##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended: September 29, 2007
 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.
  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
 (585) 352-7777
 þ o
  o o þ
 o þ




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##### 



Page(s)PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements:Consolidated Statements of Operations and Comprehensive Income for the Second
Quarter and Six Months Ended September 29, 2007 and September 23, 2006
    
    
    3Consolidated Balance Sheets as of September 29, 2007 and March 31, 2007
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended September 29, 2007
and September 23, 2006
    
    
    5Consolidated Statements of Shareholders Equity for the Six Months Ended
September 29, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-10Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    11-21Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4.
    
    Controls and Procedures
    
    
    22PART II.
    
    OTHER INFORMATIONItem 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22Item 6.
    
    Exhibits
    
    
    23SIGNATURES
    
    
    
    
    24
    

INDEX TO EXHIBITS
    
    
    25EX-3.1EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 
 TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 (Unaudited)
    
    
    (Unaudited)Second Quarter Ended
    
    
    Six Months EndedSeptember 29,
    
    
    September 23,
    
    
    September 29,
    
    
    September 23,2007
    
    
    2006
    
    
    2007
    
    
    2006Product Sales
    
    $
    11,219
    
    
    $
    9,880
    
    
    $
    22,146
    
    
    $
    20,417Service Sales
    
    
    5,406
    
    
    
    4,980
    
    
    
    10,669
    
    
    
    9,963Net Sales
    
    
    16,625
    
    
    
    14,860
    
    
    
    32,815
    
    
    
    30,380Cost of Products Sold
    
    
    8,087
    
    
    
    7,415
    
    
    
    15,952
    
    
    
    15,244Cost of Services Sold
    
    
    4,276
    
    
    
    3,897
    
    
    
    8,362
    
    
    
    7,728Total Cost of Products
and Services Sold
    
    
    12,363
    
    
    
    11,312
    
    
    
    24,314
    
    
    
    22,972Gross Profit
    
    
    4,262
    
    
    
    3,548
    
    
    
    8,501
    
    
    
    7,408Selling, Marketing and Warehouse Expenses
    
    
    1,919
    
    
    
    1,807
    
    
    
    4,127
    
    
    
    3,942Administrative Expenses
    
    
    1,749
    
    
    
    1,222
    
    
    
    3,331
    
    
    
    2,610Total Operating Expenses
    
    
    3,668
    
    
    
    3,029
    
    
    
    7,458
    
    
    
    6,552Operating Income
    
    
    594
    
    
    
    519
    
    
    
    1,043
    
    
    
    856Interest Expense
    
    
    29
    
    
    
    90
    
    
    
    63
    
    
    
    184Other Expense, net
    
    
    209
    
    
    
    46
    
    
    
    290
    
    
    
    120Total Other Expense
    
    
    238
    
    
    
    136
    
    
    
    353
    
    
    
    304Income Before Income Taxes
    
    
    356
    
    
    
    383
    
    
    
    690
    
    
    
    552Provision for Income Taxes
    
    
    162
    
    
    
    137
    
    
    
    258
    
    
    
    189Net Income
    
    
    194
    
    
    
    246
    
    
    
    432
    
    
    
    363Other Comprehensive Income
    
    
    265
    
    
    
    13
    
    
    
    457
    
    
    
    94Comprehensive Income
    
    $
    459
    
    
    $
    259
    
    
    $
    889
    
    
    $
    457Basic Earnings Per Share
    
    $
    0.03
    
    
    $
    0.04
    
    
    $
    0.06
    
    
    $
    0.05Average Shares Outstanding
    
    
    7,127
    
    
    
    6,902
    
    
    
    7,099
    
    
    
    6,864Diluted Earnings Per Share
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.05Average Shares Outstanding
    
    
    7,577
    
    
    
    7,425
    
    
    
    7,474
    
    
    
    7,377
  3




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TRANSCAT, INC.
CONSOLIDATED BALANCE SHEETS
 (Unaudited)September 29,
    
