Transcat Reports 10.3% Revenue Growth in First Quarter of Fiscal 2009

2008-07-24 15:15:00

Transcat Reports 10.3% Revenue Growth in First Quarter of Fiscal 2009

International product sales grew 43.2% in the first quarter of

fiscal 2009

First quarter fiscal 2009 gross profit grew 7.0% to $4.5 million

Continued strategic investments in marketing, sales and customer

service

ROCHESTER, N.Y.–(EMWNews)–Transcat, Inc. (Nasdaq: TRNS), a leading global distributor of

professional grade test and measurement instruments and accredited

provider of calibration, 3-D metrology and repair services, today

reported revenue of $17.9 million in the first quarter of fiscal 2009,

which ended June 28, 2008, a 10.3% increase compared with revenue of

$16.2 million in the first quarter of fiscal 2008.

Net sales of the Companys Distribution

Products (Product segment), which represented 69.0% of net revenue in

the quarter, increased 12.7% to $12.3 million in the first quarter of

fiscal 2009 compared with $10.9 million in the same period of the prior

fiscal year. The sales expansion reflected solid growth in all of its

market channels, except Canada, and was led by strong demand for

electrical instrumentation. Calibration Services (Service segment)

revenue was $5.5 million in the first quarter of fiscal 2009, a 5.3%

increase compared with revenue of $5.3 million in the first quarter of

fiscal 2008.

Charles P. Hadeed, President, CEO and COO of Transcat, commented, New

product introductions from our strategic vendor partners and strong

growth in international product sales drove our double digit sales

expansion this quarter. We continue to diversify our customer base,

expand our product offerings and focus on key calibration accounts in

order to gain market share. We believe consistent delivery of premium

quality electronic test and measurement instruments and the precise,

reliable and fast calibration service that we provide give us a strong

competitive advantage.

Net income for the quarter was relatively flat compared with the prior

years first quarter at $0.2 million, or $0.03

per diluted share. Net income was positively impacted by a reduction in

interest expense and foreign currency losses.

First Quarter Fiscal 2009 Review

Gross profit was $4.5 million in the first quarter of fiscal 2009, up

7.0% compared with gross profit of $4.2 million in the first quarter of

fiscal 2008, or 25.3% and 26.1% of total revenue, respectively. The

lower gross profit margin reflects changes in the mix of market channels

for Product segment sales, as well as a result of higher Service segment

operating costs that were not fully offset by growth in revenue.

Operating income for the quarter was $0.4 million, or 2.2% of net

revenue, compared with $0.4 million, or 2.8% of net revenue, in the

first quarter of fiscal 2008. Strong operating profit growth resulting

from the increase in product sales helped to offset the increase in

costs associated with strategic investments in sales and marketing for

the Service segment. Selling, marketing and warehouse expense increased

12.6%, or $0.3 million, over the fiscal 2008 first quarter primarily due

to additional investment in sales management and earned incentives.

The effective tax rate in the first quarter of fiscal 2009 was 40.2%.

For the fiscal year, the effective tax rate is expected to be in the 38%

to 40% range.

Product and Service Segment Review

Transcat is uniquely positioned to serve the life science,

manufacturing, utility and process industries by its ability to bundle a

wide variety of premium test and measurement instruments with quality

calibration, 3-D metrology and repair services for its customers.

Transcats calibration capabilities and

product delivery systems enable it to rapidly respond to its customers

requirements for quick turn-around times for instrument purchases and

calibration, 3-D metrology and repair services.

Product Segment

Through its Product segment, Transcat markets and distributes national

and proprietary brand instruments to over 12,500 global customers. The

Companys Master Catalog offers access to more

than 25,000 test and measurement instruments. The Product segment

primarily uses direct catalog marketing and the Companys

website, which has online ordering capabilities, to market to end-users,

as well as to resellers.

Product segment net sales increased 12.7% to $12.3 million in the first

quarter of fiscal 2009 compared with $10.9 million in the same period of

the prior fiscal year. Average Product segment sales per business day

increased to $192 thousand in the first quarter of fiscal 2009, compared

with $171 thousand in the first quarter of fiscal 2008. Increased web

presence and improved functionality of the Companys

website combined with a weak U.S. dollar and the strength of the oil

refining and petrochemical manufacturing industries helped to improve

international sales in the quarter. International Product segment net

sales, excluding Canada, for the fiscal 2009 first quarter were up $0.6

million, or a 43.2% increase in net sales over the same period of the

prior year. This increase was primarily attributable to strong

performances in the Middle East, Latin America and Europe markets. In

addition, sales of new products primarily sold into the North American

market, provided substantial contribution to product sales growth.

Gross margin for the Product segment is determined by three factors:

market channel mix, product mix and discounts to customers. Product

segment gross profit for the first quarter of fiscal 2009 was $3.4

million, up 9.8%, or $0.3 million, compared with the same period of the

prior year. Product segment gross margin was 27.3% in the first quarter

of fiscal 2009, down from 28.0% in the same period of the prior fiscal

year. Sales were stronger than expected to customers in international

markets and resellers, market channels with lower margin potential, and

sales were lower than expected to customers in Canada, which generally

have higher margins.

