JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO.
i
Fiscal 2022 Annual Report JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO.
ii
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO.
iii
Transcat, Inc. (Nasdaq: TRNS) is a leading provider of accredited calibration, reliability, maintenance optimization,
quality and compliance, validation, Computerized Maintenance Management System (CMMS), and pipette
services. We are focused on providing best-in-class services and products to highly regulated industries,
particularly the Life Science industry, which includes pharmaceutical, biotechnology, medical device, and other
FDA-regulated businesses, as well as aerospace and defense, and energy and utilities.
We provide periodic on-site services, mobile calibration services, pickup and delivery, in-house services at
our 25 Calibration Service Centers strategically located across the United States, Puerto Rico, Canada, and
Ireland. In addition, we operate calibration labs in 21 imbedded customer-site locations. The breadth and depth
of measurement parameters addressed by our ISO/IEC 17025 scopes of accreditation are believed to be the
best in the industry.
Transcat also operates as a leading value-added distributor that markets, sells and rents new and used
national and proprietary brand instruments to customers primarily in North America. We believe our combined
Service and Distribution segment offerings, experience, technical expertise, and integrity create a unique and
compelling value proposition for our customers.
Our strategy is to leverage our strong brand and unique value proposition that includes our comprehensive
instrument service capabilities, enterprise asset management, and leading distribution platform to drive
organic sales growth. We will also look to expand our addressable calibration market through acquisitions and
capability investments to further realize the inherent leverage of our business model.
Revenue
($ in millions)
Operating Income
($ in millions)
Adjusted EBITDA*
($ in millions)
$155.1 $160.9
$173.1 $173.3
$205.0
$10.2
$9.0
$122.0
$10.9
$11.1
$77.4
$84.0
$93.0
$101.2
$77.7
$76.9
$80.1
$72.1
$83.0
$5.2
$5.7
$5.0
$5.2
$5.2
$3.9
$10.4
$0.6
$14.1
$10.8
$26.3
$20.3
$17.8
$18.5
$16.4
$20.6
$10.2
$10.6
$11.1
$17.1
$3.3
$6.2
$7.2
$7.4
$6.0
$3.5
FY2018
FY2019
FY2020
FY2021
FY2022
FY2018
FY2019
FY2020
FY2021
FY2022
FY2018
FY2019
FY2020
FY2021
FY2022
Service
Distribution
Service
Distribution
Service
Distribution
* See following pages for more information about this non-GAAP measure and for the reconciliation table.
All figures are rounded to the nearest tenth of a million; therefore, totals shown in graphs may not equal the sum of the segments.
Transcat routinely posts news and other important information on its website, www.transcat.com, where additional comprehensive
information about the Company can be found. Unless indicated, information on Transcat’s website is not part of this Annual Report.
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO.
iv
Dear Shareholders,
Fiscal 2022 was a record year for Transcat as we delivered well-rounded financial performance in what continued to
be a very challenging operating environment due to the lingering impacts from the COVID-19 pandemic. Throughout
the year, we saw consistently strong demand for both our services and products, and we achieved in excess of
$200 million of consolidated revenue for the first time, an important company milestone.
The progress we made toward our long-term strategic and financial objectives were evident in our fiscal 2022 results
and highlights:
• Record revenue, operating income, EBITDA, and diluted earnings per share
• Consolidated revenue of $205.0 million, up 18% from prior year
• Service segment revenue grew 20.5% and gross margin expanded 160 basis points to 31.9%
•
• Distribution revenue grew 15.1% despite supply chain constraints and extended vendor lead times
•
52 consecutive quarters of year-over-year quarterly Service growth – 13 straight years!
Record adjusted EBITDA of $26.3 million and diluted earnings per share of $1.50, up 28% and 46%, respectively, from
prior year
Our Service segment is our primary growth engine and is driven by regulation and recurring revenue streams
Our Service segment achieved 11.6% organic revenue growth in fiscal 2022 and continued to benefit from recurring
revenue streams and our previous strategic decision to increase our exposure to highly regulated end markets,
including life sciences, which now represents approximately 60% of Service revenue. We target markets where the
cost of failure is high and where our unique high-end mission critical service offerings resonate the most. Additionally,
we continued to demonstrate the inherent leverage in our operating model as our Service gross margin hit a record
31.9%, an increase of 160 basis points from prior year and up an impressive 660 basis points from fiscal 2020.
Our Distribution segment also achieved double-digit revenue growth as demand improved significantly from a
COVID-impacted prior year. However, supply chain challenges remain acute and extended vendor lead times have
driven our backlog to all-time highs. We continue to believe this segment is a differentiator for Transcat, generating
cash and producing customer sales leads for our Service segment.
NEXA acquisition strengthens our value proposition and is an important part of our go-forward strategy
We completed three acquisitions, NEXA, Tangent and Upstate Metrology, in fiscal 2022 and all have exceeded
expectations to date. These companies have increased our capabilities, allowed us to leverage our existing
infrastructure and expanded our addressable markets.
In particular, the NEXA acquisition has not only expanded our reach into the attractive asset management market, it
has also fundamentally improved our value proposition to existing and new customers through its unique six service-
track offering of calibration, reliability, maintenance, quality/compliance, CMMS and validation services. This broad
range of solutions offers customers a unique approach to managing the cost, efficiency and reliability components
of their asset management programs and is a perfect complement to our core calibration services offering. NEXA
has already provided synergistic revenue growth opportunities for both businesses in the life science market and we
believe this approach will be transferrable to other highly regulated industries.
Additionally, NEXA’s history of success, strong proven leadership and employee footprint in Ireland expands
our geographic reach and will provide potential future opportunities for both calibration services and asset
management growth.
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. v
We are building a strong foundation for growth through investing in our core capabilities and team
We strategically invested $10.2 million of capital in fiscal 2022, which we believe has improved our internal
capabilities and increased capacity in our Service segment. We opened a new, larger pipettes facility due
to faster than anticipated growth, relocated and upgraded our Toronto-based lab and began work on a new
organic lab in Southeast Florida.
We also improved the quality of our team by adding key leaders with significant experience and technical
expertise in several functional areas. For example, we recently brought in a new human resources leader to
promote next-level recruiting and drive talent development initiatives across the company in what continues
to be a very tight labor market. We believe these new leaders, along with other recent employee additions
that maintain expertise in process improvement and automation, improve our ability to execute our long-term
initiatives around revenue growth and margin expansion.
As we think ahead into fiscal 2023 and beyond, we believe we are well positioned for continued profitable
growth. We have demonstrated our ability to grow through various economic cycles and strong Service
organic growth, continued margin expansion and acquiring companies that improve our value proposition
will remain centerpieces of our strategy. On behalf of the Transcat Board and employees, thank you for your
continued interest and investment in Transcat.
Sincerely,
Lee D. Rudow
President and Chief Executive Officer
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. vi
Five-Year Performance Highlights
(In thousands, except per share and
percentage data)
Service segment revenue
Distribution segment sales
Total revenue
Gross profit
Gross margin
Total operating expenses
Operating income
Operating margin
Net income
Earnings per share – diluted
Adjusted earnings per share* – diluted
Weighted average shares – diluted
$
FY2022
FY2021
FY2020
FY2019
$
122,005 $
101,274 $
82,954
204,959
58,439
28.5%
44,296
14,143
6.9%
11,380
72,061
173,335
46,118
26.6%
35,045
11,073
6.4%
7,791
1.50 $
2.03
7,589
1.03 $
1.35
7,548
93,003 $
80,096
173,099
42,478
24.5%
31,628
10,850
6.3%
8,067
1.08 $
1.27
7,487
84,041 $
76,857
160,898
39,343
24.5%
29,114
10,229
6.4%
7,145
0.95 $
1.14
7,515
FY2018
77,445
77,696
155,141
37,441
24.1%
28,415
9,026
5.8%
5,922
0.81
1.02
7,303
Year-end Financial Position
Total assets
Shareholders’ equity
Book value per share
$
$
177,762 $
86,176
11.45 $
132,116 $
75,078
9.95 $
128,122 $
105,230 $
67,087
59,630
8.96 $
7.93 $
96,822
51,348
7.03
Adjusted EBITDA*
(In thousands)
Service operating income
+ Depreciation & amortization
+ Restructuring expense
+ Transaction Expense
+ Other (expense)/income
+ Noncash stock compensation
Adjusted Service EBITDA
Distribution operating income
+ Depreciation & amortization
+ Restructuring expense
+ Other (expense)/income
+ Noncash stock compensation
Adjusted Distribution EBITDA
Adjusted Service EBITDA
Adjusted Distribution EBITDA
Total Adjusted EBITDA
FY2022
FY2021
FY2020
FY2019
FY2018
$
10,814 $
7,053
-
902
(104)
1,632
20,297 $
3,329 $
2,024
-
(39)
636
6,010 $
10,441 $
5,597
349
-
(162)
835
17,060 $
632 $
1,983
301
(79)
678
3,515 $
5,672 $
4,929
-
-
(20)
470
11,051 $
5,178 $
1,729
-
35
414
7,356 $
5,202 $
4,754
-
-
(69)
702
10,589 $
5,027 $
1,607
-
(22)
625
7,237 $
20,297 $
6,010 $
26,307 $
17,060 $
3,515 $
20,575 $
11,051 $
7,356 $
18,407 $
10,589 $
7,237 $
17,826 $
$
$
$
$
$
$
5,158
4,397
-
-
(61)
706
10,200
3,868
1,594
-
1
705
6,168
10,200
6,168
16,368
*See Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for a description of these non-
GAAP measures and for the reconciliation tables.
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. vii
SEC FORM 10-K
Five-Year Performance Highlights
(In thousands, except per share
and percentage data)
Service segment revenue
Distribution segment sales
Total revenue
Gross profit
Gross margin
Total operating expenses
Operating income
Operating margin
Net income
$ 101,274
$
$ 84,041
$ 77,445
$ 71,103
FY2019
FY2018
FY2017
FY2021
72,061
173,335
46,118
26.6%
35,045
11,073
6.4%
7,791
1.03
7,548
FY2020
93,003
80,096
173,099
42,478
24.5%
31,628
10,850
6.3%
8,067
1.08
7,487
76,857
160,898
39,343
24.5%
29,114
6.4%
7,145
0.95
7,515
10,229
77,696
155,141
37,441
24.1%
28,415
9,026
5.8%
5,922
0.81
7,303
72,795
143,898
34,970
24.3%
27,036
7,934
5.5%
4,522
0.64
7,111
Earnings per share – diluted
$
Weighted average shares – diluted
$
$
$
$
Year-end Financial Position
Total assets
Shareholders’ equity
Book value per share
$
132,116
$ 128,122
$ 105,230
$ 96,822
$ 92,097
75,078
67,087
59,630
51,348
43,401
$
9.95
$
8.96
$
7.93
$
7.03
$
6.10
Adjusted EBITDA*
(In thousands)
FY2021
FY2020
FY2019
FY2018
FY2017
Service operating income
$ 10,441
$
$
$
4,769
+ Depreciation & amortization
5,597
+ Restructuring expense
+ Other (expense)/income
349
(162)
+ Noncash stock compensation
835
5,672
4,929
$
5,202
4,754
-
5,158
4,397
-
(69)
(61)
(55)
702
706
Adjusted Service EBITDA
17,060
$ 11,051
$ 10,589
$ 10,200
Distribution operating income
+ Depreciation & amortization
+ Restructuring expense
+ Other (expense)/income
+ Noncash stock compensation
632
1,983
301
(79)
678
$
$
$
3,868
1,594
1,524
5,027
1,607
-
(22)
625
-
1
705
Adjusted Distribution EBITDA
$
3,515
$
7,356
$
7,237
$
6,168
-
(20)
470
5,178
1,729
-
35
414
Adjusted Service EBITDA
17,060
$ 11,051
$ 10,589
$ 10,200
Adjusted Distribution EBITDA
3,515
$
7,356
$
7,237
$
6,168
Total Adjusted EBITDA
20,575
$ 18,407
$ 17,826
$ 16,368
$ 14,520
* In addition to reporting net income and operating income, U.S. generally accepted accounting principle (“GAAP”) measures, we present Adjusted
EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, non-cash loss on sale of
building and restructuring expense), which is a non-GAAP measure. We believe 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, and stock-
based compensation expense, which is not always commensurate with the reporting period in which it is included. As such, we use Adjusted EBITDA
as a measure of performance when evaluating our business segments and as a basis for planning and forecasting. 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 measures of net income and operating income and, therefore, should not be used in isolation of, but in
conjunction with, the GAAP measures. Adjusted EBITDA, as presented, may produce results that vary from the GAAP measures and may not be
comparable to a similarly defined non-GAAP measure used by other companies.
4,660
-
217
9,591
3,165
-
4
236
4,929
9,591
4,929
$
$
$
$
$
$
$
$
$
$
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. viii
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REVISION 4
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JOB NUMBER 405949(1)
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ix
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: March 26, 2022
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 000-03905
TRANSCAT, INC.
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of
incorporation or organization)
16-0874418
(I.R.S. Employer
Identification No.)
35 Vantage Point Drive, Rochester, New York 14624
(Address of principal executive offices) (Zip Code)
(585) 352-7777
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.50 par value
Trading Symbol
TRNS
Name of each exchange on which registered
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No
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. Yes No o
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). Yes No o
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 o
Non-accelerated filer o
Emerging growth company o
Accelerated filer
Smaller reporting 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. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on September 24, 2021 (the last
business day of the registrant’s most recently completed second fiscal quarter) was approximately $455.9 million. The market value calculation was
determined using the closing sale price of the registrant’s common stock on September 24, 2021, as reported on the Nasdaq Global Market.
The number of shares of common stock of the registrant outstanding as of June 2, 2022 was 7,545,954.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement relating to the Annual Meeting of Shareholders to be held on September 7, 2022 have been
incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this report.
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. x
EXPLANATORY NOTE
The registrant was previously a smaller reporting company under applicable Securities and Exchange Commission rules
and regulations. As of the September 24, 2021 determination date, the registrant no longer qualifies as a smaller reporting
company. However, the registrant is not required to reflect the change in its smaller reporting company status or comply
with the non-scaled disclosure obligations until the registrant’s first quarterly report on Form 10-Q for the three-month
period ending June 25, 2022. In accordance with applicable rules, the registrant is permitted to use the scaled disclosure
requirements applicable to smaller reporting companies in this Annual Report on Form 10-K and has elected to do so.
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations. . . . .
Quantitative and Qualitative Disclosures about Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence. . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Exhibits and Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Item 16.
Form 10-K Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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1
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21
22
22
22
22
22
36
36
63
63
64
64
64
64
65
65
65
65
68
69
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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,” “projects,” “seek,” “strategy,” “target,”
“intends,” “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 , the impact of the COVID-19 pandemic, inflationary impacts, 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 regulated and industrial manufacturing industries, tariffs and trade relations, any
impairment of our goodwill or intangible assets, 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, competition in the rental market, the volatility of our stock price, our ability to adapt
our technology, reliance on our enterprise resource planning system, technology updates, risks related to our acquisition
strategy and the integration of the businesses we acquire, volatility in our customers’ industries, changes in vendor rebate
programs, supply chain delays or disruptions, the risks related to current and future indebtedness, risks related to our
intellectual property, the relatively low trading volume of our common stock, foreign currency rate fluctuations, adverse
weather events or other catastrophes or natural disasters, changes in tax rates, and changes in accounting standards, legal
requirements and listing standards. These risk factors and uncertainties are more fully described by us under the heading
“Risk Factors” in Item IA. of Part I of this report. You should not place undue reliance on our forward-looking statements.
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.
ITEM 1. BUSINESS
BUSINESS OVERVIEW
PART I
Transcat, Inc. (“Transcat”, the “Company,” “we” or “us”) 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. We are 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 FAA-regulated businesses, including aerospace and defense industrial manufacturing;
energy and utilities, including oil and gas and alternative energy; 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.
We conduct our business through two operating segments: service (“Service”) and distribution (“Distribution”).
See Note 7 to our Consolidated Financial Statements in this report for financial information for these segments. We
concentrate on attracting new customers in each segment, retaining existing customers and cross-selling to customers
to increase our total revenue. We serve approximately 30,000 customers through our Service and Distribution segments,
with approximately 20% to 25% of those customers transacting with us through both of our business segments.
Through our Service segment, we offer calibration, repair, inspection, analytical qualifications, preventative maintenance,
consulting and other related services, a majority of which are processed through our proprietary asset management system,
CalTrak® and our online customer portal, C3®. Our Service model is flexible, and we cater to our customers’ needs by
offering a variety of services and solutions including permanent and periodic onsite services, mobile calibration services,
pickup and delivery and in-house services. As of the end of our fiscal year ended March 26, 2022 (“fiscal year 2022”), we
operated twenty-four calibration service centers (“Calibration Service Centers”) strategically located across the United
States, Puerto Rico, and Canada. We also serve our customers onsite at their facilities for daily, weekly or longer-term
periods. In addition, we have several imbedded customer-site locations that we refer to as “client-based labs,” where we
provide calibration services, and in some cases other related services, exclusively for the customer and where we reside
and work every day. We also have a fleet of mobile calibration laboratories that can provide service at customer sites which
may not have the space or utility capabilities we require to service their equipment.
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Through the Company’s acquisition strategy, we have been focused on building out our Services segment by entering
adjacent and complimentary markets. This has been demonstrated by the acquisition of Tangent Labs, LLC, Cal OpEx
Limited (d/b/a NEXA Enterprise Asset Management) which owns all of the issued and outstanding capital stock of
its U.S. based subsidiary, Cal OpEx Inc., a Delaware corporation (collectively, “NEXA”), and Upstate Metrology Inc.
in fiscal year 2022 and the acquisitions of BioTek Services, Inc. in our fiscal year ended March 27, 2021 (“fiscal year
2021”), and the acquisition of TTE Laboratories, Inc. in our fiscal year ended March 28, 2020 (“fiscal year 2020”).
NEXA provides asset management services to the biopharmaceutical industry by leveraging its six service tracks:
(i) calibration, (ii) maintenance and spare, (iii) reliability, (iv) computerized maintenance management systems
solutions (“CMMS”), (v) quality and compliance, and (vi) validation. By delivering these services, NEXA is able to
provide unique value to their end customers in managing their asset portfolios, avoiding asset downtime and helping to
accelerate delivery of their life changing products to market, ultimately driving significant cost savings and improved
reliability. This NEXA suite of services, combined with the existing Transcat service offerings, provides a very
comprehensive and robust value proposition to existing and new customers, which allows us to manage the complexity
that is tied to doing business in these highly regulated industries.
TTE Laboratories, Inc. and BioTek Services, Inc. provided Transcat entry into pipette calibration, repair, refurbishment or
replacement, calibration management and user training, by enabling both in lab and on-site services to life sciences and
other regulated industry customers. TTE Laboratories, Inc. also provided Transcat with an opportunity to strengthen its
Distribution sales platform with incremental product sales through their growing e-commerce website, www.pipettes.com
All of our Calibration Service Centers have obtained ISO/IEC 17025:2017 scopes of accreditation. Our accreditations
are the cornerstone of our quality program, which we believe is among the best in the industry. Our dedication to
quality is highly valued by businesses that operate in the industries we serve, particularly those in life science and other
regulated industries, and our accreditations provide our customers with confidence that they will receive a consistent
and uniform service, regardless of which of our service centers completes the service.
Through our Distribution segment, we sell and rent national and proprietary brand instruments to customers globally.
Through our website, in-house sales team and printed and digital marketing materials, we offer access to more than
150,000 test, measurement and control instruments, including products from approximately 500 leading brands. Most
instruments we sell and rent require calibration service to ensure that they maintain the most precise measurements.
By having the capability to calibrate these instruments at the time of sale and at regular post-sale intervals, we can give
customers a value-added service that most of our competitors are unable to provide. Calibrating before shipping means
the customer can place their instruments into service immediately upon receipt, reducing downtime. Other value-added
options we offer through our Distribution segment include equipment kitting (which is especially valued in the power
generation sector), equipment rentals and used equipment sales.
Our commitment to quality goes beyond the services and products we deliver. Our sales, customer service and support
teams provide expert advice, application assistance and technical support to our customers. Since calibration is an
intangible service, our customers rely on us to uphold high standards and provide integrity in our people and processes.
Our customers include leading manufacturers in the life science/pharmaceutical, energy, defense, aerospace
and industrial process control sectors. We believe our customers do business with us because of our integrity and
commitment to quality service, our broad range of product and service offerings, our proprietary asset management
system, CalTrak®, and our online customer portal, C3®. In our fiscal year 2021 and in fiscal year 2022, no customer
or controlled group of customers accounted for 5% or more of our total revenue. The loss of any single customer would
not have a material adverse effect on our business, cash flows, balance sheet, or results of operations.
Transcat was incorporated in Ohio in 1964. We are headquartered in Rochester, New York. Our executive offices are
located at 35 Vantage Point Drive, Rochester, New York 14624. Our telephone number is 585-352-7777. Our website
is www.transcat.com. Information available on our website is not a part of, and is not incorporated into, this Annual
Report on Form 10-K. We trade on the Nasdaq Global Market under the ticker symbol “TRNS”.
OUR STRATEGY
Our two operating segments are highly complementary in that their offerings are of value to customers within the same
industries. Our strategy is to leverage the complementary nature of our operating segments in ways that add value for
all customers who select Transcat as their source for test and measurement equipment and/or calibration and laboratory
instrument services. We strive to differentiate ourselves within the markets we serve and build barriers to competitive
entry by offering a broad range of products and services and by integrating these solutions in a value-added manner to
benefit our customers’ operations.
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During fiscal year 2022, we renewed our commitment to capital, people and leadership investments, advancing our
“Operational Excellence” initiative. This initiative is resulting in increased productivity and operational efficiency
and further differentiation from our competitors as we leverage technology, automation, and process improvements
to enhance our effectiveness and our customers’ experiences. We also implemented Transcat University’s build-a-
tech program. This program attracts fresh talent to the organization and provides training and career advancement
opportunities for our existing employees. Our Operational Excellence initiative is a multi-year, ever-evolving program
designed to create an infrastructure that supports our strategic goals over a longer timeframe.
Within the Service segment, our strategy is to drive double-digit revenue growth through both organic expansion and
acquisitions. We have adopted an integrated sales model to drive sales and capitalize on the cross-selling opportunities
between our two segments, especially leveraging our Distribution relationships to develop new Service relationships.
We leverage these relationships with our unique value proposition which resonates strongly with customers who rely on
accredited calibration services and/or laboratory instrument services to maintain the integrity of their processes and/
or meet the demands of regulated business environments. Our customer base values our superior quality programs and
requires precise measurement capability in their processes to minimize risk, waste and defects. We execute this strategy
by leveraging our quality programs, metrology expertise, geographical footprint, qualified technicians, breadth of
capabilities, and tailored service delivery options. Together, this allows us to meet the most rigorous quality demands
of our most highly regulated customers while simultaneously being nimble enough to meet their business needs.
We expect to continue to grow our Service business organically by taking market share from other third-party providers
and original equipment manufacturers (“OEMs”), as well as by targeting the outsourcing of in-house calibration labs as
multi-year client-based lab contracts. We believe an important element in taking market share is our ability to expand
into new technical capabilities and adjacent service solutions that are in demand by our current and target customer base.
The other component to our Service growth strategy is acquisitions. There are three drivers of our acquisition strategy:
geographic expansion, increased capabilities and infrastructure leverage. The majority of our acquisition opportunities
have been in the $500 thousand to $10 million annual revenue range, and we are disciplined in our approach to selecting
target companies. One focus of our Operational Excellence initiative is to strengthen our acquisition integration process,
allowing us to capitalize on acquired sales and cost synergies at a faster pace.
Our Distribution segment strategy is to be the premier distributor and rental source of leading test and measurement
equipment while also providing cross-selling opportunities for our Service segment. Through our vendor relationships
we have access to more than 150,000 products, which we market to our existing and prospective customers both with
and without value-added service options that are unique to Transcat. In addition to offering pre-shipment value-added
services, we offer our customers the options of renting selected test and measurement equipment or buying used equipment,
furthering our ability to answer all of our customers’ test and measurement equipment needs. We continuously evaluate
our offerings to add new in-demand vendors or products, or remove less relevant vendors and products. Our equipment
rental business continues to be a strong growth segment for us and helps support our distribution and service segment
growth strategies. Having new, used and rental equipment further differentiates us from our Service segment competitors.
