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 Company’s 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

year’s 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.

Transcat’s 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

Company’s Master Catalog offers access to more

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

primarily uses direct catalog marketing and the Company’s

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 Company’s

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

Transcat’s 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. Transcat’s

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 Company’s

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 Company’s $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 Company’s

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 Company’s 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. Transcat’s

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.

Transcat’s 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 Transcat’s 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 Company’s underlying

assumptions prove incorrect, actual results may vary materially from

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

placed on the Company’s 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 [email protected] or Kei Advisors LLC Tammy Poblete, 716-843-3853 [email protected] 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