Mr. Hadeed noted, International and reseller

sales exceeded our expectations this last quarter and helped to offset

softness in our Canadian market. Importantly, U.S. core sales grew as

expected on the strength of new products. The shift in market channels

had the effect of reducing gross margin, nonetheless, the incremental

profit gained resulted in strong operating leverage that expanded

Product segment operating income by 35.8%.

Product segment operating income was $1.0 million in the first quarter

of fiscal 2009 compared with $0.7 million in the same period of the

prior fiscal year, or 7.7% and 6.4% of net product sales, respectively.

Service Segment

Transcats customers purchase calibration

services for the purpose of measurably reducing their risk of product or

process failures that can be caused by inaccurate measurements. Transcat

annually performs more than 125,000 calibrations at its eleven

Calibration Centers of Excellence, located throughout the United States,

Canada and Puerto Rico, or at its customers

locations.

Service segment revenue was $5.5 million in the first quarter of fiscal

2009, a 5.3% increase compared with $5.3 million in the same period of

the prior fiscal year. The timing of calibration orders and segment

expenses can vary on a quarter-to-quarter basis based on the nature of a

customers business and calibration

requirements. In general, a trailing twelve month trend provides a

better indication of the progress of this segment. Service segment

revenue for the trailing twelve months that ended June 28, 2008 were

$23.2 million, up 9% when compared with $21.3 million for the trailing

twelve month period that ended June 30, 2007.

Within the calibration industry, there is a broad array of measurement

disciplines making it costly and inefficient for any one provider to

invest the needed capital for facilities, equipment and uniquely trained

personnel necessary to perform all calibrations in-house. Transcats

strategy has been to focus its investments in the core electrical,

temperature, pressure and dimensional disciplines, and it has

historically subcontracted 15% to 20% of its customers

equipment to outside vendors. In the first quarter of fiscal 2009,

approximately 81% of Service segment revenue was generated by the Companys

staff of technicians while 16% was subcontracted to outside vendors.

Service segment gross margin of 21.0% was 120 basis points lower than

the first quarter of fiscal 2008 primarily as a result of a 6.9%

increase in operational costs that was not fully offset by the growth in

revenue. Operating loss for the Service segment in the fiscal 2009 first

quarter was $0.6 million compared with an operating loss of $0.2 million

in the same period of the prior fiscal year.

Mr. Hadeed continued, We have strategically

invested in our sales and marketing infrastructure in order to achieve

our goal of becoming the premier calibration services provider in the

U.S. We have added breadth and depth to our sales management team and

further expanded our coverage of accounts nationally. We believe these

investments will fuel our future calibration services growth.

Balance Sheet and Cash Management

In the first quarter of fiscal 2009, cash generated from operations was

$0.4 million compared with $1.1 million in the same period of the prior

fiscal year. In the quarter, $0.3 million was used to pay the remaining

debt balance on the Companys $10.0 million

revolving line of credit.

At June 28, 2008, inventory was $6.6 million compared with $5.4 million

at March 29, 2008. Approximately $1.6 million of the inventory increase

was related to the launch of an aggressive product sales and marketing

campaign in affiliation with one of the Companys

primary test and measurement instrument suppliers.

Capital expenditures in the first quarter of fiscal 2009 were $0.2

million compared with $0.5 million in the same period of the prior

fiscal year and were primarily used for laboratory equipment replacement

and upgrades. Transcat expects capital spending for fiscal 2009 to be in

the range of $2.0 to $2.3 million.

Outlook

Mr. Hadeed concluded, Although we may see

some shift in the timing of calibration orders on a quarter-by-quarter

basis, we continue to expect calibration revenue to grow 10% to 12% this

year. We also intend to capitalize on new product introductions and the

international opportunities gained from the weaker dollar and the

expansion and activity of the key industries we serve while expanding

our product lines and web presence in order to potentially exceed our

mid- to upper- single digit growth goal in product sales.

ABOUT TRANSCAT

Transcat, Inc. is a leading global distributor of professional grade

test and measurement instruments and accredited provider of calibration,

3-D metrology and repair services primarily for the life science,

manufacturing, utility and process industries. Through its distribution

products segment, Transcat markets and distributes national and

proprietary brand instruments to approximately 12,500 global customers.

The Companys Master Catalog offers access to

more than 25,000 test and measurement instruments. Transcat delivers

precise, reliable, fast calibration, 3-D metrology and repair services

across the United States, Canada and Puerto Rico through its eleven

strategically located Centers of Excellence. Transcats

calibration laboratories are all ISO-9001:2000 certified and the scope

of accreditation for ISO/IEC 17025 is believed to be the broadest in the

industry.

Transcats growth strategy is to expand both

its distribution products and calibration services in markets that value

product breadth and availability and rely on accredited calibration

services to maintain the integrity of their processes.

More information about Transcat can be found on its website at: www.transcat.com.