We see these various methods of meeting our Distribution customers’ needs as a way to differentiate ourselves and
to diversify this segment’s customer base from its historically niche market. This differentiation and diversification
strategy has been deliberately instituted in recent years as a means to mitigate the effect of price-driven competition
and to lessen the impact that any particular industry or market will have on the overall performance of this segment.
As part of our growth strategy, we completed three acquisitions during our fiscal year 2022 and one business acquisition
during our fiscal year 2021:
•
•
•
•
Effective December 31, 2021, Transcat purchased all of the outstanding membership units of Tangent Labs,
LLC, a privately-held company (“Tangent”). Tangent provides in-house and on-site calibrations of precision
measurement and control instrumentation to customers in the life science, aerospace and other regulated
industries, and has lab locations in Indianapolis, Indiana and Huntsville, Alabama.
Effective August 31, 2021, Transcat purchased all of the outstanding capital stock of NEXA. NEXA
provides calibration optimization and other technical solutions to improve asset and reliability management
programs to pharmaceutical, biotechnology, and medical device companies worldwide.
Effective April 29, 2021, Transcat acquired substantially all of the assets of Upstate Metrology Inc. (“Upstate
Metrology”), a New York based provider of calibration services.
Effective December 16, 2020, Transcat acquired substantially all of the assets of BioTek Services, Inc.
(“BioTek”), a Virginia based provider of pipette calibration services.
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Our acquisition strategy primarily targets service businesses that expand our geographic reach, increase the depth
and/or breadth of our service capabilities and expertise and leverage our infrastructure. The table below illustrates the
strategic drivers for the acquisitions described above:
Tangent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NEXA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Upstate Metrology . . . . . . . . . . . . . . . . . . . . . . . . . . .
BioTek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Geographic
Expansion
Increased
Capabilities
Leveraged
Infrastructure
We believe our combined Service and Distribution segment offerings, experience, technical expertise and integrity
create a unique and compelling value proposition for our customers, and we intend to continue to grow our business
through organic revenue growth and business acquisitions. We consider the attributes of our Service segment, which
include higher gross margins and recurring revenue streams from customers in regulated industries to be more
compelling and scalable than our legacy Distribution segment. For this reason, we expect our Service segment to be the
primary source of revenue and earnings growth in future fiscal years. The charts below illustrate Service, Distribution
and consolidated revenue over the past five years:
Service Revenue Trend (in millions)
Distribution Sales Trend (in millions)
$130.0
$110.0
$90.0
$70.0
$50.0
$30.0
$10.0
$240.0
$200.0
$160.0
$120.0
$80.0
$40.0
-
$90.0
$80.0
$70.0
$60.0
$50.0
$40.0
$30.0
$20.0
$10.0
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
Consolidated Revenue (in millions)
$77.4
$77.7
$84.0
$76.9
$93.0
$80.1
$101.2
$72.1
$122.0
$83.0
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
Distribution
Service
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SEGMENTS
Service Segment
Calibration
Calibration is the act of comparing a unit or instrument of unknown value to a standard of known value and reporting
the result in some specifically defined form. After the calibration has been completed, a decision is made, based on
rigorously defined parameters, regarding what, if anything, should be done to the unit to conform to the required
standards or specifications. The decision may be to adjust, optimize or repair a unit; limit the use, range or rating of
a unit; scrap the unit; or leave the unit as is. The purpose of calibration is to significantly reduce the risk of product
or process failures caused by inaccurate measurements. In addition to its being an element of quality control and risk
management, calibration improves an operation’s productivity and efficiency to optimal levels by assuring accurate,
reliable instruments and processes.
The need for calibration is often driven by regulation, which identifies a requirement for quality calibration and
laboratory instrument services as a critical component of a company’s business operation. We specifically target
industries and companies that are regulated by the U.S. FDA, FAA or other regulatory bodies. As a result of the various
levels of regulation within our target industries, our customers’ calibration and laboratory instrument service sourcing
decisions are generally made based on the provider’s quality systems, accreditation, reliability, trust, customer service
and documentation of services. To maintain our competitive position in this segment, we maintain internationally
recognized third-party accredited quality systems, further detailed in the section entitled “Service Quality” below, and
provide our customers with access to proprietary asset management software solutions, which offer tools to manage
their internal calibration programs and provide them with visibility to their service records.
Through our Service segment, we perform recurring periodic calibrations (typically ranging from three-month to
twenty-four month intervals) on new and customer-owned instruments. We perform approximately 800,000 calibrations
annually and can address a significant majority of the items requested to be calibrated with our in-house capabilities.
For customers’ calibration needs in less common and highly specialized disciplines, we subcontract some calibrations
to third-party vendors that have unique or proprietary capabilities. While typically representing approximately 13%
to 15% of our Service segment revenue, we believe the management of these items is highly valued by our customers
and providing this service has enabled us to continue our pursuit of having the broadest calibration offerings in these
targeted markets. We regularly review outsourced services to identify opportunities for in-house capability expansion.
Continuous Improvement
NEXA provides technical, consulting, and staffing solutions in the US, Canada, Ireland, Europe, and Asia Pacific to
improve asset management programs for our most highly-regulated customers, especially those in the pharmaceutical,
biotechnology, and medical device industries. NEXA offers six service tracks that support the creation or optimization
of our client’s enterprise asset management program. Whether a facility is in preconstruction, operational or
decommissioning stage, NEXA’s experienced teams can deliver results in all phases of the asset lifecycle. NEXA’s full
suite of services or combination solutions are customizable to meet our customer’s unique needs.
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Other Services
We provide other services to our customers such as inspection, repair and consulting services, which appeal to
customers across all sectors in our customer base. These are generally value-added services and allow us to provide
“one-stop shopping” for our customers.
Service Value Proposition
Our calibration services strategy encompasses multiple ways to manage a customer’s calibration and laboratory
instrument service needs:
1) We offer an “Integrated Calibration Service Solution” that provides a complete wrap-around service, which
can be delivered in the following ways:
•
in-house services: services are performed at one of our twenty-four Calibration Service Centers (often
accompanied by pick-up and delivery services);
•
•
periodic onsite services: Transcat technicians travel to a customer’s location, including aboard
vessels docked at shipyards, and provide bench-top or in-line calibration or laboratory services on
predetermined service cycles;
client-based-laboratory services: Transcat establishes and manages a calibration service program
within a customer’s facility; and
• mobile calibration services: services are completed on a customer’s property within one of our mobile
calibration units.
2)
3)
For companies that maintain an internal calibration operation, we can provide:
•
•
calibration of their primary calibration assets, also called “standards”; and
overflow capability, either onsite or at one of our Calibration Service Centers, during periods of
high demand.
Enterprise Asset Management
•
Calibration – criticality risk assessment; calibration interval analysis; calibration plans/task lists;
planning and scheduling.
• Maintenance and Spares – PM optimization; spares/BOM management; PM plans/task lists; planning
and scheduling.
•
•
Reliability – asset criticality assessments; asset hierarchy development; PdM plans/task lists;
FMECA/RCA.
CMMS – implementation and migration; data optimization; business intelligence; CMMS
KPIs/reporting.
• Quality and Compliance – technical writing; compliance audits; remediation; compliance management.
• Validation – validation master plan; confidence assessment model; validation interval analysis;
validation method/process optimization.
Inclusive with all the above services, we provide total program management including logistics, remediation and
consultation services when needed.
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We strive to provide the broadest accredited calibration offering to our targeted markets, which includes certification
of our technicians pursuant to the American Society for Quality standards, complete calibration management
encompassing the entire metrology function, and access to our complementary service and product offerings. We
believe our calibration services are of the highest technical and quality levels, with broad ranges of accreditation.
Our compliance services strategy is to identify and establish long-term relationships with life science research and
development and manufacturing customers who require analytical qualifications, validation, remediation and/or
preventative maintenance services. In most cases, these customers are life science companies, including pharmaceutical
and biotechnology companies engaged in research and development and manufacturing, which are subject to extensive
government regulation. The services we provide to these regulated customers are typically a critical component of the
customer’s overall compliance program. Because many laboratory instrument service customers operate in regulated
industries, these same customers typically also require accredited calibration services. This requirement allows a
natural synergy between our laboratory instrument and calibration services. Our strategy includes cross-selling our
services within our customer accounts to maximize our revenue opportunities with each customer.
Proprietary Asset Management Software
CalTrak® is our proprietary documentation and asset management software which is used to integrate and manage
both the workflow of our Calibration Service Centers and our customers’ assets. With CalTrak®, we are able to provide
our customers with timely and consistent calibration service while optimizing our own efficiencies. CalTrak® has been
validated to U.S. federal regulations 21 CFR Part 820.75 and 21 CFR Part 11, as applicable. This validation is important
to pharmaceutical and other FDA-regulated industries where federal regulations can be particularly stringent.
Additionally, C3® provides our customers with web-based asset management capability and a safe and secure off-site
archive of calibration and other service records that can be accessed 24 hours a day through our secure password-
protected website. C3® stands for Compliance, Control and Cost, and we see these as the major areas of focus for our
clients within the regulatory environment as it relates to instrument calibration. We specifically designed C3® to assist
our customers in increasing efficiency, driving compliance to quality system and enhancing control of instrumentation,
all while bringing their overall metrology costs down. Understanding the regulated environments that our clients
operate within, we customized the platform to allow for single system of record utilization via capabilities that allow
clients to track and manage instruments maintained internally in addition to instruments supported by Transcat. C3®
is validated to 21 CFR Part 820.75 and 21 CFR Part 11 to meet stringent FDA requirements.
Through CalTrak® and C3®, each customer calibration is tracked and automatically cross-referenced to the assets used
to perform the calibration, providing traceability.
Service Marketing and Sales
Under our integrated sales model, we have both inside and outside sales teams that seek to acquire new customers
in our targeted markets by leveraging our unique value proposition, including our broad geographic footprint and
comprehensive suite of services. We target regulated, enterprise customers with multiple manufacturing operations
throughout North America. We leverage our ability to manage the complete life cycle of instrumentation from purchase
of calibrated equipment to long-term service and maintenance requirements. Connecting all the dots by using new and
used product sales, rentals, and repair and calibration services is the goal of our marketing and sales initiatives. We also
have a team of customer success managers focused on delivering ever-increasing value for our existing customers. We
utilize print media, trade shows and web-based initiatives to market our services to customers and prospective customers
with a strategic focus in the highly regulated industries including life science and other FDA-regulated industries,
aerospace and defense, energy and utilities, and chemical manufacturing. We also target industrial manufacturing and
other industries that appreciate the value of quality calibrations.
Service Competition
The calibration services industry is highly fragmented and is composed of companies ranging from internationally
recognized and accredited OEMs to non-accredited sole proprietors as well as companies that perform their own
calibrations in-house, resulting in a tremendous range of service levels and capabilities. A large percentage of calibration
companies are small businesses that generally do not have a range of capabilities as broad as ours. There are also
several companies with whom we compete that have national or regional operations.
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We differentiate ourselves from our competitors by demonstrating our commitment to quality, expanding upon the
largest 17025 scope of accreditation and calibration capabilities of any commercial calibration laboratory that are tailored
to the markets we serve, leveraging a geographical footprint that spans North America and Puerto Rico providing a
comprehensive suite of services that spans many disciplines and hundreds of manufacturers which is not limited to
certain product lines or brands. Our unique ability to bundle our products with our compliance and calibration services
also provides a high level of differentiation from our competitors. As one of the only North American compliance
and calibration service providers who also distributes product, our customers can seamlessly replace instruments that
cannot be calibrated or are otherwise deemed to be at end of life. Our close knowledge of the products we distribute also
allows our service staff to consult and advise customers on what products are best suited for their in-house calibration
needs. We also believe that our proprietary software is a key differentiator from our competitors. CalTrak® and C3®
are utilized by our customers in an integrated manner, providing a competitive barrier as customers realize synergies
and efficiencies as a result of this integration.
Competition for laboratory instrument services is composed of both small local and regional service providers and large
multi-national OEMs. We believe we are generally financially stronger, service a larger customer base and are typically
able to offer a larger suite of services than many of the small local and regional competitors. The large OEMs may offer
specialized services and brand-specific expertise which we do not offer, but they are generally focused on providing
specialized services only for their proprietary brands and product lines, rather than servicing an array of brands and
product lines as we do. We believe our competitive advantages in the laboratory instrument services market are our
financial and technical resources, turnaround time, and flexibility to react quickly to customers’ needs. The breadth of
our suite of laboratory instrument service, combined with our calibration service offerings, also differentiates us from
our competitors by allowing us to be our customers’ one-source accredited services provider for their entire calibration
and compliance programs.
Service Quality
The accreditation process is the only system currently in existence that validates measurement competence. To ensure
that the quality and consistency of our calibrations are consistent with the global metrology network, designed to
standardize measurements worldwide, we have sought and achieved international levels of quality and accreditation
to provide uniformity across all locations with advanced levels of training for our technical staff. Our Calibration
Service Centers are accredited to ISO/IEC 17025:2017 by ANSI-ASQ National Accreditation Board (“ANAB”) and
other accrediting bodies. These accrediting bodies are International Laboratory Accreditation Cooperation Mutual
Recognition Arrangement (“ILAC MRA”) signatories, are proficient in the technical aspects of the chemistry and
physics that underlie metrology, and provide an objective, third-party, internationally accepted evaluation of the quality,
consistency, and competency of our calibration processes. Accreditation also requires that all measurement standards
used for accredited measurements have a fully documented path, known as Metrological Traceability, through the
National Institute of Standards and Technology or the National Research Council (the National Measurement Institutes
for the United States and Canada, respectively), or to other national or international standards bodies, or to measurable
conditions created in our Calibration Service Centers, or accepted fundamental and/or natural physical constants, ratio
type of calibration, or by comparison to consensus standards, all inclusive of measurement uncertainties.
The importance of this international oversight to our customers is the assurance that our service documentation will
be accepted worldwide, removing one of the barriers to trade that they may experience if using a calibration laboratory
provider whose accrediting body is not an ILAC MRA signatory. To provide the widest range of services to our
customers in our target markets, our ISO/IEC 17025:2017 accreditations extend across many technical disciplines,
including working-level and reference-level capabilities. We believe our scope of accreditation to ISO/IEC 17025:2017
to be the broadest for the industries we serve.
To reinforce our belief in the importance of calibration quality, we are leveraging a branding campaign for our Service
segment that is centered around three simple words – “Calibrated by Transcat®”. We believe we have established a
strong, differentiated brand that has a deep and meaningful association with quality, compliance and control. We want
the phrase “Calibrated by Transcat®” to be synonymous with risk reduction and quality compliance.
Acquired calibration labs might use other quality registration systems. We continually evaluate when to integrate
acquired quality systems with the focus on minimizing business disruptions and disruptions to our customers while
maintaining our commitment to quality.
Our scopes of accreditation can be found at http://www.transcat.com/calibration-services/accreditation/calibration-
lab-certificates.
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Distribution Segment
Distribution Summary
We distribute professional grade test, measurement and control instrumentation throughout North America and
internationally. Our customers use test and measurement instruments to ensure that their processes, and ultimately
their end products, are within specification. Utilization of such diagnostic instrumentation also allows for continuous
improvement processes to be in place, increasing the accuracies of their measurements. The industrial test and
measurement instrumentation market, in those geographic areas where we predominately operate, has historically
been serviced by broad-based national equipment distributors and niche or specialty-focused organizations such as
Transcat. We offer value-added services such as calibration/certification of equipment purchases, equipment rentals,
used equipment for sale, and equipment kitting.
We believe that a customer chooses a distributor based on a number of different criteria, including product availability,
price, ease of doing business, timely delivery and accuracy of orders, consistent product quality, technical competence
of the representative serving them and availability of value-added services. The decision to buy is generally made
by plant engineers, quality managers, or their purchasing personnel, and products are typically obtained from one
or more distributors as replacements, upgrades, or for expansion of manufacturing and research and development
facilities. As a result, sales to Distribution customers are somewhat unpredictable and potentially non-recurring. Our
online presence, including our website and e-newsletters, master catalog, supplemental mailings, and other sales and
marketing activities are designed to create interest and maintain a constant presence in front of our customers to ensure
we receive the order when they are ready to purchase.
We provide our customers with value-added services, including technical support, to ensure our customers receive the
right product for their application, and more comprehensive instrument suitability studies to customers in regulated
industries who are concerned about the technical uncertainties that their testing or in-process instruments may bring to
a process. We consider our biggest value-added service for our Distribution customers is the option to have calibration
service performed on their new product purchases prior to shipment, allowing them to place newly acquired equipment
directly into service upon receipt, saving downtime. We also offer online procurement, credit card payment options,
same day shipment of in-stock items, kitted products, the option to rent, training programs and a variety of custom
product offerings. Items are regularly added to and deleted from our product offerings on the basis of customer demand,
recommendations of suppliers, sales volumes and other factors. Because of the breadth of our product and service
offerings, we are often a “one-stop shop” for our customers who gain operational efficiency by dealing with just one
distributor for most or all of their test and measurement instrumentation needs.
We continue to focus on higher margin channels such as rentals to bolster profitability in the Distribution segment. To
remain competitive, we are focusing on brand consolidation along with inventory investments to support our overall
strategy of being a value-added distributor that supports our customers and Service segment. Additional areas of focus
include consumable products within the life science market which is intended to offset competitive pressures in our
legacy distribution business.
Distribution Marketing and Sales
We market, create demand and sell to our customers through multiple direct sales channels including our website,
digital and print advertising, proactive outbound sales and an inbound call center. Our outbound and inbound sales
teams are staffed with technically trained personnel who are available to help guide product selection. Our website
serves as a sales channel for our products and services, and provides search capability, detailed product information,
in-stock availability, selection guides, demo videos and downloadable product specification sheets. We have made
investments in our website to implement the latest marketing technologies which allow us to provide an intuitive
customer experience, with simple product comparison and quoting, ease at checkout and automated post-order follow-
up. We also operate and maintain several industry-specific service websites, obtained through recent acquisitions. For
example, the URL www.pipettes.com was obtained in connection with the acquisition of TTE (now known as pipettes.
com). Pipettes.com focuses on selling pipettes, pipette supplies and related services to customers.
We use a multichannel approach to reach our customers and prospective customers including our master catalog, periodic
supplemental catalogs, website, e-newsletters, and other direct sales and marketing programs. Our digital marketing
strategy includes ongoing investment in search engine optimization, application-specific digital content, pay-per-click
search engine advertising, and product listings on online marketplaces such as Amazon and Google Shopping. We continue
to invest in back-end technologies designed to provide a seamless customer experience across all our marketing channels.
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As a result of strong relationships with our product vendors and our historical marketing program results, we have
the opportunity to carry out co-branded marketing initiatives, aimed at our existing customers and our prospective
customer base, for which we receive cooperative advertising support. These co-branded marketing initiatives typically
feature specific vendors, new products or targeted product categories and take the form of direct mailers, web-based
initiatives or outbound sales efforts.
Distribution Competition
The distribution market for industrial test and measurement instrumentation is fragmented and highly competitive.
Our competitors range from large national distributors and manufacturers that sell directly to customers to small local
distributors and online distributors. Key competitive factors typically include customer service and support, quality,
lead time, inventory availability, brand recognition and price. To address our customers’ needs for technical support
and product application assistance, we employ a staff of highly trained technical sales specialists. In order to maintain
this competitive advantage, technical training is an integral part of developing our sales staff. To differentiate ourselves
from competitors, we offer pre-shipment calibration or performance data reports which allow customers to receive our
products and immediately place them into service, saving them downtime and money.
Online distributors, including Amazon which typically sells lower price-point products, have become prominent
competitors for sales of handheld test and measurement equipment, competing primarily on price. While online
competitors lack the value-added services we offer in our Distribution segment, they have been successful in capturing
some market share in the worldwide market for test and measurement instruments. To stay ahead of growing competition
from these online distributors and in keeping with the general trend of increased use of e-commerce, we continue to
invest in our digital platform including a well-indexed website with improved design and functionality. In addition, we
have diversified our offerings by expanding the brands and product lines that we offer and adding higher gross margin
equipment rentals and used equipment sales, which we believe makes Transcat unique among our competitors.
Distribution Suppliers and Purchasing
We believe that effective purchasing is a key element to maintaining and enhancing our position as a provider of
high-quality test and measurement instruments. We frequently evaluate our purchase requirements and suppliers’
offerings to obtain products at the best possible cost. We obtain our products from approximately 500 suppliers of brand
name and private-labeled equipment. In fiscal year 2022, our top 10 vendors accounted for approximately 64% of our
aggregate Distribution sales. In fiscal year 2022, the COVID-19 pandemic impacted the supply of products from our
vendors resulting in increased lead times and an increase in our backlog.
We plan our product mix and inventory stock to best serve the anticipated needs of our customers, whose individual
purchases vary in size. We can usually ship our top selling products to our customers the same day they are ordered.
Distribution Vendor Rebates
We have agreements with certain product vendors that provide for rebates based on meeting a specified cumulative
level of purchases and/or incremental distribution sales. These rebates are recorded as a reduction of cost of distribution
sales. Purchase rebates are calculated and recorded quarterly based upon our volume of purchases with specific vendors
during the quarter. Point of sale rebate programs that are based on year-over-year sales performance on a calendar year
basis are recorded as earned, on a quarterly basis, based upon the estimated level of annual achievement. Point of sale
rebate programs that are based on year-over-year sales performance on a quarterly basis are recorded as earned in the
respective quarter. Rebates had been cut significantly in fiscal year 2021 as our vendors implemented cost cutting
measures in response to the COVID-19 pandemic. During fiscal year 2022, our Distribution sales were high enough
that we saw an increase in the rebates offered by our vendors. The Company recorded vendor rebates of $1.0 million
and $0.7 million in fiscal years 2022 and 2021, respectively, as a reduction of cost of distribution sales.
Distribution Operations
Our Distribution operations primarily take place at our 48,500 square-foot facility in Rochester, New York which
includes 17,000 square feet of warehouse space. The Rochester location also serves as our corporate headquarters,
houses our customer service, sales and administrative functions, and is a Calibration Service Center. We also have
two smaller warehouse facilities. Our Wisconsin warehouse fulfills orders for certain large industrial scales and our
Houston, Texas warehouse fulfills orders for used equipment and rental equipment. In fiscal year 2022, we shipped
approximately 30,000 product orders.
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Distribution Backlog
Distribution 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. Pending product shipments are primarily backorders,
but also include products that are requested to be calibrated in one of our Calibration 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. Our total backlog was $7.7 million and $6.3 million as of March 26, 2022 and
March 27, 2021, respectively.
CUSTOMER SERVICE AND SUPPORT
Key elements of our customer service approach are our business development sales team, outbound sales team, account
management team, inbound sales and customer service organization. To ensure the quality of service provided, we
monitor our customer service through customer surveys, call monitoring and daily statistical reports.
Customers may place orders via:
Telephone at 1-800-828-1470;
• Mail to Transcat, Inc., 35 Vantage Point Drive, Rochester, NY 14624;
•
•
Email at sales@transcat.com;
• Online at www.transcat.com; or
•
Fax at 1-800-395-0543
INFORMATION REGARDING EXPORT SALES
In each of fiscal years 2022 and 2021, approximately 10% of our total revenue resulted from sales to customers outside
the United States. Of those export sales in fiscal year 2022, approximately 8% were denominated in U.S. dollars, 81%
were denominated in Canadian dollars and 11% were denominated in Euros. Our revenue is subject to the customary
risks of operating in an international environment, including the potential imposition of trade or foreign exchange
restrictions, tariff and other tax increases, fluctuations in exchange rates and unstable political situations, any one or
more of which could have a material adverse effect on our business, cash flows, balance sheet or results of operations.
See “Foreign Currency” in Item 7A. of Part II and Note 7 to our Consolidated Financial Statements in this report for
further details.
INFORMATION SYSTEMS
We utilize a turnkey enterprise software solution from Infor, Inc. (“Infor”) called Application Plus to manage our
business and operations segments. This software includes a suite of fully integrated modules to manage our business
functions, including customer service, warehouse management, inventory management, financial management,
customer relations management and business intelligence. This solution is a fully mature business package and has
been subject to more than 20 years of refinement. We utilize customer relationship management (“CRM”) software
offered by SalesForce.com, Inc., which is strategically partnered with Infor, allowing us to fully integrate the CRM
software with our Infor enterprise software.