    
    March 31,2007
    
    
    2007ASSETSCurrent Assets:Cash
    
    $
    188
    
    
    $
    357Accounts Receivable, less allowance for doubtful accounts of $62 and
$47 as of September 29, 2007 and March 31, 2007, respectively
    
    
    7,874
    
    
    
    8,846Other Receivables
    
    
    858
    
    
    
    352Inventory, net
    
    
    3,662
    
    
    
    4,336Prepaid Expenses and Other Current Assets
    
    
    1,108
    
    
    
    762Deferred Tax Asset
    
    
    955
    
    
    
    851Total Current Assets
    
    
    14,645
    
    
    
    15,504Property and Equipment, net
    
    
    3,275
    
    
    
    2,814Goodwill
    
    
    2,967
    
    
    
    2,967Deferred Tax Asset
    
    
    769
    
    
    
    791Other Assets
    
    
    352
    
    
    
    346Total Assets
    
    $
    22,008
    
    
    $
    22,422LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    5,411
    
    
    $
    5,307Accrued Compensation and Other Liabilities
    
    
    1,931
    
    
    
    2,578Income Taxes Payable
    
    
    216
    
    
    
    42Total Current Liabilities
    
    
    7,558
    
    
    
    7,927Long-Term Debt
    
    
    1,333
    
    
    
    2,900Other Liabilities
    
    
    411
    
    
    
    366Total Liabilities
    
    
    9,302
    
    
    
    11,193Shareholders Equity:Common Stock, par value $0.50 per share, 30,000,000 shares authorized;
7,413,262 and 7,286,119 shares issued as of September 29, 2007 and
March 31, 2007, respectively; 7,137,480 and 7,010,337 shares
outstanding as of September 29, 2007 and March 31, 2007,
respectively
    
    
    3,707
    
    
    
    3,643Capital in Excess of Par Value
    
    
    5,792
    
    
    
    5,268Warrants
    
    
    329
    
    
    
    329Accumulated Other Comprehensive Income
    
    
    500
    
    
    
    43Retained Earnings
    
    
    3,366
    
    
    
    2,934Less: Treasury Stock, at cost, 275,782 shares as of
September 29, 2007 and March 31, 2007
    
    
    (988
    )
    
    
    (988
    )Total Shareholders Equity
    
    
    12,706
    
    
    
    11,229Total Liabilities and Shareholders Equity
    
    $
    22,008
    
    
    $
    22,422
  4




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TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Cash Flows from Operating Activities:Net Income
    
    $
    432
    
    
    $
    363Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:Deferred Income Taxes
    
    
    (85
    )
    
    
    148Depreciation and Amortization
    
    
    788
    
    
    
    769Provision for Accounts Receivable and Inventory Reserves
    
    
    (63
    )
    
    
    43Stock-Based Compensation Expense
    
    
    428
    
    
    
    328Changes in Assets and Liabilities:Accounts Receivable and Other Receivables
    
    
    892
    
    
    
    515Inventory
    
    
    749
    
    
    
    (46
    )Prepaid Expenses and Other Assets
    
    
    (602
    )
    
    
    (280
    )Accounts Payable
    
    
    104
    
    
    
    (408
    )Accrued Compensation and Other Liabilities
    
    
    (595
    )
    
    
    (924
    )Income Taxes Payable
    
    
    174
    
    
    
    (41
    )Net Cash Provided by Operating Activities
    
    
    2,222
    
    
    
    467Cash Flows from Investing Activities:Purchase of Property and Equipment
    
    
    (999
    )
    
    
    (454
    )Net Cash Used in Investing Activities
    
    
    (999
    )
    
    
    (454
    )Cash Flows from Financing Activities:Chase Revolving Line of Credit, net
    
    
    (1,567
    )
    
    
    GMAC Revolving Line of Credit, net
    
    
    
    
    
    
    223Payments on Other Debt Obligations
    
    
    
    
    
