##### 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:
December 26, 2009
 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
    
    16-0874418(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 35 Vantage Point Drive, Rochester, New York 14624
  (585) 352-7777
  þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ
 o þ




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##### 



Page(s)PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements:Statements of Operations and Comprehensive Income for the Third Quarter and Nine Months Ended December 26, 2009 and December 27, 2008
    
    
    3Balance Sheets as of December 26, 2009 and March 28, 2009
    
    
    4Statements of Cash Flows for the Nine Months Ended December 26, 2009 and December 27, 2008
    
    
    5Statements of Shareholders Equity for the Nine Months Ended December 26, 2009
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-11Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12-21Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    21PART II.
    
    OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    22SIGNATURES
    
    
    23INDEX TO EXHIBITS
    
    
    24EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 
 TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 (Unaudited)
    
    
    (Unaudited)Third Quarter Ended
    
    
    Nine Months EndedDecember 26,
    
    
    December 27,
    
    
    December 26,
    
    
    December 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Product Sales
    
    $
    15,186
    
    
    $
    13,995
    
    
    $
    38,424
    
    
    $
    39,265Service Revenue
    
    
    6,637
    
    
    
    5,997
    
    
    
    19,102
    
    
    
    17,190Net Revenue
    
    
    21,823
    
    
    
    19,992
    
    
    
    57,526
    
    
    
    56,455Cost of Products Sold
    
    
    11,845
    
    
    
    10,586
    
    
    
    29,775
    
    
    
    29,129Cost of Services Sold
    
    
    5,214
    
    
    
    4,760
    
    
    
    15,014
    
    
    
    13,620Total Cost of Products
and Services Sold
    
    
    17,059
    
    
    
    15,346
    
    
    
    44,789
    
    
    
    42,749Gross Profit
    
    
    4,764
    
    
    
    4,646
    
    
    
    12,737
    
    
    
    13,706Selling, Marketing and Warehouse Expenses
    
    
    2,585
    
    
    
    2,666
    
    
    
    7,593
    
    
    
    7,409Administrative Expenses
    
    
    1,388
    
    
    
    1,358
    
    
    
    4,133
    
    
    
    4,548Total Operating Expenses
    
    
    3,973
    
    
    
    4,024
    
    
    
    11,726
    
    
    
    11,957Operating Income
    
    
    791
    
    
    
    622
    
    
    
    1,011
    
    
    
    1,749Interest Expense
    
    
    9
    
    
    
    43
    
    
    
    34
    
    
    
    70Other Expense, net
    
    
    7
    
    
    
    56
    
    
    
    39
    
    
    
    68Total Other Expense
    
    
    16
    
    
    
    99
    
    
    
    73
    
    
    
    138Income Before Income Taxes
    
    
    775
    
    
    
    523
    
    
    
    938
    
    
    
    1,611Provision for Income Taxes
    
    
    292
    
    
    
    181
    
    
    
    356
    
    
    
    611Net Income
    
    
    483
    
    
    
    342
    
    
    
    582
    
    
    
    1,000Other Comprehensive Income (Loss)
    
    
    26
    
    
    
    (89
    )
    
    
    98
    
    
    
    (92
    )Comprehensive Income
    
    $
    509
    
    
    $
    253
    
    
    $
    680
    
    
    $
    908Basic Earnings Per Share
    
    $
    0.07
    
    
    $
    0.05
    
    
    $
    0.08
    
    
    $
    0.14Average Shares Outstanding
    
    
    7,343
    
    
    
    7,373
    
    
    
    7,373
    
    
    
    7,280Diluted Earnings Per Share
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.08
    
    
    $
    0.13Average Shares Outstanding
    
    
    7,560
    
    
    
    7,599
    
    
    
    7,602
    
    
    
    7,486
  3




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TRANSCAT, INC.  CONSOLIDATED BALANCE SHEETS
 (Unaudited)December 26,
    