We also utilize CalTrak®, our proprietary document and asset management system, to manage documentation,
workflow and customers’ assets within and amongst most of our Calibration Service Centers. In addition to functioning
as an internal documentation, workflow, and asset management system, CalTrak®, through C3®, provides customers
with web-based calibration cycle management service and access to documentation relating to services completed
by Transcat. Certain recent acquisitions utilize either third-party or their own proprietary calibration management
systems. We continually evaluate when to integrate these acquired systems with a focus on obtaining operational
synergies while imposing minimal disruption to customers.
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INTELLECTUAL PROPERTY
We have federally registered trademarks for Transcat®, CalTrak®, C3® and Procision® which we consider to be of
material importance to our business. The registrations for these trademarks are in good standing with the U.S. Patent
& Trademark Office. Our CalTrak® trademark is also registered in Canada for one class with the Canada Intellectual
Property Office and in Puerto Rico. Our trademark registrations must be renewed at various times, and we intend to
renew our trademarks, as necessary, for the foreseeable future.
In addition, we own www.transcat.com, www.transcat.ca and pipettes.com among other Internet domain names. As
with phone numbers, we do not have, and cannot acquire any property rights to an Internet address. The regulation of
domain names in the United States and in other countries is also subject to change. Regulatory bodies could establish
additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain
names. As a result, we might not be able to maintain our domain names or obtain comparable domain names, which
could harm our business.
SEASONALITY
Our business has certain historical seasonal factors. Historically, our fiscal third and fourth quarters have been
stronger than our fiscal first and second quarters due to the operating cycles of our industrial sector customers. Our
Distribution segment has historically been strongest in our third fiscal quarter while Service has historically been
strongest in our fourth fiscal quarter.
FISCAL YEAR
We operate on a 52/53-week fiscal year, ending the last Saturday in March. In a 52-week fiscal year, each of the four
quarters is a 13-week period. In a 53-week fiscal year, the last quarter is a 14-week period. Fiscal year 2022 and fiscal
year 2021 both consisted of 52 weeks. Fiscal year 2023 which ends on March 25, 2023 (“fiscal year 2023”) will also
have 52 weeks.
ENVIRONMENTAL MATTERS
We believe that we are in compliance with federal, state, and local provisions relating to the protection of the
environment, and that continued compliance will not have any material effect on our capital expenditures, earnings, or
competitive position.
HUMAN CAPITAL MANAGEMENT
As of March 26, 2022, we had 918 employees, of which 812 were employed in the United States and 106 were employed
outside of the United States. None of our employees are covered by collective bargaining agreements or work councils.
Overall, we consider our employee relations to be good. Our culture is important to the overall success of the Company.
Health and Safety
The health and safety of our employees is of utmost importance to us. We conduct regular self-assessments and audits
to ensure compliance with our health and safety guidelines and regulatory requirements. Our ultimate goal is to achieve
a level of work-related injuries as close to zero as possible through continuous investment in our safety programs. We
provide protective gear (e.g., eye protection, masks, and gloves) as required by applicable standards and as appropriate
given employee job duties. Additionally, in response to the COVID-19 pandemic, we invested heavily in safety measures
and other initiatives to help ensure the health of our employees.
Hiring Practices
We recruit the best people for the job without regard to race, ethnicity, gender, sexual orientation or any other protected
status. It is our policy to comply fully with all domestic, foreign and local non-discrimination employment laws.
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Diversity and Inclusion
Recognizing and respecting our employees’ backgrounds and experiences, and our international presence, we strive
to maintain a diverse workforce and inclusive work environment everywhere we operate. Our diversity and inclusion
principles are also reflected in our employee training, in particular with respect to our policies against harassment and
bullying and the elimination of bias in the workplace.
In addition, to support our employees’ mental health and emotional well-being, all employees and their dependents
worldwide have access to an Employee Assistance Program (“EAP”), at no cost to them. This includes access to visits
with mental health care providers.
Compensation and Benefits
Our compensation and benefits program is designed to attract and reward individuals who demonstrate the ability to
support and advance our operational and strategic goals and create long-term value for our shareholders.
We provide employees with compensation packages that include base salary and may also include annual incentive
bonuses and/or long-term incentive awards, depending upon the employee’s position. We believe that a compensation
program with both short-term and long-term incentive awards provides fair and competitive compensation and aligns
employee and shareholder interests. In addition to cash and equity compensation, we also offer employees benefits such
as life and health (medical, dental and vision) insurance, paid time off, paid parental leave, and a 401(k) plan.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best
interest of our employees as well as the communities in which we operate. This includes having the vast majority of our
corporate employees work from home while also implementing a number of safety measures for employees continuing
critical onsite work. Employees in our Calibration Service Centers were given additional paid time off as well as
incremental pay if they were required to work offsite at a customer location.
AVAILABLE INFORMATION
We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements
and other information with the Securities and Exchange Commission (“SEC”). Our filings with the SEC are available
on the SEC’s website at www.sec.gov. We also maintain a website at www.transcat.com. We make available, free of
charge, in the Investor Relations section of our website, documents we file with or furnish to the SEC, including our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments
to those reports. We make this information available as soon as reasonably practicable after we electronically file
such materials with, or furnish such information to, the SEC. The information found on our website is not part of this
or any other report we file with, or furnish to, the SEC. Copies of such documents are available in print at no charge
to any shareholder who makes a request. Such requests should be made to our corporate secretary at our corporate
headquarters, 35 Vantage Point Drive, Rochester, New York 14624.
ITEM 1A.
RISK FACTORS
You should carefully consider the following risks and all other information included in this report. The risks and
uncertainties described below and elsewhere in this report are not the only ones facing our business. If any of the
following risks were to actually occur, our business, financial condition or results of operations would likely suffer.
MACROECONOMIC AND BUSINESS RISKS
Adverse changes in general economic conditions, including from the impact of the COVID-19 pandemic, or
uncertainty about future economic conditions could materially and adversely affect us. We are subject to the risks
arising from adverse changes in general economic market conditions, including the negative impact to the U.S. and
global economy from the COVID-19 pandemic or other global health situation, inflation, and any recessionary impacts.
Uncertainty about future economic conditions could negatively affect our current and prospective customers causing
them to delay the purchase of necessary services or test and measurement instruments. Poor economic conditions could
harm our business, financial condition, operating results and cash flows.
The COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains,
resulted in significant travel and transport restrictions, and created significant disruption of the financial markets.
While the COVID-19 pandemic did not have a material adverse effect on our reported results for fiscal year 2022,
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we continue to closely monitor the impact of the COVID-19 pandemic and emerging variants on all aspects of our
business, including the impact to our customers, employees and supply chain. The health of our workforce, customers
and communities continues to be of primary concern and we have taken, and may take in the future, actions as may be
required by government authorities or as we determine are in the best interests of our employees, customers and others.
These actions have required, and may continue to require, expenditures of significant time, attention and resources to
manage the effects of the pandemic on our business and workforce. The extent to which our operations may be impacted
by the COVID-19 pandemic or any global health situation will depend largely on future developments which are highly
uncertain and we are unable to predict the ultimate impact that it may have on our business, future results of operations,
financial position or cash flows. Even while government restrictions and responses to the COVID-19 pandemic have
lessened, we may experience materially adverse impacts to our business due to any resulting supply chain disruptions,
economic recession or depression. Furthermore, the impacts of a potential worsening of global economic conditions
and the continued disruptions to and volatility in the financial markets remain unknown. Our management team has,
and will likely continue to, spend significant time, attention and resources monitoring the COVID-19 pandemic and
seeking to manage its effects on our business and workforce.
The impact of the COVID-19 pandemic may also exacerbate other risks discussed in this section, any of which could
have a material adverse effect on us. This pandemic is still ongoing and additional impacts may arise that we are not
aware of currently.
The COVID-19 pandemic may significantly disrupt our workforce and internal operations. The COVID-19 pandemic
may significantly disrupt our workforce if a significant percentage of our employees are unable to work due to illness,
quarantines, government actions, facility closures in response to the pandemic, or fear of acquiring COVID-19 while
performing essential business functions. During the fourth quarter of fiscal year 2022, we experienced a higher than
usual rate of employee absenteeism related to COVID-19, which resulted in additional employee related costs which,
in turn, impacted our operational costs. We cannot predict the extent to which the COVID-19 pandemic may disrupt
our workforce and internal operations and we cannot guarantee that we will be able to adequately staff our operations
when needed.
Rising inflation may result in increased costs of operations and negatively impact the credit and securities markets
generally, which could have a material adverse effect on our results of operations and the market price of our
common stock. Inflation has accelerated in the U.S. and globally due in part to global supply chain issues, a rise in
energy prices, and strong consumer demand as economies continue to reopen from restrictions related to the COVID-19
pandemic. An inflationary environment can increase our cost of labor as well as our energy and other operating
costs which may have a material adverse impact on our financial results. In addition, economic conditions could
impact and reduce the number of customers who purchase our products or services as credit becomes more expensive
or unavailable. Although interest rates have increased and are expected to increase further, inflation may continue.
Further, increased interest rates could have a negative effect on the securities markets generally which may, in turn,
have a material adverse effect on the market price of our common stock.
The industries in which we compete are highly competitive, and we may not be able to compete successfully. Within
our Service segment, we provide calibration services and compete in an industry that is highly fragmented and is
composed of companies ranging from internationally recognized and accredited corporations to non-accredited sole
proprietors, resulting in a tremendous range of service levels and capabilities. Also, within our Service segment, we
provide compliance services and compete in an industry that is composed of both small local and regional service
providers and large multi-national companies who are also OEMs. Within our Service segment, some of our larger
competitors may have broader service capabilities and may have greater name recognition than us. Some manufacturers
of the products we sell may also offer calibration and compliance services for their products.
Within our Distribution segment, we compete with numerous companies, including several major manufacturers and
distributors. Most of our products are available from several sources and our customers tend to have relationships
with several distributors. Competitors in the product distribution industry could also obtain exclusive rights to market
particular products, which we would then be unable to market. Manufacturers could also increase their efforts to sell
directly to end-users and bypass distributors like us. Industry consolidation among distributors, the unavailability
of products, whether due to our inability to gain access to products or interruptions in supply from manufacturers,
or the emergence of new competitors could also increase competition and adversely affect our business or results
of operations.
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In each of the industries in which we compete, some of our competitors have greater financial and other resources than
we do, which could allow them to compete more successfully. In the future, we may be unable to compete successfully
and competitive pressures may reduce our sales.
Competition in our Distribution segment is changing with an increase in web-based distributors. We may not
be able to compete successfully. We face substantial and increased competition throughout the world, especially in
our Distribution segment. The competition is changing, with web-based distributors becoming more prevalent and
increasing their market share. Some of our competitors are much larger than us. Changes in the competitive landscape
pose new challenges that could adversely affect our ability to compete. Entry or expansion of other vendors into
this market may establish competitors that have larger customer bases and substantially greater financial and other
resources with which to pursue marketing and distribution of products. Their current customer base and relationships,
as well as their relationships and ability to negotiate with manufacturers, may also provide them with a competitive
advantage. If we are unable to effectively compete with our current and future competitors, our ability to sell products
could be harmed and could result in a negative impact on our Distribution segment. Any erosion of our competitive
position could have a material adverse effect on our business, results of operations, and financial condition.
Volatility in the oil and gas industry has had, in the past, and could have in the future, a negative impact on our
operating results. A portion of our products and services customer base is directly or indirectly related to the oil and
gas industry. As a result, demand for some of our products is dependent on the level of expenditures by the oil and gas
industry. In addition to the more significant impact on our Distribution segment, an extended downturn in the oil and
gas industry or continued volatility in oil and gas prices, including as a result of any global hostilities, could impact
customers’ demand for some of our services (generally excluding life sciences, our largest industry customer sector),
which could have a material adverse effect on our financial condition, results of operations and cash flows.
Our Service segment has a concentration of customers in the life science and other FDA-regulated and industrial
manufacturing industries. A number of our Service segment customers operate in the pharmaceutical and other
FDA-regulated or industrial manufacturing industries. This concentration of our customer base affects our overall
risk profile, since a significant portion of our customers would be similarly affected by changes in economic, political,
regulatory, and other industry conditions. An abrupt or unforeseen change in conditions in these industries could
adversely affect customer demand for our services, which could have a material adverse effect on our financial results.
Tariffs imposed by the U.S. and those imposed in response by other countries, as well as rapidly changing trade
relations, could have a material adverse effect on our business and results of operations. Changes in U.S. and foreign
governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from
the U.S. In response, some foreign governments have proposed or implemented their own tariffs on certain products,
increasing our costs of doing business. If we are unable to recover these costs, our profit margins may be negatively
impacted. In the event of diminished trade relations between the U.S. and other countries, as well as any escalation of
tariffs, could have a material adverse effect on our financial performance and results of operations.
Any impairment of goodwill or intangible assets could negatively impact our results of operations. Our goodwill
and intangible assets are subject to an impairment test on an annual basis and are also tested whenever events and
circumstances indicate that goodwill and/or intangible assets may be impaired. Any excess goodwill and/or indefinite-
lived intangible assets value resulting from the impairment test must be written-off in the period of determination.
Intangible assets (other than goodwill and indefinite-lived intangible assets) are amortized over the useful life of such
assets. In addition, from time to time, we may acquire or make an investment in a business that will require us to record
goodwill based on the purchase price and the value of the acquired tangible and intangible assets. We may subsequently
experience unforeseen issues with the businesses we acquire, which may adversely affect the anticipated returns of
the business or value of the intangible assets and trigger an evaluation of the recoverability of the recorded goodwill
and intangible assets for such business. Future determinations of significant write-offs of goodwill or intangible assets
because of an impairment test or any accelerated amortization of other intangible assets could have a material negative
impact on our results of operations and financial condition.
OPERATIONAL RISKS
Cybersecurity incidents could adversely affect our business by causing a disruption to our operations, a compromise
or corruption of our confidential information and/or damage to our business relationships, all of which could
negatively impact our business, results of operations or financial condition. We rely extensively on information
technology (“IT”) systems, some of which are provided by third parties, to support our business activities, including
for orders and the storage, processing and transmission of our electronic, business-related, information assets used in
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or necessary to conduct business. The data we store and process may include customer payment information, personal
information concerning our employees, confidential financial information and other types of sensitive business-related
information. Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems,
networks and services, as well as the confidentiality, availability and integrity of our data. Some of our office personnel
work in remote environments which may exacerbate various cybersecurity risks to our business, including an increased
risk of phishing and other social engineering attacks, and an increased risk of unauthorized dissemination of sensitive
personal, proprietary or other confidential information. Global cybersecurity threats can range from uncoordinated
individual attempts to gain unauthorized access to our IT systems to sophisticated and targeted measures known as
advanced persistent threats. The techniques used in these attacks change frequently and may be difficult to detect
for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.
While we employ comprehensive measures to prevent, detect, address and mitigate these threats (including access
controls, data encryption, vulnerability assessments, management training, continuous monitoring of our IT networks
and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature
and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data
or proprietary information and the disruption of business operations. The potential consequences of a material
cybersecurity incident include reputational damage, compromised employee, customer, or third-party information,
litigation with third parties, regulatory actions, and increased cybersecurity protection and remediation costs, which
in turn could adversely affect our business and results of operations. We maintain insurance intended to cover certain
cybersecurity events, but such insurance may not cover all risks and losses that we experience. In addition, the laws and
regulations governing security of data on IT systems and otherwise held by companies is evolving and adding layers
of complexity in the form of new requirements and increasing costs of attempting to protect IT systems and data and
complying with new cybersecurity regulations.
If we experience a significant disruption in, or breach in security of, our IT systems, or if we fail to implement new
systems and software successfully, our business could be adversely affected. Our IT systems may be susceptible to
damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, user errors,
catastrophes or other unforeseen events. Our IT systems also may experience interruptions, delays or cessations of
service or produce errors in connection with system integration, software upgrades or system migration work that
takes place from time to time. In addition, technology resources may be strained due to our remote users. If we
were to experience a prolonged system disruption in the IT systems that involve our interactions with customers or
suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely
affect our business.
Our revenue and ability to achieve our stated corporate objectives depends on our senior management and our
ability to retain recruit, train and retain quality employees. Our success is dependent on our senior management
and our ability to attract, retain and motivate qualified personnel, especially skilled service technicians. Competition
for senior management is intense, and we may not be successful in attracting and retaining key personnel. Qualified
skilled service technicians are in high demand and are subject to competing offers. The ability to meet our labor
needs while controlling costs associated with hiring and training new employees is subject to external factors such as
unemployment levels and prevailing wage rates. The loss of services of any member of our senior management team or
key employees, and the inability to attract and retain other qualified personnel, especially skilled service technicians,
could affect our ability to achieve our stated corporate objectives and could adversely impact our business and results
of operations.
We expect that our quarterly results of operations will fluctuate. Such fluctuations could cause our stock price
to decline. A large portion of our expenses for our Service segment, including expenses for facilities, equipment
and personnel are relatively fixed. Accordingly, if revenues decline or do not grow as we anticipate, we may not be
able to correspondingly reduce our expenses in any particular quarter. Our quarterly revenues and operating results
have fluctuated in the past and are likely to do so in the future. Historically, our fiscal third and fourth quarters have
been stronger than our fiscal first and second quarters due to industrial operating cycles. Fluctuations in industrial
demand for products we sell and services we provide could cause our revenues and operating results to fluctuate. If our
operating results in some quarters fail to meet the expectations of stock market analysts and investors, our stock price
may decline.
If we do not effectively compete in the rental test and measurement equipment market, our operating results may
be adversely affected. We compete in the rental market on the basis of a number of factors, including equipment
availability, price, service and reliability. Some of our competitors may offer similar equipment for rent at lower prices
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and may offer more extensive servicing, or financing options. In addition, if the supply of rental equipment available on
the market significantly increases, demand for and pricing of our rental products could be adversely impacted lowering
our gross margins on rentals. Further, customers confronting competing budget priorities and more limited resources
could lead to less demand for rental equipment and increased pressure on pricing. Failure to adequately forecast the
adoption of and demand for equipment may cause us not to meet our customers’ rental equipment requirements and
may adversely affect our operating results.
If we fail to adapt our technology to meet customer needs and preferences, the demand for our products and services
may diminish. Our future success will depend on our ability to develop services and solutions that keep pace with
technological change, evolving industry standards and changing customer preferences in the markets we serve. We
cannot be sure that we will be successful in adapting existing or developing new technology or services in a timely or
cost-effective manner or that the solutions we do develop will be successful in the marketplace. Our failure to keep pace
with changes in technology, industry standards and customer preferences in the markets we serve could diminish our
ability to retain and attract customers and retain our competitive position, which could adversely impact our business
and results of operations.
We rely on our CalTrak®, Application Plus (our enterprise resource planning system) and other management
information systems for inventory management, distribution, workflow, accounting and other functions. If our
CalTrak®, Application Plus or other management information systems fail to adequately perform these functions,
experience an interruption in their operation or a security breach, our business and results of operations could be
adversely affected. The efficient operation of our business depends on our management information systems. We rely
on our CalTrak®, Application Plus and other management information systems to effectively manage accounting and
financial functions, customer service, warehouse management, order entry, order fulfillment, inventory replenishment,
documentation, asset management, and workflow. Our management information systems are vulnerable to damage
or interruption from computer viruses or hackers, natural or man-made disasters, vandalism, terrorist attacks, power
loss, or other computer systems, internet, telecommunications or data network failures. Any such interruptions to
our management information systems could disrupt our business and could result in decreased revenues, increased
overhead costs, excess inventory and product shortages, causing our business and results of operations to suffer. In
addition, our management information systems are vulnerable to security breaches. Our security measures or those of
our third-party service providers may fail to detect or prevent such security breaches. Security breaches could result
in the unauthorized publication of our confidential business or proprietary information, the unauthorized release of
customer, vendor, or employee data and payment information, the violation of privacy or other laws, and the exposure
to litigation, any of which could harm our business and results of operations.
Our enterprise resource planning system is aging, and we may experience issues from any implementation of a
new enterprise resource planning system. We have an enterprise resource planning system (“ERP”) to assist with the
collection, storage, management and interpretation of data from our business activities to support future growth and
to integrate significant processes. Although we use current versions of software and have support agreements in place,
due to the age of our ERP, we anticipate that a new ERP will be required to be implemented sometime in the future.
ERP implementations are complex and time-consuming and involve substantial expenditures on system software
and implementation activities, as well as changes in business processes. Our ERP system is critical to our ability to
accurately maintain books and records, record transactions, provide important information to our management and
prepare our consolidated financial statements. ERP implementations also require the transformation of business and
financial processes in order to reap the benefits of the ERP system; any such transformation involves risks inherent
in the conversion to a new computer system, including loss of information and potential disruption to our normal
operations. Any disruptions, delays or deficiencies in the design and implementation of a new ERP system could
adversely affect our ability to process orders, provide services and customer support, send invoices and track payments,
fulfill contractual obligations or otherwise operate our business. Additionally, if the ERP system does not operate as
intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to
assess it adequately could be delayed.
A change in vendor rebate programs could adversely affect our gross margins and results of operations. The terms
on which we purchase products from certain of our suppliers entitle us to receive a rebate based on the volume of our
purchases. These rebates effectively reduce our costs for products. During fiscal year 2022, we saw a number of our
vendors continue to reduce the rebates offered to us as a result of current economic conditions. If suppliers adversely
change the terms of some or all of these programs, the changes may lower our gross margins on products we sell and
may have an adverse effect on our operating results.
17
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 18
We depend on manufacturers to supply inventory to our Distribution segment and if our vendors fail to provide
desired products to us, increase prices, or fail to timely deliver products, or if supply chain delays, interruptions,
or product shortages occur, our revenue and gross profit could suffer. Similar to other distributors in our industry,
we occasionally experience supplier shortages and are unable to purchase our desired volume of products. Our ability
to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply
from manufacturers and other suppliers. Any disruption in our sources of supply, particularly of the most commonly
sold items, could result in a loss of revenues, reduced margins, and damage to our relationships with customers. Supply
shortages may occur as a result of unanticipated increases in demand or difficulties in production or delivery. In
addition, we may be adversely impacted by disruptions within our supply chain network. Such disruptions may result
from weather-related events, natural disasters, international trade disputes or trade policy changes or restrictions, tariffs
or import-related taxes, third-party strikes, lock-outs, work stoppages or slowdowns, shortages of supply chain labor
and truck drivers, shipping capacity constraints, military conflicts, acts of terrorism, public health issues (including
pandemics or quarantines), civil unrest or other factors beyond our control. For example, in fiscal year 2022, our supply
chains have been and may continue to be negatively impacted by the COVID-19 pandemic and general economic factors
such as rising inflation. When shortages occur, our suppliers often allocate products among distributors. The loss of,
or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements
could adversely impact our financial condition, operating results, and cash flows, as well as our ability to benefit from
ongoing supply chain initiatives.
Due to current global supply chain disruptions, we may experience increased difficulties in obtaining products at
stable pricing levels. As a result, we may need to restructure or change some of our product lines in the future. We
cannot provide any assurance that particular products, or product lines, will be available to us, or available in quantities
sufficient to meet customer demand. If we are unable to enter into and maintain satisfactory distribution arrangements
with leading manufacturers, if we are unable to maintain an adequate supply of products, or if manufacturers do
not regularly invest in, introduce to us, and/or make new products available to us for distribution, our Distribution
segment sales could suffer materially. This is of particular significance to our Distribution segment business because
the products we sell are often only available from one source. Any limits to product access could materially and
adversely affect our Distribution segment business.
Our future success may be affected by our current and future indebtedness. Under our credit agreement, as of
March 26, 2022, we owed $48.5 million to our secured creditor, a commercial bank, including $8.5 million borrowed
under a $15.0 million term loan to fund acquisitions and provide additional working capital. We may borrow additional
funds in the future to support our growth and working capital needs. We are required to meet financial tests on a
quarterly basis and comply with other covenants customary in secured financings. Although we believe that we will
continue to comply with such covenants, if we do not remain in compliance with such covenants, our lender may demand
immediate repayment of amounts outstanding. Furthermore, we are dependent on credit from manufacturers of our
products to fund our inventory purchases. If our debt burden increases to high levels, such manufacturers may restrict
our credit. Our cash requirements will depend on numerous factors, including the rate of growth of our revenues, the
timing and levels of products purchased, payment terms, and credit limits from manufacturers, the timing and level of
our accounts receivable collections and our ability to manage our business profitably. Our ability to satisfy our existing
obligations, whether or not under our secured credit facility, will depend upon our future operating performance, which
may be impacted by prevailing economic conditions and financial, business, and other factors described in this report,
many of which are beyond our control.
