $          363  $          523
    Adjustments to Reconcile Net Income to
     Net Cash
      Provided by Operating Activities:
        Deferred Taxes                                 148               -
        Depreciation and Amortization                  769             610
        Provision for Doubtful Accounts
         Receivable                                     47              13
        Provision for Returns                            1              (3)
        Provision for Slow Moving or
         Obsolete Inventory                             (5)              6
        Common Stock Expense                           304              44
        Amortization of Unearned
         Compensation                                   24              24
    Changes in Assets and Liabilities:
      Accounts Receivable and Other
       Receivables                                     515           1,474
      Inventories                                      (46)            456
      Prepaid Expenses, Deferred Charges,
       and Other                                      (280)           (421)
      Accounts Payable                                (408)           (414)
      Accrued Payrolls, Commissions, and
       Other                                          (924)           (277)
      Income Taxes Payable                             (41)              -
      Deposits                                           -             (37)
      Deferred Compensation                              -              (6)
                                            --------------  --------------
        Net Cash Provided by Operating
         Activities                                    467           1,992
                                            --------------  --------------

Cash Flows from Investing Activities:
    Purchase of Property, Plant and
     Equipment                                        (454)           (362)
                                            --------------  --------------
        Net Cash Used in Investing
         Activities                                   (454)           (362)
                                            --------------  --------------

Cash Flows from Financing Activities:
    Revolving Line of Credit, net                      223          (1,494)
    Payments on Term Loans                            (333)           (424)
    Payments on Capital Leases                         (35)            (32)
    Issuance of Common Stock                           110             229
                                            --------------  --------------
        Net Cash Used in Financing
         Activities                                    (35)         (1,721)
                                            --------------  --------------

Effect of Exchange Rate Changes on Cash                  4              80
                                            --------------  --------------

Net Decrease in Cash                                   (18)            (11)
Cash at Beginning of Period                            115             106
                                            --------------  --------------
Cash at End of Period                       $           97  $           95
                                            ==============  ==============


Contact Information

  • Corporate Offices
    35 Vantage Point Drive
    Rochester, New York 14624
    Telephone: 585-352-7777
    Fax: 585-352-7788

    Contact:
    Charles P. Hadeed
    President and COO
    John J. Zimmer
    Vice President of Finance and CFO
    Transcat, Inc.
    585-352-7777

    Van Negris / Lexi Terrero
    Van Negris & Company, Inc.
    212-759-0290