    
    March 28,2009
    
    
    2009ASSETSCurrent Assets:Cash
    
    $
    25
    
    
    $
    59Accounts Receivable, less allowance for doubtful accounts of $94
and $75 as of December 26, 2009 and March 28, 2009, respectively
    
    
    9,997
    
    
    
    8,981Other Receivables
    
    
    262
    
    
    
    119Inventory, net
    
    
    5,598
    
    
    
    4,887Prepaid Expenses and Other Current Assets
    
    
    1,160
    
    
    
    774Deferred Tax Asset
    
    
    520
    
    
    
    380Total Current Assets
    
    
    17,562
    
    
    
    15,200Property and Equipment, net
    
    
    4,171
    
    
    
    4,174Goodwill
    
    
    9,016
    
    
    
    7,923Intangible Asset, net
    
    
    945
    
    
    
    1,091Deferred Tax Asset
    
    
    585
    
    
    
    635Other Assets
    
    
    381
    
    
    
    368Total Assets
    
    $
    32,660
    
    
    $
    29,391LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    8,274
    
    
    $
    4,748Accrued Compensation and Other Liabilities
    
    
    2,291
    
    
    
    1,757Income Taxes Payable
    
    
    105
    
    
    
    215Total Current Liabilities
    
    
    10,670
    
    
    
    6,720Long-Term Debt
    
    
    2,040
    
    
    
    3,559Other Liabilities
    
    
    590
    
    
    
    493Total Liabilities
    
    
    13,300
    
    
    
    10,772Shareholders Equity:Common Stock, par value $0.50 per share, 30,000,000 shares authorized;
7,693,830 and 7,656,358 shares issued as of December 26, 2009 and
March 28, 2009, respectively; 7,275,048 and 7,380,576 shares
outstanding as of December 26, 2009 and March 28, 2009, respectively
    
    
    3,847
    
    
    
    3,828Capital in Excess of Par Value
    
    
    9,295
    
    
    
    8,606Accumulated Other Comprehensive Income
    
    
    418
    
    
    
    320Retained Earnings
    
    
    7,435
    
    
    
    6,853Less: Treasury Stock, at cost, 418,782 and 275,782 shares as of
December 26, 2009 and March 28, 2009, respectively
    
    
    (1,635
    )
    
    
    (988
    )Total Shareholders Equity
    
    
    19,360
    
    
    
    18,619Total Liabilities and Shareholders Equity
    
    $
    32,660
    
    
    $
    29,391
  4




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TRANSCAT, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)Nine Months EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Cash Flows from Operating Activities:Net Income
    
    $
    582
    
    
    $
    1,000Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:Deferred Income Taxes
    
    
    (86
    )
    
    
    168Depreciation and Amortization
    
    
    1,524
    
    
    
    1,365Provision for Accounts Receivable and Inventory Reserves
    
    
    52
    
    
    
    111Stock-Based Compensation Expense
    
    
    530
    
    
    
    476Changes in Assets and Liabilities:Accounts Receivable and Other Receivables
    
    
    (1,143
    )
    
    
    1,050Inventory
    
    
    (706
    )
    
    
    308Prepaid Expenses and Other Assets
    
    
    (833
    )
    
    
    (792
    )Accounts Payable
    
    
    3,526
    
    
    
    (1,568
    )Accrued Compensation and Other Liabilities
    
    
    645
    
    
    
    (522
    )Income Taxes Payable
    
    
    (119
    )
    
    
    (251
    )Net Cash Provided by Operating Activities
    
    
    3,972
    
    
    
    1,345Cash Flows from Investing Activities:Purchase of Property and Equipment
    
    
    (941
    )
    
    
    (1,038
    )Payments of Contingent Consideration
    
    
    (1,093
    )
    
    
    Purchase of Westcon, Inc., net of cash acquired
    
    
    
    
    
    
    (5,641
    )Net Cash Used in Investing Activities
    
    
    (2,034
    )
    
    
    (6,679
    )Cash Flows from Financing Activities:Revolving Line of Credit, net
    
    
    (1,499
    )
    