We face risks associated with foreign currency rate fluctuations. We currently transact a portion of our business
in foreign currencies, namely the Canadian dollar and the Euro. During fiscal years 2022 and 2021, less than 10% of
our total revenues were denominated in Canadian dollars and Euros. Conducting business in currencies other than
U.S. dollars subjects us to fluctuations in currency exchange rates that could have a negative impact on our reported
operating results. Fluctuations in the value of the U.S. dollar relative to the Canadian dollar and the Euro impact our
revenues, cost of revenues and operating margins and result in foreign currency transaction gains and losses. During
fiscal year 2022, the value of the U.S. dollar relative to one Canadian dollar and to one Euro ranged from 1.20 to 1.29
and from 0.81 to 0.92, respectively.
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. However, this strategy does
not eliminate our exposure. If there is a significant or prolonged downturn in the Canadian dollar or the Euro, it could
have an adverse impact on our business and financial condition.
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JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 19
Our inability to adequately enforce and protect our intellectual property or defend against assertions of infringement
could prevent or restrict our ability to compete. We rely on intellectual property in order to maintain a competitive
advantage. Our inability to defend against the unauthorized use of these assets could have an adverse effect on our
results of operations and financial condition. Litigation may be necessary to protect our intellectual property rights
or defend against claims of infringement. This litigation could result in significant costs and divert our management’s
focus away from operations.
Hurricanes, other adverse weather events, national or regional catastrophes or natural disasters could negatively
affect the local economies we serve or disrupt our operations, which could have an adverse effect on our business
or results of operations. Our market areas include the Gulf Coast and Mid-Atlantic regions of the United States, and
Puerto Rico, which are susceptible to hurricanes. Such weather events can disrupt our operations, result in damage
to our properties and negatively affect the local economies in which we operate. Future hurricanes could result in
damage to certain of our facilities and the equipment located at such facilities, or equipment on rent with customers
in those areas. Even if our properties suffer no direct damage from such events, the operations of our customers could
be disrupted, and our supply chain impacted. In addition, climate change could lead to an increase in intensity or
occurrence of hurricanes or other adverse weather events, including severe winter storms. Future occurrences of these
events, as well as regional or national catastrophes or natural disasters, and their effects may adversely impact our
business or results of operations.
RISKS RELATED TO ACQUISITIONS
We may not successfully integrate business acquisitions. We completed three acquisitions during fiscal year 2022 and
one acquisition during fiscal year 2021. If we fail to accurately assess and successfully integrate any recent or future
business acquisitions, we may not achieve the anticipated benefits, which could result in lower revenues, unanticipated
operating expenses, reduced profitability and dilution of our book value per share. Successful integration involves
many challenges, including:
•
•
•
The difficulty of integrating acquired operations and personnel with our existing operations;
The difficulty of developing and marketing new products and services;
The diversion of our management’s attention as a result of evaluating, negotiating and integrating
acquisitions;
• Our exposure to unforeseen liabilities of acquired companies; and
•
The loss of key employees of an acquired operation.
In addition, an acquisition could adversely impact cash flows and/or operating results, and dilute shareholder interests,
for many reasons, including:
•
•
•
Charges to our income to reflect the impairment of acquired intangible assets, including goodwill;
Contingent consideration payments;
Interest costs and debt service requirements for any debt incurred in connection with an acquisition or new
business venture; and
• Any issuance of securities in connection with an acquisition or new business venture that dilutes or lessens
the rights of our current shareholders.
If the integration of any or all of our acquisitions or future acquisitions is not successful, it could have a material
adverse impact on our operating results and stock price.
Our future business acquisition efforts may not be successful, which may limit our growth or adversely affect
our results of operations, and financing of any future acquisitions could result in shareholder dilution and/or
increase our leverage. Business acquisitions are an important part of our growth strategy. If we identify an appropriate
acquisition candidate, we may not be able to successfully negotiate terms or finance the acquisition. If economic
downturns or other matters of national or global concern continue for an extensive period of time or recur, our ability
to pursue and consummate potential acquisitions could be materially adversely affected. In addition, to successfully
complete targeted acquisitions, we may issue additional equity securities that could dilute our stockholders’ ownership,
or we may incur additional debt, which could increase our leverage and our risk of default under our existing credit
facility. If we fail to successfully acquire businesses, our growth and results of operations could be adversely affected.
19
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 20
RISKS RELATED TO OUR STOCK
Our stock price may be volatile. The stock market, from time to time, has experienced significant price and volume
fluctuations that are both related and unrelated to the operating performance of companies. Our stock may be affected
by market volatility and by our own performance. The following factors, among others, may have a significant effect
on the market price of our common stock:
The impact of the COVID-19 pandemic;
•
• Developments in our relationships with current or future manufacturers of products we distribute;
• Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures
or capital commitments;
Litigation or governmental proceedings or announcements involving us or our industry;
Economic and other external factors, such as inflation, recession, disasters or other national or global crises;
•
•
•
•
•
• Our ability to satisfy our debt obligations.
Sales of our common stock or other securities in the open market;
Repurchases of our common stock on the open market or in privately-negotiated transactions;
Period-to-period fluctuations in our operating results; and
The relatively low trading volume of our common stock may limit your ability to sell your shares. Although our
shares of common stock are listed on the Nasdaq Global Market, we have historically experienced a relatively low
trading volume of approximately 35,000 shares a day. If our low trading volume continues in the future, holders of our
shares may have difficulty selling shares of our common stock in the manner or at a price that they desire.
If significant existing shareholders sell large numbers of shares of our common stock, our stock price could decline.
The market price of our common stock could decline if a large number of our shares are sold in the public market by
our existing shareholders or as a result of the perception that such sales could occur. Due to the relatively low trading
volume of our common stock, the sale of a large number of shares of our common stock may significantly depress the
price of our common stock.
REGULATORY RISKS
Tax rates applicable to us may change. Tax legislation initiatives could adversely affect our net earnings and tax
liabilities. We are subject to the tax laws and regulations of the United States federal, state and local governments,
as well as foreign jurisdictions. From time to time, various legislative initiatives may be enacted that could adversely
affect our tax positions. Tax laws and regulations are extremely complex and subject to varying interpretations. The
Tax Cuts and Jobs Act of 2017 (the “Tax Act”) made broad and complex changes to the U.S. tax code, including, but
not limited to reducing the Federal corporate income tax rate from 35% to 21%. Any additional modifications to key
aspects of the tax code could materially affect our tax obligations and negatively impact our effective tax rate. Although
we believe that our tax positions are sound and consistent with applicable laws, regulations and existing precedent,
there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be
successful in any such challenge.
Changes in accounting standards, legal requirements and the Nasdaq Global Market listing standards, or our
ability to comply with any existing requirements or standards, could adversely affect our operating results. Extensive
reforms relating to public company financial reporting, corporate governance and ethics, the Nasdaq Global Market
listing standards and oversight of the accounting profession have been implemented over the past several years and
continue to evolve. Compliance with these rules, regulations and standards that have resulted from such reforms has
increased our accounting and legal costs and has required significant management time and attention. In the event
that additional rules, regulations or standards are implemented or any of the existing rules, regulations or standards
to which we are subject undergoes additional material modification, we could be forced to spend significant financial
and management resources to ensure our continued compliance, which could have an adverse effect on our results
of operations. In addition, although we believe we are in full compliance with all such existing rules, regulations
and standards, should we be or become unable to comply with any of such rules, regulations and standards, as they
presently exist or as they may exist in the future, our results of operations could be adversely affected and the market
price of our common stock could decline.
20
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 21
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The following table presents the leased and owned properties that are material to our business as of March 26, 2022:
Property
Location
Philadelphia, PA
Corporate Headquarters, Calibration Service Center and Distribution Center . . . Rochester, NY
Calibration Service Center and Headquarters for Canadian Operations . . . . . . . . Montreal, QC
Calibration Service Center, Rental and Used Equipment Distribution Center. . . . Houston, TX
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denver, CO
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Los Angeles, CA
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Toronto, ON
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dayton, OH
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Boston, MA
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hopkinton, MA
St. Louis, MO
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
San Diego, CA
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlotte, NC
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chesapeake, VA
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Phoenix, AZ
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ottawa, ON
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Henrico, VA
Ft. Wayne, IN
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
San Juan, PR
Calibration Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decatur, AL
Mobile Service Unit and Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Scale & Engineering:
Indianapolis, IN
Portland, OR
Pittsburgh, PA
Calibration Service Center and Warehouse. . . . . . . . . . . . . . . . . . . . . . . . . . . . Milwaukee WI
Calibration Service Center and Warehouse. . . . . . . . . . . . . . . . . . . . . . . . . . . . Madison, WI
Calibration Service Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Green Bay, WI
Spectrum Technologies Inc. (“STI”):
Calibration Service Center and Warehouse. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paxinos, PA
Approximate
Square
Footage
48,500
27,500
22,300
19,400
18,200
16,900
14,000
10,500
8,900
7,600
7,000
6,100
5,600
5,500
4,900
4,600
4,200
4,000
3,600
3,600
1,600
1,700
6,300
16,000
6,000
3,300
14,500
We believe that our properties are in good condition, are well maintained and are generally suitable and adequate to
carry on our business in its current form.
21
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 22
ITEM 3. LEGAL PROCEEDINGS
From time to time we are a party to or otherwise involved in legal proceedings arising out of the normal course
of business. Management does not believe that there is any pending or threatened proceeding against us, which, if
determined adversely, would have a material adverse effect on our business, results of operations or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the Nasdaq Global Market under the symbol “TRNS”. As of June 1, 2022, we had
approximately 475 shareholders of record.
DIVIDENDS
Our credit agreement, as amended, limits our ability to pay cash dividends to $3.0 million in any fiscal year. We have
not declared any cash dividends since our inception and have no current plans to pay any dividends in the foreseeable
future.
ITEM 6.
[RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction
with our financial statements and related notes appearing elsewhere in this annual report. In addition to historical
information, the following discussion and analysis includes forward looking statements that involve risks, uncertainties
and assumptions. Our actual results and the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” and elsewhere
in this annual report. See the discussion under “Forward Looking Statements” beginning on page 1 of this annual report
OVERVIEW
Operational Overview
We are a leading provider of accredited calibration services, enterprise asset management services, and value-added
distributor of professional grade handheld test, measurement and control instrumentation.
We operate our business through two reportable business segments, Service and Distribution, which offer a
comprehensive range of services and products to the same customer base.
Our strength in our Service segment is based upon our wide range of disciplines, our investment in quality systems
and our ability to provide accredited calibrations to customers in highly-regulated targeted market segments. Our
services range from the calibration and repair of a single unit to managing a customer’s entire calibration program.
We believe our Service segment offers an opportunity for long-term growth and the potential for continuing revenue
from established customers with regular calibration cycles and recurring laboratory instrument service requirements.
Our Service segment has shown consistent revenue growth over the past several years, ending fiscal year 2022 with its
52nd consecutive quarter of year-over-year growth. This segment has benefited from both organic growth as well as
acquisitions over those 52 quarters. The business acquisitions that we made have been heavily focused on expanding
our service capabilities, increasing our geographic reach and leveraging our Calibration Service Centers and other
infrastructure to create operational synergies.
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PAGE NO. 23
Our Service segment revenue growth was 20.5% for fiscal year 2022 from fiscal year 2021, and included a combination
of organic growth and acquisition related revenue. The Service segment gross margin increased by 160 basis points.
Service segment gross profit and gross margin increases were primarily due to operating leverage on our fixed cost
base, accretive margins from recent acquisitions and continued strong technician productivity.
In our Distribution segment, we sell and offer for rent, professional grade handheld test and measurement instruments.
Because we specialize in professional grade handheld test and measurement instruments, as opposed to a wide array
of industrial products, our sales and customer service personnel can provide value-added technical assistance to our
customers to aid them in determining what product best meets their particular application requirements. We have
expertise in the procurement and sale of used equipment, furthering our ability to add value for our customers. We also
have a higher-end electronic test and measurement equipment rental business that augments our organically grown
test and measurement equipment rental business. Through our website and sales teams, customers can place orders for
test and measurement instruments and can elect to have their purchased instruments calibrated and certified by our
Calibration Service Centers before shipment as well as on regular post-purchase intervals. Pre-shipment calibration
and certification allows our customers to place newly purchased instruments into service immediately upon receipt.
Sales in our Distribution segment are generally not consumable items but are instruments purchased as replacements,
upgrades or for expansion of manufacturing or research and development facilities. As such, this segment can be
heavily impacted by changes in the economic environment. As customers increase or decrease capital and discretionary
spending, our Distribution sales will typically be directly impacted.
In fiscal year 2022, Distribution segment sales increased by 15.1%. This increase in sales was due to increased orders
in fiscal year 2022 and an easier comparison to fiscal year 2021, which was adversely impacted by the COVID-19
pandemic. In fiscal year 2021, Distribution sales decreased by 10.0% and were impacted by the COVID-19 pandemic,
with reduced demand from oil and gas related businesses and most other industrial manufacturing sectors.
The Distribution segment gross margin in fiscal year 2022 increased by 210 basis points. The increase in segment gross
margin was primarily due to a favorable mix of products sold, strong demand for our higher-margin rentals business
and an increase in cooperative advertising and rebate programs. These programs had been reduced in fiscal year 2021
as certain vendors reduced these programs to lower their costs in response to the COVID-19 pandemic.
Initiatives implemented within this segment include adding new in-demand vendors and product lines, expanding
the number of SKUs that we offer with and without pre-shipment calibration and offering equipment rental and used
equipment options. Management believes this diversification strategy will mitigate the impact that any particular
industry or sector will have on the overall performance of this segment as well as help to further differentiate us from
our competitors going forward.
Financial Overview
In evaluating our results for fiscal year 2022, investors should consider that we operate on a 52/53-week fiscal year,
ending the last Saturday in March. In a 52-week fiscal year, each of the four quarters is a 13-week period. In a 53-week
fiscal year, the last quarter is a 14-week period. Fiscal years 2022 and 2021 each consisted of 52 weeks.
Management’s discussion and analysis of financial condition and results of operations for the fiscal year ended
March 26, 2022 omits a comparative discussion regarding the fiscal year ended March 28, 2020. Such information is
located in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our
Annual Report on Form 10-K for the fiscal year ended March 27, 2021.
Total revenue for fiscal year 2022 was $205.0 million. This represented an increase of $31.6 million or 18.2% versus
total revenue of $173.3 million for fiscal year 2021. Total revenue increased due to increases in both Service revenue
and Distribution sales increases.
Service revenue was $122.0 million in fiscal year 2022, an increase of $20.7 million or 20.5%. Service revenue accounted
for 59.5% of our total revenue during fiscal year 2022. Of our Service revenue in fiscal year 2022, 84.0% was generated
by our Calibration Service Centers and enterprise asset management services while 14.5% was generated through
subcontracted third-party vendors, compared with 83.6% and 14.9%, respectively, in fiscal year 2021. The remainder
of our Service revenue in each period was derived from freight charges.
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PAGE NO. 24
Distribution sales increased 15.1% to $83.0 million in fiscal year 2022. Distribution sales accounted for 40.5% of our
total revenue in fiscal year 2022.
Sales to domestic customers comprised 93.4% of total Distribution sales in fiscal year 2022, while 5.6% were to
Canadian customers and 1.0% were to customers in other international markets.
Total gross profit was $58.4 million in fiscal year 2022 compared to $46.1 million in fiscal year 2021, an increase of
$12.3 million or 26.7%. Total gross margin was 28.5%, which is a 190 basis point increase versus fiscal year 2021.
Service gross margin was 31.9% in fiscal year 2022 compared with 30.3% in fiscal year 2021, a 160 basis point
increase. Distribution gross margin was 23.5% in fiscal year 2022 compared with 21.4% in fiscal year 2021, a 210 basis
point increase. This increase in service gross margin in fiscal year 2022 was primarily due to operating leverage on our
fixed cost base, accretive margins from recent acquisitions and continued strong technician productivity. The increase
in distribution segment gross margin was primarily due to a favorable mix of products sold, strong demand for our
higher-margin rentals business and an increase in cooperative advertising and rebate programs.
Operating expenses were $44.3 million, or 21.6% of total revenue, in fiscal year 2022 compared with $35.0 million, or
20.2% of total revenue, in fiscal year 2021. Operating income was $14.1 million, or 6.9% of total revenue, in fiscal year
2022 compared with $11.1 million, or 6.4% of total revenue, in fiscal year 2021. The year-over-year increase in selling,
marketing and warehouse expenses was due to higher performance-based sales incentives and direct marketing costs. The
year-over-year increase in general and administrative expenses was due to by incremental expenses from acquired businesses
(including stock expense), increased intangibles amortization expense, investments in technology and our employee base to
support future growth and one-time transaction expenses related to acquisitions that closed in the fiscal year.
Net income for fiscal year 2022 was $11.4 million compared with $7.8 million in fiscal year 2021, a $3.6 million increase.
Diluted earnings per share for fiscal year 2022 was $1.50 compared with $1.03 for fiscal year 2021, a $0.47 per diluted
share increase.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Use of Estimates
The preparation of our Consolidated Financial Statements in accordance with accounting principles generally accepted
in the United States (“GAAP”) requires that we 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, 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, our accounting estimates require the exercise of judgment. The accounting estimates used
in the preparation of our Consolidated Financial Statements will change as new events occur, as more experience is
acquired, as additional information is obtained, and as our operating environment changes. Our estimates are evaluated
on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable
under the circumstances. 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 our Consolidated Financial Statements.
The following items in our Consolidated Financial Statements require significant estimation or judgment:
Accounts Receivable
Accounts receivable represent amounts due from customers in the ordinary course of business. These amounts are recorded
net of the allowance for doubtful accounts and returns in the Consolidated Balance Sheets. The allowance for doubtful
accounts is based upon the expected collectability of accounts receivable. We apply a specific formula to our accounts
receivable aging, which may be adjusted on a specific account basis where the formula may not appropriately reserve for
loss exposure. After all attempts to collect a receivable have failed, the receivable is written-off against the allowance for
doubtful accounts. A returns reserve is calculated based upon the historical rate of returns applied to revenues over a specific
timeframe. The returns reserve will increase or decrease as a result of changes in the level of revenues and/or the historical
rate of returns. Management believes that the allowances are appropriate to cover anticipated losses under current conditions.
However, unexpected changes or deterioration in economic conditions could materially change these expectations.
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Inventory
Inventory consists of products purchased for resale and is valued at the lower of cost or net realizable value. Costs
are determined using the average cost method of inventory valuation. Inventory is reduced by a reserve for items
not saleable at or above cost by applying a specific loss factor, based on historical experience and current demand,
to specific categories of our inventory. Inventory is at risk of obsolescence if economic conditions change. Relevant
economic conditions include changing consumer demand, customer preferences or increasing competition. We believe
these risks are largely mitigated because our inventory typically turns several times per year. We evaluate the adequacy
of the reserve on a quarterly basis.
Business Acquisitions
We apply the acquisition method of accounting for business acquisitions. Under the acquisition method, identifiable
assets acquired, liabilities assumed and consideration transferred are measured at their acquisition-date fair value. We
use a valuation hierarchy to determine the fair values used. Historically, we have relied, in part, upon the use of reports
from third-party valuation specialists to assist in the estimation of fair values. Purchase price allocations are subject to
revision within the measurement period, not to exceed one year from the date of acquisition. Administration costs to
acquire a business may include, but are not limited to, fees for accounting, legal and valuation services and are recorded
as incurred in our Consolidated Statement of Income.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the values assigned to the underlying net assets of an acquired
business and is not amortized. As of March 26, 2022, we had $65.1 million of recorded goodwill.
Intangible assets, namely customer base and covenants not to compete, represent an allocation of purchase price to
identifiable intangible assets of an acquired business. These intangible assets are amortized over their estimated useful
lives and are reviewed for impairment if and when indicators are present. We estimate the fair value of our reporting
units using the fair market value measurement requirement.
We test goodwill for impairment for each reporting unit on an annual basis during the fourth quarter of each fiscal year
or immediately if conditions indicate that such impairment could exist. We have the option to perform a qualitative
assessment to determine if it is more likely than not that the fair value of a segment has declined below its carrying
value. This assessment considers various financial, macroeconomic, industry and segment specific qualitative factors.
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. Based on the results of our qualitative impairment testing
reviews, we have determined that it was more likely than not that the fair values exceeded the carrying values of
goodwill and there were no impairments as of each of March 26, 2022 and March 27, 2021.
Income Taxes
We record deferred income taxes for the effects of timing differences between financial and tax reporting. These
differences relate primarily to accrued expenses, bad debt reserves, inventory reserves, operating leases, goodwill
and intangible assets, depreciation and amortization and stock-based compensation. We base our deferred income
taxes, accrued income taxes and provision for income taxes upon income, statutory tax rates, the legal structure of
our Company, interpretation of tax laws and tax planning opportunities available to us in the various jurisdictions in
which we operate. We file income tax returns in the U.S. federal jurisdiction, various states, Canada and Ireland. We
are regularly audited by federal, state and foreign tax authorities, but a number of years may elapse before an uncertain
tax position, for which we have unrecognized tax benefits, is audited and finally resolved. From time to time, these
audits result in assessments of additional tax. If a loss is determined to be probable as a result of an audit, an accrual
is established.
We apply a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. Accordingly,
we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately realized upon
settlement. Future changes in judgments and estimates related to the expected ultimate resolution of uncertain tax
positions will affect income in the quarter of such change. While it is often difficult to predict the final outcome or the
timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the
most likely outcome.
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Stock-Based Compensation
We measure 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 uses the Black-
Scholes option pricing model to estimate the fair value of stock options granted. The application of this pricing model
involves assumptions that require judgment and are sensitive in the determination of compensation expense. The fair
market value of our common stock on the date of each option grant is determined based on the most recent closing price
on our primary trading stock exchange, currently the NASDAQ Global Market.
We record compensation cost related to unvested equity awards by recognizing, on a straight-line basis, the unamortized
grant date fair value over the remaining service period of each award. In accordance with Accounting Standards Updates
(“ASU”) 2016-09, excess tax benefits for share-based award activity are reflected in the Consolidated Statement 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.
We did not capitalize any stock-based compensation costs as part of an asset. We estimate forfeiture rates based on our
historical experience.
We grant timed-based and performance-based restricted stock units as a component of executive and key employee
compensation. These restricted stock units are either time vested or vest following the third fiscal year from the date
of grant subject to cumulative diluted earnings per share growth targets over the eligible period. Compensation cost
ultimately recognized for these 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, we record compensation cost based on the
expected 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.
Stock options vest either immediately or over a period of up to five years using a straight-line basis, and expire either
five years or ten years from the date of grant. The expense relating to options is recognized on a straight-line basis over
the requisite service period for the entire award.
See Note 6 to our Consolidated Financial Statements for further disclosure regarding our stock-based compensation.
Post-retirement Health Care Plans
The Company has a defined benefit post-retirement health care plan which provides long-term care insurance benefits,
medical and dental insurance benefits, and medical premium reimbursement benefits to eligible retired corporate
officers and their eligible spouses.
For accounting purposes, the defined benefit post-retirement health care plan requires assumptions to estimate the
projected and accumulated benefit obligations, including the following variables: discount rate; certain employee-
related factors, such as retirement age and mortality; and health care cost trend rates. These and other assumptions
affect the annual expense and obligations recognized for the underlying plans. Our assumptions reflect our historical
experiences and management’s best judgment regarding future expectations.
Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated post-
retirement benefit obligation and the annual net periodic post-retirement benefit cost by $0.1 million. A one percentage
point decrease in the healthcare cost trend would decrease the accumulated post-retirement benefit obligation and the
annual net periodic post-retirement benefit cost by $0.1 million.
Recently Issued Accounting Pronouncements
In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial
Accounting Standards Board (“FASB”) to determine the potential impact they may have on our consolidated financial
statements. For a discussion of the newly issued accounting pronouncements see “Recently Issued Accounting
Pronouncements” under Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of this report.
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RESULTS OF OPERATIONS
The following table sets forth, for fiscal years 2022 and 2021, the components of our Consolidated Statements of Income.