    
    (368
    )Issuance of Common Stock
    
    
    160
    
    
    
    110Net Cash Used in Financing Activities
    
    
    (1,407
    )
    
    
    (35
    )Effect of Exchange Rate Changes on Cash
    
    
    15
    
    
    
    4Net Decrease in Cash
    
    
    (169
    )
    
    
    (18
    )Cash at Beginning of Period
    
    
    357
    
    
    
    115Cash at End of Period
    
    $
    188
    
    
    $
    97Supplemental Disclosures of Cash Flow Activity:Cash paid during the period for:Interest
    
    $
    69
    
    
    $
    198Income Taxes, net
    
    $
    177
    
    
    $
    85Supplemental Disclosure of Non-Cash Financing Activity:Treasury Stock Acquired in Cashless Exercise of Stock Options
    
    $
    
    
    
    $
    50
  5




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TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 CapitalCommon Stock
    
    
    In
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    Treasury StockIssued
    
    
    Excess
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Outstanding$0.50 Par Value
    
    
    of Par
    
    
    
    
    
    
    Comprehensive
    
    
    Retained
    
    
    at CostShares
    
    
    Amount
    
    
    Value
    
    
    Warrants
    
    
    Income
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance as of March 31, 2007
    
    
    7,286
    
    
    $
    3,643
    
    
    $
    5,268
    
    
    $
    329
    
    
    $
    43
    
    
    $
    2,934
    
    
    
    276
    
    
    $
    (988
    )
    
    $
    11,229Issuance of Common Stock
    
    
    98
    
    
    
    49
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Stock-Based Compensation
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256Issuance of Restricted Stock
    
    
    29
    
    
    
    15
    
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172Comprehensive Income:Currency Translation
Adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    453Unrecognized Prior Service
Cost, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    432
    
    
    
    
    
    
    
    
    
    
    
    432Balance as of September 29, 2007
    
    
    7,413
    
    
    $
    3,707
    
    
    $
    5,792
    
    
    $
    329
    
    
    $
    500
    
    
    $
    3,366
    
    
    
    276
    
    
    $
    (988
    )
    
    $
    12,706
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TRANSCAT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  GENERAL
 Description of Business:
 Basis of Presentation:
 Earnings Per Share:
  Second Quarter Ended
    
    
    Six Months EndedSeptember 29,
    
    
    September 23,
    
    
    September 29,
    
    
    September 23,2007
    
    
    2006
    
    
    2007
    
    
    2006Shares Outstanding:Dilutive
    
    
    450
    
    
    
    523
    
    
    
    375
    
    
    
    513Anti-dilutive
    
    
    626
    
    
    
    368
    
    
    
    701
    
    
    
    378Total
    
    
    1,076
    
    
    
    891
    
    
    
    1,076
    
    
    
    891Range of Exercise Prices per
Share:Options
    
    $
    1.50-$7.72
    
    
    $
    0.80-$5.80
    
    
    $
    1.50-$7.72
    
    
    $
    0.80-$5.80Warrants
    
    $
    1.50-$5.80
    
    
    $
    0.97-$5.80
    
    
    $
    1.50-$5.80
    
    
    $
    0.97-$5.80
 Stock-Based Compensation:
 7




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Expected life
    
    6 yearsAnnualized volatility rate
    
    
    70.8
    %Risk-free rate of return
    
    
    4.6
    %Dividend rate
    
    
    0.0
    %
  NOTE 2  DEBT
 Description.
 Interest and Commitment Fees. 1 2
 Covenants.
 Other Terms.
 NOTE 3  INCOME TAXES
    8




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NOTE 4  STOCK-BASED COMPENSATION
 Stock Options:
  Weighted
    
    
    Weighted AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 31, 2007
    
    
    329
    
    
    $
    3.11Granted
    
    
    392
    
    
    
    6.94Exercised
    
    
    (50
    )
    
    
    1.09Cancelled/Forfeited
    
    
    (2
    )
    
