UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM
(Mark one)
For the quarterly period ended:
or
For the transition period from to
Commission File Number:
TRANSCAT, INC.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |
| Non-accelerated filer ☐ | 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
The number of shares of common stock, par value $0.50 per share, of the registrant outstanding as of July 28, 2023 was
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
| (Unaudited) |
||||||||
| First Quarter Ended |
||||||||
| June 24, |
June 25, |
|||||||
| 2023 |
2022 |
|||||||
| Service Revenue |
$ | $ | ||||||
| Distribution Sales |
||||||||
| Total Revenue |
||||||||
| Cost of Service Revenue |
||||||||
| Cost of Distribution Sales |
||||||||
| Total Cost of Revenue |
||||||||
| Gross Profit |
||||||||
| Selling, Marketing and Warehouse Expenses |
||||||||
| General and Administrative Expenses |
||||||||
| Total Operating Expenses |
||||||||
| Operating Income |
||||||||
| Interest and Other Expense, net |
||||||||
| Income Before Income Taxes |
||||||||
| Provision for Income Taxes |
||||||||
| Net Income |
$ | $ | ||||||
| Basic Earnings Per Share |
$ | $ | ||||||
| Average Shares Outstanding |
||||||||
| Diluted Earnings Per Share |
$ | $ | ||||||
| Average Shares Outstanding |
||||||||
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
| (Unaudited) | ||||||||
| First Quarter Ended | ||||||||
| June 24, | June 25, | |||||||
| 2023 | 2022 | |||||||
| Net Income | $ | $ | ||||||
| Other Comprehensive Income (Loss): | ||||||||
| Currency Translation Adjustment | ( | ) | ||||||
| Other, net of tax effects of $ and $() for the first quarter ended June 24, 2023 and June 25, 2022, respectively; | ( | ) | ||||||
| Total Other Comprehensive Income (Loss) | ( | ) | ||||||
| Comprehensive Income | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)
| (Unaudited) | (Audited) | |||||||
| June 24, | March 25, | |||||||
| 2023 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts Receivable, less allowance for doubtful accounts of $ and $ as of June 24, 2023 and March 25, 2023, respectively | ||||||||
| Other Receivables | ||||||||
| Inventory, net | ||||||||
| Prepaid Expenses and Other Current Assets | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible Assets, net | ||||||||
| Right To Use Assets, net | ||||||||
| Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Compensation and Other Current Liabilities | ||||||||
| Income Taxes Payable | ||||||||
| Current Portion of Long-Term Debt | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Debt | ||||||||
| Deferred Tax Liabilities, net | ||||||||
| Lease Liabilities | ||||||||
| Other Liabilities | ||||||||
| Total Liabilities | ||||||||
| Shareholders' Equity: | ||||||||
| Common Stock, par value $ per share, shares authorized; and shares issued and outstanding as of June 24, 2023 and March 25, 2023, respectively | ||||||||
| Capital in Excess of Par Value | ||||||||
| Accumulated Other Comprehensive Loss | ( | ) | ( | ) | ||||
| Retained Earnings | ||||||||
| Total Shareholders' Equity | ||||||||
| Total Liabilities and Shareholders' Equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
| (Unaudited) |
||||||||
| First Quarter Ended |
||||||||
| June 24, |
June 25, |
|||||||
| 2023 |
2022 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net Income |
$ | $ | ||||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |
||||||||
| Net Loss on Disposal of Property and Equipment |
||||||||
| Deferred Income Taxes |
( |
) | ||||||
| Depreciation and Amortization |
||||||||
| Provision for Accounts Receivable and Inventory Reserves |
||||||||
| Stock-Based Compensation Expense |
||||||||
| Changes in Assets and Liabilities, net of acquisitions: |
||||||||
| Accounts Receivable and Other Receivables |
||||||||
| Inventory |
( |
) | ||||||
| Prepaid Expenses and Other Current Assets |
||||||||
| Accounts Payable |
( |
) | ( |
) | ||||
| Accrued Compensation and Other Current Liabilities |
( |
) | ( |
) | ||||
| Income Taxes Payable |
||||||||
| Net Cash Provided by Operating Activities |
||||||||
| Cash Flows from Investing Activities: |
||||||||
| Purchases of Property and Equipment |
( |
) | ( |
) | ||||
| Proceeds from Sale of Property and Equipment |
||||||||
| Business Acquisitions, net of cash acquired |
( |
) | ( |
) | ||||
| Net Cash Used in Investing Activities |
( |
) | ( |
) | ||||
| Cash Flows from Financing Activities: |
||||||||
| (Repayments of) Proceeds from Revolving Credit Facility, net |
( |
) | ||||||
| Repayments of Term Loan |
( |
) | ( |
) | ||||
| Issuance of Common Stock |
||||||||
| Repurchase of Common Stock |
( |
) | ( |
) | ||||
| Net Cash (Used in) Provided by Financing Activities |
( |
) | ||||||
| Effect of Exchange Rate Changes on Cash |
( |
) | ||||||
| Net Increase (Decrease) in Cash |
( |
) | ||||||
| Cash at Beginning of Period |
||||||||
| Cash at End of Period |
$ | $ | ||||||
| Supplemental Disclosure of Cash Flow Activity: |
||||||||
| Cash paid during the period for: |
||||||||
| Interest |
$ | $ | ||||||
| Income Taxes, net |
$ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: |
||||||||
| Common stock issued for acquisitions |
$ | $ | ||||||
| Assets acquired and liabilities assumed in business combinations: |
||||||||
| Accrued holdback consideration related to Alliance acquisition |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In Thousands, Except Par Value Amounts)
(Unaudited)
| Capital |
||||||||||||||||||||||||
| Common Stock |
In |
Accumulated |
||||||||||||||||||||||
| Issued |
Excess |
Other |
||||||||||||||||||||||
| $0.50 Par Value |
of Par |
Comprehensive |
Retained |
|||||||||||||||||||||
| Shares |
Amount |
Value |
Income (Loss) |
Earnings |
Total |
|||||||||||||||||||
| Balance as of March 26, 2022 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Issuance of Common Stock |
||||||||||||||||||||||||
| Repurchase of Common Stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| Stock-Based Compensation |
||||||||||||||||||||||||
| Other Comprehensive Loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net Income |
- | |||||||||||||||||||||||
| Balance as of June 25, 2022 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Capital |
||||||||||||||||||||||||
| Common Stock |
In |
Accumulated |
||||||||||||||||||||||
| Issued |
Excess |
Other |
||||||||||||||||||||||
| $0.50 Par Value |
of Par |
Comprehensive |
Retained |
|||||||||||||||||||||
| Shares |
Amount |
Value |
Income (Loss) |
Earnings |
Total |
|||||||||||||||||||
| Balance as of March 25, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Issuance of Common Stock |
||||||||||||||||||||||||
| Repurchase of Common Stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| Stock-Based Compensation |
||||||||||||||||||||||||
| Other Comprehensive Income |
- | |||||||||||||||||||||||
| Net Income |
- | |||||||||||||||||||||||
| Balance as of June 24, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – GENERAL
Description of Business: Transcat, Inc. (“Transcat,” “we,” “us,” “our” or the “Company”) is a leading provider of accredited calibration services, enterprise asset management services, and value-added distributor of professional grade handheld 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 for which the risk of 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 Rule 10-01 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, 2023 (“fiscal year 2023”) contained in the Company’s Annual Report on Form 10-K for fiscal year 2023 filed with the SEC.
Use of Estimates: The preparation of Transcat’s Consolidated Financial Statements in accordance with GAAP requires that the Company make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to, allowance for doubtful accounts and returns, inventory reserves, estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives of major catalogs and intangible assets, fair value of the goodwill reporting units, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Consolidated Financial Statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Actual results could differ from those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements.
Revenue Recognition: Distribution sales are recorded when an order’s title and risk of loss transfers to the customer, which is generally upon shipment. 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. The majority of the Company’s revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and/or our obligation has been fulfilled. Some Service revenue is generated from managing customers’ calibration programs in which the Company recognizes revenue over time using the output method-time elapsed as this portrays the transfer of control to the customer. Revenue is measured as the amount of consideration the Company 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. Freight billed to customers is included in revenue. Shipping and handling is not included in revenue. Provisions for customer returns are provided for in the period the related revenue is recorded based upon historical data.
Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, we use judgments that could potentially impact both the timing of our satisfaction of performance obligations and our determination of transaction prices used in determining revenue recognized. Such judgments include considerations in determining our transaction prices and when our performance obligations are satisfied for our standard product sales that include general payment terms that are between net 30 and 90 days.
Revenue recognized from prior period performance obligations for the first quarter of the fiscal year ending March 30, 2024 (“fiscal year 2024”) was immaterial. As of June 24, 2023, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to ASC Topic 606, 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 24, 2023 and March 25, 2023 were immaterial. See Note 4 for disaggregated revenue information.
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 on a portion of the debt with the balance bearing an interest rate approximating current market rates, 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 each of June 24, 2023 and March 25, 2023, investment assets totaled $
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 awards expected to vest. Excess tax benefits for share-based award activity are reflected in the Consolidated Statements 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 quarter of fiscal year 2024 and fiscal year 2023, the Company recorded non-cash stock-based compensation cost of $
Foreign Currency Translation and Transactions: The accounts of Cal OpEx Limited (d/b/a Transcat Ireland), an Irish company, and Transcat Canada Inc., both of which are wholly-owned subsidiaries of the Company, are maintained in the local currencies, the Euro and the Canadian dollar, respectively, 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 Cal OpEx Limited’s and 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 business transactions denominated in foreign currency. The net foreign currency gain was $
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, proceeds received from the exercise of options and unvested restricted stock units 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 first quarter of each of fiscal years 2024 and fiscal year 2023, the net additional common stock equivalents had a ($
| First Quarter Ended | ||||||||
| June 24, | June 25, | |||||||
| 2023 | 2022 | |||||||
| Average Shares Outstanding – Basic | ||||||||
| Effect of Dilutive Common Stock Equivalents | ||||||||
| Average Shares Outstanding – Diluted | ||||||||
| Anti-dilutive Common Stock Equivalents | ||||||||
Goodwill and Intangible Assets: Goodwill represents the excess of the purchase price over the fair values of the underlying net assets of an acquired business. The Company tests goodwill for impairment for each reporting unit on an annual basis during the fourth quarter of its fiscal year, or immediately if conditions indicate that such impairment could exist. The Company is permitted, but not required, to qualitatively assess indicators of a reporting unit’s fair value to determine whether it is necessary to perform the two-step goodwill impairment test. If a quantitative test is deemed necessary, a discounted cash flow analysis is prepared to estimate fair value.