As a Percentage of Total Revenue:
Service Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59.5%
40.5%
58.4%
41.6%
100.0% 100.0%
FY 2022
FY 2021
Gross Profit Percentage:
Service Gross Profit. . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution Gross Profit . . . . . . . . . . . . . . . . . . . . . .
Total Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, Marketing and Warehouse Expenses . . . . . .
General and Administrative Expenses . . . . . . . . . . .
Total Operating Expenses . . . . . . . . . . . . . . . . . .
31.9%
23.5%
28.5%
10.1%
11.5%
21.6%
30.3%
21.4%
26.6%
10.2%
10.0%
20.2%
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.9%
6.4%
Interest and Other Expenses, net. . . . . . . . . . . . . . . . . . .
0.5%
0.6%
Income Before Provision for Income Taxes . . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . .
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4%
0.9%
5.6%
5.8%
1.3%
4.5%
Fiscal Year Ended March 26, 2022 Compared to Fiscal Year Ended March 27, 2021 (dollars in thousands):
Revenue:
Revenue:
For the Fiscal Years Ended
March 26,
2022
March 27,
2021
Change
$
%
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$122,005
82,954
$204,959
$101,274
72,061
$173,335
$20,731
10,893
$31,624
20.5%
15.1%
18.2%
Total revenue was $205.0 million in fiscal year 2022 compared to $173.3 million in fiscal year 2021, an increase of
$31.6 million or 18.2%.
Service revenue, which accounted for 59.5% and 58.4% of our total revenue in fiscal years 2022 and 2021, respectively,
increased $20.7 million, or 20.5% from fiscal year 2021 to fiscal year 2022. This year-over-year growth includes a
combination of organic and acquisition-related revenue growth.
This year-over-year increase also reflected increased demand from the life sciences and other highly-regulated end
markets and included $9.0 million of incremental revenue from acquisitions. Excluding acquired revenue of $9.0 million,
the Service segment organic revenue increased by 11.6%.
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Our fiscal years 2022 and 2021 Service revenue growth in relation to prior fiscal year quarter comparisons, was
as follows:
FY 2022
FY 2021
Service Revenue Growth . . . . . . . . . . .
Q4
Q1
19.6% 22.1% 20.4% 20.0% 15.8% 12.2% 4.5%
Q4
Q3
Q2
Q2
Q3
Q1
2.5%
Within any year, while we add new customers, we also have customers from the prior 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 a trailing twelve-month trend provides a better indication of
the progress of this segment.
The growth in fiscal year 2022 and fiscal year 2021 reflected both organic growth and acquisitions. The growth in
Service segment revenue in the fourth quarter of fiscal year 2022 includes revenue from Tangent and NEXA. The
growth in Service segment revenue in the third quarter of fiscal year 2022 includes revenue from NEXA. The growth
in Service segment revenue during the third and fourth quarters of fiscal year 2021 includes revenue from BioTek and
pipettes.com. The growth in Service segment revenue during the first and second quarters of fiscal year 2021 includes
revenue from the pipettes.com acquisition.
The following table presents the trailing twelve-month Service segment revenue for each quarter in fiscal years 2022
and 2021 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period:
FY 2022
FY 2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Trailing Twelve-Month:
Service Revenue. . . . . . . . . . . . $122,005 116,315 110,854 105,864 101,274 $97,225 $94,624 $93,572
7.4%
Service Revenue Growth . . . . .
20.5% 19.5% 17.2% 13.1%
8.9%
4.3%
5.4%
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 each quarter during fiscal years 2022 and 2021:
FY 2022
FY 2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
In-House . . . . . . . . . . . . . . . . . . . . . . . .
Outsourced . . . . . . . . . . . . . . . . . . . . . .
Freight Billed to Customers . . . . . . . . .
85.4% 84.1% 83.2% 83.1% 83.6% 83.1% 83.7% 82.9%
13.1% 14.4% 15.3% 15.4% 14.9% 15.3% 14.7% 15.6%
1.5%
1.5%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
1.5%
1.5%
1.5%
1.5%
1.6%
1.6%
Our Distribution sales accounted for 40.5% and 41.6% of our total revenue in fiscal years 2022 and 2021, respectively.
Distribution sales increased $10.9 million, or 15.1% in fiscal year 2022 compared to fiscal year 2021. This increase
in sales was due to increased orders in fiscal year 2022 and an easier comparison to fiscal year 2021, which was
adversely impacted by the COVID-19 pandemic. The increase in sales in fiscal year 2022 were all organic. The change
in fiscal year 2021 versus fiscal year 2020 reflected both organic and acquisition sales. Our fiscal years 2022 and 2021
Distribution sales growth (decline) in relation to prior fiscal year quarter comparisons were as follows:
Distribution Sales Growth (Decline) . . . . . . . . .
7.2% 7.2% 22.2% 27.0% (4.6%)
FY 2022
Q2
Q3
Q4
Q1
Q4
FY 2021
Q3
(8.6%)
Q2
(6.6%)
Q1
(20.3%)
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
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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 increased $1.5 million, or 23.6%, at the end of fiscal year 2022 compared to the
end of fiscal year 2021. Backorders at the end of fiscal year 2022 were $6.4 million, compared to $4.9 million at the end
of fiscal year 2021. The year-over-year increase in pending product shipments was a result of the COVID-19 pandemic
and its disruptive impact to the supply of products in fiscal year 2022 as well as overall increased demand.
The following table presents the percentage of total pending product shipments that were backorders at the end of each
quarter in fiscal years 2021 and 2020 and our historical trend of total pending product shipments:
Total Pending Product Shipments . . . . $7,747
% of Pending Product Shipments
Q4
FY 2022
FY 2021
Q3
$8,854
Q2
$7,612
Q1
$8,173
Q4
$6,287
Q3
$5,533
Q2
$4,251
Q1
$3,890
that were Backorders . . . . . . . . . . . .
83.2% 81.3% 78.1% 78.4% 77.6%
79.3% 76.6% 75.8%
Gross Profit:
Gross Profit:
For the Fiscal Years Ended
March 26,
2022
March 27,
2021
Change
$
%
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$38,921
19,518
$58,439
$30,695
15,423
$46,118
$ 8,226
4,095
$12,321
26.8%
26.6%
26.7%
Total gross profit in fiscal year 2022 was $58.4 million compared to $46.1 million in fiscal year 2021, an increase of
$12.3 million or 26.7%. As a percentage of total revenue, total gross margin was 28.5% in fiscal year 2022 compared
to 26.6% in fiscal year 2021, a 190 basis point increase.
Service gross profit increased $8.2 million, or 26.8%, from fiscal year 2021 to fiscal year 2022. Our annual and
quarterly Service segment gross margins are a function of several factors. Our organic Service revenue growth provides
some incremental gross margin growth by leveraging certain fixed costs of this segment. The mix of services provided
to customers may also affect gross margins in any given period. Service gross margin increased by 160 basis points
in fiscal year 2022 versus fiscal year 2021. This increase in service gross margin in fiscal year 2022 was primarily
due to operating leverage on our fixed cost base, accretive margins from recent acquisitions and continued strong
technician productivity.
The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue:
Service Gross Margin . . . . . . . . . . . . . . . . . . . . .
33.1% 29.7% 32.9% 31.8% 33.9% 27.9% 32.2% 26.4%
FY 2022
FY 2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
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. During fiscal year 2022, our Distribution sales were high enough that we saw an increase
in the rebates offered by our vendors. These rebates had been cut significantly in fiscal year 2021 as our vendors
implemented cost cutting measures in response to the COVID-19 pandemic. We recorded vendor rebates of $1.0 million
and $0.7 million in fiscal years 2022 and 2021, respectively, as a reduction of cost of Distribution sales. In general,
our Distribution gross margin can vary based upon the mix of products sold, price discounting, the timing of periodic
vendor rebates offered and cooperative advertising programs from suppliers.
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The following table reflects the quarterly historical trend of our Distribution gross margin as a percent of
Distribution sales:
Distribution Gross Margin . . . . . . . . . . . . . . . . .
24.5% 22.5% 23.5% 23.6% 21.0% 22.5% 21.1% 21.0%
FY 2022
FY 2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Distribution segment gross margin increased 210 basis points in fiscal year 2022 compared to fiscal year 2021. The
increase in segment gross margin was primarily due to a favorable mix of products sold, strong demand for our higher-
margin rentals business and an increase in cooperative advertising and rebate programs.
Operating Expenses:
For the Fiscal Years Ended
March 26,
2022
March 27,
2021
Change
$
%
Operating Expenses:
Selling, Marketing and Warehouse . . . . . . . . . . . .
General and Administrative. . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20,649
23,647
$44,296
$17,743
17,302
$35,045
$2,906
6,345
$9,251
16.4%
36.7%
26.4%
Total operating expenses were $44.3 million in fiscal year 2022 compared to $35.0 million in fiscal year 2021. This
represented an increase of $9.3 million, or 26.4%, compared to fiscal year 2021. As a percentage of total revenue,
operating expenses increased 140 basis points from 20.2% in fiscal year 2021 to 21.6% in fiscal year 2022. The year-
over-year increase in selling, marketing and warehouse expenses is due to higher performance-based sales incentives
and direct marketing costs. The year-over-year increase in general and administrative expenses is due to incremental
expenses from acquired businesses (including stock expense), increased intangibles amortization expense, investments
in technology and our employee base to support future growth and one-time transaction expenses related to acquisitions
that closed in the fiscal year.
Provision for Income Taxes:
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Years Ended
March 26,
2022
$1,810
March 27,
2021
$2,191
Change
$
$(381)
%
(17.4%)
Our effective tax rates for fiscal years 2022 and 2021 were 13.7% and 21.9%, respectively. The decrease in tax rate
is due to the higher discrete tax benefits from share-based compensation activity. Our 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 fiscal years 2022 and 2021 were $1.4 million and $0.3 million,
respectively. We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed necessary, our
effective tax rate given changes in facts and circumstances expected in the future.
We expect to receive certain federal, state, Canadian and Irish tax credits in future years. We also expect to receive
discrete tax benefits related to share-based compensation awards in fiscal year 2023. As such, we expect our effective
tax rate in fiscal year 2023 to be between 22.0% and 24.0%.
Net Income:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Years Ended
March 26,
2022
$11,380
March 27,
2021
$7,791
Change
$
$3,589
%
46.1%
Net income for fiscal year 2022 increased by $3.6 million or 46.1% compared to fiscal year 2021. As a percentage of
revenue, net income was 5.6% in fiscal year 2022, up from 4.5% in fiscal year 2021. This year-over-year change reflects
higher operating income discussed and a lower provision for income taxes.
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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.
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ Interest Expense . . . . . . . . . . . . . . . . . . . . . . . .
+ Other Expense. . . . . . . . . . . . . . . . . . . . . . . . . .
+ Tax Provision . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ Depreciation & Amortization. . . . . . . . . . . . . .
+ Restructuring Expense . . . . . . . . . . . . . . . . . . .
+ Transaction Expense. . . . . . . . . . . . . . . . . . . . .
+ Other Expense. . . . . . . . . . . . . . . . . . . . . . . . . .
+ Noncash Stock Compensation . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
$ 7,791
$11,380
850
810
241
143
2,191
1,810
11,073
14,143
7,580
9,077
650
—
—
902
(241)
(143)
1,513
2,328
$20,575
$26,307
During fiscal year 2022, Adjusted EBITDA was $26.3 million, an increase of $5.7 million or 27.9% compared to fiscal
year 2021. As a percentage of revenue, Adjusted EBITDA was 12.8% during fiscal year 2022 versus 11.9% during
fiscal year 2021, a 90 basis point increase. The increase in Adjusted EBITDA during fiscal year 2022 is primarily
driven by the increase in net income, depreciation and amortization expense, non-cash stock compensation expense
and acquisition transaction expenses.
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.
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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.
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ Amortization of Intangible Assets . . . . . . . . . .
+ Acquisition Amortization of Backlog . . . . . . .
+ Acquisition Deal Costs . . . . . . . . . . . . . . . . . . .
+ Business Restructuring Expense . . . . . . . . . . .
+ Income Tax Effect @ 25% . . . . . . . . . . . . . . . .
Adjusted Net Income . . . . . . . . . . . . . . . . . . . . . . . . .
Average Diluted Shares Outstanding . . . . . . . . . . . .
Diluted Earnings Per Share – GAAP . . . . . . . . . . . .
Adjusted Diluted Earnings Per Share . . . . . . . . . . . .
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
$ 7,791
$11,380
2,538
3,394
—
490
—
1,458
650
—
(797)
(1,335)
10,182
15,387
7,548
7,589
1.03
1.50
1.35
2.03
$
$
$
$
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 (as defined below).
On July 7, 2021, we entered into the Second Amended and Restated Credit Facility Agreement (the “2021 Credit
Agreement”) with Manufacturers and Traders Trust Company (“M&T”), that amended and restated in its entirety the
Company’s Amended and Restated Credit Facility Agreement dated as of October 30, 2017, as amended by Amended and
Restated Credit Facility Agreement Amendment 1 dated December 10, 2018 and Amended and Restated Credit Facility
Agreement Amendment 2 (“Amendment Two”) dated May 18, 2020 (as amended, the “Prior Credit Agreement”).
The 2021 Credit Agreement increased the revolving credit commitment (the “Revolving Credit Commitment”) from
$40.0 million to $80.0 million, with a letter of credit subfacility increased from $2.0 million to $10.0 million, and
extended the term of the Revolving Credit Commitment to June 2026. The 2021 Credit Agreement amended the
definition of Applicable Margin (formerly Applicable Rate under the Prior Credit Agreement), which is based upon the
Company’s then current leverage ratio and is used to determine interest charges on outstanding and unused borrowings
under the revolving credit facility; the amendments reduced the Applicable Margins payable at the two highest leverage
ratio levels. The 2021 Credit Agreement also amended the definition of Permitted Acquisitions, that is, acquisitions
which are permitted under, and may be financed with proceeds of, the revolving credit facility, including increasing
the aggregate purchase price for acquisitions consummated in any fiscal year from $1.0 million to $65.0 million during
the current fiscal year and $50.0 million during any subsequent fiscal year, and adding an aggregate purchase price
of $40.0 million for acquisitions consummated at any time during the term of the 2021 Credit Agreement related to
businesses with a principal place of business located in the United Kingdom or the European Union.
In addition, the 2021 Credit Agreement provides that, assuming no event of default, restricted payments up to
$25.0 million (increased from $10.0 million in the Prior Credit Agreement) in the aggregate and $10.0 million (increased
from $3.0 million in the Prior Credit Agreement) in any single fiscal year may be used by us to repurchase our shares
and pay dividends. The 2021 Credit Agreement modified the leverage ratio and fixed charge coverage ratio covenants
with which we are required to comply. The 2021 Credit Agreement also reduced the LIBOR floor from 1.0% to 0.25%
and included a mechanism for adoption of a different benchmark rate upon the discontinuation of LIBOR. The 2021
Credit Agreement also reduced the fixed interest rate on our term loan in the amount of $15.0 million (the “2018 Term
Loan”) from 4.15% to 3.90%.
The 2021 Credit Agreement superseded in its entirety, the Prior Credit Agreement. Amendment Two to the Prior Credit
Agreement had previously extended the term of the revolving credit facility to October 20, 2022 and increased the
revolving credit commitment to $40 million.
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REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 33
Amendment Two also had modified the definition of the applicable rate used to determine interest charges on outstanding
and unused borrowings under the revolving credit facility and it amended the definition of permitted acquisitions to
amend borrowings available under the revolving credit facility for acquisitions. In addition, Amendment Two had
amended the definition of restricted payments to exclude amounts up to $2.5 million during each fiscal year used to pay
certain employee tax obligations associated with share-based payment and stock option activity, and modified certain
restrictions to the Company’s ability to repurchase its shares and pay dividends. Amendment Two also had modified the
leverage ratio and fixed charge coverage ratio covenants with which the Company was required to comply and limited
capital expenditures to $5.5 million for the fiscal year 2021. Amendment Two also had established a LIBOR floor of
1.0% and included a mechanism for adoption of a different benchmark rate in the event LIBOR was discontinued.
As of March 26, 2022, $80.0 million was available under the revolving credit facility, of which $39.9 million was
outstanding and included in long-term debt on the Consolidated Balance Sheets. During fiscal year 2022, we used
$29.8 million for business acquisitions.
As of March 26, 2022, $8.5 million was outstanding on the 2018 Term Loan, of which $2.2 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.
Pursuant to the Prior Credit Agreement, we were required to comply with a fixed charge ratio covenant and a leverage
ratio covenant, which were modified by the 2021 Credit Agreement. The allowable leverage ratio under the Prior Credit
Agreement for the second, third and fourth fiscal quarter of fiscal year 2021 and the first quarter of fiscal year 2022 was
a maximum multiple of 5.0, 5.5, 7.0 and 4.0, respectively, of total debt outstanding compared to EBITDA and non-cash
stock-based compensation expense for the preceding four consecutive fiscal quarters. The Prior Credit Agreement also
had provided that the trailing twelve-month pro forma EBITDA of an acquired business was included in the allowable
leverage calculation. After the first quarter of fiscal 2022, pursuant to the 2021 Credit Agreement, the allowable
leverage ratio is a maximum multiple of 3.0. We were in compliance with all loan covenants and requirements during
fiscal years 2022 and 2021. Our leverage ratio was 1.74 at March 26, 2022, as defined in the 2021 Credit Agreement,
compared with 0.94 at March 27, 2021, as defined in the Prior Credit Agreement.
Interest on the revolving credit facility continues to accrue, at our election, at either the variable one-month LIBOR
(subject to a 1% floor during the first quarter of fiscal year 2022 and a 0.25% floor for subsequent periods) or a fixed
rate for a designated period at the LIBOR corresponding to such period, in each case, plus a margin. Interest on
outstanding borrowings of the 2018 Term Loan accrued at a fixed rate of 3.90% over the term of the loan during the
fourth quarter of fiscal year 2022 with principal and interest payments made monthly. Unused fees accrued based on
the average daily amount of unused credit available under the revolving credit facility. Interest rate margins and unused
fees were determined on a quarterly basis based upon our calculated leverage ratio.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted. The CARES Act
included a provision that allows the Company to defer the employer portion of social security payroll tax payments that
would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021
and 50% payable by December 31, 2022. During fiscal year 2021, the Company deferred $2.0 million of employer social
security payroll taxes. During fiscal year 2022, the Company repaid $1.0 million on December 31, 2021 and the other
$1.0 million is recorded in accrued compensation and other liabilities on the Consolidated Balance Sheets.
Cash Flows
The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands):
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
Cash Provided by (Used in):
Operating Activities. . . . . . . . . . . . . . . . . . . . . . .
Investing Activities . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities . . . . . . . . . . . . . . . . . . . . . . .
$ 17,618
$(39,851)
$ 23,694
$ 23,639
$(10,151)
$(12,655)
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REVISION 4
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DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 34
Operating Activities
Net cash provided by operating activities was $17.6 million during fiscal year 2022 compared to $23.6 million during
fiscal year 2021. The year-over-year decrease in cash provided by operations is 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 increased by a net amount of $5.7 million during fiscal year 2022,
inclusive of $2.8 million of accounts receivable acquired as part of three acquisitions completed during the
period. Accounts receivable increased by a net amount of $3.0 million during fiscal year 2021, inclusive of
$0.4 million of accounts receivable acquired as part of the BioTek acquisition completed during the period.
The year-over-year change reflects the timing of collections. The following table illustrates our days sales
outstanding as of March 26, 2022 and March 27, 2021:
Net Sales, for the last two fiscal months . . . . . . . . . .
Accounts Receivable, net . . . . . . . . . . . . . . . . . . . . . .
Days Sales Outstanding . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
$36,536
$42,005
$33,950
$39,737
56
57
•
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 SKUs 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 increased $1.1 million during fiscal year 2022. Our inventory balance decreased
$2.5 million during fiscal year 2021. The year-over-year change is a result of strategic inventory purchases
during fiscal year 2022.
• 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 increased $1.9 million during fiscal year 2022. Accounts payable increased by $0.3 million
during fiscal year 2021. The variance is largely due to the timing of inventory and capital expenditure
purchases 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, but not limited to, changes in expected performance levels, the performance measurement
period, and the timing of payments to employees.
During fiscal year 2022, accrued compensation and other liabilities increased by $1.0 million, inclusive of
$0.5 million of accrued compensation and other liabilities acquired as part of three acquisitions completed
during the period. During fiscal year 2021, accrued compensation and other liabilities increased by
$3.5 million, due primarily to increased accrued incentives and payroll related expense and $1.0 million of
deferred employer portion of social security payroll tax payments as part of the CARES Act.
•
Income Taxes Payable: In any given period, net working capital may be affected by the timing and amount
of income tax payments. During fiscal year 2022, income taxes payable decreased by $0.4 million. During
fiscal year 2021, income taxes payable increased by $0.3 million. The year-over-year difference is due to
timing of income tax payments.
Investing Activities
During fiscal year 2022, we invested $10.2 million in capital expenditures that was used primarily for customer-driven
expansion of Service segment capabilities and capacity and our rental business.
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During fiscal year 2021, we invested $6.6 million in capital expenditures that was used primarily for customer-driven
expansion of Service segment capabilities and our rental business.
During fiscal year 2022, we used $29.8 million for business acquisitions. During fiscal year 2021, we used $3.6 million
for a business acquisition.
During each of fiscal year 2022 and fiscal year 2021, no contingent consideration or other holdback amounts were paid
related to a business acquisition.
Financing Activities
During fiscal year 2022, $31.0 million was borrowed from our revolving line of credit and $1.5 million in cash was
generated from the issuance of common stock. In addition, we used $2.1 million for scheduled repayments of our term
loan and $6.7 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 2022, which is shown as a repurchase of shares of our common stock
on our Consolidated Statements of Cash Flows.
During fiscal year 2021, $1.2 million in cash was generated from the issuance of our common stock. In addition, we repaid
$8.8 million of our Revolving Credit Facility, we used $2.0 million for scheduled repayments of our term loan, and used
$3.0 million for the “net” award of certain share awards to cover tax-withholding obligations for share award activity in
the period which are shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.
RECENT EVENTS
On 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 total purchase price paid for the assets of Alliance was approximately
$4.5 million in cash and an amount of the Company’s common stock, par value $0.50 per share (“Common Stock”),
with a value equal to $157,500, or 2,284 shares of Common Stock. Pursuant to the asset purchase agreement, the
Company will hold back $500,000 of the purchase price for certain potential post-closing adjustments, and the purchase
price will be subject to reduction by $500,000 if a key customer relationship is not retained.
OUTLOOK
We are proud of our dedicated team, which successfully executed through the challenges of the past year and consistently
delivered excellent results. As we look ahead into fiscal year 2023 and beyond, we believe we are well positioned for
profitable growth and we expect the strength of our value proposition to continue to increase. We have demonstrated
our ability to drive growth through various economic cycles as can be seen over the past 10 years and we are confident
and expect that will continue. The business continues to benefit from a predominately life science-oriented market,
driven by regulation and recurring revenue streams. Strong organic Service growth remains a centerpiece of our
strategy. In the year ahead we expect organic Service growth in the high-single digit range. Volume increase is an
important component to driving the inherent operating leverage in the Transcat Service model.
Acquisitions that strengthen our fundamental value proposition will continue to be an important component of our go-
forward strategy. We will identify and pursue opportunities to expand our addressable markets like we did with NEXA
and our pipettes business. The NEXA and pipettes acquisitions, along with our recent acquisition of Tangent and the
bolt-on Upstate Metrology acquisition, represent a gain in value which raises the ceiling and trajectory of the business.
Additionally, Transcat has made significant investments in the quality of our team, including leaders that maintain
expertise relating to continuous process improvement and automation. We have generated sustainable margin
improvement over the past several years and we believe the improvement will continue. Automation of our calibration
processes and overall process improvement are designed to foster future margin gains. Relating to selling, general and
administrative expenses, we anticipate demonstrating more leverage in the years ahead.
We believe Transcat has substantial runway ahead for Service revenue growth and margin expansion. We have a long
history that demonstrates that we know how to succeed on both fronts. We continue to focus on generating sustainable
long-term value for our shareholders and providing a dynamic, rewarding workplace for our team.