    
    1.40Outstanding as of September 29, 2007
    
    
    669
    
    
    
    5.51
    
    
    
    9
    
    
    $
    956Exercisable as of September 29, 2007
    
    
    194
    
    
    
    3.01
    
    
    
    7
    
    
    $
    668
   Warrants:
  Weighted
    
    
    Weighted AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 31, 2007
    
    
    153
    
    
    $
    3.27Granted
    
    
    
    
    
    
    Exercised
    
    
    (43
    )
    
    
    1.81Cancelled/Forfeited
    
    
    (3
    )
    
    
    5.10Outstanding as of September 29, 2007
    
    
    107
    
    
    
    3.81
    
    
    
    2
    
    
    $
    284Exercisable as of September 29, 2007
    
    
    81
    
    
    
    3.38
    
    
    
    2
    
    
    $
    248
 9




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NOTE 5  SEGMENT INFORMATION
  Second Quarter Ended
    
    
    Six Months EndedSeptember 29,
    
    
    September 23,
    
    
    September 29,
    
    
    September 23,2007
    
    
    2006
    
    
    2007
    
    
    2006Net Sales:Product
    
    $
    11,219
    
    
    $
    9,880
    
    
    $
    22,146
    
    
    $
    20,417Service
    
    
    5,406
    
    
    
    4,980
    
    
    
    10,669
    
    
    
    9,963Total
    
    
    16,625
    
    
    
    14,860
    
    
    
    32,815
    
    
    
    30,380Gross Profit:Product
    
    
    3,132
    
    
    
    2,465
    
    
    
    6,194
    
    
    
    5,173Service
    
    
    1,130
    
    
    
    1,083
    
    
    
    2,307
    
    
    
    2,235Total
    
    
    4,262
    
    
    
    3,548
    
    
    
    8,501
    
    
    
    7,408Operating Expenses:Product
    
    
    2,209
    
    
    
    1,856
    
    
    
    4,558
    
    
    
    3,962Service
    
    
    1,459
    
    
    
    1,173
    
    
    
    2,900
    
    
    
    2,590Total
    
    
    3,668
    
    
    
    3,029
    
    
    
    7,458
    
    
    
    6,552Operating Income
    
    
    594
    
    
    
    519
    
    
    
    1,043
    
    
    
    856Unallocated Amounts:Other Expense
    
    
    238
    
    
    
    136
    
    
    
    353
    
    
    
    304Provision for Income Taxes
    
    
    162
    
    
    
    137
    
    
    
    258
    
    
    
    189Total
    
    
    400
    
    
    
    273
    
    
    
    611
    
    
    
    493Net Income
    
    $
    194
    
    
    $
    246
    
    
    $
    432
    
    
    $
    363
 10




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements.
 Rounding.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 Accounts Receivable:
 Stock-Based Compensation:
  Revenue Recognition:
 11




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RESULTS OF OPERATIONS
  (Unaudited)
    
    
    (Unaudited)Second Quarter Ended
    
    
    Six Months EndedSeptember 29,
    
    
    September 23,
    
    
    September 29,
    
    
    September 23,2007
    
    
    2006
    
    
    2007
    
    
    2006As a Percentage of Net Sales:Product Sales
    
    
    67.5
    %
    
    
    66.5
    %
    
    
    67.5
    %
    
    
    67.2
    %Service Sales
    
    
    32.5
    %
    
    
    33.5
    %
    
    
    32.5
    %
    
    
    32.8
    %Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Product Gross Profit
    