Intangible assets, namely customer base and covenants not to compete, represent an allocation of purchase price to identifiable intangible assets of an acquired business. Intangible assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. A summary of changes in the Company’s goodwill and intangible assets is as follows (amounts in thousands):
| Goodwill | Intangible Assets | |||||||||||||||||||||||
| Distribution | Service | Total | Distribution | Service | Total | |||||||||||||||||||
| Net Book Value as of March 25, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Currency Translation Adjustment | ||||||||||||||||||||||||
| Net Book Value as of June 24, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Recently Adopted Accounting Pronouncements: In June 2016, the Financial Accounting Standard Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Allowance for doubtful accounts is the most significant item for the Company under this ASU. The Company adopted ASU 2016-13 effective on March 26, 2023. The adoption of this standard did not have a material impact on our consolidated financial statements.
NOTE 2 – LONG-TERM DEBT
On July 7, 2021, the Company entered into the Second Amended and Restated Credit Facility Agreement (the “Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”), that amended and restated in its entirety the Company’s prior credit agreement with M&T.
The Credit Agreement provides for a revolving credit commitment (the “Revolving Credit Commitment”) of $
The Credit Agreement allows the Company to use up to $
Under the Credit Agreement, the Company may make restricted payments up to $
As of June 24, 2023, $
As of June 24, 2023, $
Interest and Other Costs: Interest on outstanding borrowings under the revolving credit facility accrue, 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 (subject to a
Covenants: The Credit Agreement has certain covenants with which the Company must comply, including a fixed charge ratio covenant, which prohibits the Company's fixed charge ratio from being less than
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
In September 2021, the Transcat, Inc. 2021 Stock Incentive Plan (the “2021 Plan”) was approved by shareholders and became effective. The 2021 Plan replaced the Transcat, Inc. 2003 Incentive Plan (the “2003 Plan”). Shares available for grant under the 2021 Plan include any shares remaining available for issuance under the 2003 Plan and any shares that are subject to outstanding awards under the 2003 Plan that are subsequently canceled, expired, forfeited, or otherwise not issued or are settled in cash. The 2021 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 June 24, 2023,
The Company receives an excess tax benefit related to restricted stock vesting and stock options exercised and redeemed. The discrete tax benefits related to share-based compensation and stock option activity during the first quarter of fiscal year 2024 and fiscal year 2023 were $
Restricted Stock Units: The Company grants time-based and performance-based restricted stock units as a component of executive and key employee compensation. Expense for restricted stock unit grants is recognized on a straight-line basis for the service period of the stock award based upon fair value of the award on the date of grant. The fair value of the restricted stock unit grants is the quoted market price for the Company’s common stock on the date of grant. These restricted stock units are either time vested, or vest following the fiscal year from the date of grant subject to cumulative diluted earnings per share targets over the eligible 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 following table summarizes the non-vested restricted stock units outstanding as of June 24, 2023 (in thousands, except per unit data):
| Total | Grant Date | Estimated | ||||||||
| Number | Fair | Level of | ||||||||
| Date | Measurement | of Units | Value | Achievement at | ||||||
| Granted | Period | Outstanding | Per Unit | June 24, 2023 | ||||||
| October 2018 | October 2018 – September 2027 | $ | Time Vested | |||||||
| July 2020 | July 2020 – July 2023 | $ | Time Vested | |||||||
| September 2020 | September 2020 – July 2023 | $ | Time Vested | |||||||
| September 2020 | September 2020 – July 2023 | $ | Time Vested | |||||||
| September 2020 | September 2020 – September 2023 | $ | Time Vested | |||||||
| June 2021 | June 2021 – March 2024 | $ | 133% of target level | |||||||
| June 2021 | June 2021 – March 2024 | $ | Time Vested | |||||||
| September 2021 | September 2021 – September 2024 | $ | Time Vested | |||||||
| January 2022 | January 2022 – March 2024 | $ | 133% of target level | |||||||
| January 2022 | January 2022 – March 2024 | $ | Time Vested | |||||||
| January 2022 | January 2022 – January 2025 | $ | Time Vested | |||||||
| March 2022 | March 2022 – March 2025 | $ | Time Vested | |||||||
| May 2022 | May 2022 – March 2025 | $ | 52% of target level | |||||||
| May 2022 | May 2022 – March 2025 | $ | Time Vested | |||||||
| August 2022 | August 2022 – August 2025 | $ | Time Vested | |||||||
| September 2022 | September 2022 – September 2023 | $ | Time Vested | |||||||
| December 2022 | December 2022 – December 2025 | $ | Time Vested | |||||||
| December 2022 | December 2022 – December 2025 | $ | Time Vested | |||||||
| May 2023 | May 2023 – March 2026 | $ | 100% of target level | |||||||
| May 2023 | May 2023 – March 2026 | $ | Time Vested | |||||||
| May 2023 | May 2023 – May 2026 | $ | Time Vested | |||||||
Total expense relating to restricted stock units, based on grant date fair value and the achievement criteria, was $
Stock Options: The Company grants stock options to employees and directors with an exercise price equal to the quoted market price of the Company’s stock at the date of the grant. The fair value of stock options is estimated using the Black-Scholes option pricing formula that requires assumptions for expected volatility, expected dividends, the risk-free interest rate and the expected term of the option. Expense for stock options is recognized on a straight-line basis over the requisite service period for each award. Options vest either immediately or over a period of up to years using a straight-line basis and expire either years or years from the date of grant.
We calculate the fair value of the stock options granted using the Black-Scholes model. The following weighted-average assumptions were used to value options granted during the first quarter of fiscal year 2024 and fiscal year 2023:
| Three Months Ended | ||||||||
| June 24, | June 25, | |||||||
| 2023 | 2022 | |||||||
| Risk-Free Interest Rate | % | % | ||||||
| Volatility Factor | % | % | ||||||
| Expected Term (in Years) | ||||||||
| Annual Dividend Rate | % | % | ||||||
We calculate expected volatility for stock options by taking an average of historical volatility over the expected term. The computation of expected term was determined based on safe harbor rules, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. We assume
During the first quarter of fiscal year 2024, the Company granted options for
During the first quarter of fiscal year 2023, the Company granted options for
The expense related to all stock option awards was $
The following table summarizes the Company’s options as of and for the first quarter ended June 24, 2023 (in thousands, except price per option data and years):
| Weighted | Weighted | |||||||||||||||
| Average | Average | |||||||||||||||
| Number | Exercise | Remaining | Aggregate | |||||||||||||
| Of | Price Per | Contractual | Intrinsic | |||||||||||||
| Options | Option | Term (in years) | Value | |||||||||||||
| Outstanding as of March 25, 2023 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Forfeited | ( | ) | $ | |||||||||||||
| Outstanding as of June 24, 2023 | $ | $ | ||||||||||||||
| Exercisable as of June 24, 2023 | $ | $ | ||||||||||||||
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 first quarter of fiscal year 2024 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 June 24, 2023. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common stock.
Total unrecognized compensation cost related to non-vested stock options as of June 24, 2023 was $
NOTE 4 – SEGMENT INFORMATION
The basis for determining our operating segments is the manner in which financial information is used in monitoring our operations. Transcat has
| First Quarter Ended | ||||||||
| June 24, | June 25, | |||||||
| 2023 | 2022 | |||||||
| Revenue: | ||||||||
| Service | $ | $ | ||||||
| Distribution | ||||||||
| Total | ||||||||
| Gross Profit: | ||||||||
| Service | ||||||||
| Distribution | ||||||||
| Total | ||||||||
| Operating Expenses: | ||||||||
| Service (1) | ||||||||
| Distribution (1) | ||||||||
| Total | ||||||||
| Operating Income: | ||||||||
| Service | ||||||||
| Distribution | ||||||||
| Total | ||||||||
| Unallocated Amounts: | ||||||||
| Interest and Other Expense, net | ||||||||
| Provision for Income Taxes | ||||||||
| Total | ||||||||
| Net Income | $ | $ | ||||||
| Geographic Data: | ||||||||
| Revenues to Unaffiliated Customers (2) | ||||||||
| United States (3) | $ | $ | ||||||
| Canada | ||||||||
| Other International | ||||||||
| Total | $ | $ | ||||||
| (1) | Operating expense allocations between segments are based on actual amounts, a percentage of revenues, headcount, and management’s estimates. |
| (2) | Revenues are attributed to the countries based on the destination of a product shipment or the location where service is rendered. |
| (3) | United States includes Puerto Rico. |
NOTE 5 – BUSINESS ACQUISITIONS
TIC-MS: Effective March 27, 2023, Transcat purchased all of the outstanding capital stock of TIC-MS, Inc. (“TIC-MS”), a Missouri based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
The TIC-MS goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the TIC-MS acquisition has been allocated to the Service segment. Intangible assets related to the TIC-MS acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to years and are not deductible for tax purposes. Amortization of goodwill related to the TIC-MS acquisition is not deductible for tax purposes.
The purchase price for TIC-MS was approximately $
The purchase price allocation is subject to revision based upon our final review of intangible asset valuation assumptions, working capital adjustments, assets acquired, and liabilities assumed. The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of TIC-MS's assets and liabilities acquired on March 27, 2023 (in thousands):
| Goodwill | $ | ||||
| Intangible Assets – Customer Base & Contracts | |||||
| Intangible Assets – Covenant Not to Compete | |||||
| Plus: | Cash | ||||
| Accounts Receivable | |||||
| Property and Equipment | |||||
| Less: | Current Liabilities | ( | ) | ||
| Deferred Tax Liability | ( | ) | |||
| Total Purchase Price | $ | ||||
From the date of acquisition through the end of the first quarter of fiscal year 2024, TIC-MS has contributed revenue of $
Elite: Effective February 2, 2023, Transcat acquired substantially all of the assets of Elite Calibration LLC (“Elite”), a California based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that can leverage the Company’s already existing operating infrastructure.
All the goodwill related to the Elite acquisition has been allocated to the Service segment. Amortization of goodwill related to the Elite acquisition is deductible for tax purposes. The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.
The total purchase price for the assets of Elite was approximately $
| Goodwill | $ | ||||
| Plus: | Accounts Receivable | ||||
| Total Purchase Price | $ | ||||
Since this operation was integrated immediately into our existing operations, its separate contributed revenue and operating income is undeterminable.