    
    4,945Payments on Other Debt Obligations
    
    
    (20
    )
    
    
    (4
    )Issuance of Common Stock
    
    
    169
    
    
    
    202Repurchase of Common Stock
    
    
    (647
    )
    
    
    Excess Tax Benefits Related to Stock-Based Compensation
    
    
    9
    
    
    
    41Net Cash (Used in) Provided by Financing Activities
    
    
    (1,988
    )
    
    
    5,184Effect of Exchange Rate Changes on Cash
    
    
    16
    
    
    
    20Net Decrease in Cash
    
    
    (34
    )
    
    
    (130
    )Cash at Beginning of Period
    
    
    59
    
    
    
    208Cash at End of Period
    
    $
    25
    
    
    $
    78Supplemental Disclosures of Cash Flow Activity:Cash paid during the period for:Interest
    
    $
    49
    
    
    $
    42Income Taxes, net
    
    $
    559
    
    
    $
    729Supplemental Disclosures of Non-Cash Investing and Financing Activities:Stock Issued in Connection with Business Acquisition
    
    $
    
    
    
    $
    1,113Capital Lease Obligation
    
    $
    
    
    
    $
    49
  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
    
    
    Income
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance as of March 28, 2009
    
    
    7,656
    
    
    $
    3,828
    
    
    $
    8,606
    
    
    $
    320
    
    
    $
    6,853
    
    
    
    276
    
    
    $
    (988
    )
    
    $
    18,619Issuance (Repurchase)
of Common Stock
    
    
    38
    
    
    
    19
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    143
    
    
    
    (647
    )
    
    
    (478
    )Stock-Based Compensation
    
    
    
    
    
    
    
    
    
    
    530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    530Tax Benefit from Stock-
Based Compensation
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Comprehensive Income:Currency Translation
Adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89Unrecognized Prior Service
Cost, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    582
    
    
    
    
    
    
    
    
    
    
    
    582Balance as of December 26, 2009
    
    
    7,694
    
    
    $
    3,847
    
    
    $
    9,295
    
    
    $
    418
    
    
    $
    7,435
    
    
    
    419
    
    
    $
    (1,635
    )
    
    $
    19,360
  6




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TRANSCAT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  GENERAL
 Description of Business:
 Basis of Presentation:
  Fair Value of Financial Instruments:
 Stock-Based Compensation:
 Foreign Currency Translation and Transactions:
  7




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Earnings Per Share:
  Third Quarter Ended
    
    Nine Months EndedDecember 26,
    
    December 27,
    
    December 26,
    
    December 27,2009
    
    2008
    
    2009
    
    2008Average Shares Outstanding  Basic
    
    
    7,343
    
    
    
    7,373
    
    
    
    7,373
    
    
    
    7,280Effect of Dilutive Common Stock Equivalents
    
    
    217
    
    
    
    226
    
    
    
    229
    
    
    
    206Average Shares Outstanding  Diluted
    
    
    7,560
    
    
    
    7,599
    
    
    
    7,602
    
    
    
    7,486Anti-dilutive Common Stock Equivalents
    
    
    623
    
    
    
    557
    
    
    
    612
    
    
    
    577
 Shareholders Equity:
 Income Taxes:
 Subsequent Events:
  Reclassification of Amounts:
 NOTE 2  DEBT
 Description.
 Interest and Commitment Fees. 1 2
 Covenants.
 8




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Other Terms.
 NOTE 3  STOCK-BASED COMPENSATION
   Restricted Stock:
  Stock Options:
  WeightedAverage
    
    
    Weighted AverageNumber
    
    
    Exercise
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 28, 2009
    
    
    665
    
    
    $
    5.70Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Cancelled/Forfeited
    
    
    (1
    )
    
    
    2.89Outstanding as of December 26, 2009
    
    
    664
    
    
    
    5.71
    
    
    
    7
    
    
    $
    745Exercisable as of December 26, 2009
    
    
    412
    
    
    