We expect to receive certain federal, state, Canadian and Irish tax credits in future years. We also expect to receive
discrete tax benefits related to share-based compensation awards in fiscal year 2023. As such, we expect our effective
tax rate in fiscal year 2023 to be between 22.0% and 24.0%.
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TYPE
PAGE NO. 36
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 $0.2 million assuming our average
borrowing levels remained constant. As of March 26, 2022, $80.0 million was available under our revolving credit
facility, of which $39.9 million was 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 March 26, 2022, $8.5 million was outstanding on 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 borrow from our revolving credit facility at the variable one-month LIBOR or at a fixed rate for a
designated period at the LIBOR (subject to a 1% floor during the first quarter of fiscal year 2022 and a 0.25% floor for
subsequent periods) corresponding to such period, 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 fiscal year 2022 for our revolving
credit facility ranged from 1.0% to 2.2%. Interest on outstanding borrowings on the 2018 Term Loan accrued at a fixed
rate of 4.15% over the term of the loan during the first quarter of fiscal year 2022 and 3.90% over the term of the loan
for subsequent periods. Our revolving credit facility includes a mechanism for adoption of a different benchmark rate
upon the discontinuation of LIBOR. On March 26, 2022, we had no hedging arrangements in place for our revolving
credit facility to limit our exposure to upward movements in interest rates.
FOREIGN CURRENCY
Approximately 90% of our total revenues for each of fiscal years 2022 and 2021 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. and Canadian currencies and the U.S. and Euro currencies 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 less than $0.1
million during each of fiscal year 2022 and fiscal year 2021, was recognized as a component of other expense in the
Consolidated Statements of Income. The change in the fair value of the contracts is offset by the change in fair value
on the underlying accounts receivables denominated in Canadian dollars being hedged. On March 26, 2022, we had
a foreign exchange contract, which matured in April 2022, outstanding in the notional amount of $3.3 million. The
foreign exchange contract was renewed in April 2022 and continues to be in place. We do not use hedging arrangements
for speculative purposes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 317) . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the Fiscal Years Ended March 26, 2022
and March 27, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for the Fiscal Years Ended
March 26, 2022 and March 27, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of March 26, 2022 and March 27, 2021 . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 26, 2022
and March 27, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Shareholders’ Equity for the Fiscal Years Ended
March 26, 2022 and March 27, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
37
39
40
41
42
43
44
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REVISION 4
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DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Transcat, Inc.
Rochester, New York
Opinions on the Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Transcat, Inc. and its subsidiaries (the Company)
as of March 26, 2022 and March 27, 2021, and the related consolidated statements of income, comprehensive income,
changes in shareholders’ equity and cash flows for the years ended March 26, 2022 and March 27, 2021, and the
related notes to the consolidated financial statements (collectively, the financial statements). We also have audited the
Company’s internal control over financial reporting as of March 26, 2022, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
in 2013.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of March 26, 2022 and March 27, 2021, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in the United States of America. Also,
in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of March 26, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission in 2013.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company’s financial statements and an opinion on the company’s internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on
the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on
the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Business Combinations
Critical Audit Matter Description
As discussed in Notes 1 and 9 to the consolidated financial statements, during the year ended March 26, 2022, the
Company completed multiple business combinations for an aggregate purchase of approximately $36.1 million,
including contingent consideration initially valued at $0.2 million, which can reach up to $7.5 million over the four-year
period following the closing of the transaction based upon one acquired business achieving certain annual revenue and
EBITDA targets. The Company applied the acquisition method of accounting for the acquisitions. Under this method,
identifiable assets acquired, liabilities assumed, and consideration transferred are measured at their acquisition-date fair
value. Assumptions used include the weighted-average cost of capital, risk free rate, asset volatility, customer attrition,
as well as forecasted revenue and EBITDA. Aggregate intangible assets and goodwill represented an allocation of
purchase price in the amount of $11.1 million and $21.7 million, respectively.
The Company’s determination of the fair value of assets acquired and contingent consideration is based upon assumptions
of the future performance of the acquisitions and other factors. Due to the subjectivity involved we identified the fair
value estimate of assets acquired and contingent consideration as a critical audit matter, which required a higher degree
of auditor judgement as well as the use of professionals with specialized skill and knowledge.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the estimation of fair value of assets acquired and contingent consideration associated
with the business combinations included the following, among others:
• We obtained an understanding of the process and assumptions used by management to develop the estimate
of the fair value of assets acquired and consideration transferred.
• We obtained an understanding of management’s controls and tested the operating effectiveness of
the controls.
• We engaged an internal valuation specialist to test certain assumptions and approaches used.
• We tested management’s measurement of fair value, including testing of the completeness and accuracy of
source information used, mathematical accuracy of management’s calculations, and evaluated reasonableness
and consistency of methodology and assumption.
/s/ Freed Maxick CPAs, P.C.
We have served as the Company’s auditor since 2012.
Rochester, New York
June 9, 2022
38
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 39
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
Service Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
$ 101,274
$ 122,005
72,061
82,954
173,335
204,959
Cost of Services Sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of Distribution Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Cost of Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,084
63,436
146,520
70,579
56,638
127,217
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58,439
46,118
Selling, Marketing and Warehouse Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,649
23,647
44,296
17,743
17,302
35,045
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,143
11,073
Interest and Other Expenses, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
953
1,091
Income Before Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,190
1,810
9,982
2,191
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11,380
$ 7,791
Basic Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1.52
7,496
1.50
7,589
$
$
1.05
7,423
1.03
7,548
39
See accompanying notes to consolidated financial statements.
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 40
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
$7,791
$11,380
Other Comprehensive Income:
Currency Translation Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net of tax effects of $(146) and $36 for the years ended March 26, 2022
(207)
662
and March 27, 2021, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
425
218
$11,598
(103)
559
$8,350
40
See accompanying notes to consolidated financial statements. JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 41
TRANSCAT, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable, less allowance for doubtful accounts of $460 and $526 as of
March 26, 2022 and March 27, 2021, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 26,
2022
March 27,
2021
$
1,396
$
560
39,737
558
12,712
5,301
59,704
26,439
65,074
14,692
11,026
827
$177,762
$ 14,171
11,378
—
2,161
27,710
46,291
6,724
9,194
1,667
91,586
33,950
428
11,636
2,354
48,928
22,203
43,272
7,513
9,392
808
$ 132,116
$ 12,276
10,417
382
2,067
25,142
17,494
3,201
7,958
3,243
57,038
Shareholders’ Equity:
Common Stock, par value $0.50 per share, 30,000,000 shares authorized;
7,529,078 and 7,458,251 shares issued and outstanding as of March 26, 2022
and March 27, 2021, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in Excess of Par Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated Other Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Shareholders’ Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities and Shareholders’ Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,765
23,900
(233)
58,744
86,176
$177,762
3,729
19,287
(451)
52,513
75,078
$ 132,116
41
See accompanying notes to consolidated financial statements. JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 42
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
$ 11,380
$ 7,791
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Cash Flows from Operating Activities:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88
559
9,567
34
2,329
(3,392)
(122)
(2,960)
1,901
(1,113)
(653)
17,618
Cash Flows from Investing Activities:
Purchase of Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from Sale of Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Used in Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,152)
109
(29,808)
(39,851)
Cash Flows from Financing Activities:
Proceeds from (Repayment of) Revolving Credit Facility, net. . . . . . . . . . . . . . . . . . . . .
Repayments of Term Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Provided by (Used In) Financing Activities . . . . . . . . . . . . . . . . . . . . . .
31,005
(2,114)
1,486
(6,683)
23,694
136
176
7,580
636
1,513
(1,796)
2,724
(725)
329
4,943
332
23,639
(6,617)
17
(3,551)
(10,151)
(8,801)
(1,982)
1,177
(3,049)
(12,655)
Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(625)
(772)
Net Increase in Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at Beginning of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at End of Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
836
560
$ 1,396
61
499
560
$
Supplemental Disclosures of Cash Flow Activity:
Cash paid during the fiscal year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
780
$ 3,900
$
860
$ 1,759
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Common stock issued for NEXA acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,368
Assets acquired and liabilities assumed in business combinations:
Contingent consideration related to NEXA acquisition . . . . . . . . . . . . . . . . . . . . . . . . . .
$
153
$
$
—
—
42
See accompanying notes to consolidated financial statements. JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 43
TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In Thousands, Except Per Share Amounts)
Balance as of March 28, 2020 . . . . . . . .
Issuance of Common Stock . . . . . . . . . .
Repurchase of Common Stock . . . . . . . .
Stock-Based Compensation . . . . . . . . . .
Other Comprehensive Income . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Balance as of March 27, 2021 . . . . . . . . .
Issuance of Common Stock . . . . . . . . . .
Repurchase of Common Stock . . . . . . . .
Stock-Based Compensation . . . . . . . . . .
Other Comprehensive Income . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Common Stock
Issued
$0.50 Par Value
Shares
7,381
57
(81)
101
—
—
7,458
127
(111)
55
—
—
Amount
$3,691
29
(41)
50
—
—
3,729
64
(56)
28
—
—
Capital In
Excess of
Par Value
$17,929
1,148
(1,253)
1,463
—
—
19,287
3,790
(1,478)
2,301
—
—
Accumulated
Other
Comprehensive
Income (Loss)
$(1,010)
—
—
—
559
—
(451)
—
—
—
218
—
Retained
Earnings
$46,477
—
(1,755)
—
—
7,791
52,513
—
(5,149)
—
—
11,380
Total
$67,087
1,177
(3,049)
1,513
559
7,791
75,078
3,854
(6,683)
2,329
218
11,380
Balance as of March 26, 2022 . . . . . . . .
7,529
$3,765
$23,900
$ (233)
$58,744
$86,176
43
See accompanying notes to consolidated financial statements. JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 44
TRANSCAT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Principles of Consolidation
The consolidated financial statements of Transcat include the accounts of Transcat and the Company’s wholly-owned
subsidiaries, Transcat Canada Inc., WTT Real Estate Acquisition, LLC, Cal OpEx Limited (d/b/a NEXA Enterprise
Asset Management), Cal OpEx Inc. and Tangent Labs, LLC. All intercompany balances and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of Transcat’s Consolidated Financial Statements in accordance with accounting principles generally
accepted in the United States (“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, 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.
Fiscal Year
Transcat operates on a 52/53-week fiscal year, ending the last Saturday in March. In a 52-week fiscal year, each of the
four quarters is a 13-week period. In a 53-week fiscal year, the last quarter is a 14-week period. The fiscal years ended
March 26, 2022 (“fiscal year 2022”) and March 27, 2021 (“fiscal year 2021”) both consisted of 52 weeks.
Accounts Receivable
Accounts receivable represent amounts due from customers in the ordinary course of business. These amounts are
recorded net of the allowance for doubtful accounts and returns in the Consolidated Balance Sheets. The allowance for
doubtful accounts is based upon the expected collectability of accounts receivable. The Company applies a specific
formula to its accounts receivable aging, which may be adjusted on a specific account basis where the formula may
not appropriately reserve for loss exposure. After all attempts to collect a receivable have failed, the receivable is
written-off against the allowance for doubtful accounts. The returns reserve is calculated based upon the historical rate
of returns applied to revenues over a specific timeframe. The returns reserve will increase or decrease as a result of
changes in the level of revenue and/or the historical rate of returns.
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Inventory
Inventory consists of products purchased for resale and is valued at the lower of average cost or net realizable value.
Costs are determined using the average cost method of inventory valuation. The Company performs physical inventory
counts and cycle counts on inventory throughout the year and adjusts the recorded balance to reflect the results.
Inventory is reduced by a reserve for items not saleable at or above cost by applying a specific loss factor, based
on historical experience, to specific categories of inventory. The Company evaluates the adequacy of the reserve
on a quarterly basis. The Company had reserves for inventory losses totaling $0.5 million at March 26, 2022 and
$0.6 million at March 27, 2021.
Property and Equipment, Depreciation and Amortization
Property and equipment are stated at cost. Depreciation and amortization are computed under the straight-line method
over the following estimated useful lives:
Machinery, Equipment and Software . . . . . . . . . . . . .
Rental Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . .
Years
2 – 15
5 – 8
3 – 10
2 – 12
The Company tests property and equipment for impairment on an annual basis during the fourth quarter of its fiscal
year, or immediately if conditions indicate that such impairment could exist. Property and equipment determined to
have no value are written off at their then remaining net book value. The Company capitalizes certain costs, including
internal payroll costs incurred in the procurement and development of computer software used for internal purposes.
Leasehold improvements are amortized under the straight-line method over the estimated useful life or the lease term,
whichever is shorter. Maintenance and repairs are expensed as incurred. See Note 2 for further information on property
and equipment.
Business Acquisitions
The Company applies the acquisition method of accounting for business acquisitions. Under the acquisition method,
identifiable assets acquired, liabilities assumed and consideration transferred are measured at their acquisition-date
fair value. The Company uses a valuation hierarchy, as further described under Fair Value of Financial Instruments
below, to determine the fair values. Historically, we have relied, in part, upon the use of reports from third-party
valuation specialists to assist in the estimation of fair values. Purchase price allocations are subject to revision within
the measurement period, not to exceed one year from the date of acquisition. Costs to acquire a business may include,
but are not limited to, fees for accounting, legal and valuation services, and are expensed as incurred in the Consolidated
Statements of Income.
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. The Company determined that no impairment was indicated as of
March 26, 2022 and March 27, 2021.
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The Company estimates the fair value of its reporting units using the fair market value measurement requirement.
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
Net Book Value as of March 28, 2010 . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . .
Currency Translation Adjustment . . . . .
Net Book Value as of March 27, 2021 . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . .
Currency Translation Adjustment . . . . .
Net Book Value as of March 26, 2022. . . . .
Distribution
$11,454
4
—
—
11,458
—
—
—
$11,458
Total
Service
$30,086 $41,540
1,079
—
653
43,272
21,749
—
53
$65,074
1,075
—
653
31,814
21,749
—
53
$53,616
Distribution
$1,297
—
(377 )
—
920
—
(273 )
—
$ 647
Service
$ 6,680
2,030
(2,161 )
44
6,593
11,060
(3,611 )
3
$14,045
Total
$ 7,977
2,030
(2,538 )
44
7,513
11,060
(3,884)
3
$14,692
The intangible assets are being amortized on an accelerated basis over their estimated useful lives of up to 15 years.
Amortization expense relating to intangible assets is expected to be $4.0 million in fiscal year 2023, $3.3 million in
fiscal year 2024, $2.7 million in fiscal year 2025, $1.9 million in fiscal year 2026 and $0.7 million in fiscal year 2027.
Catalog Costs
Transcat capitalizes the cost of each master catalog mailed and amortizes the cost over the respective catalog’s estimated
productive life. The Company reviews response results from catalog mailings on a continuous basis, and if warranted,
modifies the period over which costs are recognized. The Company amortizes the cost of each master catalog over an
eighteen-month period and amortizes the cost of each catalog supplement over a three-month period. Total unamortized
catalog costs, included as a component of prepaid expenses and other current assets on the Consolidated Balance
Sheets, were $0.1 million as of both March 26, 2022 and March 27, 2021.
Deferred Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the consolidated financial statement carrying amounts and the tax bases of its assets and liabilities.
Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in income tax rates is recognized in the Consolidated Statements of Income in the period that
includes the enactment date. The Company establishes valuation allowances if it believes that it is more-likely-than-not
that some or all of its deferred tax assets will not be realized. See Note 4 for further discussion on income taxes.
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 March 26,
2022 and March 27, 2021, investment assets totaled $0.2 million and $0.4 million, respectively, and are included as a
component of other assets (non-current) on the Consolidated Balance Sheets.
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DATE Thursday, July 07, 2022
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Stock-Based Compensation
The Company measures the cost of services received in exchange for all equity awards granted, including stock options
and restricted stock units, based on the fair market value of the award as of the grant date. The Company records
compensation cost related to unvested equity awards by recognizing, on a straight-line basis, the unamortized grant
date fair value over the remaining service period of each award. Excess tax benefits 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 fiscal years
2022 and 2021, the Company recorded non-cash stock-based compensation cost in the amount of $2.3 million and
$1.5 million, respectively, in the Consolidated Statements of Income.
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 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 fiscal year 2022 was immaterial. As of March 26,
2022, the Company had no unsatisfied performance obligations for contracts with an original expected duration of
greater than one year. Pursuant to 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 March 26, 2022 and March 27, 2021 were immaterial. See Note 7 for disaggregated revenue information.
Vendor Rebates
Vendor rebates are generally based on specified cumulative levels of purchases and/or incremental distribution sales
and are recorded as a reduction of cost of distribution sales. Purchase rebates are calculated and recorded quarterly
based upon the volume of purchases with specific vendors during the quarter. Point of sale rebate programs that are
based on year-over-year sales performance on a calendar year basis are recorded as earned, on a quarterly basis, based
upon the expected level of annual achievement. Point of sale rebate programs that are based on year-over-year sales
performance on a quarterly basis are recorded as earned in the respective quarter. The Company recorded vendor rebates
of $1.0 million and $0.7 million in fiscal years 2022 and 2021, respectively, as a reduction of cost of distribution sales.
Cooperative Advertising Income
The Company participates in co-op advertising programs with certain of its vendors. The Company records cash
consideration received from these vendors for advertising as a reduction of cost of distribution sales. The Company
recorded consideration in the amount of $0.8 million and $0.6 million in fiscal years 2022 and 2021, respectively, in
connection with these programs.
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Advertising Costs
Advertising costs, other than catalog costs, are expensed as they are incurred and are included in Selling, Marketing
and Warehouse Expenses in the Consolidated Statements of Income. Advertising costs were approximately $1.1 million
and $0.9 million in fiscal years 2022 and 2021, respectively.
Shipping and Handling Costs
Freight expense and direct shipping costs are included in the cost of revenue. These costs totaled approximately
$2.7 million and $2.4 million in fiscal years 2022 and 2021, respectively. Direct handling costs, the majority of which
represent direct compensation of employees who pick, pack, and prepare merchandise for shipment to customers, are
reflected in selling, marketing and warehouse expenses. Direct handling costs were approximately $0.8 million in each
of fiscal years 2022 and 2021.
Foreign Currency Translation and Transactions
The accounts of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management), 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 fiscal year 2022 and a loss of less than $0.1 million in fiscal year 2021. 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 net loss
of less than $0.1 million in each of fiscal year 2022 and 2021, was recognized as a component of Other Expenses 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 March 26, 2022, the Company
had a foreign exchange contract, which matured in April 2022, outstanding in the notional amount of $3.3 million.
This contract was subsequently renewed and remains in place. The Company does not use hedging arrangements for
speculative purposes.
Other Comprehensive Income
Other comprehensive income is composed of currency translation adjustments, unrecognized prior service costs from
post retirement plan, net of tax, and unrealized gains or losses on other assets, net of tax.
The Company determines the expense and obligations for its post-retirement plans using assumptions related to
discount rates, expected long-term rates of return on invested plan assets, and certain other factors. The Company
determines the fair value of plan assets and benefit obligations as of the end of each fiscal year. The unrecognized
portion of the gain or loss on plan assets is included in the consolidated balance sheets as a component of accumulated
other comprehensive loss in shareholders’ equity and is recognized into the plans’ expense over time. See Note 5 for
further discussion on the Company’s post retirement plan.
The Company has a non-qualified deferred compensation plan for the benefit of certain management employees and
non-employee directors. Investment assets, which fund the Company’s non-qualified deferred compensation plan,
consist of mutual funds. The unrecognized portion of the gain or loss on plan assets is included in the Consolidated
Statements of Income.
At March 26, 2022, accumulated other comprehensive loss consisted of cumulative currency translation losses of
$0.1 million, unrecognized prior service costs, net of tax, of $0.1 million and an unrealized gain on other assets, net of
tax, of less than $0.1 million.
At March 27, 2021, accumulated other comprehensive loss consisted of cumulative currency translation gains of
$0.1 million, unrecognized prior service costs, net of tax, of $0.5 million and an unrealized gain on other assets, net of
tax, of $0.1 million.
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Earnings per Share
Basic earnings per share of common stock are computed based on the weighted average number of shares of common
stock outstanding during the period. Diluted earnings per share of common stock reflect the assumed conversion of
stock options and unvested restricted stock units using the treasury stock method in periods in which they have a
dilutive effect. In computing the per share effect of assumed conversion, 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 each of fiscal years 2022 and 2021, the net additional common stock equivalents had a $0.02 per share effect on the
calculation of dilutive earnings per share. The average shares outstanding used to compute basic and diluted earnings
per share are as follows (amounts in thousands):
Average Shares Outstanding – Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Dilutive Common Stock Equivalents . . . . . . . . . . . . . . . . . . . .
Average Shares Outstanding – Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .
Anti-dilutive Common Stock Equivalents . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Years Ended
March 27,
March 26,
2021
2022
7,423
7,496
125
93
7,548
7,589
—
111
Shareholders’ Equity
During each of fiscal years 2022 and 2021, the Company repurchased and subsequently retired 0.1 million shares of its
common stock. The Company allows its employees the option of satisfying the employee tax withholding obligations
with either cash or a net share repurchase. The repurchase of shares was for the net awarding of certain share awards to
cover employee tax-withholding obligations for share award and stock option activity, totaling $6.7 million in fiscal year
2022 and $3.1 million in fiscal year 2021. There were no stock option redemptions during either fiscal year 2022 or fiscal
year 2021.
COVID-19 Pandemic
The COVID-19 pandemic had a negative impact on our fiscal year 2022 and fiscal year 2021 operations and financial
results, and the full financial impact of the pandemic cannot be reasonably estimated at this time due to uncertainty
as to its severity and duration. In fiscal year 2021, the Company took actions to manage its resources conservatively to
mitigate the negative impact of the pandemic, including aligning variable costs with demand, froze hiring and wages,
with the exception of technology personnel, tightly controlled discretionary spending; reduced the CEO’s salary and
Board of Director cash retainer fees by 20% and reduced other executive team members salaries by 10% during the first
and second quarter of fiscal year 2021; and amended our revolving credit facility to provide for, among other things,
$10.0 million in additional borrowing capacity and financial covenant modifications.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted. The CARES Act
included a provision that allows the Company to defer the employer portion of social security payroll tax payments that
would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021
and 50% payable by December 31, 2022. During fiscal year 2021, the Company deferred $2.0 million of employer social
security payroll taxes. At March 26, 2022, $1.0 million is still deferred and is recorded in accrued compensation and other
current liabilities. At March 27, 2021, $2.0 million was deferred of which $1.0 million is recorded in accrued compensation
and other current liabilities and $1.0 million is recorded in other liabilities on the Consolidated Balance Sheets.
Recently Issued Accounting Pronouncements:
Credit Losses
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
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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. As credit losses from the Company’s trade receivables have not historically been
significant, the Company anticipates that the adoption of the ASU will not have a material impact on its consolidated
financial statements.
Reclassification of Amounts
Certain reclassifications of financial information for prior fiscal years have been made to conform to the presentation
for the current fiscal year.
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment consists of (amounts in thousands):
Machinery, Equipment and Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and Fixtures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Property and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated Depreciation and Amortization. . . . . . . . . . . . . . . . . .
Total Property and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 26,
2022
$ 55,220
8,214
2,788
7,222
73,444
(47,005)
$ 26,439
March 27,
2021
$ 49,782
7,873
2,702
4,272
64,629
(42,426 )
$ 22,203
Total depreciation and amortization expense relating to property and equipment amounted to $5.7 million and
$5.0 million in fiscal years 2022 and 2021, respectively.
NOTE 3 – LONG-TERM DEBT
On July 7, 2021, we entered into the Second Amended and Restated Credit Facility Agreement (the “2021 Credit
Agreement”) with Manufacturers and Traders Trust Company (“M&T”), that amended and restated in its entirety the
Company’s Amended and Restated Credit Facility Agreement dated as of October 30, 2017, as amended by Amended and
Restated Credit Facility Agreement Amendment 1 dated December 10, 2018 and Amended and Restated Credit Facility
Agreement Amendment 2 (“Amendment Two”) dated May 18, 2020 (as amended, the “Prior Credit Agreement”).