Complete Calibrations: Effective September 28, 2022, Transcat purchased all of the outstanding capital stock of Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), an Irish company. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
All the goodwill related to the Complete Calibrations acquisition has been allocated to the Service segment. Amortization of goodwill related to the Complete Calibrations acquisition is not deductible for tax purposes. The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.
The total purchase price paid for Complete Calibrations was approximately $
The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Complete Calibrations’ assets and liabilities acquired on September 28, 2022 (in thousands):
| Goodwill | $ | ||||
| Plus: | Cash | ||||
| Inventory | |||||
| Total Purchase Price | $ | ||||
During the first quarter of fiscal year 2024, Complete Calibrations has contributed revenue of $
e2b: Effective September 27, 2022, Transcat acquired substantially all of the assets of e2b Calibration (“e2b”), an Ohio based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
The e2b goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the e2b acquisition has been allocated to the Service segment. Intangible assets related to the e2b acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to years and are deductible for tax purposes. Amortization of goodwill related to the e2b acquisition is deductible for tax purposes.
The total purchase price paid for the assets of e2b was approximately $
The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of e2b’s assets and liabilities acquired on September 27, 2022 (in thousands):
| Goodwill | $ | ||||
| Intangible Assets – Customer Base & Contracts | |||||
| Intangible Assets – Covenant Not to Compete | |||||
| Plus: | Accounts Receivable | ||||
| Other Current Assets | |||||
| Property and Equipment | |||||
| Less: | Current Liabilities | ( | ) | ||
| Total Purchase Price | $ | ||||
During the first quarter of fiscal year 2024, e2b has contributed revenue of $
Alliance: Effective May 31, 2022, Transcat acquired substantially all of the assets of Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. d/b/a Alliance Calibration (“Alliance”), an Ohio based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
The Alliance goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the Alliance acquisition has been allocated to the Service segment. Intangible assets related to the Alliance acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to years and are deductible for tax purposes. Amortization of goodwill related to the Alliance acquisition is deductible for tax purposes.
The purchase price for Alliance was approximately $
The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Alliance’s assets and liabilities acquired on May 31, 2022 (in thousands):
| Goodwill | $ | ||||
| Intangible Assets – Customer Base & Contracts | |||||
| Intangible Assets – Covenant Not to Compete | |||||
| Plus: | Accounts Receivable | ||||
| Property and Equipment | |||||
| Less: | Current Liabilities | ( | ) | ||
| Total Purchase Price | $ | ||||
During the first quarter of fiscal year 2024, Alliance has contributed revenue of $
The results of 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 acquisitions of TIC-MS, Elite, Complete Calibrations, e2b and Alliance had occurred at the beginning of fiscal year 2023. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred at the beginning of the period presented or what the Company’s operating results will be in future periods.
| (Unaudited) | ||||||||
| First Quarter Ended | ||||||||
| (in thousands except per share information) | June 24, 2023 | June 25, 2022 | ||||||
| Total Revenue | $ | $ | ||||||
| Net Income | $ | $ | ||||||
| Basic Earnings Per Share | $ | $ | ||||||
| Diluted Earnings Per Share | $ | $ | ||||||
Certain of the Company’s acquisition agreements include provisions for contingent consideration and other holdback amounts. The Company accrues for contingent consideration and holdback provisions based on their estimated fair value at the date of acquisition. As of June 24, 2023,
During the first quarter of fiscal year 2024 and fiscal year 2023, acquisition costs of $
NOTE 6 – SUBSEQUENT EVENT
Effective July 12, 2023, Transcat purchased all of the outstanding capital stock of SteriQual, Inc. (“SteriQual”), a Florida based provider of expert consulting services to pharmaceutical, biopharmaceutical, medical device and diagnostic equipment manufacturers. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities. The total purchase price paid for SteriQual was approximately $
The purchase price allocation has not been finalized, due to the timing of the acquisition and the filing date of this Quarterly Report on Form 10-Q. Therefore, the allocation of the purchase price to the assets acquired and liabilities assumed, including values to be recognized for goodwill and other intangible assets, will be disclosed in the Quarterly Report on Form 10-Q for the fiscal quarter ending September 23, 2023 with the pro forma results of operations from the SteriQual acquisition. The goodwill related to SteriQual is not expected to be deductible for income tax purposes. All of the goodwill and intangible assets relating to the SteriQual acquisition will be allocated to the Service segment.
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,” “seek,” “strategy,” “target,” “could,” “may,” “will,” “would,” 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, general economic conditions applicable to our business, inflationary impacts, the impact of widespread public health crises, the highly competitive nature of the industries in which we compete and in the nature of our two business segments, the concentration of Service segment customers in the life science and other FDA-regulated and industrial manufacturing industries, the significant competition we face in our Distribution segment, any impairment of our goodwill or intangible assets, tariffs and trade relations, our ability to successfully complete and integrate business acquisitions, cybersecurity risks, the risk of significant disruptions in our information technology systems, our ability to recruit, train and retain quality employees, skilled technicians and senior management, fluctuations in our operating results, our ability to achieve or maintain adequate utilization and pricing rates for our technical service providers, the prices we are able to charge for our services in our Service segment, competition in the rental market, our ability to adapt our technology, reliance on our enterprise resource planning system, technology updates, supply chain delays or disruptions, the risks related to current and future indebtedness, foreign currency rate fluctuations, risks related to our intellectual property, adverse weather events or other catastrophes or natural disasters, the volatility of our stock price, the relatively low trading volume of our common stock, changes in tax rates, changes in accounting standards, legal requirements and listing standards, and legal and regulatory risks related to our international operations. 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, 2023. You should not place undue reliance on our forward-looking statements, which speak only as of the date they are made. Except as required by law, we undertake no obligation to update, correct 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, 2023.
RESULTS OF OPERATIONS
Executive Summary
During our first quarter of fiscal year 2024, we had consolidated revenue of $60.6 million. This represented an increase of $5.9 million or 10.9% versus the first quarter of fiscal year 2023. This increase was primarily due to recently completed acquisitions, strong demand in our Service segment’s highly-regulated end markets and increased rental sales.
Our first quarter of fiscal year 2024 gross profit was $18.7 million. This was an increase of $2.7 million or 16.7% versus the first quarter of fiscal year 2023. In addition, consolidated gross margin was 30.9%, an increase of 160 basis points versus the first quarter of fiscal year 2023. This increase was largely the result of operating leverage on our fixed costs and accretive gross margins from our rental business.
Total operating expenses were $14.1 million in the first quarter of fiscal year 2024, an increase of $1.6 million or 13.2% when compared to the prior year first quarter. Included in operating expenses during the first quarter of fiscal year 2024 were incremental operating expenses related to the acquisitions of TIC-MS, e2b and Complete Calibrations, investments in technology and higher incentive-based employee costs due to higher sales. As a percentage of total revenue, operating expenses were 23.2% in the first quarter of fiscal year 2024, up 50 basis points from 22.7% in the first quarter of fiscal year 2023. Operating income was $4.6 million, an increase of $1.0 million, or 28.7% and operating margin increased from 6.6% to 7.7% in the first quarter of fiscal year 2024.
Net income was $2.9 million in the first quarter of fiscal year 2024 versus $3.1 million in the first quarter of fiscal year 2023. The difference between higher operating income and lower net income compared to the prior period is due to higher interest expense and provision for income taxes.
The following table presents, for the first quarter of fiscal year 2024 and fiscal year 2023, the components of our Consolidated Statements of Income:
| (Unaudited) |
||||||||
| First Quarter Ended |
||||||||
| June 24, |
June 25, |
|||||||
| 2023 |
2022 |
|||||||
| As a Percentage of Total Revenue: |
||||||||
| Service Revenue |
65.8 | % | 62.0 | % | ||||
| Distribution Sales |
34.2 | % | 38.0 | % | ||||
| Total Revenue |
100.0 | % | 100.0 | % | ||||
| Gross Profit Percentage: |
||||||||
| Service Gross Profit |
32.5 | % | 32.0 | % | ||||
| Distribution Gross Profit |
27.7 | % | 25.0 | % | ||||
| Total Gross Profit |
30.9 | % | 29.3 | % | ||||
| Selling, Marketing and Warehouse Expenses |
10.7 | % | 10.6 | % | ||||
| General and Administrative Expenses |
12.5 | % | 12.1 | % | ||||
| Total Operating Expenses |
23.2 | % | 22.7 | % | ||||
| Operating Income |
7.7 | % | 6.6 | % | ||||
| Interest and Other Expense, net |
1.5 | % | 0.3 | % | ||||
| Income Before Income Taxes |
6.2 | % | 6.3 | % | ||||
| Provision for Income Taxes |
1.3 | % | 0.7 | % | ||||
| Net Income |
4.9 | % | 5.6 | % | ||||
First Quarter Ended June 24, 2023 COMPARED TO First Quarter Ended June 25, 2022 (dollars in thousands):
Revenue:
| First Quarter Ended |
Change |
|||||||||||||||
| June 24, |
June 25, |
|||||||||||||||
| 2023 |
2022 |
$ |
% |
|||||||||||||
| Revenue: |
||||||||||||||||
| Service |
$ | 39,853 | $ | 33,876 | $ | 5,977 | 17.6 | % | ||||||||
| Distribution |
20,745 | 20,785 | (40 | ) | (0.2 | )% | ||||||||||
| Total |
$ | 60,598 | $ | 54,661 | $ | 5,937 | 10.9 | % | ||||||||
Total revenue was $60.6 million, an increase of $5.9 million, or 10.9%, in our fiscal year 2024 first quarter compared to the prior fiscal year first quarter.
Service revenue, which accounted for 65.8% and 62.0% of our total revenue in the first quarter of fiscal years 2024 and 2023, respectively, increased 17.6% from the first quarter of fiscal year 2023 to the first quarter of fiscal year 2024. This year-over-year increase included $2.2 million in revenue from acquisitions, and also included organic revenue growth of 11.2% driven by improvement in end market conditions and continued market share gains.
Our fiscal years 2024 and 2023 Service revenue growth, in relation to prior fiscal year quarter comparisons, was as follows:
| FY 2024 | FY 2023 | |||||||||||||||||||
| Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
||||||||||||||||
| Service Revenue Growth |
17.6 | % | 14.7 | % | 19.0 | % | 19.4 | % | 22.9 | % | ||||||||||
The growth in Service segment revenue during the first quarter of fiscal year 2024 versus the first quarter of fiscal year 2023 reflected both organic growth and acquisitions.