    4.83
    
    
    
    6
    
    
    
    706
  9




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Warrants:
 WeightedAverage
    
    
    Weighted AverageNumber
    
    
    Exercise
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 28, 2009
    
    
    63
    
    
    $
    4.28Granted
    
    
    
    
    
    
    Exercised
    
    
    (18
    )
    
    
    3.19Cancelled/Forfeited
    
    
    (4
    )
    
    
    2.88Outstanding as of December 26, 2009
    
    
    41
    
    
    
    4.89
    
    
    
    1
    
    
    $
    55Exercisable as of December 26, 2009
    
    
    41
    
    
    
    4.89
    
    
    
    1
    
    
    
    55
  NOTE 4  SEGMENT INFORMATION
  Third Quarter Ended
    
    
    Nine Months EndedDecember 26,
    
    
    December 27,
    
    
    December 26,
    
    
    December 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net Revenue:Product Sales
    
    $
    15,186
    
    
    $
    13,995
    
    
    $
    38,424
    
    
    $
    39,265Service Revenue
    
    
    6,637
    
    
    
    5,997
    
    
    
    19,102
    
    
    
    17,190Total
    
    
    21,823
    
    
    
    19,992
    
    
    
    57,526
    
    
    
    56,455Gross Profit:Product
    
    
    3,341
    
    
    
    3,409
    
    
    
    8,649
    
    
    
    10,136Service
    
    
    1,423
    
    
    
    1,237
    
    
    
    4,088
    
    
    
    3,570Total
    
    
    4,764
    
    
    
    4,646
    
    
    
    12,737
    
    
    
    13,706Operating Expenses:Product (1)
    
    
    2,454
    
    
    
    2,483
    
    
    
    7,102
    
    
    
    7,191Service (1)
    
    
    1,519
    
    
    
    1,541
    
    
    
    4,624
    
    
    
    4,766Total
    
    
    3,973
    
    
    
    4,024
    
    
    
    11,726
    
    
    
    11,957Operating Income
    
    
    791
    
    
    
    622
    
    
    
    1,011
    
    
    
    1,749Unallocated Amounts:Total Other Expense, net
    
    
    16
    
    
    
    99
    
    
    
    73
    
    
    
    138Provision for Income Taxes
    
    
    292
    
    
    
    181
    
    
    
    356
    
    
    
    611Total
    
    
    308
    
    
    
    280
    
    
    
    429
    
    
    
    749Net Income
    
    $
    483
    
    
    $
    342
    
    
    $
    582
    
    
    $
    1,000
 
 (1)
    
    Operating expense allocations between segments were based on actual amounts, a percentage of revenues, headcount, and
managements estimates. 10




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NOTE 5  ACQUISITION
    (Unaudited)Nine MonthsEndedDecember 27,2008Net Revenue
    
    $
    59,605Net Income
    
    $
    837Basic Earnings Per Share
    
    $
    0.12Diluted Earnings Per Share
    
    $
    0.11
 11




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 Accounts Receivable:
 Stock-Based Compensation.
   Revenue Recognition.
 Reclassification of Amounts:
 12




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RESULTS OF OPERATIONS
  (Unaudited)
    
    (Unaudited)Third Quarter Ended
    
    Nine Months EndedDecember 26,
    
    December 27,
    
    December 26,
    
    December 27,2009
    
    2008
    
    2009
    
    2008Gross Profit Percentage:Product Gross Profit
    
    
    22.0
    %
    
    
    24.4
    %
    
    
    22.5
    %
    
    
    25.8
    %Service Gross Profit
    
    
    21.4
    %
    
    
    20.6
    %
    
    
    21.4
    %
    
    
    20.8
    %Total Gross Profit
    
    
    21.8
    %
    
    
    23.2
    %
    
    
    22.1
    %
    
    
    24.3
    %As a Percentage of Total Net Revenue:Product Sales
    
    
    69.6
    %
    
    
    70.0
    %
    
    
    66.8
    %
    
    
    69.6
    %Service Revenue
    
    
    30.4
    %
    
    
    30.0
    %
    
    
    33.2
    %
    
    
    30.4
    %Total Net Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Selling, Marketing and Warehouse Expenses
    