The 2021 Credit Agreement increased the revolving credit commitment (the “Revolving Credit Commitment”) from
$40.0 million to $80.0 million, with a letter of credit subfacility increased from $2.0 million to $10.0 million, and
extended the term of the Revolving Credit Commitment to June 2026. The 2021 Credit Agreement amended the
definition of Applicable Margin (formerly Applicable Rate under the Prior Credit Agreement), which is based upon the
Company’s then current leverage ratio and is used to determine interest charges on outstanding and unused borrowings
under the revolving credit facility; the amendments reduced the Applicable Margins payable at the two highest leverage
ratio levels. The 2021 Credit Agreement also amended the definition of Permitted Acquisitions, that is, acquisitions
which are permitted under, and may be financed with proceeds of, the revolving credit facility, including increasing
the aggregate purchase price for acquisitions consummated in any fiscal year from $1.0 million to $65.0 million during
the current fiscal year and $50.0 million during any subsequent fiscal year, and adding an aggregate purchase price
of $40.0 million for acquisitions consummated at any time during the term of the 2021 Credit Agreement related to
businesses with a principal place of business located in the United Kingdom or the European Union.
In addition, the 2021 Credit Agreement provides that, assuming no event of default, restricted payments up to
$25.0 million (increased from $10.0 million in the Prior Credit Agreement) in the aggregate and $10.0 million (increased
from $3.0 million in the Prior Credit Agreement) in any single fiscal year may be used by us to repurchase our shares
and pay dividends. The 2021 Credit Agreement modified the leverage ratio and fixed charge coverage ratio covenants
with which we are required to comply. The 2021 Credit Agreement also reduced the London Interbank Offered Rate
(“LIBOR”) floor from 1.0% to 0.25% and included a mechanism for adoption of a different benchmark rate upon the
discontinuation of LIBOR. The 2021 Credit Agreement also reduced the fixed interest rate on our term loan in the
amount of $15.0 million (the “2018 Term Loan”) from 4.15% to 3.90%.
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The 2021 Credit Agreement superseded in its entirety, the Prior Credit Agreement. Amendment Two to the Prior Credit
Agreement had previously extended the term of the revolving credit facility to October 20, 2022 and increased the
revolving credit commitment to $40 million.
Amendment Two had modified the definition of the applicable rate used to determine interest charges on outstanding
and unused borrowings under the revolving credit facility and it amended the definition of permitted acquisitions to
amend borrowings available under the revolving credit facility for acquisitions. In addition, Amendment Two had
amended the definition of restricted payments to exclude amounts up to $2.5 million during each fiscal year used to pay
certain employee tax obligations associated with share-based payment and stock option activity, and modified certain
restrictions to the Company’s ability to repurchase its shares and pay dividends. Amendment Two also had modified the
leverage ratio and fixed charge coverage ratio covenants with which the Company was required to comply and limited
capital expenditures to $5.5 million for fiscal year 2021. Amendment Two also had established a LIBOR floor of 1.0%
and included a mechanism for adoption of a different benchmark rate in the event LIBOR was discontinued.
As of March 26, 2022, $80.0 million was available under the revolving credit facility, of which $39.9 million was
outstanding and included in long-term debt on the Consolidated Balance Sheets. During fiscal year 2022, $29.8 million
was used for business acquisitions.
As of March 26, 2022, $8.5 million was outstanding on the 2018 Term Loan, of which $2.2 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.
Interest and Other Costs
Interest on outstanding borrowings under the revolving credit facility accrue, at Transcat’s election, at either the
variable one-month LIBOR or a fixed rate for a designated period at the LIBOR corresponding to such period, in each
case (subject to a 1% floor during the first quarter of fiscal year 2022 and a 0.25% floor for subsequent periods), plus
a margin. Interest on outstanding borrowings under the 2018 Term Loan accrued at a fixed rate of 4.15% over the term
of the loan during the first quarter of fiscal year 2022 and 3.90% during the second quarter of fiscal year 2022 and over
the term of the loan for subsequent periods. 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
fiscal year 2022 ranged from 1.0% to 2.2%.
Covenants
The 2021 Credit Agreement has certain covenants with which the Company must comply, including a fixed charge ratio
covenant and a leverage ratio covenant. The Company was in compliance with all loan covenants and requirements
during fiscal years 2022 and 2021. Our leverage ratio was 1.74 at March 26, 2022, as defined in the 2021 Credit
Agreement, compared with 0.94 at March 27, 2021, as defined in the Prior Credit Agreement.
Pursuant to the Prior Credit Agreement, we were required to comply with a fixed charge ratio covenant and a leverage
ratio covenant, which were modified by the 2021 Credit Agreement. The allowable leverage ratio under the Prior
Credit Agreement for the second, third and fourth fiscal quarter of fiscal year 2021 and the first quarter of fiscal year
2022 was a maximum multiple of 5.0, 5.5, 7.0 and 4.0, respectively, of total debt outstanding compared to EBITDA
and non-cash stock-based compensation expense for the preceding four consecutive fiscal quarters. The Prior Credit
Agreement also had provided that the trailing twelve-month pro forma EBITDA of an acquired business was included
in the allowable leverage calculation. After the first quarter of fiscal 2022, pursuant to the 2021 Credit Agreement, the
allowable leverage ratio is a maximum multiple of 3.0.
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.
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NOTE 4 – INCOME TAXES
Transcat’s income before income taxes on the Consolidated Statements of Income is as follows (amounts in thousands):
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The provision for income taxes for fiscal years 2022 and 2021 is as follows:
Current Tax Provision:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax (Benefit) Provision:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
FY 2022
$10,417
2,773
$13,190
FY 2021
$9,187
795
$9,982
FY 2022
$ 414
240
752
$1,406
$ 456
(10)
(42)
$ 404
$1,810
FY 2021
$1,449
428
103
$1,980
$
96
(22)
137
$ 211
$2,191
A reconciliation of the income tax provision computed by applying the statutory U.S. federal income tax rate and the
income tax provision reflected in the Consolidated Statements of Income is as follows (amounts in thousands):
Federal Income Tax at Statutory Rate . . . . . . . . . . . . . . . . . . .
State Income Taxes, net of federal benefit . . . . . . . . . . . . . . .
Foreign Taxes and Federal, State and Foreign Tax Credits. . .
Tax Impact of Equity Awards . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Deductible Acquisition Costs . . . . . . . . . . . . . . . . . . . . .
GILTI and 78 Gross Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FY 2022
$ 2,770
172
(127)
(1,395)
206
161
23
$ 1,810
FY 2021
$2,096
282
9
(274)
—
—
78
$2,191
March 26,
2022
March 27,
2021
Deferred Tax Assets:
Accrued Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance-Based Stock Award Grants . . . . . . . . .
Inventory Reserves . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Qualified Deferred Compensation Plan . . . . . .
Post-Retirement Health Care Plans . . . . . . . . . . . . . .
Stock-Based Compensation . . . . . . . . . . . . . . . . . . . .
Deferred Payroll Tax – CARES Act . . . . . . . . . . . . .
Capitalized Inventory Costs. . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Deferred Tax Assets . . . . . . . . . . . . . . . . . .
$
$
384
2,622
443
100
92
333
225
—
158
233
4,590
$
354
2,439
439
132
104
506
95
259
118
267
$ 4,713
Deferred Tax Liabilities:
Goodwill and Intangible Assets. . . . . . . . . . . . . . . . .
Right of Use Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Deferred Tax Liabilities . . . . . . . . . . . . . . .
Net Deferred Tax Liabilities. . . . . . . . . . . . . . . . .
$ (3,812)
(2,623)
(4,767)
(112)
$ (11,314)
$ (6,724)
$ (1,233)
(2,408)
(4,230)
(43)
$ (7,914)
$ (3,201)
52
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 53
The Company files income tax returns in the U.S. federal jurisdiction, various states, Canada and Ireland. The Company
is no longer subject to examination by U.S. federal income tax authorities for fiscal years 2018 and prior, by state tax
authorities for fiscal years 2016 and prior, by Canadian tax authorities for fiscal years 2016 and prior, and by Ireland tax
authorities for calendar years 2017 and prior. There are no income tax years currently under examination by the Internal
Revenue Service, Canadian and Irish tax authorities. One U.S. state has selected Transcat for analysis, the results of this
analysis will determine if further action is required. The Nexa and Tangent acquisitions completed in fiscal year 2022
increased the net deferred tax liability by $3.0 million.
During fiscal years 2022 and 2021, there were no uncertain tax positions. No interest or penalties related to uncertain
tax positions were recognized in fiscal years 2022 and 2021 or were accrued at March 26, 2022 and March 27, 2021.
The Company’s effective tax rate for fiscal years 2022 and 2021 was 13.7% and 21.9%, respectively. The tax rate
is affected by recurring items, such as state income taxes and tax credits, which the Company expects to be fairly
consistent in the near term. It is also affected by discrete items that may occur in any given year but are not consistent
from year to year. The discrete benefits related to share-based compensation awards in each of fiscal years 2022 and
2021 were $1.4 and $0.3 million, respectively.
The Company expects to receive certain federal, state and Canadian tax credits in future years. The Company also
expects to receive discrete tax benefits related to share-based compensation awards in fiscal year 2023. As such, it
expects its effective tax rate in fiscal year 2023 to be between 22.0% and 24.0%.
NOTE 5 – EMPLOYEE BENEFIT PLANS
Defined Contribution Plan
All of Transcat’s U.S. based employees are eligible to participate in a defined contribution plan, the Long-Term
Savings and Deferred Profit Sharing Plan (the “Plan”), provided they meet certain qualifications. In fiscal year 2022,
the Company matched 50% of the first 6% of pay that eligible employees contribute to the Plan. In response to the
COVID-19 pandemic, the Company suspended the employer match to the Plan for the first six months of fiscal year
2021. In the second six months of fiscal year 2021, the Company matched 50% of the first 6% of pay that eligible
employees contribute to the Plan.
In the long-term savings portion of the Plan (the “401K Plan”), plan participants are entitled to a distribution of their vested
account balance upon termination of employment or retirement. Plan participants are fully vested in their contributions
while Company contributions are fully vested after three years of service. The Company’s matching contributions to
the 401K Plan were approximately $1.1 million and $0.4 million in fiscal years 2022 and 2021, respectively.
In the deferred profit sharing portion of the Plan, Company contributions are made at the discretion of the Company’s
Board of Directors. The Company made no profit sharing contributions in fiscal years 2022 and 2021.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (the “ESPP”) that allows for eligible employees as defined in
the ESPP to purchase common shares of the Company through payroll deductions at a price that is 85% of the closing
market price on the second last business day of each calendar month (the “Investment Date”). 650,000 shares can be
purchased under the ESPP. The difference between the closing market price on the Investment Date and the price paid
by employees is recorded as a general and administrative expense in the accompanying Consolidated Statements of
Income. The expense related to the ESPP was less than $0.1 million in each of fiscal years 2022 and 2021.
Non-Qualified Deferred Compensation Plan
The Company has available a non-qualified deferred compensation plan (the “NQDC Plan”) for directors and officers.
Participants are fully vested in their contributions. At its discretion, the Company may elect to match employee
contributions, subject to legal limitations in conjunction with the 401K Plan, which fully vest after three years of service.
During fiscal years 2022 and 2021, the Company did not match any employee contributions. Participant accounts are
adjusted to reflect performance, whether positive or negative, of selected investment options chosen by each participant
during the deferral period. In the event of bankruptcy, the assets of the NQDC Plan are available to satisfy the claims of
53
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 54
the Company’s general creditors. The liability for compensation deferred under the NQDC Plan was $0.2 million as of
March 26, 2022 and $0.4 million as of March 27, 2021, and is included as a component of other liabilities (non-current)
on the Consolidated Balance Sheets.
Post-retirement Health Care Plans
The Company has a defined benefit post-retirement health care plan which provides long-term care insurance benefits,
medical and dental insurance benefits and medical premium reimbursement benefits to eligible retired corporate
officers and their eligible spouses (the “Officer Plan”).
The change in the post-retirement benefit obligation is as follows (amounts in thousands):
Post-retirement benefit obligation, at beginning of fiscal year . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post-retirement benefit obligation, at end of fiscal year . . . . . . . . . . . . .
Fair value of plan assets, at end of fiscal year . . . . . . . . . . . . . . . . . . . . .
Funded status, at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated post-retirement benefit obligation, at end of fiscal year . . .
FY 2022
$ 1,831
96
52
(125)
(528)
1,326
—
$(1,326)
$ 1,326
FY 2021
$ 1,509
84
48
(95)
285
1,831
—
$(1,831)
$ 1,831
The accumulated post-retirement benefit obligation is included as a component of other liabilities (non-current) in
the Consolidated Balance Sheets. The components of net periodic post-retirement benefit cost and other amounts
recognized in other comprehensive income are as follows (amounts in thousands):
Net periodic post-retirement benefit cost:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligations recognized in other comprehensive income:
Amortization of prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in net periodic benefit cost and other comprehensive income . . . . . . . . . . . .
Amount recognized in accumulated other comprehensive income, at end of fiscal year:
FY 2022
$ 96
52
1
149
(1)
(583)
(584)
$(435)
FY 2021
$ 84
48
1
133
(1)
233
232
$365
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 156
$739
The prior service cost is amortized over the average remaining life expectancy of active participants in the Officer
Plan. The estimated prior service cost that will be amortized from accumulated other comprehensive income into net
periodic post-retirement benefit cost during fiscal year 2023 is less than $0.1 million.
The post-retirement benefit obligation was computed by an independent third-party actuary. Assumptions used to
determine the post-retirement benefit obligation and the net periodic postretirement benefit cost were as follows:
Weighted average discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical care cost trend rate:
March 26,
2022
3.6%
March 27,
2021
3.0%
Trend rate assumed for next year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year that rate reaches ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . .
7.0%
3.8%
7.0%
3.8%
2075
2075
Dental care cost trend rate:
Trend rate assumed for next year and remaining at
that level thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.0%
3.0%
54
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 55
Benefit payments are funded by the Company as needed. Payments toward the cost of a retiree’s medical and dental
coverage are initially determined as a percentage of a base coverage plan in the year of retirement and are limited
to increase at a rate of no more than 50% of the annual increase in medical and dental costs, as defined in the plan
document. The following benefit payments, which reflect expected future service, as appropriate, are expected to be
paid as follows (amounts in thousands):
Fiscal Year
2023 . . . . . . . . . . . . .
2024 . . . . . . . . . . . . .
2025 . . . . . . . . . . . . .
2026 . . . . . . . . . . . . .
2027 . . . . . . . . . . . . .
Thereafter . . . . . . . .
Amount
$135
113
118
84
91
$785
Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated post-
retirement benefit obligation and the annual net periodic post-retirement benefit cost by $0.1 million. A one percentage
point decrease in the healthcare cost trend would decrease the accumulated post-retirement benefit obligation and the
annual net periodic post-retirement benefit cost by $0.1 million.
NOTE 6 – 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 March 26, 2022,
0.7 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 benefits related to share-based compensation awards in fiscal years 2022 and 2021 were $1.4 million and
$0.3 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 third fiscal year from the date of grant subject to cumulative diluted
earnings per share targets over the eligible period.
The Company’s non-employee directors receive an annual grant of restricted stock units valued at $50,000 that vest
after one year. The fiscal year 2022 and fiscal year 2021 restricted stock unit grants to non-employee directors were
made in September 2021 and September 2020.
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.
During fiscal year 2022, 30,000 shares of time-vested restricted stock units were granted and 15,000 shares of
performance-based restricted units were granted. During fiscal year 2021, 80,000 shares of time-vested restricted
stock units were granted.
The following table summarizes the restricted stock units vested and shares issued during fiscal years 2022 and 2021
(amounts in thousands, except per unit data):
55
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 56
Date
Granted
April 2018
April 2017
July 2020
September 2019
October 2018
January 2021
May 2018
April 2018
May 2018
September 2020
October 2018
April 2019
Measurement
Period
April 2018 – March 2020
April 2017 – March 2020
July 2020
September 2019 – September 2020
October 2018 – September 2020
January 2021
April 2018 – March 2021
April 2018 – March 2021
April 2018 – March 2021
September 2020 – September 2021
October 2018 – September 2021
April 2019 – March 2022
Total
Number
of Units
Granted
1
62
1
18
1
3
29
1
29
14
1
20
Grant Date
Fair
Value
Per Unit
$15.65
$12.90
$27.08
$22.77
$20.81
$34.68
$15.30
$15.65
$15.30
$28.52
$20.81
$23.50
Target
Level
Achieved
Time Vested
79%
Time Vested
Time Vested
Time Vested
Time Vested
Time Vested
Time Vested
64%
Time Vested
Time Vested
Time Vested
Number of
Shares
Issued
1
49
1
18
1
3
29
1
19
14
1
20
Date
Shares
Issued
April 2020
May 2020
July 2020
September 2020
October 2020
January 2021
March 2021
April 2021
May 2021
September 2021
October 2021
March 2022
The following table summarizes the non-vested restricted stock units outstanding as of March 26, 2022
(amounts in thousands, except per unit data):
Date
Granted
October 2018
May 2019
April 2020
July 2020
September 2020
September 2020
September 2020
January 2021
May 2021
June 2021
June 2021
September 2021
September 2021
December 2021
January 2022
January 2022
March 2022
Measurement
Period
October 2018 – September 2027
April 2019 – March 2022
April 2020 – March 2023
July 2020 – July 2023
September 2020 – July 2023
September 2020 – July 2023
September 2020 – September 2023
January 2021 – January 2024
May 2021 – May 2024
June 2021 – March 2024
June 2021 – March 2024
September 2021 – September 2024
September 2021 – September 2022
December 2021 – December 2024
January 2022 – March 2024
January 2022 – March 2024
March 2022 – March 2025
Total
Number
of Units
Granted
7
20
2
27
4
5
3
2
1
11
11
4
7
1
1
1
2
Grant Date
Fair
Value
Per Unit
$20.81
$23.50
$26.25
$27.08
$28.54
$29.76
$29.76
$34.62
$54.21
$53.17
$53.17
$67.76
$66.09
$90.41
$90.92
$90.92
$76.31
Estimated
Level of
Achievement at
March 26, 2022
Time Vested
83% of target level
Time Vested
Time Vested
Time Vested
Time Vested
Time Vested
Time Vested
Time Vested
100% of target level
Time Vested
Time Vested
Time Vested
Time Vested
100% of target level
Time Vested
Time Vested
Total expense relating to restricted stock units, based on grant date fair value and the achievement criteria, was
$1.6 million and $1.4 million in fiscal years 2022 and 2021, respectively. Unearned compensation totaled $2.2 million as
of March 26, 2022 which is expected to be realized over a period of three years.
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-lined basis over the requisite
service period for each award. Options vest either immediately or over a period of up to five years using a straight-line
basis and expire either five years or ten years from the date of grant.
56
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 57
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 fiscal years 2022 and 2021:
Risk-Free Interest Rate . . . . . . . . . . . . . . . . . . . . .
Volatility Factor . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Term (in Years) . . . . . . . . . . . . . . . . . . .
Annual Dividend Rate . . . . . . . . . . . . . . . . . . . . .
FY 2022
1.01%
30.22%
6.25
0.00%
FY 2021
0.22%
25.83%
3.25
0.00%
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 historical experience of similar awards, 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 fiscal year 2022, the Company’s Board of Directors granted an option for 10,000 shares of common stock each
to two new members (20,000 shares in the aggregate) of the Board of Directors that vest over 5 years, an option for
2,000 shares of common stock each to five employees (10,000 shares in the aggregate) that vests over three years, an
option for 90,000 shares of common stock in the aggregate to employees during an acquisition that vests over 5 years
and an option for 6,000 shares of common stock to a Company employee that vests over 3 years.
During fiscal year 2021, the Company’s Board of Directors granted an option for 5,000 shares of common stock to a
Company employee that vests over three years and an option for 15,000 shares of common stock to an employee that
immediately vested.
The expense related to all stock option awards was $0.7 million in fiscal year 2022 and $0.1 million in fiscal year 2021.
The following table summarizes the Company’s options for fiscal years 2022 and 2021 (amounts in thousands, except
per option data):
Outstanding as of March 28, 2020 . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding as of March 27, 2021. . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding as of March 26, 2022 . . . . . . . . . . .
Exercisable as of March 26, 2022 . . . . . . . . . . . .
Weighted
Average
Exercise
Price Per
Option
$14.63
27.48
18.01
15.47
61.29
12.00
24.10
53.27
$26.27
Number
of
Options
150
20
(45)
125
131
(85)
(6)
165
2
Weighted
Average
Remaining
Contractual
Term (in Years)
Aggregate
Intrinsic
Value
9
8
$3,462
$1,770
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 fiscal year 2022 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 March 26, 2022. The amount of aggregate intrinsic value will change based on the fair market value
of the Company’s stock.
Total unrecognized compensation cost related to non-vested stock options as of March 26, 2022 was $1.9 million, which
is expected to be recognized over a period of three years. The aggregate intrinsic value of stock options exercised in
fiscal years 2022 and 2021 was $5.3 million and $1.6 million, respectively. Cash received from the exercise of options
in fiscal years 2022 and 2021 was $1.0 million and $0.8 million, respectively.
57
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 58
NOTE 7 – SEGMENT AND GEOGRAPHIC DATA
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 fiscal years 2022 and 2021 (dollars in thousands):
Revenue:
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$122,005
82,954
204,959
$101,274
72,061
173,335
FY 2022
FY 2021
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets:
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization(2):
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Expenditures:
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Geographic Data:
Revenues to Unaffiliated Customers(3):
United States(4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other International. . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and Equipment:
United States(4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,921
19,518
58,439
28,107
16,189
44,296
10,814
3,329
14,143
953
1,810
2,763
$ 11,380
$109,472
46,107
22,183
$177,762
$
$
7,543
2,024
9,567
$
7,885
2,267
$ 10,152
$187,165
14,623
3,171
$204,959
$ 22,042
4,397
$ 26,439
30,695
15,423
46,118
20,254
14,791
35,045
10,441
632
11,073
1,091
2,191
3,282
7,791
$
$ 71,090
44,759
16,267
$132,116
$
$
$
$
5,597
1,983
7,580
4,236
2,381
6,617
$159,270
13,040
1,025
$173,335
$ 19,897
2,306
$ 22,203
(1) Operating expense allocations between segments are based on actual amounts, a percentage of revenues,
headcount, and management’s estimates.
(2)
Including amortization of catalog costs and intangible assets.
(3) Revenues are attributed to the countries based on the destination of a product shipment or the location where
service is rendered.
(4) United States includes Puerto Rico.
58
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 59
NOTE 8 – COMMITMENTS
Leases
The Company determines if an arrangement is a lease at inception. Our lease agreements generally contain lease and
non-lease components. Historically, non-lease components such as utilities have been immaterial. Payments under our
lease arrangements are primarily fixed. Lease assets and liabilities are recognized at the present value of the future
lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease
payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable.
Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms
and payments, and in economic environments where the leased asset is located. Our lease terms include periods under
options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Transcat leases facilities, equipment, and vehicles under various non-cancelable operating leases. As of March 26, 2022,
the remaining lease terms on our operating leases range from approximately one year to twelve years, and include any
renewal and/or termination options that are reasonably certain to be exercised by the Company. There is no transfer of
title or option to purchase the leased assets upon expiration. The weighted average discount rate for fiscal year 2022
and 2021 was 4.15%. The weighted average remaining lease term is approximately 8 years. Short-term leases are leases
having a term of 12 months or less. The Company recognizes short-term leases on an as incurred basis and does not
record a related lease asset or liability for such leases. Short-term lease expense was immaterial in both fiscal years
2022 and 2021.
The components of lease expense for the current and prior-year comparative periods were as follows (dollars
in thousands):
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental cash flow information related to leases was as follows:
FY 2022
$3,687
$ 619
$4,306
FY 2021
$3,206
$ 577
$3,783
FY 2022
FY 2021
Cash paid for amounts included in the measurement
of lease liabilities:
Operating cash flow from operating leases . . . . . . . .
Right to Use Assets obtained in exchange for
$2,207
$2,153
lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,874
$2,945
Total rental expense was approximately $4.3 million and $3.8 million in fiscal years 2022 and 2021, respectively. The
minimum future annual rental payments under the non-cancelable leases at March 26, 2022 are as follows (in millions):
Fiscal Year
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments . . . . . . . . . . . . . . . . . . .
Less: Imputed interest. . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of remaining lease payments . . . . . . . . . .
$ 3.7
2.8
2.1
1.8
1.7
3.9
$16.0
4.7
$ 11.3
The Company has entered into two facility leases subsequent to year end. The total payments for these leases aggregates
to $2.5 million.