Within any fiscal year, while we add new customers, we also have customers from the prior 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 the first quarter of fiscal year 2024 and each quarter in fiscal year 2023 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period:
| FY 2024 | FY 2023 | |||||||||||||||||||
| Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
||||||||||||||||
| Trailing Twelve-Month: |
||||||||||||||||||||
| Service Revenue |
$ | 150,860 | $ | 144,883 | $ | 139,787 | $ | 134,047 | $ | 128,324 | ||||||||||
| Service Revenue Growth |
17.6 | % | 18.8 | % | 20.2 | % | 20.9 | % | 21.2 | % | ||||||||||
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 the first quarter of fiscal year 2024 and for each quarter during fiscal year 2023:
| FY 2024 | FY 2023 | |||||||||||||||||||
| Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
||||||||||||||||
| Percent of Service Revenue: |
||||||||||||||||||||
| In-House |
87.3 | % | 86.9 | % | 86.2 | % | 86.2 | % | 85.4 | % | ||||||||||
| Outsourced |
11.6 | % | 11.9 | % | 12.6 | % | 12.6 | % | 13.2 | % | ||||||||||
| Freight Billed to Customers |
1.1 | % | 1.2 | % | 1.2 | % | 1.2 | % | 1.4 | % | ||||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Our Distribution sales accounted for 34.2% of our total revenue in the first quarter of fiscal year 2024 and 38.0% of our total revenue in the first quarter of fiscal year 2023. During the first quarter of fiscal year 2024, Distribution segment sales showed a decrease of 0.2% or less than $0.1 million to $20.7 million. This decrease was primarily due to slower demand for our traditional products offset by increases in rental orders.
The following table presents the quarterly historical trend of Distribution sales in fiscal years 2024 and 2023 compared to the prior year fiscal quarter:
| FY 2024 | FY 2023 | |||||||||||||||||||
| Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
||||||||||||||||
| Distribution Sales Growth (Decline) |
(0.2 | )% | 5.1 | % | 3.7 | % | 1.6 | % | 2.7 | % | ||||||||||
Distribution segment sales were relatively flat in the first quarter of fiscal year 2024 versus the first quarter of fiscal year 2023.
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. Backorders are the total dollar value of orders received for which revenue has not yet been recognized. 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. Management uses pending product shipments and backorders as measures of our future business performance and financial performance within the distribution segment.
Our total pending product shipments at the end of the first quarter of fiscal year 2024 were $7.1 million, a decrease of $1.9 million versus the end of the first quarter of fiscal year 2023 and a decrease of $1.0 million since March 25, 2023. The year-over-year decrease in pending product shipments and backorders was a result of improved fulfillment of existing orders.
The following table presents our total pending product shipments and the percentage of total pending product shipments that were backorders at the end of the first quarter of fiscal year 2024 and each quarter of fiscal year 2023:
| FY 2024 | FY 2023 | |||||||||||||||||||
| Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
||||||||||||||||
| Total Pending Product Shipments |
$ | 7,109 | $ | 8,101 | $ | 9,543 | $ | 9,116 | $ | 9,034 | ||||||||||
|
|
||||||||||||||||||||
| % of Pending Product Shipments that were Backorders |
85.0 | % | 84.8 | % | 78.4 | % | 80.8 | % | 78.1 | % | ||||||||||
Gross Profit:
| First Quarter Ended |
Change |
|||||||||||||||
| June 24, |
June 25, |
|||||||||||||||
| 2023 |
2022 |
$ |
% |
|||||||||||||
| Gross Profit: |
||||||||||||||||
| Service |
$ | 12,971 | $ | 10,835 | $ | 2,136 | 19.7 | % | ||||||||
| Distribution |
5,739 | 5,203 | 536 | 10.3 | % | |||||||||||
| Total |
$ | 18,710 | $ | 16,038 | $ | 2,672 | 16.7 | % | ||||||||
Total gross profit for the first quarter of fiscal year 2024 was $18.7 million, an increase of $2.7 million or 16.7% versus the first quarter of fiscal year 2023. Total gross margin was 30.9% in the first quarter of fiscal year 2024, up from 29.3% in the first quarter of fiscal year 2023, a 160 basis point increase.
Service gross profit in the first quarter of fiscal year 2024 increased $2.1 million, or 19.7%, from the first quarter of fiscal year 2023. Service gross margin was 32.5% in the first quarter of fiscal year 2024, a 50 basis point increase versus the first quarter of fiscal year 2023. This increase in gross margin was the result of improved productivity offset by increased start-up costs from new client-based lab implementations.
The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue:
| FY 2024 | FY 2023 | |||||||||||||||||||
| Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
||||||||||||||||
| Service Gross Margin |
32.5 | % | 34.0 | % | 30.0 | % | 32.6 | % | 32.0 | % | ||||||||||
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 2024 | FY 2023 | |||||||||||||||||||
| Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
||||||||||||||||
| Distribution Gross Margin |
27.7 | % | 25.2 | % | 26.2 | % | 24.9 | % | 25.0 | % | ||||||||||
Distribution segment gross margin was 27.7% in the first quarter of fiscal year 2024 versus 25.0% in the first quarter of fiscal year 2023, a 270 basis point increase. The increase in segment gross margin was primarily due to a favorable mix of higher margin products sold and rented.
Operating Expenses:
| First Quarter Ended |
Change |
|||||||||||||||
| June 24, |
June 25, |
|||||||||||||||
| 2023 |
2022 |
$ |
% |
|||||||||||||
| Operating Expenses: |
||||||||||||||||
| Selling, Marketing and Warehouse |
$ | 6,469 | $ | 5,820 | $ | 649 | 11.2 | % | ||||||||
| General and Administrative |
7,601 | 6,614 | 987 | 14.9 | % | |||||||||||
| Total |
$ | 14,070 | $ | 12,434 | $ | 1,636 | 13.2 | % | ||||||||
Total operating expenses were $14.1 million in the first quarter of fiscal year 2024 versus $12.4 million during the first quarter of fiscal year 2023. The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions and higher incentive-based employee costs due to higher sales. The increase in general and administrative expenses includes incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.
As a percentage of total revenue, operating expenses were 23.2% in the first quarter of fiscal year 2024 and 22.7% in the first quarter of fiscal year 2023, an increase of 50 basis points.
Income Taxes:
| First Quarter Ended |
Change |
|||||||||||||||
| June 24, |
June 25, |
|||||||||||||||
| 2023 |
2022 |
$ |
% |
|||||||||||||
| Provision for Income Taxes |
$ | 813 | $ | 376 | $ | 437 | 116.2 | % | ||||||||
Our effective tax rate for the first quarter of fiscal years 2024 and 2023 was 21.6% and 10.9%, respectively. The increase in the tax provision is due to the decreased amount of discrete tax benefit from share-based compensation activity. Our quarterly provision for income taxes is affected by discrete items that may occur in any given period but are not consistent from year to year. The discrete benefits related to share-based compensation activity in the first quarter of fiscal years 2024 and 2023 was $0.1 million and $0.5 million, respectively.
Net Income:
| First Quarter Ended |
Change |
|||||||||||||||
| June 24, |
June 25, |
|||||||||||||||
| 2023 |
2022 |
$ |
% |
|||||||||||||
| Net Income |
$ | 2,949 | $ | 3,072 | $ | (123 | ) | (4.0 | )% | |||||||
Net income for the first quarter of fiscal year 2024 decreased from the first quarter of fiscal year 2023 primarily due to increased operating expenses and a higher 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, non-cash stock compensation expense, acquisition related transaction expenses, non-cash loss on sale of building, and restructuring 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, stock-based compensation expense and other items, 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 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.
| First Quarter Ended |
||||||||
| June 24, |
June 25, |
|||||||
| 2023 |
2022 |
|||||||
| Net Income |
$ | 2,949 | $ | 3,072 | ||||
| + Interest Expense |
814 | 360 | ||||||
| + Other (Income) / Expense |
64 | (204 | ) | |||||
| + Tax Provision |
813 | 376 | ||||||
| Operating Income |
$ | 4,640 | $ | 3,604 | ||||
| + Depreciation & Amortization |
2,790 | 2,641 | ||||||
| + Transaction Expense |
185 | 30 | ||||||
| + Other Income / (Expense) |
(64 | ) | 204 | |||||
| + Noncash Stock Compensation |
930 | 828 | ||||||
| Adjusted EBITDA |
$ | 8,481 | $ | 7,307 | ||||
Total Adjusted EBITDA for the first quarter of fiscal year 2024 was $8.5 million, an increase of $1.2 million or 16.1% versus the first quarter of fiscal year 2023. As a percentage of revenue, Adjusted EBITDA increased to 14.0% for the first quarter of fiscal year 2024 from 13.4% for the first quarter of fiscal year 2023. The increase in Adjusted EBITDA during the first quarter of fiscal year 2024 was primarily driven by the increase in operating income from gross margin expansion and service revenue growth.
Adjusted Diluted Earnings Per Share:
In addition to reporting Diluted Earnings Per Share, a GAAP measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring expense, on a diluted per share basis), which is a non-GAAP measure. Our management believes Adjusted Diluted Earnings Per Share is an important measure of our operating performance because it provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.
Adjusted Diluted Earnings Per Share 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 Diluted Earnings Per Share and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted Diluted Earnings Per Share, 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.
| First Quarter Ended |
||||||||
| June 24, |
June 25, |
|||||||
| 2023 |
2022 |
|||||||
| Net Income |
$ | 2,949 | $ | 3,072 | ||||
| + Amortization of Intangible Assets |
1,093 | 1,084 | ||||||
| + Acquisition Deal Costs |
367 | 299 | ||||||
| + Income Tax Effect @ 25% |
(365 | ) | (346 | ) | ||||
| Adjusted Net Income |
4,044 | 4,109 | ||||||
| Average Diluted Shares Outstanding |
7,762 | 7,629 | ||||||
| Diluted Earnings Per Share – GAAP |
$ | 0.38 | $ | 0.40 | ||||
| Adjusted Diluted Earnings Per Share |
$ | 0.52 | $ | 0.54 | ||||
LIQUIDITY AND CAPITAL RESOURCES
We expect that foreseeable liquidity and capital resource requirements will be met through anticipated cash flows from operations and borrowings from our revolving credit facility. We believe that these sources of financing will be adequate to meet our future requirements.
Under our Second Amended and Restated Credit Facility Agreement (the “Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”), we have access to a revolving credit commitment (the “Revolving Credit Commitment”) of $80.0 million through June 2026, with a letter of credit subfacility of $10.0 million. Our 2018 term loan, with an original principal amount of $15.0 million (the “2018 Term Loan”), is also provided for under the Credit Agreement.