    
    11.8
    %
    
    
    13.3
    %
    
    
    13.2
    %
    
    
    13.1
    %Administrative Expenses
    
    
    6.4
    %
    
    
    6.8
    %
    
    
    7.2
    %
    
    
    8.1
    %Total Operating Expenses
    
    
    18.2
    %
    
    
    20.1
    %
    
    
    20.4
    %
    
    
    21.2
    %Operating Income
    
    
    3.6
    %
    
    
    3.1
    %
    
    
    1.7
    %
    
    
    3.1
    %Interest Expense
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    0.1
    %
    
    
    0.1
    %Total Other Expense, net
    
    
    0.0
    %
    
    
    0.3
    %
    
    
    0.1
    %
    
    
    0.1
    %Total Other Expense
    
    
    0.0
    %
    
    
    0.5
    %
    
    
    0.2
    %
    
    
    0.2
    %Income Before Income Taxes
    
    
    3.6
    %
    
    
    2.6
    %
    
    
    1.5
    %
    
    
    2.9
    %Provision for Income Taxes
    
    
    1.3
    %
    
    
    0.9
    %
    
    
    0.6
    %
    
    
    1.1
    %Net Income
    
    
    2.3
    %
    
    
    1.7
    %
    
    
    0.9
    %
    
    
    1.8
    %
 13




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THIRD
QUARTER ENDED DECEMBER 26, 2009 COMPARED TO THIRD QUARTER ENDED
DECEMBER 27, 2008  (dollars in thousands):
 Revenue:
 Third Quarter EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Net Revenue:Product Sales
    
    $
    15,186
    
    
    $
    13,995Service Revenue
    
    
    6,637
    
    
    
    5,997Total
    
    $
    21,823
    
    
    $
    19,992
   FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Product Sales Growth (Decline)
    
    
    8.5
    %
    
    
    (7.6
    %)
    
    
    (8.5
    %)
    
    
    
    (1.4
    %)
    
    
    7.6
    %
    
    
    15.5
    %
    
    
    12.7
    %
  FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Product Sales Per Business Day
    
    $
    249
    
    
    $
    190
    
    
    $
    176
    
    
    
    $
    191
    
    
    $
    226
    
    
    $
    206
    
    
    $
    192
  FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Percent of Net Sales:Direct
    
    
    77.5
    %
    
    
    84.2
    %
    
    
    80.5
    %
    
    
    
    83.0
    %
    
    
    79.7
    %
    
    
    77.6
    %
    
    
    81.8
    %Reseller
    
    
    21.2
    %
    
    
    14.4
    %
    
    
    18.0
    %
    
    
    
    15.6
    %
    
    
    19.1
    %
    
    
    20.8
    %
    
    
    16.6
    %Freight Billed to
Customers
    
    
    1.3
    %
    
    
    1.4
    %
    
    
    1.5
    %
    
    
    
    1.4
    %
    
    
    1.2
    %
    
    
    1.6
    %
    
    
    1.6
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 14




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##### Table of Contents



FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Total Pending Product Shipments
    
    $
    2,351
    
    
    $
    1,904
    
    
    $
    1,445
    
    
    
    $
    1,189
    
    
    $
    1,701
    
    
    $
    1,398
    
    
    $
    1,366% of Pending Product Shipments
that are Backorders
    
    
    82.8
    %
    
    
    78.9
    %
    
    
    72.2
    %
    
    
    
    81.0
    %
    
    
    84.1
    %
    
    
    70.7
    %
    
    
    74.7
    %
  FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Service Revenue
Growth (Decline)
    
    
    10.7
    %
    
    
    15.5
    %
    
    
    7.2
    %
    
    
    