    
    27.9
    %
    
    
    24.9
    %
    
    
    28.0
    %
    
    
    25.3
    %Service Gross Profit
    
    
    20.9
    %
    
    
    21.7
    %
    
    
    21.6
    %
    
    
    22.4
    %Total Gross Profit
    
    
    25.6
    %
    
    
    23.9
    %
    
    
    25.9
    %
    
    
    24.4
    %Selling, Marketing and Warehouse Expenses
    
    
    11.5
    %
    
    
    12.2
    %
    
    
    12.6
    %
    
    
    13.0
    %Administrative Expenses
    
    
    10.5
    %
    
    
    8.2
    %
    
    
    10.2
    %
    
    
    8.6
    %Total Operating Expenses
    
    
    22.0
    %
    
    
    20.4
    %
    
    
    22.8
    %
    
    
    21.6
    %Operating Income
    
    
    3.6
    %
    
    
    3.5
    %
    
    
    3.1
    %
    
    
    2.8
    %Interest Expense
    
    
    0.2
    %
    
    
    0.6
    %
    
    
    0.2
    %
    
    
    0.6
    %Other Expense
    
    
    1.3
    %
    
    
    0.3
    %
    
    
    0.9
    %
    
    
    0.4
    %Total Other Expense
    
    
    1.5
    %
    
    
    0.9
    %
    
    
    1.1
    %
    
    
    1.0
    %Income Before Income Taxes
    
    
    2.1
    %
    
    
    2.6
    %
    
    
    2.0
    %
    
    
    1.8
    %Provision for Income Taxes
    
    
    1.0
    %
    
    
    0.9
    %
    
    
    0.8
    %
    
    
    0.6
    %Net Income
    
    
    1.1
    %
    
    
    1.7
    %
    
    
    1.2
    %
    
    
    1.2
    %
 12




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##### Table of Contents



SECOND QUARTER ENDED SEPTEMBER 29, 2007 COMPARED TO SECOND QUARTER ENDED SEPTEMBER 23, 2006
(dollars in millions):
 Sales:
 Second Quarter EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Net Sales:Product
    
    $
    11.2
    
    
    $
    9.9Service
    
    
    5.4
    
    
    
    5.0Total
    
    $
    16.6
    
    
    $
    14.9
   FY 2008
    
    
    
    FY 2007Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Product Sales Growth
    
    
    13.1
    %
    
    
    3.8
    %
    
    
    
    21.0
    %
    
    
    7.0
    %
    
    
    5.3
    %
    
    
    11.7
    %
  FY
2008 Second Quarter
    
    

FY
2007 Second QuarterPercent of
    
    Gross
    
    
    Percent of
    
    GrossNet Sales
    
    Profit % (1)
    
    
    Net Sales
    
    Profit % (1)Direct
    
    
    86
    %
    
    
    27.1
    %
    
    
    
    85
    %
    
    
    25.6
    %Indirect
    
    
    14
    %
    
    
    18.0
    %
    
    
    
    15
    %
    
    
    13.0
    %Total
    
    
    100
    %
    
    
    25.8
    %
    
    
    
    100
    %
    
    
    23.7
    %
  13




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##### Table of Contents



FY 2008
    
    
    
    FY 2007Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Total Unshippable Orders
    
    $
    1.7
    
    
    $
    1.7
    
    
    
    $
    1.8
    
    
    $
    2.1
    
    
    $
    2.1
    
    
    $
    1.4% of Unshippable Orders that
Are Backorders
    
    
    76.5
    %
    
    
    82.4
    %
    
    
    
    88.9
    %
    
    
    90.5
    %
    
    
    90.5
    %
    
    
    78.6
    %
  FY 2008
    
    
    
    FY 2007Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Service Sales Growth
    
    
    8.0
    %
    
    
    6.0
    %
    
    
    
    12.7
    %
    
    
    4.3
    %
    
    
    6.4
    %
    
    
    6.4
    %
 Gross Profit:
 Second Quarter EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Gross Profit:Product
    
    $
    3.1
    
    
    $
    2.5Service
    
    
    1.1
    
    
    
    1.1Total
    
    $
    4.2
    
    
    $
    3.6
   14




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##### Table of Contents



FY 2008
    
    
    
    FY 2007Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Product Gross Profit % (1)
    
    
    25.5
    %
    
    
    25.0
    %
    
    
    
