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Transcat Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 2, 2012 04:13PM

Transcat Inc. (TRNS) filed Quarterly Report for the period ended 2011-12-24. Transcat Inc. has a market cap of $87.8 million; its shares were traded at around $11.99 with a P/E ratio of 29.2 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 third quarter of fiscal year 2012, product sales through our direct distribution channel increased $1.3 million, or 10.8%, from the same quarter in the prior fiscal year. Included in this channel were net sales to wind energy industry customers, which represented 8.6% and 4.7% of our total product net sales in the third quarter of fiscal years 2012 and 2011, respectively, and increased by $0.9 million in the third quarter of fiscal year 2012 as compared to the third quarter of fiscal year 2010. This growth was aided by our acquisition of Wind Turbine, which occurred in January 2011. Sales to our reseller channel increased $1.4 million, or 37.2%, from the third quarter of fiscal year 2011 to the third 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 400 basis points from the third quarter of fiscal year 2011 to the third 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 $9.1 million in the third quarter of fiscal year 2012, a $1.8 million, or 24.0%, increase when compared to $7.3 million in the third 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. Within any year, while we may 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

Service segment gross profit increased $0.2 million, or 13.5%, from the third quarter of fiscal year 2011 to the third quarter of fiscal year 2012. Service segment gross margin decreased 190 basis points over the same time period. Costs associated with recent acquisitions as well as general inflationary increases contributed to a higher cost growth rate than that of revenue, 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 December 24, 2011 was $8.4 million, up 6.9% when compared with $7.9 million for the twelve months ended December 25, 2010. Service segment gross margin was 24.3% and 25.2% for the twelve months ended December 24, 2011 and December 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 67.6% and 65.7% of our total net revenue in the first nine months of fiscal years 2012 and 2011, respectively. For the first nine months of fiscal year 2012, product net sales increased $10.5 million, or 24.5%, compared with the first nine months of fiscal year 2011. During this same period, product net sales within our direct channel increased by $6.0 million, of which $2.6 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 direct mail and online marketing efforts contributed to the growth in our traditional customer base within our direct channel. Within our reseller channel, product net sales increased $4.4 million, or 42.3%, for the first nine months of fiscal year 2012 compared with the first nine months of fiscal year 2011, aided by sales of certain typically low volume products to large reseller customers.

Service segment gross profit increased $0.5 million, or 9.1%, from the first nine months of fiscal year 2011 to the first nine months of fiscal year 2012. Service segment gross margin declined 110 basis points over the same time period. While Service segment revenue increased 14.7%, we realized an increase in the cost of services sold of 16.4% in the first nine months of fiscal year 2012 compared to the first nine months of fiscal year 2011. The cost increase was primarily due to general inflationary increases and incremental lab costs associated with our business acquisitions.

Read the The complete Report



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