    (0.9
    %)
    
    
    10.3
    %
    
    
    4.5
    %
    
    
    5.3
    %
  FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Percent of Service Revenue:Depot/Onsite
    
    
    73.5
    %
    
    
    77.3
    %
    
    
    79.3
    %
    
    
    
    81.2
    %
    
    
    78.5
    %
    
    
    78.6
    %
    
    
    80.8
    %Outsourced
    
    
    24.0
    %
    
    
    20.2
    %
    
    
    18.2
    %
    
    
    
    15.8
    %
    
    
    18.2
    %
    
    
    18.8
    %
    
    
    16.4
    %Freight Billed to Customers
    
    
    2.5
    %
    
    
    2.5
    %
    
    
    2.5
    %
    
    
    
    3.0
    %
    
    
    3.3
    %
    
    
    2.6
    %
    
    
    2.8
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 15




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##### Table of Contents



Gross Profit:
 Third Quarter EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Gross Profit:Product
    
    $
    3,341
    
    
    $
    3,409Service
    
    
    1,423
    
    
    
    1,237Total
    
    $
    4,764
    
    
    $
    4,646
     FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Channel Gross Profit %  Direct (1)
    
    
    22.5
    %
    
    
    22.8
    %
    
    
    23.8
    %
    
    
    
    23.6
    %
    
    
    23.9
    %
    
    
    25.8
    %
    
    
    25.2
    %Channel Gross Profit %  Reseller (1)
    
    
    14.6
    %
    
    
    14.7
    %
    
    
    17.4
    %
    
    
    
    18.7
    %
    
    
    18.1
    %
    
    
    18.2
    %
    
    
    17.5
    %Channel Gross Profit %  Combined (2)
    
    
    20.8
    %
    
    
    21.6
    %
    
    
    22.6
    %
    
    
    
    22.8
    %
    
    
    22.8
    %
    
    
    24.2
    %
    
    
    23.9
    %Other Items % (3)
    
    
    1.2
    %
    
    
    0.6
    %
    
    
    0.9
    %
    
    
    
    1.2
    %
    
    
    1.6
    %
    
    
    1.8
    %
    
    
    3.4
    %Total Product Gross Profit %
    
    
    22.0
    %
    
    
    22.2
    %
    
    
    23.5
    %
    
    
    
    24.0
    %
    
    
    24.4
    %
    
    
    26.0
    %
    
    
    27.3
    %
 
 (1)
    
    Channel gross profit % calculated as net sales less purchase costs divided by net sales.(2)
    
    Represents aggregate gross profit % for direct and reseller channels, calculated as net sales less purchase cost divided by net sales.(3)
    
    Includes vendor rebates, cooperative advertising income, freight billed to customers, freight expenses, and direct shipping costs. 16




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##### Table of Contents



FY 2010
    
    
    FY 2009Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Service Gross
Profit Dollar
Growth (Decline)
    
    
    15.0
    %
    
    
    25.5
    %
    
    
    2.9
    %
    
    
    
    5.7
    %
    
    
    16.8
    %
    
    
    4.8
    %
    
    
    (0.3
    %)
 Operating Expenses:
 Third Quarter EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Operating Expenses:Selling, Marketing and Warehouse
    
    $
    2,585
    
    
    $
    2,666Administrative
    
    
    1,388
    
    
    
    1,358Total
    
    $
    3,973
    
    
    $
    4,024
  Other Expense:
 Third Quarter EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Other Expense:Interest Expense
    
    $
    9
    
    
    $
    43Other Expense, net
    
    
    7
    
    
    
    56Total
    
    $
    16
    
    
    $
    99
  Taxes:
 Third Quarter EndedDecember 26,
    
    December 27,2009
    
    2008Provision for Income Taxes
    
    $
    292
    
    
    $
    181
  17




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##### Table of Contents



NINE MONTHS ENDED DECEMBER 26, 2009 COMPARED TO NINE MONTHS ENDED DECEMBER 27, 2008  (dollars in thousands):
 Revenue:
 Nine Months EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Net Revenue:Product Sales
    