The Credit Agreement allows us to use up to $50.0 million under the Revolving Credit Commitment for acquisitions in any single fiscal year. The Credit Agreement restricts our ability to complete acquisitions of businesses with a principal place of business located in the United Kingdom or the European Union to an aggregate purchase price of $40.0 million during the term of the Credit Agreement, if the acquisition is financed directly or indirectly with the Revolving Credit Commitment. Under the Credit Agreement, we may make restricted payments up to $25.0 million in the aggregate over the term of the Credit Agreement and $10.0 million in any single fiscal year to repurchase shares and pay dividends.
Interest on outstanding borrowings under the revolving credit facility 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 (subject to a 0.25% floor), in each case, plus a margin. Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate for the revolving credit facility for the first quarter of fiscal year 2024 ranged from 6.4% to 6.9%. Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90% over the term of the loan. The Credit Agreement includes a mechanism for the adoption of a different benchmark rate upon the discontinuance of LIBOR. The Company was notified by M&T that effective July 1, 2023, LIBOR was discontinued and replaced with the Daily Simple SOFR plus applicable Benchmark Replacement Adjustment.
The Credit Agreement has certain covenants with which we must comply, including a fixed charge ratio covenant, which prohibits our fixed charge coverage ratio from being less than 1.15 to 1.00, and a leverage ratio covenant, which prohibits our leverage ratio from exceeding 3.00 to 1.00. We were in compliance with all loan covenants and requirements during the first quarter of fiscal year 2024. Our leverage ratio, as defined in the Credit Agreement, was 1.50 at June 24, 2023, compared with 1.60 at March 25, 2023.
As of June 24, 2023, $37.5 million was available for borrowing under the revolving credit facility, with $42.5 million outstanding and included in long-term debt on the Consolidated Balance Sheets. During the first quarter of fiscal year 2024 and 2023, we used $2.9 million and $4.0 million, respectively, for business acquisitions.
As of June 24, 2023, $5.9 million was outstanding on the 2018 Term Loan, of which $2.3 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt. The 2018 Term Loan requires total repayments (principal plus interest) of $0.2 million per month through December 2025.
Cash Flows: The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands):
| Three Months Ended |
||||||
| June 24, |
June 25, |
|||||
| 2023 |
2022 |
|||||
| Cash Provided by (Used in): |
||||||
| Operating Activities |
$ | 7,536 | $ | 2,043 | ||
| Investing Activities |
$ | (5,636 | ) | $ | (6,429 | ) |
| Financing Activities |
$ | (859 | ) | $ | 3,110 | |
Operating Activities: Net cash provided by operations was $7.5 million during the first quarter of fiscal year 2024 compared to $2.0 million of net cash provided by operating activities during the first quarter of fiscal year 2023. The year-over-year increase in cash provided by operations was 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 decreased $2.3 million during the first quarter of fiscal year 2024 inclusive of $0.5 million of accounts receivable acquired during the period. During the first quarter of fiscal year 2023, accounts receivable decreased by a net amount of $1.7 million inclusive of $0.3 million of accounts receivable acquired during the period. The year-over-year variation reflects changes in the timing of collections. The following table illustrates our “days sales outstanding” as of June 24, 2023 and June 25, 2022 (dollars in thousands): |
| June 24, |
June 25, |
|||||||
| 2023 |
2022 |
|||||||
| Net Sales, for the last two fiscal months |
$ | 43,430 | $ | 38,321 | ||||
| Accounts Receivable, net |
$ | 42,356 | $ | 38,031 | ||||
| Days Sales Outstanding |
61 | 60 | ||||||
| ● |
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 purchase and sales volume discounts. As a result, inventory levels may vary from quarter-to-quarter based on the timing of these large orders in relation to our quarter end. Our inventory balance decreased $1.8 million during the first quarter of fiscal year 2024 due to timing of purchases within the quarter. Our inventory balance increased by $2.2 million during the first quarter of fiscal year 2023 due to strategic inventory purchases during the quarter. |
| ● |
Accounts Payable: Changes in accounts payable may or may not correlate with changes in inventory balances at any given quarter end due to the timing of vendor payments for inventory, as well as the timing of payments for outsourced Service vendors and capital expenditures. Accounts payable decreased $4.3 million during the first quarter of fiscal year 2024. Accounts payable decreased $1.2 million during the first quarter of fiscal year 2023. The variances are largely due to the timing of inventory and capital expenditures and other payments in the respective periods. |
| ● |
Accrued Compensation and Other Current Liabilities: Accrued compensation and other current liabilities include, among other things, amounts paid to employees for non-equity performance-based compensation. At the end of any particular period, the amounts accrued for such compensation may vary due to many factors including changes in expected performance levels, the performance measurement period, and timing of payments to employees. During the first quarter of fiscal years 2024 and 2023, accrued compensation and other current liabilities decreased by $0.9 million and $2.8 million, respectively. The change from the first quarter of fiscal year 2023 was largely due to the annual payment of incentive based compensation accruals |
| ● |
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 quarter of fiscal year 2024 the net income tax payable increased by $0.6 million. During the first quarter of fiscal year 2023, income taxes payable remained flat. The year-over-year difference is due to timing of income tax payments. |
Investing Activities: During the first quarter of fiscal years 2024 and 2023, we invested $2.7 million and $2.4 million, respectively, in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.
During the first quarter of fiscal years 2024 and 2023, we used $2.9 million and $4.0 million, respectively, for business acquisitions.
During the first quarter of fiscal year 2024, we paid $0.3 million of other holdback amounts relating to business acquisitions. During the first quarter of fiscal year 2023, no contingent consideration or other holdback amounts were paid related to business acquisitions.
Financing Activities: During the first quarter of fiscal year 2024, $0.2 million in cash was generated from the issuance of common stock. In addition, we used $0.6 million for scheduled repayments of our term loan, $0.2 million was repaid to our revolving line of credit and $0.3 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2024, which are shown as a repurchase of shares of our common stock.
During the first quarter of fiscal year 2023, $3.8 million was borrowed from our revolving line of credit and $0.2 million in cash was generated from the issuance of common stock. In addition, we used $0.5 million for scheduled repayments of our term loan and $0.4 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in the quarter, which are shown as a repurchase of shares of our common stock.
OUTLOOK
We have demonstrated our ability to drive growth through various economic cycles as can be seen over the past decade and a half, and we believe that will continue. During fiscal year 2024, we expect organic Service revenue growth in the high-single digit to low double-digit range and gross margin expansion. We believe our unique value proposition drives a sustainable competitive advantage in the highly regulated markets that we serve, particularly the Life Science, Aerospace, and Defense markets. Strategic, accretive acquisitions that drive synergistic growth opportunities will be a key component of our go-forward strategy.
We expect our income tax rate to range between 21% and 23% for full fiscal year 2024. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards. Although the tax rate is consistent with recent years, there will be a difference in calendarization of the tax benefit from vesting of share-based payments in fiscal year 2024. The tax benefits are normally realized in the fiscal first quarter, but we expect to see the benefit in the second quarter of fiscal year 2024, due to a timing difference of when the awards were granted. This benefit is expected to positively impact the tax rate by approximately 13% in the second quarter of fiscal year 2024.
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 $0.4 million assuming our average borrowing levels remained constant under the revolving credit facility. As of June 24, 2023, $37.5 million was available for borrowing under the revolving credit facility, with $42.5 million outstanding and included in long-term debt on the Consolidated Balance Sheets. As described above under “Liquidity and Capital Resources,” we also have a $15.0 million (original principal) term loan. The 2018 Term Loan is considered a fixed interest rate loan. As of June 24, 2023, $5.9 million was outstanding under the 2018 Term Loan and was included in long-term debt and current portion of long-term debt on the Consolidated Balance Sheets. The 2018 Term Loan requires total (principal and interest) repayments of $0.2 million per month.
At our option, we may borrow from our revolving credit facility at the variable one-month LIBOR or at a fixed rate for a designated period at the LIBOR corresponding to such period (subject to a 0.25% floor), in each case, plus a margin. Our interest rate margin is determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate during the first quarter of fiscal year 2024 for our revolving credit facility ranged from 6.4% to 6.9%. Interest on outstanding borrowings of the 2018 Term Loan accrued at a fixed rate of 3.90% over the term of the loan. Our revolving credit facility includes a mechanism for adoption of a different benchmark rate upon the discontinuance of LIBOR. On June 24, 2023, we had no hedging arrangements in place for our revolving credit facility to limit our exposure to upward movements in interest rates. The Company was notified by M&T that effective July 1, 2023, LIBOR was discontinued and replaced with the Daily Simple SOFR plus applicable Benchmark Replacement Adjustment.
FOREIGN CURRENCY
Approximately 90% of our total revenues for each of the first quarter of fiscal year 2024 and 2023 were denominated in U.S. dollars, with the remainder denominated in Canadian dollars and Euros. A 10% change in the value of the Canadian dollar to the U.S. dollar and the Euro to the U.S. dollar would impact our revenue by approximately 1%. We monitor the relationship between the U.S. dollar and the Canadian dollar and the U.S. dollar and the Euro on a monthly basis and adjust sales prices for products and services sold in Canadian dollars or Euros as we believe to be appropriate.
