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Transcat Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 4, 2011 04:46PM

Transcat Inc. (TRNS) filed Quarterly Report for the period ended 2011-09-24. Transcat Inc. has a market cap of $94.4 million; its shares were traded at around $12.95 with a P/E ratio of 34.9 and P/S ratio of 1. Transcat Inc. had an annual average earning growth of 15.1% over the past 5 years.



Highlight of Business Operations:

In the second quarter of fiscal year 2012, sales through our direct distribution channel increased $1.8 million, or 18.3%, from the same period in the prior fiscal year. Net sales to wind energy industry customers, which represented 8.7% and 6.3% of our total product net sales in the second quarter of fiscal years 2012 and 2011, respectively, increased by $0.6 million and were aided by our acquisition of Wind Turbine, which occurred in January 2011. Sales to our reseller channel increased $1.7 million, or 49.3%, from the second quarter of fiscal year 2011 to the second quarter of fiscal year 2012, and were strengthened by large orders of typically low volume products from targeted customers. As a result, the mix of reseller channel sales, as a percent of our total product net sales, increased 460 basis points from the second quarter of fiscal year 2011 to the second quarter of fiscal year 2012. The following table presents the percent of net sales for the significant product distribution channels for each quarter during fiscal years 2012 and 2011:

Service revenue increased to $8.2 million in the second quarter of fiscal year 2012, a $0.8 million, or 10.3% increase, when compared to $7.4 million in the second quarter of fiscal year 2011. The growth can be attributed to expansion of our existing customer base and incremental revenue associated with our business acquisitions. Also, within any year, while we add new customers, we also have customers from the prior year whose calibrations may not repeat for any number of reasons. Among those reasons are variations in the timing of customer periodic calibrations on instruments and other services, customer capital expenditures and customer outsourcing decisions. Because the timing of calibration orders and segment expenses 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. Service segment revenue for the twelve months ended September 24, 2011 was $32.9 million, up 7.5% when compared with $30.6 million for the twelve months ended September 25, 2010. Our fiscal years 2012 and 2011 service revenue growth in relation to prior fiscal year quarter comparisons is as follows:

Product gross profit improved $1.1 million, or 34.6%, in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011. Product gross margin in the second quarter of fiscal year 2012 was 25.4% and increased 160 basis points when compared with 23.8% in the second quarter of fiscal year 2011. Driving the increase in gross margin was a combined $0.3 million quarter-over-quarter increase in vendor rebates and cooperative advertising income. Our product gross profit includes a point-of-sale rebate program with a key vendor that is based on Product segment sales growth on a calendar year-over-year basis. The following table reflects the quarterly historical trend of our product gross margin:

Service segment gross profit increased $0.1 million, or 4.9%, from the second quarter of fiscal year 2011 to the second quarter of fiscal year 2012. Service segment gross margin decreased 120 basis points over the same time period. During the second quarter of fiscal year 2012, general inflationary increases and incremental costs associated with our business acquisitions slightly outpaced our revenue growth, resulting in a decline in Service segment gross margin. Because the timing of calibration orders and segment expenses 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. Service segment gross profit for the twelve months ended September 24, 2011 was $8.2 million, up 6.1% when compared with $7.7 million for the twelve months ended September 25, 2010. Service segment gross margin was 24.9% and 25.3% for the twelve months ended September 24, 2011 and September 25, 2010, respectively. The following table reflects our Service segment gross profit growth in relation to prior fiscal year quarters:

Our product net sales accounted for 67.2% and 63.7% of our total net revenue in the first six months of fiscal years 2012 and 2011, respectively. For the first six months of fiscal year 2012, product net sales increased $7.7 million, or 29.1%, compared with the first six months of fiscal year 2011. During this same period, product net sales within our direct channel increased by $4.7 million, of which $1.7 million was attributable to sales to wind energy customers, due in large part to our acquisition of Wind Turbine, which occurred in January 2011. Targeted marketing efforts as well as an improved economy contributed to the growth in our traditional customer base within our direct channel. Within our reseller channel, product sales increased $2.9 million, or 45.3%, for the first six months of fiscal year 2012 compared with the first six months of fiscal year 2011, aided by sales of certain typically low volume products to large reseller customers.

Read the The complete Report



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