    24.0
    %
    
    
    24.0
    %
    
    
    23.7
    %
    
    
    22.1
    %Other Income (Expense) % (2)
    
    
    2.2
    %
    
    
    2.5
    %
    
    
    
    3.6
    %
    
    
    3.6
    %
    
    
    1.6
    %
    
    
    3.6
    %Product Gross Profit %
    
    
    27.7
    %
    
    
    27.5
    %
    
    
    
    27.6
    %
    
    
    27.6
    %
    
    
    25.3
    %
    
    
    25.7
    %
 (1)
    
    Calculated as net sales less purchase costs divided by net sales.(2)
    
    Includes vendor rebates, cooperative advertising income, freight billed to customers,
freight expenses, and direct shipping costs.
  FY 2008
    
    
    
    FY 2007Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Service Gross Profit %
    
    
    20.4
    %
    
    
    22.6
    %
    
    
    
    24.2
    %
    
    
    18.4
    %
    
    
    22.0
    %
    
    
    24.0
    %
 Operating Expenses:
 Second Quarter EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Operating Expenses:Selling, Marketing and Warehouse
    
    $
    1.9
    
    
    $
    1.8Administrative
    
    
    1.7
    
    
    
    1.2Total
    
    $
    3.6
    
    
    $
    3.0
    15




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##### Table of Contents



Other Expense:
 Second Quarter EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Other Expense:Interest Expense
    
    $
    
    
    
    $
    0.1Other Expense
    
    
    0.2
    
    
    
    Total
    
    $
    0.2
    
    
    $
    0.1
  Taxes:
 Second Quarter EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Provision for Income Taxes
    
    $
    0.2
    
    
    $
    0.1
  Other Comprehensive Income:
 Second Quarter EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Other Comprehensive Income
    
    $
    0.3
    
    
    $
    
  16




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##### Table of Contents



SIX
MONTHS ENDED SEPTEMBER 29, 2007 COMPARED TO SIX MONTHS ENDED
SEPTEMBER 23, 2006
(dollars in millions):
 Sales:
 Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Net Sales:Product
    
    $
    22.1
    
    
    $
    20.4Service
    
    
    10.7
    
    
    
    10.0Total
    
    $
    32.8
    
    
    $
    30.4
    Six Months Ended
    
    
    
    Six Months EndedSeptember 29, 2007
    
    
    
    September 23, 2006Percent of
    
    
    Gross
    
    
    
    Percent of
    
    
    GrossNet Sales
    
    
    Profit % (1)
    
    
    
    Net Sales
    
    
    Profit % (1)Direct
    
    
    86
    %
    
    
    26.6
    %
    
    
    
    83
    %
    
    
    25.1
    %Indirect
    
    
    14
    %
    
    
    16.9
    %
    
    
    
    17
    %
    
    
    12.5
    %Total
    
    
    100
    %
    
    
    25.2
    %
    
    
    
    100
    %
    
    
    23.0
    %
 (1)
    
    Calculated at net sales less purchase costs divided by net sales.
  17




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##### Table of Contents



Gross Profit:
 Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Gross Profit:Product
    
    $
    6.2
    
    
    $
    5.2Service
    
    
    2.3
    
    
    
    2.2Total
    
    $
    8.5
    
    
    $
    7.4
    Operating Expenses:
 Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Operating Expenses:Selling, Marketing and Warehouse
    
    $
    4.1
    
    
    $
    3.9Administrative
    
    
    3.3
    
    
    
    2.6Total
    
    $
    7.4
    
    
    $
    6.5
    18




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##### Table of Contents



Other Expense:
 Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Other Expense:Interest Expense
    
    $
    0.1
    
    
    $
    0.2Other Expense
    
    
    0.3
    
    
    
    0.1Total
    
    $
    0.4
    
    
    $
    0.3
  Taxes:
 Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Provision for Income Taxes
    
    $
    0.3
    
    
    $
    0.2
  Other Comprehensive Income:
 Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Other Comprehensive Income
    