We continually utilize short-term foreign exchange forward contracts to reduce the risk that future earnings denominated in Canadian dollars 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 quarter of each of the fiscal years 2024 and 2023, was recognized as a component of Interest and Other Expense, net 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 June 24, 2023, we had a foreign exchange contract, which matured in July 2023, outstanding in the notional amount of $2.5 million. The foreign exchange contract was renewed in July 2023 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 first quarter of fiscal year 2024) 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) |
||||||||||||
| Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1) |
|||||||||||
| 03/26/23 - 04/22/23 |
721 | (2) | $ | 88.00 | (2) | - | - | ||||||||
| 04/23/23 - 05/20/23 |
- | (2) | - | (2) | - | - | |||||||||
| 05/21/23 - 06/24/23 |
2,650 | (2) | $ | 89.60 | (2) | - | - | ||||||||
| Total |
3,371 | $ | 89.26 | - | - | ||||||||||
| (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 2024. |
| (2) |
Shares of common stock withheld pursuant to the Transcat, Inc. 2021 Incentive Plan, as Amended and Restated, to cover employee tax-withholding obligations upon vesting of restricted stock unit awards that vested and stock option exercises in the first quarter of fiscal year 2024. Amounts in column (b) reflect the weighted average price for shares withheld in satisfaction of these tax-withholding obligations. |
INDEX TO EXHIBITS
| Exhibit No. |
Description |
||
| (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* | Inline XBRL Instance Document | ||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | ||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | ||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
| (104) | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||
| * |
Exhibit filed with this report. |
| ** |
Exhibit furnished with this report. |
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: August 2, 2023 |
/s/ Lee D. Rudow |
|
| Lee D. Rudow |
||
| President and Chief Executive Officer (Principal Executive Officer) |
||
| Date: August 2, 2023 |
/s/ Thomas L. Barbato |
|
| Thomas L. Barbato |
||
| Senior Vice President of Finance and Chief Financial Officer (Principal Financial Officer) |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lee D. Rudow, President and Chief Executive Officer of Transcat, Inc., certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Transcat, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: August 2, 2023 |
/s/ Lee D. Rudow |
|
|
Lee D. Rudow |
||
|
President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas L. Barbato, Senior Vice President of Finance and Chief Financial Officer of Transcat, Inc., certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Transcat, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))) for the registrant and have: |
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: August 2, 2023 |
/s/ Thomas L. Barbato |
|
|
Thomas L. Barbato |
||
|
Senior Vice President of Finance and Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report on Form 10-Q of Transcat, Inc., Lee D. Rudow, the Chief Executive Officer of Transcat, Inc. and Thomas L. Barbato, the Chief Financial Officer of Transcat, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of their knowledge, that:
|
1. |
This quarterly report on Form 10-Q for the first quarter ended June 24, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2. |
The information contained in this quarterly report on Form 10-Q for the first quarter ended June 24, 2023 fairly presents, in all material respects, the financial condition and results of operations of Transcat, Inc. |
|
Date: August 2, 2023 |
/s/ Lee D. Rudow |
|
|
Lee D. Rudow |
||
|
President and Chief Executive Officer (Principal Executive Officer) |
|
Date: August 2, 2023 |
/s/ Thomas L. Barbato |
|
|
Thomas L. Barbato |
||
|
Senior Vice President of Finance and Chief Financial Officer (Principal Financial Officer) |
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Transcat, Inc. and will be retained by Transcat, Inc. and furnished to the SEC or its staff upon request.
Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
|||
| Revenue | [1] | $ 60,598 | $ 54,661 | |
| Cost of Service Revenue | 41,888 | 38,623 | ||
| Gross Profit | 18,710 | 16,038 | ||
| Selling, Marketing and Warehouse Expenses | 6,469 | 5,820 | ||
| General and Administrative Expenses | 7,601 | 6,614 | ||
| Total Operating Expenses | 14,070 | 12,434 | ||
| Operating Income | 4,640 | 3,604 | ||
| Interest and Other Expense, net | 878 | 156 | ||
| Income Before Income Taxes | 3,762 | 3,448 | ||
| Provision for Income Taxes | 813 | 376 | ||
| Net Income | $ 2,949 | $ 3,072 | ||
| Basic Earnings Per Share (in dollars per share) | $ 0.39 | $ 0.41 | ||
| Average Shares Outstanding (in shares) | 7,622 | 7,535 | ||
| Diluted Earnings Per Share (in dollars per share) | $ 0.38 | $ 0.40 | ||
| Average Shares Outstanding (in shares) | 7,762 | 7,629 | ||
| Service [Member] | ||||
| Revenue | $ 39,853 | $ 33,876 | ||
| Cost of Service Revenue | 26,882 | 23,041 | ||
| Distribution Service [Member] | ||||
| Revenue | 20,745 | 20,785 | ||
| Cost of Service Revenue | $ 15,006 | $ 15,582 | ||
| ||||
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
|
| Net Income | $ 2,949 | $ 3,072 |
| Other Comprehensive Income (Loss): | ||
| Currency Translation Adjustment | 476 | (440) |
| Other, net of tax effects of $2 and $(4) for the first quarter ended June 24, 2023 and June 25, 2022, respectively; | 6 | (13) |
| Total Other Comprehensive Income (Loss) | 482 | (453) |
| Comprehensive Income | $ 3,431 | $ 2,619 |
Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
|
| Other, tax effect | $ 2 | $ (4) |
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Jun. 24, 2023 |
Mar. 25, 2023 |
|---|---|---|
| Accounts Receivable, allowance for doubtful accounts | $ 515 | $ 457 |
| Common stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
| Common stock, shares authorized (in shares) | 30,000,000 | 30,000,000 |
| Common stock, shares issued (in shares) | 7,643,099 | 7,562,604 |
| Common stock, shares outstanding (in shares) | 7,643,099 | 7,562,604 |
Note 1 - General |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] |
NOTE 1 – GENERAL
Description of Business: Transcat, Inc. (“Transcat,” “we,” “us,” “our” or the “Company”) is a leading provider of accredited calibration services, enterprise asset management services, and value-added distributor of professional grade handheld 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 for which the risk of 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 Rule 10-01 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, 2023 (“fiscal year 2023”) contained in the Company’s Annual Report on Form 10-K for fiscal year 2023 filed with the SEC.
Use of Estimates: The preparation of Transcat’s Consolidated Financial Statements in accordance with GAAP requires that the Company make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to, allowance for doubtful accounts and returns, inventory reserves, estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives of major catalogs and intangible assets, fair value of the goodwill reporting units, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Consolidated Financial Statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Actual results could differ from those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements.
Revenue Recognition: Distribution sales are recorded when an order’s title and risk of loss transfers to the customer, which is generally upon shipment. 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. The majority of the Company’s revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and/or our obligation has been fulfilled. Some Service revenue is generated from managing customers’ calibration programs in which the Company recognizes revenue over time using the output method-time elapsed as this portrays the transfer of control to the customer. Revenue is measured as the amount of consideration the Company 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. Freight billed to customers is included in revenue. Shipping and handling is not included in revenue. Provisions for customer returns are provided for in the period the related revenue is recorded based upon historical data.
Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, we use judgments that could potentially impact both the timing of our satisfaction of performance obligations and our determination of transaction prices used in determining revenue recognized. Such judgments include considerations in determining our transaction prices and when our performance obligations are satisfied for our standard product sales that include general payment terms that are between net 30 and 90 days.
Revenue recognized from prior period performance obligations for the first quarter of the fiscal year ending March 30, 2024 (“fiscal year 2024”) was immaterial. As of June 24, 2023, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to ASC Topic 606, 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 24, 2023 and March 25, 2023 were immaterial. See Note 4 for disaggregated revenue information.
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 on a portion of the debt with the balance bearing an interest rate approximating current market rates, 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 each of June 24, 2023 and March 25, 2023, investment assets totaled $0.2 million, 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 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 awards expected to vest. Excess tax benefits for share-based award activity are reflected in the Consolidated Statements 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 quarter of fiscal year 2024 and fiscal year 2023, the Company recorded non-cash stock-based compensation cost of $0.9 million and $0.8 million, respectively, in the Consolidated Statements of Income.
Foreign Currency Translation and Transactions: The accounts of Cal OpEx Limited (d/b/a Transcat Ireland), an Irish company, and Transcat Canada Inc., both of which are wholly-owned subsidiaries of the Company, are maintained in the local currencies, the Euro and the Canadian dollar, respectively, 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 Cal OpEx Limited’s and 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 business transactions denominated in foreign currency. The net foreign currency gain was $0.1 million in the first quarter of fiscal year 2024 and $0.2 million in the first quarter of fiscal year 2023. The Company continually utilizes short-term foreign exchange forward contracts to reduce the risk that its future earnings denominated in Canadian dollars would 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 quarter of each of fiscal years 2024 and 2023, was recognized as a component of Interest and Other Expenses, net 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 June 24, 2023, the Company had a foreign exchange contract, which matured in July 2023, outstanding in the notional amount of $2.5 million. This contract was subsequently renewed and remains 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, proceeds received from the exercise of options and unvested restricted stock units 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 first quarter of each of fiscal years 2024 and fiscal year 2023, 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 (amounts in thousands):
Goodwill and Intangible Assets: Goodwill represents the excess of the purchase price over the fair values of the underlying net assets of an acquired business. The Company tests goodwill for impairment for each reporting unit on an annual basis during the fourth quarter of its fiscal year, or immediately if conditions indicate that such impairment could exist. The Company is permitted, but not required, to qualitatively assess indicators of a reporting unit’s fair value to determine whether it is necessary to perform the two-step goodwill impairment test. If a quantitative test is deemed necessary, a discounted cash flow analysis is prepared to estimate fair value.
Intangible assets, namely customer base and covenants not to compete, represent an allocation of purchase price to identifiable intangible assets of an acquired business. Intangible assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. A summary of changes in the Company’s goodwill and intangible assets is as follows (amounts in thousands):
Recently Adopted Accounting Pronouncements: In June 2016, the Financial Accounting Standard Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Allowance for doubtful accounts is the most significant item for the Company under this ASU. The Company adopted ASU 2016-13 effective on March 26, 2023. The adoption of this standard did not have a material impact on our consolidated financial statements. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 2 - Long-term Debt |
3 Months Ended |
|---|---|
Jun. 24, 2023 | |
| Notes to Financial Statements | |
| Long-Term Debt [Text Block] |
NOTE 2 – LONG-TERM DEBT
On July 7, 2021, the Company entered into the Second Amended and Restated Credit Facility Agreement (the “Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”), that amended and restated in its entirety the Company’s prior credit agreement with M&T.
The Credit Agreement provides for a revolving credit commitment (the “Revolving Credit Commitment”) of $80.0 million through June 2026, with a letter of credit subfacility of $10.0 million. The Company's 2018 term loan, with an original principal amount of $15.0 million (the "2018 Term Loan"), is also provided for under the Credit Agreement.
The Credit Agreement allows the Company to use up to $50.0 million under the Revolving Credit Commitment for acquisitions in any single fiscal year. The Credit Agreement restricts the Company's ability to complete acquisitions of businesses with a principal place of business located in the United Kingdom or the European Union to an aggregate purchase price of $40.0 million during the term of the Credit Agreement, if the acquisition is financed directly or indirectly with the Revolving Credit Commitment.
Under the Credit Agreement, the Company may make restricted payments up to $25.0 million in the aggregate over the term of the Credit Agreement and $10.0 million in any single fiscal year to repurchase shares and pay dividends.