Safe Harbor Statement

This press release contains forward-looking statements within the

meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks, uncertainties and

assumptions and are identified by words such as expects,

estimates, projects,

anticipates, believes,

could, and other

similar words. All statements addressing operating performance, events,

or developments that Transcat, Inc. expects or anticipates will occur in

the future, including but not limited to statements relating to

anticipated revenue, profit margins, sales operations, its strategy to

build its sales representative channel, customer preferences and changes

in market conditions in the industries in which Transcat operates are

forward-looking statements. Because they are forward-looking, they

should be evaluated in light of important risk factors and

uncertainties. These risk factors and uncertainties are more fully

described in Transcats Annual and Quarterly

Reports filed with the Securities and Exchange Commission, including

under the heading entitled Risk Factors.

Should one or more of these risks or uncertainties materialize, or

should any of the Companys underlying

assumptions prove incorrect, actual results may vary materially from

those currently anticipated. In addition, undue reliance should not be

placed on the Companys forward-looking

statements. Except as required by law, the Company disclaims any

obligation to update or publicly announce any revisions to any of the

forward-looking statements contained in this press release.

Transcat, Inc.

Consolidated Statements of Operations

(Amounts in thousands, except per share data)

 

 

(Unaudited)

First Quarter Ended

June 28,

 

June 30,

2008

2007

 

Product Sales

$

12,311

$

10,927

Service Revenue

 

5,542

 

 

5,263

 

Net Revenue

 

17,853

 

 

16,190

 

 

Cost of Products Sold

8,949

7,866

Cost of Services Sold

 

4,379

 

 

4,097

 

Total Cost of Products and Services Sold

 

13,328

 

 

11,963

 

 

Gross Profit

 

4,525

 

 

4,227

 

Gross margin

25.3

%

26.1

%

 

Selling, Marketing and Warehouse Expenses

2,595

2,305

Administrative Expenses

 

1,542

 

 

1,473

 

Total Operating Expenses

 

4,137

 

 

3,778

 

 

Operating Income

 

388

 

 

449

 

Operating margin

2.2

%

2.8

%

 

Interest (Income) Expense

(1

)

34

Other Expense, net

 

8

 

 

81

 

Total Other Expense

 

7

 

 

115

 

 

Income Before Income Taxes

381

334

Provision for Income Taxes

 

153

 

 

96

 

 

Net Income

$

228

 

$

238

 

 

 

Basic Earnings Per Share

$

0.03

$

0.03

Average Shares Outstanding

7,186

7,068

 

Diluted Earnings Per Share

$

0.03

$

0.03

Average Shares Outstanding

7,399

7,460

 

Note: Certain prior period balances have been reclassified to

conform with the current period presentation.

Transcat, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

 

 

(Unaudited)

 

June 28,

March 29,

2008

2008

ASSETS

Current Assets:

Cash

$

130

$

208

Accounts Receivable, less allowance for doubtful accounts of $74

and $56 as of June 28, 2008 and March 29, 2008, respectively

7,501

9,346

Other Receivables

535

370

Inventory, net

6,557

5,442

Prepaid Expenses and Other Current Assets

824

773

Deferred Tax Asset

 

299

 

 

248

 

Total Current Assets

15,846

16,387

Property and Equipment, net

3,154

3,211

Goodwill

2,967

2,967

Deferred Tax Asset

1,386

1,435

Other Assets

 

343

 

 

344

 

Total Assets

$

23,696

 

$

24,344

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts Payable

$

6,085

$

5,947

Accrued Compensation and Other Liabilities

1,410

2,489

Income Taxes Payable

 

144

 

 

62

 

Total Current Liabilities

7,639

8,498

Long-Term Debt

302

Other Liabilities

 

471

 

 

427

 

Total Liabilities

 

8,110

 

 

9,227

 

 

Shareholders’ Equity:

Common Stock, par value $0.50 per share, 30,000,000 shares

authorized; 7,460,373 and 7,446,223 shares issued as of June 28,

2008 and March 29, 2008, respectively; 7,184,591 and 7,170,441

shares outstanding as of June 28, 2008 and March 29, 2008,

respectively

3,730

3,723

Capital in Excess of Par Value

6,875

6,649

Accumulated Other Comprehensive Income

Transcat, Inc.
John Zimmer, 585-352-7777
Chief Financial

Officer
jzimmer@transcat.com
or
Kei

Advisors LLC
Tammy Poblete, 716-843-3853
tpoblete@keiadvisors.com

free cash grants, free grant money, free money, cash grants, scholarships, business grants, foundation grants, government grants, debt grants, consolidation, college tuition, financial aid, medical grants, personal grants, medical bills, unsecured loans, no interest loans, financing, loans, capital, non profit organizations

Major Newsire & Press Release Distribution with Basic Starting at only $19 and Complete OTCBB / Financial Distribution only $89

Get Unlimited Organic Website Traffic to your Website 
TheNFG.com now offers Organic Lead Generation & Traffic Solutions





























Leave a Reply

Your email address will not be published. Required fields are marked *

*