59
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 60
Term Loan
Effective December 2018, the Company has term loan repayments (principal plus interest) of $0.2 million per month
through December 2025. These amounts are not reflected in the table above. Principal payments relating to the 2018
Term Loan will be $2.2 million in fiscal year 2023, $2.2 million in fiscal year 2024, $2.3 million in fiscal year 2025
and $1.8 million in fiscal year 2026.
Contingent Consideration
In connection with the acquisition of NEXA, there are potential earn-out payments of up to $7.5 million over the
four-year period following the closing of the transaction based upon NEXA achieving certain annual revenue and
EBITDA goals. If achieved, the earn-out payments will also be made in shares of common stock unless certain criteria
is met for cash payment. As of August 31, 2021 and March 26, 2022, the estimated fair value for the contingent earn-out
payments was $0.2 million and included in the preliminary purchase price allocation in Note 9.
NOTE 9 – BUSINESS ACQUISITIONS
Tangent
Effective December 31, 2021, Transcat purchased all the outstanding membership units of Tangent Labs, LLC, a
privately held company (“Tangent”). Tangent provides in-house and on-site calibrations of precision measurement and
control instrumentation to customers in the life science, aerospace and other regulated industries, and has lab locations
in Indianapolis, Indiana and Huntsville, Alabama. This transaction aligned with a key component of the Company’s
strategy of acquiring local capabilities in attractive geographies.
The Tangent 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 Tangent
acquisition has been allocated to the Service segment. Intangible assets related to the Tangent acquisition are being
amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years
and are deductible for tax purposes. Amortization of goodwill related to the Tangent acquisition is not deductible for
tax purposes.
The purchase price for Tangent was approximately $8.9 million, all paid in cash, and is subject to certain customary
holdback provisions and a portion of which was placed in escrow to secure the sellers’ obligations in the event that a
key employee terminates employment with Tangent on or before the first anniversary of the closing of the transaction.
$7.9 million was paid in cash and $1.0 million of the purchase price has been put into escrow as a holdback for
indemnification claims, if any.
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 Tangent’s assets and liabilities
acquired on December 31, 2021 (in thousands):
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible Assets – Customer Base & Contracts . . . . . . . . . . . . . . . . .
Intangible Assets – Covenant Not to Compete . . . . . . . . . . . . . . . . . . .
Plus:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
$ 5,587
4,150
220
9,957
26
187
16
(67)
(1,195)
$ 8,924
From the date of acquisition, Tangent has contributed revenue of $0.6 million and operating income of $0.1 million,
which includes the negative impact of amortization of the acquired intangible assets, for fiscal year 2022.
60
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 61
NEXA
Effective August 31, 2021, Transcat purchased all of the outstanding capital stock of Cal OpEx Limited (d/b/a NEXA
Enterprise Asset Management), a private Irish company, which owns all of the issued and outstanding capital stock of
its U.S.-based subsidiary, Cal OpEx Inc., a Delaware corporation (collectively, “NEXA”). NEXA provides calibration
optimization and other technical solutions to improve asset and reliability management programs to pharmaceutical,
biotechnology, and medical device companies worldwide. 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 NEXA goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other
intangibles that do not qualify for separate recognition. All of the goodwill and intangible assets relating to the NEXA
acquisition has been allocated to the Service segment. Intangible assets related to the NEXA acquisition are being
amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to five years
and are deductible for tax purposes. Amortization of goodwill related to the NEXA acquisition is not deductible for
tax purposes.
The purchase price for NEXA was approximately $26.2 million and was paid with $23.9 million in cash and the
issuance of 34,943 shares of our common stock valued at $2.4 million. Additionally, there are potential earn-out
payments of up to $7.5 million over the four-year period following the closing of the transaction based upon NEXA
achieving certain annual revenue and EBITDA goals. If achieved, the earn-out payments will also be made in shares of
common stock unless certain criteria is met for cash payment. As of August 31, 2021 and March 26, 2022, the estimated
fair value for the contingent earn-out payments, classified as Level 3 in the fair value hierarchy, was $0.2 million and
included in the purchase price allocation below. This amount was calculated using a Geometric Brownian motion
distribution that was then used in a Monte Carlo simulation model. Assumptions used in the Monte Carlo simulation
model included: 1) weighted-average cost of capital of 6.60%, 2) risk-free interest rate of 0.58%, 3) asset volatility of
20.00%, and 4) forecasted revenue and EBITDA. This contingent consideration is remeasured quarterly. If, as a result
of remeasurement, the value of the contingent consideration changes, any charges or income will be included in the
Company’s Consolidated Statements of Income. For fiscal year 2022, there were no changes to the range of outcomes
for the Monte Carlo simulation model for the valuation of the contingent consideration, no gains or losses recognized in
earnings for changes in the remeasurement of the contingent consideration, and no other issuance or settlement of the
contingent consideration. $0.1 million of the purchase price has been put into escrow as a holdback for indemnification
claims, if any.
The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs,
of NEXA’s assets and liabilities acquired on August 31, 2021 (in thousands):
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible Assets – Customer Base & Contracts . . . . . . . . . . . . . . . . .
Intangible Assets – Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible Assets – Covenant Not to Compete . . . . . . . . . . . . . . . . . . .
Plus:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
$15,679
5,600
490
600
22,369
3,732
2,434
38
(572)
(1,769)
$26,232
From the date of acquisition, NEXA has contributed revenue of $5.5 million and operating loss of $0.3 million, which
includes the negative impact of amortization of the acquired intangible assets, for fiscal year 2022.
Upstate Metrology
Effective April 29, 2021, Transcat acquired substantially all of the assets of Upstate Metrology Inc. (“Upstate
Metrology”), a New York 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.
61
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 62
All the goodwill related to the Upstate Metrology acquisition has been allocated to the Service segment. Amortization
of goodwill related to the Upstate Metrology acquisition is deductible for tax purposes.
The total purchase price for the assets of Upstate Metrology was approximately $0.9 million. The following is a
summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Upstate
Metrology’s assets and liabilities acquired on April 29, 2021 (in thousands):
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus:
Non-Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
$483
189
270
(11)
$931
From the date of acquisition, Upstate Metrology has contributed revenue of $1.0 million. Since this operation was
integrated immediately into our existing operation, its separate operating income in undeterminable.
BioTek
Effective December 16, 2020, Transcat acquired substantially all of the assets of BioTek Services, Inc. (“BioTek”), a
Virginia based provider of pipette 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.
BioTek’s focus on pipettes complements the current offerings Transcat provides to the life science sector.
All of the goodwill and intangible assets relating to the BioTek acquisition has been allocated to the Service segment.
Intangible assets related to the BioTek acquisition are being amortized for financial reporting purposes on an accelerated
basis over the estimated useful life of up to 10 years and are deductible for tax purposes. Amortization of goodwill
related to the BioTek acquisition is deductible for tax purposes.
The total purchase price for the assets of BioTek was approximately $3.5 million. $0.4 million of the purchase price
had been put into escrow as a holdback for indemnification claims, if any. This escrow was released during the fourth
quarter of fiscal year 2022. The following is a summary of the purchase price allocation, in the aggregate, to the fair
value, based on Level 3 inputs, of BioTek’s assets and liabilities acquired during the period presented (in thousands):
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible Assets – Customer Base & Contracts . . . . . . . . . . . . . . . . .
Intangible Assets – Covenant Not to Compete . . . . . . . . . . . . . . . . . . .
Plus:
Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,063
1,930
100
3,093
406
8
$3,507
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 Tangent, NEXA, Upstate Metrology and BioTek had occurred at the beginning of fiscal year 2021. 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.
(in thousands except per share information)
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic Earnings Per Share . . . . . . . . . . . . . . . . . . . . . .
Diluted Earnings Per Share . . . . . . . . . . . . . . . . . . . .
(Unaudited)
Fiscal Years Ended
March 26,
2022
$210,463
$ 12,151
1.62
$
1.60
$
March 27,
2021
$183,908
9,986
$
1.35
$
1.32
$
62
JOB TITLE Transcat 10-K
REVISION 4
SERIAL <12345678>
DATE Thursday, July 07, 2022
JOB NUMBER 405949(1)
TYPE
PAGE NO. 63
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 March 26, 2022, $0.2 million of contingent consideration and $0.1 million of other
holdback amounts were unpaid and reflected in current liabilities on the Consolidated Balance Sheets. During fiscal
year 2022 and fiscal year 2021, no contingent consideration or other holdback amounts were paid.
During fiscal year 2022, acquisition costs of $0.9 million were recorded as incurred as general and administrative
expenses in the Consolidated Statements of Income. During fiscal year 2021, acquisition costs of less than $0.1 million
were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income.
NOTE 10 – SUBSEQUENT EVENT
On 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 total purchase price paid for the assets of Alliance was approximately
$4.5 million in cash and an amount of the Company’s common stock, par value $0.50 per share (“Common Stock”),
with a value equal to $157,500, or 2,284 shares of Common Stock. Pursuant to the asset purchase agreement, the
Company will hold back $500,000 of the purchase price for certain potential post-closing adjustments, and the purchase
price will be subject to reduction by $500,000 if a key customer relationship is not retained.
The purchase price allocation has not been finalized, due to the timing of the acquisition and the filing date of this
Annual Report on Form 10-K. 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 June 25, 2022. The pro forma results of operations from the Alliance
acquisition will be disclosed in the Quarterly Report on Form 10-Q for the fiscal quarter ending June 25, 2022. The
goodwill related to Alliance is expected to be deductible for income tax purposes. All of the goodwill and intangible
assets relating to the Alliance acquisition will be allocated to the Service segment.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) 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, (“Exchange Act”) Rules 13a-15(e) and 15d-15(e))
as of the end of the period covered by this 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.
(b) MANAGEMENT’S ANNUAL REPORT ON
REPORTING
INTERNAL CONTROL OVER FINANCIAL
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control system was designed 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 in the United States of America. In designing and evaluating our internal control system, we
recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance of achieving the desired control objectives and that the effectiveness of any system has inherent
limitations including, but not limited to, the possibility of human error and the circumvention or overriding of controls
63
JOB TITLE Transcat 10-K
REVISION 4
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and procedures. Management, including the principal executive officer and the principal financial officer, is required to
apply judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected in a
timely manner.
An evaluation was performed under the supervision and with the participation of our management, including our
principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our
procedures and internal control over financial reporting using the framework and criteria described in the Internal
Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, our management, including our principal executive officer and our principal
financial officer, concluded that our internal control over financial reporting was effective in providing reasonable
assurance regarding the reliability of financial reporting and the preparation of our financial statements for external
purposes in accordance with generally accepted accounting principles as of March 26, 2022.
This annual report includes an attestation report of our independent registered public accounting firm, Freed Maxick
CPAs, P.C., regarding internal control over financial reporting.
(c) 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 annual report (our fourth fiscal quarter) that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item 10 is incorporated herein by reference from our proxy statement for our 2022
Annual Meeting of Shareholders under the headings “Proposal One: Election of Directors,” “Corporate Governance,”
“Executive Officers and Senior Management,” and “Delinquent Section 16(a) Reports,” which proxy statement will be
filed pursuant to Regulation 14A within 120 days after the March 26, 2022 fiscal year end.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by reference from our proxy statement for our 2022
Annual Meeting of Shareholders under the headings “Executive Compensation” and “Director Compensation,” which
proxy statement will be filed pursuant to Regulation 14A within 120 days after the March 26, 2022 fiscal year end.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
With the exception of the information presented in the table below, the information required by this Item 12 is
incorporated herein by reference from our proxy statement for our 2022 Annual Meeting of Shareholders under the
headings “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management,” which proxy
statement will be filed pursuant to Regulation 14A within 120 days after the March 26, 2022 fiscal year end.
Securities Authorized for Issuance Under Equity Compensation Plans as of March 26, 2022:
Equity Compensation Plan Information
(In Thousands, Except Per Share Amounts)
Number of securities to
be issued upon exercise of
outstanding options and
restricted stock units
(a)
Weighted average
exercise price
of outstanding
options
(b)
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities reflected
in column (a))
(c)
Plan category
Equity compensation plans approved
by security holders . . . . . . . . . . . . . . .
Equity compensation plans not approved
by security holders . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
274(1)
—
274(1)
$53.27(2)
—
$53.27(2)
867(3)
—
867(3)
(1)
Includes time-vested restricted stock units and performance-based restricted stock units granted to officers and
key employees pursuant to our 2003 Plan and 2021 Incentive Plan. See Note 6 to our Consolidated Financial
Statements in Item 8 of Part II.
(2) Does not include restricted stock units.
(3) There are 119 shares available for grant pursuant to our ESPP.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item 13 is incorporated herein by reference from our proxy statement for our 2022
Annual Meeting of Shareholders under the headings “Corporate Governance” and “Certain Relationships and Related
Transactions,” which proxy statement will be filed pursuant to Regulation 14A within 120 days after the March 26,
2022 fiscal year end.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 is incorporated herein by reference from our proxy statement for our 2022
Annual Meeting of Shareholders under the heading “Proposal Three: Ratification of Selection of our Independent
Registered Public Accounting Firm,” which proxy statement will be filed pursuant to Regulation 14A within 120 days
after the March 26, 2022 fiscal year end.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) See Index to Financial Statements included in Item 8 of Part II of this report.
(b) Exhibits.
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(3) Articles of Incorporation and Bylaws
INDEX TO EXHIBITS
3.1(a)
3.1(b)
3.1(c)
3.1(d)
3.2
The Articles of Incorporation, as amended (the “Articles”), are incorporated herein by reference from
Exhibit 4(a) to the Company’s Registration Statement on Form S-8 (Registration No. 33-61665) filed on
August 8, 1995.
Certificate of Amendment to the Articles is incorporated herein by reference from Exhibit 3(i) to the
Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
Certificate of Amendment to the Articles is incorporated herein by reference from Exhibit 3.1 to the
Company’s Annual Report on Form 10-K for the year ended March 31, 2012.
Certificate of Amendment to the Articles is incorporated herein by reference from Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2015.
Code of Regulations, as amended through May 1, 2019, are incorporated herein by reference from
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 3, 2019.
(4)
Instruments Defining the Rights of Security Holders
4.1
Description of Securities is incorporated herein by reference from Exhibit 4.1 to the Company’s Annual
Report on Form 10-K for the year ended March 30, 2019.
(10) Material contracts
#10.1
#10.2
#10.3
#10.4
#10.5
#10.6
#10.7
#10.8
#10.9
Transcat, Inc. 2003 Incentive Plan, as Amended and Restated, is incorporated herein by reference from
Appendix A to the Company’s definitive proxy statement filed on July 22, 2011 in connection with the
2011 Annual Meeting of Shareholders.
Amendment No. 1 to the Transcat, Inc. 2003 Incentive Plan, as Amended and Restated, is incorporated
herein by reference from Appendix B to the Company’s definitive proxy statement filed on July 26, 2013
in connection with the 2013 Annual Meeting of Shareholders.
Form of Award Notice for Incentive Stock Options granted under the Transcat, Inc. 2003 Incentive Plan
is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended December 25, 2004.
Form of Performance-Based Restricted Stock Unit Award Notice granted under the Transcat, Inc.
2003 Incentive Plan, as Amended and Restated, is incorporated by reference from Exhibit 10.9 to the
Company’s Annual Report on Form 10-K for the year ended March 26, 2016.
Form of Award Notice of Non-Qualified Stock Option (five-year expiration) granted under the Transcat,
Inc. 2003 Incentive Plan, as Amended and Restated, is incorporated herein by reference from Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 24, 2017.
Form of Award Notice of Long-Term Compensation Award granted under the Transcat, Inc. 2003
Incentive Plan, as Amended and Restated, is incorporated herein by reference from Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 24, 2017.
Form of Award Notice of Restricted Stock Units and Performance Restricted Stock Units granted
pursuant to the Transcat, Inc. 2003 Incentive Plan is incorporated herein by reference from Exhibit 10.1
to the Company’s Current Report on Form 8-K filed on May 24, 2018.
Form of Award Notice of Long-Term Compensation Awards granted pursuant to the Transcat, Inc. 2003
Incentive Plan is incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report
on Form 8-K filed on May 24, 2018.
Form of Award Notice of Director Long-Term Compensation Award granted pursuant to the Transcat,
Inc. 2003 Incentive Plan is incorporated herein by reference from Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 28, 2019.
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#10.10
#10.11
#10.12
Form of Award Notice of Director Non-Qualified Stock Option Award granted pursuant to the Transcat,
Inc. 2003 Incentive Plan is incorporated herein by reference from Exhibit 10.2 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 28, 2019.
Transcat, Inc. 2021 Stock Incentive Plan is incorporated herein by reference from Exhibit 99.3 to
the Company’s Post-Effective Amendment No. 1 to Form S-8 (Registration No. 333-191631) filed on
October 13, 2021.
Form of Award Agreement of Director Long-Term Compensation Award Granted Pursuant to the
Transcat, Inc. 2021 Stock Incentive Plan is incorporated herein by reference from Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2021.
*#10.13
Form of Award Notice of Restricted Stock Units and Performance Restricted Stock Units granted
pursuant to the Transcat, Inc. 2021 Stock Incentive Plan.
10.14
10.15
10.16
10.17
10.18
10.19
#10.20
#10.21
#10.22
Amended and Restated Credit Facility Agreement, dated as of October 30, 2017, by and between
Transcat, Inc. and Manufacturers and Traders Trust Company is incorporated herein by reference from
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 23, 2017.
Amended and Restated Credit Facility Agreement Amendment 1, dated as of December 10, 2018, by
and between Transcat, Inc. and Manufacturers and Traders Trust Company is incorporated herein by
reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 12, 2018.
Amended and Restated Credit Facility Agreement Amendment 2, dated as of May 18, 2020, by and
between Transcat, Inc., and Manufacturers and Traders Trust Company is incorporated herein by
reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 27, 2020.
Second Amended and Restated Credit Facility Agreement, dated as of July 7, 2021, by and between
Transcat, Inc. and Manufacturers and Traders Trust Company is incorporated herein by reference from
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 12, 2021.
Lease Agreement between Gallina Development Corporation and Transcat, Inc. dated November 28,
2017, is incorporated herein by reference from Exhibit 10.19 to the Company’s Annual Report on Form
10-K for the year ended March 31, 2018.
Lease Agreement between AK Leasehold I, LLC and Transcat, Inc. dated May 21, 2019, is incorporated
herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
May 28, 2019.
Transcat, Inc. Post-Retirement Benefit Plan for Officers (Amended and Restated Effective April 2, 2012)
is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2012.
Transcat, Inc. Executive Officer and Director Share Repurchase Plan is incorporated herein by reference
from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 4, 2011.
Transcat, Inc. 2009 Insider Stock Sales Plan, as amended, is incorporated herein by reference from
Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012.
#10.23 Agreement for Severance Upon Change in Control between Transcat, Inc. and Lee D. Rudow dated as
of May 7, 2012 is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on May 11, 2012.
10.24
Share Purchase Agreement, dated August 31, 2021, by and among Transcat, Inc., John Cummins and
Ross Lane is incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 25, 2021.
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10.25
Registration Rights Agreement, dated August 31, 2021, by and among Transcat, Inc., John Cummins and
Ross Lane is incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 25, 2021.
10.26 Membership Unit Purchase Agreement, dated as of December 31, 2021, by and among Transcat, Inc.,
Kevin M. Broderick and Andrea Broderick is incorporated herein by reference from Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2021.
(21) Subsidiaries of the registrant
*21.1
Subsidiaries
(23) Consents of experts and counsel
*23.1
Consent of Freed Maxick CPAs, P.C.
(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 XBRL Instance Document
*101.SCH XBRL Taxonomy Extension Schema Document
*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB XBRL Taxonomy Extension Label Linkbase Document
*101.PRE 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.
# Management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
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Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: June 9, 2022
TRANSCAT, INC.
/s/ LEE D. RUDOW
By: Lee D. Rudow
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
Signature
Title
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
June 9, 2022
/s/ LEE D. RUDOW
Lee D. Rudow
/s/ MARK A. DOHENY
Mark A. Doheny
Director, President and Chief Executive Officer
(Principal Executive Officer)
Vice President of Finance and
Chief Financial Officer
(Principal Financial Officer)
/s/ SCOTT D. DEVERELL
Scott D. Deverell
Controller and Principal Accounting Officer
(Principal Accounting Officer)
/s/ GARY J. HASELEY
Gary J. Haseley
/s/ CRAIG D. CAIRNS
Craig D. Cairns
/s/ OKSANA DOMINACH
Oksana Dominach
/s/ CHARLES P. HADEED
Charles P. Hadeed
/s/ RICHARD J. HARRISON
Richard J. Harrison
/s/ MBAGO M. KANIKI
Mbago M. Kaniki
/s/ PAUL D. MOORE
Paul D. Moore
/s/ ANGELA J. PANZARELLA
Angela J. Panzarella
/s/ CARL E. SASSANO
Carl E. Sassano
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Director
Director
Director
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Shareholder and Corporate Information
Stock Exchange Listing Nasdaq: TRNS
2022 Virtual Annual Meeting
The 2022 annual meeting of shareholders will
be held on Wednesday, September 7, 2022, at
12:00 pm Eastern Time and will be conducted
exclusively as a virtual meeting by means of a live
webcast. Shareholders will be able to attend the
meeting, vote shares and submit questions via the
Internet by visiting:
www.virtualshareholdermeeting.com/TRNS2022
Transfer Agent and Registrar
For services such as change of address,
replacement of lost certificates and changes in
registered ownership, or for inquiries about your
account, contact:
Computershare
First Class/Registered/Certified Mail:
P.O. Box 505000 Louisville,
KY 40233
Courier Services:
462 South 4th Street, Suite 1600
Louisville, KY 40202
Shareholder Services:
(800) 622-6757 (US, Canada, Puerto Rico)
(781) 575-2879 (non-US)
www-us.computershare.com/Investor
Investor Relations
Investors, stockbrokers, security analysts and
others seeking information about us should contact:
Mark Doheny
Chief Financial Officer
(585) 563-5766
mark.doheny@transcat.com
Additional information about Transcat is
available at: www.transcat.com
Independent Registered Public
Accounting Firm
Freed Maxick CPAs, P.C.
Rochester, New York
Corporate Counsel
Harter Secrest & Emery LLP
Rochester, New York
Executive Officers and Senior Management
Lee Rudow
President and Chief Executive Officer
Mark Doheny
Chief Financial Officer
James Jenkins
Vice President of Corporate Development and Corporate
Secretary, General Counsel
Thomas Barbato
Senior Vice President of Finance
Marcy Bosley
Vice President of Service Sales
Theresa Conroy
Vice President of Human Resources
John Cummins
Vice President of NEXA EAM
Scott Deverell
Corporate Controller and Principal Accounting Officer
Michael West
Vice President of Distribution and Marketing
Board of Directors
Craig D. Cairns
President, Howe and Rusling, Inc.
Oksana S. Dominach 1, 3
Senior Vice President & Treasurer, Constellation Brands,
Inc.
Charles P. Hadeed 1*, 2
Retired Chief Executive Officer, Transcat, Inc.
Richard J. Harrison 2, 3
Vice Chairman, MDO II
Gary J. Haseley 2*
Chairman of the Board, Retired Senior Vice President
and General Manager, Kaman Automation, Control &
Energy
Mbago M. Kaniki
Chief Executive Officer, Adansonia Management
Paul D. Moore 1, 4*
Retired Senior Vice President, M&T Bank Corporation
Angela J. Panzarella 3*, 4
Retired Chief Executive Officer, YWCA of Rochester &
Monroe County
Lee D. Rudow 2
President and Chief Executive Officer, Transcat, Inc.
Carl E. Sassano 4
Retired Chief Executive Officer, Transcat, Inc.
1 Audit Committee
2 Executive Committee
3 Compensation Committee
4 Corporate Governance and Nominating Committee
* Committee Chair
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35 Vantage Point Drive, Rochester NY 14624
585-352-7777 • 800-828-1470 • Transcat.com
Nasdaq: TRNS
Boston, MA
Cincinnati, OH Charlotte, NC
Houston, TX
Denver, CO
Paxinos, PA Philadelphia, PA
Rochester, NY
Phoenix, AZ
San Diego, CA
Chesapeake, VA Dayton, OH
Los Angeles, CA
Pittsburgh, PA
Portland, OR
Milford, MA New Berlin, WI
Richmond, VA
Decatur, AL
San Juan, PR
St. Louis, MO
Canada Locations: Montreal
Ottawa
Toronto