As of June 24, 2023, $37.5 million was available for borrowing under the revolving credit facility, with $42.5 million outstanding and included in long-term debt on the Consolidated Balance Sheets. During the first quarter of fiscal year 2024, $2.9 million was used for one business acquisition.
As of June 24, 2023, $5.9 million was outstanding on the 2018 Term Loan, of which $2.3 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt. The 2018 Term Loan requires total amortizing repayments (principal plus interest) of $0.2 million per month through its maturity date in December 2025.
Interest and Other Costs: Interest on outstanding borrowings under the revolving credit facility accrue, 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 (subject to a 0.25% floor), in each case, plus a margin. Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon the Company’s calculated leverage ratio. The Company’s interest rate for the revolving credit facility for the first quarter of fiscal year 2024 ranged from 6.4% to 6.9%. Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90% over the term of the loan. The Credit Agreement includes a mechanism for the adoption of a different benchmark rate upon the discontinuance of LIBOR. The Company was notified by M&T that effective July 1, 2023, LIBOR was discontinued and replaced with the Daily Simple SOFR plus applicable Benchmark Replacement Adjustment.
Covenants: The Credit Agreement has certain covenants with which the Company must comply, including a fixed charge ratio covenant, which prohibits the Company's fixed charge ratio from being less than 1.15 to 1.00, and a leverage ratio covenant, which prohibits the Company's leverage ratio from exceeding 3.00 to 1.00. The Company was in compliance with all loan covenants and requirements during the first quarter of fiscal year 2024. The Company's leverage ratio, as defined in the Credit Agreement, was 1.50 at June 24, 2023, compared with 1.60 at March 25, 2023.
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 |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Text Block] |
NOTE 3 – STOCK-BASED COMPENSATION
In September 2021, the Transcat, Inc. 2021 Stock Incentive Plan (the “2021 Plan”) was approved by shareholders and became effective. The 2021 Plan replaced the Transcat, Inc. 2003 Incentive Plan (the “2003 Plan”). Shares available for grant under the 2021 Plan include any shares remaining available for issuance under the 2003 Plan and any shares that are subject to outstanding awards under the 2003 Plan that are subsequently canceled, expired, forfeited, or otherwise not issued or are settled in cash. The 2021 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 June 24, 2023, 0.6 million shares of common stock were available for future grant under the 2021 Plan.
The Company receives an excess tax benefit related to restricted stock vesting and stock options exercised and redeemed. The discrete tax benefits related to share-based compensation and stock option activity during the first quarter of fiscal year 2024 and fiscal year 2023 were $0.1 million and $0.5 million, respectively.
Restricted Stock Units: The Company grants time-based and performance-based restricted stock units as a component of executive and key employee compensation. Expense for restricted stock unit grants is recognized on a straight-line basis for the service period of the stock award based upon fair value of the award on the date of grant. The fair value of the restricted stock unit grants is the quoted market price for the Company’s common stock on the date of grant. These restricted stock units are either time vested, or vest following the fiscal year from the date of grant subject to cumulative diluted earnings per share targets over the eligible 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 following table summarizes the non-vested restricted stock units outstanding as of June 24, 2023 (in thousands, except per unit data):
Total expense relating to restricted stock units, based on grant date fair value and the achievement criteria, was $0.6 million and $0.4 million in the first quarter of fiscal year 2024 and fiscal year 2023, respectively. As of June 24, 2023, unearned compensation, to be recognized over the grants’ respective service periods, totaled $4.6 million.
Stock Options: The Company grants stock options to employees and directors with an exercise price equal to the quoted market price of the Company’s stock at the date of the grant. The fair value of stock options is estimated using the Black-Scholes option pricing formula that requires assumptions for expected volatility, expected dividends, the risk-free interest rate and the expected term of the option. Expense for stock options is recognized on a straight-line basis over the requisite service period for each award. Options vest either immediately or over a period of up to years using a straight-line basis and expire either years or years from the date of grant.
We calculate the fair value of the stock options granted using the Black-Scholes model. The following weighted-average assumptions were used to value options granted during the first quarter of fiscal year 2024 and fiscal year 2023:
We calculate expected volatility for stock options by taking an average of historical volatility over the expected term. The computation of expected term was determined based on safe harbor rules, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. We assume no expected dividends. Under FASB ASC Topic 718, “Compensation – Stock Compensation”, the Company has elected to account for forfeitures as they occur.
During the first quarter of fiscal year 2024, the Company granted options for 6,000 shares of common stock in the aggregate to Company employees that vest over years and an option for 10,000 shares of common stock to a Company employee that vests over years.
During the first quarter of fiscal year 2023, the Company granted options for 34,000 shares of common stock in the aggregate to Company employees that vest over years.
The expense related to all stock option awards was $0.3 million in the first quarter of fiscal year 2024 and $0.4 million in the first quarter of fiscal year 2023.
The following table summarizes the Company’s options as of and for the first quarter ended June 24, 2023 (in thousands, except price per option data and years):
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 first quarter of fiscal year 2024 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 June 24, 2023. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common stock.
Total unrecognized compensation cost related to non-vested stock options as of June 24, 2023 was $2.1 million, which is expected to be recognized over a period of years. The aggregate intrinsic value of stock options exercised during the first quarter of each of fiscal year 2024 and fiscal year 2023 was $0.2 million. Cash received from the exercise of options in the first quarter of each of fiscal year 2024 and fiscal year 2023 was less than $0.1 million. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 4 - Segment Information |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting Disclosure [Text Block] |
NOTE 4 – SEGMENT INFORMATION
The basis for determining our operating segments is the manner in which financial information is used in monitoring our operations. Transcat has two reportable segments: Service and Distribution. Through our Service segment, we offer calibration, repair, inspection, analytical qualifications, preventative maintenance, consulting and other related services. Through our Distribution segment, we sell and rent national and proprietary brand instruments to customers globally. The Company has no inter-segment sales. We believe that reporting performance at the operating income level is the best indicator of segment performance. The following table presents segment and geographic data for the first quarter of fiscal year 2024 and fiscal year 2023 (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 5 - Business Acquisitions |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination Disclosure [Text Block] |
NOTE 5 – BUSINESS ACQUISITIONS
TIC-MS: Effective March 27, 2023, Transcat purchased all of the outstanding capital stock of TIC-MS, Inc. (“TIC-MS”), a Missouri based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
The TIC-MS goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the TIC-MS acquisition has been allocated to the Service segment. Intangible assets related to the TIC-MS acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to years and are not deductible for tax purposes. Amortization of goodwill related to the TIC-MS acquisition is not deductible for tax purposes.
The purchase price for TIC-MS was approximately $9.8 million and was paid with $2.9 million in cash, including $0.5 million placed in escrow for certain post-closing adjustments and indemnification claims, if any, and the issuance of 77,387 shares of our common stock valued at $6.8 million. Pursuant to the asset purchase agreement, the purchase price will be subject to reduction by up to $0.5 million if a key customer relationship is not retained through March 27, 2024.
The purchase price allocation is subject to revision based upon our final review of intangible asset valuation assumptions, working capital adjustments, assets acquired, and liabilities assumed. The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of TIC-MS's assets and liabilities acquired on March 27, 2023 (in thousands):
From the date of acquisition through the end of the first quarter of fiscal year 2024, TIC-MS has contributed revenue of $0.9 million and operating income of $0.4 million, which includes the negative impact of amortization of the acquired intangible assets.
Elite: Effective February 2, 2023, Transcat acquired substantially all of the assets of Elite Calibration LLC (“Elite”), a California based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that can leverage the Company’s already existing operating infrastructure.
All the goodwill related to the Elite acquisition has been allocated to the Service segment. Amortization of goodwill related to the Elite acquisition is deductible for tax purposes. The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.
The total purchase price for the assets of Elite was approximately $0.9 million, of which $0.8 million was paid in cash. Pursuant to the asset purchase agreement, the Company held back $0.1 million of the purchase price for certain potential post-closing adjustments. The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Elite’s assets and liabilities acquired on February 2, 2023 (in thousands):
Since this operation was integrated immediately into our existing operations, its separate contributed revenue and operating income is undeterminable.
Complete Calibrations: Effective September 28, 2022, Transcat purchased all of the outstanding capital stock of Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), an Irish company. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
All the goodwill related to the Complete Calibrations acquisition has been allocated to the Service segment. Amortization of goodwill related to the Complete Calibrations acquisition is not deductible for tax purposes. The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.
The total purchase price paid for Complete Calibrations was approximately $1.2 million in cash. In connection with this transaction, the Company also entered into a Technology License Agreement with Calibration Robots Limited, an Irish company and related party to Complete Calibrations, for the use of their proprietary robotics in completing calibrations. The Technology License Agreement includes transactional royalties in the amount of 3 Euros ($3.27) per calibration performed by technology covered under this license agreement, with a royalty term of up to years commencing from the earlier of (i) the date on which cumulative revenue earned from technology covered under this license agreement equals 0.75 million Euros ($0.82 million), and (ii) March 28, 2024. In addition to the transactional royalties, as long as a key employee is employed by the Company, there is an annual royalty fee of 0.1 million Euros ($0.11 million). For purposes of this paragraph, we used a conversion rate of 1.0895 to convert Euro to U.S. dollar as of June 24, 2023.
The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Complete Calibrations’ assets and liabilities acquired on September 28, 2022 (in thousands):
During the first quarter of fiscal year 2024, Complete Calibrations has contributed revenue of $0.1 million and operating loss of less than $0.1 million.
e2b: Effective September 27, 2022, Transcat acquired substantially all of the assets of e2b Calibration (“e2b”), an Ohio based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
The e2b goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the e2b acquisition has been allocated to the Service segment. Intangible assets related to the e2b acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to years and are deductible for tax purposes. Amortization of goodwill related to the e2b acquisition is deductible for tax purposes.
The total purchase price paid for the assets of e2b was approximately $3.1 million in cash. Pursuant to the asset purchase agreement, the Company held back $0.9 million of the purchase price in escrow for certain potential post-closing adjustments. During the third quarter of fiscal year 2023, $0.6 million of the escrow was released to the sellers. As of June 24, 2023, $0.3 million remains in escrow.
The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of e2b’s assets and liabilities acquired on September 27, 2022 (in thousands):
During the first quarter of fiscal year 2024, e2b has contributed revenue of $0.8 million and operating income of $0.1 million, which includes the negative impact of amortization of the acquired intangible assets.
Alliance: Effective May 31, 2022, Transcat acquired substantially all of the assets of Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. d/b/a Alliance Calibration (“Alliance”), an Ohio based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.