    $
    38,424
    
    
    $
    39,265Service Revenue
    
    
    19,102
    
    
    
    17,190Total
    
    $
    57,526
    
    
    $
    56,455
    Gross Profit:
 Nine Months EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Gross Profit:Product
    
    $
    8,649
    
    
    $
    10,136Service
    
    
    4,088
    
    
    
    3,570Total
    
    $
    12,737
    
    
    $
    13,706
    18




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##### Table of Contents



Operating Expenses:
 Nine Months EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Operating Expenses:Selling, Marketing and Warehouse
    
    $
    7,593
    
    
    $
    7,409Administrative
    
    
    4,133
    
    
    
    4,548Total
    
    $
    11,726
    
    
    $
    11,957
  Other Expense:
 Nine Months EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Other Expense:Interest Expense
    
    $
    34
    
    
    $
    70Other Expense, net
    
    
    39
    
    
    
    68Total
    
    $
    73
    
    
    $
    138
  Taxes:
 Nine Months EndedDecember 26,
    
    December 27,2009
    
    2008Provision for Income Taxes
    
    $
    356
    
    
    $
    611
  19




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  Cash Flows .
 Nine Months EndedDecember 26,
    
    December 27,2009
    
    2008Cash Provided by (Used in):Operating Activities
    
    $
    3,972
    
    
    $
    1,345Investing Activities
    
    
    (2,034
    )
    
    
    (6,679
    )Financing Activities
    
    
    (1,988
    )
    
    
    5,184
 Operating Activities
 
    
    Inventory/Accounts Payable: Inventory balance at December 26, 2009 was $5.6
million, an increase of $0.7 million when compared to the $4.9 million on-hand on March
28, 2009. We have increased our inventory levels in conjunction with the improving
economy and in anticipation of stronger sales in our fourth quarter of fiscal year
2010. However, the timing of inventory receipts has impacted the accounts payable
balance and is the primary reason for the $3.5 million increase in accounts payable in
the first nine months of fiscal year 2010, compared to a $1.6 million decrease in the
first nine months of fiscal year 2009. In general, our accounts payable balance
increases or decreases as a result of timing of vendor payments for inventory receipts.
    
    Receivables: We continue to generate positive operating cash flows and maintain
strong collections on our accounts receivable.
 December 26,
    
    December 27,2009
    
    2008Net Sales, for the last two fiscal months
    
    $
    15,559
    
    
    $
    13,239Accounts Receivable, net
    
    $
    9,997
    
    
    $
    8,689Days Sales Outstanding
    
    
    39
    
    
    
    39
 
    
    Accrued Compensation and Other Liabilities: Lower payments for employee profit
sharing and performance-based management bonuses, while accruing for future payments,
contributed to the $0.6 million of cash provided by operations during the first nine
months of fiscal year 2010 compared with $0.5 million used in operations in the first
nine months of fiscal year 2009.
 Investing Activities
 Financing Activities
 20




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##### Table of Contents



OUTLOOK
  
 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.
 21




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 6.
    EXHIBITS
  22




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##### Table of Contents



SIGNATURES
  TRANSCAT, INC.Date:  February 8, 2010
    /s/ Charles P. HaddedCharles P. HadeedChief Executive Officer, President and Chief Operating OfficerDate:  February 8, 2010
    /s/ John J. ZimmerJohn J. ZimmerVice President of Finance and Chief Financial Officer 23




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##### Table of Contents



INDEX TO EXHIBITS
 (3)
    
    Articles of Incorporation and Bylaws3.2
    
    
    Code of Regulations, as amended through October 26, 2009, are incorporated herein by reference
from Exhibit 3.1 to the Companys Current Report on Form 8-K dated October 26, 2009(31)
    
    Rule 13a-14(a)/15d-14(a) Certifications31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(32)
    
    Section 1350 Certifications32.1
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 24