    $
    0.5
    
    
    $
    0.1
  19




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows.
 Six Months EndedSeptember 29,
    
    
    September 23,2007
    
    
    2006Cash (Used in) Provided by:Operating Activities
    
    $
    2,222
    
    
    $
    467Investing Activities
    
    
    (999
    )
    
    
    (454
    )Financing Activities
    
    
    (1,407
    )
    
    
    (35
    )
  
    
    Inventory/Accounts Payable: Our inventory of $3.7 million on September 29, 2007 is
$0.6 million less than our fiscal year 2007 year-end inventory on March 31, 2007 and
$0.3 million less than the inventory level on September 23, 2006. The year-over-year
decrease is due to refined inventory ordering models and increased focus on lower
inventory levels while maintaining consistently high order fulfillment rates. Our $1.6
million increase in accounts payable, as the following table illustrates (dollars in
millions), is primarily the result of the timing of payments and inventory purchases
made in support of the high quarter-end sales volume during the second quarter of
fiscal year 2008:
 September 29,
    
    
    September 23,2007
    
    
    2006Accounts Payable
    
    $
    5.4
    
    
    $
    3.8Inventory, net
    
    $
    3.7
    
    
    $
    4.0Accounts Payable/Inventory Ratio
    
    
    1.46
    
    
    
    0.95
 
    
    Receivables: The increase in our accounts receivable at the end of our second
quarter of fiscal year 2008 compared to the end of the second quarter of fiscal year
2007 is primarily due to sales growth in our fiscal year 2008 second quarter. We have
continued to maintain strong collections on our accounts receivable, reflected in our
days sales outstanding, as the following table illustrates (dollars in millions):
 September 29,
    
    
    September 23,2007
    
    
    2006Net Sales, for the last two fiscal months
    
    $
    12.0
    
    
    $
    10.4Accounts Receivable, net
    
    $
    7.9
    
    
    $
    7.1Days Sales Outstanding (based on 60 days)
    
    
    40
    
    
    
    41
   September 29,
    
    
    September 23,2007
    
    
    2006Total Debt
    
    $
    1.3
    
    
    $
    4.2
 20




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##### Table of Contents



Debt.
   OUTLOOK
     21




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 INTEREST RATES
   FOREIGN CURRENCY
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Controls over Financial Reporting.
 
 PART II. OTHER INFORMATION
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Proposal 1
  Nominees
    
    Votes For
    
    
    Votes WithheldCharles P. Hadeed
    
    
    6,775,888
    
    
    
    21,110Nancy D. Hessler
    
    
    6,771,936
    
    
    
    25,062Paul D. Moore
    
    
    6,772,241
    
    
    
    24,757
  22




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##### Table of Contents



Proposal 2
  Votes For:
    
    
    6,575,588Votes Against:
    
    
    146,567Votes Abstained:
    
    
    74,842Broker Non-Votes
    
    
    
 Proposal 3
  Votes For:
    
    
    6,767,630Votes Against:
    
    
    22,938Votes Abstained:
    
    
    6,429Broker Non-Votes:
    
    
    
 
 ITEM 6. EXHIBITS
  23




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##### Table of Contents



SIGNATURES
  TRANSCAT, INC.Date: November 9, 2007
    
    /s/ Charles P. HaddedCharles P. HadeedChief Executive Officer, President and Chief Operating OfficerDate: November 9, 2007
    
    /s/ John J. ZimmerJohn J. ZimmerVice President of Finance and Chief Financial Officer
 24




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##### Table of Contents



INDEX TO EXHIBITS
 (3)(ii)
    
    By-laws3.1
    
    
    Code of Regulations, as amended(31)
    
    Rule 13a-14(a)/15d-14(a) Certifications31.1
    
    
    Certification of Chief Executive Officer31.2
    
    
    Certification of Chief Financial Officer(32)
    
    Section 1350 Certifications32.1
    
    
    Section 1350 Certifications
 25