The Alliance goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the Alliance acquisition has been allocated to the Service segment. Intangible assets related to the Alliance acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to years and are deductible for tax purposes. Amortization of goodwill related to the Alliance acquisition is deductible for tax purposes.
The purchase price for Alliance was approximately $4.7 million and was paid with $4.0 million in cash and the issuance of 2,284 shares of our common stock valued at $0.1 million. Pursuant to the asset purchase agreement, the Company held back $0.5 million of the purchase price for certain potential post-closing adjustments, and the purchase price will be subject to reduction by $0.5 million if a key customer relationship is not retained.
The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Alliance’s assets and liabilities acquired on May 31, 2022 (in thousands):
During the first quarter of fiscal year 2024, Alliance has contributed revenue of $0.6 million and operating income of $0.2 million, which includes the negative impact of amortization of the acquired intangible assets.
The results of 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 acquisitions of TIC-MS, Elite, Complete Calibrations, e2b and Alliance had occurred at the beginning of fiscal year 2023. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred at the beginning of the period presented or what the Company’s operating results will be in future periods.
Certain of the Company’s acquisition agreements include provisions for contingent consideration and other holdback amounts. The Company accrues for contingent consideration and holdback provisions based on their estimated fair value at the date of acquisition. As of June 24, 2023, no contingent consideration and $0.1 million of other holdback amounts unpaid are reflected in current liabilities on the Consolidated Balance Sheets. During the first quarter of fiscal year 2024, no contingent consideration and $0.3 million of other holdback amounts were paid. During the first quarter of fiscal year 2023, no contingent consideration or other holdback amounts were paid.
During the first quarter of fiscal year 2024 and fiscal year 2023, acquisition costs of $0.2 million and less than $0.1 million, respectively, were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 - Subsequent Event |
3 Months Ended |
|---|---|
Jun. 24, 2023 | |
| Notes to Financial Statements | |
| Subsequent Events [Text Block] |
NOTE 6 – SUBSEQUENT EVENT
Effective July 12, 2023, Transcat purchased all of the outstanding capital stock of SteriQual, Inc. (“SteriQual”), a Florida based provider of expert consulting services to pharmaceutical, biopharmaceutical, medical device and diagnostic equipment manufacturers. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities. The total purchase price paid for SteriQual was approximately $4.2 million, which was paid by the issuance of 38,785 shares of our common stock valued at $3.3 million. Pursuant to the asset purchase agreement, the Company held back approximately $0.9 million of the purchase price for certain potential post-closing adjustments.
The purchase price allocation has not been finalized, due to the timing of the acquisition and the filing date of this Quarterly Report on Form 10-Q. Therefore, the allocation of the purchase price to the assets acquired and liabilities assumed, including values to be recognized for goodwill and other intangible assets, will be disclosed in the Quarterly Report on Form 10-Q for the fiscal quarter ending September 23, 2023 with the pro forma results of operations from the SteriQual acquisition. The goodwill related to SteriQual is not expected to be deductible for income tax purposes. All of the goodwill and intangible assets relating to the SteriQual acquisition will be allocated to the Service segment. |
Note 1 - General (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets and Goodwill [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 3 - Stock-based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Nonvested Restricted Stock Units Activity [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement, Option, Activity [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 4 - Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 5 - Business Acquisitions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition, Pro Forma Information [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 1 - General (Details Textual) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||
|---|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
Mar. 25, 2023 |
|
| Investments | $ 0.2 | $ 0.2 | |
| Share-Based Payment Arrangement, Expense | 0.9 | $ 0.8 | |
| Realized Gain (Loss), Foreign Currency Transaction, before Tax | 0.1 | 0.2 | |
| Unrealized Gain (Loss), Foreign Currency Transaction, before Tax | $ 0.1 | $ 0.1 | |
| Dilutive Securities, Effect Per Share on Earnings (in dollars per share) | $ 0.01 | $ 0.01 | |
| Foreign Exchange Contract [Member] | |||
| Derivative Asset, Notional Amount | $ 2.5 | ||
Note 1 - General - Computation of Basic and Diluted Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
|
| Average Shares Outstanding – Basic (in shares) | 7,622 | 7,535 |
| Effect of Dilutive Common Stock Equivalents (in shares) | 140 | 94 |
| Average Shares Outstanding – Diluted (in shares) | 7,762 | 7,629 |
| Anti-dilutive Common Stock Equivalents (in shares) | 57 | 145 |
Note 3 - Stock-based Compensation - Weighted Average Assumptions (Details) |
3 Months Ended | |
|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
|
| Annual Dividend Rate | 0.00% | |
| Share-Based Payment Arrangement, Option [Member] | ||
| Risk-Free Interest Rate | 3.43% | 2.32% |
| Volatility Factor | 37.16% | 38.11% |
| Expected Term (in Years) (Year) | 6 years 2 months 8 days | 3 years 3 months 25 days |
| Annual Dividend Rate | 0.00% | 0.00% |
Note 4 - Segment Information (Details Textual) |
3 Months Ended |
|---|---|
Jun. 24, 2023 | |
| Number of Reportable Segments | 2 |
Note 4 - Segment Information - Segment and Geographic Data (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
|||||||
| Revenue | [1] | $ 60,598 | $ 54,661 | |||||
| Gross Profit | 18,710 | 16,038 | ||||||
| Operating Expenses | 14,070 | 12,434 | ||||||
| Operating Income | 4,640 | 3,604 | ||||||
| Interest and Other Expense, net | 878 | 156 | ||||||
| Provision for Income Taxes | 813 | 376 | ||||||
| Total | 1,691 | 532 | ||||||
| Net Income | 2,949 | 3,072 | ||||||
| UNITED STATES | ||||||||
| Revenue | [1],[2] | 54,257 | 48,998 | |||||
| CANADA | ||||||||
| Revenue | [1] | 4,247 | 3,986 | |||||
| Other International [Member] | ||||||||
| Revenue | [1] | 2,094 | 1,677 | |||||
| Service Segment [Member] | Operating Segments [Member] | ||||||||
| Revenue | 39,853 | 33,876 | ||||||
| Gross Profit | 12,971 | 10,835 | ||||||
| Operating Expenses | [3] | 9,779 | 8,303 | |||||
| Operating Income | 3,192 | 2,532 | ||||||
| Distribution Segment [Member] | Operating Segments [Member] | ||||||||
| Revenue | 20,745 | 20,785 | ||||||
| Gross Profit | 5,739 | 5,203 | ||||||
| Operating Expenses | [3] | 4,291 | 4,131 | |||||
| Operating Income | $ 1,448 | $ 1,072 | ||||||
| ||||||||
Note 5 - Business Acquisitions - Summary of Purchase Price Allocation (Details) - USD ($) $ in Thousands |
Jun. 24, 2023 |
Mar. 27, 2023 |
Mar. 25, 2023 |
Feb. 02, 2023 |
Sep. 28, 2022 |
Sep. 27, 2022 |
May 31, 2022 |
|---|---|---|---|---|---|---|---|
| Goodwill | $ 77,051 | $ 69,360 | |||||
| TIC-MS, Inc. [Member] | |||||||
| Goodwill | $ 7,438 | ||||||
| Business Combination, Recognized Identifiable Assets Acquired, Goodwill, Intangibles and Deferred Taxes | 9,873 | ||||||
| Cash | 80 | ||||||
| Accounts Receivable | 470 | ||||||
| Property and Equipment | 77 | ||||||
| Current Liabilities | (118) | ||||||
| Deferred Tax Liability | (602) | ||||||
| Total Purchase Price | 9,780 | ||||||
| TIC-MS, Inc. [Member] | Customer-Related Intangible Assets [Member] | |||||||
| Intangible Assets | 2,303 | ||||||
| TIC-MS, Inc. [Member] | Noncompete Agreements [Member] | |||||||
| Intangible Assets | $ 132 | ||||||
| Elite [Member] | |||||||
| Goodwill | $ 820 | ||||||
| Accounts Receivable | 62 | ||||||
| Total Purchase Price | $ 882 | ||||||
| Complete Calibrations [Member] | |||||||
| Goodwill | $ 1,123 | ||||||
| Cash | 10 | ||||||
| Total Purchase Price | 1,177 | ||||||
| Inventory | $ 44 | ||||||
| e2b [Member] | |||||||
| Goodwill | $ 1,367 | ||||||
| Business Combination, Recognized Identifiable Assets Acquired, Goodwill, Intangibles and Deferred Taxes | 2,509 | ||||||
| Accounts Receivable | 361 | ||||||
| Property and Equipment | 326 | ||||||
| Current Liabilities | (121) | ||||||
| Total Purchase Price | 3,099 | ||||||
| Other Current Assets | 24 | ||||||
| e2b [Member] | Customer-Related Intangible Assets [Member] | |||||||
| Intangible Assets | 746 | ||||||
| e2b [Member] | Noncompete Agreements [Member] | |||||||
| Intangible Assets | $ 396 | ||||||
| Alliance [Member] | |||||||
| Goodwill | $ 1,783 | ||||||
| Business Combination, Recognized Identifiable Assets Acquired, Goodwill, Intangibles and Deferred Taxes | 4,217 | ||||||
| Accounts Receivable | 343 | ||||||
| Property and Equipment | 170 | ||||||
| Current Liabilities | (27) | ||||||
| Total Purchase Price | 4,703 | ||||||
| Alliance [Member] | Customer-Related Intangible Assets [Member] | |||||||
| Intangible Assets | 2,320 | ||||||
| Alliance [Member] | Noncompete Agreements [Member] | |||||||
| Intangible Assets | $ 114 |
Note 5 - Business Acquisitions - Pro Forma Results (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 24, 2023 |
Jun. 25, 2022 |
|
| Total Revenue | $ 60,598 | $ 56,829 |
| Net Income | $ 2,964 | $ 3,270 |
| Basic Earnings Per Share (in dollars per share) | $ 0.39 | $ 0.43 |
| Diluted Earnings Per Share (in dollars per share) | $ 0.38 | $ 0.43 |
Note 6 - Subsequent Event (Details Textual) - SteriQual, Inc. [Member] - Subsequent Event [Member] $ in Millions |
Jul. 12, 2023
USD ($)
shares
|
|---|---|
| Business Combination, Consideration Transferred | $ 4.2 |
| Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) | shares | 38,785 |
| Business Combination, Consideration Transferred, Equity Interests Issued and Issuable | $ 3.3 |
| Business Combination, Consideration Transferred, Liabilities Incurred | $ 0.9 |